<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1998.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
OFFICE CENTRE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 5112 04-3341936
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------
38 EAST 32ND STREET
4TH FLOOR
NEW YORK, NEW YORK 10016
(212) 779-6700
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------
ROBERT J. GILLON, JR.
CHIEF EXECUTIVE OFFICER
OFFICE CENTRE CORPORATION
38 EAST 32ND STREET
4TH FLOOR
NEW YORK, NEW YORK 10016
(212) 779-6700
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
<TABLE>
<S> <C>
Floyd I. Wittlin, Esq. John A. Good, Esq.
Richards & O'Neil, LLP Baker, Donelson, Bearman & Caldwell
885 Third Avenue 2000 First Tennessee Building, 20th Floor
New York, New York 10022-4802 Memphis, Tennessee 38103
(212) 207-1200 (901) 526-2000
</TABLE>
------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $.001 par value per
share ........................ 4,600,000 Shares $12.00 $55,200,000 $16,284
================================================================================================================================
</TABLE>
(1) Includes 600,000 shares that may be purchased pursuant to the over-allotment
option granted to the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee, based
on a bona fide estimate of the proposed maximum offering price per share of
the securities being registered in accordance with Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 22, 1998
PROSPECTUS
4,000,000 SHARES
[OFFICE CENTER LOGO]
OFFICE CENTRE CORPORATION
COMMON STOCK
------------------
Of the 4,000,000 shares of common stock, par value $.001 per share (the
"Common Stock"), of Office Centre Corporation (the "Company") being offered
hereby (the "Offering"), 3,575,000 shares are being offered by the Company and
425,000 shares are being offered by certain stockholders of the Company (the
"Selling Stockholders"). See "Principal and Selling Stockholders." The Company
will not receive any proceeds from the sale of shares by the Selling
Stockholders.
Prior to this offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price per
share will be between $10 and $12. For factors considered in determining the
initial public offering price, see "Underwriting." The Company will apply to
have the Common Stock approved for quotation on The Nasdaq Stock Market's
National Market (the "Nasdaq National Market") under the symbol "OCCI."
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................
- ---------------------------------------------------------------------------------------------------------------------------
Total(4)...................
===========================================================================================================================
</TABLE>
(1) See "Underwriting" for a description of the indemnification arrangements
with the Underwriters.
(2) Before deducting expenses of the Offering payable by the Company estimated
to be $ .
(3) Before deducting expenses of the Offering payable by the Selling
Shareholders estimated to be $ .
(4) The Company and one of the Selling Stockholders have granted the
Underwriters a 30-day option to purchase up to 600,000 additional shares of
Common Stock solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts,
Proceeds to the Company and Proceeds to Selling Stockholders will be
$ , $ , $ , and $ , respectively. See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if issued to and accepted by them,
and subject to the Underwriters' right to withdraw, cancel, or modify such Offer
and reject any order in whole or in part. It is expected that delivery of the
shares of Common Stock will be made on or about , 1998.
MORGAN KEEGAN & COMPANY, INC.
MCDONALD & COMPANY SECURITIES, INC.
CREDIT LYONNAIS SECURITIES (USA) INC.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3
[A MAP OF THE UNITED STATES WITH THE OFFICE CENTRE LOGO IN THE MIDDLE,
CONTAINING STARS AND DOTS SHOWING THE COMPANY'S CENTRES AND SATELLITES,
WITH PICTURES OF A COMPUTER, AN OFFICE CENTRE DELIVERY TRUCK,
AN EMPLOYEE HOLDING A BOX OF SUPPLIES, AND A CERTAIN STOCK ITEM.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES OF COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF SHARES OF COMMON
STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent accountants.
<PAGE> 4
PROSPECTUS SUMMARY
Simultaneously with and conditioned on the closing of the Offering, Office
Centre Corporation will acquire in separate transactions (the "Acquisitions") in
exchange for cash and shares of Common Stock, twelve commercial office products
businesses (collectively, the "Founding Companies"). Unless otherwise indicated,
all references herein to the "Company" mean Office Centre Corporation after
consummation of the Acquisitions and include the Founding Companies, and
references herein to "Office Centre Corporation" shall mean Office Centre
Corporation and its wholly-owned subsidiary prior to consummation of the
Acquisitions.
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Prospectus, including the information set forth under "Risk Factors" and in the
financial statements, including the notes thereto. Unless otherwise indicated,
all share (including the number of options granted at the time of the Offering
and shares issued in connection with the Acquisitions), per share and financial
information set forth herein has been adjusted to give effect to (i) a one-for-
3.44 reverse stock split effective as of the closing of the Offering (the
"Reverse Split"), and (ii) the Acquisitions and assumes an initial public
offering price of $11 per share, the midpoint of the range set forth on the
cover page of this Prospectus. Unless otherwise indicated, the information in
this Prospectus does not give effect to the exercise of the Underwriters'
over-allotment option. In addition, all references to years, unless otherwise
noted, refer to the Company's fiscal year which ends on December 31 of each
year.
Certain statements contained in this Prospectus, including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects," "estimates" and words of similar import, constitute
"forward-looking statements" and involve known and unknown risks, uncertainties
and other factors set forth under "Risk Factors" and elsewhere in this
Prospectus, that may cause the actual results, performance or achievements of
the Company or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These statements appear under the captions
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and elsewhere in this
Prospectus. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward-looking statements. The Company
expressly disclaims any obligation to update any such factors or to announce
publicly the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
THE COMPANY
Office Centre Corporation has been established for the purpose of becoming
a nationwide office products supplier that serves primarily small and
medium-sized corporate customers. The Founding Companies serve the New York
City; Los Angeles; Atlanta; Dallas/Fort Worth; Boston; Baltimore; Sacramento;
Richmond, Virginia; Grand Rapids, Michigan; and Montgomery, Alabama metropolitan
areas. Following the Acquisitions, the Company believes that it will be one of
the largest office products suppliers in the United States. The Company, through
its wholly-owned subsidiary, UDI Corp. ("UDI"), also operates one of the largest
office products buying groups in the United States, with approximately 1,100
office products stationers and office furniture dealers as members. In addition
to selling office supplies, the Company also sells office furniture and
technology supplies, performs and outsources printing services and conducts
limited retail operations. The Company had pro forma revenues and operating
income for the year ended December 31, 1997 of approximately $126.8 million and
$5.2 million, respectively and for the three months ended March 31, 1998 of
approximately $33.8 million and $1.6 million, respectively.
In 1996, the office products industry generated approximately $125 billion
in revenues, and the Company estimates that the segment supplying the small and
medium-sized corporate customer (i.e., companies with 20 to 250 employees)
represented approximately $18 billion of such revenues. Historically, the
distribution of office products to the corporate segment has been fragmented and
served by numerous stationers, most of which operated in only one metropolitan
area and had annual sales of less than $15 million. In recent years, large
consolidators have grown rapidly through acquisitions of medium and large-sized
contract stationers, which primarily serve companies with more than 250
employees.
3
<PAGE> 5
The Company is considered a "commercial stationer," rather than a contract
stationer, and its typical customer is the 20 to 250 employee company. This
segment of the industry remains highly fragmented, as much of the consolidation
in the industry has involved contract stationers. There are approximately 3,200
independent commercial stationers with estimated aggregate 1996 sales of $18
billion. To successfully compete with other suppliers, most commercial
stationers have "partnered" with national wholesalers in order to be more
efficient with warehousing and distribution and have joined industry buying
groups such as UDI in order to offer more competitive prices and marketing
programs.
The Company has adopted an integrated operating and acquisition strategy
designed to provide superior localized service to small and medium-sized
companies, and to achieve growth internally as well as through the acquisition
of other commercial stationers.
The key elements of the Company's operating strategy are as follows:
- Focus on Serving Small and Medium-Sized Companies. The Company
believes that small and medium-sized companies will be the fastest
growing sector of the economy in the United States in terms of
revenues over the next three to five years, and that these companies
tend to be very loyal customers, generally purchasing office
products from one primary supplier. The Company believes that this
market segment is more fragmented and offers better margins than the
large company (over 250 employees) segment.
- Leverage Wholesaler Resources. The Company intends to leverage the
resources of two national wholesalers, S.P. Richards and United
Stationers, as well as regional and niche wholesalers. Such
resources include custom catalogs, electronic ordering, wrap and
label capabilities and national distribution. The Company believes
that this will allow it to (i) reduce inventory, warehousing and
distribution costs; and (ii) minimize the need to build an extensive
distribution system.
- Achieve Operating Efficiencies and Economies of Scale. The Company
will seek to achieve operating efficiencies and economies of scale
through: (i) volume purchasing of office products; (ii) combining
certain administrative functions at the corporate level; (iii)
implementing a centre/satellite strategy and eliminating redundant
facilities and services; (iv) implementing Company-wide integrated
technology and operating systems; (v) providing a Company-wide
proprietary catalog to increase advertising rebates from
manufacturers; and (vi) increasing sales volumes by broadening the
complement of products and services its stationers offer. The
Company intends to combine the buying power of UDI with that of the
Company's stationers in order to obtain more favorable prices and
rebates, which office product manufacturers and wholesalers have
historically offered only to high volume purchasers.
- Capitalize on Private Brand Image. The Company has developed a
private brand image program that includes Office Centre brand
products, retail store signage, proprietary catalogs and a web site.
The Company believes this three-year old program enhances its name
recognition with commercial stationers and customers and offers a
significant profit opportunity.
- Operate with Decentralized Management. The Company intends to
operate with decentralized management, and has entered into
long-term employment contracts with senior management employees at
each of the Founding Companies and intends to continue to enter into
such contracts in connection with future acquisitions. Under the
Company's "centre and satellite" strategy, experienced local
management will make decisions relating to the day-to-day operations
of a particular centre and its related satellites and will be
responsible for the profitability and growth of that operation. The
Company believes that the operating autonomy provided by this
decentralized structure, together with the implementation of
reporting systems and financial controls at the corporate level,
will enable it to combine the superior customer service and
responsiveness of a locally-oriented stationer with the resources
and economies of scale of a large company.
4
<PAGE> 6
The key elements of the Company's acquisition strategy are as follows:
- Target Major Metropolitan Areas. The Company intends to expand
aggressively through acquisitions into an additional 35 major
metropolitan areas throughout the country. The Company will first
seek to make a centre acquisition in a targeted area by acquiring an
established, high quality commercial stationer with revenues of $7
million to $20 million. It will then seek to acquire additional,
smaller synergistic commercial stationers, or satellites, typically
with revenues of $5 million or less, within the metropolitan market
surrounding the centre stationers. The Company intends to
substantially integrate the operations of acquired satellites with
the centre stationers in order to leverage more effectively the
Company's distribution capabilities, thereby eliminating a
substantial portion of the operating expenses of the acquired
satellites and increasing the Company's margins.
- Leverage UDI Membership and Exclusivity Agreements. Through UDI,
the Company maintains relationships with a large network of
stationers that are potential acquisition candidates for the
Company. Ten of the Founding Companies are members of UDI. In order
to strengthen its acquisition pipeline, the Company has entered into
exclusivity agreements with approximately 60 UDI members, which the
Company believes collectively had 1997 revenues in excess of $130
million. The exclusivity agreements provide that, at the Company's
request, the acquisition candidates will engage in good faith
discussions with the Company with respect to the sale of their
respective companies and that they will not solicit offers from, or
engage in any such discussions with, any other party for a period of
six to nine months. In addition, the exclusivity agreements permit
the Company to conduct due diligence on the acquisition candidates.
- Retain Local Management and Image. The Company intends to acquire
successful commercial stationers with strong management in its
targeted centre locations. In most instances, the Company expects to
retain the management, sales personnel and name of the acquired
centre stationer. To preserve local market knowledge and customer
relationships, the Company has entered into long-term employment
contracts with senior management employees at each of the Founding
Companies and intends to continue to do so in connection with
stationers acquired in the future.
Office Centre Corporation, a Delaware corporation, was incorporated in
October 1996. Its principal executive offices are located at 38 East 32nd
Street, New York, New York 10016 and its telephone number is (212) 779-6700.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by Office Centre
Corporation................................... 3,575,000 shares
Common Stock offered by the Selling
Stockholders.................................. 425,000 shares(1)
Common Stock to be outstanding after the
Offering...................................... 8,500,000 shares(2)
Use of proceeds................................. To pay the cash portion of the purchase price for
the Founding Companies, to repay certain
indebtedness and to pay certain obligations due
upon consummation of the Offering and for working
capital and general corporate purposes, including
possible future acquisitions. The Company will not
receive any proceeds from the sale of shares by the
Selling Stockholders. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol.......... OCCI
</TABLE>
- ---------------
(1) See "Principal and Selling Stockholders."
(2) Includes 3,354,482 shares of Common Stock to be issued in connection with
the Acquisitions. See Note 1 to the Unaudited Pro Forma Combined Financial
Statements of the Company. Excludes shares issuable upon exercise of
currently outstanding options, options to be granted upon the closing of the
Offering and options to be granted in connection with the Acquisitions. See
"Management -- Employment Agreements; Covenants Not To Compete" and
"Management -- Directors Compensation," and "Business -- The Founding
Companies."
5
<PAGE> 7
SUMMARY COMBINED HISTORICAL AND PRO FORMA FINANCIAL DATA
Office Centre Corporation will acquire the Founding Companies
simultaneously with and conditioned on the consummation of the Offering. The
following table presents summary combined historical statement of operations
data of the Company for the three most recent calendar years, summary combined
pro forma statement of operations data for the year ended December 31, 1997 and
the three months ended March 31, 1997 and 1998, and summary combined pro forma
and pro forma, as adjusted, balance sheet data as of March 31, 1998. The summary
combined historical statement of operations data are a summation of the
revenues, gross margin and operating expenses of the Company and do not
represent combined results presented in accordance with generally accepted
accounting principles. Each Founding Company has a fiscal year ending December
31, or has been converted to a December 31 year end for purposes of the
following table.
The pro forma combined statement of operations data assume that the
Acquisitions and the Offering were consummated on January 1, 1997 (see notes
below). The pro forma combined balance sheet data assume that the Acquisitions
were consummated on March 31, 1998 and, as adjusted, reflect the consummation of
the Offering (see notes below).
The data presented below should be read in conjunction with "Selected
Combined Historical and Pro Forma Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
and pro forma financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- ------------------------
PRO PRO FORMA
FORMA ------------------------
1995 1996 1997 1997(1) 1997(1) 1998(1)
------- -------- -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS DATA:
Revenues.................................... $88,639 $104,151 $118,952 $ 126,846 $ 29,806 $ 33,814
Gross margin................................ 27,921 33,499 38,667 41,035 9,994 10,948
Operating expenses.......................... 25,723 31,499 35,672 34,454(2) 8,331(2) 9,020(2)
Goodwill amortization....................... 249 254 251 1,419(3) 323(3) 332(3)
------- -------- -------- ---------- ---------- ----------
Operating income............................ $ 1,949 $ 1,746 $ 2,744 5,162 1,340 1,596
======= ======== ========
Other income (expense), net(4).............. (79) (70) (77)
---------- ---------- ----------
Income before income taxes.................. $ 5,083 $ 1,270 $ 1,519
========== ========== ==========
Net Income(5)............................... $ 2,482 $ 633 $ 779
========== ========== ==========
Net income per share
Basic and Diluted......................... $ .29 $ .07 $ .09
========== ========== ==========
Shares used in computing pro forma net
income per share(6)
Basic and Diluted......................... 8,500,000 8,500,000 8,500,000
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1998
-------------------------
PRO FORMA AS
COMBINED(7) ADJUSTED(8)
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
COMBINED BALANCE SHEET DATA:
Total assets(9)............................................. $97,232 $99,664
Total short-term debt....................................... 9,221 202
Total long-term debt........................................ 2,122 708
Stockholders' equity........................................ 36,982 66,886
</TABLE>
- ---------------
(Footnotes on following page)
6
<PAGE> 8
(1) The pro forma combined statement of operations data assume that the
Acquisitions and the Offering were consummated on January 1, 1997 and assume
the acquisition of Total Office Products by The Supply Room Companies, Inc.
on January 1, 1997. These results are not necessarily indicative of the
results the Company would have obtained had these events actually then
occurred or of the Company's future results.
(2) Adjusted to reflect the acquisition of the Founding Companies and
adjustments to salaries, bonuses and benefits of certain owners and officers
of the Founding Companies and Office Centre Corporation pursuant to
employment agreements ("Compensation Differential").
(3) Includes $1.2 million, $300,000 and $300,000 of additional goodwill
amortization attributable to the Acquisitions for the year ended December
31, 1997, and the three months ended March 31, 1997 and 1998, respectively.
(4) Includes a pro forma adjustment to reflect the elimination of interest
expense resulting from the repayment of certain debt paid from the net
proceeds of the Offering. See "Use of Proceeds."
(5) Assumes all income is subject to a corporate income tax rate of 40% and that
all goodwill amortization is nondeductible for income tax purposes.
(6) Includes (i) 1,434,155 shares outstanding prior to the Acquisitions and the
Offering; (ii) 3,354,482 shares to be issued to the stockholders of the
Founding Companies in connection with the Acquisitions; (iii) 136,363 shares
to be issued to certain consultants of the Company; and (iv) 3,575,000
shares to be issued by the Company in the Offering. Outstanding options have
no material dilutive effect.
(7) The pro forma combined balance sheet data assumes the Acquisitions were
consummated on March 31, 1998.
(8) Adjusted for the sale of 3,575,000 shares of Common Stock offered hereby at
an assumed initial public offering price of $11 per share and the
application of the net proceeds therefrom and the repayment of certain
indebtedness. See "Use of Proceeds."
(9) Includes $46.7 million of additional goodwill attributable to the
Acquisitions.
7
<PAGE> 9
SUMMARY HISTORICAL STATEMENT OF OPERATIONS DATA
FOR THE FOUNDING COMPANIES
The following table presents summary historical statement of operations
data for the Founding Companies for each of the three most recent calendar years
and for the three months ended March 31, 1997 and 1998, respectively. Each
Founding Company has a fiscal year ending December 31, or has been converted to
a December 31 year end for purposes of the following table. Operating expenses
and operating income (loss) have not been adjusted for the Compensation
Differential, goodwill amortization, or costs associated with the Company's new
corporate management and with being a public company. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation -- Introduction."
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
THE SUPPLY ROOM COMPANIES, INC. ("TSR")
Revenues.......................................... $19,950 $26,997 $29,953 $ 7,090 $7,814
Gross margin...................................... 6,534 8,258 9,175 2,404 2,575
Operating expenses(1)............................. 6,253 7,962 8,723 2,095 2,188
Operating income.................................. 281 296 452 309 387
NEW ENGLAND OFFICE SUPPLY, INC. ("NEW ENGLAND")
Revenues.......................................... $ 8,161 $11,733 $14,665 $ 3,547 $4,132
Gross margin...................................... 2,062 2,859 3,690 950 1,058
Operating expenses(1)............................. 1,823 2,662 3,373 869 850
Operating income.................................. 239 197 317 81 208
KING OFFICE SUPPLY, INC. AND SUBSIDIARY ("KING")
Revenues.......................................... $11,757 $12,443 $13,893 $ 3,481 $3,870
Gross margin...................................... 4,419 4,565 5,113 1,282 1,409
Operating expenses(1)............................. 4,131 4,341 4,736 1,165 1,240
Operating income.................................. 288 224 377 117 169
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
("SIERRA")
Revenues.......................................... $ 8,991 $11,090 $12,215 $ 2,924 $3,459
Gross margin...................................... 2,806 3,588 4,120 945 1,063
Operating expenses................................ 2,624 3,416 3,829 936 1,063
Operating income.................................. 182 172 291 9 0
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES,
INC. ("OFFICE SOLUTIONS")
Revenues.......................................... $ 5,397 $ 7,367 $10,879 $ 2,275 $3,339
Gross margin...................................... 1,459 2,105 2,908 628 883
Operating expenses................................ 1,053 1,728 2,653 646 698
Operating income (loss)........................... 406 377 255 (18) 185
GREENWOOD OUTFITTERS, INC. ("GREENWOOD")
Revenues.......................................... $ 5,915 $ 7,296 $ 8,920 $ 2,051 $2,718
Gross margin...................................... 1,889 2,490 3,035 723 980
Operating expenses................................ 1,812 2,183 2,652 582 701
Operating income.................................. 77 307 383 141 279
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
"SOS" OFFICE SUPPLY COMPANY ("SOS")
Revenues.......................................... $ 5,010 $ 5,290 $ 5,484 $ 1,334 $1,526
Gross margin...................................... 1,708 1,785 1,889 452 464
Operating expenses................................ 1,586 1,667 1,994 514 383
Operating income (loss)........................... 122 118 (105) (62) 81
GEORGIA IMPRESSION, INC. ("GEORGIA IMPRESSION")
Revenues.......................................... $ 3,467 $ 3,279 $ 3,642 $ 752 $ 836
Gross margin...................................... 725 724 993 195 252
Operating expenses................................ 630 631 811 161 153
Operating income.................................. 95 93 182 34 99
OFFICE EXPRESS, INC. ("OFFICE EXPRESS")
Revenues.......................................... $ 1,802 $ 2,313 $ 2,856 $ 703 $ 796
Gross margin...................................... 542 691 915 237 243
Operating expenses................................ 501 604 785 185 207
Operating income.................................. 41 87 130 52 36
SOUTHERN OFFICE CENTRE, INC. ("SOUTHERN OFFICE
CENTRE")
Revenues.......................................... $ 2,729 $ 2,562 $ 2,531 $ 592 $ 618
Gross margin...................................... 722 710 602 139 140
Operating expenses................................ 664 672 653 160 159
Operating income (loss)........................... 58 38 (51) (21) (19)
METRO DATA SUPPLY, INC. ("METRO DATA")
Revenues.......................................... $ 1,593 $ 1,899 $ 2,167 $ 502 $ 546
Gross margin...................................... 333 406 473 110 136
Operating expenses................................ 309 356 452 97 129
Operating income.................................. 24 50 21 13 7
BCB OFFICE PRODUCTS COMPANY AND BCB SPECIALTIES,
INC. ("BCB")
Revenues.......................................... $ 883 $ 951 $ 745 $ 201 $ 223
Gross margin...................................... 353 319 241 68 77
Operating expenses................................ 324 343 281 57 71
Operating income (loss)........................... 29 (24) (40) 11 6
</TABLE>
- ---------------
(1) Includes historical goodwill amortization.
9
<PAGE> 11
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the specific risk factors
set forth below as well as the other information set forth in this Prospectus in
evaluating an investment in the Common Stock.
ABSENCE OF COMBINED OPERATING HISTORY
Office Centre Corporation was founded in October 1996 and has been a
holding company for UDI since May 1997. Office Centre Corporation has entered
into agreements to acquire the Founding Companies simultaneously with and
conditioned on the closing of the Offering. The Founding Companies have been
operating independently and there can be no assurance that the Company will be
able to successfully integrate these businesses on a profitable basis. The
Company's management group has been assembled only recently, and there can be no
assurance that the management group will be able to oversee the combined entity
and effectively implement the Company's operating or acquisition strategies. The
pro forma financial data included in this Prospectus cover periods during which
Office Centre Corporation and the Founding Companies were not under common
control and are not necessarily indicative of the combined results which would
have been achieved had Office Centre Corporation and the Founding Companies been
under common control during such periods. See "Business -- The Founding
Companies" and "Management."
RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY
The Company intends to grow significantly through the acquisition of
additional office products stationers. This strategy will entail reviewing and
potentially reorganizing acquired business operations, corporate infrastructure
and systems and financial controls. Acquisitions may involve a number of special
risks, including adverse short-term effects on the Company's reported operating
results, diversion of management's attention and resources to acquisitions,
dependence on retention, hiring and training of key personnel, the possible loss
of acquired customer bases, possible adverse effects on earnings resulting from
amortization of goodwill created in purchase transactions and the risks
associated with the past operations and other unanticipated problems arising in
the acquired companies, some or all of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
The success of the Company's acquisition strategy will depend on the extent to
which it is able to identify, acquire, profitably manage and successfully
integrate additional companies, and there can be no assurance that the Company's
strategy will succeed. There also can be no assurance that the Company will seek
to acquire, or that it will be successful in acquiring, any of the acquisition
candidates who have entered into exclusivity agreements with the Company. In
addition, there can be no assurance that companies acquired in the future will
achieve sales and profitability that justify the Company's investment in them.
The Company believes that during the next few years competing sellers of office
products will continue the recent trend of consolidation. The Company believes
there is likely to be significant competition among the large consolidators of
office products companies to acquire independent stationers, which could limit
the Company's ability to locate suitable acquisition targets and could increase
the cost of purchasing such acquisition targets. See "-- Substantial
Competition," "Business -- Industry Overview," "Business -- Acquisition
Strategy," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
RISKS RELATED TO ACQUISITION FINANCING
The Company currently intends to finance possible future acquisitions using
a combination of cash and shares of Common Stock. The Company will need
additional debt or equity financing in order to implement fully its acquisition
strategy. There can be no assurance that the Company will be able to obtain such
financing if and when it is needed or that, if available, such financing will be
available on terms the Company deems acceptable. If the Company does not have
sufficient cash resources, the Common Stock does not maintain sufficient value,
or potential acquisition candidates are unwilling to accept the Common Stock as
part of the consideration for the sale of their businesses, the Company may be
unable to implement its acquisition strategy. The Company has obtained a
commitment for a $25 million line of credit from CoreStates Bank, N.A. to be
secured by receivables and inventory and used for working capital and other
general corporate purposes, including possible future
10
<PAGE> 12
acquisitions. There can be no assurance, however, that any line of credit will
be obtained or that, if obtained, it will be on terms that are favorable to the
Company or sufficient for the Company's needs. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Acquisition
Strategy."
POTENTIAL FOR NEGATIVE IMPACT ON UDI MEMBERSHIP
If the Company acquires commercial stationers that serve the same markets
as those served by members of UDI, certain UDI members may withdraw from UDI due
to this competition. Such withdrawals could adversely affect the revenues of
UDI.
DEPENDENCE ON TWO NATIONAL WHOLESALERS
The operations of the Company depend to a great degree on two national
wholesalers, S.P. Richards and United Stationers. For the fiscal year ended
December 31, 1997, these two national wholesalers accounted for approximately
60% of the products purchased by the Founding Companies. Although alternative
wholesalers may exist for products distributed by the Company, the loss of
either of the two national wholesalers as a source of product could have a
material adverse effect on the Company. See "Business -- Operating Strategy."
DEPENDENCE ON IMPLEMENTATION AND OPERATION OF SYSTEMS
The Company believes that the successful implementation of its technology
and operating systems at additional locations will enhance customer service,
improve inventory management and increase the speed and accuracy of order
fulfillment at such locations. However, the Company may experience unanticipated
delays, complications or expenses in implementing, integrating and operating
these systems, which could have a material adverse effect on the Company's
operations and financial performance. In addition, interruptions or disruptions
in system operations could adversely affect operations and financial performance
at some or all locations. Although the Company believes that its technology and
operating systems will be adequate for its current needs, such systems will
require modification, improvement or replacement as the Company expands or as
new technologies make the Company's systems obsolete. Such modifications,
improvements or replacements may require substantial expenditures and may
interfere with operations during periods of implementation, any of which could
have a material adverse effect on the Company's financial performance. See
"Business -- Operating Strategy" and "Business -- Operations."
SUBSTANTIAL COMPETITION
The office products industry is highly competitive. The Company competes
with small commercial office products stationers who sell to customers in a
limited geographic area and several large retailers, mail order companies and
contract stationers, a number of which have greater financial resources than the
Company. In addition, the Company intends to enter new markets by acquiring
existing commercial stationers and expects that one or more of these competitors
will have a presence in each of these new markets. As a result of this
competition, the Company may lose customers or have difficulty in acquiring new
customers. In addition, the Company's revenues and/or margins may decline as a
result of lower pricing in response to competitive pressures on pricing of
products. In addition, UDI competes with other industry buying groups for
members. See "Business -- Competition."
The Company may compete with the large consolidators of office products
companies to acquire independent stationers, which could lead to higher prices
being paid for such stationers. See "-- Risks Related to the Company's
Acquisition Strategy" and "Business -- Acquisition Strategy."
ABSENCE OF OR CHANGE IN CONTRACTUAL RELATIONSHIPS WITH CUSTOMERS
Companies in the office products industry generally do not enter into sales
contracts with their customers requiring them to make any specific volume of
purchases over any specific term. Instead, sales are generally made pursuant to
purchase orders or similar documentation with respect to specific sales. As a
result of these practices, the Company's customers generally have the right to
terminate their relationships with the Company without
11
<PAGE> 13
penalty and with little or no notice. Accordingly, a customer from which the
Company generates substantial revenue in one period may not be a substantial
customer in a subsequent period. If the Company's customers elect to reduce or
cease purchases from the Company, the Company could experience a material
adverse effect on its business, financial condition or results of operations.
Two of the Founding Companies are currently certified as women-owned and/or
minority-owned small businesses. These Founding Companies are required to notify
certain customers that are state agencies and other customers of any changes in
ownership or control. Such customers could elect to reduce or cease purchases
from these Founding Companies after the consummation of the Acquisitions based
on the loss of their women-owned or minority-owned status. See "Business --
Customers."
ACQUISITION PRICE FOR FOUNDING COMPANIES EXCEEDS ASSET VALUE
Valuations of the Founding Companies have not been established by
independent appraisals, but, other than with respect to King, have been
determined through arm's-length negotiations between representatives of Office
Centre Corporation and representatives of the Founding Companies. The
consideration being paid for each of the Founding Companies, including Founding
Companies whose stockholders will become affiliates of the Company upon
consummation of the Offering, is based primarily on the value of such Founding
Company as a going concern and not on the value of the acquired assets. The
purchase price for King was not determined by arm's length negotiations. No
assurance can be given that the future performance of the Founding Companies
will be commensurate with the consideration to be paid to acquire the Founding
Companies or the price of the Common Stock offered hereby. See
"Business -- Organization" and "Certain Transactions." See "Business -- The
Founding Companies" for a discussion of the principles followed in determining
the consideration being paid for each Founding Company.
AMORTIZATION OF INTANGIBLE ASSETS
As of March 31, 1998, approximately $48.5 million, or 48.6% of the
Company's pro forma total assets, as adjusted for the Acquisitions and the
Offering, consists of goodwill arising from the acquisition of the Founding
Companies. Goodwill is an intangible asset that represents the excess of the
aggregate purchase price over the estimated fair value of the net assets
acquired. The amount amortized in a particular period is reported as an expense
that reduces the Company's net income for that period. The amount amortized,
however, may not give rise to a deduction for tax purposes. In addition, the
Company will be required to amortize the goodwill, if any, from future
acquisitions. A reduction in net income resulting from the amortization of
goodwill may have an adverse impact upon the market price of the Company's
Common Stock. The Company plans to amortize goodwill associated with the
acquisitions of the Founding Companies over a period of 40 years. The Company
plans to evaluate continually whether events or circumstances have occurred that
may warrant revisions to the remaining useful life of goodwill, and any
shortening of such useful life may have a material adverse effect on the
Company's results of operations.
PROCEEDS OF OFFERING PAYABLE FOR EXISTING OBLIGATIONS AND TO AFFILIATES
Approximately $16.6 million of the net proceeds of the Offering will be
used to pay the cash portion of the purchase price for the Founding Companies.
Approximately $2.0 million of such amount will be paid to Yancey S. Jones, a
director of the Company, and/or M. Addison Jones, the brother of Yancey Jones,
both of whom are principal stockholders of one of the Founding Companies.
Approximately $1 million of such amount will be paid to Robert J. Gillon, Jr.,
the Chairman, Chief Executive Officer and President of the Company and a
principal stockholder of one of the Founding Companies. Approximately $7.8
million of the net proceeds of the Offering will be used to repay debt of the
Founding Companies, approximately $1.5 million of which will be used to repay
debt that is payable to, or guaranteed by, shareholders of the Founding Company
who are executive officers and/or directors of Office Centre Corporation or
members of their immediate families. Approximately $6.4 million of the net
proceeds of the Offering will be used to repay debt of Office Centre
Corporation. Approximately $4.3 million of the net proceeds of the Offering will
be received by the Selling Stockholders, who together own approximately 91.2% of
the Common Stock (prior to the consummation of the Acquisitions and the
Offering). Approximately $425,000 and $587,500 of the net proceeds of the
Offering will be used to pay the cash portions
12
<PAGE> 14
of consideration for consulting services which become due upon consummation of
the Offering to (i) an affiliate of Richard T. Case, an executive officer of the
Company, and (ii) an affiliate of John D. Kaweske, a founder of the Company,
respectively. In addition to borrowings available under the Company's credit
facility with CoreStates Bank, N.A. ("CoreStates"), approximately $9.5 million
in cash and cash equivalents will remain available to the Company on a pro forma
basis, as adjusted for the Acquisitions and the Offering, at March 31, 1998 to
meet the Company's cash requirements following the closing of the Offering. See
"Use of Proceeds," "Business -- The Founding Companies" and "Certain
Transactions."
RELIANCE ON KEY PERSONNEL
The Company's operations are dependent on the continued efforts of Robert
J. Gillon, Jr., its Chief Executive Officer and Chairman of the Board, Joseph E.
Hajjar, its Senior Vice President, Chief Financial Officer, Treasurer and
Secretary, Mr. Case, its Senior Vice President of Corporate Development, and
senior management of the Founding Companies. Furthermore, the Company will
likely be dependent on the senior management of companies that may be acquired
in the future. If any of these people becomes unable to continue in his or her
present role, or if the Company is unable to attract and retain other management
employees, the Company's business could be adversely affected. The Company has
key man life insurance covering Mr. Gillon in the amount of $3 million. See
"Management."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
Following the completion of the Offering, executive officers and directors
of the Company, and existing stockholders of the Company who are not executive
officers or directors of the Company, will beneficially own approximately 11.3%,
and 12.5%, respectively, of the then outstanding shares of Common Stock (10.8%,
and 9.7%, respectively, if the Underwriters' over-allotment option is exercised
in full). These stockholders are likely to continue to exercise substantial
control over the Company's affairs. Clifford M. Davie and a trust of Mr. Davie
(the "Davie Trust"), who, following the completion of the Offering, together
will own 6.7% of the then outstanding shares of Common Stock (6.4% if the
Underwriters' over-allotment option is exercised in full), have agreed with the
Company that following the completion of the Offering through December 31, 2002,
they will vote all shares of Common Stock owned by them in the same proportion
as all other outstanding shares of Common Stock are voted. They have irrevocably
authorized certain officers of the Company as their proxy to vote their shares
in accordance with such agreement. See "Principal and Selling
Stockholders -- Standstill Agreements with Founders."
HOLDING COMPANY STRUCTURE
The Company is a holding company, the principal assets of which are the
shares of the capital stock of its subsidiaries. As a holding company without
independent means of generating operating revenues, the Company depends on
dividends and other payments from its subsidiaries to fund its obligations and
meet its cash needs. Expenses of the Company include salaries of its executive
officers, insurance, professional fees and service of any indebtedness that may
be outstanding from time to time. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Introduction."
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK
The 4,000,000 shares of Common Stock being sold in the Offering will be
freely tradeable unless acquired by affiliates of the Company. The market price
of the Common Stock could be adversely affected by the sale of substantial
amounts of Common Stock in the public market following the Offering, or the
perception that such sales could occur.
Simultaneously with the closing of the Offering, the stockholders of the
Founding Companies will receive, in the aggregate, 3,354,482 shares of Common
Stock as a portion of the consideration for their businesses, and two
consultants of Office Centre Corporation will receive, in the aggregate, 136,363
shares of Common Stock in exchange for services rendered. See "Business -- The
Founding Companies" and "Certain Transactions." These shares are not being
offered by this Prospectus. Certain of the stockholders of the Founding
Companies who will
13
<PAGE> 15
receive, in the aggregate, 1,332,455 shares of Common Stock also have certain
piggy-back registration rights with respect to such shares. See "Shares Eligible
for Future Sale." Following the completion of the Offering, certain other
stockholders of Office Centre Corporation will beneficially own, in the
aggregate, an additional 1,097,786 shares of Common Stock. See "Certain
Transactions." None of these 4,500,000 shares were acquired in transactions
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, such shares may not be sold except in transactions registered
under the Securities Act or pursuant to an exemption from registration,
including the exemption provided by Rule 144 ("Rule 144") under the Securities
Act.
The Company, all of its existing stockholders and all of the former
stockholders of the Founding Companies who will receive Common Stock in
connection with the Acquisitions, have agreed that they will not offer or sell
any shares of Common Stock for a period of 180 days (the "Lockup Period") after
the date of this Prospectus without the prior written consent of the
Underwriters, except that the Company may issue shares of Common Stock in
connection with acquisitions. Walter H. Gordenstein, Mr. Davie and the Davie
Trust have agreed with the Company that they will not sell or transfer more than
25% of the Common Stock owned by them during each six month period in the two
years following the Lockup Period. After the Lockup Period (or such longer
period to which a shareholder has agreed), such shares may be sold in accordance
with Rule 144 promulgated under the Securities Act, subject to the volume,
holding period, and other limitations of Rule 144. See "Underwriting."
Upon the consummation of the Offering, the Company will have outstanding
options to purchase 1,043,000 shares of Common Stock, none of which will be
exercisable prior to the first anniversary of the Offering. Of these options,
743,000 options will be exercisable at the initial public offering price per
share, and 300,000 options will be exercisable at $9.12 per share. The Company
expects to file a registration statement on Form S-8 under the Securities Act to
register the shares of Common Stock issuable upon exercise of options to be
granted under the Company's 1998 Stock Option Plan. Accordingly, such shares
will be freely tradeable by holders who are not affiliates of the Company and,
subject to the volume and manner of sale limitations of Rule 144, by holders who
are affiliates of the Company.
The effect, if any, of the availability for sale, or sale, of the shares of
Common Stock available for future sale on the market price of the Common Stock
prevailing from time to time is unpredictable, and no assurance can be given
that the effect will not be adverse.
ABSENCE OF PUBLIC MARKET AND DETERMINATION OF OFFERING PRICE
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price has been determined by
negotiations between the Company and the Underwriters and may bear no relation
to the market price for the Common Stock after the Offering. (See "Underwriting"
for factors considered in determining the initial public offering price.) There
can be no assurance that the price so determined is representative of the
current or future market value of the Common Stock offered hereby. Although
application will be made for quotation of the Common Stock on the Nasdaq
National Market, there can be no assurance that an active public market for the
Common Stock will develop or continue after the Offering. The market price of
the Common Stock after the Offering may be subject to significant fluctuations
from time to time in response to numerous factors, including the depth and
liquidity of the market for the Common Stock, variations in the reported
financial results of the Company, investor perception of the Company, changes in
conditions in the economy in general and the office products industry in
particular.
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of the shares of Common Stock offered hereby will experience
immediate dilution in the net tangible book value of their shares of $8.83 per
share. After giving effect to the Acquisitions of the Founding Companies, the
total consideration paid to the Company by its existing stockholders (which
consideration represents the combined stockholders' equity before the Offering,
adjusted to reflect the payment of approximately $16.6 million in cash in
connection with the Acquisitions) will be $38.6 million. See "Dilution." In the
event the Company issues additional shares of Common Stock in the future,
including shares which may be issued in connection with possible future
acquisitions, purchasers of Common Stock in the Offering may experience further
dilution in the net tangible book value per share of the Common Stock.
14
<PAGE> 16
CERTAIN ANTI-TAKEOVER PROVISIONS
The Amended and Restated Certificate of Incorporation and Amended and
Restated By-Laws of the Company contain various provisions that may discourage
future takeover attempts which the Company's stockholders may deem to be in
their best interests and perpetuating the Company's existing management. Among
other things, such provisions: (i) provide the Board of Directors with broad
discretion to issue preferred stock; (ii) provide for three year terms for the
directors of the Company and the election of such directors on a staggered
basis; (iii) prohibit certain business combinations without the affirmative vote
of the holders of at least 80% of the then outstanding shares of Common Stock
and at least 66% of each series of preferred stock then outstanding; and (iv)
require the approval of 80% of all shares of Common Stock eligible to vote for
any proposed amendment to the Certificate of Incorporation or By-Laws that seeks
to modify or remove the foregoing provisions. In addition, the Company is
subject to the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law, which prohibit the Company from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an "interested
stockholder," unless the business combination is approved in a prescribed
manner. Further, pursuant to the Company's 1998 Stock Option Plan, in the event
of a change in control of the Company, all stock options and stock appreciation
rights ("SARs") granted under the Plan will automatically vest and become
exercisable. These provisions could delay or hinder the removal of incumbent
directors and could discourage or make more difficult a proposed merger, tender
offer or proxy contest involving the Company or may otherwise adversely affect
the market price of the Common Stock. See "Description of Capital
Stock -- Certain Provisions of Delaware Law and the Company's Certificate of
Incorporation and By-Laws" and "Management -- 1998 Stock Option Plan."
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,575,000 shares of
Common Stock offered hereby by the Company, assuming an initial public offering
price at the midpoint of the range set forth on the cover page of this
Prospectus, after deducting underwriting discounts and other Offering expenses
(estimated to be approximately $4.5 million (excluding amounts of approximately
$4.0 million previously paid), all of which are payable by the Company), are
estimated to be approximately $34.9 million. The Company will not receive any
proceeds from the sale of shares by the Selling Stockholders. The net proceeds
to the Company of the Offering are expected to be applied as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Cash portion of acquisition consideration for the Founding
Companies(1).............................................. $16,560
Payment of debt of the Founding Companies(2)................ 7,819
Payment of debt of Office Centre Corporation(3)............. 6,400
Cash consideration to consultants and financial
advisers(4)............................................... 1,113
Working capital and general corporate purposes, including
possible future acquisitions.............................. 2,980
-------
Total............................................. $34,872
=======
</TABLE>
- ---------------
(1) See "Business -- The Founding Companies" for a discussion of the principles
followed in determining the consideration being paid for each Founding
Company and a description of the aggregate consideration to be paid for each
Founding Company.
(2) The indebtedness of the Founding Companies to be repaid from the proceeds of
the Offering bears interest at rates ranging from 6.4% to 18.5%, with a
weighted average interest rate of 10.06%. Such indebtedness would otherwise
mature at various dates from the date hereof through 2002.
(3) The indebtedness under the Company's existing demand line of credit with
CoreStates, which allows the Company to borrow an amount up to a maximum of
$10 million, bears interest at the bank's prime lending rate and is secured
by all of the Company's assets. The proceeds of the CoreStates Bank, N.A.
line of credit drawn within the last year were used for working capital,
costs associated with the Offering and an investment in TSR.
(4) Payable to two consultants, one of which is an affiliate of an executive
officer of the Company and one of which is an affiliate of a founder of the
Company, and to one of the Underwriters. See "Certain Transactions" and
"Underwriting."
Pending such uses, the net proceeds will be invested in short-term,
interest-bearing investment grade securities or government issued securities.
The Company has no agreement or letter of intent to acquire any company
other than the Founding Companies. The Company intends to finance possible
future acquisitions using a combination of cash and shares of Common Stock. The
Company will need additional debt or equity financing in order to fully
implement its acquisition strategy. There can be no assurance that the Company
will be able to obtain such financing if and when it is needed or that, if
available, such financing will be available on terms the Company deems
acceptable. See "Risk Factors -- Risks Related to Acquisition Financing." The
Company has obtained a commitment for a $25 million line of credit from
CoreStates to be used for working capital and other general corporate purposes,
including additional acquisitions and refinancing of existing indebtedness.
There can be no assurance, however, that any line of credit will be obtained or
that, if obtained, it will be on terms that are favorable to the Company or
sufficient for the Company's needs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
16
<PAGE> 18
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on the Common
Stock in the foreseeable future because it intends to retain its earnings, if
any, to finance the expansion of its business and for general corporate
purposes. Any payment of future dividends will be at the discretion of the Board
of Directors and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, level of indebtedness, contractual
restrictions, covenants under existing credit facilities with respect to the
payment of dividends and other factors that the Company's Board of Directors
deems relevant. Under the Company's line of credit with CoreStates, the Company
is prohibited from paying dividends or making distributions.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 (i) on a pro forma combined basis to reflect the Acquisitions;
and (ii) on a pro forma combined basis to reflect the Acquisitions and, as
adjusted to give effect to the sale of 3,575,000 shares of Common Stock offered
hereby by the Company, assuming an initial public offering price of $11 per
share, the midpoint of the range set forth on the cover page of this Prospectus,
and the application of the estimated net proceeds therefrom. For a description
of the adjustments, see Notes to the Unaudited Pro Forma Combined Financial Data
included elsewhere in this Prospectus. The following table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical and pro forma financial statements
of the Company and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1998
------------------------
PRO FORMA
COMBINED AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt and capital lease
obligations............................................... $ 9,221 $ 202
------- -------
Long-term debt and capital lease obligations, excluding
current portion........................................... 2,122 708
------- -------
Short and long-term amounts due to stockholders of Founding
Companies and related parties............................. 17,039 --
------- -------
Stockholders' equity:
Preferred Stock, $1.00 par value, 1,000 shares authorized;
no shares outstanding.................................. -- --
Common Stock, $0.001 par value, 50,000,000 shares
authorized; 4,812,000 shares issued and outstanding pro
forma combined and 8,500,000 shares issued and
outstanding pro forma as adjusted...................... 1 9
Additional paid-in capital.................................. 37,419 67,315
Retained earnings........................................... (438) (438)
------- -------
Total stockholders' equity.................................. 36,982 66,886
------- -------
Total capitalization........................................ $65,364 $67,796
======= =======
</TABLE>
17
<PAGE> 19
DILUTION
The pro forma net tangible book value of the Company at March 31, 1998 was
($11.5) million or a deficit of ($2.33) per share after giving effect to the
Acquisitions. "Pro forma net tangible book value per share" is the pro forma
tangible net worth (total tangible assets less total liabilities) of the Company
divided by the number of shares of Common Stock outstanding after giving effect
to the Acquisitions. After giving effect to the sale by the Company of 3,575,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $11 per share, the midpoint of the range set forth on the cover page of
this Prospectus (after deducting underwriting discounts and commissions and
estimated Offering expenses to be paid by the Company), the pro forma net
tangible book value of the Company at March 31, 1998, was $18.4 million or $2.17
per share, representing an immediate increase in net tangible book value of
$4.50 per share to existing stockholders and an immediate dilution of $8.83 per
share to the investors purchasing the shares in the Offering ("New Investors").
The following table illustrates per share dilution to New Investors:
<TABLE>
<S> <C> <C>
Initial public offering price............................... $11.00
Pro forma net tangible book value before the Offering....... $(2.33)
Increase attributable to the sale of shares offered
hereby.................................................... 4.50
------
Pro forma net tangible book value after the Offering........ 2.17
------
Dilution in net tangible book value to New Investors........ $ 8.83
======
</TABLE>
The following table sets forth at the date of this Prospectus the number of
shares of Common Stock acquired from the Company, the total consideration to the
Company and the average price per share paid by existing stockholders,
stockholders of the Founding Companies, consultants to the Company and New
Investors, after giving effect to the Acquisitions and the Offering, based on an
assumed initial public offering price of $11 per share, the midpoint of the
range set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
SHARES ACQUIRED TOTAL CONSIDERATION AVERAGE
------------------ -------------------- PRICE
NUMBER % AMOUNT % PER SHARE
--------- ----- ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 1,434,155 16.9% $ 256,000(1) 0.3% $ 0.15
Stockholders of the Founding
Companies(2).......................... 3,354,482 39.5 36,899,000 47.3 11.00
Consultants to the Company.............. 136,363 1.6 1,500,000 1.9 11.00
--------- ----- ----------- -----
4,925,000 58.0 38,655,000 49.5 7.85
New Investors........................... 3,575,000 42.0 39,325,000 50.5 11.00
--------- ----- ----------- -----
Total................................... 8,500,000 100.0% $77,980,000 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Based on the net tangible book value of Office Centre Corporation at March
31, 1997.
(2) Represents the number of shares of Common Stock and the related fair value
of such shares to be issued in connection with the Acquisitions, but
excludes all contingent consideration. See "Business -- The Founding
Companies."
18
<PAGE> 20
SELECTED COMBINED HISTORICAL AND PRO FORMA FINANCIAL DATA
In May 1997, Office Centre Corporation acquired UDI Corp. and UDI II Corp.
in a stock for stock exchange. For accounting purposes, the transaction was
accounted for as a reverse acquisition with the results of UDI's operations
presented on a historical basis as the results of Office Centre Corporation. UDI
II Corp. was subsequently merged with and into UDI Corp., with UDI Corp.
remaining as the surviving entity. Office Centre Corporation will acquire the
Founding Companies simultaneously with and conditioned on the consummation of
the Offering. The Acquisitions will be accounted for under the purchase method
of accounting, whereby their assets and liabilities are recorded at their
estimated fair market value.
The following table presents selected combined historical statement of
operations data of the Company for the three most recent calendar years and the
three months ended March 31, 1997 and 1998, selected combined pro forma
statement of operations data for the year ended December 31, 1997 and the three
months ended March 31, 1997 and 1998, and selected combined pro forma and pro
forma, as adjusted, balance sheet data as of March 31, 1998. The selected
combined historical statement of operations data are a summation of the
revenues, cost of revenues and operating expenses of the Company and do not
represent combined results presented in accordance with generally accepted
accounting principles. Each Founding Company has a fiscal year ending December
31, or has been converted to a December 31 year end for purposes of the
following table.
The pro forma combined statement of operations data assume that the
Acquisitions and the Offering were consummated on January 1, 1997 (see notes
below). The pro forma combined balance sheet data assume that the Acquisitions
were consummated on March 31, 1998 and, as adjusted, reflect the consummation of
the Offering (see notes below).
The data presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical and pro forma financial statements of the Company and related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------- -------------------------------------------
PRO PRO FORMA
FORMA ----------------------
1995 1996 1997 1997(1) 1997 1998 1997(1) 1998(1)
------- -------- -------- --------- ------- ------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF
OPERATIONS DATA:
Revenues.................. $88,639 $104,151 $118,952 $ 126,846 $28,238 $32,477 $ 29,806 $ 33,814
Cost of revenues.......... 60,718 70,652 80,285 85,811 18,723 21,904 19,812 22,866
------- -------- -------- --------- ------- ------- --------- ---------
Gross margin.............. 27,921 33,499 38,667 41,035 9,515 10,573 9,994 10,948
Operating expenses........ 25,723 31,499 35,672 34,454(2) 8,539 10,036 8,331(2) 9,020(2)
Goodwill amortization..... 249 254 251 1,419(3) 20 32 323(3) 332(3)
------- -------- -------- --------- ------- ------- --------- ---------
Operating income.......... $ 1,949 $ 1,746 $ 2,744 5,162 $ 956 $ 505 1,340 1,596
======= ======== ======== ======= =======
Other income (expense),
net(4).................. (79) (70) (77)
--------- --------- ---------
Income before income
taxes................... $ 5,083 $ 1,270 $ 1,519
========= ========= =========
Net Income(5)............. $ 2,482 $ 633 $ 779
========= ========= =========
Net income per share
Basic and Diluted....... $ .29 $ .07 $ .09
========= ========= =========
Shares used in computing
pro forma net income per
share(6)
Basic and Diluted....... 8,500,000 8,500,000 8,500,000
========= ========= =========
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-----------------------------
PRO FORMA
COMBINED(7) AS ADJUSTED(8)
----------- --------------
(IN THOUSANDS)
<S> <C> <C>
COMBINED BALANCE SHEET DATA:
Total assets(9)............................................. $97,232 $99,664
Total short-term debt....................................... 9,221 202
Total long-term debt........................................ 2,122 708
Stockholders' equity........................................ 36,982 66,886
</TABLE>
- ---------------
(1) The pro forma combined statement of operations data assume that the
Acquisitions and the Offering were consummated on January 1, 1997 and assume
the acquisition of Total Office Products by The Supply Room Companies, Inc.
on January 1, 1997. These results are not necessarily indicative of the
results the Company would have obtained had these events actually then
occurred or of the Company's future results.
(2) Adjusted to reflect the acquisition of the Founding Companies and the
Compensation Differential.
(3) Includes $1.2 million, $300,000 and $300,000 of additional goodwill
amortization attributable to the Acquisitions for the year ended December
31, 1997, and the three months ended March 31, 1997 and 1998, respectively.
(4) Includes a pro forma adjustment to reflect the elimination of interest
expense resulting from the repayment of certain debt paid from the net
proceeds of the Offering. See "Use of Proceeds."
(5) Assumes all income is subject to a corporate income tax rate of 40% and that
all goodwill amortization is nondeductible for income tax purposes.
(6) Includes (i) 1,434,155 shares outstanding prior to the Acquisitions and the
Offering; (ii) 3,354,482 shares to be issued to the stockholders of the
Founding Companies in connection with the Acquisitions; (iii) 136,363 shares
to be issued to certain consultants of the Company; and (iv) 3,575,000
shares to be issued by the Company in the Offering. Outstanding options have
no material dilutive effect.
(7) The pro forma combined balance sheet data assume the Acquisitions were
consummated on March 31, 1998.
(8) Adjusted for the sale of 3,575,000 shares of Common Stock offered hereby at
an assumed initial public offering price of $11 per share and the
application of the net proceeds therefrom and the repayment of certain
indebtedness. See "Use of Proceeds."
(9) Includes $46.7 million of additional goodwill attributable to the
Acquisitions.
20
<PAGE> 22
SELECTED FINANCIAL DATA OF OFFICE CENTRE CORPORATION
The following selected financial data of Office Centre Corporation, which
has been designated as the accounting acquirer of the Founding Companies, should
be read in conjunction with the consolidated financial statements of Office
Centre Corporation and related notes thereto and other financial data included
elsewhere in this Prospectus. The financial data set forth below as of and for
each of the periods ended December 31, 1995, 1996, 1997 have been derived from
the audited consolidated financial statements of Office Centre Corporation
included elsewhere in this Prospectus. The financial data as of and for the
periods ended December 31, 1993 and 1994 have been derived from unaudited
financial statements of Office Centre Corporation not included in this
Prospectus. The financial data as of and for the three months ended March 31,
1997 and 1998 have been derived from the unaudited consolidated financial
statements included elsewhere in this Prospectus. In May 1997, Office Centre
Corporation acquired all of the outstanding shares of UDI Corp. and UDI II Corp.
(which were subsequently merged to form UDI) in exchange for shares of Office
Centre Corporation. The transaction was accounted for as a reverse acquisition
with the results of UDI's operations presented on a historical basis as the
results of Office Centre Corporation. Accordingly, this discussion relates to
the results of UDI as the only operating unit of the registrant. These
historical results are not indicative of the results that may be expected in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Prospectus Summary -- Summary Combined Historical
and Pro Forma Financial Data."
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................... $ 4,573 $ 9,825 $ 12,984 $ 10,931 $ 11,002 $ 2,786 $ 2,600
Gross margin............... 2,181 4,021 4,369 5,000 5,513 1,382 1,293
Operating costs and
expenses................. 1,496 2,877 4,262 5,189 4,981 1,092 2,226
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss).... $ 685 $ 1,144 $ 107 $ (189) $ 532 $ 290 $ (933)
========= ========= ========= ========= ========= ========= =========
Net income (loss).......... $ 404 $ 658 $ 81 $ (185) $ 183 $ 156 $ (716)
========= ========= ========= ========= ========= ========= =========
Net income (loss) per share
Basic and Diluted........ $ .30 $ .49 $ .06 $ (.14) $ .13 $ .12 $ (.50)
========= ========= ========= ========= ========= ========= =========
Shares used in computing
net income (loss) per
share Basic and
Diluted.................. 1,355,091 1,355,091 1,355,091 1,355,091 1,371,758 1,355,091 1,434,155
========= ========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------- AS OF MARCH 31,
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficiency)............. $ 349 $ 706 $ 416 $ (25) (4,354) $ (5,810)
Total assets............... 6,233 17,970 19,127 19,961 25,467 24,026
Total long-term debt....... -- -- 366 189 96 96
Stockholders' equity....... 432 858 285 100 393 (58)
</TABLE>
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is qualified in its entirety by, and should be
read in conjunction with, the financial statements and related notes thereto and
other financial data appearing elsewhere in this Prospectus.
INTRODUCTION
Office Centre Corporation was founded in October 1996 for the purpose of
becoming a nationwide office products supplier that serves primarily small and
medium-sized corporate customers. Upon acquiring the Founding Companies, the
Company believes that it will be one of the largest office products suppliers in
the United States. The Company, through its wholly-owned subsidiary, UDI, also
operates one of the largest office products buying groups in the United States,
with approximately 1,100 office products stationers and office furniture dealers
as members. Revenues of the Founding Companies are derived primarily from the
sale of a wide variety of office supplies, office furniture and other office
products to small and medium-sized corporate customers. Certain of the Founding
Companies also have limited retail operations and provide or outsource other
services to customers, such as printing services. UDI's revenues primarily
consist of membership fees, fees received for the programs offered to members
and volume rebates received from national office products wholesalers and
certain manufacturers.
Revenues from the sale of office products are recognized upon shipment of
the product to customers, at the point of sale for retail operations and upon
delivery of the service provided in the case of printing and other services. UDI
recognizes revenues ratably throughout the year as membership fees and volume
rebates are earned. Cost of revenues includes the cost of the merchandise plus
the cost of in-bound freight and direct labor and other direct costs of printing
services. In the case of UDI, the cost of revenues includes the cost of programs
provided and the portion of rebates it will pass along to buying group members
who achieve specified volume requirements. Operating costs and expenses include
warehouse and customer delivery expenses, employee salaries, wages and benefits,
sales commissions, telephone expenses, promotional expenses, depreciation and
occupancy costs.
The Founding Companies have been operated historically as independent,
privately-owned entities, and their results of operations reflect varying tax
structures, including both S and C Corporations, which have influenced the
historical level of owners' compensation. Gross profit margins and operating
costs and expenses as a percentage of revenues may not be comparable among the
individual Founding Companies. Owners of certain of the Founding Companies have
agreed to certain reductions in their compensation and benefits commencing upon
the consummation of the Offering. The Compensation Differential of $3,141,000,
$570,000 and $1,311,000 for the year ended December 31, 1997 and the three
months ended March 31, 1997 and 1998, respectively, has been reflected as a pro
forma adjustment in the Unaudited Pro Forma Combined Statements of Operations.
The Company believes that, following the Acquisitions, it will be able to
realize operating efficiencies and achieve certain synergies among the Founding
Companies. In particular, with a larger operational scale, the Company believes
that it can obtain more favorable prices and other purchasing terms on office
products through volume purchasing and through the use of a Company-wide
proprietary catalog. The Company will also seek to reduce costs over time
through the implementation of its centre and satellite strategy and by combining
certain administrative functions at the corporate level, such as cash
management, insurance, payroll processing and employee benefits, marketing and
advertising, long distance services and a variety of professional services. The
Company anticipates that these savings will be offset to some extent by costs
and expenditures related to the Company's new corporate management, corporate
expenses relating to being a public company and systems integration. These
various costs and possible cost savings may make historical operating results
not comparable to, or indicative of, future performance.
Office Centre Corporation has been designated as the accounting acquirer of
the Founding Companies. The $46.7 million excess of merger consideration over
the estimated fair value of the net assets of the Founding Companies will be
recorded as goodwill and amortized over a 40-year period. The pro forma impact
of this amortization expense, which is not deductible for tax purposes, is $1.2
million per year.
22
<PAGE> 24
HISTORICAL COMBINED RESULTS OF OPERATIONS
The combined results of operations of the Founding Companies for the
periods presented do not represent combined results of operations presented in
accordance with generally accepted accounting principles, but are only a
summation of the revenues, cost of revenues, operating costs and expenses of the
individual Founding Companies on an historical basis. The combined results also
exclude the effect of pro forma adjustments and may not be comparable to, or
indicative of, the Company's post-combination results of operations because (i)
the Founding Companies were not under common control or management during the
periods presented; (ii) the Founding Companies used different tax structures (S
Corporations or C Corporations) during the periods presented; (iii) the Company
will incur incremental costs related to its new corporate management and the
costs of being a public company; (iv) the Company will use the purchase method
to record the Acquisitions, resulting in the recording of goodwill which will be
amortized over 40 years; and (v) the combined data do not reflect the
Compensation Differential and potential benefits and cost savings the Company
expects to realize when operating as a combined entity.
The following table sets forth certain combined operating results of the
Founding Companies on a historical basis and shows such results as a percentage
of revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- ---------------------------------
1995 1996 1997 1997 1998
--------------- ---------------- ---------------- --------------- ---------------
(IN THOUSANDS, EXCEPT PERCENT DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $88,639 100.0% $104,151 100.0% $118,952 100.0% $28,238 100.0% $32,477 100.0%
Cost of revenues.......... 60,718 68.5 70,652 67.8 80,285 67.5 18,723 66.3 21,904 67.4
------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Gross margin.............. 27,921 31.5 33,499 32.2 38,667 32.5 9,515 33.7 10,573 32.6
Operating expenses........ 25,972 29.3 31,753 30.5 35,923 30.2 8,559 30.3 10,068 31.0
------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Operating income.......... $ 1,949 2.2% $ 1,746 1.7% $ 2,744 2.3% $ 956 3.4% $ 505 1.6%
======= ===== ======== ===== ======== ===== ======= ===== ======= =====
</TABLE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenues. Revenues increased 15.0% from $28.2 million for the three months
ended March 31, 1997 to $32.5 million in the three months ended March 31, 1998.
The increase primarily reflects both internal growth attributable to volume
increases for substantially all the Founding Companies and growth through
acquisitions. Most notably, revenues for Office Solutions grew by 46.8%, aided
by the full quarter impact of the acquisition of a customer list in March 1997;
revenues for Greenwood grew by 32.5%, aided by additions of new customers; and
revenues for TSR grew by 10.2%, aided by the full quarter impact of the
acquisition of a printing operation acquired in the third quarter of 1997 and
the acquisition of TOP in March 1998. Other notable increases from internal
growth were experienced by New England, King, Sierra and SOS, whose revenues
grew 16.5%, 11.2%, 18.3% and 14.4%, respectively.
Gross Margin. Gross margin increased 11.1% from $9.5 million or 33.7% of
revenues for the three months ended March 31, 1997 to $10.6 million or 32.6% of
revenues for the three months ended March 31, 1998. As a percentage of revenue,
gross margin declined by 1.1%. This includes the impact of cost increases from
the national wholesalers, which have not yet been fully reflected in the selling
prices of the Founding Companies. In addition, certain of the Founding Companies
have experienced increased revenues in technology supplies, which carry lower
margins.
Operating Expenses. Operating expenses increased 17.6% from $8.6 million
or 30.3% of revenues for the three months ended March 31, 1997 to $10.1 million
or 31.0% of revenues for the three months ended March 31, 1998. This increase is
primarily attributable to $2.1 million of compensation paid to certain executive
officers and stockholders of Office Centre Corporation and senior management of
the Founding Companies compared to $1.3 million in the corresponding period of
the prior year. This includes non-recurring cash and stock related compensation
charges of Office Centre Corporation totalling $732,000 in the three months
ended March 31, 1998. Other increases such as sales commissions and other
selling related costs increased at a rate consistent with the increase in
revenues of the Founding Companies.
23
<PAGE> 25
Year Ended 1997 Compared to 1996
Revenues. Revenues increased 14.2% from $104.2 million in 1996 to $119.0
million in 1997. The increase primarily reflects internal growth attributable to
volume increases for substantially all the Founding Companies and growth through
acquisitions. Most notably, revenues for Office Solutions grew by 47.7% aided by
the acquisition of a customer list in March 1997, and TSR by 10.9%, aided by the
acquisition of three office products businesses in the first quarter of 1996 and
a printing operation in the third quarter of 1997. Other notable increases from
internal growth were experienced by King, Sierra and Greenwood, whose revenues
grew 11.7%, 10.1% and 22.3%, respectively.
Gross Margin. Gross margin increased 15.4%, from $33.5 million or 32.2% of
revenues for the year ended December 31, 1996 to $38.7 million or 32.5% of
revenues for 1997. The increase in gross margin is consistent with the growth in
revenues and to a lesser extent to the increase in profit margin UDI realized on
the programs it provided members.
Operating Expenses. Operating expenses increased 13.1% from $31.8 million
or 30.5% of revenues in 1996 to $35.9 million or 30.2% of revenues in 1997. The
decrease in operating expenses as a percentage of revenues related to the 1997
acquisitions and the operating efficiencies achieved through their integration.
These savings were partly offset by increases in compensation costs paid to the
stockholders of the Founding Companies and the establishment of corporate level
functions of Office Centre Corporation in preparation for the Offering.
Year Ended 1996 Compared to 1995
Revenues. Revenues increased 17.5% from $88.6 million in 1995 to $104.2
million in 1996. The increase primarily reflects internal growth attributable to
volume increases at substantially all the Founding Companies and growth through
acquisitions. Most notably, revenues for TSR grew 35.3% due in part to the full
year benefit of two office products businesses acquired in the first quarter of
1995 and three acquired in the first quarter of 1996. The increase in revenue
from the Founding Companies was offset in part by a decrease in UDI revenues of
$2.1 million. In 1995, the stipulated rebate UDI received from the two national
wholesalers was increased by 1% of member purchases as an incentive by the
wholesalers to stimulate member volume. In 1996, the rebate was reduced to the
pre-1995 levels, resulting in the decrease in UDI revenues.
Gross Margin. Gross margin increased 20.0%, from $27.9 million or 31.5% of
revenues for the year ended December 31, 1995 to $33.5 million or 32.2% of
revenues for 1996. The increase in gross margin is consistent with the growth in
revenues. The UDI rebate decrease had an insignificant impact on gross margin
since the portion of the rebate retained by UDI and not passed along to UDI
members remained consistent with the 1995 level.
Operating Expenses. Operating expenses increased 22.3% from $26.0 million
or 29.3% of revenues in 1995 to $31.8 million or 30.5% of revenues in 1996. The
increase in operating expenses is largely attributable to the same factors
increasing revenues and the effect of salary increases paid to the stockholders
of Office Centre Corporation and the Founding Companies.
Combined Liquidity and Capital Resources
The Founding Companies' principal sources of liquidity have historically
been cash flows from operating activities and, to a lesser extent, borrowings.
Approximately $16.6 million of the proceeds from the Offering will be used to
fund the cash portion of the consideration to be paid in connection with the
Acquisitions and $7.8 million will be used to repay borrowings of the Founding
Companies, and $6.4 million will be used to repay amounts outstanding on the
Company's Corestates credit line. As of March 31, 1998, on a pro forma combined
basis, after giving effect to the application of the proceeds of the Offering
(assuming net proceeds of the Offering of $34.9 million), the Company would have
cash and cash equivalents of approximately $9.5 million, working capital of
approximately $12.8 million, no debt outstanding (excluding capital leases) and
the borrowing capacity under the Corestates credit line. Although there can be
no assurance of its ability to do so, the Company expects
24
<PAGE> 26
to fund its future cash requirements with funds generated from operations, from
borrowed funds and from other sources.
Office Centre Corporation currently has a demand line of credit with
CoreStates, which allows it to borrow a maximum of $10 million at the bank's
prime lending rate. The line is collateralized by all the assets of UDI.
Availability under the line is based primarily on 85% of eligible accounts
receivable plus 60% of eligible inventory.
In May 1998, the Company received a commitment from CoreStates to provide a
$25 million Revolving Credit Facility which will replace the existing $10
million facility. Amounts outstanding are to bear interest at the prime lending
rate plus an applicable margin of up to .75% or LIBOR plus an applicable margin
of up to 3.25%. The Company's obligations under the credit facility are to be
guaranteed by the current and future subsidiaries of the Company and are to be
secured by a priority security interest in all other assets of the Company.
Pursuant to the CoreStates commitment, the credit facility is to contain
customary covenants, including restrictions on other indebtedness, approval of
acquisitions in excess of $20 million, limits on capital expenditures as well as
various financial covenants customary for transactions of this type. The Company
is obligated to pay a financing fee of $150,000 upon completion of the
documentation for the credit facility and a commitment fee of .375% per annum on
the daily average of the unused portion of the credit facility from and after
the date the Company enters into the credit facility.
The Founding Companies' capital expenditures were $1.1 million, $1.8
million, and $1.4 million for the three years ended December 31, 1995, 1996 and
1997, respectively. These capital expenditures were primarily for office
equipment, delivery vehicles, computers and facility additions and improvements.
Office Centre Corporation does not currently have any commitments to make
significant capital expenditures in the next twelve months. Office Centre
Corporation believes that funds generated from operations, together with the
proceeds from the Offering and possible future sources of borrowings will be
sufficient to finance its current operations and planned capital expenditure
requirements at least through the twelve months following the Offering. Although
Office Centre Corporation is not currently involved in negotiations and has no
current commitments with respect to any acquisitions (other than the
Acquisitions), to the extent Office Centre Corporation is successful in
consummating possible future acquisitions, it may be necessary to finance such
acquisitions through the issuance of additional equity securities, incurrence of
indebtedness or a combination of both.
RESULTS OF OPERATIONS OF OFFICE CENTRE CORPORATION
In May 1997, Office Centre Corporation acquired all of the outstanding
shares of UDI Corp. and UDI II Corp. (which were subsequently merged to form
UDI) in exchange for shares of Common Stock. The transaction was accounted for
as a reverse acquisition with the results of UDI's operations presented on a
historical basis as the results of Office Centre Corporation. Accordingly, this
discussion relates to the results of UDI as the only operating unit of the
registrant.
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenues. Revenues declined 6.7% from $2.8 million for the three months
ended March 31, 1997 to $2.6 million in the three months ended March 31, 1998.
This decline reflects the impact of lower volume in one of the wholesaler
programs offset in part by increases in direct manufacturer volume and program
revenue derived from OffiSat.
Gross Margin. Gross margin declined 6.4% from $1.4 million or 49.6% of
revenues for the three months ended March 31, 1997 to $1.3 million or 49.7% of
revenues for the three months ended March 31, 1998. Gross margin declined
primarily as a result of decreased revenue.
Operating Costs and Expenses. Operating costs and expenses increased
103.8% from $1.1 million or 39.2% of revenues for the three months ended March
31, 1997 to $2.2 million or 85.6% in the three months ended March 31, 1998. The
increase in operating expenses is primarily attributable to $1.3 million of
costs incurred in the operation of Office Centre Corporation's corporate
functions, which were initiated in May 1997. For the three months ended March
31, 1998, the increase in operating expenses includes non-recurring cash and
25
<PAGE> 27
stock related compensation charges for awards to certain officers and
stockholders of Office Centre Corporation totalling $732,000, accounting and
administrative functions and audit and other costs associated with becoming a
public entity. These expenses were offset in part by decreases, of $127,000, in
compensation paid to officers of UDI and reductions in other selling, general
and administrative costs.
Year Ended 1997 Compared to 1996
Revenues. Revenues for 1997 remained constant with 1996 levels, increasing
by $71,000. The mix in revenues shows increases in income from UDI's
manufacturers' rebate programs and advertising and promotional income, which
more than offset the declines in income from UDI's wholesalers' rebate programs.
Gross Margin. Gross margin increased 10.3% from $5.0 million or 45.7% of
revenues for the year ended December 31, 1996 to $5.5 million or 50.1% of
revenues for 1997. Gross profit improved as higher margins were realized from
the growth in promotional fees from UDI's catalog and flyer programs.
Operating Costs and Expenses. Operating costs and expenses declined .04%
from $5.2 million or 47.4% of revenues in 1996 to $5.0 million or 45.3% of
revenues in 1997. This decline in operating expenses was primarily attributable
to a $554,000 decrease in compensation paid to the officers of UDI and
reductions in other selling, general and administrative costs. These were offset
in part by $649,000 of costs for the start up of Office Centre Corporation's
corporate function, which began in May 1997.
Year Ended 1996 Compared to 1995
Revenues. Revenues declined 15.8% or $2.1 million in 1996 from $13.0
million in 1995 to $10.9 million in 1996. The primary reason for the overall
revenue decline was the decrease in revenues from wholesalers rebates of $3.1
million. In 1995, the stipulated rebate UDI received from the two national
wholesalers was increased by 1% of member purchases as an incentive by the
wholesalers to stimulate member volume. In 1996, the rebate percentage was
reduced to the pre-1995 levels resulting in the decrease in UDI revenues.
Gross Margin. Gross margin increased $631,000 in 1996 from $4.4 million or
33.6% of revenues in 1995 to $5.0 million or 45.7% of revenues in 1996,
resulting from increases from membership fees and other programs. The revenue
decline associated with the wholesaler program did not impact gross margin
negatively because the portion of the rebate retained by UDI and not passed
along to UDI members remained consistent with the 1995 level.
Operating Costs and Expenses. Operating costs and expenses increased 21.8%
from $4.3 million or 32.8% of revenues in 1995 to $5.2 million or 47.5% of
revenues in 1996. This increase resulted primarily from sales commissions and
bonuses paid to UDI's owners.
Liquidity and Capital Resources of Office Centre Corporation
At March 31, 1998, Office Centre Corporation had a working capital deficit
of $5.8 million. The primary capital requirements have been to fund Office
Centre Corporation's working capital throughout the year. In addition, Office
Centre Corporation has expended $649,000 in 1997 and $1.3 million for the three
months ended March 31, 1998, in costs associated with operating its corporate
functions and $4.0 million in costs associated with its initial public offering
and a $1.5 million investment in TSR which was made in 1997.
Net cash provided by (used in) operating activities for 1995, 1996, and
1997 was $(453,000), $77,000, and $444,000, respectively. The cash flow from
operations is primarily a result of the net income (loss) each year, adjusted
for non-cash charges, and has been impacted by increases in accounts receivable,
including rebates due from the wholesalers, offset by increases in accounts
payable and rebates due to members.
Net cash used in investing activities in 1995, 1996, and 1997 of $30,000,
$143,000 and $1.7 million, respectively, were primarily to fund capital
expenditures and, in 1997, to make an investment in TSR as part of the overall
consideration to be paid for the acquisition of that company.
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Net cash provided by (used in) financing activities for 1995, 1996 and 1997
was $255,000, ($56,000) and $745,000, respectively. In 1997 and 1996, UDI repaid
loans to former stockholders of $564,000 and $126,000, respectively, and
incurred $2.9 million and $92,000, respectively, for initial public offering
costs.
NEW ACCOUNTING PRONOUNCEMENTS
In July 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS No. 130") and Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS No.
131"). SFAS No. 130, which must be adopted by the Company in 1999, establishes
standards for the reporting and display of comprehensive income and its
components in a complete set of financial statements. SFAS No. 131, which must
also be adopted by the Company in fiscal year 1999, changes the way segment
information is reported and establishes standards for related disclosures about
products and services, geographic areas, and major customers.
The Company believes that the adoption of these new standards will not have
a material impact on the Company's financial position or results of operations.
Management is currently evaluating the effect of SFAS No. 131 on consolidated
financial statement disclosures.
INFLATION
Office Centre Corporation does not believe that inflation has had a
material impact on its operations or the operations of the Founding Companies
during 1995, 1996 or 1997.
SEASONALITY
The Company's revenues are generally not impacted by seasonal influences.
Quarterly results may be materially affected by the timing of acquisitions.
YEAR 2000
The Company relies on various computer applications for the operations of
its business, which are primarily purchased or licensed from third-party vendors
and software providers. The Company has received or expects to receive the
necessary modifications to be year 2000 compliant by the end of 1998 or the
early part of 1999. The Company believes that year 2000 compliance will not
materially impact its operations or result in a material expenditure. The
Company believes that its software vendors will absorb the costs of becoming
year 2000 compliant and, consequently, the Company will not be required to make
material expenditures to become year 2000 compliant.
The Company will continue to communicate with entities that provide and
receive data from the Company to ensure they are aware of the year 2000 issues.
There can be no assurance that such other entities will become year 2000
compliant. However, the Company does not anticipate that their noncompliance
will have a material adverse effect on the Company.
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BUSINESS
Office Centre Corporation has been established for the purpose of becoming
a nationwide office products supplier that serves primarily small and
medium-sized corporate customers. The Founding Companies serve the New York
City; Los Angeles; Atlanta; Dallas/Fort Worth; Boston; Baltimore; Sacramento;
Richmond, Virginia; Grand Rapids, Michigan; and Montgomery, Alabama metropolitan
areas. Following the Acquisitions, the Company believes that it will be one of
the largest office products suppliers in the United States. The Company, through
its wholly-owned subsidiary, UDI, also operates one of the largest office
products buying groups in the United States, with approximately 1,100 office
products stationers and office furniture dealers as members. In addition to
selling office supplies, the Company also sells office furniture and technology
supplies, performs and outsources printing services and conducts limited retail
operations. The Company had pro forma revenues and operating income for the year
ended December 31, 1997 of approximately $126.8 million and $5.2 million,
respectively, and for the three months ended March 31, 1998 of approximately
$33.8 million and $1.6 million, respectively.
INDUSTRY OVERVIEW
In 1996, the office products industry generated approximately $125 billion
in revenues, and the Company estimates that the segment of its industry
supplying the small and medium-sized corporate customer represented
approximately $18 billion of such revenues. Historically, the distribution of
office products has been fragmented and served by numerous stationers, most of
which operated in only one metropolitan area and had annual sales of less than
$15 million. In recent years, large consolidators have grown rapidly through
acquisitions of medium and large-sized contract stationers, which primarily
serve companies with more than 250 employees. The commercial stationer segment
of the industry supplying the 20 to 250 employee companies remains highly
fragmented.
There are five primary types of suppliers in the office products industry:
contract stationers, retailers, national mail order houses, warehouse clubs/mass
marketers and commercial stationers.
Contract stationers focus principally on serving companies with 250 or more
employees. The four largest contract stationers (Boise Cascade, Corporate
Express, BT Office Products and U.S. Office Products) have grown rapidly,
primarily through acquisitions of medium and large contract stationers. These
large contract stationers have been rapidly building or acquiring warehouses to
provide nationwide product distribution to their corporate customers.
The large retailers (Office Max, Staples and Office Depot) or "superstores"
have rapidly built stores that provide availability of product primarily to the
retail consumer. Initially attracting a wide variety of customers through
advertising low prices, their competitive strength is the wide variety of
products offered and extended hours of operation which make their product
readily available. This is especially important to the small office and home
office market. Staples and Office Depot have also acquired contract stationers
and they now sell to all market segments.
While not having grown historically through acquisitions, the mail order
companies (including Viking Office Supplies, Quill and Global Directmail)
nonetheless have capitalized on the growing acceptance in the United States of
ordering items by mail. Mail order companies have built a strong following by
offering outstanding service and reliability, especially to the home office and
the individual end-user in a company.
Viking Office Supplies recently announced that it had reached a definitive
agreement to merge with Office Max. In addition, Quill recently announced that
it had reached a definitive agreement to merge with Staples. Consummation of
those mergers would join two of the largest mail order companies with two of the
largest office products retailers.
Warehouse club/mass marketers (such as WalMart, Target and K-Mart)
represent a relatively small share of the office products industry and typically
carry only 200 to 500 stock keeping units ("SKUs") of office products.
Merchandise is purchased directly from the manufacturer and shipped directly to
stores for sale to the public.
The commercial stationers' typical customer is the 20 to 250 employee
company. This segment remains highly fragmented, with approximately 3,200
independent commercial stationers with estimated aggregate 1996
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sales of $18 billion. To successfully compete with other suppliers, most
commercial stationers have "partnered" with national wholesalers in order to be
more efficient with warehousing and distribution and have joined industry buying
groups such as UDI in order to offer more competitive prices and marketing
programs. The Company is considered a commercial stationer.
OPERATING STRATEGY
The Company has adopted an integrated operating and acquisition strategy
designed to provide superior localized service to small and medium-sized
companies, which the Company defines as companies with 20 to 250 employees, and
to achieve growth internally as well as through the acquisition of other
commercial stationers. The key elements of the Company's operating strategy are
as follows:
Focus on Serving Small and Medium-Sized Companies. The Company believes
that small and medium-sized companies will be the fastest growing sector of the
economy in the United States in terms of revenues over the next three to five
years, and that these companies tend to be very loyal customers, generally
purchasing office products from one primary supplier. The Company believes that
this market segment is more fragmented and offers better margins than the large
company (over 250 employees) segment. In the Company's target markets, the
Company believes customers are concerned not only with the overall reduction of
their office products costs but also on dependability, superior service and
flexible delivery capabilities. Accordingly, the Company is focused on providing
its customers with knowledgeable sales personnel, next day delivery service and
delivery of products exactly as ordered, as well as competitive pricing on the
highest volume items.
Leverage Wholesaler Resources. The Company intends to leverage the
resources of two national wholesalers, S.P. Richards and United Stationers, as
well as regional and niche wholesalers. Such resources include custom catalogs,
electronic ordering, wrap and label capabilities and national distribution. The
two national wholesalers, which together have approximately 105 warehouses
stocking over $650 million of inventory, will provide the backbone of the
Company's distribution network. These wholesalers are able to provide the
Company with next-day delivery of product wrapped and labeled by customer and
local stationer name ("wrap and label" capability), which the local stationer
can deliver to its customers on the same day. The Company believes that by
utilizing the wholesalers' proven distribution capabilities it can ensure prompt
and efficient delivery of products. The Company believes that leveraging the
resources of the wholesalers will allow it to (i) reduce inventory, warehousing
and distribution costs; and (ii) minimize the need to build an extensive
distribution system.
Achieve Operating Efficiencies and Economies of Scale. The Company will
seek to achieve operating efficiencies and economies of scale through (i) volume
purchasing of office products; (ii) combining certain administrative functions
at the corporate level; (iii) implementing a centre/satellite strategy and
eliminating redundant facilities and services; (iv) implementing Company-wide
integrated technology and operating systems; (v) providing a Company-wide
proprietary catalog to increase advertising rebates from manufacturers; and (vi)
increasing sales volumes by broadening the complement of products and services
its stationers offer. The Company intends to combine the buying power of UDI
with that of the Company's stationers in order to obtain more favorable prices
and rebates, which office product manufacturers and wholesalers have
historically offered only to high volume purchasers. UDI has already been
successful in obtaining lower pricing and annual rebates based on the volume of
purchases for its members. As the Company's revenues increase, the Company
believes that it will be able to increase the discounts and rebates currently
obtained by the Founding Companies and by companies to be acquired in the future
and enable such companies to leverage the wholesalers' "wrap and label"
capabilities. The Company also intends to centralize certain administrative
functions such as cash management, insurance, payroll processing and employee
benefits, marketing and advertising, long distance services and a variety of
professional services to further reduce costs.
Capitalize on Private Brand Image. The Company has developed a private
brand image program that includes Office Centre brand products, retail store
signage, proprietary catalogs and a web site. Currently, approximately 290 UDI
member stationers have paid $1,500 each to participate in this program. Under
the private brand program, the Company has over 250 of the highest volume items
manufactured with the Office Centre name and in 1997 over $5 million of Office
Centre brand product was sold by UDI members. The
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Company believes this three-year old program enhances its name recognition with
commercial stationers and customers and offers a significant profit opportunity.
Operate with Decentralized Management. The Company intends to operate with
decentralized management and has entered into long-term employment contracts
with senior management at each of the Founding Companies and intends to continue
to enter into such contracts in connection with future acquisitions. Under the
Company's "centre and satellite" strategy, the centre stationers will fulfill
all management functions for the satellites in their respective regions.
Experienced local management will make decisions relating to the day-to-day
operations of a particular centre and its related satellites and will be
responsible for the profitability and growth of that operation. The Company's
senior managers will provide the centre stationers with strategic planning and
guidance with respect to acquisitions, marketing and operations. The Company
intends to motivate its employees and align their interests with those of the
Company's stockholders by using Common Stock as a currency in its acquisition
program and granting options to purchase Common Stock as a part of employee
compensation. The Company believes that the operating autonomy provided by this
decentralized structure, together with the implementation of reporting systems
and financial controls at the corporate level, will enable it to combine the
superior customer service and responsiveness of a locally-oriented stationer
with the resources and economies of scale of a large company.
ACQUISITION STRATEGY
The Company is principally a commercial stationer and its acquisition focus
will continue to be on commercial stationers. The Company believes that, due to
the fragmented nature of the commercial stationer market, there are
opportunities for acquiring additional commercial stationers nationwide. The key
elements of the Company's acquisition strategy are as follows:
Target Major Metropolitan Areas. The Company intends to expand
aggressively through acquisitions into an additional 35 major metropolitan areas
throughout the country. The Company will first seek to make a centre acquisition
in a targeted area by acquiring an established, high quality commercial
stationer with revenues of $7 million to $20 million. It will then seek to
acquire additional, smaller synergistic commercial stationers, or satellites,
typically with revenues of $5 million or less, within the metropolitan market
surrounding the centre stationers. The Company believes that the local presence
created through the acquisition of a centre stationer will facilitate the
identification of satellite acquisition targets. The Company intends to
substantially integrate the operations of acquired satellites with the centre
stationers. This integration is intended to leverage more effectively the
Company's distribution capabilities, thereby eliminating a substantial portion
of the operating expenses of the acquired satellites and increasing the
Company's margins.
Leverage UDI Membership and Exclusivity Agreements. Through UDI, the
Company maintains relationships with a large network of stationers that are
potential acquisition candidates for the Company. UDI's membership consists of
approximately 1,100 office products stationers and office furniture dealers
servicing the United States and parts of Canada. Ten of the Founding Companies
are members of UDI. The Company intends to utilize the assistance of UDI sales
representatives to approach acquisition candidates who are UDI members.
Approximately 290 UDI member stationers are already participating in the
Company's private brand image program. The Company believes that the development
of this kind of affiliation between UDI's member stationers and the Office
Centre name and organization will facilitate acquisitions within the buying
group. The Company also intends to leverage the industry contacts of its
Founding Companies, four of which belong or formerly belonged to industry buying
groups other than UDI. In order to strengthen its acquisition pipeline, the
Company has entered into exclusivity agreements with approximately 60 UDI
members, which the Company believes collectively had 1997 revenues in excess of
$130 million. The exclusivity agreements provide that, at the Company's request,
the acquisition candidates will engage in good faith discussions with the
Company with respect to the sale of their respective companies and that they
will not solicit offers from, or engage in any such discussions with, any other
party for a period of six to nine months. In addition, the exclusivity
agreements permit the Company to conduct due diligence on the acquisition
candidates. There can be no assurance that the Company will seek to acquire, or
that it will be successful in acquiring, any of the acquisition candidates who
have entered into exclusivity agreements with the Company.
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Retain Local Management and Image. The Company intends to acquire
successful commercial stationers with strong management in its targeted centre
locations. In most instances, the Company expects to retain the management,
sales personnel and name of the acquired centre stationer. To preserve local
market knowledge and customer relationships, the Company has entered into
long-term employment contracts with senior management level employees at each of
the Founding Companies and intends to continue to do so in connection with
stationers acquired in the future. The Company believes that its decentralized
management strategy will make it an attractive acquirer of additional centre
stationers, particularly those companies whose owners wish to remain involved in
the day-to-day operations of their companies. The Company also intends to retain
the name of the local stationer to maintain continuity with local customers.
THE FOUNDING COMPANIES
Simultaneously with the Offering, Office Centre Corporation will acquire
the Founding Companies. The aggregate consideration to be paid by Office Centre
Corporation for the Founding Companies is approximately $55.0 million, subject
to certain adjustments, consisting of an aggregate of approximately $18.1
million in cash and an aggregate of approximately $36.9 million in shares of
Common Stock valued at the initial public offering price per share. The Company
will also repay approximately $7.8 million in debt of the Founding Companies.
See "Use of Proceeds." For additional information concerning the Founding
Companies, see the Unaudited Pro Forma Combined Financial Statements and the
notes thereto, as well as the audited financial statements of certain Founding
Companies, all contained elsewhere in this Prospectus.
The following table sets forth the aggregate consideration being paid for
each Founding Company:
<TABLE>
<CAPTION>
VALUE OF
COMMON TOTAL DEBT
CASH STOCK OTHER CONSIDERATION REPAID
------- ---------- -------------- ------------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
TSR...................................... $ 2,757 $ 8,107(1) $1,500(2) $12,364(3) $2,710
New England.............................. 2,000 4,498(1) 6,498(4)(5) 1,125
King..................................... 2,937 3,629 6,566(5)(6) 2,374
Sierra................................... 272 4,861 5,133(5) 1,309
Office Solutions......................... 3,826 3,825 7,651(7) --
Greenwood................................ 2,650 6,550(1) 9,200(8) --
SOS...................................... 600 2,910 3,510(9) --
Georgia Impression....................... 325 977 1,302 24
Office Express........................... 195 1,107 1,302 17
Southern Office Centre................... 300 -- 300 186
Metro Data............................... 531 435 966 25
BCB...................................... 167 -- 167(10) 49
------- ---------- ------ ------- ------
TOTAL:................................... $16,560 $ 36,899 $1,500 $54,959 $7,819
======= ========== ====== ======= ======
</TABLE>
- ---------------
(1) Pursuant to the definitive merger agreements, as amended, between the
Company and each of TSR, New England, and Greenwood, respectively, the
Company, in its sole discretion, may substitute cash in the amount of $1
million with respect to each such transaction as consideration in lieu of $1
million of Common Stock otherwise deliverable under each such agreement.
(2) Represents the purchase price for shares of TSR stock purchased in September
1997.
(3) Additional consideration may be payable in cash and shares of Common Stock,
based upon TSR's earnings before interest, taxes, depreciation and
amortization ("EBITDA") for 1998.
(4) Additional consideration may be payable in shares of Common Stock based upon
New England's EBITDA for 1998.
(5) Subject to adjustment based on the amount of outstanding liabilities at
closing.
(6) Additional consideration may be payable in cash and shares of Common Stock
based upon King's EBITDA for 1998.
(7) Additional consideration may be payable in shares of Common Stock based upon
Office Solution's EBITDA for the period January 1, 1998 through the closing
date and for the twelve months following the Offering.
(8) Additional consideration may be payable in cash and/or shares of Common
Stock, based upon Greenwood's EBITDA for 1998.
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(9) Excludes ten-year options to purchase 25,000 shares of Common Stock at the
initial public offering price per share, which vest ratably over three
years.
(10) Subject to adjustment based upon liabilities and working capital at
closing.
The consideration to be paid for the Founding Companies other than King was
determined through arm's-length negotiations between representatives of Office
Centre Corporation and representatives of each Founding Company. See "Certain
Transactions." The factors considered by Office Centre Corporation in
determining the consideration to be paid for the Founding Companies include,
among others, the historical operating results, the net worth, the levels and
type of indebtedness, and the future prospects of the Founding Companies.
The consummation of each Acquisition is subject to customary conditions,
none of which is in the control of the stockholders of the Founding Companies.
These conditions include, among others, the continuing accuracy on the closing
date of the Acquisitions of the representations and warranties of the Founding
Companies and of Office Centre Corporation, the performance by each of them of
all covenants included in the agreements relating to the Acquisitions, and the
nonexistence of a material adverse change in the results of operations,
financial condition or business of each Founding Company. In addition, each
Acquisition is subject to consummation of the Offering.
Simultaneously with the consummation of the Acquisitions, the controlling
shareholders of the Founding Companies (other than Mr. Gillon, the controlling
shareholder of King, who has already entered an employment agreement with Office
Centre Corporation) will enter into three-year employment agreements (except
three stockholders of Southern Office Centre who will enter into one-year
employment agreements) with Office Centre Corporation under which Office Centre
Corporation will pay them annual base salaries and performance bonuses, and
simultaneous with the Offering will grant them options to purchase, in the
aggregate, 425,000 shares of Common Stock at the initial public offering price
per share, which will vest one-third per year over three years commencing with
the first anniversary of the Offering. Such options will expire upon the
occurrence of certain events or ten years after grant, whichever is earlier. See
"Management -- Employment Agreements; Covenants Not to Compete" for description
of Mr. Gillon's employment agreement.
Pursuant to the employment agreements that will be executed in connection
with the Acquisitions, the controlling stockholders of the Founding Companies
have agreed not to compete with the Company during their employment and for
varying periods of one to three years thereafter, commencing on the date of
consummation of the Offering. See "Management -- Employment Agreements;
Covenants Not To Compete."
OPERATIONS
General. The Company intends to sell a wide variety of office supplies,
office furniture and other office products directly to small and medium-sized
business customers (generally companies having 20 to 250 employees). The Company
intends to provide next-day delivery of ordered items which will enable certain
customers to reduce overhead costs by reducing inventory and the associated
personnel and space requirements. The Company believes that many of its
customers purchase office products based on a long-term business relationship
with one primary supplier. Accordingly, the Company's operations, and the
improvements and enhancements that the Company intends to implement, are focused
primarily on achieving superior customer satisfaction, as well as operating
efficiencies and economies of scale.
The Company purchases office products from manufacturers and wholesalers,
and will maintain cross-docking facilities at or near each of the centre
locations. These cross-docking facilities will stock high volume items and will
carry approximately 250 to 500 SKUs. The remaining items will not be kept in
inventory, but will be obtained by the Company from two national wholesalers
with whom the Company has relationships, S.P. Richards and United Stationers, as
well as regional and niche wholesalers. Orders for items received from the
wholesalers will be combined with orders picked from inventory at the
cross-docking facilities and delivered by the Company to its customers.
Order Processing, Fulfillment and Distribution. Certain Founding Companies
use an electronic data interchange ("EDI") system and/or fulfill orders using a
system that combines the inventory they maintain and the "wrap and label"
capabilities of the wholesalers. The Company intends, where appropriate, to
implement
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these systems at other Founding Companies following the consummation of the
Offering and at companies acquired in the future. The EDI system will enable
customers to place orders directly with the Founding Company's computer system
and generate customized usage reports. Once an order is placed, the
order-processing system, which is electronically linked to national wholesalers,
will automatically determine on a real-time basis whether an ordered item is to
be filled from inventory at the centre stationers' cross-docking facility or
from a wholesaler. When a customer order needs to be filled from a wholesaler,
the system will electronically route the order to the wholesaler. The order will
be wrapped, labeled by customer and local stationer name and delivered for
next-day service to the centre stationer. This capability is called "wrap and
label." On the same day that it receives the items supplied by the wholesalers,
the centre stationer will deliver the order directly to the customer without
having to break down or sort through any of the received shipments. Orders for
items not supplied by a wholesaler will be filled at the centre cross-docking
facility by "picking" orders arranged according to the location of items within
the facility, improving the efficiency of personnel in filling orders. When
orders have been picked, they will be combined with the ready orders from the
wholesalers, staged and loaded onto trucks. The orders will then be delivered by
trucks based on their routing. The Company intends to deliver ordered items
using Company-owned trucks, leased trucks, and unaffiliated delivery companies.
Under its centre/satellite strategy, the Company's satellite locations will
serve as local sales and marketing operations only, and the centre locations
will fulfill all orders and deliveries within their respective regions.
Technology Systems. Certain Founding Companies have developed operating and
technology systems designed to improve and enhance their operations, including
computerized inventory management and order processing systems and warehouse
management and distribution systems. The Company intends, where appropriate, to
implement these systems at other Founding Companies following the consummation
of the Offering and at companies acquired in the future. One such system, a
CD-ROM based computer program called E-Cat (Electronic Catalog), displays all
the products and prices offered by the Founding Company and enables a customer
to process orders electronically and track an ordered item. The Company believes
that this program will increase significantly the speed and accuracy of order
processing and fulfillment while reducing personnel requirements at centre
facilities. An Internet version of the E-Cat program is also available.
Management Information Systems and Reporting. The Founding Companies
currently utilize various compatible management and financial information
systems which cater to the specialized needs of the commercial stationer. These
user-based systems support the customer service, order entry, order fulfillment,
billing and inventory management functions. The Company intends to integrate
these systems with a common core general ledger system following the
consummation of the Offering. This will allow the Company to improve and
standardize its existing reporting capabilities and financial controls at the
corporate level, while allowing the local stationer to continue to have superior
customer service capability and focus. The Company tracks important data related
to each Founding Company's operations and financial performance against prior
year performance and budgeted goals and objectives. In addition, the Company has
developed a daily and monthly reporting process which allows management at the
corporate level to monitor key operational statistics and ratios such as each
Founding Company's revenues, gross profit and expenses, cash flows, receivables,
inventory turnover and number of employees. The Company will use such
information to prepare and provide each Founding Company with monthly and
quarterly financial data which will enable them to track and benchmark their
performance with the other Founding Companies.
PRODUCTS
Sourcing. In 1997, the Founding Companies purchased approximately 60% of
its office products from wholesalers and the remainder from manufacturers. The
principal wholesalers of the office products sold by the Company are S.P.
Richards and United Stationers and the principal manufacturers include 3M, ACCO,
Avery Dennison, Hon, Pentel, Rubbermaid and Smead. In the twelve months
following the consummation of the Offering, the Company intends to increase the
amount of office products it purchases from wholesalers in order to reduce its
inventory, warehousing and distribution costs. In addition, each Founding
Company and each company acquired in the future will be able to order products
from the manufacturers or wholesalers at prices and on terms negotiated by the
Company, therefore benefitting from the Company's purchasing power and
expertise.
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Merchandising and Products. The Company intends to offer a full complement
of name brand office products, including paper products, desktop accessories,
writing instruments, technology supplies, office furniture and janitorial
supplies, and to provide and outsource printing services. To market these
products and services, the Company intends to provide its customers with
catalogs containing full color photographs and descriptions of offered items.
One of these catalogs, which will be produced by wholesalers and will bear the
name of the Company's local operation, will list approximately 20,000 items, all
of which will be available for next-day delivery. To supplement the wholesaler
produced catalog, the Company also intends to use a 5,000 item proprietary
catalog similar to the catalog being used by UDI. This catalog will contain the
highest volume items and will feature the Office Centre brand products. The
Company intends to purchase the highest volume items listed in the proprietary
catalog directly from the manufacturers at a lower cost than from the
wholesalers. The Company believes that the proprietary catalog will increase
operating margins by including Office Centre brand products and capturing
additional manufacturers' advertising rebates. In addition, the Company is
developing a multimedia program to be used by the Company's sales
representatives to sell printing services to its customers.
Inventory Management. The Company has developed a custom bar coding
system, which will enable it to track its 250 to 500 SKU inventory through
prompt recording of incoming and outgoing products. The use of bar codes enables
orders to be filled more accurately, eliminating costly returns and pick-ups. In
addition, this system will enable the Company to forecast product demand by SKU,
enabling it to select the highest selling items for its proprietary catalog. The
Company believes that the proprietary bar coding system will be a significant
factor in reducing its inventory investment through increased inventory turns.
Additionally, all picking slips will be bar coded for more accurate invoicing
with less effort and error. The Company intends to implement this bar coding
system at additional facilities during the twelve months following the
consummation of the Offering.
Office Centre Private Label Products. The Company has over 250 of the
highest volume items manufactured with the Office Centre brand name. The Company
offers these products through customized catalogs. The Company believes that the
Office Centre brand name products provide stationers with an additional source
of image recognition and enhance profitability.
Broadened Offered Products and Services. The Company intends to broaden
the complement of products and services it offers to increase its sales to
existing customers. For example, following the consummation of the Offering, the
Company intends to utilize its wholesalers to provide janitorial supplies,
office furniture and advertising specialties at its facilities, as appropriate.
SALES AND MARKETING
The Company intends to focus its marketing efforts on the small and
medium-sized corporate customers. The Company believes that a significant
opportunity exists in this segment and that the larger contract stationers
primarily are positioned to serve the large corporate segment. To address the
high degree of customer satisfaction demanded by the small to medium-sized
company, the Company intends to emphasize training of sales and customer service
personnel. The Company intends to hire a Vice President of Marketing who will
operate from its corporate headquarters and, using the UDI staff, coordinate the
sales and marketing efforts of sales representatives at the Company's centre
locations. The centre locations will provide marketing and sales programs to the
satellites in their respective regions. The Vice President of Marketing will
oversee the development of all marketing and promotional materials, assist the
centres in recruiting and training sales representatives, supervise the
Company's in-house training programs and support centre management and sales
representatives with computerized analyses of sales by product and customer.
The Company's stationers establish and maintain relationships with
customers by assigning a sales representative to most customers. Sales
representatives, who are compensated almost exclusively on a commission and/or
incentive basis, have frequent contact with their customers and share
responsibility for increasing account penetration and providing customer
service. Sales representatives also are responsible for marketing efforts
directed to prospective customers. The Company has approximately 160 sales
representatives in the field, covering ten metropolitan areas. The Company
intends to emphasize a team approach and generally will integrate management,
sales, customer service, purchasing and other personnel into the relationship
with each customer.
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<PAGE> 36
The Company believes that its decentralized management strategy offers it a
competitive advantage because, by not adhering to a standardized national model,
it has greater flexibility to respond to the needs of each local market while
achieving the buying power and operating efficiencies of a large company.
The Company provides training and information about products and markets to
the Company's stationers through OffiSat, a digital, interactive, closed-circuit
satellite system developed by UDI. OffiSat enables the Company to perform
Company-wide training without the associated travel cost. UDI utilizes the
OffiSat system to broadcast programming to subscribing members. Through a system
of digital signal encoding, broadcasts can target one specific stationer or can
be sent to some or all of the Company's stationers and the stationers can
participate in the broadcasts. The Company also intends to utilize OffiSat to
market its offered products and services to its customers. The Company intends
to sponsor regional meetings, where appropriate, at which customers invited by
the Company's local stationers will view OffiSat programs targeting the end user
of the Company's products and services.
The Company intends to capitalize on cross-marketing and business
development opportunities that it believes will be available to the Company as a
national distributor of office products. The Company intends to leverage the
diverse industry specializations and marketing strengths of individual Founding
Companies to expand the overall penetration of products and services within
additional geographic markets. The Company also intends to increase sales by
marketing to customers with multiple locations. Marketing to customers with
multiple locations will be done by Company personnel and implemented through
Company facilities and through participating UDI members. The Company believes
its ability to offer a high level of service and product selection, volume
purchasing discounts and customized central billing will offer customers with
multiple locations a cost-effective way to purchase office supplies.
BUYING GROUP DIVISION (UDI)
The Company, through its wholly-owned subsidiary, UDI, has been operating a
buying group since 1988. The buying group allows small and medium-sized office
products stationers and office furniture dealers to combine their buying power
to negotiate better purchasing terms than they would be able to obtain
individually and to participate in a rebate program with wholesalers and
manufacturers, as well as other programs with manufacturers. In addition, UDI
offers its members access to a number of marketing programs designed to improve
their operations and profitability. As a for-profit operator of a buying group,
UDI retains a fee equal to approximately 1% of its members' qualifying annual
purchases, subject to certain exceptions, as well as certain other fees,
including fees received in connection with the marketing programs UDI offers to
its members. There are other buying groups in the office products industry, and
the Company may, from time to time, seek to acquire other buying groups.
UDI has approximately 1,100 members, servicing the United States and parts
of Canada. The Company believes that the majority of UDI's members have annual
sales of $2 million to $7 million. Aggregated revenues of UDI's members are
estimated by the Company to be approximately $3 billion, which the Company
believes makes UDI one of the largest office products buying groups in the
United States. UDI has been successful in leveraging the combined buying power
of its members to obtain better purchasing terms and annual rebates based on
sales volumes from approved national, regional and niche wholesalers and
manufacturers for its members. The Company intends to combine the purchasing
power of UDI and the Founding Companies and, as its revenues increase, the
Company believes that it will be able to increase the discounts and rebates
received.
UDI has developed a number of marketing programs which the Company intends,
where appropriate, to implement at the Founding Companies following the
consummation of the Offering and at companies acquired in the future. The
Company intends to utilize the experienced staff of UDI to implement such
programs. For example, UDI has developed operational and technology systems
designed to improve and enhance the operations of local stationers, including
E-Cat and EDI. UDI also offers stationers access to OffiSat and has developed a
web site which allows UDI members' customers to order office products by
computer. The web site offers more than 20,000 office products, many with
picture confirmation, and allows the user to search for products by category. E-
Cat is currently in use in over 1,000 companies in the United States and
approximately 150 UDI members have OffiSat satellite dishes at their facilities.
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<PAGE> 37
The Company's private brand image program is currently being used by
approximately 150 of UDI's members, and private label Office Centre products are
currently offered in UDI's customized catalogs. In 1997, sales of Office Centre
brand name products by UDI members totaled more than $5 million. The Company
believes that the development of this kind of affiliation between UDI's members
and the Office Centre name and organization will facilitate acquisitions within
the UDI network. Ten of the Founding Companies are members of UDI.
UDI competes with other office products buying groups for members.
Currently, there are at least seven other buying groups in the United States.
While these groups historically have competed for members based upon product
costs and rebates, the Company believes that programs designed to increase
members' sales and to decrease members' expenses will become more important to
membership retention and growth. UDI believes its technology programs offer it a
competitive advantage among the buying groups and it intends to use these
programs to increase membership and participation.
COMPETITION
The Company operates in a highly competitive environment. The Company
competes with small commercial office products stationers who sell to customers
in a limited geographic area, and several large retailers, mail order companies
and contract stationers, including Boise Cascade, Corporate Express, BT Office
Products, Office Max, Staples, Office Depot, U.S. Office Products, Viking Office
Supplies, Quill, and Global Directmail, all of which have greater financial
resources than the Company. Viking Office Supplies recently announced that it
had reached a definitive agreement to merge with Office Max. In addition, Quill
recently announced that it had reached a definitive agreement to merge with
Staples. Consummation of those mergers would join two of the largest mail order
companies with two of the largest office products retailers. In the Company's
target markets, the Company believes customers are concerned not only with the
overall reduction of their office products costs but also on dependability,
superior levels of service, and flexible delivery capabilities. The Company
believes that it competes favorably on the basis of service, price and
experience.
The Company also expects that there will be competition to acquire
independent commercial stationers as the office products industry undergoes
continuing consolidation, which could limit the Company's ability to locate
suitable acquisition targets and could increase the cost of purchasing such
acquisition targets. The Company believes that its decentralized management
strategy, long-term relationships with its stationers and other operational
strategies will make it an attractive acquirer of other commercial stationers.
In addition, the Company believes it has an advantage over its competitors due
to its long-term relationships with UDI member stationers.
CUSTOMERS
None of the Company's customers accounted for more than ten percent of the
Company's pro forma revenues for 1997. Purchases by certain customers of two of
the Founding Companies may be attributable to the status of such Founding
Companies as women-owned and/or minority-owned small businesses. Such customers
could elect to reduce or cease purchases from these Founding Companies after the
consummation of the Acquisitions based on the loss of their women-owned or
minority-owned status.
EMPLOYEES
As of March 31, 1998, the Company had 680 full-time employees, 138 of whom
were employed primarily in management and administration, 176 in warehouse and
distribution, 77 in printing operations, 168 in marketing, 87 in customer
service, and 34 in retail sales. As of March 31, 1998, one of the Founding
Companies had entered a collective bargaining agreement covering six employees.
The Company considers its relations with its employees to be satisfactory.
PROPERTIES
The Company operates 36 properties, consisting of center and satellite
facilities for office products operations and administrative offices. Of these
facilities, 35 are leased and one is owned. These facilities are used
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<PAGE> 38
principally for operations, general and administrative functions, storage and
cross-docking space and retail space. The Company's facilities range from
approximately 400 square feet to 29,200 square feet. All of the leased
properties are leased for terms expiring on dates ranging from November 1998 to
May 2007, some with options to extend the lease term. The Company believes that
no single lease is material to its operations, that the owned and leased
facilities are adequate to serve its current level of operations and that
alternative facilities presently are available at market rates.
INTELLECTUAL PROPERTY
The Company holds a federal registered trademark for the name "OC Office
Centre" and the associated Company logo. No assurance can be given that such
trademark will be effective to prevent others from using the trademark
concurrently or to permit the Company to use the trademark in certain locations.
LITIGATION
The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involves claims for personal injury
and property damage incurred in connection with its operations. Management
believes that none of these actions will have a material adverse effect on the
financial condition or results of operations of the Company.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid or hazardous wastes; and (ii) impose liability
for the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposal or other releases of hazardous substances. Two Founding
Companies conduct printing operations which may generate, or may have generated
in the past, hazardous wastes. Each of these Founding Companies believes that it
has conducted such operations and disposed of any such wastes in compliance with
applicable environmental laws and regulations.
The Company is not aware of any environmental conditions relating to
present or past waste generation at or from these facilities, or any other of
the Company's facilities or operations, that would be likely to have a material
adverse effect on the financial condition or results of operations of the
Company and does not anticipate any material expenditures to comply with
environmental laws, regulations or ordinances. However, there can be no
assurance that environmental liabilities in the future will not have a material
adverse effect on the financial condition or results of operations of the
Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
directors, executive officers and persons who will become directors or executive
officers of the Company following the consummation of the Offering:
<TABLE>
<CAPTION>
AGE POSITION
--- --------
<S> <C> <C>
Robert J. Gillon, Jr. 54 Chairman of the Board, President and Chief Executive Officer
Chief Financial Officer, Senior Vice President, Treasurer
Joseph E. Hajjar 45 and Secretary
Richard T. Case 46 Senior Vice President, Corporate Development
Thomas F. Mooney 55 Vice President, Purchasing
Yancey S. Jones 48 Director, President -- TSR
Charles J. Murphy 50 Director
Edward A. Schefer 63 Director
</TABLE>
Robert J. Gillon, Jr. has been Chief Executive Officer of Office Centre
Corporation since May 1997, President of the Company since March 1997, a
director of the Company since March 1997 and Chairman of the Board of the
Company since August 1997. From February 1994 until the present, Mr. Gillon has
been Chief Executive Officer and President of King. From August 1989 until
December 1993, Mr. Gillon was Chief Executive Officer of Emco Corporation, a
regional wholesaler of office supplies in the New York area. Prior to that, for
more than 20 years, Mr. Gillon served in various management positions in sales,
marketing, product development and general management with IBM.
Joseph E. Hajjar has been Chief Financial Officer, Senior Vice President,
Treasurer and Secretary of Office Centre Corporation since September 1997. Mr.
Hajjar was employed from November 1994 to August 1997 as Vice President of
Finance for Bovis, Inc., one of the largest companies in the construction
management, general contracting and construction consulting field. From May 1992
to October 1994, Mr. Hajjar was employed by ENSERCH Corporation where his most
recent position was Chief Financial Officer of ENSERCH Environmental
Corporation, one of the largest firms in environmental consulting and
remediation (now part of Foster-Wheeler Corporation). Mr. Hajjar's 25 years of
finance and accounting experience includes 13 years with the accounting and
management consulting firm of Price Waterhouse, LLP. Mr. Hajjar is a certified
public accountant.
Richard T. Case has been Senior Vice President, Corporate Development, of
Office Centre Corporation since May 1, 1998. From February 1, 1997 until he
joined Office Centre Corporation, Mr. Case provided consulting services to
Office Centre Corporation. Since April 1981, Mr. Case has been President of
Benchmark Associates. Through Benchmark Associates, Mr. Case has served as a
consultant to companies in numerous industries in the area of financial
turnarounds, strategic planning, acquisitions and mergers, operational analysis,
product development and strategic marketing. From March 1979 until April 1981,
Mr. Case was Senior Vice President of Marketing for one of the largest divisions
of American Hospital Supply Corporation, a manufacturer and distributor of
health care products (now part of Baxter International Inc.). From May 1975
until March 1979, Mr. Case was Director of New Business Development, responsible
for acquisition and mergers, at American Hospital.
Thomas F. Mooney has been Vice President of Purchasing of Office Centre
Corporation since May 8, 1998. Prior to joining Office Centre Corporation, Mr.
Mooney served as the Vice President of Purchasing for Corporate Express from
March 1994 until May 1997. From March 1988 until March 1994, Mr. Mooney served
as a Vice President of Purchasing of Hanson Office Products, a contract
stationer.
Yancey S. Jones has been a director of Office Centre Corporation since May
13, 1998. Mr. Jones has been the President and Chief Executive Officer of TSR
since October 1988. Mr. Jones currently serves as the treasurer
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<PAGE> 40
of TriMega, a national office products buying group that is also a member of
Business Products Group International ("BPGI"), a global office supply buying
group. He is a past president of the Richmond Office Products Association, and
was a charter member of the Virginia Office Products Association. He is also the
founder and chairman of the board of MEGA Office Furniture, LLC, an office
furniture superstore chain, founded in May 1996.
Charles J. Murphy has been a director of Office Centre Corporation since
May 13, 1998. Since March 1996, Mr. Murphy has been a Managing Director of
Sextant Group, Inc., a private investment firm. Prior to joining Sextant Group,
Inc., Mr. Murphy headed CS First Boston's global equity business and was a
member of its Executive Board. At CS First Boston, Mr. Murphy managed global
investment banking from 1992 to April 1995, having held both coverage and
management positions in the capital markets, corporate finance and regulated
industry groups. Mr. Murphy has been a Trustee of Manhattan College and recently
has become a member of the Executive Committee of the Boston College Wall Street
Council. Mr. Murphy is also an adjunct professor at New York University.
Edward A. Schefer has been a director of Office Centre Corporation since
May 13, 1998. From April 1992 until he retired in January 1998, Mr. Schefer
served as Vice President of Management Information Systems at American Home
Products Corp., a diversified health care company.
Pursuant to the listing requirements of the Nasdaq National Market System,
the Company is required to have at least two independent directors on its Board
of Directors and to establish an audit committee, at least a majority of which
members are independent. See "-- Committees of the Board of Directors." At each
annual meeting of stockholders, approximately one-third of the directors are
elected by the holders of the Common Stock for a term of three years to succeed
those directors whose terms are expiring. All officers serve at the discretion
of the Board of Directors. See "Description of Capital Stock -- Common Stock."
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company will receive a fee of $2,000 per meeting of the Board of Directors
or committees thereof and has been granted options to purchase 20,000 shares of
Common Stock at an exercise price equal to the initial public offering price,
vesting ratably over the initial term of his directorship, and expiring ten
years after the date of grant. Directors also are reimbursed for out-of-pocket
expenses incurred in attending meetings of the Board of Directors or committees
thereof, or for other expenses incurred in their capacity as directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established an Audit Committee and a
Compensation Committee.
The responsibilities of the Audit Committee include recommending to the
Board of Directors the independent public accountants to be selected to conduct
the annual audit of the books and records of the Company, reviewing the proposed
scope of such audit and approving the audit fees to be paid, reviewing
accounting and financial controls of the Company with the independent public
accountants and the Company's financial and accounting staff and reviewing and
approving transactions between the Company and its directors, officers and
affiliates. Messrs. Murphy and Schefer are the members of the Audit Committee.
The Compensation Committee provides a general review of the Company's
compensation plans to ensure that they meet corporate objectives. As described
below, the Company's existing plans with respect to executive compensation are
largely based on contractual commitments set forth in employment agreements that
are either in effect or are to be entered into upon consummation of the
Acquisitions. The responsibilities of the Compensation Committee also include
administering the 1998 Stock Option Plan, and selecting the officers and
salaried employees to whom awards will be granted. Messrs. Gillon, Jones, Murphy
and Schefer are the members of the Compensation Committee.
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<PAGE> 41
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to Office Centre
Corporation's chief executive officer and the two other most highly compensated
executive officers whose aggregate salaries and bonuses exceeded $100,000 during
the year ended December 31, 1997 (the "Named Executive Officers").
<TABLE>
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
--------------------------- -------- -------- ------------
<S> <C> <C> <C>
Robert J. Gillon, Jr..................................... $167,000 $150,000 --
Chairman, Chief Executive Officer and President(1)
Walter H. Gordenstein.................................... $294,700 -- $64,000(3)
President, Chief Executive Officer and Chairman of
UDI(2)
Joseph E. Hajjar......................................... $ 61,000 $110,000(4) --
Chief Financial Officer, Senior Vice President,
Treasurer and Secretary
</TABLE>
- ---------------
(1) Excludes compensation paid to Mr. Gillon by King.
(2) Mr. Gordenstein ceased to serve as President and Chief Executive Officer of
UDI on February 11, 1998 and ceased to serve as Chairman of UDI on April 15,
1998.
(3) Reflects life insurance premium payments of approximately $63,000 and $1,000
paid to Mr. Gordenstein in director fees.
(4) Consists of the fair market value at the time awarded of 50,000 shares of
Common Stock awarded to Mr. Hajjar.
EMPLOYMENT AGREEMENTS; COVENANTS NOT TO COMPETE
On May 1, 1997, Office Centre Corporation entered into an employment
agreement with Mr. Gillon pursuant to which Mr. Gillon serves as the President
and Chief Executive Officer of the Company for a term expiring on the third
anniversary of the date of the consummation of the Offering. Mr. Gillon receives
an annual base salary of $250,000 and will be eligible for additional year-end
bonuses. See "-- Executive Compensation." In addition, Mr. Gillon's employment
agreement automatically renews at the end of the current term and each
succeeding year for an additional year unless terminated or the Company or Mr.
Gillon provides notice of its or his intent not to renew at least six months
prior to the end of the current term. If the Company elects not to renew Mr.
Gillon's employment agreement, the Company must pay Mr. Gillon as severance an
amount equal to the greater of: (i) his then current annual salary, or (ii)
$250,000. If Mr. Gillon's employment is terminated at any time by the Company
without cause, he will be entitled to receive the greater of (i) his base salary
for the remainder of the term had his employment not been terminated and (ii)
$250,000 (or such greater amount as is Mr. Gillon's annual base salary at the
time of termination). Pursuant to his employment agreement, Mr. Gillon was
awarded options to purchase 50,000 shares of Common Stock, with one-third
vesting on the first anniversary of the Offering, one-third on the second
anniversary of the Offering and one-third on the third anniversary of the
Offering. The options are exercisable for ten years from the date of the
Offering. The exercise price for the options is the initial public offering
price per share. Pursuant to his employment agreement, in 1997 Mr. Gillon
received a signing bonus of $150,000 and in 1998 received a non-recurring bonus
of $250,000. Under his employment agreement, Mr. Gillon agrees not to compete
with the Company during his employment with the Company and for one year
thereafter, provided, that if his employment is terminated by the Company other
than for cause, Mr. Gillon will not compete with the Company until the date
which is the later of (i) the first anniversary of the date of such termination,
and (ii) the date in which his employment would have expired but for his
termination.
On April 15, 1998, Office Centre Corporation entered into an employment
agreement with Mr. Gordenstein pursuant to which Mr. Gordenstein is employed by
UDI at an annual base salary of $200,000. See "-- Executive Compensation." Mr.
Gordenstein's employment agreement terminates on the date of the consummation of
the
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<PAGE> 42
Offering. Pursuant to his employment agreement, Mr. Gordenstein agrees not to
compete with the Company during his employment with the Company and for one year
thereafter.
Effective May 1, 1998, Office Centre Corporation entered into a three-year
employment agreement with Mr. Case pursuant to which Mr. Case serves as the
Senior Vice President, Corporate Development of the Company. Mr. Case receives
an annual base salary of $200,000 and will be eligible for additional year-end
bonuses. If Mr. Case's employment with the Company is terminated at any time
without cause, the Company must pay Mr. Case as severance the unpaid base salary
he would have been entitled to receive for the remainder of the current term and
the earned but unpaid bonus during the year of termination. Pursuant to his
employment agreement, Mr. Case was awarded options to purchase 300,000 shares of
Common Stock, with one-third vesting on January 1, 1999, one-third on January 1,
2000 and one-third on January 1, 2001. The options are exercisable until
December 1, 2007. The exercise price per share for the options is $9.12.
Pursuant to his employment agreement, Mr. Case agrees not to compete with the
Company during his employment with the Company and for one year thereafter.
On August 22, 1997, Office Centre Corporation entered into an employment
agreement with Mr. Hajjar pursuant to which Mr. Hajjar serves as Senior Vice
President and Chief Financial Officer of the Company for a term expiring on the
third anniversary of the date of the consummation of this Offering. Mr. Hajjar
receives an annual base salary of $185,000 and will be eligible for additional
year-end bonuses. If Mr. Hajjar's employment is terminated at any time without
cause, the Company must pay Mr. Hajjar as severance an amount equal to the base
salary he would have been entitled to receive for the one year period following
his termination without cause. Pursuant to his employment agreement, at the time
of the Offering Mr. Hajjar will be awarded options to purchase 50,000 shares of
Common Stock, with one-third vesting on the first anniversary of the Offering,
one-third on the second anniversary of the Offering and one-third on the third
anniversary of the Offering. The options are exercisable for ten years from the
date of the Offering. The exercise price for the options is the initial public
offering price per share. Pursuant to his employment agreement, Mr. Hajjar
agrees not to compete with the Company during his employment with the Company
and for one year thereafter.
Effective May 8, 1998, Office Centre Corporation entered into a three-year
employment agreement with Mr. Mooney pursuant to which Mr. Mooney serves as a
Vice President of the Company. Mr. Mooney receives an annual base salary of
$115,000 and will be eligible for additional year-end bonuses. If Mr. Mooney's
employment with the Company is terminated at any time without cause, the Company
must pay Mr. Mooney as severance an amount equal to the base salary he would
have been entitled to receive for the one year period following his termination
without cause. Pursuant to his employment agreement at the time of the Offering
Mr. Mooney will be awarded options to purchase 50,000 shares of Common Stock,
with one-third vesting on the first anniversary of the Offering, one-third on
the second anniversary of the Offering and one-third on the third anniversary of
the Offering. The options are exercisable for ten years from the date of this
Offering. The exercise price for the options is the initial public offering
price per share. Pursuant to his employment agreement, Mr. Mooney agrees not to
compete with the Company during his employment with the Company and for one year
thereafter.
Simultaneous with the Offering, Office Centre Corporation will enter into a
three-year employment agreement with Mr. Jones pursuant to which Mr. Jones will
serve as President of TSR. Mr. Jones will receive an annual base salary of
$150,000 and will be eligible for additional year-end bonuses. If Mr. Jones
terminates his employment for good reason (as defined in his employment
agreement) at any time after six months following the commencement of his
employment, the Company must pay Mr. Jones as severance an amount equal to the
base salary he would have been entitled to receive for the remainder of the then
current term of the employment agreement had such termination not occurred. Mr.
Jones will also agree not to compete with the Company during his employment with
the Company and for two years thereafter. Pursuant to his employment agreement,
at the time of the Offering Mr. Jones will be awarded options to purchase 50,000
shares of Common Stock, which will vest ratably over three years. The options
are exercisable for ten years from the date of the Offering. The exercise price
for the options is the initial public offering price per share.
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<PAGE> 43
1998 STOCK OPTION PLAN
In March 1998, the Company adopted the 1998 Stock Option Plan (the "Plan").
The Plan is administered by the Compensation Committee, which consists of two
independent members of the Board of Directors. Pursuant to the Plan, the Company
may grant options to purchase up to 1,500,000 shares of Common Stock to
officers, directors, consultants and employees of the Company, its subsidiaries
and affiliates. Such options may be either incentive stock options or options
which do not qualify for treatment as incentive stock options. The Plan also
provides for the grant of stock appreciation rights ("SARs") in conjunction with
all or part of any stock option granted under the Plan. SARs are exercisable at
such time and to the extent as the stock options to which they relate.
Options granted under the Plan are non-transferable by the optionee during
his lifetime, and will expire if not exercised within ten years from the date of
the grant and terminate upon an optionee's termination of employment or service
with the Company or a subsidiary, except that, under certain circumstances,
options are exercisable for a period of three months after retirement or
termination of employment and for a period of one year after death or
disability, unless such options expire earlier.
Incentive stock options are also subject to the following limitations (i)
the aggregate fair market value (determined at the time an option is granted) of
stock with respect to which incentive stock options are exercisable for the
first time by an optionee during any calendar year (under all such plans of the
Company or its subsidiaries) shall not exceed $100,000; and (ii) if the
individual to whom the incentive stock options were granted is considered as
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, then (A) the option price at the time of grant
may not be less than 110% of the fair market value per share for such Common
Stock and (B) the option period must be no more than five years from the date of
grant.
In the event of a Change in Control of the Company, for a period of 60 days
thereafter, holders of options under the Plan shall have the right to surrender
all or a portion of the options held by them (whether or not exercisable) and to
receive cash in an amount equal to the amount by which the Change of Control
Price per share of Common Stock on the date of such election exceeds the
exercise price, multiplied by the numbers of shares underlying the options held
by them. The Plan defines "Change in Control" as (i) an acquisition of 20% or
more of the outstanding common voting stock of the Company; (ii) a change in the
majority of the composition of the Board of Directors of the Company; (iii) a
reorganization, merger, consolidation or sale of all or substantially all of the
assets of the Company; or (iv) dissolution or liquidation of the Company. The
Change in Control Price is the highest price of a share of Common Stock on the
exchange on which the shares are listed during the 60-day period prior to the
Change in Control.
Upon the consummation of the Offering, options to acquire shares will
have been granted under the Plan and no SARs will have been granted under the
Plan.
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<PAGE> 44
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Company's Common Stock as of May 15, 1998 and immediately
following the Offering (assuming no exercise of the Underwriters' over-allotment
option) by: (i) all persons known to the Company to be the beneficial owner of
5% or more of the Company's Common Stock; (ii) each Selling Stockholder; (iii)
each director; (iv) each Named Executive Officer; and (v) all executive officers
and directors as a group. Except as otherwise indicated below, each of the
persons listed has sole voting and investment power with respect to their
shares.
<TABLE>
<CAPTION>
COMMON
STOCK NUMBER OF
BENEFICIALLY PERCENTAGE COMMON SHARES
OWNED OWNERSHIP STOCK TO BENEFICIALLY PERCENTAGE
PRIOR TO PRIOR TO BE SOLD OWNED OWNERSHIP
NAME AND ADDRESS OF THE THE IN THE AFTER THE AFTER THE
BENEFICIAL OWNER OFFERING OFFERING OFFERING OFFERING OFFERING
------------------- ------------ ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Clifford M. Davie(1)........................ 770,304 53.7% 200,000 570,304 6.7%
20 Royal Palm Way
Unit 103
Boca Raton, FL 33432
Walter H. Gordenstein(2).................... 537,054 37.5% 225,000 312,054 3.7%
c/o UDI Corp.
90 Tapley Street
Springfield, MA 01101
Robert J. Gillon, Jr.(3).................... -- -- -- 329,937 3.9%
c/o Office Centre Corporation
38 East 32nd Street
New York, NY 10016
Yancey S. Jones(4).......................... -- -- -- 552,782 6.5%
c/o The Supply Room Companies, Inc.
4103 West Clay Street
Richmond, VA 23230
Joseph E. Hajjar(5)......................... 50,000 3.5% -- 50,000 0.6%
c/o Office Centre Corporation
38 East 32nd Street
New York, NY 10016
All directors and executive officers as a
group(6).................................. 50,000 3.5% -- 962,264 11.3%
</TABLE>
- ---------------
(1) Includes 37,670 shares held by Dean Witter Reynolds, custodian for Clifford
M. Davie IRA Rollover Trust (the "Davie Trust"). Clifford Davie and the
Davie Trust have agreed that following the completion of the Offering
through December 31, 2002, they will vote all shares of Common Stock owned
by them in the same proportion as all other outstanding shares of Common
Stock are voted. See "-- Standstill Agreements with Founders." Does not
include 29,064 shares held by John Davie, Clifford Davie's son, as to which
Clifford Davie disclaims beneficial ownership. For additional information
about Mr. Davie, see "Certain Transactions."
(2) Does not include 25,000 shares of Common Stock which may be acquired by
Peter B. Gordenstein, Walter H. Gordenstein's son, upon the exercise of
options which are not exercisable within 60 days, of which Walter
Gordenstein disclaims beneficial ownership. Walter Gordenstein has granted
the Underwriters an option to purchase 204,640 shares of Common Stock solely
to cover over-allotments, if any. To the extent such option is exercised,
the number and percent of shares beneficially owned by Mr. Gordenstein after
the Offering will be reduced accordingly. For additional information about
Mr. Gordenstein, see "Management" and "Certain Transactions."
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<PAGE> 45
(3) Consists of an estimated 329,937 shares to be acquired upon consummation of
the Offering in connection with the Acquisition of King. Does not include
50,000 shares which may be acquired by Mr. Gillon upon the exercise of
options not exercisable within 60 days.
(4) Consists of an estimated 552,782 shares to be acquired upon consummation of
the Offering in connection with the Acquisition of TSR. Does not include
50,000 shares which may be acquired by Yancey S. Jones upon the exercise of
options not exercisable within 60 days. Does not include an estimated
184,261 shares to be acquired by M. Addison Jones, the brother of Yancey
Jones, upon consummation of the Offering in connection with the Acquisition
of TSR, or 25,000 shares which may be acquired by Addison Jones upon the
exercise of options not exercisable within 60 days, as to all of which
Yancey Jones disclaims beneficial ownership.
(5) Does not include 50,000 shares of Common Stock which may be acquired by Mr.
Hajjar upon the exercise of options not exercisable within 60 days.
(6) Does not include 50,000, 50,000, 300,000, 50,000, 20,000 and 20,000 shares
of Common Stock which may be acquired by Messrs. Gillon, Hajjar, Case,
Mooney, Schefer and Murphy, respectively, upon the exercise of options not
exercisable within 60 days. See "Management -- Employment Agreements;
Covenants Not to Compete" and "Management--Director Compensation."
INVOLVEMENT OF FOUNDER IN LEGAL PROCEEDINGS
In January 1993, an involuntary bankruptcy petition (In Re Interco Systems,
Inc., Case No. 93-20144, United States Bankruptcy Court for the Western District
of New York) was filed against a company of which Clifford M. Davie, a founder
and principal stockholder of Office Centre Corporation, was president and chief
executive officer. In such proceeding, the bankruptcy trustee filed adversary
proceedings against Mr. Davie which were settled by Mr. Davie's returning his
interest in a real estate project and paying $475,000 in cash to the bankrupt
estate. The bankruptcy case has proceeded to the distribution phase of the
liquidation.
STANDSTILL AGREEMENTS WITH FOUNDERS
On May 13, 1998, Office Centre Corporation, Mr. Davie and the Davie Trust
entered into an agreement (the "Davie Standstill Agreement") whereby Mr. Davie
and the Davie Trust have agreed not to sell or transfer more than 25% of the
shares of Common Stock owned by each of them during each six month period in the
two years following the expiration of the Lockup Period. Pursuant to the Davie
Standstill Agreement, Mr. Davie and the Davie Trust have agreed that following
the completion of the Offering through December 31, 2002, they will vote all
shares of Common Stock owned by them in the same proportion as all other
outstanding shares of Common Stock are voted. They have irrevocably authorized
certain officers of the Company as their proxy to vote their shares in
accordance with such agreement through December 31, 2002. Mr. Davie also agreed
that he will not participate in any manner in the management of the Company, nor
will he acquire any additional capital stock or other securities of the Company
or seek to influence the voting thereof by other stockholders of the Company. In
addition, Mr. Davie has agreed not to compete with the Company until May 2003.
On April 15, 1998, Office Centre Corporation and Mr. Gordenstein entered
into an agreement whereby Mr. Gordenstein has agreed not to sell or transfer
more than 25% of the shares of Common Stock owned by him during each six month
period in the two years following the expiration of Lockup Period. In addition,
Mr. Gordenstein has agreed not to compete with the Company until April 2003.
44
<PAGE> 46
CERTAIN TRANSACTIONS
TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
Mr. Gillon, Chairman, Chief Executive Officer and President of Office
Centre Corporation, is also the President and Chief Executive Officer of King
and, until the consummation of the Acquisition of King, will own approximately
70% of the stock of King. Upon the closing of the Acquisition of King, Office
Centre Corporation will pay to King's stockholders aggregate consideration of
approximately $6.6 million, subject to adjustment, consisting of approximately
$2.9 million in cash and $3.6 million in shares of Common Stock. Office Centre
Corporation will also repay approximately $2.4 million of debt of King, of which
$500,000 was personally guaranteed by Robert J. Gillon, Jr. See "Business -- The
Founding Companies" for a description of the factors considered by Office Centre
Corporation in determining the consideration to be paid for King. The
consideration was determined by the Board of Directors (including independent
directors) of Office Centre Corporation at the time consisting of Messrs.
Gillon, Davie and Kaweske.
King acquired certain of its assets from two predecessors effective June
30, 1996, for aggregate consideration of approximately $714,000, which
consideration included assumption of a $75,000 promissory note personally
guaranteed by Mr. Gillon. Office Centre Corporation will repay such promissory
note in connection with the Acquisition of King. After the 1996 acquisitions,
King acquired the assets of another company for which it paid, in the aggregate,
approximately $198,000.
Office Centre Corporation has incurred costs payable to King of
approximately $9,500 per month since March 1997 for the use of office space and
certain administrative services. In addition, Office Centre Corporation is
obligated to reimburse King, without markup, for certain disbursements made by
King on behalf of Office Centre Corporation. As a member of UDI, in the ordinary
course of business, King receives wholesale rebates from UDI and reimburses UDI
for direct manufacturer purchases made through UDI.
Prior to becoming an executive officer of the Company, Mr. Case was the
President and owner of Benchmark Associates, Inc. The Company retained the
services of Benchmark Associates, Inc. pursuant to a one-year Consulting
Agreement that expired February 1, 1998 under which Benchmark Associates, Inc.
was paid approximately $94,000, $34,379 of which consists of reimbursement for
expenses. Pursuant to the Benchmark Consulting Agreement, at the time of the
Offering, Benchmark Associates, Inc. will receive $425,000 in cash and $325,000
in the form of unregistered shares of Common Stock valued at the initial public
offering price per share. From February 1, 1998 until Mr. Case became an
employee of the Company on May 1, 1998, the Company retained the services of Mr.
Case pursuant to a Consulting Agreement with Mr. Case under which he was paid
approximately $104,200, of which approximately $56,300 consists of reimbursement
for expenses.
In September 1997, Office Centre Corporation purchased 1,250 shares of
common stock of TSR for $1.5 million. Yancey S. Jones, a director of Office
Centre Corporation, is an officer and director of TSR and, until the closing of
the Acquisition of TSR, Mr. Jones and his brother, M. Addison Jones, will be the
principal shareholders of TSR. Upon the closing the Acquisition of TSR, Office
Centre Corporation will pay to TSR's stockholders aggregate consideration of
approximately $10.9 million, subject to adjustment, consisting of approximately
$2.8 million in cash and approximately $8.1 million in shares of Common Stock
valued at the initial public offering price per share. Office Centre Corporation
may, in its sole discretion, substitute cash in the amount of $1 million with
respect to the Acquisition as consideration in lieu of $1 million of Common
Stock otherwise deliverable in connection with such Acquisition. Office Centre
Corporation will also repay approximately $2.7 million of debt of TSR, $750,000
of which is personally guaranteed by Yancey S. Jones and/or M. Addison Jones and
$290,000 of which is payable to Yancey S. Jones and/or M. Addison Jones. See
"Business -- The Founding Companies" for a description of the factors considered
by Office Centre Corporation in determining the consideration to be paid for
TSR. The consideration was determined by the Board of Directors (including
independent directors) of Office Centre Corporation prior to the time Mr. Jones
became a member of the Board of Directors.
TSR entered into a lease dated January 1, 1992 with Messrs. Yancey Jones
and Addison Jones for commercial space in Virginia, with a lease term of ten
years, for a monthly rent of $6,000 in the first three years,
45
<PAGE> 47
increasing to $7,000 for the next two years, increasing to $8,000 for the next
year, and increasing by 2% increments annually thereafter.
TSR entered into a lease dated October 1, 1993 with Mr. Jones for
commercial space in Virginia, with a lease term of ten years, for a monthly rent
of $4,300 in the first year, increasing by 4% increments annually thereafter.
TRANSACTIONS WITH FOUNDERS
In connection with the formation of Office Centre Corporation, Office
Centre Corporation issued 1,291,157 shares of Common Stock at an aggregate
purchase price of approximately $4,442 to Messrs. Davie, Gordenstein and John D.
Kaweske. Mr. Kaweske's shares were issued pursuant to the Financial Advisory
Agreement described below.
On May 23, 1997, Messrs. Davie and Gordenstein entered into two Stock
Purchase Agreements with Office Centre Corporation pursuant to which Mr.
Gordenstein and the Davie Trust transferred all of their capital stock in UDI
Corp. and UDI II Corp. to Office Centre Corporation, whereupon UDI Corp. and UDI
II Corp. became wholly-owned subsidiaries of Office Centre Corporation. In
consideration therefor, Mr. Gordenstein received an aggregate of 26,292 shares
of Common Stock and the Davie Trust received an aggregate of 37,670 shares of
Common Stock. The consideration was determined by the Board of Directors of
Office Centre Corporation at the time consisting of Messrs. Gordenstein, Gillon,
Davie and Kaweske. The principle used in determining the amount of consideration
was to give Mr. Gordenstein and the Davie Trust an interest in Office Centre
Corporation proportionate to the interests they held in UDI.
From time to time, UDI has borrowed funds from its directors, officers and
principal shareholders. In 1997, UDI repaid loans of approximately $200,000 and
approximately $364,000 made to UDI by Messrs. Gordenstein and Davie,
respectively, at an interest rate of 7%.
UDI entered into a lease dated January 1, 1997, with Mr. Gordenstein for
office space in Massachusetts, with a lease term of three years, for a monthly
rent of $2,767 (plus lessee's proportionate share of any increase in the annual
real estate taxes on the property above the real estate taxes assessed for
fiscal year ending June 30, 1997).
On July 20, 1995, Mr. Davie and Buying Group Services, Inc. ("Buying
Group"), a company wholly-owned by Mr. Davie, entered into an agreement with UDI
pursuant to which Mr. Davie and Buying Group were retained by UDI to provide
consulting services for a period of eight years. Mr. Davie and/or Buying Group
receive a base salary equal to the greater (i) $50,000 or (ii) the base salary
of the highest paid sales representative of UDI, and commissions based on
one-half of the income derived from certain fees UDI receives from certain UDI
members. Pursuant to this agreement, Mr. Davie and Buying Group received
compensation of approximately $555,800 in 1997, which consisted of an annual
salary of approximately $190,400, sales commissions of approximately $283,600
and consulting fees of approximately $12,500 paid to Mr. Davie or Buying Group,
life insurance premium payments of approximately $68,300, and $1,000 in director
fees paid to Mr. Davie. This Agreement will be terminated upon the consummation
of the Offering.
On January 9, 1998, Office Centre Corporation entered into a license
agreement with John Davie, who is the son of Clifford Davie. Pursuant to the
license agreement, John Davie granted to Office Centre Corporation a
royalty-free, perpetual license to use the marketing concept and name "Smart
Consumer" in the office products, office services and office furniture business
worldwide (the "License"). In consideration of the License, Office Centre
Corporation issued John Davie 29,064 shares of Common Stock and, if Office
Centre Corporation exploits the License in Taiwan, agreed to pay an additional
fee of 15% of all profits therefrom. If after 18 months of consummation of the
Offering, Office Centre Corporation does not spend reasonable amounts of time
and money exploiting the License, John Davie will have a 30-day option to
repurchase the License for either $500,000 or 14,532 shares of Common Stock.
John Davie also agreed not to compete with the business of Office Centre
Corporation within a 25 mile radius of any business location of Office Centre
Corporation or any of its subsidiaries from the date of the agreement until the
end of the 30-day option period.
Pursuant to a Financial Advisory Agreement, Office Centre Corporation has
retained R.K. Grace & Company ("R.K. Grace") to provide financial advice in
connection with its business plan and its acquisition
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<PAGE> 48
program from February 1, 1997 through December 31, 1998. Mr. Kaweske, a founder
and former director and officer of Office Centre Corporation, is the Chief
Executive Officer and a founder of R.K. Grace. R.K. Grace receives a monthly fee
of $5,000 plus expenses and, in the event the Offering closes during the term of
the agreement, it will receive $587,500 in cash and $1,175,000 in the form of
unregistered shares of Common Stock valued at the initial public offering price
per share. Also pursuant to the Financial Advisory Agreement, Office Centre
Corporation issued 47,741 shares of Common Stock to Mr. Kaweske. In 1997, Office
Centre Corporation paid R.K. Grace approximately $97,200.
FUTURE TRANSACTIONS WITH AFFILIATES
In the future, transactions with affiliates of the Company are anticipated
to be minimal and will be approved by a majority of the Board of Directors,
including a majority of the disinterested members of the Board of Directors, and
will be made on terms no less favorable to the Company than could be obtained
from unaffiliated third parties.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value $.001 per share and 1,000 shares of preferred stock, par
value $1.00 per share (the "Preferred Stock"). After giving effect to the
Acquisitions, but prior to the consummation of the Offering, the Company will
have outstanding 4,925,000 shares of Common Stock and no shares of Preferred
Stock. Upon completion of the Offering, the Company will have outstanding
8,500,000 shares of Common Stock. As of April 25, 1998, there were six record
holders of Common Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors.
The holders of the Common Stock are entitled to such dividends as may be
declared in the discretion of the Board of Directors out of funds legally
available therefor. See "Dividend Policy." Holders of Common Stock are entitled
to share ratably in the net assets of the Company upon liquidation after payment
or provision for all liabilities. The holders of Common Stock have no preemptive
rights to purchase shares of stock of the Company. Shares of Common Stock are
not subject to any redemption provisions and are not convertible into any other
securities of the Company. All outstanding shares of Common Stock are, and the
shares of Common Stock to be issued pursuant to the Offering will be upon
payment therefor, fully paid and non-assessable.
PREFERRED STOCK
The Company's stockholders have approved the creation of a class of
preferred shares, $1.00 par value, to consist of up to 1,000 shares for which
the Board of Directors shall have the authority, without further action by the
stockholders, to issue in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series. The issuance of preferred shares could adversely affect the
voting power of holders of Common Shares and the likelihood that such holders
would receive dividends or payments upon liquidation. In the event of issuance,
the preferred shares could be utilized, under certain circumstances, as a method
of discouraging, deferring or preventing a change in control of the Company.
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BY-LAWS
Upon consummation of the Offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("DGCL")
("Section 203"). Section 203 provides, with certain exceptions,
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<PAGE> 49
that a Delaware corporation may not engage in any of a broad range of business
combinations with a person or an affiliate, or associate of such person, who is
an "interested stockholder" for a period of three years from the date that such
person became an interested stockholder unless: (i) the transaction resulting in
a person becoming an interested stockholder, or the business combination, is
approved by the Board of Directors of the corporation before the person becomes
an interested stockholder; (ii) the interested stockholder acquired 85% or more
of the outstanding voting stock of the corporation in the same transaction that
makes such person an interested stockholder (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's Board of Directors and by the holders of at least 662/3% of
the corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined as any person who is: (i) the owner of 15%
or more of the outstanding voting stock of the corporation; or (ii) an affiliate
or associate of the corporation and who was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or bylaws, by action of
its stockholders, to exempt itself from coverage, provided that such bylaw or
certificate of incorporation amendment shall not become effective until 12
months after the date it is adopted. The Company has not adopted such an
amendment to its Certificate of Incorporation or By-laws.
The Certificate of Incorporation and By-Laws of the Company contain various
provisions which may have the effect of discouraging future takeover attempts
which the Company's stockholders may deem to be in their best interests and
perpetuating the Company's existing management. Among other things, such
provisions: (i) provide the Board of Directors with broad discretion to issue
preferred stock; (ii) provide for three year terms for the directors of the
Company and the election of such directors on a staggered basis; (iii) prohibit
certain business combinations without the affirmative vote of the holders of at
least 80% of the then outstanding shares of Common Stock and at last 66% of each
series of preferred stock then outstanding; and (iv) require the approval of 80%
of all shares of Common Stock eligible to vote for any proposed amendment to the
Certificate of Incorporation or By-Laws that seeks to modify or remove the
foregoing provisions.
The Company's Certificate of Incorporation provides that liability of
directors of the Company is eliminated to the fullest extent permitted under the
DGCL. As a result, no director of the Company will be liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability: (i) for any breach of the director's duty of
loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) for any wilful or negligent payment of an unlawful dividend, stock
purchase or redemption; or (iv) for any transaction from which the director
derived an improper personal benefit.
In addition, pursuant to indemnification agreements with each of its
executive officers and directors, the Company has agreed to indemnify each such
person from any action or omission by him in his capacity as officer or director
of the Company other than actions or omissions resulting from knowingly
fraudulent, deliberately dishonest or intentional misconduct. The Company
maintains directors' and officers' liability insurance in the amount of $5
million.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering and the consummation of the Acquisitions,
the Company will have outstanding 8,500,000 shares of Common Stock. The
4,000,000 shares sold in the Offering will be freely tradeable without
restriction unless purchased by affiliates of the Company. None of the remaining
4,500,000 outstanding shares of Common Stock (collectively, the "Restricted
Shares") have been registered under the
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<PAGE> 50
Securities Act, which means that they may be resold publicly only upon
registration under the Securities Act or in compliance with an exemption from
the registration requirements of the Securities Act, including the exemption
provided by Rule 144 thereunder.
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of the acquisition of restricted shares of Common
Stock from the Company or any affiliate of the Company, the acquirer or
subsequent holder thereof may sell, within any three-month period commencing 90
days after the date of this Prospectus, a number of shares that does not exceed
the greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume of the Common Stock on the Nasdaq National Market during
the four calendar weeks preceding the date on which notice of the sale is filed
with the Securities and Exchange Commission. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. If two years have
elapsed since the later of the date of acquisition of restricted shares of
Common Stock from the Company or from any affiliate of the Company and the
acquirer or subsequent holder thereof is deemed not to have been an affiliate of
the Company at any time during the 90 days preceding a sale, such person would
be entitled to sell such shares under Rule 144(k) without regard to the
limitations described above.
Upon the consummation of this Offering, the Company will have outstanding
options to purchase 1,043,000 shares of Common Stock, none of which will be
exercisable prior to the first anniversary of the Offering. Of these options,
743,000 options will be exercisable at the initial public offering price per
share, and 300,000 options will be exercisable at $9.12 per share. The Company
expects to file a registration statement on Form S-8 under the Securities Act to
register the shares of Common Stock issuable upon exercise of options to be
granted under the 1998 Stock Option Plan. Accordingly, such shares will be
freely tradeable by holders who are not affiliates of the Company and, subject
to the volume and manner of sale limitations of Rule 144, by holders who are
affiliates of the Company.
Pursuant to the agreements relating to the Acquisitions of TSR and
Greenwood, the Company granted recipients of Common Stock in such Acquisitions
certain piggy-back registration rights on customary terms and conditions. Up to
approximately 1,332,455 shares of Common Stock will be covered by such
registration rights following the Offering. Such registration rights are subject
to certain notice requirements, timing restrictions and volume limitations which
may be imposed by the Underwriters.
Prior to the Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of the
Common Stock in the public market could adversely affect prevailing market
prices and the ability of the Company to raise equity capital in the future.
UNDERWRITING
Morgan Keegan & Company, Inc., McDonald & Company Securities, Inc. and
Credit Lyonnais Securities (USA) Inc. (the "Underwriters") have severally
agreed, subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") to purchase from the Company and the
Selling Stockholders the number of shares of Common Stock indicated below
opposite their respective names at the initial public offering price less the
underwriting discount set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
NAME OF NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Morgan Keegan & Company, Inc................................
McDonald & Company Securities, Inc..........................
Credit Lyonnais Securities (USA) Inc........................
Total.....................................................
=========
</TABLE>
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<PAGE> 51
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any of such shares are
purchased. The Company and the Selling Stockholders have been advised by the
Underwriters that the Underwriters propose to offer the shares of Common Stock
to the public at the initial public offering price set forth on the cover page
of this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share of Common Stock. The Underwriters may allow, and
such dealers may allow, a discount not in excess of $ per share to
other dealers. The initial public offering price and the concessions and
discount to dealers may be changed by the Underwriters after the initial public
offering.
The Company and Mr. Gordenstein have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
additional 600,000 shares of Common Stock (of which the first 204,640 shares
will be sold by Mr. Gordenstein and the remaining shares will be sold by the
Company) at the initial public offering price, less underwriting discounts and
commissions, as shown on the cover page of this Prospectus. The Underwriters may
exercise such option solely for the purpose of covering over-allotments incurred
in the sale of the shares of Common Stock offered hereby.
The Company has agreed to pay Credit Lyonnais Securities (USA) Inc. at the
time of closing of the Offering a financial advisory fee equal to $100,000 for
services rendered in structuring the Offering.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or to contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
The Company, all of its existing stockholders and all of the former
stockholders of the Founding Companies who will receive Common Stock in
connection with the Acquisitions, have agreed that they will not offer or sell
any shares of Common Stock for a period of 180 days (the "Lockup Period") after
the date of this Prospectus without the prior written consent of the
Underwriters, except that the Company may issue shares of Common Stock in
connection with acquisitions. Messrs. Gordenstein and Davie and the Davie Trust
have agreed with the Company that they will not sell or transfer more than 25%
of the Common Stock owned by each of them during each six month period in the
two years following the Lockup Period. After the Lockup Period (or such longer
period to which a shareholder has agreed), all of such shares may be sold in
accordance with Rule 144, subject to the volume, holding period, and other
limitations of Rule 144.
Prior to the Offering, there has been no public market for the shares of
Common Stock. The initial public offering price was negotiated among the Company
and the Underwriters. Among the factors considered in determining the initial
public offering price of the Common Stock, in addition to prevailing market
conditions, were the Company's historical performance and capital structure,
estimates of the business potential and earnings prospects of the Company, an
overall assessment of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to market valuation of
companies in related businesses.
It is anticipated that, at the time of the Offering, the Company's Common
Stock will be approved for quotation on the Nasdaq National Market under the
symbol "OCCI."
The Underwriters have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934 (the "Exchange Act"). Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids for and purchases
of Common Stock so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve the purchase of Common Stock in
the open market in order to cover a syndicate short position. Penalty bids
permit the Underwriters to reclaim a selling concession from a syndicate member
when the shares of Common Stock originally sold by such syndicate member are
purchased in a stabilizing transaction or syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions, and penalty bids may cause the price of the Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the Nasdaq National Market, or otherwise,
and, if commenced, may be discontinued at any time.
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<PAGE> 52
LEGAL MATTERS
The validity of the issuance of shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Richards & O'Neil, LLP, 885
Third Avenue, New York, New York 10022-4873. Certain legal matters in connection
with the sale of the Common Stock offered hereby will be passed upon for the
Underwriters by Baker, Donelson, Bearman & Caldwell, 2000 First Tennessee
Building, 20th Floor, Memphis, Tennessee 38103.
EXPERTS
The audited financial statements included in this Prospectus have been
audited by Grant Thornton LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information pertaining to the Company and the
shares of Common Stock offered hereby, reference is made to such Registration
Statement, including the exhibits, financial statements, and schedules filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or any other document are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza Building,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained from the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, the Company is required to file electronic
versions of these documents with the Commission through the Commission's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) System. The Commission
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
51
<PAGE> 53
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
Introduction to Unaudited Pro Forma Combined Financial
Statements............................................. F-3
Unaudited Pro Forma Combined Balance Sheet................ F-4
Unaudited Pro Forma Combined Statements of Operations..... F-5-F-7
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-8-F-15
HISTORICAL FINANCIAL STATEMENTS
OFFICE CENTRE CORPORATION AND SUBSIDIARIES (REGISTRANT)
Report of Independent Certified Public Accountants........ F-16
Financial Statements
Consolidated Balance Sheets............................ F-17
Consolidated Statements of Operations.................. F-18
Consolidated Statement of Changes in Stockholders'
Equity (Deficiency)................................... F-19
Consolidated Statements of Cash Flows.................. F-20
Notes to Consolidated Financial Statements............. F-21-F-28
THE SUPPLY ROOM COMPANIES, INC.
Report of Independent Certified Public Accountants........ F-29
Financial Statements
Balance Sheets......................................... F-30
Statements of Operations............................... F-31
Statement of Changes in Stockholders' Equity........... F-32
Statements of Cash Flows............................... F-33
Notes to Financial Statements.......................... F-34-F-41
NEW ENGLAND OFFICE SUPPLY, INC.
Report of Independent Certified Public Accountants........ F-42
Financial Statements
Balance Sheets......................................... F-43
Statements of Operations and Retained Earnings......... F-44
Statements of Cash Flows............................... F-45
Notes to Financial Statements.......................... F-46-F-50
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
Report of Independent Certified Public Accountants........ F-51
Financial Statements
Consolidated Balance Sheets............................ F-52
Consolidated Statements of Operations.................. F-53
Consolidated Statement of Changes in Stockholders'
Equity................................................ F-54
Consolidated Statements of Cash Flows.................. F-55
Notes to Consolidated Financial Statements............. F-56-F-61
</TABLE>
F-1
<PAGE> 54
<TABLE>
<CAPTION>
PAGE
<S> <C>
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
Report of Independent Certified Public Accountants........ F-62
Financial Statements
Balance Sheet.......................................... F-63
Statement of Operations and Retained Earnings.......... F-64
Statement of Cash Flows................................ F-65
Notes to Financial Statements.......................... F-66-F-69
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES, INC.
Report of Independent Certified Public Accountants........ F-70
Financial Statements
Balance Sheets......................................... F-71
Statements of Operations and Retained Earnings......... F-72
Statements of Cash Flows............................... F-73
Notes to Financial Statements.......................... F-74-F-77
GREENWOOD OUTFITTERS, INC.
Report of Independent Certified Public Accountants........ F-78
Financial Statements
Balance Sheets......................................... F-79
Statements of Operations and Retained Earnings......... F-80
Statements of Cash Flows............................... F-81
Notes to Financial Statements.......................... F-82-F-83
GEORGIA IMPRESSION PRODUCTS, INC.
Report of Independent Certified Public Accountants........ F-84
Financial Statements
Balance Sheets......................................... F-85
Statements of Operations and Retained Earnings......... F-86
Statements of Cash Flows............................... F-87
Notes to Financial Statements.......................... F-88-F-91
MEGA OFFICE FURNITURE, L.L.C. (EQUITY INVESTMENT OF THE
SUPPLY ROOM, INC.)
Report of Independent Certified Public Accountants........ F-92
Financial Statements
Balance Sheets......................................... F-93
Statements of Operations............................... F-94
Statement of Changes in Members' Capital............... F-95
Statements of Cash Flows............................... F-96
Notes to Financial Statements.......................... F-97-F-103
</TABLE>
F-2
<PAGE> 55
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
INTRODUCTION TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
Office Centre Corporation, a Delaware corporation, was founded in October
1996 for the purpose of becoming a nationwide office products supplier, that
serves primarily small and medium sized corporate customers. The historical
combined financial statements reflect the financial position and results of
operations of Office Centre Corporation and the Founding Companies and were
derived from the respective Companies' financial statements. During 1997, Office
Centre Corporation acquired all of the outstanding shares of UDI Corp. and UDI
II Corp. (collectively referred to as "UDI") in a stock-for-stock exchange. UDI
II Corp. was subsequently merged with and into UDI Corp., with UDI Corp.
remaining as the surviving entity. The transaction was accounted for as a
reverse acquisition, with the results of UDI's operations presented on a
historical basis.
The unaudited pro forma combined financial statements give effect to the
acquisitions by Office Centre Corporation of The Supply Room Companies, Inc.
("TSR"), New England Office Supply, Inc. ("New England"), King Office Supply,
Inc. and Subsidiary ("King"), Sierra Office Systems and Products, Inc.
("Sierra"), Office Solutions Business Products and Services, Inc. ("Office
Solutions"), Greenwood Outfitters, Inc. ("Greenwood"), Metro Data Supply, Inc.
("Metro Data"), BCB Office Products Company ("BCB"), "SOS" Office Supply Company
("SOS"), Georgia Impression Products, Inc. ("Georgia Impression"), Office
Express, Inc. ("Office Express"), and Southern Office Centre, Inc. ("Southern
Office Centre") (together the "Founding Companies"). These acquisitions (the
"Acquisitions") will occur simultaneously with and as a condition to the closing
of the initial public offering (the "Offering") and will be accounted for using
the purchase method of accounting whereby the assets and liabilities are
recorded at fair market value. Office Centre Corporation has been identified as
the accounting acquirer for financial statement presentation purposes.
The unaudited pro forma combined balance sheet gives effect to the
Acquisitions and the Offering as if they had occurred on March 31, 1998. The
unaudited pro forma combined statements of operations give effect to these
transactions as if they had occurred on January 1, 1997. The pro forma combined
statements of operations reflect the operating results of Office Centre
Corporation and each of the Founding Companies, for the calendar year ended
December 31, 1997 and for the three months ended March 31, 1997 and 1998. Office
Centre Corporation and each of the Founding Companies have a fiscal year ending
December 31, with the exception of TSR, whose fiscal year-end is the last Friday
closest to September 30; Sierra and Metro Data, whose year-ends are March 31;
Office Solutions, whose fiscal year-end is September 30; SOS, whose fiscal
year-end is July 31; and Georgia Impression, whose fiscal year-end is June 30.
Sierra's and Metro Data's operating results for the year ended March 31,
1997 were adjusted by adding the subsequent period April 1, 1997 to December 31,
1997 and subtracting the interim period April 1, 1996 to December 31, 1996.
TSR's and Office Solutions' operating results for the year ended September 30,
1997 were adjusted by adding the subsequent period October 1, 1997 to December
31, 1997 and subtracting the interim period October 1, 1996 to December 31,
1996. SOS's operating results for the year ended July 31, 1997 were adjusted by
adding the subsequent period August 1, 1997 to December 31, 1997 and subtracting
the interim period August 1, 1996 to December 31, 1996. Georgia Impression's
operating results for the year ended June 30, 1997 were adjusted by adding the
subsequent period July 1, 1997 to December 31, 1997 and subtracting the interim
period July 1, 1996 to December 31, 1996.
The pro forma financial statements include adjustments to reflect (i) the
effect of the Acquisitions of the Founding Companies and the Offering, (ii) the
reductions in salaries, lease costs and certain benefits to the owners of the
Founding Companies, (iii) the effect of contractual compensation of Office
Centre Corporation's new corporate management, (iv) amortization of goodwill
over forty years, (v) elimination of interest expense as a result of the
repayment of certain debt with a portion of the proceeds of the Offering and
(vi) all income subject to a corporate income tax rate of 40% and all goodwill
amortization treated as nondeductible.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what the
Company's financial position or results of operations would actually have been
if such transactions, in fact, had occurred on those dates and are not
necessarily representative of the Company's financial position or results of
operations for any future period. Since the Founding Companies were not under
common control, historical combined results may not be comparable to, or
indicative of, future performance. The unaudited pro forma combined financial
statements should be read in conjunction with the other financial statements and
notes thereto included elsewhere in this Prospectus. See "Risk Factors" included
elsewhere herein.
F-3
<PAGE> 56
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
OFFICE
CENTRE
CORPORATION NEW OFFICE
(REGISTRANT) TSR ENGLAND KING SIERRA SOLUTIONS GREENWOOD
------------ ------ ------- ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............... $ 1,395 $ 5 $ 3 $ 13 $ 29 $ 244 $ 348
Accounts receivable, net................ 15,936 3,707 2,663 2,417 1,657 1,335 1,086
Due from related parties................ -- -- -- -- -- -- --
Due from affiliate...................... -- -- -- 120 -- -- --
Inventories............................. -- 1,324 369 473 337 330 166
Other current assets.................... 825 155 121 119 58 93 17
------- ------ ------ ------ ------ ------ ------
Total current assets.................. 18,156 5,191 3,156 3,142 2,081 2,002 1,617
INVESTMENT IN AFFILIATE.................. 1,500 1,318 -- -- -- -- --
DUE FROM STOCKHOLDER..................... -- -- -- -- 800 -- --
PROPERTY AND EQUIPMENT, NET.............. 415 900 374 233 1,078 212 118
GOODWILL, NET............................ -- 952 92 781 -- -- --
DEFERRED OFFERING COSTS.................. 3,955 -- -- -- -- -- --
OTHER ASSETS............................. -- 154 21 146 29 -- --
------- ------ ------ ------ ------ ------ ------
$24,026 $8,515 $3,643 $4,302 $3,988 $2,214 $1,735
======= ====== ====== ====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Short-term debt......................... $ 2,997 $1,968 $ 633 $2,023 $1,334 $ -- $ --
Accounts payable and accrued expenses... 20,849 2,482 1,410 1,758 1,406 1,134 675
Due to related parties.................. -- -- -- -- -- -- --
Due to affiliate........................ 120 -- -- -- -- -- --
Income taxes payable.................... -- 45 34 45 49 199 2
Notes payable to stockholders........... -- -- -- 78 -- -- --
------- ------ ------ ------ ------ ------ ------
Total current liabilities............. 23,966 4,495 2,077 3,904 2,789 1,333 677
DUE TO RELATED PARTIES................... 96 290 -- -- -- -- --
LONG-TERM DEBT........................... -- 501 492 273 110 -- --
LEASE OBLIGATIONS........................ -- 154 -- -- 389 116 --
DEFERRED INCOME TAXES.................... 22 62 -- 19 -- -- --
------- ------ ------ ------ ------ ------ ------
24,084 5,502 2,569 4,196 3,288 1,449 677
------- ------ ------ ------ ------ ------ ------
STOCKHOLDERS' EQUITY
Common stock............................ 1 2,411 515 -- 329 435 150
Additional paid-in capital.............. 379 -- -- -- -- -- --
Retained earnings (accumulated
deficit).............................. (438) 602 559 106 371 330 1,038
Less: Treasury stock.................... -- -- -- -- -- -- (130)
------- ------ ------ ------ ------ ------ ------
(58) 3,013 1,074 106 700 765 1,058
------- ------ ------ ------ ------ ------ ------
$24,026 $8,515 $3,643 $4,302 $3,988 $2,214 $1,735
======= ====== ====== ====== ====== ====== ======
<CAPTION>
SOUTHEAST SATELLITES
GREENWOOD -------------------------------
SATELLITES PRO
--------------- SOUTHERN FORMA PRO
METRO GEORGIA OFFICE OFFICE ACQUISITION FORMA
DATA BCB SOS IMPRESSION EXPRESS CENTRE ADJUSTMENTS COMBINED
------ ------ ------ ---------- ------- -------- ----------- --------
(NOTE 2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............... $ 116 $ 5 $ 758 $ 307 $ 27 $ 4 $ (183) $ 3,071
Accounts receivable, net................ 310 72 487 361 257 206 -- 30,494
Due from related parties................ -- 1 -- -- -- 5 -- 6
Due from affiliate...................... -- -- -- -- -- -- (120) --
Inventories............................. 16 31 132 54 13 124 -- 3,369
Other current assets.................... -- 8 1 3 -- 3 -- 1,403
------ ------ ------ ------ ------ ------ ------- -------
Total current assets.................. 442 117 1,378 725 297 342 (303) 38,343
INVESTMENT IN AFFILIATE.................. -- -- -- -- -- -- (1,500) 1,318
DUE FROM STOCKHOLDER..................... -- -- -- -- -- -- -- 800
PROPERTY AND EQUIPMENT, NET.............. 44 15 198 50 441 65 (421) 3,722
GOODWILL, NET............................ -- -- -- -- -- -- 46,655 48,480
DEFERRED OFFERING COSTS.................. -- -- -- -- -- -- 3,955
OTHER ASSETS............................. 4 9 100 1 2 8 140 614
------ ------ ------ ------ ------ ------ ------- -------
$ 490 $ 141 $1,676 $ 776 $ 740 $ 415 $44,571 $97,232
====== ====== ====== ====== ====== ====== ======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Short-term debt......................... $ 16 $ 17 $ 18 $ 24 $ 38 $ 186 $ (33) $ 9,221
Accounts payable and accrued expenses... 184 212 465 167 180 286 -- 31,208
Due to related parties.................. -- 8 -- -- -- 9 (9) 8
Due to affiliate........................ -- -- -- -- -- -- (120) --
Income taxes payable.................... 2 -- 30 125 26 -- -- 557
Notes payable to stockholders........... -- -- -- -- -- -- 16,560 16,638
------ ------ ------ ------ ------ ------ ------- -------
Total current liabilities............. 202 237 513 316 244 481 16,398 57,632
DUE TO RELATED PARTIES................... -- 7 -- -- -- 58 (58) 393
LONG-TERM DEBT........................... 9 17 -- -- 339 -- (327) 1,414
LEASE OBLIGATIONS........................ -- -- 49 -- -- -- -- 708
DEFERRED INCOME TAXES.................... -- -- -- -- -- -- -- 103
------ ------ ------ ------ ------ ------ ------- -------
211 261 562 316 583 539 16,013 60,250
------ ------ ------ ------ ------ ------ ------- -------
STOCKHOLDERS' EQUITY
Common stock............................ 30 1 12 48 -- 47 (3,978) 1
Additional paid-in capital.............. -- -- -- -- 1 15 37,024 37,419
Retained earnings (accumulated
deficit).............................. 249 (121) 1,102 544 156 (186) (4,750) (438)
Less: Treasury stock.................... -- -- -- (132) -- -- 262 --
------ ------ ------ ------ ------ ------ ------- -------
279 (120) 1,114 460 157 (124) 28,558 36,982
------ ------ ------ ------ ------ ------ ------- -------
$ 490 $ 141 $1,676 $ 776 $ 740 $ 415 $44,571 $97,232
====== ====== ====== ====== ====== ====== ======= =======
<CAPTION>
PRO
FORMA
OFFERING AS
ADJUSTMENTS ADJUSTED
----------- --------
(NOTE 2)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............... $ 6,387 $ 9,458
Accounts receivable, net................ -- 30,494
Due from related parties................ -- 6
Due from affiliate...................... -- --
Inventories............................. -- 3,369
Other current assets.................... -- 1,403
------- -------
Total current assets.................. 6,387 44,730
INVESTMENT IN AFFILIATE.................. -- 1,318
DUE FROM STOCKHOLDER..................... -- 800
PROPERTY AND EQUIPMENT, NET.............. -- 3,722
GOODWILL, NET............................ -- 48,480
DEFERRED OFFERING COSTS.................. (3,955) --
OTHER ASSETS............................. -- 614
------- -------
$ 2,432 $99,664
======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Short-term debt......................... $(9,019) $ 202
Accounts payable and accrued expenses... -- 31,208
Due to related parties.................. (8) --
Due to affiliate........................
Income taxes payable.................... -- 557
Notes payable to stockholders........... (16,638) --
------- -------
Total current liabilities............. (25,665) 31,967
DUE TO RELATED PARTIES................... (393) --
LONG-TERM DEBT........................... (1,414) --
LEASE OBLIGATIONS........................ -- 708
DEFERRED INCOME TAXES.................... -- 103
------- -------
(27,472) 32,778
------- -------
STOCKHOLDERS' EQUITY
Common stock............................ 8 9
Additional paid-in capital.............. 29,896 67,315
Retained earnings (accumulated
deficit).............................. -- (438)
Less: Treasury stock.................... -- --
------- -------
29,904 66,886
------- -------
$ 2,432 $99,664
======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE> 57
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OFFICE CENTRE
CORPORATION NEW OFFICE
(REGISTRANT) TSR ENGLAND KING SIERRA SOLUTIONS GREENWOOD
------------- --------- ------- ------ ------ --------- ---------
(NOTE 5)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ $2,600 $9,151 $4,132 $3,870 $3,459 $3,339 $2,718
Cost of revenues........................ 1,307 6,201 3,074 2,461 2,396 2,456 1,738
------ ------ ------ ------ ------ ------ ------
Gross margin........................ 1,293 2,950 1,058 1,409 1,063 883 980
Operating expenses...................... 2,226 2,465 849 1,235 1,063 698 701
Goodwill amortization................... -- 32 1 5 -- -- --
------ ------ ------ ------ ------ ------ ------
Operating income (loss)............. (933) 453 208 169 -- 185 279
Other income (expense)
Interest income....................... 16 (4) -- -- 3 3 --
Interest expense...................... (101) (63) (39) (65) (81) (4) --
Other income (expense)................ -- (99) 4 -- 19 -- --
------ ------ ------ ------ ------ ------ ------
Income (loss) before taxes.......... (1,018) 287 173 104 (59) 184 279
Provision for income taxes.............. (302) 128 5 42 (16) 74 1
------ ------ ------ ------ ------ ------ ------
Net income (loss)................... $ (716) $ 159 $ 168 $ 62 $ (43) $ 110 $ 278
====== ====== ====== ====== ====== ====== ======
Pro forma net income per share
Basic and Diluted.....................
Shares used in computing pro forma net
income per share
Basic and Diluted.....................
<CAPTION>
GREENWOOD SOUTHEAST SATELLITES
SATELLITES -------------------------------
-------------- SOUTHERN PRO FORMA
METRO GEORGIA OFFICE OFFICE -----------------------
DATA BCB SOS IMPRESSION EXPRESS CENTRE ADJUSTMENTS COMBINED
----- ------ ------ ---------- ------- -------- ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ $546 $ 223 $1,526 $836 $796 $618 $ -- $ 33,814
Cost of revenues........................ 410 146 1,062 584 553 478 -- 22,866
---- ------ ------ ---- ---- ---- ------ ---------
Gross margin........................ 136 77 464 252 243 140 -- 10,948
Operating expenses...................... 129 71 383 153 207 159 (1,319) 9,020
Goodwill amortization................... -- -- -- -- -- -- 294 332
---- ------ ------ ---- ---- ---- ------ ---------
Operating income (loss)............. 7 6 81 99 36 (19) 1,025 1,596
Other income (expense)
Interest income....................... 1 -- 7 -- -- -- - 26
Interest expense...................... -- (1) (2) -- (12) (12) 335 (45)
Other income (expense)................ -- -- -- -- 1 17 -- (58)
---- ------ ------ ---- ---- ---- ------ ---------
Income (loss) before taxes.......... 8 5 86 99 25 (14) 1,360 1,519
Provision for income taxes.............. 2 -- 5 39 11 -- 751 740
---- ------ ------ ---- ---- ---- ------ ---------
Net income (loss)................... $ 6 $ 5 $ 81 $ 60 $ 14 $(14) $ 609 $ 779
==== ====== ====== ==== ==== ==== ====== =========
Pro forma net income per share
Basic and Diluted..................... $ 0.09
=========
Shares used in computing pro forma net
income per share
Basic and Diluted..................... 8,500,000
=========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 58
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OFFICE CENTRE
CORPORATION NEW OFFICE
(REGISTRANT) TSR ENGLAND KING SIERRA SOLUTIONS GREENWOOD
------------- --------- ------- ------ ------ --------- ---------
(NOTE 5)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ $2,786 $8,658 $3,547 $3,481 $2,924 $2,275 $2,051
Cost of revenues........................ 1,404 5,775 2,597 2,199 1,979 1,647 1,328
------ ------ ------ ------ ------ ------ ------
Gross margin........................ 1,382 2,883 950 1,282 945 628 723
Operating expenses...................... 1,092 2,458 856 1,162 936 646 582
Goodwill amortization................... -- 13 13 3 -- -- --
------ ------ ------ ------ ------ ------ ------
Operating income (loss)............. 290 412 81 117 9 (18) 141
Other income (expense)
Interest income....................... 32 10 -- -- 21 3 --
Interest expense...................... (30) (79) (23) (58) (78) (4) --
Other income (expense)................ -- (35) (42) -- -- -- --
------ ------ ------ ------ ------ ------ ------
Income (loss) before taxes.......... 292 308 16 59 (48) (19) 141
Provision for income taxes.............. 136 128 3 8 (20) 24 1
------ ------ ------ ------ ------ ------ ------
Net income (loss)................... $ 156 $ 180 $ 13 $ 51 $ (28) $ (43) $ 140
====== ====== ====== ====== ====== ====== ======
Pro forma net income per share
Basic and Diluted.....................
Shares used in computing pro forma net
income per share
Basic and Diluted...................
<CAPTION>
GREENWOOD SOUTHEAST SATELLITES
SATELLITES -------------------------------
------------ SOUTHERN PRO FORMA
METRO GEORGIA OFFICE OFFICE ------------------------
DATA BCB SOS IMPRESSION EXPRESS CENTRE ADJUSTMENTS COMBINED
----- ---- ------ ---------- ------- -------- ----------- ----------
(NOTE 3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ $502 $201 $1,334 $752 $703 $592 $ -- $ 29,806
Cost of revenues........................ 392 133 882 557 466 453 -- 19,812
---- ---- ------ ---- ---- ---- ----- ----------
Gross margin........................ 110 68 452 195 237 139 -- 9,994
Operating expenses...................... 97 57 514 161 185 160 (575) 8,331
Goodwill amortization................... -- -- -- -- -- -- 294 323
---- ---- ------ ---- ---- ---- ----- ----------
Operating income (loss)............. 13 11 (62) 34 52 (21) 281 1,340
Other income (expense)
Interest income....................... -- -- 9 2 -- -- -- 77
Interest expense...................... -- (3) (2) -- (12) (10) 250 (49)
Other income (expense)................ -- (21) -- -- -- -- -- (98)
---- ---- ------ ---- ---- ---- ----- ----------
Income (loss) before taxes.......... 13 (13) (55) 36 40 (31) 531 1,270
Provision for income taxes.............. -- -- (3) 10 16 (12) 346 637
---- ---- ------ ---- ---- ---- ----- ----------
Net income (loss)................... $ 13 $(13) $ (52) $ 26 $ 24 $(19) $ 185 $ 633
==== ==== ====== ==== ==== ==== ===== ==========
Pro forma net income per share
Basic and Diluted..................... $ 0.07
==========
Shares used in computing pro forma net
income per share
Basic and Diluted................... 8,500,000
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE> 59
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OFFICE CENTRE
CORPORATION NEW OFFICE
(REGISTRANT) TSR ENGLAND KING SIERRA SOLUTIONS GREENWOOD
------------- --------- ------- ------- ------- --------- ---------
(NOTE 5)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $11,002 $37,847 $14,665 $13,893 $12,215 $10,879 $ 8,920
Cost of revenues................... 5,489 26,304 10,975 8,780 8,095 7,971 5,885
------- ------- ------- ------- ------- ------- -------
Gross margin................... 5,513 11,543 3,690 5,113 4,120 2,908 3,035
Operating expenses................. 4,981 10,621 3,226 4,690 3,829 2,653 2,652
Goodwill amortization.............. -- 58 147 46 -- -- --
------- ------- ------- ------- ------- ------- -------
Operating income (loss)........ 532 864 317 377 291 255 383
Other income (expense)
Interest income.................. 84 15 -- 1 130 10 --
Interest expense................. (189) (283) (141) (254) (326) (14) --
Other income (expense)........... -- (147) -- -- (22) -- --
------- ------- ------- ------- ------- ------- -------
Income (loss) before taxes..... 427 449 176 124 73 251 383
Provision for income taxes......... 244 238 10 15 30 101 3
------- ------- ------- ------- ------- ------- -------
Net income (loss).............. $ 183 $ 211 $ 166 $ 109 $ 43 $ 150 $ 380
======= ======= ======= ======= ======= ======= =======
Pro forma net income per share
Basic and Diluted................
Shares used in computing pro forma
net income per share
Basic and Diluted................
<CAPTION>
GREENWOOD SOUTHEAST SATELLITES
SATELLITES -------------------------------
--------------- SOUTHERN PRO FORMA
METRO GEORGIA OFFICE OFFICE ------------------------
DATA BCB SOS IMPRESSION EXPRESS CENTRE ADJUSTMENTS COMBINED
------ ------ ------- ---------- ------- -------- ----------- ----------
(NOTE 3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $2,167 $ 745 $ 5,484 $3,642 $2,856 $2,531 $ -- $ 126,846
Cost of revenues................... 1,694 504 3,595 2,649 1,941 1,929 -- 85,811
------ ------ ------- ------ ------ ------ ------- ----------
Gross margin................... 473 241 1,889 993 915 602 -- 41,035
Operating expenses................. 452 281 1,994 811 785 653 (3,174) 34,454
Goodwill amortization.............. -- -- -- -- -- -- 1,168 1,419
------ ------ ------- ------ ------ ------ ------- ----------
Operating income (loss)........ 21 (40) (105) 182 130 (51) 2,006 5,162
Other income (expense)
Interest income.................. 1 -- 34 7 -- -- -- 282
Interest expense................. (1) (11) (8) (3) (42) (53) 1,150 (175)
Other income (expense)........... -- (18) (23) -- -- 24 -- (186)
------ ------ ------- ------ ------ ------ ------- ----------
Income (loss) before taxes..... 21 (69) (102) 186 88 (80) 3,156 5,083
Provision for income taxes......... 4 -- 6 52 16 -- 1,882 2,601
------ ------ ------- ------ ------ ------ ------- ----------
Net income (loss).............. $ 17 $ (69) $ (108) $ 134 $ 72 $ (80) $ 1,274 $ 2,482
====== ====== ======= ====== ====== ====== ======= ==========
Pro forma net income per share
Basic and Diluted................ $ 0.29
==========
Shares used in computing pro forma
net income per share
Basic and Diluted................ 8,500,000
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-7
<PAGE> 60
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
NOTE 1 -- ACQUISITION OF THE FOUNDING COMPANIES
The following table sets forth the consideration to be paid (the "Purchase
Consideration") in cash and shares of restricted Common Stock to the Founding
Companies, and the allocation of the consideration to the net assets acquired
and resulting goodwill at March 31, 1998. The number of shares to be issued to
the Founding Companies is based upon the assumed Initial Public Offering ("IPO")
price of $11 per share.
<TABLE>
<CAPTION>
NET
SHARES OF ASSETS
COMMON VALUE OF TOTAL (LIABILITIES)
CASH STOCK SHARES CONSIDERATION ACQUIRED GOODWILL
------- --------- -------- ------------- ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
TSR (1)....................... $ 4,257 737,042 $ 8,107 $12,364 $3,013 $ 9,351
New England................... 2,000 408,909 4,498 6,498 1,074 5,424
King.......................... 2,937 329,937 3,629 6,566 106 6,460
Sierra........................ 272 441,920 4,861 5,133 700 4,433
Office Solutions.............. 3,826 347,773 3,825 7,651 765 6,886
Greenwood..................... 2,650 595,455 6,550 9,200 1,058 8,142
SOS........................... 600 264,545 2,910 3,510 1,114 2,396
Georgia Impression(2)......... 325 88,773 977 1,302 277 1,025
Office Express(3)............. 195 100,610 1,107 1,302 95 1,207
Southern Office Centre(4)..... 300 -- -- 300 (57) 357
Metro Data.................... 531 39,518 435 966 279 687
BCB........................... 167 -- -- 167 (120) 287
------- --------- ------- ------- ------ -------
$18,060 3,354,482 $36,899 $54,959 $8,304 $46,655
======= ========= ======= ======= ====== =======
</TABLE>
- ---------------
(1) Cash includes the purchase of 1,250 shares of TSR stock for $1.5 million in
September 1997.
(2) Net assets as of March 31, 1998 have been adjusted to reflect entitlement of
Georgia Impression stockholders to cash in excess of $100,000 available at
closing provided no amounts are outstanding under Georgia Impression's line
of credit and all payables are current.
(3) Net assets as of March 31, 1998 have been adjusted to reflect the transfer
of real estate valued at $421,000 (net of depreciation) and a related
mortgage balance of $360,000 prior to closing.
(4) Net assets have been adjusted to reflect required conversion of debt owed by
Southern to a stockholder in the amount of $67,000 to equity prior to
closing.
The total Purchase Consideration does not reflect contingent consideration
related to earn out arrangements included in the merger agreements for TSR, New
England, King, Office Solutions and Greenwood.
Office Centre Corporation has agreed to issue to the stockholders of TSR
additional consideration based on TSR's 1998 earnings before interest, taxes and
depreciation and amortization ("EBITDA") of up to $3 million in shares of
restricted common stock, valued at the IPO price per share, to be deposited in
escrow and released only if TSR achieves certain profitability objectives in
1998.
Office Centre Corporation will contingently issue to the sole stockholder
of New England additional shares of restricted common stock equal to 4.5 times
the increase in New England's 1998 EBITDA over its 1997 EBITDA, divided by the
IPO price.
Office Centre Corporation will contingently issue to the stockholders of
King cash and shares of restricted common stock equal to 3.5 times the increase
in King's 1998 EBITDA over its 1997 EBITDA, divided by the IPO price. The
contingent consideration of cash and shares of restricted stock will be paid in
the same ratio as the consideration of cash and shares of restricted stock set
forth at the time of the Offering.
F-8
<PAGE> 61
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Office Centre Corporation will contingently issue to the sole stockholder
of Office Solutions additional shares of restricted common stock equal to 3.5
times the amount by which the actual EBITDA of Office Solutions for the twelve
months following the acquisition exceeds the annualized EBITDA of Office
Solutions for the period between January 1, 1998 and the date of the
acquisition, divided by the IPO price.
Office Centre Corporation will contingently issue to the stockholders of
Greenwood cash and shares of restricted common stock equal to 3.05 times the
amount of the increase in Greenwood's 1998 EBITDA over its 1997 EBITDA less an
adjustment for owners' compensation in certain circumstances. The contingent
consideration of cash and shares of restricted stock will be paid in the same
ratio as the consideration of cash and shares of restricted stock set forth at
the time of the Offering.
The holders of all of the shares of restricted Common Stock issued as
consideration for the Acquisitions have contractually agreed with the Company
not to offer, sell or otherwise dispose of any of those shares for a period of
180 days after the Offering.
F-9
<PAGE> 62
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
The following table summarizes unaudited pro forma combined balance sheet
adjustments (amounts in thousands):
<TABLE>
<CAPTION>
ACQUISITION ADJUSTMENTS OFFERING ADJUSTMENTS
-------------------------------- -------------------------------------------
TOTAL TOTAL
ACQUISITION OFFERING
(a) (b) ADJUSTMENTS (c) (d) (e) ADJUSTMENTS
-------- ------- ----------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......... $ -- $ (183) $ (183) $33,859 $(10,912) $(16,560) $ 6,387
Accounts receivable, net........... -- -- -- -- -- -- --
Due from related parties........... -- -- -- -- -- -- --
Due from affiliate................. -- (120) (120) -- -- -- --
Inventories........................ -- -- -- -- -- -- --
Other current assets............... -- -- -- -- -- -- --
-------- ------- ------- ------- -------- -------- --------
Total current assets......... -- (303) (303) 33,859 (10,912) (16,560) 6,387
INVESTMENT IN AFFILIATE.............. -- (1,500) (1,500) -- -- -- --
DUE FROM STOCKHOLDER................. -- -- -- -- -- -- --
PROPERTY AND EQUIPMENT, NET.......... -- (421) (421) -- -- -- --
GOODWILL, NET........................ -- 46,655 46,655 -- -- -- --
DEFERRED OFFERING COSTS.............. -- -- -- (3,955) -- -- (3,955)
OTHER ASSETS......................... -- 140 140 -- -- -- --
-------- ------- ------- ------- -------- -------- --------
$ -- $44,571 $44,571 $29,904 $(10,912) $(16,560) $ 2,432
======== ======= ======= ======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt.................... $ -- $ (33) $ (33) $ -- $ (9,019) $ -- $ (9,019)
Accounts payable and accrued
expenses......................... -- -- -- -- -- -- --
Due to related parties............. -- (9) (9) -- (8) -- (8)
Due to affiliate................... -- (120) (120) -- -- -- --
Income taxes payable............... -- -- -- -- -- -- --
Notes payable to stockholders...... 16,560 -- 16,560 -- (78) (16,560) (16,638)
-------- ------- ------- ------- -------- -------- --------
Total current liabilities.... 16,560 (162) 16,398 -- (9,105) (16,560) (25,665)
DUE TO RELATED PARTIES............... -- (58) (58) -- (393) -- (393)
LONG-TERM DEBT....................... -- (327) (327) -- (1,414) -- (1,414)
LEASE OBLIGATIONS.................... -- -- -- -- -- -- --
DEFERRED INCOME TAXES................ -- -- -- -- -- -- --
-------- ------- ------- ------- -------- -------- --------
16,560 (547) 16,013 -- (10,912) (16,560) (27,472)
STOCKHOLDERS' EQUITY
Common stock....................... -- (3,978) (3,978) 8 -- -- 8
Additional paid-in capital......... (16,560) 53,584 37,024 29,896 -- -- 29,896
Retained earnings (deficit)........ -- (4,750) (4,750) -- -- -- --
Less: treasury stock............... -- 262 262 -- -- -- --
-------- ------- ------- ------- -------- -------- --------
--
Total Stockholders' Equity....... (16,560) 45,118 28,558 29,904 -- -- 29,904
-------- ------- ------- ------- -------- -------- --------
$ -- $44,571 $44,571 $29,904 $(10,912) $(16,560) $ 2,432
======== ======= ======= ======= ======== ======== ========
</TABLE>
- ---------------
(a) Records a pro forma liability for the cash portion of the consideration to
be paid to stockholders of the Founding Companies in connection with the
Acquisitions less $1.5 million which was previously paid to TSR.
(b) Records the purchase of the Founding Companies by Office Centre Corporation,
including consideration of $18.1 million in cash and issuance of 3,354,482
shares of restricted common stock valued at $11 per share (or $36.9 million)
for a total
F-10
<PAGE> 63
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
estimated purchase price of $55 million. The excess of the purchase price
over the estimated fair value of net assets acquired is $46.7 million. It
also reflects a reduction of $421,000 in Property and Equipment, net and
$360,000 in related short term and long term debt pertaining to a facility
owned by one of the stockholders of the Founding Companies, the elimination
of $120,000 in related party receivables and payables between Office Centre
Corporation and certain Founding Companies, the exchange of debt for equity
in one of the Founding Companies prior to the Offering; the entitlement to
excess cash available at closing to one of the Founding Companies' owners,
and the recording of goodwill associated with acquisition of a customer list
by one of the Founding Companies.
(c) Records the cash proceeds from the issuance of shares of Office Centre
Corporation Common Stock, net of estimated offering costs (based on an
assumed initial public offering of $11 per share). Offering costs primarily
consist of underwriting discounts and commissions, accounting fees, legal
fees, consulting fees and printing expenses.
(d) Represents the repayment of $9 million in short-term debt, $1.4 million in
long-term debt and $479,000 in payments to related parties.
(e) Records the use of Offering proceeds to pay the cash portion of the
consideration due to the stockholders of the Founding Companies in
connection with the Acquisitions.
F-11
<PAGE> 64
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
The following table summarizes unaudited pro forma combined statements of
operations adjustments:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------------------------
PRO FORMA
(a) (b) (c) (d) (e) ADJUSTMENTS
------- ---- ------- ------ ------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ -- $ -- $ -- $ -- $ -- $ --
Cost of revenues...................... -- -- -- -- -- --
------- ---- ------- ------ ------- ------
Gross margin........................ -- -- -- -- -- --
Operating expenses.................... (1,311) (8) -- -- -- (1,319)
Goodwill amortization................. -- -- 294 -- -- 294
------- ---- ------- ------ ------- ------
Operating income (loss)............. 1,311 8 (294) -- -- 1,025
Other income (expenses)
Interest income..................... -- -- -- -- -- --
Interest expense.................... -- -- -- 335 -- 335
Other income (expense).............. -- -- -- -- -- --
------- ---- ------- ------ ------- ------
Income (loss) before taxes....... 1,311 8 (294) 335 -- 1,360
Provision for income taxes............ -- -- -- -- 751 751
------- ---- ------- ------ ------- ------
Net income (loss)................ $ 1,311 $ 8 $ (294) $ 335 $ (751) $ 609
======= ==== ======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
---------------------------------------------------------
PRO FORMA
(a) (b) (c) (d) (e) ADJUSTMENTS
------- ---- ------- ------ ------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ -- $ -- $ -- $ -- $ -- $ --
Cost of revenues...................... -- -- -- -- -- --
------- ---- ------- ------ ------- ------
Gross margin........................ -- -- -- -- -- --
Operating expenses.................... (570) (5) -- -- -- (575)
Goodwill amortization................. -- -- 294 -- -- 294
------- ---- ------- ------ ------- ------
Operating income (loss)............. 570 5 (294) -- -- 281
Other income (expenses)
Interest income..................... -- -- -- -- -- --
Interest expense.................... -- -- -- 250 -- 250
Other income (expense).............. -- -- -- -- -- --
------- ---- ------- ------ ------- ------
Income (loss) before taxes....... 570 5 (294) 250 -- 531
Provision for income taxes............ -- -- -- -- 346 346
------- ---- ------- ------ ------- ------
Net income (loss)................ $ 570 $ 5 $ (294) $ 250 $ (346) $ 185
======= ==== ======= ====== ======= ======
</TABLE>
F-12
<PAGE> 65
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------
PRO FORMA
(a) (b) (c) (d) (e) ADJUSTMENTS
------- ---- ------- ------ ------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ -- $ -- $ -- $ -- $ -- $ --
Cost of revenues...................... -- -- -- -- -- --
------- ---- ------- ------ ------- ------
Gross margin........................ -- -- -- -- -- --
Operating expenses.................... (3,141) (33) -- -- -- (3,174)
Goodwill amortization................. -- -- 1,168 -- -- 1,168
------- ---- ------- ------ ------- ------
Operating income (loss)............. 3,141 33 (1,168) -- -- 2,006
Other income (expenses)
Interest income..................... -- -- -- -- -- --
Interest expense.................... -- -- -- 1,150 -- 1,150
Other income (expense).............. -- -- -- -- -- --
------- ---- ------- ------ ------- ------
Income (loss) before taxes....... 3,141 33 (1,168) 1,150 -- 3,156
Provision for income taxes............ -- -- -- -- 1,882 1,882
------- ---- ------- ------ ------- ------
Net income (loss)................ $ 3,141 $ 33 $(1,168) $1,150 $(1,882) $1,274
======= ==== ======= ====== ======= ======
</TABLE>
- ---------------
(a) Reflects the net reduction in salaries, bonuses and benefits to the owners
and officers of the Founding Companies and Office Centre Corporation to
which they have agreed prospectively.
(b) Reflects occupancy costs reduced pursuant to lease agreement renegotiated
with related parties.
(c) Reflects the amortization of goodwill to be recorded as a result of the
Acquisitions over a 40-year period.
(d) Reflects a reduction of interest expense eliminated by the retirement of all
interest-bearing debt from the proceeds of the Offering, excluding interest
related to capital lease obligations.
(e) Reflects the incremental provision for Federal and state income taxes
assuming all income is subject to a corporate income tax rate of 40% and
that all goodwill amortization is non-deductible.
NOTE 4 -- EARNINGS PER SHARE
Basic and diluted net income per share is computed by dividing net income
by the 8,500,000 common shares outstanding upon the completion of the
Acquisitions and the Offering. The dilutive effect of options outstanding have
not been included in the computation as the effect is not material.
NOTE 5 -- THE SUPPLY ROOM ACQUISITION OF TOP
In March 1998, TSR acquired the office and furniture supply operations
known as Total Office Products ("TOP") from Baltimore Stationery Company,
located in Baltimore, Maryland. The acquisition agreement requires a minimum
purchase price of $613,000, plus additional amounts up to a maximum amount of
$1,212,500 contingent upon future gross profit levels. The minimum purchase
price was allocated to intangible assets, and has been included in the
accompanying unaudited pro forma combined balance sheet.
Pro forma revenues and the related expenses of the acquired business have
been added to the results of operations of TSR for the period January 1, 1998
through the date of acquisition and for the first quarter of 1997 and calendar
year ended December 31, 1997.
The pro forma adjustments reflect: (i) the reduction in salaries and
certain overhead costs, which will not be incurred in the future, (ii)
amortization of goodwill over forty years, customer lists over ten years and
covenants
F-13
<PAGE> 66
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
not to compete over four years, and (iii) assuming all income is subject to a
corporate income tax rate of 40% and that goodwill amortization is
nondeductible, for income tax purposes.
The pro forma combined statement of operations below gives effect to the
transaction as if it had occurred on January 1, 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------------
PRO FORMA
MERGER AS
TSR TOP ADJUSTMENTS ADJUSTED
------- ------ ----------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.................................. $ 7,814 $1,337 $ -- $ 9,151
Cost of revenues.......................... 5,239 962 -- 6,201
------- ------ ----- -------
Gross margin......................... 2,575 375 -- 2,950
Operating expenses........................ 2,162 350 (47) 2,465
Goodwill amortization..................... 26 -- 6 32
------- ------ ----- -------
Operating income..................... 387 25 41 453
Other income (expense)
Interest income......................... (4) -- -- (4)
Interest expense........................ (63) -- -- (63)
Other income (expense).................. (99) -- -- (99)
------- ------ ----- -------
Income before taxes.................. 221 25 41 287
Provision for income taxes................ 89 11 28 128
------- ------ ----- -------
Net income........................... $ 132 $ 14 $ 13 $ 159
======= ====== ===== =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
--------------------------------------------
PRO FORMA
MERGER AS
TSR TOP ADJUSTMENTS ADJUSTED
------- ------ ----------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.................................. $ 7,090 $1,568 $ -- $ 8,658
Cost of revenues.......................... 4,686 1,089 -- 5,775
------- ------ ----- -------
Gross profit......................... 2,404 479 -- 2,883
Operating expenses........................ 2,091 435 (68) 2,458
Goodwill amortization..................... 4 -- 9 13
------- ------ ----- -------
Operating income..................... 309 44 59 412
Other income (expenses)
Interest income......................... 10 -- -- 10
Interest expense........................ (79) -- -- (79)
Other income (expense).................. (35) -- -- (35)
------- ------ ----- -------
Income before taxes.................. 205 44 59 308
Provision for income taxes................ 90 19 19 128
------- ------ ----- -------
Net income........................... $ 115 $ 25 $ 40 $ 180
======= ====== ===== =======
</TABLE>
F-14
<PAGE> 67
OFFICE CENTRE CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------
PRO FORMA
MERGER AS
TSR TOP ADJUSTMENTS ADJUSTED
------- ------ ----------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.................................. $29,953 $7,894 $ -- $37,847
Cost of revenues.......................... 20,778 5,526 -- 26,304
------- ------ ----- -------
Gross profit......................... 9,175 2,368 -- 11,543
Operating expenses........................ 8,699 2,195 (273) 10,621
Goodwill amortization..................... 24 -- 34 58
------- ------ ----- -------
Operating income..................... 452 173 239 864
Other income (expenses)
Interest income......................... 15 -- -- 15
Interest expense........................ (283) -- -- (283)
Other income (expense).................. (147) -- -- (147)
------- ------ ----- -------
Income before taxes.................. 37 173 239 449
Provision for income taxes................ 22 69 147 238
------- ------ ----- -------
Net Income........................... $ 15 $ 104 $ 92 $ 211
======= ====== ===== =======
</TABLE>
F-15
<PAGE> 68
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of Office
Centre Corporation and Subsidiaries (the "Company") as of December 31, 1996 and
1997 and the related consolidated statements of operations, changes in
stockholders' equity (deficiency) and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Office Centre
Corporation and Subsidiaries as of December 31, 1996 and 1997, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
New York, New York
February 6, 1998 (except for
Note C, as to which the
date is March 16, 1998)
F-16
<PAGE> 69
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998
----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 910,294 $ 371,146 $ 1,394,704
Accounts receivable, net of allowance for doubtful
accounts of $261,583 in 1996, $341,292 in 1997 and
$383,489 in 1998
From members............................................ 11,069,159 12,386,148 12,797,580
Rebates from wholesalers................................ 6,581,207 5,402,910 1,544,240
Other programs.......................................... 354,926 1,969,708 1,594,138
Prepaid and other current assets.......................... 130,854 74,375 202,302
Prepaid and refundable income taxes....................... 440,490 283,061 201,719
Deferred tax assets....................................... 136,510 114,176 421,176
----------- ----------- -----------
Total current assets.................................. 19,623,440 20,601,524 18,155,859
INVESTMENT IN AFFILIATE..................................... -- 1,500,000 1,500,000
PROPERTY AND EQUIPMENT, NET................................. 245,363 406,319 415,411
DEFERRED OFFERING COSTS..................................... 92,386 2,958,772 3,954,691
----------- ----------- -----------
$19,961,189 $25,466,615 $24,025,961
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Line of credit............................................ $ 1,350,000 $ 5,615,000 $ 2,904,094
Current portion of notes payable.......................... 89,788 93,027 93,027
Accounts payable -- trade................................. 12,632,453 13,648,225 17,233,078
Rebates due to members
Wholesaler program...................................... 4,446,166 3,601,941 1,022,783
Manufacturer program.................................... 366,618 1,251,738 1,504,022
Accrued expenses.......................................... 198,907 653,879 1,089,002
Due to King Office Supply, Inc............................ -- 91,946 119,945
Due to stockholders....................................... 564,193 -- --
----------- ----------- -----------
Total current liabilities............................. 19,648,125 24,955,756 23,965,951
NOTES PAYABLE -- LONG-TERM PORTION.......................... 189,455 96,429 96,429
DEFERRED TAXES.............................................. 23,818 21,805 21,805
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.001 par value; 50,000,000 authorized
shares; 1,355,091, 1,405,091 and 1,434,155 shares issued
and outstanding at December 31, 1996 and 1997 and March
31, 1998, respectively.................................. 1,355 1,405 1,434
Additional paid-in capital................................ 3,307 113,257 378,228
Retained earnings (accumulated deficit)................... 95,129 277,963 (437,886)
----------- ----------- -----------
99,791 392,625 (58,224)
----------- ----------- -----------
$19,961,189 $25,466,615 $24,025,961
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-17
<PAGE> 70
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Wholesaler program................ $ 9,759,585 $ 6,669,243 $ 5,425,774 $ 1,459,657 $ 1,173,714
Manufacturer program.............. 1,491,801 2,063,563 2,126,520 509,838 527,220
Advertising and promotion
income.......................... 1,057,884 971,285 2,305,090 571,735 617,518
Membership fees................... 328,537 360,293 303,345 76,260 51,126
Other income...................... 346,209 867,054 840,959 168,433 230,173
----------- ----------- ----------- ----------- -----------
12,984,016 10,931,438 11,001,688 2,785,923 2,599,751
----------- ----------- ----------- ----------- -----------
Cost of revenues
Wholesaler program................ 7,261,353 4,446,162 3,571,285 960,757 800,000
Other programs.................... 1,353,525 1,485,708 1,917,229 442,881 506,878
----------- ----------- ----------- ----------- -----------
8,614,878 5,931,870 5,488,514 1,403,638 1,306,878
----------- ----------- ----------- ----------- -----------
Gross margin.................. 4,369,138 4,999,568 5,513,174 1,382,285 1,292,873
Operating costs and expenses........ 4,261,595 5,188,541 4,981,467 1,091,897 2,226,443
----------- ----------- ----------- ----------- -----------
Operating income (loss)....... 107,543 (188,973) 531,707 290,388 (933,570)
Other income (expense)
Interest income................... 80,984 99,050 84,636 31,908 16,681
Interest expense.................. (51,410) (87,181) (189,410) (30,187) (100,986)
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes......................... 137,117 (177,104) 426,933 292,109 (1,017,875)
Provision for income taxes.......... 56,513 8,418 244,099 135,773 (302,026)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS)............. $ 80,604 $ (185,522) $ 182,834 $ 156,336 $ (715,849)
=========== =========== =========== =========== ===========
Net income (loss) per share of
common stock
Basic and Diluted............... $ .06 $ (.14) $ .13 $ .12 $ (.50)
----------- ----------- ----------- ----------- -----------
Weighted average common stock
outstanding
Basic and Diluted............... 1,355,091 1,355,091 1,371,758 1,355,091 1,434,155
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE> 71
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995.................. 1,355,091 $1,355 $ 3,307 $ 200,047 $ 204,709
Net income................................ 80,604 80,604
--------- ------ -------- --------- ---------
Balance at December 31, 1995................ 1,355,091 1,355 3,307 280,651 285,313
Net loss.................................. (185,522) (185,522)
--------- ------ -------- --------- ---------
Balance at December 31, 1996................ 1,355,091 1,355 3,307 95,129 99,791
Issuance of common stock in connection
with employment agreement (Note H),
50,000 shares at $2.20 per share, $.001
par value.............................. 50,000 50 109,950 110,000
Net income................................ 182,834 182,834
--------- ------ -------- --------- ---------
Balance at December 31, 1997................ 1,405,091 1,405 113,257 277,963 392,625
Issuance of common stock in connection
with license agreement-related party... 29,064 29 264,971 265,000
Net loss (unaudited)...................... (715,849) (715,849)
--------- ------ -------- --------- ---------
Balance at March 31, 1998 (unaudited)....... 1,434,155 $1,434 $378,228 $(437,886) $ (58,224)
========= ====== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-19
<PAGE> 72
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ -----------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)...................... $ 80,604 $ (185,522) $ 182,834 $ 156,336 $ (715,849)
Adjustments to reconcile net income
(loss) to net cash (used in) provided
by operating activities
Depreciation and amortization........ 35,735 48,723 69,326 24,786 25,148
Deferred taxes....................... (235,397) 143,078 20,321 -- (307,000)
Stock compensation to officer........ -- -- 110,000 -- --
Stock issued pursuant to licensing
agreement.......................... -- -- -- 265,000
Provision for bad debts.............. 169,633 217,846 109,943 25,986 42,197
Changes in operating assets and
liabilities Accounts receivable.... (1,511,459) (361,096) (1,863,417) 4,020,579 3,780,611
Prepaid and refundable income
taxes, net...................... (214,584) (255,121) 157,509 136,773 81,342
Prepaid expenses and other current
assets.......................... (2,647) (94,251) 53,664 94,314 (128,611)
Accounts payable................... 1,087,045 708,748 171,547 (3,738,995) 1,007,695
Rebates due members................ 200,654 36,879 885,120 1,088,847 252,284
Due to affiliate................... -- -- 91,946 -- 27,999
Accrued expenses................... (62,234) (182,562) 454,972 75,351 433,123
---------- ---------- ---------- ---------- ----------
Net cash (used in) provided by
operating activities................. (452,650) 76,722 443,765 1,883,977 4,763,939
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities
Purchase of property and equipment..... (29,507) (142,989) (227,547) (27,707) (33,556)
Investment in affiliate................ -- -- (1,500,000) -- --
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities......................... (29,507) (142,989) (1,727,547) (27,707) (33,556)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities
Net borrowings (payments) under line
of credit.......................... 100,000 250,000 4,265,000 (1,135,000) (2,710,906)
Payments on long-term debt........... -- (86,703) (89,787) -- --
Loans (repayments) from
stockholders....................... 442,461 (126,463) (564,193) (564,193) --
Initial public offering costs........ -- (92,386) (2,866,386) (65,257) (995,919)
Purchase of treasury stock........... (287,053)
-- -- -- --
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities............... 255,408 (55,552) 744,634 (1,764,450) (3,706,825)
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS................. (226,749) (121,819) (539,148) 91,820 1,023,558
Cash and cash equivalents at beginning of
period................................. 1,258,862 1,032,113 910,294 910,294 371,146
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of
period................................. $1,032,113 $ 910,294 $ 371,146 $1,002,114 $1,394,704
========== ========== ========== ========== ==========
Supplemental disclosures of cash flow
information:
Cash paid during the period for
Interest........................... $ 50,802 $ 84,346 $ 159,216 $ 29,187 $ 123,218
Taxes.............................. 506,494 120,461 76,000 -- --
</TABLE>
During 1995, the repurchase of $365,946 of treasury stock was financed through
the issuance of a note payable to the former stockholder.
The accompanying notes are an integral part of these statements.
F-20
<PAGE> 73
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE A -- DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Formation of the Company
Office Centre Corporation (the "Company") was founded in October 1996 to
create a nationwide office products supplier, serving primarily small and medium
sized corporate customers. During 1997, the Company acquired all of the
outstanding shares of UDI Corp. and UDI II Corp. (collectively referred to as
"UDI") in a stock-for-stock exchange. The transaction was accounted for as a
reverse acquisition with the results of UDI's operations presented on a
historical basis as the results of the Company. The stock exchange is reflected
in stockholders' equity for all periods presented along with the retirement of
previously acquired treasury stock.
UDI is an office products buying group. Members receive the benefit of
UDI's consolidated buying power and the more favorable purchasing terms it
receives with industry manufacturers and wholesalers.
Acquisitions and Public Offering
During 1997, the Company entered into definitive agreements to acquire four
commercial office products businesses. The Company expects to enter into
definitive agreements to acquire an additional eight commercial office products
businesses. The companies to be acquired are The Supply Room Companies, Inc.
(the "Supply Room"), New England Office Supply, Inc., King Office Supply, Inc.,
Sierra Office Systems and Products, Inc., Office Solutions Business Products and
Services, Inc., Greenwood Outfitters, Inc., SOS Office Supply Company, Georgia
Impression, Inc., Office Express, Inc., Southern Office Centre, Inc., Metro Data
Supply, Inc. and BCB Office Products Company (collectively referred to as the
"Founding Companies"), eight of which are members of UDI. These acquisitions
will occur simultaneously with and conditioned on the closing of a contemplated
initial public offering (the "Offering") and will be accounted for using the
purchase method of accounting. The expected aggregate consideration that will be
paid by the Company to acquire approximately $8.3 million of net assets of the
Founding Companies is approximately $18.1 million in cash and shares of the
Company's common stock valued at approximately $36.9 million, including $1.5
million paid to the Supply Room in September 1997 (see Note E).
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, UDI Corp. and UDI II Corp.
All intercompany accounts and transactions have been eliminated in the
accompanying consolidated financial statements.
Interim Reporting
The accompanying condensed financial information as of the three months
ended March 31, 1997 and 1998, including such information in the notes to
financial statements, is unaudited. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. Operating results for any
interim period are not necessarily indicative of the results of any other
interim period or for an entire year.
F-21
<PAGE> 74
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
Revenue Recognition
UDI recognizes revenue on the accrual basis for: (i) periodic buying group
fees of 1% to 2% of member purchases from manufacturers and (ii) annual rebate
income from manufacturers and wholesalers paid to UDI primarily based on the
volume of member purchases. Portions of such rebates, which are determined by
management of the Company, are passed on to certain eligible members and accrued
as an operating expense. Revenue is also recognized for membership fees and
other programs offered to UDI's members on the accrual method.
The volume of gross purchases generated by UDI members with manufacturers
was $65,354,000, $81,642,000 and $94,456,000 for the years ended December 31,
1995, 1996 and 1997, respectively, and $23,053,000 and $24,787,000 for the three
months ended March 31, 1997 and 1998, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Deferred Offering Costs
Deferred offering costs incurred in connection with the Company's
contemplated Offering amounted to approximately $92,000, $2,867,000, and
$996,000 during the years ended December 31, 1996 and 1997, and the three-month
period ended March 31, 1998, respectively. Such deferred offering costs will be
charged against the proceeds of such Offering when completed. In the event the
Offering is unsuccessful, such costs would be charged against earnings.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation
and amortization. Depreciation and amortization expense is recorded on the
straight-line basis over the estimated useful lives of the assets. Repairs and
maintenance are charged directly to expense as incurred.
Earnings Per Share
As of December 31, 1997, the Company has adopted the provisions of
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
Per Share," which was also applied to December 31, 1996 and 1995. Basic earnings
per share exclude dilution and are computed by dividing income available to
common shareholders by the weighted-average common shares outstanding for the
period. The dilutive effect of options outstanding has not been included in the
computation of earnings per share as the effect is not material (see Note J).
Income Taxes
Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities and loss
carryforwards and tax credit carryforwards for which income tax benefits
F-22
<PAGE> 75
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
are expected to be realized in future years. A valuation allowance has been
established to reduce deferred tax assets as it is more likely than not that
some portion of such deferred tax assets will not be realized. The effect of a
change in tax rates on deferred taxes is recognized in income in the period that
includes the enactment date.
Fair Value of Financial Instruments
Financial instruments consist principally of cash and cash equivalents,
line of credit and promissory notes classified as long-term debt. The carrying
value of these instruments approximates their fair value because of their short
maturity and their stipulated interest rates being based on current market
rates.
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31, ESTIMATED
1996 1997 1998 USEFUL LIVES
-------- -------- --------- -------------
<S> <C> <C> <C> <C>
Office furniture and fixtures..................... $350,176 $564,802 $574,089 5 to 7 years
Leasehold improvements............................ 29,089 42,010 66,279 3 to 10 years
-------- -------- --------
379,265 606,812 640,368
Less accumulated depreciation and amortization.... 133,902 200,493 224,957
-------- -------- --------
$245,363 $406,319 $415,411
======== ======== ========
</TABLE>
Depreciation and amortization expense amounted to $32,719, $45,707 and
$66,591 for the years ended December 31, 1995, 1996 and 1997, respectively, and
$24,366 and $24,464 for the three months ended March 31, 1997 and 1998,
respectively.
NOTE C -- LINE OF CREDIT
As of December 31, 1997, UDI had a demand line of credit with CoreStates
Bank NA ("CoreStates") which allowed the Company to borrow a maximum of
$10,000,000 at a rate of .5% above prime (8.75% at December 31, 1997). The line
was collateralized by all of the assets of UDI. As of December 31, 1997 and
March 31, 1998, the Company had $5,615,000 and $2,904,000, respectively,
outstanding under this line. As of December 31, 1996, the Company had $1,350,000
outstanding under a similar line. Availability under the line is based primarily
on 85% of certain eligible accounts receivable plus 60% of eligible inventory.
On March 16, 1998, the Company received a commitment from CoreStates to
provide a $25 million revolving credit facility. Amounts outstanding are to bear
interest at the prime lending rate plus an applicable margin of up to .75% or
LIBOR plus an applicable margin of up to 3.25%. The Company's obligations under
the revolving credit facility are to be guaranteed by the current and future
subsidiaries of the Company and are to be secured by a priority security
interest in all other assets of the Company. Pursuant to the CoreStates
commitment, the revolving credit facility is to contain customary covenants,
including restrictions on other indebtedness, approval of acquisitions in excess
of $20 million, limits on capital expenditures as well as various financial
covenants. The Company is obligated to pay a financing fee of $150,000 upon
completion of the documentation for the facility and a commitment fee of .375%
per annum on the daily average of the unused portion of the credit facility from
and after the date the facility is entered into. Prior to completion of an IPO
which raises a minimum of $20,000,000, borrowings in excess of $15,000,000
require the bank's written approval.
F-23
<PAGE> 76
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
In the event the Company does not complete its IPO by December 31, 1998,
maximum outstanding borrowings based on UDI's receivables shall be reduced
commencing on March 31, 1999 to $6,000,000 and further reductions through
December 31, 1999 to $3,000,000.
The line is collateralized by all of UDI's assets and guaranteed by the
Company. Among other provisions, the demand line agreement provides that: (i)
the annual compensation paid to the president of UDI does not exceed $200,000
and (ii) a maximum amount of $7,500,000 on this line may be used by the Company
for nonoperational purposes in connection with the Offering and anticipated
business acquisitions.
NOTE D -- INCOME TAXES
The provision for income taxes is comprised of:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------- ---------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Federal
Current provision (benefit)...... $220,930 $(28,840) $169,887 $102,947 $ 3,780
Current refundable............... -- (75,210) -- -- --
Deferred taxes................... (179,599) 105,542 15,444 -- (250,000)
-------- -------- -------- -------- ---------
41,331 1,492 185,331 102,947 (246,220)
-------- -------- -------- -------- ---------
State
Current provision (benefit)...... 70,980 (5,960) 53,891 32,826 1,194
Current refundable............... -- (24,650) -- -- --
Deferred taxes................... (55,798) 37,536 4,877 -- (57,000)
-------- -------- -------- -------- ---------
15,182 6,926 58,768 32,826 (55,806)
-------- -------- -------- -------- ---------
$ 56,513 $ 8,418 $244,099 $135,773 $(302,026)
======== ======== ======== ======== =========
</TABLE>
The following is a reconciliation of the statutory Federal income tax rate
to the effective rate reported in the financial statements:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------- --------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Current "expected" provision (benefit) for Federal
income taxes..................................... 34.0% (34.0)% 34.0% 34.0% (34.0)%
State and local taxes, net of Federal income tax
benefit.......................................... 7.3 2.6 9.1 7.5 (6.2)
Allocations to Canadian operations................. -- 28.6 .8 -- --
Other.............................................. (0.1) 7.6 13.3 5.0 10.5
----- ----- ----- ----- -----
41.2% 4.8% 57.2% 46.5% (29.7)%
===== ===== ===== ===== =====
</TABLE>
F-24
<PAGE> 77
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Deferred tax assets
Reserve for bad debts..................................... $150,339 $134,631 $134,631
Accrued compensation expense.............................. 187,000
Nondeductible accruals.................................... 120,000
Net operating loss carryforward -- Canadian subsidiary.... 59,521 63,420 63,420
Other items............................................... 9,049 8,089 8,089
-------- -------- --------
218,909 206,140 513,140
Valuation allowance......................................... (82,399) (91,964) (91,964)
-------- -------- --------
Net deferred tax assets................................ 136,510 114,176 421,176
Deferred tax liability
Accelerated depreciation.................................. (23,818) (21,805) (21,805)
-------- -------- --------
Net deferred taxes..................................... $112,692 $ 92,371 $399,371
======== ======== ========
</TABLE>
NOTE E -- DUE TO AFFILIATES AND STOCKHOLDERS
Transactions With King
As of December 31, 1997, the amount due to King Office Supply, Inc.
("King") is comprised of disbursements made by King on behalf of the Company for
various operating expenses totalling $142,179 during the year ended December 31,
1997 and $59,495 for the three months ended March 31, 1998. The Chief Executive
Officer of the Company is a shareholder of King.
The Company has accounts receivable due from King for direct manufacturers'
purchases which amounted to $32,584 and $133,566 at December 31, 1996 and 1997,
respectively, and $239,258 for the three months ended March 31, 1998. In
addition, the Company has accounts payable due to King for wholesaler rebates
accrued during the year which amounted to $30,227 and $47,758 at December 31,
1996 and 1997, respectively, and $10,900 for the three months ended March 31,
1998.
Transactions With The Supply Room
In September 1997, the Company purchased 10% of the outstanding common
stock of The Supply Room for $1,500,000.
Due to Stockholders
Due to stockholders represents loans made to the Company by certain
stockholders at an interest rate of 7%. These amounts were fully repaid by the
Company in 1997.
NOTE F -- PROFIT SHARING PLAN
The Company has established a profit sharing plan covering substantially
all employees who meet eligibility requirements. Contributions are made annually
at the discretion of the board of directors and are funded prior to the filing
of the Company's Federal tax return. Plan expense for 1995, 1996 and 1997 was
approximately $100,000, $100,000 and $30,000, respectively.
F-25
<PAGE> 78
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE G -- STOCK REDEMPTION
During 1995, pursuant to a stock redemption agreement, 750 shares of stock
in UDI Corp. and 1,000 shares of stock in UDI II were purchased, from one of
their stockholders at a cost of $203,501 and $449,498, respectively. The
redemption agreement provides for: (i) a $272,500 cash payment, (ii) a note
payable in the amount of $100,000 at a 5% interest rate, and (iii) cash
installment payments of $75,000 per year for four years. The note payable
outstanding, net of a 5% discount on the installment payment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Amounts outstanding......................................... $279,243 $189,456 $189,456
Less current portion........................................ 89,788 93,027 93,027
-------- -------- --------
Long-term................................................... $189,455 $ 96,429 $ 96,429
======== ======== ========
</TABLE>
The long-term portion of the outstanding principal on this note of $96,429
at March 31, 1998 is scheduled to be repaid in 1999.
NOTE H -- COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space under operating leases of which two leases
are on month-to-month terms and one lease has a term expiring in 1999, with the
related lessor being an officer of UDI. Remaining future minimum lease payments
under this related party operating lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998........................................................ $ 37,751
1999........................................................ 33,204
----------
$ 70,955
==========
</TABLE>
Total rental expense paid by the Company was $35,636, $76,216 and $114,256
for the years ended December 31, 1995, 1996 and 1997, respectively, which
comprised $27,904, $36,328 and $48,958 paid to the related party in those years,
respectively, and $11,388 and $13,034 for the three months ended March 31, 1997
and 1998, respectively.
Consulting Agreement
Pursuant to a Financial Advisory Agreement, the Company has retained R.K.
Grace & Company ("R.K. Grace") to provide financial advice in connection with
its business plan and its acquisition program, from February 1, 1997 through
December 31, 1998. A founder and former director and officer of the Company is
the Chief Executive Officer and a founder of R.K. Grace. R.K. Grace receives a
monthly fee of $5,000 plus expenses and, in the event that the Offering closes
during the term of the agreement, it will receive $587,500 in cash and
$1,175,000 in the form of unregistered shares of common stock valued at the
initial public offering price per share. Also pursuant to the Financial Advisory
Agreement, the Company has issued 47,732 shares of common stock to the former
officer. The Company paid consulting fees and expenses to R.K. Grace & Company
of approximately $97,200 for services during the year ended December 31, 1997
and $15,000 for the three months ended March 31, 1998.
F-26
<PAGE> 79
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
Employment Contracts
As of December 31, 1997, the Company was obligated under separate
employment contracts with three officers of the Company. The contracts contain
employment terms expiring at various dates through August 2000 and provide for,
among other things, annual compensation, performance bonuses, certain fringe
benefits and life insurance and noncompetition agreements. Historical
compensation expense to key officers for the years ended December 31, 1995, 1996
and 1997 and the three-month periods ended March 31, 1997 and 1998 amounted to
$1,528,000, $1,575,000, $1,439,000, $318,000 and $746,000, respectively.
Remaining future annual salaries with respect to these contracts are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1998................................................... $ 635,000
1999................................................... 635,000
2000................................................... 400,000
----------
$1,670,000
==========
</TABLE>
In September 1997, the Company issued 50,000 shares of common stock to an
officer in connection with an employment agreement. Accordingly, $110,000 was
included in operating costs and expensed to record the compensatory issuance of
these 50,000 shares having a fair value of $2.20 per share (based on an
externally prepared valuation).
Dispute With Third-Party Administrator
During June 1994, a health plan was established for the employees of UDI
and its buying groups' members. The health plan was organized as a legal entity,
UDI-Cooperative Health Plan ("UDI-CHP"), separate and apart from the UDI buying
groups and the Company. During 1996, a third-party benefit administrator ("TPA")
to the plan advised UDI-CHP and UDI that they were obligated to reimburse the
TPA for certain underfunded claims incurred and paid through September 1997.
UDI-CHP disputed such claims on the basis of errors committed by the TPA in
calculating adequate premiums. UDI disputed the claims as unenforceable as UDI
is a separate entity and only UDI-CHP is contractually bound to the TPA. Both
parties to the dispute claim approximately $1 million in damages from the other.
The Company has been advised by legal counsel that a materially adverse effect
on the Company as a result of this dispute would be remote.
Concentrations
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable from
members. Management continually monitors the financial condition of its members
to reduce the risk of loss. In addition, the Company maintains credit insurance
or has obtained irrevocable letters of credit equal to each member's average
monthly purchases, thus reducing its exposure to credit risk.
NOTE I -- LICENSE AGREEMENT -- RELATED PARTY
On January 9, 1998, the Company entered into a license agreement with the
son of a stockholder of the Company. Pursuant to the license agreement, the
Company was granted a royalty-free, perpetual license to use the marketing
concept and name "Smart Consumer" in the office products, office services and
office furniture business worldwide (the "License"). In consideration of the
License, the Company issued 29,064 shares of its common stock and, if the
Company exploits the License in Taiwan, agreed to pay an additional fee of 15%
of all profits therefrom. Under certain conditions, the seller will have a
30-day option to repurchase the License for either $500,000 in cash or 14,532
shares of the Company's common stock. The aggregate value of the shares, which
was $265,000, was charged to operations during the three months ended March 31,
1998.
F-27
<PAGE> 80
OFFICE CENTRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE J -- SUBSEQUENT EVENTS
1998 Stock Option Plan
In March 1998, the Company adopted the 1998 Stock Option Plan (the "Plan").
The Plan is administered by the Compensation Committee, which consists of two
independent members of the board of directors. Pursuant to the Plan, the Company
may grant options to purchase up to 1,500,000 shares of Common Stock to
officers, directors, consultants and employees of the Company, its subsidiaries
and affiliates. Such options may be either incentive stock options or options
which do not qualify for treatment as incentive stock options. The Plan also
provides for the grant of stock appreciation rights ("SARs") in conjunction with
all or part of any stock option granted under the Plan. SARs are exercisable at
such time and to the extent as the stock options to which they relate.
As of March 31, 1998, no options or SARs have been granted under the Plan.
Stock Split
The Board of Directors will approve a one-for 3.44 reverse stock split of
the Company's common stock upon the consummation of the offering, and will be
effective as of that date. All share, per share, and other financial information
contained in this report have been adjusted to reflect the impact of the
proposed common stock reverse split.
Officer Compensation
In May 1998, the Company granted to two executive officers bonuses
aggregating $352,000. The Company recorded compensation expense for that amount
during the three months ended March 31, 1998.
F-28
<PAGE> 81
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
THE SUPPLY ROOM COMPANIES, INC.
We have audited the accompanying balance sheets of The Supply Room
Companies, Inc. (the "Company"), as of September 27, 1996 and October 3, 1997
and the related statements of operations, changes in stockholders' equity and
cash flows for the fiscal years ended September 27, 1996 and October 3, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Supply Room Companies,
Inc., as of September 27, 1996 and October 3, 1997 and the results of its
operations and its cash flows for the fiscal years then ended in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
New York, New York
February 19, 1998
F-29
<PAGE> 82
THE SUPPLY ROOM COMPANIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 27, OCTOBER 3, MARCH 31,
1996 1997 1998
------------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................... $ 25,770 $ 103,260 $ 4,592
Accounts receivable, net of allowance for doubtful
accounts of $29,915 in 1996 and 1997, $45,000 at
March 31, 1998................................... 3,582,101 4,024,650 3,707,255
Inventories......................................... 1,489,834 1,463,298 1,324,369
Prepaid expenses and other current assets........... 7,836 10,500 100,168
Income tax receivable............................... 11,185 -- --
Deferred tax benefit................................ 14,967 14,571 54,705
Due from affiliate.................................. -- 400,000 --
Due from related party -- current portion........... -- 26,194 --
---------- ---------- ----------
Total current assets........................ 5,131,693 6,042,473 5,191,089
PROPERTY AND EQUIPMENT -- NET......................... 629,440 832,016 900,317
OTHER ASSETS
Investment in affiliate............................. 200,000 1,489,718 1,317,913
Goodwill, net of accumulated amortization........... 196,135 483,045 952,774
Due from related party, net of current portion...... -- 104,777 --
Security deposits and other assets.................. 27,664 35,653 153,584
---------- ---------- ----------
423,799 2,113,193 2,424,271
---------- ---------- ----------
$6,184,932 $8,987,682 $8,515,677
========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit...................................... $2,368,670 $1,806,132 $1,589,097
Current portion of long-term debt................... 163,255 624,866 316,703
Current maturities of capital lease obligations..... 48,728 54,727 62,394
Accounts payable -- trade........................... 1,696,537 2,326,444 2,271,180
Accrued expenses and other current liabilities...... 331,896 452,991 210,887
Due to related parties -- current portion........... -- 51,146 --
Income taxes payable................................ -- 24,795 44,918
---------- ---------- ----------
Total current liabilities................... 4,609,086 5,341,101 4,495,179
LONG-TERM DEBT, NET................................... 212,622 257,171 501,281
DUE TO RELATED PARTIES, NET........................... 290,000 266,886 290,000
CAPITAL LEASE OBLIGATIONS, NET........................ 181,380 126,653 154,303
DEFERRED INCOME TAXES................................. 38,209 29,024 62,436
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock: no par value, 15,000 authorized
shares; 10,000, 11,970 and 11,970 shares issued
at September 27, 1996, October 3, 1997 and March
31, 1998, respectively........................... 441,496 2,410,821 2,410,821
Retained earnings................................... 412,139 556,026 601,657
---------- ---------- ----------
853,635 2,966,847 3,012,478
---------- ---------- ----------
$6,184,932 $8,987,682 $8,515,677
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-30
<PAGE> 83
THE SUPPLY ROOM COMPANIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
---------------------------- --------------------------
SEPTEMBER 27, OCTOBER 3, MARCH 31, MARCH 31,
1996 1997 1997 1998
------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales............................. $24,869,002 $30,027,157 $14,381,474 $15,031,798
Cost of goods sold.................... 17,133,959 20,777,574 9,814,388 10,367,942
----------- ----------- ----------- -----------
Gross margins............... 7,735,043 9,249,583 4,567,086 4,663,856
Operating costs and expenses.......... 7,430,712 8,667,132 4,140,368 4,288,339
----------- ----------- ----------- -----------
Operating income............ 304,331 582,451 426,718 375,517
Other income (expense)
Interest income..................... 40,055 29,105 31,270 2,394
Interest expense.................... (217,022) (272,312) (138,941) (133,356)
Equity in net loss of affiliated
companies........................ -- (104,311) (47,039) (147,205)
Other income (expense).............. -- -- 1,475 (5,318)
----------- ----------- ----------- -----------
Income before provision for
income taxes.............. 127,364 234,933 273,483 92,032
Provision for income taxes............ 45,595 91,046 116,622 46,401
----------- ----------- ----------- -----------
NET INCOME.................. $ 81,769 $ 143,887 $ 156,861 $ 45,631
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-31
<PAGE> 84
THE SUPPLY ROOM COMPANIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- RETAINED
SHARES AMOUNTS EARNINGS
------ ---------- --------
<S> <C> <C> <C>
Balance at September 30, 1995............................... 10,000 $ 441,496 $330,370
Net income................................................ -- -- 81,769
------ ---------- --------
Balance at September 27, 1996............................... 10,000 441,496 412,139
Net income................................................ -- -- 143,887
Common stock issued....................................... 1,970 1,969,325 --
------ ---------- --------
Balance at October 3, 1997.................................. 11,970 2,410,821 556,026
Net income (unaudited).................................... -- -- 45,631
------ ---------- --------
Balance at March 31, 1998 (unaudited)....................... 11,970 $2,410,821 $601,657
====== ========== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-32
<PAGE> 85
THE SUPPLY ROOM COMPANIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
--------------------------- ---------------------
SEPTEMBER 27, OCTOBER 3, MARCH 31, MARCH 31,
1996 1997 1997 1998
------------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income................................................ $ 81,769 $ 143,887 $156,861 $ 45,631
Adjustment to reconcile net income to net cash (used in)
provided by operating activities
Deferred income taxes -- net.......................... 10,682 (8,789) 29,391 (6,188)
Depreciation and amortization......................... 172,559 202,241 98,205 166,211
Provision for bad debts............................... 12,597 -- -- --
(Gain) loss on sale of fixed assets................... (5,778) -- -- 5,318
Equity in net loss of affiliated companies............ -- 104,311 47,039 147,205
Related party notes receivable foregiveness........... -- -- -- 130,971
Changes in operating assets and liabilities
Accounts receivable................................. (935,610) (150,035) 162,642 317,395
Inventories......................................... (231,561) 80,094 (258,750) 138,929
Prepaid expenses and other current assets........... 54,029 (1,452) (48,067) (89,668)
Income taxes receivable............................. (11,185) 11,185 11,185 --
Other assets........................................ (1,771) (7,989) (26,230) 2,069
Accounts payable -- trade........................... 133,801 531,051 259,973 (55,264)
Accrued expenses and other current liabilities...... 123,823 81,771 (10,877) (242,104)
Income taxes payable................................ (21,691) 24,795 70,214 20,123
---------- ----------- --------- ---------
Net cash (used in) provided by operating activities... (618,336) 1,011,070 491,586 580,628
---------- ----------- --------- ---------
Cash flows from investing activities
Investment in affiliate................................... -- (1,546,258) (13,506) --
Purchase of property, plant and equipment................. (172,234) (138,460) (116,341) (189,999)
Acquisition of businesses................................. (246,535) -- -- (165,494)
Proceeds from sale of property and equipment.............. 10,988 -- -- --
---------- ----------- --------- ---------
Net cash used in investing activities................. (407,781) (1,684,718) (129,847) (355,493)
---------- ----------- --------- ---------
Cash flows from financing activities
Principal payments on long-term debt...................... (272,626) (236,324) (61,043) (106,768)
Net increase (decrease) in line of credit................. 1,080,771 (562,538) (323,516) (217,035)
Proceeds from note payable................................ 181,994 50,000 -- --
Capital contributions..................................... -- 1,500,000 -- --
---------- ----------- --------- ---------
Net cash provided by (used in) financing activities... 990,139 751,138 (384,559) (323,803)
---------- ----------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...... (35,978) 77,490 (22,820) (98,668)
Cash and cash equivalents at beginning of period............ 61,748 25,770 25,770 103,260
---------- ----------- --------- ---------
Cash and cash equivalents at end of period.................. $ 25,770 $ 103,260 $ 2,950 $ 4,592
========== =========== ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest................................................ $ 203,832 $ 285,502 $152,131 $ 133,356
Income taxes............................................ 54,387 55,040 36,371 42,000
Summary of noncash items:
On July 1, 1997, the Company purchased all the common stock of Proximus Acquisitions, Inc., in exchange for 720
shares of stock valued at $469,325. Assets acquired and liabilities assumed were as follows:
Fair value of assets acquired.......................................... $ 879,293
Value of stock issued.................................................. (469,325)
Liabilities assumed.................................................... 409,968
</TABLE>
A debt obligation and a receivable in the amount of $400,000 were recorded as of
October 3, 1997 as a result of the Company's co-signing a demand note with MEGA.
The note was subsequently paid off by MEGA in November 1997.
The Company sold a 7.6% ownership in MEGA on September 30, 1997 in return for
notes receivable from two officers in the amount of $130,971. The notes were
forgiven by the Company in November 1997.
The accompanying notes are an integral part of these statements.
F-33
<PAGE> 86
THE SUPPLY ROOM COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 27, 1996 and October 3, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Supply Room Companies, Inc. (the "Company") is primarily in the
business of selling office supplies and office equipment to commercial and
retail enterprises located in the Commonwealth of Virginia and the mid-Atlantic
region.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
Accounting Period
The Company elected to operate on a 52-53 week fiscal year, beginning
October 1, 1995. The Company's fiscal year ends on the last Friday nearest the
end of September.
Interim Reporting
The accompanying condensed financial information as of March 31, 1998 and
the six months ended March 31, 1997 and 1998, including such information in the
notes to financial statements, is unaudited. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. Operating results for any
interim period are not necessarily indicative of the results of any other
interim period or for an entire year.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.
Revenue Recognition
Revenue is recognized at the time merchandise is shipped to customers.
Retail store revenue is recognized at the time of sale.
Inventories
Inventories, which consist of office supplies, office furniture and
equipment, printing supplies and stationery, are stated at the lower of cost or
market, determined on a first-in, first-out basis.
Investments
The investment in affiliate is accounted for under the equity method of
accounting.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are recorded using the
straight-line and accelerated methods over their estimated useful lives. Repairs
and maintenance are charged to expense as incurred.
F-34
<PAGE> 87
THE SUPPLY ROOM COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 27, 1996 and October 3, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
Deferred Income Taxes
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Deferred tax assets and
liabilities are measured using enacted tax law.
Goodwill
Goodwill is amortized on a straight-line basis over a 15-year period.
Accumulated amortization at September 27, 1996, October 3, 1997 and March 31,
1998, was $31,130, $44,011 and $69,776, respectively.
Valuation of Long-Lived Assets
The Company reviews long-lived assets and certain identifiable intangibles
held and used for possible impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
The Company has determined no provision is necessary for the impairment of
long-lived assets at September 27, 1996, October 3, 1997 and March 31, 1998.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Fair Value of Financial Instruments
Financial instruments consist principally of cash and cash equivalents, due
from affiliate and related party, capital lease obligations, line of credit and
promissory notes classified as long-term debt. The carrying value of these
instruments approximates their fair value because of their short maturity and
their stipulated interest rates being based on current market rates.
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 27, OCTOBER 3, MARCH 31, ESTIMATED
1996 1997 1998 USEFUL LIVES
------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Vehicles.................................... $ 344,484 $ 396,209 $ 405,908 5 years
Furniture and fixtures...................... 387,986 460,198 783,544 7 years
Machinery and equipment..................... 333,225 591,958 359,948 5 years
Leasehold improvements...................... 78,265 87,532 87,257 7-15 years
---------- ---------- ----------
1,143,960 1,535,897 1,636,657
Less accumulated depreciation and
amortization.............................. 514,520 703,881 736,340
---------- ---------- ----------
$ 629,440 $ 832,016 $ 900,317
========== ========== ==========
</TABLE>
Depreciation expense amounted to $147,187 and $189,361 and $90,000 and
$177,381 for the years ended September 27, 1996 and October 3, 1997, and the six
months ended March 31, 1997 and 1998, respectively.
F-35
<PAGE> 88
THE SUPPLY ROOM COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 27, 1996 and October 3, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE C -- INVESTMENT IN AFFILIATE
On August 31, 1996, the Company acquired a 7.6% interest in MEGA Office
Furniture, LLC (MEGA) for a cost of $200,000. The president and chief executive
officer of the Company is a principal shareholder of MEGA and also serves as its
chairman. On September 11, 1997, the Company acquired an additional 19% interest
in MEGA for a cost of $1,500,000. The Company has accounted for the investment
using the equity method of accounting, and has recognized its proportionate
share of MEGA's operations retroactive to the date of purchase of the original
investment in a manner consistent with the step purchase method of a subsidiary.
The purchase price of the 19% interest exceeded the underlying equity of MEGA by
$738,000, which difference is considered goodwill and will be amortized over a
15-year period. The Company's share of MEGA's operating losses totaled $104,311
and $147,205 in the year ended October 3, 1997 and the six months ended March
31, 1998, respectively.
At September 27, 1997, MEGA had current assets and noncurrent assets of
approximately $2,302,000 and $2,164,000, respectively, based on financial
information included elsewhere in the Offering document. MEGA had current
liabilities and noncurrent liabilities of $2,518,000 and $190,000, respectively,
at September 27, 1997. In addition, MEGA had sales and net losses of $7,444,000
and $1,080,000 for the nine months ended September 27, 1997, respectively. The
Company measures impairment on this investment based on a comparison of the
carrying value to projected future cash flows. If MEGA continues to recognize
significant losses, a write-down in the carrying value of the asset may be
necessary.
On September 30, 1997, the Company sold its 7.6% interest in MEGA to the
Company's president and vice-president for its net book value of $130,971, in
return for five-year, interest-bearing note receivables from each of the
officers. The notes were forgiven on November 28, 1997, with compensation
expense recognized for the book value.
NOTE D -- LINE OF CREDIT
The Company has an available revolving line of credit with Crestar Bank of
up to $3,500,000, with interest at the lower of 30-day LIBOR plus 375 basis
points or prime plus 1.50%, which expired January 31, 1998. Interest is payable
monthly. The line of credit is collateralized by the assets of the Company. The
$3,500,000 line-of-credit agreement states that the maximum principal amount
outstanding at any time be equal to 85% of eligible receivables, plus 50% of
certain inventory value. In addition, the Company must maintain certain
financial requirements and quarterly ratios in connection with the
line-of-credit agreement. At October 3, 1997, September 27, 1996 and March 31,
1998, the Company was in compliance with the covenants. The remaining unused
portion of the revolving line of credit at October 3, 1997 and March 31, 1998
was $1,693,868 and $1,910,903, respectively. The payment of the line is
guaranteed by the Company's shareholders. Subsequent to year-end, the agreement
was renewed with Crestar Bank to February 28, 1999, with terms similar to those
described above.
NOTE E -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 27, OCTOBER 3, MARCH 31,
1996 1997 1998
------------- ---------- ----------
<S> <C> <C> <C>
Richmond Office Supply Company, Inc., collateralized by
a subordinated interest in certain tangible and
intangible personal property and accounts receivable,
interest at 9%; $3,732 paid monthly, final installment
due October 1998...................................... $ 86,245 $ 47,655 $ 27,022
</TABLE>
F-36
<PAGE> 89
THE SUPPLY ROOM COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 27, 1996 and October 3, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 27, OCTOBER 3, MARCH 31,
1996 1997 1998
------------- ---------- ----------
<S> <C> <C> <C>
Payable to officers, collateralized by a subordinated
interest in all the Company's assets, with interest at
9%, interest paid quarterly, principal due ranging
from September 30, 1998 to September 30, 2001......... 290,000 290,000 290,000
Minimum earn-out payments due on purchase of Total
Office Products....................................... $ 450,000
Crestar Bank, collateralized by certain Company assets,
payable in monthly principal payments ranging from
$1,000 to $8,000 at interest rates ranging from 8.25%
to 8.5% which mature on dates ranging from March 25,
1999 through January 15, 2002......................... $258,350 $ 294,536 225,706
Commercial Bank, collateralized by equipment and
consumer goods, interest at 10.50%, $3,328 paid
monthly, final installment due May 7, 2001............ -- 121,143 107,231
Payable to stockholder; collateralized by computer
equipment, principal and interest of $1,553 paid
monthly, interest at 12%.............................. -- 28,032 --
Crestar Bank, collateralized by inventory, furniture,
fixtures and equipment; note due on demand, interest
at lower of 30-day LIBOR plus 3.75% or prime plus
1.5%, interest payable monthly, co-signed with MEGA... -- 400,000 --
Installment loans to commercial banks, collateralized by
vehicles, interest from 8.75% to 10.25%; $1,848 paid
monthly, final installment June 19, 1999.............. 31,282 18,703 8,025
-------- ---------- ----------
66$5,877... $1,200,069 $1,107,984
======== ========== ==========
</TABLE>
As of October 3, 1997, aggregate maturities of long-term debt are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S> <C>
October 2, 1998........................................... $ 676,012
October 1, 1999........................................... 164,058
September 29, 2000........................................ 115,775
September 28, 2001........................................ 240,201
September 27, 2002........................................ 4,023
----------
$1,200,069
==========
</TABLE>
The Company must maintain certain quarterly financial ratio covenants with
its primary lender, Crestar Bank. For the year ended October 3, 1997 and the six
months ended March 31, 1998, the Company was in compliance with the
requirements.
Related Party Borrowings
During the year ended October 3, 1997, the Company co-signed on three
demand notes with a bank for MEGA. The notes were in the amounts of $600,000,
$250,000, and $400,000, of which only the $400,000 note remains outstanding as
of October 3, 1997. The Company has recorded the $400,000 as an amount due from
affiliate and due to bank as of October 3, 1997. The note was subsequently paid
in full on November 7, 1997.
F-37
<PAGE> 90
THE SUPPLY ROOM COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 27, 1996 and October 3, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
The Company also co-signed on two letters of credit in the amounts of
$85,000 and $50,000. Neither letter of credit has been drawn upon as of January
2, 1998. The notes and letters of credit were collateralized by the assets of
the Company and MEGA, and were personally guaranteed by the president of the
Company.
NOTE F -- CAPITAL LEASES
During the year ended September 27, 1996, the Company entered into capital
leases for certain equipment that met the criteria for capitalization. The
assets were recorded in the accompanying financial statements at a cost of
$281,801, and the related obligations were recorded at the present value of
future minimum lease payments. Accumulated depreciation at September 27, 1996
and October 3, 1997 was $63,292 and $116,524, respectively, and $137,841 at
March 31, 1998.
The following is a schedule of future minimum payments under the lease:
<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S> <C>
October 2, 1998........................................... $ 72,951
October 1, 1999........................................... 69,320
September 29, 2000........................................ 46,608
September 28, 2001........................................ 28,036
--------
Total lease payments................................... 216,915
Less portion representing interest.......................... (35,535)
--------
Present value of future lease payments...................... 181,380
Current maturities.......................................... 54,727
--------
$126,653
========
</TABLE>
NOTE G -- OPERATING LEASES
Related Party
The Company leases its main business location from two of its shareholders.
The lease began January 1, 1992, and expires December 31, 2001. Payments are
currently $7,000 per month and will escalate in increments of 2% annually until
January 1, 2002.
Beginning October 1, 1993, the Company leases certain premises from the
president of the Company. The lease expires September 30, 2003. Payments are
$4,300 per month and will escalate in increments of 4% annually until October 1,
2002.
Total rental expense and payments to shareholders for the years ended
September 27, 1996 and October 3, 1997, were $139,811 and $151,044,
respectively, and $73,836 and $89,116 for the six months ended March 31, 1997
and March 31, 1998, respectively.
F-38
<PAGE> 91
THE SUPPLY ROOM COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 27, 1996 and October 3, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S> <C>
October 2, 1998........................................... $157,806
October 1, 1999........................................... 162,167
September 29, 2000........................................ 166,662
September 28, 2001........................................ 171,301
September 27, 2002........................................ 70,619
Thereafter................................................ 73,444
--------
$801,999
========
</TABLE>
Other Leases
The Supply Room Companies, Inc. is a lessee in noncancelable leasing
arrangements for office buildings and warehouses in various locations expiring
at various dates. Future minimum lease payments at October 3, 1997, are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S> <C>
October 2, 1998........................................... $ 315,893
October 1, 1999........................................... 245,588
September 29, 2000........................................ 181,156
September 28, 2001........................................ 186,648
September 27, 2002........................................ 137,655
----------
$1,066,940
==========
</TABLE>
Total rental expense for the years ended September 27, 1996 and October 3,
1997, was $267,320 and $274,728, respectively, and $136,837 and $155,912 for the
six months ended March 31, 1997 and 1998, respectively.
NOTE H -- ACQUISITIONS
Effective March 2, 1998, the Company acquired the office furniture and
office supply operations known as Total Office Products ("TOP") from Baltimore
Stationery Company, located in Baltimore, Maryland. The purchase price included
$162,500 in cash paid at closing, with additional earn-out payments to be made
to the seller equal to 14.1% of the semiannual gross profit of TOP in excess of
$750,000, for four years from the date of closing. The required minimum amount
of total earn-out payments to be made to the seller is $450,000. The Company has
allocated the minimum amount of the purchase price, $612,500, based on the fair
values of the assets purchased, which included customer lists, a noncompete
agreement and goodwill. The goodwill will be amortized over a forty-year period.
On July 1, 1997, the Company purchased the printing business of Proximus
Acquisition, Inc., in Richmond, Virginia, in return for the issuance of 720
shares of the Company's common stock valued at $469,325. The assets purchased
included printing presses and inventory, which, along with goodwill, had a fair
value of approximately $879,000, and liabilities assumed had a fair value of
approximately $410,000. The purchase price includes goodwill in the amount of
$276,115, which is being amortized on a straight-line method over 15 years from
the date of acquisition. This purchase was a noncash transaction.
F-39
<PAGE> 92
THE SUPPLY ROOM COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 27, 1996 and October 3, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
On February 1, 1996, the Company purchased the retail office supply
business of Ann's Books and Cards, Ltd., in Ashland, Virginia, for approximately
$11,600. The assets purchased consisted of inventory and a computer.
Also on February 1, 1996, the Company purchased the retail office supply
business of Service Stationers, Inc., in Harrisonburg, Virginia, for
approximately $153,250. The assets purchased consisted of inventory, fixed
assets and prepaid expenses.
On April 1, 1996, the Company purchased the retail office supply business
of Leimkuhler-Biden, Inc., in Baltimore, Maryland, for approximately $85,000.
Assets purchased consisted of inventory, furniture and fixtures, and vehicles.
None of the above acquisitions were considered to be significant.
NOTE I -- STOCK OPTIONS
On April 30, 1994, the Company granted two officers hired during the
purchase of an office supply company the right to purchase a maximum of 555
shares each of common stock at a per share price of $360. The options are
exercisable within ten years of the date they were granted, in accordance with
the following terms: 10% expiring each April 1 until April 1, 2002, and 15%
expiring each April 1 thereafter until April 1, 2004. The Company shall have the
right to repurchase from the officers all or any portion of the option at
repurchase prices established in the option agreement. No options were exercised
during the years ended September 27, 1996 and October 3, 1997, and for the six
months ended March, 1998.
NOTE J -- DEFINED CONTRIBUTION RETIREMENT PLAN
The Company has a retirement savings and investment plan for substantially
all full-time employees, which allows participants to make contributions by
salary reduction pursuant to Section 401(k) of the Internal Revenue Code.
Matching employer contributions to the plan are limited to 6% of a participant's
compensation. Employer contributions to the plan for the years ended September
27, 1996 and October 3, 1997 were $28,731 and $34,154, respectively, and $15,894
and $21,322 for the six months ended March 31, 1997 and 1998, respectively.
NOTE K -- INCOME TAXES
The Company has recognized as of September 27, 1996 and October 3, 1997 a
current deferred tax asset of $14,967 and $14,571, respectively, and $54,705 at
March 31, 1998, for the deductible difference related to the allowance for bad
debt expense and inventory capitalization, and a noncurrent deferred tax
liability of $38,209, $29,024, and $62,436, respectively, for the taxable
difference related to the depreciation of property and equipment.
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
-------------------------- ---------------------
SEPTEMBER 27, OCTOBER 3, MARCH 31, MARCH 31,
1996 1997 1997 1998
------------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Current.......................................... $34,913 $99,835 $ 87,231 $52,589
Deferred......................................... 10,682 (8,789) 29,391 (6,188)
------- ------- -------- -------
$45,595 $91,046 $116,622 $46,401
======= ======= ======== =======
</TABLE>
F-40
<PAGE> 93
THE SUPPLY ROOM COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 27, 1996 and October 3, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
The income tax provision differs from the amount of income tax determined
by applying the U.S. federal income tax rate to pretax income. Increases to the
provision consist primarily of the tax effect of nondeductible expenses.
Decreases to the provision are related to the tax effect of the excess of tax
over financial depreciation.
The following is a reconciliation of the statutory Federal income tax rate
to the effective rate reported in the financial statements:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
-------------------------- ---------------------
SEPTEMBER 27, OCTOBER 3, MARCH 31, MARCH 31,
1996 1997 1997 1998
------------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Current "expected" provision for Federal income
taxes.......................................... 34.0% 34.0% 34.0% 34.0%
Adjustments in income taxes resulting from
State income taxes, net of Federal income tax
benefit........................................ 4.0 4.0 4.0 4.0
Permanent differences -- other
miscellaneous............................. (2.2) .8 4.6 12.4
---- ---- ----- -----
Income tax expense............................... 35.8% 38.8% 42.6% 50.4%
==== ==== ===== =====
</TABLE>
NOTE L -- AGREEMENT WITH OFFICE CENTRE CORPORATION
The Company and its stockholders have entered into a definitive agreement
(the "Agreement") with Office Centre Corporation and Subsidiaries ("Office
Centre") whereby Office Centre will acquire, by merger, all of the issued and
outstanding stock of the Company, in exchange for cash and common stock of
Office Centre upon the consummation of the initial public offering of Office
Centre.
In September 1997, the Company issued 1,250 shares of its common stock
(approximately 10% of the Company's common stock, issued and outstanding) to
Office Centre for $1,500,000.
F-41
<PAGE> 94
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
NEW ENGLAND OFFICE SUPPLY, INC.
We have audited the accompanying balance sheet of New England Office
Supply, Inc. (the "Company"), as of December 31, 1997, and the related
statements of operations and retained earnings and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of New England Office Supply,
Inc., as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
New York, New York
February 9, 1998 (except for
Notes C and D, as to which
the date is April 9, 1998)
F-42
<PAGE> 95
NEW ENGLAND OFFICE SUPPLY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... $ 199,962 $ 2,585
Accounts receivable, net of allowance for doubtful
accounts of $60,000 at December 31, 1997 and March 31,
1998................................................... 2,354,788 2,663,232
Inventories............................................... 338,787 368,682
Prepaid expenses and other current assets................. 50,744 121,824
---------- ----------
Total current assets................................. 2,944,281 3,156,323
PROPERTY AND EQUIPMENT -- NET............................... 400,184 373,749
OTHER ASSETS
Covenants not to compete, net............................. 45,100 20,650
Goodwill, net of accumulated amortization................. 94,002 92,439
---------- ----------
$3,483,567 $3,643,161
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit............................................ $ 300,000 $ --
Current portion of long-term debt......................... 552,832 552,832
Current portion of covenants payable...................... 80,000 80,000
Accounts payable -- trade................................. 1,000,227 1,312,970
Accrued expenses and other current liabilities............ 47,280 97,504
Income taxes payable...................................... 2,800 34,286
---------- ----------
Total current liabilities............................ 1,983,139 2,077,592
LONG-TERM DEBT, NET......................................... 522,178 483,970
COVENANTS PAYABLE, NET...................................... 18,400 7,800
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock: no par value, 200,000 shares authorized;
25,000 shares issued and outstanding................... 514,700 514,700
Retained earnings......................................... 445,150 559,099
---------- ----------
959,850 1,073,799
---------- ----------
$3,483,567 $3,643,161
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-43
<PAGE> 96
NEW ENGLAND OFFICE SUPPLY, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ------------------------
1997 1997 1998
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Net sales............................................ $14,664,883 $3,546,577 $4,131,605
Cost of goods sold................................... 10,974,620 2,597,053 3,073,153
----------- ---------- ----------
Gross margin.................................. 3,690,263 949,524 1,058,452
Operating costs and expenses......................... 3,372,892 868,572 850,216
----------- ---------- ----------
Operating income.............................. 317,371 80,952 208,236
Other income (expense)
Interest expense................................... (141,667) (23,028) (39,341)
Other income (expense)............................. -- (42,000) 4,000
----------- ---------- ----------
Income before provision for income taxes...... 175,704 15,924 172,895
Provision for income taxes........................... 9,965 2,844 5,300
----------- ---------- ----------
NET INCOME.................................... 165,739 13,080 167,595
Retained earnings at beginning of period............. 506,411 506,411 445,150
Distributions........................................ (227,000) (45,212) (53,646)
----------- ---------- ----------
Retained earnings at end of period................... $ 445,150 $ 474,279 $ 559,099
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-44
<PAGE> 97
NEW ENGLAND OFFICE SUPPLY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------
1997 1997 1998
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities
Net income........................................... $ 165,739 $ 13,080 $ 167,595
Adjustments to reconcile net income to net cash (used
in) provided by operating activities
Depreciation and amortization................... 260,898 56,169 54,813
Provision for bad debts......................... 46,000 -- --
Changes in operating assets and liabilities
Accounts receivable.......................... (844,457) (640,264) (308,444)
Inventories.................................. (156,566) (31,292) (29,895)
Prepaid expenses and other current assets.... (27,967) (16,350) (71,080)
Accounts payable -- trade.................... 198,285 540,502 312,743
Accrued expenses and other current
liabilities................................ (15,478) 43,853 50,224
Income taxes payable............................ 2,800 -- 31,486
--------- --------- ---------
Net cash (used in) provided by operating
activities........................................ (370,746) (34,302) 207,442
--------- --------- ---------
Cash flows from investing activities
Purchase of property and equipment................... (232,781) (95,320) (2,365)
--------- --------- ---------
Cash flows from financing activities
Principal payments on long-term debt................. (159,112) (48,750) (48,808)
Net increase (decrease) in line of credit............ 300,000 30,000 (300,000)
Proceeds from note payable........................... 884,162 200,000 --
Distribution to shareholders......................... (227,000) (45,212) (53,646)
--------- --------- ---------
Net cash provided by (used in) financing
activities...................................... 798,050 136,038 (402,454)
--------- --------- ---------
INCREASE (DECREASE) IN CASH....................... 194,523 6,416 (197,377)
Cash at beginning of period............................ 5,439 5,439 199,962
--------- --------- ---------
Cash at end of period.................................. $ 199,962 $ 11,855 $ 2,585
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest.......................................... $ 125,000 $ 22,500 $ 28,000
Income taxes...................................... 7,000 2,800 8,000
</TABLE>
The accompanying notes are an integral part of these statements.
F-45
<PAGE> 98
NEW ENGLAND OFFICE SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
New England Office Supply, Inc. (the "Company") was incorporated on
September 12, 1985, in the Commonwealth of Massachusetts. During 1992, the
stockholder acquired the stock of New England Office Supply, Inc., which was
doing business under the name of Allen Stationery Co. The Company is engaged in
the distribution and sales of office supplies and related products, primarily
throughout the states of Massachusetts and Rhode Island.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
Revenue Recognition
Revenue is recognized at the time merchandise is shipped to customers.
Revenue is recognized at the time of sale.
Interim Reporting
The accompanying financial information as of March 31, 1998 and for the
three months ended March 31, 1997 and 1998, including such information in the
notes to financial statements, is unaudited. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. Operating results for any
interim period are not necessarily indicative of the results of any other
interim period or for an entire year.
Inventories
Inventories, which consist of office supplies, office furniture and
equipment, printing supplies and stationery, are stated at the lower of cost or
market, determined on a first-in, first-out basis.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are recorded using the
straight-line method over their estimated useful lives. Repairs and maintenance
are charged to expense as incurred.
Income Taxes
Federal income taxes are payable personally by the stockholders of the
Company pursuant to an election under Subchapter S of the Internal Revenue
Service Code not to have the Company taxed as a corporation. Accordingly,
Federal income taxes are not reflected in the accompanying financial statements.
Other Assets
Other assets consist of goodwill and covenants not to compete. Goodwill is
amortized on a straight-line basis over a 15-year period. Covenants not to
compete are stated at cost and amortized on a straight-line basis over the
contractual lives which range from 4 to 6 years. Accumulated amortization for
the goodwill and the covenants at December 31, 1997 was $93,702 and $524,900,
respectively, and $95,265 and $549,350 at March 31, 1998, respectively.
F-46
<PAGE> 99
NEW ENGLAND OFFICE SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
Valuation of Long-Lived Assets
The Company reviews long-lived assets and certain identifiable intangibles
held and used for possible impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
The Company has determined no provision is necessary for the impairment of
long-lived assets at December 31, 1997.
Covenants Payable
Covenants payable represent the discounted value of the amount due to
employees arising from covenants not to compete. During 1997, approximately
$86,000 was paid under these agreements.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Fair Value of Financial Instruments
Financial instruments consist principally of covenants payable and a
promissory note classified as long-term debt. The carrying value of these
instruments approximates their fair value because of their short maturity and
their stipulated interest rate being based on current market rates,
respectively.
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, ESTIMATED
1997 1998 USEFUL LIVES
------------ --------- ------------
<S> <C> <C> <C>
Transportation equipment......................... $285,932 $267,273 5 years
Furniture and fixtures........................... 155,881 155,881 7 years
Machinery and equipment.......................... 120,352 120,352 5 years
Computer equipment............................... 165,143 169,374 5 years
-------- --------
727,308 712,880
Less accumulated depreciation and amortization... 327,124 339,131
-------- --------
$400,184 $373,749
======== ========
</TABLE>
Depreciation expense amounted to $114,206, $23,040 and $12,007 for the year
ended December 31, 1997 and the three months ended March 31, 1997 and 1998,
respectively.
NOTE C -- LINE OF CREDIT
The Company has a $700,000 revolving line of credit which was renewed
during 1997. Bank advances on the credit line are payable on demand and carry an
interest rate of 1% over the bank's prime lending rate. The credit line is
secured by substantially all assets of the Company and is personally guaranteed
by the shareholder of the Company. The Company's line of credit contains
restrictive covenants, including limitations on owner distributions and salary,
and capital expenditures. In the event of default of such covenants, the line of
credit
F-47
<PAGE> 100
NEW ENGLAND OFFICE SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
along with the long-term debt (Note D) will become due on demand. The balance
due under the credit line was $300,000 at December 31, 1997.
The line of credit expired on March 31, 1998 and was renewed and increased
to $1,500,000 on April 9, 1998.
NOTE D -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ----------
<S> <C> <C>
Note payable to bank, due on March 24, 1998.
Interest at 1% above the prime rate...................... $ 400,000 $ 400,000
Note payable to bank, original amount $764,162, due in
sixty fixed monthly principal payments of $12,736 plus
interest at 1% above the prime rate due May 2002......... 675,010 636,802
---------- ----------
1,075,010 1,036,802
Less current maturities of long-term debt.................. 552,832 552,832
---------- ----------
Long-term debt, excluding current maturities............... $ 522,178 $ 483,970
========== ==========
</TABLE>
Long-term debt agreements are secured by substantially all assets of the
company and are personally guaranteed by the shareholder of the Company.
As of December 31, 1997, aggregate maturities of long-term debt are as
follows:
<TABLE>
<S> <C>
Year ending December 31,
1998...................................................... $ 552,832
1999...................................................... 152,832
2000...................................................... 152,832
2001...................................................... 152,832
2002...................................................... 63,682
----------
$1,075,010
==========
</TABLE>
The Company's loan agreements contain restrictive covenants, including
limitations on owner distributions and salary, and capital expenditures. On
April 9, 1998 the note payable of $400,000 due on March 24, 1998 was paid in
full and the note payable to bank due May 2002 was replaced with a note payable
in the amount of $850,000 due April 2003 which is payable in sixty monthly
payments of $14,167.
NOTE E -- COMMITMENTS AND CONTINGENCIES
Operating Leases
Prior to March 1, 1997, the Company leased 15,000 square feet of office and
warehouse space under a lease agreement that expires on October 31, 1999. The
Company had a thirty-day option upon written notice of terminating the lease,
which was exercised effective March 1, 1997. Monthly lease expense under this
agreement was $7,809.
On February 3, 1997, the Company signed a five-year lease for 29,200 square
feet of office and warehouse space in Braintree, Massachusetts, effective March
1, 1997. Monthly lease expense is $13,383, with additional
F-48
<PAGE> 101
NEW ENGLAND OFFICE SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
charges for real estate taxes, insurance and common area maintenance. The
Company has an option to renew for an additional five years.
Future minimum lease payments are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1998...................................................... $ 160,600
1999...................................................... 160,600
2000...................................................... 160,600
2001...................................................... 160,600
2002...................................................... 13,383
----------
$ 655,783
==========
</TABLE>
Total rental expense for the year ended December 31, 1997 and the three
months ended March 31, 1997 and 1998 was $181,085, $32,165 and $49,640,
respectively.
Litigation
During 1997, the Company finalized its litigation with the principals of
Shawmut Printers, which they acquired in 1993. The resolution resulted in no
damages being paid by either party.
Presently, the Company is a plaintiff in litigation with a former owner of
an acquired company for violating the terms of his employment and noncompetition
agreement. In response, this defendant has filed for arbitration claiming that
the Company had not met the terms of the purchase and sales agreement between
New England Office Supply and his former company, Orr Business Products. In the
opinion of legal counsel, this claim is without merit, and no loss has been
recorded by the Company.
Concentrations
The Company is currently certified as a women or minority owned small
business in both Massachusetts and Rhode Island. One of the criteria used in the
selection of the Company as a vendor for state-related, municipal and other
governmental contracts may have been its certification as a women or minority
owned small business. During the year ended December 31, 1997 and the three
months ended March 31, 1997 and 1998, the Company's sales to state, state
related, municipal and governmental agencies represented approximately 16%, 3%,
and 21%, respectively, of the Company's revenues. The Company is required to
notify the respective state agencies of any changes in information supplied to
the state for certification, including any changes in ownership or control.
NOTE F -- COMMON STOCK
Authorized common stock is comprised of both voting (180,000 shares) and
nonvoting (20,000 shares) stock. At December 31, 1997 and March 31, 1998, no
nonvoting shares have been issued.
NOTE G -- DEFINED CONTRIBUTION RETIREMENT PLAN
The Company maintains a retirement plan adopted under Internal Revenue Code
Section 401(k). The plan covers all employees who meet certain age and service
requirements. The Company does not make contributions to the plan.
F-49
<PAGE> 102
NEW ENGLAND OFFICE SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE H -- SUBSEQUENT EVENT
In May 1998, the Company and its stockholder have entered into a definitive
agreement with Office Centre Corporation and Subsidiaries ("Office Centre")
whereby Office Centre will acquire, by merger, all of the issued and outstanding
stock of the Company, in exchange for cash and common stock of Office Centre
upon the consummation of the initial public offering of Office Centre.
F-50
<PAGE> 103
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
KING OFFICE SUPPLY, INC.
We have audited the accompanying consolidated balance sheets of King Office
Supply, Inc. (formerly The King Group, LLC) and Subsidiary (the "Company") as of
December 31, 1996 and 1997, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the period June
30, 1996 (inception) through December 31, 1996 (for the King Group, LLC) and the
year ended December 31, 1997. We have also audited the statements of operations
and cash flows of King Office Supply Co., Inc. (the "Predecessor") for the
period January 1, 1996 through June 29, 1996. These financial statements are the
responsibility of the Company's and the Predecessor's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of King Office
Supply, Inc. and Subsidiary as of December 31, 1996 and 1997, and the
consolidated results of its operations and its consolidated cash flows for the
period June 30, 1996 (inception) to December 31, 1996 (for the King Group, LLC)
and the year ended December 31, 1997 and the results of operations and cash
flows of the Predecessor for the period January 1, 1996 through June 29, 1996 in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
New York, New York
February 9, 1998
F-51
<PAGE> 104
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................... $ 1,900 $ 5,730 $ 12,766
Accounts receivable, net of allowance for doubtful
accounts of $50,000 and $63,500 at December 31, 1996
and 1997 and $63,500 at March 31, 1998.............. 1,802,273 2,167,311 2,417,304
Inventories............................................ 285,742 426,633 473,000
Due from affiliate..................................... -- 91,946 120,130
Prepaid expenses and other current assets.............. 33,586 64,451 60,216
Deferred tax benefit................................... -- 58,494 58,494
---------- ---------- ----------
Total current assets................................ 2,123,501 2,814,565 3,141,910
PROPERTY AND EQUIPMENT -- NET............................ 147,857 229,536 232,538
OTHER ASSETS
Goodwill, net of accumulated amortization.............. 805,784 786,073 780,969
Deferred charges, net.................................. 85,746 129,070 121,070
Due from stockholder................................... 12,351 -- 3,108
Security deposits and other assets..................... 52,342 22,256 22,544
---------- ---------- ----------
956,223 937,399 927,691
---------- ---------- ----------
$3,227,581 $3,981,500 $4,302,139
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit......................................... $1,399,528 $1,756,567 $1,839,779
Notes payable, vendor.................................. 156,343 -- --
Notes payable -- current portion....................... 134,030 177,873 183,022
Accounts payable....................................... 910,697 1,255,307 1,442,847
Accrued expenses and other current liabilities......... 201,481 288,166 315,217
Income taxes payable................................... 17,000 44,607 44,905
Due to stockholders.................................... -- 77,708 77,708
---------- ---------- ----------
Total current liabilities........................... 2,819,079 3,600,228 3,903,478
NOTE PAYABLE -- LONG-TERM PORTION........................ 397,454 320,522 272,789
DEFERRED INCOME TAXES.................................... -- 16,610 19,510
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Members' capital....................................... 150,000 -- --
Common stock -- no par value; authorized, 1,000 shares;
issued and outstanding, 800 shares.................. -- -- --
Retained earnings (accumulated deficit)................ (23,702) 44,140 106,362
---------- ---------- ----------
126,298 44,140 106,362
Subscriptions receivable............................... (115,250) -- --
---------- ---------- ----------
11,048 44,140 106,362
---------- ---------- ----------
$3,227,581 $3,981,500 $4,302,139
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-52
<PAGE> 105
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSOR
--------------- PERIOD FROM
PERIOD FROM JUNE 30, 1996
JANUARY 1, 1996 (INCEPTION) THREE MONTHS ENDED
THROUGH THROUGH YEAR ENDED MARCH 31,
JUNE 29, DECEMBER 31, DECEMBER 31, -----------------------
1996 1996 1997 1997 1998
--------------- ------------- ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................... $6,236,542 $6,205,987 $13,892,846 $3,481,097 $3,869,784
Cost of goods sold........... 3,916,123 3,962,142 8,780,430 2,199,173 2,461,211
---------- ---------- ----------- ---------- ----------
Gross margin............... 2,320,419 2,243,845 5,112,416 1,281,924 1,408,573
Operating costs and
expenses................... 2,208,879 2,131,793 4,735,379 1,165,315 1,239,241
---------- ---------- ----------- ---------- ----------
Operating income........... 111,540 112,052 377,037 116,609 169,332
Other income (expenses)
Interest income............ 16,482 9,913 1,475 -- --
Interest expense........... (83,165) (123,170) (254,345) (57,750) (65,387)
Other income (expense)..... 40,442 (5,497) -- -- --
---------- ---------- ----------- ---------- ----------
Income (loss) before
income taxes.......... 85,299 (6,702) 124,167 58,859 103,945
Provision for income taxes... 6,911 17,000 15,367 7,576 41,723
---------- ---------- ----------- ---------- ----------
NET INCOME (LOSS)....... $ 78,388 $ (23,702) $ 108,800 $ 51,283 $ 62,222
========== ========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-53
<PAGE> 106
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
EARNINGS TOTAL
MEMBERS' COMMON (ACCUMULATED SUBSCRIPTIONS STOCKHOLDERS'
CAPITAL STOCK DEFICIT) RECEIVABLE EQUITY
--------- --------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996
(inception)..................... $ 150,000 $(150,000)
Contributed capital............. -- 34,750 $ 34,750
Net loss for the period June 30,
1996 (inception) through
December 31,1996............. -- $(23,702) -- (23,702)
--------- -------- --------- --------
Balance at December 31, 1996...... 150,000 (23,702) (115,250) 11,048
Contributed capital............. -- -- 2,000 2,000
Dissolution of the King Group
LLC and formation of King
Office Supply, Inc........... (150,000) $ -- (40,958) 113,250 (77,708)
Net income for the year ended
December 31, 1997............ -- -- 108,800 -- 108,800
--------- --------- -------- --------- --------
Balance at December 31, 1997...... -- -- 44,140 -- 44,140
Net income for the period
(unaudited).................. -- -- 62,222 -- 62,222
--------- --------- -------- --------- --------
Balance at March 31, 1998
(unaudited)..................... $ -- $ -- $106,362 $ -- $106,362
========= ========= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-54
<PAGE> 107
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR
--------------- PERIOD FROM
PERIOD FROM JUNE 30, 1996
JANUARY 1, 1996 (INCEPTION) THREE MONTHS ENDED
THROUGH THROUGH YEAR ENDED MARCH 31,
JUNE 29, DECEMBER 31, DECEMBER 31, ---------------------
1996 1996 1997 1997 1998
--------------- ------------- ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)................... $ 78,388 $ (23,702) $ 108,800 $ 51,283 $ 62,222
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities
Depreciation and amortization... 29,147 33,695 103,615 19,959 29,742
Provision for bad debts......... 37,975 50,626 73,336 18,206 8,499
Deferred income taxes -- net.... -- -- (41,884) -- 2,900
Noncash compensation expense.... -- -- 85,000 -- --
Changes in operating assets and
liabilities, net of the
effects of acquisitions
Accounts receivable........ (173,186) 70,606 (375,100) (283,789) (258,492)
Inventories................ 46,621 37,279 (30,891) (5,396) (46,367)
Prepaid expenses and other
current assets........... 16,475 (5,543) (30,864) (1,228) 4,236
Due from affiliate......... -- -- (91,946) (10,667) (28,185)
Other assets............... -- (67,864) (62,530) 39,663 (288)
Accounts payable........... 23,341 (127,375) 309,876 182,997 187,540
Accrued expenses and other
current liabilities...... (106,690) 77,233 69,611 51,872 27,051
Income taxes payable....... (10,218) 17,000 35,494 9,433 298
--------- --------- ----------- --------- ---------
Net cash (used in) provided by
operating activities............ (58,147) 61,955 152,517 72,333 (10,844)
--------- --------- ----------- --------- ---------
Cash flows from investing activities
Acquisition of businesses........... -- (125,000) (75,000) -- --
Purchase of property and
equipment......................... -- (11,252) (81,856) -- (19,640)
Increase in due from stockholder.... (75,501) (12,351) (38,967) (9,349) (3,108)
--------- --------- ----------- --------- ---------
Net cash used in investing
activities...................... (75,501) (148,603) (195,823) (9,349) (22,748)
--------- --------- ----------- --------- ---------
Cash flows from financing activities
Principal payments on long-term
debt................................ -- (57,473) (155,560) (32,099) (42,584)
Increase (decrease) in line of
credit............................ 101,524 (48,228) 357,039 101,069 83,212
Proceeds from note payable,
vendor............................ -- 210,000 -- --
Principal payments on notes payable,
vendor............................ -- (53,657) (156,343) (41,338) --
Capital contributions............... -- 34,750 2,000 1,000 --
--------- --------- ----------- --------- ---------
Net cash provided by financing
activities...................... 101,524 85,392 47,136 28,632 40,628
--------- --------- ----------- --------- ---------
(DECREASE) INCREASE IN CASH....... (32,124) (1,256) 3,830 91,616 7,036
Cash at beginning of period........... 35,280 3,156 1,900 1,900 5,730
--------- --------- ----------- --------- ---------
Cash at end of period................. $ 3,156 $ 1,900 $ 5,730 $ 93,516 $ 12,766
========= ========= =========== ========= =========
Supplemental disclosures of cash flow
information:
Cash paid during the period for
Interest............................ $ 83,165 $ 122,753 $ 253,812 $ 58,066 $ 65,485
Income taxes........................ $ 17,200 $ -- $ 30,500 $ -- $ 38,525
</TABLE>
See Note B for noncash acquisition-related items.
The accompanying notes are an integral part of these statements.
F-55
<PAGE> 108
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE A -- DESCRIPTION OF THE BUSINESS AND SIGNIFICANT
Accounting Policies
The King Group, LLC (the "LLC") was formed as a limited liability company
on June 26, 1996, and effective June 30, 1996, acquired King Office Supply Co.,
Inc. ("King" or "Predecessor") and certain of the assets of Carnegie Coffee Co.,
Inc. ("Carnegie") in business combinations (see Note B). King is a supplier of
office and stationery supplies to businesses in the New York metropolitan area
and also has a retail store located in New York City.
Effective May 8, 1997, the members of the LLC contributed the assets and
liabilities of the LLC to a newly formed C Corporation, King Office Supply, Inc.
(the "Company"), in exchange for stock of the Company. The LLC was then
subsequently dissolved in a tax-free transaction. The Company elected to
distribute all of the retained earnings and capital of the LLC, which was
recorded as a note payable to stockholders.
Effective as of March 1, 1997, King Office Supply Co., Inc., a Connecticut
corporation (wholly-owned by the Company) acquired certain assets and assumed
certain liabilities of Commercial -- Connecticut Office Supply Company, Inc.
("Commercial"). Commercial is a supplier of office and stationery supplies to
businesses in the Stamford, Connecticut area and also has a retail store located
in Stamford, Connecticut.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated financial statements follows:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. All material intercompany balances and
transactions have been eliminated in consolidation.
Interim Reporting
The accompanying financial information as of March 31, 1998 and the three
months ended March 31, 1997 and 1998, including such information in the notes to
financial statements, is unaudited. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. Operating results for any
interim period are not necessarily indicative of the results of any other
interim period or for an entire year.
Revenue Recognition
Revenue within the dealership operations is recognized at the time
merchandise is shipped to customers. Retail store revenues are recognized at the
time of sale.
Inventories
Inventories, which consist of printing supplies, stationery and office
supplies, are stated at the lower of cost or market. Cost is determined by the
first-in, first-out ("FIFO") method.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Machinery and equipment are depreciated using the double declining
balance method over their estimated useful lives of five
F-56
<PAGE> 109
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
years. Leasehold improvements are amortized using the straight-line method over
the shorter of the lease term or the estimated useful lives of the assets.
Repairs and maintenance are charged to expense as incurred.
Goodwill
Goodwill, principally from the acquisition of King and Carnegie, represents
the excess of the purchase price over the fair market value of the assets
acquired.
Goodwill is amortized on a straight-line basis over a forty-year period.
Accumulated amortization at December 31, 1996 and 1997 and March 31, 1998 was
approximately $9,800, $30,600 and $35,711, respectively.
Income Taxes
The Company and its wholly-owned subsidiary file a consolidated Federal
income tax return. Deferred income taxes reflect the net effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amount used for income tax purposes.
As an LLC, Federal and state taxes for the periods of June 30, 1996 through
December 31, 1996 and January 1, 1997 through May 7, 1997 are payable personally
by the members. Accordingly, no provision was made for Federal and New York
State income taxes for the periods. Provision was made by the Company for New
York City unincorporated business tax. Therefore, the effective tax rate for the
year ended December 31, 1997, is less than the statutory Federal income tax
rate.
As an S Corporation, Federal taxes for the period of January 1, 1996
through June 29, 1996 are payable personally by the stockholders. Accordingly,
no provision was made by the Predecessor for Federal income taxes. Provision was
made by the Predecessor for New York City corporate income taxes and New York
State income taxes on S Corporations.
Valuation of Long-Lived Assets
The Company reviews long-lived assets and certain identifiable intangibles
held and used for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company has determined that no provision is necessary for the
impairment of long-lived assets at December 31, 1996 and 1997 and March 31,
1998.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Fair Value of Financial Instruments
Financial instruments consist principally of a line of credit and
promissory notes classified as long-term debt. The carrying value of these
instruments approximates their fair value because of their short maturity and
their stipulated interest rates being based on current market rates.
F-57
<PAGE> 110
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE B -- ACQUISITIONS
The Company (formerly the LLC) acquired King and certain assets of Carnegie
for an aggregate purchase price of approximately $714,000. The Company paid
$125,000 at the time of the agreement and obtained two promissory notes due to
the sellers of King and Carnegie of approximately $472,000 and $42,000,
respectively. In addition, the Company also assumed a note for $75,000 due to an
officer of the Predecessor who was named the Chairman of the Company, after the
acquisition (Note F).
The acquisitions of King and Carnegie in 1996 were accounted for using the
purchase method of accounting and, accordingly, the total acquisition cost has
been allocated to the net assets acquired based on the fair value of the assets
and liabilities on the date of acquisition. The Predecessor ceased operations on
the date of acquisition.
The results of operations of the acquired companies are included in the
accompanying financial statements since the date of acquisition. The total cost
of the acquisition exceeded the fair value of the acquired net assets of King
and Carnegie by approximately $816,000.
In March 1997, the Company acquired certain assets and liabilities of
Commercial for an aggregate purchase price of $198,000. The Company paid $75,000
in April 1997 and obtained a promissory note for the balance of the purchase
price.
The acquisition of Commercial was also accounted for as a purchase. The
results of operations of Commercial are included in the accompanying financial
statements since the date of acquisition. The fair value of the acquired net
assets of $231,000 exceeded the total cost of the acquisition of $198,000, which
resulted in negative goodwill of $33,000. The Company reduced the fair value of
the long-term assets by this excess.
NOTE C -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31, ESTIMATED
1996 1997 1998 USEFUL LIVES
-------- -------- --------- ------------
<S> <C> <C> <C> <C>
Leasehold improvements............................. $106,445 $168,805 $168,805 5-10 years
Machinery and equipment............................ 57,278 134,579 154,219 5 years
-------- -------- --------
163,723 303,384 323,024
Less accumulated depreciation
and amortization................................. 15,866 73,848 90,486
-------- -------- --------
$147,857 $229,536 $232,538
======== ======== ========
</TABLE>
Depreciation expense amounted to $29,147, $15,866, $57,982, $10,615 and
$16,638 for the period ended June 29, 1996, the period ended December 31, 1996,
the year ended December 31, 1997 and the three months ended March 31, 1997 and
1998, respectively.
NOTE D -- LINE OF CREDIT
The Company has an available line of credit of up to $1,750,000, limited to
advances of up to 85% of eligible accounts receivable, and expires in August
1998. Interest is payable monthly at a rate of 2.5% over the prime rate (10.75%
and 11.00% at December 31, 1996 and 1997, respectively). The liability is
collateralized by the assets of the Company and there is a limited guarantee by
the majority shareholder. During November 1997, the Company arranged an
overadvance of $175,000 which is being repaid monthly at a rate not to exceed
$15,000 per month.
F-58
<PAGE> 111
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE E -- NOTE PAYABLE, VENDOR
The note payable, vendor was due in monthly installments of $14,879,
including interest at 9% per annum, and was paid in full in November 1997. The
note was collateralized by the assets of the Company.
NOTE F -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
(a) Note payable, seller -- King............................ $424,698 $318,375 $290,423
(a) Note payable, seller -- Carnegie........................ 35,843 22,523 19,005
(b) Note payable, seller -- Commercial...................... -- 103,691 97,052
(c) Note payable, officer................................... 70,943 53,806 49,331
-------- -------- --------
531,484 498,395 455,811
Less current portion..................................... 134,030 177,873 183,022
-------- -------- --------
$397,454 $320,522 $272,789
======== ======== ========
</TABLE>
- ---------------
(a) The notes payable to the sellers of King and Carnegie are due in monthly
installments of $12,433 and $1,389, including interest at 12% per annum, and
expire in June 2000 and June 1999, respectively. The King note requires a
mandatory prepayment each year of the lesser of $25,000 or 50% of the
preceding year's net profit of the Company. The Carnegie note requires a
mandatory prepayment each year of 10% of the prepayment amount of the King
note. Both notes require a limited guarantee by the majority shareholder of
the Company. Life insurance policies of approximately $350,000 on the
majority shareholder were assigned to the seller.
(b) The note payable to the sellers of Commercial is due in quarterly
installments of $9,750, including interest at 12% per annum, through March
2001. The note is guaranteed by the majority shareholder of the Company.
(c) The note payable, officer, assumed by the Company as part of the purchase
price for the acquisition of King, is due in quarterly installments of
$5,425, including interest at 7% per annum, through September 2000. Life
insurance policies of approximately $100,000 on the majority shareholder
were assigned to the officer.
All of the long-term debt is subordinated to the amounts owed under the
line of credit (Note D).
Minimum principal payments of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998...................................................... $177,873
1999...................................................... 190,596
2000...................................................... 120,459
2001...................................................... 9,467
--------
$498,395
========
</TABLE>
NOTE G -- DEFINED CONTRIBUTION PLAN
The Company has a 401(k) retirement plan covering all of its eligible
employees. The plan is funded by employee and discretionary employer
contributions. The employer contributed $3,111, $2,696, $6,568, $1,480 and
$1,955 for the periods of January 1, 1996 through June 29, 1996, June 30, 1996
through December 31, 1996, the year ended December 31, 1997 and the three months
ended March 31, 1997 and 1998, respectively.
F-59
<PAGE> 112
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE H -- COMMITMENTS AND CONTINGENCIES
Leases
On May 7, 1997, the Company entered into an agreement to lease office
space. The lease term is for ten years with an option by the Company to
terminate the agreement in 2004. The lease provides for annual rents ranging
from $77,000 per annum to $113,000 per annum plus escalation clauses relating to
operating expenses and real estate taxes.
The Company leases a retail store under an operating lease expiring in
2001. The lease contains a renewal option for a five-year period and escalation
clauses relating to operating expenses and real estate taxes.
The Company also leases a retail store and office space in Connecticut for
Commercial's operations, under an operating lease expiring in February 2000. The
lease contains a renewal option for a three-year period and a 3% escalation
clause for the renewal period.
Rent expense was $123,831, $125,308 and $312,320 for the periods of January
1, 1996 through June 29, 1996, June 30, 1996 through December 31, 1996 and the
year ended December 31, 1997, respectively, and $75,730 and $95,933 for the
three months ended March 31, 1997 and 1998, respectively.
Future minimum lease payments under all noncancellable operating leases are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998...................................................... $ 283,850
1999...................................................... 290,238
2000...................................................... 246,464
2001...................................................... 204,384
2002...................................................... 95,808
Thereafter................................................ 135,364
----------
$1,256,108
==========
</TABLE>
Employment Contracts
The Company has employment agreements with certain employees expiring in
2001. Future annual payments as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998...................................................... $ 230,000
1999...................................................... 230,000
2000...................................................... 230,000
2001...................................................... 100,000
----------
$ 790,000
==========
</TABLE>
Concentration
During the periods of January 1, 1996 through June 29, 1996, June 30, 1996
through December 31, 1996, the year ended December 31, 1997 and the three months
ended March 31, 1997 and 1998, one vendor accounted for 57%, 56%, 60%, 58% and
60% of the Company's purchases, respectively.
F-60
<PAGE> 113
KING OFFICE SUPPLY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE I -- INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
PREDECESSOR
--------------- PERIOD FROM
PERIOD FROM JUNE 30, 1996
JANUARY 1, 1996 (INCEPTION) THREE MONTHS ENDED
THROUGH THROUGH YEAR ENDED MARCH 31,
JUNE 29, DECEMBER 31, DECEMBER 31, ------------------
1996 1996 1997 1997 1998
--------------- ------------- ------------ ------- --------
<S> <C> <C> <C> <C> <C>
Current
Federal.......................... $ -- $ -- $22,423 $ -- $22,400
State and local.................. 6,911 17,000 34,828 7,576 16,423
Deferred........................... -- -- (41,884) -- 2,900
------ ------- ------- ------ -------
$6,911 $17,000 $15,367 $7,576 $41,723
====== ======= ======= ====== =======
</TABLE>
As discussed in Note A, King was taxed as an S Corporation for Federal and
state tax purposes for the period of January 1, 1996 through June 29, 1996. The
King Group, LLC was taxed as a partnership for Federal and New York State tax
purposes for the periods of June 30, 1996 through May 7, 1997. The Company will
file a consolidated Federal income tax return for the period of May 8, 1997
through December 31, 1997. Had the Company filed a consolidated Federal income
tax return, the provision for income taxes for the periods of January 1, 1996
through June 29, 1996, June 30, 1996 through December 31, 1996 and for the year
ended December 31, 1997 would have been approximately $39,000, $0 and $95,000,
respectively.
Significant components of the Company's deferred taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
<S> <C> <C>
Deferred tax assets (liabilities)
Allowance for doubtful accounts........................... $ 21,590 $21,590
Deferred compensation..................................... 34,000 34,000
Capitalized inventory costs............................... 2,904 2,904
-------- -------
58,494 58,494
Amortization of goodwill.................................. (16,610) (19,510)
-------- -------
$ 41,884 $38,984
======== =======
</TABLE>
NOTE J -- AGREEMENT WITH OFFICE CENTRE CORPORATION
The Company and its stockholders have entered into a definitive agreement
with Office Centre Corporation and Subsidiaries ("Office Centre") whereby Office
Centre will acquire, by merger, all of the issued and outstanding stock of the
Company, in exchange for cash and common stock of Office Centre upon the
consummation of the initial public offering of Office Centre. The majority owner
of the Company is also the President, Chief Executive Officer and Chairman and,
upon consummation of the proposed transaction, will be a holder of approximately
10% of the outstanding common stock of Office Centre Corporation.
As of December 31, 1997, the amount due from affiliate is comprised of
payments made by (and owed from) the Company on behalf of Office Centre for the
purchase of certain equipment and various operating expenses and deferred
offering costs incurred by Office Centre during the year ended December 31,
1997.
F-61
<PAGE> 114
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
We have audited the accompanying balance sheet of Sierra Office Systems and
Products, Inc. (the "Company"), as of March 31, 1998, and the related statements
of operations and retained earnings and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sierra Office Systems and
Products, Inc., as of March 31, 1998, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
New York, New York
April 30, 1998
F-62
<PAGE> 115
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
BALANCE SHEET
MARCH 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 28,782
Accounts receivable, net of allowance for doubtful
accounts of $54,048.................................... 1,657,334
Inventories............................................... 337,200
Prepaid expenses and other current assets................. 57,972
----------
Total current assets................................. 2,081,288
DUE FROM STOCKHOLDER........................................ 800,000
PROPERTY AND EQUIPMENT -- NET............................... 1,077,888
OTHER ASSETS
Deferred tax benefit...................................... 20,000
Security deposits and other assets........................ 9,559
----------
$3,988,735
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit............................................ $1,083,808
Current portion of long-term debt......................... 55,119
Current maturities of capital lease obligations........... 115,438
Note payable -- customer.................................. 80,000
Accounts payable -- trade................................. 1,105,570
Accrued expenses and other current liabilities............ 299,637
Income taxes payable...................................... 49,000
----------
Total current liabilities............................ 2,788,572
LONG-TERM DEBT, NET......................................... 109,782
CAPITAL LEASE OBLIGATIONS, NET.............................. 389,003
COMMITMENT AND CONTINGENCY
STOCKHOLDERS' EQUITY
Common stock, no par value; 10,000 shares authorized;
754 shares issued and outstanding...................... 329,463
Retained earnings......................................... 371,915
----------
701,378
----------
$3,988,735
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-63
<PAGE> 116
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
YEAR ENDED MARCH 31, 1998
<TABLE>
<S> <C>
Net sales................................................... $12,789,343
Cost of goods sold.......................................... 8,531,525
-----------
Gross margin......................................... 4,257,818
Operating costs and expenses................................ 3,897,177
Operating income.......................................... 360,641
Other income (expense)
Interest income -- related party.......................... 82,241
Interest expense.......................................... (311,493)
Other expense, net........................................ (8,771)
-----------
Income before provision for income taxes............. 122,618
Provision for income taxes.................................. 49,000
-----------
NET INCOME........................................... 73,618
Retained earnings at beginning of period.................... 298,297
-----------
Retained earnings at end of period.......................... $ 371,915
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-64
<PAGE> 117
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1998
<TABLE>
<S> <C>
Cash flows from operating activities
Net income................................................ $ 73,618
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization.......................... 172,210
Changes in operating assets and liabilities
Accounts receivable.................................. (229,239)
Inventories.......................................... (89,667)
Prepaid expenses and other current assets............ 112,333
Other assets......................................... 52,338
Accounts payable -- trade............................ 140,454
Note payable -- customer............................. 80,000
Accrued expenses and other current liabilities....... 39,064
-----------
Net cash provided by operating activities......... 351,111
-----------
Cash flows from investing activities
Purchase of property, plant and equipment................. (192,118)
-----------
Cash flows from financing activities
Principal payments on long-term debt...................... (45,814)
Net increase in line of credit............................ 147,962
Capital lease payments.................................... (246,540)
-----------
Net cash used in financing activities............. (144,392)
-----------
INCREASE IN CASH AND CASH EQUIVALENTS............. 14,601
Cash and cash equivalents at beginning of period............ 14,181
-----------
Cash and cash equivalents at end of period.................. $ 28,782
===========
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest............................................... $ 311,493
Income taxes........................................... 36,418
</TABLE>
The accompanying notes are an integral part of this statement.
F-65
<PAGE> 118
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Sierra Office Systems and Products, Inc. (the "Company") is primarily in
the business of selling office supplies, printing and office furniture to
commercial and retail enterprises located in the State of California and Pacific
region.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
Accounting Period
The Company operates on a fiscal year beginning April 1 and ending March
31.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.
Revenue Recognition
Revenue is recognized at the time merchandise is shipped to customers.
Inventories
Inventories, which consist of office supplies, office furniture and
equipment, printing supplies and stationery, are stated at the lower of cost or
market, determined on a first-in, first-out basis.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are recorded using the
straight-line and accelerated methods over their estimated useful lives. Repairs
and maintenance are charged to expense as incurred.
Valuation of Long-Lived Assets
The Company reviews long-lived assets held and used for possible impairment
whenever events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable. The Company has determined no provision is
necessary for the impairment of long-lived assets at March 31, 1998.
Income Taxes
Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Deferred taxes primarily
result from temporary differences related to the allowance for doubtful
accounts.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
F-66
<PAGE> 119
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
March 31, 1998
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Fair Value of Financial Instruments
Financial instruments consist principally of cash and cash equivalents, due
from related party, capital lease obligations, line of credit and promissory
notes classified as long-term debt. The carrying value of these instruments
approximates their fair value because of their short maturity and their
stipulated interest rates being based on current market rates.
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of March 31, 1998:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
------------
<S> <C> <C>
Machinery and equipment.................................... $1,248,464 5 years
Vehicles................................................... 305,918 5 years
Leasehold improvements..................................... 126,621 7 - 10 years
Furniture and fixtures..................................... 103,658 7 years
----------
1,784,661
Less accumulated depreciation and Amortization............. (706,773)
----------
$1,077,888
==========
</TABLE>
Depreciation expense amounted to $172,210 for the year ended March 31,
1998.
NOTE C -- DUE FROM STOCKHOLDER
At March 31, 1998, the Company had an outstanding receivable from Sierra
Dental in the amount of $800,000. Sierra Dental was a company previously owned
by the President of the Company. The President is personally liable for
repayment of the loan. During the year ending March 31, 1998, interest was
charged on this receivable at an effective annual rate of approximately 10%. The
receivable is due no later than December 31, 2001.
NOTE D -- LINE OF CREDIT
The Company has an available revolving line of credit with San Jose
National Bank for up to $1,100,000, which bears interest at a rate of prime plus
7% for balances up to $1,000,000 and prime plus 10% for the balance in excess of
$1,000,000 (18.5% at March 31, 1998). Interest is payable monthly. The line of
credit is collateralized by the assets of the Company. The $1,100,000
line-of-credit agreement states that the maximum principal amount outstanding at
any time be equal to 80% of eligible receivables. In addition, the Company must
maintain certain financial requirements and quarterly ratios in connection with
the line-of-credit agreement. At March 31, 1998, the Company was in compliance
with the covenants. The remaining unused portion of the revolving line of credit
at March 31, 1998 was $16,192. The payment of the line is guaranteed by the
Company's stockholders.
F-67
<PAGE> 120
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
March 31, 1998
NOTE E -- LONG-TERM DEBT
Long-term debt at March 31, 1998 consists primarily of ten notes due to two
financial credit institutions which call for monthly payments ranging from $271
to $636 and bearing interest at rates which range from 5.9% to 12%. These notes
are all collateralized by property of the Company. The final installments of
these notes are due at various times from June 1999 through October 2002.
As of March 31, 1998, aggregate maturities of long-term debt are as
follows:
<TABLE>
<S> <C>
Year ending March 31,
1999...................................................... $ 55,119
2000...................................................... 41,695
2001...................................................... 30,295
2002...................................................... 27,457
2003...................................................... 10,335
--------
$164,901
========
</TABLE>
NOTE F -- CAPITAL LEASES
The Company has entered into capital leases for certain equipment that met
the criteria for capitalization. The assets were recorded at a cost of $914,656,
and the related obligations were recorded at the present value of future minimum
lease payments. Accumulated depreciation at March 31, 1998 was $399,577.
The following is a schedule of future minimum payments under the lease:
<TABLE>
<S> <C>
Year ending March 31,
1999...................................................... $ 215,015
2000...................................................... 183,738
2001...................................................... 178,544
2002...................................................... 63,459
2003...................................................... 7,932
---------
Total lease payments.............................. 648,688
Less portion representing interest.......................... (144,247)
---------
Present value of future lease payments...................... 504,441
Current maturities.......................................... 115,438
---------
$ 389,003
=========
</TABLE>
NOTE G -- COMMITMENT AND CONTINGENCY
Operating Leases
The Company leases its main business location. The lease began June 1,
1997, and expires July 1, 2007. Payments are currently $12,369 per month and
will escalate in increments of 4% annually until July 1, 1999. Payments at that
time will be reduced to $10,727 and will escalate in increments of 4% annually
until July 1, 2007.
F-68
<PAGE> 121
SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
March 31, 1998
Future minimum lease commitments are as follows:
<TABLE>
<S> <C>
Year ending March 31,
1999...................................................... $ 151,864
2000...................................................... 156,580
2001...................................................... 135,976
2002...................................................... 132,573
2003...................................................... 137,876
Thereafter................................................ 649,622
----------
$1,364,491
==========
</TABLE>
Total rental expense for the year ended March 31, 1998, was $136,553.
Concentration
During the year ended March 31, 1998, one vendor accounted for 48% of the
Company's purchases.
NOTE H -- INCOME TAXES
The provisions for income taxes consist of the following for the year ended
March 31, 1998:
<TABLE>
<S> <C>
Current
Federal................................................... $40,000
State..................................................... 9,000
-------
$49,000
=======
</TABLE>
The following is a reconciliation of the statutory Federal income tax rate
to the effective rate reported in the financial statements for the year ended
March 31, 1998:
<TABLE>
<S> <C>
Current "expected" provision for Federal income taxes....... 25.3%
Adjustments in income taxes resulting from
State income taxes, net of Federal income tax benefit..... 6.6
Permanent differences -- other miscellaneous.............. 8.1
----
Income tax expense.......................................... 40.0%
====
</TABLE>
NOTE I -- SUBSEQUENT EVENT
In April 1998, the Company and its stockholders have entered into a
definitive agreement with Office Centre Corporation and Subsidiaries ("Office
Centre") whereby Office Centre will acquire, by merger, all of the issued and
outstanding stock of the Company, in exchange for cash and common stock of
Office Centre upon the consummation of the initial public offering of Office
Centre.
F-69
<PAGE> 122
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES, INC.
We have audited the accompanying balance sheet of Office Solutions Business
Products and Services, Inc. (the "Company"), as of September 30, 1997, and the
related statements of operations and retained earnings and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Office Solutions Business
Products and Services, Inc., as of September 30, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
New York, New York
February 13, 1998
F-70
<PAGE> 123
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1998
------------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 123,973 $ 244,498
Accounts receivable, less allowances of $25,000 at
September 30, 1997 and March 31, 1998.................. 1,151,921 1,335,026
Inventories............................................... 354,078 329,903
Prepaid expenses and other current assets................. 44,674 92,365
---------- ----------
Total current assets................................. 1,674,646 2,001,792
PROPERTY AND EQUIPMENT -- NET............................... 247,996 212,384
---------- ----------
$1,922,642 $2,214,176
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of capital lease obligations........... $ 55,789 $ 47,611
Accounts payable and accrued expenses..................... 1,179,074 1,134,208
Income taxes payable...................................... 59,000 198,831
---------- ----------
Total current liabilities............................ 1,293,863 1,380,650
CAPITAL LEASE OBLIGATIONS, NET.............................. 88,742 68,770
COMMITMENTS AND CONTINGENCY
STOCKHOLDERS' EQUITY
Common stock, no par value; authorized, 1,500 shares;
issued and outstanding, 1,000 shares as of September
30, 1997 and March 31, 1998, respectively.............. 434,642 434,642
Retained earnings......................................... 105,395 330,114
---------- ----------
540,037 764,756
---------- ----------
$1,922,642 $2,214,176
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-71
<PAGE> 124
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED ------------------------
SEPTEMBER 30, MARCH 31, MARCH 31,
1997 1997 1998
------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Net sales............................................ $9,630,943 $4,160,569 $6,472,780
Cost of goods sold................................... 6,994,643 2,951,197 4,737,192
---------- ---------- ----------
Gross margin.................................. 2,636,300 1,209,372 1,735,588
Operating costs and expenses......................... 2,468,759 1,120,611 1,356,657
---------- ---------- ----------
Operating income.............................. 167,541 88,761 378,931
Other income (expense)
Interest income.................................... 10,473 4,231 4,024
Interest expense................................... (13,619) (7,151) (7,705)
---------- ---------- ----------
Income before provision for income taxes...... 164,395 85,841 375,250
Provision for income taxes........................... 59,000 30,000 150,531
---------- ---------- ----------
NET INCOME.................................... 105,395 55,841 224,719
Retained earnings at beginning of period............. -- -- 105,395
---------- ---------- ----------
Retained earnings at end of period................... $ 105,395 $ 55,841 $ 330,114
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-72
<PAGE> 125
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED ---------------------
SEPTEMBER 30, MARCH 31, MARCH 31,
1997 1997 1998
------------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities
Net income.............................................. $105,395 $ 55,841 $224,719
Adjustments to reconcile net income to net cash (used
in) provided by operating activities
Depreciation and amortization........................ 61,856 30,692 40,268
Changes in operating assets and liabilities
Accounts receivable................................ (273,157) (58,375) (183,105)
Inventories........................................ (145,412) (27,400) 24,175
Prepaid expenses and other current assets.......... (46,497) (18,048) (47,691)
Accounts payable and accrued expenses.............. 160,786 (79,213) (44,866)
Income taxes payable............................... 59,000 30,000 139,831
-------- -------- --------
Net cash (used in) provided by operating
activities......................................... (78,029) (66,503) 153,331
-------- -------- --------
Cash flows from investing activities
Purchase of property and equipment...................... (33,150) (3,075) (4,656)
-------- -------- --------
Cash flows from financing activities
Principal payments on capital lease obligations......... (41,708) (12,296) (28,150)
-------- -------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS... (152,887) (81,874) 120,525
Cash and cash equivalents at beginning of period.......... 276,860 276,860 123,973
-------- -------- --------
Cash and cash equivalents at end of period................ $123,973 $194,986 $244,498
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest............................................. $ 5,000 $ 6,000 $ 7,000
Income taxes......................................... -- -- 16,000
Noncash investing and financial activities:
Equipment purchased under capital leases............. 90,290 -- --
</TABLE>
The accompanying notes are an integral part of these statements.
F-73
<PAGE> 126
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES, INC
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Office Solutions Business Products and Services, Inc. (the "Company") is
primarily in the business of selling office supplies to commercial and retail
enterprises located in Southern California.
The Company was formed on October 1, 1996 when the stockholders exchanged
certain assets and liabilities of their wholly-owned business of the Company in
exchange for all of the Company's common stock. The assets and liabilities were
valued at their historical cost.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.
Revenue Recognition
Revenue is recognized at the time merchandise is shipped to customers.
Inventories
Inventories, which consist of office supplies, printing supplies, and
stationery, are stated at the lower of cost or market, determined on a first-in,
first-out basis.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are recorded using the
straight-line and accelerated methods over their estimated useful lives. Leased
property meeting certain criteria is capitalized and the present value of the
related lease payments is recorded as a liability. Amortization of capitalized
leased assets is computed on a straight-line method over the term of the lease.
Repairs and maintenance are charged to expense as incurred.
Income Taxes
Federal income taxes are payable personally by the stockholders of the
Company pursuant to an election under Subchapter S of the Internal Revenue
Service Code not to have the Company taxed as a corporation. Accordingly,
Federal income taxes are not reflected in the accompanying financial statements.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
F-74
<PAGE> 127
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES, INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 30, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
Fair Value of Financial Instruments
Financial instruments consist principally of cash and cash equivalents and
capital lease obligations. The carrying value of these instruments approximates
their fair value because of their short maturity and their stipulated interest
rates being based on current market rates.
Interim Reporting
The accompanying financial information as of the six months ended March 31,
1997 and 1998, including such information in the notes to financial statements
is unaudited. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, considered necessary for a fair presentation have
been included. Operating results for any interim period are not necessarily
indicative of the results of any other interim period or for an entire year.
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31, ESTIMATED
1997 1998 USEFUL LIVES
------------- --------- ------------
<S> <C> <C> <C>
Vehicles...................................... $ 291,994 $ 291,994 5 years
Furniture and fixtures........................ 132,012 132,012 7 years
Data processing equipment..................... 13,740 18,396 5 years
Leasehold improvements........................ 26,518 26,518 7 - 15 years
--------- ---------
464,264 468,920
Accumulated depreciation and amortization..... (216,268) (256,536)
--------- ---------
$ 247,996 $ 212,384
========= =========
</TABLE>
Depreciation expense amounted to $61,856, $40,268 and $31,052 for the year
ended September 30, 1997, and the six months ended March 31, 1997 and 1998,
respectively.
NOTE C -- CAPITAL LEASES
The Company leases certain vehicles included in property and equipment that
meet the criteria for capitalization. The assets and obligations were recorded
at $241,337. Accumulated amortization was $101,437 and $130,182 as of September
30, 1997 and March 31, 1998, respectively.
F-75
<PAGE> 128
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES, INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 30, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
The following is a schedule of future minimum payments under the leases:
<TABLE>
<S> <C>
Year ending September 30,
1998...................................................... $ 71,205
1999...................................................... 49,079
2000...................................................... 33,440
2001...................................................... 17,755
--------
Total lease payments.............................. 171,479
Less portion representing interest.......................... (26,948)
--------
Present value of future lease payments...................... 144,531
Current maturities.......................................... 55,789
--------
$ 88,742
========
</TABLE>
NOTE D -- COMMITMENTS AND CONTINGENCY
Operating Lease -- Related Party
The Company leases its corporate office from the stockholders on a
month-to-month lease. Payments are currently $6,000 per month. The stockholders
have a $378,000 note payable related to the corporate office that is guaranteed
by the Company.
Total rental expense and payments to the stockholders was $49,148 for the
year ended September 30, 1997 and $45,949 for the six months ended March 31,
1998.
Operating Lease -- Other
The Company leases office space under an operating lease expiring October
31, 1999. Future rental obligations are $18,000 per year for the years ending
September 30, 1998 and 1999.
Concentration
During the year ended September 30, 1997 and the six months ended March 31,
1997 and 1998, two vendors accounted for approximately 70% of the Company's
purchases, respectively.
NOTE E -- DEFINED CONTRIBUTION RETIREMENT PLAN
The Company has a retirement savings and investment plan for substantially
all full-time employees, which allows participants to make contributions by
salary reduction pursuant to Section 401(k) of the Internal Revenue Code.
Matching employer contributions to the plan are limited to 6% of a participant's
compensation. Employer contributions to the plan for the year ended September
30, 1997 were $25,017 and $8,154 and $5,816 for the six months ended March 31,
1997 and 1998, respectively.
NOTE F -- INCOME TAXES
Income taxes currently payable are provided for on taxable income at the
statutory rates applicable to such income. Deferred taxes have not been provided
for as the tax basis amounts of the Company's assets and liabilities approximate
their reported amounts in the accompanying financial statements.
F-76
<PAGE> 129
OFFICE SOLUTIONS BUSINESS PRODUCTS AND SERVICES, INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
September 30, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31,
SEPTEMBER 30, -------------------
1997 1997 1998
------------- ------- --------
<S> <C> <C> <C>
Current
Federal......................................... $49,000 $25,000 $128,531
State........................................... 10,000 5,000 22,000
------- ------- --------
$59,000 $30,000 $150,531
======= ======= ========
</TABLE>
The following is a reconciliation of the statutory Federal income tax rate
to the effective rate reported in the financial statements:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31,
SEPTEMBER 30, ---------------------
1997 1997 1998
------------- -------- ---------
<S> <C> <C> <C>
Current "expected" provision for Federal income
taxes......................................... 30% 29% 34%
Adjustments in income taxes resulting from State
tax, net of Federal benefit................... 6 6 6
-- -- --
Income tax expense.............................. 36% 35% 40%
== == ==
</TABLE>
NOTE G -- SUBSEQUENT EVENT
In April 1998, the Company and its stockholders have entered into a
definitive agreement with Office Centre Corporation and Subsidiaries ("Office
Centre") whereby Office Centre will acquire, by merger, all of the issued and
outstanding stock of the Company, in exchange for cash and common stock of
Office Centre upon the consummation of the initial public offering of Office
Centre.
F-77
<PAGE> 130
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
GREENWOOD OUTFITTERS, INC.
We have audited the accompanying balance sheets of Greenwood Outfitters,
Inc. (the "Company") as of December 31, 1996 and 1997 and the related statements
of operations and retained earnings, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of Greenwood Outfitters, Inc.
as of December 31, 1996 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
New York, New York
January 30, 1998
F-78
<PAGE> 131
GREENWOOD OUTFITTERS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................. $ 130,941 $ 222,025 $ 347,668
Accounts receivable.................................. 674,635 977,622 1,086,158
Inventories.......................................... 236,762 129,248 166,136
Prepaid expenses and other current assets............ 6,687 11,819 16,604
---------- ---------- ----------
Total current assets......................... 1,049,025 1,340,714 1,616,566
PROPERTY AND EQUIPMENT -- NET.......................... 64,520 102,165 117,957
---------- ---------- ----------
$1,113,545 $1,442,879 $1,734,523
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable -- trade............................ $ 341,093 $ 473,926 $ 550,867
Accrued expenses and other current liabilities....... 42,012 118,734 125,171
---------- ---------- ----------
Total current liabilities.................... 383,105 592,660 676,038
COMMITMENT
STOCKHOLDERS' EQUITY
Common stock -- no par value; authorized, 1,000,000
shares; issued, 50,000 shares..................... 150,000 150,000 150,000
Retained earnings.................................... 710,440 830,219 1,038,485
---------- ---------- ----------
860,440 980,219 1,188,485
Less treasury stock -- 25,000 shares, at cost........ (130,000) (130,000) (130,000)
---------- ---------- ----------
730,440 850,219 1,058,485
---------- ---------- ----------
$1,113,545 $1,442,879 $1,734,523
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-79
<PAGE> 132
GREENWOOD OUTFITTERS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ ------------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales................................. $7,296,089 $8,920,139 $2,051,384 $2,718,212
Cost of goods sold........................ 4,805,822 5,885,430 1,328,731 1,737,804
---------- ---------- ---------- ----------
Gross margin.................... 2,490,267 3,034,709 722,653 980,408
Operating costs and expenses.............. 2,182,847 2,651,594 581,823 701,308
---------- ---------- ---------- ----------
Income before income taxes...... 307,420 383,115 140,830 279,100
State income tax expense.................. 13,330 3,336 333 834
---------- ---------- ---------- ----------
NET INCOME...................... 294,090 379,779 140,497 278,266
Retained earnings at beginning of
period.................................. 476,350 710,440 710,440 830,219
Distributions............................. (60,000) (260,000) (30,000) (70,000)
---------- ---------- ---------- ----------
Retained earnings at end of period........ $ 710,440 $ 830,219 $ 820,937 $1,038,485
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-80
<PAGE> 133
GREENWOOD OUTFITTERS, INC.
STATEMENTS OF CASH FLOWS
Years ended December 31,
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- ----------------------
1996 1997 1997 1998
--------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income.................................. $294,090 $ 379,779 $ 140,497 $ 278,266
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation........................... 45,249 53,726 9,765 9,592
Gain on disposal of property and
equipment........................... -- (1,421) -- --
Changes in operating assets and
liabilities
Accounts receivable................. (64,962) (302,987) (150,082) (108,536)
Inventories......................... (70,372) 107,514 160,111 (36,888)
Prepaid expenses and other current
assets............................ 6,486 (5,132) 792 (4,785)
Accounts payable -- trade........... (13,359) 132,833 33,080 76,941
Accrued expenses and other
liabilities....................... (9,762) 76,722 9,067 6,437
-------- --------- --------- ---------
Net cash provided by operating
activities.......................... 187,370 441,034 203,230 221,027
-------- --------- --------- ---------
Cash flows from investing activities
Purchase of property and equipment.......... (33,557) (93,525) (18,384) (25,384)
Proceeds from disposal of property and
equipment................................ -- 3,575 -- --
-------- --------- --------- ---------
Net cash used in investing activities.... (33,557) (89,950) (18,384) (25,384)
-------- --------- --------- ---------
Cash flows from financing activities
Distributions to shareholders............... (60,000) (260,000) (30,000) (70,000)
-------- --------- --------- ---------
INCREASE IN CASH......................... 93,813 91,084 154,846 125,643
Cash at beginning of period................... 37,128 130,941 130,941 222,025
-------- --------- --------- ---------
Cash at end of period......................... $130,941 $ 222,025 $ 285,787 $ 347,668
======== ========= ========= =========
Supplemental disclosures of cash flow
information:
Cash paid during the period for Income
taxes.................................... $ 13,330 $ 3,336 -- --
</TABLE>
The accompanying notes are an integral part of these statements.
F-81
<PAGE> 134
GREENWOOD OUTFITTERS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE A -- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Greenwood Outfitters, Inc. (the "Company") is an office supply dealer to
businesses in the Dallas/Fort Worth area.
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows:
Revenue Recognition
Revenue is recognized at the time merchandise is shipped to customers.
Inventories
Inventories, which consist of merchandise held for sale, are stated at the
lower of cost or market. Cost is determined by the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is provided using accelerated methods over the
estimated useful lives of the assets ranging from five to seven years. Repairs
and maintenance are charged to expense as incurred.
Income Taxes
Federal income taxes are payable personally by the stockholders of the
Company pursuant to an election under Subchapter S of the Internal Revenue
Service Code not to have the Company taxed as a corporation. Accordingly,
federal income taxes are not reflected in the accompanying financial statements.
Interim Reporting
The accompanying financial information as of the three months ended March
31, 1997 and 1998, including such information in the notes to financial
statements, is unaudited. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, considered necessary for a fair
presentation have been included. Operating results for any interim period are
not necessarily indicative of the results of any other interim period or for an
entire year.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
F-82
<PAGE> 135
GREENWOOD OUTFITTERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996 and 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- MARCH 31, ESTIMATED
1996 1997 1998 USEFUL LIVES
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Furniture and fixtures............... $ 14,029 $ 14,029 $ 14,029 5 - 7 years
Equipment............................ 242,304 321,403 346,787 5 - 7 years
Vehicles............................. 24,016 24,016 24,016 5 years
--------- --------- --------
280,349 359,448 384,832
Less accumulated depreciation........ (215,829) (257,283) 266,875
--------- --------- --------
$ 64,520 $ 102,165 $117,957
========= ========= ========
</TABLE>
NOTE C -- COMMITMENT
Leases
The Company leases office and warehouse space under a noncancellable
operating lease that expired in February 1998. Rent expense was approximately
$46,000, $47,000, $12,000 and $12,000 for the years ended December 31, 1996 and
1997 and the three-month periods ended March 31, 1997 and 1998, respectively.
NOTE D -- AGREEMENT WITH OFFICE CENTRE CORPORATION
The Company and its stockholders entered into a definitive agreement with
Office Centre Corporation and Subsidiaries ("Office Centre") in October 1997,
whereby Office Centre will acquire, by merger, all of the issued and outstanding
stock of the Company, in exchange for cash and common stock of Office Centre
upon the consummation of the initial public offering of Office Centre.
F-83
<PAGE> 136
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
GEORGIA IMPRESSION PRODUCTS, INC.
We have audited the accompanying balance sheet of Georgia Impression
Products, Inc. (the "Company"), as of June 30, 1997, and the related statements
of operations and retained earnings and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Georgia Impression Products,
Inc., as of June 30, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
New York, New York
March 13, 1998
F-84
<PAGE> 137
GEORGIA IMPRESSION PRODUCTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1998
-------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $180,082 $306,920
Accounts receivable....................................... 464,255 360,899
Inventories............................................... 48,970 54,483
Prepaid expenses and other current assets................. -- 3,441
-------- --------
Total current assets................................. 693,307 725,743
PROPERTY AND EQUIPMENT -- NET............................... 56,455 49,702
OTHER ASSETS
Security deposits......................................... 650 650
-------- --------
$750,412 $776,095
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt......................... $ 35,210 $ 23,967
Notes payable -- stockholders............................. 43,245 --
Accounts payable -- trade................................. 273,492 158,358
Accrued liabilities....................................... 14,625 8,815
Income taxes payable...................................... 49,101 125,000
-------- --------
Total current liabilities............................ 415,673 316,140
LONG-TERM DEBT, NET......................................... 23,538
COMMITMENT AND CONTINGENCY
STOCKHOLDERS' EQUITY
Common stock, $1 par value; 100,000 shares authorized
shares; 48,000 shares issued; 16,000 shares outstanding
at June 30, 1997 and March 31, 1998.................... 48,000 48,000
Retained earnings......................................... 395,391 544,145
Treasury stock............................................ (132,190) (132,190)
-------- --------
311,201 459,955
-------- --------
$750,412 $776,095
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-85
<PAGE> 138
GEORGIA IMPRESSION PRODUCTS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED ---------------------------
JUNE 30, MARCH 31, MARCH 31,
1997 1997 1998
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net sales............................................ $3,390,319 $2,309,190 $ 2,644,626
Cost of goods sold................................... 2,477,472 1,725,087 1,923,868
---------- ---------- -------------
Gross margin.................................. 912,847 584,103 720,758
Operating costs and expenses......................... 745,488 439,722 499,311
---------- ---------- -------------
Operating income.............................. 167,359 144,381 221,447
Other income (expense)
Interest income.................................... 4,843 1,640 4,216
Interest expense................................... (1,271) (940) (3,010)
---------- ---------- -------------
Income before provision for income taxes...... 170,931 145,081 222,653
Provision for income taxes........................... 55,374 47,664 73,899
---------- ---------- -------------
NET INCOME.................................... 115,557 97,417 148,754
Retained earnings at beginning of period............. 279,834 279,834 395,391
---------- ---------- -------------
Retained earnings at end of period................... $ 395,391 $ 377,251 $ 544,145
========== ========== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-86
<PAGE> 139
GEORGIA IMPRESSION PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED ----------------------
JUNE 30, MARCH 31, MARCH 31,
1997 1997 1998
---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities
Net income............................................ $ 115,557 $ 97,417 $148,754
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization.................... 3,536 1,394 6,753
Provision for bad debts.......................... 8,542 -- --
Changes in operating assets and liabilities
Accounts receivable........................... (94,170) 13,722 103,356
Inventories................................... 1,620 (22,641) (5,513)
Prepaid expenses and other current assets..... 850 (4,665) (3,441)
Accounts payable -- trade..................... 25,039 (24,321) (115,134)
Accrued expenses and other current
liabilities................................. 4,210 (5,000) (5,810)
Income taxes payable.......................... 46,401 45,401 75,899
---------- -------- --------
Net cash provided by operating activities........ 111,585 101,307 204,864
---------- -------- --------
Cash flows from investing activities
Purchase of property and equipment.................... (22,604) (8,904) --
---------- -------- --------
Net cash used in investing activities............ (22,604) (8,904) --
---------- -------- --------
Cash flows from financing activities
Principal payments on long-term debt.................. (24,676) (18,507) (34,781)
Proceeds from note payable to shareholders............ 43,244 -- --
Payments on note payable to shareholders.............. (39,094) (31,734) (43,245)
---------- -------- --------
Net cash used in financing activities............ (20,526) (50,241) (78,026)
---------- -------- --------
INCREASE IN CASH AND CASH EQUIVALENTS............ 68,455 42,162 126,838
Cash and cash equivalents at beginning of period........ 111,627 111,627 180,082
---------- -------- --------
Cash and cash equivalents at end of period.............. $ 180,082 $153,789 $306,920
========== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest........................................... $ 1,271 $ 940 $ 3,010
Income taxes....................................... 8,919 4,665 2,970
</TABLE>
The accompanying notes are an integral part of these statements.
F-87
<PAGE> 140
GEORGIA IMPRESSION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Georgia Impression Products, Inc. (the "Company") is primarily in the
business of selling office supplies and office equipment to commercial and
retail enterprises located in the Atlanta, Georgia region.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
Accounting Period
The Company elected to operate on a fiscal year beginning July 1.
Interim Reporting
The accompanying financial information as of the nine months ended March
31, 1997 and 1998, including such information in the notes to financial
statements, is unaudited. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, considered necessary for a fair
presentation have been included. Operating results for any interim period are
not necessarily indicative of the results of any other interim period or for an
entire year.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.
Revenue Recognition
Revenue is recognized at the time merchandise is shipped to customers.
Inventories
Inventories, which consist of office supplies, printing supplies and
stationery, are stated at the lower of cost or market, determined on a first-in,
first-out basis.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are recorded using the
straight-line method over their estimated useful lives. Repairs and maintenance
are charged to expense as incurred.
Income Taxes
Federal income taxes are payable personally by the stockholders of the
Company pursuant to an election under Subchapter S of the Internal Revenue
Service Code not to have the Company taxed as a corporation. Accordingly,
Federal income taxes are not reflected in the accompanying financial statements.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
F-88
<PAGE> 141
GEORGIA IMPRESSION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUE)
June 30, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Fair Value of Financial Instruments
Financial instruments consist principally of cash and cash equivalents,
notes payable to stockholders and promissory notes classified as long-term debt.
The carrying value of these instruments approximates their fair value because of
their short maturity and their stipulated interest rates approximate current
market rates.
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, ESTIMATED
1997 1998 USEFUL LIVES
-------- --------- ------------
<S> <C> <C> <C>
Equipment and furniture................................. $144,310 $144,310 5 -- 7 years
Leasehold improvements.................................. 4,713 4,713 7 -- 15 years
-------- --------
149,023 149,023
Less accumulated depreciation and amortization.......... 92,568 99,321
-------- --------
$ 56,455 $ 49,702
======== ========
</TABLE>
Depreciation expense amounted to $3,500, $1,394 and $6,753 for the year
ended June 30, 1997, and the nine months ended March 31, 1997 and 1998,
respectively.
NOTE C -- NOTE PAYABLE -- STOCKHOLDERS
Note payable -- stockholders represents bonuses earned by stockholders
during the year ended June 30, 1997, and will be paid in equal monthly
installments of $1,880 to each stockholder through May 31, 1998. The notes bear
interest at 8.0%.
NOTE D -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1998
-------- ---------
<S> <C> <C>
Payable to former stockholder, principal of $2,056 paid
monthly, no interest, final installment due July 31, 1998
(see Note E).............................................. $26,732 $ 8,224
Installment loans to Nations Bank, collateralized by
vehicles, interest at 8.76%, $1,018 paid monthly, final
installment May 13, 2000.................................. 32,016 15,743
------- -------
$58,748 $23,967
======= =======
</TABLE>
As of June 30, 1997, aggregate maturities of long-term debt are as follows:
F-89
<PAGE> 142
GEORGIA IMPRESSION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUE)
June 30, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
- --------------------
<S> <C>
1998........ $35,210
1999........ 12,815
2000........ 10,723
-------
$58,748
=======
</TABLE>
The Company expects to repay the debt during the next fiscal year;
therefore, the debt has been classified as a current liability, as of March 31,
1998.
NOTE E -- STOCK REDEMPTION
On December 29, 1995, the Company purchased 24,000 shares of stock in the
Company from one of its stockholders at a cost of $86,690. The repurchase
agreement provides for: (i) a $25,000 cash payment and (ii) a note payable in
the amount of $61,690 with no stated interest rate. The note payable is payable
in monthly installments of $2,056 through July 31, 1998.
NOTE F -- COMMITMENT AND CONTINGENCY
Operating Lease
The Company leases its main business location under a lease agreement that
expires November 30, 1998. Payments are currently $1,592 per month.
Total rental expense for the year ended June 30, 1997 and the nine-month
periods ended March 31, 1997 and 1998, was $18,430, $15,246 and $15,914,
respectively.
Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
- --------------------
<S> <C>
1998 $19,104
1999 7,962
-------
$27,066
=======
</TABLE>
Concentration
During the year ended June 30, 1997 and each of the nine-month periods
ended March 31, 1997 and 1998, one vendor accounted for 58%, 45% and 49% of the
Company's purchases, respectively.
NOTE G -- DEFINED CONTRIBUTION RETIREMENT PLAN
The Company has a retirement savings and investment plan for substantially
all full-time employees, which allows participants to make contributions by
salary reduction pursuant to Section 401(k) of the Internal Revenue Code.
Matching employer contributions to the plan are limited to 35% of a
participant's contribution. Employer contributions to the plan for the year
ended June 30, 1997 were $8,670 and $5,108 for the nine months ended March 31,
1998.
F-90
<PAGE> 143
GEORGIA IMPRESSION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUE)
June 30, 1997
(Information relating to March 31, 1997 and 1998 is unaudited)
NOTE H -- INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED ----------------------
JUNE 30, MARCH 31, MARCH 31,
1997 1997 1998
---------- --------- ---------
<S> <C> <C> <C>
Current
Federal........................................... $45,220 $38,959 $60,540
State............................................. 10,154 8,705 13,359
------- ------- -------
$55,374 $47,664 $73,899
======= ======= =======
</TABLE>
The following is a reconciliation of the statutory Federal income tax rate
to the effective rate reported in the financial statements:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED ----------------------
JUNE 30, MARCH 31, MARCH 31,
1997 1997 1998
---------- --------- ---------
<S> <C> <C> <C>
Current "expected" provision for Federal income
taxes............................................. 28.0% 28.6% 28.9%
Adjustments in income taxes resulting from
State income taxes, net of Federal income tax
benefit........................................ 4.0 4.3 4.3
Permanent differences -- other miscellaneous...... .4 -- --
---- ---- ----
Income tax expense.................................. 32.4% 32.9% 33.2%
==== ==== ====
</TABLE>
NOTE I -- SUBSEQUENT EVENT
In May 1998, the Company and its stockholders have entered into a
definitive agreement with Office Centre Corporation and Subsidiaries ("Office
Centre") whereby Office Centre will acquire, by merger, all of the issued and
outstanding stock of the Company, in exchange for cash and common stock of
Office Centre upon the consummation of the initial public offering of Office
Centre.
F-91
<PAGE> 144
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
MEGA OFFICE FURNITURE, L.L.C.
We have audited the accompanying balance sheets of MEGA Office Furniture,
L.L.C. (the "Company"), (formerly known as U.S. Office Furniture, L.L.C.), as of
December 28, 1996 and January 3, 1998, and the related statements of operations,
changes in members' capital and cash flows for the four-month period from
September 1, 1996 (inception of operations) to December 28, 1996 and the year
ended January 3, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MEGA Office Furniture,
L.L.C. as of December 28, 1996 and January 3, 1998, and the results of its
operations, changes in members' equity and its cash flows for the four-month
period from September 1, 1996 (inception of operations) to December 28, 1996 and
the year ended January 3, 1998 in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
New York, New York
February 25, 1998
F-92
<PAGE> 145
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... $ 208,459 $ 218,415
Accounts receivable, net of allowance for doubtful
accounts of $10,000 and $15,000, respectively.......... 461,248 755,647
Other receivables......................................... 129,964 129,389
Inventories............................................... 1,037,107 1,498,602
Other assets.............................................. 5,909 62,368
---------- -----------
Total current assets.............................. 1,842,687 2,664,421
PROPERTY AND EQUIPMENT, NET................................. 207,687 424,049
INTANGIBLES AND OTHER ASSETS, NET........................... 1,892,991 1,668,999
---------- -----------
$3,943,365 $ 4,757,469
========== ===========
LIABILITIES AND MEMBERS' CAPITAL
CURRENT LIABILITIES
Current maturities of long-term debt...................... $ 40,763 $ 25,238
Notes payable -- demand................................... -- 715,228
Due to related parties -- current portion................. 964,000 432,588
Accounts payable.......................................... 593,652 773,766
Accrued liabilities....................................... 127,814 124,459
Customer deposits and other liabilities................... 116,701 201,174
---------- -----------
Total current liabilities......................... 1,842,930 2,272,453
LONG-TERM DEBT, net......................................... 201,287 183,454
COMMITMENTS AND CONTINGENCIES
MEMBERS' CAPITAL
Contributed capital, 295,294 and 367,977 Class A Units,
respectively........................................... 2,510,000 4,010,000
Accumulated deficit....................................... (240,852) (1,529,696)
---------- -----------
2,269,148 2,480,304
Subscriptions and notes receivable issued for Class A
Units.................................................. (370,000) (178,742)
---------- -----------
1,899,148 2,301,562
---------- -----------
$3,943,365 $ 4,757,469
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-93
<PAGE> 146
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SEPTEMBER 1,
1996 (INCEPTION)
THROUGH YEAR ENDED
DECEMBER 28, JANUARY 3,
1996 1998
---------------- -----------
<S> <C> <C>
Net sales................................................... $2,727,645 $10,322,689
Cost of sales............................................... 1,844,771 7,146,105
---------- -----------
Gross margin...................................... 882,874 3,176,584
---------- -----------
Store operating expenses.................................... 785,142 3,205,577
General and administrative expenses......................... 344,839 1,181,202
---------- -----------
Loss from operations.............................. (247,107) (1,210,195)
Interest income............................................. 2,703 6,026
Interest expense............................................ (34,318) (145,563)
Other income, net........................................... 37,870 60,888
---------- -----------
NET LOSS.......................................... $ (240,852) $(1,288,844)
========== ===========
</TABLE>
The accompanying notes are integral part of these statements.
F-94
<PAGE> 147
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
STATEMENT OF CHANGES IN MEMBERS' CAPITAL
<TABLE>
<CAPTION>
SUBSCRIPTIONS
CONTRIBUTED ACCUMULATED AND NOTES
CAPITAL DEFICIT RECEIVABLE TOTAL
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Members' initial capital
contributions......................... $2,510,000 $ -- $ -- $ 2,510,000
Subscriptions and notes receivable
issued for Class A Units........... -- -- (370,000) (370,000)
Net loss.............................. -- (240,852) -- (240,852)
---------- ----------- --------- -----------
Members' capital at December 28, 1996... 2,510,000 (240,852) (370,000) 1,899,148
Members' capital contributions........ 1,500,000 -- -- 1,500,000
Collections of subscriptions and notes
receivable issued for Class A
Units.............................. -- -- 191,258 191,258
Net loss.............................. -- (1,288,844) -- (1,288,844)
---------- ----------- --------- -----------
Members' capital at January 3, 1998..... $4,010,000 $(1,529,696) $(178,742) $ 2,301,562
========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-95
<PAGE> 148
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SEPTEMBER 1,
1996 (INCEPTION)
THROUGH YEAR ENDED
DECEMBER 28, JANUARY 3,
1996 1998
---------------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss.................................................. $ (240,852) $(1,288,844)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation........................................... 18,892 120,127
Amortization of intangible assets...................... 75,392 296,412
Loss on disposal of assets............................. -- 233
Changes in operating assets and liabilities, net of the
effects of acquisition
Increase in receivables.............................. (11,768) (294,399)
Decrease in other assets............................. (80,606) (54,532)
Increase in inventory................................ (10,467) (461,495)
Increase in accounts payable and other liabilities... 21,523 261,232
---------- -----------
Net cash used in operating activities............. (227,886) (1,421,266)
---------- -----------
Cash flows from investing activities
Purchase of assets of OFP................................. (800,000) --
Purchase of assets of MacThrift........................... -- (34,833)
Proceeds from sale of property and equipment.............. 15,500 500
Additions to property and equipment....................... (43,866) (324,786)
---------- -----------
Net cash used in investing activities............. (828,366) (359,119)
---------- -----------
Cash flows from financing activities
Members' contributed capital.............................. 2,140,000 1,691,258
Repayment of debt and other obligations................... (582,158) (1,827,206)
Organization, acquisition and financing costs............. (293,131) (38,939)
Proceeds from notes payable............................... -- 1,250,000
Proceeds from bank borrowings............................. -- 715,228
---------- -----------
Net cash provided by financing activities......... 1,264,711 1,790,341
---------- -----------
NET INCREASE IN CASH.............................. 208,459 9,956
Cash at beginning of period................................. -- 208,459
---------- -----------
Cash at end of period....................................... $ 208,459 $ 218,415
========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest............................................... $ 34,318 $ 145,563
Noncash transactions
Notes and subscriptions receivable for issuance of Class A
Units.................................................. 370,000 --
Issuance of note in connection with acquisition of
business............................................... 534,000 --
Execution of noncompetition and employment agreements in
connection with acquisition of business................ 530,000 --
</TABLE>
The accompanying notes are an integral part of these statements.
F-96
<PAGE> 149
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
NOTES TO FINANCIAL STATEMENTS
December 28, 1996 and January 3, 1998
NOTE A -- ORGANIZATION AND ACQUISITIONS
MEGA Office Furniture, L.L.C. (the "Company"), formerly known as U.S.
Office Furniture, L.L.C., was organized on May 9, 1996 as a Virginia limited
liability company for the purpose of establishing and operating a chain of
retail office furniture superstores. The Company began operations effective
September 1, 1996, when it purchased substantially all of the assets and assumed
specified liabilities of Office Furniture Plus, Inc. ("OFP"), an office
furniture retailer with operations in Richmond and Chesapeake, Virginia, for an
initial cash payment of $800,000 and a total consideration of approximately $2
million. The Company financed the OFP acquisition and its initial working
capital requirements by the receipt of equity capital of $2,140,000 pursuant to
the terms of a confidential memorandum dated August 16, 1996 for the private
placement of equity units and the assumption of certain other obligations
related to the purchase of OFP totaling $1 million. The OFP transaction was
accounted for as a purchase and the purchase price and the related acquisition
costs were allocated to the assets acquired and liabilities assumed based on
their fair values at the date of acquisition.
Effective April 25, 1997, the Company purchased, for a nominal price,
certain assets of Southern Office Furniture Distributors, Inc. related to the
operations of MacThrift Office Furniture of Richmond. These assets consisted
primarily of customer lists, open orders and outstanding bids and proposals.
This transaction was also accounted for as a purchase.
On September 11, 1997, the Company received an equity contribution, from an
affiliate of the Company's Chairman, to purchase a 19% interest in the Company
for a cash consideration of $1.5 million. These proceeds were used to reduce
certain obligations associated with the purchase of OFP and for general working
capital requirements.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Period
The Company's fiscal year comprises the 52 or 53 weeks ending on the last
Saturday closest to the end of the calendar year. The accompanying financial
statements are for the 17-week period ended December 28, 1996 and the 53-week
period ended January 3, 1998.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the average cost method.
Property and Equipment
Additions to property and equipment, other than capital leases, are
recorded at cost. Capital leases are recorded at the lesser or fair value or the
discounted present value of the minimum lease payments. Depreciation is computed
by the straight-line method over the estimated useful lives of the assets.
Capital leases are amortized by the straight-line method over the estimated
useful lives of the leased assets. Leasehold improvements are amortized by the
straight-line method over the shorter of the estimated useful life of the asset
or the term of the lease.
F-97
<PAGE> 150
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 28, 1996 and January 3, 1998
Intangibles
Goodwill and other intangibles related to the acquisition of OFP are being
amortized over a period of 15 years using the straight-line method. Organization
costs and customer lists are being amortized over periods of 10 years and 5
years, respectively, using the straight-line method. Deferred employment costs
and similar intangibles are being amortized over the terms of the related
contracts, which are generally 2 years. Accumulated amortization at December 28,
1996 and January 3, 1998 was $75,392 and $371,804, respectively.
Revenue Recognition and Customer Deposits
Revenue is recognized at the time merchandise is shipped to the customer.
The Company generally offers extended payment terms to customers other than
individuals and requires deposits from customers for initial purchases and
special order transactions. Customer deposits are applied against a customer's
account receivable balance upon delivery of merchandise.
Valuation of Long-Lived Assets
The Company reviews long-lived assets and certain identifiable intangibles
held and used for possible impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
The Company has determined no provision is necessary for the impairment of
long-lived assets at December 28, 1996 and January 3, 1998.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Income Taxes
Income taxes are not reflected in the accompanying financial statements
because the Company is treated as a partnership for income tax purposes, and the
responsibility for income taxes is that of the members and not that of the
Company.
Fair Value of Financial Instruments
Financial instruments consist principally of cash, promissory notes due
from related parties, capital lease obligations, line of credit and promissory
notes classified as long-term debt. The carrying value of these instruments
approximates their fair value because of their short maturity and their
stipulated interest rates being based on current market rates.
NOTE C -- FINANCING ARRANGEMENTS AND LIQUIDITY ISSUES
The Company reported a cumulative net loss of $1,529,696 since beginning
operations on September 1, 1996 and is continuing to require cash on a monthly
basis as it develops and refines its business model. However, management has
prepared a business plan for the current operations to include a financial
forecast through March 1999 which indicates that the working capital at January
3, 1998 together with the line of credit facility finalized in November 1997
(see Note E) will adequately fund the Company's cash requirements for this
period.
F-98
<PAGE> 151
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 28, 1996 and January 3, 1998
To fully execute its expansion strategy and open superstores in other markets,
additional equity capital will be required and management is continuing to
explore these opportunities.
NOTE D -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
DECEMBER 28, JANUARY 3, USEFUL
1996 1998 LIVES
------------ ---------- ---------
<S> <C> <C> <C>
Leasehold improvements................................. $ 61,003 $302,611 2-5 years
Fixtures and equipment................................. 145,949 231,273 3-5 years
Transportation equipment............................... 19,122 28,412 3-5 years
--------- --------
226,074 562,296
Less accumulated depreciation.......................... 18,387 138,247
--------- --------
$ 207,687 $424,049
========= ========
</TABLE>
Depreciation expense for the periods ended December 28, 1996 and January 3,
1998 was $18,892 and $120,127, respectively.
NOTE E -- NOTES PAYABLE AND LONG-TERM DEBT
Balances outstanding comprise:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Demand notes payable to commercial bank (a)................. $ -- $ --
Line of credit demand borrowings with a financial services
company (b)............................................... -- 715,228
10% subordinated convertible note payable to OFP (payable
within one year)(c)....................................... 534,000 267,588
Employment and noncompete contracts (payable within one
year) (d)................................................. 430,000 165,000
11.5% subordinated convertible note, due August 31, 1999
(e)....................................................... 150,000 150,000
Capital lease obligations ($26,763 and $25,238 payable
within one year, respectively) (Note G)................... 78,050 58,692
Installment purchase (payable within one year).............. 14,000 --
----------- -----------
1,206,050 1,356,508
Less amount due within one year............................. (1,004,763) (1,173,054)
----------- -----------
$ 201,287 $ 183,454
=========== ===========
</TABLE>
- ---------------
(a) In December 1996, the Company established, with a commercial bank, a
$600,000 line of credit (the "Line"). As of December 28, 1996, the line
remained unused. The Company's line of credit was subsequently increased by
additional borrowings under demand notes of $400,000 in April and $250,000
in June 1997. All assets of the Company, and all accounts receivable and
inventory of an affiliate of the Company's Chairman, The Supply Room
Companies, Inc. ("TSRC"), were pledged as collateral for borrowings under
these arrangements. Advances under these facilities were also guaranteed by
the Company's Chairman. All borrowings under these arrangements were repaid
as of January 3, 1998 and these credit facilities were closed at year-end.
F-99
<PAGE> 152
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 28, 1996 and January 3, 1998
(b) In November 1997, the Company obtained a revolving line of credit with a
commercial finance company providing for maximum borrowings of $1,500,000 at
an interest rate of prime plus 1.5%. Borrowings under this facility are
subject to advance rates of 80% of eligible accounts receivable and 50% of
qualifying inventories and are secured by effectively all of the Company's
assets. The Company's Chairman has a deficiency guarantee limited to
$100,000.
(c) In connection with the acquisition of certain assets of OFP, the Company
issued a $570,000 subordinated convertible note to OFP. The principal
balance of the note was subsequently adjusted to $532,588 and certain terms
of this agreement were renegotiated in September 1997. A payment of $265,000
was made on September 30, 1997 and the balance is due on or before March 31,
1998. The principal balance of this note bears interest at 10%, payable
monthly, and is convertible in increments of at least $50,000, at the option
of OFP, at any time prior to maturity into membership units in the Company
at the rate of $15 per unit.
(d) The Company also entered into agreements with certain key personnel of OFP
to provide payments to such employees in exchange for continued employment
and noncompete agreements. The terms of these arrangements were renegotiated
in September 1997. A payment of $265,000 under these obligations was made in
September 1997 and the remaining $165,000 due under such arrangements is now
payable on March 31, 1998.
(e) In connection with the August 1996 acquisition of OFP, the Company assumed a
$150,000 promissory note from a former stockholder of OFP. The principal
balance of this note is due on August 31, 1999, bears interest at the rate
of 11.5%, payable monthly, and is convertible in increments of at least
$50,000, at the option of the holder, at any time prior to maturity into
membership units in the Company at a rate of $15 per unit.
NOTE F -- OPERATING AGREEMENT AND MEMBER'S CAPITAL
As a limited liability company, the Company is comprised of members holding
units in the Company pursuant to the applicable sections of the operating
agreement of the Company (the "Operating Agreement"). Each member has voting
rights based upon the number of units owned. At January 3, 1998, there were
367,977 Class A Units outstanding. Originally, 214,000 units were issued to
management and other members pursuant to the terms of a confidential memorandum
(the "Confidential Memorandum") dated August 16, 1996 for a cash consideration
of $10 per unit. Additionally, pursuant to the terms of the Confidential
Memorandum, two former stockholders of OFP were issued 16,500 units in exchange
for noninterest-bearing notes due August 31, 1997 (these notes are payable on
March 31, 1998), 18,500 units were issued to five members whose subscription
agreements were accepted (and subsequently collected) by the Company, and 2,000
units were issued to an officer of the Company in exchange for a promissory note
payable in equal biweekly installments over three years at an interest rate of
10%. In September 1997, 69,266 units representing a 19% interest in the Company
were issued to TSRC for a total consideration of $1,500,000.
Pursuant to the terms of the Confidential Memorandum, the Company issued
44,294 Class A Units to the Chairman to effect an ownership interest of 15%
("Founder's Interest") with respect to the number of units of members' capital
outstanding. The Founder's Interest was granted in recognition of the Chairman's
effort in organizing the Company and his guarantees of certain financing
arrangements received by the Company. The Operating Agreement also provides that
the Founder's Interest will not be reduced below 12.5% on a fully diluted basis
with respect to the Company's first $7.5 million in capital contributions. Class
B Units Options at an exercise price of $5.30 per unit will be automatically
granted to the Chairman upon the issuance of any subsequent units by the Company
in an amount sufficient to maintain his Founder's Interest at 12.5%. In
September 1997, 10,924 options were issued to the Founder to maintain his
Founder's Interest at 12.5% as a
F-100
<PAGE> 153
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 28, 1996 and January 3, 1998
result of the $1.5 million investment by TSRC. All units issued relating to the
Founder's Interest only entitle the holder to share, on a pro rata basis, in the
profits of the Company. These units do not receive a capital account or a
priority in the return of the Chairman's investment.
The Operating Agreement also establishes an Incentive Plan which provides
for the issuance of restricted awards of Class A Units ("Restricted Class A
Units") and options to acquire Class B Units to management of the Company. The
aggregate of such awards under the Incentive Plan may not at any time exceed 15%
of the total units outstanding, including units authorized and relating to the
Incentive Plan. As of January 3, 1998, the Company had awarded 10,250 Restricted
Class A Units and 29,250 options to acquire Class B Units at an exercise price
of $10.00 per unit to management and other key employees, with such awards
vesting ratably as future services are performed over a three-year period. The
exercise price of all options awarded under the Incentive Plan shall be equal to
the fair market value of a unit in the Company on the date of grant, and options
will be granted for 10-year terms. The Restricted Class A Units only entitle the
holder to share in a pro rata basis in the profits of the Company relating back
to the date of grant. These units do not receive a capital account or a priority
in the return of the holder's investment. At January 3, 1998, 3,417 restricted
Class A Units and 26,751 options to purchase Class B Units were vested.
Profits and losses are allocated in accordance with the Operating
Agreement, in proportion to each Member's pro rata interest in the Company. The
Operating Agreement provides each holder of Class A Units with preemptive rights
to purchase additional units in the event of future issuance of units by the
Company. Exercise of such preemptive rights would be at the same per unit price
being received by the Company from other investors. In addition, the Operating
Agreement provides that any member wishing to sell units must first offer such
units to existing members before selling such units to persons or entities not
holding a membership interest in the Company. Such offers must be at the same
terms and provisions for all parties.
The Company recognizes compensation cost in accordance with APB No. 25,
"Accounting for Stock Issued to Employees." Had compensation cost for the
Company's stock option plans been determined consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation," the impact on the Company's net loss
for either period would have been immaterial.
The following summarizes stock option transactions for the respective
periods:
<TABLE>
<CAPTION>
1996 1997
-------------------------- --------------------------
NUMBER OF WEIGHTED NUMBER OF WEIGHTED
UNEXERCISED AVERAGE UNEXERCISED AVERAGE
OPTIONS OPTION PRICE OPTIONS OPTION PRICE
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Options at beginning of year....................... -- $ -- 39,250 $10.00
Granted............................................ 39,250 10.00 11,424 5.51
Exercised.......................................... -- --
Cancelled.......................................... -- 10,500 10.00
Options at end of year............................. 39,250 10.00 40,174 8.72
Options exercisable at year-end.................... 35,750 10.00 37,675 8.64
</TABLE>
F-101
<PAGE> 154
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 28, 1996 and January 3, 1998
NOTE G -- COMMITMENTS AND CONTINGENCIES
Leases
The Company has entered into lease agreements with initial terms ranging from 1
to 5 years for certain stores, warehouses and equipment. The lease terms
generally provide that the Company pay the related taxes, insurance and
maintenance costs. The following capital leases are included in the balance
sheet at January 3, 1998:
<TABLE>
<S> <C>
Fixtures and equipment...................................... $95,850
Less accumulated amortization............................... 29,044
-------
$66,806
=======
</TABLE>
Capitalized lease amortization is included in depreciation expense.
Future minimum lease payments under capital leases and operating leases
having lease terms in excess of one year at January 3, 1998, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ----------
<S> <C> <C>
1998.................................................. $30,902 $ 467,671
1999.................................................. 29,126 460,812
2000.................................................. 8,060 467,720
2001.................................................. -- 350,545
2002.................................................. -- 56,807
------- ----------
Total minimum lease payments.......................... 68,088 $1,803,555
==========
Less imputed interest and executory costs............. 9,396
-------
Present value of minimum lease payments (included in
long-term debt)..................................... $58,692
=======
</TABLE>
The Company recorded rent expense for the years ended December 28, 1996 and
January 3, 1998 of $155,206 and $578,306, respectively.
Employment Contracts
The Company has employment contracts with certain key employees covering
such matters as base compensation, incentive plans, benefits, termination and
noncompetition. These agreements are for initial periods of two years or less
and are automatically renewable for additional one-year terms. Annual base
compensation pursuant to the terms of these contracts is approximately $370,000
and the agreements may be terminated by the Company with sixty-days' notice
prior to the end of an initial or any renewal term.
Concentrations
As of December 28, 1996 and January 3, 1998, one vendor represented
approximately 40% of total purchases for both years. The vendor's balance
represented less than 1% of trade payables at both December 28, 1996 and January
3, 1998. No customer represented more than 5% of total revenues in either
period.
F-102
<PAGE> 155
MEGA OFFICE FURNITURE, L.L.C.
(FORMERLY KNOWN AS U.S. OFFICE FURNITURE, L.L.C.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 28, 1996 and January 3, 1998
NOTE H -- RELATED PARTY TRANSACTIONS
The Company leases retail sales and warehouse space from an affiliate of
certain stockholders of MEGA who are currently employed by the Company. The
related rents for the four-month period ended December 28, 1996 and twelve-month
period ended January 3, 1998 were $92,083 and $242,917, respectively. The
Company's future obligations under such lease agreements total approximately
$646,250 over the remaining lease terms.
At January 3, 1998, the Company had two letters of credit outstanding
totalling $185,000 with a commercial bank. The accounts receivable and
inventories of TSRC have been pledged as collateral for these facilities and the
letters of credit have been additionally guaranteed by the Company's Chairman.
NOTE I -- SUBSEQUENT EVENTS (UNAUDITED)
The property which the Company has been leasing for its retail operations
in Chesapeake, Virginia was sold effective October 28, 1997 and, pursuant to the
terms of the lease for this space, notice was received from the new landlord
that the lease would terminate at the end of February 1998. Effective March 1,
1998, this lease was amended such that the Company would occupy 30% of the
demised premises through May 31, 1998. On March 3, 1998, the Company entered
into a lease agreement for a property in Norfolk, Virginia for an initial term
of five years and plans to relocate the operations from Chesapeake, Virginia at
the end of April 1998. Management has recognized the relocation of its
operations in Tidewater, Virginia in the business plan discussed in Note C and
believes that these changes will not adversely impact the Company.
On March 24, 1998, the Board of Directors approved a resolution to amend
the operating agreement with respect to the allocation of profits and losses and
to revalue the Company's assets as of September 11, 1997 for capital account
purposes only, as permitted by the Internal Revenue Code, such that the value of
the capital accounts is equal to the aggregate of the capital contributions
received. The amendments to the operating agreement provide that: (1) if the
capital account balances are less than the capital initially contributed,
profits and losses are to be allocated based on the percentage of capital
contributed by each member and (2) if the capital account balances are in excess
of the capital contributions of all members, profits and losses will be
distributed on a per unit basis. Member consent to the amendments to the
operating agreement was subsequently received by the Company.
The balance due to OFP of $265,588 pursuant to the terms of the
subordinated promissory note (see Note E(c)) was paid on March 31, 1998. Also on
March 31, 1998, the subscription receivables due from two shareholders of OFP
for the combined amount of $165,000 (see Note F) and the payments due to these
same individuals relating to employment and noncompetition agreements totalling
$165,000 (see Note E(d)) were deemed to have been paid in full.
F-103
<PAGE> 156
============================================================
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................... 3
Risk Factors.......................................... 10
Use of Proceeds....................................... 16
Price Range of Common Stock...........................
Dividend Policy....................................... 17
Capitalization........................................ 17
Dilution.............................................. 18
Selected Combined Historical and Pro Forma Financial
Data................................................ 19
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 22
Business.............................................. 28
Management............................................ 38
Principal and Selling Stockholders.................... 43
Certain Transactions.................................. 45
Description of Capital Stock.......................... 47
Shares Eligible for Future Sale....................... 48
Underwriting.......................................... 49
Legal Matters......................................... 51
Experts............................................... 51
Additional information................................ 51
Index to Financial Statements......................... F-1
</TABLE>
THROUGH AND INCLUDING , 1998 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
============================================================
============================================================
4,000,000 SHARES
OFFICE CENTRE CORPORATION
COMMON STOCK
------------------------
PROSPECTUS
------------------------
MORGAN KEEGAN & COMPANY, INC.
MCDONALD & COMPANY SECURITIES, INC.
CREDIT LYONNAIS SECURITIES (USA) INC.
, 1998
============================================================
<PAGE> 157
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities being registered hereby, other
than underwriting discounts and commissions. The Company is paying all of these
expenses in connection with the issuance and distribution of the securities
except for the incremental costs associated with the shares being sold by the
Selling Stockholders (i.e., the additional SEC registration fee, NASD filing fee
and the Nasdaq Stock Market's National Market listing fee attributable to such
shares).
<TABLE>
<S> <C>
SEC registration fee........................................ $ 16,284
NASD filing fee............................................. 5,300
Nasdaq Stock Market's National Market listing fee........... 77,000
Accountant's fees and expenses.............................. 2,600,000
Legal fees and expenses..................................... 1,200,000
Printing expenses........................................... 250,000
Transfer Agent and Registrar fees........................... 10,000
Financial advisers and offering consultants................. 1,015,000
Miscellaneous............................................... 481,416
----------
Total.................................................. $5,655,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Office Centre Corporation's Amended and Restated Certificate of
Incorporation provides that Office Centre Corporation shall, to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law (the
"DGCL"), as amended from time to time, indemnify its officers and directors.
Section 145 of the DGCL permits a corporation, under specified
circumstances, to indemnify its directors, officers, employees or agents against
expenses (including attorney's fees), judgments, fine and amounts paid in
settlements actually and reasonably incurred by them in connection with any
action, suit or proceeding brought by third parties by reason of the fact that
they were or are directors, officers, employees or agents of the corporation, if
such directors, officers, employees or agents acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reason to believe their conduct was unlawful. In the case of a derivative suit,
indemnification may be made only for expenses actually and reasonably incurred
by directors, officers, employees or agents in connection with the defense or
settlement of an action or suit, and only with respect to a matter as to which
they shall have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interest of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
directors, officers, employees or agents are fairly and reasonably entitled to
indemnity for such expenses despite such adjudication of liability.
Reference is hereby made to Article V of the Company's Amended and Restated
By-Laws, filed as Exhibit 3.02 hereto, which provides for indemnification of
directors and officers.
Reference is hereby made to the Indemnification Agreement, the form of
which is filed as Exhibit 10.17 hereto, which Office Centre Corporation has
entered into with its directors and certain key officers. Pursuant to such
Agreement, Office Centre Corporation generally is obligated to indemnify its
directors and such officers to the full extent permitted by the DGCL as
described above. In addition, Office Centre Corporation maintains directors' and
officers' liability insurance in the amount of $5 million.
Reference is hereby made to the Underwriting Agreement, the form of which
is filed as Exhibit 1.01 hereto, in which Office Centre Corporation agrees to
indemnify the underwriters and certain other persons against certain civil
liabilities.
II-1
<PAGE> 158
Office Centre Corporation's Amended and Restated Certificate of
Incorporation also contains provisions eliminating a director's personal
liability to the fullest extent permitted by the provisions of paragraph (7) of
subsection (b) of Section 102 of the DGCL.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since its incorporation in October 1996, Office Centre Corporation has
issued the following securities. The number of shares listed in paragraphs (a)
through (c) and in paragraph (e) do not give effect to the Reverse Split:
(a) On March 21, 1997, Office Centre Corporation issued shares of Common
Stock to the following founders in the amounts and for the consideration
indicated:
<TABLE>
<S> <C>
Clifford M. Davie: 1 share for a consideration of $.001
Walter H. Gordenstein: 1 share for a consideration of $.001
</TABLE>
(b) On May 2, 1997, Office Centre Corporation issued shares of Common Stock
to the following founders in the amounts and for the consideration indicated:
<TABLE>
<S> <C>
Clifford M. Davie: 2,520,727 shares for a consideration of $2,520.73
Walter H. Gordenstein: 1,757,444 shares for a consideration of $1,757.44
John D. Kaweske: 164,229 shares for a consideration of $164.23
</TABLE>
(c) On May 23, 1997, Office Centre Corporation issued shares of Common
Stock to the following parties in the amounts and for the consideration
indicated:
<TABLE>
<S> <C>
Clifford M. Davie Trust: (i) 78,492 shares in exchange for Mr. Davie's
ownership interest in UDI Corp.
(ii) 51,116 shares in exchange for Mr. Davie's
ownership interests in UDI II Corp.
Walter H. Gordenstein: (i) 39,246 shares in exchange for Mr. Gordenstein's
ownership interest in UDI Corp.
(ii) 51,116 shares in exchange for Mr.
Gordenstein's ownership interest in UDI II Corp.
</TABLE>
(d) On August 22, 1997, Office Centre Corporation issued 50,000 shares of
Common Stock to Joseph Hajjar for a consideration of $5,000 pursuant to an
employment agreement between Office Centre Corporation and Mr. Hajjar.
(e) On January 9, 1998, Office Centre Corporation issued 100,000 shares of
Common Stock to John Davie in exchange for a license to use the "Smart Consumer"
concept developed by Mr. Davie.
(f) Simultaneously with the Offering, Office Centre Corporation will issue
an aggregate principal amount of $325,000 of shares of Common Stock calculated
at the initial public offering price per share to Benchmark Associates, Inc. in
exchange for consulting services rendered.
(g) Simultaneously with the Offering, Office Centre Corporation will issue
an aggregate principal amount of $1,175,000 of shares of Common Stock calculated
at the initial public offering price per share to R.K. Grace & Company in
exchange for consulting services rendered.
(h) Simultaneously with the Offering, the Company will issue an aggregate
principal amount of $36,899,000 of shares of Common Stock calculated at the
initial public offering price per share in connection with the acquisition of
twelve businesses.
(i) Simultaneously with the Offering, Office Centre Corporation will grant
options to purchase 450,000 shares of Common Stock to certain stockholders of
the Founding Companies pursuant to definitive merger agreements or employment
agreements between Office Centre Corporation, the Founding Companies and/or such
stockholders. Pursuant to the definitive merger agreements, as amended, between
the Company and each of TSR,
II-2
<PAGE> 159
New England, and Greenwood, respectively, Office Centre Corporation, in its sole
discretion, may substitute cash in the amount of $1 million with respect to each
such transaction as consideration in lieu of $1 million of Common Stock
otherwise deliverable under each such agreement. If such options are exercised,
the number of shares of Common Stock issued in connection with such acquisitions
will be reduced accordingly.
(j) At various times between September 1, 1997 and the date of the
Offering, Office Centre Corporation granted options to purchase shares
of Common Stock to various consultants, employees, directors and officers of
Office Centre Corporation.
The transactions set forth above were undertaken in reliance upon the
exemptions from the registration requirements of the Securities Act afforded by
(i) Section 4(2) thereof and/or Regulation D promulgated thereunder, as sales
not involving a public offering, and/or (ii) Rule 701 promulgated thereunder, as
sales by an issuer to employees, directors, officers, consultants or advisors
pursuant to written compensatory benefits plans or written contracts relating to
the compensation of such persons. The purchasers of the securities described
above acquired them for their own account and not with a view to any
distribution thereof to the public. The certificates evidencing the securities
bear legends stating that the shares may not be offered, sold or transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from such registration requirements. Office Centre
Corporation will place stop transfer instructions with its transfer agent with
respect to all such securities.
ITEM 16. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits (see exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
*1.01 Underwriting Agreement, dated as of , 1998, by
and among Office Centre Corporation, Morgan Keegan, Credit
Lyonnais Securities Inc. and McDonald & Company Securities,
Inc.
2.01 Merger Agreement, dated as of May 18, 1998, among Office
Centre Corporation, OCC New York, Inc., King Office Supply,
Inc. and the persons listed on Schedule A
2.02 Merger Agreement, dated as of October 31, 1997, by and among
Office Centre Corporation, Office Centre Grand Rapids, Inc.,
"SOS" Office Supply, Inc. and the shareholders named therein
2.03 First Amendment to Merger Agreement, dated May 15, 1998, by
and among Office Centre Corporation, Office Centre Grand
Rapids, Inc., "SOS" Office Supply, Inc. and the shareholders
named therein
2.04 Merger Agreement, dated as of October 24, 1997, by and among
Office Centre Corporation, Office Centre Fort Worth,
Greenwood Outfitters, Inc. and the shareholders named
therein
2.05 First Amendment to Merger Agreement, dated October 24, 1997,
by and among Office Centre Corporation, Office Centre Fort
Worth, Greenwood Outfitters, Inc. and the shareholders named
therein
2.06 Second Amendment to Merger Agreement, dated April 24, 1998,
by and among Office Centre Corporation, Office Centre Fort
Worth, Greenwood Outfitters, Inc. and the shareholders named
therein
*2.07 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
Fort Worth, Greenwood Outfitters, Inc. and the shareholders
named therein
2.08 Amended and Restated Merger Agreement, dated May 20, 1998,
by and among Office Centre Corporation, Office Centre
Richmond, Office Centre Richmond, The Supply Room Companies
Inc. and the shareholders named therein
*2.09 Amendment No. 1 to Amended and Restated Merger Agreement,
dated as of May 20, 1998, by and among Office Centre
Corporation, Office Centre Richmond, Office Centre Richmond,
The Supply Room Companies, Inc. and the shareholders named
therein
2.10 Merger Agreement, dated as of April 20, 1998, by and among
Office Centre Corporation, Office Centre Montgomery, Office
Express, Inc. and the shareholders named therein
</TABLE>
II-3
<PAGE> 160
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
2.11 Merger Agreement, dated as of April 10, 1998, by and among
Office Centre Corporation, Office Centre Yorba Linda, Office
Solutions Business Products and Services, Inc. and the
shareholders named therein
*2.12 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
Yorba Linda, Office Solutions Business Products and
Services, Inc. and the shareholders named therein
2.13 Merger Agreement, dated as of May 15, 1998, by and among
Office Centre Corporation, Office Centre New England, New
England Office Supply Company, Inc. and the shareholder
named therein
*2.14 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
New England, New England Office Supply Company, Inc. and the
shareholder named therein
2.15 Merger Agreement, dated as of April 23, 1998, by and among
Office Centre Corporation, Office Centre Sacramento, Sierra
Office Systems and Products, Inc. and the shareholders named
therein
*2.16 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
Sacramento, Sierra Office Systems and Products, Inc. and the
shareholders named therein
2.17 Merger Agreement, dated as of April 8, 1998, by and among
Office Centre Corporation, Office Centre Georgia, Southern
Office Centre, Inc. and the shareholders named therein
2.18 Merger Agreement, dated as of April 23, 1998, by and among
Office Centre Corporation, Office Centre Georgia, Georgia
Impressions, Inc. and the shareholders named therein
*2.19 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
Georgia, Georgia Impressions, Inc. and the shareholders
named therein
2.20 Merger Agreement, dated as of April 23, 1998, by and among
Office Centre Corporation, Office Centre Fort Worth, Inc.,
Metro Data Supply, Inc. and the shareholders named therein
2.21 Merger Agreement, dated as of April 21, 1998, by and among
Office Centre Corporation, Office Centre Fort Worth, Inc.,
BCB Office Products Company, BCB Specialties, Inc. and the
shareholders named therein
2.22 Stock Purchase Agreement, dated as of May 23, 1997, among
Walter Gordenstein, Dean Witter Reynolds, Inc., Custodian
for the IRA Rollover of Clifford M. Davie DTD 12/15/94,
Clifford M. Davie and Office Centre Corporation relating to
UDI Corp.
2.23 Stock Purchase Agreement, dated as of May 23, 1997, among
Walter Gordenstein, Dean Witter Reynolds, Inc., Custodian
for the IRA Rollover of Clifford M. Davie DTD 12/15/94,
Clifford M. Davie and Office Centre Corporation relating to
UDI II Corp.
2.24 Agreement and Plan of Merger, dated as of April 15, 1998,
between UDI Corp. and UDI II Corp.
3.01 Amended and Restated Certificate of Incorporation of Office
Centre Corporation
3.02 Amended and Restated By-Laws of Office Centre Corporation
4.01 Specimen of Common Stock Certificate of Office Centre
Corporation
*5.01 Opinion of Richards & O'Neil, LLP
10.01 Employment/Consulting Agreement, dated July 20, 1995, by and
between UDI Corp., UDI II Corp, Clifford M. Davie and/or
Buying Group Services, Inc.
10.02 Employment Agreement, dated as of May 1, 1997, by and
between Office Centre Corporation and Robert J. Gillon, Jr.
10.03 Amendment to Employment Agreement, dated as of August 8,
1997, between Office Centre Corporation and Robert J.
Gillon, Jr.
10.04 Reformation of Employment Agreement, dated as of March 12,
1998, between Office Centre Corporation and Robert J.
Gillon, Jr.
</TABLE>
II-4
<PAGE> 161
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
10.05 Amendment No. 2 to Employment Agreement, dated as of May 14,
1998, between Office Centre Corporation and Robert J.
Gillon, Jr.
10.06 Employment Agreement, dated as of August 22, 1997, between
Office Centre Corporation and Joseph Hajjar
10.07 Amendment No. 1 to Employment Agreement, dated as of May 14,
1998, between Office Centre Corporation and Joseph Hajjar
10.08 Employment Agreement, dated as of April 15, 1998, between
Office Centre Corporation and Walter Gordenstein
10.09 Employment Agreement, dated as of April 8, 1998, between
Office Centre Corporation and Thomas F. Mooney
10.10 Employment Agreement, dated as of February 20, 1998, by and
between Office Centre Corporation and Richard Case
10.11 Consulting Agreement, dated February 1, 1997, between Office
Centre Corporation and Benchmark Associates, Inc.
10.12 Agreement, dated January 9, 1998, by and between Office
Centre Corporation and John Davie
10.13 Agreement, dated as of April 15, 1998, between Office Centre
Corporation and Walter Gordenstein
10.14 Amendment No. 1 to Agreement, dated as of May 14, 1998, by
and between Office Centre Corporation and Walter Gordenstein
10.15 Agreement, dated as of May 13, 1998, between Office Centre
Corporation, Dean Witter Reynolds, Inc., Custodian for the
IRA Rollover DTD 12/15/94, and Clifford M. Davie
10.16 Financial Advisory Agreement, dated as of February 1, 1997,
by and between Office Centre Corporation and R.K. Grace &
Company
10.17 Form of Indemnification Agreement entered into by Office
Centre Corporation with each of the following persons:
Robert J. Gillon, Jr., John D. Kaweske, Joseph Hajjar,
Clifford M. Davie, Edward A. Schefer, Thomas F. Mooney,
Charles J. Murphy and Yancey Jones.
*10.18 Office Centre Corporation 1998 Stock Option Plan
*10.19 Form of Stock Option Agreement
10.20 Commitment Letter, dated December 15, 1997, from CoreStates
Bank, N.A. to Office Centre Corporation
10.21 Commitment Extension Letter, dated March 16, 1998, from
CoreStates Bank, N.A. to Office Centre Corporation
10.22 Second Commitment Extension Letter, dated May 18, 1998, from
First Union National Bank (formerly CoreStates Bank, N.A.)
to Office Centre Corporation
10.23 Commitment Letter, dated December 5, 1997, from CoreStates
Bank, N.A. to UDI Corp. and UDI II Corp.
*10.24 Master Demand Note, undated, from CoreStates Bank, N.A. to
UDI Corp. and UDI II Corp.
*10.25 Guaranty, dated September 26, 1997, from Office Centre
Corporation to CoreStates Bank, N.A.
*10.26 Form of Security Agreement entered into by UDI Corp. and UDI
II Corp. with CoreStates Bank, N.A. on October 25, 1993
10.27 Buying Group Agreement, dated December 1, 1997, between
Office Centre Corporation and S.P. Richards Co.
</TABLE>
II-5
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
10.28 Buying Group Agreement, dated December 1, 1997, between
Office Centre Corporation and United Stationers
10.29 Form of Employment Agreement by and between Office Centre
Corporation and Yancey S. Jones
21.01 Subsidiaries of Office Centre Corporation
23.01 Consent of Grant Thornton LLP
23.02 Consent of Richards & O'Neil, LLP (incorporated into Exhibit
5.01)
27.01 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
(b) Financial Statement Schedules
Schedules are omitted because they are not required, are not applicable, or
the information is included in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issues.
(b) The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 163
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK,
STATE OF NEW YORK, ON MAY 20, 1998.
OFFICE CENTRE CORPORATION
By: /s/ ROBERT J. GILLON, JR.
------------------------------------
Name: Robert J. Gillon, Jr.
Title: Chairman of the Board,
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT J. GILLON, JR. Chairman of the Board, President and May 20, 1998
- ------------------------------------------------ Chief Executive Officer
Robert J. Gillon, Jr.
/s/ JOSEPH E. HAJJAR Chief Financial Officer, Senior Vice May 20, 1998
- ------------------------------------------------ President, Treasurer and Secretary
Joseph E. Hajjar
/s/ THOMAS F. MOONEY Vice President, Purchasing May 19, 1998
- ------------------------------------------------
Thomas F. Mooney
/s/ YANCEY S. JONES Director, President -- TSR May 20, 1998
- ------------------------------------------------
Yancey S. Jones
/s/ CHARLES J. MURPHY Director May 20, 1998
- ------------------------------------------------
Charles J. Murphy
/s/ EDWARD A. SCHEFER Director May 20, 1998
- ------------------------------------------------
Edward A. Schefer
</TABLE>
II-7
<PAGE> 164
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<C> <S> <C>
*1.01 Underwriting Agreement, dated as of , 1998, by
and among Office Centre Corporation, Morgan Keegan, Credit
Lyonnais Securities Inc. and McDonald & Company Securities,
Inc.........................................................
2.01 Merger Agreement, dated as of May 18, 1998, among Office
Centre Corporation, OCC New York, Inc., King Office Supply,
Inc. and the persons listed on Schedule A...................
2.02 Merger Agreement, dated as of October 31, 1997, by and among
Office Centre Corporation, Office Centre Grand Rapids, Inc.,
"SOS" Office Supply, Inc. and the shareholders named
therein.....................................................
2.03 First Amendment to Merger Agreement, dated May 15, 1998, by
and among Office Centre Corporation, Office Centre Grand
Rapids, Inc., "SOS" Office Supply, Inc. and the shareholders
named therein...............................................
2.04 Merger Agreement, dated as of October 24, 1997, by and among
Office Centre Corporation, Office Centre Fort Worth,
Greenwood Outfitters, Inc. and the shareholders named
therein.....................................................
2.05 First Amendment to Merger Agreement, dated October 24, 1997,
by and among Office Centre Corporation, Office Centre Fort
Worth, Greenwood Outfitters, Inc. and the shareholders named
therein.....................................................
2.06 Second Amendment to Merger Agreement, dated April 24, 1998,
by and among Office Centre Corporation, Office Centre Fort
Worth, Greenwood Outfitters, Inc. and the shareholders named
therein.....................................................
*2.07 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
Fort Worth, Greenwood Outfitters, Inc. and the shareholders
named therein...............................................
2.08 Amended and Restated Merger Agreement, dated May 20, 1998,
by and among Office Centre Corporation, Office Centre
Richmond, Office Centre Richmond, The Supply Room Companies
Inc. and the shareholders named therein.....................
*2.09 Amendment No. 1 to Amended and Restated Merger Agreement,
dated as of May 20, 1998, by and among Office Centre
Corporation, Office Centre Richmond, Office Centre Richmond,
The Supply Room Companies, Inc. and the shareholders named
therein.....................................................
2.10 Merger Agreement, dated as of April 20, 1998, by and among
Office Centre Corporation, Office Centre Montgomery Office
Express, Inc. and the shareholders named therein............
2.11 Merger Agreement, dated as of April 10, 1998, by and among
Office Centre Corporation, Office Centre Yorba Linda, Office
Solutions Business Products and Services, Inc. and the
shareholders named therein..................................
*2.12 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
Yorba Linda, Office Solutions Business Products and
Services, Inc. and the shareholders named therein...........
2.13 Merger Agreement, dated as of May 15, 1998, by and among
Office Centre Corporation, Office Centre New England, New
England Office Supply Company, Inc. and the shareholder
named therein...............................................
*2.14 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
New England, New England Office Supply Company, Inc. and the
shareholder named therein...................................
2.15 Merger Agreement, dated as of April 23, 1998, by and among
Office Centre Corporation, Office Centre Sacramento, Sierra
Office Systems and Products, Inc. and the shareholders named
therein.....................................................
</TABLE>
<PAGE> 165
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<C> <S> <C>
*2.16 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
Sacramento, Sierra Office Systems and Products, Inc. and the
shareholders named therein..................................
2.17 Merger Agreement, dated as of April 8, 1998, by and among
Office Centre Corporation, Office Centre Georgia, Southern
Office Centre, Inc. and the shareholders named therein......
2.18 Merger Agreement, dated as of April 23, 1998, by and among
Office Centre Corporation, Office Centre Georgia, Georgia
Impressions, Inc. and the shareholders named therein........
*2.19 Amendment No. 1 to Merger Agreement, dated as of May 20,
1998, by and among Office Centre Corporation, Office Centre
Georgia, Georgia Impressions, Inc. and the shareholders
named therein...............................................
2.20 Merger Agreement, dated as of April 23, 1998, by and among
Office Centre Corporation, Office Centre Fort Worth, Inc.,
Metro Data Supply, Inc. and the shareholders named
therein.....................................................
2.21 Merger Agreement, dated as of April 21, 1998, by and among
Office Centre Corporation, Office Centre Fort Worth, Inc.,
BCB Office Products Company, BCB Specialties, Inc. and the
shareholders named therein..................................
2.22 Stock Purchase Agreement, dated as of May 23, 1997, among
Walter Gordenstein, Dean Witter Reynolds, Inc., Custodian
for the IRA Rollover of Clifford M. Davie DTD 12/15/94,
Clifford M. Davie and Office Centre Corporation relating to
UDI Corp....................................................
2.23 Stock Purchase Agreement, dated as of May 23, 1997, among
Walter Gordenstein, Dean Witter Reynolds, Inc., Custodian
for the IRA Rollover of Clifford M. Davie DTD 12/15/94,
Clifford M. Davie and Office Centre Corporation relating to
UDI II Corp.................................................
2.24 Agreement and Plan of Merger, dated as of April 15, 1998,
between UDI Corp. and UDI II Corp...........................
3.01 Amended and Restated Certificate of Incorporation of Office
Centre Corporation..........................................
3.02 Amended and Restated By-Laws of Office Centre Corporation...
4.01 Specimen of Common Stock Certificate of Office Centre
Corporation.................................................
*5.01 Opinion of Richards & O'Neil, LLP...........................
10.01 Employment/Consulting Agreement, dated July 20, 1995, by and
between UDI Corp., UDI II Corp, Clifford M. Davie and/or
Buying Group Services, Inc..................................
10.02 Employment Agreement, dated as of May 1, 1997, by and
between Office Centre Corporation and Robert J. Gillon,
Jr..........................................................
10.03 Amendment to Employment Agreement, dated as of August 8,
1997, between Office Centre Corporation and Robert J.
Gillon, Jr..................................................
10.04 Reformation of Employment Agreement, dated as of March 12,
1998, between Office Centre Corporation and Robert J.
Gillon, Jr..................................................
10.05 Amendment No. 2 to Employment Agreement, dated as of May 14,
1998, between Office Centre Corporation and Robert J.
Gillon, Jr..................................................
10.06 Employment Agreement, dated as of August 22, 1997, between
Office Centre Corporation and Joseph Hajjar.................
10.07 Amendment No. 1 to Employment Agreement, dated as of May 14,
1998, between Office Centre Corporation and Joseph Hajjar...
10.08 Employment Agreement, dated as of April 15, 1998, between
Office Centre Corporation and Walter Gordenstein............
10.09 Employment Agreement, dated as of April 8, 1998, between
Office Centre Corporation and Thomas F. Mooney..............
</TABLE>
<PAGE> 166
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<C> <S> <C>
10.10 Employment Agreement, dated as of February 20, 1998, by and
between Office Centre Corporation and Richard Case..........
10.11 Consulting Agreement, dated February 1, 1997, between Office
Centre Corporation and Benchmark Associates, Inc............
10.12 Agreement, dated January 9, 1998, by and between Office
Centre Corporation and John Davie...........................
10.13 Agreement, dated as of April 15, 1998, between Office Centre
Corporation and Walter Gordenstein..........................
10.14 Amendment No. 1 to Agreement, dated as of May 14, 1998, by
and between Office Centre Corporation and Walter
Gordenstein.................................................
10.15 Agreement, dated as of May 13, 1998, between Office Centre
Corporation, Dean Witter Reynolds, Inc., Custodian for the
IRA Rollover DTD 12/15/94, and Clifford M. Davie............
10.16 Financial Advisory Agreement, dated as of February 1, 1997,
by and between Office Centre Corporation and R.K. Grace &
Company.....................................................
10.17 Form of Indemnification Agreement entered into by Office
Centre Corporation with each of the following persons:
Robert J. Gillon, Jr., John D. Kaweske, Joseph Hajjar,
Clifford M. Davie, Edward A. Schefer, Thomas F. Mooney,
Charles J. Murphy and Yancey Jones..........................
*10.18 Office Centre Corporation 1998 Stock Option Plan............
*10.19 Form of Stock Option Agreement..............................
10.20 Commitment Letter, dated December 15, 1997, from CoreStates
Bank, N.A. to Office Centre Corporation.....................
10.21 Commitment Extension Letter, dated March 16, 1998, from
CoreStates Bank, N.A. to Office Centre Corporation..........
10.22 Second Commitment Extension Letter, dated May 18, 1998, from
First Union National Bank (formerly CoreStates Bank, N.A.)
to Office Centre Corporation................................
10.23 Commitment Letter, dated December 5, 1997, from CoreStates
Bank, N.A. to UDI Corp. and UDI II Corp.....................
*10.24 Master Demand Note, undated, from CoreStates Bank, N.A. to
UDI Corp. and UDI II Corp...................................
*10.25 Guaranty, dated September 26, 1997, from Office Centre
Corporation to CoreStates Bank, N.A.........................
*10.26 Form of Security Agreement entered into by UDI Corp. and UDI
II Corp. with CoreStates Bank, N.A. on October 25, 1993.....
10.27 Buying Group Agreement, dated December 1, 1997, between
Office Centre Corporation and S.P. Richards Co..............
10.28 Buying Group Agreement, dated December 1, 1997, between
Office Centre Corporation and United Stationers.............
10.29 Form of Employment Agrement by and between Office Centre
Corporation and Yancey S. Jones.............................
21.01 Subsidiaries of Office Centre Corporation...................
23.01 Consent of Grant Thornton LLP...............................
23.02 Consent of Richards & O'Neil, LLP (incorporated into Exhibit
5.01).......................................................
27.01 Financial Data Schedule.....................................
</TABLE>
<PAGE> 1
EXHIBIT 2.01
MERGER AGREEMENT
DATED AS OF MAY 18, 1998
among
OFFICE CENTRE CORPORATION,
OCC NEW YORK, INC.,
KING OFFICE SUPPLY, INC.,
and
THE PERSONS LISTED ON SCHEDULE A HERETO
<PAGE> 2
MERGER AGREEMENT
THIS MERGER AGREEMENT, dated as of May 18, 1998, is made and
entered into among Office Centre Corporation, a Delaware corporation (the
"Purchaser"), OCC New York, Inc., a Delaware corporation and wholly-owned
subsidiary of the Purchaser (the "Merger Subsidiary"), King Office Supply, Inc.,
a New York corporation (the "Company"), and the persons listed on Schedule A
hereto (each a "Seller"; collectively, the "Sellers").
WHEREAS, the Company and its wholly-owned subsidiary, King
Office Supply Co., Inc., a Connecticut corporation (the "Subsidiary"), are
engaged in the business of selling office supply products (the "Business"); and
WHEREAS, the Sellers own all of the issued and outstanding
shares of the capital stock of the Company as set forth in Schedule A (the
"Shares"); and
WHEREAS, the Purchaser and the Sellers desire that the
Purchaser acquire the Company by merging the Company with the Merger Subsidiary
under the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter contained and intending to be legally bound, the
undersigned parties hereby agree as follows:
1. MERGER
1.1. TERMINATION OF PREVIOUS AGREEMENT. That certain stock
purchase agreement, dated February 6, 1998, between the Purchaser and the
Sellers is hereby terminated in its entirety and of no further force or effect.
1.2. THE MERGER. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined below), the Company shall
be merged with and into the Merger Subsidiary (the "Merger"). The separate
existence and corporate organization of the Company shall thereupon cease and
the Merger Subsidiary shall thereupon be a single corporation. The Merger
Subsidiary shall be the surviving corporation in the Merger (the "Surviving
Corporation") and shall continue its existence under the provisions of the
Delaware General Corporation Law.
1.3. EFFECTIVE DATE OF THE MERGER. On the Closing Date (as
defined below), a certificate of merger (the "Articles of Merger") shall be
executed by the Company and the Merger Subsidiary and shall be filed with the
Secretary of State of the States of New York and Delaware. The Merger shall
become effective at such time as the Articles of Merger are filed with the
Secretary of State of the States of New York and Delaware, such time being
hereinafter called the "Effective Time."
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1.4. ARTICLES OF INCORPORATION. The Articles of Incorporation
of the Merger Subsidiary as in effect immediately prior to the Effective Time
shall be and remain the Articles of Incorporation of the Surviving Corporation
from and after the Effective Time until amended as provided by law. The
Purchaser shall deliver to Sellers a copy of such Articles prior to the Closing
(as defined below).
1.5. BY-LAWS. The By-Laws of the Merger Subsidiary as in
effect immediately prior to the Effective Time shall be and remain the By-Laws
of the Surviving Corporation from and after the Effective Time until amended as
provided by law. The Purchaser shall deliver to Sellers a copy of such Bylaws
prior to Closing.
1.6. DIRECTORS AND OFFICERS. The Merger Subsidiary and the
Purchaser shall, at Closing, cause Robert J. Gillon, Jr. to be appointed a
director of the Surviving Corporation. Robert J. Gillon, Jr. and such other
officers as the Purchaser shall direct shall serve as the officers of the
Surviving Corporation until their successors have been elected or appointed and
shall have qualified in accordance with applicable law.
1.7. CLOSING The closing of such Merger (the "Closing") shall
be effective (i) on the date the condition set forth in Sections 7 and 8 have
been satisfied and otherwise waived, or (ii) at such other date as the parties
hereto shall agree in writing (the "Closing Date"), and shall be held at the
offices of the Purchaser's counsel at 200 East Las Olas Boulevard, Fort
Lauderdale, Florida 33301 at 10:00 a.m. (local time).
1.8. MERGER CONSIDERATION.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of any holder of capital stock of the Purchaser, the
Merger Subsidiary, the Company or the Sellers: (i) the shares of Common Stock of
the Merger Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted as a result of the Merger and without any action on the
part of the holder thereof, into 1 share of capital stock of the Surviving
Corporation and (ii) the shares of the Company held by the Sellers shall be
converted into and shall become, without further action on the part of the
Sellers, the right to receive consideration equal to 7.6 times the Company's
earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the year ending December 31, 1997, as further adjusted in the manner set forth
on Schedule 1.8 to this Agreement (the "1997 EBITDA"), which aggregate
consideration amount equals $6,566,000. Such consideration shall be payable to
the Sellers in shares of common stock, $.001 par value per share, of the
Purchaser (the "Purchaser Shares") or cash as set forth on Schedule A hereto.
(b) Within ninety (90) calendar days after December 31, 1998,
the Purchaser shall cause its independent auditing firm to deliver to the
Sellers a certificate (the "Certificate") of the EBITDA of the Surviving
Corporation for the twelve (12) month period ended December 31, 1998,
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as further adjusted in the same manner as the 1997 EBITDA (the "1998 EBITDA").
The Sellers shall have a period of twenty (20) days after delivery of the
Certificate, to present in writing to the Purchaser, any objections that the
Sellers may have to any of the matters set forth in the Certificate, which
objection shall be set forth in reasonable detail. If no objections are raised
within such twenty (20) day period, the certificate shall be deemed accepted and
approved by the Sellers. If the Sellers shall raise any objections within the
twenty (20) day period, the parties shall attempt to resolve the matter or
matters in dispute. If such dispute cannot be resolved with a further period of
twenty (20) days, the Sellers shall have the right to submit the dispute to a
nationally recognized firm of independent public accountants mutually agreed to
by the Sellers and the Purchaser, which firm shall make a final and binding
determination as to such matter or matters in dispute. Each party shall bear
one-half of the fees and expenses in connection with such review. The Sellers
shall be entitled to receive consideration equal 3.85 times the amount by which
the 1998 EBITDA exceeds the 1997 EBITDA. Such consideration shall be payable to
the Sellers in cash in accordance with their percentages set forth on SCHEDULE A
attached hereto except with respect to Seller Gillon, who in lieu thereof, shall
receive such number of Parent Shares equal to the amount of cash he would be
entitled to receive under this Section 1.8(b) divided by the initial public
offering price share. All such consideration shall be paid no later than
twenty-five (25) days after delivery of the Certificate if Seller raises no
objection thereto. If Seller raises an objection to the Certificate, then
payment shall be made within seven (7) days of the resolution of such dispute in
accordance with this Section 1.8(b).
1.9. PURCHASE PRICE ADJUSTMENT.
(a) The Company shall deliver two (2) business days prior to
Closing a statement certified by its president and its accounting firm of the
aggregate amount of personal loans set forth on the Company's and its
Subsidiary's balance sheet as of such date (the "Personal Loan Amount"). There
shall be distributed to Sellers 1.66 times the amount of the Personal Loan
Amount immediately prior to Closing (the "Distributed Loan Amount"). The
Distributed Loan Amount shall reduce on a dollar for dollar basis the cash to be
received by the Sellers as set forth on Schedule A hereto. Upon such
distribution the Sellers shall repay such Personal Loan Amount.
(b) In the event that the Liabilities exceed $530,000, then
the Purchaser shall cause the cash to be received by the Sellers as set forth on
Schedule A hereto to be reduced pro rata among such Sellers by an aggregate
amount equal the amount of Liabilities in excess of $530,000. In the event that
such Liabilities are less than $530,000, then the Purchaser shall cause the cash
to be received by the Sellers as set forth on Schedule A hereto to be increased
pro rata among such Sellers by an aggregate amount equal to the amount of
Liabilities less than $530,000. For purposes of this Section, Liabilities shall
mean the obligations listed to the entities on Schedule 1.9(b).
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1.10. TIME AND PLACE OF CLOSING. The Closing shall be held on
such date as the conditions to Closing set forth in Articles 7 and 8 have been
fully satisfied or waived (the "Closing Date") at the offices of Purchaser at
10:00 a.m.
1.11. FURTHER ASSURANCES. In addition to the actions,
documents and instruments specifically required to be taken or delivered hereby,
each party hereto shall execute and deliver such other instruments and take such
other actions as any other party, or its counsel, may reasonably request in
order to complete and perfect the transactions contemplated by this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller severally represents and warrants to the
Purchaser:
2.1. LEGAL CAPACITY OF THE SELLERS.
(a) Such Seller, if an individual, has the legal capacity to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Such Seller, if an entity, has the power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Such Seller, if an entity, has taken all action as and in
the manner required by law, its Certificate of Incorporation, By-Laws or other
organizational documents or otherwise to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by such
Seller, and the consummation of the transactions contemplated hereby, do not
violate or conflict with (i) any material terms of any organizational document
or any instrument, contractual restriction or commitment of any kind or
character to which such Seller is a party or by which he or it is bound, or (ii)
any requirement of law or any judgment, decree or order of any governmental or
regulatory authority to which such Seller is subject or by which such Seller or
any of his or its assets or properties is bound.
(c) This Agreement has been duly and validly executed by such
Seller, and constitutes a valid and binding obligation of such Seller
enforceable against such Seller in accordance with its terms except to the
extent that (i) such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) the availability of remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
2.2. TITLE TO THE SHARES. Such Seller is not a party to or
bound by any options, calls, voting agreements, contracts, or commitments of any
character relating to any issued or unissued capital stock or any other equity
security issued or to be issued by the Company. Such
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Seller owns the Shares listed opposite such Seller's name on Schedule A hereto
free and clear of any liens, pledges, encumbrances, charges, rights of first
refusal, obligations or commitments to sell or other claims.
2.3. INVESTMENT PURPOSE. With respect to Seller Gillon, such
Seller is an "accredited investor" as such term is defined in Rule 501 under the
Securities Act of 1933, as amended (the "Securities Act"). Such Seller is able
to bear the economic risk of an investment in the Purchaser Shares and can
afford to sustain a total loss of his investment, and has, alone or together
with the assistance of a representative, such knowledge and experience in
financial and business matters that he will be capable of evaluating the merits
and risks of an investment in buying the Purchaser Shares. Such Seller is
acquiring the Purchaser Shares for his own account for investment purposes only
and not with a view to, or for sale in connection with, any distribution
thereof. Such Seller will not sell the Purchaser Shares except in compliance
with the registration requirements of the Securities Act or in a transaction
exempted therefrom. In addition, each Seller acknowledges that he will be
subject to such "lockup" restrictions as may be imposed by the Purchaser's
underwriter or any entity regulating the issuance of securities of the Purchaser
in connection with an initial public offering thereof. Such Seller understands
that each share certificate representing Purchaser Shares shall bear the
substantially following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SHARES MAY NOT BE SOLD OR
OFFERED FOR SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE OF THE
FOLLOWING: (i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE SECURITIES ACT, OR (ii) AN OPINION OF
COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE
COMPANY RELATING TO THE COMPANY.
Each Seller jointly and severally with the Company represent
and warrant to the Purchaser and the Merger Subsidiary:
3.1. ORGANIZATION AND AUTHORITY OF THE COMPANY. Each of the
Company and the Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to carry on its business as presently
conducted and to own or lease and to operate its properties. Each of the Company
and the Subsidiary is qualified to transact business as a foreign corporation in
each jurisdiction wherein
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the failure to so qualify would have a material adverse effect on the business
or financial condition of the Company.
3.2. CAPITALIZATION. The authorized capital stock of the
Company consists of 1,000 shares of common stock, without par value, of which
800 are issued and outstanding on the date hereof. The Shares constitute all of
the issued and outstanding capital stock of the Company and the Shares have been
duly authorized and are validly issued, fully paid and non-assessable. The
Company is not a party to or bound by any options, calls, voting agreements,
contracts, or commitments of any character relating to any issued or unissued
capital stock or any other equity security issued or to be issued by the
Company.
3.3. ARTICLES OF INCORPORATION AND BY-LAWS. Copies of the
Certificate of Incorporation and the By-Laws of the Company and the Subsidiary,
heretofore delivered to the Purchaser, are true and complete copies of such
instruments as amended to the date of this Agreement, and are in full force and
effect on the date hereof.
3.4. SUBSIDIARIES AND AFFILIATES. Except as set forth in
Schedule 3.4, the Company does not own or control, directly or indirectly, any
capital stock, bonds or other securities of, and does not have any proprietary
interest in, any corporation, partnership, firm, association or business
organization, entity or enterprise, and the Company does not control, directly
or indirectly, the management or policies of any corporation, partnership, firm,
association or business organization, entity or enterprise. The Company owns
100% of the capital stock of the Subsidiary, and all options, warrants, calls,
rights, commitments, convertible securities or agreements of a similar character
(if any) related thereto.
3.5. CONSENTS AND APPROVALS. No approval, order or consent of,
filing or registration with or notice or payment to, any foreign, federal,
state, county, local or other governmental or regulatory body, and no approval
or consent of, or filing with or notice or payment to, any other person is
required by or with respect to the Company or the Subsidiary in connection with
the execution and delivery by the Sellers of this Agreement and the consummation
and performance by each of them of the transactions contemplated hereby.
3.6. NO CONFLICT. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, and the
performance by the Sellers of this Agreement in accordance with its terms and
conditions will not (a) conflict with or result in the breach or violation of
any of the terms or conditions of, or give rise to any acceleration of the
Company's or the Subsidiary's obligations or constitute (or with notice or lapse
of time or both would constitute) a default under (i) the Articles of
Incorporation or By-Laws of the Company or the Subsidiary; (ii) any instrument,
contract or other agreement by or to which the Company or the Subsidiary is a
party or by or to which it or its assets or properties are bound or subject;
(iii) any statute, law or regulation of any jurisdiction or any order, writ,
judgment, injunction, award or decree
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<PAGE> 8
of any court, arbitrator or governmental or regulatory body against, or binding
upon, the Company or the Subsidiary or the assets or properties of the Company
or the Subsidiary; or (iv) any license, franchise, approval, certificate, permit
or authorization applicable to the Company or the Subsidiary or any of the
Company's or the Subsidiary's assets; or (b) result in the creation of any lien,
charge or encumbrance of any nature, upon the assets or property of the Company
or the Subsidiary.
3.7. FINANCIAL STATEMENTS.
(a) Attached hereto as Schedule 3.7 are copies of the draft
combined financial statements of the Company and the Subsidiary for the
twelve-month period ending December 31, 1997 (collectively, the "Financial
Statements").
(b) The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied with prior
periods (except as may be indicated therein or in the notes thereto) and fairly
present the financial condition of the Company and the Subsidiary as of the date
thereof and the results of operations of the Company and the Subsidiary for the
period indicated.
3.8. ABSENCE OF CHANGES. Since December 31, 1997, each of the
Company and the Subsidiary has operated its business only in the ordinary course
and there has not been any material and adverse change in the business,
financial condition, results of operations, assets or properties of the Company
or the Subsidiary.
3.9. LIABILITIES. Neither the Company nor the Subsidiary has
any direct or indirect indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, including without limitation, liabilities on
account of taxes, other governmental charges or legal proceedings
("Liabilities") other than (i) Liabilities fully and adequately reflected on the
balance sheet included in the Financial Statements, (ii) those Liabilities, as
of the date of the Financial Statements, that would not be required to be
disclosed on the balance sheet included in the Financial Statements in
accordance with generally accepted accounting principles, (iii) those
Liabilities incurred since the date of the Financial Statements in the ordinary
course of business consistent with past practice, and (iv) Liabilities disclosed
pursuant to any section of this Agreement. Neither the Company nor any Seller
has any knowledge of any current or threatened circumstances, conditions, events
or arrangements affecting specifically the Company or the Subsidiary, which may
hereafter give rise to any Liabilities of the Company or the Subsidiary, except
in the ordinary course of business consistent with past practice.
3.10. INVENTORIES. The inventory of the Company and the
Subsidiary is in usable or salable condition in the ordinary course of business,
is up to normal commercial standards for comparable products, is of at least the
standard quality for similar items sold by the Company and the Subsidiary in
prior years and is appropriate for use without any modification other than in
the
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normal processes of the Business. The inventory of the Company and the
Subsidiary is not in excess of that reasonably expected to be sold within twelve
months based on the past experience of the Business. The Sellers do not know of
any adverse condition currently affecting, or anticipated to affect in the
future, the supply of inventory available to the Company and the Subsidiary.
3.11. COLLECTIBILITY OF RECEIVABLES. All accounts receivable
set forth on the books and records of the Company and the Subsidiary (i) are
accurately reflected in the books and records of the Company or the Subsidiary,
(ii) are valid receivables owned by the Company or the Subsidiary, (iii) are not
subject to counterclaims (other than customer debit memos issued in the ordinary
course of business), and (iv) to the knowledge of the Company and the Sellers
are collectible (subject to applicable reserves as set forth on the books and
records of the Company and the Subsidiary) in their recorded amounts in the
ordinary course of business. Schedule 3.11 attached hereto contains a breakdown
of the accounts receivable of the Company and the Subsidiary as of December 31,
1997.
3.12. LITIGATION. Except as set forth in Schedule 3.12 hereto,
there is no action, suit or proceeding pending or threatened, or any
investigation, at law or in equity, before any arbitrator, court or other
governmental authority, pending or threatened, nor any judgment, decree,
injunction, award or order outstanding, against or in any manner involving the
Company, the Subsidiary or any of the Company's or the Subsidiary's properties
or rights which (i) could reasonably be expected to have an adverse effect upon
the financial condition, results of operations, assets, properties or business
of the Company or the Subsidiary, or (ii) could reasonably be expected to
prevent the consummation of the transactions contemplated by this Agreement.
3.13. EMPLOYEE BENEFIT PLANS; ERISA.
(a) For purposes of this Section 3.13:
(i) "Code" means the Internal Revenue Code of
1986, as amended.
(ii) "Employee Benefit Plan" has the meaning set
forth in ERISA Section 3(3), including any such plan contributed to or required
to be contributed to by the Company, and/or any ERISA Affiliate.
(iii) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(iv) "ERISA Affiliate" means any entity required to
be aggregated with the Company and its subsidiaries, trades or businesses under
Sections 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.
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<PAGE> 10
(v) "Fiduciary" has the meaning set forth in ERISA
Section 3(21).
(vi) "PBGC" means the Pension Benefit Guaranty
Corporation.
(vii) "Prohibited Transaction" has the meaning set
forth in ERISA Section 406 and Code Section 4975.
(b) Schedule 3.13(b) attached hereto contains a true and
complete list of each Employee Benefit Plan and all other employee benefit
arrangements, policies or payroll practices, including, without limitation,
employee pension, retirement, profit sharing, Multiemployer Plan stock bonus,
stock option, stock purchase, incentive, severance, sick leave, vacation pay,
disability, deferred and other executive compensation, bonus, hospitalization,
medical, dental, vision and life insurance plans, whether written or unwritten,
that the Company or any ERISA Affiliate maintains or to which the Company or any
ERISA Affiliate contributes or in which any current or former employees of the
Company or any ERISA Affiliate has accrued any benefits to which they remain
entitled (collectively, the "Plans").
(c) The Company has with respect to each such Plan provided
true and complete copies of: (i) all plan and related trust documents, and
amendments thereto; (ii) all summary plan descriptions and employee
communications; (iii) the most recent Internal Revenue Service Form 5500's
including all schedules thereto; (iv) the most recent actuarial valuation or, in
the case of a defined contribution plan, a valuation report; (v) the most recent
Internal Revenue Service determination letter issued; any and all insurance
contracts, and other funding and third party administrative agreements; and all
communications from any government agency.
(d) To the knowledge of Seller, each of the Plans complies in
form and in operation in all material respects with the applicable requirements
of ERISA, the Code and other applicable laws.
(e) To the knowledge of Seller, all required reports and
descriptions (including, but not limited to Form 5500 Annual Reports, Summary
Annual Reports, PBGC-l's and Summary Plan Descriptions) have been timely filed
or distributed appropriately with respect to each Plan for which such reporting
and/or distribution is required. The requirements of Parts 6 and 7 of Subtitle B
of Title I of ERISA and of Section 4980B of the Code have been met with respect
to each Plan to which such requirements apply.
(f) Each Plan intended to qualify under Section 401(a) of the
Code so qualifies, and any related trust is exempt from federal income tax under
Section 501(a) of the Code. A favorable determination letter from the IRS has
been issued with respect to each such plan and trust covering, without
limitation, the qualification requirements imposed under the Tax Reform Act of
1986, the Unemployment Compensation Amendments of 1992 and the Omnibus
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Budget Reconciliation Act of 1993, and nothing has occurred since the date of
such determination letter that would adversely affect such qualification or such
tax-exempt status.
(g) Except as indicated in Schedule 3.13(g), with respect to
each Plan that is subject to Title IV of ERISA, there is no amount of unfunded
benefit liabilities as defined in Section 4001(a)(18) of ERISA as determined in
accordance with actuarial assumptions used by the PBGC to determine the level of
funding required in the event of termination of the Plan.
(h) To the knowledge of Seller, no Prohibited Transaction has
occurred with respect to any Plan. Neither the Company nor any ERISA Affiliate
has any liability for breach of fiduciary duty or any other failure to act or
comply in connection with any Plan.
(i) Except as indicated in Schedule 3.13(i), no action, suit,
proceeding, hearing, or investigation with respect to any of the Plans (other
than routine claims for benefits) is pending or threatened.
(j) To the knowledge of Seller, with respect to each Plan
which is subject to Title IV of ERISA: (i) no such plan has terminated, or has
filed a notice of intent to terminate in the last six years; (ii) there is no
outstanding liability under Section 4062 of ERISA; (iii) neither the Company,
nor any ERISA Affiliate that is a substantial employer has made a withdrawal (or
has deemed to do so under Section 4062(e) of ERISA) that could result in
liability under Section 4063 of ERISA or otherwise; (iv) the PBGC has not
instituted proceedings to terminate any such Plan; (v) no reportable event, as
described in Section 4043 of ERISA has occurred.
(k) Except as indicated in Schedule 3.13(k), neither the
Company nor any ERISA Affiliate contributes to any Multiemployer Plan. With
respect to each such Multiemployer Plan to which the Company and/or any ERISA
Affiliate contributes or has contributed, neither the Company nor any ERISA
Affiliate has: (i) withdrawn, partially withdrawn, or received any notice of any
claim or demand for withdrawal liability or partial withdrawal liability, (ii)
received any notice that any such plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, or that any such plan is or may become insolvent,
(iii) failed to make any required contribution, (iv) any withdrawal liability by
reason of a sale of assets pursuant to Section 4204 of ERISA.
(l) Schedule 3.13(1) includes for each Multiemployer Plan, as
of its last valuation date, the amount of any potential withdrawal liability of
the Company and any ERISA Affiliate calculated according to the information made
available pursuant to ERISA Section 4221(e), and identifies the specific
obligor. To the best knowledge of the Company, nothing has occurred or is
expected to occur that would increase the amount of the total potential
withdrawal liability of a specified obligor for any such plan over the amount
shown in Schedule 3.13(1).
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(m) No Plan is a "multiple employer plan" within the meaning
of Section 4063 or 4064 of ERISA. No Plan is a "multiple employer welfare
arrangement" within the meaning of Section 3(40) of ERISA. Neither the Company,
nor any of its subsidiaries maintains or has any obligation to contribute to any
"voluntary employees' beneficiary association" within the meaning of Section
501(c)(9) of the Code for the provision of welfare benefits.
(n) The Company has made all payments due from it to date with
respect to each Plan.
(o) No current or former employee of the Company or any ERISA
Affiliate is or may become entitled to post-employment retirement benefits of
any kind other than coverage mandated by Section 4980B of the Code.
(p) To the knowledge of Seller, no amounts paid or payable by
the Company will fail to be deductible for federal income tax purposes by reason
of Section 28OG of the Code.
(q) Within the last six months, only terminations of
employment in the normal course of operations occurred.
(r) Neither the Company nor any ERISA Affiliate maintains any
plan, arrangement or program which provides severance benefits to current or
former employees of the Company or any ERISA Affiliate and neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in any liability for the payment of severance
benefits.
3.14. TAXES.
(a) Each of the Company and the Subsidiary has filed all tax
returns that it was required to file, and has paid all taxes indicated on such
returns for such periods. All such tax returns were in all respects true,
complete and correct and filed on a timely basis.
(b) None of the income tax returns filed by, on behalf of or
with respect to the Company or the Subsidiary is currently the subject of an
audit, and no notice of a planned audit has been received.
(c) Neither the Company nor the Subsidiary has waived any
statute of limitations in respect of taxes or agreed to any extension of time
with respect to a tax assessment or deficiency with respect to any tax return
that is currently the subject of audit.
3.15. LIENS. Except as set forth on Schedule 3.15, each of the
Company and the Subsidiary owns outright and has good and marketable title to
all of its assets, properties and
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rights necessary to conduct its Business as currently conducted, in each case
free and clear of any lien, claim or encumbrance.
3.16. CONTRACTS. Schedule 3.16 sets forth a complete and
accurate list of all of the following agreements, contracts, arrangements or
understandings, whether oral or written ("Contracts") to which the Company or
the Subsidiary is a party or by or to which the assets or properties of the
Company or the Subsidiary are bound or subject, including all amendments
thereto: (i) Contracts with any current or former officer, director, employee,
consultant, shareholder (or related person of any shareholder), subsidiary or
other affiliate; (ii) Contracts and purchase orders calling for payments of more
than $25,000 to any one supplier, contract manufacturer or vendor for the
purchase or acquisition of inventory, materials, supplies, equipment,
merchandise or services; (iii) copyright, trademark or trade name licenses,
royalty agreements or similar Contracts; (iv) warehousing, distributorship,
depository, representative, management, marketing, sales agency, printing or
advertising Contracts; (v) Contracts for the sale of any assets or properties of
the Company other than in the ordinary course of business or for the grant to
any person of any preferential rights to purchase any of the assets or
properties of the Company other than in the ordinary course of business; (vi)
partnership, joint venture and license agreements relating to the assets,
properties, Business or products of the Company or the Subsidiary or by or to
which any of them or any of their assets, properties or products are bound or
subject; (vii) Contracts under which the Company or the Subsidiary agrees to
indemnity any party, to share the tax liability of any party or to refrain from
competing with any party or covenants of any other person not to compete with
the Company or the Subsidiary in any line of business or in any geographical
area; (viii) Contracts relating to the acquisition by the Company or the
Subsidiary of any operating business or the capital stock of any other person;
(ix) Contracts requiring the payment to any person of a commission or fee in
excess of $25,000; (x) Contracts relating to the borrowing of money; (xi)
Contracts pursuant to which the Company or the Subsidiary is required to
purchase or sell a stated portion of its requirements or output from or to
another party; (xii) material leases, conditional sales Contracts, franchises or
licenses, pursuant to which the Company or the Subsidiary may hold or use any
material tangible property; (xiii) Contracts not made in the ordinary course of
business; (xiv) guarantees issued by the Company or the Subsidiary or any other
arrangement under which the Company or the Subsidiary assumes any material
liability (including indebtedness) of any other person; (xv) collective
bargaining agreements; and (xvi) all other Contracts to which the Company or the
Subsidiary is a party other than those referred to or excluded pursuant to
subsections (i) through (xv) of this Section 3.16 and those that are not
material to the Business. True and complete copies of all such Contracts have
been delivered or made available to the Purchaser. All of such Contracts are
valid and binding upon the Company or the Subsidiary, and are, to the knowledge
of the Company and the Sellers, in full force and effect. Neither the Company
nor the Subsidiary is in breach or default under any such Contract, nor, to the
knowledge of the Company or the Subsidiary or any Seller, is any other party to
any such Contract in breach or in default thereunder, nor does any condition
exist with respect to the Company or the Subsidiary (or, to the knowledge of the
Company or any Seller, with respect to any other party
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to any such Contract) that with notice or lapse of time or both would constitute
a breach or default thereunder, nor is there any dispute between the Company or
the Subsidiary and any other party to any such Contract. To the knowledge of the
Company, the Subsidiary and the Sellers, all royalties that have been due and
payable by the Company or the Subsidiary under any such Contracts have been
calculated properly and paid in accordance with the terms of such Contracts.
3.17. SUPPLIERS AND CUSTOMERS. Schedule 3.17 sets forth the
(i) names of, and dollar value of sales to, the ten largest customers (each a
"Major Customer") by volume of sales of the Company and the Subsidiary (on a
combined basis) during the 12 months ended December 31, 1997; and (ii) names of,
and dollar value of purchases from, the ten largest suppliers (each, a "Major
Supplier") by volume of purchases during the 12 months ended December 31, 1997.
The relationships of each of the Company and the Subsidiary with its suppliers
and customers are good commercial working relationships consistent with industry
conditions. Except as set forth on Schedule 3.17, no Major Supplier, and no
Major Customer, has cancelled or otherwise terminated, or threatened to cancel
or otherwise terminate, its relationship with the Company or the Subsidiary.
Except as set forth on Schedule 3.17, the Company does not have any notice that
any Major Supplier or Major Customer intends to cancel or otherwise materially
modify its relationship with the Company or the Subsidiary.
3.18. COMPLIANCE WITH LAWS; PERMITS. Each of the Company and
the Subsidiary is in compliance with, and its operations have been conducted in
accordance with, all laws applicable to the Company and the Subsidiary or the
Business. Schedule 3.18 sets forth each permit necessary to conduct the business
of the Company and its subsidiaries and to lawfully use and occupy the Real
Property as defined in Section 3.19(a). True and complete copies of such permits
have been made available to the Purchaser. Except as set forth in Schedule 3.18,
all permits have been lawfully issued and are in full force and effect; no
violations are or have been recorded in respect of any permit; none of the
permits is in the nature of a conditional use permit or other special approval
or variance; no legal proceeding is pending or (to the knowledge of the Company
and the Sellers) threatened, and no claim or demand has been asserted to revoke,
suspend, modify or limit any permit and there is no basis for the taking of any
such action; and neither the execution of this agreement or the consummation of
the transactions contemplated hereby or thereby will result in any violation of
or limitation on any permit.
3.19. REAL ESTATE.
(a) Neither the Company nor the Subsidiary owns fee title to
any real property, nor does the Company or the Subsidiary sublease any of the
Real Property (as hereinafter defined) to any other person or entity. Schedule
3.19(a) sets forth a list and summary description of all leases, subleases,
licenses and other agreements ("Leases") under which the Company or the
Subsidiary uses or occupies, or has the right to use or occupy, now
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or in the future, any real property or portion thereof (the "Real Property"),
which schedule also sets forth the date of and parties to each Lease, the date
of and party to each amendment, modification and supplement thereto, the initial
and any renewal term of each Lease and whether or not any option for a renewal
term has been exercised, any expansion or other option under each Real Property
Lease, and a brief description of the Lease covered thereby.
(b) (i) Each of the Company and the Subsidiary does not own or
hold, and is not obligated under or a party to, any option, right of first
refusal or other contractual right to purchase any real property or any portion
thereof or interest therein.
(ii) Each of the Company and the Subsidiary does not own or
hold, and is not obligated under or a party to, any option, right of first
refusal or other contractual right to purchase any Leased Real Property or any
portion thereof or interest therein.
(c) Each Lease described in Schedule 3.19(a) hereto is valid
and binding and is in full force and effect in accordance with its terms. No
lessor or lessee is in default under any of the Leases and there is no existing
condition, event or act which, with notice or lapse of time or both would
constitute a default under any of the Leases. To the extent that the
transactions contemplated by this Agreement constitute an assignment of a lease,
either (a) such lease may be assigned without the consent or approval of any
other person or entity, or (b) if any such consent or approval shall be
required, such consent or approval shall have been obtained by Sellers prior to
the Closing Date. There are no material disputes, oral agreements or forbearance
programs in effect as to any of the Leases.
(d) The Company has heretofore furnished to the Purchaser a
true and complete copy of each Lease and all amendments thereto, each of which
is valid and binding and in full force and effect in accordance with its terms
with respect to the Company or the Subsidiary and each respective landlord. The
rent and additional rents set forth in each Lease is the actual rent and
additional rents being paid, and there are no separate agreements or
understandings with respect to the same. All rent and additional rent payable
under the leases has been paid in full through the date hereof. All of the land,
buildings, structures and other improvements used by the Company and the
Subsidiary in the conduct of its Business are included in the Real Property.
(e) Neither the Company, the Subsidiary nor any Seller has
received any notice nor has any knowledge of any pending, threatened or
contemplated condemnation proceeding affecting the Real Property or any part
thereof or of any sale or other disposition of the Real Property or any part
thereof in lieu of condemnation.
(f) Except as set forth on Schedule 3.19(f), neither the
Company nor the Subsidiary owes any money in an amount exceeding $2,500 to any
architect, contractor, subcontractor or materialman for labor or materials
performed, rendered or supplied to or in
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connection with any Real Property within the past 90 days. Except as set forth
on Schedule 3.19(f), there is no work being done at or materials being supplied
to any Real Property at the date hereof other than routine maintenance projects
having an aggregate cost through completion of not more than $1,000.
(g) The consummation of the transactions contemplated by this
Agreement will not result in the imposition of any tax on the Company or the
Subsidiary relating to the transfer of Real Property or any interest therein.
(h) To Sellers' knowledge, all components of all buildings,
structures and other improvements (the "Improvements") included within the Real
Property including but not limited to the roofs and structural elements thereof
and the heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, waste water, storm water, systems and facilities included
therein, are in good working order and repair in all material respects, adequate
for the Company and the Subsidiary to own and operate its business in accordance
with good industry standards. The Company's and the Subsidiary's use and
occupancy of the Real Property is in full compliance with all applicable laws,
rules and regulations of all governmental and quasi-governmental authorities
having or asserting jurisdiction thereover.
(i) All certificates of occupancy, permits, licenses,
franchises, approvals and authorizations (collectively, "Real Property Permits")
of all governmental authorities having jurisdiction over the Real Property, and
from all insurance companies and fire rating and other similar boards and
organizations (collectively, "insurance organizations"), required to have been
issued to the Company or the Subsidiary to enable the Real Property to be
lawfully occupied and used by the Company or the Subsidiary for all of the
purposes for which they are currently occupied and used have been lawfully
issued and are, as of the date hereof, in full force and effect. Neither the
Company nor the Subsidiary has received or been informed by a third party of the
receipt by it of any notice from any governmental authority having jurisdiction
over the Real Property or from any insurance organization threatening a
suspension, revocation, modification or cancellation of any Real Property Permit
and, to the best knowledge of the Sellers, there is no basis for the issuance of
any such notice or the taking of any such action. No action under the terms of
such Property Permits by Sellers, the Company, the Subsidiary, the Purchaser or
any other party is required in order that all Real Property Permits will
continue in full force and effect following the consummation of the transactions
provided for herein.
3.20. INSURANCE.
(a) Neither the Company nor the Subsidiary has, during the
past three fiscal years or in the current fiscal year, been denied, or had
revoked or rescinded any policy of property, casualty, liability, errors and
omissions, medical, dental, workers' compensation coverage, bond and surety
arrangements or other forms of insurance ("Insurance Policies").
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<PAGE> 17
(b) Schedule 3.20 sets forth the following information with
respect to each Insurance Policy to which the Company or the Subsidiary is a
party, a named insured, or otherwise the beneficiary of coverage: (i) the name,
address, and telephone number of the agent; (ii) the name of the insurer, the
name of the policyholder, and the name of each covered insured; (iii) the policy
number and the period of coverage; (iv) the scope (including an indication of
whether the coverage was on a claims made, occurrence, or other basis) and
amount (including the amount of any deductibles and ceilings and a description
of how deductibles and ceilings are calculated and operate) of coverage; (v) the
annual policy premium; (vi) a description of the terms and premiums for any
discovery period available with the policy; (vii) a description of any
retroactive premium adjustments or other loss-sharing arrangements; (viii) each
claim made thereunder during the past five years; and (ix) each pending claim
thereunder.
(c) The Sellers have made available to the Purchaser a
complete and correct copy of each policy reflected on Schedule 3.20. With
respect to each such insurance policy: (a) the policy is in full force and
effect; (b) all premiums due thereon have been paid in a timely manner and all
premiums which become due commencing with the date hereof, through and including
the Closing Date will be so paid by the Company or the Subsidiary (other than
retroactive or retrospective premium adjustments that, as of the Closing Date,
have not been, but thereafter may be, required to be paid with respect to any
period ending prior to the Closing Date under comprehensive general liability
and workers' compensation insurance policies); and (c) no notice of cancellation
or termination has been received with respect to any such policy which has not
been replaced on substantially similar terms prior to the date of such
cancellation. Each of the Company and the Subsidiary has been covered during the
past five (5) years by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned period.
3.21. INTELLECTUAL PROPERTY. Each of the Company and the
Subsidiary owns or otherwise has the right or license to use the Intellectual
Property (as defined below) (and, to the Company's and the Sellers' knowledge,
the sole right or license with respect to trademarks) used in the Business as
currently conducted. All Intellectual Property used in the Business that has
been created or developed by employees of the Company and the Subsidiary is work
for hire and the Company or the Subsidiary owns all such rights to such
creations and developments free and clear of all liens. Schedule 3.21(a)
attached hereto contains a true and complete list of all patents, trademarks,
trade names and copyrights included in the Intellectual Property, all pending
applications therefor and all licenses and other agreements relating thereto,
whether as licensor or licensee or otherwise. Except as set forth on Schedule
3.21(b) attached hereto, the Company or the Subsidiary owns the Intellectual
Property free and clear of all liens. To the knowledge of the Company and the
Sellers, no claims are currently being asserted by any person involving or
questioning the Company's or the Subsidiary's sole right to use any of the
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or similar agreement. To the knowledge of the
Company and the Sellers, the use of the Intellectual
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<PAGE> 18
Property by the Company and the Subsidiary does not infringe the rights of any
person nor, is any infringing use currently ongoing by any person.
"Intellectual Property" shall mean all of the following,
irrespective of where any of the same were issued, are pending or exist that are
owned by or issued to the Company or the Subsidiary and that have been, are or
are proposed to be used: United States and foreign patents of any description,
and applications therefor; United States (federal and state) and foreign
trademarks (and goodwill associated therewith) and other trade names, labels,
trade dress, advertising and package designs, and other trade rights, whether or
not registered and all applications therefor; United States and foreign
copyrights, whether or not registered and all applications therefor (including
copyrights in computer software and computer software documentation, source code
and systems documentation); trade secrets, data, license agreements and other
agreements of every kind and character relating to any of the foregoing; and all
claims and causes of action relating to any of the foregoing, including claims
and causes of action for past infringement.
3.22. CORPORATE RECORDS. The Company has given the Purchaser
access to all the tax, accounting, corporate and financial books and records
relating to the Business of the Company and the Subsidiary. Such books and
records have been maintained on a current basis, are true and complete and
fairly reflect the financial condition and results of operations of the Company
and the Subsidiary as of the dates thereof and the periods ended. The minute
books of the Company and the Subsidiary contain complete and accurate records of
all meetings and other corporate actions of its Board of Directors (including
committees of the Board of Directors) and shareholders and have been made
available to the Purchaser for review.
3.23. NAME AND BUSINESS ADDRESSES. Set forth on Schedule 3.23
is a list of each name under which the Company and the Subsidiary has conducted
its Business during, and each current and former address of the Company and the
Subsidiary for, the past five years.
3.24. BANKS, BROKERS AND PROXIES. Schedule 3.24 sets forth (i)
the name and address of each bank, trust company and securities or other broker
with which the Company and the Subsidiary maintains relations; (ii) the name of
each person authorized by the Company and the Subsidiary to effect transactions
therewith or to have access to any safe deposit box or vault; and (iii) all
proxies, powers of attorney or other like instruments to act on behalf of the
Company and the Subsidiary in matters concerning its business or affairs.
3.25. ENVIRONMENTAL MATTERS. Except as set forth in
Schedule 3.25:
(a) Each of the Company and the Subsidiary is, and at all
times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law as defined below. No Seller,
the Company or the Subsidiary has any basis to expect, nor has any of them or
any other person for whose conduct they are or may be held
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to be responsible received, any actual or threatened order, notice, or other
communication from (i) any governmental body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
facilities of the Company or the Subsidiary, of any actual or potential
violation or failure to comply with any Environmental Law, or of any actual or
threatened obligation to undertake or bear the cost of any environmental,
health, and safety liabilities with respect to any of the properties or assets
(whether real, personal, or mixed) in which Sellers, the Company or the
Subsidiary has had an interest, or with respect to any property or facility of
the Company or the Subsidiary at or to which hazardous materials were generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, the
Company or the Subsidiary, or from which hazardous materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, to the knowledge of Sellers and
the Company, threatened claims, proceedings or encumbrances relating to any
environmental, health, and safety liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the facilities of the
Company or the Subsidiary or any other properties and assets (whether real,
personal, or mixed) in which the Company or the Subsidiary has or had an
interest.
(c) No Seller, the Company or the Subsidiary has any basis to
expect, nor has any of them or any other person for whose conduct they are or
may be held responsible, received, any citation, directive, inquiry, notice,
order, summons, warning, or other communication that relates to hazardous
activity, hazardous materials, or any alleged, actual, or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any environmental, health,
and safety liabilities with respect to any of the facilities of the Company or
the Subsidiary or any other properties or assets (whether real, personal, or
mixed) in which the Company or the Subsidiary had an interest, or with respect
to any property or facility to which hazardous materials generated,
manufactured, refined, transferred, imported, used, or processed by the Company
or the Subsidiary have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(d) Neither the Company, the Subsidiary, nor any other person
for whose conduct they are or may be held responsible, has any environmental,
health, and safety liabilities with respect to any other properties and assets
(whether real, personal, or mixed) in which the Company or the Subsidiary (or
any predecessor), has or had an interest.
(e) To the extent same would constitute a violation of
Environmental Law, there are no hazardous materials present on or in the
environment at the facilities of the Company or the Subsidiary, including any
hazardous materials contained in barrels, above or underground storage tanks,
landfills, land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in land,
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water, sumps, or any other part of the facilities of the Company or the
Subsidiary, or such adjoining property, or incorporated into any structure
therein or thereon. To the extent same would constitute a violation of
Environmental Laws, the Company, the Subsidiary, any other person for whose
conduct they are or may be held responsible, or any other person, has not
permitted or conducted any hazardous activity conducted with respect to the
facilities of the Company or the Subsidiary or any other properties or assets
(whether real, personal, or mixed) in which the Company or the Subsidiary has or
had an interest.
(f) To the extent same would constitute a violation of
Environmental Laws and there has been no release or threat of release, of any
hazardous materials at or from the facilities of the Company or the Subsidiary,
or from or by any other properties and assets (whether real, personal, or mixed)
in which the Company or the Subsidiary has or had an interest.
(g) Sellers have delivered to the Purchaser true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed by Sellers, the Company or the Subsidiary pertaining to hazardous
materials or hazardous activities in, on, or under the facilities of the Company
or the Subsidiary, or concerning compliance by the Company or the Subsidiary
with Environmental Laws.
(h) There are no underground or above-ground storage tanks,
incinerators or surface impoundments, at, on, or about under or within any real
property operated or controlled, in whole or in part by the Company or the
Subsidiary.
"Environmental Law" shall mean any federal, state, local,
municipal, or other administrative order, constitution, law, ordinance,
principle of common law, regulation or statute that requires or relates to:
(i) notification of appropriate authorities and
employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the environment;
(ii) preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or materials into the environment;
(iii) reducing the quantities, preventing the
release, or minimizing the hazardous characteristics of wastes that are
generated;
(iv) reducing to acceptable levels the risks inherent
in the transportation of hazardous substances, pollutants, oil or other
potentially harmful substances;
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(v) cleaning up pollutants that have been released,
preventing the threat
of release, or paying the costs of such clean up or prevention;
(vi) pollution, contamination, protection of the
environment, human health
or safety.
3.26. LABOR, EMPLOYMENT CONTRACTS. Except as set forth on
Schedule 3.26, neither the Company nor any of its subsidiaries has recognized
any representative or collective bargaining agent of any group of employees, or
is a party to any collective bargaining agreement, individual written employment
agreement or consulting agreement. Schedule 3.26 lists the name, job title or
classification and compensation of each employee or consultant of the Company or
any of its subsidiaries. Except as forth on Schedule 3.26, neither the Company
nor any of its subsidiaries has, directly or through its agents, engaged in any
employment discrimination, sexual harassment, defamation, breach of implied
covenant of good faith and fair dealing, breach of contract or unfair labor
practices with respect to any employee. Except as set forth on Schedule 3.26,
neither the Company, any of its subsidiaries nor any Seller knows of any present
or threatened union organization effort, walkout, strike or any other similar
occurrence or circumstances related to the representation or organization or
attempted representation or organization of all or any portion of the labor
force of the Company or any of its subsidiaries, and the Sellers have fully
disclosed to the Purchaser the circumstances and progress of any known attempt
to organize or represent all or any portion of the labor force of the Company in
the last three (3) years.
3.27. TANGIBLE PROPERTY. Schedule 3.27 sets forth the
depreciation schedule for the Tangible Property, as defined below, of the
Company and the Subsidiary as of December 31, 1997. The Tangible Property is in
good operating condition and repair except for ordinary wear and tear, and is
not in violations of any existing law. During the past three years there has not
been any significant interruption of the Company's operations or any of its
subsidiaries' operations due to inadequate maintenance of the Tangible Property.
"Tangible Property" shall mean all interests owned, leased or claimed by the
Company or the Subsidiary (including without limitation, options) in or to the
machinery, equipment, furniture, leasehold improvements, fixtures, vehicles, any
related capitalized items and other tangible property, which is treated by the
Company or the Subsidiary as depreciable or amortizable property.
3.28. POTENTIAL CONFLICTS OF INTEREST. Except as set forth on
Schedule 3.28, neither any Seller nor any officer or director of the Company or
any of its subsidiaries (i) has any interest in any person which is an affiliate
of the Company or with which the Company or the Subsidiary has entered into a
contract; (ii) owns, directly or indirectly, in whole or in part, any
Intellectual Property which the Company or any of its subsidiaries is using or
the use of which is necessary for the business of the Company or any of its
subsidiaries; or (iii) has any cause of action or other claim whatsoever
against, or owes any amount to, the Company or any of its subsidiaries, except
for claims in the ordinary course of business, such as for accrued
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<PAGE> 22
vacation pay, accrued benefits under Benefit Plans and similar matters and
agreements existing on the date hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
AND THE MERGER SUBSIDIARY
The Purchaser and the Merger Subsidiary jointly and severally
hereby represents and warrants to the Sellers and the Company as follows:
4.1. ORGANIZATION AND AUTHORITY OF PURCHASER AND THE
MERGER SUBSIDIARY.
(a) Each of the Purchaser and the Merger Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of the Purchaser and the Merger Subsidiary has
all requisite corporate power and authority (i) to carry on its business as
presently conducted and to own or lease and to operate its properties and (ii)
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The Purchaser is qualified to transact business as a
foreign corporation in each jurisdiction wherein the failure to so qualify would
have a material adverse effect on the business or financial condition of the
Purchaser. Each of the Purchaser and the Merger Subsidiary has taken all action
as and in the manner required by law, its Certificate of Incorporation and its
ByLaws or otherwise to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
(b) This Agreement constitutes the valid and binding
obligation of the Purchaser and the Merger Subsidiary enforceable against the
Purchaser and the Merger Subsidiary in accordance with its terms except to the
extent that (i) such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and (ii) the availability of remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
4.2. CAPITALIZATION; PURCHASER SHARES. The authorized capital
stock of the Purchaser consists of 50,000,000 shares of common stock, $.001 par
value per share, of which approximately 5,500,000 (as may be increased pursuant
to acquisitions) will be issued and outstanding immediately prior to the
Closing. All such shares have been duly authorized and are validly issued, fully
paid and non-assessable. The Purchaser is not a party to nor is bound by any
options, calls, voting agreements, contracts, or commitments of any character
relating to any issued or unissued stock or any other equity security issued or
to be issued by the Purchaser other than as set forth on Schedule 4.2 or has
been disclosed to Sellers in writing. The Purchaser Shares to be delivered to
the Sellers as set forth on Schedule A hereto are free and clear of any liens,
pledges, encumbrances, charges, rights of first refusal, obligations or
commitments to sell or other claims.
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4.3. ARTICLES OF INCORPORATION AND BY-LAWS. Copies of the
Certificate of Incorporation and the By-Laws of the Purchaser, heretofore
delivered to the Sellers, are true and complete copies of such instruments as
amended to the date of this Agreement, and are in full force and effect on the
date hereof.
4.4. SUBSIDIARIES AND AFFILIATES. Other than the Merger
Subsidiary and as set forth on Schedule 4.4, the Purchaser does not own or
control, directly or indirectly, any capital stock, bonds or other securities
of, and does not have any proprietary interest in, any corporation, partnership,
firm, association or business organization, entity or enterprise, and the
Purchaser does not control, directly or indirectly, the management or policies
of any corporation, partnership, firm, association or business organization,
entity or enterprise.
4.5. ABSENCE OF CHANGES. Other than (i) the purchase of UDI
Corp. and UDI II Corp. and (ii) actions taken in anticipation of the initial
public offering of the Company's securities, since January 1, 1997, the
Purchaser has operated its business only in the ordinary course and there has
not been any material and adverse change in the business, financial condition,
results of operations, assets or properties of the Purchaser.
4.6. LIABILITIES.
(a) The Purchaser has no Liabilities other than (i)
Liabilities fully and adequately reflected on the balance sheet included in the
Purchaser Financial Statements, (ii) those Liabilities, as of the date of the
Purchaser Financial Statements, that would not be required to be disclosed on
the balance sheet included in the Purchaser Financial Statements in accordance
with generally accepted accounting principles, (iii) those Liabilities incurred
since the date of the Purchaser Financial Statements in the ordinary course of
business consistent with past practice, (iv) Liabilities disclosed pursuant to
any section of this Agreement and (v) Liabilities that may be incurred as a
result of acquisitions or in connection with financing of the Purchaser's
business operations. The Purchaser has no knowledge of any current or threatened
circumstances, conditions, events or arrangements affecting specifically the
Purchaser, which may hereafter give rise to any Liabilities of the Purchaser,
except in the ordinary course of business consistent with past practice.
4.7. COLLECTIBILITY OF RECEIVABLES. All accounts receivable
set forth on the books and records of the Purchaser and its subsidiaries (i) are
accurately reflected in the books and records of the Purchaser and its
subsidiaries, (ii) are valid receivables owned by the Purchaser and its
subsidiaries, (iii) are not subject to counterclaims (other than customer debit
memos issued in the ordinary course of business), and (iv) to the knowledge of
the Purchaser and its subsidiaries, are collectible (subject to applicable
reserves as set forth on the books and records of the Purchaser and its
subsidiaries) in their recorded amounts in the ordinary course of business.
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4.8. EMPLOYEE BENEFIT PLANS; ERISA. With respect to each of
the Benefit Plans maintained by the Purchaser and its subsidiaries:
(a) each of the Benefit Plans has been administered in
compliance with its terms and in compliance with applicable law;
(b) there are no outstanding liabilities of, or with respect
to, any Benefit Plan, other than liabilities for administrative fees and
benefits to be paid in the ordinary course to participants in such Benefit Plan
and their beneficiaries in accordance with the terms of such Benefit Plan.
4.9. CONSENTS AND APPROVALS. No approval, order or consent of,
filing or registration with or notice or payment to, any foreign, federal,
state, county, local or other governmental or regulatory body, and no approval
or consent of, or filing with or notice or payment to, any other person is
required by or with respect to the Purchaser and the Merger Subsidiary in
connection with the execution and delivery by the Purchaser and the Merger
Subsidiary of this Agreement and the consummation and performance by them of the
transactions contemplated hereby.
4.10. NO CONFLICT. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, and the
performance by the Purchaser and the Merger Subsidiary of this Agreement in
accordance with its terms and conditions does not (a) conflict with or result in
the breach or violation of any of the terms or conditions of, or give rise to
any acceleration of the Purchaser's or the Merger Subsidiary's obligations or
constitute (or with notice or lapse of time or both would constitute) a default
under (i) the Articles of Incorporation or By-Laws of the Purchaser or the
Merger Subsidiary; (ii) any instrument, contract or other agreement by or to
which the Purchaser or the Merger Subsidiary is a party or by or to which it or
its assets or properties are bound or subject; (iii) any statute, law or
regulation of any jurisdiction or any order, writ, judgment, injunction, award
or decree of any court, arbitrator or governmental or regulatory body against,
or binding upon, the Purchaser or the Merger Subsidiary or its assets or
properties; or (iv) any license, franchise, approval, certificate, permit or
authorization applicable to the Purchaser or the Merger Subsidiary or any of its
assets; or (b) result in the creation of any lien, charge or encumbrance of any
nature, upon the assets or property of the Purchaser or the Merger Subsidiary.
4.11. LITIGATION. Except as set forth in Schedule 4.11 hereto,
there is no action, suit or proceeding pending or threatened, or any
investigation, at law or in equity, before any arbitrator, court or other
governmental authority, pending or threatened, nor any judgment, decree,
injunction, award or order outstanding, against or in any manner involving the
Purchaser or any of the Purchaser's properties or rights which (i) will have an
adverse effect upon the financial condition, results of operations, assets,
properties or business of the Purchaser, or (ii) might reasonably prevent the
consummation of the transactions contemplated by this Agreement.
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4.12. TAXES.
(a) The Purchaser has filed, or sought extension for filing,
all tax returns that it was required to file, and has paid all taxes indicated
on such returns for such periods. Except as set forth on Schedule 4.12, all such
tax returns were in all respects true, complete and correct and filed on a
timely basis.
(b) None of the income tax returns filed by, on behalf of or
with respect to the Purchaser is currently the subject of an audit, and no
notice of a planned audit has been received.
(c) The Purchaser has not waived any statute of limitations in
respect of taxes or agreed to any extension of time with respect to a tax
assessment or deficiency with respect to any tax return that is currently the
subject of audit.
4.13. LIENS. Except as set forth on Schedule 4.13, the
Purchaser owns outright and has good and marketable title to all of its assets,
properties and rights necessary to conduct its business as currently conducted,
in each case free and clear of any lien, claim or encumbrance.
4.14. CONTRACTS. All the material agreements, contracts,
arrangements or understandings, whether oral or written ("Purchaser Contracts")
to which the Purchaser or any of its subsidiaries is a party or by or to which
the assets or properties of the Purchaser or any of its subsidiaries are bound
or subject, including all amendments thereto, are valid and binding upon the
Purchaser or its subsidiaries, as applicable, and are, to the knowledge of the
Purchaser and its subsidiaries, in full force and effect. The Purchaser and its
subsidiaries, as applicable, are not in breach or default under any such
Purchaser Contract, nor, to the knowledge of the Purchaser and its subsidiaries,
is any other party to any such Purchaser Contract in breach or in default
thereunder, nor does any condition exist with respect to the Purchaser or its
subsidiaries, as applicable (or, to the knowledge of the Purchaser and its
subsidiaries, with respect to any other party to such Purchaser Contract) that
with notice or lapse of time or both would constitute a breach or default
thereunder, nor is there any dispute between the Purchaser or its subsidiaries
and any other party to any such Purchaser Contract. To the knowledge of the
Purchaser and its subsidiaries, all royalties that have been due and payable by
the Purchaser under any such Purchaser Contracts have been calculated properly
and paid in accordance with the terms of such Purchaser Contracts.
4.15. SUPPLIERS AND CUSTOMERS. The relationships of Purchaser
and its subsidiaries with their suppliers and customers are good commercial
working relationships consistent with industry conditions.
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4.16. REAL ESTATE.
(a) Each Lease to which the Purchaser or its subsidiaries is a
party (the "Purchaser Leases") is valid and binding and is in full force and
effect in accordance with its terms. No lessor or lessee is in default under any
of the Purchaser Leases and there is no existing condition, event or act which,
with notice or lapse of time or both would constitute a default under any of the
Purchaser Leases. There are no material disputes, oral agreements or forbearance
programs in effect as to any of the Purchaser Leases.
(b) To the Purchaser's and its subsidiaries' knowledge, all
components of all buildings, structures and other improvements included within
the real property used or occupied by the Purchaser, including but not limited
to the roofs and structural elements thereof and the heating, ventilation, air
conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water,
systems and facilities included therein, are in good working order and repair in
all material respects, adequate for the Purchaser or its subsidiaries, as
applicable, to own and operate its business in accordance with good industry
standards. The Purchaser's and its subsidiaries' use and occupancy of the real
property is in material compliance with all applicable laws, rules and
regulations of all governmental and quasi-governmental authorities having or
asserting jurisdiction thereover.
4.17. INSURANCE.
(a) The Purchaser and its subsidiaries have not, during the
past three fiscal years or in the current fiscal year, been denied, or had
revoked or rescinded any policy of property, casualty, liability, errors and
omissions, medical, dental, workers' compensation coverage, bond and surety
arrangements or other forms of insurance.
(b) With respect to each Insurance Policy to which the
Purchaser or its subsidiaries is a party, a named insured or otherwise the
beneficiary of coverage: (a) the policy is in full force and effect; (b) all
premiums due thereon have been paid in a timely manner and all premiums which
become due commencing with the date hereof, through and including the Closing
Date will be so paid by the Purchaser and its subsidiaries (other than
retroactive or retrospective premium adjustments that, as of the Closing Date,
have not been, but thereafter may be, required to be paid with respect to any
period ending prior to the Closing Date under comprehensive general liability
and workers' compensation insurance policies); and (c) no notice of cancellation
or termination has been received with respect to any such policy which has not
been replaced on substantially similar terms prior to the date of such
cancellation. The Purchaser and its subsidiaries have been covered during the
past five (5) years by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned period.
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4.18. INTELLECTUAL PROPERTY. The Purchaser and its
subsidiaries own or otherwise have the right or license to use the Purchaser
Intellectual Property (as defined below) (and, to the Purchaser's and its
subsidiaries' knowledge, the sole right or license with respect to trademarks)
used in the Purchaser's business as currently conducted. All Purchaser
Intellectual Property used in the Purchaser's and its subsidiaries' business
that has been created or developed by employees of the Purchaser and its
subsidiaries is work for hire and the Purchaser or its subsidiaries owns all
such rights to such creations and developments free and clear of all liens. To
the Purchaser's and its subsidiaries' knowledge, no claims are currently being
asserted by any person involving or questioning the Purchaser's and its
subsidiaries sole right to use any of the Purchaser Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
similar agreement. To the knowledge of the Purchaser and its subsidiaries, the
use of the Purchaser Intellectual Property by the Purchaser and its subsidiaries
does not infringe the rights of any person nor, is any infringing use currently
ongoing by any person.
"Purchaser Intellectual Property" shall mean all of the
following, irrespective of where any of the same were issued, are pending or
exist that are owned by or issued to the Purchaser and its subsidiaries and that
have been, are or are proposed to be used: United States and foreign patents of
any description, and applications therefor; United States (federal and state)
and foreign trademarks (and goodwill associated therewith) and other trade
names, labels, trade dress, advertising and package designs, and other trade
rights, whether or not registered and all applications therefor; United States
and foreign copyrights, whether or not registered and all applications therefor
(including copyrights in computer software and computer software documentation,
source code and systems documentation); trade secrets, data, license agreements
and other agreements of every kind and character relating to any of the
foregoing; and all claims and causes of action relating to any of the foregoing,
including claims and causes of action for past infringement.
4.19. CORPORATE RECORDS. The Purchaser has given the Sellers'
Representative access to all the tax, accounting, corporate and financial books
and records relating to the business of the Purchaser and its subsidiaries. Such
books and records have been maintained on a current basis, are true and complete
and fairly reflect the financial condition and results of operations of the
Purchaser and its subsidiaries as of the dates thereof and the periods ended.
The minute books of the Purchaser and its subsidiaries contain complete and
accurate records of all meetings and other corporate actions of its Board of
Directors (including committees of the Board of Directors) and shareholders and
have been made available to the Sellers' Representative for review.
4.20. INVESTMENT PURPOSE. The Purchaser is acquiring the
Shares for its own account for investment purposes only and not with a view to,
or for sale in connection with, any distribution thereof. The Purchaser will not
sell the Shares except in compliance with the registration requirements of the
Securities Act or in a transaction exempted therefrom.
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<PAGE> 28
4.21. COMPLIANCE WITH LAWS. The Purchaser is in compliance
with, and its operations have been conducted in accordance with, all laws
applicable to the Purchaser or its business.
5. THE OBLIGATIONS OF THE SELLERS AND THE COMPANY
BEFORE THE CLOSING DATE
The Company and the Sellers jointly and severally covenant
that, prior to the Closing:
5.1. PURCHASER'S ACCESS TO PREMISES AND INFORMATION. The
Purchaser and its attorneys, accountants, financial advisers, consultants,
representatives and agents shall have full access at the times agreed to by the
representatives of the Company to the Company's and the Subsidiary's premises
and, upon reasonable notice, to all the Company's and the Subsidiary's
properties, books, accounts, records, contracts, and documents. The Sellers
shall furnish or cause to be furnished to the Purchaser and its agents all data
and information concerning the Business, finances and properties of the Company
and the Subsidiary that may be reasonably requested by the Purchaser. Except as
and to the extent required by law, the Purchaser will not disclose or use, and
will direct its representatives not to disclose or use to the detriment of the
Sellers, any Confidential Information (as defined below) with respect to the
Company, the Subsidiary or the Sellers which is furnished, or which is to be
furnished by the Sellers or their respective representatives at any time or in
any manner other than in connection with its evaluation of the consummation of
the transaction contemplated by this Agreement. For purposes of this Section
5.1, "Confidential Information" means any information concerning the Company,
the Subsidiary or any Seller that is furnished to the Purchaser and its agents
pursuant to this Section 5.1, unless, (i) such information is already known to
the receiver of the information or its representatives or to others not bound by
a duty of confidentiality or such information becomes publicly available through
no fault of the receiver of the information or its representatives, (ii) the use
of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereby, (iii) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings or (iv) such information has been independently developed by the
Purchaser without violating any of the Purchaser's obligations under this
Section 5.1. Upon the written request of either any of the Sellers or the
Company, the receiver of any Confidential Information will promptly return such
information to the provider of the Confidential Information or destroy any
Confidential Information in its possession and certify in writing to the
provider of the Confidential Information that it has done so.
5.2. EMPLOYEES AND COMPENSATION. The Sellers shall cause the
Company and the Subsidiary to not, without the written consent of the Purchaser,
or except as otherwise permitted herein or as required under existing written
contracts, do, or agree to do, any of the
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following acts except in the ordinary course of business and consistent with
past practice: (i) grant any increase in salaries payable or to become payable
to, or pay any bonus to, any officer, employee, sales agent, or representative
of the Company or the Subsidiary; or (ii) increase benefits payable to any
officer, employee, sales agent, or representative of the Company or the
Subsidiary under any bonus or Benefit Plan or other contract or commitment
except pursuant to the provisions of such Benefit Plan or contract.
5.3. CONTROLLED ACTS. The Sellers shall not, and the Sellers
shall cause the Company and the Subsidiary to not, without the prior written
consent of the Purchaser, do or agree to do any of the following acts:
(a) take or suffer or permit any actions that are within its
control which would render untrue any of the representations or warranties of
the Sellers, or omit to take any action within its control, the omission of
which would render untrue any such representation or warranty;
(b) reveal, orally or in writing, to any party, other than to
the Purchaser, or to others in the ordinary course of business or as required by
law, any of the business procedures and practices followed by the Company and
the Subsidiary in the conduct of the Business;
(c) enter into any contract, commitment, or transaction not in
the usual and ordinary course of its business;
(d) make any capital expenditures or commitments therefor in
excess of $10,000 for any single item or $50,000 in the aggregate, or enter into
any leases of capital equipment or property, or commitments therefor, under
which the annual aggregate lease charges are in excess of $10,000, except for
lease of warehouse space in New Jersey;
(e) sell or dispose of any capital assets with a value in
excess of $10,000 for any single item or $50,000 in the aggregate;
(f) change the name or any trade name of the Company or the
Subsidiary or change the nature of the Business of the Company or the Subsidiary
as currently conducted;
(g) adopt or modify any employment agreement or Benefit Plan;
(h) authorize its merger or consolidation or the sale of all
or substantially all of its assets;
(i) change its accounting methods or practices or make any
change in depreciation or amortization policies or rates adopted by it;
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<PAGE> 30
(j) amend its Articles of Incorporation or By-Laws or
terminate its corporate existence;
(k) conduct its business other than in material compliance
with all applicable Laws;
(l) materially change any of its business policies, including,
without limitation, advertising, marketing, pricing, purchasing, personnel,
sales, credit, rebates, returns, budget or product acquisition policies, or its
discount structure;
(m) make any payment or commitment to pay any severance or
termination amount to any of its officers, directors, employees, consultants or
agents other than in the ordinary course of business;
(n) guarantee any debt, obligation or liability;
(o) declare, set aside, make or pay any dividend or other
distribution with respect to its capital stock, or retire or redeem any of such
capital stock, or take any action which would have an effect equivalent to any
of the foregoing;
(p) issue or sell any shares of its capital stock or options,
warrants, calls, rights or commitments with respect thereto;
(q) agree to waive or compromise any material right or claim
other than in the ordinary course of business; or
(r) modify, amend, cancel, or terminate any of its existing
Contracts, or agree to do any of those acts, except in the original course of
business.
5.4. NO SHOP. The Sellers shall not, and shall cause the
Company and the Subsidiary not to, conduct any discussions or solicit, receive
or entertain any proposals relating to the merger of the Company, the sale of
the capital stock or any of the assets of the Company, except for sales of
inventory in the ordinary course of business and except for the transactions
contemplated by this Agreement. No Seller shall conduct any discussions or
solicit, receive or entertain any proposals relating to the sale of the Shares.
5.5. BEST EFFORTS. The Sellers and the Company will use their
best efforts to take, or cause to be taken, all action, and to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement.
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<PAGE> 31
5.6. LEGAL PROCEEDINGS. The Sellers shall promptly notify the
Purchaser of any legal proceedings which after the date hereof are threatened or
commenced against the Company, the Subsidiary or against any officer, director,
employee, consultant, agent or shareholder of the Company or the Subsidiary with
respect to the affairs of the Company or the Subsidiary or with respect to the
transactions contemplated by this Agreement, and each Seller shall promptly
notify the Purchaser of any legal proceedings which after the date hereof are
threatened or commenced against such Seller with respect to the Shares or the
transfer thereof or with respect to the transactions contemplated by this
Agreement.
5.7. NO DEFAULT OR VIOLATION. Except as otherwise consented to
in writing by the Purchaser, prior to the Closing, the Sellers shall not and the
Sellers shall cause the Company and the Subsidiary to not knowingly (i) violate,
or commit a breach of or a default under, any Contract or (ii) violate any law.
5.8. TAX PAYMENTS; TAX RETURNS; ETC. The Sellers shall cause
the Company and the Subsidiary to timely file all tax returns of the Company and
the Subsidiary for all periods ending prior to the Closing Date and shall pay
the taxes related to such tax returns. The Sellers shall cause the Company and
the Subsidiary to withhold from payments to its employees all amounts required
to be withheld for taxes and shall pay such taxes when due to the appropriate
government agencies.
5.9. SUPPLEMENTS TO DISCLOSURE SCHEDULES. From time to time
prior to the Closing, the Sellers shall deliver to the Purchaser information
that was not known to Sellers on the date hereof ("Update Information") and
which supplements or amends the representations, warranties and/or disclosures
in this Agreement (including, without limitation, the Schedules hereto) in order
to make the information set forth therein timely, complete and accurate within
five days after the Update Information becomes known (but in any event before
the Closing). Subject to Section 12.2(b) hereof, any covenant, representation or
warranty of the Seller herein which is affected by such supplemental or amended
information shall be deemed to have been amended accordingly.
5.10 WITHDRAWAL LIABILITY . The Sellers shall use their best
efforts to obtain an estimate of the Company's withdrawal liability ("Estimate
of Withdrawal Liability") with respect to the Retail, Wholesale and Department
Store International Union and Industrial Pension Fund.
6. THE PURCHASER'S AND THE MERGER SUBSIDIARY'S
OBLIGATIONS BEFORE THE CLOSING DATE
The Purchaser and the Merger Subsidiary jointly and severally
covenant that, prior to the Closing:
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<PAGE> 32
6.1. CONTROLLED ACTS. The Purchaser shall not, without the
prior written consent of the Sellers, do or agree to do any of the following
acts:
(a) amend its Articles of Incorporation in a manner that could
have a dilutive effect on the Purchaser Shares or terminate its corporate
existence;
(b) conduct its business other than in material compliance
with all applicable Laws;
(c) make any payment or commitment to pay any severance or
termination amount to any of its shareholders except in the ordinary course of
business and consistent with past practice;
(d) declare, set aside, make or pay any dividend or other
distribution with respect to its capital stock, or retire or redeem any of such
capital stock, or take any action which would have an effect equivalent to any
of the foregoing; or
(e) agree to waive or compromise any material right or claim
other than in the ordinary course of business.
6.2. BEST EFFORTS. The Purchaser and the Merger Subsidiary
will use its best efforts to take, or cause to be taken, all action, and to do,
or cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
6.3. LEGAL PROCEEDINGS. The Purchaser shall promptly notify
the Sellers of any legal proceedings which after the date hereof are threatened
or commenced against the Purchaser or the Merger Subsidiary with respect to the
transactions contemplated by this Agreement.
6.4. NO DEFAULT OR VIOLATION. Except as otherwise consented to
in writing by the Sellers, prior to the Closing, the Purchaser and the Merger
Subsidiary shall not knowingly (i) violate, or commit a breach of or a default
under, any Contract or (ii) violate any law.
6.5. TAX PAYMENTS, TAX RETURNS; ETC. The Purchaser shall
timely file all tax returns of the Purchaser for all periods ending prior to the
Closing Date and shall pay the taxes related to such tax returns. The Purchaser
shall withhold from payments to its employees all amounts required to be
withheld for taxes and shall pay such taxes when due to the appropriate
government agencies.
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<PAGE> 33
7. CONDITIONS PRECEDENT TO THE PURCHASER'S AND THE
MERGER SUBSIDIARY'S PERFORMANCE
The obligations of the Purchaser and the Merger Subsidiary to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or before the Closing, of all of the following conditions:
7.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Sellers and the Company in this
Agreement, including in any Schedule hereto, shall be true in all material
respects on and as of the Closing as though made at that time. Each Seller and
the Company shall have delivered to the Purchaser at Closing a certificate so
certifying to this and to the matters set forth in Sections 7.2 and 7.6.
7.2. PERFORMANCE OF THE COMPANY AND THE SELLERS. The Company
and each Seller shall have performed and complied in all material respects with
all covenants and agreements, and satisfied all conditions, that it is required
by this Agreement to perform, comply with, or satisfy on or before the Closing
Date.
7.3. NO INJUNCTION. Neither the Purchaser, the Merger
Subsidiary, the Company nor any Seller shall be subject to any order, decree or
injunction of a court of competent jurisdiction within the United States which
prevents or materially delays the consummation of the transactions contemplated
by this Agreement.
7.4. NO LEGAL PROCEEDING. No legal action or proceeding shall
have been instituted or threatened seeking to restrain, prohibit or invalidate
consummation of the transactions contemplated by this Agreement. No court or
governmental or regulatory authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary, preliminary or
permanent) or taken any action which prohibits the consummation of the
transactions contemplated by this Agreement or imposes material restrictions on
the Purchaser in connection with consummation of the transactions contemplated
hereby or with respect to the business of the Company subsequent to such
transactions or which imposes any material limitation on the ability of the
Purchaser effectively to exercise full rights of ownership of the Shares of the
Company.
7.5. DIVIDENDS; SECURITIES; COMPENSATION. Since December 31,
1996, no dividends shall have been declared or paid by the Company; no Shares
shall have been purchased by the Company; and no change shall have been made to
any compensation arrangements with employees of the Company between December 31,
1996 and the Closing Date other than increases in employee compensation in the
ordinary course of business and consistent with prior practice, which shall in
no event exceed 5% of aggregate employee payroll.
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<PAGE> 34
7.6. OPINION OF COUNSEL. The Purchaser shall have received an
opinion from Silverman & Weinraub, in the form attached as Exhibit A hereto.
7.7. APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions, and other documents delivered to the
Purchaser under this Agreement shall be satisfactory in all reasonable respects
to the Purchaser and its counsel.
7.8. OWNERSHIP OF SHARES. There shall be no securities of the
Company issued or outstanding other than the Shares. The Purchaser shall have
received evidence reasonably satisfactory to it that all options, warrants,
calls, rights and convertible securities or agreements of a similar nature with
respect to the Company's capital stock have been cancelled. All shares shall be
owned beneficially and of record by the Sellers free and clear of any Lien.
7.9. RECEIPT OF SHARES. The Purchaser shall have received,
free and clear of any liens, pledges, charges, encumbrances, claims, options or
equity, certificates representing the Shares duly endorsed in blank or
accompanied by stock powers or other instruments of transfer duly executed in
blank, together with certificates representing all of the equity securities of
the Subsidiary, against delivery of the Purchaser Shares to the Sellers set
forth on Schedule A hereto, free and clear of any liens, pledges, charges,
encumbrances, claims, options or equity, or cash, as the case may be as set
forth on Schedule A attached hereto.
7.10. DUE DILIGENCE. Following a "due diligence" examination
of the business, liabilities, operations, assets, books and finances of the
Business, Purchaser has not reasonably determined that any of the Company's or
the Sellers' representations and warranties set forth herein are untrue or
incorrect in any material respect based on information contained in documents
described on Schedule 7.10 hereto.
7.11. IPO COMPLETION. The Purchaser shall have closed its
Initial Public Offering.
8. CONDITIONS PRECEDENT TO THE SELLERS' AND THE
COMPANY'S PERFORMANCE
The obligations of the Company and the Sellers to consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or before the Closing, of all of the following conditions:
8.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Purchaser and the Merger Subsidiary
in this Agreement shall be true in all material respects on and as of the
Closing as though made at that time except as a result of any acquisitions or
actions taken in furtherance of the Purchaser's initial public offering. The
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Purchaser and the Merger Subsidiary shall have delivered to the Sellers at
Closing a certificate so certifying to both this and to the matters set forth in
Section 8.2.
8.2. THE PURCHASER'S PERFORMANCE. The Purchaser and the Merger
Subsidiary shall have performed and complied in all material respects with all
covenants and agreements, and satisfied all conditions, that they are required
by this Agreement to perform, comply with, or satisfy, on or before the Closing
Date.
8.3. NO INJUNCTION. Neither the Purchaser, the Company, the
Merger Subsidiary nor any Seller shall be subject to any order, decree or
injunction of a court of competent jurisdiction within the United States which
prevents or materially delays the consummation of the transactions contemplated
by this Agreement.
8.4. NO LEGAL PROCEEDING. No legal action or proceeding shall
have been instituted or threatened seeking to restrain, prohibit or invalidate
consummation of the transactions contemplated by this Agreement. No court or
governmental or regulatory authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary, preliminary or
permanent) or taken any action which prohibits the consummation of the
transactions contemplated by this Agreement or imposes material restrictions on
the Sellers or the Company in connection with consummation of the transactions
contemplated hereby or which imposes any material limitation on the ability of
the applicable Sellers set forth on Schedule A hereto effectively to exercise
full rights of ownership of the Purchaser Shares.
8.5. DIVIDENDS; SECURITIES; COMPENSATION. Except as provided
for herein, since September 1, 1997, no dividends shall have been declared or
paid by the Purchaser; no shares of common stock of the Purchaser shall have
been purchased by the Purchaser; and no change shall have been made to any
compensation arrangements with employees of the Purchaser between the date
hereof and the Closing Date other than increases in employee compensation in the
ordinary course of business and consistent with prior practice.
8.6. OPINION OF COUNSEL. The Sellers shall have received an
opinion from Atlas, Pearlman, Trop & Borkson, P.A., in the form attached as
Exhibit B hereto.
8.7. APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions, and other documents delivered to the
Sellers under this Agreement shall be satisfactory in all reasonable respects to
the Seller and their counsel.
8.8. RECEIPT OF CONSIDERATION. In accordance with Schedule A
attached hereto, each Seller shall have received from the Purchaser cash or
certificates representing the Purchaser Shares, free and clear of any liens,
pledges, charges, encumbrances, claims, options or equity, against delivery of
the Shares to the Purchaser.
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<PAGE> 36
8.9. ASSUMPTION OF OBLIGATIONS. The Purchaser shall have
agreed in writing to assume the Company's liabilities under the documents
described on Schedule 3.9(b) and under the Company's lease for the property at
38 East 32nd Street, New York, New York.
8.10. IPO COMPLETION. The Purchaser shall have closed its
Initial Public Offering.
9. SURVIVAL AND INDEMNITY
9.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Notwithstanding any right of a party hereunder fully to investigate the affairs
of another party, the Purchaser and the Merger Subsidiary have the right to rely
fully upon the representations and warranties of the Sellers and the Company
contained in this Agreement, and the Sellers and the Company have the right to
rely fully upon the representations and warranties of the Purchaser and the
Merger Subsidiary contained in this Agreement. All such representations and
warranties shall survive the execution and delivery hereof and the Closing
hereunder as follows: (i) all representations and warranties that are based on
items that are capable of review as part of the audit process shall survive
until issuance of the first independent audit report following the Closing; (ii)
all other representations and warranties shall survive until the first
anniversary of the Closing; and (iii) the indemnification set forth in Section
9.3(c) shall survive for a period of three (3) years following the first
anniversary of the Closing. The indemnification obligations of any Indemnifying
Party (as hereinafter defined) under Section 9.3(a), 9.4 or 9.5(a) shall not
continue beyond the survival period indicated above unless a notice of an
Indemnifiable Claim (as hereinafter defined) shall be delivered prior to the
expiration of such period. If such a notice is delivered prior to the expiration
of such period an indemnification obligation with respect to such Indemnifiable
Claim shall continue until final disposition thereof. The covenants and
agreements contained herein shall survive until fully performed or discharged.
9.2. DEFINITIONS. The following capitalized terms shall have
the following meanings when used in this Article 9:
(a) "Indemnified Party" shall mean any party hereto entitled
to indemnification hereunder.
(b) "Indemnifiable Claim" shall mean any claim which, if
sustained, would result in a Loss or Liability.
(c) "Indemnifying Party" shall mean any party hereto required
to provide indemnification to another party hereunder.
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<PAGE> 37
(d) "Liability" or "Liabilities" shall mean any direct or
indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, including, without limitation, liabilities on account of taxes,
other governmental charges or legal proceedings.
(e) "Loss" or "Losses" shall mean any and all Liabilities,
losses, damages, costs, or expenses (including, without limitation, the fees and
expenses of counsel).
9.3. INDEMNIFICATION BY THE SELLERS. Subject to the
limitations set forth in Section 9.1, (i) at all times after the date of this
Agreement until the Closing, each Seller jointly and severally with the Company
shall indemnify, hold harmless and defend the Purchaser, the Merger Subsidiary
and their respective officers, directors, shareholders and employees, and (ii)
at all times after the Closing, the Sellers severally shall indemnify, hold
harmless and defend the Purchaser, the Surviving Corporation and their
respective officers, directors, shareholders and employees against and in
respect of:
(a) any and all Losses and Liabilities arising out of or in
connection with or based upon the inaccuracy of any representation or warranty
made by the Company or the Sellers herein (other than in Article 2 hereof), or
in any certificate delivered pursuant hereto;
(b) any and all Losses and Liabilities arising out of or in
connection with or based upon the breach by the Company or the Sellers of any
agreement or covenant made herein; and
(c) any and all Losses and Liabilities arising out of or in
connection with any pension liability in excess of $50,000 associated with the
union members of the Company;
PROVIDED that each Seller shall only be liable under this Section 9.3 for his or
its Percentage Interest of any Losses and Liabilities referenced in this Section
9.3. "Percentage Interest" shall mean, with respect to each Seller, the
percentage indicated opposite such Seller's name on Schedule A hereto.
9.4. INDEMNIFICATION BY THE SELLERS AS TO CERTAIN
REPRESENTATIONS AND WARRANTIES. Subject to the limitations set forth in Section
9.1, at all times after the date of this Agreement, each Seller shall indemnify,
hold harmless and defend the Purchaser, the Merger Subsidiary, the Surviving
Corporation and their respective officers, directors, shareholders and employees
against and in respect of any and all Losses and Liabilities arising out of or
in connection with or based upon the inaccuracy of any representation or
warranty made by such Seller in Article 2 hereof, or in any certificate relating
to any such representation or warranty delivered pursuant hereto.
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<PAGE> 38
9.5. INDEMNIFICATION BY THE PURCHASER. Subject to the
limitations set forth in Section 9.1, the Purchaser shall indemnify, hold
harmless and defend the Sellers at all times after the date of this Agreement,
against and in respect of:
(a) any and all Losses and Liabilities arising out of or in
connection with or based upon the inaccuracy of any representation or warranty
made by the Purchaser or the Merger Subsidiary herein, or in any certificate
delivered pursuant hereto;
(b) any and all Losses and Liabilities arising out of or in
connection with or based upon the breach by the Purchaser or the Merger
Subsidiary of any agreement or covenant made herein; and
(c) any and all Losses and Liabilities in excess of $50,000
associated with the UDI Medical Plan.
9.6. DEFENSE OF CLAIMS. If any action, suit, claim,
proceeding, demand, assessment or enforcement action is filed or initiated
against any Indemnified Party hereunder, the Indemnified Party shall give
written notice thereof to the Indemnifying Party or parties as promptly as
practicable (and in any event within 30 days after the service of the citation
or summons); PROVIDED, HOWEVER, that the failure of any Indemnified Party to
give timely notice shall not affect the rights of such party to indemnification
hereunder except to the extent that the Indemnifying Party demonstrates actual
damage caused by such failure. Such notice shall be deemed to have been given by
the Indemnified Party at the Closing with respect to any action, suit, claim,
proceeding, demand, assessment or enforcement action that commenced prior to the
Closing. After such notice and a reasonable period of time to allow for analysis
of the relevant claim, if the Indemnifying Party shall acknowledge in writing to
such Indemnified Party that such Indemnifying Party shall be obligated under the
terms of its indemnity hereunder for all Losses of the Indemnified Party in
connection with such action, suit, claim, proceeding, demand, assessment or
enforcement action (subject to the following sentence), then the Indemnifying
Party shall be entitled, if it so elects and with counsel reasonably
satisfactory to the Indemnified Party, to take control of the defense and
investigation of such action, suit, claim, proceeding, demand, assessment or
enforcement action, and to employ and engage attorneys to handle and defend the
same, at the Indemnifying Party's cost, risk and expense; and the Indemnified
Party shall cooperate in all reasonable respects, at the Indemnifying Party's
request and cost, risk, and expense, with the Indemnifying Party and its
attorneys in the investigation, trial and defense of such action, suit, claim,
proceeding, demand, assessment or enforcement action, and any appeal arising
therefrom; PROVIDED, HOWEVER, that the Indemnified Party may, at its own cost,
participate in such investigation, trial and defense of such action, suit,
claim, proceeding, demand, assessment or enforcement action, and any appeal
arising therefrom; and PROVIDED, FURTHER, that the Indemnifying Party shall have
an obligation to keep the Indemnified Party apprised of the status of the
action, suit, claim, proceeding, demand, assessment or enforcement action, to
furnish the Indemnified Party with all documents and information that the
Indemnified
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<PAGE> 39
Party shall reasonably request in connection therewith, and to consult with the
Indemnified Party prior to acting on major matters involved in such action,
suit, claim, proceeding, demand, assessment or enforcement action, including
settlement discussions, it being understood that no settlement of any action for
which indemnification may be payable hereunder shall be made without the prior
written consent of the Indemnified Party. Notwithstanding any other provision of
this Article 9, if an Indemnified Party withholds its consent to a settlement or
elects to defend any claim, where but for such action the Indemnifying Party
could have settled such claim, the Indemnifying Party shall be required to
indemnify the Indemnified Party only up to a maximum of the bona fide settlement
offer for which the Indemnifying Party could have settled such claim. The
Indemnified Party shall be entitled to defend, settle or proceed in such other
manner as it deems fit, in its sole discretion, in connection with any action,
suit, claim, proceeding, demand, assessment or enforcement action as to which
the Indemnifying Party has not acknowledged its obligations in writing in
accordance with the second sentence of this Section 9.6; and no actions taken by
the Indemnified Party in connection therewith shall affect or limit the
obligations of the Indemnifying Party pursuant to this Article 9. If the
Indemnified Party does not have control over any proceeding described in this
Article 9 and the Indemnified Party determines that it desires to settle its
claim in such proceeding it shall have the right to do so without the consent of
the Indemnifying Party, provided that in such event, the Indemnified Party shall
lose the benefits of any indemnification provided by this Article 9 with respect
to such proceeding.
9.7. INDEMNIFICATION AS SOLE REMEDY . Except as otherwise
provided in this Agreement, the sole remedy of the parties hereto for a
misrepresentation or breach of a representation or warranty contained in
Articles 2, 3 and 4 of this Agreement shall be a claim for indemnification under
this Article 9. Any indemnification payments to the Purchaser shall be paid by
the Sellers in cash (if the Sellers were paid for their Shares in cash according
to Schedule A attached hereto) or Purchaser Shares (if such Sellers were paid
for their Shares in Purchaser Shares according to Schedule A attached hereto),
which Purchaser Shares shall have a valuation of the price per share in the
initial public offering for this purpose. If any Seller has sold his or its
Purchaser Shares, then the Purchaser's recourse under this Article (shall be the
proceeds of such sale).
9.8. APPOINTMENT OF REPRESENTATIVE. Each of the Sellers hereby
appoints Robert J. Gillon, Jr., or if Robert J. Gillon, Jr. is unwilling or
unable to serve, Anthony Taranto as the Sellers' Representative (the "Sellers'
Representative") as his or its exclusive agent to act on his or its behalf with
respect to (i) the rights and obligations granted to the Sellers' Representative
under this Agreement and (ii) any and all claims for indemnity by or against any
Seller arising under this Agreement. The Sellers' Representative shall take, and
the Sellers agree that the Sellers' Representative shall take, any and all
actions which he believes are necessary or appropriate under this Agreement for
and on behalf of the Sellers, as fully as if the Sellers were acting on their
own behalf, including, without limitation, asserting claims for indemnity
against the Purchaser, defending against all claims for indemnity by the
Purchaser, consenting to, compromising or settling all claims for indemnity,
conducting negotiations with
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<PAGE> 40
the Purchaser and its representatives regarding such claims, taking any and all
other actions specified in or contemplated by this Agreement and engaging
counsel, accountants or other representatives in connection with the foregoing
matters. The Purchaser shall have the right to rely upon all actions taken or
omitted to be taken by the Sellers' Representative pursuant to this Agreement,
all of which actions or omissions shall be legally binding upon each of the
Sellers. If neither Robert J. Gillon, Jr. nor Anthony Taranto shall at any time
be willing or able to serve as the Sellers' Representative, the majority in
number of the Sellers shall inform the Purchaser as to the identity of the new
Sellers' Representative within ten days of learning that neither Robert J.
Gillon, Jr. nor Anthony Taranto shall be willing or able to so serve.
9.9. LIMITATIONS ON INDEMNIFICATION.
(a) The Sellers and the Company shall not be required to
indemnify the Purchaser and the Merger Subsidiary for any Loss unless the
aggregate amount of Losses exceeds $50,000, and then for the aggregate amount of
all Losses (not just those over $50,000).
(b) The Purchaser and the Merger Subsidiary shall not be
required to indemnity the Sellers and the Company for any Loss unless the
aggregate amount of Losses exceeds $50,000, and then for the amount of all
Losses (not just those over $50,000).
10. COVENANTS
10.1. NON-COMPETITION. The Sellers acknowledge that the
Purchaser would not purchase the Shares but for the covenant not to compete
contained in this Section 10.1. Accordingly, each Seller covenants and agrees
that during the period from the Closing Date until the date which is 18 months
following the Closing Date (the "Restricted Period") he will not, directly or
indirectly (i) engage in any business or activity competitive with the Purchaser
or its subsidiaries; (ii) enter the employ of, or render any services to, any
person engaged in such prohibited activities described in clause (i) above; or
(iii) become interested in any such person described in clause (ii) above as an
individual, partner, member, shareholder, officer, director, principal, agent,
employee, trustee, consultant or in any other relationship or capacity;
PROVIDED, HOWEVER, that the Seller may own, directly or indirectly, solely as an
investment, securities of any entity which are traded on any national securities
exchange if such Seller does not, directly or indirectly, own 1% or more of any
class of securities of such person. Nothing contained in this Section 10.1 shall
be deemed to change any non-competition periods set forth in any other agreement
between any Seller and the Company or the Purchaser which currently exists and
is listed on Schedule 10.1 or which is entered into after the Closing.
10.2. CONFIDENTIALITY. During the Restricted Period, each
Seller shall keep secret and retain in strictest confidence, and shall not use
for the benefit of himself or others, all confidential matters relating to the
Business (including, without limitation, the terms and provisions of this
Agreement), including, without limitation, trade "know-how," secrets,
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<PAGE> 41
intellectual property, customer lists, pricing policies, operational methods,
marketing plans or strategies, product development techniques or plans, methods
of manufacture, technical processes, designs and design projects, inventions and
research projects and other business affairs relating to the Business, and shall
not disclose them to anyone other than to the Purchaser or the Purchaser's
affiliates. Following the Restricted Period, each Seller shall keep secret and
retain in strictest confidence from all competitors of the Company and its
subsidiaries, from time to time, all such confidential matters relating to the
Business and shall not use for the benefit of himself, itself or others any such
confidential matters in competition with the Business as conducted at the end of
the Restricted Period.
10.3. NONSOLICITATION. During the Restricted Period, each
Seller shall not, directly or indirectly, hire, solicit or encourage to leave
the employment of the Company any employee of the Company employed by the
Company during the 12-month period preceding the Closing Date or hire any such
employee who has left the employment of the Company during the Restricted
Period.
10.4. RIGHTS AND REMEDIES. If a party breaches, or threatens
to commit a breach of, any of the provisions of Sections 10.1 - 10.3, inclusive
(the "Restrictive Covenants"), the nonbreaching party shall have the following
right and remedy, which shall be in addition to, and not in lieu of, any other
rights and remedies available to the non-breaching party under law or in equity:
the right and remedy to have the Restrictive Covenants specifically enforced by
any court having equity jurisdiction, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury to the
non-breaching party and that money damages will not provide adequate remedy to
the non-breaching party.
10.5. SEVERABILITY. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
10.6. DURATION. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration of such provision or the area covered thereby, such court shall have
the power to reduce the duration or area of such provision and, in its reduced
form, such provision shall then be enforceable and shall be enforced.
11. OTHER AGREEMENTS
11.1. EXPENSES. The Purchaser and the Merger Subsidiary on the
one hand, and the Sellers and the Company on the other hand, shall each bear
their own expenses (including those of counsel, accountants and investment
bankers) incurred by each of them in connection with this Agreement and the
transactions contemplated hereby.
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<PAGE> 42
11.2. REPORTING REQUIREMENTS. After the initial public
offering of the Purchaser's securities (the "Initial Public Offering"), the
Purchaser will file the reports required to be filed by it under the Securities
Exchange Act of 1934, and it will take such further action as the Sellers may
reasonably request to the extent required to enable the Sellers to sell
Purchaser Shares without registration under the Securities Act within the
limitation of the exemption provided by Rule 144 under the Securities Act.
11.3. RESTRICTIONS ON SALE OF PURCHASER SHARES. Prior to an
Initial Public Offering, the Sellers hereby agree to sign lock-up agreements
substantially similar to those signed at such time by the founders of the
Purchaser.
11.4. COMMUNICATIONS. Without the prior consent of the parties
hereto, between the date hereof and the Closing Date, neither the Sellers, the
Company, the Purchaser, the Merger Subsidiary nor any of the officers,
directors, employees, affiliates, stockholders or agents of any of them, shall
make any statement or public announcement or any release to trade publications
on through the press or otherwise, or make any statement to any competitor,
customer or any other third party, with respect to the transaction contemplated
hereby; provided, however, that nothing contained herein shall prevent (i) a
party from communicating with those employees who will be involved in
facilitating the consummation of the transaction contemplated hereby; (ii) the
Purchaser from disclosing this transaction to its lenders, prospective
underwriters of an Initial Public Offering, and other acquisition candidates and
their respective stockholders; and (iii) the disclosure of this transaction by
the Purchaser in the registration statement and in connection with an Initial
Public Offering.
12. AMENDMENT; TERMINATION
12.1. AMENDMENT. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
12.2. TERMINATION.
(a) This Agreement may be terminated (i) by the mutual consent
of the parties hereto; (ii) by the Purchaser or any Seller at any time after
September 30, 1998 if for any reason the Closing shall not have occurred and
such failure to close the transaction is not caused by a breach of this
Agreement by the terminating party; (iii) by the Purchaser if there has been a
misrepresentation or breach on the part of the Sellers or the Company in the
representations, warranties and covenants of the Sellers and the Company set
forth herein which has not been cured within 10 business days of notice thereof
by the Purchaser and which breach, if not cured, would cause a failure of one or
more of the conditions set forth in Article 7; (iv) by the Sellers if there has
been a misrepresentation or breach on the part of the Purchaser or the Merger
Subsidiary in the representations, warranties and covenants of the Purchaser and
the Merger Subsidiary set forth herein which has not been cured within 10
business days of notice thereof
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<PAGE> 43
by the Sellers and which breach, if not cured, would cause a failure of the
conditions set forth in Article 8; (v) by the Purchaser, if by September 30,
1998, the Purchaser has satisfied all conditions to Closing set forth in Article
8 and is ready, willing and able to consummate the transactions contemplated
hereby, but the Sellers have not satisfied all conditions to Closing set forth
in Article 7 by such date; (vi) by the Sellers, if by September 30, 1998, the
Sellers have satisfied all conditions to closing set forth in Article 7 and are
ready, willing and able to consummate the transactions contemplated hereby, but
the Purchaser has not satisfied all conditions to Closing set forth in Article 8
by such date; and (vii) by the Purchaser or the Sellers if any court of
competent jurisdiction or other competent governmental or regulatory authority
shall have issued an order making illegal or otherwise restricting, preventing
or prohibiting the transactions contemplated by this Agreement and such order
shall have become final and nonappealable.
(b) In addition to (a) above, this Agreement may be terminated
at any time prior to the Closing by the Purchaser following delivery of any
supplemental or amended Schedule to this Agreement pursuant to Section 5.9
hereof, if the Purchaser reasonably determines the new or changed provisions of
such Schedule, together with prior supplemental or amended Schedules delivered
under Section 5.9, disclose, individually or in the aggregate, that any of the
Sellers' representations and warranties set forth herein are untrue or incorrect
in any material respect.
12.3. EFFECT OF TERMINATION. If this Agreement is validly
terminated pursuant to Section 12.2, this Agreement will forthwith become null
and void and there will be no liability or obligation on the part of any party
hereto (or any of their respective representatives or Affiliates), except (i)
that the provisions of the last three sentences of Section 5.1, Article 9 and
Sections 11.1 and 11.4 will continue to apply following any such termination and
(ii) that notwithstanding anything contained in Section 12.2, nothing contained
herein shall relieve or limit any party hereto from liability for breach of its
representations, warranties, covenants or agreements contained in this
Agreement.
13. MISCELLANEOUS
13.1. ENTIRE AGREEMENT. This Agreement (including the
documents and instruments referred to herein) embodies the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersedes all other prior commitments, arrangements or
understandings, both oral and written, and between the parties with respect
thereto. There are no agreements, covenants, representations or warranties with
respect to the transactions contemplated hereby other than those expressly set
forth herein.
13.2. BINDING EFFECT. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
heirs, personal representatives, successors and assigns.
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<PAGE> 44
13.3. ASSIGNMENT. This Agreement may not be assigned by any
party without the prior written consent of the other parties.
13.4. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without regard to principles of conflicts of laws.
13.5. NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and personally delivered at the
addresses designated below, by facsimile transmission to the respective
facsimile numbers designated below, or mailed by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows, or to such
other address or addresses as may hereafter be furnished by one party to the
other parties in compliance with the terms hereof:
If to the Purchaser or the Merger Subsidiary:
Office Center Corporation
c/o R.K. Grace & Company
Suite 150
Coral Gables, Florida 33134
(Facsimile No.: (305) 444-2261)
ATTENTION: John D. Kaweske
with a copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
New River Center, Suite 1900
200 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
(Facsimile No.: (954) 766-7800)
ATTENTION: Joel D. Mayersohn, Esq.
If to the Company or the Sellers:
King Office Supply, Inc.
14 East 33rd Street
New York, New York 10016
(Facsimile No.: (212) 725-2591)
ATTENTION: Robert J. Gillon, Jr.
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<PAGE> 45
with a copy to:
Silverman & Weinraub
50 East 42nd Street
Suite 1500
New York, New York 10017
(Facsimile No.: (212) 682-4309)
ATTENTION: Martin Weinraub, Esq.
All such notices and communications shall be deemed to be given for purposes of
this Agreement on the day such writing is received by the intended recipient
thereof.
13.6. COUNTERPARTS. This Agreement may be executed in any
number of counterparts each of which, when executed, shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.
13.7. AMENDMENT. This Agreement may not be amended except by
an instrument in writing signed by the Purchaser and the Sellers.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
OFFICE CENTRE CORPORATION
By: /s/ JOSEPH E. HAJJAR
----------------------------
Name: Joseph E. Hajjar
Title:
OCC NEW YORK, INC.
By:/S/ R.J. GILLON, JR.
------------------------------
Name: Robert J. Gillon, Jr.
Title:
KING OFFICE SUPPLY, INC.
By: /s/ R.J. GILLON, JR.
------------------------------
Name: Robert J. Gillon, Jr.
Title:
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<PAGE> 47
THE SELLERS:
/s/ R.J. GILLON, JR.
----------------------------------
ROBERT J. GILLON, JR.
/s/ ANTHONY TARANTO
----------------------------------
ANTHONY TARANTO
/s/ BARRY GINSBERG
----------------------------------
BARRY GINSBERG
/s/ EDWARD NOVICK
----------------------------------
EDWARD NOVICK
/s/ RICHARD SALIT
----------------------------------
RICHARD SALIT
/s/ RONALD TUCKER
----------------------------------
RONALD TUCKER
/s/ JAY ROBERT LEVY
----------------------------------
J. ROBERT LEVY
ATTITUDE, INC.
By:/s/ JOHN GRILLO
----------------------------------
Name: John Grillo
Title:
- 46 -
<PAGE> 48
KING OFFICE SUPPLY, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit A Opinion of Silverman & Weinraub
Exhibit B Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
SCHEDULES
---------
Schedule A List of King Stockholders
Schedule 3.4 Subsidiaries and Affiliates
Schedule 3.7 Financial Statements as of December 31, 1997
Schedule 3.9(b) Liabilities
Schedule 3.11 Accounts Receivable as of December 31, 1997
Schedule 3.12 Litigation
Schedule 3.13(b) Employee Benefits Plans
Schedule 3.15 Liens
Schedule 3.16 Contracts
Schedule 3.17 Suppliers and Customers
Schedule 3.18 Permits
Schedule 3.19(a) Real Estate
Schedule 3.19(f) Amounts Owed to Architects, Contractors, Etc.
and Work Being Done to the Real Property
Schedule 3.20 Insurance
Schedule 3.21(a) Intellectual Property
Schedule 3.23 List of Names and Address under which King
has Conducted Business
Schedule 3.24 Bankers, Brokers and Proxies
Schedule 3.25 Environmental Matters
Schedule 3.26 Labor; Employment Contracts
Schedule 3.27 Tangible Property as of December 31, 1997
Schedule 3.28 Potential Conflicts of Interest
Schedule 4.2 Capitalization; Purchaser Shares
Schedule 4.4 Subsidiaries and Affiliates
Schedule 4.5 Financial Statements
Schedule 4.11 Litigation
Schedule 4.12 Taxes
Schedule 4.13 Liens
Schedule 10.1 Employment Agreements with Non-Compete Clauses
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.02
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of October 31,
1997, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE GRAND RAPIDS, INC., a Michigan corporation and a wholly-owned
subsidiary of Buyer ("Acquisition"), "SOS" OFFICE SUPPLY COMPANY, a Michigan
corporation (the "Company"), DAVID L. SHAPIRO, an individual resident in
Michigan ("D. Shapiro") and CAROL L. SHAPIRO, an individual resident in Michigan
("C. Shapiro") (D. Shapiro and C. Shapiro each a "Seller" and, collectively the
"Sellers or Shareholders").
RECITALS
WHEREAS, Sellers own 100% of the issued and outstanding
shares of capital stock of the Company;
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish
to set forth the terms and conditions upon which a merger of Company with and
into Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement; and
WHEREAS, the Board of Directors of each of Buyer, Acquisition
and the Company deems the merger advisable and in the best interests of each of
Buyer, Acquisition and the Company and of their respective shareholders. The
Board of Directors of each of Buyer, Acquisition and the Company has adopted
resolutions approving this Agreement and the transactions contemplated hereby,
and each of the Boards of Directors of Acquisition and the Company have directed
that this Agreement be submitted for consideration by the shareholders of
Acquisition and the Company.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
0.0.1 DEFINITIONS
For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section
1:
"APPLICABLE CONTRACT"--any Contract (a) under
which Company has or may acquire any rights, (b) under which the
Company has or may become subject to any obligation or liability,
<PAGE> 2
or (c) by which the Company or any of the assets owned, leased or
used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of Company with and into Acquisition;
(b) the execution, delivery, and performance of the Employment
Agreements and the Sellers' Releases;
(c) the performance by Buyer, Company and Sellers of their
respective covenants and obligations under this Agreement; and
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"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES"--as defined in Section 9.2.
"DISCLOSURE LETTER"--the disclosure letter
delivered by Sellers and Company to Buyer concurrently with the execution and
delivery of this Agreement.
"EBITDA"--shall mean the earnings of the Surviving
Corporation, or an indicated period, for such period determined in accordance
with generally accepted accounting principles applied on a consistent basis
before taking into account interest, income taxes (including the Michigan Single
Business Tax), depreciation and amortization based upon the Company's annualized
adjusted revenues and expenses.
"EMPLOYMENT AGREEMENT"--as defined in Section 6.2.
"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"-- any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
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(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601 et
seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention;
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(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets; or
(i) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently or formerly owned or operated by Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by Company.
"GAAP"--generally accepted accounting principles, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national governmental organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, manufacturing,
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processing, production, refinement, Release, storage, transfer, transportation,
treatment, or use (including any withdrawal or other use of groundwater) of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment, and any other act, business, operation, or thing
that increases the danger, or risk of danger, or poses an unreasonable risk of
harm to persons or property on or off the Facilities, or that may affect the
value of the Facilities or the Company.
"HAZARDOUS MATERIALS"--any waste or other substance that is
listed, defined, designated, classified or regulated as, or otherwise determined
to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"HSR ACT"--the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.22.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law
(the "Internal Revenue Code"), and regulations issued by the IRS pursuant to the
Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge"
of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably comprehensive investigation concerning the existence of such fact
or other matter.
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A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
manager, executor, or trustee of such Person (or in any similar capacity) has,
or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
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<PAGE> 8
"PERSON"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PLAN"--as defined in Section 3.13.
"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
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(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause
(b) or (c).
(g) For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, and (iii)
any other natural person who resides with such individual, and (b) "Material
Interest" means direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 1% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 1%
of the outstanding equity securities or equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this
Agreement.
"SELLERS' RELEASES"--as defined in Section 6.2.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the
merger of Company into the Acquisition.
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"TAX"--any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Governmental Body or payable pursuant to any tax-sharing agreement or any
other contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 2.2), Company shall be
merged with and into Acquisition (the "Merger"). The separate existence and
corporate organization of Company shall thereupon cease and the Company and
Acquisition shall thereupon be a single corporation. The Acquisition shall be
the surviving corporation in the Merger (the "Surviving Corporation") and shall
continue its existence under the provisions of the Business Corporation Act of
Michigan.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the "Articles of
Merger") shall be executed by the Company and
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Acquisition and shall be filed with the Michigan Department of Consumer &
Industry Services; Corporation, Securities and Land Development Bureau
("Bureau") of the State of Michigan. The Merger shall become effective at such
time as the Certificate of Merger is filed with the Bureau of the State of
Michigan, such time being hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in
effect immediately prior to the Effective Time shall be and remain the Articles
of Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
2.4 BY-LAWS
The By-Laws of the Acquisition as in effect
immediately prior to the Effective Time shall be and remain the By-laws of the
Surviving Corporation from and after the Effective Time until amended as
provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause
Richard T. Case, Robert J. Gillon, Jr. and David L. Shapiro to be
appointed as directors of the Surviving Corporation. David L.
Shapiro shall serve as the President of the Surviving
Corporation. Directors and officers of Surviving Corporation
shall serve until their successors have been elected or appointed
and shall have qualified in accordance with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall
be effective on the (i) closing or effective date of Buyer's initial public
offering, or (ii) at such other date as the parties hereto shall agree in
writing (the "Closing Date"), and shall be held at the offices of Buyer's
counsel at 200 East Las Olas Boulevard, Fort Lauderdale, Florida 33301 at 10:00
a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
(a) At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of capital stock of
Buyer, Acquisition, Company or Sellers: (i) the shares of common stock of
Acquisition purchased, issued and outstanding immediately prior to the Effective
Time shall be converted as a result of the Merger and without any action on the
part of the holder thereof, into 100 shares of capital stock of the Surviving
Corporation and shall thereafter represent all the
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issued and outstanding Shares; and (ii) the shares of the Company shall be
converted into and shall become, without further action on the part of the
Sellers, the right to receive on a pro rata basis Three Million Five Hundred Ten
Thousand Dollars ($3,510,000) in consideration to be paid as follows: (a) Six
Hundred Thousand Dollars ($600,000) by wire transfer or certified check; (b) Two
Million Nine Hundred Ten Thousand Dollars ($2,910,000) principal amount of
restricted Common Stock of Buyer, which number of shares of Common Stock shall
be determined by dividing $2,910,000 by the initial public offering price of
Buyer's Common Stock (the "IPO Price").
(b) At the Closing, the Sellers shall be
issued options to purchase 25,000 shares of Buyer's restricted Common Stock. The
options shall have a ten (10) year term and shall vest immediately upon Closing.
The exercise price shall be the IPO Price, the grant date shall be the Closing
Date of Buyer's initial public offering.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and Company hereby jointly and severally
represent and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Michigan, with full corporate power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that it purports
to own or use, and to perform all its obligations under Applicable Contracts.
The Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification except where the failure
to so qualify would not have a material adverse effect on the Company.
(b) Sellers have delivered to Buyer copies
of the Organizational Documents of the Company, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the
legal, valid, and binding obligation of Sellers and Company, enforceable against
Sellers and Company in accordance with its terms. Upon the execution and
delivery by Sellers of the Employment Agreement and the Sellers' Releases,
(collectively, the "Sellers' Closing Documents"), the Sellers' Closing Documents
will constitute the
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legal, valid, and binding obligations of Sellers, enforceable against Sellers in
accordance with their terms. Sellers and Company have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers' Closing Documents and to perform their obligations
under this Agreement and the Sellers' Closing Documents.
(b) Neither the execution and delivery of
this Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company or any Seller, or any of
the assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Tax;
(v) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no
Seller or the Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
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Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Sellers are acquiring the Buyer's Common Stock for their
own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act. Each Seller is an "accredited investor" as
such term is defined in Rule 501(a) under the Securities Act. Each Seller
acknowledges that each certificate representing Buyer's Common Stock acquired
pursuant to the transactions contemplated hereby shall bear the following
restrictive legend:
THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE OF THE
FOLLOWING: (i) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SHARES UNDER THE SECURITIES ACT, OR (ii) AN
OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION,
THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SAID
SALE, OFFER OR DISTRIBUTION.
Each Seller further acknowledges
that each shall be subject to such "lock-up" restriction as imposed by the
Buyer's underwriter or any entity regulating the issuance of the Buyer's Common
Stock in its initial public offering. Such lock-up shall not, in any event,
exceed eighteen (18) months from Closing.
3.3 CAPITALIZATION
The authorized common stock of the Company
consist of 50,000 shares of common stock, $1.00 par value per share, of which
12,319 shares are issued and outstanding and constitute the Shares and 5,000
shares of preferred stock $1.00 par value per share, none of which are
outstanding. The Sellers are and will be on the Closing Date the record and
beneficial owners and holders of the shares listed on Schedule 3.3 hereto, free
and clear of all Encumbrances. All of the outstanding securities of the Company
are owned of record and beneficially by the persons listed on Schedule 3.3. No
legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth in
Schedule 3.3, there are no Contracts relating to the issuance, sale, or transfer
of any equity securities or other securities of the Company. None of the
outstanding equity securities or other securities of the Company was issued in
violation of the Securities Act or any
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other Legal Requirement. The Company does not own, or have any Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) unaudited consolidated
balance sheets of the Company as at July 31, 1997, (including the notes thereto,
the "Balance Sheet"); (b) unaudited consolidated balance sheets as at July 31 of
1996 and 1997, and the related unaudited consolidated statements of income,
changes in stockholders' equity, and cash flow for each of the fiscal years then
ended, together with the report thereon of Grant Thornton independent certified
public accountants; and (c) an unaudited consolidated balance sheet of the
Company as at September 30, 1997 (the "Interim Balance Sheet") and the related
unaudited consolidated statements of income. Such financial statements and notes
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the Balance
Sheet). The financial statements referred to in this Section 3.4 reflect the
consistent application of such accounting principles throughout the periods
involved. No financial statements of any Person other than the Company are
required by GAAP to be included in the consolidated financial statements of the
Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Company, all of which have been made available to Buyer,
are complete and correct and have been maintained in accordance with sound
business practices. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Company, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
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Part 3.6 of the Disclosure Letter contains a
complete and accurate list of all real property, leaseholds, or other interests
therein owned by the Company. Sellers have delivered or made available to Buyer
copies of the deeds and other instruments (as recorded) by which the Company
acquired such real property and interests and such instruments are true,
complete and accurate, and copies of all title insurance policies, opinions,
abstracts, and surveys in the possession of Sellers or the Company and relating
to such property or interests. The Company owns (with good and marketable title
in the case of real property, subject only to the matters permitted by the
following sentence) all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that they purport to own located in
the facilities owned or operated by the Company or reflected as owned in the
books and records of the Company, including all of the properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet (except for assets
held under capitalized leases disclosed or not required to be disclosed in Part
3.6 of the Disclosure Letter and personal property sold since the date of the
Balance Sheet and the Interim Balance Sheet, as the case may be, in the Ordinary
Course of Business), and all of the properties and assets purchased or otherwise
acquired by the Company since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the Ordinary
Course of Business and consistent with past practice), which subsequently
purchased or acquired properties and assets (other than inventory and short-term
investments) are listed in Part 3.6 of the Disclosure Letter. All material
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances; and the Company has good and
marketable title thereto and are not, in the case of real property, subject to
any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except, with respect to all such
properties and assets, (a) mortgages or security interests shown on the Balance
Sheet or the Interim Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Interim Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (c) liens for current taxes not yet due and
payable, and (d) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount, materially detracts from
the value or impairs the use of the property subject thereto, or impairs the
operations of the Company, and (ii) zoning laws and other land use restrictions
that do not impair the present or anticipated use of the property subject
thereto. All buildings, plants, and structures owned by
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the Company lie wholly within the boundaries of the real property owned by the
Company and do not encroach upon the property of, or otherwise conflict with the
property rights of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and
equipment of the Company are structurally sound, are in good operating condition
and repair, and are adequate for the uses to which they are being put, and none
of such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The building, plants, structures, and equipment of
the Company are sufficient for the continued conduct of the Company's business
after the Closing in substantially the same manner as conducted prior to the
Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that
are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the Ordinary Course
of Business. Unless paid prior to the Closing Date, the Accounts Receivable are
or will be as of the Closing Date current and collectible net of the respective
reserves shown on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (which reserves are
adequate and calculated consistent with past practice and, in the case of the
reserve as of the Closing Date, will not represent a greater percentage of the
Accounts Receivable as of the Closing Date than the reserve reflected in the
Interim Balance Sheet represented of the Accounts Receivable reflected therein
and will not represent a material adverse change in the composition of such
Accounts Receivable in terms of aging). Subject to such reserves, each of the
Accounts Receivable either has been or will be collected in full, without any
set-off, within ninety days after the day on which it first becomes due and
payable. There is no contest, claim, or right of set-off, other than returns in
the Ordinary Course of Business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. A complete and accurate list of all Accounts Receivable as of the
date of the Interim Balance Sheet, which list sets forth the aging of such
Accounts Receivable, has been furnished to Buyer.
3.9 INVENTORY
All inventory of the Company, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet,
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consists of a quality and quantity usable and salable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, which
in no event exceeds $25,000, all of which have been written off or written down
to net realizable value in the Balance Sheet or the Interim Balance Sheet or on
the accounting records of the Company as of the Closing Date, as the case may
be. All inventories not written off have been priced at the lower of cost or
market on a first in, first out basis. The quantities of each item of inventory
(whether raw materials, work-in-process, or finished goods) are not excessive,
but are reasonable in the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the
Disclosure Letter, the Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the respective dates thereof.
3.11 TAXES
(a) The Company has filed or caused to
be filed (on a timely basis since December 31, 1993) all Tax Returns that are or
were required to be filed by or with respect to any of them, either separately
or as a member of a group of corporations, pursuant to applicable Legal
Requirements. Sellers have delivered to Buyer a complete and accurate list of
all such Tax Returns filed since December 31, 1993. The Company has paid, or
made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Sellers or the Company, except such Taxes, if any, as are listed in
Part 3.11 of the Disclosure Letter and are being contested in good faith and as
to which adequate reserves (determined in accordance with GAAP) have been
provided in the Balance Sheet and the Interim Balance Sheet.
(b) The United States federal and the
Michigan single business Tax Returns of the Company subject to such Taxes have
been audited by the IRS or relevant state tax authorities or are closed by the
applicable statute of limitations for all taxable years through 1993. Part 3.11
of the Disclosure Letter contains a complete and accurate list of all audits of
all such Tax Returns, including a reasonably detailed description of the nature
and outcome of each audit. All deficiencies proposed as a result of such audits
have been paid, reserved against, settled, or, as described in Part 3.11 of the
Disclosure Letter, are being contested in good faith by appropriate proceedings.
Part 3.11 of the Disclosure Letter describes all adjustments to the United
States federal income Tax
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Returns filed by the Company or any group of corporations including the Company
for all taxable years since December 31, 1993, and the resulting deficiencies
proposed by the IRS. Except as described in Part 3.11 of the Disclosure Letter,
the Company has not given or been requested to give waivers or extensions (or is
or would be subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of the Company or for
which the Company may be liable.
(c) The charges, accruals, and reserves
with respect to Taxes on the respective books of the Company are adequate
(determined in accordance with GAAP) and are at least equal to the Company's
liability for Taxes. There exists no proposed tax assessment against the Company
except as disclosed in the Balance Sheet or in Part 3.11 of the Disclosure
Letter. No consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired, or to be acquired
by the Company. All Taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person.
(d) All Tax Returns filed by (or that
include on a consolidated basis) the Company are true, correct, and complete.
There is no tax sharing agreement that will require any payment by the Company
after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there
has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the
following terms have the meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an
Other Benefit Obligation owed, adopted, or followed by the Company or an ERISA
Affiliate of the Company.
"COMPANY PLAN" means all Plans of which the
Company or an ERISA Affiliate of the Company is or was a Plan Sponsor, or to
which the Company or an ERISA Affiliate of the Company otherwise contributes or
has contributed, or in which the Company or an ERISA Affiliate of the Company
otherwise
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participates or has participated. All references to Plans are to Company Plans
unless the context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of
the Company or any ERISA Affiliate of the Company.
"ERISA AFFILIATE" means, with respect to the Company, any
other person that, together with the Company, would be treated as a single
employer under IRC ss. 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA ss.
3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations,
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon the
amount of service rendered, sabbatical policies, severance payment policies, and
fringe benefits within the meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" has the meaning given in ERISA ss. 3(2)(A).
"PLAN" has the meaning given in ERISA ss. 3(3).
"PLAN SPONSOR" has the meaning given in ERISA ss. 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet
the requirements of IRC ss. 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. ss. 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC ss. 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA ss. 3(1).
(b) (i) Part 3.13(i) of the Disclosure Letter contains a
complete and accurate list of all Company
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Plans, Company Other Benefit Obligations, and Company VEBAs, and identifies as
such all Company Plans that are (A) defined benefit Pension Plans, (B) Qualified
Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.
(ii) Part 3.13(ii) of the Disclosure Letter contains a
complete and accurate list of (A) all ERISA Affiliates of the Company, and (B)
all Plans of which any such ERISA Affiliate is or was a Plan Sponsor, in which
any such ERISA Affiliate participates or has participated, or to which any such
ERISA Affiliate contributes or has contributed.
(iii) Part 3.13(iii) of the Disclosure Letter sets forth, for
each Multi-Employer Plan, as of its last valuation date, the amount of potential
withdrawal liability of the Company and the Company's other ERISA Affiliates,
calculated according to information made available pursuant to ERISA ss.
4221(e).
(iv) Part 3.13(iv) of the Disclosure Letter sets forth a
calculation of the liability of the Company for post-retirement benefits other
than pensions, made in accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether the Company is
required by this Statement to disclose such information.
(v) Part 3.13(v) of the Disclosure Letter sets forth the
financial cost of all obligations owed under any Company Plan or Company Other
Benefit Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
(c) Sellers have delivered to Buyer
(i) all documents that set forth the terms of the Company
Plan, Company Other Benefit Obligation, or Company VEBA and of any related
trust, including (A) all plan descriptions and summary plan descriptions of
Company Plans for which Sellers or the Company are required to prepare, file,
and distribute plan descriptions and summary plan descriptions, and (B) all
summaries and descriptions furnished to participants and beneficiaries regarding
Company Plans, Company Other Benefit Obligations, and Company VEBAs for which a
plan description or summary plan description is not required;
(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both pension and
welfare
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benefits) by the Company and the ERISA Affiliates of the Company, and all
collective bargaining agreements pursuant to which contributions are being made
or obligations are owed by such entities;
(iv) a written description of any Company Plan or Company
Other Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any
Company Plan;
(vi) all insurance policies purchased by or to provide
benefits under any Company Plan;
(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other independent contractors
that relate to any Company Plan, Company Other Benefit Obligation, or Company
VEBA;
(viii) all reports submitted within the four years preceding
the date of this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to any
Company Plan, Company Other Benefit Obligation, or Company VEBA;
(ix) all notifications to employees of their rights under
ERISA ss. 601 et seq. and IRC ss. 4980B;
(x) the Form 5500 filed in each of the most recent three plan
years with respect to each Company Plan, including all schedules thereto and the
opinions of independent accountants;
(xi) all notices that were given by the Company or any ERISA
Affiliate of the Company or any Company Plan to the IRS, the PBGC, or any
participant or beneficiary, pursuant to statute, within the three years
preceding the date of this Agreement, including notices that are expressly
mentioned elsewhere in this Section 3.13;
(xii) all notices that were given by the IRS, the PBGC, or the
Department of Labor to the Company, any ERISA Affiliate of the Company, or any
Company Plan within the three years preceding the date of this Agreement;
(xiii) with respect to Qualified Plans and VEBAs, the most
recent determination letter for each Plan of the Company that is a Qualified
Plan; and
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(xiv) with respect to Title IV Plans, the Form PBGC-1 filed
for each of the three most recent plan years.
(d) Except as set forth in Part 3.13(vi) of the Disclosure Letter:
(i) The Company has performed all of its respective
obligations under all Company Plans, Company Other Benefit Obligations, and
Company VEBAs. The Company has made appropriate entries in its financial records
and statements for all obligations and liabilities under such Plans, VEBAs, and
Obligations that have accrued but are not due.
(ii) No statement, either written or oral, has been made by
the Company to any Person with regard to any Plan or Other Benefit Obligation
that was not in accordance with the Plan or Other Benefit Obligation and that
could have an adverse economic consequence to the Company or to Buyer.
(iii) The Company, with respect to all Company Plans, Company
Other Benefits Obligations, and Company VEBAs, are, and each Company Plan,
Company Other Benefit Obligation, and Company VEBA is, in full compliance with
ERISA, the IRC, and other applicable Laws including the provisions of such Laws
expressly mentioned in this Section 3.13, and with any applicable collective
bargaining agreement.
(A) No transaction prohibited by ERISA ss. 406 and no
"prohibited transaction" under IRC ss. 4975(c) have occurred with respect to any
Company Plan.
(B) No Seller or the Company has any liability to the IRS
with respect to any Plan, including any liability imposed by Chapter 43 of the
IRC.
(C) No Seller or the Company has any liability to the
PBGC with respect to any Plan or has any liability under ERISA ss. 502 or ss.
4071.
(D) All filings required by ERISA and the IRC as to each
Plan have been timely filed, and all notices and disclosures to participants
required by either ERISA or the IRC have been timely provided.
(E) All contributions and payments made or accrued with
respect to all Company Plans, Company Other Benefit Obligations, and Company
VEBAs are deductible under IRC ss. 162 or ss. 404. No amount, or any asset of
any Company Plan or Company VEBA, is subject to tax as unrelated business
taxable income.
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(iv) Each Company Plan can be terminated within thirty days,
without payment of any additional contribution or amount and without the vesting
or acceleration of any benefits promised by such Plan.
(v) Since January 1, 1996, there has been no establishment
or amendment of any Company Plan, Company VEBA, or Company Other Benefit
Obligation.
(vi) No event has occurred or circumstance exists that could
result in a material increase in premium costs of Company Plans and Company
Other Benefit Obligations that are insured, or a material increase in benefit
costs of such Plans and Obligations that are self-insured.
(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding involving,
any Company Plan, Company Other Benefit Obligation, or Company VEBA is pending
or, to Sellers' Knowledge, is Threatened.
(viii) No Company Plan is a stock bonus, pension, or
profit-sharing plan within the meaning of IRC ss. 401(a).
(ix) Each Qualified Plan of the Company is qualified in form
and operation under IRC ss. 401(a); each trust for each such Plan is exempt from
federal income tax under IRC ss. 501(a). Each Company VEBA is exempt from
federal income tax. No event has occurred or circumstance exists that will or
could give rise to disqualification or loss of tax-exempt status of any such
Plan or trust.
(x) The Company and each ERISA Affiliate of the Company has
met the minimum funding standard, and has made all contributions required, under
ERISA ss. 302 and IRC ss. 402.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) The Company has paid all amounts due to the PBGC
pursuant to ERISA ss. 4007.
(xiii) The Company or any ERISA Affiliate of the Company has
not ceased operations at any facility or has withdrawn from any Title IV Plan in
a manner that would subject to any entity or Sellers to liability under ERISA
ss. 4062(e), ss. 4063, or ss. 4064.
(xiv) The Company or any ERISA Affiliate of the Company has
not filed a notice of intent to terminate any Plan or has adopted any amendment
to treat a Plan as terminated.
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The PBGC has not instituted proceedings to treat any Company Plan as terminated.
No event has occurred or circumstance exists that may constitute grounds under
ERISA ss. 4042 for the termination of, or the appointment of a trustee to
administer, any Company Plan.
(xv) No amendment has been made, or is reasonably expected
to be made, to any Plan that has required or could require the provision of
security under ERISA ss. 307 or IRC ss. 401(a)(29).
(xvi) No accumulated funding deficiency, whether or not
waived, exists with respect to any Company Plan; no event has occurred or
circumstance exists that may result in an accumulated funding deficiency as of
the last day of the current plan year of any such Plan.
(xvii) The actuarial report for each Pension Plan of the
Company and each ERISA Affiliate of the Company fairly presents the financial
condition and the results of operations of each such Plan in accordance with
GAAP.
(xviii) Since the last valuation date for each Pension Plan
of the Company and each ERISA Affiliate of the Company, no event has occurred or
circumstance exists that would increase the amount of benefits under any such
Plan or that would cause the excess of Plan assets over benefit liabilities (as
defined in ERISA ss. 4001) to decrease, or the amount by which benefit
liabilities exceed assets to increase.
(xix) No reportable event (as defined in ERISA ss. 4043 and
in regulations issued thereunder) has occurred.
(xx) No Seller or the Company has knowledge of any facts or
circumstances that may give rise to any liability of any Seller, the Company, or
Buyer to the PBGC under Title IV of ERISA.
(xxi) Neither the Company nor any ERISA Affiliate of the
Company has established, maintained, or contributed to or otherwise participated
in, or had an obligation to maintain, contribute to, or otherwise participate
in, any Multi-Employer Plan.
(xxii) Neither the Company nor any ERISA Affiliate of the
Company has withdrawn from any Multi-Employer Plan with respect to which there
is any outstanding liability as of the date of this Agreement. No event has
occurred or circumstance exists that presents a risk of the occurrence of any
withdrawal from, or the participation, termination, reorganization, or
insolvency of, any Multi-Employer Plan that could result in any liability of the
Company or Buyer to a Multi-Employer Plan.
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(xxiii) Neither the Company nor any ERISA Affiliate of the
Company has received notice from any Multi- Employer Plan that it is in
reorganization or is insolvent, that increased contributions may be required to
avoid a reduction in plan benefits or the imposition of any excise tax, or that
such Plan intends to terminate or has terminated.
(xxiv) No Multi-Employer Plan to which the Company or any
ERISA Affiliate of the Company contributes or has contributed is a party to any
pending merger or asset or liability transfer or is subject to any proceeding
brought by the PBGC.
(xxv) Except to the extent required under ERISA ss. 601 et
seq. and IRC ss. 4980B, or by written agreement, the Company provides no health
or welfare benefits for any retired or former employee or is obligated to
provide health or welfare benefits to any active employee following such
employee's retirement or other termination of service.
(xxvi) The Company has the right to modify and terminate
benefits to retirees (other than pensions) with respect to both retired and
active employees except as set forth on Part 3.13.
(xxvii) Sellers and the Company have complied with the
provisions of ERISA ss. 601 et seq. and IRC ss. 4980B.
(xxviii) No payment that is owed or may become due to any
director, officer, employee, or agent of the Company will be non-deductible to
the Company or subject to tax under IRC ss. 280G or ss. 4999; nor will the
Company be required to "gross up" or otherwise compensate any such person
because of the imposition of any excise tax on a payment to such person.
(xxix) The consummation of the Contemplated Transactions
will not result in the payment, vesting, or acceleration of any benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure
Letter:
(i) the Company is, and at all times, has been, in full
compliance with each Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use of any of its
assets;
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(ii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute or result in a violation
by the Company of, or a failure on the part of the Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) the Company has not received, at any time, any notice
or other communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete
and accurate list of each Governmental Authorization that is held by the Company
or that otherwise relates to the business of, or to any of the assets owned or
used by, the Company (all of which authorizations have been delivered to Buyer).
Each Governmental Authorization listed or required to be listed in Part 3.14 of
the Disclosure Letter is valid and in full force and effect. Except as set forth
in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.14 of the
Disclosure Letter;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed in Part 3.14
of the Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter;
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
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(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Part 3.14 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Company to own and use their assets in the manner in which they currently
own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the
Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers and the Company, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Company.
(b) Except as set forth in Part 3.15 of the Disclosure
Letter:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that relates to
the business of, or any of the assets owned or used by, the Company; and
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(iii) no officer, director, agent, or employee of the
Company is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to which it, or
any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since
the date of the Balance Sheet, the Company has conducted its business only in
the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of
the Company;
(c) payment or increase by the Company of any
bonuses, salaries, or other compensation to any stockholder, director, officer,
or (except in the Ordinary Course of Business provided that any increase in the
compensation of a Seller or any member of the family of Seller shall not be
deemed to be in the
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Ordinary Course of Business and any increase shall in no event exceed 1% of the
aggregate employee payroll of the Seller other than a bonus or dividend to the
Seller's in the Ordinary Course of Business);
(d) adoption of, or increase in the payments to
or benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any
asset or property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of the Company;
(f) entry into, termination of, or receipt of
notice of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least $15,000;
(g) sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of any asset or
property of the Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company, including the
sale, lease, or other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or
rights with a value to the Company in excess of $15,000;
(i) material change in the accounting methods
used by the Company; or
(j) agreement, whether oral or written, by
the Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter
contains a complete and accurate list, and Sellers have delivered to Buyer true
and complete copies, of:
(i) each Applicable Contract that
involves performance of services or delivery of goods or materials by the
Company of an amount or value in excess of $15,000;
(ii) each Applicable Contract that
involves performance of services or delivery of goods or materials to the
Company of an amount or value in excess of $15,000;
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(iii) each Applicable Contract that was not
entered into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of $15,000;
(iv) each lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements having
a value per item or aggregate payments of less than $15,000 and with terms of
less than one year);
(v) each licensing agreement or other
Applicable Contract with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the non-disclosure
of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any Affiliate of
the Company to engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than direct payments
for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in
excess of $15,000;
(xiii) each written warranty, guaranty, indemnity, and or
other similar undertaking with respect to
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contractual performance extended by the Company other than in the Ordinary
Course of Business;
(xiv) each Contract for indebtedness involving aggregate
payments of more than $10,000; and
(xv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably
complete details concerning such Contracts, including the parties to the
Contracts, the amount of the remaining commitment of the Company under the
Contracts, and the Company's office where details relating to the Contracts are
located.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) no Seller (and no Related Person of any Seller) has or
may acquire any rights under, and no Seller has or may become subject to any
obligation or liability under, any Contract that relates to the business of, or
any of the assets owned or used by, the Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract identified or required to be identified in Part 3.17(a) of
the Disclosure Letter is in full force and effect and is valid and enforceable
in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) the Company is, and at all times has been, in full
compliance with all applicable terms and requirements of each Contract under
which the Company has or had any obligation or liability or by which the Company
or any of the assets owned or used by the Company is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which the
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Company has or had any rights is in full compliance with all applicable terms
and requirements of such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) the Company has not given to or received from any other
Person, any notice or other communication (whether oral or written) regarding
any actual, alleged, possible, or potential violation or breach of, or default
under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission
of any act alone or in concert with any other Person, or any consideration
having been paid or promised, that is or would be in violation of any Legal
Requirement.
(g) The Company has provided to Buyer true, complete and correct
copies of the Contracts set forth in this Section 3.17.
3.18 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all
policies of insurance to which the Company is a party or under which the
Company, or any director of the Company, is or has been covered at any time
within the three years preceding the date of this Agreement;
(ii) true and complete copies of all
pending applications for policies of insurance; and
(iii) any statement by the auditor of
the Company's financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
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(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year,
for the current policy year and each of the three preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $15,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost of such
claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) All policies to which the Company is a party or that
provide coverage to any Seller, the Company, or any director or officer of the
Company:
(A) are valid, outstanding, and enforceable;
(B) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by which any of
them is bound;
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(C) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(D) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of the Company.
(ii) Neither Seller nor the Company has received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Company has paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy to
which the Company is a party or that provides coverage to the Company or
director thereof.
(iv) The Company has given notice to the insurer of all
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure
letter:
(a) The Company is, and at all times has been,
in full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. No Seller or the Company has any basis to expect,
nor has any of them or any other Person for whose conduct they are or may be
held to be responsible received, any actual or Threatened order, notice, or
other communication from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
Sellers, the Company, or any other Person for whose conduct they are or may be
held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
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(b) There are no pending or, to the Knowledge of
Sellers and the Company, Threatened claims, Proceedings, Encumbrances, or other
restrictions of any nature, relating to any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which Sellers or the Company has or had an
interest.
(c) No Seller or the Company has any basis to
expect, nor has any of them or any other Person for whose conduct they are or
may be held responsible, received, any citation, directive, inquiry, notice,
Order, summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Sellers or the
Company had an interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred, imported,
used, or processed by Sellers, the Company, or any other Person for whose
conduct they are or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(d) No Seller or the Company, or any other
Person for whose conduct they are or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect to the Facilities or
with respect to any other properties and assets (whether real, personal, or
mixed) in which Sellers or the Company (or any predecessor), has or had an
interest, or, to the knowledge of Sellers, at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on
or in the Environment at the Facilities or to the knowledge of Sellers at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. No Seller, the Company, any other Person
for whose conduct they are or may be held responsible, or any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has or had an interest.
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(f) There has been no Release or Threat of
Release, of any Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the Facilities,
or to the knowledge of Sellers from or by any other properties and assets
(whether real, personal, or mixed) in which Sellers or the Company has or had an
interest, or any geologically or hydrologically adjoining property, whether by
Sellers, the Company, or any other Person.
(g) Sellers have delivered to Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Sellers or the Company pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by Sellers, the Company, or any other Person for whose
conduct they are or may be held responsible, with Environmental Laws.
(h) Except as set forth on the Phase I
Environmental Audit dated September 16, 1997, prepared by Dixon Environmental
Consulting, Inc., there are no underground or above-ground storage tanks,
incinerators or surface impoundments at, on, or about under or within any real
property operated or controlled, in whole or in part by the Company.
3.20 EMPLOYEES
(a) A complete and accurate list of the
following information for each employee or director of the Company, including
each employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since
December 31, 1996; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under the Company's pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan has been furnished
to Buyer.
(b) No employee or director of the Company is a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers or
the Company by any such employee or
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director. To Sellers' knowledge, no director, officer, or other key employee of
the Company intends to terminate his employment with the Company.
(c) The Company has previously delivered to the
Buyer a complete and accurate list of the following information for each retired
employee or director of the Company, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to any
collective bargaining or other labor Contract. There has not
been, there is not presently pending or existing, and to Sellers' knowledge
there is not threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any proceeding against or affecting the Company
relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed by an
employee or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting the Company
or its premises, or (c) any application for certification of a collective
bargaining agent. To Sellers' knowledge no event has occurred or circumstance
exists that could provide the basis for any work stoppage or other labor
dispute. There is no lockout of any employees by the Company, and no such action
is contemplated by the Company. The Company has complied in all respects with
all Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS--The term
"Intellectual Property Assets" includes:
(i) the name Company's, all fictional
business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively,
"Marks");
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(ii) all patents, patent applications,
and inventions and discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published
works and unpublished works (collectively, "Copyrights");
(iv) all rights in mask works
(collectively, "Rights in Mask Works"); and
(v) all know-how, trade secrets,
confidential information, customer lists, software, technical information, data,
process technology, plans, drawings, and blue prints (collectively, "Trade
Secrets"); owned, used, or licensed by the Company as licensee or licensor.
(b) AGREEMENTS--Part 3.22(b) of the Disclosure
Letter contains a complete and accurate list and summary description, including
any royalties paid or received by the Company, of all Contracts relating to the
Intellectual Property Assets to which the Company is a party or by which the
Company is bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs with a
value of less than $15,000 under which the Company is the licensee. There are no
outstanding and, to Sellers' knowledge, no threatened disputes or disagreements
with respect to any such agreement.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS
The Intellectual Property Assets are all
those necessary for the operation of the Company's business as they are
currently conducted. The Company is the owner of all right, title, and interest
in and to each of the Intellectual Property Assets, free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims,
and has the right to use without payment to a third party all of the
Intellectual Property Assets.
(d) Trademarks
(i) Part 3.22(d) of Disclosure Letter
contains a complete and accurate list and summary description of all Marks. The
Company is the owner of all right, title, and interest in and to each of the
Marks, free and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
(ii) All Marks that have been
registered with the United States Patent and Trademark Office are currently in
compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and
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incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
(iii) No Mark has been or is now
involved in any opposition, invalidation, or cancellation and, to Sellers'
Knowledge, no such action is Threatened with the respect to any of the Marks.
(iv) To Sellers' Knowledge, there is
no potentially interfering trademark or trademark application of any third
party.
(v) No Mark is infringed or, to
Sellers' Knowledge, has been challenged or threatened in any way. None of the
Marks used by any Acquired Company infringes or is alleged to infringe any trade
name, trademark, or service mark of any third party.
(vi) All products and materials
containing a Mark bear the proper federal registration notice where permitted by
law.
(e) Copyrights
(i) Part 3.22(e) of the Disclosure
Letter contains a complete and accurate list and summary description of all
Copyrights. The Company is the owner of all right, title, and interest in and to
each of the Copyrights, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims.
(ii) All the Copyrights have been
registered and are currently in compliance with formal legal requirements, are
valid and enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the date of Closing.
(iii) No Copyright is infringed or, to
Sellers' Knowledge, has been challenged or threatened in any way. None of the
subject matter of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.
(iv) All works encompassed by the
Copyrights have been marked with the proper copyright notice.
(f) Trade Secrets
(i) With respect to each Trade
Secret, the documentation relating to such Trade Secret is current, accurate,
and sufficient in detail and content to
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identify and explain it and to allow its full and proper use without reliance on
the knowledge or memory of any individual.
(ii) Sellers and the Company
have taken all reasonable precautions to protect the secrecy, confidentiality,
and value of their Trade Secrets.
(iii) The Company has good title
and an absolute (but not necessarily exclusive) right to use the Trade Secrets.
The Trade Secrets are not part of the public knowledge or literature, and, to
Sellers' knowledge, have not been used, divulged, or appropriated either for the
benefit of any Person (other than one or more of the Company) or to the
detriment of the Company. No Trade Secret is subject to any adverse claim or has
been challenged or threatened in any way.
3.23 CERTAIN PAYMENTS
The Company or any director, officer, agent, or
employee of the Company, or to Sellers' knowledge any other person associated
with or acting for or on behalf of the Company, has not directly or indirectly
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of the Company or any Affiliate of the Company, or (iv) in
violation of any Legal Requirement, (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in
this Agreement and no statement in the Disclosure Letter omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
(c) There is no fact known to either Seller that
has specific application to either Seller or the Company (other than general
economic or industry conditions) and that materially adversely affects or, as
far as either Seller can reasonably foresee, materially threatens, the assets,
business, prospects,
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financial condition, or results of operations of the Company (on a consolidated
basis) that has not been set forth in this Agreement or the Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth on Part 3.25 of the Disclosure
Letter, no Seller or any Related Person of Sellers or of the Company has had any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Company's business. No Seller or
any Related Person of Sellers or of the Company is, or has owned (of record or
as a beneficial owner) an equity interest or any other financial or profit
interest in, a Person that has (i) had business dealings or a material financial
interest in any transaction with the Company, or (ii) engaged in competition
with the Company with respect to any line of the products or services of the
Company (a "Competing Business") in any market presently served by the Company.
Except as set forth in Part 3.25 of the Disclosure Letter, no Seller or any
Related Person of Sellers or of the Company is a party to any Contract with, or
has any claim or right against the Company.
3.26 BROKERS OR FINDERS
Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND BUYER
Acquisition and Buyer (the "Buyer Companies") jointly and
severally represent and warrant to Sellers as follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan
and Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of Acquisition and Buyer has the
corporate power and authority to own or lease and operate its properties to
carry on its business as now being conducted, and is duly qualified and in good
standing and authorized to do business as a foreign corporation in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization except where the failure
to so qualify would not have a material adverse effect on the Buyer and
Acquisition, taken as a whole.
4.2 AUTHORITY
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Each of Acquisition and Buyer has the corporate
power and has taken all necessary corporate action to authorize Acquisition or
Buyer as the case may be, to execute, deliver and perform the Agreement and to
consummate the transactions contemplated thereby. The execution and delivery by
each of Acquisition and Buyer of this Agreement and the Employment Agreement to
which each is a party constitutes the valid and legally binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as maybe limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
4.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been
commenced against Buyer or Acquisition and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the contemplated transactions. To Buyer's and Acquisition's knowledge, no
such proceeding has been threatened.
4.4 BROKERS OR FINDERS
Buyers and Acquisition and their officers and
agents have incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement and will indemnify and hold Company and Sellers
harmless from any such payment alleged to be due by or through Buyer or
Acquisition as a result of the action of Buyer and Acquisition or their officers
or agents.
5. COVENANTS OF SELLERS AND COMPANY PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing
Date, Sellers will, and will cause Company and their Representatives to, (a)
afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") full and free access to the
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY
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Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to:
(a) conduct the business of the Company only in
the Ordinary Course of Business;
(b) use their Best Efforts to preserve intact
the current business organization of the Company, keep available the services of
the current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational
matters of a material nature; and
(d) otherwise report periodically to Buyer
concerning the status of the business, operations, and finances
of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this
Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of Sellers' representations and warranties as of the date of this
Agreement, or if such Seller or the Company becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would
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(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the occurrence
or discovery of any such fact or condition, Sellers will promptly deliver to
Buyer a supplement to the Disclosure Letter specifying such change. During the
same period, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Sellers in this Section 5 or of the occurrence of any
event that may make the satisfaction of the conditions in Section 7 impossible
or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and will cause the Company
and each of their Representatives not to, directly or indirectly solicit,
initiate, encourage, accept or discuss any inquiries or proposals from, discuss
or negotiate with, provide any non-public information to, or consider the merits
of any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving any
Acquired Company. Seller and the Company will promptly notify Buyer of any such
inquiries or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Sellers and the Company will use their Best Efforts to cause the
conditions in Sections 6 and 7 to be satisfied.
6. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S
OBLIGATION TO CLOSE
Buyer's and Acquisition's obligation to consummate the Merger
and to take the other actions required to be taken by Buyer and Acquisition at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Buyer and
Acquisition, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and Company's representations and
warranties in this Agreement must have been accurate in all respects as of the
date of this Agreement, and must be accurate in all respects as of the Closing
Date as if made on the Closing
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Date, without giving effect to any supplement to the Disclosure Letter.
6.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that
Sellers and Company are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing, and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) There shall be executed and delivered at
Closing (i) the sellers' releases, in the form of Exhibit 6.2(b)(i) (the
"Sellers' Releases"); (ii) the employment agreement with D. Shapiro in the form
of Exhibit 6.2(b)(ii) (the "Employment Agreement"); (iii) the certificate
executed by Sellers and an officer of the Company representing to Buyer and
Acquisition that each of the Sellers' and Company's representations and
warranties in this Agreement was accurate in all respects as to the date of this
Agreement and is accurate in all respects as of the Closing as if made on the
Closing Date, and (iv) each of the other covenants and obligations in the
Agreement must have been performed and complied with in all respects.
6.3 CONSENTS
Each of the consents identified in subparts 3.2 of
the Disclosure Letter, must have been obtained and must be in full force and
effect.
6.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been
delivered to Buyer:
(a) an opinion of Rhoades, McKee, Boer, Goodrich
& Titta, dated the Closing Date, in the form of Exhibit 6.4(a);
(b) termination of the Shareholder's Agreement
between D. Shapiro and Harold Shapiro;
(c) such other documents as Buyer or its counsel
may reasonably request for the purpose of (i) enabling its counsel to provide
the opinion referred to in Section 7.3(a), (ii) evidencing the accuracy of any
of Sellers' representations and warranties, (iii) evidencing the performance by
Seller, the Company, or the compliance by Seller or the Company with, any
covenant or obligation required to be performed or complied with by such party,
(iv) evidencing the satisfaction of any condition referred to in this Section 6,
or (v) otherwise facilitating the
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consummation or performance of any of the Contemplated Transactions; and
(d) Buyer shall have consummated its Initial
Public Offering.
6.5 NO PROCEEDINGS
Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer or Acquisition, or against any
Person affiliated with Buyer, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
6.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
PROCEEDS
There must not have been made or Threatened by any
Person any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in, the Company, or
(b) is entitled to all or any portion of the Merger consideration.
6.7 NO PROHIBITION
Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
6.8 NO INJUNCTION
No preliminary or permanent injunction or other
order by any federal or state court preventing or consummation of the
transactions contemplated in this Agreement has been issued and continues in
effect, and this Agreement and the transactions contemplated hereby are not
prohibited under any applicable federal or state law or regulation.
6.9 INITIAL PUBLIC OFFERING
Buyer shall have consummated its Initial Public
Offering.
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7. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S
OBLIGATION TO CLOSE
Sellers' and the Company's obligation to consummate the merger
and to take the other actions required to be taken by Sellers and the Company at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Sellers, in whole or
in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations
and warranties in this Agreement must have been accurate in all respects as of
the date of this Agreement and must be accurate in all respects as of the
Closing Date as if made on the Closing Date.
7.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that
Buyer and Acquisition are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Buyer must have delivered the Employment
Agreement and the consideration set forth in Section 2.7(a) and (b).
7.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the
following documents to be delivered to Sellers:
(a) an opinion of Atlas, Pearlman, Trop &
Borkson, P.A., dated the Closing Date, in the form of
Exhibit 7.3(a);
(b) the Buyer's prospectus or latest form
thereof, in connection with its initial public offering; and
(c) such other documents as Sellers may
reasonably request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 6.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or
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<PAGE> 49
(v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8. TERMINATION
8.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by either Buyer and Acquisition or Sellers
and the Company if a material Breach of any provision of this Agreement has been
committed by the other party and such Breach has not been waived;
(b) (i) by Buyer and Acquisition if any of the
conditions in Section 6 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before the Closing Date; or (ii) by
Sellers and Company, if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Sellers and Company to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Acquisition
and Sellers and the Company; or
(d) by either Buyer and Acquisition or Sellers
and the Company if the effective date of Buyer's initial public offering (as
determined by the SEC) has not occurred (other than through the failure of any
party seeking to terminate this Agreement to comply fully with its obligations
under this Agreement) on or before June 30, 1998, or such later date as the
parties may agree upon.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE
All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter and any of the supplements
thereto, and any other certificate or document delivered pursuant to this
Agreement will survive the Closing for a period of thirty-six (36) months other
than the representations or warranties contained in Sections 3.3, 3.11, 3.13 and
3.19 which shall survive for the applicable statute of limitations. The right to
indemnification, payment of Damages or other remedy
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based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. Each party has the right to rely on the
representations and warranties of the other party. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Subject to the provisions of Section 9.4, Sellers,
jointly and severally will indemnify and hold harmless Buyer, the Surviving
Corporation, and their respective Representatives, stockholders, controlling
persons, and affiliates (collectively, the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, liability, claim,
damage, expense (including costs of investigation and defense and reasonable
attorneys' and other professional fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty
made by Sellers in this Agreement, giving effect to any supplement to Disclosure
Letter, the Disclosure Letter and any of the supplements thereto, or any other
certificate or document delivered by Sellers pursuant to this Agreement;
(b) any Breach by either Seller of any covenant
or obligation of such Seller in this Agreement;
(c) any product shipped or manufactured by, or
any services provided by, the Company prior to the Closing Date;
(d) any matter disclosed in Parts 3.11, 3.15 and
3.19 of the Disclosure Letter; or
(e) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Sellers or the
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
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The remedies provided in this Section 9.2 will not
be exclusive of or limit any other remedies that may be available to Buyer or
the other Indemnified Persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers,
the Surviving Corporation, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Buyer's Indemnified
Persons") for, and will pay to the Indemnified Persons the amount of, any loss,
liability, claim, damage, expense (including costs of investigation and defense
and reasonable attorneys' and other professional fees) or diminution of value,
whether or not involving a third-party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty
made by Buyer in this Agreement, giving effect to any supplement to Disclosure
Letter, the Disclosure Letter and any of the supplements thereto, or any other
certificate or document delivered by Buyer pursuant to this Agreement;
(b) any Breach by Buyer of any covenant or
obligation of such Buyer in this Agreement; or
(c) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Buyer or the
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 9.3 will not
be exclusive of or limit any other remedies that may be available to Seller or
the other Indemnified Persons.
9.4 TIME LIMITATIONS; DOLLAR LIMITATIONS
If the Closing occurs, Sellers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, other than those in Sections 3.3, 3.11, 3.13, and 3.19,
unless on or before thirty-six (36) months from the date of Closing, Buyer
notifies Sellers of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer. A claim with respect to
Section 3.3, 3.11, 3.13, or 3.19, may be made at any time prior to the
applicable statute of limitations with respect to such matter. If the Closing
occurs, Buyer will have no liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, unless on
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or before thirty-six (36) months from the date of Closing, Sellers notify Buyer
of any claim specifying the factual basis of that claim in reasonable detail to
the extent then known by Sellers. Notwithstanding any conflicting provisions
herein, the Seller's aggregate liability for a breach of Section 3.19 will in no
event exceed the consideration to be paid to Seller pursuant to Section 2.7.
9.5 RIGHT OF SET-OFF
Buyer may set off any amount to which it may be
entitled under this Section 9 against amounts otherwise payable under the
Employment Agreement with D. Shapiro. The exercise of or the failure to exercise
such right of set-off will not constitute an election of remedies or limit Buyer
in any manner in the enforcement of any other remedies that may be available to
it.
9.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified
party under Sections 9.2 or 9.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section
9.6(a) is brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the indemnifying
party will be entitled to participate in such Proceeding and, to the extent that
it wishes (unless (i) the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint representation
would be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 9 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with
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the defense of such Proceeding, other than reasonable costs of investigation. If
the indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
10. GENERAL PROVISIONS
10.1 EXPENSES
Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants, provided Buyer shall bear the
costs of the preparation of the Company's audited financial statements for the
period ended September 30, 1997.
10.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Buyer
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determines provided that Buyer shall provide Sellers advance notice of any
public announcement that mentions Company or Sellers, excluding the filing of
Buyer's prospectus with the Securities and Exchange Commission or other related
filing or announcements. Unless consented to by Buyer in advance or required by
Legal Requirements, prior to the Closing Sellers shall, and shall cause the
Company to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. Sellers and Buyer will consult with
each other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for any
such communication.
10.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
(b) If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
10.4 NOTICES
All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
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Sellers: "SOS" Office Supply Company
3855 Eastern Avenue, S.E.
Grand Rapids, Michigan 49508
Attention: David L. Shapiro
(616) 452-3176
Facsimile No.:
with a copy to: Rhoades, McKee, Boer, Goodrich & Titta
161 Ottawa Avenue, N.W., Suite 600
Grand Rapids, Michigan
Attention: Arthur C. Spalding
Facsimile No.: (616) 235-1639
Buyer or Acquisition: Office Centre Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
Facsimile No.: (212) 686-6623
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Facsimile No.: (954) 766-7800
10.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
10.6 WAIVER
The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of
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the party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
10.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements
between the parties with respect to its subject matter (including the Letter of
Intent between Buyer and Sellers dated June 30, 1997) and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
10.8 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter,
and those in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between
the statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
10.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under
this Agreement without the prior consent of the other parties except that Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer
provided that such assignment shall not release Buyer from any obligation or
agreement contained in this Agreement. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
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10.10 SEVERABILITY
If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
10.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
10.12 TIME OF ESSENCE
With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
10.13 GOVERNING LAW
This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles.
10.14 COUNTERPARTS
This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLERS:
/s/ DAVID L. SHAPIRO
OFFICE CENTRE CORPORATION --------------------------
DAVID L. SHAPIRO
By: /s/ R. J. GILLON, JR.
----------------------------
Name: Robert J. Gillon, Jr. /s/ CAROL L. SHAPIRO
-------------------------
Title: Chairman CAROL L. SHAPIRO
ACQUISITION:
OFFICE CENTRE GRAND RAPIDS, INC.
By: /s/ R. J. GILLON, JR.
-----------------------------
Name: Robert J. Gillon, Jr.
Title: Chairman
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COMPANY:
"SOS" OFFICE SUPPLY COMPANY
By: /s/ DAVID L. SHAPIRO
---------------------------
Name: David L. Shapiro
Title: President
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"SOS" OFFICE SUPPLY COMPANY
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 6.2(b)(i) Sellers' Releases
Exhibit 6.2(b)(ii) Employment Agreement
Exhibit 6.4(a) Opinion of Rhoades, McKee, Boer, Goodrich & Titta
Exhibit 7.3(a) Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
SCHEDULES
---------
Schedule 3.3 Capitalization
Schedule 3.6 Real Property; Encumbrances
Schedule 3.10 No Undisclosed Liabilities
Schedule 3.11 Taxes
Schedule 3.13 Employee Benefits
Schedule 3.14(b) List of Governmental Authorizations
Schedule 3.15 Legal Proceedings; Orders
Schedule 3.17 Contracts; No defaults
Schedule 3.18 Insurance
Schedule 3.19 Environmental Matters
Schedule 3.22 Intellectual Property
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.03
FIRST AMENDMENT TO MERGER AGREEMENT
THIS FIRST AMENDMENT TO MERGER AGREEMENT dated May 15, 1998, by and
among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"), OFFICE CENTRE
GRAND RAPIDS, INC., a Michigan corporation and a wholly-owned subsidiary of
Buyer ("Acquisition"), "SOS" OFFICE SUPPLY COMPANY, INC., a Michigan corporation
(the "Company"), DAVID L. SHAPIRO, an individual resident in Michigan ("D.
Shapiro") and CAROL L. SHAPIRO, an individual resident in Michigan ("C.
Shapiro") (D. Shapiro and C. Shapiro each a "Seller" and, collectively the
"Sellers or Shareholders").
RECITALS
WHEREAS, the parties have entered into a Merger Agreement dated as of
October 31, 1997, (the "Merger Agreement") and have agreed to amend certain
provisions of the Merger Agreement as set forth below.
NOW, THEREFORE, in consideration of the agreements contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
conclusively acknowledged, the parties intending to be legally bound, agree as
follows:
1. The provisions of this First Amendment shall govern and control over
any conflicting or inconsistent provisions in the Merger Agreement, but except
as modified hereby, all provisions of the Merger Agreement remain unmodified and
in full force and effect and are hereby reaffirmed by each of the parties
hereto. Unless otherwise defined herein, all capitalized terms shall have the
meanings as provided therefor in the Merger Agreement.
2. Section 2.7(b) of the Merger Agreement is amended to read as
follows:
2.7 (b) At the Closing, D. Shapiro shall be granted options
for 25,000 shares, exercisable at the initial public offering price of Buyer's
Common Stock, for a period of ten (10) years from the date of grant, which vest
ratably over a three (3) year period. The unvested options shall only be
forfeited in the event D. Shapiro's employment with the Company is terminated by
the Company for "cause" (as defined in the "Employment Agreement") or D. Shapiro
voluntarily terminates employment with the Company, other than in accordance
with Paragraph 9(c)(1) of the Employment Agreement.
3. Section 8.1(d) of the Merger Agreement is amended to read as
follows:
(d) by either Buyer and Acquisition or Sellers and the
Company if the effective date of Buyer's initial public offering (as determined
by the SEC) has not
<PAGE> 2
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply with the obligations under this Agreement) on or before
September 1, 1998, or such later date as the parties may agree in writing.
4. Each party represents and warrants to the others as follows:
(a) The execution, delivery and performance of this First
Amendment
(i) has been duly authorized by all necessary or
appropriate acts or proceedings, corporate or otherwise; and
(ii) does not violate or result in a breach or
default under any contract, understanding judgment, order writ, law regulation
that is applicable to the representing party or its assets.
(b) This First Amendment is a valid, legal and binding
obligation and agreement of the representing party, and is enforceable against
it in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to the Merger Agreement this _____ day of May, 1998.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION /s/ David L. Shapiro
-----------------------------------
By:/s/ Robert J. Gillon, JR. DAVID L. SHAPIRO
--------------------------------
Name: Robert J. Gillon, Jr.
Title: /s/ Carol L. Shapiro
-----------------------------------
CAROL L. SHAPIRO
ACQUISITION:
COMPANY:
OFFICE CENTRE GRAND RAPIDS, INC.
"SOS" OFFICE SUPPLY COMPANY, INC.
By:/s/ Robert J. Gillon, JR.
--------------------------------
Name: Robert J. Gillon, Jr. By: /s/ David Shapiro
Title: ---------------------------------
Name: David Shapiro
Title: President
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<PAGE> 1
EXHIBIT 2.04
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of October 24,
1997, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE FORT WORTH, a Texas corporation to be formed as a wholly-owned
subsidiary of Buyer ("Acquisition"), GREENWOOD OUTFITTERS, INC., a Texas
corporation (the "Company"), ROBERT WOOD, an individual resident in Texas
("Wood") and RALEIGH GREEN, an individual resident in Texas ("Green") (Wood and
Green each a "Seller" and, collectively the "Sellers or Shareholders").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish
to set forth the terms and conditions upon which a merger of the Company with
and into Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition
and the Company deems the merger advisable and in the best interests of each of
Buyer, Acquisition and the Company and of their respective shareholders.
WHEREAS, the shareholders of Acquisition and the Company have
approved this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section
1:
"APPLICABLE CONTRACT"--any Contract (a) under
which Company has or may acquire any rights, (b) under which the Company has or
may become subject to any obligation or liability, or (c) by which the Company
or any of the assets owned, leased or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
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"BEST EFFORTS"--the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
and the term "Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this
Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of Company with and into
Acquisition;
(b) the execution, delivery, and performance of
the Employment Agreements;
(c) the performance by Buyer, Acquisition,
Company and Sellers of their respective covenants and obligations
under this Agreement; and
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES"--as defined in Section 9.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by
Sellers and Company to Buyer concurrently with the execution and delivery of
this Agreement.
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"EMPLOYMENT AGREEMENTS"--as defined in Section
6.2.
"ENCUMBRANCE"--any charge, claim, lien, option,
pledge, security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--
any cost, damages, expense, liability, or obligation, arising from or under
Environmental Law or Occupational Safety and Health Law and resulting from:
(a) any environmental, health, or safety matters
or conditions (including on-site or off-site contamination,
occupational safety and health, and regulation of chemical
substances or products);
(b) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, claims,
demands and response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental
Law or Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable Environmental
Law or Occupational Safety and Health Law and for any natural resource damages;
or
(d) any other compliance, corrective,
investigative, or remedial measures required under Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response
action," include the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
sec. 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that
requires or relates to:
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<PAGE> 4
(a) notification of appropriate authorities and employees of
releases of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions and of the commencements of activities,
such as resource extraction or construction, that could have significant impact
on the Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(e) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention;
(f) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently or formerly owned or operated by Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by Company.
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4(b) were
prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval,
consent, license, permit, waiver, or other authorization issued, granted, given,
or otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
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<PAGE> 5
(b) federal, state, local, municipal, foreign,
or other government;
(c) governmental or quasi-governmental authority
of any nature (including any governmental agency, branch, department, official,
or entity and any court or other tribunal);
(d) body exercising, or entitled to exercise,
any administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution,
generation, handling, importing, management, manufacturing, processing,
production, refinement, Release, storage, transfer, transportation, treatment,
or use of Hazardous Materials in, on, under, about, or from the Facilities or
any part thereof into the Environment.
"HAZARDOUS MATERIALS"--any waste or other
substance that is listed, defined, designated, classified or regulated as, or
otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"HSR ACT"--the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.22.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such individual is actually
aware of such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any
5
<PAGE> 6
individual who is serving, or who has at any time served, as a director or
officer of such Person has, or at any time had, Knowledge of such fact or other
matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal,
or other administrative order, constitution, law, ordinance, principle of common
law, regulation, or statute.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards.
"ORDER"--any award, decision, injunction,
judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered
by any court, administrative agency, or other Governmental Body or by any
arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person; and
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority).
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PLAN"--as defined in Section 3.13.
"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
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<PAGE> 7
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one
or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, general
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other
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<PAGE> 8
releasing into the Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLERS"--as defined in the first paragraph of this
Agreement.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the
merger of Acquisition into the Company.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any written demand or
statement has been made or any written notice has been given that would lead a
prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter is likely to be asserted, commenced, taken, or otherwise pursued in
the future.
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2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of
this Agreement, at the Effective Time, Company shall be merged with and into
Acquisition (the "Merger"). The separate existence and corporate organization of
Company shall thereupon cease and the Company and Acquisition shall thereupon be
a single corporation. Acquisition shall be the surviving corporation in the
Merger (the "Surviving Corporation") and shall continue its existence under the
provisions of the Texas Business Corporation Act.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the
"Articles of Merger") shall be executed by the Company and Acquisition and shall
be filed with the Secretary of State of the State of Texas. The Merger shall
become effective at such time as the Articles of Merger are filed with the
Secretary of State of the State of Texas, such time being hereinafter called the
"Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in
effect immediately prior to the Effective Time shall be and remain the Articles
of Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
2.4 BY-LAWS
The By-Laws of Acquisition as in effect
immediately prior to the Effective Time shall be and remain the By-Laws of the
Surviving Corporation from and after the Effective Time until amended as
provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause Bob
Gillon, Richard Case and Bob Wood to be appointed as directors of the Surviving
Corporation. Bob Wood, Raleigh Green and Bob Gillon shall serve as the officers
of the Surviving Corporation until their successors have been elected or
appointed and shall have qualified in accordance with applicable law.
2.6 CLOSING
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The closing of such Merger (the "Closing") shall
be effective on the (i) closing or effective date of Buyer's initial public
offering, or (ii) at such other date as the parties hereto shall agree in
writing (the "Closing Date"), and shall be held at the offices of Buyer's
counsel at 200 East Las Olas Boulevard, Fort Lauderdale, Florida 33301 at 10:00
a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
At the Effective Time, by virtue of the Merger and
without any action on the part of any holder of capital stock of Buyer,
Acquisition, Company or Sellers: (i) the shares of Common Stock of Acquisition
purchased, issued and outstanding immediately prior to the Effective Time shall
be converted as a result of the Merger and without any action on the part of the
holder thereof, into 100 shares of capital stock of the Surviving Corporation
and shall represent all the issued and outstanding shares of the Surviving
Corporation; and (ii) the shares of the Company held by Sellers shall be
converted into and shall become, without further action on the part of the
Sellers, the right to receive on a pro rata basis Nine Million Five Hundred
Thousand Dollars ($9,500,000) in consideration to be paid as follows: (a) Two
Million Seven Hundred Fifty Thousand Dollars ($2,750,000) by wire transfer or
certified check; and (b) the number of shares of restricted Common Stock of
Buyer having a value of a Six Million Seven Hundred Fifty Thousand Dollars
($6,750,000), which number of shares of Common Stock shall be determined by
dividing such dollar amount by the initial public offering price of Buyer's
Common Stock (the "IPO Price").
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and Company hereby jointly and severally
represent and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification.
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(b) Sellers have delivered to Buyer
copies of the Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the
legal, valid, and binding obligation of Sellers and Company, enforceable against
Sellers and Company in accordance with its terms subject to bankruptcy,
insolvency or other laws affecting the rights of creditors generally. Upon the
execution and delivery by Sellers of the Employment Agreements, the Employment
Agreements will constitute the legal, valid, and binding obligations of Sellers
enforceable against Sellers in accordance with their respective terms. Sellers
and Company have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform their obligations
under this Agreement. The Sellers and Company have approved this Agreement under
applicable state corporate law provisions, and such approval is binding.
(b) Neither the execution and delivery
of this Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or
result in a violation of (A) any provision of the Organizational Documents of
the Company, or (B) any resolution adopted by the board of directors or the
stockholders of the Company;
(ii) contravene, conflict with, or
result in a violation of, or give any Governmental Body or other Person the
right to challenge any of the Contemplated Transactions or to exercise any
material remedy or obtain any material relief under, any Legal Requirement or
any Order to which the Company or any Seller, or any of the assets owned or used
by the Company, may be subject;
(iii) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any material Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or any of the assets owned or used
by, the Company;
(iv) contravene, conflict with, or
result in a violation or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to
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cancel, terminate, or modify, any material Applicable Contract; or
(v) result in the imposition or
creation of any Encumbrance upon or with respect to any of the material assets
owned or used by the Company.
Except as set forth in Part 3.2 of
the Disclosure Letter, no Seller or the Company is or will be required to give
any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
(c) Sellers are acquiring the Buyer's
Common Stock for their own account and not with a view to its distribution
within the meaning of Section 2(11) of the Securities Act. Each Seller is an
"accredited investor" as such term is defined in Rule 501(a) under the
Securities Act. Each Seller acknowledges that each certificate representing
Buyer's Common Stock acquired pursuant to this Agreement shall bear an
appropriate restrictive legend and each Seller further acknowledges that each
shall be subject to such "lock-up" restriction as may be imposed by the Buyer's
underwriter or any entity regulating the issuance of the Buyer's Common Stock in
its initial public offering, for a period not to exceed one year from the
Closing Date.
3.3 CAPITALIZATION
The authorized equity securities of the
Company consist of 1,000,000 shares of common stock, no par value, of which
50,000 shares are issued and outstanding and constitute the Shares. The Sellers
are, and will be on the Closing Date, the record and beneficial owners and
holders of the Shares listed on Schedule 3.3 hereto, free and clear of all
Encumbrances. All of the outstanding securities of the Company are owned of
record and beneficially by the persons listed on Schedule 3.3. All of the
outstanding Shares have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth in Schedule 3.3, there are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of the Company. None of the outstanding equity securities or
other securities of the Company was issued in violation of the Securities Act or
any other Legal Requirement. The Company does not own, or have any Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
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Sellers have delivered to Buyer:
(a) unaudited consolidated balance sheets of the Company as at December 31, 1995
and December 31, 1996 ("Balance Sheet") and the related statements of income,
changes in stockholders' equity, and cash flow for each of the fiscal years then
ended, and (b) an unaudited consolidated balance sheet of the Company as at
September 30, 1997 (the "Interim Balance Sheet") and the related unaudited
consolidated statements of income for the nine months then ended. Such financial
statements and notes fairly present in all material respects the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of the Company as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP, subject,
in the case of interim financial statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented, would not
differ materially from those included in the Balance Sheet). No financial
statements of any Person other than the Company are required by GAAP to be
included in the financial statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are, in all material respects, complete and correct and have
been maintained in accordance with sound business practices and the requirements
of Section 13(b)(2) of the Securities Exchange Act of 1934, as amended
(regardless of whether or not the Company is subject to that Section), including
the maintenance of an adequate system of internal controls. The minute books of
the Company contain, in all material respects, accurate and complete records of
all meetings held of, and corporate action taken by, the stockholders, the Board
of Directors, and committees of the Board of Directors of the Company. At the
Closing, all of those books and records will be in the possession of the
Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a
complete and accurate list of all real property, leaseholds, or other interests
therein owned by the Company. Sellers have delivered or made available to Buyer
copies of the leases and other instruments by which the Company occupies such
real property and interests and such instruments are true, complete and
accurate. The Company owns or leases all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) that they purport
to own or lease located in the facilities owned or operated by the Company and
reflected as owned or leased in the books and records of the Company,
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including all of the properties and assets reflected in the Balance Sheet and
the Interim Balance Sheet (except for assets held under capitalized leases
disclosed or not required to be disclosed in Part 3.6 of the Disclosure Letter
and personal property sold since the date of the Balance Sheet and the Interim
Balance Sheet, as the case may be, in the Ordinary Course of Business), and all
of the properties and assets purchased or otherwise acquired by the Company
since the date of the Balance Sheet (except for personal property acquired and
sold since the date of the Balance Sheet in the Ordinary Course of Business and
consistent with past practice), which subsequently purchased or acquired
properties and assets (other than inventory and short-term investments) are
listed in Part 3.6 of the Disclosure Letter. All material properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet are free and clear
of all Encumbrances except with respect to all such properties and assets, (a)
mortgages or security interests shown on the Balance Sheet or the Interim
Balance Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the Interim
Balance Sheet (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(c) liens for current taxes not yet due, and (d) with respect to real property,
(i) minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Company, and (ii) zoning laws
and other land use restrictions that do not impair the present or anticipated
use of the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
To the knowledge of Sellers, the buildings,
plants, structures, and equipment of the Company are, in all material respects,
structurally sound, in good operating condition and repair, and adequate for the
uses to which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that
are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable") represent or will
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represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the Accounts Receivable are, or will be as of the Closing Date, in
all material respects, current and collectible net of the respective reserves
shown on the Balance Sheet or the Interim Balance Sheet or on the accounting
records of the Company as of the Closing Date (which reserves are calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the Interim Balance Sheet
represented of the Accounts Receivable reflected therein and will not represent
a material adverse change in the composition of such Accounts Receivable in
terms of aging). Subject to such reserves, each of the Accounts Receivable
either has been or will be collected in full, without any set-off, within ninety
days after the day on which it first becomes due and payable. To Seller's
knowledge, there is no contest, claim, or right of set-off, other than returns
in the Ordinary Course of Business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 3.8 of the Disclosure Letter contains a complete and accurate
list of all Accounts Receivable as of the date of the Interim Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, which in no event
exceeds $25,000, all of which have been written off or written down to net
realizable value in the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or net
realizable value on and average cost basis. The quantities of each item of
inventory are reasonable in the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the
Disclosure Letter, to Seller's knowledge the Company has no liabilities or
obligations of any nature (whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected or reserved against in the
Balance Sheet or the Interim Balance Sheet and current liabilities incurred in
the Ordinary Course of Business since the respective dates thereof.
3.11 TAXES
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(a) The Company has filed or caused to
be filed (on a timely basis since December 31, 1993) all Tax Returns that are or
were required to be filed by or with respect to it pursuant to applicable Legal
Requirements. The Company has delivered to Buyer copies of, and Part 3.11 of the
Disclosure Letter contains a complete and accurate list of, all such Tax Returns
filed by the Company since December 31, 1993. The Company has paid, or made
provision for the payment of, all Taxes that have or may have become due from
the Company pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by the Company, except such Taxes, if any, as are listed in
Part 3.11 of the Disclosure Letter and are being contested in good faith and as
to which adequate reserves (determined in accordance with GAAP) have been
provided in the Balance Sheet and the Interim Balance Sheet.
(b) Except as set out in Part 3.11 of
the Disclosure Schedule, no United States federal income Tax Returns of the
Company subject to such Taxes have been audited by the IRS for taxable years
from 1990 through 1996. Part 3.11 of the Disclosure Letter contains a complete
and accurate list of any audits of all such Tax Returns, including a reasonably
detailed description of the nature and outcome of each audit. All deficiencies
proposed as a result of such audits have been paid, reserved against, settled,
or, as described in Part 3.11 of the Disclosure Letter, are being contested in
good faith by appropriate proceedings. Part 3.11 of the Disclosure Letter
describes all adjustments to the United States federal income Tax Returns filed
by the Company or any group of corporations including the Company for all
taxable years since December 31, 1993, and the resulting deficiencies proposed
by the IRS. Except as described in Part 3.11 of the Disclosure Letter, the
Company has not given or been requested to give waivers or extensions (or is or
would be subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of the Company or for
which the Company may be liable.
(c) In all material respects, the
charges, accruals, and reserves with respect to Taxes on the respective books of
the Company are adequate (determined in accordance with GAAP) and fairly
approximate the Company's liability for Taxes. To Seller's knowledge, there
exists no proposed tax assessment against the Company except as disclosed in the
Balance Sheet or in Part 3.11 of the Disclosure Letter. No consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
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(d) All Tax Returns filed by (or that
include on a consolidated basis) the Company are true, correct, and complete in
all material respects. There is no tax sharing agreement that will require any
payment by the Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there
has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and, to Sellers'
Knowledge, no event has occurred or circumstance exists that may result in such
a material adverse change, excluding general economic conditions.
3.13 EMPLOYEE BENEFITS
Except for group medical insurance and
associated life insurance, the Company (i) has not contributed to any pension,
profit sharing, option or other incentive plan or other type of employee benefit
plan, (ii) does not maintain or has not maintained, is not or was not a party
to, or otherwise participates or participated in, on its own behalf or on behalf
of any former employees, any pension, profit sharing, option or other incentive
plan or other type of employee benefit plan, or (iii) has no obligation to, or
customary arrangement with, former employees, if any, for bonuses, incentive
compensation, vacation, severance pay, sick pay, sick leave, insurance, service
award, relocation, disability or other benefits, whether oral or written.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of
the Disclosure Letter:
(i) in all material respects, the
Company is, and at all times, has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets;
(ii) no event has occurred or
circumstance exists that (with or without notice or lapse of time) in any
material respect (A) may constitute or result in a violation by the Company of,
or a failure on the part of the Company to comply with, any Legal Requirement,
or (B) may give rise to any obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature;
and
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(iii) the Company has not received,
at any time, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any material
Legal Requirement, or (B) any actual, alleged, possible, or potential material
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter
contains a complete and accurate list of each Governmental Authorization that is
held by the Company or that otherwise relates to the business of, or to any of
the assets owned or used by, the Company (all of which authorizations have been
delivered to Buyer). Each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all
times has been, in all material respects, in full compliance with all of the
terms and requirements of each Governmental Authorization identified or required
to be identified in Part 3.14 of the Disclosure Letter;
(ii) no event has occurred or
circumstance exists that may (with or without notice or lapse of time) in any
material respect (A) constitute or result directly or indirectly in a violation
of or a failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.14 of the Disclosure
Letter, or (B) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter;
(iii) the Company has not received
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential material violation of or failure to comply with any term
or requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to
have been filed for the renewal of the Governmental Authorizations listed or
required to be listed in Part 3.14 of the Disclosure Letter have been duly filed
on a timely basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such Governmental
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Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in
Part 3.14 of the Disclosure Letter collectively constitute all of
the Governmental Authorizations necessary to permit the Company to lawfully
conduct and operate their businesses in the manner they currently conduct and
operate such businesses and to permit the Company to own and use their assets in
the manner in which they currently own and use such assets except where the
failure to obtain a Governmental Authorization would not result in a material
adverse change to the Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of
the Disclosure Letter, to Sellers' knowledge there is no pending Proceeding:
(i) that has been commenced by or
against the Company that relates to or may affect the business
of, or any of the assets owned or used by, the Company; or
(ii) that challenges, or that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
To the Knowledge of Sellers
and the Company, no such Proceeding as described above has been Threatened.
Sellers have delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Part 3.15 of the
Disclosure Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter
will not have a material adverse effect on the business, operations, assets,
condition, or prospects of the Company.
(b) To Sellers' knowledge, except as set
forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which
the Company, or any of the assets owned or used by the Company, is subject;
(ii) Sellers are not subject to
any Order that relates to the business of, or any of the assets owned or used
by, the Company; and
(iii) no officer, director, agent,
or employee of the Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of Company.
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(c) To Sellers' knowledge, except as set
forth in Part 3.15 of the Disclosure Letter:
(i) the Company is, and at all
times has been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets
owned or used by it, is or has been subject;
(ii) no event has occurred or
circumstance exists that may constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with any term or requirement
of any Order to which the Company, or any of the assets owned or used by the
Company, is subject; and
(iii) the Company has not received
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which the Company, or any of the assets owned or used by the
Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the
Disclosure Letter, since the date of the Balance Sheet, the Company has
conducted its business only in the Ordinary Course of Business and there has not
been any:
(a) change in the Company's authorized
or issued capital stock; grant of any stock option or right to purchase shares
of capital stock of the Company; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of any such
capital stock; or declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock;
(b) amendment to the Organizational
Documents of the Company;
(c) payment or increase by the Company
of any bonuses, salaries, distributions or other compensation to any
stockholder, director, officer, or employee except in the Ordinary Course of
Business provided that any payments or distributions to stockholders, directors
or officers are set forth on Part 3.16(c) of the Disclosure Letter.
(d) adoption of, or increase in the
payments to or benefits under, any profit sharing, bonus, deferred
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compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any employees of the Company;
(e) damage to or destruction or loss of
any asset or property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of the Company, taken as a whole;
(f) except in the Ordinary Course of
Business, entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to the Company of at least $15,000.
(g) except in the Ordinary Course of
Business, sale, lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company, including the sale, lease, or
other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any
claims or rights with a value to the Company in excess of $15,000;
(i) material change in the accounting
methods used by the Company; or
(j) agreement, whether oral or written,
by the Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure
Letter contains a complete and accurate list, and Sellers have delivered to
Buyer true and complete copies, of:
(i) each Applicable Contract that
involves performance of services or delivery of goods or
materials by the Company of an amount or value in excess of
$15,000;
(ii) each Applicable Contract that
involves performance of services or delivery of goods or
materials to the Company of an amount or value in excess of
$15,000;
(iii) each Applicable Contract that
was not entered into in the Ordinary Course of Business and that
involves expenditures or receipts of the Company in excess of
$15,000;
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(iv) each lease, rental or
occupancy agreement, license, installment and conditional sale agreement, and
other Applicable Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements having
a value per item or aggregate payments of less than $15,000 and with terms of
less than one year);
(v) each licensing agreement or
other Applicable Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current or former
employees, consultants, or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining
agreement and other Applicable Contract to or with any labor
union or other employee representative of a group of employees;
(vii) each joint venture,
partnership, and other Applicable Contract (however named) involving a sharing
of profits, losses, costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract
containing covenants that in any way purport to restrict the business activity
of the Company or any Affiliate of the Company or limit the freedom of the
Company or any Affiliate of the Company to engage in any line of business or to
compete with any Person;
(ix) each Applicable Contract
providing for payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods and sales commission arrangements
for employees;
(x) each power of attorney granted
by the Company that is currently effective and outstanding;
(xi) each Applicable Contract
entered into other than in the Ordinary Course of Business that contains or
provides for an express undertaking by the Company to be responsible for
consequential damages;
(xii) each Applicable Contract for
future capital expenditures in excess of $15,000;
(xiii) each currently effective
written warranty, guaranty, indemnity, and or other similar undertaking with
respect to contractual performance extended by the Company other than in the
Ordinary Course of Business;
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(xiv) each Contract for
indebtedness of the Company involving future aggregate payments of more than
$10,000; and
(xv) each amendment, supplement,
and modification (whether oral or written) in respect of any of
the foregoing.
(b) Except as set forth in Part 3.17(b)
of the Disclosure Letter:
(i) no Seller (and, to the
knowledge of Sellers, no Related Person of any Seller) has or may acquire any
rights under, and no Seller has or may become subject to, any obligation or
liability under, any Contract that relates to the business of, or any of the
assets owned or used by, the Company; and
(ii) to the knowledge of Sellers,
no officer, director, agent, employee, consultant, or contractor of the Company
is bound by any Contract with any person other than the Company that purports to
limit the ability of such officer, director, agent, employee, consultant, or
contractor to (A) engage in or continue any conduct, activity, or practice
relating to the business of the Company, or (B) assign to the Company or to any
other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c)
of the Disclosure Letter, each Contract identified or required to be identified
in Part 3.17(a) of the Disclosure Letter is, to the knowledge of Sellers, in
full force and effect and is valid and enforceable in accordance with its terms.
(d) To Sellers' knowledge, except as set
forth in Part 3.17(d) of the Disclosure Letter:
(i) the Company is, and at all
times has been, in full compliance with all applicable terms and requirements of
each Contract under which the Company has or had any material obligation or
liability or by which the Company or any of the material assets owned or used by
the Company is or was bound;
(ii) each other Person that has or
had any material obligation or liability under any Contract under which the
Company has or had any rights is in full compliance with all material applicable
terms and requirements of such Contract;
(iii) no event has occurred or
circumstance exists that (with or without notice or lapse of
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time) may contravene, conflict with, or result in a violation or breach of, or
give the Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iv) the Company has not given to
or received from any other Person, any notice or other communication (whether
oral or written) regarding any actual, alleged, possible, or potential violation
or breach of, or default under, any Applicable Contract.
(e) There are no renegotiations of,
attempts to renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to the Company under current or completed Applicable
Contracts with any Person and, to Sellers' Knowledge, no such Person has made
written demand for such renegotiation.
(f) To Sellers' Knowledge, the
Applicable Contracts relating to the sale or provision of products or services
by the Company have been entered into in the Ordinary Course of Business and
have been entered into without the commission of any act alone or in concert
with any other Person, or any consideration having been paid or promised, that
is or would be in violation of any Legal Requirement.
(g) The Company has made available to
Buyer true, complete and correct copies of the Contracts required to be set
forth in Part 3.17 of the Disclosure Letter.
3.18 INSURANCE
(a) Sellers have made available to
Buyer:
(i) true and complete copies of
all policies of insurance to which the Company is a party or under which the
Company, or any director of the Company, is or has been covered at any time
within the three years preceding the date of this Agreement;
(ii) true and complete copies of
all pending applications for policies of insurance; and
(iii) any statement by the auditor
of the Company's financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure
Letter describes:
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(i) any self-insurance arrangement
by or affecting the Company, including any reserves established
thereunder;
(ii) any contract or arrangement,
other than a policy of insurance, for the transfer or sharing of
any risk by the Company; and
(iii) all obligations of the Company
to third parties with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under which such
coverage is provided.
(c) All material assets, properties and
risks of the Company are, and for the past three years have been, covered by
valid and, except for policies that have expired under their terms in the
ordinary course, currently effective insurance policies or binders of insurance
(including, without limitation, general liability insurance, property insurance
and workers' compensation insurance) issued in favor of the Company, in each
case with responsible insurance companies, in such types and amounts and
covering such risks as are consistent with customary practices and standards of
companies engaged in business and operations similar to those of the Company.
There has not been any claim under any such insurance policy during the past
three years that could reasonably be expected to have a material adverse effect
on the Company.
(d) Except as set forth on Part 3.18(d)
of the Disclosure Letter:
(i) Since January 1, 1997 the
Company has not received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of any policy is
not willing or able to perform its obligations thereunder.
(ii) The Company has paid all
premiums due, and has otherwise performed all of its obligations, under each
policy to which the Company is a party or that provides coverage to the Company
or director thereof.
(iii) To Sellers' Knowledge, the
Company has given notice to the insurer of all claims that may be insured
thereby.
3.19 ENVIRONMENTAL MATTERS
To Sellers' knowledge, except as set forth
in part 3.19 of the disclosure letter:
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(a) The Company is, and at all times has
been, in full compliance with, and has not been and is not in violation of or
liable under, any Environmental Law. No Seller or the Company has any basis to
expect, nor has any of them received, any actual or Threatened Order, notice, or
other communication from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
Sellers, or the Company, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, to the
Knowledge of Sellers and the Company, Threatened claims, Proceedings or
Encumbrances relating to any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which the Company has or had an interest.
(c) No Seller or the Company has any
basis to expect, nor has any of them received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company had an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) The Company has no Environmental,
Health, and Safety Liabilities with respect to the Facilities or with respect to
any other properties and assets (whether real, personal, or mixed) in which the
Company (or any predecessor), has or had an interest.
(e) To the extent same would constitute
a violation of Environmental Laws, there are no Hazardous Materials
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present on or in the Environment at the Facilities, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities, or incorporated into any structure therein
or thereon. To the extent same would constitute a violation of Environmental
Laws, the Company, has not permitted or conducted any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which the Company has or had an interest.
(f) To the extent same would constitute
a violation of Environmental Laws and there has been no Release or Threat of
Release, of any Hazardous Materials at or from the Facilities, or from or by any
other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest.
(g) Sellers have delivered to Buyer
true and complete copies and results of any reports, studies, analyses, tests,
or monitoring possessed by Sellers or the Company pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Company with Environmental Laws.
(h) There are no underground or
above-ground storage tanks, incinerators or surface impoundments at, on, or
about under or within any real property operated or controlled, in whole or in
part by the Company.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter
contains a complete and accurate list of the following information for each
employee or director of the Company, including each employee on leave of absence
or layoff status: employer; name; job title; current compensation paid or
payable and any change in compensation since December 31, 1996; vacation
accrued; and service credited for purposes of vesting and eligibility to
participate under the Company's insurance, medical, welfare, or vacation plan,
or any other employee benefit plan.
(b) To Seller's Knowledge, no employee
or director of the Company is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, non-competition, or
proprietary rights agreement, between such employee or director and any other
Person ("Proprietary Rights Agreement") that in any way adversely affects or
will affect (i) the performance of his duties as an employee or director of the
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Company, or (ii) the ability of the Company to conduct its business, including
any Proprietary Rights Agreement with Sellers or the Company by any such
employee or director. To Sellers' Knowledge, no director, officer, or other key
employee of the Company presently intends to terminate his employment with the
Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to
any collective bargaining or other labor Contract. There has not been, there is
not presently pending or existing, and to Sellers' Knowledge there is not
threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any proceeding against or affecting the Company relating
to the alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. To Sellers' Knowledge no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute. There is
no lockout of any employees by the Company, and no such action is contemplated
by the Company. To Sellers' knowledge, the Company has complied in all respects
with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. The Company is not liable for the payment
of any compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements
that would have a material adverse effect of the Company.
3.22 INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS--The term
"Intellectual Property Assets" includes:
(i) the Company's name, all
fictional business names, trading names, registered and
unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents, patent
applications, and inventions and discoveries that may be patentable
(collectively, "Patents");
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(iii) all copyrights in both
published works and unpublished works (collectively,
"Copyrights"); and
(iv) all know-how, trade
secrets, confidential information, customer lists, software, technical
information, data, process technology, plans, drawings, and blue prints and
considered by Sellers to be proprietary to the Company's business (collectively,
"Trade Secrets"); owned, used, or licensed by the Company as licensee or
licensor.
(b) AGREEMENTS--Part 3.22(b) of the
Disclosure Letter contains a complete and accurate list and summary description,
including any royalties paid or received by the Company, of all Contracts
relating to the Intellectual Property Assets to which the Company is a party or
by which the Company is bound, except for any license implied by the sale of a
product and perpetual, paid-up licenses for commonly available software programs
with a value of less than $15,000 under which the Company is the licensee. There
are, to Sellers' Knowledge, no disputes or disagreements with respect to any
such Contracts.
(c) OWNERSHIP--
The Company is the owner of all
right, title, and interest in and to each of its Intellectual Property Assets,
free and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
(d) MARKS--
(i) The Company is the owner of no
Marks, other than its corporate name and its assumed name, Greenwood Office
Outfitters.
(ii) Except as set forth on Part
3.22(d) of the Disclosure Letter, no Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to Sellers' Knowledge, no such
action is Threatened with the respect to any of the Marks.
(iii) Except as set forth on Part
3.22(d) of the Disclosure Letter, to Sellers' Knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(iv) To Sellers' Knowledge, none of
the Marks used by Company infringes or is alleged to infringe any trade name,
trademark, or service mark of any third party.
(e) COPYRIGHTS--The Company is the owner
of no Copyrights.
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(f) Trade Secrets--The Company owns no
Trade Secrets
3.23 CERTAIN PAYMENTS
To Sellers' Knowledge, neither the Company
or any director, to Sellers' Knowledge, officer, agent, or employee of the
Company, or any other person associated with or acting for or on behalf of the
Company, has directly or indirectly and in violation of any Legal Requirement
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of the Company or any Affiliate of the Company, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of
Sellers in this Agreement and no statement in the Disclosure Letter knowingly
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section
5.5 will contain any untrue statement or omit to state a material fact necessary
to make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth on Part 3.25 of the
Disclosure Letter, no Seller or, to Sellers' Knowledge, any Related Person of
Sellers or of the Company has any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Company's business other than through ownership of the Company's common
stock. No Seller or, to Sellers' Knowledge, any Related Person of Sellers or of
the Company owns (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that (i) has business dealings
or a material financial interest in any transaction with the Company, or (ii)
engages in competition with the Company with respect to any line of the products
or services of the Company (a "Competing Business") in any market presently
served by the Company. Except
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as set forth in Part 3.25 of the Disclosure Letter, no Seller or, to Sellers'
Knowledge, any Related Person of Sellers or of the Company is a party to any
Contract with, or has any claim or right against the Company that will survive
the Closing.
3.26 BROKERS OR FINDERS
Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND
BUYER
Acquisition and Buyer (the "Buyer Companies")
jointly and severally represent and warrant to Sellers as
follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition will at the Closing Date be a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
Acquisition and Buyer has the corporate power and authority to own or lease and
operate its properties to carry on its business as now being conducted, and is
duly qualified and in good standing and authorized to do business as a foreign
corporation in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization except
where the failure to so qualify would not have a material adverse effect on the
Buyer and Acquisition, taken as a whole.
4.2 AUTHORITY
Each of Acquisition and Buyer has the
corporate power and has taken all necessary corporate action to authorize
Acquisition or Buyer as the case may be, to execute, deliver and perform the
Agreement and to consummate the transactions contemplated thereby. The execution
and delivery by each of Acquisition and Buyer of this Agreement and the
Employment Agreement to which each is a party constitutes the valid and legally
binding obligation of Acquisition or Buyer, as the case may be, enforceable in
accordance with the documents' terms, except as may be limited by bankruptcy,
insolvency or other laws effecting creditors' rights generally.
4.3 CAPITALIZATION
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As of the date hereof, the authorized common
stock of the Buyer consist of 50,000,000 shares of common stock, $.001 par value
per share, of which 5,309,800 shares are issued and outstanding. All of the
outstanding common stock of the Company has been duly authorized and validly
issued and are fully paid and nonassessable. None of the outstanding common
stock or other securities of the Company was issued in violation of the
Securities Act or any other Legal Requirement. The shares of the Company's
Common Stock to be delivered to Sellers at Closing pursuant to Section 2.7 will
be duly authorized, validly issued, fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock
record books, and other records of the Buyer, are complete, in all material
respects, and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
The minute books of the Buyer contain, in all material respects, accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of Directors
of the Buyer.
4.5 TAXES
Buyer has filed or caused to be filed on a
timely basis all Tax Returns that are or were required to be filed by or with
respect to it. Buyer has paid, or made provision for the payment of, all Taxes
that have or may have become due from Buyer pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Buyer, except such Taxes,
if any, are being contested in good faith.
4.6 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
Except as set forth on Schedule 4.6:
(i) In all material respects, Buyer is,
and at all times, has been, in full compliance with each Legal Requirement that
is or was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) no event has occurred that (with or
without notice or lapse of time) in any material respect (A) may constitute or
result in a violation by Buyer of, or a failure on the part of Buyer to comply
with, any Legal Requirement, or (B) may give rise to any obligation on the part
of the Buyer to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
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(iii) Buyer has not received notice
or other communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential material obligation on the part of the
Buyer to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
4.7 LEGAL PROCEEDINGS; ORDERS
There is no pending material Proceeding:
(i) that has been
commenced by or against Buyer or that otherwise relates to or may affect the
business of, or any of the assets owned or used by, the Buyer; or
(ii) that challenges, or that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
To the Knowledge of Buyer, no such
Proceeding has been Threatened.
4.8 PRO FORMA FINANCIAL STATEMENTS
On or before November 10, 1997, Buyer shall
deliver to Sellers a copy of pro forma unaudited combined financial statements
of Buyer as at September 30, 1997 and for the nine months then ended in the form
to be included in the Registration Statement for Buyer's initial public offering
(the "Pro Forma Financial Statements"). A copy of which will be attached as
Exhibit 4.8. Such Pro Forma Financial Statements will fairly present the Buyer's
belief as to the pro forma financial condition of the Company as at September
30, 1997 based upon the assumptions set forth therein. Sellers shall have five
business days after receipt of the Pro Forma Financial Statements to advise
Buyer whether they elect to terminate this Agreement. If Seller's furnish
written notice to Buyer within such five Business Days period that they elect to
terminate this Agreement, it shall terminate without further obligation to any
party.
4.9 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been
commenced against Buyer or Acquisition and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the contemplated transactions. To Buyer's and Acquisition's knowledge, no
such proceeding has been threatened.
4.10 BROKERS OR FINDERS
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Buyers and Acquisition and their officers
and agents have incurred no obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other similar payment
in connection with this Agreement and will indemnify and hold Company and
Sellers harmless from any such payment alleged to be due by or through Buyer or
Acquisition as a result of the action of Buyer and Acquisition or their officers
or agents.
5. COVENANTS OF SELLERS AND COMPANY PRIOR TO CLOSING
DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the
Closing Date, Sellers will, and will cause Company and their Representatives to,
(a) afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") full and free access to the
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data pertaining to Company as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information pertaining to Company as
Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the
Closing Date, Sellers will use their Best Efforts to, and will use their Best
Efforts to cause the Company to:
(a) conduct the business of the Company
only in the Ordinary Course of Business;
(b) preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company;
(c) confer with Buyer concerning
operational matters of a material nature; and
(d) otherwise report periodically to
Buyer concerning the status of the business, operations, and finances of the
Company.
5.3 NEGATIVE COVENANT
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Except for distributions to Sellers in
amounts consistent with prior periods and except as otherwise expressly
permitted by this Agreement, between the date of this Agreement and the Closing
Date, Sellers will not, and will cause the Company not to, without the prior
consent of Buyer, take any affirmative action, or fail to take any reasonable
action within their or its control, as a result of which any of the changes or
events listed in Section 3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of
this Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the
Closing Date, each Seller will promptly notify Buyer in writing if such Seller
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Sellers' representations and warranties as of the date of this Agreement,
or if such Seller becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly contemplated
by this Agreement) cause or constitute a Breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Disclosure Letter if the Disclosure Letter
were dated the date of the occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, each Seller will promptly
notify Buyer of the occurrence of any Breach of any covenant of Sellers in this
Section 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 7 impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement
is terminated pursuant to Section 10, Sellers will not, and the Company will not
and each of their Representatives will not directly or indirectly solicit,
initiate or encourage, accept or discuss any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the
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merits of any unsolicited inquiries or proposals from, any Person (other than
Buyer) relating to any transaction involving the sale of the business or assets
of the Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company. Sellers or the Company will promptly notify Buyer of any such inquiries
or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the
Closing Date, Sellers and the Company will use their Best Efforts to cause the
conditions in Section 7 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the
Closing Date Buyer will furnish Sellers and Sellers's advisers with copies of
such agreements, books and records, and other existing documents and data
pertaining to Buyer as Sellers may reasonably request, and furnish Sellers and
Sellers's advisors with such additional financial, operating and other data and
information as Sellers's may reasonably request.
6.2 NOTIFICATION
Between the date of this Agreement and the
Closing Date, Buyer will promptly notify Sellers in writing if Buyer becomes
aware of any fact or condition that causes or constitutes a Breach of any of
Buyer's representations and warranties as of the date of this Agreement, or if
Buyer becomes aware of the occurrence after the date of this Agreement or any
fact or condition that would, except as expressly contemplated by this
Agreement, cause or constitute a Breach of any such representation or warranty.
6.3 BEST EFFORTS
Between the date of this Agreement and the
Closing Date, Buyer will use its Best Efforts to cause the conditions in Section
8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S AND
ACQUISITION'S OBLIGATION TO CLOSE
Buyer's and Acquisition's obligations to
consummate the Merger and to take the other actions required to be taken by
Buyer and Acquisition at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the
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following conditions (any of which may be waived by Buyer and
Acquisition, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and Company's
representations and warranties in this Agreement must have been accurate in all
material respects as of the date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date, without
giving effect to any supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations
that Sellers and Company are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing, must have been duly performed and
complied with in all material respects.
(b) There shall be delivered at Closing
(i) the Employment Agreements with Wood and Green in the form of Exhibit
7.2(b)(i) executed by Wood and Green, respectively, and (ii) the certificate
executed by Sellers and an officer of the Company representing to Buyer and
Acquisition that each of the Sellers' and Company's representations and
warranties in this Agreement was accurate in all material respects as to the
date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing Date, and (iii) each of the other covenants
and obligations in the Agreement must have been performed and complied with in
all respects.
7.3 CONSENTS
Each of the consents identified in subparts
3.2 of the Disclosure Letter, must have been obtained and must be in full force
and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have
been delivered to Buyer:
(a) an opinion of Kelly, Hart & Hallman,
dated the Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Buyer or its
counsel may reasonably request for the purpose of (i) enabling its counsel to
provide the opinion referred to in Section 8.4(a), (ii) evidencing the accuracy
of any of Sellers' representations and warranties, (iii) evidencing the
performance by Seller, the Company, or the compliance by Seller or the Company
with, any
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covenant or obligation required to be performed or complied with by such party,
(iv) evidencing the satisfaction of any condition referred to in this Section 7,
or (v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must
not have been commenced or Threatened against Buyer or Acquisition, or against
any Person affiliated with Buyer, any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
PROCEEDS
There must not have been made or Threatened
by any Person other than Sellers any claim asserting that such Person other than
Sellers (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other voting,
equity, or ownership interest in, the Company, or (b) is entitled to all or any
portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or
other order by any federal or state court preventing or consummation of the
transactions contemplated in this Agreement has been issued and continues in
effect, and this Agreement and the transactions contemplated hereby are not
prohibited under any applicable federal or state law or regulation.
8. CONDITIONS PRECEDENT TO SELLERS' AND THE
COMPANY'S OBLIGATION TO CLOSE
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Sellers' and the Company's obligations to
consummate the Merger and to take the other actions required to be taken by
Sellers and the Company at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by Sellers and Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's
representations and warranties in this Agreement must have been accurate in all
material respects as of the date of this Agreement and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations
that Buyer and Acquisition are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing must have been performed and complied
with in all material respects.
(b) Buyer must have executed and
delivered (i) the Employment Agreements (ii) a certificate executed by an
officer of Buyer representing to Sellers that Buyer and Acquisition's
representations and warranties contained in this Agreement were accurate in all
material respects as to the date of this Agreement and is accurate in all
material respects as of the Closing as if made on the Closing.
8.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the
following documents to be delivered to Sellers:
(a) an opinion of Atlas, Pearlman, Trop
& Borkson, P.A., dated the Closing Date, in the form of Exhibit 8.3(a); and
(b) such other documents as Sellers or
their counsel may reasonably request for the purpose of (i) enabling their
counsel to provide the opinion referred to in Section 7.3(a), (ii) evidencing
the accuracy of any representation or warranty of Buyer or Acquisition, (iii)
evidencing the performance by Buyer or Acquisition of, or the compliance by
Buyer or Acquisition with, any covenant or obligation required to be performed
or complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of
any condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
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8.4 CONSUMMATION OF RELATED TRANSACTIONS
On or prior to the Closing Date, (a) each of
the corporations listed on Schedule 8.4 hereto shall have merged with or into a
wholly-owned subsidiary of the Buyer (and shall have become a wholly-owned
subsidiary of the Buyer by virtue thereof), (b) the consolidated balance sheet
of Buyer upon closing of the Merger and the acquisitions referred to in clause
(a) shall not be materially different from the balance sheet included in the Pro
Forma Financial Statements, (c) the Buyer shall have executed an underwriting
agreement with a nationally recognized investment banking firm providing for a
firm commitment underwritten offering of Buyer's Common Stock and (d) Sellers
shall have received a certificate of Buyer, executed by its Chief Executive
Officer, stating that each such condition has been satisfied.
8.5 TAX OPINION
The Sellers shall have received the opinion
of Kelly, Hart & Hallman, P.C., counsel to the Sellers, to the effect that the
Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code and that the
Sellers will not recognize any taxable income as the result of the Merger except
in respect of the cash consideration received pursuant to Section 2.7. In
rendering such opinion, counsel may rely upon representations and certificates
of the Sellers, the Company, Acquisition and Buyer, each of which shall furnish
the same to counsel upon request. Not later than November 10, 1997 counsel shall
advise Sellers whether it believes that it will be able to render such opinion.
If counsel has advised Sellers by such date that such opinion cannot be
rendered, Sellers may terminate this Agreement by written notice to Buyer on or
prior to November 15, 1997. If counsel advises that such opinion may not be
rendered, Sellers agree to consider alternative structures that would provide
tax free treatment.
9. INCIDENTAL REGISTRATION
9.1 RIGHT TO INCLUDE SHARES
If at any time after the Buyer's Initial
Public Offering but before the second anniversary of the Closing, the Buyer
proposes to register any of its securities under the Securities Act of 1933
(other than by a registration in connection with an acquisition in a manner
which would not permit registration of the Shares for sale to the public, on
Form S-4, or any successor form thereto, or on Form S-8, or any successor form
thereto), the Buyer will each such time give prompt written notice to Sellers of
its intention to do so and of Sellers' rights under this Section 9.1. Upon the
written request of any
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Sellers made within twenty (20) days after the receipt of any such notice (which
request shall specify the Shares intended to be disposed of by such Sellers and
the intended method of disposition thereof), the Buyer will, subject to the
terms of this Agreement, effect the registration under the Securities Act of
that number of Shares by inclusion of such Shares in the registration statement
which covers the securities which the Buyer proposes to register, provided that
if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Buyer shall determine for any reason
either not to register or to delay registration of such securities, the Buyer
may, at its election, give written notice of such determination to Sellers and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Shares in connection with such registration,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Shares, for the same period as the delay in registering
such other securities. The Company will pay all registration expenses in
connection with each registration of Shares requested pursuant to this Section
9.1.
If the managing underwriter of an
underwritten offering contemplated by this Section 9.1 shall inform in writing
the Buyer and Sellers requesting such registration of its belief that the number
of securities requested to be included in such registration exceeds the number
which can be sold in (or during the time of) such offering, then the Buyer will
include in such registration, to the extent of the number which the Buyer is so
advised can be sold in (or during the time of) such offering, (i) first
securities proposed by the Buyer to be sold for its own account, and (ii) second
shares and securities of other selling security holders requested to be included
in such registration pro rata on the basis of the number of shares of such
securities so proposed to be sold and so requested to be included.
10. TERMINATION
10.1 TERMINATION EVENTS
This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer and Acquisition or
Sellers and the Company if a material Breach of any provision of this Agreement
has been committed by the other party and such Breach has not been cured or
waived;
(b) (i) by Buyer and Acquisition if any
of the conditions in Section 7 has not been satisfied as of the
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Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Buyer to comply with its obligations under
this Agreement) and Buyer has not waived such condition on or before the Closing
Date; or (ii) by Sellers and Company, if any of the conditions in Section 8 has
not been satisfied of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Sellers and Company to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and
Acquisition and Sellers and the Company; or
(d) by either Buyer and Acquisition or
Sellers and the Company if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement to comply fully with
its obligations under this Agreement) on or before June 1, 1998, or such later
date as the parties may agree upon.
A party's right of termination under Section
10.1 is in addition to any other rights it may have under this Agreement or
otherwise, the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 10.1, all further
obligations of the parties under this Agreement terminate, except the
obligations in Section 12.1 and 12.3 will survive; provided, however, that if
this Agreement is terminated by a party because of a breach of the Agreement by
the other party or because one or more of the conditions to the terminating
party's obligations is not satisfied as a result of the other party's failure to
comply with its obligations under this Agreement, the terminating party's right
to pursue all legal remedies will survive such termination unimpaired.
11. INDEMNIFICATION; REMEDIES
11.1 SURVIVAL
All representations, warranties, covenants,
and obligations in this Agreement, the Disclosure Letter and any of the
supplements thereto, and any other certificate or document delivered pursuant to
this Agreement will survive the Closing until the audit report for the Buyer's
fiscal year ended December 31, 1998 is issued except for the representations and
warranties in Sections 3.3 and 3.11, which shall survive for the applicable
statute of limitations. Each party has the right to rely on the representations
and warranties of the other party. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
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indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
SELLERS
Sellers, jointly and severally will
indemnify and hold harmless Buyer, the Surviving Corporation, and their
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' and other professional fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or
warranty made by Sellers in this Agreement, giving effect to any supplement to
Disclosure Letter, the Disclosure Letter and any of the supplements thereto, or
any other certificate or document delivered by Sellers pursuant to this
Agreement;
(b) any Breach by either Seller of any
covenant or obligation of such Seller in this Agreement;
(c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such Person with
Sellers or the Company (or any Person acting on their behalf) in connection with
any of the Contemplated Transactions.
The remedies provided in this Section 11.2
will not be exclusive of or limit any other remedies that may be available to
Buyer or the other Indemnified Persons.
11.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
BUYER
Buyer will indemnify and hold harmless
Sellers for, and will pay to the Sellers the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' and
other professional fees) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with:
(a) any Breach of any representation or
warranty made by Buyer in this Agreement;
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<PAGE> 44
(b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement;
(c) any claim by any Person for brokerage
or finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Buyer (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 11.3
will not be exclusive of or limit any other remedies that may be
available to Sellers.
11.4 TIME LIMITATIONS; DOLLAR LIMITATIONS
If the Closing occurs, Sellers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, other than those in Sections 3.3, 3.11 and 3.15, unless on
or before twenty-seven (27) months from the date of Closing, Buyer notifies
Sellers of a claim specifying the factual basis of that claim. A claim with
respect to Section 3.3, 3.11 and 3.15 may be made at any time prior to the
applicable statute of limitations with respect to such matter.
Notwithstanding any conflicting provisions
herein, no party shall be liable for damages, indemnity or otherwise to another
party in respect to the inaccuracy or breach of any representations, warranties,
covenants or agreements herein except to the extent that Damages to the
aggrieved party caused by such inaccuracy of breach exceed the sum of $100,000.
Furthermore, Sellers' aggregate liability hereunder shall in no event exceed the
cash consideration to be paid to Sellers pursuant to 2.7, provided, however,
such limitation will not apply for breaches of the representations and
warranties contained in Section 3.3.
11.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY
CLAIMS
(a) Promptly after receipt by an
indemnified party under Sections 9.2 or 9.3 of notice of the commencement of any
Proceeding against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is prejudiced by
the indemnified party's failure to give such notice.
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<PAGE> 45
(b) If any Proceeding referred to in
Section 11.5(a) is brought against an indemnified party and it gives notice to
the indemnifying party of the commencement of such Proceeding, the indemnifying
party will be entitled to participate in such Proceeding and, to the extent that
it wishes (unless (i) the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint representation
would be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 9 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding. If the indemnifying party
assumes the defense of a Proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (ii) no compromise or settlement of
such claims may be effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no effect on
any other claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no liability with
respect to any compromise or settlement of such claims effected without its
consent. If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so
45
<PAGE> 46
defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
11.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim may be asserted by notice to the
party from whom indemnification is sought.
11.7 ADDITIONAL LIMITATIONS ON LIABILITY OF
SELLER. Notwithstanding anything to the contrary contained in this Agreement,
Sellers shall not be liable under the indemnification provisions of Section 11
hereof or otherwise have any liability for any misrepresentation or breach of
warranty or covenant under this Agreement or otherwise have any liability in
connection with the transactions contemplated by this Agreement to the extent
that the existence of such liability, the breach of warranty or covenant or the
falsity of the representation upon which such liability would be based is
disclosed in the Disclosure Letter or the Schedules attached hereto or which is
disclosed in a written notice furnished to Buyer prior to the Closing; provided,
however, that any such misrepresentation or breach of warranty or covenant so
disclosed to Buyer after the execution and delivery of this Agreement and prior
to the Closing shall not affect the right of Buyer to elect not to close the
transactions contemplated by this Agreement as provided in Section 7 hereof (it
being understood and agreed that if, despite such right of Buyer to elect not to
close by reason of the misrepresentation or breach so disclosed, nevertheless
elects to close, thereby waiving such misrepresentation or breach, Buyer shall
thereafter have no claim against any Seller by reason of, in connection with or
arising from any such disclosed misrepresentation or breach of warranty or
covenant).
12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in
this Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants, provided Buyer shall bear the
costs of the preparation of the Company's audited financial statements for the
period ended September 30, 1997.
12.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions
will be issued, if at all, at such time and in such manner as
Buyer determines. Unless consented to by Buyer in advance or
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<PAGE> 47
required by Legal Requirements, prior to the Closing Sellers shall, and shall
cause the Company to, keep this Agreement strictly confidential and may not make
any disclosure of this Agreement to any Person other than their professional
advisors and such employees of the Company who have a need to know. Sellers and
Buyer will consult with each other concerning the means by which the Company's
employees, customers, and suppliers and others having dealings with the Company
will be informed of the Contemplated Transactions, and Buyer will have the right
to be present for any such communication.
12.3 CONFIDENTIALITY
(a) Between the date of this Agreement
and the Closing Date, Buyer and Sellers will maintain in confidence, and will
cause the directors, officers, employees, agents, and advisors of Buyer,
Acquisition and the Company to maintain in confidence, and not use to the
detriment of another party or the Company any written, oral, or other
information obtained in confidence from another party or the Company in
connection with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by legal proceedings.
(b) If the Contemplated Transactions
are not consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
12.4 NOTICES
All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand, (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Sellers: Greenwood Outfitters, Inc.
290 Suffolk Court E, #300
Fort Worth, Texas 76133
Attention: Robert Wood
Raleigh Green
47
<PAGE> 48
Facsimile No.: (817) 923-2914
with a copy to: Kelly Hart & Hallman, P.C.
201 Main Street
Suite 2500
Fort Worth, Texas 76102
Attention: Don C. Plattsmier
Facsimile No.: (817) 878-9280
Buyer or Acquisition: Office Center Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
(212) 686-6623
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
(954) 766-7800
12.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
12.6 WAIVER
The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
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12.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior
agreements between the parties with respect to its subject matter (including the
Letter of Intent between Buyer and Sellers dated June 30, 1997) and constitutes
(along with the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
12.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY
RIGHTS
Neither party may assign any of its rights
under this Agreement without the prior consent of the other parties. Subject to
the preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the heirs, successors and permitted assigns of
the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
12.9 SEVERABILITY
If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
12.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
12.11 TIME OF ESSENCE
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<PAGE> 50
With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
12.12 GOVERNING LAW
This Agreement will be governed by the laws
of the State of New York without regard to conflicts of laws
principles.
12.13 COUNTERPARTS
This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION
/s/ Robert Wood
-----------------------
ROBERT WOOD
By: /s/Robert J. Gillon, Jr.
----------------------------
Name: Robert J. Gillon, Jr. /s/ Raleigh Green
Title: CEO ------------------------
RALEIGH GREEN
ACQUISITION:
OFFICE CENTRE FORT WORTH
By: /s/Robert J. Gillon, Jr.
---------------------------------
Name: Robert J. Gillon, Jr.
Title: CEO
COMPANY:
GREENWOOD OUTFITTERS, INC.
By: /s/Raleigh Green
-------------------------------
Name: Raleigh Green
Title: President
51
<PAGE> 52
GREENWOOD OUTFITTERS, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 7.2(b)(i) Employment Agreements
Exhibit 7.4(a) Opinion of Kelly, Hart & Hallman
Exhibit 8.3(a) Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
SCHEDULES
Schedule 3.2 Authority; No Conflict
Schedule 3.3 List of Owners of Outstanding Securities
Schedule 3.6 Real Property
Schedule 3.8 Accounts Receivable
Schedule 3.11 Taxes
Schedule 3.14 Compliance with Legal Requirements;
Governmental Authorizations
Schedule 3.16 Absence of Certain Changes and Events
Schedule 3.17(a) Contracts; No Defaults
Schedule 3.20 Employees
Schedule 8.4 Consummation of Related Transactions
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.05
FIRST AMENDMENT TO MERGER AGREEMENT
THIS FIRST AMENDMENT TO MERGER AGREEMENT dated October 24,
1997, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE FORT WORTH, a Texas corporation and a wholly-owned subsidiary of
Buyer ("Acquisition"), GREENWOOD OUTFITTERS, INC., a Texas corporation (the
"Company"), ROBERT WOOD, an individual resident in Texas ("Wood") and RALEIGH
GREEN, an individual resident in Texas ("Green") (Wood and Green each a "Seller"
and, collectively the "Sellers or Shareholders").
RECITALS
WHEREAS, the parties have entered into a Merger Agreement
dated as of October 24, 1997 (the "Merger Agreement") and have agreed to amend
certain provisions of the Merger Agreement as set forth below.
NOW, THEREFORE, in consideration of the agreements contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are conclusively acknowledged, the parties intending to be legally bound,
agree as follows:
0.0.1 The provisions of this First Amendment shall govern and
control over any conflicting or inconsistent provisions in the Merger Agreement,
but except as modified hereby, all provisions of the Merger Agreement remain
unmodified and in full force and effect and are hereby reaffirmed by each of the
parties hereto. Unless otherwise defined herein, all capitalized terms shall
have the meanings as provided therefor in the Merger Agreement.
0.0.2 Section 3.2(c) of the Merger Agreement is amended as
follows:
(c) Sellers are acquiring the Buyer's
Common Stock for their own account and not with a view to its distribution
within the meaning of Section 2(11) of the Securities Act. Each Seller is an
"accredited investor" as such term is defined in Rule 501(a) under the
Securities Act. Each Seller acknowledges that each certificate representing
Buyer's Common Stock acquired pursuant to this Agreement shall bear the
following restrictive legend:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE (THE "SHARES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE
SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE OF
THE FOLLOWING: (i) AN EFFECTIVE REGISTRATION
<PAGE> 2
STATEMENT FOR THE SHARES UNDER THE SECURITIES
ACT, OR (ii) AN OPINION OF COUNSEL,
SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE,
OFFER OR DISTRIBUTION.
Each Seller further acknowledges
that he shall be subject to such "lock-up" restriction as may be imposed by the
Buyer's underwriter or any entity regulating the issuance of the Buyer's Common
Stock in its initial public offering, for a period not to exceed one (1) year
from the Closing Date.
0.0.3 The Merger Agreement is amended to add the
following as Section 7.9:
7.9 INITIAL PUBLIC OFFERING
Buyer shall have closed its initial public
offering.
0.0.4 Section 8.4(c) is amended as follows:
(c) The Buyer shall have closed its initial
public offering.
0.0.5 Each party represents and warrants the other
as follows:
(a) The execution, delivery and performance of
this First Amendment
(i) has been duly authorized by all
necessary or appropriate acts or proceedings, corporate or
otherwise; and
(ii) does not violate or result in a
breach or default under any contract, understanding judgment, order writ, law
regulation that is applicable to the representing party for its assets.
(b) This First Amendment is a valid legal and
binding obligation and agreement of the representing party, and is enforceable
against it in accordance with its terms.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to the Merger Agreement this _____ day of December, 1997.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION
/s/ Robert Wood
---------------------------------
ROBERT WOOD
By: /s/ Robert J. Gillon, Jr.
---------------------------------
Name: Robert J. Gillon, Jr. /s/ Raleigh Green
Title: CEO ----------------------------------
RALEIGH GREEN
ACQUISITION: COMPANY:
OFFICE CENTRE FORT WORTH GREENWOOD OUTFITTERS, INC.
By: /s/ Robert J. Gillon, Jr. /s/ Robert Wood
- ------------------------------------ -----------------------------------
Name: Robert J. Gillon, Jr. Name: Robert Wood
Title: Title: Vice President
3
<PAGE> 1
EXHIBIT 2.06
SECOND AMENDMENT TO MERGER AGREEMENT
THIS SECOND AMENDMENT TO MERGER AGREEMENT dated April 24,
1998, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE FORT WORTH, a Texas corporation and a wholly-owned subsidiary of
Buyer ("Acquisition"), GREENWOOD OUTFITTERS, INC., a Texas corporation (the
"Company"), ROBERT WOOD, an individual resident in Texas ("Wood") and RALEIGH
GREEN, an individual resident in Texas ("Green") (Wood and Green each a "Seller"
and, collectively the "Sellers or Shareholders").
RECITALS
WHEREAS, the parties have entered into a Merger Agreement
dated as of October 24, 1997, as amended on December __, 1997 (the "Merger
Agreement") and have agreed to amend certain provisions of the Merger Agreement
as set forth below.
NOW, THEREFORE, in consideration of the agreements contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are conclusively acknowledged, the parties intending to be legally bound,
agree as follows:
0.0.1 The provisions of this Second Amendment shall govern and
control over any conflicting or inconsistent provisions in the Merger Agreement,
but except as modified hereby, all provisions of the Merger Agreement remain
unmodified and in full force and effect and are hereby reaffirmed by each of the
parties hereto. Unless otherwise defined herein, all capitalized terms shall
have the meanings as provided therefor in the Merger Agreement.
0.0.2 Section 2.5 of the Merger Agreement is amended to read
as follows:
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing,
cause Robert J. Gillon, Jr., Richard T. Case, Robert Wood, and Carey Beck to be
appointed as Directors of the Surviving Corporation. Robert Wood, Raleigh Green,
Robert J. Gillon, Jr., Carey Beck, and Aaron Beck shall serve as the officers of
the Surviving Corporation until their successors have been elected or appointed
and shall have been qualified in accordance with applicable law.
0.0.3 Section 2.7 of the Merger Agreement is amended to read
as follows:
<PAGE> 2
2.7 CONVERSION OF COMPANY COMMON STOCK
At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of capital stock of
Buyer, Acquisition, Company or Sellers: (i) the shares of Common Stock of
Acquisition purchased, issued and outstanding immediately prior to the Effective
Time shall be converted as a result of the Merger and without any action on the
part of the holder thereof, into 100 shares of capital stock of the Surviving
Corporation and shall represent all the issued and outstanding shares of the
Surviving Corporation; and (ii) the shares of the Company held by Sellers shall
be converted into and shall become, without further action on the part of the
Sellers, the right to receive, at Closing and on a pro rata basis, the
following: (a) Two Million Six Hundred Fifty Thousand Dollars ($2,650,000) by
wire transfer or certified check; (b) the number of shares of restricted Common
Stock of Buyer having a value of Six Million Five Hundred Fifty Thousand Dollars
($6,550,000), which number of shares of Common Stock shall be determined by
dividing such dollar amount by the initial public offering price of Buyer's
Common Stock (the "IPO Price"), and; (c) the contingent right to receive
additional consideration as follows:
(1) As promptly as practicable
following December 31, 1998, the independent public accounting firm then
employed by Buyer shall determine, in accordance with GAAP except for the
guidelines set forth in clause (2) below, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for the year ended
December 31, 1998 (the "1998 EBITDA"). Buyer shall notify Sellers of the
determination of the 1998 EBITDA as soon as it is received.
(2) The EBITDA determination
provided for in clause (1) above shall be done in such a way as to simulate that
the merger transaction provided for in this Agreement ("Transaction") had not
occurred and that the Company had remained a separately owned enterprise. For
example, it is intended that such determination will, whether or not recorded on
the financial statements of Company, Acquisition or Buyer, disregard and exclude
(A) all costs associated with the consummation of the Transaction, (B) all
general and administrative, overhead and other costs and expenses over and above
those customarily incurred by the Company in the period preceding the
Transaction, and (C) all net income resulting from the integration of the
operations of other enterprises with those of the Company after the Transaction.
In addition, in order to facilitate comparison of the two periods, the EBITDA
determinations for the periods ending December 31, 1997 and December 31, 1998
will be adjusted in regard to compensation, bonuses, and distributions paid to
Sellers during such periods as follows:
2
<PAGE> 3
(A) The 1997 EBITDA (as
defined below) has been adjusted to eliminate as costs all compensation, bonuses
and distributions paid by the Company to Sellers in excess of $300,000.
(B) In determining the
1998 EBITDA, if compensation, bonuses and distributions paid to Sellers exceed
$300,000, the amount of such excess will be added back as an increase to the
1998 EBITDA.
(3) It is stipulated that,
solely for the purposes hereof, the EBITDA of the Company for the year ended
December 31,1997 (taking into account the provisions of clause (2) above), was
$1,231,000 (the "1997 EBITDA"). The EBITDA determination for the year ended
December 31, 1998, shall be done in a manner consistent with the determination
for the year ended December 31, 1997.
(4) If the 1998 EBITDA exceeds
the 1997 EBITDA, the amount of such excess shall be multiplied by 3.05 and the
resulting sum shall be the "Difference," provided, however, that in no event
shall the Difference exceed $3,500,000. If, in calculating the 1998 EBITDA, an
adjustment was made as provided in clause (2)(B) above in regard to
compensation, bonuses and distributions paid to Sellers, then the amount so
added back as an increase to the 1998 EBITDA will be subtracted from the
Difference, and the resulting sum shall be the "Adjustment Amount." If no such
adjustment was made, the Difference shall be the Adjustment Amount.
(5) The Adjustment Amount shall
be paid to Sellers (one-half thereof to each of Sellers) within ten (10) days
after the determination of the 1998 EBITDA as follows: (A) by the issuance to
Sellers (one-half to each of Sellers) of the number of shares of restricted
Common Stock of Buyer having a value equal to seventy percent (70%) of the
Adjustment Amount, which number of shares of Common Stock shall be determined by
dividing 70% of the Adjustment Amount by the IPO Price, provided, however, that
the number of shares so issued shall not exceed the number of shares issued to
Sellers at Closing, and (B) by the payment to Sellers (one-half to each of
Sellers) of an amount in cash equal to the Adjustment Amount LESS the value (at
the IPO Price) of the shares of Common Stock of Buyer issued to Sellers pursuant
to clause (A) above.
0.0.4 The first sentence of Section 9.1 of the Merger
Agreement is amended to read as follows:
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9.1 RIGHT TO INCLUDE SHARES
If at any time after the first anniversary
of Buyer's Initial Public Offering but before the third anniversary of the
Closing, the Buyer proposes to register any of its securities under the
Securities Act of 1933 (other than by registration in connection with an
acquisition in a manner which would not permit registration of the Shares for
sale to the public, on Form S-4 or any successor form thereto, or on Form S-8 or
any successor form thereto), the Buyer will each such time give prompt written
notice to Sellers of its intention to do so and of Sellers' rights under this
Section 9.1.
0.0.5 Section 10.1(d) of the Merger Agreement is amended to
read as follows:
(d) by either Buyer and Acquisition or
Sellers and the Company if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement to comply with the
obligations under this Agreement) on or before September 1, 1998, or such later
date as the parties may agree in writing.
0.0.6 The definition of "Employment Agreements" in Section 1.
of the Merger Agreement is amended by changing the reference from Section 6.2 to
Section 7.2 and the forms of the Employment Agreements attached hereto shall
replace those attached to the Merger Agreement as Exhibit 7.2(b)(i).
0.0.7 The number, but not the exercise price, of the options
to be granted to each Seller under their Employment Agreements is subject to
adjustment (prior to Closing) based upon any stock split, combinations or
subdivisions of Buyer's Common Stock, provided that Seller's options shall be
adjusted no less favorably than any other "founding dealers." Provided, further,
that in no event shall the number of options be reduced by more than forty
percent (40%).
0.0.8 Each party represents and warrants to the others as
follows:
(a) The execution, delivery and performance of
this Second Amendment
(i) has been duly authorized by all
necessary or appropriate acts or proceedings, corporate or
otherwise; and
(ii) does not violate or result in a
breach or default under any contract, understanding judgment, order writ, law
regulation that is applicable to the representing party or its assets.
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(b) This Second Amendment is a valid, legal and
binding obligation and agreement of the representing party, and is enforceable
against it in accordance with its terms.
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IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to the Merger Agreement this _____ day of April, 1998.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION
/s/ Robert Wood
---------------------------
ROBERT WOOD
By: /s/ Robert J. Gillon, Jr.
- ---------------------------------------
Name: Robert J. Gillon, Jr. /s/ Raleigh Green
Title: CEO ----------------------------
RALEIGH GREEN
ACQUISITION: COMPANY:
OFFICE CENTRE FORT WORTH GREENWOOD OUTFITTERS, INC.
By: /s/Robert J. Gillon, Jr. /s/ Robert C. Wood
- -------------------------------------- ---------------------------
Name: Robert J. Gillon, Jr. Name: Robert Wood
Title: Title: Vice President
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EXHIBIT 2.08
AMENDED AND RESTATED MERGER AGREEMENT
THIS AMENDED AND RESTATED MERGER AGREEMENT ("Agreement") dated May 20,
1998, is made as of September 10, 1997, by and among OFFICE CENTRE CORPORATION,
a Delaware corporation ("Buyer"), OFFICE CENTRE RICHMOND, a Virginia corporation
and a wholly-owned subsidiary of Buyer ("VA Acquisition"), OFFICE CENTRE
RICHMOND, a Delaware corporation and wholly-owned subsidiary of Buyer
("Acquisition"), THE SUPPLY ROOM COMPANIES, INC., a Virginia corporation (the
"Company"), YANCEY S. JONES, an individual resident in Virginia ("Y. Jones") and
M. ADDISON JONES, JR. ("M. Jones") (Y. Jones and M. Jones each a "Seller" and,
collectively the "Sellers").
RECITALS
WHEREAS, in September 1997, the parties entered into an agreement the
terms of which they desire to amend and restate;
WHEREAS, Sellers own 93.28% of the issued and outstanding shares of
capital stock of the Company;
WHEREAS, Buyer wishes to substitute and assign the rights of VA
Acquisition to OFFICE CENTRE RICHMOND, a Delaware corporation, and a
wholly-owned subsidiary of the Buyer;
WHEREAS, upon consummation of the Merger, Acquisition, as the Surviving
Corporation, will be a wholly-owned subsidiary of Buyer;
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish to set
forth the terms and conditions upon which a merger of Company with and into
Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition and the
Company deems the merger advisable and in the best interests of each of Buyer,
Acquisition and the Company and of their respective shareholders. The Board of
Directors of each of Buyer, Acquisition and the Company has adopted resolutions
approving this Agreement and the transactions contemplated hereby, and each of
the Boards of Directors of Acquisition and the Company have directed that this
Agreement be submitted for consideration by the shareholders of Acquisition and
the Company.
<PAGE> 2
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any Contract (a) under which Company
has or may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability, or (c) by which the Company or any of
the assets owned, leased or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
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(a) the merger of Company with and into Acquisition;
(b) the execution, delivery, and performance of the Employment
Agreements, the Sellers' Releases, and the Escrow Agreement;
(c) the performance by Buyer, Company and Sellers of their
respective covenants and obligations under this Agreement; and
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by
Sellers and Company to Buyer concurrently with the execution and delivery of
this Agreement.
"EBITDA"--shall mean the earnings of the Surviving Corporation
for such period determined in accordance with generally accepted accounting
principles applied on a consistent basis before taking into account interest,
income taxes, depreciation and amortization. The Surviving Corporation's EBITDA
shall be calculated on a basis similar to that set forth on the attached
Schedule A provided, however such number shall be subject to adjustment upward
for (i) amounts representing corporate overhead expenses of Buyer and other
expenses which Buyer may incur on the Surviving Corporation's behalf in excess
of the amounts that the Company would have incurred in the ordinary course of
its business; (ii) expenses associated with this transaction; and (iii) expenses
associated with acquisitions made by the Company either prior to or after the
date hereof. Notwithstanding the foregoing, (x) the EBITDA shall be adjusted to
add back decreases, if any, in earnings of the Surviving Corporation directly
caused by changes in the Surviving Corporation's business practice as compared
to the Company's business practice resulting from the Merger including changes
in discounts, rebates and pricing, provided such decreases shall have been
dictated by Buyer in order to make such adjustments and (y) the calculation of
EBITDA shall not include any loss or gain attributable to the Company's
membership interest in Mega Office Furniture, L.L.C.
"EMPLOYMENT AGREEMENTS"--as defined in Section 6.2.
"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and
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wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
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(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention;
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets; or
(i) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently or formerly owned or operated by Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by Company.
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4(b) were
prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
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(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS"--any waste or other substance that is
listed, defined, designated, classified or regulated as, or otherwise determined
to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"HSR ACT"--the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.22.
"IRC"--the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge"
of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
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(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the normal course of
conducting a Person's business concerning the existence of such fact or other
matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
manager, executor, or trustee of such Person (or in any similar capacity) has,
or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"MEGA"--Mega Office Furniture, L.L.C., a Virginia limited
liability company.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
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"PERSON"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PLAN"--as defined in Section 3.13.
"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause
(b) or (c).
(g) For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
other natural person who is
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related to the individual or the individual's spouse within the second degree,
and (iv) any other natural person who resides with such individual, and (b)
"Material Interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or
other voting interests representing at least 1% of the outstanding voting power
of a Person or equity securities or other equity interests representing at least
1% of the outstanding equity securities or equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this
Agreement.
"SELLERS' RELEASES"--as defined in Section 6.2.
"SHAREHOLDERS"--those individuals listed in Schedule 3.3
hereto. As used herein, the term "Shareholder" shall not include the Buyer.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the
merger of Company into Acquisition.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
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"THREAT OF RELEASE"--a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Company shall be merged with Acquisition (the
"Merger"). The separate existence and corporate organization of Company shall
thereupon cease and the Company and Acquisition shall thereupon be a single
corporation. Acquisition shall be the surviving corporation in the Merger (the
"Surviving Corporation") and shall continue its existence under the provisions
of the Delaware General Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the "Articles of
Merger") shall be executed by the Company and Acquisition and shall be filed
with the Secretary of State of the State of Virginia. The Merger shall become
effective at such time as the Articles of Merger are filed with the State
Corporation Commission of the Commonwealth of Virginia, and the Secretary of
State of the State of Delaware such time being hereinafter called the "Effective
Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in effect
immediately prior to the Effective Time shall be and remain the Articles of
Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law, except the name shall be changed to The Supply
Room Companies, Inc.
2.4 BY-LAWS
The By-laws of the Company as in effect immediately prior to
the Effective Time shall be and remain the By-laws of the Surviving Corporation
from and after the Effective Time until amended as provided by law.
2.5 DIRECTORS AND OFFICERS
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Acquisition and Buyer shall, at Closing, cause Yancey S.
Jones, Robert J. Gillon, Jr. and Richard T. Case to be appointed as directors of
the Surviving Corporation. Yancey S. Jones and M. Addison Jones shall serve as
the officers of the Surviving Corporation until their successors have been
elected or appointed and shall have qualified in accordance with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall be effective
on the earlier to occur of (i) closing date of Buyer's initial public offering,
or (ii) in the event that the shares issued to Buyer pursuant to Section 2.9
have not been repurchased by Company after notice by Buyer to Company of its
request for repurchase, nine (9) months from the earlier of (a) the date of such
notice or (b) July 31, 1998, or (iii) at such other date as the parties hereto
shall agree in writing (the "Closing Date"), and shall be held at the offices of
Buyer's counsel at 200 East Las Olas Boulevard, Fort Lauderdale, Florida 33301
at 10:00 a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of any holder of capital stock of Buyer, Acquisition,
Company or Sellers: (i) the shares of Common Stock of Acquisition purchased,
issued and outstanding immediately prior to the Effective Time shall be without
any action on the part of the holder thereof, the capital stock of the Surviving
Corporation and shall represent all the issued and outstanding shares thereof;
and (ii) the shares of the Company owned by the Sellers and the Shareholders
which represent all the issued and outstanding shares of the Company on the date
hereof, and on the Closing shall be converted into and shall become, without
further action on the part of the Sellers or the Shareholders, the right of the
Shareholders to receive a total of Ten Million Eight Hundred Sixty-Four Thousand
Dollars ($10,864,000) in consideration to be paid as follows: (a) the
Shareholders, other than Sellers, shall receive Seven Hundred Twenty-Nine
Thousand Six Hundred Seventy-Two Dollars ($729,672) by wire transfer or
certified check; (b) Two Million Twenty-Six Thousand Eight Hundred and Sixty-Six
Dollars ($2,026,866) by wire transfer or certified check to Sellers; and (c)
Eight Million One Hundred Seven Thousand Four Hundred Sixty-Two Dollars
($8,107,462) principal amount of restricted Common Stock of Buyer, which number
of shares of Common Stock shall be determined by dividing $8,107,462 by the
initial public offering price of Buyer's Common Stock (the "IPO Price") to
Sellers. The Sellers shall also be entitled to receive on a pro rata basis,
consideration having a value, of an amount equal to eight (8) times the
difference between $1,234,000 of EBITDA for the twelve (12) month period ended
December 31, 1998 (the "Targeted Amount") and EBITDA for such period of
$1,500,000. In addition, the Sellers shall also be entitled to receive on a pro
rata basis, consideration equal to four (4) times the amount in which the EBITDA
for such twelve (12) month period exceeds $1,500,000.
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(b) Within 120 calendar days after December 31, 1998, Buyer
shall cause its independent auditing firm to deliver to the Sellers a report of
EBITDA of the Surviving Corporation for the twelve (12) month period then ended.
In the event that the Surviving Corporation produces EBITDA for such twelve (12)
month period of at least $1,234,000, as determined by the accountants for Buyer,
the Buyer shall deliver to the Shareholders shares and cash based upon 1998
EBITDA of the Surviving Corporation and the formula set forth in this Section
2.7. The amount of the consideration to be received by the Sellers shall be
twenty percent (20%) in cash and the remaining eighty percent (80%) in stock.
The shares to be received by Sellers shall be valued at the IPO Price.
Notwithstanding the foregoing, the consideration to be received shall not be
less than the minimum of $500,000 in value provided that the EBITDA of the
Surviving Corporation for such period is at least equal to the Targeted Amount.
(c) The Buyer shall provide to the Shareholders, their
accountants and advisors full access to its books, records (including work
papers of its independent and in-house counsel), employees involved in the
Surviving Corporation's operations, as well as all of their employees and
personnel of the Buyer having knowledge of the Surviving Corporation's
operations, and all such persons shall cooperate with the Shareholders and the
Shareholders shall cooperate with the Buyer in preparing the end report of
EBITDA or investigating the basis of any dispute in connection therewith.
(d) The Sellers shall have a period of twenty (20) days after
delivery of the EBITDA certificate, to present in writing to Buyer, any
objections that the Seller may have to any of the matters set forth in such
certificate, which objection shall be set forth in reasonable detail. If no
objections are raised within such twenty (20) day period, the certificate shall
be deemed accepted and approved by the Sellers. If the Sellers shall raise any
objections within the twenty (20) day period, the parties shall attempt to
resolve the matter or matters in dispute. If such dispute cannot be resolved
with a further period of twenty (20) days, the Sellers shall have the right, at
their expense, except as noted below, to submit the dispute to a nationally
recognized firm of independent public accountants mutually agreed to by Sellers
and Buyer, which firm shall make a final and binding determination as to such
matter or matters in dispute. In the event that the EBITDA for such period is
greater by more than 5%, Buyer shall bear all fees and expenses in connection
with such review.
(e) In the event that the Closing occurs as a result of the
conditions set forth in Section 2.6(ii), the consideration to be received as a
result of the conversion of the Company's Common Stock shall be determined based
upon appraisal of both the Buyer and the Company conducted by an appraiser
selected by the Buyer and the Sellers, provided, however, that the consideration
to be received shall (i) be no less than the value of the consideration to be
received by Shareholders in this Section 2.7 and (ii) such appraisal shall
consider the "value" of both the Company and the Buyer and its subsidiaries;
such valuations to be calculated on the same basis. If the Buyer and Sellers are
unable to agree on an appraiser, each shall select an appraiser, and the two
appraisers shall select a third appraiser who shall conduct the required
appraisal.
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2.8 REGISTRATION OF COMMON STOCK
(a) If, at any one time beginning one year after the Closing
and during the two (2) year period thereafter, the Buyer proposes to prepare and
file with the Securities and Exchange Commission (the "Commission") a
registration statement covering equity securities of the Buyer (in any such
case, other than in connection with a merger, acquisition or pursuant to Form
S-8 or successor form), it will give written notice of its intention to do so by
registered mail ("Notice") at least twenty (20) days prior to the filing of each
such Registration Statement to the Shareholders of the Company. Upon the written
request of the Sellers, made within twenty (20) days after receipt of the
Notice, the Buyer will include any of the shares in the proposed Registration
Statement.
(b) Notwithstanding the provisions of this Section 2.8, (i)
the Buyer shall have the right at any time after it shall have given written
notice pursuant to this Section 2.8 (irrespective of whether any written request
for inclusion of the shares shall have already been made) to elect not to file
any such proposed Registration Statement, or to withdraw the same after the
filing but prior to the effective date thereof; or (ii) if the Company's
managing underwriter of the offering for which a Registration Statement has been
filed so requests in writing, the Shares shall not be offered or sold.
(c) The Buyer shall pay all costs, fees and expenses in
connection with the Registration Statement filed pursuant to this Section 2.8
including, without limitation, the Buyer's legal and accounting fees, printing
expenses, and blue sky fees and expenses; provided, however, that the Sellers
shall be solely responsible for the fees of any counsel retained by the Sellers
in connection with such registration and any transfer taxes or underwriting
discounts, commissions or fees applicable to the shares sold by Sellers pursuant
thereto.
2.9 PURCHASE OF COMMON STOCK PRIOR TO CLOSING
Contemporaneously with the execution of this Agreement, Buyer
shall purchase shares of Common Stock of Company representing a total of One
Thousand Two Hundred Fifty (1,250) shares for a purchase price of (i) Seven
Hundred Fifty Thousand Dollars ($750,000) on the date hereof and (ii) an
additional Seven Hundred Fifty Thousand Dollars ($750,000) on September 19,
1997. Such shares upon issuance shall be fully paid, non-assessable.
Furthermore, such shares shall be subject to repurchase as set forth below.
No later than July 31, 1998, Buyer shall notify the Company of
its intent to consummate its initial public offering. If such notice is not
received by the Company, or such notice shall state that Buyer shall not proceed
with such offering, the Company shall have the right to repurchase from Buyer
the shares issued pursuant to this Section at a purchase price of One Million
Five Hundred Thousand Dollars ($1,500,000) no later than nine (9) months
following the earlier to occur of (i) the date of notice or (ii) July 31, 1998.
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3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and Company hereby jointly and severally represent and
warrant to Buyer and Acquisition the following as of September 10, 1997, except
as specifically stated otherwise:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under Applicable
Contracts. The Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification.
(b) Sellers have delivered to Buyer copies of the
Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and Company, enforceable against Sellers and Company in
accordance with its terms. Upon the execution and delivery by Sellers of the
Escrow Agreement, the Employment Agreement, the Sellers' Releases,
(collectively, the "Sellers' Closing Documents") and Company of the Escrow
Agreement (the "Company Closing Document"), the Sellers' Closing Documents and
Company Closing Document will constitute the legal, valid, and binding
obligations of Sellers and Company as the case may be, enforceable against
Sellers and Company in accordance with their respective terms. Sellers and
Company have the absolute and unrestricted right, power, authority, and capacity
to execute and deliver this Agreement and the Sellers' Closing Documents and
Company Closing Document and to perform their obligations under this Agreement
and the Sellers' Closing Documents and Company Closing Document.
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the stockholders of the Company;
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(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company or any Seller, or any of
the assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no
Seller or the Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Sellers are acquiring the Buyer's Common Stock for their
own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act. Each Seller is an "accredited investor" as
such term is defined in Rule 501(a) under the Securities Act. Each Seller
acknowledges that each certificate representing Buyer's Common Stock acquired
pursuant to the transactions contemplated hereby shall bear restrictive legend,
set forth below, and each Seller further acknowledges that each Seller shall be
subject to such "lock-up" restriction as imposed by the Buyer's underwriter or
any entity regulating the issuance of the Buyer's Common Stock in its initial
public offering.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE
OR
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OTHERWISE DISTRIBUTED WITHOUT ONE OF THE FOLLOWING: (i) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT, OR (ii)
AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
(d) Shareholders have approved the Merger Agreement.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of
15,000 shares of common stock, no par value per share, of which 10,000 shares
are issued and outstanding and constitute the Shares. The Shareholders are and
will be on the Closing Date the record and beneficial owners and holders of the
shares listed on Schedule 3.3 hereto, free and clear of all Encumbrances. All of
the outstanding securities of the Company are owned of record and beneficially
by the persons listed on Schedule 3.3. No legend or other reference to any
purported Encumbrance appears upon any certificate representing equity
securities of the Company. All of the outstanding equity securities of the
Company, including the shares of Common Stock to be issued pursuant to Section
2.9 hereof have been duly authorized and are or will be upon issuance validly
issued and fully paid and nonassessable. Except as set forth in Schedule 3.3,
there are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in violation of the
Securities Act or any other Legal Requirement. The Company does not own, or have
any Contract to acquire, any equity securities or other securities of any Person
or any direct or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: an audited consolidated
balance sheets of the Company as at December 31, 1997, (including the notes
thereto, the "Balance Sheet") (b) a balance sheet in each of the years September
30, 1993 through September 30, 1996, and the related audited consolidated
statements of income, changes in stockholders' equity, and cash flow for each of
the fiscal years then ended, together with the report thereon of Mitchell
Wiggins & Co. independent certified public accountants (the "Financial
Statements"). Such Financial Statements and notes fairly present the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of the Company as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP. No
financial statements of any Person other than the Company are required by GAAP
to be included in the consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS
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The books of account, minute books, stock record books, and
other records of the Company, all of which have been made available to Buyer,
are complete and correct and have been maintained in accordance with sound
business practices and the requirements of Section 13(b)(2) of the Securities
Exchange Act of 1934, as amended (regardless of whether or not the Company is
subject to that Section), including the maintenance of an adequate system of
internal controls. The minute books of the Company contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Company, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other interests therein owned
by the Company. Sellers have delivered or made available to Buyer copies of the
deeds and other instruments (as recorded) by which the Company acquired such
real property and interests and such instruments are true, complete and
accurate, and copies of all title insurance policies, opinions, abstracts, and
surveys in the possession of Sellers or the Acquired Companies and relating to
such property or interests. The Company owns (with good and marketable title in
the case of real property, subject only to the matters permitted by the
following sentence) all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that they purport to own located in
the facilities owned or operated by the Company or reflected as owned in the
books and records of the Company, including all of the properties and assets
reflected in the Balance Sheet (except for assets held under capitalized leases
disclosed or not required to be disclosed in Part 3.6 of the Disclosure Letter
and personal property sold since the date of the Balance Sheet in the Ordinary
Course of Business), and all of the properties and assets purchased or otherwise
acquired by the Company since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the Ordinary
Course of Business and consistent with past practice), which subsequently
purchased or acquired properties and assets (other than inventory and short-term
investments) are listed in Part 3.6 of the Disclosure Letter. All material
properties and assets reflected in the Balance Sheet are free and clear of all
Encumbrances; and the Company has good and marketable title thereto and are not,
in the case of real property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations, or limitations of any nature
except, with respect to all such properties and assets, (a) mortgages or
security interests shown on the Balance Sheet as securing specified liabilities
or obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists,
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(c) liens for current taxes not yet due, and (d) with respect to real property,
(i) minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Company, and (ii) zoning laws
and other land use restrictions that do not impair the present or anticipated
use of the property subject thereto. All buildings, plants, and structures owned
by the Company lie wholly within the boundaries of the real property owned by
the Company and do not encroach upon the property of, or otherwise conflict with
the property rights of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the
Company are structurally sound, are in good operating condition and repair, and
are adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the Company
are sufficient for the continued conduct of the Company's business after the
Closing in substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on
the Balance Sheet or on the accounting records of the Company as of the Closing
Date (collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Balance Sheet or on the
accounting records of the Company as of the Closing Date (which reserves are
adequate and calculated consistent with past practice and, in the case of the
reserve as of the Closing Date, will not represent a greater percentage of the
Accounts Receivable as of the Closing Date than the reserve reflected in the
Balance Sheet represented of the Accounts Receivable reflected therein and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within ninety days after the day on which it first becomes due and payable.
There is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. Part
3.8 of the Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the date of the Financial Statements, which list sets
forth the aging of such Accounts Receivable.
3.9 INVENTORY
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All inventory of the Company, whether or not reflected in the
Balance Sheet, consists of a quality and quantity usable and salable in the
Ordinary Course of Business, except for obsolete items and items of
below-standard quality, which in no event exceeds $50,000, all of which have
been written off or written down to net realizable value in the Balance Sheet or
on the accounting records of the Company as of the Closing Date, as the case may
be. All inventories not written off have been priced at the lower of cost or
market on a "fifo" basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the
Company has no material liabilities or obligations of any nature (whether known
or unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed (on a timely
basis since December 31, 1993) all Tax Returns that are or were required to be
filed by or with respect to any of them, either separately or as a member of a
group of corporations, pursuant to applicable Legal Requirements. Sellers have
delivered to Buyer copies of, and Part 3.11 of the Disclosure Letter contains a
complete and accurate list of, all such Tax Returns filed since December 31,
1993. The Company has paid, or made provision for the payment of, all Taxes that
have or may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Sellers or the Company, except such
Taxes, if any, as are listed in Part 3.11 of the Disclosure Letter and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Balance Sheet.
(b) The United States federal and state income Tax Returns of
the Company subject to such Taxes have been audited by the IRS or relevant state
tax authorities or are closed by the applicable statute of limitations for all
taxable years through 1993. Part 3.11 of the Disclosure Letter contains a
complete and accurate list of all audits of all such Tax Returns, including a
reasonably detailed description of the nature and outcome of each audit. All
deficiencies proposed as a result of such audits have been paid, reserved
against, settled, or, as described in Part 3.11 of the Disclosure Letter, are
being contested in good faith by appropriate proceedings. Part 3.11 of the
Disclosure Letter describes all adjustments to the United States federal income
Tax Returns filed by the Company or any group of corporations including the
Company for all taxable years since December 31, 1993, and the resulting
deficiencies proposed by the IRS. Except as described in Part 3.11 of the
Disclosure Letter, the Company has not given or been requested to give waivers
or extensions (or is or would be subject to a waiver or extension
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given by any other Person) of any statute of limitations relating to the payment
of Taxes of the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate (determined in accordance
with GAAP) and are at least equal to the Company's liability for Taxes. There
exists no proposed tax assessment against the Company except as disclosed in the
Balance Sheet or in Part 3.11 of the Disclosure Letter. No consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There is no tax
sharing agreement that will require any payment by the Company after the date of
this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have the
meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit
Obligation owed, adopted, or followed by an Acquired Company or an ERISA
Affiliate of the Company.
"COMPANY PLAN" means all Plans of which the Company or an
ERISA Affiliate of the Company is or was a Plan Sponsor, or to which the Company
or an ERISA Affiliate of the Company otherwise contributes or has contributed,
or in which the Company or an ERISA Affiliate of the Company otherwise
participates or has participated. All references to Plans are to Company Plans
unless the context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of
the Company or any ERISA Affiliate of the Company.
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"ERISA AFFILIATE" means, with respect to the Company, any
other person that, together with the Company, would be treated as a single
employer under IRC ss. 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA ss.
3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations,
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon the
amount of service rendered, sabbatical policies, severance payment policies, and
fringe benefits within the meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" has the meaning given in ERISA ss. 3(2)(A).
"PLAN" has the meaning given in ERISA ss. 3(3).
"PLAN SPONSOR" has the meaning given in ERISA ss. 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet
the requirements of IRC ss. 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. ss. 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC ss. 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA ss. 3(1).
(b) (i) Part 3.13(i) of the Disclosure Letter contains a
complete and accurate list of all Company Plans, Company Other Benefit
Obligations, and Company VEBAs, and identifies as such all Company Plans that
are (A) defined benefit Pension Plans, (B) Qualified Plans, (C) Title IV Plans,
or (D) Multi-Employer Plans.
(ii) Part 3.13(ii) of the Disclosure Letter contains a
complete and accurate list of (A) all ERISA Affiliates of the Company, and (B)
all Plans of which any such ERISA Affiliate is or was a Plan Sponsor, in which
any such ERISA Affiliate participates or has participated, or to which any such
ERISA Affiliate contributes or has contributed.
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(iii) Part 3.13(iii) of the Disclosure Letter sets forth,
for each Multi-Employer Plan, as of its last valuation date, the amount of
potential withdrawal liability of the Company and the Company's other ERISA
Affiliates, calculated according to information made available pursuant to ERISA
ss. 4221(e).
(iv) Part 3.13(iv) of the Disclosure Letter sets forth a
calculation of the liability of the Company for post-retirement benefits other
than pensions, made in accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether the Company is
required by this Statement to disclose such information.
(v) Part 3.13(v) of the Disclosure Letter sets forth the
financial cost of all obligations owed under any Company Plan or Company Other
Benefit Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
(c) Sellers have delivered to Buyer
(i) all documents that set forth the terms of the Company
Plan, Company Other Benefit Obligation, or Company VEBA and of any related
trust, including (A) all plan descriptions and summary plan descriptions of
Company Plans for which Sellers or the Company are required to prepare, file,
and distribute plan descriptions and summary plan descriptions, and (B) all
summaries and descriptions furnished to participants and beneficiaries regarding
Company Plans, Company Other Benefit Obligations, and Company VEBAs for which a
plan description or summary plan description is not required;
(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all collective bargaining agreements pursuant to
which contributions have been made or obligations incurred (including both
pension and welfare benefits) by the Company and the ERISA Affiliates of the
Company, and all collective bargaining agreements pursuant to which
contributions are being made or obligations are owed by such entities;
(iv) a written description of any Company Plan or Company
Other Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any
Company Plan;
(vi) all insurance policies purchased by or to provide
benefits under any Company Plan;
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(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other independent contractors
that relate to any Company Plan, Company Other Benefit Obligation, or Company
VEBA;
(viii) all reports submitted within the four years
preceding the date of this Agreement by third party administrators, actuaries,
investment managers, consultants, or other independent contractors with respect
to any Company Plan, Company Other Benefit Obligation, or Company VEBA;
(ix) all notifications to employees of their rights under
ERISA ss. 601 et seq. and IRC ss. 4980B;
(x) the Form 5500 filed in each of the most recent three
plan years with respect to each Company Plan, including all schedules thereto
and the opinions of independent accountants;
(xi) all notices that were given by the Company or any
ERISA Affiliate of the Company or any Company Plan to the IRS, the PBGC, or any
participant or beneficiary, pursuant to statute, within the three years
preceding the date of this Agreement, including notices that are expressly
mentioned elsewhere in this Section 3.13;
(xii) all notices that were given by the IRS, the PBGC, or
the Department of Labor to the Company, any ERISA Affiliate of the Company, or
any Company Plan within the three years preceding the date of this Agreement;
(xiii) with respect to Qualified Plans and VEBAs, the most
recent determination letter for each Plan of the Company that is a Qualified
Plan; and
(xiv) with respect to Title IV Plans, the Form PBGC-1
filed for each of the three most recent plan years.
(d) Except as set forth in Part 3.13(vi) of the Disclosure
Letter:
(i) The Company has performed all of its respective
obligations under all Company Plans, Company Other Benefit Obligations, and
Company VEBAs. The Company has made appropriate entries in its financial records
and statements for all obligations and liabilities under such Plans, VEBAs, and
Obligations that have accrued but are not due.
(ii) No statement, either written or oral, has been made
by the Company to any Person with regard to any Plan or Other Benefit Obligation
that was not in accordance with the Plan or Other Benefit Obligation and that
could have an adverse economic consequence to the Company or to Buyer.
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(iii) The Company, with respect to all Company Plans,
Company Other Benefits Obligations, and Company VEBAs, are, and each Company
Plan, Company Other Benefit Obligation, and Company VEBA is, in full compliance
with ERISA, the IRC, and other applicable Laws including the provisions of such
Laws expressly mentioned in this Section 3.13, and with any applicable
collective bargaining agreement.
(A) No transaction prohibited by ERISA ss. 406 and
no "prohibited transaction" under IRC ss. 4975(c) have occurred with respect to
any Company Plan.
(B) No Seller or the Company has any liability to
the IRS with respect to any Plan, including any liability imposed by Chapter 43
of the IRC.
(C) No Seller or the Company has any liability to
the PBGC with respect to any Plan or has any liability under ERISA ss. 502 or
ss. 4071.
(D) All filings required by ERISA and the IRC as to
each Plan have been timely filed, and all notices and disclosures to
participants required by either ERISA or the IRC have been timely provided.
(E) All contributions and payments made or accrued
with respect to all Company Plans, Company Other Benefit Obligations, and
Company VEBAs are deductible under IRC ss. 162 or ss. 404. No amount, or any
asset of any Company Plan or Company VEBA, is subject to tax as unrelated
business taxable income.
(iv) Each Company Plan can be terminated within thirty
days, without payment of any additional contribution or amount and without the
vesting or acceleration of any benefits promised by such Plan.
(v) Since September 8, 1996, there has been no
establishment or amendment of any Company Plan, Company VEBA, or Company Other
Benefit Obligation.
(vi) No event has occurred or circumstance exists that
could result in a material increase in premium costs of Company Plans and
Company Other Benefit Obligations that are insured, or a material increase in
benefit costs of such Plans and Obligations that are self-insured.
(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding involving,
any Company Plan, Company Other Benefit Obligation, or Company VEBA is pending
or, to Sellers' Knowledge, is Threatened.
(viii) No Company Plan is a stock bonus, pension, or
profit- sharing plan within the meaning of IRC ss. 401(a).
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(ix) Each Qualified Plan of the Company is qualified in
form and operation under IRC ss. 401(a); each trust for each such Plan is exempt
from federal income tax under IRC ss. 501(a). Each Company VEBA is exempt from
federal income tax. No event has occurred or circumstance exists that will or
could give rise to disqualification or loss of tax-exempt status of any such
Plan or trust.
(x) The Company and each ERISA Affiliate of the Company
has met the minimum funding standard, and has made all contributions required,
under ERISA ss. 302 and IRC ss. 402.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) The Company has paid all amounts due to the PBGC
pursuant to ERISA ss. 4007.
(xiii) The Company or any ERISA Affiliate of the Company
has not ceased operations at any facility or has withdrawn from any Title IV
Plan in a manner that would subject to any entity or Sellers to liability under
ERISA ss. 4062(e), ss. 4063, or ss. 4064.
(xiv) The Company or any ERISA Affiliate of the Company
has not filed a notice of intent to terminate any Plan or has adopted any
amendment to treat a Plan as terminated. The PBGC has not instituted proceedings
to treat any Company Plan as terminated. No event has occurred or circumstance
exists that may constitute grounds under ERISA ss. 4042 for the termination of,
or the appointment of a trustee to administer, any Company Plan.
(xv) No amendment has been made, or is reasonably expected
to be made, to any Plan that has required or could require the provision of
security under ERISA ss. 307 or IRC ss. 401(a)(29).
(xvi) No accumulated funding deficiency, whether or not
waived, exists with respect to any Company Plan; no event has occurred or
circumstance exists that may result in an accumulated funding deficiency as of
the last day of the current plan year of any such Plan.
(xvii) The actuarial report for each Pension Plan of the
Company and each ERISA Affiliate of the Company fairly presents the financial
condition and the results of operations of each such Plan in accordance with
GAAP.
(xviii) Since the last valuation date for each Pension Plan
of the Company and each ERISA Affiliate of the Company, no event has occurred or
circumstance exists that would increase the amount of benefits under any such
Plan or that would cause the excess of Plan assets over benefit liabilities (as
defined in ERISA ss. 4001) to decrease, or the amount by which benefit
liabilities exceed assets to increase.
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(xix) No reportable event (as defined in ERISA ss. 4043
and in regulations issued thereunder) has occurred.
(xx) No Seller or the Company has knowledge of any facts
or circumstances that may give rise to any liability of any Seller, the Company,
or Buyer to the PBGC under Title IV of ERISA.
(xxi) The Company or any ERISA Affiliate of the Company
has not established, maintained, or contributed to or otherwise participated in,
or had an obligation to maintain, contribute to, or otherwise participate in,
any Multi-Employer Plan.
(xxii) Neither the Company or any ERISA Affiliate of the
Company has not withdrawn from any Multi-Employer Plan with respect to which
there is any outstanding liability as of the date of this Agreement. No event
has occurred or circumstance exists that presents a risk of the occurrence of
any withdrawal from, or the participation, termination, reorganization, or
insolvency of, any Multi-Employer Plan that could result in any liability of the
Company or Buyer to a Multi-Employer Plan.
(xxiii) Neither the Company or any ERISA Affiliate of the
Company has not received notice from any Multi-Employer Plan that it is in
reorganization or is insolvent, that increased contributions may be required to
avoid a reduction in plan benefits or the imposition of any excise tax, or that
such Plan intends to terminate or has terminated.
(xxiv) No Multi-Employer Plan to which the Company or any
ERISA Affiliate of the Company contributes or has contributed is a party to any
pending merger or asset or liability transfer or is subject to any proceeding
brought by the PBGC.
(xxv) Except to the extent required under ERISA ss. 601 et
seq. and IRC ss. 4980B, the Company provides no health or welfare benefits for
any retired or former employee or is obligated to provide health or welfare
benefits to any active employee following such employee's retirement or other
termination of service.
(xxvi) The Company has the right to modify and terminate
benefits to retirees (other than pensions) with respect to both retired and
active employees.
(xxii) Sellers and the Company have complied with the
provisions of ERISA ss. 601 et seq. and IRC ss. 4980B.
(xxviii) No payment that is owed or may become due to any
director, officer, employee, or agent of the Company will be non-deductible to
the Company or subject to tax under IRC ss. 280G or ss. 4999; nor will the
Company be required to "gross up" or otherwise compensate any such person
because of the imposition of any excise tax on a payment to such person.
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(xxiv) The consummation of the Contemplated Transactions
will not result in the payment, vesting, or acceleration of any benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure
Letter:
(i) the Company is, and at all times, has been, in
material compliance with each Legal Requirement that is or was applicable to it
or to the conduct or operation of its business or the ownership or use of any of
its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) may constitute or result in a
material violation by the Company of, or a failure on the part of the Company to
comply with, any Legal Requirement, or (B) may give rise to any obligation on
the part of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature; and
(iii) the Company has not received, at any time, any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or (B)
any actual, alleged, possible, or potential obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company (all of which authorizations have been
delivered to Buyer). Each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times has been, in
full compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.14 of the
Disclosure Letter;
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter;
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(iii) the Company has not received any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or potential violation
of or failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or required to be
listed in Part 3.14 of the Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Company to own and use their assets in the manner in which they currently
own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure
Letter, there is no pending Proceeding:
(i) that has been commenced by or against the Company
or that otherwise relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers and the Company,
(1) no such Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding. Sellers have delivered to Buyer copies of
all pleadings, correspondence, and other documents relating to each Proceeding
listed in Part 3.15 of the Disclosure Letter. The Proceedings listed in Part
3.15 of the Disclosure Letter will not have a material adverse effect on the
business, operations, assets, condition, or prospects of the Company.
(b) Except as set forth in Part 3.15 of the Disclosure
Letter:
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(i) there is no Order to which the Company, or
any of the assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that
relates to the business of, or any of the assets owned or used by, the Company;
and
(iii) no officer, director, agent, or employee
of the Company is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of Company.
(c) Except as set forth in Part 3.15 of the Disclosure
Letter:
(i) the Company is, and at all times has been,
in full compliance with all of the terms and requirements of each Order to which
it, or any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance
exists that may constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the Company,
is subject; and
(iii) the Company has not received any notice
or other communication (whether oral or written) from any Governmental Body or
any other Person regarding any actual, alleged, possible, or potential violation
of, or failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter,
since the date of the Balance Sheet, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
the Company; issuance of any security convertible into such capital stock; grant
of any registration rights; purchase, redemption, retirement, or other
acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director or officer, except
in the Ordinary Course
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of Business. As used in this Section 3.16(c), the term "Ordinary Course of
Business" shall include the payment of salary, bonus or other compensation,
based on profits earned by the Company through the date of payment, consistent
with past practices.
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least $15,000.
(g) sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company, including the sale, lease, or
other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $15,000;
(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to
do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a
complete and accurate list, and Sellers have delivered to Buyer true and
complete copies, of:
(i) each Applicable Contract that involves performance
of services or delivery of goods or materials to the Company of an amount or
value in excess of $15,000 not in the Ordinary Course of Business;
(ii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves expenditures or
receipts of the Company in excess of $15,000;
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(iii) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $15,000 and with terms of less than
one year);
(iv) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(v) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vi) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(vii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any Affiliate of
the Company to engage in any line of business or to compete with any Person;
(viii) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(ix) each power of attorney that is currently
effective and outstanding;
(x) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xi) each Applicable Contract for capital
expenditures in excess of $15,000;
(xii) each written warranty, guaranty, indemnity, and
or other similar undertaking with respect to contractual performance extended by
the Company other than in the Ordinary Course of Business;
(xiii) each Contract for indebtedness involving
aggregate payments of more than $10,000; and
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(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth
reasonably complete details concerning such Contracts, including the parties to
the Contracts, the amount of the remaining commitment of the Company under the
Contracts, and the Company's office where details relating to the Contracts are
located.
(b) Except as set forth in Part 3.17(b) of the
Disclosure Letter:
(i) no Seller (and no Related Person of any Seller)
has or may acquire any rights under, and no Seller has or may become subject to
any obligation or liability under, any Contract that relates to the business of,
or any of the assets owned or used by, the Company; and
(ii) no officer, director, agent, employee,
consultant, or contractor of the Company is bound by any Contract that purports
to limit the ability of such officer, director, agent, employee, consultant, or
contractor to (A) engage in or continue any conduct, activity, or practice
relating to the business of the Company, or (B) assign to the Company or to any
other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the
Disclosure Letter, each Contract identified or required to be identified in Part
3.17(a) of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the
Disclosure Letter:
(i) the Company is, and at all times has been, in
material compliance with all applicable terms and requirements of each Contract
under which the Company has or had any obligation or liability or by which the
Company or any of the assets owned or used by the Company is or was bound;
(ii) to the Knowledge of the Sellers and the
Company, each other Person that has or had any obligation or liability under any
Contract under which the Company has or had any rights is in material compliance
with all applicable terms and requirements of such Contract;
(iii) to the Knowledge of the Sellers and the
Company, no event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with, or result in a violation
or breach of, or give the Company or other Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract; and
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(iv) the Company has not given to or received from
any other Person, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Contract.
(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Company under current or completed Contracts with any Person and
no such Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design,
manufacture, or provision of products or services by the Company have been
entered into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or would be in violation
of any Legal Requirement.
(g) The Company has provided to Buyer true, complete and
correct copies of the Contracts set forth in this Section 3.17.
3.18 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the Company, or any
director of the Company, is or has been covered at any time within the three
years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting
the Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy
of insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties
with respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
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(c) Part 3.18(c) of the Disclosure Letter sets forth, by
year, for the current policy year and each of the three preceding policy years:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $15,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type
of insurance, and period of coverage; and
(C) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for
all claims that were self-insured, including the number and aggregate cost of
such claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) All policies to which the Company is a party or
that provide coverage to the Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially
sound and reputable;
(C) taken together, provide adequate insurance
coverage for the assets and the operations of the Company for all risks normally
insured against by a Person carrying on the same business or businesses as the
Company;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by which any of
them is bound;
(E) will continue in full force and effect
following the consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of the Company.
(ii) The Company has not received (A) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights, or (B) any
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notice of cancellation or any other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy to
which the Company is a party or that provides coverage to the Company or
director thereof.
(iv) The Company has given notice to the insurer of all
threatened claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure letter:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. No Seller or the Company has any reasonable basis to
expect, nor has any of them or to the Knowledge of the Sellers or the Company,
any other Person for whose conduct they are or may be held to be responsible
received, any actual or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Sellers or the Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, the
Company, or any other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Sellers and
the Company, Threatened claims, Proceedings, Encumbrances, or other restrictions
of any nature, relating to any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest.
(c) No Seller or the Company has any reasonable basis to
expect, nor has any of them or any other Person for whose conduct they are or
may be held responsible, received, any citation, directive, inquiry, notice,
Order, summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any
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Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Sellers or the Company had an interest, or with respect to any property
or facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by Sellers, the Company, or, to the
Knowledge of the Company and Sellers, any other Person for whose conduct they
are or may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) To the Knowledge of the Sellers and the Company, no Seller
or the Company, or any other Person for whose conduct they are or may be held
responsible, has any Environmental, Health, and Safety Liabilities with respect
to the Facilities or with respect to any other properties and assets (whether
real, personal, or mixed) in which Sellers or the Company (or any predecessor),
has or had an interest, or at any property geologically or hydrologically
adjoining the Facilities or any such other property or assets.
(e) To the Knowledge of the Sellers and the Company, there are
no Hazardous Materials present on or in the Environment at the Facilities or at
any geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. No Seller, the Company, any other Person
for whose conduct they are or may be held responsible, or any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest.
(f) To the Knowledge of the Sellers and the Company, there has
been no Release or Threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which Sellers or the Company has or
had an interest, or any geologically or hydrologically adjoining property,
whether by Sellers, the Company, or any other Person.
(g) Sellers have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by Sellers, the Company, or any other Person for whose conduct they are or may
be held responsible, with Environmental Laws.
(h) There are no underground or above-ground storage tanks,
incinerators or surface impoundments at, on, or about under or within any real
property operated or controlled, in whole or in part by the Company.
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3.20 EMPLOYEES
(a) The Company has previously delivered to the Buyer a
complete and accurate list of the following information for each employee or
director of the Company, (which information is not materially different from the
date hereof) including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since December 31, 1996; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under the Company's
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
(b) No employee or director of the Company is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers or
the Company by any such employee or director. To Sellers' knowledge, no
director, officer, or other key employee of the Company intends to terminate his
employment with the Company.
(c) The Company has previously delivered to the Buyer a
complete and accurate list of the following information for each retired
employee or director of the Company, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to any collective
bargaining or other labor Contract. There has not been, there is not presently
pending or existing, and to Sellers' knowledge there is not threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any proceeding against or affecting the Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting the Company or its premises, or (c) any
application for certification of a collective bargaining agent. To Sellers'
knowledge no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by the Company, and no such action is contemplated by the Company. The
Company has complied in all respects with
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all Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS--The term "Intellectual
Property Assets" includes:
(i) the name Company's, all fictional business names,
trading names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in
Mask Works"); and
(v) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process technology,
plans, drawings, and blue prints (collectively, "Trade Secrets"); owned, used,
or licensed by the Company as licensee or licensor.
(b) AGREEMENTS--Part 3.22(b) of the Disclosure Letter contains
a complete and accurate list and summary description, including any royalties
paid or received by the Company, of all Contracts relating to the Intellectual
Property Assets to which the Company is a party or by which the Company is
bound, except for any license implied by the sale of a product and perpetual,
paid-up licenses for commonly available software programs with a value of less
than $15,000 under which the Company is the licensee. There are no outstanding
and, to Sellers' knowledge, no threatened disputes or disagreements with respect
to any such agreement.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS
The Intellectual Property Assets are all those necessary
for the operation of the Company's business as they are currently conducted. The
Company is the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security interests,
charges, encumbrances, equities, and other
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adverse claims, and has the right to use without payment to a third party all of
the Intellectual Property Assets.
(d) Trademarks
(i) Part 3.22(d) of Disclosure Letter contains a complete
and accurate list and summary description of all Marks. The Company is the owner
of all right, title, and interest in and to each of the Marks, free and clear of
all liens, security interests, charges, encumbrances, equities, and other
adverse claims.
(ii) All Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance with all formal
legal requirements (including the timely post-registration filing of affidavits
of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the Closing Date.
(iii) No Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to Sellers' Knowledge, no such
action is Threatened with the respect to any of the Marks.
(iv) To Sellers' Knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) No Mark is infringed or, to Sellers' Knowledge, has
been challenged or threatened in any way. None of the Marks used by any
Acquired Company infringes or is alleged to infringe any trade name, trademark,
or service mark of any third party.
(vi) All products and materials containing a Mark bear the
proper federal registration notice where permitted by law.
(e) Copyrights
(i) Part 3.22(f) of the Disclosure Letter contains a
complete and accurate list and summary description of all Copyrights. The
Company is the owner of all right, title, and interest in and to each of the
Copyrights, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All the Copyrights have been registered and are
currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the date of Closing.
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(iii) No Copyright is infringed or, to Sellers'
Knowledge, has been challenged or threatened in any way. None of the subject
matter of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.
(iv) All works encompassed by the Copyrights have been
marked with the proper copyright notice.
(f) TRADE SECRETS
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in detail and
content to identify and explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual.
(ii) Sellers and the Company have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) To its Knowledge, the Company has good title and an
absolute (but not necessarily exclusive) right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature, and, to
Sellers' knowledge, have not been used, divulged, or appropriated either for the
benefit of any Person (other than one or more of the Company) or to the
detriment of the Company. No Trade Secret is subject to any adverse claim or has
been challenged or threatened in any way.
3.23 CERTAIN PAYMENTS
The Company or any director, officer, agent, or employee of
the Company, or to Sellers' knowledge any other person associated with or acting
for or on behalf of the Company, has not directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Company or any Affiliate of the Company, or (iv) in violation of
any Legal Requirement, (b) established or maintained any fund or asset that has
not been recorded in the books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement
and no statement in the Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
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(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
(c) There is no fact known to either Seller that has specific
application to either Seller or the Company (other than general economic or
industry conditions) and that materially adversely affects or, as far as either
Seller can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the Company (on a
consolidated basis) that has not been set forth in this Agreement or the
Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth on Part 3.22, no Seller or any Related
Person of Sellers or of the Company has had any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to the Company's business. No Seller or any Related Person of
Sellers or of the Company is, or since has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with the Company, or (ii) engaged in competition with the Company
with respect to any line of the products or services of the Company (a
"Competing Business") in any market presently served by the Company. Except as
set forth in Part 3.25 of the Disclosure Letter, no Seller or any Related Person
of Sellers or of the Company is a party to any Contract with, or has any claim
or right against the Company.
3.26 BROKERS OR FINDERS
Sellers and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND BUYER
Acquisition and Buyer (the "Buyer Companies") jointly and
severally represent and warrant to Sellers as follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Acquisition and Buyer has the corporate power
and authority to own or lease and operate its properties to carry on its
business as now being conducted, and is duly qualified and in good standing and
authorized to do business as a foreign corporation in each jurisdiction in which
the character of its properties or the nature of its business requires
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such qualification and authorization except where the failure to so qualify
would not have a material adverse effect on the Buyer and Acquisition, taken as
a whole.
4.2 AUTHORITY
Each of Acquisition and Buyer has the corporate power and has
taken all necessary corporate action to authorize Acquisition or Buyer as the
case may be, to execute, deliver and perform the Agreement and to consummate the
transactions contemplated thereby. The execution and delivery by each of
Acquisition and Buyer of this Agreement, the Escrow Agreement and the Employment
Agreement to which each is a party constitutes the valid and legally binding
obligation of Acquisition or Buyer, as the case may be, enforceable in
accordance with the documents' terms, except as maybe limited by bankruptcy,
insolvency or other laws effecting creditors' rights generally.
4.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against
Buyer or Acquisition and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the contemplated
transactions. To Buyer's and Acquisition's knowledge, no such proceeding has
been threatened.
4.4 BROKERS OR FINDERS
Buyers and Acquisition and their officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Company and Sellers harmless from any
such payment alleged to be due by or through Buyer or Acquisition as a result of
the action of Buyer and Acquisition or their officers or agents.
4.5 INITIAL PUBLIC OFFERING
Buyer represents that it presently intends to offer its shares
of Common Stock in an Initial Public Offering and Buyer shall use its reasonable
best efforts to proceed with such securities transaction, provided, however,
that there can be no assurance that Buyer will successfully complete such
transaction.
5. COVENANTS OF SELLERS AND COMPANY PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Sellers will, and will cause Company and their Representatives to, (a) afford
Buyer and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
personnel, properties (including subsurface testing),
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contracts, books and records, and other documents and data, (b) furnish Buyer
and Buyer's Advisors with copies of all such contracts, books and records, and
other existing documents and data as Buyer may reasonably request, and (c)
furnish Buyer and Buyer's Advisors with such additional financial, operating,
and other data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY
Between the date of this Agreement and the Closing Date,
Sellers will, and will cause the Company to:
(a) conduct the business of the Company only in the
Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing Date, Sellers will not, and
will cause the Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement,
Sellers will, and will cause the Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining any required consents.
5.5 NOTIFICATION
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Between the date of this Agreement and the Closing Date, each
Seller will promptly notify Buyer in writing if such Seller or the Company
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Sellers' representations and warranties as of the date of this Agreement,
or if such Seller or the Company becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Disclosure Letter if the Disclosure
Letter were dated the date of the occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, each Seller will promptly
notify Buyer of the occurrence of any Breach of any covenant of Sellers in this
Section 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 7 impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated
pursuant to Section 9, Sellers will not, and will cause the Company and each of
their Representatives not to, directly or indirectly solicit, initiate,
encourage, accept or discuss any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving any
Acquired Company. Seller and the Company will promptly notify Buyer of any such
inquiries or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date,
Sellers and the Company will use their Best Efforts to cause the conditions in
Sections 6 and 7 to be satisfied.
6. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S OBLIGATION
TO CLOSE
Buyer's and Acquisition's obligation to consummate the Merger
and to take the other actions required to be taken by Buyer and Acquisition at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Buyer and
Acquisition, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and Company's representations and warranties
in this Agreement must have been accurate in all respects as of the date of this
Agreement, and
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must be accurate in all respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure Letter.
6.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers and
Company are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing, and each of these covenants and obligations (considered
individually), must have been duly performed and complied with in all material
respects.
(b) There shall be delivered at Closing (i) the Sellers'
Releases, in the form of Exhibit 6.2(b)(i), executed by Sellers, (ii) the
Employment Agreements with Yancey S. Jones and M. Addison Jones, Jr. in the form
of Exhibit 6.2(b)(ii) executed by Yancey S. Jones and M. Addison Jones, Jr.,
(iii) the Escrow Agreement in the form of Exhibit 6.2(b)(iii) executed by
Sellers, (iv) the certificate executed by Sellers and an officer of the Company
representing to Buyer and Acquisition that each of the Sellers' and Company's
representations and warranties in this Agreement was accurate in all respects as
to the date of this Agreement and is accurate in all respects as of the Closing
as if made on the Closing Date, and (v) each of the other covenants and
obligations in the Agreement must have been performed and complied with in all
respects.
6.3 CONSENTS
Each of the consents identified in subparts 3.2 of the
Disclosure Letter, must have been obtained and must be in full force and effect.
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6.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to
Buyer:
(a) an opinion of Cantor Arkema & Edmonds, dated the
Closing Date;
(b) such other documents as Buyer or its counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of any of
Sellers' representations and warranties, (iii) evidencing the performance by
Seller, the Company, or the compliance by Seller or the Company with, any
covenant or obligation required to be performed or complied with by such party,
(iv) evidencing the satisfaction of any condition referred to in this Section 6,
or (v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
6.5 NO GUARANTOR
At Closing the Company shall not be a guarantor of any
obligations under any Mega loan agreement or any other agreement as to which
Mega is a party.
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6.6 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced or Threatened against Buyer or Acquisition, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
6.7 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER PROCEEDS
There must not have been made or Threatened by any Person any
claim asserting that such Person (a) is the holder or the beneficial owner of,
or has the right to acquire or to obtain beneficial ownership of, any stock of,
or any other voting, equity, or ownership interest in, the Company, or (b) is
entitled to all or any portion of the Merger consideration.
6.8 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
6.9 NO INJUNCTION
No preliminary or permanent injunction or other order by any
federal or state court preventing or consummation of the transactions
contemplated in this Agreement has been issued and continues in effect, and this
Agreement and the transactions contemplated hereby are not prohibited under any
applicable federal or state law or regulation.
7. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S
OBLIGATION TO CLOSE
Sellers' and the Company's obligation to consummate the merger
and to take the other actions required to be taken by Sellers and the Company at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Sellers, in whole or
in part):
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7.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations and
warranties in this Agreement must have been accurate in all respects as of the
date of this Agreement and must be accurate in all respects as of the Closing
Date as if made on the Closing Date.
7.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that Buyer and
Acquisition are required to perform or to comply with pursuant to this Agreement
at or prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been performed
and complied with in all material respects.
(b) Buyer must have delivered the Employment Agreements
and Escrow Agreement.
7.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the following documents
to be delivered to Sellers:
(a) an opinion of Atlas, Pearlman, Trop & Borkson, P.A., dated
the Closing Date; and
(b) such other documents as Sellers may reasonably request for
the purpose of (i) enabling their counsel to provide the opinion referred to in
Section 6.3(a), (ii) evidencing the accuracy of any representation or warranty
of Buyer or Acquisition, (iii) evidencing the performance by Buyer or
Acquisition of, or the compliance by Buyer or Acquisition with, any covenant or
obligation required to be performed or complied with by Buyer or Acquisition,
(iv) evidencing the satisfaction of any condition referred to in this Section 7,
or (v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
7.4 GUARANTY
Buyer shall have (i) released, (ii) made provision for
release, or (iii) agreed to indemnify Sellers from the personal guaranties set
forth on Schedule 7.4.
8. TERMINATION
8.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the
Closing, be terminated:
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(a) by either Buyer and Acquisition or Sellers and the
Company if a material Breach of any provision of this Agreement has been
committed by the other party and such Breach has not been waived;
(b) (i) by Buyer and Acquisition if any of the conditions
in Section 6 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date; or (ii) by Sellers and
Company, if any of the conditions in Section 7 has not been satisfied of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Sellers and Company to comply with their
obligations under this Agreement) and Sellers have not waived such condition on
or before the Closing Date;
(c) by mutual consent of Buyer and Acquisition and Sellers
and the Company; or
(d) by either Buyer and Acquisition or Sellers and the
Company if the Closing has not occurred (other than through the failure of any
party seeking to terminate this Agreement to comply fully with its obligations
under this Agreement) on or before September 1, 1998, or such later date as the
parties may agree upon.
A party's right of termination under Section 8.1 is in
addition to any other rights it may have under this Agreement or otherwise, the
exercise of a right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section 8.1, all further obligations of the
parties under this Agreement terminate, except the obligations in Section 10.1
and 10.3 will survive; provided, however, that if this Agreement is terminated
by a party because of a breach of the Agreement by the other party or because
one or more of the conditions to the terminating party's obligations is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE
All representations, warranties, covenants, and obligations in
this Agreement, the Disclosure Letter and any of the supplements thereto, and
any other certificate or document delivered pursuant to this Agreement will,
subject to Section 9.4, survive the Closing until March 31, 2000. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery
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of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant,
or obligation. Each party has the right to rely on the representations and
warranties of the other party. The waiver of any condition based on the accuracy
of any representation or warranty, or on the performance of or compliance with
any covenant or obligation, will not affect the right to indemnification,
payment of Damages, or other remedy based on such representations, warranties,
covenants, and obligations.
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers jointly and severally will indemnify and hold harmless
Buyer, the Surviving Corporation, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' and other professional fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Sellers in this Agreement, giving effect to any supplement to Disclosure Letter,
the Disclosure Letter and any of the supplements thereto, or any other
certificate or document delivered by Sellers pursuant to this Agreement;
(b) any Breach by either Seller of any covenant or
obligation of such Seller in this Agreement;
(c) any product shipped or manufactured by, or any
services provided by, the Company prior to the Closing Date;
(d) any matter not disclosed in the Disclosure Letter; or
(e) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Sellers or the
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 9.2 will not be
exclusive of or limit any other remedies that may be available to Buyer or the
other Indemnified Persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay
to Sellers the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made by Buyer
in this Agreement or in any
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certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
9.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.3, 3.11, 3.13, and 3.19, unless on or
before March 31, 2000, Buyer notifies Sellers of a claim specifying the factual
basis of that claim. A claim with respect to Section 3.3, 3.11, 3.13, or 3.19,
may be made at any time prior to the applicable statute of limitations with
respect to such matter. If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before March 31, 2000, Sellers notify Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Sellers.
Notwithstanding any conflicting or inconsistent provisions
hereof, no party shall be liable in damages, indemnity or otherwise to another
party in respect to the inaccuracy or breach of any representations, warranties,
covenants or agreements herein except to the extent that Damages to the
aggrieved party caused by such inaccuracy or breach exceed the sum of Fifty
Thousand Dollars ($50,000). Furthermore, that Sellers' aggregate liability
hereunder shall in no event exceed Five Million Dollars ($5,000,000).
9.5 ESCROW; RIGHT OF SET-OFF
Upon written agreement by the Sellers or on a final decision
by a court of competent jurisdiction, Buyer may set off any amount to which it
may be entitled under this Section 9 against amounts otherwise payable under the
Employment Agreement or the Escrowed Shares. Neither the exercise of nor the
failure to exercise such right of set-off will not constitute an election of
remedies or limit Buyer in any manner in the enforcement of any other remedies
that may be available to it.
9.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Sections 9.2, 9.4, or to the extent provided in the last sentence of Section
9.3, Section 9.3 of notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that
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the defense of such action is prejudiced by the indemnifying party's failure to
give such notice.
(b) If any Proceeding referred to in Section 9.7(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 9 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such
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Proceeding or the matters alleged therein, and agree that process may be served
on Sellers with respect to such a claim anywhere in the world.
9.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
Subject to Section 9.4, a claim must be asserted by notice to
the party from whom indemnification is sought by March 31, 2000.
10. GENERAL PROVISIONS
10.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants, provided Buyer shall bear the costs
of the preparation of the Company's audited financial statements for the year
ended September 30, 1997, and for the periods ending December 31, 1997 and 1998.
10.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to
this Agreement or the Contemplated Transactions will be issued, if at all, at
such time and in such manner as Buyer determines. Unless consented to by Buyer
in advance or required by Legal Requirements, prior to the Closing Sellers
shall, and shall cause the Company to, keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person. Sellers and
Buyer will consult with each other concerning the means by which the Company's
employees, customers, and suppliers and others having dealings with the Company
will be informed of the Contemplated Transactions, and Buyer will have the right
to be present for any such communication.
10.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the Closing
Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or
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use of such information is required by or necessary or appropriate in connection
with legal proceedings.
(b) If the Contemplated Transactions are not consummated,
each party will return or destroy as much of such written information as the
other party may reasonably request. Whether or not the Closing takes place,
Sellers and Company waive, any cause of action, right, or claim arising out of
the access of Buyer or its representatives to any trade secrets or other
confidential information of the Company except for the intentional competitive
misuse by Buyer of such trade secrets or confidential information.
10.4 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers: The Supply Room Companies, Inc.
4103 West Clay Street
Richmond, Virginia 23230
Attention: Yancey S. Jones
Facsimile No.: (804) 213-0761
with a copy to: Cantor Arkema & Edmonds, P.C.
823 Main Street
Richmond, Virginia 23204
Attention: Grant S. Grayson, Esq.
Facsimile No.: (804) 225-8706
Buyer or Acquisition: Office Center Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
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10.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
10.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
10.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
10.8 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in
any Supplement thereto, must relate only to the representations and warranties
in the Section of the Agreement to which they expressly relate and not to any
other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
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10.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties except that Buyer may
assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
10.10 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
10.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
10.12 TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
10.13 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Delaware without regard to conflicts of laws principles.
10.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
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<PAGE> 57
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION /s/ Yancey S. Jones
---------------------------
YANCEY S. JONES
By:/s/ Robert J. Gillon, JR.
------------------------------
Name: ROBERT J. GILLON, JR. /s/ M. Addison Jones, Jr.
Title: ---------------------------
M. ADDISON JONES, JR.
VA ACQUISITION:
OFFICE CENTRE RICHMOND (Virginia)
By:/s/ R. J. Gillon, Jr.
------------------------------
Name: ROBERT J. GILLON, JR.
Title:
ACQUISITION:
OFFICE CENTRE RICHMOND
(Delaware)
By:/s/ R. J. Gillon, Jr.
------------------------------
Name: ROBERT J. GILLON, JR.
Title:
COMPANY:
THE SUPPLY ROOM COMPANIES,
INC.
By:/s/ Yancey S. Jones
------------------------------
Name: YANCEY S. JONES
Title: PRESIDENT
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THE SUPPLY ROOM COMPANIES, INC.
EXHIBITS
--------
Exhibit 6.2(b)(i) Employment Agreement
SCHEDULES
---------
Schedule A Rent Schedule for 4103 West Clay Street
Schedule 3.2 Authority; No Conflict
Schedule 3.3 Capitalization
Schedule 3.6 Real Property
Schedule 3.8 Accounts Receivable
Schedule 3.11 Taxes
Schedule 3.13 Employee Benefits
Schedule 3.14 Compliance with Legal Requirements;
Governmental Authorizations
Schedule 3.15 Legal Proceedings; Orders
Schedule 3.16 Absence of Certain Changes and Events
Schedule 3.17 Contracts; No defaults
Schedule 3.18 Insurance
Schedule 3.20 Employees
Schedule 3.25 Relationships with Related Persons
The Company agrees to furnish supplementally a copy of any omitted
schedule to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.10
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of April 20,
1998, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE MONTGOMERY, a Delaware corporation to be formed as a wholly-owned
subsidiary of Buyer ("Acquisition"), OFFICE EXPRESS, INC., an Alabama
corporation ("Company"), JAMES L. MOTLEY ("Motley"), an individual residing in
Alabama and GARY K. BLACKWELL ("Blackwell"), an individual residing in Alabama
(Motley and Blackwell each as the "Seller" or "Shareholder" and collectively
"Sellers" or "Shareholders").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish
to set forth the terms and conditions upon which a merger of the Company with
and into Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition
and the Company deems the merger advisable and in the best interests of each of
Buyer, Acquisition and the Company and of their respective shareholders.
WHEREAS, the shareholders of Acquisition and the Company have
approved this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section
1:
"APPLICABLE CONTRACT"--any Contract (a) under
which the Company has or may acquire any rights, (b) under which the Company has
or may become subject to any obligation or liability, or (c) by which the
Company or any of the assets owned, leased or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
<PAGE> 2
"BEST EFFORTS"--the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation,
warranty, covenant, obligation, or other provision of this Agreement or any
instrument delivered pursuant to this Agreement will be deemed to have occurred
if there is or has been any inaccuracy in or breach of, or any failure to
perform or comply with, such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this
Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of the Company with and into Acquisition;
(b) the execution, delivery, and performance of the
Employment Agreement;
(c) the performance by Buyer, Acquisition, the Company and
Sellers of their respective covenants and obligations under this Agreement; and
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by
Sellers and the Company to Buyer concurrently with the execution and delivery of
this Agreement.
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<PAGE> 3
"EBITDA"--earnings before interest, taxes, depreciation and
amortization, as adjusted.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
"ENCUMBRANCE"--any charge, claim, lien, option, pledge,
security interest, right of first refusal, or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"-- any cost,
damages, expense, liability, or obligation, arising from or under Environmental
Law or Occupational Safety and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal
or administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601 et
seq., as amended ("CERCLA").
3
<PAGE> 4
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or
relates to:
(a) advising or notifying of appropriate authorities and
employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(e) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention;
(f) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Company.
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
4
<PAGE> 5
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment and any other act or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Company.
"HAZARDOUS MATERIALS"--any waste or other substance that is
listed, defined, designated, classified or regulated as, or otherwise determined
to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"IRC"--the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if (a) such individual is
actually aware of such fact or other matter or (b) a prudent individual could be
expected to discover or otherwise become aware of such fact or other matter in
the ordinary course of business.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a
5
<PAGE> 6
director or officer of such Person has, or at any time had, Knowledge of such
fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal,
or other administrative order, constitution, law, ordinance, principle of common
law, regulation, or statute.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program designed to provide safe
and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the Board of Directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of businesses as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil,
6
<PAGE> 7
criminal, administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Body
or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one
or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, general
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) For purposes of this definition, (a) the
"Family" of an individual includes (i) the individual, (ii) the individual's
spouse, (iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a Person or equity
securities or other equity
7
<PAGE> 8
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other
releasing into the Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLERS"--as defined in the first paragraph of this
Agreement.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the
merger of Acquisition into the Company.
"TAX"--any tax (including any income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax, or estate levy), levy,
assessment, tariff, duty, deficiency, or other fee in any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration,
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<PAGE> 9
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute,
action, or other matter will be deemed to have been "Threatened" if any demand
or statement has been made (orally or in writing) or any notice has been given
(orally or in writing) that would lead a prudent Person to conclude that such a
claim, Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of
this Agreement, at the Effective Time, Company shall be merged with and into
Acquisition (the "Merger"). The separate existence and corporate organization of
the Company shall thereupon cease and the Company and Acquisition shall
thereupon be a single corporation. Acquisition shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
existence under the provisions of the Delaware General Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the
"Articles of Merger") shall be executed by the Company and Acquisition and shall
be filed with the Secretary of State of the States of Alabama and Delaware. The
Merger shall become effective at such time as the Articles of Merger are filed
with the Secretary of State of the States of Alabama and Delaware, such time
being hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in
effect immediately prior to the Effective Time shall be and remain the Articles
of Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately prior
to the Effective Time shall be and remain the
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By-Laws of the Surviving Corporation from and after the Effective Time until
amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause
Robert J. Gillon, Jr., [Buyer appointment] and James L. Motley to be appointed
as directors of the Surviving Corporation. James L. Motley and Robert J. Gillon,
Jr. shall serve as the officers of the Surviving Corporation until their
successors have been elected or appointed and shall have qualified in accordance
with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall
be effective (i) on the date the conditions in Sections 7 and 8 have been
satisfied or otherwise waived, or (ii) at such other date as the parties hereto
shall agree in writing (the "Closing Date"), and shall be held at the offices of
Buyer's counsel at 200 East Las Olas Boulevard, Fort Lauderdale, Florida 33301
at 10:00 a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
At the Effective Time, by virtue of the Merger and
without any action on the part of any holder of capital stock of Buyer,
Acquisition, the Company or Sellers: (i) the shares of Common Stock of
Acquisition purchased, issued and outstanding immediately prior to the Effective
Time shall be converted as a result of the Merger and without any action on the
part of the holder thereof, into 1 share of capital stock of the Surviving
Corporation and shall represent all the issued and outstanding shares of the
Surviving Corporation; and (ii) the shares of the Company held by Sellers shall
be converted into and shall become, without further action on the part of the
Sellers, the right to receive six (6) times the Company's annualized EBITDA
based upon the adjusted projected EBITDA for the fiscal year ended December 31,
1997 (the "Purchase Price"). The Purchase Price shall be One Million Three
Hundred Two Thousand Dollars ($1,302,000). The EBITDA shall be adjusted by the
amounts set forth on Schedule 2.7(a). The consideration shall consist (i) of
shares of restricted Common Stock of Buyer which number of shares of Common
Stock shall be determined by dividing eighty-five percent (85%) of the amount
determined above by Buyer's initial public offering price per share (the "IPO
Price") and (ii) fifteen percent (15%) in cash, all of which shall be allocated
to the shares held by Blackwell.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
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Sellers and the Company hereby jointly and
severally represent and warrant to Buyer and Acquisition as
follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under Applicable
Contracts. The Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification.
(b) Sellers have delivered to Buyer copies of
the Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid,
and binding obligation of Sellers and the Company, enforceable against Sellers
and the Company in accordance with its terms subject to bankruptcy, insolvency
or other laws affecting the rights of creditors generally. Upon the execution
and delivery by each Seller of his Employment Agreement, the Employment
Agreement will constitute the legal, valid, and binding obligations of such
Seller enforceable against such Seller in accordance with its respective terms.
Sellers and the Company have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and to perform
their obligations under this Agreement. The Sellers and the Company have
approved this Agreement under applicable state corporate law provisions, and
such approval is binding.
(b) Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result
in a violation of (A) any provision of the Organizational Documents of the
Company, or (B) any resolution adopted by the board of directors or the
stockholders of the Company;
(ii) contravene, conflict with, or result
in a violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any material
remedy or obtain any material relief under,
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any Legal Requirement or any Order to which the Company or Sellers, or any of
the assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any material Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or any of the assets owned or used
by, the Company;
(iv) cause Buyer or the Company to become
subject to, or to become liable for the payment of any tax;
(v) contravene, conflict with, or result in
a violation or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any material Applicable
Contract; or
(vi) result in the imposition or creation
of any Encumbrance upon or with respect to any of the material assets owned or
used by the Company.
Except as set forth in Part 3.2 of the
Disclosure Letter, neither Sellers or the Company is or will be required to give
any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
(c) Sellers are acquiring the Buyer's Common
Stock for their own account and not with a view to its distribution within the
meaning of Section 2(11) of the Securities Act. Each Seller is an "accredited
investor" as such term is defined in Rule 501(a) under the Securities Act.
Sellers acknowledge that each certificate representing Buyer's Common Stock
acquired pursuant to this Agreement shall bear the following restrictive legend:
THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD
OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE OF
THE FOLLOWING: (i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE SECURITIES ACT, OR (ii) AN OPINION OF
COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT
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REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
Each Seller further acknowledges that he shall be subject to such "lock-up"
restriction as may be imposed by the Buyer's underwriter or any entity
regulating the issuance of the Buyer's Common Stock in its initial public
offering.
3.3 CAPITALIZATION
The authorized equity securities of the Company
consist of 1,000 shares of common stock, $1.00 par value, of which 1,000 shares
are issued and outstanding and constitute all the shares of the Company. Motley
is the owner of 625 shares and Blackwell is the owner of 375 shares. The Sellers
are, and will be on the Closing Date, the record and beneficial owner and holder
of the shares of the Company free and clear of all Encumbrances. All of the
outstanding shares of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of the
Company. None of the outstanding equity securities or other securities of the
Company was issued in violation of the Securities Act or any other Legal
Requirement. The Company does not own, or has any Contract to acquire, any
equity securities or other securities of any Person or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer unaudited
consolidated balance sheets of the Company as at December 31, 1996 and December
31, 1997 ("Balance Sheet") and the related statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended.
Such financial statements and notes fairly present in all material respects the
financial condition and the results of operations, changes in stockholders'
equity, and cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP
subject, in the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually run the
aggregate, be materially adverse). No financial statements of any Person other
than the Company are required by GAAP to be included in the financial
statements.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record
books, and other records of the Company, all of which have been made available
to Buyer, are, complete and correct and have been maintained in accordance with
sound business practices and the
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requirements of Section 13(b)(2) of the Securities Exchange Act of 1934, as
amended (regardless of whether or not the Company is subject to that Section),
including the maintenance of an adequate system of internal controls. The minute
books of the Company contain accurate and complete records of all meetings held
of, and corporate action taken by, the stockholders, the Board of Directors, and
committees of the Board of Directors of the Company. At the Closing, all of
those books and records will be in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a
complete and accurate list of all real property, leaseholds, or other interests
therein owned by the Company. Sellers have delivered or made available to Buyer
copies of the deeds and leases and other instruments by which the Company
occupies or acquired such real property and interests and such instruments are
true, complete and accurate. The Company owns (with good and marketable title in
the case of real property) or lease all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that they purport to own
or lease located in the facilities owned or operated by the Company and
reflected as owned or leased in the books and records of the Company, including
all of the properties and assets reflected in the Balance Sheet (except for
assets held under capitalized leases disclosed or not required to be disclosed
in Part 3.6 of the Disclosure Letter and personal property sold since the date
of the Balance Sheet, as the case may be, in the Ordinary Course of Business),
and all of the properties and assets purchased or otherwise acquired by the
Company since the date of the Balance Sheet (except for personal property
acquired and sold since the date of the Balance Sheet in the Ordinary Course of
Business and consistent with past practice), which subsequently purchased or
acquired properties and assets (other than inventory and short-term investments)
are listed in Part 3.6 of the Disclosure Letter. All material properties and
assets reflected in the Balance Sheet are free and clear of all Encumbrances
except with respect to all such properties and assets, (a) mortgages or security
interests shown on the Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (c) liens for current taxes not yet due, and (d)
with respect to real property, (i) minor imperfections of title, if any, none of
which is substantial in amount, materially detracts from the value or impairs
the use of the property subject
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thereto, or impairs the operations of the Company, and (ii) zoning laws and
other land use restrictions that do not impair the present or anticipated use of
the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment
of the Company are structurally sound, in good operating condition and repair,
and adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are
reflected on the Balance Sheet or on the accounting records of the Company as of
the Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the Accounts Receivable are, or will be as of the Closing Date,
current and collectible net of the respective reserves shown on the Balance
Sheet or on the accounting records of the Company as of the Closing Date (which
reserves are calculated consistent with past practice and, in the case of the
reserve as of the Closing Date, will not represent a greater percentage of the
Accounts Receivable as of the Closing Date than the reserve reflected in the
Balance Sheet represented of the Accounts Receivable reflected therein and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within ninety days after the day on which it first becomes due and payable.
There is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. Part
3.8 of the Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the date of the Balance Sheet, which list sets forth
the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not
reflected in the Balance Sheet, consists of a quality and quantity usable and
salable in the Ordinary Course of Business, except for obsolete items and items
of below-standard quality, which in no event exceeds $10,000, all of which have
been written
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off or written down to net realizable value in the Balance Sheet or on the
accounting records of the Company as of the Closing Date, as the case may be.
All inventories not written off have been priced at the [lower of cost or net
realizable value on and average cost basis.] The quantities of each item of
inventory are reasonable in the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure
Letter, the Company has no liabilities or obligations of any nature (whether
known or whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
date thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed
(on a timely basis) all Tax Returns that are or were required to be filed by or
with respect to any of them pursuant to applicable Legal Requirements. Sellers
have delivered to Buyer copies of, and Part 3.11 of the Disclosure Letter
contains a complete and accurate list of, all such Tax Returns filed by the
Company since December 31, 1993. The Company has paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by the Company,
except such Taxes, if any, as are listed in Part 3.11 of the Disclosure Letter
and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet.
(b) Except as set out in Part 3.11 of the
Disclosure Schedule, no United States federal income Tax Returns of the Company
subject to such Taxes have been audited. Part 3.11 of the Disclosure Letter
contains a complete and accurate list of any audits of all such Tax Returns,
including a reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Part 3.11 of the Disclosure
Letter, are being contested in good faith by appropriate proceedings. Part 3.11
of the Disclosure Letter describes all adjustments to the United States federal
income Tax Returns filed by the Company or any group of corporations including
the Company for all taxable years since December 31, 1993, and the resulting
deficiencies proposed by the IRS. Except as described in Part 3.11 of the
Disclosure Letter, the Company has not given or been requested to give waivers
or extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating
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to the payment of Taxes of the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with
respect to Taxes on the respective books of the Company are adequate (determined
in accordance with GAAP) and are at least equal to the Company's liability for
Taxes. There exists no proposed tax assessment against the Company except as
disclosed in the Balance Sheet or in Part 3.11 of the Disclosure Letter. No
consent to the application of Section 341(f)(2) of the IRC has been filed with
respect to any property or assets held, acquired, or to be acquired by the
Company. All Taxes that the Company is or was required by Legal Requirements to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on
a consolidated basis) the Company are true, correct, and complete. There is no
tax sharing agreement that will require any payment by the Company after the
date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not
been any material adverse change in the business, operations, properties,
prospects, assets, or condition of the Company, and, no event has occurred or
circumstance exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
Except for group medical insurance and associated
life insurance, the Company (i) has not contributed to any pension, profit
sharing, option or other incentive plan or other type of employee benefit plan,
(ii) does not maintain or has maintained, is or was a party to, or otherwise
participates or participated in, on its own behalf or on behalf of any former
employees, any pension, profit sharing, option or other incentive plan or other
type of employee benefit plan, or (iii) does not have any obligation to, or
customary arrangement with, former employees, if any, for bonuses, incentive
compensation, vacation, severance pay, sick pay, sick leave, insurance, service
award, relocation, disability or other benefits, whether oral or written.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the
Disclosure Letter:
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(i) the Company is, and at all times,
has been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(ii) no event has occurred or
circumstance exists that (with or without notice or lapse of time) in any
material respect (A) may constitute or result in a violation by the Company of,
or a failure on the part of the Company to comply with, any Legal Requirement,
or (B) may give rise to any obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature;
and
(iii) the Company has not received,
at any time, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any material
Legal Requirement, or (B) any actual, alleged, possible, or potential material
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company (all of which authorizations have been
delivered to Buyer). Each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times has
been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Part 3.14
of the Disclosure Letter;
(ii) no event has occurred or
circumstance exists that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter, or (B) result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Governmental Authorization listed
or required to be listed in Part 3.14 of the Disclosure Letter;
(iii) the Company has not received
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any
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actual, alleged, possible, or potential material violation of or failure to
comply with any term or requirement of any Governmental Authorization, or (B)
any actual, proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental Authorization;
and
(iv) all applications required to have
been filed for the renewal of the Governmental Authorizations listed or required
to be listed in Part 3.14 of the Disclosure Letter have been duly filed on a
timely basis with the appropriate Governmental Bodies, and all other filings
required to have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part
3.14 of the Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
their businesses in the manner they currently conduct and operate such
businesses and to permit the Company to own and use their assets in the manner
in which they currently own and use such assets except where the failure to
obtain a Governmental Authorization would not result in a material adverse
change to the Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the
Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or against
the Company that relates to or may affect the business of, or any
of the assets owned or used by, the Company; or
(ii) that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of Sellers and the
Company, no such Proceeding as described above has been Threatened. Sellers have
delivered to Buyer copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Part 3.15 of the Disclosure Letter. The
Proceedings listed in Part 3.15 of the Disclosure Letter will not have a
material adverse effect on the business, operations, assets, condition, or
prospects of the Company.
(b) Except as set forth in Part 3.15 of the
Disclosure Letter:
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(i) there is no Order to which the Company,
or any of the assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order
that relates to the business of, or any of the assets owned or used by, the
Company; and
(iii) no officer, director, agent,
or employee of the Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) the Company is, and at all times has
been, in full compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance
exists that may constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the Company,
is subject; and
(iii) the Company has not received
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which the Company, or any of the assets owned or used by the
Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure
Letter, since the date of the Balance Sheet, the Company has conducted its
business only in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
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(b) amendment to the Organizational Documents of
the Company;
(c) payment or increase by the Company of any
bonuses, salaries, distributions or other compensation to any
stockholder, director, officer, or employee;
(d) adoption of, or increase in the payments to
or benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any
asset or property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of
notice of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least $10,000.
(g) except in the Ordinary Course of Business,
sale, lease, or other disposition of any asset or property (other than inventory
in the Ordinary Course of Business) of the Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any material asset or property of
the Company, including the sale, lease, or other disposition of any of the
intellectual property assets;
(h) cancellation or waiver of any claims or
rights with a value to the Company in excess of $10,000;
(i) material change in the accounting methods
used by the Company; or
(j) agreement, whether oral or written, by the
Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter
contains a complete and accurate list, and Sellers have delivered to Buyer true
and complete copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by the
Company of an amount or value in excess of $15,000;
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(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to the
Company of an amount or value in excess of $15,000;
(iii) each Applicable Contract that
was not entered into in the Ordinary Course of Business and that
involves expenditures or receipts of the Company in excess of
$15,000;
(iv) each lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements having
a value per item or aggregate payments of less than $15,000 and with terms of
less than one year);
(v) each licensing agreement or other
Applicable Contract with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the non-disclosure of
any of the Intellectual Property Assets;
(vi) each collective bargaining agreement
and other Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership,
and other Applicable Contract (however named) involving a sharing of profits,
losses, costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract
containing covenants that in any way purport to restrict the business activity
of the Company or any Affiliate of the Company or limit the freedom of the
Company or any Affiliate of the Company to engage in any line of business or to
compete with any Person;
(ix) each Applicable Contract providing
for payments to or by any Person based on sales, purchases, or profits, other
than direct payments for goods and sales commission arrangements for employees;
(x) each power of attorney granted by the
Company that is currently effective and outstanding;
(xi) each Applicable Contract entered into
other than in the Ordinary Course of Business that contains or
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provides for an express undertaking by the Company to be responsible for
consequential damages;
(xii) each Applicable Contract for
future capital expenditures in excess of $15,000;
(xiii) each currently effective
written warranty, guaranty, indemnity, and or other similar undertaking with
respect to contractual performance extended by the Company other than in the
Ordinary Course of Business;
(xiv) each Contract for indebtedness
of the Company involving future aggregate payments of more than
$10,000; and
(xv) each amendment, supplement, and
modification (whether oral or written) in respect of any of the
foregoing.
(b) Except as set forth in Part 3.17(b) of the
Disclosure Letter:
(i) Sellers (and no Related Person of
the Sellers) do not have or may acquire any rights under, and Sellers do not
have or may become subject to, any obligation or liability under, any Contract
that relates to the business of, or any of the assets owned or used by, the
Company; and
(ii) no officer, director, agent,
employee, consultant, or contractor of the Company is bound by any Contract that
purports to limit the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct, activity, or
practice relating to the business of the Company, or (B) assign to the Company
or to any other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the
Disclosure Letter, each Contract identified or required to be identified in Part
3.17(a) of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the
Disclosure Letter:
(i) the Company is, and at all times has
been, in full compliance with all applicable terms and requirements of each
Contract under which the Company has or had any material obligation or liability
or by which the Company or any of the material assets owned or used by the
Company is or was bound;
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(ii) each other Person that has or had
any material obligation or liability under any Contract under which the Company
has or had any rights is in full compliance with all material applicable terms
and requirements of such Contract;
(iii) no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give the
Company or other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any Applicable Contract; and
(iv) the Company has not given to or
received from any other Person, any notice or other communication (whether oral
or written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Applicable Contract.
(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Company under current or completed Applicable Contracts with any
Person and, to Sellers' Knowledge, no such Person has made written demand for
such renegotiation.
(f) The Applicable Contracts relating to the
sale or provision of products or services by the Company have been entered into
in the Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
(g) The Company has made available to Buyer
true, complete and correct copies of the Contracts required to be set forth in
Part 3.17 of the Disclosure Letter.
3.18 INSURANCE
(a) Sellers have made available to Buyer:
(i) true and complete copies of all
policies of insurance to which the Company is a party or under which the
Company, or any director of the Company, is or has been covered at any time
within the three years preceding the date of this Agreement; and
(ii) true and complete copies of all
pending applications for policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter
describes:
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(i) any self-insurance arrangement by or
affecting the Company, including any reserves established
thereunder;
(ii) any contract or arrangement, other
than a policy of insurance, for the transfer or sharing of any risk by the
Company; and
(iii) all obligations of the Company
to third parties with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under which such
coverage is provided.
(c) All material assets, properties and risks of
the Company are, and for the past three years have been, covered by valid and,
except for policies that have expired under their terms in the ordinary course,
currently effective insurance policies or binders of insurance (including,
without limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company, in each case with
responsible insurance companies, in such types and amounts and covering such
risks as are consistent with customary practices and standards of companies
engaged in business and operations similar to those of the Company. There has
not been any claim under any such insurance policy during the past three years
that could reasonably be expected to have a material adverse effect on the
Company.
(d) Except as set forth on Part 3.18(d) of the
Disclosure Letter:
(i) Since January 1, 1993 the Company
has not received (A) any refusal of coverage or any notice that a defense will
be afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
(ii) The Company has paid all premiums due,
and have otherwise performed all of their obligations, under each policy to
which the Company is a party or that provides coverage to the Company or
director thereof.
(iii) The Company has given notice
to the insurer of all claims that may be insured thereby.
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3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure
letter:
(a) The Company is, and at all times has been,
in full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither Sellers or the Company has any basis to
expect, nor has any of them received, any actual or Threatened Order, notice, or
other communication from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which any Seller or the Company has had an interest, or
with respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
any Seller, or the Company, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, to the Knowledge of
Sellers and the Company, Threatened claims, Proceedings or Encumbrances relating
to any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which the Company has or had an interest.
(c) Neither Sellers or the Company has any basis
to expect, nor has any of them received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company had an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) The Company has no Environmental, Health,
and Safety Liabilities with respect to the Facilities or with respect to any
other properties and assets (whether real, personal, or
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mixed) in which the Company (or any predecessor), has or had an interest.
(e) There are no Hazardous Materials present on
or in the Environment at the Facilities, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities, or incorporated into any structure therein
or thereon. The Company has not permitted or conducted any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which the Company has or had an interest.
(f) There has been no Release or Threat of
Release, of any Hazardous Materials at or from the Facilities, or from or by any
other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest.
(g) Sellers have delivered to Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed by Sellers or the Company pertaining to Hazardous Materials
or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Company with Environmental Laws.
(h) There are no underground or above-ground
storage tanks, incinerators or surface impoundments at, on, or about under or
within any real property operated or controlled, in whole or in part by the
Company.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains
a complete and accurate list of the following information for each employee or
director of the Company, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or payable and any
change in compensation since December 31, 1997; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under the
Company's insurance, medical, welfare, or vacation plan, or any other employee
benefit plan.
(b) No employee or director of the Company is a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights
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Agreement with Sellers or the Company by any such employee or director. No
director, officer, or other key employee of the Company presently intends to
terminate his employment with the Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to any
collective bargaining or other labor Contract. There has not been, there is not
presently pending or existing, and to Sellers' Knowledge there is not
threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any proceeding against or affecting the Company relating
to the alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by the Company, and no such action is contemplated by the Company. The
Company has complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. The Company is
not liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) The Company does not own or licenses for use
any patents, trademarks, trade names, service marks, mask works or copyrights,
other than the common trade law names, the common law trade names listed on 3.22
of the Disclosure Letter.
(b) There has not been any actual or alleged
infringement or use or misuse by any party of the Company's trade secrets,
confidential information or other intellectual property rights.
3.23 CERTAIN PAYMENTS
Neither the Company or any director, officer,
agent, or employee of the Company, or any other person associated with or acting
for or on behalf of the Company, has directly or indirectly and in violation of
any Legal Requirement (a) made any
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contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Company or any Affiliate of the Company, (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in
this Agreement and no statement in the Disclosure Letter knowingly omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Neither Sellers or any Related Person of Sellers
or of the Company has any interest in any property (whether real, personal, or
mixed and whether tangible or intangible), used in or pertaining to the
Company's business. Neither Sellers or any Related Person of Sellers or of the
Company owns (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that (i) has business dealings
or a material financial interest in any transaction with the Company, or (ii)
engages in competition with the Company with respect to any line of the products
or services of the Company (a "Competing Business") in any market presently
served by the Company. Except as set forth in Part 3.25 of the Disclosure
Letter, no Seller or any Related Person of any Seller or of the Company is a
party to any Contract with, or has any claim or right against the Company that
will survive the Closing.
3.26 BROKERS OR FINDERS
Sellers, the Company and their agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
3.27 ADJUSTED EBITDA
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The Adjusted EBITDA of the Company for the fiscal
year ended December 31, 1997 equals or exceeds One Hundred Fifty Thousand
Dollars ($150,000).
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND
BUYER
Acquisition and Buyer (the "Buyer Companies")
jointly and severally represent and warrant to Sellers as
follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition will at the Closing Date be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Acquisition and Buyer
has the corporate power and authority to own or lease and operate its properties
to carry on its business as now being conducted, and is duly qualified and in
good standing and authorized to do business as a foreign corporation in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization except where the failure
to so qualify would not have a material adverse effect on the Buyer and
Acquisition, taken as a whole.
4.2 AUTHORITY
Each of Acquisition and Buyer has the corporate
power and has taken all necessary corporate action to authorize Acquisition or
Buyer as the case may be, to execute, deliver and perform the Agreement and to
consummate the transactions contemplated thereby. The execution and delivery by
each of Acquisition and Buyer of this Agreement and the Employment Agreement to
which each is a party constitutes the valid and legally binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as may be limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
4.3 CAPITALIZATION
As of the date hereof, the authorized common stock
of the Buyer consist of 50,000,000 shares of common stock, $.001 par value per
share, of which 4,712,372 shares are issued and outstanding. All of the
outstanding common stock of the Buyer has been duly authorized and validly
issued and are fully paid and nonassessable. The shares of the Buyer's Common
Stock to be delivered to Sellers at Closing pursuant to Section 2.7 will be duly
authorized, validly issued, fully paid and non-assessable.
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4.4 BOOKS AND RECORDS
The books of account, minute books, stock record
books, and other records of the Buyer, are complete, in all material respects,
and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been
commenced against Buyer or Acquisition and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the contemplated transactions. To Buyer's and Acquisition's knowledge, no
such proceeding has been threatened.
4.6 BROKERS OR FINDERS
Buyers and Acquisition and their officers and
agents have incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement and will indemnify and hold the Company and
Sellers harmless from any such payment alleged to be due by or through Buyer or
Acquisition as a result of the action of Buyer and Acquisition or their officers
or agents.
5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO
CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company and its Representatives to, (a)
afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") full and free access to the
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data pertaining to the Company as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information pertaining to the Company
as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing
Date, Sellers will cause the Company to:
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(a) conduct the business of the Company only in
the Ordinary Course of Business;
(b) preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company;
(c) confer with Buyer concerning operational
matters of a material nature; and
(d) otherwise report periodically to Buyer
concerning the status of the business, operations, and finances
of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this
Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing
Date, Sellers will promptly notify Buyer in writing if any Seller becomes aware
of any fact or condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if any
Seller becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact
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or condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the occurrence
or discovery of any such fact or condition, Sellers will promptly deliver to
Buyer a supplement to the Disclosure Letter specifying such change. During the
same period, Sellers will promptly notify Buyer of the occurrence of any Breach
of any covenant of Sellers in this Section 5 or of the occurrence of any event
that may make the satisfaction of the conditions in Section 7 impossible or
unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and the Company will not and
each of their Representatives will not directly or indirectly solicit, initiate
or encourage, accept or discuss any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company. Sellers or the Company will promptly notify Buyer of any such inquiries
or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Sellers and the Company will use their Best Efforts to cause the
conditions in Section 7 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Sellers in writing if Buyer becomes aware of
any fact or condition that causes or constitutes a Breach of any of Buyer's or
Acquisition's representations and warranties as of the date of this Agreement,
or if Buyer becomes aware of the occurrence after the date of this Agreement or
any fact or condition that would, except as expressly contemplated by this
Agreement, cause or constitute a Breach of any such representation or warranty.
6.2 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Buyer will use its Best Efforts to cause the conditions in Section 8 to be
satisfied.
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7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S
OBLIGATION TO CLOSE
Buyer's and Acquisition's obligations to
consummate the Merger and to take the other actions required to be taken by
Buyer and Acquisition at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer and Acquisition, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and the Company's representations
and warranties in this Agreement must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that
Sellers and the Company are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing, must have been duly performed and
complied with in all material respects.
(b) There shall be delivered at Closing (i) any
Employment Agreement with James L. Motley ("Motley") in the form of Exhibit
7.2(b)(i) and an Employment Agreement with Gary K. Blackwell in the form of
Exhibit 7.2(b)(ii) (the "Employment Agreements") executed by Motley and (ii) the
certificate executed by Sellers and an officer of the Company representing to
Buyer and Acquisition that Sellers' and the Company's representations and
warranties in this Agreement was accurate in all material respects as to the
date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing Date, and (iii) each of the other covenants
and obligations in the Agreement must have been performed and complied with in
all respects.
7.3 CONSENTS
Each of the consents identified in subpart ____ of
the Disclosure Letter, must have been obtained and must be in full force and
effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been
delivered to Buyer:
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(a) an opinion of Kaufman & Rothfeder P.C.,
dated the Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Buyer or its counsel
may reasonably request for the purpose of (i) enabling its counsel to provide
the opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any
of Sellers' and the Company's representations and warranties, (iii) evidencing
the performance by Sellers, the Company, or the compliance by Sellers or the
Company with, any covenant or obligation required to be performed or complied
with by such party, (iv) evidencing the satisfaction of any condition referred
to in this Section 7, or (v) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not
have been commenced, pending or Threatened any Proceeding (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
PROCEEDS
There must not have been made or Threatened by any
Person any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in, the Company, or
(b) is entitled to all or any portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other
order by any federal or state court preventing or consummation of the
transactions contemplated in this Agreement has been issued
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and continues in effect, and this Agreement and the transactions contemplated
hereby are not prohibited under any applicable federal or state law or
regulation.
7.9 MATERIAL ADVERSE CHANGE
There shall have been no material adverse change
in the business, operations, prospects, financial condition or
results of the Company.
7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public
offering.
7.11 REMOVAL OF PROPERTY; LEASE
The property located at 918 Plantation Way,
Montgomery, Alabama shall have been transferred to B&M Enterprises, L.C.
("Enterprises") on terms and conditions reasonably satisfactory to Buyer and the
Company and Enterprises shall have entered into a lease in the form of Exhibit
7.11 hereto (the "Lease").
8. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S
OBLIGATION TO CLOSE
Sellers' and the Company's obligations to
consummate the Merger and to take the other actions required to be taken by each
Seller and the Company at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by Sellers and the Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations
and warranties in this Agreement must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that
Buyer and Acquisition are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been performed and complied with
in all material respects.
(b) Buyer must have executed and delivered (i)
the Employment Agreements (ii) a certificate executed by an officer of Buyer
representing to Sellers that Buyer and
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Acquisition's representations and warranties contained in this Agreement were
accurate in all material respects as to the date of this Agreement and is
accurate in all material respects as of the Closing as if made on the Closing.
8.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the following
documents to be delivered to Sellers:
(a) an opinion of Atlas, Pearlman, Trop &
Borkson, P.A., dated the Closing Date, in the form of
Exhibit 8.3(a); and
(b) such other documents as Sellers or their
counsel may reasonably request for the purpose of (i) enabling its counsel to
provide the opinion referred to in Section 7.3(a), (ii) evidencing the accuracy
of any representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
8.4 GUARANTY
Buyer shall have (i) released, (ii) made provision
for release or (iii) agreed to indemnify Sellers from the personal guaranties
set forth on Schedule 8.4.
8.5 INITIAL PUBLIC OFFERING
Buyer shall complete its initial public offering.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by either Buyer and Acquisition or Sellers
and the Company if a material Breach of any provision of this Agreement has been
committed by the other party and such Breach has not been cured or waived within
ten (10) days of the date of notification of such Breach;
(b) (i) by Buyer and Acquisition if any of the
conditions in Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes
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impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Sellers and the Company, if any of the
conditions in Section 8 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Sellers and the Company to comply with their obligations under
this Agreement) and Sellers have not waived such condition on or before the
Closing Date;
(c) by mutual consent of Buyer and Acquisition
and Sellers and the Company; or
(d) by either Buyer and Acquisition or Sellers
and the Company if the Closing has not occurred (other than through the failure
of any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before September 30, 1998, or such later
date as the parties may agree upon.
A party's right of termination under Section 9.1
is in addition to any other rights it may have under this Agreement or
otherwise, the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 9.1, all further
obligations of the parties under this Agreement terminate, except the
obligations in Section 11.1 and 11.3 will survive; provided, however, that if
this Agreement is terminated by a party because of a breach of the Agreement by
the other party or because one or more of the conditions to the terminating
party's obligations is not satisfied as a result of the other party's failure to
comply with its obligations under this Agreement, the terminating party's right
to pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter and any of the supplements
thereto, and any other certificate or document delivered pursuant to this
Agreement will survive the Closing until the thirty-six (36) months from the
Closing except for the representations and warranties in Sections 3.3, 3.11,
3.15 and 3.19, which shall survive for the applicable statute of limitations.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties, covenants, and
obligations. [Discuss with Pooling]
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10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
SELLERS
Sellers will jointly and severally indemnify and
hold harmless Buyer, Acquisition, the Surviving Corporation, and their
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' and other professional fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty
made by Sellers in this Agreement, without giving effect to any supplement to
Disclosure Letter, the Disclosure Letter and any of the supplements thereto, or
any other certificate or document delivered by Sellers pursuant to this
Agreement;
(b) any Breach by Sellers or the Company of any
covenant or obligation of Sellers or the Company in this
Agreement;
(c) any product shipped or any services provided
by Company prior to the Closing Date;
(d) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Sellers or the
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions; and
(e) any matter disclosed in Part ____ of the
Disclosure Letter.
The remedies provided in this Section 10.2 will
not be exclusive of or limit any other remedies that may be available to Buyer
or the other Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
BUYER
Buyer will indemnify and hold harmless Sellers
for, and will pay to the Sellers the amount of, any loss, liability, claim,
damage (including incidental and consequential damages), expense (including
costs of investigation and defense and reasonable attorneys' and other
professional fees) or diminution of value, whether or not involving a
third-party claim
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<PAGE> 40
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty
made by Buyer in this Agreement;
(b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement;
(c) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Buyer (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 10.3 will
not be exclusive of or limit any other remedies that may be
available to Sellers.
10.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, other than those in Sections 3.3, 3.11, 3.15 and 3.19, unless
on or before thirty-six (36) months from the date of Closing, Buyer notifies
Seller of a claim specifying the factual basis of that claim. A claim with
respect to Section 3.3, 3.11, 3.15 and 3.19 may be made at any time prior to the
applicable statute of limitations with respect to such matter.
If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and to comply with prior to the Closing
Date, unless on or before thirty-six (36) months from the date of Closing,
Sellers notify Buyer of claims specifying the factual basis of that claim.
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY
CLAIMS
(a) Promptly after receipt by an indemnified
party under Sections 10.2 or 10.3 of notice of the commencement of any
Proceeding against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the
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defense of such action is prejudiced by the indemnified party's failure to give
such notice.
(b) If any Proceeding referred to in Section
10.5(a) is brought against an indemnified party and it gives notice, unless the
claim involves Taxes, to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding with
counsel satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice to
the
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<PAGE> 42
indemnifying party, assume the exclusive right to defend, compromise, or settle
such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
10.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim may be asserted by notice to the party
from whom indemnification is sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Buyer determines. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing Sellers
shall, and shall cause the Company to, keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person other than their
professional advisors. Sellers and Buyer will consult with each other concerning
the means by which the Company's employees, customers, and suppliers and others
having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication. Notwithstanding the foregoing, Buyer may disclose information
about this Agreement, the Sellers, or the Company in connection with its initial
public offering and any related obligations therewith.
11.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer, Acquisition and
the Company to maintain in confidence, and not use to the detriment of another
party or the Company any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound
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by a duty of confidentiality or such information becomes publicly available
through no fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Transactions, or (c) the furnishing or
use of such information is required by legal proceedings. Notwithstanding the
foregoing, Buyer may disclose information about this Agreement, the Sellers, or
the Company in connection with its initial public offering and any related
obligations therewith.
(b) If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand, (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Seller: Office Express, Inc.
918 Plantation Way
Montgomery, Alabama 36117
Attention: James L. Motley
Facsimile No.: (___) ________
with a copy to: __________________________
__________________________
__________________________
Attention: __________________________
Facsimile No.: (___) ________
Buyer or Acquisition: Office Center Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
Facsimile No.: (212) 686-6623
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Facsimile No.: (954) 766-7800
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11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements
between the parties with respect to its subject matter and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY
RIGHTS
Neither party may assign any of its rights under
this Agreement without the prior consent of the other parties. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the heirs, successors and permitted assigns of
the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any
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<PAGE> 45
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.11 TIME OF ESSENCE
With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.12 GOVERNING LAW
This Agreement will be governed by the laws of the
State of Delaware without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION /s/ James L. Motley
------------------------------
JAMES L. MOTLEY
By: /s/ Robert J. Gillon, Jr. /s/ Gary K. Blackwell
--------------------------------- --------------------------------
Name: Robert J. Gillon, Jr. GARY K. BLACKWELL
Title:
ACQUISITION:
OFFICE CENTRE MONTGOMERY
By: /s/Robert J. Gillon, Jr.
---------------------------------
Name: Robert J. Gillon, Jr.
Title:
COMPANY:
OFFICE EXPRESS, INC.
By: /s/ James L. Motley
----------------------------------
Name: JAMES L. MOTLEY
Title:President
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OFFICE EXPRESS, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 3.8 Accounts Receivable
Exhibit 3.20 List of employees
Exhibit 7.2 Employment Agreement
Exhibit 7.4 Opinion from Kaufman & Rothfeder
Exhibit 7.11 The "Lease"
SCHEDULES
---------
Schedule 3.6 Real Property; Encumbrances
Schedule 3.8 Accounts Receivable
Schedule 3.10 Liabilities
Schedule 3.11 Taxes
Schedule 3.14 Compliance with Legal Requirements;
Governmental Authorizations
Schedule 3.17 Contracts; No Defaults
Schedule 3.25 Relationships with Related Persons
Schedule 8.4 Guaranty
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.11
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of April 10,
1998, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE YORBA LINDA, a Delaware corporation and a wholly-owned subsidiary
of Buyer ("Acquisition"), OFFICE SOLUTIONS BUSINESS PRODUCTS and SERVICES, INC.,
a California corporation ("Company"), ROBERT J. MAIRENA, an individual resident
in California and CYNTHIA S. MAIRENA, an individual resident in California (each
the "Seller" or "Shareholder" and collectively the "Sellers" and
"Shareholders").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish
to set forth the terms and conditions upon which a merger of the Company with
and into Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition
and the Company deems the merger advisable and in the best interests of each of
Buyer, Acquisition and the Company and of their respective shareholders.
WHEREAS, the shareholders of Acquisition and the Company have
approved this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section
1:
"ACQUISITION ADJUSTED EBITDA"--as defined in
Section 2.7(a).
"APPLICABLE CONTRACT"--any Contract (a) under
which the Company has or may acquire any rights, (b) under which the Company has
or may become subject to any obligation or liability, or (c) by which the
Company or any of the assets owned, leased or used by it is or may become bound.
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"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to cause such result to
be achieved as expeditiously as possible, however not at an unusual or
unreasonable cost or on unusual or unreasonable terms.
"BREACH"--a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any material inaccuracy in or breach of, or any material failure to
perform or comply with, such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such material inaccuracy,
breach, failure, claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this
Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"COMPANY"--as defined in the first paragraph of this
Agreement.
" COMPANY ADJUSTED EBITDA" --earnings of the Company before
interest, taxes, depreciation and amortization with items added back for the
accounting period in question. Company Adjusted EBITDA shall be determined
consistent with Exhibit 2.7(a) which is attached hereto and incorporated herein.
"CONSENT"--any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of the Company with and into Acquisition;
(b) the execution, delivery, and performance of the
Employment Agreement; and
(c) the performance by Buyer, Acquisition, the Company and
Sellers of their respective covenants and obligations under this Agreement.
2
<PAGE> 3
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DISCLOSURE DOCUMENT" --as defined in Section 4.7.
"DAMAGES"--as defined in Section 11.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by
Sellers and the Company to Buyer concurrently with the execution and delivery of
this Agreement.
"EBITDA"--earnings before interest, taxes, depreciation and
amortization.
"EBITDA CERTIFICATE" --as defined in Section 2.7(b).
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
"ENCUMBRANCE"--any charge, claim, lien, option, pledge,
security interest, right of first refusal, or restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"-- any cost,
damages, expense, liability, or obligation, arising from or under Environmental
Law or Occupational Safety and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal
or administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or
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<PAGE> 4
corrective action, including any investigation, cleanup, removal, containment,
or other remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601 et
seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or
relates to:
(a) advising or notifying of appropriate authorities and
employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(e) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention;
(f) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures, or equipment
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(including motor vehicles, tank cars, and rolling stock) currently or formerly
owned or operated by the Company.
"FIRST MERGER CONSIDERATION" --as defined in Section 2.7(a).
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Audited
Financial Statements referred to in Section 3.4 were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment and any other act or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Company.
"INTEREST SHARES" --as defined in Section 2.7(d).
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"HAZARDOUS MATERIALS"--any waste or other substance that is
listed, defined, designated, classified or regulated as, or otherwise determined
to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or
5
<PAGE> 6
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"IRC"--the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if (a) such individual is
actually aware of such fact or other matter or (b) an ordinarily prudent
individual would discover or otherwise become aware of such fact or other matter
in the ordinary course of business; provided further that "Knowledge" is
distinguished from "actual knowledge", which means only actual awareness by the
individual in question of the fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" or "actual knowledge" of a particular fact or other matter if any
individual who is serving, or who has at any time served, as a director or
officer of such Person has, or at any time had, Knowledge or actual knowledge,
respectively, of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal,
or other administrative order, constitution, law, ordinance, principle of common
law, regulation, or statute.
"MERGER CONSIDERATION" --as defined in Section 2.7(a).
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program designed to provide safe
and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
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(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the Board of Directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of businesses as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one
or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
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With respect to a specified Person other than an
individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, general
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
child, parent, brother or sister of the individual or the individual's spouse,
and (iv) any other natural person who resides with such individual, and (b)
"Material Interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or
other voting interests representing at least 5% of the outstanding voting power
of a Person or equity securities or other equity interests representing at least
5% of the outstanding equity securities or equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECOND MERGER CONSIDERATION" --as defined in Section
2.7(a).
"SECURITIES ACT"--the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLERS"--as defined in the first paragraph of this
Agreement.
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"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the
merger of the Company into Acquisition, namely Acquisition.
"TAX"--any tax (including any income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax, or estate levy), levy,
assessment, tariff, duty, deficiency, or other fee in any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing) that would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
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Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Company shall be merged with and into
Acquisition (the "Merger"). The separate existence and corporate organization of
the Company shall thereupon cease and the Company and Acquisition shall
thereupon be a single corporation. Acquisition shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
existence under the provisions of the Delaware General Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the "Articles
of Merger") shall be executed by the Company and Acquisition and shall be filed
with the Secretary of State of the States of California and Delaware. The Merger
shall become effective at such time as the Articles of Merger are filed with the
Secretary of State of the States of California and Delaware, such time being
hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in effect
immediately prior to the Effective Time shall be and remain the Articles of
Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately prior to
the Effective Time shall be and remain the By-Laws of the Surviving Corporation
from and after the Effective Time until amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause Robert J.
Gillon, Jr., [Buyer appointment] and Bob Mairena to be appointed as directors of
the Surviving Corporation. Bob Mairena and Robert J. Gillon, Jr. shall serve as
the officers of the Surviving Corporation until their successors have been
elected or appointed and shall have qualified in accordance with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall be
effective (i) on the date the conditions in Sections 7 and 8 have been satisfied
or otherwise waived, or (ii) at such other date as the parties hereto shall
agree in writing (the "Closing Date"), provided, however that the Closing and
the Closing Date
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shall not be earlier than April 6, 1998. The Closing shall be held at the
offices of Buyer's counsel at 200 East Las Olas Boulevard, Fort Lauderdale,
Florida 33301 at 10:00 a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
(a) At the Effective Time, by virtue of the Merger and
without any further action on the part of any holder of capital stock of Buyer,
Acquisition, the Company or Sellers: (i) the Company shall be merged with and
into Acquisition; and (ii) the shares of the Company held by Sellers shall be
converted into and shall become, without further action on the part of the
Sellers, the right to receive cash and stock equal to the "Merger
Consideration". The Merger Consideration shall consist of the "First Merger
Consideration" and the "Second Merger Consideration". The "First Merger
Consideration" means cash and stock having an aggregate value of seven (7) times
the annualized Company Adjusted EBITDA based upon the greater of: (aa) the
annualized Company Adjusted EBITDA for the three (3) months beginning January 1,
1998 and ending with March 31, 1998; or (bb) the annualized Company Adjusted
EBITDA for the full months beginning January 1, 1998 and ending on the last day
of the month immediately prior to the Closing for which financial statements are
available. The parties agree that Exhibit 2.7(a), which is attached hereto and
incorporated herein by this reference, sets forth the agreed categories of
adjustments for the Company. The First Merger Consideration shall consist of (i)
fifty percent (50%) in shares of restricted Common Stock of Buyer which number
of shares of Common Stock shall be determined by dividing fifty percent (50%) of
the amount of the total First Merger Consideration by Buyer's initial public
offering price per share (the "IPO Price") and (ii) fifty percent (50%) in cash.
The "Second Merger Consideration" shall be shares of Buyer's Common Stock having
a value, at the IPO Price, of an amount equal to three and one-half (3.5) times
the difference between; (i) the annualized Company Adjusted EBITDA used in
determining First Merger Consideration and (ii) Acquisition Adjusted EBITDA.
"Acquisition Adjusted EBITDA" means the actual twelve (12) months EBITDA of
Acquisition after the Effective Date, including in such calculation of EBITDA
any increase for any acquisitions for such period, and excluding (i) all
reasonable acquisition expenses of this merger transaction and any and all other
acquisitions (provided however that any acquisition costs not incurred or
approved by Sellers shall be excluded regardless of whether such costs are
reasonable which consent shall not be unreasonably withheld by Sellers); and
(ii) any costs or expenses not in the ordinary course of Acquisition's business
which are approved by Buyer in writing; (iii) all overhead, management fees, or
other amounts charged to Acquisition by Buyers or any Related Person of Buyer.
There shall be counted as an expense, any bonus amounts paid to Robert Mairena
or a bonus to any employee of the Company
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in lieu of payment to Mairena. Notwithstanding the foregoing, in no event shall
the number of shares to be issued as the Second Merger Consideration exceed the
number of shares issued as a part of the First Merger Consideration. The only
restrictions on the Common Stock Buyer issued as Merger Consideration shall be
those set forth in Section 5.8 and as required by law.
(b) Within 120 calendar days the first
anniversary of the Effective Date, Buyer shall cause its independent auditing
firm to deliver to the Sellers a report of Acquisition Adjusted EBITDA of
Acquisition for the twelve (12) month period which ended on the first
Anniversary of the Effective Date (the "EBITDA Certificate"). In the event that
Acquisition produces Acquisition Adjusted EBITDA for such twelve (12) month
period in excess of annualized Company Adjusted EBITDA on which the Merger
Consideration was based, as determined by the accountants for Buyer, then
following review of the EBITDA certificate by Sellers and resolution of any
dispute pursuant to Section 2.7(c), Buyer shall cause the delivery to Sellers,
shares of its Common Stock in an amount equal to three and one-half (3.5) times
the increase divided by the IPO Price (but in no event a number of shares
greater than the number of shares included in the First Merger Consideration).
If the Acquisition Adjusted EBITDA is less than the annualized Company Adjusted
EBITDA on which the First Merger Consideration was based then no additional
consideration shall be received by Sellers. In addition to the Second Merger
Consideration, Buyer shall further issue and deliver to Seller the Interest
Shares simultaneously with delivery of the Second Merger Consideration.
(c) The Sellers shall have a period of
forty-five (45) days after delivery of the EBITDA certificate, to present in
writing to Buyer, any objections that the Sellers may have to any of the matters
set forth in such certificate, which objection shall be set forth in reasonable
detail. Sellers and Sellers' Representatives shall have full access to the books
and records of Acquisition and, to the extent relevant, of Buyer during each
forty-five (45) day period. If no objections are raised within such forty-five
(45) day period, the certificate shall be deemed accepted and approved by the
Sellers. If the Sellers shall raise any objections within the forty-five (45)
day period, the parties shall attempt to resolve the matter or matters in
dispute. If such dispute cannot be resolved within a further period of thirty
(30) days, the Sellers shall have the right to submit the dispute to a
nationally recognized firm of independent public accountants mutually agreed to
by Sellers and Buyer, which firm shall make a final and binding determination as
to such matter or matters in dispute. Each party shall bear one-half of the fees
and expenses in connection with such review.
(d) If Sellers are entitled to Second Merger
Consideration, then, in addition to the shares of Buyer's Common
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Stock constituting the Second Merger Consideration, Sellers shall also be
entitled to receive shares of Buyer's Common Stock valued at the IPO price, in
an amount equal to interest at the Applicable Federal Rate (determined as of the
Effective Date) on the value of the Second Merger Consideration, from the
Effective Date until the Second Merger Consideration is paid (the "Interest
Shares"). Should the foregoing computation result in a fractional share, the
number of Interest Shares shall be rounded up.
(e) The parties acknowledge and agree that the
Second Merger Consideration is necessary because of the inability of Buyer and
Sellers to agree on the value of the Company and a fixed amount of merger
consideration at the Closing, particularly given the Company's high rate of
growth during the fiscal year ending September 30, 1997 and during the current
fiscal year.
2.8 DETERMINATION OF FIRST MERGER CONSIDERATION
At least three (3) days before the scheduled
Closing Date, Company shall deliver to Buyer Company's computation of annualized
Company Adjusted EBITDA for the period January 1, 1998 through March 31, 1998
and for the period January 1, 1998 through the end of the last full month prior
to the scheduled Closing Date ("Company's EBITDA Certificate"); provided,
however that if the Company's financial records have not been properly closed
for that month and do not reasonably permit inclusion of the last full month
prior to the scheduled Closing Date, then the second period calculation shall be
based on January 1, 1998 through the end of the most recent full month before
the scheduled Closing Date for which the Company's financial records have been
properly closed.
Sellers and Buyer shall review the Company's
EBITDA Certificate and, subject to correction of any obvious error in the
Company's EBITDA Certificate, the First Merger Consideration paid at the Closing
shall be paid based on the Company's EBITDA Certificate.
During thirty (30) days following the Closing,
Sellers may provide to Buyer a revised Company's EBITDA Certificate and any
corrections which Sellers believe are appropriate.
Within thirty (30) days after the Closing or, if a
revised Company's EBITDA Certificate is timely delivered by Sellers to Buyer,
then within thirty (30) days after delivery of the revised Company's EBITDA
Certificate, Buyer shall notify Sellers that either: (1) Buyer accepts as
accurate the Company's EBITDA Certificate or the revised Company's EBITDA
Certificate, as applicable; or (2) Buyer disputes the accuracy of the Company's
EBITDA Certificate or the revised Company's EBITDA
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Certificate, as applicable, specifying the disputed items and the factual basis
for the dispute. Failure of Buyer to so notify Sellers within such thirty (30)
day period shall constitute acceptance and approval by Buyer and Acquisition of
the Company's EBITDA Certificate or the revised Company's EBITDA Certificate, as
applicable.
If Buyer timely disputes any items, Sellers and
Buyer shall attempt to resolve the matter(s) in dispute. If such dispute is not
resolved within a further period of thirty (30) days, either Sellers or Buyer
may submit the dispute to a nationally recognized firm of independent public
accountants mutually acceptable to Sellers and Buyer, which firm shall make a
final and binding determination as to such matter(s) in dispute. Each party
shall bear one-half of the fees and expenses in connection with such review.
Upon final resolution of the amount of the First
Merger Consideration, any required adjustment shall be made by the respective
party promptly and one-half in cash/cash equivalents and one-half in Buyer's
Common Stock valued at the IPO Price.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
The Company and Sellers hereby jointly and
severally represent and warrant to Buyer and Acquisition as
follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under Applicable
Contracts. The Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification, except
where failure to so qualify would not have a material affect on the Company.
(b) Sellers have delivered or made available to
Buyer copies of the Organizational Documents of the Company, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT
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(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and the Company, enforceable against Sellers and the
Company in accordance with its terms subject to bankruptcy, insolvency or other
laws affecting the rights of creditors generally. Sellers and the Company have
all right, power, authority, and capacity to execute and deliver this Agreement
and to perform their obligations under this Agreement. The Sellers and the
Company have approved this Agreement under applicable state corporate law
provisions, and such approval is binding.
(b) Except as set forth in Part 3.2 of the Disclosure
Letter, neither the execution and delivery of this Agreement by Company and
Sellers nor the consummation or performance of any of the Contemplated
Transactions by Company and Sellers will, directly or indirectly (with or
without notice or lapse of time):
(i) result in a violation of (A) any provision of the
Organizational Documents of the Company, or (B) any resolution adopted by the
board of directors or the stockholders of the Company;
(ii) result in a violation of, or give any Governmental Body
or other Person the right to challenge any of the Contemplated Transactions or
to exercise any material remedy or obtain any material relief under, any Legal
Requirement or any Order to which the Company or Sellers, or any of the assets
owned or used by the Company, may be subject;
(iii) result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any material Governmental Authorization
that is held by the Company or that otherwise relates to the business of, or any
of the assets owned or used by, the Company;
(iv) result in a violation or breach of any provision of, or
give any Person the right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel, terminate, or
modify, any material Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance
upon or with respect to any of the material assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter,
neither Sellers or the Company is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this
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Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Sellers are acquiring the Buyer's Common
Stock for their own account and not with a view to its distribution within the
meaning of Section 2(11) of the Securities Act. Sellers are "accredited
investors" as such term is defined in Rule 501(a) under the Securities Act.
3.3 CAPITALIZATION
The authorized equity securities of the Company
consist of 1,500 shares of common stock, no par value, of which 1,000 shares are
issued and outstanding and constitute all the outstanding shares of the Company.
The Sellers are and will be on the Closing Date, the record and beneficial owner
and holder of the outstanding shares of the Company free and clear of all
Encumbrances. All of the outstanding shares of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of the Company. None of the outstanding equity securities or
other securities of the Company was issued in violation of the Securities Act or
any other Legal Requirement. Except as set forth in part 3.3 of the Disclosure
Letter, the Company does not own, or has any Contract to acquire, any equity
securities or other securities of any Person or any direct or indirect equity or
ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Company has delivered or made available to Buyer:
(a) a reviewed balance sheet of the Company as at September 30, 1996; (b) the
audited balance sheet, related statements of income, changes in stockholders'
equity, and cash flow for the fiscal year then ending September 30, 1997 (the
"Audited Financial Statements"); and (c) a reviewed balance sheet of the Company
as at December 31, 1997 (the "Interim Balance Sheet") and the related
consolidated statement of income, changes in stockholders' equity, and cash flow
for the three (3) months then ended. Such financial statements and notes fairly
present in all material respects the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Company as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP subject, in the case of Interim Balance
Sheet, to normal recurring year-end adjustments (the effect of which will not,
individually run the aggregate, be materially adverse). No financial statements
of any Person other than the Company are required by GAAP to be included in the
financial statements.
3.5 BOOKS AND RECORDS
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The books of account and other financial records of the
Company, all of which have been made available to Buyer are, complete and
correct in all material respects and have been maintained in accordance with
sound business practices. The minute books of the Company contain accurate and
complete records of all meetings held by the stockholders, the Board of
Directors, and committees of the Board of Directors of the Company and
accurately reflect in all material respects, all other corporate action of the
Shareholders and Board of Directors of the Company for which minutes were
prepared. At the Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO TANGIBLE PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a
complete and accurate list of all real property, leaseholds, or other interests
therein owned by the Company. The Company does not hold fee title to any real
property. Sellers have delivered or made available to Buyer copies of leases by
which the Company occupies such real property and such leases are true, complete
and accurate. The Company owns or leases all the tangible properties and assets
(whether real, personal, or mixed) that they purport to own or lease located in
the facilities owned or operated by the Company and reflected as owned or leased
in the books and records of the Company, including all of the tangible
properties and assets reflected in the Interim Balance Sheet (except for assets
held under capitalized leases disclosed or not required to be disclosed in Part
3.6 of the Disclosure Letter and personal property sold since the date of the
Balance Sheet, as the case may be, in the Ordinary Course of Business), and all
of the tangible properties and assets purchased or otherwise acquired by the
Company since the date of the Interim Balance Sheet (except for personal
property acquired and sold since the date of the Interim Balance Sheet in the
Ordinary Course of Business and consistent with past practice), which
subsequently- purchased or acquired tangible properties and assets (other than
inventory and short-term investments) are listed in Part 3.6 of the Disclosure
Letter. All material tangible properties and assets reflected in the Interim
Balance Sheet are free and clear of all Encumbrances except with respect to all
such properties and assets, (a) mortgages or security interests shown on the
Interim Balance Sheet as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the Interim Balance Sheet (such mortgages and security interests being limited
to the property or assets so acquired), with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, (c) liens for current taxes not yet due, and (d) with respect to
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real property, (i) minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of the Company, and (ii)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment
of the Company are structurally sound, in good operating condition and repair,
and adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are
reflected on the Balance Sheet, the Interim Balance Sheet or on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are, or will be
as of the Closing Date, current and collectible net of the respective reserves
shown on the Balance Sheet, the Interim Balance Sheet or on the accounting
records of the Company as of the Closing Date (in the case of the reserve as of
the Closing Date, the reserves will not represent a greater percentage of the
Accounts Receivable as of the Closing Date than the reserve reflected in the
Interim Balance Sheet represented of the Accounts Receivable reflected therein
and will not represent a material adverse change in the composition of such
Accounts Receivable in terms of aging). Subject to such reserves, each of the
Accounts Receivable either has been or will be collected in full, without any
set-off, within 120 days after the day on which it first becomes due and
payable. There is no contest, claim, or right of set-off, other than returns in
the Ordinary Course of Business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 3.8 of the Disclosure Letter contains a complete and accurate
list of all Accounts Receivable as of the date of the Interim Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not
reflected in the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business,
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except for obsolete items and items of below-standard quality, which in no event
exceeds $10,000, all of which have been written off or written down to net
realizable value in the Balance Sheet or on the accounting records of the
Company as of the Closing Date, as the case may be. All inventories not written
off have been priced at cost. The quantities of each item of inventory are
reasonable in the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure
Letter, the Company has no liabilities or obligations of any nature (whether
known or whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Interim Balance
Sheet and current liabilities incurred in the Ordinary Course of Business since
the date thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed
(on a timely basis since December 31, 1996) all Tax Returns that are or were
required to be filed by or with respect to the Company pursuant to applicable
Legal Requirements. Company has delivered to Buyer copies of, and Part 3.11 of
the Disclosure Letter contains a complete and accurate list of, all such Tax
Returns filed by the Company since December 31, 1996. The Company has paid, or
made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Company, except such Taxes, if any, as are listed in Part 3.11
of the Disclosure Letter and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in the
Balance Sheet.
(b) Except as set out in Part 3.11 of the
Disclosure Schedule, no United States federal income Tax Returns of the Company
subject to such Taxes have been audited by the IRS for the taxable year ending
September 30, 1997, which is the only full taxable year of the Company. Part
3.11 of the Disclosure Letter contains a complete and accurate list of any
audits of all such Tax Returns, including a reasonably detailed description of
the nature and outcome of each audit. All deficiencies proposed as a result of
such audits have been paid, reserved against, settled, or, as described in Part
3.11 of the Disclosure Letter, are being contested in good faith by appropriate
proceedings. Part 3.11 of the Disclosure Letter describes all adjustments to the
United States federal income Tax Returns filed by the Company or any group of
corporations including the Company for all taxable years since December 31,
1996, and the resulting deficiencies proposed by the IRS. Except as described in
Part 3.11 of the Disclosure Letter, the Company has not given or
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been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of Taxes of the Company or for which the Company may be
liable.
(c) The charges, accruals, and reserves with respect to
Taxes on the respective books of the Company are adequate (determined in
accordance with GAAP) and are at least equal to the Company's liability for
Taxes based on the Company's taxable income for the period in question. There
exists no proposed tax assessment against the Company except as disclosed in the
Balance Sheet or in Part 3.11 of the Disclosure Letter. No consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
(d) All Tax Returns filed by the Company are true, correct,
and complete. There is no tax sharing agreement that will require any payment by
the Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Except as set forth in Part 3.12 of the Disclosure Letter
and, since the date of the Interim Balance Sheet, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Company, and, to Sellers' and the Company's actual
knowledge, no event has occurred or circumstance exists that may result in such
a material adverse change, other than general economic conditions that could
affect the Company.
3.13 EMPLOYEE BENEFITS
Except for group medical insurance and any associated life
insurance, a 401K Plan, and those employee benefits described in the Company's
Employment Manual, a copy of which has been previously delivered or made
available to Buyer, and except as set forth in Part 3.13 of the Disclosure
Letter, the Company (i) has not contributed to any pension, profit sharing,
option or other incentive plan or other type of employee benefit plan, (ii) does
not maintain or has maintained, is or was a party to, or otherwise participates
or participated in, on its own behalf or on behalf of any former employees, any
pension, profit sharing, option or other incentive plan or other type of
employee benefit plan, or (iii) does not have any obligation to, or customary
arrangement with, former employees, if any, for bonuses, incentive compensation,
vacation, severance pay, sick
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pay, sick leave, insurance, service award, relocation, disability or other
benefits, whether oral or written.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the
Disclosure Letter:
(i) the Company is, and at all times, has
been, in full compliance with each Legal Requirement that is or was applicable
to it or to the conduct or operation of its business or the ownership or use of
any of its assets;
(ii) no event has occurred or circumstance
exists that (with or without notice or lapse of time) in any material respect
(A) may constitute or result in a violation by the Company of, or a failure on
the part of the Company to comply with, any Legal Requirement, or (B) may give
rise to any obligation on the part of the Company to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature; and
(iii) the Company has not received,
at any time, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any material
Legal Requirement, or (B) any actual, alleged, or potential material obligation
on the part of the Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains
a complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company and for which the Company has documentation
(those for which documentation is not available are not material to the
operations of the Company) (all of which authorizations have been delivered or
made available to Buyer). Except as set forth in Part 3.14 of the Disclosure
Letter, each Governmental Authorization listed or required to be listed in Part
3.14 of the Disclosure Letter is valid and in full force and effect. Except as
set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times has
been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Part 3.14
of the Disclosure Letter;
(ii) no event has occurred or
circumstance exists that may (with or without notice or lapse of time) (A)
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constitute or result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter, or (B) result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Governmental Authorization listed
or required to be listed in Part 3.14 of the Disclosure Letter;
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential material
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Part 3.14 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Company to own and use their assets in the manner in which they currently
own and use such assets except where the failure to obtain a Governmental
Authorization would not result in a material adverse change to the Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure
Letter, there is no pending Proceeding:
(i) that has been commenced by or against the Company that
relates to or may affect the business of, or any of the assets owned or used by,
the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
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To the Knowledge of Sellers and the Company, no such
Proceeding as described above has been Threatened. Company has delivered or made
available to Buyer copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Part 3.15 of the Disclosure Letter. The
Proceedings listed in Part 3.15 of the Disclosure Letter will not have a
material adverse effect on the business, operations, assets, condition, or
prospects of the Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that relates to
the business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the
Company is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to which it, or
any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter,
since the date of the Interim Balance Sheet, the Company
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has conducted its business only in the Ordinary Course of Business and there has
not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock; grant of
any registration rights; purchase, redemption, retirement, or other acquisition
by the Company of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of shares of
capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries,
distributions or other compensation to any stockholder, director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of
the Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of more than
$10,000, except in the Ordinary Course of Business.
(g) except in the Ordinary Course of Business, sale, lease, or
other disposition of any asset or property (other than inventory in the Ordinary
Course of Business) of the Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of the Company,
including the sale, lease, or other disposition of any of the intellectual
property assets;
(h) cancellation or waiver of any claims or rights with a value to
the Company in excess of $10,000;
(i) material change in the accounting methods used by the Company;
or
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(j) agreement, whether oral or written, by the Company to do any
of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Company has delivered or made available to Buyer true and
complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount or value
in excess of $15,000;
(ii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or receipts of
the Company in excess of $15,000;
(iii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $15,000 and with terms of less than one
year);
(iv) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(v) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vi) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(vii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of the Company or any Seller
of the Company or limit the freedom of the Company or any Seller of the Company
to engage in any line of business or to compete with any Person;
(viii) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than direct payments
for goods and sales commission arrangements for employees;
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(ix) each power of attorney granted by the Company that is
currently effective and outstanding;
(x) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
(xi) each Applicable Contract for future capital
expenditures in excess of $15,000;
(xii) each currently effective written warranty, guaranty,
indemnity, and or other similar undertaking with respect to contractual
performance extended by the Company other than in the Ordinary Course of
Business;
(xiii) each Contract for indebtedness of the Company
involving future aggregate payments of more than $10,000; and
(xiv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) Sellers (and no Related Person of the Sellers) do not
have or may acquire any rights under, and Sellers do not have or may become
subject to, any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Company; and
(ii) no officer or director of the Company is bound by any
Contract that purports to limit the ability of such officer or director to (A)
engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract identified or required to be identified in Part 3.17(a) of
the Disclosure Letter is in full force and effect and is valid and enforceable
in accordance with its material terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) the Company is, and at all times has been, in full
compliance with all applicable terms and requirements of each Contract under
which the Company has or had
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any material obligation or liability or by which the Company or any of the
material assets owned or used by the Company is or was bound;
(ii) each other Person that has or had any material
obligation or liability under any Contract under which the Company has or had
any rights is in full compliance with all material applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) the Company has not given to or received from any other
Person, any notice or other communication (whether oral or written) regarding
any actual, alleged, possible, or potential violation or breach of, or default
under, any Applicable Contract.
(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Company under current or completed Applicable Contracts with any
Person and, to Sellers' Knowledge, no such Person has made written demand for
such renegotiation.
(f) The Applicable Contracts relating to the sale or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
(g) The Company has made available to Buyer true, complete and
correct copies of the Contracts required to be set forth in Part 3.17 of the
Disclosure Letter.
3.18 INSURANCE
(a) Company has made available to Buyer:
(i) true and complete copies of all
current policies of insurance to which the Company is a party or under which the
Company, or any director of the Company, is covered; and
(ii) true and complete copies of all
pending applications for policies of insurance.
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(b) Part 3.18(b) of the Disclosure Letter
describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder; (ii) any contract or
arrangement, other than a policy of insurance, for the transfer or sharing of
any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) There has not been any claim under any insurance policy
of the Company since its formation that could reasonably be expected to have a
material adverse effect on the Company.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) Since its formation the Company has not received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
(ii) The Company has paid all premiums due, and have
otherwise performed all of their obligations, under each policy to which the
Company is a party or that provides coverage to the Company or director thereof.
(iii) The Company has given notice to the insurer of all
claims that may be insured thereby, if failure to make such claim could
reasonably be expected to have a material adverse affect on the Company.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure
letter:
(a) The Company is, and at all times has been,
in full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither Sellers or the Company has any basis to
expect, nor has any of them received, any actual or Threatened Order, notice, or
other communication
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from (i) any Governmental Body or private citizen acting in the public interest,
or (ii) the current or prior owner or operator of any Facilities, of any actual
or potential violation or failure to comply with any Environmental Law, or of
any actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Sellers or the Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, or
the Company, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Sellers and the
Company, Threatened claims, Proceedings or Encumbrances relating to any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or any
other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest.
(c) Neither Sellers or the Company has any basis to expect, nor
has any of them received, any citation, directive, inquiry, notice, Order,
summons, warning, or other communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential violation or failure
to comply with any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which the Company had an
interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by the Company have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) The Company has no Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which the Company
(or any predecessor), has or had an interest.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities, or incorporated into any structure therein or thereon. The
Company has not permitted or conducted
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any Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which the Company has
or had an interest.
(f) There has been no Release or Threat of Release, of any
Hazardous Materials at or from the Facilities, or from or by any other
properties and assets (whether real, personal, or mixed) in which the Company
has or had an interest.
(g) Sellers and Company have delivered or made available to Buyer
true and complete copies and results of any reports, studies, analyses, tests,
or monitoring possessed by Sellers or the Company pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Company with Environmental Laws.
(h) There are no underground or above-ground storage tanks,
incinerators or surface impoundments at, on, or about under or within any real
property operated or controlled, in whole or in part by the Company.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains
a complete and accurate list of the following information for each employee or
director of the Company, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or payable and any
change in compensation since December 31, 1997; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under the
Company's insurance, medical, welfare, or vacation plan, or any other employee
benefit plan.
(b) No officer or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such officer or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an officer
or director of the Company, or (ii) the ability of the Company to conduct its
business, including any Proprietary Rights Agreement with Sellers or the Company
by any such officer or director.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to any collective
bargaining or other union labor Contract. There has not been, there is not
presently pending or existing, and to Sellers' Knowledge there is not
Threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any proceeding against or affecting the Company
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relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed by an
employee or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting the Company
or its premises, or (c) any application for certification of a collective
bargaining agent. No event has occurred or circumstance exists that could
provide the basis for any work stoppage. There is no lockout of any employees
by the Company, and no such action is contemplated by the Company. Except as
set forth in Part 3.21 of the Disclosure Letter, the Company has complied in
all material respects with all Legal Requirements relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing. Except as set forth in Part
3.21 of the Disclosure Letter, the Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) The Company does not own or licenses for use
any patents, trademarks, trade names, service marks, mask works or copyrights,
other than the common trade law names, the common law trade names listed on 3.22
of the Disclosure Letter.
(b) To the Company's and Sellers' Knowledge,
there has not been any actual or alleged infringement or use or misuse by any
party of the Company's trade secrets, confidential information or other
intellectual property rights, except as set forth on Part 3.22 of the Disclosure
Letter.
3.23 CERTAIN PAYMENTS
Neither the Company or any director or officer of
the Company, or any other person associated with or acting for or on behalf of
the Company, has directly or indirectly and in violation of any Legal
Requirement (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Affiliate of the Company, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
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3.24 DISCLOSURE
(a) No representation or warranty of Sellers in
this Agreement and no statement in the Disclosure Letter
knowingly omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
(b) No notice given pursuant to Section 5.5 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.25 of the Disclosure
Letter, neither Sellers or any Related Person of Sellers or of the Company has
any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Company's business.
Neither Sellers or any Related Person of Sellers or of the Company owns (of
record or as a beneficial owner) an equity interest or any other financial or
profit interest in, a Person that (i) has business dealings or a material
financial interest in any transaction with the Company, or (ii) engages in
competition with the Company with respect to any line of the products or
services of the Company (a "Competing Business") in any market presently served
by the Company. Except as set forth in Part 3.25 of the Disclosure Letter,
neither Sellers or any Related Person of Sellers or of the Company is a party to
any Contract with, or has any claim or right against the Company that will
survive the Closing.
3.26 BROKERS OR FINDERS
Sellers, the Company and their agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
3.27 CREDIT LINE; CASH
At Closing, (i) there will be no amounts due or
outstanding under the Company's credit line with Wells Fargo Bank and (ii) the
Company will have cash available of at least $150,000.
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4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND
BUYER
Acquisition and Buyer (the "Buyer Companies")
jointly and severally represent and warrant to Sellers as
follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
(a) Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is a wholly-owned subsidiary of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of Acquisition and Buyer has full corporate power and authority
to conduct its business as it is now being conducted, and to own or use the
properties and assets that it purports to own or use. Each of Buyer and
Acquisition is duly qualified to do business as a foreign corporation, duly
qualified and is in good standing unless the laws of each state and jurisdiction
in which either the ownership or use of the properties owned or used by it or
the nature of the activities conducted by it requires such qualification, except
where the failure to so qualify would not have a material adverse effect on the
Buyer or on Acquisition.
(b) Buyer and Acquisition have delivered to
Sellers copies of their respective Organizational Documents as currently in
effect.
4.2 AUTHORITY
(a) This Agreement constitutes the legal, valid,
and binding obligation of Acquisition and the Buyer, enforceable against
Acquisition and the Buyer in accordance with its terms subject to bankruptcy,
insolvency or other laws affecting the rights of creditors generally.
Acquisition and the Buyer have all right, power, authority, and capacity to
execute and deliver this Agreement and to perform their obligations under this
Agreement. Acquisition and the Buyer have approved this Agreement in accordance
with applicable state corporate law provisions, and such approval is binding.
(b) Neither the execution and delivery of this
Agreement by Buyer and Acquisition nor the consummation or performance of any of
the Contemplated Transactions by Buyer and Acquisition will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or
result in a violation of (A) any provision of the Organizational Documents of
the Buyer or Acquisition, or (B) any resolution adopted by the
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board of directors or the stockholders of the Buyer or Acquisition;
(ii) result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Contemplated Transactions or to
exercise any material remedy or obtain any material relief under, any Legal
Requirement or any Order to which the Buyer or Acquisition, or any of the assets
owned or used by the Buyer or Acquisition, may be subject;
(iii) result in a violation of any of the terms or requirements
of, or give any Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any material Governmental Authorization that is
held by the Buyer or Acquisition or that otherwise relates to the business of,
or any of the assets owned or used by, the Buyer or Acquisition;
(iv) result in a violation or breach of any provision of, or give
any Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any material contract of Buyer or of Acquisition; or
(v) result in the imposition or creation of any Encumbrance upon
or with respect to any of the material assets owned or used by the Buyer or
Acquisition.
Neither Acquisition or the Buyer is or will be required to give
any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions, except for those Consents already
obtained.
4.3 CAPITALIZATION
As of the date hereof, the equity securities of the Buyer consist
of 50,000,000 shares of common stock, $.001 par value per share, of which
4,712,372 shares are issued and outstanding (other than those to be issued for
acquisitions or in connection with Buyer's IPO). All of the outstanding common
stock of the Buyer has been duly authorized and validly issued and is fully paid
and nonassessable. The shares of the Buyer's Common Stock to be delivered to
Sellers as Merger Consideration pursuant to Section 2.7 will be duly authorized,
validly issued, fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of the Buyer, are complete, in all
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material respects, and correct and have been maintained in accordance with sound
business practices, including the maintenance of an adequate system of internal
controls.
4.5 CERTAIN PROCEEDINGS; ORDERS
There is no pending Proceeding that has been
commenced against Buyer or Acquisition that relates to or may affect the
business of, or any of the assets owned or used by Buyer or Acquisition or that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's and
Acquisition's Knowledge, no such proceeding has been Threatened. There is no
Order to which the Buyer or Acquisition, or any of the assets owned or used by
either of them, is subject. No officer, director, agent, or employee of the
Buyer or Acquisition is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Buyer or Acquisition.
4.6 BROKERS OR FINDERS
Buyers and Acquisition and their officers and
agents have incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement and will indemnify and hold the Company and
Sellers harmless from any such payment alleged to be due by or through Buyer or
Acquisition as a result of the action of Buyer and Acquisition or their officers
or agents.
4.7 DISCLOSURE
Buyer has delivered to Sellers disclosure
information concerning Buyer, its management, its financial statements, its
proposed IPO, its outstanding stock and stock rights, and its proposed
acquisitions other than the Contemplated Transactions (collectively the
"Disclosure Document"). All of the information in such Disclosure Document is
true and correct in all material respects and, together with Buyer's and
Acquisition's representations and warranties set forth in this Agreement, do not
omit to state a material fact necessary to make the statements therein or herein
not misleading.
5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO
CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company and its
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Representatives to, (a) afford Buyer and its Representatives and prospective
lenders and their Representatives (collectively, "Buyer's Advisors") full and
free access to the Company's personnel, properties (including subsurface
testing), contracts, books and records, and other documents and data, (b)
furnish Buyer and Buyer's Advisors with copies of all such contracts, books and
records, and other existing documents and data pertaining to the Company as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information pertaining
to the Company as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing
Date, Sellers will cause the Company to do each of the following except as set
forth in Part 5.2 of the Disclosure Letter:
(a) conduct the business of the Company only in
the Ordinary Course of Business;
(b) use reasonable efforts to: preserve intact
the current business organization of the Company; keep available the services of
the current officers, employees, and agents of the Company; and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational
matters of a material nature; and
(d) otherwise report periodically to Buyer
concerning the status of the business, operations, and finances
of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS; FILINGS
Between the date of this Agreement and the Closing
Date, each party hereto will cooperate with the other parties with respect to
all filings that any other party elects to make or is required by Legal
Requirements to make in connection with
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the Contemplated Transactions, and (b) cooperate with the other parties in
obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing
Date, Sellers will promptly notify Buyer in writing if Sellers
become aware of any fact or condition that causes or constitutes a Breach of any
of Sellers' representations and warranties as of the date of this Agreement, or
if Sellers become aware of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Disclosure Letter if the Disclosure Letter were dated the date
of the occurrence or discovery of any such fact or condition, Sellers will
promptly deliver to Buyer a supplement to the Disclosure Letter specifying such
change. During the same period, Sellers will promptly notify Buyer of the
occurrence of any Breach of any covenant of Sellers in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and the Company will not and
each of their Representatives will not directly or indirectly solicit, initiate
or encourage, accept or discuss any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company. Sellers or the Company will promptly notify Buyer of any such inquiries
or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Sellers and the Company will use their Best Efforts to cause the
conditions in Section 7 to be satisfied.
5.8 RESTRICTIONS ON COMMON STOCK OF BUYER
Sellers acknowledge that each certificate
representing Buyer's Common Stock acquired pursuant to this Agreement shall bear
the following restrictive legend:
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THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE OF THE
FOLLOWING: (i) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SHARES UNDER THE SECURITIES ACT, OR (ii) AN
OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION,
THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SAID
SALE, OFFER OR DISTRIBUTION.
Sellers further agree that Sellers will consent to such "lock-up" restriction as
may be imposed by the Buyer's underwriter or any entity regulating the issuance
of the Buyer's Common Stock in its initial public offering, provided, however
that Sellers shall only be required to consent to "lock up" restrictions that
are the same as those "lock up" restrictions imposed on principals of companies
acquired by Buyer which in no event exceed one (1) year.
6. COVENANTS OF BUYER AND ACQUISITION PRIOR TO
CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing
Date, Buyer and Acquisition will promptly notify Sellers in writing if Buyer or
Acquisition becomes aware of any fact or condition that causes any statement in
the Disclosure Document or any statement therein to become untrue or incomplete
in any material respect or causes or constitutes a Breach of any of Buyer's or
Acquisition's representations and warranties as of the date of this Agreement,
or if Buyer or Acquisition becomes aware of the occurrence after the date of
this Agreement or any fact or condition that would, except as expressly
contemplated by this Agreement, cause or constitute a Breach of any such
representation or warranty or would cause the Disclosure Document or any
statement therein to become untrue or incomplete in any material respect.
6.2 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Buyer and Acquisition will each use its Best Efforts to cause the
conditions in Section 8 to be satisfied.
6.3 REQUIRED APPROVALS; FILINGS
Buyer and Acquisition shall comply with Section
5.4.
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6.5 INSURANCE
At or before the Closing, Acquisition shall have obtained,
or have taken all action necessary to continue the Company's insurance from
reliable insurance companies and in amounts at least equal to the insurance
coverage amount for the respective type of insurance maintained by the Company
and disclosed pursuant to Section 3.18.
7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S
OBLIGATION TO CLOSE
Buyer's and Acquisition's obligations to
consummate the Merger and to take the other actions required to be taken by
Buyer and Acquisition at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer and Acquisition, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and the Company's representations
and warranties in this Agreement must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, after giving
effect to any supplement to the Disclosure Letter subject, however, to the
provisions of Section 9).
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that
Sellers and the Company are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing, must have been duly performed and
complied with in all material respects.
(b) There shall be delivered at Closing (i) the
Employment Agreement with Robert J. Mairena ("Mairena") in the form of Exhibit
7.2(b)(i) (the "Employment Agreement") executed by Mairena; (ii) a Lease
Agreement executed by the Company and Mairena in form reasonably acceptable to
Buyer; (iii) a certificate executed by Sellers and an officer of the Company
representing to Buyer and Acquisition that Sellers' and the Company's
representations and warranties in this Agreement were accurate in all material
respects as to the date of this Agreement and are accurate in all material
respects as of the Closing as if made on the Closing Date; and (iv) each of the
other covenants and obligations in the Agreement must have been performed and
complied with by Sellers and Company in all respects.
7.3 CONSENTS
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Each of the consents identified in Part 3.2 number
7 of the Disclosure Letter, must have been obtained and must be in full force
and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been
delivered to Buyer:
(a) an opinion of Carney & Delany, LLP, dated
the Closing Date, in a form reasonably acceptable to Buyer;
(b) such other documents as Buyer or its counsel
may reasonably request for the purpose of (i) evidencing the accuracy of any of
Sellers' and the Company's representations and warranties, (ii) evidencing the
performance by Sellers, the Company, or the compliance by Sellers or the Company
with, any covenant or obligation required to be performed or complied with by
such party, (iii) evidencing the satisfaction of any condition referred to in
this Section 7, or (iv) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not
have been commenced, pending or Threatened any Proceeding (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
CONSIDERATION
There must not have been made or Threatened by any
Person any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in, the Company, or
(b) is entitled to all or any portion of the Merger Consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published,
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introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other
order by any federal or state court preventing or consummation of the
Contemplated Transactions in this Agreement has been issued and continues in
effect, and this Agreement and the transactions contemplated hereby are not
prohibited under any applicable federal or state law or regulation.
7.9 MATERIAL ADVERSE CHANGE
There shall have been no material adverse change
in the business, operations, prospects, financial condition or
results of the Company.
7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public
offering.
8. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S
OBLIGATION TO CLOSE
Sellers' and the Company's obligations to
consummate the Merger and to take the other actions required to be taken by
Sellers and the Company at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by Sellers and the Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations
and warranties in this Agreement and all statements in the Disclosure Document
must have been accurate in all material respects as of their respective dates
and must be accurate in all material respects as of the Closing Date as if made
on the Closing Date.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that
Buyer and Acquisition are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been performed and complied with
in all material respects.
(b) There shall be delivered to Sellers at
Closing (i) the cash portion of the Merger Consideration in accordance with wire
transfer instructions given by Sellers; (ii)
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certificates evidencing the shares of Common Stock of Buyer constituting the
stock portion of the Merger Consideration; (iii) the Employment Agreement with
Mairena executed by Acquisition; (iv) the certificate executed by Buyer and
Acquisition representing to Sellers that Buyer's and the Acquisition's
representations and warranties in this Agreement and all statements in the
Disclosure Document were accurate in all material respects as of their
respective dates and are accurate in all material respects as of the Closing as
if made on the Closing Date; and (v) each of the other covenants and obligations
in the Agreement must have been performed and complied with by Buyer and
Acquisition in all respects.
8.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the following
documents to be delivered to Sellers:
(a) an opinion of Atlas, Pearlman, Trop &
Borkson, P.A., dated the Closing Date, in a form reasonably
acceptable of Sellers;
(b) such other documents as Sellers or their
counsel may reasonably request for the purpose of (i) evidencing the accuracy of
any representation or warranty of Buyer or Acquisition, (ii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iii) evidencing the satisfaction of any
condition referred to in this Section 8, (iv) evidencing compliance with Section
6.5; or (v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions; and
(c) a certificate executed by Buyer representing
and warranting that none of Richard Case or Joe Hajjar has actual knowledge of
any breach by Company or Sellers of any of their representatives or warranties
given by Company and/or Sellers herein or in any document delivered before or at
closing.
8.4 CONSENTS
Each of the consents identified in Part 3.2 number
7 of the Disclosure Letter, must have been obtained and must be in full force
and effect.
8.5 NO PROCEEDINGS
Since the date of this Agreement, there must not
have been commenced, pending or Threatened any Proceeding (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions,
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or (b) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the Contemplated Transactions.
8.6 CONSUMMATION OF RELATED TRANSACTIONS
On or prior to the Closing Date, (i) each of the
corporations listed on Schedule 8.6 shall have merged with Buyer (or a
wholly-owned subsidiary of Buyer) or shall have become a wholly-owned subsidiary
of Buyer by the acquisition of all the stock thereof, (ii) the consolidated
balance sheet of Buyer upon closing of the acquisitions referred to in clause
(i), shall not be materially and adversely different from the balance sheet
included in the proforma financial statements of Buyer as set forth on Schedule
8.6, and (iii) Sellers shall have received a certificate from Buyer stating,
that such condition has been satisfied.
8.7 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public
offering, as described in the Disclosure Document.
8.8 NO INJUNCTION
No preliminary or permanent injunction or other
order by any federal or state court preventing or consummation of the
Contemplated Transactions in this Agreement has been issued and continues in
effect, and this Agreement and the transactions contemplated hereby are not
prohibited under any applicable federal or state law or regulation.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by either Buyer and Acquisition or Sellers
and the Company if a material Breach of any provision of this Agreement has been
committed by the other party and such Breach has not been cured or waived within
ten (10) days of the date of notification of such Breach;
(b) by Buyer and Acquisition if any of the
conditions in Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before the Closing Date; or (ii) by
Sellers and the Company, if any of the conditions in Section 8
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has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sellers
and the Company to comply with their obligations under this Agreement) and
Sellers have not waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Acquisition
and Sellers and the Company; or
(d) by either Buyer and Acquisition or Sellers
and the Company if the Closing has not occurred (other than through the failure
of any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before September 30, 1998, or such later
date as the parties may agree upon.
(e) by either Buyer/Acquisition or
Seller/Company if the other party makes a supplemental disclosure pursuant to
Section 6.1 or Section 5.5, as applicable, and the party receiving the
supplemental disclosure determines in its sole discretion that it will
terminate this Agreement rather than go forward with the Contemplated
Transactions given the information disclosed.
A party's right of termination under Section 9.1
is such party's exclusive remedy and only right in any of the circumstances
described above in subparts (a) through (e). If this Agreement is terminated
pursuant to Section 9.1, all further obligations of the parties under this
Agreement terminate.
10. COVENANTS FOLLOWING CLOSING
10.1 SALES/USE TAX
To the extent, if any, that any sales or use tax
is imposed on any of the Contemplated Transactions or any portion thereof,
Acquisition shall timely file any and all required returns and pay any and all
sales and/or use tax imposed thereon.
10.2 REGISTRATION OF MOTOR VEHICLES
As soon as is reasonably possible following the
Closing, Acquisition shall register in Acquisition's name all motor vehicles
received by Acquisition in the merger transaction hereunder.
10.3 REQUIREMENTS FOR TAX-FREE REORGANIZATION
Buyer, Acquisition, the Company and Sellers acknowledge and
agree that they intend the merger under the Agreement to qualify as a forward
triangular merger under Internal Revenue Code Section 368 (a)(2)(D) and related
Internal
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Revenue Code sections and Internal Revenue Service regulations. Buyer and
Acquisition agree not to take any action or fail to take any action, the
consequence of which would be, or would be likely to be, to cause this merger
transaction not to qualify as a Section 368(a)(2)(D) forward triangular merger.
In addition to and not in limitation of the foregoing, Buyer and Acquisition
will comply with the following until such time as any action to the contrary of
any of the following will not adversely impact the treatment of this merger as
a tax-free reorganization:
(a) Buyer and Acquisition agree to continue the
historic business of the Company and to use in business a significant portion of
the Company's historic business assets.
(b) Buyer agrees that it has no present plan or
intention to, and will not, liquidate Acquisition, merge Acquisition into or
with another Person, sell or otherwise dispose of the stock of Acquisition, or
cause Acquisition to sell or otherwise dispose of any of the assets of the
Company except in the ordinary course of business.
10.4 ACCESS TO BOOK AND RECORDS
Buyer and Acquisition will allow Sellers and
Sellers' Representatives to have access to the books and records of the Company
and Acquisition for any reasonable tax or business purpose related to the
Company's operations prior to Closing.
10.5 CERTAIN STOCK OPTIONS
Following the Closing, Buyer will use reasonable
efforts to establish a Stock Option Plan and, pursuant to the plan, grant
options to employees of the Company, other than Sellers, to purchase 26,600
shares of Buyer's Common Stock, subject to adjustment for stock splits and stock
dividends.
11. INDEMNIFICATION; REMEDIES
11.1 SURVIVAL
(a) All representations, warranties, covenants,
and obligations in this Agreement, the Disclosure Letter and any of the
supplements thereto, and any other certificate or document delivered pursuant to
this Agreement will survive the Closing until sixteen (16) months from the
Closing except for the representations and warranties in Sections 3.3, 3.11, and
3.19 which shall survive for the applicable statute of limitations.
(b) All representations, warranties, covenants,
and obligations of Buyer and Acquisition in this Agreement and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing for the applicable statute of limitations.
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11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
SELLERS
Subject to the limitations set forth in Section
11.4, Sellers will jointly and severally indemnify and hold harmless Buyer and
Acquisition (collectively, the "Indemnified Persons") from any loss, liability,
claim, damage (excluding incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' and
other professional fees) whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty
made by Sellers in this Agreement, after giving effect to the Disclosure Letter
and the supplements thereto, or any other certificate or document delivered by
Sellers pursuant to this Agreement;
(b) any Breach by Sellers or the Company of any
covenant or obligation of Sellers or the Company in this
Agreement;
(c) any product shipped or any services provided
by Company prior to the Closing Date;
(d) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Sellers or the
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions; and
(e) any matter disclosed in numbers 1, 2 and 5
of Part 3.15 of the Disclosure Letter.
11.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
BUYER
Subject to the limitations set forth in Section
11.4 as applicable, Buyer will indemnify and hold harmless Sellers and Company
from any loss, liability, claim, damage (excluding incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' and other professional fees) whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
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(a) any Breach of any representation or warranty
made by Buyer and/or Acquisition in this Agreement, after giving effect to any
supplemental disclosure, or any other certificate of document delivered by
Buyer and/or Acquisition pursuant to this Agreement;
(b) any Breach by Buyer or Acquisition of any
covenant or obligation of Buyer or Acquisition in this Agreement;
(c) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Buyer and/or
Acquisition (or any Person acting on behalf of either or both of them) in
connection with any of the Contemplated Transactions.
11.4 LIMITATIONS
(a) Prior to Closing, no party shall have any
right to indemnification and the provisions of Section 9.1 shall apply and
constitute the sole and exclusive remedy of the parties.
(b) Following the Closing, Sellers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to or on the Closing Date, other than those in Sections 3.3, 3.11 and 3.19,
unless on or before sixteen (16) months from the date of Closing, Buyer notifies
Sellers of a claim specifying the factual basis of that claim. A claim with
respect to Section 3.3, 3.11 and 3.19 may be made at any time prior to the
applicable statute of limitations with respect to such matter.
(c) Following the Closing, Buyer will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and to comply with prior
to or on the Closing Date, unless on or before the expiration of the applicable
statute of limitations, Sellers notify Buyer of claims specifying the factual
basis of that claim.
(d) Notwithstanding any other provision of this
Agreement, (i) neither Buyer nor Acquisition shall be entitled to
indemnification for Damages arising out of matters referred to in Section 11.2
unless and only to the extent that such Damages exceed Seventy-Five Thousand
Dollars ($75,000.00); (ii) in no event shall the aggregate liability of Sellers
arising out of matters referred to in Section 11.2 exceed Thirty-Five Percent
(35%) of the value of the First Merger Consideration, except with respect to
Sections 3.3, 3.11 and 3.19, the aggregate liability for breach of any such
section shall not exceed the value of the
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First Merger Consideration (with the shares of Common Stock valued at the IPO
price); (iii) in no event shall the aggregate liability of Buyer and
Acquisition arising out of matters referred to in Section 11.3(a) exceed the
value of the First Merger Consideration received by Sellers in any proceeding
in which any claim for Damages is asserted, regardless of the legal theory
asserted; (iv) the limitations set forth in subparts (i) and (ii) immediately
above shall apply in any proceeding in which any claim for damages is asserted
regardless of the legal theory asserted; and (v) the provisions of Section 9.1
and this Section 11 (including Sections 11.1 through 11.7) shall constitute the
sole and exclusive remedies of the parties hereto except only in circumstances
in which any party has a legally-enforceable right to rescind this Agreement
and the Contemplated Transactions, which right of rescission shall remain
available to such party.
11.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY
CLAIMS
(a) Promptly after receipt by an indemnified
party under Sections 11.2 or 11.3 of notice of the commencement of any
Proceeding against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is prejudiced by
the indemnified party's failure to give such notice.
(b) If any Proceeding referred to in Section
11.5(a) is brought against an indemnified party and it gives notice, to the
indemnifying party of the commencement of such Proceeding, the indemnifying
party will be entitled to participate in such Proceeding and, to the extent that
it wishes (unless (i) the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint representation
would be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 11 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding other than reasonable costs of
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<PAGE> 49
investigation. If the indemnifying party assumes the defense of a Proceeding,
no compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and (ii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of
the commencement of any Proceeding and the indemnifying party does not, within
thirty days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding
or any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
11.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim may be asserted by notice to the party
from whom indemnification is sought.
11.7 CLAIM WITHIN SIXTEEN MONTHS
In the event that a good faith, reasonable claim,
is made by Buyer or Acquisition pursuant to Section 11.2 within sixteen (16)
months from the Closing Date, then, out of the Second Merger Consideration,
Buyer shall issue in the name of Sellers, but retain in an escrow, the number of
shares of Buyer's common stock which, at the IPO price, have a value equal to
the reasonably estimated Damages arising from the claim. Such shares shall
continue to be held in such escrow until the earlier of resolution of the claim
or fifty-nine (59) months after the Closing Date. Upon resolution of the claim,
if Sellers are found liable for an amount of Damages, the Merger Consideration
shall be reduced by the amount of the Damages and Buyer shall receive from the
escrow shares of its Common Stock valued at the IPO price in the amount of the
Damages, which shall constitute a
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<PAGE> 50
reduction in the Merger Consideration. The foregoing provisions of this Section
11.7 shall terminate and all shares of Common Stock held in escrow shall be
distributed to Sellers no later than one (1) month before the fifth (5th)
anniversary of the Closing Date.
12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants.
12.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Buyer determines. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing Sellers
shall, and shall cause the Company to, keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person other than their
professional advisors. Sellers and Buyer will consult with each other concerning
the means by which the Company's employees, customers, and suppliers and others
having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
12.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer, Acquisition and
the Company to maintain in confidence, and not use to the detriment of another
party or the Company any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by legal proceedings. Notwithstanding the foregoing, Buyer may disclose
information about this Agreement, the Sellers, or the Company in connection with
its initial public offering and any related obligations therewith.
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(b) If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
12.4 NOTICES
All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand, (b) sent by telecopier (with written
confirmation of receipt), provided that a copy is mailed by registered mail,
return receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in each
case to the appropriate addresses and telecopier numbers set forth below (or to
such other addresses and telecopier numbers as a party may designate by notice
to the other parties):
Seller or Company: Office Solutions, Inc.
5334 East Versailles Court
Orange, CA 92867
Attention: Bob Mairena
Facsimile No.: (714) 637-6535
with a copy to: Jane W. Carney
Carney & Delany, LLP 3801 University
Avenue, Suite 650 Riverside, CA
92501
Facsimile No.: (909) 682-6591
Buyer or Acquisition: Office Center Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
Facsimile No.: (212) 686-6623
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Facsimile No.: (954) 766-7800
12.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
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12.6 WAIVER
Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements
between the parties with respect to its subject matter and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
12.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY
RIGHTS
Neither party may assign any of its rights under
this Agreement without the prior consent of the other parties; provided,
however, that the rights of Sellers under Section 2.7 to the Second Merger
Consideration may not be voluntarily assigned by Sellers or either of them and
may be transferred only by operation of law, including, without limitation upon
death of one or both of the Sellers. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the heirs, successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their heirs,
successors and assigns.
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12.9 SEVERABILITY
If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement and all subsections or
subparts thereof. All words used in this Agreement will be construed to be of
such gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
Nothing set forth in this Agreement is intended
nor shall be interpreted to be a waiver by any party of the
attorney-client privilege in whole or in part.
12.11 TIME OF ESSENCE
With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
12.12 GOVERNING LAW
This Agreement will be governed by the laws of the
State of Delaware without regard to conflicts of laws principles.
12.13 DISPUTES
Except as set forth below, all disputes of any
nature arising out of or relating to this Agreement, any of the Contemplated
Transactions or any of the other documents or agreements related hereto and the
matters covered in any of them except the Employment Agreement shall be decided
by arbitration pursuant to the applicable Judicial Arbitration and Mediation
Service Rules and Procedures in effect in California at the time. Among the
disputes that must be submitted to arbitration are those concerning the
interpretation, enforcement or alleged breach of this Agreement, as well as
those based on the state and/or federal law. The arbitration shall be held in
Orange County, California and the substantive laws of the State of
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<PAGE> 54
Delaware shall be applied without effect given to that State's or the State of
California's choice of law rules. Procedural matters will be governed by the
laws of the State of California. Absent manifest error, the decision of the
arbitrator shall be final and binding on all parties. The provisions of
California Code of Civil Procedure Section 1283.05 are incorporated herein and
made applicable to this Section 12.13. The parties agree the injunctive or
other equitable relief preventing any breach or otherwise enforcing or
rescinding this Agreement may be ordered by the arbitrator. Only matters
specifically designated to be determined by an independent accounting firm
under Sections 2.7 and 2.8 are exempt from this arbitration provision.
In furtherance and not in limitation of the mandatory
arbitration provisions set forth above, the parties hereby expressly and
irrevocably agree and consent that any legal action, suit or proceeding arising
out of or relating to any such arbitration shall be instituted exclusively in a
state court sitting in the County of Orange, State of California, and by
execution and delivery of this Agreement, each party expressly waives any
objection which such party may now have or hereafter may arise to the venue of
any such suit, action, or proceeding or to the jurisdiction of such court, and
irrevocably and unconditionally consents to the personal jurisdiction of such
court in such action, suit or proceeding. The parties each waive personal
service of any and all process upon them and consent to all such service of
process may be made by certified mail directed to such intended recipient at the
address given for notice to that party herein.
12.14 COUNTERPARTS
This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
<TABLE>
<CAPTION>
BUYER: SELLERS:
<S> <C>
OFFICE CENTRE CORPORATION /s/Robert J. Mairena
--------------------
ROBERT J. MAIRENA
By: /s/Robert J. Gillon, Jr. /s/Cynthia S. Mairena
---------------------------- ---------------------
Name: Robert J. Gillon, Jr. CYNTHIA S. MAIRENA
Title:
</TABLE>
ACQUISITION:
OFFICE CENTRE YORBA LINDA
By: /s/Robert J. Gillon, Jr.
----------------------------
Name: Robert J. Gillon, Jr.
Title:
COMPANY:
OFFICE SOLUTIONS, INC.
By: /s/Robert J. Mairena
-----------------------------
Name: Robert J. Mairena
Title: President
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<PAGE> 56
OFFICE SOLUTIONS BUSINESS PRODUCTS AND
SERVICES, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 7.2(b)(i) Employment Agreement
SCHEDULES
---------
Schedule 3.2 Authority; No conflict
Schedule 3.6 Real Property; Encumbrances
Schedule 3.8 Accounts Receivable
Schedule 3.10 Liabilities
Schedule 3.11 Taxes
Schedule 3.13 Employee Benefits
Schedule 3.14 Governmental Authorizations
Schedule 3.15 Legal Proceedings; Orders
Schedule 3.16 Absence of Certain Changes and Events
Schedule 3.17 Contracts; No Defaults
Schedule 3.18 Insurance
Schedule 3.19 Environmental Matters
Schedule 3.20 Employees
Schedule 3.21 Labor Relations; Compliance
Schedule 3.22 Intellectual Property
Schedule 3.25 Relationships with Related Persons
Schedule 5.2 Operation of the Business of the Company
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.13
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of May 15, 1998, by and
among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"), OFFICE CENTRE
NEW ENGLAND, a Delaware corporation to be formed as a wholly-owned subsidiary of
Buyer ("Acquisition"), NEW ENGLAND OFFICE SUPPLY COMPANY, a Massachusetts
corporation ("Company"), INDIRA PATEL, an individual resident in Massachusetts
(the "Seller" or "Shareholder").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Seller wish to set
forth the terms and conditions upon which a merger of the Company with and into
Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition and the
Company deems the merger advisable and in the best interests of each of Buyer,
Acquisition and the Company and of their respective shareholders.
WHEREAS, the shareholders of Acquisition and the Company have approved
this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any Contract (a) under which the
Company has or may acquire any rights, (b) under which the Company has or may
become subject to any obligation or liability, or (c) by which the Company or
any of the assets owned, leased or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
<PAGE> 2
"BEST EFFORTS"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision, and the
term "Breach" means any such inaccuracy, breach or failure.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of the Company with and into Acquisition;
(b) the execution, delivery, and performance of the Employment
Agreement;
(c) the performance by Buyer, Acquisition, the Company and
Seller of their respective covenants and obligations under this Agreement; and
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by Seller
and the Company to Buyer concurrently with the execution and delivery of this
Agreement.
"EBITDA"--earnings before interest, taxes, depreciation and
amortization, as adjusted.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
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<PAGE> 3
"ENCUMBRANCE"--any charge, claim, lien, option, pledge,
security interest, right of first refusal, or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost,
damages, expense, liability, or obligation, arising from or under Environmental
Law or Occupational Safety and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or
relates to:
(a) advising or notifying of appropriate authorities and
employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
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<PAGE> 4
(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
hazardous substances;
(e) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention;
(f) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently owned or operated by the Company.
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town or district government;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal).
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use of Hazardous
Materials in, on, under, about, or from the Facilities or any part thereof into
the environment.
"HAZARDOUS MATERIALS"--any waste or other substance that is
listed, defined, designated, classified or regulated as, or otherwise determined
to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
4
<PAGE> 5
"IRC"--the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge"
of a particular fact or other matter if (a) such individual is actually aware of
such fact or other matter or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the ordinary
course of business.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director or officer of such Person has Knowledge of such fact or
other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, or
other administrative order, constitution, law, ordinance, regulation, or
statute.
"MATERIAL ADVERSE EFFECT"--means a material adverse effect on
the business, properties, condition (financial and otherwise) or operations of
the Company.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program designed to provide safe
and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the Board of Directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of businesses as such Person.
5
<PAGE> 6
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's immediate Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, general
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) For purposes of this definition, "Material Interest" means
direct or indirect beneficial ownership of voting securities or other voting
interests representing at least 5% of the outstanding voting power of a Person
or equity securities or other equity interests representing at least 5% of the
outstanding equity securities or equity interests in a Person.
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<PAGE> 7
"RELEASE"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"SELLER"--as defined in the first paragraph of this Agreement.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the
merger of Acquisition into the Company.
"TAX"--any tax (including any income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax, or estate levy), levy,
assessment, tariff, duty, deficiency, or other fee in any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made in writing or any notice has been given in writing that would lead a
prudent Person to conclude that such a claim, Proceeding,
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dispute, action, or other matter is likely to be asserted, commenced, taken,
or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Company shall be merged with and into
Acquisition (the "Merger"). The separate existence and corporate organization of
the Company shall thereupon cease and the Company and Acquisition shall
thereupon be a single corporation. Acquisition shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
existence under the provisions of the Delaware General Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the "Articles of
Merger") shall be executed by the Company and Acquisition and shall be filed
with the Secretary of State of the States of Massachusetts and Delaware. The
Merger shall become effective at such time as the Articles of Merger are filed
with the Secretary of State of the States of Massachusetts and Delaware, such
time being hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in effect
immediately prior to the Effective Time shall be and remain the Articles of
Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately prior to
the Effective Time shall be and remain the By-Laws of the Surviving Corporation
from and after the Effective Time until amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause Robert J.
Gillon, Jr., Buyer appointment and Indira Patel to be appointed as directors of
the Surviving Corporation. Indira Patel and Robert J. Gillon, Jr. shall serve as
the officers of the Surviving Corporation until their successors have been
elected or appointed and shall have qualified in accordance with applicable law.
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2.6 CLOSING
The closing of such Merger (the "Closing") shall be effective
(i) on the date the conditions in Sections 7 and 8 have been satisfied or
otherwise waived, or (ii) at such other date as the parties hereto shall agree
in writing (the "Closing Date"), and shall be held at the offices of Buyer's
counsel at 200 East Las Olas Boulevard, Fort Lauderdale, Florida 33301 at 10:00
a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of any holder of capital stock of Buyer, Acquisition, the
Company or Seller: (i) the shares of Common Stock of Acquisition purchased,
issued and outstanding immediately prior to the Effective Time shall be
converted as a result of the Merger and without any action on the part of the
holder thereof, into 1 share of capital stock of the Surviving Corporation and
shall represent all the issued and outstanding shares of the Surviving
Corporation; and (ii) the shares of the Company held by Seller shall be
converted into and shall become, without further action on the part of the
Seller, the right to receive seven and one-half (7.5) times the Company's EBITDA
based upon the adjusted EBITDA for the year ending December 31, 1997, as set
forth in Schedule 2.7(a) to this Agreement ("1997 Adjusted EBITDA"), less One
Hundred Eighty-Five Thousand Dollars ($185,000) for long-term debt. The
consideration shall consist of Two Million Dollars ($2,000,000) in cash (the
"Cash Consideration") and shares of restricted Common Stock of Buyer which
number of shares of Common Stock (the "Share Consideration") shall be determined
by dividing the amount set forth in the following sentence, less the Cash
Consideration, by Buyer's initial public offering price per share (the "IPO
Price"). The 1997 Adjusted EBITDA is Eight Hundred Ninety-One Thousand Dollars
($891,000), resulting in consideration of Six Million Four Hundred Ninety-Eight
Thousand Dollars ($6,498,000). The Purchase Price shall be adjusted, through an
adjustment to the Cash Consideration, (based on internal financial statements of
the Company reasonably acceptable to Buyer and Seller) (increased or decreased
as the case may be) by the difference between (i) total assets less total
liabilities (exclusive of goodwill) on the Closing Date as compared to (ii)
total assets less total liabilities (exclusive of goodwill) at December 31,
1997.
Seller shall receive shares of Common Stock of Buyer
in an amount equal to four and one-half (4.5) times the difference between 1998
EBITDA and 1997 Adjusted EBITDA in the event that the Company's 1998 EBITDA
equals or exceeds 1997 Adjusted EBITDA. The shares of Buyer's restricted Common
Stock shall be valued at the IPO Price. Buyer shall deposit in escrow shares of
Buyer's Common Stock (the "Escrowed Shares") having a value equal to One Million
Eight Hundred Thousand Dollars ($1,800,000) (provided that it is understood that
the number of Escrowed Shares shall not limit the number of shares of Common
Stock of Buyer that Seller may receive under this paragraph). The Escrowed
Shares shall be registered in Seller's name and held in escrow, pursuant to the
terms of an escrow agreement, the form and substance of which is attached as
Exhibit 2.7(b) hereto.
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(b) Within ninety (90) calendar days after December 31, 1998,
Buyer shall cause its independent auditing firm to deliver to the Seller a
report of adjusted EBITDA of the Company for the twelve (12) month period ended
December 31, 1998 (the "1998 EBITDA Certificate") which shall contain
adjustments to the Company's 1998 EBITDA in a manner consistent with Schedule
2.7(a).
(c) The Seller shall have a period of twenty (20) days after
delivery of the 1998 EBITDA Certificate, to present in writing to Buyer, any
objections that the Seller may have to any of the matters set forth in such
certificate, which objection shall be set forth in reasonable detail. If no
objections are raised within such twenty (20) day period, the certificate shall
be deemed accepted and approved by the Seller. If the Seller shall raise any
objections within the twenty (20) day period, the parties shall attempt to
resolve the matter or matters in dispute. If such dispute cannot be resolved
with a further period of twenty (20) days, the Seller shall have the right to
submit the dispute to a nationally recognized firm of independent public
accountants mutually agreed to by Seller and Buyer, which firm shall make a
final and binding determination as to such matter or matters in dispute. Each
party shall bear one-half of the fees and expenses in connection with such
review.
(d) Issuance of the shares of Buyer's common stock under
Section 2.7(b) shall be made no later than twenty-five (25) days after delivery
of the 1998 EBITDA Certificate if Seller raises no objection to such certificate
as provided in Section 2.7(c). If Seller raises an objection to the 1998 EBITDA
Certificate, then the issuance of such shares shall be made within seven (7)
days of the resolution of such dispute, provided, however, that the number of
Escrowed Shares not in dispute shall be immediately released to Buyer in
accordance with the provisions of this Section 2.7(d).
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and the Company hereby jointly and severally represent
and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its material obligations under
Applicable Contracts. The Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification except where the failure to so qualify would not have a Material
Adverse Effect.
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(b) Seller has delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller and the Company, enforceable against Seller and the Company
in accordance with its terms subject to bankruptcy, insolvency or other laws
affecting the rights of creditors generally. Upon the execution and delivery by
Seller of the Employment Agreement, the Employment Agreement will constitute the
legal, valid, and binding obligations of Seller enforceable against Seller in
accordance with its respective terms subject to bankruptcy, insolvency or other
laws affecting the rights of creditors generally. Seller and the Company have
the right, power, authority, and capacity to execute and deliver this Agreement
and to perform their obligations under this Agreement. The Seller and the
Company have approved this Agreement under applicable state corporate law
provisions.
(b) Except as disclosed in Section 3.2 to the Disclosure
Letter, neither the execution and delivery of this Agreement by Seller or the
Company nor the consummation or performance of any of the Contemplated
Transactions by the Seller or the Company will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Company,
or (B) any resolution adopted by the board of directors or the shareholders of
the Company;
(ii)result in a violation of any Legal Requirement
or any Order to which the Company or Seller, or any of the assets owned or used
by the Company, may be subject except where such violation or such material
remedy would not reasonably be expected to result in a Material Adverse Effect;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
material Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets owned or used by, the
Company;
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any material Applicable
Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the material assets owned or used by
the Company.
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Except as set forth in Part 3.2 of the Disclosure Letter,
neither Seller or the Company is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Seller is acquiring the Buyer's Common Stock for his own
account and not with a view to its distribution within the meaning of Section
2(11) of the Securities Act. Seller is an "accredited investor" as such term is
defined in Rule 501(a) under the Securities Act. Seller acknowledges that each
certificate representing Buyer's Common Stock acquired pursuant to this
Agreement shall bear the following restrictive legend:
THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE "SHARES") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE
OR OTHERWISE DISTRIBUTED WITHOUT ONE OF THE FOLLOWING: (i) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT, OR (ii)
AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
Seller further acknowledges she shall be subject to such "lock-up" restriction
as may be imposed by the Buyer's underwriter or any entity regulating the
issuance of the Buyer's Common Stock in its initial public offering which
restriction shall not exceed the lesser of (a) one year from the date of Buyer's
initial public offering or (b) the shortest period of time any "founding dealer"
of Buyer is required to lock-up his or her shares of Buyer's Common Stock.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of
200,000 shares of common stock, $.01 par value, of which 25,000 shares are
issued and outstanding and constitute all the shares of the Company. The Seller
is, and will be on the Closing Date, the record and beneficial owner and holder
of the shares of the Company free and clear of all Encumbrances except as
disclosed in the Disclosure Letter. All of the outstanding shares of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company. None of
the outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any other Legal Requirement. The Company
does not own, or has any Contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business.
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3.4 FINANCIAL STATEMENTS
Seller has delivered to Buyer audited consolidated balance
sheets of the Company as at December 31, 1996 and December 31, 1997 ("Balance
Sheet") and the related statements of income, and cash flow for each of the
fiscal years then ended. Such financial statements and notes fairly present in
all material respects the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually run the aggregate, be materially adverse). No
financial statements of any Person other than the Company are required by GAAP
to be included in the financial statements.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Company, all of which have been made available to Buyer,
are, complete and correct in all material respects and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of the Company contain
accurate records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of Directors
of the Company. At the Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other interests therein owned
by the Company. Seller has delivered or made available to Buyer copies of the
deeds and leases and other instruments by which the Company occupies or acquired
such real property and interests and such instruments are true, complete and
accurate. The Company owns (with good and marketable title in the case of real
property) or lease all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that they purport to own or lease
located in the facilities owned or operated by the Company and reflected as
owned or leased in the books and records of the Company, including all of the
properties and assets reflected in the Balance Sheet (except for assets held
under capitalized leases disclosed or not required to be disclosed in Part 3.6
of the Disclosure Letter and personal property sold since the date of the
Balance Sheet, as the case may be, in the Ordinary Course of Business), and all
of the material properties and assets purchased or otherwise acquired by the
Company since the date of the Balance Sheet (except for personal property
acquired and sold since the date of the Balance Sheet in the Ordinary Course of
Business and consistent with past practice), which subsequently purchased or
acquired properties and assets (other than inventory and short-term investments)
are listed in Part 3.6 of the Disclosure Letter. All material properties and
assets reflected in the Balance Sheet are free and clear of all Encumbrances
except with respect to all such properties and assets, (a) mortgages or security
interests shown on the Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a
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default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the Balance Sheet (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (c) liens for current taxes
not yet due, (d) liens imposed by law and incurred in the Ordinary Course of
Business for obligations not yet due and payable to landlords, carriers,
warehousemen, materialmen and the like, (e) unperfected purchase money security
interests existing in the Ordinary Course of Business without the execution of a
separate security agreement, and (f) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of the Company, and (ii) zoning laws and
other land use restrictions that do not impair the present or anticipated use of
the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the
Company are in good operating condition and repair, and adequate for the uses to
which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
3.8 ACCOUNTS RECEIVABLE
(a) All accounts receivable of the Company that are reflected
on the Balance Sheet or on the accounting records of the Company as of the
Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. The Company's reserves
for Accounts Receivable are calculated consistent with past practice and, in the
case of the reserve as of the Closing Date, will not represent a greater
percentage of the Accounts Receivable as of the Closing Date than the reserve
reflected in the Balance Sheet represented of the Accounts Receivable reflected
therein and will not represent a material adverse change in the composition of
such Accounts Receivable in terms of aging). There is no contest, claim, or
right of set-off, other than returns in the Ordinary Course of Business, under
any Contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable. Part 3.8 of the Disclosure Letter
contains a complete and accurate list of all Accounts Receivable as of the date
of the Balance Sheet, which list sets forth the aging of such Accounts
Receivable.
(b) Notwithstanding anything contained herein, as of December
31, 1997, the Balance Sheet reflected a reserve for uncollectible receivables of
Sixty Thousand Dollars ($60,000), Seller shall indemnify Buyer for any bad debt
expense in excess of such amount during the twelve (12) months ended December
31, 1998.
3.9 INVENTORY
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All inventory of the Company, whether or not reflected in the
Balance Sheet, consists of a quality and quantity usable and salable in the
Ordinary Course of Business, except for obsolete items and items of
below-standard quality, which in no event exceeds $50,000. All inventories not
written off have been valued at the lower of cost (first in, first out). The
quantities of each item of inventory are reasonable in the present circumstances
of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the
Company has no liabilities or obligations of the type required to be disclosed
as liabilities on a balance sheet reflected in accordance with GAAP except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
date thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed (on a timely
basis since December 31, 1993) all Tax Returns that are or were required to be
filed by or with respect to any of them pursuant to applicable Legal
Requirements. Seller has delivered to Buyer copies of, and Part 3.11 of the
Disclosure Letter contains a complete and accurate list of, all such Tax Returns
filed by the Company since December 31, 1993. The Company has paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Company, except such Taxes, if any, as are listed in Part 3.11
of the Disclosure Letter and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in the
Balance Sheet.
(b) Except as set out in Part 3.11 of the Disclosure Schedule,
no United States federal income Tax Returns of the Company subject to such Taxes
have been audited by the IRS for taxable years from 1993 through 1997. Part 3.11
of the Disclosure Letter contains a complete and accurate list of any audits of
all such Tax Returns, including a reasonably detailed description of the nature
and outcome of each audit. All deficiencies proposed as a result of such audits
have been paid, reserved against, settled, or, as described in Part 3.11 of the
Disclosure Letter, are being contested in good faith by appropriate proceedings.
Part 3.11 of the Disclosure Letter describes all adjustments to the United
States federal income Tax Returns filed by the Company or any group of
corporations including the Company for all taxable years since December 31,
1993, and the resulting deficiencies proposed by the IRS. Except as described in
Part 3.11 of the Disclosure Letter, the Company has not given or been requested
to give waivers or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of limitations relating to
the payment of Taxes of the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company have been determined in accordance with
GAAP. There exists no proposed tax assessment against the Company except as
disclosed in the Balance Sheet or in Part 3.11 of the
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Disclosure Letter. No consent to the application of Section 341(f)(2) of the
IRC has been filed with respect to any property or assets held, acquired, or to
be acquired by the Company. All Taxes that the Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Body or
other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There is no tax
sharing agreement that will require any payment by the Company after the date of
this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Company, and, no event has occurred or circumstance
exists that would reasonably be expected to result in such a material adverse
change.
3.13 EMPLOYEE BENEFITS
Except for group medical insurance, associated life insurance
and a 401(k) Plan, the Company (i) has not contributed to any pension, profit
sharing, option or other incentive plan or other type of employee benefit plan,
(ii) does not maintain or has maintained, is or was a party to, or otherwise
participates or participated in, on its own behalf or on behalf of any former
employees, any pension, profit sharing, option or other incentive plan or other
type of employee benefit plan, or (iii) does not have any obligation to, or
customary arrangement with, former employees, if any, for bonuses, incentive
compensation, vacation, severance pay, sick pay, sick leave, insurance, service
award, relocation, disability or other benefits, whether oral or written.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure
Letter:
(i) the Company is, and at all times, has been, in
full compliance with each Legal Requirement that is or was applicable to it or
to the conduct or operation of its business or the ownership or use of any of
its assets except where such non-compliance would not reasonably be expected to
result in a Material Adverse Effect;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) in any material respect (A) would
constitute or result in a violation by the Company of, or a failure on the part
of the Company to comply with, any Legal Requirement, or (B) would give rise to
any obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature except where such
violation, failure to
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comply or remedial action would not reasonably be expected to result in a
Material Adverse Effect; and
(iii) the Company has not received, at any time,
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any material
Legal Requirement, or (B) any actual, alleged, possible, or potential material
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, the Company (all of which authorizations have been delivered to Buyer). Each
Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter is valid and in full force and effect, and the Company has
been in full compliance with all of the terms and requirements of each
Governmental Authorization except as set forth in Part 3.14 of the Disclosure
Letter or as would not result in a Material Adverse Effect:
(i) no event has occurred or circumstance exists that
would reasonably be expected to (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter, or (B) result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Governmental Authorization listed
or required to be listed in Part 3.14 of the Disclosure Letter except where such
violation or failure to comply would not result in a Material Adverse Effect;
(ii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential material
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iii) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or required to be
listed in Part 3.14 of the Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other material filings
required to have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental Bodies except
where such non-filing would not have a Material Adverse Effect.
The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to
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lawfully conduct and operate its businesses in the manner currently conducted
and operated and to permit the Company to own and use its assets in the manner
in which it currently owns and uses such assets except where the failure to
obtain a Governmental Authorization would not result in a Material Adverse
Effect.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the
Company that relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller and the Company,
no such Proceeding as described above has been Threatened. Seller has delivered
or made available to Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.15 of the Disclosure
Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter will not
have a Material Adverse Effect.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which the Company, or any
of the assets owned or used by the Company, is subject;
(ii) Seller is not subject to any Order that relates
to the business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director or key employee of the
Company is subject to any Order that prohibits such officer, director or key
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter
and except as would not result in a Material Adverse Effect:
(i) the Company is, and at all times has been, in
full compliance with all of the terms and requirements of each Order to which
it, or any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists
that may constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term
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or requirement of any Order to which the Company, or any of the assets owned or
used by the Company, is subject; and
(iii) the Company has not received any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or potential violation of,
or failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter,
since the date of the Balance Sheet, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
the Company; issuance of any security convertible into such capital stock; grant
of any registration rights; purchase, redemption, retirement, or other
acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
salaries, distributions or other compensation to any stockholder, director,
officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
the Company;
(e) damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least
$100,000.
(g) except in the Ordinary Course of Business, sale, lease, or
other disposition of any asset or property (other than inventory in the Ordinary
Course of Business) of the Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property
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of the Company, including the sale, lease, or other disposition of any of the
intellectual property assets;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete
and accurate list, and Seller has delivered to Buyer true and complete copies,
of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by the Company of an
amount or value in excess of $100,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to the Company of an
amount or value in excess of $100,000;
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves expenditures or
receipts of the Company in excess of $100,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $100,000 and with terms of less than
one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non- disclosure of any of the
Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
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(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any Affiliate of
the Company to engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits by or of the Company, other
than direct payments for goods and sales commission arrangements for employees;
(x) each power of attorney granted by the Company that is
currently effective and outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for future capital expenditures
in excess of $15,000;
(xiii) each currently effective written warranty, guaranty,
indemnity, and or other similar undertaking with respect to contractual
performance extended by the Company other than in the Ordinary Course of
Business;
(xiv) each Contract for indebtedness of the Company involving
future aggregate payments of more than $10,000; and
(xv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) Seller (and no Related Person of the Seller) does not have
or may acquire any rights under, and Seller does not have or may become subject
to, any obligation or liability under, any Contract that relates to the business
of, or any of the assets owned or used by, the Company; and
(ii) no officer, director or key employee of the Company is
bound by any Contract that purports to limit the ability of such officer,
director or key employee to engage in or continue any conduct, activity, or
practice relating to the business of the Company.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract identified or required to be identified in Part 3.17(a) of
the Disclosure Letter is in full force and effect and is valid and enforceable
in accordance with its terms subject to the enforceability of
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remedies to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws effecting the enforcement of creditors' rights generally from time
to time in effect.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) the Company is, and at all times has been since
January 1, 1995, in full compliance with all applicable terms and requirements
of each Contract under which the Company has or had any material obligation or
liability or by which the Company or any of the material assets owned or used by
the Company is or was bound except where such non-compliance would not have a
Material Adverse Effect;
(ii) to the Company's and the Seller's Knowledge,
each other Person that has or had any material obligation or liability under any
Contract under which the Company has or had any rights is in full compliance
with all material applicable terms and requirements of such Contract except
where such non-compliance would not have a Material Adverse Effect;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) would result in a violation or
breach of, or give the Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract except where such
breach would not result in a Material Adverse Effect; and
(iv) the Company has not given to or received from
any other Person, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Applicable Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Applicable Contracts with any Person and, to
Seller's Knowledge, no such Person has made written demand for such
renegotiation.
(f) The Applicable Contracts relating to the sale or provision
of products or services by the Company have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been paid
or promised, that is or would be in violation of any Legal Requirement.
(g) The Company has made available to Buyer true, complete and
correct copies of the Contracts required to be set forth in Part 3.17 of the
Disclosure Letter.
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3.18 INSURANCE
(a) Seller has made available to Buyer:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the Company, or any
director of the Company, is or has been covered at any time within the three
years preceding the date of this Agreement; and
(ii) true and complete copies of all pending
applications for policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting
the Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy
of insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties
with respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) All material assets, properties and risks of the Company
are, and for the past three years have been, covered by valid and, except for
policies that have expired under their terms in the ordinary course, currently
effective insurance policies or binders of insurance (including, without
limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company, in each case with
responsible insurance companies, in such types and amounts and covering such
risks as are consistent with customary practices and standards of companies
engaged in business and operations similar to those of the Company and of
similar size. There has not been any claim under any such insurance policy
during the past three years that could reasonably be expected to have a material
adverse effect on the Company.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) Since January 1, 1995 the Company has not
received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
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(ii) The Company has paid all premiums due, and have
otherwise performed all of their obligations, under each policy to which the
Company is a party or that provides coverage to the Company or director thereof.
(iii) The Company has given notice to the insurer of
all claims of a material nature that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure letter:
(a) To the Company's and the Seller's Knowledge, the Company
is, and at all times has been, in full compliance with, and has not been and is
not in violation of or liable under, any Environmental Law. Neither Seller or
the Company has received any actual or Threatened Order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller or the Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
Seller, or the Company, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Seller and
the Company, Threatened claims, Proceedings or Encumbrances relating to any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or, to
the Knowledge of the Company or the Seller, any other properties and assets
(whether real, personal, or mixed) in which the Company has or had an interest.
(c) Neither Seller or the Company has received any citation,
directive, inquiry, notice, Order, summons, warning, or other communication that
relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company had an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) To the Company's and the Seller's Knowledge, the Company
has no Environmental, Health, and Safety Liabilities with respect to the
Facilities or with respect to any
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other properties and assets (whether real, personal, or mixed) in which the
Company (or any predecessor), has or had an interest.
(e) To the Company's and the Seller's Knowledge, there are no
Hazardous Materials present on or in the Environment at the Facilities,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Facilities, or
incorporated into any structure therein or thereon.
(f) To the Company's and the Seller's Knowledge, there has
been no Release or Threat of Release, of any Hazardous Materials at or from the
Facilities, or from or by any other properties and assets (whether real,
personal, or mixed) in which the Company has or had an interest.
(g) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed by
Seller or the Company pertaining to Hazardous Materials or Hazardous Activities
in, on, or under the Facilities, or concerning compliance by the Company with
Environmental Laws.
(h) To the Company's and the Seller's Knowledge, there are no
underground or above-ground storage tanks, incinerators or surface impoundments
at, on, or about under or within any real property operated or controlled, in
whole or in part by the Company.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of the
Company, including each employee on leave of absence or layoff status: employer;
name; job title; current compensation paid or payable and any change in
compensation since December 31, 1997; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under the Company's
insurance, medical, welfare, or vacation plan, or any other employee benefit
plan.
(b) No officer or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such officer or
director and any other Person ("Proprietary Rights Agreement") that materially
adversely affects or will affect (i) the performance of his duties as an officer
or director of the Company, or (ii) the ability of the Company to conduct its
business as presently conducted, including any Proprietary Rights Agreement with
Seller or the Company by any such officer or director. No director, officer, or,
to the Company's and the Seller's Knowledge, other key employee of the Company
presently intends to terminate his employment with the Company.
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3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to any collective
bargaining or other labor Contract. There has not been, there is not presently
pending or existing, and to Seller's Knowledge there is not threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
except as disclosed in Section 3.21 of the Disclosure Letter, any proceeding
against or affecting the Company relating to the alleged violation of any Legal
Requirement pertaining to labor relations or employment matters, including any
charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Body, organizational activity, or other labor or employment dispute
against or affecting the Company or its premises, or (c) any application for
certification of a collective bargaining agent. No event has occurred or
circumstance exists that could reasonably provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. The Company has
complied in all material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. The Company is
not liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) The Company does not own or licenses for use any patents,
trademarks, trade names, service marks, mask works or copyrights, other than the
common trade law names, the common law trade names listed on 3.22 of the
Disclosure Letter.
(b) There has not been any actual or alleged infringement or
use or misuse by any party of the Company's trade secrets, confidential
information or other intellectual property rights.
3.23 CERTAIN PAYMENTS
Neither the Company or any director, officer, agent, or
employee of the Company, or any other person associated with or acting for or on
behalf of the Company, has directly or indirectly and in violation of any Legal
Requirement (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Affiliate of the Company, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.24 DISCLOSURE
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(a) No representation or warranty of Seller in this Agreement
and no statement in the Disclosure Letter knowingly omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as stated in the Disclosure Letter, neither Seller or
any Related Person of Seller or of the Company has any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to the Company's business. Neither Seller or any Related Person of
Seller or of the Company owns (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that (i) has
business dealings or a material financial interest in any transaction with the
Company, or (ii) engages in competition with the Company with respect to any
line of the products or services of the Company (a "Competing Business") in any
market presently served by the Company. Except as set forth in Part 3.25 of the
Disclosure Letter, neither Seller or any Related Person of Seller or of the
Company is a party to any Contract with, or has any claim or right against the
Company that will survive the Closing.
3.26 BROKERS OR FINDERS
Seller, the Company and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND BUYER
Acquisition and Buyer (the "Buyer Companies") jointly and
severally represent and warrant to Seller as follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition will at the Closing Date be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Acquisition and Buyer
has the corporate power and authority to own or lease and operate its properties
to carry on its business as now being conducted, and is duly qualified and in
good standing and authorized to do business as a foreign corporation in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization except where the failure
to so qualify would not have a material adverse effect on the Buyer and
Acquisition, taken as a whole.
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4.2 AUTHORITY
Each of Acquisition and Buyer has the corporate power and has
taken all necessary corporate action to authorize Acquisition or Buyer as the
case may be, to execute, deliver and perform the Agreement and to consummate the
transactions contemplated thereby. The execution and delivery by each of
Acquisition and Buyer of this Agreement and the Employment Agreement to which
each is a party constitutes the valid and legally binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as may be limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
4.3 CAPITALIZATION
As of the date hereof, the authorized common stock of the
Buyer consist of 50,000,000 shares of common stock, $.001 par value per share,
of which 4,712,372 shares are issued and outstanding (excluding shares to be
issued in the Buyer's Initial Public Offering or in other acquisitions. All of
the outstanding common stock of the Buyer has been duly authorized and validly
issued and are fully paid and nonassessable. The shares of the Buyer's Common
Stock to be delivered to Seller at Closing pursuant to Section 2.7 will be duly
authorized, validly issued, fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Buyer, are complete, in all material respects, and correct
and have been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against
Buyer or Acquisition and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the contemplated
transactions. To Buyer's and Acquisition's knowledge, no such proceeding has
been threatened.
4.6 BROKERS OR FINDERS
Buyer and Acquisition and their officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold the Company and Seller harmless from
any such payment alleged to be due by or through Buyer or Acquisition as a
result of the action of Buyer and Acquisition or their officers or agents.
4.7 AUTHORITY
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This Agreement constitutes the legal, valid and binding
obligations of Acquisition and Buyer, enforceable against Acquisition and Buyer
in accordance with its terms, subject to bankruptcy, insolvency or other loss
affecting the rights of creditors generally. Buyer and Acquisition have the
right, power and corporate authority and capacity to execute and deliver this
Agreement and perform their obligations under this Agreement.
Neither the execution and delivery of this Agreement by
Acquisition or Buyer nor the consummation of performance of any contemplated
transactions by Buyer or Acquisition will, (with or without notice or lapse of
time) (i) contravene, conflict with, result in any violation of (A) any
provision of the organizational documents of the Buyer or Acquisition, or (B)
any resolutions adopted by the Board of Directors of Buyer or Acquisition; (ii)
contravene, conflict with or result in the violation of material terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel terminate or modify any material Governmental Authorization that
is held by Buyer or Acquisition or otherwise relates to the business of, or any
of the assets owned or used by Buyer or Acquisition, as the case may be.
4.8 DISCLOSURES
Buyer has delivered to Seller disclosure information
concerning Buyer and its proposed operations, its management, its proposed IPO
(the "Disclosure Document"). All of the information contained in such Disclosure
Document is true and correct in all material respects in light of the
circumstances when made.
5. COVENANTS OF SELLER AND THE COMPANY PRIOR TO CLOSING
DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Seller will, and will cause the Company and its Representatives to, (a) afford
Buyer and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
personnel, properties (including subsurface testing), contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data pertaining to the Company as Buyer may reasonably request,
and (c) furnish Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information pertaining to the Company as Buyer may
reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date,
Seller will cause the Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business;
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(b) preserve intact the current business organization of the
Company, and use its reasonable best efforts to keep available the services of
the current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing Date, Seller will not, and
will cause the Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur, provided, however, that the Company shall be permitted
to pay bonuses in the ordinary course of business and consistent with the past
practice subject to the achievement of documented milestones. Such bonuses are
not to exceed Fifty Thousand Dollars ($50,000) over the twelve (12) month period
ending December 31, 1998.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement,
Seller will, and will cause the Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Seller
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining any required consents.
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5.5 NOTIFICATION
Seller or the Company may update or supplement the Disclosure
Letter in writing delivered to Buyer at any time on or prior to the Closing to
reflect matters which occur subsequent to the date of this Agreement. Buyer, in
its sole discretion, may (i) accept such Disclosure Letter as modified and
consummate the transactions contemplated by this Agreement, thereby waiving any
claim that Buyer may have that such modification is a breach of the
representations and warranties given in Section 3 on the date of this Agreement,
or (ii) terminate this Agreement whereupon all further obligations of the
parties hereunder will terminate and there shall be no liability on the part of
any party or its respective directors, officers or shareholders, except in any
such case in accordance with the expenses provisions of Section 11.1 and the
mutual confidentiality obligations contained in this Agreement and in such other
mutual confidentiality agreement entered into between Buyer and the Company,
which shall survive any such termination.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated
pursuant to Section 9, Seller will not, and the Company will not and each of
their Representatives will not directly or indirectly solicit, initiate or
encourage, accept or discuss any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company. Seller or the Company will promptly notify Buyer of any such inquiries
or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date,
Seller and the Company will use their Best Efforts to cause the conditions in
Section 7 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer
will promptly notify Seller in writing if Buyer becomes aware of any fact or
condition that causes or constitutes a Breach of any of Buyer's or Acquisition's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement or any fact or
condition that would, except as expressly contemplated by this Agreement, cause
or constitute a Breach of any such representation or warranty.
6.2 BEST EFFORTS
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Between the date of this Agreement and the Closing Date, Buyer
will use its Best Efforts to cause the conditions in Section 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S
OBLIGATION TO CLOSE
Buyer's and Acquisition's obligations to consummate the Merger
and to take the other actions required to be taken by Buyer and Acquisition at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Buyer and
Acquisition, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Seller's and the Company's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
7.2 SELLER'S PERFORMANCE
(a) All of the covenants and obligations that Seller and the
Company are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing, must have been duly performed and complied with in all
material respects.
(b) There shall be delivered at Closing (i) the Employment
Agreements with Indira Patel ("Patel") and Dennis McCarthy ("McCarthy") in the
form of Exhibit 7.2(b)(i) (the "Employment Agreements") executed by Patel and
McCarthy, respectively; and (ii) the certificate executed by Seller and an
officer of the Company representing to Buyer and Acquisition that Seller's and
the Company's representations and warranties in this Agreement was accurate in
all material respects as to the date of this Agreement and is accurate in all
material respects as of the Closing as if made on the Closing Date.
7.3 CONSENTS
Each of the consents identified in the Disclosure Letter, must
have been obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to
Buyer:
(a) an opinion of Davis, Malm and D'Agostine, P.C., dated the
Closing Date, reasonably acceptable to Buyer;
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(b) such other documents as Buyer or its counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
Seller's and the Company's representations and warranties, (iii) evidencing the
performance by Seller, the Company, or the compliance by Seller or the Company
with, any covenant or obligation required to be performed or complied with by
such party, (iv) evidencing the satisfaction of any condition referred to in
this Section 7, or (v) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced, pending or Threatened any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
PROCEEDS
There must not have been made or Threatened by any Person any
claim asserting that such Person (a) is the holder or the beneficial owner of,
or has the right to acquire or to obtain beneficial ownership of, any stock of,
or any other voting, equity, or ownership interest in, the Company, or (b) is
entitled to all or any portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other order by any
federal or state court preventing or consummation of the transactions
contemplated in this Agreement has been issued and continues in effect, and this
Agreement and the transactions contemplated hereby are not prohibited under any
applicable federal or state law or regulation.
7.9 MATERIAL ADVERSE CHANGE
There shall have been no material adverse change in the
business, operations, prospects, financial condition or results of the Company.
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7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering.
8. CONDITIONS PRECEDENT TO SELLER'S AND THE COMPANY'S
OBLIGATION TO CLOSE
Seller's and the Company's obligations to consummate the
Merger and to take the other actions required to be taken by Seller and the
Company at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Seller and the Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that Buyer and
Acquisition are required to perform or to comply with pursuant to this Agreement
at or prior to the Closing must have been performed and complied with in all
material respects.
(b) Buyer must have executed and delivered (i) the Employment
Agreements (ii) a certificate executed by an officer of Buyer representing to
Seller that Buyer and Acquisition's representations and warranties contained in
this Agreement were accurate in all material respects as to the date of this
Agreement and is accurate in all material respects as of the Closing as if made
on the Closing.
8.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the following documents
to be delivered to Seller:
(a) an opinion of Atlas, Pearlman, Trop & Borkson, P.A., dated
the Closing Date, reasonably acceptable to Buyer and Seller; and
(b) such other documents as Seller or its counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 7.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition,
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(iv) evidencing the satisfaction of any condition referred to in this Section 7,
or (v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
8.4 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced, pending or Threatened any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
8.5 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
PROCEEDS
There must not have been made or Threatened by any Person any
claim asserting that such Person (a) is the holder or the beneficial owner of,
or has the right to acquire or to obtain beneficial ownership of, any stock of,
or any other voting, equity, or ownership interest in, the Company, or (b) is
entitled to all or any portion of the Merger consideration.
8.6 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
8.7 NO INJUNCTION
No preliminary or permanent injunction or other order by any
federal or state court preventing or consummation of the transactions
contemplated in this Agreement has been issued and continues in effect, and this
Agreement and the transactions contemplated hereby are not prohibited under any
applicable federal or state law or regulation.
8.8 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the
Closing, be terminated:
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(a) by either Buyer and Acquisition or Seller and the Company
if a material Breach of any provision of this Agreement has been committed by
the other party and such Breach has not been cured or waived within ten (10)
days of the date of notification of such Breach;
(b) (i) by Buyer and Acquisition if any of the conditions in
Section 7 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date; or (ii) by Seller and the
Company, if any of the conditions in Section 8 has not been satisfied of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Seller and the Company to comply with their
obligations under this Agreement) and Seller has not waived such condition on or
before the Closing Date;
(c) by mutual consent of Buyer and Acquisition and Seller and
the Company; or
(d) by either Buyer and Acquisition or Seller and the Company
if the Closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before September 30, 1998, or such later date as the
parties may agree upon.
A party's right of termination under Section 9.1 is in
addition to any other rights it may have under this Agreement or otherwise, the
exercise of a right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section 9.1, all further obligations of the
parties under this Agreement terminate, except the obligations in Section 11.1
and 11.3 will survive; provided, however, that if this Agreement is terminated
by a party because of a breach of the Agreement by the other party or because
one or more of the conditions to the terminating party's obligations is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in
this Agreement, the Disclosure Letter and any of the supplements thereto, and
any other certificate or document delivered pursuant to this Agreement will
survive the Closing until the one (1) year from the Closing except for the
representations and warranties in Section 3.3, which shall survive for eighteen
(18) months from the Closing.
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10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Seller will indemnify and hold harmless Buyer, Acquisition,
the Surviving Corporation, and their respective affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' and other professional fees)
(collectively, "Damages"), arising from or in connection with:
(a) any Breach of any representation or warranty made by
Seller in this Agreement, without giving effect to any supplement to Disclosure
Letter with respect to matters occurring before the date of this Agreement,
provided that information in any supplement to the Disclosure Letter shall not
constitute a Breach if the Contemplated Transactions are consummated or any
other certificate or document delivered by Seller pursuant to this Agreement;
(b) any Breach by Seller or the Company of any covenant or
obligation of Seller or the Company in this Agreement;
(c) any product shipped or any services provided by Company
prior to the Closing Date (other than returns in the ordinary course of
business);
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or the Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions;
(e) any matter disclosed in Part 3.15 of the Disclosure
Letter, including legal fees and related expenses associated with such matters,
provided, however, Seller shall not be liable for indemnification for Damages
for legal fees and related expenses (with respect to the matters set forth in
this Section 10.2(e)) unless and only to the extent that such amounts exceed
Forty Thousand Dollars ($40,000.00); and
(f) any claim for matters referred to in Section 3.8(b).
The remedies provided in this Section 10.2 shall be the sole
and exclusive remedy available to Buyer or the other Indemnified Persons under
this Agreement. Damages indemnified hereunder shall be reduced to the extent
Buyer or the Company receives compensation from its insurance coverage for such
Damages, provided, however, that Buyer or the Company shall not be obligated to
seek recovery from its insurance coverage for such Damages.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Seller for, and will
pay to the Seller the amount of, any loss, liability, claim, damage, expense
(including costs of investigation and defense
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and reasonable attorneys' and other professional fees) (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Buyer
in this Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Buyer (or any Person acting on
their behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.3 shall be the
exclusive remedy that may be available to Seller.
10.4 TIME LIMITATIONS
If the Closing occurs, Seller will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Section 3.3, unless on or before one (1) year from the
date of Closing, Buyer notifies Seller of a claim specifying the factual basis
of that claim. With respect to the claim under Section 3.3, Seller will have no
liability unless on or before eighteen (18) months from the date of Closing,
Buyer notified Seller of a claim specifying the factual basis of that claim.
If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and to comply with prior to the Closing
Date, unless on or before one (1) year from the date of Closing, Seller notifies
Buyer of claims specifying the factual basis of that claim.
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Sections 10.2 or 10.3 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to
any indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnified
party's failure to give such notice.
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(b) If any Proceeding referred to in Section 10.5(a) is
brought against an indemnified party and it gives notice, unless the claim
involves Taxes, to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding with
counsel reasonably satisfactory to the indemnified party and, after notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (ii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
10.6 MONETARY LIMITATIONS ON INDEMNIFICATION
Notwithstanding any other provisions of this Agreement, (i) no
party shall be entitled to indemnification for Damages, arising out of any
matter referred to in Sections 10.2 and 10.3 above, as applicable, unless and
only to the extent that such Damages, exceed Seventy-Five Thousand Dollars
($75,000) provided, however, that such limitation shall not apply to claims for
matters set forth in Section 10.2(e) and (f); (ii) in no event shall the
aggregate liability of Seller arising out of the matters referred to in Section
10.2 exceed the initial Share Consideration received by Seller upon closing of
the merger based upon the 1997 Adjusted EBITDA.
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Seller, at her sole discretion, may satisfy any claim for
Damages by delivery of cash or shares of Buyer's Common Stock. For the purposes
of this Section, the shares of Buyer's Common Stock shall be valued at the
greater of (i) the Fair Market Value of Buyer's Common Stock based upon the
average thirty (30) day trading price of such stock for the thirty (30) day
period ending five (5) trading days prior to the final determination of the
amount of any claim or (ii) the initial public offering price per share.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants, Buyer shall pay the fees and expenses
of Grant Thornton.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to
this Agreement or the Contemplated Transactions will be issued, if at all, at
such time and in such manner as Buyer determines. Unless consented to by Buyer
in advance or required by Legal Requirements, prior to the Closing Seller shall,
and shall cause the Company to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person other than their
professional advisors. Seller and Buyer will consult with each other concerning
the means by which the Company's employees, customers, and suppliers and others
having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
11.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the Closing Date,
Buyer and Seller will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Buyer, Acquisition and the Company
to maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings. Notwithstanding the foregoing, Buyer may disclose information
about this Agreement, the Seller, or the Company in connection with its initial
public offering and any related obligations therewith.
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(b) If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand, (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties):
Seller: New England Office Supply Company
135 Lundquist Drive
Braintree, Massachusetts 02184
Attention: Indira Patel
Facsimile No.: (781) 848-7184
with a copy to: Davis, Malm & D'Agostine, P.C.
One Boston Place, 37th Floor
Boston, Massachusetts 02108
Attention: Andrew D. Myers, Esq.
Facsimile No.: (617) 523-6215
Buyer or Acquisition: Office Center Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
Facsimile No.: (212) 686-6623
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Facsimile No.: (954) 766-7800
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
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11.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the heirs, successors and permitted assigns of
the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
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11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
11.11 TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
11.12 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Delaware without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLER:
OFFICE CENTRE CORPORATION
By:/s/ R.J. GILLON, JR. /s/ INDIRA B. PATEL
--------------------------------- --------------------------------
Name: Robert J. Gillon, Jr. INDIRA PATEL
Title: Sole Director/Owner
ACQUISITION:
OFFICE CENTRE NEW ENGLAND
By: /s/ R.J. GILLON, JR.
---------------------------------
Name: Robert J. Gillon, Jr.
Title:
COMPANY:
NEW ENGLAND OFFICE SUPPLY
COMPANY
By: /s/ INDIRA B. PATEL
---------------------------------
Name: Indira B. Patel
Title: President
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NEW ENGLAND OFFICE SUPPLY COMPANY
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 7.2(b)(i) Employment Agreements
Exhibit 8.3(a) Opinion of Atlas, Pearlman, Trop & Borkson,
P.A. (not there)
SCHEDULES
---------
Schedule 3.2 Authority; No conflict
Schedule 3.6 Real Property
Schedule 3.8 Accounts Receivable
Schedule 3.11 Taxes
Schedule 3.14 Compliance with Legal Requirements;
Governmental Authorizations
Schedule 3.15 Legal Proceedings; Orders
Schedule 3.16 Absence of Certain Changes and Events
Schedule 3.17 Contracts; No defaults
Schedule 3.18 Insurance
Schedule 3.20 List of Employees
Schedule 3.21 See section 3.15
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.15
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of April 23,
1998, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE SACRAMENTO, a Delaware corporation to be formed as a wholly-owned
subsidiary of Buyer ("Acquisition"), SIERRA OFFICE SYSTEMS AND PRODUCTS, INC., a
California corporation ("Company"), MICHAEL KIPP, an individual resident in
California, JOHN E. KIPP, JR. and ROSE MARIE KIPP (each a "Seller" collectively
the "Sellers").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish
to set forth the terms and conditions upon which a merger of the Company with
and into Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition
and the Company deems the merger advisable and in the best interests of each of
Buyer, Acquisition and the Company and of their respective shareholders.
WHEREAS, the Sellers own 94.7% of the outstanding shares of
common stock of the Company.
WHEREAS, the shareholders of Acquisition and the Company have
approved this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms
have the meanings specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any Contract (a) under which
the Company has or may acquire any rights, (b) under which the Company has or
may become subject to any obligation or liability, or (c) by which the Company
or any of the assets owned, leased or used by it is or may become bound.
<PAGE> 2
"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any material inaccuracy in or material breach of, or any failure
substantially to perform or comply with, such representation, warranty,
covenant, obligation, or other provision, and the term "Breach" means any such
material inaccuracy, breach, failure, claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this
Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the
Closing actually takes place.
"COMPANY"--as defined in the Recitals of this
Agreement.
"CONSENT"--any approval, consent, ratification,
waiver, or other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of the Company with and
into Acquisition;
(b) the execution, delivery, and
performance of the Employment Agreement;
(c) the performance by Buyer,
Acquisition, the Company and Sellers of their respective covenants and
obligations under this Agreement; and
"CONTRACT"--any agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether express or implied)
that is legally binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE SCHEDULE"--the disclosure schedule
delivered by Sellers and the Company to Buyer concurrently with the execution
and delivery of this Agreement.
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"EBITDA"--earnings before interest, taxes,
depreciation and amortization, as adjusted by Schedule 2.7.
"EFFECTIVE TIME"--as defined in Section 2.2.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
"ENCUMBRANCE"--any charge, claim, lien, option,
pledge, security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any
cost, damages, expense, liability, or obligation, arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses arising
under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law
or Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative,
or remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response
action," include the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
sec. 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that
requires or relates to:
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(a) advising or notifying of appropriate authorities
and employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release
or minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent
in the transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(e) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention;
(f) pollution, contamination, protection of the
Environment, human health or safety.
"ERISA"--the Employee Retirement Income Security Act
of 1974 or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently owned or operated by the Company.
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent,
license, permit, waiver, or. other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government;
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<PAGE> 5
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment and any other act or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Company.
"HAZARDOUS MATERIALS"--any waste or other substance
that is listed, defined, designated, classified or regulated as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"IPO"--Buyer's proposed initial public offering as
defined in Section 8.4.
"IRC"--the Internal Revenue Code of 1986 or any
successor law, and regulations issued by the IRS Pursuant to the Internal
Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the United States Department
of the Treasury.
"KNOWLEDGE"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such individual is actually
aware of such fact or other matter or (b) a prudent individual could be expected
to discover or otherwise become aware of such fact or other matter in the
ordinary course of business.
A Person (other than an individual) will be deemed to
have "Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director or executive officer of
such Person has, or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local,
municipal, or other administrative order, constitution, law, ordinance,
regulation, or statute except for any Environmental Law.
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"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal
Requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program designed to
provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" --an action taken by a
Person will be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by
the board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the Board of Directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of businesses as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--an individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PROCEEDING"--any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"PROMISSORY NOTE"--the Promissory Note described in
Section 2.7.
"RELATED PERSON"--with respect to a particular
individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly
controlled by such individual or one or more members of such individual's
Family;
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<PAGE> 7
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual
or one or more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity).
(e) For purposes of this definition, (a) the "Family"
of an individual includes (i) the individual, (ii) the individual's spouse,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule l3d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 5 % of the
outstanding equity securities or equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular
Person, any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLERS"--as defined in the first paragraph of this
Agreement.
"SUBSIDIARY"--with respect to any Person (the
"Owner"), any corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other Person's
board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that
survives the merger of Acquisition into the Company.
"TAX"--any tax (including any income tax, capital
gains tax, value added tax, sales tax, property tax, gift tax, or estate levy),
levy, assessment, tariff, duty, deficiency, or other fee in any related charge
or amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable
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<PAGE> 8
pursuant to any tax sharing agreement or any other contract relating to the
sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency
or fee.
"TAX RETURN"--any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a
Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action,
or other matter will be deemed to have been "threatened" if any demand or
statement has been made (orally or in writing) or any notice has been given
(orally or in writing) that would lead a Prudent Person to conclude that such a
claim, Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Company shall be merged with and into
Acquisition (the "Merger"). The separate existence and corporate organization of
the Company shall thereupon cease and the Company and Acquisition shall
thereupon be a single corporation. Acquisition shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
existence under the provisions of the Delaware General Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the
"Articles of Merger") shall be executed by the Company and Acquisition and shall
be filed with the Secretary of State of the States of California and Delaware.
The Merger shall become effective at such time as the Articles of Merger are
filed with the Secretary of State of the States of California and Delaware, such
time being hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in
effect immediately prior to the Effective Time shall be and remain the Articles
of Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
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2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately
prior to the Effective Time shall be and remain the By-Laws Of the Surviving
Corporation from and after the Effective Time until amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause Robert
J. Gillon, Jr., [Buyer appointment] and Michael Kipp to be appointed as
directors of the Surviving Corporation. Michael Kipp and Robert J. Gillon, Jr.
shall serve as the officers of the Surviving Corporation until their successors
have been elected or appointed and shall have qualified in accordance with
applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall be
effective (i) on the date the conditions in Sections 7 and 8 have been satisfied
or otherwise waived, or (ii) at such other date as the parties hereto shall
agree in writing (the "Closing Date"), and shall be held at the offices of
Buyer's counsel at 200 East Las Olas Boulevard, Fort Lauderdale, Florida 33301
at 10:00 a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
(a) At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of capital stock of
Buyer, Acquisition, the Company or Sellers: (1) the shares of Common Stock of
Acquisition purchased, issued and outstanding immediately prior to the Effective
Time shall be converted as a result of the Merger and without any action on the
part of the holder thereof, into 1 share of capital stock of the Surviving
Corporation and shall represent all the issued and outstanding shares of the
Surviving Corporation; and (ii) the shares of the Company held by Sellers (and
the other shareholders of the Company) shall be converted into and shall become,
without further action on the part of the Sellers and the other shareholders of
the Company, the right to receive the sum of (i) seven (7) times the Company's
actual adjusted EBITDA (as set forth in Schedule 2.7(a)) for the fiscal year
ending March 31, 1998, which shall be composed of the Company's pre-tax earnings
for the fiscal year ending March 31, 1998 plus the sum of (x) interest in an
amount not less than $310,000, (y) depreciation and amortization in an amount
not less than $200,000 and (z) the adjustments listed on Schedule 2.7(a) in the
amount of $217,000; plus (ii) the amount outstanding on that promissory note
(the "Promissory Note") issued by Sellers to the Company in the amount of
$875,000 on the date of this Agreement and which is expected to be about
$825,000 on the Closing Date (the "Purchase Price"). The Purchase Price shall be
reduced by (a) any amounts outstanding under the Company's line of credit with
San Jose National Bank on the Closing Date; (b) any accounts payable over 30
days on the Closing Date; (c) any negative cash balance per the Company's
financial records on the Closing Date; and (d) the amount of legal
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fees and costs incurred by the Company in connection with the negotiation and
documentation of this Agreement and the Employment Agreement that will have been
paid and/or remain payable on the Closing Date. The Purchase Price shall be
further adjusted (increased or decreased, as the case may be) by the difference
between the amount of accounts receivable (less than 90 days), inventory and
accounts payable on the Closing Date as compared to the amount of the Company's
accounts receivable (less than 90 days), inventory and accounts payable on
December 31, 1997. The consideration shall consist of shares of restricted
Common Stock of Buyer which number of shares of Common Stock shall be determined
by dividing the Purchase Price above by Buyer's initial public offering price
per share (the "IPO Price"), provided, however, that the consideration to be
received by shareholders, other than the Sellers, shall consist only of cash.
(b) By May 15, 1998, Buyer shall cause its
independent auditing firm to deliver to the Sellers a report of Adjusted EBITDA
of Company for the twelve (12) month period ended March 31, 1998, which shall
conform with the provisions of Section 2.7(a) hereof (the "EBITDA Certificate").
Buyer and Buyer's Representatives shall have full access to the books and
records of Acquisition and, to the extent relevant to prepare such certificates.
(c) The Sellers shall have a period of ten
(10) days after delivery of the EBITDA certificate, to present in writing to
Buyer, any objections that the Sellers may have to any of the matters set forth
in such certificate, which objection shall be set forth in reasonable detail. If
no objections are raised within such ten (10) day period, the certificate shall
be deemed accepted and approved by the Sellers. If the Sellers shall raise any
objections within the ten (10) day period, the parties shall attempt to resolve
the matter or matters in dispute. If such dispute cannot be resolved within a
further period of ten (10) days, the Sellers shall have the right to submit the
dispute to a nationally recognized firm of independent public accountants
mutually agreed to by Sellers and Buyer, which firm shall make a final and
binding determination as to such matter or matters in dispute. Each party shall
bear one-half of the fees and expense in connection with such review.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and the Company hereby jointly and severally
represent and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted
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by it, requires such qualification, except for any states wherein the failure
to be so qualified will not have a material effect on Company's financial
condition.
(b) Sellers have delivered to Buyer copies
of the Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal,
valid, and binding obligation of Sellers and the Company, enforceable against
Sellers and the Company in accordance with its terms subject to bankruptcy,
insolvency or other laws affecting the rights of creditors generally. Upon the
execution and delivery by Sellers of the Employment Agreement, the Employment
Agreement will constitute the legal, valid, and binding obligations of Sellers
enforceable against Sellers in accordance with its respective terms. Sellers and
the Company have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform their obligations
under this Agreement. The Company and its shareholders have approved this
Agreement under applicable state corporate law provisions, and such approval is
binding.
(b) Neither the execution and delivery of
this Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result
in a violation of (A) any provision of the Organizational Documents of the
Company, or (B) any resolution adopted by the board of directors or the
shareholders of the Company;
(ii) contravene, conflict with, or
result in a violation of, or give any Governmental Body or other Person the
right to challenge any of the Contemplated Transactions or to exercise any
material remedy or obtain any material relief under, any Legal Requirement or
any Order to which the Company or Sellers, or any of the assets owned or used by
the Company, may be subject; or
(iii) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any material Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or any of the assets owned or used
by, the Company.
(c) Sellers are acquiring the Buyer's Common
Stock for their own account and not with a view to its distribution within the
meaning of Section 2(11) of the Securities Act. Sellers are "accredited
investors" as such term is defined in Rule 501(a) under the Securities Act.
Sellers acknowledge that each certificate representing Buyer's Common Stock
acquired pursuant to this Agreement shall bear the following restrictive legend:
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THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD
OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE OF
THE FOLLOWING: (i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE SECURITIES ACT, OR (ii) AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
Sellers further acknowledge they each shall be subject to such "lock-up"
restriction as may be imposed by the Buyer's underwriter or any entity
regulating the issuance of the Buyer's Common Stock in its initial public
offering which "lock-up in no event shall exceed one (1) year.
(d) Prior to the Closing Date, Sellers and
the Company shall obtain written Consents in connection with the consummation or
performance of the Contemplated Transactions from the persons listed in Part
3.2(d) of the Disclosure Schedule. Sellers and the Company are not required to
obtain such written Consent from any other Person other than those listed on
Part 3.2(d) of the Disclosure Schedule.
3.3 CAPITALIZATION
The authorized equity securities of the Company
consist of 10,000 shares of common stock, with no par value, of which 754 shares
are issued and outstanding and constitute all the shares of the Company. The
Sellers are and will be on the Closing Date, the record and beneficial the
record owner and holder of 714 shares of the Company. On the Closing date, all
the shares of the Company will be free and clear of all Encumbrances. All of the
outstanding shares of the Company have been duly authorized and validly issued
and are fully paid and nonassessable and except as disclosed in Part 3.3 of the
Disclosure Schedule, are free and clear of all Encumbrances. Except as set forth
on Section 3.3 to the Disclosure Schedule, there are no Contracts relating to
the issuance, sale, or transfer of any equity securities or other securities of
the Company. None of the outstanding equity securities or other securities of
the Company was issued in violation of the Securities Act or any other Legal
Requirement. The Company does not own, or has any Contract to acquire, any
equity securities or other securities of any Person or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) unaudited
consolidated balance sheets of the Company as at September 30, 1996 and
September 30, 1997 ("Balance Sheet" ) and the related statements of income for
each of the fiscal years then ended and (b) an unaudited balance sheet of the
Company as of December 31, 1997 (the "Interim Balance Sheet") and the related
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statement of income for the three (3) months then ended. Except as disclosed
on Part 3.4 of the Disclosure Schedule such financial statements and notes
fairly present in all material respects the financial condition and the results
of operations of the Company as at the respective dates of and for the periods
referred to in such financial statements subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse).
3.5 BOOKS AND RECORDS
The books of account, minute books, and stock record
books, all of which have been made available to Buyer, are, complete and correct
in all material respects. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
Shareholders and the Board of Directors of the Company. At the Closing, all of
those books and records will be in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Schedule contains a
complete and accurate list of all real property, leaseholds, or other interests
therein owned by the Company. Sellers have delivered or made available to Buyer
copies of the deeds and leases and other instruments by which the Company
occupies or acquired such real property and interests and such instruments are
true, complete and accurate. The Company owns (with good and marketable title in
the case of real property) or leases all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) that it purports to
own or lease located in the facilities owned or operated by the Company and
reflected as owned or leased in the books and records of the Company, including
all of the properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Disclosure Schedule and
personal property sold since the date of the Balance Sheet, as the case may be,
in the Ordinary Course of Business), and all of the properties and assets
purchased or otherwise acquired by the Company since the date of the Balance
Sheet and the Interim Balance Sheet (except for personal property acquired and
sold since the date of the Balance Sheet in the Ordinary Course of Business and
consistent with past practice), which subsequently purchased or acquired
properties and assets (other than inventory and short-term investments) are
listed in Part 3.6 of the Disclosure Schedule. All material properties and
assets reflected in the Balance Sheet and the Interim Balance Sheet are free and
clear of all Encumbrances except with respect to all such properties and assets,
(a) mortgages or security interests shown on the Balance Sheet or the Interim
Balance Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the Interim
Balance Sheet (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which to the Knowledge of
Company and the Sellers, no default (or event that, with notice or lapse of time
or both, would constitute a default) exists, (c) liens for current taxes not yet
due, and (d) with respect to real property, (i) minor imperfections of title, if
any, none of
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which is substantial in amount, materially detracts from the value
or materially impairs the use of the property subject thereto, or impairs the
operations of the Company, (ii) zoning laws and other land use restrictions that
do not impair the present use of the property subject thereto, and (iii) except
as set forth in Part 3.6 of the Disclosure Schedule, all UCC-1 filings of record
represent current, validly existing encumbrances on the Company's assets.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
Except as provided in Part 3.7 of the Disclosure
Schedule, to the Knowledge of Company and the Sellers, the buildings, plants,
structures, and equipment of the Company are structurally sound, in good
operating condition and repair, and adequate for the uses to which they are
being put, and none of such buildings, plants. structures, or equipment is in
need of significant maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
3.8 ACCOUNTS RECEIVABLE
Except as provided in Part 3.8 of the Disclosure
Schedule, all accounts receivable of the Company that are reflected on the
Balance Sheet and the Interim Balance Sheet or on the accounting records of the
Company (collectively, the "Accounts Receivable") represent valid obligations
arising from sales actually made or services actually performed in the Ordinary
Course of Business. Unless paid prior to the date hereof, the Accounts
Receivable are current (in accordance with the terms of agreements between
Company and its customers) and collectible shown on the Balance Sheet and the
Interim Balance Sheet of the Company. To the Knowledge of Company and the
Sellers, there is no contest, claim, or right of set-off, other than returns in
the Ordinary Course of Business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Sellers have delivered or made available to Buyer a complete and
accurate list of all Accounts Receivable as of the date of the Interim Balance
Sheet, which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not reflected in the
Balance Sheet, or the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, which in no event exceeds $25,000. All
inventories not written off have been priced at the net realizable value on and
average cost basis. The quantities of each item of inventory are reasonable in
the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Schedule,
the Company has no material liabilities or obligations of any nature except for
liabilities or obligations reflected in the
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Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the date thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed all
Tax Returns that are or were required to be filed by or with respect to it
pursuant to applicable Legal Requirements. Sellers have delivered or made
available to Buyer copies of, and Part 3. 11 of the Disclosure Schedule
contains, a complete and accurate list of, all such Tax Returns filed by the
Company since December 31, 1993. The Company has paid or made provision for the
payment of all Taxes that have become due pursuant to those Tax Returns or
pursuant to any assessment received by the Company, except such Taxes, if any,
as are listed in Part 3.11 of the Disclosure Schedule and are being contested in
good faith have been provided in the Balance Sheet.
(b) Except as set out in Part 3.11 of the Disclosure
Schedule, no United States federal income Tax Returns have been audited by the
IRS. Part 3.11 of the Disclosure Schedule describes all adjustments to the
United States federal income Tax Returns filed by the Company or any group of
corporations including the Company for all taxable years since December 31,
1993, and the resulting deficiencies proposed by the IRS. Except as described in
Part 3.11 of the Disclosure Schedule, the Company has not given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of the Company or for which the Company may be liable.
(c) The charges and accruals with respect to Taxes on
the respective books of the Company are adequate. To the Knowledge of Company
and the Sellers, there exists no proposed tax assessment against the Company
except as disclosed in the Balance Sheet or in Part 3.11 of the Disclosure
Schedule. No consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired, or to be acquired
by the Company. All taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person.
(d) All Tax Returns filed by the Company are true,
correct, and complete in material respects. There is no tax sharing agreement
that will require any payment by the Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Company, and, no event has occurred or circumstance
exists that may result in such a material adverse change.
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3.13 EMPLOYEE BENEFITS
Sellers have delivered to Buyer copies of the Company's group
medical insurance plan, associated life insurance plan, and 401(k) Plan. Part
3.13 of the Disclosure Schedule contains a list of such plans. Other than the
plans listed in Part 3.13, the Company has not contributed to any pension,
profit sharing or other employee benefit plan and does not have any obligation
to, or customary arrangement with, former employees, if any, for bonuses,
incentive compensation, vacation, severance pay, sick pay, sick leave,
insurance, service award, relocation, disability or other benefits.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the
Disclosure Schedule and further except for such matters which would not be
reasonably expected to have (individually or in the aggregate) a material
adverse effect on the Company:
(i) the Company has not received any notice that
it is in violation of any Legal Requirement that is applicable to it or to the
conduct or operation of its business or the ownership or use of any of its
assets; and
(ii) no event has occurred or circumstance exists
that in any material respect (A) will constitute a violation by the Company of,
or a failure on the part of the Company to comply with, any Legal Requirement or
(B) will give rise to any obligation on the part of the Company to undertake, or
to bear all or any portion of the cost of, any remedial action of any nature;
(b) Part 3.14 of the Disclosure Schedule contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company (all of which authorizations have been
delivered to Buyer. Each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Schedule is valid and in full force and
effect. Except as set forth in Part 3.14 and further except for such matters
which would not be reasonably expected to have (individually or in the
aggregate) a material adverse effect on the Company:
(i) to the knowledge of Sellers or the Company,
no event has occurred or circumstance exists that (A) constitutes in a violation
of or a failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.14 of the Disclosure
Schedule, or (B) results in the revocation, withdrawal, suspension,
cancellation, or termination of any Governmental Authorization listed in Part
3.14 of the Disclosure Schedule; and
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(ii) the Company has not received any notice from
any Governmental Body regarding (A) any actual violation of or failure to comply
with any term or requirement of any Governmental Authorization, or (B) any
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization;
(c) The Governmental Authorizations listed in Part
3.14 of the Disclosure Schedule, collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
its business in the manner it currently conducts and operates such business and
to permit the Company to own and use its assets in the manner in which it
currently owns and uses such assets except where the failure to obtain a
Governmental Authorization would not result in a material adverse effect on the
Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the
Disclosure Schedule, there is no pending Proceeding:
(i) that has been commenced by or against the
Company that relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions.
To the Knowledge of Sellers and the Company, no
such Proceeding as described above has been Threatened. Sellers have made
available to Buyer copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Part 3.15 of the Disclosure Schedule.
(b) Except as set forth in Part 3.15 of the
Disclosure Schedule:
(i) there is no Order to which the Company, or
any of the assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that
relates to the business of, or any of the assets owned or used by, the Company;
and
(iii) no officer, director, or employee of the
Company is subject to any Order that prohibits such officer, director, or to the
Knowledge of the Company and the Sellers, employee from engaging in or.
continuing any conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Part 3.15 of the
Disclosure Schedule:
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(i) no event has occurred or circumstance exists
that constitutes a violation of any material term or requirement of any Order to
which the Company, or any of the assets owned or used by the Company, is
subject; and
(ii) the Company has not received any notice from
any Governmental Body regarding any violation of, or failure to comply with, any
term or requirement of any Order to which the Company, or any of the assets
owned or used by the Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Schedule,
since the date of the Balance Sheet, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized capital stock;
grant by the Company of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any
bonuses, salaries, distributions or other compensation to any shareholder,
director, officer, or employee.
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice
of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least $25,000.
(g) except in the Ordinary Course of Business, sale,
lease, or other disposition of any asset or property (other than inventory in
the Ordinary Course of Business) of the Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any
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material asset or property of the Company, including the sale, lease, or other
disposition of any of the intellectual property assets;
(h) cancellation or waiver of any claims or rights
with a value to the Company in excess of $25,000 ;
(i) material change in the accounting methods used by
the Company; or
(j) agreement by the Company to do any of the
foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Schedule contains
a complete and accurate list, and Sellers have delivered or made available to
Buyer true and complete copies of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by the Company of an
amount or value in excess of $25,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to the Company of an
amount or value in excess of $25,000;
(iii) each Applicable Contract that was not
entered into in the Ordinary Course of Business and that involves expenditures
or receipts of the Company in excess of $25,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property of the Company
(except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than $25,000
and with terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with the Company with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current or former
employees, consultants, or contractors regarding the appropriation or the
nondisclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other employee
representative of a group of employees;
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(vii) each joint venture, Partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of the
Company or any Affiliate of the Company or limit the freedom of the Company or
any Affiliate of the Company to engage in any line of business or to compete
with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or profits, other than
direct payments for goods and sales commission arrangements for employees;
(x) each power of attorney granted by the Company
that is currently effective and outstanding;
(xi) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for future capital
expenditures in excess of $25,000;
(xiii) each currently effective written warranty,
guaranty, indemnity, and or other similar undertaking with respect to
contractual performance extended by the Company other than in the Ordinary
Course of Business;
(xiv) each Contract for indebtedness of the
Company involving future aggregate payments of more than $25,000; and
(xv) each written amendment, supplement, and
modification [(whether oral or written)] in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the
Disclosure Schedule.
(i) Sellers (and no Related Person of the
Sellers) do not have any rights under, and Sellers do not have or may become
subject to, any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Company; and
(c) To the Knowledge of Company and the Sellers,
except as set forth in Part 3.17(c) of the Disclosure Schedule, each Contract
identified in Part 3.17(a) of the Disclosure Schedule is in full force and
effect.
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(d) Except as set forth in Part 3.17(d) of the
Disclosure Schedule:
(i) the Company is, and at all times has been, in
material compliance with all applicable terms and requirements of each Contract
under which the Company has or had any material obligation or liability or by
which the Company or any of the material assets owned or used by the Company is
or was bound;
(ii) the Company has not received any notice
regarding any actual or alleged violation or breach of, or default under, any
Applicable Contract.
(e) To the Knowledge of the Company or Sellers there
are no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to the Company under current or
completed Applicable Contracts with any Person and, to Sellers' Knowledge, no
such Person has made written demand for such renegotiation.
(f) The Applicable Contracts relating to the sale or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business
(g) The Company has made available to Buyer true,
complete and correct copies of the Contracts required to be set forth in Part
3.17 of the Disclosure Schedule.
3.18 INSURANCE
(a) Sellers have made available to Buyer:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the Company is covered;
and
(ii) true and complete copies of all pending
applications for policies of insurance.
(b) Part 3.18(b) of the Disclosure Schedule
describes:
(i) any self-insurance arrangement by or
affecting the Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third
parties with respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such coverage is
provided.
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(c) To the Knowledge of Company and the Sellers, all
material assets, properties and risks of the Company are covered by valid and,
except for policies that have expired under their terms in the ordinary course,
currently effective insurance policies or binders of insurance (including,
without limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company, in each case with
responsible insurance companies, in such types and amounts and covering such
risks as are consistent with customary practices and standards of companies
engaged in business and operations similar to those of the Company. There has
not been any claim under any such insurance policy during the past three years
that could reasonably be expected to have a material adverse effect on the
Company.
(d) Except as set forth on Part 3.18(d) of the
Disclosure Schedule:
(i) Since January 1, 1993 the Company has not
received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
(ii) The Company has paid all premiums due, and
to the Knowledge of Company and the Sellers, has otherwise performed all of its
obligations, under each policy to which the Company is a party or that provides
coverage to the Company or director thereof.
(iii) The Company has given notice to the insurer
of all MATERIAL claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in Part 3.19 of the Disclosure Schedule:
(a) The Company is and at all times has been in
material compliance with all applicable Environmental Laws. Neither Sellers nor
the Company has any reasonable basis to expect, nor has any of them received,
any actual or Threatened Order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public interest, or (ii) the
current or prior owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law on the part of the
Company, or of any actual or Threatened obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to Hazardous
Activity or Hazardous Materials or any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which the Company has had an
interest, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or
processed by the Company, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
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(b) There are no pending or, to the Knowledge of
Sellers and the Company, Threatened claims, Proceedings or Encumbrances against
Sellers or the Company relating to any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which the Company has or had an interest.
(c) Neither Sellers or the Company has any reasonable
basis to expect, nor has any of them received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company had an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) The Company has no Environmental, Health, and
Safety Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which the Company
(or any predecessor), has or had an interest except for such matters which have
not nor would have a material adverse effect on the Company.
(e) Except as set forth on Paragraph 3.19 of the
Disclosure Schedule, there are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities, or incorporated into any structure therein or thereon except for
such matters which have not nor would have a material adverse effect on the
Company. The Company has not permitted or conducted any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which the Company has or had an interest
except for such matters which have not nor would have a material adverse effect
on the Company.
(f) Sellers have delivered to Buyer, or have
otherwise made available, true and complete copies and results of any reports,
studies, analyses, tests, or monitoring possessed by Sellers or the Company
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by the Company with Environmental Laws.
(g) To the best of Sellers' and the Company's
Knowledge, there are no underground or above-ground storage tanks, incinerators
or surface impoundments at, on, or about under or within any real property
operated or controlled, in whole or in part by the Company.
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3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Schedule contains a
complete and accurate list of the following information for each employee or
director of the Company, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or payable and any
change in compensation since December 31, 1997; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under the
Company's insurance, medical, welfare, or vacation plan, or any other employee
benefit plan.
(b) No key employee or director of the Company is a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers or
the Company by any such employee or director. Company and the Sellers have not
received any notice that any director, officer or other key employee intends to
terminate his employment with the Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company is not a party to any collective bargaining or
other labor Contract. There has not been, there is not presently pending or
existing, and to Sellers' Knowledge there is not threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
proceeding presently commenced against the Sellers and/or Company or otherwise
affecting the Company relating to the alleged violation of any material Legal
Requirement pertaining to labor relations or employment matters, specifically
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting the Company or its premises, or (c) any
application for certification of a collective bargaining agent. To the Knowledge
of Company and Sellers, no violation of any material Legal Requirement exists
that could provide the basis for any work stoppage or other labor dispute. There
is no lockout of any employees by the Company. The Company has substantially
complied in all material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing.
3.22 INTELLECTUAL PROPERTY
(a) The Company does not own or licenses for use any
patents, trademarks, trade names, service marks, mask works or copyrights, other
than the common trade law names listed on Part 3.22 of the Disclosure Schedule.
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(b) To the Knowledge of Company and the Sellers,
there has not been any actual or alleged infringement or use or misuse by any
party of the Company's trade secrets, confidential information or other
intellectual property rights except as listed on Part 3.22 of the Disclosure
Schedule.
3.23 CERTAIN PAYMENTS
No director or executive officer nor, to the Knowledge of
Company and the Sellers, the Company nor any agent or employee of the Company
has (a) made any contribution, gift, bribe, rebate, payoff, influence payment or
kickback to any person, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of the Company in
this Agreement and no statement in the Disclosure Schedule knowingly omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will
knowingly contain any untrue statement or knowingly omit to state a material
fact necessary to make the statements therein in light of the circumstances in
which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Neither Sellers nor any Related Person of Sellers or of the
Company has any interest in any property (whether real, personal, or mixed, used
in or pertaining to the Company's business. Neither Sellers or any Related
Person of Sellers or of the Company owns (of record or as a beneficial owner) an
equity interest or any other similar financial or profit interest in, a Person
that (i) has business dealings or a material financial interest in any
transaction with the Company, or (ii) engages in competition with the Company
with respect to any line of the products or services of the Company (a
"Competing Business") in any market presently served by the Company. Except as
set forth in Part 3.25 of the Disclosure Schedule, neither Sellers or any
Related Person of Sellers or of the Company is a party to any Contract with, or
has any claim or right against the Company that will survive the Closing.
3.26 BROKERS OR FINDERS
Sellers, the Company and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
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3.27 LINE OF CREDIT
Amounts outstanding under the Company's line of credit shall
in no event exceed $1,150,000.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND
BUYER
Acquisition and Buyer (the "Buyer Companies") jointly and
severally represent and warrant to Sellers as follows:
4.1 ORGANIZATION; POWER QUALIFICATION
Acquisition will at the Closing Date be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Buyer is and will be on the Closing Date, a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of Acquisition and Buyer has the corporate power and authority to
own or lease and operate its properties to carry on its business as now being
conducted, and is duly qualified and in good standing and authorized to do
business as a foreign corporation in each jurisdiction in which the character of
its properties or the nature of its business requires on such qualification and
authorization except where the failure to so qualify would not have a material
adverse effect on the Buyer or Acquisition.
4.2 AUTHORITY
(a) Each of Acquisition and Buyer has the corporate
power and has taken all necessary corporate action to authorize Acquisition or
Buyer as the case may be, to execute, deliver and perform the Agreement and to
consummate the transactions contemplated thereby. The execution and delivery by
each of Acquisition and Buyer of this Agreement and the Employment Agreement to
which each is a party constitutes the legal, valid and binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as may be limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
(b) Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will:
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Buyer and
Acquisition, or (B) any resolution adopted by the board of directors or the
stockholders of the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body the right to challenge any of the
Contemplated Transactions or to exercise any material remedy or obtain any
material relief under, any material Legal Requirement to which Buyer as
Acquisition may be subject; or
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(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
material Governmental Authorization that is held by the Buyer or Acquisition or
that otherwise relates to the business of, or any of the assets owned or used
by, the Company;
4.3 CAPITALIZATION
(a) As of the date hereof, the authorized common
stock of the Buyer consist of 50,000,000 shares of common stock, $.001 par value
per share, of which 4,712,372 shares are issued and outstanding (subject to
increases for Acquisitions and the IPO). All of the outstanding common stock of
the Buyer has been duly authorized and validly issued and are fully paid and
nonassessable. The shares of the Buyer's Common Stock to be delivered to Sellers
at Closing pursuant to Section 2.7 will be duly authorized, validly issued,
fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Buyer, are complete, in all material respects, and collect
and have been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls.
4.5 CERTAIN PROCEEDINGS
There is no Pending Proceeding that has been commenced against
Buyer or Acquisition and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the contemplated
transactions. To Buyer's and Acquisition's Knowledge, no such proceeding has
been threatened.
4.6 BROKERS OR FINDERS
Buyer and Acquisition and their officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents, commissions or other similar payment in connection with
this Agreement and will indemnify and hold the Company and Sellers harmless from
any such payment alleged to be due by or through Buyer or Acquisition as a
result of the action of Buyer and Acquisition or their officers or agents.
4.7 DISCLOSURE
Buyer has delivered to Sellers disclosure information
concerning Buyer, its management, its financial statements, its proposed IPO,
its proposed acquisitions other than the Contemplated Transactions (collectively
the "Disclosure Documents"). All the information in such Disclosure Documents is
true and correct in all material respects.
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5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO CLOSING
DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Sellers will, and will cause the Company and its Representatives to, (a) afford
Buyer and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
properties (including subsurface testing), contracts, books and records, and
other documents and data during normal business hours, (b) furnish Buyer and
Buyer's Advisors with copies of all such contracts, books and records, and other
existing documents and data pertaining to the Company as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information pertaining to the Company
as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date,
Sellers will cause the Company to:
(a) conduct the business of the Company only in the
Ordinary Course of Business;
(b) preserve intact the current business organization
of the Company, use his best efforts to keep available the services of the
current officers, employees, and agents of the Company, and to maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters
of a material nature; and
(d) otherwise report periodically to Buyer concerning
the status of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement or
approved by Buyer between the date of this Agreement and the Closing Date,
Sellers will not and will cause the Company not to, without the prior consent of
Buyer, take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section 3.16 is likely to occur.
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5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement,
Sellers will, and will cause the Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date,
Sellers will promptly notify Buyer in writing if Sellers become aware of any
fact or condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if Sellers
become aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Disclosure Schedule if the Disclosure Schedule were dated the date of the
occurrence or discovery of any such fact or condition, Sellers will promptly
deliver to Buyer a supplement to the Disclosure Schedule specifying such change.
During the same period, Sellers will promptly notify Buyer of the occurrence of
any Breach of any covenant of Sellers in this Section 5 or of the occurrence of
any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated
pursuant to Section 9, Sellers will not, and the Company will not and each of
their Representatives will not directly or indirectly solicit, or initiate or
encourage, accept or discuss any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company. Sellers or the Company will promptly notify Buyer of any such inquiries
or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date,
Sellers and the Company will use their Best Efforts to cause the conditions in
Section 7 to be satisfied.
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6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer
will promptly notify Sellers in writing if Buyer becomes aware of any fact or
condition that causes or constitutes a Breach of any of Buyer's or Acquisition's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement or any fact or
condition that would, except as expressly contemplated by this Agreement, cause
or constitute a Breach of any such representation or warranty.
6.2 BEST EFFORTS/EXPENSES
Between the date of this Agreement and the Closing Date, Buyer
will use its Best Efforts to complete the IPO of Buyer's securities and to cause
the conditions in Section 8 to be satisfied. In connection with the Contemplated
Transactions, Buyer agrees to bear all expenses and fees of Grant Thornton
incurred in connection with the audit of the Company's financial statements. In
the event that the Initial Public Offering is not completed prior to September
30, 1998, or this Agreement is terminated by Sellers, Buyer will reimburse
Company for legal and accounting fees and costs of Company incurred in
connection with the contemplated transactions in an amount not to exceed Twenty
Thousand Dollars ($20,000) subject to appropriate documentation.
6.3 COMPLIANCE WITH SECURITIES LAWS
Buyer shall comply with the Securities Act in all material
respects in connection with its issuance of shares in its IPO. After such time
as a public market exists for the Shares, the Buyer agrees to: (a) make and keep
public information available, as those terms are understood and defined in Rule
144 under the Securities Act, and (b) for a period of two years from Closing
file with the Commission in a timely manner all reports and other documents
required of the Buyer under the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements).
7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S
OBLIGATION TO CLOSE
Buyer's and Acquisition's obligations to consummate the Merger
and to take the other actions required to be taken by Buyer and Acquisition at
the Closing is subject to the satisfaction, at or prior to the Closing of each
of the following conditions (any of which may be waived by Buyer and
Acquisition, in whole or in part):
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7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and the Company's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Schedule.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers
and the Company are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing, must have been duly performed and complied
with in all material respects.
(b) There shall be delivered at Closing (i) the
Employment Agreement with Michael Kipp ("Kipp") as of the Closing Date in the
form of Exhibit 7.2(b)(i) (the "Employment Agreement") executed by Kipp; (ii)
the certificate executed by Sellers and an officer of the Company representing
to Buyer and Acquisition that Sellers' and the Company's representations and
warranties in this Agreement was accurate in all material respects as to the
date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing Date; (iii) a schedule dated the day prior to
Closing documenting the difference in Company payables, receivables (less than
90 days) and inventory from December 31, 1999 and the amount due under the
Promissory Note; and (iv) each of the other covenants and obligations in the
Agreement must have been performed and complied with in all respects.
7.3 CONSENTS
Each of the consents identified in Part 3.2(d) of the
Disclosure Schedule, must have been obtained and must be in full force and
effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to
Buyer:
(a) an opinion of Graham & James, LLP dated the
Closing Date, reasonably acceptable to Buyer;
(b) such other documents as Buyer or its counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
Sellers' and the Company's representations and warranties, (iii) evidencing the
performance by Sellers, the Company, or the compliance by Sellers or the Company
with, any covenant or obligation required to be performed or complied with by
such party, (iv) evidencing the satisfaction of any condition referred to in
this Section 7, or (v) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.
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7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced, Pending or Threatened any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
PROCEEDS
There must not have been made or Threatened by any Person any
claim asserting that such Person (a) is the holder or the beneficial owner of,
or has the right to acquire or to obtain beneficial ownership of, any stock of,
or any other voting, equity, or ownership interest in, the Company, or (b) is
entitled to all or any portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other order by any
federal or state court preventing or consummation of the transactions
contemplated in this Agreement has been issued and continues in effect, and this
Agreement and the transactions contemplated hereby are not prohibited under any
applicable federal or state law or regulation.
7.9 MATERIAL ADVERSE CHANGE
There shall have been no material adverse change in the
business, operations, prospects, financial condition or results of the Company.
7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering.
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7.11 PROMISSORY NOTE
Michael Kipp and Company shall have entered into a revised
Promissory Note as of the Closing, which shall provide for interest at the rate
of six percent (6%) per annum, to be paid on the annual anniversary of the
revised Promissory Note, with all principal due and payable on the third
anniversary of such note, and which shall be secured by a number of shares of
Buyer's Common Stock issued to Sellers in this Agreement equal to the principal
amount of the revised Promissory Note divided by the IPO Price. Such shares
shall be released upon the full payment of such Promissory Note, which may be
prepaid at any time without penalty.
7.12 TATRO CONSENT
The conditions to release of a security interest presently
held by Mr. Tatro in shares of Company common stock owned by Michael Kipp has
been satisfied and Mr. Tatro has executed the Lock-Up Agreement proposed by
Buyer's underwriters.
8. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S
OBLIGATION TO CLOSE
Sellers' and the Company's obligations to consummate the
Merger and to take the other actions required to be taken by Sellers and the
Company at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Sellers and the Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
Supplement to the Buyer's Disclosure Schedule.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that Buyer
and Acquisition are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been performed and complied with
in all material respects.
(b) Buyer must have executed and delivered (i) the
Employment Agreement (ii) a certificate executed by an officer of Buyer
representing to Sellers that Buyer and Acquisition's representations and
warranties contained in this Agreement were accurate in all material respects as
to the date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing.
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8.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the following documents
to be delivered to Sellers:
(a) an opinion of Atlas, Pearlman, Trop & Borkson,
P.A., dated the Closing Date, reasonably acceptable to Sellers; and
(b) such other documents as Sellers or its counsel
may reasonably request for the purpose of (i) enabling its counsel to provide
the opinion referred to in Section 7.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
8.4 INITIAL PUBLIC OFFERING
Buyer shall have completed an initial public offering of its
Common Stock in compliance with the Securities Act as a result of which shares
of Buyer's Common Stock are traded on a national securities exchange or the
NASDAQ Stock Market.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the
Closing, be terminated:
(a) by either Buyer and Acquisition or Sellers and
the Company if a material Breach of any provision of this Agreement has been
committed by the other party and such Breach has not been cured or waived within
15 days of the date of notification of such Breach;
(b) (i) by Buyer and Acquisition if any of the
conditions in Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before the Closing Date; or (ii) by
Sellers and the Company, if any of the conditions in Section 8 has not been
satisfied of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Sellers and the Company to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
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(c) by mutual consent of Buyer and Acquisition and
Sellers and the Company; or
(d) by either Buyer and Acquisition or Sellers and
the Company if the Closing has not occurred (other than through the failure of
any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before September 30, 1998, or such later
date as the parties may agree upon.
A party's right of termination under Section 9.1 is
in addition to any other rights it may have under this Agreement or otherwise,
the exercise of a right of termination will not be an election of remedies. If
this Agreement is terminated pursuant to Section 9.1, all further obligations of
the parties under this Agreement terminate, except the obligations in Section
11.1 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of a breach of the Agreement by the other party or
because one or more of the conditions to the terminating party's obligations is
not satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in
this Agreement, the Disclosure Schedule and any of the supplements thereto, and
any other certificate or document delivered pursuant to this Agreement will
survive the Closing until eighteen (18) months from the Closing except for the
representations and warranties in Section 3.3, which shall survive for the
applicable statute of limitations and the representations and warranties in
Sections 3.11 and 3.19, which shall survive for thirty-six (36) months from
Closing. The waiver of any condition based on the accuracy of any representation
or warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties, covenants, and
obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers will indemnify and hold harmless Buyer, Acquisition,
the Surviving Corporation, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage, expense (including costs of investigation and defense and
reasonable attorneys' and other professional fees) whether or not involving a
third-party claim (collectively, "Damages"), arising, from or in connection
with:
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(a) any Breach of any representation or warranty made
by Sellers or Company in this Agreement, the Disclosure Schedule and any of the
supplements thereto, or any other certificate or document delivered by Sellers
or Company pursuant to this Agreement;
(b) any Breach by Sellers or the Company of any
covenant or obligation of Sellers or the Company in this Agreement;
(c) any product shipped or any services provided by
Company prior to the Closing Date; and
(d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Sellers or the
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 will not be
exclusive of or limit any other remedies that may be available to Buyer or the
other Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers for, and will
pay to the Sellers the amount of, any loss, liability, claim, damage, expense
(including costs of investigation and defense and reasonable attorneys' and
other professional fees) whether or not involving a third-party claim
(collectively, "Damages"), arising from or in connection with:
(a) any Breach of any representation or warranty made
by Buyer in this Agreement or any certificate or document delivered by Buyer
pursuant to this Agreement;
(b) any Breach by Buyer of any covenant or obligation
of Buyer in this Agreement;
(c) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Buyer (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 10.3 will not be
exclusive of or limit any other remedies that may be available to Sellers.
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10.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.3, 3.11 and 3.19, unless on or before
eighteen (18) months from the date of Closing, Buyer notifies Sellers of a claim
specifying the factual basis of that claim. A claim with respect to Section 3.3
may be made at any time prior to the applicable statute of limitations with
respect to such matter. A claim with respect to Sections 3.11 and 3.19 may be
made at any time thirty-six (36) months from the date of Closing.
If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and to comply with prior to the Closing
Date, unless on or before eighteen (18) months from the date of Closing, Sellers
notify Buyer of claims specifying the factual basis of that claim.
10.5 PROCEDURE FOR INDEMNIFICATION-THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party
under Sections 10.2 or 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnified party's failure
to give such notice.
(b) If any Proceeding referred to in Section 10.5(a)
is brought against an indemnified party and it gives notice, unless the claim
involves Taxes, to the indemnifying party of the commencement of such
proceeding, the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such proceeding), to assume the defense of such Proceeding with
counsel satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified Party in connection with the defense of such Proceeding If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the
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indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any Compromise or settlement effected without its consent (which may
not be unreasonably withheld).
10.6 PROCEDURE FOR INDEMNIFICATION-OTHER CLAIMS
A claim may be asserted by notice to the party from whom
indemnification is sought.
10.7 LIMITATIONS ON LIABILITY
Notwithstanding any other provision of this
Agreement, (i) no party shall be entitled to indemnification for Damages; unless
and only to the extent that such Damages exceed Seventy-Five Thousand Dollars
($75,000.00); (ii) in no event shall the aggregate liability of Sellers exceed
Three Million Dollars ($3,000,000) except with respect to Sections 3.3, 3.11 and
3.19, the aggregate liability for breach of any such section shall not exceed
the purchase price in Section 2.7, and (iii) in no event shall the aggregate
liability of Buyer and Acquisition exceed $3,000,000).
10.8 INSURANCE POLICIES
Buyer agrees to either purchase or maintain the
Company's "occurrence based" insurance policy for a period of eighteen (18)
months from Closing.
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11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to
this Agreement or the Contemplated Transactions will be issued, if at all, at
such time and in such manner as Buyer determines and Company agrees. Unless
consented to by Buyer in advance or required by Legal Requirements, prior to the
Closing Sellers shall, and shall cause the Company to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person other than their professional advisors. Sellers and Buyer will consult
with each other concerning the means by which the Company's employees,
customers, and suppliers and others having dealings with the Company will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the Closing Date,
Buyer and Sellers will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Buyer, Acquisition and the Company
to maintain in confidence, and not use the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings. Notwithstanding the foregoing, Buyer may disclose information
about this Agreement, the Sellers, or the Company in connection with its initial
public offering and any related obligations therewith.
(b) If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand, (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by
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registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers: Sierra Office Systems and Products, Inc.
9950 Horn Road, Suite 5
Sacramento, California 95827
Attention: Michael Kipp
Facsimile No.: (916) 369-0497
with a copy to: Graham & James LLP
400 Capitol Mall, Suite 2400
Sacramento, CA 95814
Attention: Gilles Attia, Esq.
Facsimile No.: (916) 441-6700
Buyer or Acquisition: Office Centre Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
Facsimile No.: (212) 686-6623
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Facsimile No.: (954) 766-7800
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by
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applicable law, (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the heirs, successors and permitted assigns of
the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
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11.11 TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
11.12 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Delaware without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
11.14 TAXES
Buyer and Sellers will each pay one-half pay all sales,
transfer and documentary taxes, if any, payable in connection with the
Contemplated Transactions.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION
By: /s/ R. J. Gillon, Jr. /s/ Michael Kipp
--------------------------- -------------------------
Name: ROBERT J. GILLON, JR. MICHAEL KIPP
Title:
/s/ John E. Kipp, Jr.
---------------------
JOHN E. KIPP, JR.
ACQUISITION:
OFFICE CENTRE SACRAMENTO /s/ Rose Marie Kipp
---------------------
ROSE MARIE KIPP
By: /s/ R. J. Gillon, Jr.
---------------------------
Name: ROBERT J. GILLON, JR.
Title:
COMPANY:
SIERRA OFFICE SYSTEMS AND
PRODUCTS, INC.
By: /s/ Michael Kipp
-----------------------------
Name: Michael Kipp
Title: President
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SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 3.1 Organization and Good Standing
Exhibit 3.3 Capitalization
Exhibit 3.4 Financial Statements
Exhibit 3.6 Equipment Leases
Exhibit 3.8 Accounts Receivable
Exhibit 3.11 Taxes
Exhibit 3.13(a) Group Medical Plan
Exhibit 3.14 Government Licenses
Exhibit 3.15 Legal Proceedings; Orders
Exhibit 3.17 Contracts; No defaults
Exhibit 3.18 Insurance
Exhibit 3.19 Environmental Matters
Exhibit 3.20 Employees
Exhibit 3.21 Employee Manual
Exhibit 3.22 Intellectual Property
Exhibit 3.27 Line of Credit
Exhibit 7.2(b)(i) Form of KIPP Employment Agreement
SCHEDULES
---------
Schedule 2.7(a) EBITDA Calculation
Schedule 3.2 Authority; No conflict
Schedule 3.3 Capitalization
Schedule 3.4 Financial Statements
Schedule 3.6 Real Property; Encumbrances
Schedule 3.7 Condition and Sufficiency of Assets
Schedule 3.8 Accounts Receivable
Schedule 3.11 Taxes
Schedule 3.13 Employee Benefits
Schedule 3.14 Compliance with Legal Requirements;
Governmental Authorizations
Schedule 3.15 Legal Proceedings; Orders
Schedule 3.17 Contracts; No defaults
Schedule 3.18 Insurance
Schedule 3.19 Environmental Matters
Schedule 3.20 Employees
Schedule 3.22 Intellectual Property
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.17
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of April 8,
1998, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE GEORGIA, a Delaware corporation to be formed as a wholly-owned
subsidiary of Buyer ("Acquisition"), SOUTHERN OFFICE CENTER, INC., a Georgia
corporation ("Company"), DIANE SELBY, an individual resident in Georgia, EDWARD
A. ZIMMERMAN, an individual residing in Georgia and ROGERS A. GROGAN, an
individual residing in Georgia (each a "Seller" or "Shareholder" collectively,
the "Sellers" or "Shareholders").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish
to set forth the terms and conditions upon which a merger of the Company with
and into Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition
and the Company deems the merger advisable and in the best interests of each of
Buyer, Acquisition and the Company and of their respective shareholders.
WHEREAS, the shareholders of Acquisition and the Company have
approved this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section
1:
"APPLICABLE CONTRACT"--any Contract (a) under
which the Company has or may acquire any rights, (b) under which the Company has
or may become subject to any obligation or liability, or (c) by which the
Company or any of the assets owned, leased or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
<PAGE> 2
"BEST EFFORTS"--the efforts that a prudent Person
desirous of achieving a result would use in similar
circumstances to ensure that such result is achieved as expeditiously as
possible.
"BREACH"--a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
and the term "Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this
Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the
Closing actually takes place.
"COMPANY"--as defined in the Recitals of this
Agreement.
"CONSENT"--any approval, consent, ratification,
waiver, or other authorization (including any Governmental
Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of the Company with and into
Acquisition;
(b) the execution, delivery, and performance of the
Employment Agreement;
(c) the performance by Buyer, Acquisition, the
Company and Sellers of their respective covenants and obligations under this
Agreement; and
"CONTRACT"--any agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether express or implied)
that is legally binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered
by Sellers and the Company to Buyer concurrently with the execution and delivery
of this Agreement.
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"EBITDA"--earnings before interest, taxes,
depreciation and amortization, as adjusted.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
"ENCUMBRANCE"--any charge, claim, lien, option,
pledge, security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--
any cost, damages, expense, liability, or obligation, arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses arising
under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law
or Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative,
or remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response
action," include the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. sec. 9601 et seq., as amended ("CERCLA").
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"ENVIRONMENTAL LAW"--any Legal Requirement that
requires or relates to:
(a) advising or notifying of appropriate authorities
and employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release,
or minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent
in the transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(e) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention;
(f) pollution, contamination, protection of the
Environment, human health or safety.
"ERISA"--the Employee Retirement Income Security Act
of 1974 or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Company.
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
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(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment and any other act or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Company.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"HAZARDOUS MATERIALS"--any waste or other substance
that is listed, defined, designated, classified or regulated as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"IRC"--the Internal Revenue Code of 1986 or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the United States Department
of the Treasury.
"KNOWLEDGE"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if (a) such individual is
actually aware of such fact or other matter or (b) a prudent individual could be
expected to discover or otherwise become aware of such fact or other matter in
the ordinary course of business.
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<PAGE> 6
A Person (other than an individual) will be deemed to
have "Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director or officer of such Person
has, or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local,
municipal, or other administrative order, constitution, law, ordinance,
principle of common law, regulation, or statute.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal
Requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program designed to
provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a
Person will be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by
the board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the Board of Directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of businesses as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
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<PAGE> 7
"PROCEEDING"--any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular
individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly
controlled by such individual or one or more members of such individual's
Family;
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual
or one or more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an
individual:
(a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or indirectly under
common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
general partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) For purposes of this definition, (a) the "Family"
of an individual includes (i) the individual, (ii) the individual's spouse,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 5% of the outstanding
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voting power of a Person or equity securities or other equity interests
representing at least 5% of the outstanding equity securities or equity
interests in a Person.
"RELEASE"--any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular
Person, any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLER"--as defined in the first paragraph of this
Agreement.
"SUBSIDIARY"--with respect to any Person (the
"Owner"), any corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other Person's
board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that
survives the merger of Acquisition into the Company.
"TAX"--any tax (including any income tax, capital
gains tax, value added tax, sales tax, property tax, gift tax, or estate levy),
levy, assessment, tariff, duty, deficiency, or other fee in any related charge
or amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
"TAX RETURN"--any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or
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payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a
Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action,
or other matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has been given
(orally or in writing) that would lead a prudent Person to conclude that such a
claim, Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Company shall be merged with and into
Acquisition (the "Merger"). The separate existence and corporate organization of
the Company shall thereupon cease and the Company and Acquisition shall
thereupon be a single corporation. Acquisition shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
existence under the provisions of the Delaware General Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the
"Articles of Merger") shall be executed by the Company and Acquisition and shall
be filed with the Secretary of State of the States of Georgia and Delaware. The
Merger shall become effective at such time as the Articles of Merger are filed
with the Secretary of State of the States of Georgia and Delaware, such time
being hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in
effect immediately prior to the Effective Time shall be and remain the Articles
of Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
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2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately
prior to the Effective Time shall be and remain the By-Laws of the Surviving
Corporation from and after the Effective Time until amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause Robert
J. Gillon, Jr., [Buyer appointments,] to be appointed as directors of the
Surviving Corporation. Robert J. Gillon, Jr. and such officers as appointed by
Buyer shall serve as the officers of the Surviving Corporation until their
successors have been elected or appointed and shall have qualified in accordance
with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall be
effective (i) on the date the conditions in Sections 7 and 8 have been satisfied
or otherwise waived, or (ii) at such other date as the parties hereto shall
agree in writing (the "Closing Date"), and shall be held at the offices of
Buyer's counsel at 200 East Las Olas Boulevard, Fort Lauderdale, Florida 33301
at 10:00 a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
At the Effective Time, by virtue of the Merger and
without any action on the part of any holder of capital stock of Buyer,
Acquisition, the Company or Sellers: (i) the shares of Common Stock of
Acquisition purchased, issued and outstanding immediately prior to the Effective
Time shall be converted as a result of the Merger and without any action on the
part of the holder thereof, into 1 share of capital stock of the Surviving
Corporation; and (ii) the shares of the Company held by Sellers shall be
converted into and shall become, without further action on the part of the
Sellers, the right to receive Three Hundred Thousand Dollars ($300,000).
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and the Company hereby jointly and severally
represent and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and
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authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. The Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
(b) Sellers have delivered to Buyer copies of the
Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and
binding obligation of Sellers and the Company, enforceable against Sellers and
the Company in accordance with its terms subject to bankruptcy, insolvency or
other laws affecting the rights of creditors generally. Upon the execution and
delivery by Sellers of the Employment Agreement, the Employment Agreement will
constitute the legal, valid, and binding obligations of each Seller enforceable
against each Seller in accordance with its respective terms. Sellers and the
Company have the absolute and unrestricted right, power, authority, and capacity
to execute and deliver this Agreement and to perform their obligations under
this Agreement. The Sellers and the Company have approved this Agreement under
applicable state corporate law provisions, and such approval is binding.
(b) Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Company,
or (B) any resolution adopted by the board of directors or the stockholders of
the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any material
remedy or obtain any material relief under, any Legal Requirement or any Order
to which the Company or Sellers, or any of the assets owned or used by the
Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
material Governmental Authorization that is held by the Company or that
otherwise
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relates to the business of, or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject
to, or to become liable for the payment of any tax;
(v) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any material Applicable
Contract; or
(vi) result in the imposition or creation of any
Encumbrance upon or with respect to any of the material assets owned or used by
the Company.
Except as set forth in Part 3.2 of the
Disclosure Letter, neither Sellers or the Company is or will be required to give
any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company
consist of 100,000 shares of common stock, $1.00 par value, of which 30,000
shares are issued and outstanding and constitute all the shares of the Company.
The Sellers are, and will be on the Closing Date, the record and beneficial
owner and holder of the shares of the Company free and clear of all
Encumbrances. Each Seller owns a number of shares set forth in Part 3.3 of the
Disclosure Letter. All of the outstanding shares of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of the Company. None of the outstanding equity securities or
other securities of the Company was issued in violation of the Securities Act or
any other Legal Requirement. The Company does not own, or has any Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) unaudited
consolidated balance sheets of the Company as at September 30, 1996 and
September 30, 1997 ("Balance Sheet") and the related statements of income,
changes in stockholders' equity, and cash flow for each of the fiscal years then
ended and (b) an unaudited consolidated balance sheet of the Company as at
December 31, 1997 (the "Interim Balance Sheet") and the related consolidated
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statement of income, changes in stockholders' equity, and cash flow for the
three (3) months then ended. Such financial statements and notes fairly present
in all material respects the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually run the aggregate, be materially adverse). No
financial statements of any Person other than the Company are required by GAAP
to be included in the financial statements.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record
books, and other records of the Company, all of which have been made available
to Buyer, are, complete and correct and have been maintained in accordance with
sound business practices and the requirements of Section 13(b)(2) of the
Securities Exchange Act of 1934, as amended (regardless of whether or not the
Company is subject to that Section), including the maintenance of an adequate
system of internal controls. The minute books of the Company contain accurate
and complete records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of Directors
of the Company. At the Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete
and accurate list of all real property, leaseholds, or other interests therein
owned by the Company. Sellers have delivered or made available to Buyer copies
of the deeds and leases and other instruments by which the Company occupies or
acquired such real property and interests and such instruments are true,
complete and accurate. The Company owns (with good and marketable title in the
case of real property) or lease all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that they purport to own
or lease located in the facilities owned or operated by the Company and
reflected as owned or leased in the books and records of the Company, including
all of the properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Disclosure Letter and personal
property sold since the date of the Balance Sheet, as the case may be, in the
Ordinary Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Balance Sheet and the
Interim Balance Sheet (except for personal property acquired and sold
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since the date of the Balance Sheet in the Ordinary Course of Business and
consistent with past practice), which subsequently purchased or acquired
properties and assets (other than inventory and short-term investments) are
listed in Part 3.6 of the Disclosure Letter. All material properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet are free and clear
of all Encumbrances except with respect to all such properties and assets, (a)
mortgages or security interests shown on the Balance Sheet or the Interim
Balance Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the Interim
Balance Sheet (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(c) liens for current taxes not yet due, and (d) with respect to real property,
(i) minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Company, and (ii) zoning laws
and other land use restrictions that do not impair the present or anticipated
use of the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of
the Company are structurally sound, in good operating condition and repair, and
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are
reflected on the Balance Sheet, the Interim Balance Sheet or on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are, or will be
as of the Closing Date, current and collectible net of the respective reserves
shown on the Balance Sheet, the Interim Balance Sheet or on the accounting
records of the Company as of the Closing Date (which reserves are calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve
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reflected in the Interim Balance Sheet represented of the Accounts Receivable
reflected therein and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within ninety days after the day on which it first
becomes due and payable. There is no contest, claim, or right of set-off, other
than returns in the Ordinary Course of Business, under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Part 3.8 of the Disclosure Letter contains a complete and
accurate list of all Accounts Receivable as of the date of the Interim Balance
Sheet, which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not
reflected in the Balance Sheet, or the Interim Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, which in no event
exceeds $10,000, all of which have been written off or written down to net
realizable value in the Balance Sheet or on the accounting records of the
Company as of the Closing Date, as the case may be. All inventories not written
off have been priced at the lower of cost. The quantities of each item of
inventory are reasonable in the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure
Letter, the Company has no liabilities or obligations of any nature (whether
known or whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
date thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed (on a
timely basis since December 31, 1994) all Tax Returns that are or were required
to be filed by or with respect to any of them pursuant to applicable Legal
Requirements. Sellers have delivered to Buyer copies of, and Part 3.11 of the
Disclosure Letter contains a complete and accurate list of, all such Tax Returns
filed by the Company since December 31, 1996. The Company has paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Company, except such Taxes, if any, as are listed in Part 3.11
of the
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Disclosure Letter and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the Balance
Sheet.
(b) No United States federal income Tax Returns of
the Company subject to such Taxes have been audited by the IRS. Part 3.11 of the
Disclosure Letter describes all adjustments to the United States federal income
Tax Returns filed by the Company or any group of corporations including the
Company for all taxable years since December 31, 1994, and the resulting
deficiencies proposed by the IRS. Except as described in Part 3.11 of the
Disclosure Letter, the Company has not given or been requested to give waivers
or extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of Taxes of
the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect
to Taxes on the respective books of the Company are adequate (determined in
accordance with GAAP) and are at least equal to the Company's liability for
Taxes. There exists no proposed tax assessment against the Company except as
disclosed in the Balance Sheet or in Part 3.11 of the Disclosure Letter. No
consent to the application of Section 341(f)(2) of the IRC has been filed with
respect to any property or assets held, acquired, or to be acquired by the
Company. All Taxes that the Company is or was required by Legal Requirements to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There is no tax
sharing agreement that will require any payment by the Company after the date of
this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not
been any material adverse change in the business, operations, properties,
prospects, assets, or condition of the Company, and, no event has occurred or
circumstance exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
Except for group medical insurance and associated
life insurance [others], the Company (i) has not contributed to any pension,
profit sharing, option or other incentive plan or other type of employee benefit
plan, (ii) does not maintain or has maintained, is or was a party to, or
otherwise participates or participated in, on its own behalf or on behalf of any
former employees, any pension, profit sharing, option or other incentive
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plan or other type of employee benefit plan, or (iii) does not have any
obligation to, or customary arrangement with, former employees, if any, for
bonuses, incentive compensation, vacation, severance pay, sick pay, sick leave,
insurance, service award, relocation, disability or other benefits, whether oral
or written.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the
Disclosure Letter:
(i) the Company is, and at all times, has been,
in full compliance with each Legal Requirement that is or was applicable to it
or to the conduct or operation of its business or the ownership or use of any of
its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) in any material respect (A) may
constitute or result in a violation by the Company of, or a failure on the part
of the Company to comply with, any Legal Requirement, or (B) may give rise to
any obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time,
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any material
Legal Requirement, or (B) any actual, alleged, possible, or potential material
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company (all of which authorizations have been
delivered to Buyer). Each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times has been, in
full compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.14 of the
Disclosure Letter;
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(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter;
(iii) the Company has not received any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or potential material
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or required to be
listed in Part 3.14 of the Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part
3.14 of the Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
their businesses in the manner they currently conduct and operate such
businesses and to permit the Company to own and use their assets in the manner
in which they currently own and use such assets except where the failure to
obtain a Governmental Authorization would not result in a material adverse
change to the Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the
Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or against the
Company that relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions.
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To the Knowledge of Sellers and the Company, no
such Proceeding as described above has been Threatened. Sellers have delivered
to Buyer copies of all pleadings, correspondence, and other documents relating
to each Proceeding listed in Part 3.15 of the Disclosure Letter. The
Proceedings listed in Part 3.15 of the Disclosure Letter will not have a
material adverse effect on the business, operations, assets, condition, or
prospects of the Company.
(b) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) there is no Order to which the Company, or
any of the assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that
relates to the business of, or any of the assets owned or used by, the Company;
and
(iii) no officer, director, agent, or employee of
the Company is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) the Company is, and at all times has been, in
full compliance with all of the terms and requirements of each Order to which
it, or any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists
that may constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any Order to
which the Company, or any of the assets owned or used by the Company, is
subject; and
(iii) the Company has not received any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or potential violation of,
or failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure
Letter, since the date of the Balance Sheet, the Company has
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conducted its business only in the Ordinary Course of Business and there has not
been any:
(a) change in the Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any
bonuses, salaries, distributions or other compensation to any stockholder,
director, officer, or employee;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice
of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least $10,000.
(g) except in the Ordinary Course of Business, sale,
lease, or other disposition of any asset or property (other than inventory in
the Ordinary Course of Business) of the Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any material asset or property of
the Company, including the sale, lease, or other disposition of any of the
intellectual property assets;
(h) cancellation or waiver of any claims or rights
with a value to the Company in excess of $10,000;
(i) material change in the accounting methods used by
the Company; or
(j) agreement, whether oral or written, by the
Company to do any of the foregoing.
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3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a
complete and accurate list, and Sellers have delivered to Buyer true and
complete copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by the Company of an
amount or value in excess of $15,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to the Company of an
amount or value in excess of $15,000;
(iii) each Applicable Contract that was not
entered into in the Ordinary Course of Business and that involves expenditures
or receipts of the Company in excess of $15,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $15,000 and with terms of less than
one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of the
Company or any Affiliate of the Company or limit the freedom of the Company or
any Affiliate of the Company to engage in any line of business or to compete
with any Person;
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(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or profits, other than
direct payments for goods and sales commission arrangements for employees;
(x) each power of attorney granted by the Company
that is currently effective and outstanding;
(xi) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for future capital
expenditures in excess of $15,000;
(xiii) each currently effective written warranty,
guaranty, indemnity, and or other similar undertaking with respect to
contractual performance extended by the Company other than in the Ordinary
Course of Business;
(xiv) each Contract for indebtedness of the
Company involving future aggregate payments of more than $10,000; and
(xv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the
Disclosure Letter:
(i) Sellers (and no Related Person of the
Sellers) do not have or may acquire any rights under, and Sellers do not have or
may become subject to, any obligation or liability under, any Contract that
relates to the business of, or any of the assets owned or used by, the Company;
and
(ii) no officer, director, agent, employee,
consultant, or contractor of the Company is bound by any Contract that purports
to limit the ability of such officer, director, agent, employee, consultant, or
contractor to (A) engage in or continue any conduct, activity, or practice
relating to the business of the Company, or (B) assign to the Company or to any
other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the
Disclosure Letter, each Contract identified or required to be identified in Part
3.17(a) of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
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(d) Except as set forth in Part 3.17(d) of the
Disclosure Letter:
(i) the Company is, and at all times has been, in
full compliance with all applicable terms and requirements of each Contract
under which the Company has or had any material obligation or liability or by
which the Company or any of the material assets owned or used by the Company is
or was bound;
(ii) each other Person that has or had any
material obligation or liability under any Contract under which the Company has
or had any rights is in full compliance with all material applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance
exists that (with or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of, or give the Company or other Person
the right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) the Company has not given to or received
from any other Person, any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Applicable Contract.
(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Company under current or completed Applicable Contracts with any
Person and, to Sellers' Knowledge, no such Person has made written demand for
such renegotiation.
(f) The Applicable Contracts relating to the sale or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
(g) The Company has made available to Buyer true,
complete and correct copies of the Contracts required to be set forth in Part
3.17 of the Disclosure Letter.
3.18 INSURANCE
(a) Sellers have made available to Buyer:
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(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the Company, or any
director of the Company, is or has been covered at any time within the three
years preceding the date of this Agreement; and
(ii) true and complete copies of all pending
applications for policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or
affecting the Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third
parties with respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such coverage is
provided.
(c) All material assets, properties and risks of the
Company are, and for the past three years have been, covered by valid and,
except for policies that have expired under their terms in the ordinary course,
currently effective insurance policies or binders of insurance (including,
without limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company, in each case with
responsible insurance companies, in such types and amounts and covering such
risks as are consistent with customary practices and standards of companies
engaged in business and operations similar to those of the Company. There has
not been any claim under any such insurance policy during the past three years
that could reasonably be expected to have a material adverse effect on the
Company.
(d) Except as set forth on Part 3.18(d) of the
Disclosure Letter:
(i) Since January 1, 1993 the Company has not
received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
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(ii) The Company has paid all premiums due, and
have otherwise performed all of their obligations, under each policy to which
the Company is a party or that provides coverage to the Company or director
thereof.
(iii) The Company has given notice to the insurer
of all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure
letter:
(a) The Company is, and at all times has been, in
full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither Sellers or the Company has any basis to
expect, nor has any of them received, any actual or Threatened Order, notice, or
other communication from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
Sellers, or the Company, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, to the Knowledge of
Sellers and the Company, Threatened claims, Proceedings or Encumbrances relating
to any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which the Company has or had an interest.
(c) Neither Sellers or the Company has any basis to
expect, nor has any of them received, any citation, directive, inquiry, notice,
Order, summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which the Company had
an interest, or with respect to any property or facility to which Hazardous
Materials
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generated, manufactured, refined, transferred, imported, used, or processed by
the Company have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(d) The Company has no Environmental, Health, and
Safety Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which the Company
(or any predecessor), has or had an interest.
(e) There are no Hazardous Materials present on or in
the Environment at the Facilities, including any Hazardous Materials contained
in barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities, or incorporated into any structure therein or thereon. The
Company has not permitted or conducted any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has or had an interest.
(f) There has been no Release or Threat of Release,
of any Hazardous Materials at or from the Facilities, or from or by any other
properties and assets (whether real, personal, or mixed) in which the Company
has or had an interest.
(g) Sellers have delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed by Sellers or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by the Company with Environmental Laws.
(h) There are no underground or above-ground storage
tanks, incinerators or surface impoundments at, on, or about under or within any
real property operated or controlled, in whole or in part by the Company.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a
complete and accurate list of the following information for each employee or
director of the Company, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or payable and any
change in compensation since December 31, 1997; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under the
Company's insurance, medical, welfare, or vacation plan, or any other employee
benefit plan.
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(b) No employee or director of the Company is a party
to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers or
the Company by any such employee or director. No director, officer, or other key
employee of the Company presently intends to terminate his employment with the
Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company [has] not been or is a party to any
collective bargaining or other labor Contract. There has not been, there is not
presently pending or existing, and to Sellers' Knowledge there is not
threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any proceeding against or affecting the Company relating
to the alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by the Company, and no such action is contemplated by the Company. The
Company has complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. The Company is
not liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) The Company does not own or licenses for use any
patents, trademarks, trade names, service marks, mask works or copyrights, other
than the common trade law names, the common law trade names listed on 3.22 of
the Disclosure Letter.
(b) There has not been any actual or alleged
infringement or use or misuse by any party of the Company's trade
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secrets, confidential information or other intellectual property rights.
3.23 CERTAIN PAYMENTS
Neither the Company or any director, officer, agent,
or employee of the Company, or any other person associated with or acting for or
on behalf of the Company, has directly or indirectly and in violation of any
Legal Requirement (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any Affiliate
of the Company, (b) established or maintained any fund or asset that has not
been recorded in the books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this
Agreement and no statement in the Disclosure Letter knowingly omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Neither Sellers or any Related Person of any Seller
or of the Company has any interest in any property (whether real, personal, or
mixed and whether tangible or intangible), used in or pertaining to the
Company's business. Neither Sellers or any Related Person of any Seller or of
the Company owns (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that (i) has business dealings
or a material financial interest in any transaction with the Company, or (ii)
engages in competition with the Company with respect to any line of the products
or services of the Company (a "Competing Business") in any market presently
served by the Company. Except as set forth in Part 3.25 of the Disclosure
Letter, neither Sellers or any Related Person of any Seller or of the Company is
a party to any Contract with, or has any claim or right against the Company that
will survive the Closing.
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3.26 BROKERS OR FINDERS
Sellers, the Company and their agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
3.27 EBITDA
The Company shall have annualized EBITDA as set forth
on Schedules 3.27.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND
BUYER
Acquisition and Buyer (the "Buyer Companies") jointly
and severally represent and warrant to Sellers as follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition will at the Closing Date be a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of
Acquisition and Buyer has the corporate power and authority to own or lease and
operate its properties to carry on its business as now being conducted, and is
duly qualified and in good standing and authorized to do business as a foreign
corporation in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization except
where the failure to so qualify would not have a material adverse effect on the
Buyer and Acquisition, taken as a whole.
4.2 AUTHORITY
Each of Acquisition and Buyer has the corporate power
and has taken all necessary corporate action to authorize Acquisition or Buyer
as the case may be, to execute, deliver and perform the Agreement and to
consummate the transactions contemplated thereby. The execution and delivery by
each of Acquisition and Buyer of this Agreement and the Employment Agreement to
which each is a party constitutes the valid and legally binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as may be limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
4.3 CAPITALIZATION
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As of the date hereof, the authorized common stock of
the Buyer consist of __________ shares of common stock, $.001 par value per
share, of which _________ shares are issued and outstanding (other than for
acquisitions or in connection with Buyer's IPO). All of the outstanding common
stock of the Buyer has been duly authorized and validly issued and are fully
paid and nonassessable. The shares of the Buyer's Common Stock to be delivered
to Sellers at Closing pursuant to Section 2.7 will be duly authorized, validly
issued, fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record
books, and other records of the Buyer, are complete, in all material respects,
and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been
commenced against Buyer or Acquisition and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the contemplated transactions. To Buyer's and Acquisition's knowledge, no
such proceeding has been threatened.
4.6 BROKERS OR FINDERS
Buyers and Acquisition and their officers and agents
have incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold the Company and Sellers harmless
from any such payment alleged to be due by or through Buyer or Acquisition as a
result of the action of Buyer and Acquisition or their officers or agents.
5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO
CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company and its Representatives to, (a)
afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") full and free access to the
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data
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pertaining to the Company as Buyer may reasonably request, and (c) furnish Buyer
and Buyer's Advisors with such additional financial, operating, and other data
and information pertaining to the Company as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing
Date, Sellers will cause the Company to:
(a) conduct the business of the Company only in the
Ordinary Course of Business;
(b) preserve intact the current business organization
of the Company, keep available the services of the current officers, employees,
and agents of the Company, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others having
business relationships with the Company;
(c) confer with Buyer concerning operational matters
of a material nature; and
(d) otherwise report periodically to Buyer concerning
the status of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this
Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining any required consents.
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5.5 NOTIFICATION
Between the date of this Agreement and the Closing
Date, Sellers will promptly notify Buyer in writing if Sellers become aware of
any fact or condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if any
Seller becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Disclosure Letter if the Disclosure Letter were dated the date
of the occurrence or discovery of any such fact or condition, Sellers will
promptly deliver to Buyer a supplement to the Disclosure Letter specifying such
change. During the same period, Sellers will promptly notify Buyer of the
occurrence of any Breach of any covenant of Sellers in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is
terminated pursuant to Section 10, Sellers will not, and the Company will not
and each of their Representatives will not directly or indirectly solicit,
initiate or encourage, accept or discuss any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Buyer) relating to any transaction involving the sale of the business or
assets of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company. Sellers or the Company will promptly notify Buyer of any such
inquiries or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Sellers and the Company will use their Best Efforts to cause the
conditions in Section 7 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Sellers in writing if Buyer becomes aware of
any fact or condition that causes or constitutes a Breach of any of Buyer's or
Acquisition's representations and
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warranties as of the date of this Agreement, or if Buyer becomes aware of the
occurrence after the date of this Agreement or any fact or condition that would,
except as expressly contemplated by this Agreement, cause or constitute a Breach
of any such representation or warranty.
6.2 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Buyer will use its Best Efforts to cause the conditions in Section 8 to be
satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S
OBLIGATION TO CLOSE
Buyer's and Acquisition's obligations to consummate
the Merger and to take the other actions required to be taken by Buyer and
Acquisition at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Buyer and Acquisition, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and the Company's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers
and the Company are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing, must have been duly performed and complied
with in all material respects.
(b) There shall be delivered at Closing (i) the
Employment Agreements with Roger A. Grogan, Diane Selby and Edward A. Zimmerman
in the form of Exhibit 7.2(b)(i) (the "Employment Agreements") executed by each
Seller and (ii) the certificate executed by Sellers and an officer of the
Company representing to Buyer and Acquisition that Sellers' and the Company's
representations and warranties in this Agreement was accurate in all material
respects as to the date of this Agreement and is accurate in all material
respects as of the Closing as if made on the Closing Date, and (iii) each of the
other covenants and obligations in the Agreement must have been performed and
complied with in all respects.
7.3 CONSENTS
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Each of the consents identified in subpart 3.6 of
the Disclosure Letter, must have been obtained and must be in full force and
effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been
delivered to Buyer:
(a) an opinion of Hicks, Casey & Barber, P.C., dated
the Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Buyer or its counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
Sellers' and the Company's representations and warranties, (iii) evidencing the
performance by Sellers, the Company, or the compliance by Sellers or the Company
with, any covenant or obligation required to be performed or complied with by
such party, (iv) evidencing the satisfaction of any condition referred to in
this Section 7, or (v) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have
been commenced, pending or Threatened any Proceeding (a) involving any challenge
to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
PROCEEDS
There must not have been made or Threatened by any
Person any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in, the Company, or
(b) is entitled to all or any portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order,
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or (b) any Legal Requirement or Order that has been published, introduced, or
otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other order
by any federal or state court preventing or consummation of the transactions
contemplated in this Agreement has been issued and continues in effect, and this
Agreement and the transactions contemplated hereby are not prohibited under any
applicable federal or state law or regulation.
7.9 MATERIAL ADVERSE CHANGE
There shall have been no material adverse change in
the business, operations, prospects, financial condition or results of the
Company.
7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public
offering.
7.11 REPAYMENT OF LOANS
All indebtedness of Sellers including, but not
limited to, those set forth on Schedule 7.11 shall be converted into shares of
the Company's Common Stock prior to Closing.
7.12 MERGER WITH GEORGIA IMPRESSIONS, INC.
Buyer shall have completed its business combination
with Georgia Impressions, Inc.
8. CONDITIONS PRECEDENT TO SELLERS' AND THE
COMPANY'S OBLIGATION TO CLOSE
Sellers' and the Company's obligations to consummate
the Merger and to take the other actions required to be taken by Sellers and the
Company at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Sellers and the Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
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8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that Buyer
and Acquisition are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been performed and complied with
in all material respects.
(b) Buyer must have executed and delivered (i) the
Employment Agreement (ii) a certificate executed by an officer of Buyer
representing to Sellers that Buyer and Acquisition's representations and
warranties contained in this Agreement were accurate in all material respects as
to the date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing.
8.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the following
documents to be delivered to Sellers:
(a) an opinion of Atlas, Pearlman, Trop & Borkson,
P.A., dated the Closing Date, in the form of Exhibit 8.3(a);
(b) such other documents as Sellers or their counsel
may reasonably request for the purpose of (i) enabling its counsel to provide
the opinion referred to in Section 7.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions; and
(c) Three Hundred Thousand Dollars in cash.
8.4 RELEASE OF GUARANTY
At Closing, Buyer shall either (i) release, (ii) make
provision for, or (iii) indemnify Sellers for any personal guaranty's set forth
on the Disclosure Letter, provided, however, that the line of credit and
factoring agreement shall be paid within 15 days following Closing.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at
the Closing, be terminated:
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(a) by either Buyer and Acquisition or Sellers and
the Company if a material Breach of any provision of this Agreement has been
committed by the other party and such Breach has not been cured or waived within
10 days of the date of notification of such Breach;
(b) (i) by Buyer and Acquisition if any of the
conditions in Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before the Closing Date; or (ii) by
Sellers and the Company, if any of the conditions in Section 8 has not been
satisfied of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Sellers and the Company to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Acquisition and
Sellers and the Company; or
(d) by either Buyer and Acquisition or Sellers and
the Company if the Closing has not occurred (other than through the failure of
any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before September 30, 1998, or such later
date as the parties may agree upon.
A party's right of termination under Section 9.1 is
in addition to any other rights it may have under this Agreement or otherwise,
the exercise of a right of termination will not be an election of remedies. If
this Agreement is terminated pursuant to Section 9.1, all further obligations of
the parties under this Agreement terminate, except the obligations in Section
11.1 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of a breach of the Agreement by the other party or
because one or more of the conditions to the terminating party's obligations is
not satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter and any of the supplements
thereto, and any other certificate or document delivered pursuant to this
Agreement will survive the Closing
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until the thirty-six (36) months from the Closing except for the representations
and warranties in Sections 3.3, 3.11, 3.15 and 3.19, which shall survive for the
applicable statute of limitations. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
SELLERS
Sellers will jointly and severally indemnify and hold
harmless Buyer, Acquisition, the Surviving Corporation, and their respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' and other professional fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made
by Sellers in this Agreement, without giving effect to any supplement to
Disclosure Letter, the Disclosure Letter and any of the supplements thereto, or
any other certificate or document delivered by Sellers pursuant to this
Agreement;
(b) any Breach by Sellers or the Company of any
covenant or obligation of Sellers or the Company in this Agreement;
(c) any product shipped or any services provided by
Company prior to the Closing Date; and
(d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Sellers or the
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 will not
be exclusive of or limit any other remedies that may be available to Buyer or
the other Indemnified Persons.
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10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers for,
and will pay to the Sellers the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' and other professional fees)
or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made
by Buyer in this Agreement;
(b) any Breach by Buyer of any covenant or obligation
of Buyer in this Agreement;
(c) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Buyer (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 10.3 will not
be exclusive of or limit any other remedies that may be available to Sellers.
10.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, other than those in Sections 3.3, 3.11, 3.15 and 3.19, unless
on or before thirty-six (36) months from the date of Closing, Buyer notifies
Sellers of a claim specifying the factual basis of that claim. A claim with
respect to Section 3.3, 3.11, 3.15 and 3.19 may be made at any time prior to the
applicable statute of limitations with respect to such matter.
If the Closing occurs, Buyer will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and to comply with prior to
the Closing Date, unless on or before thirty-six (36) months from the date of
Closing, Sellers notify Buyer of claims specifying the factual basis of that
claim.
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY
CLAIMS
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(a) Promptly after receipt by an indemnified party
under Sections 10.2 or 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnified party's failure
to give such notice.
(b) If any Proceeding referred to in Section 10.5(a)
is brought against an indemnified party and it gives notice, unless the claim
involves Taxes, to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding with
counsel satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any
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determination made in such Proceeding or any compromise or settlement effected
by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
10.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim may be asserted by notice to the party from
whom indemnification is sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Buyer determines. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing Sellers
shall, and shall cause the Company to, keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person other than their
professional advisors. Sellers and Buyer will consult with each other concerning
the means by which the Company's employees, customers, and suppliers and others
having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
11.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and
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advisors of Buyer, Acquisition and the Company to maintain in confidence, and
not use to the detriment of another party or the Company any written, oral, or
other information obtained in confidence from another party or the Company in
connection with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by legal proceedings. Notwithstanding the
foregoing, Buyer may disclose information about this Agreement, the Sellers, or
the Company in connection with its initial public offering and any related
obligations therewith.
(b) If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand, (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Sellers: Southern Office Center, Inc.
1800 Sandy Plains Parkway, suite 102
Marietta, Georgia 30066
Attention: Rogers A. Grogan
Facsimile No.: (770) ___________
with a copy to: Hicks, Casey & Barber, P.C.
61 Atlanta Street
Marietta, Georgia 30060
Attention: Sam Hicks
Facsimile No.: (770) 428-4684
Buyer or Acquisition: Office Center Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
Facsimile No.: (212) 686-6623
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with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Facsimile No.: (954) 766-7800
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each
other such further information, (b) to execute and deliver to each other such
other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements
between the parties with respect to its subject matter and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY
RIGHTS
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Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the heirs, successors and permitted assigns of
the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.11 TIME OF ESSENCE
With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
11.12 GOVERNING LAW
This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION /S/ROGERS A. GROGAN
-------------------------
ROGERS A. GROGAN
By: /S/ROBERT J. GILLON, JR. /S/DIANE SELBY
----------------------------- -------------------------
Name: ROBERT J. GILLON, JR. DIANE SELBY
Title:
/S/EDWARD A. ZIMMERMAN
-------------------------
EDWARD A. ZIMMERMAN
ACQUISITION:
OFFICE CENTRE GEORGIA
By: /S/ROBERT J. GILLON, JR.
-----------------------------
Name: Robert J. Gillon, Jr.
Title:
COMPANY:
SOUTHERN OFFICE CENTER, INC.
By: /S/DIANE C. SELBY
-----------------------------
Name: Diane C. Selby
Title:
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SOUTHERN OFFICE CENTER, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 7.2(b)(i) Employment Agreement
Exhibit 7.4(a) Opinion of Hicks, Casey & Barber, P.C.
Exhibit 8.3(a) Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
SCHEDULES
---------
Schedule 3.6 Real Property; Encumbrances
Schedule 3.8 Accounts Receivable
Schedule 3.13 Employee Benefits
Schedule 3.17 Contracts; No Defaults
Schedule 3.20 Employees
Schedule 3.27 EBITDA
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.18
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of April 23, 1998, by
and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"), OFFICE
CENTRE GEORGIA, a Delaware corporation to be formed as a wholly-owned
subsidiary of Buyer ("Acquisition"), GEORGIA IMPRESSIONS, INC., a Georgia
corporation ("Company"), WILLIAM D. CARROLL, an individual resident in Georgia
and RONALD C. PACE, an individual residing in Georgia (each a "Seller" or
"Shareholder" collectively, the "Sellers" or "Shareholders").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish to set
forth the terms and conditions upon which a merger of the Company with and into
Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition and the
Company deems the merger advisable and in the best interests of each of Buyer,
Acquisition and the Company and of their respective shareholders.
WHEREAS, the shareholders of Acquisition and the Company have approved
this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any Contract (a) under
which the Company has or may acquire any rights, (b) under which the Company
has or may become subject to any obligation or liability, or (c) by which the
Company or any of the assets owned, leased or used by it is or may become
bound.
"BALANCE SHEET"--as defined in Section 3.4.
<PAGE> 2
"BEST EFFORTS"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision, and
the term "Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of the Company with and into Acquisition;
(b) the execution, delivery, and performance of the
Employment Agreement;
(c) the performance by Buyer, Acquisition, the Company and
Sellers of their respective covenants and obligations under this Agreement; and
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by
Sellers and the Company to Buyer concurrently with the execution and delivery
of this Agreement.
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"EBITDA"--earnings before interest, taxes, depreciation and
amortization, as adjusted.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
"ENCUMBRANCE"--any charge, claim, lien, option, pledge,
security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"-- any cost,
damages, expense, liability, or obligation, arising from or under Environmental
Law or Occupational Safety and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety
and health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal
or administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq., as amended ("CERCLA").
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"ENVIRONMENTAL LAW"--any Legal Requirement that requires or
relates to:
(a) advising or notifying of appropriate authorities and
employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(e) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention;
(f) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the
Company.
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise
made available by or under the authority of any Governmental Body or pursuant
to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
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(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use of Hazardous
Materials in, on, under, about, or from the Facilities or any part thereof into
the Environment and any other act or thing that increases the danger, or risk
of danger, or poses an unreasonable risk of harm to persons or property on or
off the Facilities, or that may affect the value of the Facilities or the
Company.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"HAZARDOUS MATERIALS"--any waste or other substance that is
listed, defined, designated, classified or regulated as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"IRC"--the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge"
of a particular fact or other matter if (a) such individual is actually aware
of such fact or other matter or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the ordinary
course of business.
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A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director or officer of such Person
has, or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, or statute.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program designed to provide
safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the Board of Directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the
same line of businesses as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
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"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one
or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, general
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
other natural person who is related to the individual or the individual's
spouse within the second degree, and (iv) any other natural person who resides
with such individual, and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of voting securities or other voting interests representing at
least 5% of the outstanding
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voting power of a Person or equity securities or other equity interests
representing at least 5% of the outstanding equity securities or equity
interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor
law.
"SELLER"--as defined in the first paragraph of this
Agreement.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the
merger of Acquisition into the Company.
"TAX"--any tax (including any income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax, or estate levy), levy,
assessment, tariff, duty, deficiency, or other fee in any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or
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<PAGE> 9
payment of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing) that would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Company shall be merged with and into
Acquisition (the "Merger"). The separate existence and corporate organization
of the Company shall thereupon cease and the Company and Acquisition shall
thereupon be a single corporation. Acquisition shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
existence under the provisions of the Delaware General Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the "Articles
of Merger") shall be executed by the Company and Acquisition and shall be filed
with the Secretary of State of the States of Georgia and Delaware. The Merger
shall become effective at such time as the Articles of Merger are filed with
the Secretary of State of the States of Georgia and Delaware, such time being
hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in effect
immediately prior to the Effective Time shall be and remain the Articles of
Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
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2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately prior to
the Effective Time shall be and remain the By-Laws of the Surviving Corporation
from and after the Effective Time until amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause Robert J.
Gillon, Jr., [Buyer appointment] and [Seller appointment] to be appointed as
directors of the Surviving Corporation. Ronald C. Pace, Doug Carroll and Robert
J. Gillon, Jr. shall serve as the officers of the Surviving Corporation until
their successors have been elected or appointed and shall have qualified in
accordance with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall be effective
(i) on the date the conditions in Sections 7 and 8 have been satisfied or
otherwise waived, or (ii) at such other date as the parties hereto shall agree
in writing (the "Closing Date"), and shall be held at the offices of Buyer's
counsel at 200 East Las Olas Boulevard, Fort Lauderdale, Florida 33301 at 10:00
a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
At the Effective Time, by virtue of the Merger and without
any action on the part of any holder of capital stock of Buyer, Acquisition,
the Company or Sellers: (i) the shares of Common Stock of Acquisition
purchased, issued and outstanding immediately prior to the Effective Time shall
be converted as a result of the Merger and without any action on the part of
the holder thereof, into 1 share of capital stock of the Surviving Corporation
and shall represent all the issued and outstanding shares of the Surviving
Corporation; and (ii) the shares of the Company held by Sellers shall be
converted into and shall become, without further action on the part of the
Sellers, the right to receive six (6) times the Company's annualized EBITDA
based upon the annualized adjusted projected EBITDA for the number of full
months of the fiscal year beginning July 1, 1997 and ending with the month
ended December 31, 1997. The EBITDA shall be adjusted as set forth on Schedule
2.7 (a). The consideration shall be (i) seventy-five percent (75%) in shares of
restricted Common Stock of Buyer which number of shares of Common Stock shall
be determined by dividing seventy-five percent (75%) of the consideration to be
received by Buyer's initial public offering price per share (the "IPO Price");
and (ii) twenty-five percent (25%) in cash. The adjusted EBITDA is Two Hundred
Seventeen Thousand Dollars ($217,000) resulting in a total purchase price
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of One Million Three Hundred Two Thousand Dollars ($1,302,000). Sellers shall
be entitled to an additional cash payment in an amount equal to the excess of
cash available to the Company at closing in excess of One Hundred Thousand
Dollars ($100,000) provided no more than $0 is outstanding under the Company's
line of credit and all payables are current.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and the Company hereby jointly and severally
represent and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under Applicable
Contracts. The Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
(b) Sellers have delivered to Buyer copies of the
Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and the Company, enforceable against Sellers and the
Company in accordance with its terms subject to bankruptcy, insolvency or other
laws affecting the rights of creditors generally. Upon the execution and
delivery by Sellers of the Employment Agreement, the Employment Agreement will
constitute the legal, valid, and binding obligations of each Seller enforceable
against each Seller in accordance with its respective terms. Sellers and the
Company have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform their obligations
under this Agreement. The Sellers and the Company have approved this Agreement
under applicable state corporate law provisions, and such approval is binding.
(b) Neither the execution and delivery of this Agreement nor
the consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
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(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the stockholders of the
Company;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any material remedy or obtain any
material relief under, any Legal Requirement or any Order to which the Company
or Sellers, or any of the assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any material
Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of any tax;
(v) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any material Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance
upon or with respect to any of the material assets owned or used by the
Company.
Except as set forth in Part 3.2 of the Disclosure Letter,
neither Sellers or the Company is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
(c) Each Seller is acquiring the Buyer's Common Stock for his own
account and not with a view to its distribution within the meaning of Section
2(11) of the Securities Act. Each Seller is an "accredited investor" as such
term is defined in Rule 501(a) under the Securities Act. Seller acknowledges
that each certificate representing Buyer's Common Stock acquired pursuant to
this Agreement shall bear the following restrictive legend:
THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER
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THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED WITHOUT ONE OF THE FOLLOWING: (i) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE
SECURITIES ACT, OR (ii) AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE CORPORATION, THAT SUCH REGISTRATION IS
NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
Each Seller further acknowledges that he shall be subject to such "lock-up"
restriction as may be imposed by the Buyer's underwriter or any entity
regulating the issuance of the Buyer's Common Stock in its initial public
offering.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of
100,000 shares of common stock, $1.00 par value, of which 16,000 shares are
issued and outstanding and constitute all the shares of the Company. The
Sellers are, and will be on the Closing Date, the record and beneficial owner
and holder of the shares of the Company free and clear of all Encumbrances.
Each Seller owns a number of shares set forth in Part 3.3 of the Disclosure
Letter. All of the outstanding shares of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company was issued in violation of the Securities Act or any
other Legal Requirement. The Company does not own, or has any Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) unaudited consolidated
balance sheets of the Company as at September 30, 1996 and September 30, 1997
("Balance Sheet") and the related statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended and
(b) an unaudited consolidated balance sheet of the Company as at December 31,
1997 (the "Interim Balance Sheet") and the related consolidated statement of
income, changes in stockholders' equity, and cash flow for the three (3) months
then ended. Such financial statements and notes fairly present in all material
respects the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the respective dates
of and for the periods referred to in such financial statements, all in
accordance with GAAP subject, in the
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case of interim financial statements, to normal recurring year-end adjustments
(the effect of which will not, individually run the aggregate, be materially
adverse). No financial statements of any Person other than the Company are
required by GAAP to be included in the financial statements.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Company, all of which have been made available to Buyer,
are, complete and correct and have been maintained in accordance with sound
business practices and the requirements of Section 13(b)(2) of the Securities
Exchange Act of 1934, as amended (regardless of whether or not the Company is
subject to that Section), including the maintenance of an adequate system of
internal controls. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of Directors
of the Company. At the Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other interests therein
owned by the Company. Sellers have delivered or made available to Buyer copies
of the deeds and leases and other instruments by which the Company occupies or
acquired such real property and interests and such instruments are true,
complete and accurate. The Company owns (with good and marketable title in the
case of real property) or lease all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that they purport to own
or lease located in the facilities owned or operated by the Company and
reflected as owned or leased in the books and records of the Company, including
all of the properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Disclosure Letter and personal
property sold since the date of the Balance Sheet, as the case may be, in the
Ordinary Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Balance Sheet and the
Interim Balance Sheet (except for personal property acquired and sold since the
date of the Balance Sheet in the Ordinary Course of Business and consistent
with past practice), which subsequently purchased or acquired properties and
assets (other than inventory and short-term investments) are listed in Part 3.6
of the Disclosure Letter. All material properties and assets reflected in the
Balance Sheet and the Interim Balance Sheet are free and clear of all
Encumbrances except with respect to all such
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properties and assets, (a) mortgages or security interests shown on the Balance
Sheet or the Interim Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Interim Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (c) liens for current taxes not yet due, and (d)
with respect to real property, (i) minor imperfections of title, if any, none
of which is substantial in amount, materially detracts from the value or
impairs the use of the property subject thereto, or impairs the operations of
the Company, and (ii) zoning laws and other land use restrictions that do not
impair the present or anticipated use of the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the
Company are structurally sound, in good operating condition and repair, and
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except
for ordinary, routine maintenance and repairs that are not material in nature
or cost.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on
the Balance Sheet, the Interim Balance Sheet or on the accounting records of
the Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are, or will be as of the
Closing Date, current and collectible net of the respective reserves shown on
the Balance Sheet, the Interim Balance Sheet or on the accounting records of
the Company as of the Closing Date (which reserves are calculated consistent
with past practice and, in the case of the reserve as of the Closing Date, will
not represent a greater percentage of the Accounts Receivable as of the Closing
Date than the reserve reflected in the Interim Balance Sheet represented of the
Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been or
will be collected in full, without any set-off, within ninety days after the
day on which it first becomes due and payable. There is no contest,
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<PAGE> 16
claim, or right of set-off, other than returns in the Ordinary Course of
Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Part 3.8 of the
Disclosure Letter contains a complete and accurate list of all Accounts
Receivable as of the date of the Interim Balance Sheet, which list sets forth
the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not reflected in the
Balance Sheet, or the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, which in no event exceeds $10,000,
all of which have been written off or written down to net realizable value in
the Balance Sheet or on the accounting records of the Company as of the Closing
Date, as the case may be. All inventories not written off have been priced at
the lower of cost. The quantities of each item of inventory are reasonable in
the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter,
the Company has no liabilities or obligations of any nature (whether known or
whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet and current
liabilities incurred in the Ordinary Course of Business since the date thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed (on a timely
basis since December 31, 1993) all Tax Returns that are or were required to be
filed by or with respect to any of them pursuant to applicable Legal
Requirements. Sellers have delivered to Buyer copies of, and Part 3.11 of the
Disclosure Letter contains a complete and accurate list of, all such Tax
Returns filed by the Company since December 31, 1993. The Company has paid, or
made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Company, except such Taxes, if any, as are listed in Part 3.11
of the Disclosure Letter and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in
the Balance Sheet.
(b) Except as set out in Part 3.11 of the Disclosure
Schedule, no United States federal income Tax Returns of the Company subject to
such Taxes have been audited by the
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IRS. Except as described in Part 3.11 of the Disclosure Letter, the Company has
not given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or for which the
Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate (determined in accordance
with GAAP) and are at least equal to the Company's liability for Taxes. There
exists no proposed tax assessment against the Company except as disclosed in
the Balance Sheet or in Part 3.11 of the Disclosure Letter. No consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There is no
tax sharing agreement that will require any payment by the Company after the
date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Company, and, no event has occurred or circumstance
exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
Except for group medical insurance and associated life
insurance others, the Company (i) has not contributed to any pension, profit
sharing, option or other incentive plan or other type of employee benefit plan,
(ii) does not maintain or has maintained, is or was a party to, or otherwise
participates or participated in, on its own behalf or on behalf of any former
employees, any pension, profit sharing, option or other incentive plan or other
type of employee benefit plan, or (iii) does not have any obligation to, or
customary arrangement with, former employees, if any, for bonuses, incentive
compensation, vacation, severance pay, sick pay, sick leave, insurance, service
award, relocation, disability or other benefits, whether oral or written.
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3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times, has been, in full
compliance with each Legal Requirement that is or was applicable to it or to
the conduct or operation of its business or the ownership or use of any of its
assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) in any material respect (A) may
constitute or result in a violation by the Company of, or a failure on the part
of the Company to comply with, any Legal Requirement, or (B) may give rise to
any obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time, any notice
or other communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any material Legal Requirement, or (B)
any actual, alleged, possible, or potential material obligation on the part of
the Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or to any of the assets owned or
used by, the Company (all of which authorizations have been delivered to
Buyer). Each Governmental Authorization listed or required to be listed in Part
3.14 of the Disclosure Letter is valid and in full force and effect. Except as
set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.14 of the
Disclosure Letter;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter, or (B) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any
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Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter;
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential material
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Part 3.14 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
their businesses in the manner they currently conduct and operate such
businesses and to permit the Company to own and use their assets in the manner
in which they currently own and use such assets except where the failure to
obtain a Governmental Authorization would not result in a material adverse
change to the Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the Company that
relates to or may affect the business of, or any of the assets owned or used
by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers and the Company, no such
Proceeding as described above has been Threatened. Sellers have delivered to
Buyer copies of all pleadings, correspondence, and other documents relating to
each Proceeding listed in Part 3.15 of the Disclosure Letter. The Proceedings
listed in Part 3.15 of the Disclosure Letter will not
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have a material adverse effect on the business, operations, assets, condition,
or prospects of the Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that relates to
the business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the
Company is subject to any Order that prohibits such officer, director, agent,
or employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to which it, or
any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation
of or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since
the date of the Balance Sheet, the Company has conducted its business only in
the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock; grant of
any registration
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rights; purchase, redemption, retirement, or other acquisition by the Company
of any shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries,
distributions or other compensation to any stockholder, director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees
of the Company;
(e) damage to or destruction or loss of any asset or property of
the Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects
of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or
transaction involving a total remaining commitment by or to the Company of at
least $10,000.
(g) except in the Ordinary Course of Business, sale, lease, or
other disposition of any asset or property (other than inventory in the
Ordinary Course of Business) of the Company or mortgage, pledge, or imposition
of any lien or other encumbrance on any material asset or property of the
Company, including the sale, lease, or other disposition of any of the
intellectual property assets;
(h) cancellation or waiver of any claims or rights with a value
to the Company in excess of $10,000;
(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to do any
of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete
and accurate list, and Sellers have delivered to Buyer true and complete
copies, of:
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(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount or value
in excess of $15,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount or value
in excess of $15,000;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or receipts of
the Company in excess of $15,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $15,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants,
or contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that
in any way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any Affiliate
of the Company to engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than direct payments
for goods and sales commission arrangements for employees;
(x) each power of attorney granted by the Company that is
currently effective and outstanding;
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(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for future capital
expenditures in excess of $15,000;
(xiii) each currently effective written warranty, guaranty,
indemnity, and or other similar undertaking with respect to contractual
performance extended by the Company other than in the Ordinary Course of
Business;
(xiv) each Contract for indebtedness of the Company
involving future aggregate payments of more than $10,000; and
(xv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) Sellers (and no Related Person of the Sellers) do not
have or may acquire any rights under, and Sellers do not have or may become
subject to, any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor
to (A) engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract identified or required to be identified in Part 3.17(a)
of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) the Company is, and at all times has been, in full
compliance with all applicable terms and requirements of each Contract under
which the Company has or had any material obligation or liability or by which
the Company or
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any of the material assets owned or used by the Company is or was bound;
(ii) each other Person that has or had any material
obligation or liability under any Contract under which the Company has or had
any rights is in full compliance with all material applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) the Company has not given to or received from any
other Person, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach of,
or default under, any Applicable Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Applicable Contracts with any Person and, to
Sellers' Knowledge, no such Person has made written demand for such
renegotiation.
(f) The Applicable Contracts relating to the sale or provision
of products or services by the Company have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been
paid or promised, that is or would be in violation of any Legal Requirement.
(g) The Company has made available to Buyer true, complete and
correct copies of the Contracts required to be set forth in Part 3.17 of the
Disclosure Letter.
3.18 INSURANCE
(a) Sellers have made available to Buyer:
(i) true and complete copies of all policies of insurance
to which the Company is a party or under which the Company, or any director of
the Company, is or has been covered at any time within the three years
preceding the date of this Agreement; and
(ii) true and complete copies of all pending applications
for policies of insurance.
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(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) All material assets, properties and risks of the Company
are, and for the past three years have been, covered by valid and, except for
policies that have expired under their terms in the ordinary course, currently
effective insurance policies or binders of insurance (including, without
limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company, in each case with
responsible insurance companies, in such types and amounts and covering such
risks as are consistent with customary practices and standards of companies
engaged in business and operations similar to those of the Company. There has
not been any claim under any such insurance policy during the past three years
that could reasonably be expected to have a material adverse effect on the
Company.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) Since January 1, 1993 the Company has not received (A)
any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(ii) The Company has paid all premiums due, and have
otherwise performed all of their obligations, under each policy to which the
Company is a party or that provides coverage to the Company or director
thereof.
(iii) The Company has given notice to the insurer of all
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
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Except as set forth in part 3.19 of the disclosure letter:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. Neither Sellers or the Company has any basis to expect,
nor has any of them received, any actual or Threatened Order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has had an interest, or
with respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used, or
processed by Sellers, or the Company, or from which Hazardous Materials have
been transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, to the Knowledge of Sellers and the
Company, Threatened claims, Proceedings or Encumbrances relating to any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or
any other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest.
(c) Neither Sellers or the Company has any basis to expect, nor
has any of them received, any citation, directive, inquiry, notice, Order,
summons, warning, or other communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential violation or failure
to comply with any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which the Company
had an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by the Company have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) The Company has no Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which the Company
(or any predecessor), has or had an interest.
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(e) There are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities, or incorporated into any structure therein or thereon. The
Company has not permitted or conducted any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has or had an interest.
(f) There has been no Release or Threat of Release, of any
Hazardous Materials at or from the Facilities, or from or by any other
properties and assets (whether real, personal, or mixed) in which the Company
has or had an interest.
(g) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed by
Sellers or the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by the
Company with Environmental Laws.
(h) There are no underground or above-ground storage tanks,
incinerators or surface impoundments at, on, or about under or within any real
property operated or controlled, in whole or in part by the Company.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of the
Company, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since December 31, 1997; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under the Company's
insurance, medical, welfare, or vacation plan, or any other employee benefit
plan.
(b) No employee or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties
as an employee or director of the Company, or (ii) the ability of the Company
to conduct its business, including any Proprietary Rights Agreement with
Sellers or the Company by any such employee or director. No director, officer,
or other key employee of the
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Company presently intends to terminate his employment with the Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to any collective
bargaining or other labor Contract. There has not been, there is not presently
pending or existing, and to Sellers' Knowledge there is not threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any proceeding against or affecting the Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. No event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by the Company, and no such action is contemplated by the Company.
The Company has complied in all respects with all Legal Requirements relating
to employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant closing. The
Company is not liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) The Company does not own or licenses for use any patents,
trademarks, trade names, service marks, mask works or copyrights, other than
the common trade law names, the common law trade names listed on 3.22 of the
Disclosure Letter.
(b) There has not been any actual or alleged infringement or use
or misuse by any party of the Company's trade secrets, confidential information
or other intellectual property rights.
3.23 CERTAIN PAYMENTS
Neither the Company or any director, officer, agent, or employee
of the Company, or any other person associated with or acting for or on behalf
of the Company, has directly or indirectly and in violation of any Legal
Requirement (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any person, private or public,
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regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any Affiliate
of the Company, (b) established or maintained any fund or asset that has not
been recorded in the books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement
and no statement in the Disclosure Letter knowingly omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Neither Sellers or any Related Person of any Seller or of the
Company has any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to the Company's
business. Neither Sellers or any Related Person of any Seller or of the Company
owns (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that (i) has business dealings or a
material financial interest in any transaction with the Company, or (ii)
engages in competition with the Company with respect to any line of the
products or services of the Company (a "Competing Business") in any market
presently served by the Company. Except as set forth in Part 3.25 of the
Disclosure Letter, neither Sellers or any Related Person of any Seller or of
the Company is a party to any Contract with, or has any claim or right against
the Company that will survive the Closing.
3.26 BROKERS OR FINDERS
Sellers, the Company and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND BUYER
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Acquisition and Buyer (the "Buyer Companies") jointly and
severally represent and warrant to Sellers as follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition will at the Closing Date be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Acquisition and
Buyer has the corporate power and authority to own or lease and operate its
properties to carry on its business as now being conducted, and is duly
qualified and in good standing and authorized to do business as a foreign
corporation in each jurisdiction in which the character of its properties or
the nature of its business requires such qualification and authorization except
where the failure to so qualify would not have a material adverse effect on the
Buyer and Acquisition, taken as a whole.
4.2 AUTHORITY
Each of Acquisition and Buyer has the corporate power and has
taken all necessary corporate action to authorize Acquisition or Buyer as the
case may be, to execute, deliver and perform the Agreement and to consummate
the transactions contemplated thereby. The execution and delivery by each of
Acquisition and Buyer of this Agreement and the Employment Agreement to which
each is a party constitutes the valid and legally binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as may be limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
4.3 CAPITALIZATION
As of the date hereof, the authorized common stock of the Buyer
consist of 50,000,000 shares of common stock, $.001 par value per share, of
which 4,712,372 shares are issued and outstanding. All of the outstanding
common stock of the Buyer has been duly authorized and validly issued and are
fully paid and nonassessable. The shares of the Buyer's Common Stock to be
delivered to Sellers at Closing pursuant to Section 2.7 will be duly
authorized, validly issued, fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Buyer, are complete, in all material respects, and correct
and have been maintained in
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accordance with sound business practices, including the maintenance of an
adequate system of internal controls.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against
Buyer or Acquisition and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
contemplated transactions. To Buyer's and Acquisition's knowledge, no such
proceeding has been threatened.
4.6 BROKERS OR FINDERS
Buyers and Acquisition and their officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold the Company and Sellers
harmless from any such payment alleged to be due by or through Buyer or
Acquisition as a result of the action of Buyer and Acquisition or their
officers or agents.
5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company and its Representatives to, (a) afford Buyer
and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
personnel, properties (including subsurface testing), contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data pertaining to the Company as Buyer may reasonably request,
and (c) furnish Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information pertaining to the Company as Buyer
may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date, Sellers
will cause the Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business;
(b) preserve intact the current business organization of the
Company, keep available the services of the
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current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the status
of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing Date, Sellers will not, and
will cause the Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement,
Sellers will, and will cause the Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, Sellers
will promptly notify Buyer in writing if Sellers become aware of any fact or
condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if any
Seller becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Disclosure Letter if the Disclosure Letter were dated the
date of the occurrence or discovery of any such fact or condition, Sellers will
promptly deliver to Buyer a supplement to the Disclosure Letter specifying such
change. During the same
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period, Sellers will promptly notify Buyer of the occurrence of any Breach of
any covenant of Sellers in this Section 5 or of the occurrence of any event
that may make the satisfaction of the conditions in Section 7 impossible or
unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated
pursuant to Section 10, Sellers will not, and the Company will not and each of
their Representatives will not directly or indirectly solicit, initiate or
encourage, accept or discuss any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits
of any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company. Sellers or the Company will promptly notify Buyer of any such
inquiries or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers
and the Company will use their Best Efforts to cause the conditions in Section
7 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer
will promptly notify Sellers in writing if Buyer becomes aware of any fact or
condition that causes or constitutes a Breach of any of Buyer's or
Acquisition's representations and warranties as of the date of this Agreement,
or if Buyer becomes aware of the occurrence after the date of this Agreement or
any fact or condition that would, except as expressly contemplated by this
Agreement, cause or constitute a Breach of any such representation or warranty.
6.2 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Buyer
will use its Best Efforts to cause the conditions in Section 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S OBLIGATION
TO CLOSE
Buyer's and Acquisition's obligations to consummate the Merger
and to take the other actions required to
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be taken by Buyer and Acquisition at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer and Acquisition, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and the Company's representations and warranties
in this Agreement must have been accurate in all material respects as of the
date of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers and the
Company are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing, must have been duly performed and complied with in all
material respects.
(b) There shall be delivered at Closing (i) the Employment
Agreements with Doug Carroll and Ronald C. Pace ("Carroll" and "Pace,"
respectively) in the form of Exhibit 7.2(b)(i) (the "Employment Agreements")
executed by Carroll and Pace and (ii) the certificate executed by Sellers and
an officer of the Company representing to Buyer and Acquisition that Sellers'
and the Company's representations and warranties in this Agreement was accurate
in all material respects as to the date of this Agreement and is accurate in
all material respects as of the Closing as if made on the Closing Date, and
(iii) each of the other covenants and obligations in the Agreement must have
been performed and complied with in all respects.
7.3 CONSENTS
Each of the consents identified in subpart ____ of the
Disclosure Letter, must have been obtained and must be in full force and
effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to
Buyer:
(a) an opinion of Edwards Friedewald & Grayson, dated the Closing
Date, in the form of Exhibit 7.4(a);
(b) such other documents as Buyer or its counsel may reasonably
request for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 8.4(a), (ii) evidencing the accuracy of any of Sellers'
and the Company's
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representations and warranties, (iii) evidencing the performance by Sellers,
the Company, or the compliance by Sellers or the Company with, any covenant or
obligation required to be performed or complied with by such party, (iv)
evidencing the satisfaction of any condition referred to in this Section 7, or
(v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced, pending or Threatened any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER PROCEEDS
There must not have been made or Threatened by any Person any
claim asserting that such Person (a) is the holder or the beneficial owner of,
or has the right to acquire or to obtain beneficial ownership of, any stock of,
or any other voting, equity, or ownership interest in, the Company, or (b) is
entitled to all or any portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other order by any
federal or state court preventing or consummation of the transactions
contemplated in this Agreement has been issued and continues in effect, and
this Agreement and the transactions contemplated hereby are not prohibited
under any applicable federal or state law or regulation.
7.9 MATERIAL ADVERSE CHANGE
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There shall have been no material adverse change in the
business, operations, prospects, financial condition or results of the Company.
7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering.
8. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S OBLIGATION
TO CLOSE
Sellers' and the Company's obligations to consummate the Merger
and to take the other actions required to be taken by Sellers and the Company
at the Closing is subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by Sellers and the
Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations and warranties
in this Agreement must have been accurate in all material respects as of the
date of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that Buyer and
Acquisition are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been performed and complied with
in all material respects.
(b) Buyer must have executed and delivered (i) the Employment
Agreement (ii) a certificate executed by an officer of Buyer representing to
Sellers that Buyer and Acquisition's representations and warranties contained
in this Agreement were accurate in all material respects as to the date of this
Agreement and is accurate in all material respects as of the Closing as if made
on the Closing.
8.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the following documents
to be delivered to Sellers:
(a) an opinion of Atlas, Pearlman, Trop & Borkson, P.A., dated
the Closing Date, in the form of Exhibit 8.3(a); and
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(b) such other documents as Sellers or their counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 7.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
8.4 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering.
8.5 GUARANTEES
At Closing, Buyer shall either (i) release; (ii) provide a
mechanism for; or (iii) agree to indemnify Sellers from any guarantees as set
forth on Schedule 8.5.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing,
be terminated:
(a) by either Buyer and Acquisition or Sellers and the Company
if a material Breach of any provision of this Agreement has been committed by
the other party and such Breach has not been cured or waived within 10 days of
the date of notification of such Breach;
(b) (i) by Buyer and Acquisition if any of the conditions in
Section 7 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date; or (ii) by Sellers and the
Company, if any of the conditions in Section 8 has not been satisfied of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Sellers and the Company to comply with their
obligations under this Agreement) and Sellers have not waived such condition on
or before the Closing Date;
(c) by mutual consent of Buyer and Acquisition and Sellers and
the Company; or
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(d) by either Buyer and Acquisition or Sellers and the Company
if the Closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before September 30, 1998, or such later date as the
parties may agree upon.
A party's right of termination under Section 9.1 is in addition
to any other rights it may have under this Agreement or otherwise, the exercise
of a right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section 9.1, all further obligations of the
parties under this Agreement terminate, except the obligations in Section 11.1
and 11.3 will survive; provided, however, that if this Agreement is terminated
by a party because of a breach of the Agreement by the other party or because
one or more of the conditions to the terminating party's obligations is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in
this Agreement, the Disclosure Letter and any of the supplements thereto, and
any other certificate or document delivered pursuant to this Agreement will
survive the Closing until the thirty-six (36) months from the Closing except
for the representations and warranties in Sections 3.3, 3.11, 3.15 and 3.19,
which shall survive for the applicable statute of limitations. The waiver of
any condition based on the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of Damages, or other remedy based
on such representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers will jointly and severally indemnify and hold harmless
Buyer, Acquisition, the Surviving Corporation, and their respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' and other professional fees) or diminution of
value, whether or not involving a third-
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party claim (collectively, "Damages"), arising, directly or indirectly, from or
in connection with:
(a) any Breach of any representation or warranty made by Sellers
in this Agreement, without giving effect to any supplement to Disclosure
Letter, the Disclosure Letter and any of the supplements thereto, or any other
certificate or document delivered by Sellers pursuant to this Agreement;
(b) any Breach by Sellers or the Company of any covenant or
obligation of Sellers or the Company in this Agreement;
(c) any product shipped or any services provided by Company
prior to the Closing Date; and
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Sellers or the Company (or
any Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 10.2 will not be exclusive
of or limit any other remedies that may be available to Buyer or the other
Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers for, and will pay
to the Sellers the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' and other professional
fees) or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by Buyer
in this Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Buyer (or any Person acting
on their behalf) in connection with any of the Contemplated Transactions.
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<PAGE> 40
The remedies provided in this Section 10.3 will not be exclusive
of or limit any other remedies that may be available to Sellers.
10.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with prior to the
Closing Date, other than those in Sections 3.3, 3.11, 3.15 and 3.19, unless on
or before thirty-six (36) months from the date of Closing, Buyer notifies
Sellers of a claim specifying the factual basis of that claim. A claim with
respect to Section 3.3, 3.11, 3.15 and 3.19 may be made at any time prior to
the applicable statute of limitations with respect to such matter.
If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and to comply with prior to the
Closing Date, unless on or before thirty-six (36) months from the date of
Closing, Sellers notify Buyer of claims specifying the factual basis of that
claim.
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Sections 10.2 or 10.3 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may have
to any indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnified
party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.5(a) is brought
against an indemnified party and it gives notice, unless the claim involves
Taxes, to the indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding and, to
the extent that it wishes (unless (i) the indemnifying party is also a party to
such Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such
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<PAGE> 41
Proceeding with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding other than
reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in that Proceeding are within the scope
of and subject to indemnification; (ii) no compromise or settlement of such
claims may be effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no effect
on any other claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no liability with
respect to any compromise or settlement of such claims effected without its
consent. If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the indemnified party of
its election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding,
but the indemnifying party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated
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Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to
this Agreement or the Contemplated Transactions will be issued, if at all, at
such time and in such manner as Buyer determines. Unless consented to by Buyer
in advance or required by Legal Requirements, prior to the Closing Sellers
shall, and shall cause the Company to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person
other than their professional advisors. Sellers and Buyer will consult with
each other concerning the means by which the Company's employees, customers,
and suppliers and others having dealings with the Company will be informed of
the Contemplated Transactions, and Buyer will have the right to be present for
any such communication.
11.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the Closing Date,
Buyer and Sellers will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Buyer, Acquisition and the Company
to maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings. Notwithstanding the foregoing, Buyer may disclose
information about this Agreement, the Sellers, or the Company in connection
with its initial public offering and any related obligations therewith.
(b) If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand, (b) sent by telecopier (with written confirmation
of receipt), provided that a copy is mailed by registered mail, return receipt
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requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the
other parties):
Sellers: Georgia Impressions, Inc.
4215 Wendell Drive, Suite H
Atlanta, Georgia 30336
Attention: ___________________
Facsimile No.: (___) ________
with a copy to: Edwards Friedewald & Grayson
272 Washington Ave.
Marietta, GA 30060
Attention: _____________________
Facsimile No.: (___) ________
Buyer or Acquisition: Office Center Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
Facsimile No.: (212) 686-6623
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Facsimile No.: (954) 766-7800
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this
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Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement
without the prior consent of the other parties. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the heirs, successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this
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Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.11 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred
to in this Agreement, time is of the essence.
11.12 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Delaware without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION /s/ William D. Carroll
__________________________________
WILLIAM D. CARROLL
/s/ R.J. Gillon, Jr. /s/ Ronald C. Pace
By:___________________________ __________________________________
Name: Robert J. Gillon, Jr. RONALD C. PACE
Title:
ACQUISITION:
OFFICE CENTRE GEORGIA
/s/ R.J. Gillon, Jr.
By:___________________________
Name: ROBERT J. GILLON, JR.
Title:
COMPANY:
GEORGIA IMPRESSIONS, INC.
/s/ Ronald C. Pace
By:___________________________
Name: RONALD C. PACE
Title:
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<PAGE> 47
GEORGIA IMPRESSIONS, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit A Independent Sales Groups Commission
Exhibit 7.2(b)(i) "Employment Agreement"
Exhibit 7.4(a) Opinion of Edwards Friedewald & Grayson
Exhibit 8.3(a) Opinion of Atlas, Pearlman, Trop & Borkson,
P.A.
SCHEDULES
---------
Schedule 3.1 (a) Organization and Good Standing
Schedule 3.2(b) Authority; No Conflict
Schedule 3.3 Capitalization
Schedule 3.5 Books and Records
Schedule 3.6 Real Property; Encumbrances
Schedule 3.14 Compliance with Legal Requirements;
Governmental Authorizations
Schedule 3.17 Contracts; No Default
Schedule 3.20 Employees
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.20
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of April 23, 1998, by
and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"), OFFICE
CENTRE FORT WORTH, INC., a Texas corporation to be formed as a wholly-owned
subsidiary of Buyer ("Acquisition"), METRO DATA SUPPLY, INC., a Texas
corporation ("Company"), CAREY BECK, an individual residing in Texas and JUDY
BECK, an individual residing in Texas (each a "Seller" or "Shareholder" and
collectively the "Sellers" or "Shareholders").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish to set
forth the terms and conditions upon which a merger of the Company with and into
Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition and the
Company deems the merger advisable and in the best interests of each of Buyer,
Acquisition and the Company and of their respective shareholders;
WHEREAS, the shareholders of Acquisition and the Company have approved
this Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the
merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any Contract except for this Agreement (a)
under which the Company has or may acquire any rights, (b) under which the
Company has or may become subject to any obligation or liability, or (c) by
which the Company or any of the assets owned, leased or used by it is or may
become bound.
<PAGE> 2
"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances in an effort to obtain
that such result is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision, and
the term "Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated
by this Agreement, including:
(a) the merger of the Company with and into Acquisition;
(b) the execution, delivery, and performance of the Employment
Agreement;
(c) the performance by Buyer, Acquisition, the Company and
Sellers of their respective covenants and obligations under this Agreement;
(d) delivery of the Purchase Price Consideration; and
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
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<PAGE> 3
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by Sellers
and the Company to Buyer concurrently with the execution and delivery of this
Agreement, a copy of which is attached hereto and incorporated herein for all
purposes.
"EBITDA"--earnings before interest, taxes, depreciation and
amortization, as adjusted.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
"ENCUMBRANCE"--any charge, claim, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership excepting out those liens for taxes not yet due
and payable and automatic statutory and constitutional liens.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"-- any cost,
damages, expense, liability, or obligation, arising from or under Environmental
Law or Occupational Safety and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law and for any natural
resource damages; or
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(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include
the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or
relates to:
(a) advising or notifying of appropriate authorities and
employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(e) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention;
(f) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES"--any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by the Company.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise
made available by or under the
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authority of any Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use of Hazardous
Materials in, on, under, about, or from the Facilities or any part thereof into
the Environment and any other act or thing that increases the danger, or risk
of danger, or poses an unreasonable risk of harm to persons or property on or
off the Facilities, or that may affect the value of the Facilities or the
Company.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"HAZARDOUS MATERIALS"--any waste or other substance that is
listed, defined, designated, classified or regulated as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"IRC"--the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of
a particular fact or other matter if (a) such
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<PAGE> 6
individual is actually aware of such fact or other matter or (b) a prudent
individual could be expected to discover or otherwise become aware of such fact
or other matter in the ordinary course of business.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, or statute.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program designed to provide
safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator of which
Sellers have knowledge.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the Board of Directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the
same line of businesses as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
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"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, general
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
child of the individual, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of voting securities or other voting interests representing at
least 5% of the outstanding voting power of a Person or equity securities or
other equity interests
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<PAGE> 8
representing at least 5% of the outstanding equity securities or equity
interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor
law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the merger
of Company into Acquisition.
"TAX"--any tax (including any income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax, or estate levy), levy,
assessment, tariff, duty, deficiency, or other fee in any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration,
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implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the Environment
that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing) that would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this Agreement,
at the Effective Time, Company shall be merged with and into Acquisition (the
"Merger"). The separate existence and corporate organization of the Company
shall thereupon cease and the Company and Acquisition shall thereupon be a
single corporation. Acquisition shall be the surviving corporation in the
Merger (the "Surviving Corporation") and shall continue its existence under the
provisions of the Texas Business Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the "Articles of
Merger") shall be executed by the Company and Acquisition and shall be filed by
Acquisition with the Secretary of State of the State of Texas. The Merger shall
become effective at such time as the Articles of Merger are filed with the
Secretary of State of the State of Texas, such time being hereinafter called
the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in effect
immediately prior to the Effective Time shall be and remain the Articles of
Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately prior to the
Effective Time shall be and remain the
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By-Laws of the Surviving Corporation from and after the Effective Time until
amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause Robert J. Gillon,
Jr., Carey Beck and [Buyer appointments] to be appointed as directors of the
Surviving Corporation. Aaron Beck shall be employed as a Senior Vice President,
Carey Beck shall be employed as a Vice President, Robert J. Gillon, Jr. and
such appointments as Buyer shall determine shall serve as officers of the
Surviving Corporation until their successors have been elected or appointed and
shall have qualified in accordance with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall be effective (i)
on the date the conditions in Sections 7 and 8 have been satisfied or otherwise
waived, or (ii) at such other date as the parties hereto shall agree in writing
(the "Closing Date"), and shall be held at the offices of Buyer's counsel at
200 East Las Olas Boulevard, Fort Lauderdale, Florida 33301 at 10:00 a.m.
(local time) or such other place and methods as agreed upon by the parties.
2.7 CONVERSION OF COMPANY COMMON STOCK
At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of capital stock of Buyer, Acquisition, the
Company or Sellers: (i) the shares of Common Stock of Acquisition purchased,
issued and outstanding immediately prior to the Effective Time shall be
converted as a result of the Merger and without any action on the part of the
holder thereof, into one (1) share of capital stock of the Surviving
Corporation; and (ii) the shares of the Company held by Sellers shall be
converted into and shall become, without further action on the part of the
Sellers, the right to receive six (6) times the Company's annualized EBITDA
based upon the annualized adjusted projected EBITDA for the nine (9) months
ended December 31, 1997. The Purchase Price (defined as such payable by the
Buyer) shall be Nine Hundred Sixty-Six Thousand Dollars ($966,000). The
consideration shall consist of (i) forty-five percent (45%) in shares of voting
Common Stock of Buyer which number of shares of Common Stock shall be
determined by dividing the amount determined above by Buyer's initial public
offering price per share (the "IPO Price") and (ii) fifty-five percent (55%) in
cash.
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3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and the Company hereby jointly and severally represent
and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of Texas, with full corporate
power and authority to conduct its business as it is now being conducted, to
own or use the properties and assets that it purports to own or use, and to
perform all its obligations under Applicable Contracts. The Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where such failure to so
qualify does not have a Material Adverse Effect.
(b) The Company has delivered to Buyer copies of the
Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and the Company, enforceable against Sellers and the
Company in accordance with its terms subject to bankruptcy, insolvency or other
laws affecting the rights of creditors generally and by general equity
principles. Sellers and the Company have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and to
perform their obligations under this Agreement. The Sellers and the Company
have approved this Agreement under applicable state corporate law provisions,
and such approval is binding.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time) other than as
a result of the actions of Buyer or Acquisition:
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the stockholders of the
Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person
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known to Sellers the right to challenge any of the contemplated SEC filing (but
not with regard to any matter which Sellers do not control), or to exercise any
material remedy or obtain any material relief under, any Legal Requirement or
any Order to which the Company or Sellers, or any of the assets owned or used
by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any material
Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or any of the assets owned or used by, the Company
other than as a result of the actions of Buyer or Acquisition;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of any tax other than as a result of the actions
of Buyer or Acquisition;
(v) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any material Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance
other than as a result of the actions of Buyer or Acquisition upon or with
respect to any of the material assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, neither
Sellers or the Company is or will be required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Sellers are acquiring the Buyer's Common Stock for his own account
and not with a view to its distribution within the meaning of Section 2(11) of
the Securities Act. Sellers acknowledge that each certificate representing
Buyer's Common Stock acquired pursuant to this Agreement shall bear the
following restrictive legend:
THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE
SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE
OF THE FOLLOWING: (i) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE
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SHARES UNDER THE SECURITIES ACT, OR (ii) AN OPINION OF
COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
Buyer agrees to pay the reasonable fees of the opinion referred in clause (ii)
above. The issuance and delivery of such opinion shall not be unreasonably
delayed. Sellers are "accredited investors" as such term is defined in the
Securities Act of 1933. Sellers further acknowledge they each shall be subject
to such "lock-up" restriction as may be imposed by the Buyer's underwriter or
any entity regulating the issuance of the Buyer's Common Stock in its initial
public offering.
Notwithstanding the foregoing, the requirements of this Section
3.2 (c) need not be satisfied with respect to the following transactions: (i)
transactions in compliance with Rule 144 or Rule 144A; (ii) transfers by the
estate of a Seller; (iii) the transfer by any Seller by gift, will, or
intestate succession to a Family member of such Seller or to a trustee of any
trust of which such Family members are beneficiaries; (iv) transfers by a
Seller to a Related Party; or (v) transfers not involving a change in
beneficial ownership.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 50,000
shares of common stock, $1.00 par value, of which 30,000 shares are issued and
outstanding and constitute all the shares of the Company. The Sellers are, and
will be on the Closing Date, the record and beneficial owner and holder of the
shares of the Company free and clear of all Encumbrances. All of the
outstanding shares of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of the
Company. None of the outstanding equity securities or other securities of the
Company was issued in violation of the Securities Act or any other Legal
Requirement. The Company does not own, or has any Contract to acquire, any
equity securities or other securities of any Person or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) unaudited balance sheets of
the Company as at March 31, 1996 and March 31, 1997 ("Balance Sheet") and the
related statements of income for each of the fiscal years then ended and (b) an
unaudited balance sheet of the Company as at December 31, 1997 (the "Interim
Balance Sheet") and the related statement of income for the nine
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(9) months then ended, as amended and supplemented by the Disclosure Letter, .
Such financial statements and notes fairly present in all material respects the
financial condition and the results of operations of the Company as at the
respective dates of and for the periods referred to in such financial
statements. No financial statements of any Person other than the Company are
required to be included in the financial statements.
3.5 BOOKS AND RECORDS
The books of account, minute books and other records of the
Company, all of which have been made available to Buyer, are, complete and
correct and have been maintained in accordance with sound business practices.
The minute books of the Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Board of
Directors. At the Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and
accurate list of all leaseholds, or other interests therein owned by the
Company. Sellers have delivered or made available to Buyer copies of the leases
and other instruments by which the Company occupies such real property and
interests and such instruments are true, complete and accurate. The Company
owns or leases all the properties and assets (whether personal, or mixed and
whether tangible or intangible) that they purport to own or lease located in
the facilities owned or operated by the Company and reflected as owned or
leased in the books and records of the Company, including all of the properties
and assets reflected in the Balance Sheet and the Interim Balance Sheet (except
for assets held under capitalized leases disclosed or not required to be
disclosed in Part 3.6 of the Disclosure Letter and personal property sold since
the date of the Interim Balance Sheet, as the case may be, in the Ordinary
Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Interim Balance Sheet
(except for personal property acquired and sold since the date of the Interim
Balance Sheet in the Ordinary Course of Business and consistent with past
practice), which subsequently purchased or acquired properties and assets
(other than inventory and short-term investments) are listed in Part 3.6 of the
Disclosure Letter. All material properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet are free and clear of all Encumbrances
except with respect to all such properties and assets, except for (a) mortgages
or security interests shown on the Balance Sheet or the Interim Balance Sheet
as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute
a default) exists, (b) mortgages or
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security interests incurred in connection with the purchase of assets after the
date of the Interim Balance Sheet (such mortgages and security interests being
limited to the property or assets so acquired), with respect to which no
default (or event that, with notice or lapse of time or both, would constitute
a default) exists, and (c) purchase money security interests and liens for
current taxes not yet due and payable.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
[Intentionally left blank.]
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the
Balance Sheet, the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. To Sellers'
knowledge, there is no contest, claim, or right of set-off, other than returns
in the Ordinary Course of Business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 3.8 of the Disclosure Letter contains a complete and accurate
list of all Accounts Receivable as of the date of the Interim Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not reflected in the
Balance Sheet, or the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, which in no event exceeds $10,000.
The quantities of each item of inventory are reasonable in the present
circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the
Company has no liabilities or obligations of any material nature (whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Interim Balance Sheet and
current liabilities incurred in the Ordinary Course of Business since the date
thereof.
3.11 TAXES
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(a) The Company has filed or caused to be filed (on a timely
basis since December 31, 1994) all Tax Returns that are or were required to be
filed by or with respect to any of them pursuant to applicable Legal
Requirements. Sellers have delivered to Buyer copies of, and Part 3.11 of the
Disclosure Letter contains a complete and accurate list of, all such Tax
Returns filed by the Company since December 31, 1994. The Company has paid, or
made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Company, except such Taxes, if any, as are listed in Part 3.11
of the Disclosure Letter and are being contested in good faith and as to which
adequate reserves have been provided in the Interim Balance Sheet.
(b) Except as set out in Part 3.11 of the Disclosure Schedule, no
United States federal income Tax Returns of the Company subject to such Taxes
have been audited by the IRS. Part 3.11 of the Disclosure Letter describes all
adjustments to the United States federal income Tax Returns filed by the
Company or any group of corporations including the Company for all taxable
years since December 31, 1994, and the resulting deficiencies proposed by the
IRS. Except as described in Part 3.11 of the Disclosure Letter, the Company has
not given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or for which the
Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on
the respective books of the Company are adequate and are at least equal to the
Company's liability for Taxes. There exists no proposed tax assessment against
the Company except as disclosed in the Balance Sheet or in Part 3.11 of the
Disclosure Letter. No consent to the application of Section 341(f)(2) of the
IRC has been filed with respect to any property or assets held, acquired, or to
be acquired by the Company. All Taxes that the Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Body or
other Person.
(d) All Tax Returns filed by (or that include on a consolidated
basis) the Company are true, correct, and complete. There is no tax sharing
agreement that will require any payment by the Company after the date of this
Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Interim Balance Sheet, there has not been
any material adverse change in the business, operations, properties, prospects,
assets, or condition of the
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Company, and, no event has occurred or circumstance exists that may result in
such a material adverse change.
3.13 EMPLOYEE BENEFITS
Except as disclosed in the Disclosure Letter for group medical
insurance and associated life insurance simple IRA plans and worker's
compensation unemployment, the Company (i) has not contributed to any pension,
profit sharing, option or other incentive plan or other type of employee
benefit plan, (ii) does not maintain or has maintained, is or was a party to,
or otherwise participates or participated in, on its own behalf or on behalf of
any former employees, any pension, profit sharing, option or other incentive
plan or other type of employee benefit plan, or (iii) does not have any
obligation to, or customary arrangement with, former employees, if any, for
bonuses, incentive compensation, vacation, severance pay, sick pay, sick leave,
insurance, service award, relocation, disability or other benefits, whether
oral or written.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) to the best of Sellers' knowledge, the Company is, and
at all times, has been, in full compliance with each Legal Requirement that is
or was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) to the best of Sellers' knowledge, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
in any material respect (A) may constitute or result in a violation by the
Company of, or a failure on the part of the Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the part of the Company
to undertake, or to bear all or any portion of the cost of, any remedial action
of any nature; and
(iii) the Company has not received, at any time, any notice
or other communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any material Legal Requirement, or (B)
any actual, alleged, possible, or potential material obligation on the part of
the Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization
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that is held by the Company or that otherwise relates to the business of, or to
any of the assets owned or used by, the Company (all of which authorizations
have been delivered to Buyer). Each Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter is valid and in
full force and effect. Except as set forth in Part 3.14 of the Disclosure
Letter:
(i) to the best of Sellers' knowledge, the Company is, and
at all times has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Letter;
(ii) to the best of Sellers' knowledge, no event has
occurred or circumstance exists that may (with or without notice or lapse of
time) (A) constitute or result directly or indirectly in a violation of or a
failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.14 of the Disclosure
Letter, or (B) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter;
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential material
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications, if any, required to have been filed
for the renewal of the Governmental Authorizations listed or required to be
listed in Part 3.14 of the Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
their businesses in the manner they currently conduct and operate such
businesses and to permit the Company to own and use their assets in the manner
in which they currently own and use such assets except where the failure to
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obtain a Governmental Authorization would not result in a material adverse
change to the Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) to Sellers' knowledge, that has been commenced by or
against the Company that relates to or may affect the business of, or any of
the assets owned or used by, the Company which Proceeding could have a material
adverse effect on the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers and the Company, no such
Proceeding as described above has been Threatened. Sellers have delivered to
Buyer copies of all pleadings, correspondence, and other documents relating to
each Proceeding listed in Part 3.15 of the Disclosure Letter. The Proceedings
listed in Part 3.15 of the Disclosure Letter will not have a material adverse
effect on the business, operations, assets, condition, or prospects of the
Company.
(b) Except as set forth in Part 3.15 of the Disclosure
Letter:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the Company
is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the Disclosure
Letter:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to which it, or
any of the assets owned or used by it, is or has been subject;
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(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation
of or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since the
date of the Interim Balance Sheet, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock; grant of
any registration rights; purchase, redemption, retirement, or other acquisition
by the Company of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of shares
of capital stock except as agreed to by Buyer in writing;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries,
distributions or other compensation to any stockholder, director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects
of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar
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agreement, or (ii) any Contract or transaction involving a total remaining
commitment by or to the Company of at least $10,000.
(g) except in the Ordinary Course of Business, sale, lease, or other
disposition of any asset or property (other than inventory in the Ordinary
Course of Business) of the Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of the Company,
including the sale, lease, or other disposition of any of the intellectual
property assets;
(h) cancellation or waiver of any claims or rights with a value to
the Company in excess of $10,000;
(i) material change in the accounting methods used by the Company;
or
(j) agreement, whether oral or written, by the Company to do any of
the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Sellers have delivered to Buyer true and complete copies,
of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount or value
in excess of $15,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount or value
in excess of $15,000;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or receipts of
the Company in excess of $15,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $15,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants,
or contractors
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regarding the appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any Affiliate
of the Company to engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments
for goods and sales commission arrangements for employees;
(x) each power of attorney granted by the Company that is
currently effective and outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for future capital
expenditures in excess of $15,000;
(xiii) each currently effective written warranty, guaranty,
indemnity, and or other similar undertaking with respect to contractual
performance extended by the Company other than in the Ordinary Course of
Business;
(xiv) each Contract for indebtedness of the Company involving
future aggregate payments of more than $15,000; and
(xv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
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(i) Sellers (and no Related Person of the Sellers) do not
have or may acquire any rights under, and Sellers do not have or may become
subject to, any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor
to (A) engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter,
each Contract, to Sellers' knowledge, identified or required to be identified
in Part 3.17(a) of the Disclosure Letter is in full force and effect and is
valid and enforceable in accordance with its terms.
(d) To Sellers' knowledge and except as set forth in Part 3.17(d) of
the Disclosure Letter:
(i) the Company is, and at all times has been, in full
compliance with all applicable terms and requirements of each Contract under
which the Company has or had any material obligation or liability or by which
the Company or any of the material assets owned or used by the Company is or
was bound;
(ii) each other Person that has or had any material
obligation or liability under any Contract under which the Company has or had
any rights is in full compliance with all material applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with, or result in
a violation or breach of, or give the Company or other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable Contract;
and
(iv) the Company has not given to or received from any other
Person, any notice or other communication (whether oral or written) regarding
any actual, alleged, possible, or potential violation or breach of, or default
under, any Applicable Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material
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amounts paid or payable to the Company under current or completed Applicable
Contracts with any Person and, to Sellers' Knowledge, no such Person has made
written demand for such renegotiation.
(f) The Applicable Contracts relating to the sale or provision of
products or services by the Company have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been
paid or promised, that is or would be in violation of any Legal Requirement.
(g) The Company has made available to Buyer true, complete and
correct copies of the Contracts required to be set forth in Part 3.17 of the
Disclosure Letter.
3.18 INSURANCE
(a) Sellers have made available to Buyer:
(i) true and complete copies of all policies of insurance to
which the Company is a party or under which the Company, or any director of the
Company, is covered; and
(ii) true and complete copies of all pending applications for
policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) All material assets, properties and risks of the Company are,
and for the past three years have been, covered by valid and, except for
policies that have expired under their terms in the ordinary course, currently
effective insurance policies or binders of insurance (including, without
limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company. There has not been any
claim under any such insurance policy during the
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past three years that could reasonably be expected to have a material adverse
effect on the Company.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) Since January 1, 1994 the Company has not received (A)
any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(ii) The Company has paid all premiums due, and have
otherwise performed all of their obligations, under each policy to which the
Company is a party or that provides coverage to the Company or director
thereof.
(iii) The Company has given notice to the insurer of all
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the Disclosure Letter:
(a) The Company is, and at all times has been, in material
compliance with, and has not been and is not in material violation of or liable
under, any Environmental Law. Neither Sellers or the Company have any
reasonable basis to expect, nor has any of them received, any written or
Threatened Order, notice, or other written communication from (i) any
Governmental Body, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has had an interest, or
with respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used, or
processed by Sellers, or the Company, or from which Hazardous Materials have
been transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, to the Knowledge of Sellers and the
Company, Threatened claims, Proceedings or Encumbrances relating to any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or
any
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other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest.
(c) Neither Sellers or the Company have any reasonable basis to
expect, nor has any of them received, any written citation, directive, inquiry,
notice, Order, summons, warning, or other written communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company had an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) The Company has no Environmental, Health, and Safety Liabilities
with respect to the Facilities or with respect to any other properties and
assets (whether real, personal, or mixed) in which the Company has or had an
interest except liabilities which would cause a material adverse effect on the
Company..
(e) To Sellers' knowledge, there are no Hazardous Materials present
on or in the Environment at the Facilities, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities, or incorporated into any structure therein
or thereon. The Company has not permitted or conducted any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which the Company has or had an interest.
(f) There has been no Release or, to Sellers' knowledge, Threat of
Release, of any Hazardous Materials at or from the Facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest.
(g) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed by
Sellers or the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by the
Company with Environmental Laws.
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(h) There are no underground (to Sellers' knowledge) or above-ground
storage tanks, incinerators or surface impoundments at, on, or under or within
any real property operated or controlled, in whole by the Company.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of the
Company, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since December 31, 1997; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under the Company's
insurance, medical, welfare, or vacation plan, or any other employee benefit
plan.
(b) No employee (to Sellers' knowledge other than an officer) or
director of the Company is a party to, or is otherwise bound by, any agreement
or arrangement, including any confidentiality, non-competition, or proprietary
rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an employee or director of the
Company, or (ii) the ability of the Company to conduct its business, including
any Proprietary Rights Agreement with Sellers or the Company by any such
employee or director. No director, officer, or other key employee of the
Company presently intends to terminate his employment with the Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to any collective bargaining
or other labor Contract. There has not been, there is not presently pending or
existing, and to Sellers' Knowledge there is not threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
proceeding against or affecting the Company relating to the alleged violation
of any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting the Company or its premises, or (c) any
application for certification of a collective bargaining agent. To Sellers'
knowledge, no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by the Company, and no such action is contemplated by the Company.
The Company has complied in all respects with all Legal Requirements relating
to employment,
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equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing except where the
failure to comply would create a material adverse effect to Company. The
Company is not liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) The Company does not own or licenses for use any patents,
trademarks, trade names, service marks, mask works or copyrights.
(b) There has not been any actual or alleged infringement or use or
misuse by any party of the Company's trade secrets, confidential information or
other intellectual property rights.
3.23 CERTAIN PAYMENTS
To Sellers' knowledge, neither the Company or any director, officer,
agent, or employee of the Company, or any other person associated with or
acting for or on behalf of the Company, has directly or indirectly and in
violation of any Legal Requirement (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company
or any Affiliate of the Company, (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement and
no statement in the Disclosure Letter knowingly omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
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3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.25 of the Disclosure Letter, neither
Sellers or any Related Person of Sellers or of the Company has any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to the Company's business. Neither Sellers
or any Related Person of Sellers or of the Company owns (of record or as a
beneficial owner) an equity interest or any other financial or profit interest
in, a Person that (i) has business dealings or a material financial interest in
any transaction with the Company, or (ii) engages in competition with the
Company with respect to any line of the products or services of the Company (a
"Competing Business") in any market presently served by the Company. Except as
set forth in Part 3.25 of the Disclosure Letter, neither Sellers or any Related
Person of Sellers or of the Company is a party to any Contract with, or has any
claim or right against the Company that will survive the Closing.
3.26 BROKERS OR FINDERS
Sellers, the Company and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND BUYER
Acquisition and Buyer (the "Buyer Companies") jointly and severally
represent and warrant to Sellers as follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition will at the Closing Date be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Each of Acquisition and Buyer
has the corporate power and authority to own or lease and operate its
properties to carry on its business as now being conducted, and is duly
qualified and in good standing and authorized to do business as a foreign
corporation in each jurisdiction in which the character of its properties or
the nature of its business requires such qualification and authorization except
where the failure to so qualify would not have a material adverse effect on the
Buyer and Acquisition, taken as a whole.
4.2 AUTHORITY
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Each of Acquisition and Buyer has the corporate power and has taken
all necessary corporate action to authorize Acquisition or Buyer as the case
may be, to execute, deliver and perform the Agreement and to consummate the
transactions contemplated thereby. The execution and delivery by each of
Acquisition and Buyer of this Agreement and the Employment Agreement to which
each is a party constitutes the valid and legally binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as may be limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
4.3 CAPITALIZATION
As of the date hereof, the authorized common stock of the Buyer
consist of 50,000,000 shares of common stock, $.001 par value per share, of
which 4,712,372 shares are issued and outstanding (excluding shares to be
issued in the Buyer's Initial Public Offering or in other acquisitions. All of
the outstanding common stock of the Buyer has been duly authorized and validly
issued and are fully paid and nonassessable. The shares of the Buyer's Common
Stock to be delivered to Sellers at Closing pursuant to Section 2.7 will be
duly authorized, validly issued, fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of the Buyer, are complete, in all material respects, and correct and
have been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer
or Acquisition and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
contemplated transactions. To Buyer's and Acquisition's knowledge, no such
proceeding has been threatened.
4.6 BROKERS OR FINDERS
Buyers and Acquisition and their officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold the Company and Sellers harmless from any
such payment alleged to be due by or through Buyer or Acquisition as a result
of the action of Buyer and Acquisition or their officers or agents.
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4.7 NO FURTHER APPROVAL. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required by or with respect to Buyer, or Acquisition in connection
with the execution and delivery of this Agreement or the consummation by Buyer
or Acquisition of the Contemplated Transactions except as contemplated by this
Agreement.
4.8 EXCHANGE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
Buyer and Acquisition in reliance upon Buyer's and Acquisition's
representations to the Sellers, which by Buyer's and Acquisition's execution of
this Agreement Buyer and Acquisition hereby confirm, that shares of stock to be
received by Buyer will be acquired for investment for Buyer's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that Buyer has no present intention of granting any
participation in, or otherwise distributing the same. By executing this
Agreement, Buyer further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participation to such person or to any third person, with respect to
shares of stock.
4.9 INTENTION OF BUYER. Buyer has no current plan or intention to
liquidate Acquisition, or to merge with and into another corporation, to sell
or otherwise dispose of the stock of or to cause to sell or otherwise dispose
of any of its assets or any of the assets acquired from the Contemplated
Transactions.
5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Sellers will, and will cause the Company and its Representatives to, (a) afford
Buyer and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
personnel, properties (including subsurface testing), contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data pertaining to the Company as Buyer may reasonably request,
and (c) furnish Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information pertaining to the Company as Buyer
may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date,
Sellers will cause the Company to:
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(a) conduct the business of the Company only in the Ordinary Course
of Business;
(b) use reasonable commercial efforts to preserve intact the current
business organization of the Company, keep available the services of the
current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of the Company if any consent of Buyer
is requested by Seller or the Company; Buyer shall promptly, but no later than
thirty (30) days after notice, respond to such request.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, Sellers will not, and will
cause the Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers
will, and will cause the Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, Sellers
will promptly notify Buyer in writing if Sellers become aware of any fact or
condition that causes or constitutes a material Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if Sellers
become aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by
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this Agreement) cause or constitute a Breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Disclosure Letter if the Disclosure Letter
were dated the date of the occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, Sellers will
promptly notify Buyer of the occurrence of any Breach of any covenant of
Sellers in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 10, Sellers will not, and the Company will not and each of their
Representatives will not directly or indirectly solicit, initiate or encourage,
accept or discuss any inquiries or proposals from, discuss or negotiate with,
provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets of the Company,
or any of the capital stock of the Company, or any merger, consolidation,
business combination, or similar transaction involving the Company. Sellers or
the Company will promptly notify Buyer of any such inquiries or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers and
the Company will use their Best Efforts to cause the conditions in Section 7 to
be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer will
promptly notify Sellers in writing if Buyer becomes aware of any fact or
condition that causes or constitutes a Breach of any of Buyer's or
Acquisition's representations and warranties as of the date of this Agreement,
or if Buyer becomes aware of the occurrence after the date of this Agreement or
any fact or condition that would, except as expressly contemplated by this
Agreement, cause or constitute a Breach of any such representation or warranty.
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6.2 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Buyer will
use its Best Efforts to cause the conditions in Section 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S OBLIGATION TO
CLOSE
Buyer's and Acquisition's obligations to consummate the Merger and
to take the other actions required to be taken by Buyer and Acquisition at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Buyer and Acquisition,
in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and the Company's representations and warranties in
this Agreement must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers and the
Company are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing, must have been duly performed and complied with in all
material respects.
(b) There shall be delivered at Closing (i) the Employment
Agreements with Aaron Beck and Carey Beck ("Beck") in the forms of Exhibit
7.2(b)(i) (the "Employment Agreement") executed by Beck and (ii) the
certificate executed by Sellers and an officer of the Company representing to
Buyer and Acquisition that Sellers' and the Company's representations and
warranties in this Agreement was accurate in all material respects as to the
date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing Date, and (iii) each of the other covenants
and obligations in the Agreement must have been performed and complied with in
all respects.
7.3 CONSENTS
[NOT APPLICABLE; INTENTIONALLY LEFT BLANK.]
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
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(a) an opinion of Olson, Gibbons, Nicoud, Birne Sussman & Gueck,
L.L.P. dated the Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Buyer or its counsel may reasonably
request for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 8.4(a), (ii) evidencing the accuracy of any of Sellers'
and the Company's representations and warranties, (iii) evidencing the
performance by Sellers, the Company, or the compliance by Sellers or the
Company with, any covenant or obligation required to be performed or complied
with by such party, (iv) evidencing the satisfaction of any condition referred
to in this Section 7, or (v) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced, pending or Threatened any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, the Company, or (b) is entitled
to all or any portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other order by any federal
or state court preventing or consummation of
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the transactions contemplated in this Agreement has been issued and continues
in effect, and this Agreement and the transactions contemplated hereby are not
prohibited under any applicable federal or state law or regulation.
7.9 MATERIAL ADVERSE CHANGE
There shall have been no material adverse change in the business,
operations, prospects, financial condition or results of the Company.
7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering on or before
September 30, 1998.
8. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S OBLIGATION TO
CLOSE
Sellers' and the Company's obligations to consummate the Merger and
to take the other actions required to be taken by Sellers and the Company at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Sellers and the
Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations and warranties in
this Agreement must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that Buyer and Acquisition
are required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been performed and complied with in all material
respects.
(b) Buyer must have executed and delivered (i) the Employment
Agreement (ii) a certificate executed by an officer of Buyer representing to
Sellers that Buyer and Acquisition's representations and warranties contained
in this Agreement were accurate in all material respects as to the date of this
Agreement and is accurate in all material respects as of the Closing as if made
on the Closing.
8.3 ADDITIONAL DOCUMENTS
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Buyer and Acquisition must have caused the following documents to be
delivered to Sellers:
(a) an opinion of Atlas, Pearlman, Trop & Borkson, P.A., dated the
Closing Date, in the form of Exhibit 8.3(a); and
(b) such other documents as Sellers or their counsel may reasonably
request for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 7.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of any
condition referred to in this Section 8, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
(c) Buyer shall provide to Sellers a copy of Buyer's registration
statement concerning its initial public offering as filed with the Securities
and Exchange Commission.
8.4 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, the Company, or (b) is entitled
to all or any portion of the Merger consideration.
8.5 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
8.6 NO INJUNCTION
No preliminary or permanent injunction or other order by any federal
or state court preventing or consummation of the transactions contemplated in
this Agreement has been issued and continues in effect, and this Agreement and
the transactions
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contemplated hereby are not prohibited under any applicable federal or state
law or regulation.
8.7 RELEASE OF GUARANTIES
At the Closing, Buyer will have agreed to either (a) remove, (b)
make provision for, or (c) agree to indemnify Sellers on account of any
guaranties of Sellers set forth in Schedule 8.7.
8.8 CONSUMMATION OF RELATED TRANSACTIONS
On or prior to the Closing Date, each of the corporations listed on
Schedule 8.8 hereto, shall have merged with or into a wholly-owned subsidiary
of the Buyer or have otherwise become a wholly-owned subsidiary of Buyer.
8.9. RULE 144 REPORTING
With a view to making available the benefits of certain rules and
regulations of the Commission that may permit, subject to any lockup agreement
executed by Sellers, the sale of the Shares to the public without registration,
after such time as a public market exists for the Shares, the Buyer agrees to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act.
(b) For a period of two years from Closing file with the
Commission in a timely manner all reports and other documents required of the
Buyer under the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements);
(c) Until two years from the closing of this Agreement to
furnish to the Seller forthwith upon request a written statement by the Buyer
as to its compliance with the public information requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Buyer for an offering of its securities to the general
public), and the reporting requirements of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Buyer, and such other
reports and documents so filed by the Buyer as a Seller may reasonably request
in availing itself of any rule or regulation of the Commission allowing a
Seller to sell any such securities without registration.
8.10 INITIAL PUBLIC OFFERING
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Buyer shall have completed its Initial Public Offering on or before
September 30, 1998.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer and Acquisition or Sellers and the Company if a
material Breach of any provision of this Agreement has been committed by the
other party and such Breach has not been cured or waived within ten (10) days
of the date of notification of such Breach;
(b) (i) by Buyer and Acquisition if any of the conditions in Section
7 has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date; or (ii) by Sellers and the Company, if
any of the conditions in Section 8 has not been satisfied of the Closing Date
or if satisfaction of such a condition is or becomes impossible (other than
through the failure of Sellers and the Company to comply with their obligations
under this Agreement) and Sellers have not waived such condition on or before
the Closing Date;
(c) by mutual consent of Buyer and Acquisition and Sellers and the
Company; or
(d) by either Buyer and Acquisition or Sellers and the Company if
the Closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before September 30, 1998, or such later date as the
parties may agree upon.
A party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, the exercise of
a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement terminate, except the obligations in Section 11.1 and 11.3
will survive; provided, however, that if this Agreement is terminated by a
party because of a breach of the Agreement by the other party or because one or
more of the conditions to the terminating
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party's obligations is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter and any of the supplements thereto, and any
other certificate or document delivered pursuant to this Agreement will survive
the Closing until the sixteen (16) months from the Closing. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers will indemnify and hold harmless Buyer, Acquisition, the
Surviving Corporation, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss,
liability, claim, damage, expense (including costs of investigation and defense
and reasonable attorneys' and other professional fees), whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Sellers in
this Agreement, after giving effect to any Disclosure Letter, as amended, and
supplemented from time to time, and any other certificate or document delivered
by Sellers pursuant to this Agreement;
(b) any Breach by Sellers or the Company of any covenant or
obligation of Sellers or the Company in this Agreement;
(c) any product shipped or any services provided by Company prior to
the Closing Date; and
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Sellers or the Company (or
any Person acting on their behalf) in connection with any of the Contemplated
Transactions.
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The remedies provided in this Section 10.2 will not be exclusive of
or limit any other remedies that may be available to Buyer or the other
Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers for, and will pay to
the Sellers the amount of, any loss, liability, claim, damage, expense
(including costs of investigation and defense and reasonable attorneys' and
other professional fees), whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by Buyer in
this Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Buyer (or any Person acting
on their behalf) in connection with any of the Contemplated Transactions; and
(d) any third party claim on account of Buyer's initial public
offering, other than as a result of actions or statements of Sellers or the
Company.
The remedies provided in this Section 10.3 will not be exclusive of
or limit any other remedies that may be available to Sellers.
10.4 TIME LIMITATIONS AND DOLLAR LIMITATIONS
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with prior to the
Closing, unless on or before twelve (12) months from the date of Closing, Buyer
notifies Sellers of a claim specifying the factual basis of that claim.
If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and to comply with prior to the
Closing Date, unless on or before twelve (12) months from the date of Closing,
Sellers notify Buyer of claims specifying the factual basis of that claim
except for those provisions of Sections 8.9 - 8.10 shall survive.
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Neither Sellers nor Company will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a), clause (b) or, to the extent relating to any failure to perform or comply
prior to the Closing, clause (c) of Section 10.2 until the total of all Damages
with respect to such matters exceeds $10,000, and then only for the amount by
which such Damages exceed $10,000. Notwithstanding anything herein to the
contrary, the maximum amount Sellers shall be liable for indemnification claims
shall not exceed $425,000 in the aggregate provided, however, that such
limitation shall be $966,000 for any breach of a representation or warranty
contained in Sections 3.11 and 3.19. In case of a breach of a representation
and warranty contained in Sections 3.11 and 3.19, Sellers may at their option,
settle a portion of such claims for indemnification with shares of Buyer's
Common Stock received by Sellers under this Agreement. For purposes of this
indemnification, such shares shall be valued at the IPO Price for Buyer's
Common Stock.
Neither Buyer nor Acquisition will have any liability (for
indemnification or otherwise with respect to any matters described in Section
10.3 until the total of all damages with respect to such matters exceeds
$10,000, then only for the amount by which such damage exceeds $10,000.
Notwithstanding anything herein to the contrary, the maximum amount the Company
shall be liable for indemnification claims shall not exceed $450,000 in the
aggregate.
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Sections
10.2 or 10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement
of such claim, but the failure to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnified
party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.5(a) is brought
against an indemnified party and it gives notice, unless the claim involves
Taxes, to the indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding and, to
the extent that it wishes (unless (i) the indemnifying party is also a party to
such Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide
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reasonable assurance to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding,
in each case subsequently incurred by the indemnified party in connection with
the defense of such Proceeding other than reasonable costs of investigation. If
the indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and (iii) the indemnified party
will have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an indemnifying
party of the commencement of any Proceeding and the indemnifying party does
not, within ten days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination made in
such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding,
but the indemnifying party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
10.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim may be asserted by notice to the party from whom
indemnification is sought.
11. GENERAL PROVISIONS
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11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection with
the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines. Unless consented to by Buyer in
advance or required by Legal Requirements, prior to the Closing Sellers shall,
and shall cause the Company to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person other than their
professional advisors. Sellers and Buyer will consult with each other
concerning the means by which the Company's employees, customers, and suppliers
and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for any
such communication.
11.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the Closing Date, Buyer
and Sellers will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Buyer, Acquisition and the Company
to maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings. Notwithstanding the foregoing, Buyer may disclose
information about this Agreement, the Sellers, or the Company in connection
with its initial public offering and any related obligations therewith.
(b) If the Contemplated Transactions are not consummated, each party
will return or destroy as much of such written information as the other party
may reasonably request and agree to keep any confidential information
confidential.
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11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the
other parties):
Sellers: Metro Data Supply, Inc.
Post Office Box 1668
Hurst, Texas 76053
Attention: Carey Beck
with a copy to: Olson, Gibbons, Nicoud, Birne, Sussman &
Gueck, LLP
2200 Ross Avenue, Suite 2525
Dallas, Texas 75201
Attention: Bert Starr, Esq.
Facsimile No.: (214) 979-7301
Buyer or Acquisition: Office Center Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
Facsimile No.: (212) 686-6623
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Facsimile No.: (954) 766-7800
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or
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privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement and the Disclosure Letter supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement
without the prior consent of the other parties. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the heirs, successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or
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unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
11.11 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.
11.12 GOVERNING LAW
This Agreement will be governed by the laws of the State of Delaware
without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION /s/Carey Beck
-----------------------------
CAREY BECK
By: /s/Robert J. Gillon, Jr.
- --------------------------- /s/Judy Beck
-------------------------
Name: JUDY BECK
Title:
ACQUISITION:
OFFICE CENTRE FORT WORTH, INC.
By: /s/Robert J. Gillon, Jr.
-------------------------------
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Name: Robert J. Gillon, Jr.
Title:
COMPANY:
METRO DATA SUPPLY, INC.
By: /s/Carey Beck
------------------------------------
Name: Carey Beck
Title: President
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METRO DATA SUPPLY, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 3.1 Organization
Exhibit 3.2 Resolutions
Exhibit 3.3 Capitalization
Exhibit 3.4 Financial Statements
Exhibit 3.6 Assets
Exhibit 3.8 Accounts Receivable
Exhibit 3.9 Inventory
Exhibit 3.10 Liabilities
Exhibit 3.11 Taxes
Exhibit 3.14 Governmental Requirements
Exhibit 3.17 Contracts
Exhibit 3.18 Insurance
Exhibit 3.20 List of Employees
Exhibit 3.25 Relationships with Related Persons
Exhibit 7.2(b)(i) The "Employment Agreement"
Exhibit 7.4(a) Opinion of Olson, Gibbons, Nicoud, Birne
Sussman & Gueck, L.L.P.
Exhibit 8.3(a) Opinion of Atlas, Pearlman, Trop &Borkson, P.A.
SCHEDULES
---------
Schedule 3.1 Organization and Good Standing
Schedule 3.2 Authority
Schedule 3.3 Capitalization
Schedule 3.4 Financial Statements
Schedule 3.5 Books and Records
Schedule 3.6 Real Property; Encumbrances
Schedule 3.7 Condition and Sufficiency of Assets
Schedule 3.8 Accounts Receivable
Schedule 3.9 Inventory
Schedule 3.10 No Undisclosed Liabilities
Schedule 3.11 Taxes
Schedule 3.12 No Material Adverse Change
Schedule 3.13 Employee Benefits
Schedule 3.14 Compliance with Legal Requirements;
Governmental Authorizations
Schedule 3.15 Legal Proceedings; Orders
Schedule 3.16 Absence of Certain Changes and Events
Schedule 3.17 Contracts
Schedule 3.18 Insurance
Schedule 3.19 Environmental Matters
Schedule 3.20 Employees
Schedule 3.21 Labor Relations; Compliance
Schedule 3.22 Intellectual Property
Schedule 3.23 Certain Payments
Schedule 3.25 Relationship with Related Parties
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.21
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of April 21,
1998, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE FORT WORTH, INC., a Texas corporation to be formed as a
wholly-owned subsidiary of Buyer ("Acquisition"), BCB OFFICE PRODUCTS COMPANY, a
Texas corporation ("Office") and BCB SPECIALTIES, INC., a Texas corporation
("Specialties") (each a "Company" and collectively the "Acquired Companies"),
BERNARD MANDEL, an individual resident in Texas (the "Seller" or "Shareholder")
and CYNTHIA MANDEL, an individual residing in Texas.
RECITALS
WHEREAS, Buyer, Acquisition, the Acquired Companies and the
Seller wish to set forth the terms and conditions upon which a merger of the
Acquired Companies with and into Acquisition will occur and provide for the
representations, warranties, agreements, and conditions applicable to the
transactions contemplated by this Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition
and the Acquired Companies deems the merger advisable and in the best interests
of each of Buyer, Acquisition and the Company and of their respective
shareholders.
WHEREAS, the shareholders of Acquisition and the Company have
approved this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section
1:
"ACQUIRED COMPANIES"--as defined in the Recitals
of this Agreement.
"APPLICABLE CONTRACT"--any Contract (a) under
which any Acquired Company has or may acquire any rights, (b) under which any
Acquired Company has or may become subject to any obligation or liability, or
(c) by which any Acquired Company or
<PAGE> 2
any of the assets owned, leased or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
and the term "Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this
Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the
Closing actually takes place.
"COMPANY"--as defined in the Recitals of this
Agreement.
"CONSENT"--any approval, consent, ratification,
waiver, or other authorization (including any Governmental
Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of the Acquired Companies with and
into Acquisition;
(b) the execution, delivery, and performance of the
Employment Agreement; and
(c) the performance by Buyer, Acquisition, the
Acquired Companies and Seller of their respective covenants and obligations
under this Agreement;
"CONTRACT"--any agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether express or implied)
that is legally binding.
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"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered
by Seller and Acquired Companies to Buyer concurrently with the execution and
delivery of this Agreement.
"EBITDA"--earnings before interest, taxes,
depreciation and amortization, as adjusted as set forth on Schedule 2.7.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
"ENCUMBRANCE"--any charge, claim, lien, option,
pledge, security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--
any cost, damages, expense, liability, or obligation, arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses arising
under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law
or Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law and for any natural resource damages; or
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(d) any other compliance, corrective, investigative,
or remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response
action," include the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
ss. 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that
requires or relates to:
(a) advising or notifying of appropriate authorities
and employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release,
or minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent
in the transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(e) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention;
(f) pollution, contamination, protection of the
Environment, human health or safety.
"ERISA"--the Employee Retirement Income Security Act
of 1974 or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently or formerly owned or operated by any Acquired Company and
any buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by any Acquired
Company.
"GOVERNMENTAL AUTHORIZATION"--any approval,
consent, license, permit, waiver, or other authorization issued,
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granted, given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment and any other act or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Acquired Companies.
"HAZARDOUS MATERIALS"--any waste or other substance
that is listed, defined, designated, classified or regulated as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"IRC"--the Internal Revenue Code of 1986 or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service
or any successor agency, and, to the extent relevant, the United
States Department of the Treasury.
"KNOWLEDGE"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if (a) such individual is
actually aware of such fact or other matter or (b) a prudent individual could be
expected to discover or otherwise
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become aware of such fact or other matter in the ordinary course of business.
A Person (other than an individual) will be deemed
to have "Knowledge" of a particular fact or other matter if any
individual who is serving, or who has at any time served, as a
director or officer of such Person has, or at any time had, Knowledge of such
fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local,
municipal, or other administrative order, constitution, law, ordinance,
principle of common law, regulation, or statute.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal
Requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program designed to
provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction,
judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered
by any court, administrative agency, or other Governmental Body or by any
arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by
a Person will be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by
the board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the Board of Directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of businesses as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including
any non-profit corporation), general or limited partnership,
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limited liability company, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.
"PROCEEDING"--any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular
individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly
controlled by such individual or one or more members of such individual's
Family;
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual
or one or more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an
individual:
(a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or indirectly under
common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
general partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) For purposes of this definition, (a) the "Family"
of an individual includes (i) the individual, (ii) the individual's spouse,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with
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such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular
Person, any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLER"--as defined in the first paragraph of this
Agreement.
"SUBSIDIARY"--with respect to any Person (the
"Owner"), any corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other Person's
board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that
survives the merger of Acquisition into the Acquired Company.
"TAX"--any tax (including any income tax, capital
gains tax, value added tax, sales tax, property tax, gift tax, or estate levy),
levy, assessment, tariff, duty, deficiency, or other fee in any related charge
or amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
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"TAX RETURN"--any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a
Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action,
or other matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has been given
(orally or in writing) that would lead a prudent Person to conclude that such a
claim, Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of
this Agreement, at the Effective Time, each Acquired Company shall be merged
with and into Acquisition (the "Merger"). The separate existence and corporate
organization of each Acquired Company shall thereupon cease and the Acquired
Companies and Acquisition shall thereupon be a single corporation. Acquisition
shall be the surviving corporation in the Merger (the "Surviving Corporation")
and shall continue its existence under the provisions of the Texas Business
Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the
"Articles of Merger") shall be executed by each Acquired Company and Acquisition
and shall be filed with the Secretary of State of the State of Texas. The Merger
shall become effective at such time as the Articles of Merger are filed with the
Secretary of State of the State of Texas, such time being hereinafter called the
"Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in
effect immediately prior to the Effective Time shall be and remain the Articles
of Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by
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law. Buyer shall deliver to Seller a copy of such Articles prior to Closing.
2.4 BY-LAWS
The By-Laws of Acquisition as in effect
immediately prior to the Effective Time shall be and remain the By-Laws of the
Surviving Corporation from and after the Effective Time until amended as
provided by law. Buyer shall deliver to Seller a copy of such Bylaws prior to
Closing.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause
Robert J. Gillon, Jr., and Buyer appointments to be appointed directors of the
Surviving Corporation. Bernard Mandel shall serve as an account executive and
Robert J. Gillon, Jr., and such other officers as Buyer shall direct shall serve
as the officers of the Surviving Corporation until their successors have been
elected or appointed and shall have qualified in accordance with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall
be effective (i) on the date the condition set forth in Sections 7 and 8 have
been satisfied and otherwise waived, or (ii) at such other date as the parties
hereto shall agree in writing (the "Closing Date"), and shall be held at the
offices of Buyer's counsel at 200 East Las Olas Boulevard, Fort Lauderdale,
Florida 33301 at 10:00 a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
(a) At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of capital stock of Buyer,
Acquisition, the Acquired Companies or Seller: (i) the shares of Common Stock of
Acquisition purchased, issued and outstanding immediately prior to the Effective
Time shall be converted as a result of the Merger and without any action on the
part of the holder thereof, into 1 share of capital stock of the Surviving
Corporation and (ii) the shares of the Acquired Companies held by Seller shall
be converted into and shall become, without further action on the part of the
Seller, the right to receive six (6) times the Acquired Companies' EBITDA for
the year-ended December 31, 1997. The EBITDA shall be adjusted as set forth on
Schedule 2.7 resulting in an adjusted EBITDA of Fifty-Five Thousand Five Hundred
Dollars ($55,500). There shall be deducted from the consideration to be received
any payables of the Acquired Companies which are due past thirty (30) days at
Closing and adding back any increase in working capital of the Acquired
Companies from the working capital at December 31, 1997 as determined by Buyer.
There shall also be deducted any long-term indebtedness due at Closing. The
Acquired
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Companies' working capital at December 31, 1997 was ($110,776). The
consideration shall be paid in cash.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Acquired Companies hereby jointly and
severally represent and warrant to Buyer and Acquisition as
follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Each Acquired Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. Each Acquired Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
(b) Seller has delivered to Buyer copies of the
Organizational Documents of each Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and
binding obligation of Seller and the Acquired Companies, enforceable against
Seller and the Acquired Companies in accordance with its terms subject to
bankruptcy, insolvency or other laws affecting the rights of creditors
generally. Upon the execution and delivery by Seller of the Employment
Agreement, the Employment Agreement will constitute the legal, valid, and
binding obligations of Seller enforceable against Seller in accordance with its
respective terms. Seller and the Acquired Companies have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and to perform their obligations under this Agreement. The Seller and
the Acquired Companies have approved this Agreement under applicable state
corporate law provisions, and such approval is binding.
(b) Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in
a violation of (A) any provision of the Organizational Documents of the Acquired
Companies, or (B) any resolution adopted by the board of directors or the
stockholders of any Acquired Company;
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(ii) contravene, conflict with, or result in
a violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any material
remedy or obtain any material relief under, any Legal Requirement or any Order
to which the Acquired Companies or Seller, or any of the assets owned or used by
the Acquired Companies, may be subject;
(iii) contravene, conflict with, or result
in a violation of any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
material Governmental Authorization that is held by any Acquired Company or that
otherwise relates to the business of, or any of the assets owned or used by, any
Acquired Company;
(iv) cause Buyer or any Acquired Company to
become subject to, or to become liable for the payment of any tax;
(v) contravene, conflict with, or result in
a violation or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any material Applicable
Contract; or
(vi) result in the imposition or creation of
any Encumbrance upon or with respect to any of the material assets owned or used
by any Acquired Company.
Except as set forth in Part 3.2 of the
Disclosure Letter, neither Seller or an Acquired Company is or will be required
to give any notice to or obtain any Consent from any Person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions.
3.3 CAPITALIZATION
The authorized equity securities of Office consist
of 1,000 shares of common stock, $1.00 par value, of which 1,000 shares are
issued and outstanding and constitute all the shares of Office. The authorized
equity securities of Specialties consist of 1,000 shares of common stock, $1.00
par value of which 100 shares are issued and outstanding and constitute all the
shares of Specialties. Bernard Mandel is, and will be on the Closing Date, the
record and beneficial owner and holder of the shares of the Acquired Companies
free and clear of all Encumbrances. All of the outstanding shares of the
Acquired Companies have been duly authorized and validly issued and are fully
paid and nonassessable. There are no Contracts relating to the issuance, sale,
or transfer of any equity securities or other securities of any Acquired
Company. None of the outstanding equity securities or other securities of any
Acquired Company was issued in violation of the Securities Act or any other
Legal
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Requirement. No Acquired Company owns, or has any Contract to acquire, any
equity securities or other securities of any Person or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Seller has delivered to Buyer: unaudited consolidated
balance sheets of each Acquired Company as at December 31, 1996 and December 31,
1997 ("Balance Sheet") and the related statements of income for each of the
fiscal years then ended. Such financial statements fairly present in all
material respects the financial condition and the results of operations of the
Acquired Companies as at the respective dates of and for the periods referred to
in such financial statements. No financial statements of any Person other than
the Acquired Companies to be included in the financial statements.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record
books, and other records of the Acquired Companies, all of which have been made
available to Buyer, are, complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Acquired
Companies contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors, and
committees of the Board of Directors of the Acquired Companies. At the Closing,
all of those books and records will be in the possession of the Acquired
Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a
complete and accurate list of all real property, leaseholds, or other interests
therein owned by the Acquired Companies. Seller has delivered or made available
to Buyer copies of the deeds and leases and other instruments by which the
Acquired Companies occupy or acquired such real property and interests and such
instruments are true, complete and accurate. The Acquired Companies own (with
good and marketable title in the case of real property) or lease all the
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) that they purport to own or lease located in the facilities owned or
operated by the Acquired Companies and reflected as owned or leased in the books
and records of the Company, including all of the properties and assets reflected
in the Balance Sheet (except for assets held under capitalized leases disclosed
or not required to be disclosed in Part 3.6 of the Disclosure Letter and
personal property sold since the date of the Balance Sheet, as the case may be,
in the Ordinary Course of Business), and all of the properties and assets
purchased or otherwise acquired by the Acquired Companies since the date of the
Balance Sheet (except for personal property acquired and sold since the date of
the Balance Sheet in the Ordinary Course of Business and consistent
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with past practice), which subsequently purchased or acquired properties and
assets (other than inventory and short-term investments) are listed in Part 3.6
of the Disclosure Letter. All material properties and assets reflected in the
Balance Sheet are free and clear of all Encumbrances except with respect to all
such properties and assets, (a) mortgages or security interests shown on the
Balance Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the Balance
Sheet (such mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, (c) liens
for current taxes not yet due, and (d) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of the Acquired Companies, and (ii) zoning
laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment
of the Acquired Companies are structurally sound, in good operating condition
and repair, and adequate for the uses to which they are being put, and none of
such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies
that are reflected on the Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are, or will be
as of the Closing Date, current and collectible net of the respective reserves
shown on the Balance Sheet or on the accounting records of the Acquired
Companies as of the Closing Date (which reserves are calculated consistent with
past practice and, in the case of the reserve as of the Closing Date, will not
represent a greater percentage of the Accounts Receivable as of the Closing Date
than the reserve reflected in the Balance Sheet represented of the Accounts
Receivable reflected therein and will not represent a material adverse change in
the composition of such Accounts Receivable in terms of aging). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within ninety days after the day on which it first
becomes
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due and payable. There is no contest, claim, or right of set-off, other than
returns in the Ordinary Course of Business, under any Contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 3.8 of the Disclosure Letter contains a complete and accurate
list of all Accounts Receivable as of the date of the Balance Sheet, which list
sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Acquired Companies, whether
or not reflected in the Balance Sheet, consists of a quality and quantity usable
and salable in the Ordinary Course of Business, except for obsolete items and
items of below-standard quality, which in no event exceeds $10,000, all of which
have been written off or written down to net realizable value in the Balance
Sheet or on the accounting records of the Acquired Companies as of the Closing
Date, as the case may be. All inventories not written off have been priced at
the [lower of cost or net realizable value on and average cost basis.] The
quantities of each item of inventory are reasonable in the present circumstances
of the Acquired Companies.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure
Letter, to the Acquired Companies have no liabilities or obligations of any
nature (whether known or whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected or reserved against in the
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the date thereof.
3.11 TAXES
(a) The Acquired Companies have filed or caused to be
filed (on a timely basis since December 31, 1993) all Tax Returns that are or
were required to be filed by or with respect to any of them pursuant to
applicable Legal Requirements. Seller has delivered to Buyer copies of, and Part
3.11 of the Disclosure Letter contains a complete and accurate list of, all such
Tax Returns filed by the Acquired Companies since December 31, 1993. The
Acquired Companies have paid, or made provision for the payment of, all Taxes
that have or may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by any Acquired Company, except such Taxes,
if any, as are listed in Part 3.11 of the Disclosure Letter and are being
contested in good faith and as to which adequate reserves have been provided in
the Balance Sheet.
(b) Except as set out in Part 3.11 of the Disclosure
Schedule, no United States federal income Tax Returns of any Acquired Company
subject to such Taxes have been audited by the IRS for taxable years from 1993
through 1996. Part 3.11 of the Disclosure Letter contains a complete and
accurate list of
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any audits of all such Tax Returns, including a reasonably detailed description
of the nature and outcome of each audit. All deficiencies proposed as a result
of such audits have been paid, reserved against, settled, or, as described in
Part 3.11 of the Disclosure Letter, are being contested in good faith by
appropriate proceedings. Part 3.11 of the Disclosure Letter describes all
adjustments to the United States federal income Tax Returns filed by any
Acquired Company or any group of corporations including the Acquired Company for
all taxable years since December 31, 1993, and the resulting deficiencies
proposed by the IRS. Except as described in Part 3.11 of the Disclosure Letter,
no Acquired Company has given or been requested to give waivers or extensions
(or is or would be subject to a waiver or extension given by any other Person)
of any statute of limitations relating to the payment of Taxes of any Acquired
Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect
to Taxes on the respective books of each Acquired Company are adequate and are
at least equal to the Acquired Companies' liability for Taxes. There exists no
proposed tax assessment against any Acquired Company except as disclosed in the
Balance Sheet or in Part 3.11 of the Disclosure Letter. No consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by any Acquired Company.
All Taxes that any Acquired Company is or was required by Legal Requirements to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) any Acquired Company are true, correct, and complete in all
material respects. There is no tax sharing agreement that will require any
payment by the Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not
been any material adverse change in the business, operations, properties,
prospects, assets, or condition of the Company, and, no event has occurred or
circumstance exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
Except for group medical insurance and associated
life insurance [others], no Acquired Company (i) has contributed to any pension,
profit sharing, option or other incentive plan or other type of employee benefit
plan, (ii) maintains or has maintained, is or was a party to, or otherwise
participates or participated in, on its own behalf or on behalf of any former
employees, any pension, profit sharing, option or other incentive plan or other
type of employee benefit plan, or (iii) has any
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obligation to, or customary arrangement with, former employees, if any, for
bonuses, incentive compensation, vacation, severance pay, sick pay, sick leave,
insurance, service award, relocation, disability or other benefits, whether oral
or written.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the
Disclosure Letter:
(i) each Acquired Company is, and at all
times, has been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(ii) no event has occurred or circumstance
exists that (with or without notice or lapse of time) in any material respect
(A) may constitute or result in a violation by any Acquired Company of, or a
failure on the part of any Acquired Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the part of any Acquired
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) no Acquired Company has received, at
any time, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any material
Legal Requirement, or (B) any actual, alleged, possible, or potential material
obligation on the part of any Acquired Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
any Acquired Company or that otherwise relates to the business of, or to any of
the assets owned or used by, any Acquired Company (all of which authorizations
have been delivered to Buyer). Each Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter is valid and in full
force and effect. Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all
times has been, in full compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be identified in Part
3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance
exists that may (with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a violation of or a failure to comply with any
term or requirement of any Governmental Authorization listed or required to be
listed in
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Part 3.14 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter;
(iii) no Acquired Company has received any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible, or
potential material violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been
filed for the renewal of the Governmental Authorizations listed or required to
be listed in Part 3.14 of the Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part
3.14 of the Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Acquired Companies to lawfully conduct
and operate their businesses in the manner they currently conduct and operate
such businesses and to permit the Acquired Companies to own and use their assets
in the manner in which they currently own and use such assets except where the
failure to obtain a Governmental Authorization would not result in a material
adverse change to the Acquired Companies.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the
Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or against
any Acquired Company that relates to or may affect the business of, or any of
the assets owned or used by, any Acquired Company; or
(ii) that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of Seller and the
Acquired Companies, no such Proceeding as described above has been Threatened.
Seller has delivered to Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.15 of the Disclosure
Letter. The
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Proceedings listed in Part 3.15 of the Disclosure Letter will not have a
material adverse effect on the business, operations, assets, condition, or
prospects of any Acquired Company.
(b) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) there is no Order to which any Acquired
Company, or any of the assets owned or used by any Acquired Company, is subject;
(ii) Seller is not subject to any Order that
relates to the business of, or any of the assets owned or used by, any Acquired
Company; and
(iii) no officer, director, agent, or
employee of any Acquired Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of any Acquired Company.
(c) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) each Acquired Company is, and at all
times has been, in full compliance with all of the terms and requirements of
each Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance
exists that may constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or requirement of any
Order to which any Acquired Company, or any of the assets owned or used by any
Acquired Company, is subject; and
(iii) no Acquired Company has received any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any Order to
which any Acquired Company, or any of the assets owned or used by any Acquired
Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure
Letter, since the date of the Balance Sheet, the Acquired Companies have
conducted their business only in the Ordinary Course of Business and there has
not been any:
(a) change in any Acquired Company's authorized or
issued capital stock; grant of any stock option or right to purchase shares of
capital stock of any Acquired Company; issuance of any security convertible into
such capital stock;
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grant of any registration rights; purchase, redemption, retirement, or other
acquisition by any Acquired Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of any
Acquired Company;
(c) payment or increase by any Acquired Company of
any bonuses, salaries, distributions or other compensation to any stockholder,
director, officer, or employee;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of any Acquired Company;
(e) damage to or destruction or loss of any asset or
property of any Acquired Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of any Acquired Company, taken as a whole;
(f) entry into, termination of, or receipt of notice
of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to any
Acquired Company of at least $10,000.
(g) except in the Ordinary Course of Business, sale,
lease, or other disposition of any asset or property (other than inventory in
the Ordinary Course of Business) of any Acquired Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any material asset or property of
any Acquired Company, including the sale, lease, or other disposition of any of
the intellectual property assets;
(h) cancellation or waiver of any claims or rights
with a value to any Acquired Company in excess of $10,000;
(i) material change in the accounting methods used by
any Acquired Company; or
(j) agreement, whether oral or written, by any
Acquired Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a
complete and accurate list, and Seller has delivered to Buyer true and complete
copies, of:
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(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by any Acquired
Company of an amount or value in excess of $15,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to any Acquired
Company of an amount or value in excess of $15,000;
(iii) each Applicable Contract that was not
entered into in the Ordinary Course of Business and that involves expenditures
or receipts of any Acquired Company in excess of $15,000;
(iv) each lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements having
a value per item or aggregate payments of less than $15,000 and with terms of
less than one year);
(v) each licensing agreement or other
Applicable Contract with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the non-disclosure of
any of the Intellectual Property Assets;
(vi) each collective bargaining agreement
and other Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and
other Applicable Contract (however named) involving a sharing of profits,
losses, costs, or liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of any
Acquired Company or any Affiliate of any Acquired Company or limit the freedom
of any Acquired Company or any Affiliate of any Acquired Company to engage in
any line of business or to compete with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or profits, other than
direct payments for goods and sales commission arrangements for employees;
(x) each power of attorney granted by any
Acquired Company that is currently effective and outstanding;
(xi) each Applicable Contract entered into
other than in the Ordinary Course of Business that contains or
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provides for an express undertaking by any Acquired Company to be responsible
for consequential damages;
(xii) each Applicable Contract for future
capital expenditures in excess of $15,000;
(xiii) each currently effective written
warranty, guaranty, indemnity, and or other similar undertaking with respect to
contractual performance extended by any Acquired Company other than in the
Ordinary Course of Business;
(xiv) each Contract for indebtedness of any
Acquired Company involving future aggregate payments of more than $10,000; and
(xv) each amendment, supplement, and
modification (whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the
Disclosure Letter:
(i) Seller (and no Related Person of the
Seller) does not have or may acquire any rights under, and Seller does not have
or may become subject to, any obligation or liability under, any Contract that
relates to the business of, or any of the assets owned or used by, any Acquired
Company; and
(ii) no officer, director, agent, employee,
consultant, or contractor of any Acquired Company is bound by any Contract that
purports to limit the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct, activity, or
practice relating to the business of any Acquired Company, or (B) assign to any
Acquired Company or to any other Person any rights to any invention,
improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the
Disclosure Letter, each Contract identified or required to be identified in Part
3.17(a) of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the
Disclosure Letter:
(i) each Acquired Company is, and at all
times has been, in full compliance with all applicable terms and requirements of
each Contract under which such Acquired Company has or had any material
obligation or liability or by which such Acquired Company or any of the material
assets owned or used by such Acquired Company is or was bound;
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(ii) each other Person that has or had any
material obligation or liability under any Contract under which any Acquired
Company has or had any rights is in full compliance with all material applicable
terms and requirements of such Contract;
(iii) no event has occurred or circumstance
exists that (with or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of, or give any Acquired Company or
other Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Applicable Contract; and
(iv) no Acquired Company has given to or
received from any other Person, any notice or other communication (whether oral
or written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Applicable Contract.
(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to any Acquired Company under current or completed Applicable Contracts
with any Person and, to Seller's Knowledge, no such Person has made written
demand for such renegotiation.
(f) the Applicable Contracts relating to the sale or
provision of products or services by the Acquired Company have been entered into
in the Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
(g) The Company has made available to Buyer true,
complete and correct copies of the Contracts required to be set forth in Part
3.17 of the Disclosure Letter.
3.18 INSURANCE
(a) Seller has made available to Buyer:
(i) true and complete copies of all policies
of insurance to which any Acquired Company is a party or under which any
Acquired Company, or any director of any Acquired Company, is or has been
covered at any time within the three years preceding the date of this Agreement;
and
(ii) true and complete copies of all pending
applications for policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter describes:
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(i) any self-insurance arrangement by or
affecting any Acquired Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than
a policy of insurance, for the transfer or sharing of any risk by any Acquired
Company; and
(iii) all obligations of any Acquired
Company to third parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy under which such
coverage is provided.
(c) All material assets, properties and risks of any
Acquired Company are, and for the past three years have been, covered by valid
and, except for policies that have expired under their terms in the ordinary
course, currently effective insurance policies or binders of insurance
(including, without limitation, general liability insurance, property insurance
and workers' compensation insurance) issued in favor of any Acquired Company, in
each case with responsible insurance companies, in such types and amounts and
covering such risks as are consistent with customary practices and standards of
companies engaged in business and operations similar to those of the Acquired
Companies. There has not been any claim under any such insurance policy during
the past three years that could reasonably be expected to have a material
adverse effect on the Company.
(d) Except as set forth on Part 3.18(d) of the
Disclosure Letter:
(i) Since January 1, 1993 no Acquired
Company has received (A) any refusal of coverage or any notice that a defense
will be afforded with reservation of rights, or (B) any notice of cancellation
or any other indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not willing or
able to perform its obligations thereunder.
(ii) The Acquired Companies have paid all
premiums due, and have otherwise performed all of their obligations, under each
policy to which any Acquired Company is a party or that provides coverage to any
Acquired Company or director thereof.
(iii) The Acquired Companies have given
notice to the insurer of all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure
letter:
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(a) Each Acquired Company is, and at all times has
been, in full compliance with, and has not been and is not in violation of or
liable under, any Environmental Law. Neither Seller or any Acquired Company has
any basis to expect, nor has any of them received, any actual or Threatened
Order, notice, or other communication from (i) any Governmental Body or private
citizen acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or failure to
comply with any Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Seller or any Acquired Company has had an
interest, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or
processed by Seller, or any Acquired Company, or from which Hazardous Materials
have been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(b) There are no pending or, to the Knowledge of
Seller and the Acquired Companies, Threatened claims, Proceedings or
Encumbrances relating to any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which any Acquired Company has or had an interest.
(c) Neither Seller or any Acquired Company has any
basis to expect, nor has any of them received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which any Acquired Company had an interest, or with respect to any property
or facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by any Acquired Company have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(d) No Acquired Company has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or with respect to
any other properties and assets (whether real, personal, or mixed) in which any
Acquired Company (or any predecessor), has or had an interest.
(e) There are no Hazardous Materials present on or in
the Environment at the Facilities, including any Hazardous Materials contained
in barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
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permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities, or incorporated into any structure therein or thereon. No
Acquired Company has permitted or conducted any Hazardous Activity conducted
with respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has or had an interest.
(f) There has been no Release or Threat of Release,
of any Hazardous Materials at or from the Facilities, or from or by any other
properties and assets (whether real, personal, or mixed) in which any Acquired
Company has or had an interest.
(g) Seller has delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed by Seller or any Acquired Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by any Acquired Company with Environmental Laws.
(h) There are no underground or above-ground storage
tanks, incinerators or surface impoundments at, on, or about under or within any
real property operated or controlled, in whole or in part by any Acquired
Company.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a
complete and accurate list of the following information for each employee or
director of the Acquired Companies, including each employee on leave of absence
or layoff status: employer; name; job title; current compensation paid or
payable and any change in compensation since December 31, 1997; vacation
accrued; and service credited for purposes of vesting and eligibility to
participate under any Acquired Company's insurance, medical, welfare, or
vacation plan, or any other employee benefit plan.
(b) No employee or director of any Acquired Company
is a party to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, non-competition, or proprietary rights agreement, between
such employee or director and any other Person ("Proprietary Rights Agreement")
that in any way adversely affects or will affect (i) the performance of his
duties as an employee or director of any Acquired Company, or (ii) the ability
of any Acquired Company to conduct its business, including any Proprietary
Rights Agreement with Seller or the Acquired Companies by any such employee or
director. No director, officer, or other key employee of any Acquired Company
presently intends to terminate his employment with any Acquired Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to any
collective bargaining or other labor Contract. There has not
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been, there is not presently pending or existing, and to Seller's Knowledge
there is not threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any proceeding against or affecting any Acquired
Company relating to the alleged violation of any Legal Requirement pertaining to
labor relations or employment matters, including any charge or complaint filed
by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting any Acquired Company or its premises, or (c) any application for
certification of a collective bargaining agent. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by any Acquired Company, and
no such action is contemplated by any Acquired Company. The Acquired Companies
have complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. No Acquired
Company is liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) No Acquired Company owns or licenses for use any
patents, trademarks, trade names, service marks, mask works or copyrights, other
than the common trade law names, the common law trade names listed on 3.22 of
the Disclosure Letter.
(b) There has not been any actual or alleged
infringement or use or misuse by any party of any Acquired Companies' trade
secrets, confidential information or other intellectual property rights.
3.23 CERTAIN PAYMENTS
Neither any Acquired Company or any director,
officer, agent, or employee of any Acquired Company, or any other person
associated with or acting for or on behalf of any Acquired Company, has directly
or indirectly and in violation of any Legal Requirement (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of any Acquired Company or any Affiliate of any Acquired Company, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of any Acquired Company.
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3.24 DISCLOSURE
(a) No representation or warranty of Seller in this
Agreement and no statement in the Disclosure Letter knowingly omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Neither Seller or any Related Person of Seller or
of any Acquired Company has any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
any Acquired Company's business. Neither Seller or any Related Person of Seller
or of any Acquired Company owns (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that (i) has
business dealings or a material financial interest in any transaction with any
Acquired Company, or (ii) engages in competition with any Acquired Company with
respect to any line of the products or services of any Acquired Company (a
"Competing Business") in any market presently served by any Acquired Company.
Except as set forth in Part 3.25 of the Disclosure Letter, neither Seller or any
Related Person of Seller or of any Acquired Company is a party to any Contract
with, or has any claim or right against any Acquired Company that will survive
the Closing.
3.26 BROKERS OR FINDERS
Seller and its agent have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.27 PAYABLE
The Acquired Companies non-current (over thirty
(30) days) payables shall not be in excess of One Hundred Seventy-Five Thousand
Dollars ($175,000) at closing.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND
BUYER
Acquisition and Buyer (the "Buyer Companies")
jointly and severally represent and warrant to Seller as follows:
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4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition will at the Closing Date be a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas. Each of
Acquisition and Buyer has the corporate power and authority to own or lease and
operate its properties to carry on its business as now being conducted, and is
duly qualified and in good standing and authorized to do business as a foreign
corporation in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization except
where the failure to so qualify would not have a material adverse effect on the
Buyer and Acquisition, taken as a whole.
4.2 AUTHORITY
Each of Acquisition and Buyer has the corporate
power and has taken all necessary corporate action to authorize Acquisition or
Buyer as the case may be, to execute, deliver and perform the Agreement and to
consummate the transactions contemplated thereby. The execution and delivery by
each of Acquisition and Buyer of this Agreement and the Employment Agreement to
which each is a party constitutes the valid and legally binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as may be limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
4.3 CAPITALIZATION
As of the date hereof, the authorized common stock
of the Buyer consist of 50,000,000 shares of common stock, $.001 par value per
share, of which 4,712,372 shares are issued and outstanding. All of the
outstanding common stock of the Buyer has been duly authorized and validly
issued and are fully paid and nonassessable. The shares of the Buyer's Common
Stock to be delivered to Seller at Closing pursuant to Section 2.7 will be duly
authorized, validly issued, fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record
books, and other records of the Buyer, are complete, in all material respects,
and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been
commenced against Buyer or Acquisition and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the contemplated transactions.
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To Buyer's and Acquisition's knowledge, no such proceeding has been threatened.
4.6 BROKERS OR FINDERS
Buyers and Acquisition and their officers and
agents have incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement and will indemnify and hold any Acquired Company
and Seller harmless from any such payment alleged to be due by or through Buyer
or Acquisition as a result of the action of Buyer and Acquisition or their
officers or agents.
5. COVENANTS OF SELLER AND ACQUIRED COMPANY PRIOR TO
CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing
Date, Seller will, and will cause each Acquired Company and their
Representatives to, (a) afford Buyer and its Representatives and prospective
lenders and their Representatives (collectively, "Buyer's Advisors") full and
free access to the Company's personnel, properties (including subsurface
testing), contracts, books and records, and other documents and data, (b)
furnish Buyer and Buyer's Advisors with copies of all such contracts, books and
records, and other existing documents and data pertaining to Company as Buyer
may reasonably request, and (c) furnish Buyer and Buyer's Advisors with such
additional financial, operating, and other data and information pertaining to
Company as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE ACQUIRED
COMPANIES
Between the date of this Agreement and the Closing
Date, Seller will cause each Acquired Company to:
(a) conduct the business of such Acquired Company
only in the Ordinary Course of Business;
(b) preserve intact the current business organization
of such Acquired Company, keep available the services of the current officers,
employees, and agents of such Acquired Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with such Acquired Company;
(c) confer with Buyer concerning operational matters
of a material nature; and
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(d) otherwise report periodically to Buyer concerning
the status of the business, operations, and finances of such Acquired Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
not, and will cause each Acquired Company not to, without the prior consent of
Buyer, take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section 3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this
Agreement, Seller will, and will cause each Acquired Company to, make all
filings required by Legal Requirements to be made by them in order to consummate
the Contemplated Transactions. Between the date of this Agreement and the
Closing Date, Seller will, and will cause each Acquired Company to, (a)
cooperate with Buyer with respect to all filings that Buyer elects to make or is
required by Legal Requirements to make in connection with the Contemplated
Transactions, and (b) cooperate with Buyer in obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing
Date, Seller will promptly notify Buyer in writing if Seller become aware of any
fact or condition that causes or constitutes a Breach of any of Seller's
representations and warranties as of the date of this Agreement, or if Seller
become aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Disclosure Letter if the Disclosure Letter were dated the date of the
occurrence or discovery of any such fact or condition, Seller will promptly
deliver to Buyer a supplement to the Disclosure Letter specifying such change.
During the same period, Seller will promptly notify Buyer of the occurrence of
any Breach of any covenant of Seller in this Section 5 or of the occurrence of
any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is
terminated pursuant to Section 10, Seller will not, and each Acquired Company
will not and each of their Representatives will not directly or indirectly
solicit, initiate or encourage, accept
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or discuss any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets of any Acquired
Company, or any of the capital stock of any Acquired Company, or any merger,
consolidation, business combination, or similar transaction involving any
Acquired Company. Seller or any Acquired Company will promptly notify Buyer of
any such inquiries or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Seller and each Acquired Company will use their Best Efforts to cause the
conditions in Section 7 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Seller in writing if Buyer becomes aware of any
fact or condition that causes or constitutes a Breach of any of Buyer's or
Acquisition's representations and warranties as of the date of this Agreement,
or if Buyer becomes aware of the occurrence after the date of this Agreement or
any fact or condition that would, except as expressly contemplated by this
Agreement, cause or constitute a Breach of any such representation or warranty.
6.2 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Buyer will use its Best Efforts to cause the conditions in Section 8 to be
satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S
OBLIGATION TO CLOSE
Buyer's and Acquisition's obligations to
consummate the Merger and to take the other actions required to be taken by
Buyer and Acquisition at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer and Acquisition, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Seller's and each Acquired Companies'
representations and warranties in this Agreement must have been accurate in all
material respects as of the date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date, without
giving effect to any supplement to the Disclosure Letter.
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7.2 SELLER'S PERFORMANCE
(a) All of the covenants and obligations that Seller
and each Acquired Company are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing, must have been duly performed and
complied with in all material respects.
(b) There shall be delivered at Closing (i) the
Employment Agreement with Mandel in the form of Exhibit 7.2(b)(i) (the
"Employment Agreement") executed by Mandel; (ii) the certificate executed by
Seller and an officer of each Acquired Company representing to Buyer and
Acquisition that Seller's and each Acquired Companies' representations and
warranties in this Agreement was accurate in all material respects as to the
date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing Date, and (iii) each of the other covenants
and obligations in the Agreement must have been performed and complied with in
all respects.
7.3 CONSENTS
Intentionally left blank.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been
delivered to Buyer:
(a) an opinion of Krage and Janvey, dated the Closing
Date, in the form of Exhibit 7.4(a);
(b) such other documents as Buyer or its counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
Seller's and each Acquired Company's representations and warranties, (iii)
evidencing the performance by Seller, each Acquired Company, or the compliance
by Seller or the Company with, any covenant or obligation required to be
performed or complied with by such party, (iv) evidencing the satisfaction of
any condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not
have been commenced, pending or Threatened any Proceeding (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
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7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
PROCEEDS
There must not have been made or Threatened by any
Person any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in, the Acquired
Companies, or (b) is entitled to all or any portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other
order by any federal or state court preventing or consummation of the
transactions contemplated in this Agreement has been issued and continues in
effect, and this Agreement and the transactions contemplated hereby are not
prohibited under any applicable federal or state law or regulation.
7.9 MATERIAL ADVERSE CHANGE
There shall have been no material adverse change
in the business, operations, prospects, financial condition or
results of the Acquired Companies.
7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public
offering.
7.11 FINANCIAL STATEMENTS
Seller shall deliver at least five (5) days prior
to Closing a statement of (x) the Acquired Companies' non-current payables (past
thirty (30) days) and (y) the change, if any, in the Acquired Companies' working
capital since December 31, 1997, in each case in form and substance satisfactory
to Buyer.
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8. CONDITIONS PRECEDENT TO SELLER'S AND THE ACQUIRED
COMPANIES' OBLIGATION TO CLOSE
Seller's and the Acquired Companies' obligations
to consummate the Merger and to take the other actions required to be taken by
Seller and the Acquired Companies at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Seller and the Acquired Companies, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations
and warranties in this Agreement must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that Buyer
and Acquisition are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been performed and complied with
in all material respects.
(b) Buyer must have executed and delivered (i) the
Employment Agreement (ii) a certificate executed by an officer of Buyer
representing to Seller that Buyer and Acquisition's representations and
warranties contained in this Agreement were accurate in all material respects as
to the date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing.
8.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the following
documents to be delivered to Seller:
(a) an opinion of Atlas, Pearlman, Trop & Borkson,
P.A., dated the Closing Date, in the form of Exhibit 8.3(a); and
(b) such other documents as Seller or its counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 7.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
8.4 RELEASE OF GUARANTEES
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Seller shall cause or make provision for, at or
reasonably following the Closing, the release of Cynthia and Bernard Mandel from
the following guarantees: (a) Lease between BCB Specialty Companies and Aetna
Life Insurance Company; (b) Equipment Lease with Primary Capital Corp.; and (c)
Promissory Note to Addison National Bank, which documents are set forth on the
Disclosure Schedule.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by either Buyer and Acquisition or Seller and the
Acquired Companies if a material Breach of any provision of this Agreement has
been committed by the other party and such Breach has not been cured or waived;
(b) (i) by Buyer and Acquisition if any of the
conditions in Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before the Closing Date; or (ii) by
Seller and Acquired Companies, if any of the conditions in Section 8 has not
been satisfied of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Seller and Acquired
Company to comply with their obligations under this Agreement) and Seller has
not waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Acquisition and
Seller and the Acquired Companies; or
(d) by either Buyer and Acquisition or Seller and the
Acquired Companies if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement to comply fully with
its obligations under this Agreement) on or before September 30, 1998, or such
later date as the parties may agree upon.
A party's right of termination under Section 9.1
is in addition to any other rights it may have under this Agreement or
otherwise, the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 9.1, all further
obligations of the parties under this Agreement terminate, except the
obligations in Section 11.1 and 11.3 will survive; provided, however, that if
this Agreement is terminated by a party because of a breach of the Agreement by
the other party or because one or more of the conditions to the terminating
party's obligations is not satisfied as a result of the other party's failure to
comply with its obligations under this Agreement, the terminating
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party's right to pursue all legal remedies will survive such termination
unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter and any of the supplements
thereto, and any other certificate or document delivered pursuant to this
Agreement will survive the Closing until the eighteen (18) months from the
Closing except for the representations and warranties in Sections 3.3, 3.11,
3.15 and 3.19, which shall survive for the applicable statute of limitations.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties, covenants, and
obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Seller will indemnify and hold harmless Buyer,
Acquisition, the Surviving Corporation, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' and other professional fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made
by Seller in this Agreement, without giving effect to any supplement to
Disclosure Letter, the Disclosure Letter and any of the supplements thereto, or
any other certificate or document delivered by Seller pursuant to this
Agreement;
(b) any Breach by Seller or any Acquired Company of
any covenant or obligation of Seller or any Acquired Company in this Agreement;
(c) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Seller or any
Acquired Company (or any Person acting on their behalf) in connection with any
of the Contemplated Transactions; and
(d) any matter disclosed in Part ____ of the
Disclosure Letter.
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The remedies provided in this Section 10.2 will
not be exclusive of or limit any other remedies that may be available to Buyer
or the other Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Seller for,
and will pay to the Seller the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' and other professional fees)
or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made
by Buyer in this Agreement;
(b) any Breach by Buyer of any covenant or obligation
of Buyer in this Agreement;
(c) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Buyer (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 10.3 will not
be exclusive of or limit any other remedies that may be available to Seller.
10.4 TIME LIMITATIONS
If the Closing occurs, Seller will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, other than those in Sections 3.3, 3.11, 3.15 and 3.19, unless
on or before eighteen (18) months from the date of Closing, Buyer notifies
Seller of a claim specifying the factual basis of that claim. A claim with
respect to Section 3.3, 3.11, 3.15 and 3.19 may be made at any time prior to the
applicable statute of limitations with respect to such matter.
If the Closing occurs, Buyer will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and to comply with prior to
the Closing Date, unless on or before eighteen (18) months from the date of
Closing, Seller notifies Buyer of claims specifying the factual basis of that
claim.
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY
CLAIMS
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(a) Promptly after receipt by an indemnified party
under Sections 10.2 or 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnified party's failure
to give such notice.
(b) If any Proceeding referred to in Section 10.5(a)
is brought against an indemnified party and it gives notice, unless the claim
involves Taxes, to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding with
counsel satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
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(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
10.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim may be asserted by notice to the party from
whom indemnification is sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants, provided Buyer shall bear the
costs of the preparation of the Acquired Companies' financial statements as
prepared by Grant Thornton for the period ended December 31, 1997. Furthermore,
in the event the Closing does not occur as a result of Buyer's failure to
complete its initial public offering or termination by Seller, pursuant to
Section 9.1(a), Buyer shall reimburse Seller up to $10,000 for Seller's legal
and accounting fees. Payment shall be made with thirty days after delivery of an
invoice from Seller to Buyer.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Buyer determines. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing Seller
shall, and shall cause each Acquired Company to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person
other than their professional advisors. Seller and Buyer will consult with each
other concerning the means by which the Acquired Companies' employees,
customers, and suppliers and others having dealings with the Company will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.3 CONFIDENTIALITY
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(a) Between the date of this Agreement and the
Closing Date, Buyer and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer, Acquisition and
each Acquired Company to maintain in confidence, and not use to the detriment of
another party or the Company any written, oral, or other information obtained in
confidence from another party or each Acquired Company in connection with this
Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault of such party,
(b) the use of such information is necessary or appropriate in making any filing
or obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by legal proceedings. Notwithstanding the foregoing, Buyer may disclose
information about this Agreement, the Seller, or the Acquired Companies in
connection with its initial public offering and any related obligations
therewith.
(b) If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand, (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Seller: BCB Office Products Company
BCB Specialties Inc.
3706 Realty Road
Addison, Texas 75244
Attention: Bernard Mandel
Facsimile No.: (972) 484-5973
with a copy to: Krage & Janvey
2001 Bryan Tower, Suite 2700
Dallas, Texas 75201
Attention: Ralph Janvey, Esq.
Facsimile No.: (214) 220-0230
Buyer or Acquisition: Office Center Corporation
38 East 32nd Street
New York, New York 10015
Attention: Robert J. Gillon, Jr.
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Facsimile No.: (212) 686-6623
with a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Facsimile No.: (954) 766-7800
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements
between the parties with respect to its subject matter (including the Letter of
Intent between Buyer and Seller dated December 3, 1997) and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY
RIGHTS
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Neither party may assign any of its rights under
this Agreement without the prior consent of the other parties. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the heirs, successors and permitted assigns of
the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.11 TIME OF ESSENCE
With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.12 GOVERNING LAW
This Agreement will be governed by the laws of the
State of Delaware without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
43
<PAGE> 44
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
BUYER: SELLER:
OFFICE CENTRE CORPORATION /s/ Bernard Mandel
--------------------------
BERNARD MANDEL
By: /s/ Robert J. Gillon, Jr.
----------------------------------
Name:
Title:
SPOUSE:
ACQUISITION: /s/ Cynthia Mandel
-------------------------
CYNTHIA MANDEL
OFFICE CENTRE FORT WORTH, INC.
By: /s/ Robert J. Gillon, Jr.
----------------------------------
Name: Robert J. Gillon, Jr.
Title:
ACQUIRED COMPANY:
BCB OFFICE PRODUCTS COMPANY
By: /s/ Bernard Mandel
----------------------------------
Name: Bernard Mandel
Title: President
BCB SPECIALTIES, INC.
By: /s/ Bernard Mandel
----------------------------------
Name: Bernard Mandel
Title: President
44
<PAGE> 45
BCB OFFICE PRODUCTS, INC./BCB SPECIALTIES, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 7.2(b)(i) Employment Agreement
Exhibit 7.4(a) Opinion of Krage and Janvey
Exhibit 8.3 (a) Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
SCHEDULES
---------
Schedule 2.7 EBITDA Calculation
Schedule 3.6 Real Property
Schedule 3.8 Accounts Receivable
Schedule 3.10 Liabilities or Obligations
Schedule 3.11 Taxes
Schedule 3.16 Absence of Certain Changes and Events
Schedule 3.17 Contracts; No Defaults
Schedule 3.18(b) Insurance
Schedule 3.20 Employees
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.22
STOCK PURCHASE AGREEMENT
AMONG
WALTER GORDENSTEIN,
DEAN WITTER REYNOLDS INC., CUSTODIAN FOR
THE IRA ROLLOVER OF CLIFFORD M. DAVIE
DTD 12/15/94,
CLIFFORD M. DAVIE
AND
OFFICE CENTRE CORPORATION
RELATING TO UDI CORP.
Dated as of May 23, 1997
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of May 23, 1997, is
made and entered into by and between OFFICE CENTRE CORPORATION, a Delaware
corporation (the "Purchaser"), WALTER GORDENSTEIN ("Gordenstein"), DEAN WITTER
REYNOLDS INC., CUSTODIAN FOR THE IRA ROLLOVER OF CLIFFORD M. DAVIE DTD 12/15/94
(the "IRA"; each of the IRA and Gordenstein, a "Seller"; collectively, the
"Sellers") and CLIFFORD M. DAVIE ("Davie"; each of Davie and each Seller a
"Seller Party;" collectively the "Seller Parties").
WHEREAS, the Sellers own all of the issued and outstanding
shares of the capital stock of UDI Corp., a Massachusetts corporation (the
"Company") as set forth in Schedule A;
WHEREAS, the Purchaser desires to purchase and the Sellers
desire to sell to the Purchaser all of the issued and outstanding shares of
capital stock of the Company under the terms and conditions of this Agreement;
and
WHEREAS, recognizing that he receives substantial benefit from
the consummation of the transactions contemplated by this Agreement, Davie
desires to make certain representations relating to the Company and to make
certain agreements relating to the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter contained and intending to be legally bound, the
undersigned parties hereby agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE. Subject to the terms and conditions
contained in this Agreement, each Seller hereby sells, assigns, transfers and
delivers to the Purchaser, and the Purchaser hereby purchases, accepts, assumes
and receives from each Seller, all right, title and interest in the number of
shares of common stock without par value (the "Shares") of the Company set
forth opposite such Seller's name on Schedule A hereto.
1.2 PURCHASE PRICE. The purchase price hereby paid by the
Purchaser to the Sellers for all of the Shares is a total of 117,738 shares of
common stock, par value $.001 per share (the "Purchaser Shares"), of the
Purchaser. The Purchaser hereby delivers to each Seller (or its designees)
certificates representing the number of Purchaser Shares set forth opposite
such Seller's name on Schedule A hereto. Each such certificate bears the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
<PAGE> 3
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SHARES
MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED WITHOUT ONE OF THE FOLLOWING: (i) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES
ACT, OR (ii) AN OPINION OF COUNSEL, SATISFACTORY TO THE
CORPORATION, THAT SUCH REGISTRATION IS NOT REQUIRED AS TO
SAID SALE, OFFER OR DISTRIBUTION.
1.3 DELIVERY OF SHARES. The Sellers hereby deliver to the
Purchaser, free and clear of any liens, pledges, charges, encumbrances, claims,
options or equity, certificates representing the Shares duly endorsed in blank
or accompanied by stock powers or other instruments of transfer duly executed
in blank, against delivery of the Purchaser Shares to the Sellers (or their
designees).
1.4 FURTHER ASSURANCES. In addition to the actions, documents
and instruments specifically required to be taken or delivered hereby, each of
the Sellers (and its designees) and the Purchaser shall execute and deliver
such other instruments and take such other actions as any other party, or its
counsel, may reasonably request in order to complete and perfect the
transactions contemplated by this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller Parties hereby represent, warrant and agree as
follows:
2.1 LEGAL CAPACITY, TRUST POWER AND AUTHORITY OF THE SELLERS.
(a) Each of Davie and Gordenstein has the legal capacity to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Dean Witter Reynolds Inc., Custodian for the IRA (the
"Custodian") has the legal power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The IRA has
taken all actions necessary to authorize the execution and delivery of, and
consummation of the transactions under, this Agreement.
(b) The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, do not violate (i) any
material terms of any instrument, contractual restriction or commitment of any
kind or character to which any Seller Party is a party or by which he or it is
bound, or (ii) any requirement of law.
- 2 -
<PAGE> 4
(c) This Agreement has been duly and validly executed by
each Seller Party, and constitutes a valid and binding obligation of each
Seller Party enforceable against each Seller Party in accordance with its terms
except to the extent that (i) such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) the availability of
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
2.2 TITLE TO THE SHARES. No Seller Party is a party to or bound
by any options, calls, voting agreements, contracts, or commitments of any
character relating to any issued or unissued stock or any other equity security
issued or to be issued by the Company. The Sellers own the Shares free and
clear of any liens, pledges, encumbrances, charges, rights of first refusal,
obligations or commitments to sell or other claims.
2.3 CONSENTS AND APPROVALS. No approval, order or consent of,
filing or registration with or notice or payment to, any foreign, federal,
state, county, local or other governmental or regulatory body, and no approval
or consent of, or filing with or notice or payment to, any other person is
required by or with respect to the Seller Parties in connection with the
execution and delivery by the Seller Parties of this Agreement and the
consummation and performance by each of them of the transactions contemplated
hereby.
2.4 NO CONFLICT. The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby, and the performance
by the Seller Parties of this Agreement in accordance with its terms and
conditions will not conflict with or result in the breach or violation of any
of the terms or conditions of, or constitute (or with notice or lapse of time
or both would constitute) a default under (i) any instrument, contract or other
agreement by or to which any Seller Party is a party or by or to which any of
them or their assets or properties are bound or subject; (ii) any statute, law
or regulation of any jurisdiction or any order, writ, judgment, injunction,
award or decree of any court, arbitrator or governmental or regulatory body
against, or binding upon, any Seller Party or the assets or properties of any
of them.
2.5 INVESTMENT PURPOSE. The Sellers (and their designees) are
acquiring the Purchaser Shares for their own account for investment purposes
only and not with a view to, or for sale in connection with, any distribution
thereof. The Sellers (and their designees) will not resell the Purchaser Shares
except in compliance with the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), or in a transaction exempted
therefrom.
- 3 -
<PAGE> 5
3. REPRESENTATIONS AND WARRANTIES OF GORDENSTEIN AND DAVIE
WITH RESPECT TO THE COMPANY
Gordenstein and Davie hereby represent, warrant and agree as
follows:
3.1 ORGANIZATION AND AUTHORITY OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has all requisite corporate power
and authority to carry on its business as presently conducted and to own or
lease and to operate its properties. The Company is qualified to transact
business as a foreign corporation in each jurisdiction wherein the failure to
so qualify would have a material adverse effect on the business or financial
condition of the Company.
3.2 CAPITALIZATION; TITLE TO THE SHARES. The authorized capital
stock of the Company consists of 15,000 shares of common stock, without par
value, of which 2,250 are issued and outstanding on the date hereof. The Shares
constitute all of the issued and outstanding capital stock of the Company and
the Shares have been duly authorized and are validly issued, fully paid and
non-assessable. The Company is not a party to or bound by any options, calls,
voting agreements, contracts, or commitments of any character relating to any
issued or unissued stock or any other equity security issued or to be issued by
the Company. 3.3 CONSENTS AND APPROVALS. No approval, order or consent of,
filing or registration with or notice or payment to, any foreign, federal,
state, county, local or other governmental or regulatory body, and no approval
or consent of, or filing with or notice or payment to, any other person is
required by or with respect to the Company in connection with the execution and
delivery by the Seller Parties of this Agreement and the consummation and
performance by each of them of the transactions contemplated hereby.
3.4 NO CONFLICT. The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby, and the performance
by the Seller Parties of this Agreement in accordance with its terms and
conditions will not conflict with or result in the breach or violation of any
of the terms or conditions of, or give rise to any acceleration of the
Company's obligations or constitute (or with notice or lapse of time or both
would constitute) a default under (i) the Articles of Incorporation or By Laws
of the Company; (ii) any instrument, contract or other agreement by or to which
the Company is a party or by or to which any of them or their assets or
properties are bound or subject; (ii) any instrument, contract or other
agreement by or to which the Company is a party or by or to which any of them
or their assets or properties are bound or subject; (iii) any statute, law or
regulation of any jurisdiction or any order, writ, judgment, injunction, award
or decree of any court, arbitrator or governmental or regulatory body against,
or binding upon, the Company or the assets or properties of any of them; or
(iv) any license, franchise, approval, certificate, permit or authorization
applicable to the Company or any
- 4 -
<PAGE> 6
of its assets; or (b) result in the creation of any lien, charge or encumbrance
of any nature, upon the assets or property of the Company.
3.5 ARTICLES OF INCORPORATION AND BY-LAWS. Copies of the
Certificate of Incorporation and the By-Laws of the Company, heretofore
delivered to the Purchaser, are true and complete copies of such instruments as
amended to the date of this Agreement, and are in full force and effect on the
date hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents, warrants and agrees as
follows:
4.1 ORGANIZATION AND AUTHORITY OF PURCHASER.
(a) The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Purchaser has all requisite corporate power and authority (i) to carry on its
business as presently conducted and to own or lease and to operate its
properties and (ii) to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Purchaser is qualified to transact
business as a foreign corporation in each jurisdiction wherein the failure to
so qualify would have a material adverse effect on the business or financial
condition of the Purchaser. The Purchaser has taken all action as and in the
manner required by law, its Certificate of Incorporation and its By-Laws or
otherwise to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
(b) This Agreement constitutes the valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance
with its terms except to the extent that (i) such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and (ii) the
availability of remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought.
4.2 CAPITALIZATION; PURCHASER SHARES. The authorized capital
stock of the Purchaser consists of 50,000,000 shares of common stock, $.001 par
value per share. After giving effect to the transactions contemplated hereby,
there will be 5,374,302 shares of common stock of the Purchaser issued and
outstanding. All such shares have been duly authorized and are validly issued,
fully paid and non-assessable. The Purchaser is not a party to nor is bound by
any options, calls, voting agreements, contracts, or commitments of any
character relating to any issued or unissued stock or any other equity
- 5 -
<PAGE> 7
security issued or to be issued by the Purchaser. The Purchaser Shares
delivered to the Sellers (or their designees) hereby are free and clear of any
liens, pledges, encumbrances, charges, rights of first refusal, obligations or
commitments to sell or other claims.
4.3 CONSENTS AND APPROVALS. No approval, order or consent of,
filing or registration with or notice or payment to, any foreign, federal,
state, county, local or other governmental or regulatory body, and no approval
or consent of, or filing with or notice or payment to, any other person is
required by or with respect to the Purchaser in connection with the execution
and delivery by the Purchaser of this Agreement and the consummation and
performance by it of the transactions contemplated hereby.
4.4 NO CONFLICT. The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby, and the performance
by the Purchaser of this Agreement in accordance with its terms and conditions
does not (a) conflict with or result in the breach or violation of any of the
terms or conditions of, or give rise to any acceleration of the Purchaser's
obligations or constitute (or with notice or lapse of time or both would
constitute) a default under (i) the Articles of Incorporation or By-Laws of the
Purchaser; (ii) any instrument, contract or other agreement by or to which the
Purchaser is a party or by or to which it or its assets or properties are bound
or subject; (iii) any statute, law or regulation of any jurisdiction or any
order, writ, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body against, or binding upon, the Purchaser or its
assets or properties; or (iv) any license, franchise, approval, certificate,
permit or authorization applicable to the Purchaser or any of its assets; or
(b) result in the creation of any lien, charge or encumbrance of any nature,
upon the assets or property of the Purchaser.
5. SURVIVAL AND INDEMNITY
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding
any opportunity of a party fully to investigate the affairs of another party,
the Purchaser has the right to rely fully upon the representations and
warranties of the Seller Parties contained in this Agreement, and the Sellers
have the right to rely fully upon the representations and warranties of the
Purchaser contained in this Agreement. All such representations and warranties
shall survive the execution and delivery hereof and the consummation of the
transactions contemplated hereunder. The covenants and agreements contained
herein shall survive until fully performed or discharged.
5.2 INDEMNIFICATION BY GORDENSTEIN AND DAVIE. Subject to the
limitations set forth in Section 5.1, at all times after the date of this
Agreement, Gordenstein and Davie shall, other than as described in Section 5.3,
jointly and severally indemnify, hold harmless and defend
- 6 -
<PAGE> 8
the Purchaser, the Company and their respective officers, directors,
shareholders and employees against and in respect of:
(a) any and all Losses and Liabilities (as such terms are
defined below) arising out of or in connection with or based upon the
inaccuracy of any representation or warranty made by any Seller Party herein,
or in any certificate delivered pursuant hereto; and
(b) any and all Losses and Liabilities arising out of or in
connection with or based upon the breach by any Seller Party of any agreement
or covenant made herein.
5.3 INDEMNIFICATION AS TO CERTAIN MATTERS BY GORDENSTEIN AND
DAVIE. Subject to the limitations set forth in Section 5.1, at all times after
the date of this Agreement, Gordenstein and Davie shall, severally but not
jointly, indemnify, hold harmless and defend the Purchaser, the Company and
their respective officers, directors, shareholders and employees as follows:
(a) in the case of Gordenstein, against and in respect of any
and all Losses and Liabilities arising out of or in connection with or based
upon the inaccuracy of any representation or warranty made by Gordenstein in
Article 2, or in any certificate related thereto; and
(b) in the case of Davie, against and in respect of any and all
Losses and Liabilities arising out of or in connection with or based upon the
inaccuracy of any representation or warranty made by Davie or the IRA in
Article 2, or in any certificate related thereto.
5.4 INDEMNIFICATION BY THE PURCHASER. Subject to the
limitations set forth in Section 5.1, the Purchaser shall indemnify, hold
harmless and defend the Sellers at all times after the date of this Agreement,
against and in respect of:
(a) any and all Losses and Liabilities arising out of or in
connection with or based upon the inaccuracy of any representation or warranty
made by the Purchaser herein, or in any certificate delivered pursuant hereto;
and
(b) any and all Losses and Liabilities arising out of or in
connection with or based upon the breach by the Purchaser of any agreement or
covenant made herein.
5.5 DEFENSE OF CLAIMS. If any action, suit, claim, proceeding,
demand, assessment or enforcement action is filed or initiated against any
Indemnified Party (as defined below) hereunder, the Indemnified Party shall
give written notice thereof to the Indemnifying Party or parties as promptly as
practicable (and in any event within thirty (30) days after the
- 7 -
<PAGE> 9
service of the citation or summons); PROVIDED, HOWEVER, that the failure of any
Indemnified Party to give timely notice shall not affect the rights of such
party to indemnification hereunder except to the extent that the Indemnifying
Party demonstrates actual damage caused by such failure. After such notice and
a reasonable period of time to allow for analysis of the relevant claim, if the
Indemnifying Party shall acknowledge in writing to such Indemnified Party that
such Indemnifying Party shall be obligated under the terms of its indemnity
hereunder for all Losses of the Indemnified Party in connection with such
action, suit, claim, proceeding, demand, assessment or enforcement action
(subject to the following sentence), then the Indemnifying Party shall be
entitled, if it so elects and with counsel reasonably satisfactory to the
Indemnified Party, to take control of the defense and investigation of such
action, suit, claim, proceeding, demand, assessment or enforcement action, and
to employ and engage attorneys to handle and defend the same, at the
Indemnifying Party's cost, risk and expense; and the Indemnified Party shall
cooperate in all reasonable respects, at the Indemnifying Party's request and
cost, risk, and expense, with the Indemnifying Party and its attorneys in the
investigation, trial and defense of such action, suit, claim, proceeding,
demand, assessment or enforcement action, and any appeal arising therefrom;
PROVIDED, HOWEVER, that the Indemnified Party may, at its own cost, participate
in such investigation, trial and defense of such action, suit, claim,
proceeding, demand, assessment or enforcement action, and any appeal arising
therefrom; and PROVIDED, FURTHER, that the Indemnifying Party shall have an
obligation to keep the Indemnified Party apprised of the status of the action,
suit, claim, proceeding, demand, assessment or enforcement action, to furnish
the Indemnified Party with all documents and information that the Indemnified
Party shall reasonably request in connection therewith, and to consult with the
Indemnified Party prior to acting on major matters involved in such action,
suit, claim, proceeding, demand, assessment or enforcement action, including
settlement discussions, it being understood that no settlement of any action
for which indemnification may be payable hereunder shall be made without the
prior written consent of the Indemnified Party. Notwithstanding any other
provision of this Article 5, if an Indemnified Party withholds its consent to a
settlement or elects to defend any claim, where but for such action the
Indemnifying Party could have settled such claim, the Indemnifying Party shall
be required to indemnify the Indemnified Party only up to a maximum of the bona
fide settlement offer for which the Indemnifying Party could have settled such
claim. The Indemnified Party shall be entitled to defend, settle or proceed in
such other manner as it deems fit, in its sole discretion, in connection with
any action, suit, claim, proceeding, demand, assessment or enforcement action
as to which the Indemnifying Party has not acknowledged its obligations in
writing in accordance with the second sentence of this Section 5.5; and no
actions taken by the Indemnified Party in connection therewith shall affect or
limit the obligations of the Indemnifying Party pursuant to this Article 5. If
the Indemnified Party does not have control over any proceeding described in
this Article 5 and the Indemnified Party determines that it desires to settle
its claim in such proceeding it shall have the right to do so without the
consent of the Indemnifying Party, provided that in such event, the Indemnified
Party shall lose the benefits of any indemnification provided by this Article 5
with respect to such proceeding.
- 8 -
<PAGE> 10
5.6 INDEMNIFICATION AS SOLE REMEDY. Except as otherwise
provided in this Agreement, the sole remedy of the parties hereto for a
misrepresentation or breach of a representation or warranty contained in
Article 2, 3 or 4 of this Agreement shall be a claim for indemnification under
this Article 5.
5.7 DEFINITIONS. The following capitalized terms shall have the
following meanings when used in this Article 5:
(a) "Indemnified Party" shall mean any party hereto
entitled to indemnification hereunder.
(b) "Indemnifiable Claim" shall mean any claim which, if
sustained, would result in a Loss or Liability.
(c) "Indemnifying Party" shall mean any party hereto
required to provide indemnification to another party hereunder.
(d) "Liability" or "Liabilities" shall mean any direct or
indirect indebtedness, liability, claim, loss, damage, deficiency, obligation
or responsibility, including, without limitation, liabilities on account of
taxes, other governmental charges or legal proceedings.
(e) "Loss" or "Losses" shall mean any and all Liabilities,
losses, damages, costs, or expenses (including, without limitation, the fees
and expenses of counsel).
6. OTHER AGREEMENTS
6.1 EXPENSES. The Purchaser and the Seller Parties shall each
bear their own expenses (including those of counsel, accountants and investment
bankers) incurred by each of them in connection with this Agreement and the
transactions contemplated hereby; PROVIDED that Davie shall bear such expenses
of the IRA.
6.2 REPORTING REQUIREMENTS. The Purchaser covenants that it
will file the reports required to be filed by it under the Securities Exchange
Act of 1934, and it will take such further action as the Sellers may reasonably
request to the extent required to enable the Sellers to sell Purchaser Shares
without registration under the Securities Act within the limitation of the
exemption provided by Rule 144 under the Securities Act.
- 9 -
<PAGE> 11
7. MISCELLANEOUS
7.1 ENTIRE AGREEMENT. This Agreement (including the documents
and instruments referred to herein) embodies the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersedes all other prior commitments, arrangements or
understandings, both oral and written, and between the parties with respect
thereto. There are no agreements, covenants, representations or warranties with
respect to the transactions contemplated hereby other than those expressly set
forth herein.
7.2 BINDING EFFECT. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
personal representatives, successors and assigns.
7.3 ASSIGNMENT. This Agreement may not be assigned by any party
without the prior written consent of the other parties.
7.4 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without regard to principles of conflicts of laws.
7.5 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and personally delivered at the
addresses designated below, by facsimile transmission to the respective
facsimile numbers designated below, or mailed by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows, or to such
other address or addresses as may hereafter be furnished by one party to the
other parties in compliance with the terms hereof:
If to the Purchaser:
Office Centre Corporation
c/o The King Group
38 East 32nd Street
New York, New York 10016
(Facsimile No.: (212) 725-2591)
Attention: Robert Gillon, Jr.
- 10 -
<PAGE> 12
If to Walter Gordenstein:
c/o UDI Corp.
90 Tapley Street
Springfield, Massachusetts 01101
(Facsimile No.: 413-732-3333)
If to the IRA:
Dean Witter Reynolds Inc.
1100 First Federal Plaza
Rochester, New York 14614
(Facsimile No.:_____________)
Attention: Delores Lee
If to Clifford M. Davie:
20 Royal Palm Way, Unit 103
Boca Raton, Florida 33432
(Facsimile No.: 407-393-6926 and 716-671-9335)
All such notices and communications shall be deemed to be given for purposes of
this Agreement on the day such writing is received by the intended recipient
thereof.
7.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
7.7 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the Purchaser and the Sellers.
- 11 -
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
OFFICE CENTRE CORPORATION
By: /s/ROBERT J. GILLON, JR.
---------------------------------
Name: Robert J. Gillon, Jr.
Title: President
/s/WALTER GORDENSTEIN
----------------------------------
WALTER GORDENSTEIN
DEAN WITTER REYNOLDS INC.,
CUSTODIAN FOR THE IRA
ROLLOVER OF CLIFFORD DAVIE
DTD 12/15/94
By: /s/IRA MILLER
--------------------------------
Name: Ira Miller
Title: SVP - Branch Mgr.
/s/CLIFFORD M. DAVIE
----------------------------------
CLIFFORD M. DAVIE
- 12 -
<PAGE> 1
EXHIBIT 2.23
STOCK PURCHASE AGREEMENT
AMONG
WALTER GORDENSTEIN,
DEAN WITTER REYNOLDS INC., CUSTODIAN FOR
THE IRA
ROLLOVER OF CLIFFORD M. DAVIE DTD 12/15/94,
CLIFFORD M. DAVIE
AND
OFFICE CENTRE CORPORATION
RELATING TO UDI II CORP.
Dated as of May 23, 1997
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of May 23, 1997, is
made and entered into by and between OFFICE CENTRE CORPORATION, a Delaware
corporation (the "Purchaser"), WALTER GORDENSTEIN ("Gordenstein"), DEAN WITTER
REYNOLDS INC., CUSTODIAN FOR THE IRA ROLLOVER OF CLIFFORD M. DAVIE DTD 12/15/94
(the "IRA"; each of the IRA and Gordenstein, a "Seller"; collectively, the
"Sellers") and CLIFFORD M. DAVIE ("Davie"; each of Davie and each Seller a
"Seller Party;" collectively the "Seller Parties").
WHEREAS, the Sellers own all of the issued and outstanding
shares of the capital stock of UDI II Corp., a Massachusetts corporation (the
"Company") as set forth in Schedule A;
WHEREAS, the Purchaser desires to purchase and the Sellers
desire to sell to the Purchaser all of the issued and outstanding shares of
capital stock of the Company under the terms and conditions of this Agreement;
and
WHEREAS, recognizing that he receives substantial benefit from
the consummation of the transactions contemplated by this Agreement, Davie
desires to make certain representations relating to the Company and to make
certain agreements relating to the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter contained and intending to be legally bound, the
undersigned parties hereby agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE. Subject to the terms and conditions
contained in this Agreement, each Seller hereby sells, assigns, transfers and
delivers to the Purchaser, and the Purchaser hereby purchases, accepts, assumes
and receives from each Seller, all right, title and interest in the number of
shares of common stock without par value (the "Shares") of the Company set forth
opposite such Seller's name on Schedule A hereto.
1.2 PURCHASE PRICE. The purchase price hereby paid by the
Purchaser to the Sellers for all of the Shares is a total of 102,232 shares of
common stock, par value $.001 per share (the "Purchaser Shares"), of the
Purchaser. The Purchaser hereby delivers to each Seller (or its designees)
certificates representing the number of Purchaser Shares set forth opposite such
Seller's name on Schedule A hereto. Each such certificate bears the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
<PAGE> 3
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SHARES MAY
NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED
WITHOUT ONE OF THE FOLLOWING: (i) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT, OR (ii) AN
OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
1.3 DELIVERY OF SHARES. The Sellers hereby deliver to the
Purchaser, free and clear of any liens, pledges, charges, encumbrances, claims,
options or equity, certificates representing the Shares duly endorsed in blank
or accompanied by stock powers or other instruments of transfer duly executed in
blank, against delivery of the Purchaser Shares to the Sellers (or their
designees).
1.4 FURTHER ASSURANCES. In addition to the actions, documents
and instruments specifically required to be taken or delivered hereby, each of
the Sellers (and its designees) and the Purchaser shall execute and deliver such
other instruments and take such other actions as any other party, or its
counsel, may reasonably request in order to complete and perfect the
transactions contemplated by this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller Parties hereby represent, warrant and agree as follows:
2.1 LEGAL CAPACITY, POWER AND AUTHORITY OF THE SELLERS.
(a) Each of Davie and Gordenstein has the legal capacity to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Dean Witter Reynolds Inc., Custodian for the IRA Rollover
of Clifford M. Davie DTD 12/15/94 (the "Custodian") has the legal power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The IRA has taken all actions necessary to
authorize the execution and delivery of, and consummation of the transactions
under, this Agreement.
(b) The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, do not violate (i) any
material terms of any instrument, contractual restriction or commitment of any
kind or character to which any Seller Party is a party or by which he or it is
bound, or (ii) any requirement of law.
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<PAGE> 4
(c) This Agreement has been duly and validly executed by
each Seller Party, and constitutes a valid and binding obligation of each Seller
Party enforceable against each Seller Party in accordance with its terms except
to the extent that (i) such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) the availability of
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
2.2 TITLE TO THE SHARES. No Seller Party is a party to or bound by
any options, calls, voting agreements, contracts, or commitments of any
character relating to any issued or unissued stock or any other equity security
issued or to be issued by the Company. The Sellers own the Shares free and clear
of any liens, pledges, encumbrances, charges, rights of first refusal,
obligations or commitments to sell or other claims.
2.3 CONSENTS AND APPROVALS. No approval, order or consent of, filing
or registration with or notice or payment to, any foreign, federal, state,
county, local or other governmental or regulatory body, and no approval or
consent of, or filing with or notice or payment to, any other person is required
by or with respect to the Seller Parties in connection with the execution and
delivery by the Seller Parties of this Agreement and the consummation and
performance by each of them of the transactions contemplated hereby.
2.4 NO CONFLICT. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the performance by the
Seller Parties of this Agreement in accordance with its terms and conditions
will not conflict with or result in the breach or violation of any of the terms
or conditions of, or constitute (or with notice or lapse of time or both would
constitute) a default under (i) any instrument, contract or other agreement by
or to which any Seller Party is a party or by or to which any of them or their
assets or properties are bound or subject; (ii) any statute, law or regulation
of any jurisdiction or any order, writ, judgment, injunction, award or decree of
any court, arbitrator or governmental or regulatory body against, or binding
upon, any Seller Party or the assets or properties of any of them.
2.5 INVESTMENT PURPOSE. The Sellers (and their designees) are
acquiring the Purchaser Shares for their own account for investment purposes
only and not with a view to, or for sale in connection with, any distribution
thereof. The Sellers (and their designees) will not resell the Purchaser Shares
except in compliance with the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), or in a transaction exempted therefrom.
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<PAGE> 5
3. REPRESENTATIONS AND WARRANTIES OF GORDENSTEIN AND DAVIE
WITH RESPECT TO THE COMPANY
Gordenstein and Davie hereby represent, warrant and agree as
follows:
3.1 ORGANIZATION AND AUTHORITY OF THE COMPANY. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has all requisite corporate power
and authority to carry on its business as presently conducted and to own or
lease and to operate its properties. The Company is qualified to transact
business as a foreign corporation in each jurisdiction wherein the failure to so
qualify would have a material adverse effect on the business or financial
condition of the Company.
3.2 CAPITALIZATION; TITLE TO THE SHARES. The authorized
capital stock of the Company consists of 20,000 shares of common stock, without
par value, of which 2,000 are issued and outstanding on the date hereof. The
Shares constitute all of the issued and outstanding capital stock of the Company
and the Shares have been duly authorized and are validly issued, fully paid and
non-assessable. The Company is not a party to or bound by any options, calls,
voting agreements, contracts, or commitments of any character relating to any
issued or unissued stock or any other equity security issued or to be issued by
the Company.
3.3 CONSENTS AND APPROVALS. No approval, order or consent
of, filing or registration with or notice or payment to, any foreign, federal,
state, county, local or other governmental or regulatory body, and no approval
or consent of, or filing with or notice or payment to, any other person is
required by or with respect to the Company in connection with the execution and
delivery by the Seller Parties of this Agreement and the consummation and
performance by each of them of the transactions contemplated hereby.
3.4 NO CONFLICT. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, and the
performance by the Seller Parties of this Agreement in accordance with its terms
and conditions will not conflict with or result in the breach or violation of
any of the terms or conditions of, or give rise to any acceleration of the
Company's obligations or constitute (or with notice or lapse of time or both
would constitute) a default under (i) the Articles of Incorporation or By Laws
of the Company; (ii) any instrument, contract or other agreement by or to which
the Company is a party or by or to which any of them or their assets or
properties are bound or subject; (ii) any instrument, contract or other
agreement by or to which the Company is a party or by or to which any of them or
their assets or properties are bound or subject; (iii) any statute, law or
regulation of any jurisdiction or any order, writ, judgment, injunction, award
or decree of any court, arbitrator or governmental or regulatory body against,
or binding upon, the Company or the assets or properties of any of them; or (iv)
any license, franchise, approval, certificate, permit or authorization
applicable to the Company or any
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<PAGE> 6
of its assets; or (b) result in the creation of any lien, charge or encumbrance
of any nature, upon the assets or property of the Company.
3.5 ARTICLES OF INCORPORATION AND BY-LAWS. Copies of the
Certificate of Incorporation and the By-Laws of the Company, heretofore
delivered to the Purchaser, are true and complete copies of such instruments as
amended to the date of this Agreement, and are in full force and effect on the
date hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents, warrants and agrees as follows:
4.1 ORGANIZATION AND AUTHORITY OF PURCHASER.
(a) The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Purchaser has all requisite corporate power and authority (i) to carry on its
business as presently conducted and to own or lease and to operate its
properties and (ii) to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Purchaser is qualified to transact
business as a foreign corporation in each jurisdiction wherein the failure to so
qualify would have a material adverse effect on the business or financial
condition of the Purchaser. The Purchaser has taken all action as and in the
manner required by law, its Certificate of Incorporation and its By-Laws or
otherwise to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby.
(b) This Agreement constitutes the valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms except to the extent that (i) such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and (ii) the
availability of remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought.
4.2 CAPITALIZATION; PURCHASER SHARES. The authorized capital stock of
the Purchaser consists of 50,000,000 shares of common stock, $.001 par value per
share. After giving effect to the transactions contemplated hereby, there will
be 5,374,302 shares of common stock of the Purchaser issued and outstanding. All
such shares have been duly authorized and are validly issued, fully paid and
non-assessable. The Purchaser is not a party to nor is bound by any options,
calls, voting agreements, contracts, or commitments of any character relating to
any issued or unissued stock or any other equity
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<PAGE> 7
security issued or to be issued by the Purchaser. The Purchaser Shares delivered
to the Sellers (or their designees) hereby are free and clear of any liens,
pledges, encumbrances, charges, rights of first refusal, obligations or
commitments to sell or other claims.
4.3 CONSENTS AND APPROVALS. No approval, order or consent of, filing
or registration with or notice or payment to, any foreign, federal, state,
county, local or other governmental or regulatory body, and no approval or
consent of, or filing with or notice or payment to, any other person is required
by or with respect to the Purchaser in connection with the execution and
delivery by the Purchaser of this Agreement and the consummation and performance
by it of the transactions contemplated hereby.
4.4 NO CONFLICT. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the performance by the
Purchaser of this Agreement in accordance with its terms and conditions does not
(a) conflict with or result in the breach or violation of any of the terms or
conditions of, or give rise to any acceleration of the Purchaser's obligations
or constitute (or with notice or lapse of time or both would constitute) a
default under (i) the Articles of Incorporation or By-Laws of the Purchaser;
(ii) any instrument, contract or other agreement by or to which the Purchaser is
a party or by or to which it or its assets or properties are bound or subject;
(iii) any statute, law or regulation of any jurisdiction or any order, writ,
judgment, injunction, award or decree of any court, arbitrator or governmental
or regulatory body against, or binding upon, the Purchaser or its assets or
properties; or (iv) any license, franchise, approval, certificate, permit or
authorization applicable to the Purchaser or any of its assets; or (b) result in
the creation of any lien, charge or encumbrance of any nature, upon the assets
or property of the Purchaser.
5. SURVIVAL AND INDEMNITY
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
opportunity of a party fully to investigate the affairs of another party, the
Purchaser has the right to rely fully upon the representations and warranties of
the Seller Parties contained in this Agreement, and the Sellers have the right
to rely fully upon the representations and warranties of the Purchaser contained
in this Agreement. All such representations and warranties shall survive the
execution and delivery hereof and the consummation of the transactions
contemplated hereunder. The covenants and agreements contained herein shall
survive until fully performed or discharged.
5.2 INDEMNIFICATION BY GORDENSTEIN AND DAVIE. Subject to the
limitations set forth in Section 5.1, at all times after the date of this
Agreement, Gordenstein and Davie shall, other than as described in Section 5.3,
jointly and severally indemnify, hold harmless and defend
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<PAGE> 8
the Purchaser, the Company and their respective officers, directors,
shareholders and employees against and in respect of:
(a) any and all Losses and Liabilities (as such terms are
defined below) arising out of or in connection with or based upon the inaccuracy
of any representation or warranty made by any Seller Party herein, or in any
certificate delivered pursuant hereto; and
(b) any and all Losses and Liabilities arising out of or in
connection with or based upon the breach by any Seller Party of any agreement or
covenant made herein.
5.3 INDEMNIFICATION AS TO CERTAIN MATTERS BY GORDENSTEIN AND DAVIE.
Subject to the limitations set forth in Section 5.1, at all times after the date
of this Agreement, Gordenstein and Davie shall, severally but not jointly,
indemnify, hold harmless and defend the Purchaser, the Company and their
respective officers, directors, shareholders and employees as follows:
(a) in the case of Gordenstein, against and in respect of any and all
Losses and Liabilities arising out of or in connection with or based upon the
inaccuracy of any representation or warranty made by Gordenstein in Article 2,
or in any certificate related thereto; and
(b) in the case of Davie, against and in respect of any and all
Losses and Liabilities arising out of or in connection with or based upon the
inaccuracy of any representation or warranty made by Davie or the IRA in Article
2, or in any certificate related thereto.
5.4 INDEMNIFICATION BY THE PURCHASER. Subject to the limitations set
forth in Section 5.1, the Purchaser shall indemnify, hold harmless and defend
the Sellers at all times after the date of this Agreement, against and in
respect of:
(a) any and all Losses and Liabilities arising out of or in
connection with or based upon the inaccuracy of any representation or warranty
made by the Purchaser herein, or in any certificate delivered pursuant hereto;
and
(b) any and all Losses and Liabilities arising out of or in
connection with or based upon the breach by the Purchaser of any agreement or
covenant made herein.
5.5 DEFENSE OF CLAIMS. If any action, suit, claim, proceeding,
demand, assessment or enforcement action is filed or initiated against any
Indemnified Party (as defined below) hereunder, the Indemnified Party shall give
written notice thereof to the Indemnifying Party or parties as promptly as
practicable (and in any event within thirty (30) days after the
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<PAGE> 9
service of the citation or summons); PROVIDED, HOWEVER, that the failure of any
Indemnified Party to give timely notice shall not affect the rights of such
party to indemnification hereunder except to the extent that the Indemnifying
Party demonstrates actual damage caused by such failure. After such notice and a
reasonable period of time to allow for analysis of the relevant claim, if the
Indemnifying Party shall acknowledge in writing to such Indemnified Party that
such Indemnifying Party shall be obligated under the terms of its indemnity
hereunder for all Losses of the Indemnified Party in connection with such
action, suit, claim, proceeding, demand, assessment or enforcement action
(subject to the following sentence), then the Indemnifying Party shall be
entitled, if it so elects and with counsel reasonably satisfactory to the
Indemnified Party, to take control of the defense and investigation of such
action, suit, claim, proceeding, demand, assessment or enforcement action, and
to employ and engage attorneys to handle and defend the same, at the
Indemnifying Party's cost, risk and expense; and the Indemnified Party shall
cooperate in all reasonable respects, at the Indemnifying Party's request and
cost, risk, and expense, with the Indemnifying Party and its attorneys in the
investigation, trial and defense of such action, suit, claim, proceeding,
demand, assessment or enforcement action, and any appeal arising therefrom;
PROVIDED, HOWEVER, that the Indemnified Party may, at its own cost, participate
in such investigation, trial and defense of such action, suit, claim,
proceeding, demand, assessment or enforcement action, and any appeal arising
therefrom; and PROVIDED, FURTHER, that the Indemnifying Party shall have an
obligation to keep the Indemnified Party apprised of the status of the action,
suit, claim, proceeding, demand, assessment or enforcement action, to furnish
the Indemnified Party with all documents and information that the Indemnified
Party shall reasonably request in connection therewith, and to consult with the
Indemnified Party prior to acting on major matters involved in such action,
suit, claim, proceeding, demand, assessment or enforcement action, including
settlement discussions, it being understood that no settlement of any action for
which indemnification may be payable hereunder shall be made without the prior
written consent of the Indemnified Party. Notwithstanding any other provision of
this Article 5, if an Indemnified Party withholds its consent to a settlement or
elects to defend any claim, where but for such action the Indemnifying Party
could have settled such claim, the Indemnifying Party shall be required to
indemnify the Indemnified Party only up to a maximum of the bona fide settlement
offer for which the Indemnifying Party could have settled such claim. The
Indemnified Party shall be entitled to defend, settle or proceed in such other
manner as it deems fit, in its sole discretion, in connection with any action,
suit, claim, proceeding, demand, assessment or enforcement action as to which
the Indemnifying Party has not acknowledged its obligations in writing in
accordance with the second sentence of this Section 5.5; and no actions taken by
the Indemnified Party in connection therewith shall affect or limit the
obligations of the Indemnifying Party pursuant to this Article 5. If the
Indemnified Party does not have control over any proceeding described in this
Article 5 and the Indemnified Party determines that it desires to settle its
claim in such proceeding it shall have the right to do so without the consent of
the Indemnifying Party, provided that in such event, the Indemnified Party shall
lose the benefits of any indemnification provided by this Article 5 with respect
to such proceeding.
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<PAGE> 10
5.6 INDEMNIFICATION AS SOLE REMEDY. Except as otherwise provided in
this Agreement, the sole remedy of the parties hereto for a misrepresentation or
breach of a representation or warranty contained in Article 2, 3 or 4 of this
Agreement shall be a claim for indemnification under this Article 5.
5.7 DEFINITIONS. The following capitalized terms shall have the
following meanings when used in this Article 5:
(a) "Indemnified Party" shall mean any party hereto entitled
to indemnification hereunder.
(b) "Indemnifiable Claim" shall mean any claim which, if
sustained, would result in a Loss or Liability.
(c) "Indemnifying Party" shall mean any party hereto
required to provide indemnification to another party hereunder.
(d) "Liability" or "Liabilities" shall mean any direct or
indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, including, without limitation, liabilities on account of taxes,
other governmental charges or legal proceedings.
(e) "Loss" or "Losses" shall mean any and all Liabilities,
losses, damages, costs, or expenses (including, without limitation, the fees and
expenses of counsel).
6. OTHER AGREEMENTS
6.1 EXPENSES. The Purchaser and the Seller Parties shall each bear
their own expenses (including those of counsel, accountants and investment
bankers) incurred by each of them in connection with this Agreement and the
transactions contemplated hereby; PROVIDED that Davie shall bear such expenses
of the IRA.
6.2 REPORTING REQUIREMENTS. The Purchaser covenants that it will
file the reports required to be filed by it under the Securities Exchange Act
of 1934, and it will take such further action as the Sellers may reasonably
request to the extent required to enable the Sellers to sell Purchaser Shares
without registration under the Securities Act within the limitation of the
exemption provided by Rule 144 under the Securities Act.
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<PAGE> 11
7. MISCELLANEOUS
7.1 ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) embodies the entire agreement and understanding
of the parties with respect to the transactions contemplated hereby and
supersedes all other prior commitments, arrangements or understandings, both
oral and written, and between the parties with respect thereto. There are no
agreements, covenants, representations or warranties with respect to the
transactions contemplated hereby other than those expressly set forth herein.
7.2 BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective heirs,
personal representatives, successors and assigns.
7.3 ASSIGNMENT. This Agreement may not be assigned by any party
without the prior written consent of the other parties.
7.4 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without
regard to principles of conflicts of laws.
7.5 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and personally delivered at the
addresses designated below, by facsimile transmission to the respective
facsimile numbers designated below, or mailed by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows, or to such
other address or addresses as may hereafter be furnished by one party to the
other parties in compliance with the terms hereof:
If to the Purchaser:
Office Centre Corporation
c/o The King Group
38 East 32nd Street
New York, New York 10016
(Facsimile No.: (212) 725-2591)
Attention: Robert Gillon, Jr.
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<PAGE> 12
If to Walter Gordenstein:
c/o UDI Corp.
90 Tapley Street
Springfield, Massachusetts 01101
(Facsimile No.: 413-732-3333)
If to the IRA:
Dean Witter Reynolds Inc.
1100 First Federal Plaza
Rochester, New York 14614
(Facsimile No.:_____________)
Attention: Delores Lee
If to Clifford M. Davie:
20 Royal Palm Way, Unit 103
Boca Raton, Florida 33432
(Facsimile No.: 407-393-6926 and 716-671-9335)
All such notices and communications shall be deemed to be given for purposes of
this Agreement on the day such writing is received by the intended recipient
thereof.
7.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
7.7 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the Purchaser and the Sellers.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
OFFICE CENTRE CORPORATION
By: /s/ROBERT J. GILLON, JR.
-------------------------------------
Name: Robert J. Gillon, Jr.
Title: President
/s/WALTER GORDENSTEIN
---------------------------------------
WALTER GORDENSTEIN
DEAN WITTER REYNOLDS INC.,
CUSTODIAN FOR THE IRA
ROLLOVER OF CLIFFORD M. DAVIE
DTD 12/15/94
By: /s/IRA MILLER
-------------------------------------
Name: Ira Miller
Title: SVP - Branch Mgr.
/s/CLIFFORD M. DAVIE
----------------------------------------
CLIFFORD M. DAVIE
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<PAGE> 1
EXHIBIT 2.24
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of April 15, 1998 (the
"AGREEMENT"), by and between UDI CORP., a Massachusetts corporation ("UDI") and
UDI II CORP., a Massachusetts corporation ("UDI II").
W I T N E S S E T H:
--------------------
WHEREAS, the respective Boards of Directors of UDI and UDI II deem
it advisable that UDI II merge with and into UDI (the "MERGER"), upon the terms
and conditions herein and in accordance with the laws of the State of
Massachusetts, and that the shares of stock of each of UDI and UDI II shall be
converted upon the Merger as set forth herein.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERMS
1.1. At the Effective Time (as hereinafter defined) of the Merger,
UDI II shall be merged with and into UDI, with UDI as the surviving corporation
(hereinafter also referred to as the "SURVIVING CORPORATION").
1.2. The Surviving Corporation shall be named "UDI Corp."
1.3. At the Effective Time, each share of Common Stock of UDI II
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger, be converted into and exchanged for one share of Common Stock of
the Surviving Corporation.
1.4. Upon and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises, and be subject
to all the restrictions, disabilities and duties, of the Constituent
Corporations (as hereinafter defined); and all rights, privileges, powers and
franchises of the Constituent Corporations shall be vested in and be the
property of the Surviving Corporation; and all debts, liabilities and duties of
the Constituent Corporations shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if said debts,
liabilities and duties have been incurred or contracted by it.
SECTION 2. EFFECTIVE TIME
2.1. Subsequent to the execution of this Agreement, UDI II and UDI
(collectively, the "CONSTITUENT CORPORATIONS") shall submit this Agreement to
their stockholder for its approval pursuant to the applicable provisions of the
Business Corporation Law of the Commonwealth of Massachusetts.
<PAGE> 2
2.2. Following approval of this Agreement in accordance with Section
2.1 above, and provided that:
(a) each Constituent Corporations shall have received the approval
of its stockholder as required under law; and
(b) this Agreement has not been terminated and abandoned pursuant to
Section 4.2 hereof; the Surviving Corporation will cause an Articles of Merger
to be executed and filed with the Secretary of the Commonwealth of
Massachusetts as provided by law.
2.3. The Merger shall become effective immediately upon the filing
of the Articles of Merger with the Secretary of the Commonwealth of
Massachusetts (the date and time of such filing being herein referred to as the
"EFFECTIVE TIME").
SECTION 3. CERTIFICATE OF INCORPORATION AND BYLAWS; BOARD OF DIRECTORS
3.1. The Certificate of Incorporation of UDI constituted at the
Effective Time shall thereafter be the Articles of Incorporation of the
Surviving Corporation until such time as it shall be amended as provided by
law.
3.2. The Bylaws of UDI shall be the bylaws of the Surviving
Corporation, subject to alteration, amendment or repeal from time to time by
the Board of Directors or the stockholders of the Surviving Corporation.
3.3. From and after the Effective Time the members of the Board of
Directors of the Surviving Corporation shall consist of the members of the
Board of Directors of UDI immediately prior to the Effective Time, to hold
office until the expiration of their then current terms and until their
respective successors shall be elected.
3.4. From and after the Effective Time, the officers of UDI shall
consist of the officers of UDI immediately prior to the Effective Time, to hold
office until the next annual meeting of the Stockholder of UDI and until their
respective successors are elected and appointed.
SECTION 4. AMENDMENT AND TERMINATION
4.1. To the fullest extent permitted by applicable law, the
Constituent Corporations, by mutual consent of their respective Boards of
Directors, may amend, modify or supplement this Agreement in such a manner as
may be agreed upon by them in writing at any time prior to the Effective Time,
even though the Agreement shall have been approved by the stockholder of the
Constituent Corporations or of either thereof.
4.2. This Agreement may be terminated and the Merger abandoned for
any reason by resolution adopted by either of the respective Boards of
Directors of the Constituent Corporations
<PAGE> 3
at any time prior to the Effective Time, even though this Agreement shall have
been approved by the stockholder of the Constituent Corporations or of either
thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their respective officers thereunto duly authorized affixed, all as
of the day and year first above written.
UDI CORP.
By /s/Robert J. Gillon, Jr.
---------------------------------
Robert J. Gillon, Jr.
UDI II CORP.
By /s/Robert J. Gillon, Jr.
--------------------------------
Robert J. Gillon, Jr.
<PAGE> 1
EXHIBIT 3.01
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OFFICE CENTRE CORPORATION
Under Sections 242 and 245 of the Delaware General Corporation Law
OFFICE CENTRE CORPORATION, a corporation organized and
existing under the laws of the State of Delaware (the "CORPORATION"), does
hereby certify that:
1. The name of the Corporation is OFFICE CENTRE CORPORATION.
2. The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
October 21, 1996.
3. This Restated Certificate of Incorporation was duly
authorized and adopted by the Board of Directors of the Corporation and duly
approved and adopted by the stockholders of the Corporation in accordance with
Sections 242 and 245 of the General Corporation Law of the State of Delaware.
4. The text of the Corporation's Certificate of Incorporation,
as heretofore amended, is hereby restated and amended to read as set forth in
full herein:
FIRST: The name of the Corporation is OFFICE CENTRE
CORPORATION.
SECOND: The address, including street, number, city, and
county, of the registered office of the Corporation in the State of Delaware is
1013 Centre Road, City of Wilmington 19805, County of New Castle; and the name
of the registered agent of the corporation in the State of Delaware at such
address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 50,001,000 shares of capital stock,
of which 1,000 shares shall be of a class designated "Preferred Stock," par
value $1.00 per share, and 50,000,000 shares shall be of a class designated
"Common Stock," par value $.001 per share.
<PAGE> 2
1. COMMON STOCK.
Each holder of Common Stock shall be entitled to vote
at any time on matters presented to the stockholders of the
Corporation for their approval, adoption or authorization and
shall have one vote for each share of Common Stock held of
record by him. Unless prevented by applicable law, all shares
of Common Stock shall vote as a single class on all matters
requiring the approval of the stockholders of the Corporation.
Each holder of Common Stock shall be entitled to
dividends ratably with all other shares of Common Stock
outstanding when, if and as such dividends are declared and
paid. The Corporation shall not make any payment on Common
Stock, effect any split of Common Stock, or allocate any
benefit or preference to Common Stock, except in proportion to
the total number of shares of Common Stock then outstanding.
2. PREFERRED STOCK.
The Preferred Stock may be issued from time to time
in one or more series of any number of shares, provided that
the aggregate number of shares issued and not canceled of any
and all such series shall not exceed the total number of
shares of Preferred Stock authorized herein.
Authority is hereby vested in the Board of Directors
of the Corporation to issue from time to time the Preferred
Stock as Preferred Stock of any series and, in connection with
the creation of each such series, to fix by resolution or
resolutions providing for the issuance of shares thereof the
voting rights, if any, the designations, preferences and
relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions, of such
series to the full extent now or hereafter permitted by this
Certificate of Incorporation and the laws of the State of
Delaware, in respect of the matters set forth in the following
paragraphs (a) through (e) inclusive:
(a) the liquidation value to which each
share shall be entitled and the preference, if any,
in relation to any other series or class of
securities of the Corporation;
(b) whether such shares shall be convertible
into Common Stock and if so, the ratio of conversion
expressed in whole and/or fractional shares of Common
Stock and the terms and conditions thereof;
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<PAGE> 3
(c) the number of votes, if any, to which
each share shall be entitled;
(d) whether such shares may be called in and
retired or be otherwise subject to redemption
(including redemption through the operation of a
sinking fund, purchase fund or retirement fund) and
if so, the terms and conditions thereof; and
(e) the dividend, if any, for such shares
stated in an amount per share, together with the
terms and conditions relating to the declaration and
payment of such dividend and the preference, if any,
in relation to any other series or class of
securities of the Corporation.
In addition to the foregoing, the Board of Directors
may, in its discretion, assign to such Preferred Stock, in
connection with each issuance thereof, such other terms,
conditions, restrictions, limitations, rights and privileges
as it may deem appropriate.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them, and/or between
this Corporation and its stockholders or any class of them, in any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof, or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver of receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
SEVENTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of the
Corporation, and for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders:
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<PAGE> 4
(a) 1. The number of directors of the Corporation shall be
fixed as provided in the by-laws of the Corporation (the "By-Laws").
The directors shall be divided into three classes, each class to
contain as near as possible to one-third (1/3) of the whole number of
directors of the Board of Directors so fixed in the By-Laws, and,
except as otherwise provided by statute, in the case of any increase in
the number of directors fixed as provided in the By-Laws, such increase
shall be apportioned among the classes of directors so as to maintain
each class as near as possible to one-third of the whole number of
directors as so increased. The initial term of office for members of
the first class shall expire at the annual meeting of stockholders next
following; the initial term for members of the second class shall
expire at the annual meeting of stockholders one year thereafter; and
the initial term for members of the third class shall expire at the
annual meeting of stockholders two years thereafter. At the expiration
of the initial term, and of each succeeding term of each class, the
directors of each class shall be elected to serve for a term of three
years. The By-Laws may contain any provision regarding classification
not inconsistent with the terms hereof.
2. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting
from any increase in the authorized number of directors or any
vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall
be filled by a majority vote of the directors then in office, and
directors so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of the class to which they
have been elected expires. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any
incumbent director.
3. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause
and only by the affirmative vote of the holders of at least 80% of the
voting power of all of the shares of the Corporation entitled to vote
for the election of directors.
4. Notwithstanding anything contained in the Certificate of
Incorporation to the contrary, the affirmative vote of the holders of
at least 80% of the voting power of all of the shares of the
Corporation entitled to vote for the election of directors shall be
required to amend or repeal, or to adopt any provision inconsistent
with, this Article SEVENTH (a).
(b) The Board of Directors shall have power, without the
assent or vote of the stockholders:
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<PAGE> 5
1. To make, alter, amend, change, add to or repeal the By-
Laws of the Corporation as set forth therein; to fix and vary the
amount to be reserved for any proper purpose; to authorize and cause to
be executed mortgages and liens upon all or any part of the property of
the Corporation; to determine the use and disposition of any surplus or
net profits; and to fix the times for the declaration and payment of
dividends.
2. To determine from time to time whether, and to what times
and places, and under what conditions the accounts and books of the
Corporation (other than the stockledger) or any of them, shall be open
to the inspection of the stockholders.
(c) The directors in their discretion may submit any contract
or act for approval or ratification at any annual meeting of the
stockholders or at any meeting of the stockholders called for the
purpose of considering any such act or contract, and any contract or
act that shall be approved or be ratified by the vote of the holders of
a majority of the stock of the Corporation which is represented in
person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in
person or by proxy) shall be as valid and as binding upon the
Corporation and upon all the stockholders as though it had been
approved or ratified by every stockholder of the Corporation, whether
or not the contract or act would otherwise be open to legal attack
because of directors' interest, or for any other reason.
(d) Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may
not be effected by any consent in writing by such stockholders. Special
meetings of stockholders of the Corporation may be called only by the
Board of Directors, upon not less than 10 nor more than 60 days'
written notice. Notwithstanding anything contained in this Certificate
of Incorporation to the contrary, the affirmative vote of the holders
of at least 80% of the voting power of all of the shares of the
Corporation entitled to vote for the election of directors shall be
required to amend or repeal, or to adopt any provision inconsistent
with, this Article SEVENTH (d).
(e) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation; subject, nevertheless,
to the provisions of the statutes of Delaware, of this certificate, and
to any By-Laws from time to time made by the stockholders;
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<PAGE> 6
provided, however, that no By-Laws so made shall invalidate any prior
act of the directors which would have been valid if such By-Law had not
been made.
EIGHTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of ss.102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
NINTH: The Corporation shall, to the full extent permitted by Section
145 of the Delaware General Corporation Law, as amended, from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
TENTH: From time to time any of the provisions of this restated
certificate of incorporation may be amended, altered, or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this restated certificate of incorporation are granted subject to the provisions
of this Article TENTH.
ELEVENTH: (a) 1. In addition to any affirmative vote required by law or
this Certificate of Incorporation, and except as otherwise expressly provided in
section (b) of this Article ELEVENTH:
a. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value of $1,000,000 or more; or
c. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in exchange
for cash, securities or other property (or combination thereof) having
an aggregate Fair Market Value of $1,000,000 or more; or
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<PAGE> 7
d. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
e. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder;
shall require the affirmative vote of the holders of (i) at least 80%
of the then outstanding shares of Common Stock of the Corporation
entitled to vote generally in the election of directors voting together
as a single class; and (ii) at least 66% of the then outstanding shares
of each series of Preferred Stock then issued and outstanding, each
such series of Preferred Stock voting separately and having one vote
for each share of Preferred Stock issued and outstanding. Such
affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that a lesser percentage may be specified, by
law or in any agreement with any national securities exchange or
otherwise.
2. The Term "Business Combination" as used in this
Article ELEVENTH shall mean any transaction which is referred
to in any one or more of clauses (a) through (e) of paragraph
1 of this Section (a).
(b) The provisions of Section (a) of this Article ELEVENTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of this Certificate of Incorporation, if the Business Combination
shall have been approved by a majority of the Continuing Directors (as
hereinafter defined).
(c) For the purposes of this Article ELEVENTH:
1. A "person" shall mean any individual, firm, corporation or
other entity.
2. "Interested Stockholder" shall mean any person (other than
the Corporation or any Subsidiary) who or which:
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<PAGE> 8
a. is the beneficial owner, directly or indirectly,
of more than 10% of the voting power of the outstanding Voting
Stock; or
b. is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of
10% or more of the voting power of the then outstanding Voting
Stock; or
c. is an assignee of or has otherwise succeeded to
any shares of Voting Stock which were at any time within the
two-year period immediately prior to the date in question
beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
3. A person shall be a "beneficial owner" of any Voting Stock:
a. which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly; or
b. which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding; or
c. which are beneficially owned, directly or
indirectly, by any person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
4. For the purposes of determining whether a person is an
Interested Stockholder pursuant to paragraph 2 of this Section (c), the
number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned through application of paragraph 3 of this Section
(c) but shall not include any of the shares of Voting Stock which may
be issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
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<PAGE> 9
5. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
6. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation PROVIDED, HOWEVER, that for the purposes of the definition
of Interested Stockholder set forth in paragraph 2 of this Section (c),
the term "Subsidiary" shall mean only a corporation of which a majority
of each class of equity security is owned, directly or indirectly, by
the Corporation.
7. "Continuing Director" means any member of the Board of
Directors of the Corporation (the "Board") who is unaffiliated with the
Interested Stockholder and was a member of the Board prior to the time
that the Interested Stockholder became an Interested Stockholder, and
any successor of a Continuing Director who is unaffiliated with the
Interested Stockholder and is recommended to succeed a Continuing
Director by a majority of Continuing Directors then on the Board.
8. "Fair Market Value" means:
a. In the case of stock, the highest closing bid
quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of a
share of such stock as determined by the Board in good faith;
and
b. In the case of property other than cash or stock,
the fair market value of such property on the date in question
as determined by the Board in good faith.
(d) The directors of the Corporation shall have the power and duty to
determine for the purposes of this Article ELEVENTH, on the basis of information
known to them after reasonable inquiry:
1. whether a person is an Interested Stockholder;
2. the number of shares of Voting Stock beneficially owned by
any person;
3. whether a person is an Affiliate or Associate of another;
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<PAGE> 10
4. whether the assets which are the subject of any Business
Combination have, or to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $1,000,000 or more.
(e) Nothing contained in this Article ELEVENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
(f) Notwithstanding any other provision of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Certificate of
Incorporation or the By-Laws of the Corporation), the affirmative vote of the
holders of 80% or more of the voting power of the shares of the then outstanding
shares of each class entitled to vote under Section a hereof, voting separately,
shall be required to amend or repeal, or adopt any provisions inconsistent with,
this Article ELEVENTH of this Certificate of Incorporation .
IN WITNESS WHEREOF, I have hereunto set my hands as of this 15TH day of
APRIL, 1998.
OFFICE CENTRE CORPORATION
By: /s/Robert J. Gillon, Jr.
----------------------------------
Name: Robert J. Gillon, Jr.
Title: President
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<PAGE> 1
EXHIBIT 3.02
OFFICE CENTRE CORPORATION
- A DELAWARE CORPORATION -
AMENDED AND RESTATED BY-LAWS
----------------------------
ARTICLE I
---------
MEETINGS OF STOCKHOLDERS
Section 1.1. ANNUAL MEETINGS. The annual meeting of the
stockholders for the election of directors and for the transaction of such other
business as may properly come before such meeting shall be held each year on
such date and at such time and place, within or without the State of Delaware,
as may be designated by the Board of Directors.
Section 1.2. SPECIAL MEETINGS. Special meetings of the
stockholders may be called only by the Board of Directors. Any such meeting
shall be held on such date and at such time and place, within or without the
State of Delaware, as may be designated by the person or persons calling such
meeting.
Section 1.3. NOTICE OF MEETINGS; WAIVER OF NOTICE.
(a) NOTICE OF MEETINGS. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given by mail, facsimile, telegram, cable or personal delivery by or at the
direction of the Board of Directors and shall state the place, date and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than 10 nor more than 60 days
before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be directed to each stockholder at his
address as it appears on the records of the Corporation.
(b) WAIVER OF NOTICE. Whenever notice is required to be given
to the stockholders under any provision of law, the Certificate of Incorporation
of the Corporation or these By-laws, a written waiver signed by a stockholder
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a stockholder at a meeting shall
constitute a waiver of notice of such meeting, except when the stockholder
attends such meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor
<PAGE> 2
the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation of the Corporation.
Section 1.4. QUORUM. The presence at any meeting, in person or
by proxy, of the holders of record of a majority of the shares then issued and
outstanding and entitled to vote shall be necessary and sufficient to constitute
a quorum for the transaction of business, except as otherwise provided by law or
the Certificate of Incorporation of the Corporation.
Section 1.5. ADJOURNMENTS. In the absence of a quorum, a
majority in interest of the stockholders entitled to vote, present in person or
by proxy at a meeting, or, if no stockholder entitled to vote is present in
person or by proxy, any officer entitled to act as chairman or secretary of such
meeting, may adjourn the meeting to another time or place. When a meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the Corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
Section 1.6. ORGANIZATION. The Chairman of the Board, or, if
there is no Chairman or in his absence or disability, the Vice Chairman, if any,
the President or any Vice President, or, in the absence of all of them, a
chairman appointed by the stockholders, shall act as chairman of all meetings of
stockholders. The Secretary or, in his absence or disability, any Assistant
Secretary, or, in the absence of both of them, a Secretary appointed by the
chairman of the meeting, shall act as secretary at all meetings of stockholders.
Section 1.7. VOTING. Except as otherwise permitted by law or
by the Certificate of Incorporation, all action by stockholders shall be taken
at a meeting of the stockholders. Except as otherwise provided in the
Certificate of Incorporation, every stockholder of record, as determined
pursuant to Section 1.11 hereof, who is entitled to vote shall at every meeting
of the stockholders be entitled to one vote for each share of stock entitled to
participate in such vote held by such stockholder on the record date. Each
stockholder entitled to vote shall have the right to vote in person or by proxy.
Except as otherwise provided by law, no vote on any question upon which a vote
of the stockholders may be taken need be by ballot unless the chairman of the
meeting shall determine that it shall be by ballot or the holders of a majority
of the voting power of the shares of stock present in person or by proxy and
entitled to participate in such vote shall so demand. In a vote by ballot each
ballot shall state the number of shares voted and the name of the stockholder or
proxy voting. Unless otherwise provided by law or by the Certificate of
Incorporation, each director shall be elected and all other questions shall be
decided by the vote of the holders of a majority of the voting power of all
shares of stock present in person or by proxy at the meeting and entitled to
vote on the question; provided, however, that the Board of Directors may require
on any question a vote of the holders of a majority of the voting power of all
shares of stock outstanding and entitled to vote thereon. Notwithstanding
anything contained in these By-Laws to the contrary, the affirmative vote of at
least 80% of the voting power of all of the shares of the Corporation entitled
to vote for the election of directors shall be required to amend or repeal, or
to adopt any provision inconsistent with this Section.
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<PAGE> 3
Section 1.8. PROXIES. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate actions in
writing may authorize another person or persons to act for him by proxy, but no
such proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power.
Section 1.9. STOCKHOLDER LIST. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address and number of shares registered in the name of each stockholder. Such
list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the entire time thereof, and may be inspected by any stockholder who is
present.
Section 1.10. INSPECTORS OF ELECTION. In advance of any
stockholders' meeting, the Board of Directors may appoint one or more inspectors
to act at the meeting and make a written report thereof. The Board of Directors
may designate one or more persons as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the person presiding at the meeting shall appoint one
or more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
his ability.
Section 1.11. FIXING THE RECORD DATE. So that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix in advance a record date,
which shall not precede the date upon which the resolution fixing the record
date is adopted by the Board, and (i) in the case of a meeting, shall not be
more than 60 nor less than 10 days before the date of such meeting, or (ii) in
the case of a written consent, shall not exceed by more than 10 days the date
upon which the resolution fixing the record date is adopted by the Board, or
(iii) in the case of any other action, shall not be more than 60 days prior to
such action. Only those stockholders of record on the date so fixed shall be
entitled to any of the foregoing rights, notwithstanding the transfer of any
stock on the books of the Corporation after any such record date fixed by the
Board of Directors.
Section 1.12. NOMINATION OF DIRECTORS. Nominations for the
election of a Director made by a stockholder must be submitted in writing to the
Secretary of the Corporation not less than 30 nor more than 60 days prior to any
stockholders' meeting called for the election of Directors.
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Such notice shall set forth the following information with respect to each
nominee and each stockholder making a nomination: (1) name, age and business
address; (2) business experience during the last five years and other
directorships presently held; and (3) number of shares and percentage of the
Corporation's capital stock beneficially owned (or securities convertible into
or exchangeable for capital stock). Within such time period, the Secretary of
the Corporation must also receive from each nominee a written consent to being a
nominee and a statement of intention to serve as a Director, if elected.
ARTICLE II
----------
BOARD OF DIRECTORS
Section 2.1. NUMBER; CLASSIFICATION. The Board of Directors
shall be fixed from time to time by the vote of a majority of the entire Board
then in office and the number thereof may thereafter by like vote be increased
or decreased to such greater or lesser number (not less than three) as may be so
provided, subject to Section 2.11. All of the directors shall be of full age and
need not be stockholders. The directors shall be divided into three classes,
each class to contain as near as possible to one-third (1/3) of the whole number
of directors of the Board of Directors so fixed in the By-laws, and, except as
otherwise required by law, in the case of any increase in the number of
directors fixed in the By-laws, such increase shall be appointed among the
classes of directors so as to maintain each class as near as possible to
one-third of the whole number of directors as so increased. The initial term for
members of the first class shall expire at the annual meeting of stockholders
next following; the initial term for the members of the second class shall
expire at the annual meeting of stockholders one year thereafter; and the
initial term for members of the third class shall expire at the annual meeting
of stockholders two years thereafter. At the expiration of the initial term, and
of each succeeding term of each class, the directors of each class shall be
elected to serve for a term of three years.
Section 2.2. ELECTION AND TERM OF OFFICE. Directors shall be
elected at the annual meeting of the stockholders, except as provided in
Sections 2.3 or 2.11 of these By-laws. Each director (whether elected at an
annual meeting or to fill a vacancy or otherwise) shall hold office until his
successor shall have been duly elected and qualified or until his earlier death,
resignation or removal in the manner hereinafter provided.
Section 2.3. VACANCIES AND ADDITIONAL DIRECTORSHIPS. Subject
to the rights of the holders of any series of Preferred Stock then outstanding,
newly created directorships resulting from any increase in the authorized number
of directors or any vacancy created by death, resignation, retirement,
disqualification, removal from office or other cause shall be filled by the
affirmative vote of a majority of the remaining directors or by a sole remaining
director though the remaining director or directors be less than the quorum
provided for in Section 2.5 hereof. Each director so chosen shall hold office
for a term expiring at the next annual meeting of stockholders at which the term
of the class which he has been elected expires. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
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Section 2.4. MEETINGS.
(a) REGULAR MEETINGS. The Board of Directors may by resolution
provide for the holding of regular meetings for the organization of the
Corporation, for the election of officers and for the transaction of such other
business as may properly come before the meeting, and may fix the times and
places at which such meetings shall be held. Notice of regular meetings shall
not be required to be given, provided that whenever the time or place of regular
meetings shall be fixed or changed, notice of such action shall be given
promptly by mail, facsimile, telegram, radio, cable, telephone or personal
delivery to each director who shall not have been present at the meeting at
which such action was taken, addressed, sent, delivered or communicated to him
at his residence or usual place of business.
(b) SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the direction of the Chairman of the Board, if
any, the Vice Chairman, if any, the President or a majority of the directors
then in office, except that when the Board of Directors consists of one
director, then such director may call a special meeting. Except as otherwise
required by law, notice of each special meeting shall be mailed to each
director, addressed to him at his residence or usual place of business, at least
five days before the day on which such meeting is to be held, or shall be sent
to him at such place by facsimile, telegram, radio or cable, or telephoned or
delivered to him personally, not later than 24 hours before the day on which
such meeting is to be held. Such notice shall state the time and place of such
meeting, but need not state the purpose thereof, unless otherwise required by
law, the Certificate of Incorporation of the Corporation or these By-laws.
(c) WAIVER OF NOTICE. Whenever notice is required to be given
to the directors under any provision of law, the Certificate of Incorporation of
the Corporation or these By-laws, a written waiver, signed by the director
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except when a director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors need be specified in any written
waiver of notice unless so required by the Certificate of Incorporation of the
Corporation.
(d) PARTICIPATION BY CONFERENCE CALL. Members of the Board of
Directors may participate in any meeting of the Board by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at the meeting.
Section 2.5. QUORUM; VOTING. Unless the Certificate of
Incorporation of the Corporation provides otherwise, at each meeting of the
Board of Directors a majority of the total number of members of the Board of
Directors shall constitute a quorum for the transaction of business, except that
when the Board consists of only one director, then one director shall constitute
a quorum. Unless otherwise required by the Certificate of Incorporation of the
Corporation or these
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By-laws, a vote of the majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board.
Section 2.6. ADJOURNMENTS. A majority of the directors
present, whether or not a quorum is present, may adjourn any meeting to another
time and place. Notice of any adjournment of a meeting of the Board of Directors
to another time or place shall be given to the directors who were not present at
the time of the adjournment and, unless such time and place are announced at
such meeting, to the directors who were present.
Section 2.7. ORGANIZATION. The Chairman of the Board, or if
there is no Chairman or in his absence or disability, the Vice Chairman, if any,
the President, or any Vice President, or in the absence of all of them, a
chairman appointed by the directors present at such meeting, shall act as
chairman at meetings of directors. The Secretary, or in his absence or
disability, any Assistant Secretary, or in the absence of all of them, a
secretary appointed by the chairman of the meeting, shall act as secretary at
all meetings of the Board of Directors.
Section 2.8. ACTION OF BOARD WITHOUT MEETING. Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting if all members of the Board consent thereto in
writing and such writing or writings are filed with the minutes of proceedings
of the Board.
Section 2.9. MANNER OF ACTING. A member of the Board of
Directors shall, in the performance of his duties, be fully protected in relying
in good faith upon the records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of the
Corporation's officers or employees, or committees of the Board, or by any other
person as to matters the director reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 2.10. RESIGNATION OF DIRECTORS. Any director may
resign at any time upon giving written notice of such resignation to the Board
of Directors, the Chairman of the Board, if any, the Vice Chairman, if any, the
President, any Vice President or the Secretary. Unless otherwise specified in
such notice, such resignation shall take effect upon receipt thereof by the
Board of Directors or any such officer, and acceptance of such resignation shall
not be necessary to make it effective.
Section 2.11. REMOVAL OF DIRECTORS. Subject to the rights of
the holders of any series of Preferred Stock then outstanding, any director, or
the entire Board of Directors, may be removed at any time, but only for cause
and only by the affirmative vote of the holders of at least 80% of the voting
power of all of the shares of the Corporation entitled to vote for the election
of directors.
Section 2.12. COMPENSATION OF DIRECTORS. Directors may receive
such reasonable compensation for their services as directors, whether in the
form of salary or a fixed fee for attendance at meetings, with expenses, if any,
as the Board of Directors may from time to time
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determine. Nothing contained herein shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
Section 2.13. AMENDMENT AND REPEAL. Notwithstanding anything
contained in these By-Laws to the contrary, the affirmative vote of the holders
of at least 80% of the voting power of all of the shares of the Corporation
entitled to vote for the election of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with this Article.
ARTICLE III
-----------
COMMITTEES OF THE BOARD
Section 3.1. DESIGNATION AND POWERS. The Board of Directors
may, by a resolution passed by a majority of the entire Board of Directors,
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. Any such committee, to the extent provided in
such resolution and permitted by law, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; PROVIDED, HOWEVER, that no such
committee shall have the power or authority to (i) amend the Certificate of
Incorporation of the Corporation, except as permitted by law, (ii) adopt an
agreement of merger or consolidation, (iii) recommend to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property or assets, (iv) recommend to the stockholders a dissolution of the
Corporation, or a revocation of a dissolution, or (v) amend the By-laws of the
Corporation. Any such committee, to the extent provided in such resolution,
shall have the power and authority to (i) declare a dividend, (ii) authorize the
issuance of stock, or (iii) adopt a certificate of ownership and merger as
permitted by law.
Section 3.2. TERM OF OFFICE. The term of office of the members
of each committee shall be as fixed from time to time by the Board of Directors,
subject to these Bylaws; PROVIDED, HOWEVER, that any committee member who ceases
to be a member of the Board of Directors shall IPSO FACTO cease to be a member
of any committee thereof.
Section 3.3. ALTERNATE MEMBERS AND VACANCIES. The Board of
Directors may designate one or more directors as alternate members of any
committee who, in the order specified by the Board of Directors, may replace any
absent or disqualified member at any meeting of the committee. If at a meeting
of any committee one or more of the members thereof should be absent or
disqualified, and if either the Board of Directors has not so designated any
alternate member or members or the number of absent or disqualified members
exceeds the number of alternate members who are present at such meeting, then
the member or members of such committee (including alternates) present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another director to act at the meeting in the
place of any such absent or disqualified member. If any vacancy shall occur in
any committee by reason of death, resignation, disqualification, removal or
otherwise, the remaining member or members of such
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committee, so long as a quorum is present, may continue to act until such
vacancy is filled by the Board of Directors.
Section 3.4. MEETINGS. Each committee shall fix its own rules
of procedure, and shall meet where and as and upon such notice as provided by
such rules or by resolution of the Board of Directors. Each committee shall keep
regular minutes of its proceedings and all actions by each committee shall be
reported to the Board of Directors at its next regular meeting succeeding any
such action. Members of any committee designated by the Board may participate in
a meeting of the committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at the meeting.
Section 3.5. QUORUM; VOTING. At each meeting of any committee
the presence of a majority of the total number of its members then in office
shall constitute a quorum for the transaction of business; except that when a
committee consists of one member, then one member shall constitute a quorum. A
vote of the majority of committee members present at any meeting of a committee
at which a quorum is present shall be the act of such committee.
Section 3.6. ADJOURNMENTS. A majority of the members of a
committee present, whether or not a quorum is present, may adjourn any meeting
of such committee to another place and time.
Section 3.7. ACTION OF COMMITTEE WITHOUT MEETING. Any action
required or permitted to be taken at any meeting of any committee designated by
the Board of Directors may be taken without a meeting if all members of such
committee consent thereto in writing and such writing or writings are filed with
the minutes of the proceedings of such committee.
Section 3.8. MANNER OF ACTING. A member of any committee
designated by the Board of Directors shall, in the performance of his duties, be
fully protected in relying in good faith upon the records of the Corporation and
upon such information, opinions, reports or statements presented to the
Corporation by any of the Corporation's officers or employees, or other
committees of the Board of Directors, or by any other person as to matters the
member reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation.
Section 3.9. RESIGNATION OF COMMITTEE MEMBERS. Any member of a
committee may resign at any time by giving written notice of such resignation to
the Board of Directors, the Chairman of the Board, if any, the Vice Chairman, if
any, the President, any Vice President or the Secretary. Unless otherwise
specified in such notice, such resignation shall take effect upon receipt
thereof by the Board of Directors or any such officer, and acceptance of such
resignation shall not be necessary to make it effective.
Section 3.10. REMOVAL OF COMMITTEE MEMBERS. Any member of any
committee may be removed with or without cause at any time by the Board of
Directors.
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Section 3.11. COMPENSATION OF COMMITTEE MEMBERS. Committee
members may receive such reasonable compensation for their services as committee
members, whether in the form of salary or a fixed fee for attendance at
meetings, with expenses, if any, as the Board of Directors may from time to time
determine. Nothing contained herein shall be construed to preclude any committee
member from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
----------
OFFICERS
Section 4.1. OFFICERS. The officers of the Corporation shall
be a Chairman of the Board (if elected by the Board of Directors), a Vice
Chairman of the Board (if elected by the Board of Directors), a President, one
or more Vice Presidents (if elected by the Board of Directors), a Secretary, a
Treasurer, and such other officers as may be appointed in accordance with the
provisions of Section 4.3 of these By-laws.
Section 4.2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. Each
officer (except such officers as may be appointed in accordance with the
provisions of Section 4.3 of these By- laws) shall be elected or appointed by a
majority of the Board of Directors present at any meeting at which such election
is held. Unless otherwise provided in the resolution of election, each officer
(whether elected at the first meeting of the Board of Directors after the annual
meeting of stockholders or to fill a vacancy or otherwise) shall hold his office
until the first meeting of the Board of Directors after the next annual meeting
of stockholders and until his successor shall have been elected and qualified,
or until his earlier death, resignation or removal.
Section 4.3. SUBORDINATE OFFICERS AND AGENTS. The Board of
Directors may from time to time appoint other officers or agents (including,
without limitation, one or more Assistant Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers), to hold office for such
periods, have such authority and perform such duties as are provided in these
By-laws or as may be provided in the resolutions appointing them. The Board of
Directors may delegate to any officer or agent the power to appoint any such
subordinate officers or agents and to prescribe their respective terms of
office, authority and duties.
Section 4.4. CHAIRMAN OF THE BOARD. The Chairman of the Board
shall be elected by the Board of Directors. He shall preside at all meetings of
the Board of Directors and stockholders and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall also
have such other powers and perform such other duties as may from time to time be
prescribed by the Board of Directors or these By-laws.
Section 4.5. VICE CHAIRMAN. At the request of the Chairman of
the Board, if there is one, or in his absence or disability, the Vice Chairman,
if there is one, shall perform all the duties of the Chairman of the Board and,
when so acting, shall have all the powers of and be subject to all
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the restrictions on the Chairman of the Board. The Vice Chairman shall also have
such other powers and perform such other duties as may from time to time be
prescribed by the Board of Directors, the Chairman of the Board or these
By-laws.
Section 4.6. PRESIDENT. The President shall be the chief
executive officer of the Corporation. The President shall have charge of the day
to day supervision of the business, affairs and property of the Corporation. The
President may sign (which signature may be a facsimile signature), with any
other officer thereunto duly authorized, certificates representing stock of the
Corporation, the issuance of which shall have been duly authorized, and may sign
(which signature may be a facsimile signature) and execute, in the name and on
behalf of the Corporation, deeds, mortgages, bonds, contracts, agreements and
other instruments and documents duly authorized by the Board of Directors,
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to another officer or agent. The President shall also
have such other powers and perform such other duties as may from time to time be
prescribed by the Board or these By-laws.
Section 4.7. VICE PRESIDENTS. At the request of the President,
or in his absence or disability, the Vice President designated by the Board of
Directors shall perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions on the
President. Any Vice President may also sign (which signature may be a facsimile
signature), with any other officer thereunto duly authorized, certificates
representing stock of the Corporation, the issuance of which shall have been
duly authorized, and may sign (which signature may be a facsimile signature) and
execute, in the name and on behalf of the Corporation, deeds, mortgages, bonds,
contracts, agreements and other instruments and documents duly authorized by the
Board of Directors, except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to another officer or agent. Each
Vice President shall have such other powers and perform such other duties as may
from time to time be prescribed by the Board, the President or these By-laws.
Section 4.8. THE SECRETARY. The Secretary shall:
(a) record all the proceedings of meetings of the
stockholders, the Board of Directors, and any committees
thereof in a book or books to be kept for that purpose;
(b) cause all notices to be duly given in accordance
with the provisions of these By-laws and as required by law;
(c) whenever any committee shall be appointed
pursuant to a resolution of the Board of Directors, furnish
the chairman of such committee with a copy of such resolution;
(d) be custodian of the records and the seal of the
Corporation, and cause such seal to be affixed to (or a
facsimile to be reproduced on) all certificates
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representing stock of the Corporation prior to the issuance
thereof and all instruments the execution of which in the name
and on behalf of the Corporation and under its seal shall have
been duly authorized;
(e) see that the lists, books, reports, statements,
certificates and other documents and records required by law
are properly kept and filed;
(f) have charge of the stock and transfer books of
the Corporation, and exhibit such books at all reasonable
times to such persons as are entitled by law to have access
thereto;
(g) sign (which signature may be a facsimile
signature), with any other officer thereunto duly authorized,
certificates representing stock of the Corporation, the
issuance of which shall have been duly authorized, and sign
(which signature may be a facsimile signature) and execute, in
the name and on behalf of the Corporation, instruments and
documents duly authorized by the Board of Directors, except
where the signing and execution thereof shall be expressly
delegated by the Board of Directors to another officer or
agent; and
(h) in general, perform all duties incident to the
office of Secretary and have such other powers and perform
such other duties as may from time to time be prescribed by
the Board, the President or these By-laws.
Section 4.9. ASSISTANT SECRETARIES. At the request of the
Secretary, or in his absence or disability, the Assistant Secretary designated
by the Secretary, the Board of Directors or the President, shall perform all the
duties of the Secretary, and, when so acting, shall have all the powers of and
be subject to all the restrictions on the Secretary. Each Assistant Secretary
shall have such other powers and perform such other duties as may from time to
time be prescribed by the Board of Directors, the President, the Secretary or
these By-laws.
Section 4.10. THE TREASURER. The Treasurer shall:
(a) have charge of and supervision over and be
responsible for the funds, securities, receipts and
disbursements of the Corporation;
(b) cause the moneys and other valuable effects of
the Corporation to be deposited in the name and to the credit
of the Corporation in such banks or trust companies, or with
such bankers or other depositaries, as shall be selected in
accordance with Section 6.3 of these By-laws, or to be
otherwise dealt with in such manner as the Board of Directors
may direct from time to time;
(c) cause the funds of the Corporation to be
disbursed by checks or drafts upon the authorized depositaries
of the Corporation, and cause to be taken and preserved proper
vouchers for all moneys disbursed;
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(d) render to the Board of Directors or the
President, whenever requested, a statement of the financial
condition of the Corporation and of all of his transactions as
Treasurer;
(e) cause to be kept at the Corporation's principal
office correct books of account of all of the Corporation's
business and transactions and such duplicate books of account
as he shall determine and, upon application, cause such books
or duplicates thereof to be exhibited to any director;
(f) be empowered, from time to time, to require from
the officers or agents of the Corporation reports or
statements giving such information as he may desire or deem
appropriate with respect to any or all financial transactions
of the Corporation;
(g) sign (which signature may be a facsimile
signature), with any other officer thereunto duly authorized,
certificates representing stock of the Corporation, the
issuance of which shall have been duly authorized, and sign
(which signature may be a facsimile signature) and execute, in
the name and on behalf of the Corporation, instruments and
documents duly authorized by the Board of Directors, except
where the signing and execution thereof shall be expressly
delegated by the Board of Directors to another officer or
agent; and
(h) in general, perform all duties incident to the
office of Treasurer and have such other powers and perform
such other duties as may from time to time be prescribed by
the Board of Directors, the President or these By-laws.
Section 4.11. ASSISTANT TREASURER. At the request of the
Treasurer, or in his absence or disability, the Assistant Treasurer designated
by the Treasurer, the Board of Directors or the President shall perform all the
duties of the Treasurer, and, when so acting, shall have all the powers of and
be subject to all the restrictions on the Treasurer. Each Assistant Treasurer
shall have such other powers and perform such other duties as may from time to
time be prescribed by the Board of Directors, the President, the Treasurer or
these By-laws.
Section 4.12. RESIGNATIONS. Any officer may resign at any time
by giving written notice of such resignation to the Board of Directors, the
Chairman of the Board, the Vice Chairman, the President, any Vice President or
the Secretary. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
any such officer, and the acceptance of such resignation shall not be necessary
for it to be effective.
Section 4.13. REMOVAL. Any officer specifically designated in
Section 4.1 of these By-laws may be removed with or without cause at any meeting
of the Board of Directors by the affirmative vote of a majority of the directors
then in office. Any officer or agent appointed pursuant to the provisions of
Section 4.3 of these By-laws may be removed with or without cause at any meeting
of the Board of Directors by the affirmative vote of a majority of the directors
present at
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such meeting or at any time by any superior officer or agent upon whom such
power of removal shall have been conferred by the Board of Directors.
Section 4.14. VACANCIES. Any vacancy in any office (whether by
reason of death, resignation, removal, disqualification or otherwise) shall be
filled for the unexpired portion of the term in the manner prescribed by these
By-laws for regular elections or appointments to such office.
Section 4.15. COMPENSATION. The salaries of the officers of
the Corporation shall be fixed from time to time by the Board of Directors,
except that the Board of Directors may delegate to any person the power to fix
the salaries or other compensation of any officers or agents appointed pursuant
to the provisions of Section 4.3 of these By-laws. No officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the Corporation.
Section 4.16. BONDING The Corporation may secure the fidelity
of any or all of its officers or agents by bond or otherwise.
ARTICLE V
---------
INDEMNIFICATION
The Corporation may indemnify, in the manner and to the extent
permitted by applicable law, any person (or the estate of any person) who was or
is a party to, or is threatened to be made a party to, any threatened, pending
or completed action, suit or proceeding, whether or not by or in the right of
the Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director, officer,
employee, fiduciary or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, fiduciary, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding. To the extent and in the manner
provided by applicable law, any such expenses may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding. Any
indemnification or advancement of expenses provided for herein shall be made
only as authorized in the specific case upon a determination, made in the manner
provided by applicable law, that indemnification of, or advancement of expenses
to, such director, officer, employee or agent is proper in the circumstances.
The Corporation may, to the fullest extent permitted by applicable law, purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability which may be asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under applicable
law. Any indemnification or advancement of expenses pursuant hereto shall not
limit the right of the Corporation to indemnify or make advances to any other
person for any expenses (including attorneys' fees), judgments, fines or other
amounts
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to the fullest extent permitted by applicable law, nor shall they be exclusive
of any other rights to which any person seeking indemnification or advancement
of expenses may be entitled under any agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
ARTICLE VI
----------
EXECUTION OF INSTRUMENTS AND
DEPOSIT OF CORPORATE FUNDS
Section 6.1. EXECUTION OF INSTRUMENTS GENERALLY. Subject to
the approval of the Board of Director, the President, any Vice President, the
Secretary or the Treasurer may enter into any contract or execute and deliver
any instrument in the name and on behalf of the Corporation. The Board of
Directors may authorize any officer or officers or agent or agents to enter into
any contract or execute and deliver any instrument in the name and on behalf of
the Corporation, and such authorization may be general or confined to specific
instances.
Section 6.2. BORROWING. No loans or advances shall be obtained
or contracted for by or on behalf of the Corporation, and no negotiable paper
shall be issued in the name of the Corporation, unless and except as authorized
by the Board of Directors. Such authorization may be general or confined to
specific instances. Any officer or agent of the Corporation thereunto so
authorized may obtain loans and advances for the Corporation, and in connection
with such loans and advances may make, execute and deliver promissory notes,
bonds or other evidences of indebtedness of the Corporation. Any officer or
agent of the Corporation so authorized may pledge, hypothecate or transfer as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation any and all stocks, bonds, other securities and
other personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same and do every act and thing necessary or
proper in connection therewith.
Section 6.3. DEPOSITS. All funds of the Corporation not
otherwise employed shall be deposited from time to time to its credit in such
banks or trust companies or with such bankers or other depositaries as the Board
of Directors may select, or as may be selected by any officer or officers or
agent or agents authorized to do so by the Board of Directors. Endorsements for
deposit to the credit of the Corporation in any of its duly authorized
depositaries shall be made in such manner as the Board of Directors may from
time to time determine.
Section 6.4. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for the payment of money, and all notes or other evidences of
indebtedness issued in the name of the Corporation, shall be signed by such
officer or officers or agent or agents of the Corporation, and in such manner,
as from time to time shall be determined by the Board of Directors.
Section 6.5. PROXIES. Proxies to vote with respect to shares
of stock of other corporations owned by or standing in the name of the
Corporation may be executed and delivered
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<PAGE> 15
from time to time on behalf of the Corporation by the President or any Vice
President, or by any other person or persons thereunto authorized by the Board
of Directors.
ARTICLE VII
-----------
STOCK
Section 7.1. FORM AND EXECUTION OF CERTIFICATES. The shares of
capital stock of the Corporation shall be represented by certificates in the
form approved by the Board of Directors from time to time. The certificates
shall be signed by, or in the name of the Corporation by, the President or any
Vice President, and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer. Any or all of the signatures on the certificates may
be facsimile signatures. In case any officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 7.2. REGULATIONS. The Board of Directors may make such
rules and regulations consistent with any governing statute as it may deem
expedient concerning the issue, transfer and registration of certificates of
stock and concerning certificates of stock issued, transferred or registered in
lieu or replacement of any lost, stolen, destroyed or mutilated certificates of
stock.
Section 7.3. TRANSFER AGENT AND REGISTRAR. The Board of
Directors may appoint a transfer agent or transfer agents and a registrar or
registrars of transfers for any or all classes of the capital stock of the
Corporation, and may require stock certificates of any or all classes to bear
the signature of either or both.
ARTICLE VIII
------------
CORPORATE SEAL
The corporate seal shall be circular in form, shall bear the
name of the Corporation and words and figures denoting its organization under
the laws of the State of Delaware and the year thereof, and otherwise shall be
in such form as shall be approved from time to time by the Board of Directors.
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<PAGE> 16
ARTICLE IX
----------
FISCAL YEAR
The fiscal year of the Corporation shall end on the last day
of December in each year or such other day as the Board of Directors may
determine by resolution.
ARTICLE X
---------
AMENDMENTS
Except as otherwise provided herein, these By-Laws may be
amended or repealed or new By-Laws may be adopted by the Board at any meeting
thereof; provided, however, that notice of such meeting shall have been given as
provided in these By-Laws, which notice shall mention that amendment or repeal
of the By-Laws, or the adoption of new By-Laws, is one of the purposes of such
meetings.
-16-
<PAGE> 1
SPECIMEN CERTIFICATE Exhibit 4.01
NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SHARES
0
OFFICE CENTRE CORPORATION
TOTAL AUTHORIZED ISSUE
50,000,000 SHARES PAR VALUE $.001 EACH
COMMON STOCK See Reverse for
Certain Additions
This is to Certify that ______________________________________ is the owner of
_____________________________________________________________ fully paid and
non-assessable shares of the above Corporation transferable only on the books
of the Corporation by the holder hereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed.
WITNESS, the seal of the Corporation and the signatures of its duly authorized
officers.
DATED
_____________________________________ _________________________________
Secretary President
<PAGE> 2
THE FOLLOWING ABBREVIATIONS, WHEN USED IN THE INSCRIPTION ON THE FACE
OF THIS CERTIFICATE, SHALL BE CONSTRUED AS THOUGH THEY WERE WRITTEN OUT IN FULL
ACCORDING TO APPLICABLE LAWS OR REGULATIONS:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ....... Custodian .......
(Cust) (Minor)
TEN ENT - as tenants by the under Uniform Gifts to Minors
entireties Act.......................
(State)
JT TEN - as joint tenants with
right of survivorship
and not as tenants in
common
Additional abbreviations may also be used though not in the above
list
For value received ________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
|
______________________________________________________________________________
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
_____________________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________ 19 ___________
In presence of
____________________________________ _____________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 10.01
EMPLOYMENT/CONSULTING AGREEMENT
-------------------------------
AGREEMENT made this 20th day of July, 1995, by and between UDI
CORP. and UDI II CORP., both Massachusetts corporations having usual places of
business in Springfield, Hampden County, Massachusetts, hereinafter called
"Company" and CLIFFORD M. DAVIE, residing at 20 Royal Palm Way, Unit 103, Boca
Raton, Florida 33432, hereinafter called "Employee" and/or BUYING GROUP
SERVICES, INC. a Delaware Corporation, hereinafter called "Consultant".
WHEREAS, Company conducts a business engaging in the
collective purchasing of office products for its members; and
WHEREAS, Employee/Consultant desires to become a sales
consultant to the Company in its business under certain terms and conditions;
and
WHEREAS, Company desires to utilize Employee's/Consultant's
services in its business.
NOW, THEREFORE, in consideration for the mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Company hereby agrees to appoint and retain
Employee/Consultant as a sales consultant and representative for a period of
eight (8) years from the date of this Agreement. Employee's/Consultant's duties
shall be to sign-up dealers and members under the Company's purchasing program.
1
<PAGE> 2
Employee/Consultant shall work under the direction
of the Board of Directors and shall discharge such duties as the Board shall
from time to time reasonably require.
2. Employee/Consultant agrees that he will devote his time and
efforts on behalf of Company and shall serve diligently and according to his
best abilities in all respects and shall generally do all things for the best
interest of Company that are usually done by persons occupying similar
positions.
3. As part of this Agreement, Employee/Consultant shall have
as his exclusive sales territory the following states: New York, New Jersey,
Pennsylvania, Washington, Oregon and Idaho. Employee/Consultant shall work
primarily on New York, New Jersey, and Pennsylvania and will not start work on
the Washington, Oregon and Idaho territory until a majority of the major
customers in the New York, New Jersey and Pennsylvania areas have been
contacted.
4. As compensation for the work to be performed as sales
representative, Employee/Consultant shall be entitled to receive one-half (?) of
all revenues received by the Company from dealer members signed up by
Employee/Consultant as of January 1, 1993. The revenues shall include but not be
limited to administration fees, fees generally, catalog fees, etc.
In addition, the Employee/Consultant shall receive an
annual retainer of $25,000.00 from the date hereof through February, 1994.
Commencing on March 1, 1994 the annual retainer shall be increased to $50,000.00
per year. Said retainer shall be paid monthly and in no event shall
said annual retainer be less
2
<PAGE> 3
than the highest paid representative employee on the payroll of the company from
time to time. This retainer shall commence upon the execution of this Agreement.
As additional remuneration, the Employee/Consultant shall also
be entitled to a secretary at UDI to perform secretarial duties and assist
Employee/Consultant in his sales effort, including the making of appointments
and the follow-up required.
As additional consideration the Employee/Consultant shall be
entitled to all travel and other expenses directly related to his duties as a
sales representative, however, said travel expenses shall be limited to
$25,000.00 annually unless approved by the Company's President.
As additional consideration the Employee/Consultant shall be
allowed to maintain an office away from the Company and the Company will be
responsible for equipping the office with such machines and furniture as are
necessary, including telephone, fax machine, desks, chairs, etc. The Company
will not be responsible for any personnel hired to staff this office. Any
additional personnel, including sales and clerical personnel shall be paid by
the Employee/Consultant at no cost to the Company.
Employer shall elect to give employee, including and without
limitation, health, major medical insurance, disability insurance, if available,
paid vacation and disbursements for all reasonable and necessary business
expenses including disbursements for employees automobile expenses.
3
<PAGE> 4
5. Employee/Consultant shall be allowed to make sales in
territories other than the exclusive territories listed above. In the event that
a sale is made in a territory other than the exclusive territories listed above,
the commission to be earned by the Employee/Consultant shall be reduced by that
commission which is normally due and paid to the area representative.
6. It is agreed and understood that in the event a wholesaler
to UDI leaves the program and does not make payments to UDI pursuant to their
agreement, the payments due Employee/Consultant as set forth in paragraph "4"
herein shall be reduced by the portion that UDI is not paid. The
Employee/Consultant agrees that if payment is not made by the wholesaler to UDI,
UDI is not responsible for the compensation to Employee/Consultant.
7. Nothing contained in this Agreement shall prohibit
Employee's/Consultant's receipt of any distributions which may be made to him as
a shareholder of either or both corporations for whom he is employed.
8. A. The parties further agree that this Agreement shall
remain in force for a term of eight (8) years, and shall be renewed
automatically on an annual basis thereafter, unless sooner terminated by the
Company for cause, it being expressly understood that gross misfeasance or gross
malfeasance on the part of Employee/Consultant, dishonesty, conviction of any
felony, the inability of employee to perform his duties by reason of extended
disability in excess of six (6) months and/or breach of any provision of this
Agreement by Employee/Consultant shall be due cause
4
<PAGE> 5
for dismissal. In the event of any such cause, the Company may
terminate this Agreement by furnishing to Employee/Consultant a ninety (90) day
notice in writing by certified mail, provided, however, that notwithstanding
anything else contained herein to the contrary, Employee/Consultant shall
continue to receive the compensation as set forth in paragraph 4 for a period of
ninety (90) days following the effective date of termination for cause. Except
for termination for cause, as aforesaid, and except for Company's termination
rights contained in paragraph 7(A), the said Agreement shall continue for the
full term hereof and for such additional term as the parties may mutually agree
upon.
B. Disability shall be defined as Employee/Consultant being
unable to perform his usual and customary duties hereunder for a period in
excess of six (6) consecutive months.
9. Employee/Consultant covenants and agrees that, (i) in the
event of the termination of said employment for cause, or in the event that
Employee/Consultant voluntarily leaves the Company, other than as a result of a
breach of this Agreement by Company, he will not render any service either as an
employee, independent contractor or as an owner in any other business which is
competitive to the business being conducted by Company. This restrictive
covenant shall remain in full force and effect for a period of one (1) year from
the date of termination of employment and shall apply to any territory where
Company then conducts business.
5
<PAGE> 6
In the event of any violation of the provisions of this
paragraph, Company shall be entitled, in addition to any other rights or
remedies which it may have, to maintain an action for damages and permanent
injunctive relief, and in addition, shall be entitled to preliminary injunctive
relief, it being agreed by the parties that as a result of any such breach by
Employee/Consultant, Company would suffer substantial and irreparable damages,
the amount of which would be impossible to ascertain in advance.
It is specifically understood and agreed that provisions of
this clause shall not apply in the event that Employee/ Consultant terminates
his position as a result of a breach of Agreement by Company.
If, in any respect, any provision of this contract, in whole
or in part, shall prove to be invalid for any reason, such invalidity shall only
affect the part of such provisions which shall be invalid and in all other
respects this contract shall stand as if such invalid provisions had not been
made, and it shall fail to the extent, and only to the extent, of such invalid
provisions, and no other portion or provisions of this contract shall be
invalidated, impaired, or affected thereby.
It is intended by the parties that the foregoing restrictions
shall be liberally construed in order to protect to a maximum degree the good
will and business of the Company, and, in the event that any court of competent
jurisdiction shall determine that the restrictions herein set forth are
unreasonable or
6
<PAGE> 7
invalid, either as to length of time or area, or for any other
reason, then the parties agree that what shall constitute a reasonable area or a
reasonable time shall be determined by said Court.
10. Any controversy or claim arising out of or related to this
Agreement including whether or not Employee/Consultant has committed an offense
which is cause for termination, or its breach shall be settled by arbitration in
accordance with the governing rules of the American Arbitration Association to
be held in Springfield, Massachusetts. All costs and expenses of the
arbitration, including the attorney fees for both parties, shall be paid by the
Company. A judgment upon the award rendered may be entered in any court of
competent jurisdiction. If the parties cannot agree upon a single arbitrator,
then they shall each select an arbitrator who will jointly select a third. The
successful party to an arbitration proceeding shall be entitled to collect his
reasonable attorney's fees and costs in addition to any award rendered pursuant
to such arbitration proceeding.
11. This Agreement is to be construed under the laws of the
Commonwealth of Massachusetts, and no changes or additions to same shall be made
except by a writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties have set their hands and seals
to this instrument and to one other instrument of like tenor, both being
considered original instruments, the day and year first above written.
7
<PAGE> 8
UDI CORP.
BY/s/ Walter Gordenstein
--------------------------------------------------
WALTER GORDENSTEIN
UDI II CORP.
BY/s/ Walter Gordenstein
--------------------------------------------------
WALTER GORDENSTEIN
BUYING GROUP SERVICES, INC.
BY/s/ Clifford M. Davie
--------------------------------------------------
CLIFFORD M. DAVIE, Secretary
8
<PAGE> 1
EXHIBIT 10.02
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 1st day of May, 1997 by and between
Office Centre Corporation, a Delaware corporation (hereinafter referred to as
"OCC"), with an office at Springfield, Massachusetts, and Robert J. Gillon, Jr.
(hereinafter referred to as the "Executive"), residing at 203 Overlook Drive,
Greenwich, CT 06830.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, OCC wishes to engage the services of the Executive to
serve as its president and chief executive officer; and
WHEREAS, the Executive desires to serve as the president and
chief executive officer of OCC on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties agree as
follows:
1. PERFORMANCE OF DUTIES. The Executive shall become President
and Chief Executive Officer of OCC with responsibility to manage OCC on a daily
basis. The Executive shall report directly to the Board of Directors. During the
term of Executive's employment, OCC shall (a) provide the Executive with
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<PAGE> 2
a private office, secretarial help, office equipment and supplies, and such
other facilities and services, which are suitable to the Executive's position
and adequate for the performance of his duties and (b) maintain its headquarters
in Manhattan or in such other location as Executive shall approve.
2. COMPENSATION. As compensation for his services
hereunder, the Executive shall receive:
(a) An annual salary equal to $250,000 per year,
such amount to be paid to the Executive semi-monthly starting
May 1, 1997;
(b) A yearly salary review by the Board of Directors
to determine if said annual salary shall be increased, but in
no event shall said salary be decreased;
(c) A yearly cash bonus determined by the Board of
Directors of OCC based upon the performance of OCC;
(d) A bonus upon signing this contract equal to
seventy-five thousand ($75,000) dollars and an additional
$75,000 payable on December 31, 1997;
(e) 547,430 shares of OCC stock;
(f) Options to purchase stock of OCC, the number and
price to be determined by the Board of Directors on an annual
basis, in the same proportion and on the same terms and
provisions as options granted to other shareholders and key
employees; and
- 2 -
<PAGE> 3
(g) In the event of a sale prior to an IPO of assets
of OCC, 12 1/2% of the profit, with profit defined as the
amount by which the consideration paid to OCC for its assets
exceeds the amount paid by OCC for its assets; the provisions
of this Section 2(g) shall survive a termination of this
agreement.
3. FRINGE BENEFITS. In addition to the provisions of Paragraph
2(a), as part of his compensation, the Executive shall be entitled to the
following fringe benefits:
(a) AUTOMOBILE ALLOWANCE. The Executive shall be entitled to
the use of a company vehicle, the make, model and year of which shall be
selected by the Executive and approved by the Board of Directors of OCC, which
approval shall not be unreasonably withheld. The Executive shall have the right
to have OCC lease on his behalf a new vehicle every three (3) years. The
Executive shall be entitled to all reasonable expenses relating to his use of
the vehicle including, but not limited to, automobile insurance, fuel, and
maintenance.
(b) LIFE INSURANCE. OCC shall expend twenty-five thousand
($25,000.00) in annual premiums to obtain an insurance policy on the life of
Executive, which policy shall be chosen by the Executive. Executive shall have
the right to designate the beneficiary thereof.
(c) SALARY CONTINUATION DURING DISABILITY. If the Executive
for any reason becomes disabled, so that he is
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<PAGE> 4
unable to perform his duties hereunder in the opinion of OCC due to physical or
mental illness or other cause for either (i) a period of 90 consecutive days or
(ii) 180 days during any 360-day period ("Disabled"), the Executive's employment
under this Agreement shall terminate. OCC shall nevertheless continue to pay him
periodic salary payments that he would have been entitled to receive under
Section 2(a) until the earlier to occur of (x) the time that this Agreement
would have expired but for such termination (assuming no automatic extension
under Section 5(a)) and (y) the time that he is no longer Disabled. Until such
period of such disability shall commence, the Executive shall be entitled to
receive his regular salary payments provided he is not in default under this
Agreement.
(d) OTHER BENEFITS. The Executive shall be entitled to such
other benefits as are granted to other senior executives of OCC. In any event,
Executive will receive group insurance, similar to, and not less than, that
currently made available to Executive by his present employer, The King Group,
LLC, including life insurance, medical insurance (hospitalization, dental,
etc.).
4. EXPENSE REIMBURSEMENT. The Executive shall be entitled to
the use of a corporate phone card and credit card for business expenses and
shall be entitled to reimbursement from OCC for all reasonable out-of-pocket
business expenses incurred by him in connection with the performance of his
duties as President
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<PAGE> 5
and Chief Executive Officer, subject to compliance with the OCC's rules and
practices relating to expense reimbursement.
5. DURATION AND TERMINATION OF EMPLOYMENT.
(a) Unless the Executive's employment under this Agreement
is otherwise terminated, the term of this Agreement is three (3) years from the
date first above written. Unless the Executive's employment under this Agreement
is otherwise terminated, this agreement shall automatically be extended for
further one-year terms unless either party advises the other by written notice
at least six months before the end of the then current term of its intention to
cancel the agreement.
(b) OCC may terminate the employment of the Executive for
Cause (defined herein) and notice of such termination shall be sent to
Executive. "Cause" shall mean the Executive's (i) willful misconduct, (ii)
grossly negligent misconduct in the performance of his duties to the
Corporation, (iii) material breach of his obligations under this Agreement, (iv)
failure to comply with the lawful instructions of the Board of Directors or (v)
conviction of, or plea of nolo contendere to a felony, or conviction of, or plea
of nolo contendere to, a crime involving moral turpitude under federal, state or
local laws. Notwithstanding the foregoing, a crime involving tax matters shall
not be considered a crime involving moral turpitude.
- 5 -
<PAGE> 6
(c) If, at any time, OCC decides, pursuant to paragraph (a)
of this Section 5, to exercise its option to cancel this agreement, it shall pay
Executive as severance an amount equal to the greater of (i) the Executive's
then current annual salary or (ii) two hundred fifty thousand ($250,000) dollars
at the time such notice is given.
(d) If, at any time, OCC terminates the employment of the
Executive for Cause, the Executive resigns his position for any reason, or the
Executive dies, the Executive (or his estate) shall be entitled to receive only
the unpaid portion of his salary which has accrued to the date of such
termination, resignation or death.
(e) If, at any time, OCC terminates the employment of the
Executive for any reason other than for Cause ("Non-Cause Termination"), the
Executive shall be entitled to receive the greater of (i) the periodic salary
payments that he would have been entitled to receive under Section 2(a) until
this Agreement would have expired but for such termination (assuming no
automatic extension under Section 5(a)); and (ii) $250,000 (or such greater
amount that is the Executive's annual salary at the time of such termination),
which amount in (e)(ii) to be paid at the time of termination. With respect to
the payments provided in subsection (e)(i) of this Section 5, the Executive
shall be entitled to receive (A) at the time of termination, a lump sum payment
equal to $250,000 (or such greater amount that is the
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<PAGE> 7
Executive's annual salary at that time) in lieu of one year's periodic payments
and (B) commencing one year from the date of termination, the remaining
periodic payments to which Executive is entitled (after adjusting for the lump
sum payment referred to in (A)), such payments to be made semi-monthly. For all
purposes of this Agreement, if OCC fails to maintain its headquarters in
Manhattan, or if the Executive is not elected to OCC's Board of Directors, such
events shall be deemed to be Non-Cause Termination.
Notwithstanding anything else contained in this Agreement, if,
by July 23, 1997, OCC has not consummated a purchase of all of the capital stock
of King Office Supply Inc. ("King"), OCC shall have the right (the "Right") to
terminate the employment of the Executive under this Agreement by written notice
to the Executive with no further obligations under this Agreement; provided,
however, if the Right is exercised despite Robert Gillon, in his capacity as a
stockholder of King, having negotiated in good faith to consummate such purchase
by July 23, 1997, then, upon exercise of the Right OCC shall make a lump sum
payment of $250,000 to the Executive. If OCC does not exercise the Right by
August 6, 1977, the Right shall expire and be of no further force and effect.
(f) If Executive becomes disabled, no payments shall be
owing by OCC other than those specified in Section 3(c).
6. COVENANTS OF THE EXECUTIVE.
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<PAGE> 8
(a) NONCOMPETITION. From the date hereof through the
Non-compete Termination Date (as defined below), the Executive shall not,
directly or indirectly, engage in or be associated with any entity (other than,
prior to December 31, 1997, King Office Supply Inc.) which engages in a business
which is competitive with the business or activities of OCC and its
subsidiaries, within a 25 mile radius of any business location of OCC or any of
its subsidiaries, whether as a director, officer, employee, agent, consultant,
partner, owner, independent contractor or otherwise. OCC and the Executive
hereby acknowledge that nothing contained herein shall prohibit the Executive
from making investments in other entities or businesses, PROVIDED, that such
entities or businesses are not engaged in activities which are competitive with
the business and activities of OCC and its subsidiaries. The Executive shall
refrain from making any investment in, or receiving compensation or other
payment from, any entity or business which is competitive with the business or
activities of OCC and its subsidiaries. Notwithstanding the foregoing, the
Executive's beneficial ownership of less than 1% of the outstanding capital
stock of a publicly traded company, whether or not such company is competitive
with OCC and its subsidiaries, shall not, in and of itself, be deemed to be
activities which are competitive with the business and activities of OCC and its
subsidiaries.
"Non-compete Termination Date" shall mean:
- 8 -
<PAGE> 9
(i) If OCC decides, pursuant to Section 5(a), to exercise
its option to cancel this Agreement, the first anniversary of the date on which
the Executive's employment terminates as described in Section 5(a) (assuming no
automatic extension under Section 5(a));
(ii) If the Executive is terminated for Cause or resigns for
any reason, the first anniversary of the effective date of such resignation or
termination for Cause;
(iii) If the Executive's employment is terminated by OCC
pursuant to a Non-Cause Termination, the later of (A) one year from the
effective date of such termination, and (B) the date on which the Executive's
employment would have terminated if the term of this Agreement would have
continued until expiration (assuming no automatic renewals under Section 5(a));
and
(iv) If the Executive becomes Disabled, the date on which no
further payments are owing under Section 3(c).
(b) NONSOLICITATION. From the date hereof through the
Non-compete Termination Date, the Executive shall not, and shall cause each
business or entity with which he shall become associated in any capacity not to,
(i) solicit for employment or employ any person who is then, or who was at any
time six months prior to the date of such termination, employed by OCC or its
subsidiaries or (ii) solicit business from any
- 9 -
<PAGE> 10
current customer or supplier of OCC or its subsidiaries or any person or entity
who was a customer or supplier of OCC or its subsidiaries at any time within six
months prior to the date of such termination.
(c) CONFIDENTIALITY. The Executive agrees and acknowledges
that the Confidential Information (as defined below) of OCC and its subsidiaries
is valuable, special and unique to its business; that such business depends on
such Confidential Information; and that OCC wishes to protect such Confidential
Information by keeping it confidential for the use and benefit of OCC and its
subsidiaries. Based on the foregoing, the Executive agrees to undertake the
following obligations with respect to such Confidential Information:
(i) the Executive agrees to keep any and all Confidential
Information in trust for the exclusive use and benefit of OCC and its
subsidiaries;
(ii) the Executive agrees that, except as required by
applicable law or as authorized in writing by OCC, he will not, at any time
prior to the second anniversary of the termination of his employment hereunder,
disclose, directly or indirectly, any Confidential Information of OCC or its
subsidiaries;
(iii) the Executive agrees to take all reasonable steps
necessary, or reasonably requested by OCC, to ensure that all Confidential
Information is kept confidential for
- 10 -
<PAGE> 11
the use and benefit of OCC and its subsidiaries; and
(iv) the Executive agrees that, upon termination of his
employment hereunder or at any other time as OCC may in writing request, he will
promptly deliver to OCC all materials constituting Confidential Information
(including all copies thereof) that are in his possession or under his control.
The Executive further agrees that, if requested by OCC, to return any
Confidential Information pursuant to this subparagraph (iv), he will not make or
retain any copy or extract from such materials.
For purposes of SECTION 6(c), "Confidential Information" means any and all
information developed by or for OCC and its subsidiaries of which the Executive
gains or has acquired knowledge during or prior to the terms of his employment
with OCC by reason of his employment with OCC that is (A) not generally known in
any industry in which OCC and its subsidiaries is or may become engaged or (B)
not publicly available. Confidential Information includes, but is not limited
to, any and all information developed by or for OCC and its subsidiaries
concerning plans, marketing and sales methods, customer lists, materials,
processes, software, procedures, devices, plans for development of products,
services or expansion into new areas of markets, internal operations, and any
trade secrets and proprietary information of any type owned by OCC and its
- 11 -
<PAGE> 12
subsidiaries, together with all written, graphic, electronic and other materials
relating to all or any part of the same.
(d) REMEDIES. The Executive acknowledges and agrees that the
covenants and obligations of the Executive contained in this SECTION 6 relate to
special, unique and extraordinary matters and are reasonable and necessary to
protect the legitimate interests of OCC and that a breach of any of the terms of
such covenants and obligations will cause OCC irreparable injury for which
adequate remedies at law are not available. Therefore, the Executive agrees that
OCC shall be entitled to an injunction, restraining order, or other equitable
relief from any court of competent jurisdiction, restraining the Executive from
any such breach. OCC's rights and remedies under this SECTION 6(d) are
cumulative and are in addition to any other rights and remedies OCC may have at
law or in equity.
7. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This
agreement shall not be terminated by any:
(a) Merger or consolidation where OCC is not the
consolidated or surviving corporation;
(b) Transfer of all or substantially all of the
assets of OCC unless, in the case of a transfer before an IPO,
the provisions of Section 2(g) hereof are satisfied; or
(c) Voluntary or involuntary dissolution of OCC.
In the event of any such merger or consolidation or transfer of
- 12 -
<PAGE> 13
assets, the surviving or resulting corporation or the transferee of OCC's assets
shall be bound by and shall have the benefit of the provisions of this
agreement; OCC shall take all actions necessary to insure that such corporation
or transferee is bound by the provisions of this agreement.
8. NON-ASSIGNABILITY. Except as provided in Section 7, above,
neither party shall assign its rights and obligations under this contract
without the written approval of the other party, which approval may be withheld
for any reason or no reason.
9. INDEMNITY. OCC shall indemnify Executive and hold him
harmless for all acts or decisions made by him in good faith that are not
grossly negligent while performing services for OCC. OCC shall also use its best
efforts to obtain coverage for him under any insurance policy now in force or
hereafter obtained during the term of this Agreement covering the other officers
and/or directors against lawsuits. OCC shall pay all expenses including
attorney's fees, incurred by the Executive in connection with the defense of
such act, suit or proceeding and in connection with any related appeal including
the cost of settlement.
10. TIME TO CURE. In the event either party fails to perform
any of either his or its respective obligations hereunder and if such failure
would otherwise constitute a default under this agreement, the non-defaulting
party shall give written
- 13 -
<PAGE> 14
notice specifying such obligations to the defaulting party who shall have five
(5) business days after receipt of such notice to cure the specified default;
PROVIDED that an action or failure to act that constitutes a default and that
has been described with reasonable particularity may not be cured more than
once.
11. ARBITRATION. Any controversy or claim arising out of, or
relating to this Agreement, or its breach, shall be settled by arbitration in
the City of New York in accordance with the then governing rules of the American
Arbitration Association. Judgment upon the award rendered may be entered and
enforced in any court of competent jurisdiction. The prevailing party shall be
entitled to reasonable attorneys' fees and expenses.
12. NOTICES. Any written notice required or permitted to be
given under any provision of this Agreement shall be deemed to have been given
(a) if to the Executive, when sent by Registered or Certified Mail (return
receipt requested) in a sealed envelope addressed to him at his last known
residence address as shown on OCC's records or when delivered by hand to him or,
in his absence, in a sealed envelope to an adult member of his household, and
(b) if to OCC, when sent by Registered or Certified Mail (return receipt
requested) in a sealed envelope addressed to the OCC or delivered by hand at its
then existing executive offices, ATTENTION: Counsel.
13. ENTIRE AGREEMENT; ENFORCEABILITY; PARTIAL
INVALIDITY.
- 14 -
<PAGE> 15
(a) This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them relating to its subject matter. No
modification or waiver of any of the provisions of this Agreement shall be
effective unless set forth in a writing signed by the party against whom the
same is sought to be enforced. The waiver by either party of any breach of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach hereof by such other party.
(b) The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
14. INTERPRETATION OF AGREEMENT. This Agreement is made in the
State of New York and its validity and interpretation shall be governed by the
laws of such state, without giving effect to conflicts of law principles. The
section and subsection headings in this Agreement are for convenience only and
shall be disregarded in any interpretation of this Agreement.
IN WITNESS WHEREOF, OCC has caused this Agreement to be
executed in its name and on its behalf by its Chairman and the Executive has
signed this Agreement as of the day and year first above written.
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<PAGE> 16
OFFICE CENTRE CORPORATION
By:/s/ Walter Gordenstein
---------------------------------
Walter H. Gordenstein
EXECUTIVE:
/s/ Robert J. Gillon, Jr.
------------------------------------
Robert J. Gillon, Jr.
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<PAGE> 17
Office Centre Corporation
c/o The King Group
14 East 33rd Street
New York, NY 10016
May 23, 1997
Robert J. Gillon, Jr.
14 East 33rd Street
New York, NY 10016
John D. Kaweske
Suite 150
2600 Douglas Road
Coral Gables, FL 33134
Dear Sirs:
By countersignature of this letter agreement, you hereby agree
that if Office Centre Corporation (the "Company") exercises the Right (as
defined in Section 5 of the Employment Agreement dated as of May 1, 1997 between
the Company and Robert J. Gillon, Jr.), you will sell to the Company any shares
of capital stock of the Company that have been issued to you on or before the
exercise date of the Right. You further agree to take all reasonable actions
requested by the Company to effectuate the foregoing.
Sincerely,
/s/ Walter Gordenstein
---------------------------------
Name: Walter Gordenstein
Title: Chairman
ACCEPTED AND AGREED
/s/ Robert J. Gillon, Jr.
- -----------------------------
Robert J. Gillon, Jr.
/s/ John D. Kaweske
- -----------------------------
John D. Kaweske
- 17 -
<PAGE> 18
August 6, 1997
I, Robert J. Gillon, Jr. ("Executive"), hereby agree that the
reference to August 6, 1997 in Section 5(e) of the Employment Agreement dated
May 1, 1997, between the Executive and Office Centre Corporation, be changed to
August 8, 1997.
/s/ Robert J. Gillon Jr.
----------------------------
Robert J. Gillon, Jr.
<PAGE> 1
EXHIBIT 10.03
AMENDMENT
---------
AMENDMENT, dated as of August 8, 1997, to the Employment
Agreement (the "Original Agreement") dated as of May 1, 1997, between Office
Centre Corporation, a Delaware corporation ("OCC") and Robert J. Gillon, Jr.
(the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, OCC and the Executive wish to amend the Original
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties agree as
follows:
1. All terms used but not defined herein are used herein as
defined in the Original Agreement.
2. The second paragraph of Section 5(e) of the Original
Agreement is hereby deleted in its entirety and replaced by the following:
Notwithstanding anything else contained in this
Agreement, if, by August 8, 1998, there has been no initial
public offering of OCC's capital stock ("IPO") and OCC has not
consummated a purchase of all of the capital stock of King
Office Supply Inc. ("King"), OCC shall have the right (the
"Right") to terminate the employment of the Executive under
this Agreement by written notice to the Executive with no
further obligations under this Agreement, except as set forth
in this Section 5(e), pursuant to which the exercise of the
Right shall be considered Non-Cause Termination. Upon exercise
of the Right, the Executive shall sell to OCC any shares of
capital stock of OCC that have been issued to the Executive on
or before the exercise date
<PAGE> 2
of the Right, at par value. In addition, upon exercise of the
Right, for no additional consideration, the Executive shall
cancel any options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any
character relating to the capital stock of OCC or obligating
OCC to issue or sell any shares of capital stock of, or any
other interest in, OCC, to the Executive or any of his
affiliates or assignees. The Executive and OCC also hereby
agree to use their best efforts to promptly enter into an
asset purchase agreement pursuant to which OCC will purchase
(the "Purchase") all of the issued and outstanding capital
stock of King Office Supply Inc., which Purchase will be
effective at the time of the IPO. If OCC does not exercise the
Right by August 8, 1998, the Right shall expire and be of no
further force and effect. The Right may not be exercised if
OCC has refused to close a Purchase under a fully executed
contract for the Purchase if the stockholders of King are
ready, willing and able to close under such contract.
3. The first paragraph of Section 6(a) of the Original
Agreement is hereby amended by deleting the parenthetical statement in the third
line thereof and replacing such parenthetical with the following: "(other than,
prior to the termination of this Agreement, King Office Supply Inc., so long as
King Office Supply Inc. continues to operate in the territory in which its
business is presently conducted."
4. Sections 6(a)(i) - (iv) of the Original Agreement are
hereby deleted in their entirety and replaced by the following:
The date on which this Agreement is
terminated.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, OCC has caused this Agreement to be
executed in its name and on its behalf by its Chairman and the Executive has
signed this Agreement as of the day and year first above written.
OFFICE CENTRE CORPORATION
By: /s/Walter Gordenstein
------------------------------------
Walter Gordenstein
EXECUTIVE:
/s/R.J. Gillon, Jr.
----------------------------------------
Robert J. Gillon, Jr.
<PAGE> 1
EXHIBIT 10.04
REFORMATION OF EMPLOYMENT AGREEMENT
REFORMATION, dated as of March 12, 1998, by and between Office
Centre Corporation, a Delaware corporation, with an office at Springfield,
Massachusetts ("OCC"), and Robert J. Gillon, Jr., an individual residing at 203
Overlook Drive, Greenwich, Connecticut 06830 (the "Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, OCC and the Executive are parties to that certain
Employment Agreement, dated as of May 1, 1997 (the "Original Agreement"), as
supplemented by a letter agreement, dated May 23, 1997 (the "Letter Agreement"),
and as amended by an amendment agreement, dated as of August 8, 1997 (the "First
Amendment;" together with the Original Agreement and the Letter Agreement, the
"Employment Agreement");
WHEREAS, contrary to the intent of OCC and the Executive, the
Employment Agreement provides that the Executive is entitled to receive from OCC
547,430 shares of common stock of OCC (the "OCC Shares");
WHEREAS, the language in the Employment Agreement with respect
to the OCC Shares implies that the OCC Shares were to be issued to the Executive
as compensation for services to be rendered by the Executive for OCC under the
Employment Agreement;
WHEREAS, the Executive is the principal shareholder of King
Office Supply, Inc. ("King"), a corporation which as of the date of the
Employment Agreement OCC intended, and still intends, to acquire;
WHEREAS, the Employment Agreement was inextricably intertwined
with the acquisition of King by OCC;
WHEREAS, OCC and the Executive did not intend OCC to issue the
OCC Shares to the Executive as compensation but rather as consideration for the
purchase of the Executive's shares of capital stock of King;
WHEREAS, pursuant to Delaware law, shares of stock received
for services are not deemed fully paid and nonassessable until the services
therefor have been fully rendered, and therefore, the shares of OCC Stock, if
issued as compensation under the Employment Agreement, would not be fully paid
and nonassessable shares until the Executive had fully performed his services
under the Employment Agreement;
WHEREAS, OCC never intended to issue, and Executive did not
intend to accept, OCC Shares which were not fully paid and nonassessable shares
of OCC; and
WHEREAS, in light of the foregoing, OCC and the Executive
agree that the
<PAGE> 2
issuance of the OCC Shares under the Employment Agreement was a
mutual mistake and hereby wish to rescind the issuance and reform the Employment
Agreement as set forth herein to accurately reflect the intent of the parties.
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. The issuance of the OCC Shares pursuant to the Employment
Agreement is hereby rescinded as of May 1, 1997. The Employment Agreement is
hereby reformed by deleting in its entirety Section 2(e) of the Original
Agreement.
2. The Employment Agreement, as hereby reformed, shall remain
in full force and effect.
3. This Reformation may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which counterparts together shall constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered
this instrument as of the date and year first above written.
OFFICE CENTRE CORPORATION
By: /s/Joseph E. Hajjar
------------------------
Name:
Title:
/s/R.J. Gillon, Jr.
------------------------
ROBERT J. GILLON JR.
<PAGE> 1
EXHIBIT 10.05
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
AMENDMENT, dated as of May 14, 1998, by and between Office
Centre Corporation, a Delaware corporation ("OCC"), and Robert J. Gillon, Jr.
(the "Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, OCC and the Executive are parties to that certain
employment agreement, dated as of May 1, 1997, as subsequently amended and
reformed (the "Original Agreement"); and
WHEREAS, the parties desire to amend the Original Agreement in
accordance with the terms set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. SECTION 5(a). The first sentence in Section 5(a) to the
Original Agreement is hereby deleted in its entirety and replaced with the
following:
"Unless the Executive's employment under this
Agreement is otherwise terminated, the term of this Agreement
shall commence on May 1, 1997 and shall expire on the date
which is three years from the date of the IPO."
2. The Company hereby grants the Executive ten-year options to
purchase 50,000 shares of Common Stock of the Company (after giving effect to
any reverse stock split of the Company's shares). Such options shall vest
ratably over a three year period and shall be exercisable at the IPO price per
share.
3. Upon execution of this Amendment the Executive shall be
entitled to receive a bonus from the Company in the amount of $250,000.
4. The Original Agreement, as hereby amended, shall remain in
full force and effect.
5. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which counterparts together shall constitute but one and
the same instrument.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed and delivered
this instrument as of the date and year first above written.
OFFICE CENTRE CORPORATION
By: /s/Joseph E. Hajjar
-------------------------
Name: Joseph E. Hajjar
Title:
/s/R.J. Gillon, Jr.
-------------------------
Robert J. Gillon, Jr.
<PAGE> 1
EXHIBIT 10.06
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 22nd day of August, 1997 by and
between Office Centre Corporation, a Delaware corporation (hereinafter referred
to as "OCC"), with an office in New York City, and Joseph Hajjar (hereinafter
referred to as the "Executive"), residing at 48 Walsh Drive, Mahwah, New Jersey
07430.
W I T N E S E T H:
- - - - - - - - -
WHEREAS, OCC wishes to engage the services of the Executive to
serve as its Senior Vice President and Chief Financial Officer;
WHEREAS, the Executive desires to serve as the Senior Vice
President and Chief Financial Officer on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties agree as
follows;
1. PERFORMANCE OF DUTIES. The Executive shall become Senior
Vice President and Chief Financial Officer of OCC with such responsibility
relating to finances and the management of OCC as are normally attendant to such
offices and as may be prescribed by the Chief Executive Officer of OCC. The
Executive shall report directly to the Chief Executive Officer of OCC.
<PAGE> 2
2. COMPENSATION. As compensation for his services hereunder,
the Executive shall receive:
(a) An annual salary equal to $185,000 per year, such amount
to be paid to the Executive semi-monthly starting on the Effective Date (as
defined below);
(b) A yearly salary review by the Board of Directors to
determine if said annual salary shall be increased, but in no event shall said
salary be decreased;
(c) A yearly cash bonus of up to 25% of the Executive's annual
salary determined by the Board of Directors of OCC based upon the performance of
OCC, which bonus shall, for the first twelve months of employment, not be less
than $15,000;
(d) Options to purchase stock of OCC, the number and price to
be determined by the Board of Directors on an annual basis, in the same
proportion and on the same terms and provisions as options granted to other key
employees;
(e) 50,000 shares of unregistered OCC stock, at a purchase
price of $.10 per share, to be delivered to the Executive within 90 days of the
Effective Date; and
(f) Upon an initial public offering of common stock of OCC
(the "IPO"), the Executive shall be awarded options to purchase 50,000 shares of
OCC common stock at a price per share equal to the price per share to the public
in the IPO, 1/3 of such options to vest on each of the first, second and third
anniversaries of the date of the IPO. All such options must be exercised prior
to the tenth anniversary of the IPO.
-2-
<PAGE> 3
3. FRINGE BENEFITS. In addition to the provisions of Section
2(a), as part of his compensation, the Executive shall be entitled to the
following fringe benefits:
(a) SALARY CONTINUATION DURING DISABILITY. If the Executive
for any reason becomes disabled, so that he is unable to perform his duties
hereunder in the opinion of OCC due to physical or mental illness or other cause
for either (i) a period of 90 consecutive days or (ii) 180 days during any
360-day period ("Disabled"), the Executive's employment under this Agreement
shall terminate. OCC shall nevertheless continue to pay him periodic salary
payments that he would have been entitled to receive under Section 2(a) until
the earlier to occur of (x) the third anniversary of the Effective Date and (y)
the time that he is no longer Disabled. Until such period of disability shall
commence, the Executive shall be entitled to receive his regular salary payments
provided he is not in default under this Agreement.
(b) AUTOMOBILE AND PARKING ALLOWANCE. The Executive shall be
entitled to an automobile allowance of $300 per month, and a parking allowance
of $225 per month.
(c) OTHER BENEFITS. The Executive shall be eligible to
participate in such other benefit programs, including health and hospitalization
insurance, as are generally available to all executives of OCC.
-3-
<PAGE> 4
4. EXPENSE REIMBURSEMENT. The Executive shall be entitled to
the use of a corporate phone card and credit card for business expenses and
shall be entitled to reimbursement from OCC for all reasonable out-of-pocket
business expenses incurred by him in connection with the performance of his
duties as Senior Vice President and Chief Financial Officer, subject to
compliance with OCC's rules and practices relating to expense reimbursement.
5. DURATION AND TERMINATION OF EMPLOYMENT.
(a) Unless the Executive's employment under this Agreement is
otherwise terminated, the term of this Agreement is three (3) years from the
Effective Date.
(b) OCC may terminate the employment of the Executive for
Cause (defined herein) and notice of such termination shall be sent to
Executive. "Cause" shall mean the Executive's (i) willful misconduct, (ii)
grossly negligent misconduct in the performance of his duties to the
Corporation, (iii) material breach of his obligations under this Agreement, (iv)
failure to comply with the lawful instructions of the Board of Directors or (v)
conviction of, or plea of NOLO CONTENDERE to, a felony; or conviction of, or
plea of NOLO CONTENDERE to, a crime involving moral turpitude under federal,
state or local laws. Notwithstanding the foregoing, a crime involving tax
matters shall not be considered a crime involving moral turpitude.
(c) If, at any time, OCC terminates the employment of the
Executive for Cause, the Executive resigns his position for
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<PAGE> 5
any reason, or the Executive dies, the Executive (or his estate) shall be
entitled to receive only the unpaid portion of his salary which has accrued to
the date of such termination, resignation or death.
(d) If, at any time, OCC terminates the employment of the
Executive for any reason other than for Cause ("Non-Cause Termination"), the
Executive shall be entitled to receive a lump sum payment equal to the periodic
salary payments that he would have been entitled to receive under Section 2(a)
for the period from the effective date of the Non-Cause Termination until the
one-year anniversary of the effective date of the Non-Cause Termination.
(e) If the Executive becomes disabled, no payments shall be
owing by OCC other than those specified in Section 3(a).
6. COVENANTS OF THE EXECUTIVE.
(a) NONCOMPETITION. From the Effective Date through the
Non-compete Termination Date (as defined below), the Executive shall not,
directly or indirectly, engage in or be associated with any entity which engages
in a business which is competitive with the business or activities of OCC and
its subsidiaries, within a 25 mile radius of any business location of OCC or any
of its subsidiaries, whether as a director, officer, employee, agent,
consultant, partner, owner, independent contractor or otherwise. OCC and the
Executive hereby acknowledge that nothing contained herein shall prohibit the
Executive from making investments in other entities or
-5-
<PAGE> 6
businesses, PROVIDED, that such entities or businesses are not engaged in
activities which are competitive with the business and activities of OCC and its
subsidiaries. The Executive shall refrain from making any investment in, or
receiving compensation or other payment from, any entity or business which is
competitive with the business or activities of OCC and its subsidiaries.
Notwithstanding the foregoing, the Executive's beneficial ownership of less than
1% of the outstanding capital stock of a publicly traded company, whether or not
such company is competitive with OCC and its subsidiaries, shall not, in and of
itself, be deemed to be activities which are competitive with the business and
activities of OCC and its subsidiaries.
"Non-compete Termination Date" shall mean one year from the
expiration or earlier termination of this Agreement, PROVIDED that, if the
Executive becomes Disabled, the Non-compete Termination Date shall be the date
on which no further payments are owing under Section 3(a).
(b) NONSOLICITATION. From the Effective Date through the
Non-compete Termination Date, the Executive shall not, and shall cause each
business or entity with which he shall become associated in any capacity not to,
(i) solicit for employment or employ any person who is then, or who was at any
time six months prior to the date of such termination, employed by OCC or its
subsidiaries or (ii) solicit business which is competitive with OCC's business
from any current customer or
-6-
<PAGE> 7
supplier of OCC or its subsidiaries or any person or entity who was a customer
or supplier of OCC or its subsidiaries at any time within six months prior to
the date of such termination.
(c) CONFIDENTIALITY. The Executive agrees and acknowledges
that the Confidential Information (as defined below) of OCC and its subsidiaries
is valuable, special and unique to its business; that such business depends on
such Confidential Information; and that OCC wishes to protect such Confidential
Information by keeping it confidential for the use and benefit of OCC and its
subsidiaries. Based on the foregoing, the Executive agrees to undertake the
following obligations with respect to such Confidential Information:
(i) the Executive agrees to keep any and all
Confidential Information in trust for the exclusive use and benefit of OCC and
its subsidiaries;
(ii) the Executive agrees that, except as required by
applicable law or as authorized in writing by OCC, he will not, at any time
prior to the second anniversary of the termination of his employment hereunder,
disclose, directly or indirectly, any Confidential Information of OCC or its
subsidiaries;
(iii) the Executive agrees to take all reasonable
steps necessary, or reasonably requested by OCC, to ensure that all Confidential
Information is kept confidential for the use and benefit of OCC and its
subsidiaries; and
(iv) the Executive agrees that, upon termination of
his employment hereunder or at any other time as OCC may in
-7-
<PAGE> 8
writing request, he will promptly deliver to OCC all materials constituting
Confidential Information (including all copies thereof) that are in his
possession or under his control. The Executive further agrees that, if requested
by OCC to return any Confidential Information pursuant to this subparagraph
(iv), he will not make or retain any copy or extract from such materials.
For purposes of SECTION 6(C), "Confidential Information" means
any and all information developed by or for OCC and its subsidiaries of which
the Executive gains or has acquired knowledge during or prior to the term of his
employment with OCC by reason of his employment with OCC that is (A) not
generally known in any industry in which OCC and its subsidiaries is or may
become engaged or (B) not publicly available. Confidential Information includes,
but is not limited to, any and all information developed by or for OCC and its
subsidiaries concerning plans, marketing and sales methods, customer lists,
materials, processes, software, procedures, devices, plans for development of
products, services or expansion into new areas or markets, internal operations,
and any trade secrets and proprietary information of any type owned by OCC and
its subsidiaries, together with all written, graphic, electronic and other
materials relating to all or any part of the same.
(d) REMEDIES. The Executive acknowledges and agrees that the
covenants and obligations of the Executive contained in this SECTION 6 relate to
special, unique and extraordinary matters and are reasonable and necessary to
protect
-8-
<PAGE> 9
the legitimate interests of OCC and that a breach of any of the terms of such
covenants and obligations will cause OCC irreparable injury for which adequate
remedies at law are not available. Therefore, the Executive agrees that OCC
shall be entitled to an injunction, restraining order, or other equitable relief
from any court of competent jurisdiction, restraining the Executive from any
such breach. OCC's rights and remedies under this SECTION 6(d) are cumulative
and are in addition to any other rights and remedies OCC may have at law or in
equity.
7. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This
agreement shall not be terminated by any:
(a) Merger or consolidation where OCC is not the consolidated
or surviving corporation;
(b) Transfer of all or substantially all of the assets of OCC;
or
(c) Voluntary or involuntary dissolution of OCC. In the event
of any such merger or consolidation or transfer of assets, the surviving or
resulting corporation or the transferee of OCC's assets shall be bound by and
shall have the benefit of the provisions of this agreement; OCC shall take all
actions necessary to insure that such corporation or transferee is bound by the
provisions of this agreement.
8. NON-ASSIGNABILITY. Except as provided in Section 7 above,
neither party shall assign its rights and obligations under this contract
without the written approval of
-9-
<PAGE> 10
the other party, which approval may be withheld for any reason or no reason.
9. INDEMNITY. OCC shall indemnify Executive and hold him
harmless for all acts or decisions made by him to the fullest extent permitted
by applicable law. OCC shall also use its best efforts to obtain coverage for
him under any insurance policy now in force or hereafter obtained during the
term of this Agreement covering the other officers and/or directors against
lawsuits. OCC shall pay all expenses including attorney's fees, incurred by the
Executive in connection with the defense of such act, suit or proceeding and in
connection with any related appeal including the cost of settlement.
10. TIME TO CURE. In the event either party fails to perform
any of either his or its respective obligations hereunder and if such failure
would otherwise constitute a default under this agreement, the non-defaulting
party shall give written notice specifying such obligations to the defaulting
party who shall have five (5) business days after receipt of such notice to cure
the specified default; PROVIDED that an action or failure to act that
constitutes a default and that has been described with reasonable particularity
may not be cured more than once.
11. ARBITRATION. Any controversy or claim arising out of, or
relating to this Agreement, or its breach, shall be settled by arbitration in
the City of New York in accordance with the then governing rules of the American
Arbitration Association.
-10-
<PAGE> 11
Judgment upon the award rendered may be entered and enforced in any court of
competent jurisdiction. The prevailing party shall be entitled to reasonable
attorneys' fees and expenses.
12. NOTICES. Any written notice required or permitted to be
given under any provision of this Agreement shall be deemed to have been given
(a) if to the Executive, when sent by Registered or Certified Mail (return
receipt requested) in a sealed envelope addressed to him at his last known
residence address as shown on OCC's records or when delivered by hand to him or,
in his absence, in a sealed envelope to an adult member of his household, and
(b) if to OCC, when sent by Registered or Certified Mail (return receipt
requested) in a sealed envelope addressed to OCC or delivered by hand at its
then existing executive offices, ATTENTION: Counsel.
13. ENTIRE AGREEMENT; ENFORCEABILITY; PARTIAL
INVALIDITY.
(a) This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them relating to its subject matter. No
modification or waiver of any of the provisions of this Agreement shall be
effective unless set forth in a writing signed by the party against whom the
same is sought to be enforced. The waiver by either party of any breach of this
Agreement by the other party shall not operate or be
-11-
<PAGE> 12
construed as a waiver of any subsequent breach hereof by such other party.
(b) The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
14. INTERPRETATION OF AGREEMENT. This Agreement is made in the
State of New York and its validity and interpretation shall be governed by the
laws of such state, without giving effect to conflicts of law principles. The
section and subsection headings in this Agreement are for convenience only and
shall be disregarded in any interpretation of this Agreement.
15. EFFECTIVE DATE; EFFECT ON OTHER ARRANGEMENTS.
(a) This Agreement shall be effective on September 1,
1997.
(b) On the Effective Date, all employment agreements
and all other compensation arrangements that at that time are in effect between
the Executive and OCC and any of OCC's subsidiaries as of the Effective Date
shall be automatically terminated. The Executive agrees to take all actions, and
OCC agrees to take and to cause its subsidiaries to take all actions, necessary
to effectuate the provisions of this Section 15(b).
-12-
<PAGE> 13
IN WITNESS WHEREOF, OCC has caused this Agreement to be
executed in its name and on its behalf by its Chief Executive Officer and the
Executive has signed this Agreement as of the day and year first above written.
OFFICE CENTRE CORPORATION
By: /s/ Robert J. Gillon, Jr.
-------------------------------
Robert J. Gillon, Jr.
CEO
EXECUTIVE:
/s/ Joseph E. Hajjar
-------------------------------
Joseph Hajjar
-13-
<PAGE> 1
EXHIBIT 10.07
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT, dated as of May 14, 1998, by and between Office
Centre Corporation, a Delaware corporation ("OCC"), and Joseph Hajjar (the
"Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, OCC and the Executive are parties to that certain
employment agreement, dated as of August 22, 1997 (the "Original Agreement");
and
WHEREAS, the parties desire to amend the Original Agreement in
accordance with the terms set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. SECTION 2(e). Section 2(e) to the Original Agreement is
hereby amended by adding the following phrase after the words "OCC stock":
"(after giving effect to any reverse stock split)"
2. SECTION 2(f). Section 2(f) to the Original Agreement is
hereby amended by adding the following sentence at the end thereof:
"Such options (and only such options) shall not be subject to
dilution as a result of any stock dividends, stock splits,
combinations or subdivisions occurring on or before the
completion of the IPO."
3. SECTION 5(a). Section 5(a) to the Original Agreement is
hereby deleted in its entirety and replaced with the following:
"(a) Unless the Executive's employment under this
Agreement is otherwise terminated, the term of this Agreement
shall commence on the Effective Date and shall expire on the
date which is three years from the date of the IPO."
4. The Original Agreement, as hereby amended, shall remain in
full force and effect.
<PAGE> 2
5. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which counterparts together shall constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered
this instrument as of the date and year first above written.
OFFICE CENTRE CORPORATION
By: /s/R.J. Gillon, Jr.
----------------------------
Name: Robert J. Gillon, Jr.
Title:
/s/Joseph Hajjar
----------------------------
Joseph Hajjar
<PAGE> 1
EXHIBIT 10.08
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 15th day of April, 1998 by and between
Office Centre Corporation, a Delaware corporation (hereinafter referred to as
"OCC"), with an office in New York City, and Walter Gordenstein (hereinafter
referred to as "the Executive"), residing at 208 Tanglewood Drive, Longmeadow,
MA 01106.
W I T N E S E T H:
------------------
WHEREAS, OCC wishes to engage the services of the Executive to
continue to serve as an employee of OCC or its subsidiaries;
WHEREAS, the Executive desires to serve as an employee on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties agree as follows;
1. PERFORMANCE OF DUTIES. The Executive shall perform such
employment duties for OCC or its subsidiaries as may be prescribed by the Board
of Directors of OCC. The Executive shall report directly to the Board of
Directors of OCC. Until such time as he is replaced by the Board of Directors
of OCC, the Executive shall serve as the President and Chief Executive Officer
of UDI Corp., a wholly-owned subsidiary of OCC ("UDI"). At such time as he is
replaced as President and Chief Executive Officer of UDI, the Executive shall
become the Chairman of UDI and in such capacity his sole responsibility shall
be to facilitate a smooth
<PAGE> 2
transition of the duties of chief executive from Executive to the new President
and Chief Executive Officer.
2. COMPENSATION. As compensation for his services hereunder, the
Executive shall receive:
(a) An annual salary equal to $200,000 per year, such amount to
be paid to the Executive semi-monthly;
(b) A yearly salary review by the Board of Directors to
determine if said annual salary shall be increased, but in no event shall said
salary be decreased; and (c) A yearly cash bonus determined by the Board of
Directors of OCC based upon the performance of OCC.
3. FRINGE BENEFITS. In addition to the provisions of Paragraph
2(a), as part of his compensation, the Executive shall be entitled to the
following fringe benefits:
(a) LIFE INSURANCE. OCC shall expend $25,000 in annual premiums
to obtain an insurance policy on the life of Executive, which policy shall be
chosen by the Executive. Executive shall have the right to designate the
beneficiary thereof.
(b) SALARY CONTINUATION DURING DISABILITY. If the Executive for
any reason becomes disabled, so that he is unable to perform his duties
hereunder in the opinion of OCC due to physical or mental illness or other
cause for either (i) a period of 90 consecutive days or (ii) 180 days during
any 360-day period ("Disabled"), the Executive's employment under this
Agreement shall terminate. OCC shall nevertheless continue to pay him periodic
salary payments that he would have been entitled to receive under Section 2(a)
until the earlier to occur of (x) the time that this Agreement would have
expired but for such termination and (y) the time
-- 2 --
<PAGE> 3
that he is no longer Disabled. Until such period of disability shall commence,
the Executive shall be entitled to receive his regular salary payments provided
he is not in default under this Agreement.
4. EXPENSE REIMBURSEMENT. The Executive shall be entitled to the
use of a corporate phone card and credit card for business expenses and shall
be entitled to reimbursement from OCC for all reasonable out-of-pocket business
expenses incurred by him in connection with the performance of his duties
hereunder, subject to compliance with OCC's rules and practices relating to
expense reimbursement.
5. DURATION AND TERMINATION OF EMPLOYMENT.
(a) Unless the Executive's employment under this Agreement is
otherwise terminated, the term of this Agreement shall commence on the date
hereof and end on the earlier of (i) the date of an initial public offering of
OCC's common stock in which the Executive (including transferees of his OCC
common stock) realizes not less than $1,000,000 from the sale of his OCC common
stock or (ii) August 15, 2000. If (i) there has not been a public offering of
OCC's common stock prior to August 15, 2000, or (ii) the Executive's employment
under this Agreement has not been otherwise terminated, then this Agreement
shall be extended, subject to the approval of the Board of Directors, for
further one-year terms unless either party advises the other by written notice
at least six months before the end of the then current term of its intention to
cancel the Agreement.
(b) OCC may terminate the employment of the Executive for Cause
(defined herein) and notice of such termination shall be sent to Executive.
"Cause" shall mean the
-- 3 --
<PAGE> 4
Executive's (i) willful misconduct, (ii) grossly negligent misconduct in the
performance of his duties to the Corporation, (iii) material breach of his
obligations under this Agreement, (iv) failure to comply with the lawful
instructions of the Board of Directors or (v) conviction of, or plea of NOLO
CONTENDERE to, a felony; or conviction of, or plea of NOLO CONTENDERE to, a
crime involving moral turpitude under federal, state or local laws.
Notwithstanding the foregoing, (i) a crime involving tax matters shall not be
considered a crime involving moral turpitude; and (ii) Cause shall not include
any event, act or omission which occurred prior to the date hereof.
(c) If, at any time, OCC terminates the employment of the
Executive for Cause, the Executive resigns his position for any reason, or the
Executive dies, the Executive (or his estate) shall be entitled to receive only
the unpaid portion of his salary which has accrued to the date of such
termination, resignation or death.
(d) If, at any time, OCC terminates the employment of the
Executive for any reason other than for Cause ("Non-Cause Termination"), the
Executive shall be entitled to receive the greater of (i) the periodic salary
payments that he would have been entitled to receive under Section 2(a) until
this Agreement would have expired but for such termination (assuming no
extension under Section 5(a)); and (ii) $200,000 (or such greater amount that
is the Executive's annual salary at the time of such termination), which amount
in (d)(ii) to be paid at the time of termination. With respect to the payments
provided in subsection (d)(i) of this Section 5, the Executive shall be
entitled to receive (A) at the time of termination, a lump sum payment equal to
$200,000 (or such greater amount that is the Executive's annual salary at that
time) in lieu of one year's periodic payments and (B) commencing one year from
the date of
-- 4 --
<PAGE> 5
termination, the remaining periodic payments to which the Executive is entitled
(after adjusting for the lump sum payment referred to in (A)), such payments to
be made semi-monthly.
(e) If the Executive becomes disabled, no payments shall be
owing by OCC other than those specified in Section 3(b).
6. COVENANTS OF THE EXECUTIVE.
(a) NONCOMPETITION. From the date hereof through the Non-compete
Termination Date (as defined below), the Executive shall not, directly or
indirectly, engage in or be associated with any entity which engages in a
business which is competitive with the business or activities of OCC and its
subsidiaries, within a 25 mile radius of any business location of OCC or any of
its subsidiaries, whether as a director, officer, employee, agent, consultant,
partner, owner, independent contractor or otherwise. OCC and the Executive
hereby acknowledge that nothing contained herein shall prohibit the Executive
from making investments in other entities or businesses, PROVIDED, that such
entities or businesses are not engaged in activities which are competitive with
the business and activities of OCC and its subsidiaries. The Executive shall
refrain from making any investment in, or receiving compensation or other
payment from, any entity or business which is competitive with the business or
activities of OCC and its subsidiaries. Notwithstanding the foregoing, the
Executive's beneficial ownership of less than 1% of the outstanding capital
stock of a publicly traded company, whether or not such company is competitive
with OCC and its subsidiaries, shall not, in and of itself, be deemed to be
activities which are competitive with the business and activities of OCC and
its subsidiaries.
"Non-compete Termination Date" shall mean:
-- 5 --
<PAGE> 6
(i) If the Executive's employment terminates upon the
expiration of the period specified in Section 5(a), the first anniversary of
the date on which the Executive's employment expires as described in Section
5(a);
(ii) If the Executive is terminated for Cause or resigns
for any reason, the first anniversary of the effective date of such resignation
or termination for Cause;
(iii) If the Executive's employment is terminated by OCC
pursuant to a Non-Cause Termination, the later of (A) one year from the
effective date of such termination, and (B) the date on which the Executive's
employment would have terminated if the term of this Agreement would have
continued until expiration; and
(iv) If the Executive becomes Disabled, the date on which
no further payments are owing under Section 3(c).
(b) NONSOLICITATION. From the date hereof through the Non-compete
Termination Date, the Executive shall not, and shall cause each business or
entity with which he shall become associated in any capacity not to, (i)
solicit for employment or employ any person who is then, or who was at any time
six months prior to the date of such termination, employed by OCC or its
subsidiaries, other than Peter Gordenstein or (ii) solicit business which is
competitive with OCC's business from any current customer or supplier of OCC or
its subsidiaries or any person or entity who was a customer or supplier of OCC
or its subsidiaries at any time within six months prior to the date of such
termination.
(c) CONFIDENTIALITY. The Executive agrees and acknowledges that the
Confidential Information (as defined below) of OCC and its subsidiaries is
valuable, special and
-- 6 --
<PAGE> 7
unique to its business; that such business depends on such Confidential
Information; and that OCC wishes to protect such Confidential Information by
keeping it confidential for the use and benefit of OCC and its subsidiaries.
Based on the foregoing, the Executive agrees to undertake the following
obligations with respect to such Confidential Information:
(i) the Executive agrees to keep any and all Confidential
Information in trust for the exclusive use and benefit of OCC and its
subsidiaries;
(ii) the Executive agrees that, except as required by
applicable law or as authorized in writing by OCC, he will not, at any time
prior to the second anniversary of the termination of his employment hereunder,
disclose, directly or indirectly, any Confidential Information of OCC or its
subsidiaries;
(iii) the Executive agrees to take all reasonable steps
necessary, or reasonably requested by OCC, to ensure that all Confidential
Information is kept confidential for the use and benefit of OCC and its
subsidiaries; and
(iv) the Executive agrees that, upon termination of his
employment hereunder or at any other time as OCC may in writing request, he
will promptly deliver to OCC all materials constituting Confidential
Information (including all copies thereof) that are in his possession or under
his control. The Executive further agrees that, if requested by OCC, to return
any Confidential Information pursuant to this subparagraph (iv), he will not
make or retain any copy or extract from such materials.
For purposes of SECTION 6(C), "Confidential Information" means any
and all information developed by or for OCC and its subsidiaries of which the
Executive gains or has
-- 7 --
<PAGE> 8
acquired knowledge during or prior to the term of his employment with OCC by
reason of his employment with OCC that is (A) not generally known in any
industry in which OCC and its subsidiaries is or may become engaged or (B) not
publicly available. Confidential Information includes, but is not limited to,
any and all information developed by or for OCC and its subsidiaries concerning
plans, marketing and sales methods, customer lists, materials, processes,
software, procedures, devices, plans for development of products, services or
expansion into new areas or markets, internal operations, and any trade secrets
and proprietary information of any type owned by OCC and its subsidiaries,
together with all written, graphic, electronic and other materials relating to
all or any part of the same.
(d) REMEDIES. The Executive acknowledges and agrees that the
covenants and obligations of the Executive contained in this SECTION 6 relate
to special, unique and extraordinary matters and are reasonable and necessary
to protect the legitimate interests of OCC and that a breach of any of the
terms of such covenants and obligations will cause OCC irreparable injury for
which adequate remedies at law are not available. Therefore, the Executive
agrees that OCC shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Executive from any such breach. OCC's rights and remedies under this SECTION
6(D) are cumulative and are in addition to any other rights and remedies OCC
may have at law or in equity.
7. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This
agreement shall not be terminated by any:
-- 8 --
<PAGE> 9
(a) Merger or consolidation where OCC is not the consolidated or
surviving corporation;
(b) Transfer of all or substantially all of the assets of OCC; or
(c) Voluntary or involuntary dissolution of OCC.
In the event of any such merger or consolidation or transfer of
assets, the surviving or resulting corporation or the transferee of OCC's
assets shall be bound by and shall have the benefit of the provisions of this
agreement; OCC shall take all actions necessary to insure that such corporation
or transferee is bound by the provisions of this agreement.
8. NON-ASSIGNABILITY. Except as provided in Section 7 above, neither
party shall assign its rights and obligations under this contract without the
written approval of the other party, which approval may be withheld for any
reason or no reason.
9. INDEMNITY. OCC shall indemnify Executive and hold him harmless
for all acts or decisions made by him in good faith that are not grossly
negligent while performing services for OCC or any of its subsidiaries. This
indemnity shall survive the termination of this Agreement and shall remain an
obligation of OCC at all times thereafter until claims with respect to such
acts or decisions are time barred as a matter of law. OCC shall also use its
best efforts to obtain coverage for him under any insurance policy now in force
or hereafter obtained during the term of this Agreement covering the other
officers and/or directors against lawsuits. OCC shall pay all expenses
including attorney's fees, incurred by the Executive in connection with the
defense of such act, suit or proceeding and in connection with any related
appeal including the cost of settlement.
-- 9 --
<PAGE> 10
10. TIME TO CURE. In the event either party fails to perform any of
either his or its respective obligations hereunder and if such failure would
otherwise constitute a default under this agreement, the non-defaulting party
shall give written notice specifying such obligations to the defaulting party
who shall have five (5) business days after receipt of such notice to cure the
specified default; PROVIDED that an action or failure to act that constitutes a
default and that has been described with reasonable particularity may not be
cured more than once.
11. ARBITRATION. Any controversy or claim arising out of, or
relating to this Agreement, or its breach, shall be settled by arbitration in
the City of New York in accordance with the then governing rules of the
American Arbitration Association. Judgment upon the award rendered may be
entered and enforced in any court of competent jurisdiction. The prevailing
party shall be entitled to reasonable attorneys' fees and expenses.
12. NOTICES. Any written notice required or permitted to be given
under any provision of this Agreement shall be deemed to have been given (a) if
to the Executive, when sent by Registered or Certified Mail (return receipt
requested) in a sealed envelope addressed to him at his last known residence
address as shown on OCC's records or when delivered by hand to him or, in his
absence, in a sealed envelope to an adult member of his household, and (b) if
to OCC, when sent by Registered or Certified Mail (return receipt requested) in
a sealed envelope addressed to the OCC or delivered by hand at its then
existing executive offices, ATTENTION: Counsel.
-- 10 --
<PAGE> 11
13. ENTIRE AGREEMENT; ENFORCEABILITY; PARTIAL INVALIDITY.
(a) This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings between them relating to its subject matter. No modification or
waiver of any of the provisions of this Agreement shall be effective unless set
forth in a writing signed by the party against whom the same is sought to be
enforced. The waiver by either party of any
breach of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach hereof by such other party.
(b) The invalidity or unenforceability of any particular provision
of this Agreement shall not affect the other provisions, and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
14. INTERPRETATION OF AGREEMENT. This Agreement is made in the State
of New York and its validity and interpretation shall be governed by the laws
of such state, without giving effect to conflicts of law principles. The
section and subsection headings in this Agreement are for convenience only and
shall be disregarded in any interpretation of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-- 11 --
<PAGE> 12
15. EFFECTIVE DATE; EFFECT ON OTHER ARRANGEMENTS.
(a) This Agreement shall be effective on the date set forth in
the preamble hereof.
(b) All employment agreements and all other compensation
arrangements that at that time are in effect between the Executive and OCC and
any of OCC's subsidiaries (including but not limited to UDI Corp. and UDI II
Corp.) shall be automatically terminated. The Executive agrees to take all
actions, and OCC agrees to take and to cause its subsidiaries to take all
actions, necessary to effectuate the provisions of this Section 15(b).
IN WITNESS WHEREOF, OCC has caused this Agreement to be executed in
its name and on its behalf by its Chief Executive Officer and the Executive has
signed this Agreement as of the day and year first above written.
OFFICE CENTRE CORPORATION
By: /s/Robert J. Gillon, Jr.
-------------------------------------
Robert J. Gillon, Jr., President
EXECUTIVE:
/s/Walter Gordenstein
---------------------------------------
Walter Gordenstein
-- 12 --
<PAGE> 1
EXHIBIT 10.09
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 8th day of April, 1998 by and between
Office Centre Corporation, a Delaware corporation (hereinafter referred to as
"OCC"), with an office in New York City, and Thomas F. Mooney (hereinafter
referred to as the "Executive"), residing at 130 Roosevelt Avenue, Cranford, New
Jersey 07016.
W I T N E S E T H:
- - - - - - - - -
WHEREAS, OCC wishes to engage the services of the Executive to
serve as its Vice President, Purchasing;
WHEREAS, the Executive desires to serve as a Vice President on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties agree as
follows;
1. PERFORMANCE OF DUTIES. The Executive shall become a Vice
President of OCC with such responsibilities relating to purchasing as are
normally attendant to such offices and as may be prescribed by the Chief
Executive Officer of OCC or his designee.
2. COMPENSATION. As compensation for his services hereunder,
the Executive shall receive:
<PAGE> 2
(a) An annual salary equal to $115,000 per year, such amount
to be paid to the Executive semi-monthly starting on the Effective Date (as
defined below);
(b) A yearly salary review by the Board of Directors to
determine if said annual salary shall be increased, but in no event shall said
salary be decreased;
(c) A yearly cash bonus of up to 50% of the Executive's annual
salary determined by the Board of Directors of OCC based upon Executive's
performance and the performance of OCC;
(d) Upon an initial public offering of common stock of OCC
(the "IPO"), the Executive shall be awarded options to purchase 50,000 shares of
OCC common stock at a price per share equal to the price per share to the public
in the IPO, 1/3 of such options to vest ratably on each of the first, second and
third anniversaries of the date of the IPO. All such options must be exercised
prior to the tenth anniversary of the IPO.
3. FRINGE BENEFITS. In addition to the provisions of Section
2(a), as part of his compensation, the Executive shall be entitled to the
following fringe benefits:
(a) SALARY CONTINUATION DURING DISABILITY. If the Executive
for any reason becomes disabled, so that he is unable to perform his duties
hereunder in the opinion of the due to physical or mental illness or other cause
for either (i) a period of 90 consecutive days or (ii) 180 days during any
360-day period ("Disabled"), the Executive's employment under this Agreement
-2-
<PAGE> 3
shall terminate. OCC shall nevertheless continue to pay him periodic salary
payments that he would have been entitled to receive under Section 2(a) until
the earlier to occur of (x) the third anniversary of the Effective Date and (y)
the time that he is no longer Disabled. Until such period of disability shall
commence, the Executive shall be entitled to receive his regular salary payments
provided he is not in default under this Agreement.
(b) AUTOMOBILE ALLOWANCE. If the Executive's principal place
of business for OCC is required by OCC to be located outside of Manhattan, the
Executive shall be entitled to an automobile allowance of $400 per month.
(c) OTHER BENEFITS. The Executive shall be eligible to
participate in such other benefit programs, including health and hospitalization
insurance, as are generally available to all executives of OCC.
4. EXPENSE REIMBURSEMENT. The Executive shall be entitled to
the use of a corporate phone card and credit card for business expenses and
shall be entitled to reimbursement from OCC for all reasonable out-of-pocket
business expenses incurred by him in connection with the performance of his
duties as Vice President, subject to compliance with OCC's rules and practices
relating to expense reimbursement.
-3-
<PAGE> 4
5. DURATION AND TERMINATION OF EMPLOYMENT.
(a) Unless the Executive's employment under this Agreement is
otherwise terminated, the term of this Agreement is three (3) years from the
Effective Date.
(b) OCC may terminate the employment of the Executive for
Cause (defined herein) and notice of such termination shall be sent to
Executive. "Cause" shall mean the Executive's (i) willful misconduct, (ii)
grossly negligent misconduct in the performance of his duties to the
Corporation, (iii) material breach of his obligations under this Agreement, (iv)
failure to comply with the lawful instructions of the Board of Directors or (v)
conviction of, or plea of NOLO CONTENDERE to, a felony; or conviction of, or
plea of NOLO CONTENDERE to, a crime involving moral turpitude under federal,
state or local laws. Notwithstanding the foregoing, a crime involving tax
matters shall not be considered a crime involving moral turpitude.
(c) If, at any time, OCC terminates the employment of the
Executive for Cause, the Executive resigns his position for any reason, or the
Executive dies, the Executive (or his estate) shall be entitled to receive only
the unpaid portion of his salary which has accrued to the date of such
termination, resignation or death.
(d) If, at any time, OCC terminates the employment of the
Executive for any reason other than for Cause ("Non-Cause Termination"), the
Executive shall be entitled to receive a lump sum payment equal to the periodic
salary payments that he would
-4-
<PAGE> 5
have been entitled to receive under Section 2(a) for the period from the
effective date of the Non-Cause Termination until the one-year anniversary of
the effective date of the Non-Cause Termination.
(e) If the Executive becomes disabled, no payments shall be
owing by OCC other than those specified in Section 3(a).
6. COVENANTS OF THE EXECUTIVE.
(a) NONCOMPETITION. From the Effective Date through the
Non-compete Termination Date (as defined below), the Executive shall not,
directly or indirectly, engage in or be associated with any entity which engages
in a business which is competitive with the business or activities of OCC and
its subsidiaries, within a 25 mile radius of any business location of OCC or any
of its subsidiaries, whether as a director, officer, employee, agent,
consultant, partner, owner, independent contractor or otherwise. OCC and the
Executive hereby acknowledge that nothing contained herein shall prohibit the
Executive from making investments in other entities or businesses, PROVIDED,
that such entities or businesses are not engaged in activities which are
competitive with the business and activities of OCC and its subsidiaries. The
Executive shall refrain from making any investment in, or receiving compensation
or other payment from, any entity or business which is competitive with the
business or activities of OCC and its subsidiaries. Notwithstanding the
foregoing, the Executive's beneficial ownership of less than 1% of the
outstanding capital stock of a publicly traded company, whether or not such
company
-5-
<PAGE> 6
is competitive with OCC and its subsidiaries, shall not, in and of itself, be
deemed to be activities which are competitive with the business and activities
of OCC and its subsidiaries.
"Non-compete Termination Date" shall mean one year from the
expiration or earlier termination of this Agreement, PROVIDED that, if the
Executive becomes Disabled, the Non-compete Termination Date shall be the date
on which no further payments are owing under Section 3(a).
(b) NONSOLICITATION. From the Effective Date through the
Non-compete Termination Date, the Executive shall not, and shall cause each
business or entity with which he shall become associated in any capacity not to,
(i) solicit for employment or employ any person who is then, or who was at any
time six months prior to the date of such termination, employed by OCC or its
subsidiaries or (ii) solicit business which is competitive with OCC's business
from any current customer or supplier of OCC or its subsidiaries or any person
or entity who was a customer or supplier of OCC or its subsidiaries at any time
within six months prior to the date of such termination.
(c) CONFIDENTIALITY. The Executive agrees and acknowledges
that the Confidential Information (as defined below) of OCC and its subsidiaries
is valuable, special and unique to its business; that such business depends on
such Confidential Information; and that OCC wishes to protect such Confidential
Information by keeping it confidential for the use and benefit of OCC and its
subsidiaries. Based on the foregoing, the Executive
-6-
<PAGE> 7
agrees to undertake the following obligations with respect to such Confidential
Information:
(i) the Executive agrees to keep any and all
Confidential Information in trust for the exclusive use and benefit of OCC and
its subsidiaries;
(ii) the Executive agrees that, except as required by
applicable law or as authorized in writing by OCC, he will not, at any time
prior to the second anniversary of the termination of his employment hereunder,
disclose, directly or indirectly, any Confidential Information of OCC or its
subsidiaries;
(iii) the Executive agrees to take all reasonable
steps necessary, or reasonably requested by OCC, to ensure that all Confidential
Information is kept confidential for the use and benefit of OCC and its
subsidiaries; and
(iv) the Executive agrees that, upon termination of
his employment hereunder or at any other time as OCC may in writing request, he
will promptly deliver to OCC all materials constituting Confidential Information
(including all copies thereof) that are in his possession or under his control.
The Executive further agrees that, if requested by OCC to return any
Confidential Information pursuant to this subparagraph (iv), he will not make or
retain any copy or extract from such materials.
For purposes of SECTION 6(C), "Confidential Information" means
any and all information developed by or for OCC and its subsidiaries of which
the Executive gains or has
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<PAGE> 8
acquired knowledge during or prior to the term of his employment with OCC by
reason of his employment with OCC that is (A) not generally known in any
industry in which OCC and its subsidiaries is or may become engaged or (B) not
publicly available. Confidential Information includes, but is not limited to,
any and all information developed by or for OCC and its subsidiaries concerning
plans, marketing and sales methods, customer lists, materials, processes,
software, procedures, devices, plans for development of products, services or
expansion into new areas or markets, internal operations, and any trade secrets
and proprietary information of any type owned by OCC and its subsidiaries,
together with all written, graphic, electronic and other materials relating to
all or any part of the same.
(d) REMEDIES. The Executive acknowledges and agrees that the
covenants and obligations of the Executive contained in this SECTION 6 relate to
special, unique and extraordinary matters and are reasonable and necessary to
protect the legitimate interests of OCC and that a breach of any of the terms of
such covenants and obligations will cause OCC irreparable injury for which
adequate remedies at law are not available. Therefore, the Executive agrees that
OCC shall be entitled to an injunction, restraining order, or other equitable
relief from any court of competent jurisdiction, restraining the Executive from
any such breach. OCC's rights and remedies under this SECTION 6(D) are
cumulative and are in addition to any other rights and remedies OCC may have at
law or in equity.
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<PAGE> 9
7. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This
agreement shall not be terminated by any:
(a) Merger or consolidation where OCC is not the consolidated
or surviving corporation;
(b) Transfer of all or substantially all of the assets of OCC;
or
(c) Voluntary or involuntary dissolution of OCC.
In the event of any such merger or consolidation or transfer
of assets, the surviving or resulting corporation or the transferee of OCC's
assets shall be bound by and shall have the benefit of the provisions of this
agreement; OCC shall take all actions necessary to insure that such corporation
or transferee is bound by the provisions of this agreement.
8. NON-ASSIGNABILITY. Except as provided in Section 7 above,
neither party shall assign its rights and obligations under this contract
without the written approval of the other party, which approval may be withheld
for any reason or no reason.
9. INDEMNITY. OCC shall indemnify Executive and hold him
harmless for all acts or decisions made by him on behalf of OCC to the fullest
extent permitted by applicable law. OCC shall also use its best efforts to
obtain coverage for him under any insurance policy now in force or hereafter
obtained during the term of this Agreement covering the other officers and/or
directors against lawsuits. OCC shall pay all expenses including
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<PAGE> 10
attorney's fees, incurred by the Executive in connection with thedefense of such
act, suit or proceeding and in connection with any related appeal including the
cost of settlement.
10. TIME TO CURE. In the event either party fails to perform
any of either his or its respective obligations hereunder and if such failure
would otherwise constitute a default under this agreement, the non-defaulting
party shall give written notice specifying such obligations to the defaulting
party who shall have five (5) business days after receipt of such notice to cure
the specified default; PROVIDED that an action or failure to act that
constitutes a default and that has been described with reasonable particularity
may not be cured more than once.
11. ARBITRATION. Any controversy or claim arising out of, or
relating to this Agreement, or its breach, shall be settled by arbitration in
the City of New York in accordance with the then governing rules of the American
Arbitration Association. Judgment upon the award rendered may be entered and
enforced in any court of competent jurisdiction. The prevailing party shall be
entitled to reasonable attorneys' fees and expenses.
12. NOTICES. Any written notice required or permitted to be
given under any provision of this Agreement shall be deemed to have been given
(a) if to the Executive, when sent by Registered or Certified Mail (return
receipt requested) in a sealed envelope addressed to him at his last known
residence address as shown on OCC's records or when delivered by hand to
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<PAGE> 11
him or, in his absence, in a sealed envelope to an adult member of his
household, and (b) if to OCC, when sent by Registered or Certified Mail (return
receipt requested) in a sealed envelope addressed to OCC or delivered by hand at
its then existing executive offices, ATTENTION: Counsel.
13. ENTIRE AGREEMENT; ENFORCEABILITY; PARTIAL INVALIDITY.
(a) This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them relating to its subject matter. No
modification or waiver of any of the provisions of this Agreement shall be
effective unless set forth in a writing signed by the party against whom the
same is sought to be enforced. The waiver by either party of any breach of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach hereof by such other party.
(b) The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
14. INTERPRETATION OF AGREEMENT. This Agreement is made in the
State of New York and its validity and interpretation shall be governed by the
laws of such state, without giving effect to conflicts of law principles. The
section and
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<PAGE> 12
subsection headings in this Agreement are for convenience only and shall be
disregarded in any interpretation of this Agreement.
15. EFFECTIVE DATE; OTHER AGREEMENTS.
(a) This Agreement shall be effective on May 8, 1998.
(b) Executive warrants and represents that, as at the
Effective Date, he is not and will not be subject to any employment agreement or
other obligation to any other entity restricting his abilities to perform his
duties to OCC, or any of its affiliates.
IN WITNESS WHEREOF, OCC has caused this Agreement to be
executed in its name and on its behalf by its Chief Executive Officer and the
Executive has signed this Agreement as of the day and year first above written.
OFFICE CENTRE CORPORATION
By: /s/ Robert J. Gillon, Jr.
---------------------------------
Robert J. Gillon, Jr.
EXECUTIVE:
/s/ Thomas F. Mooney
------------------------------------
Thomas F. Mooney
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<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 20th day of February, 1998 by and
between Office Centre Corporation, a Delaware corporation, with its principal
place of business at 38 East 32nd Street, New York, New York (hereinafter
referred to as "OCC"), and Richard Case, residing at 4425 Ballinger Court,
Plano, Texas (hereinafter referred to as the "EXECUTIVE").
WITNESSETH:
-----------
WHEREAS, on the terms and conditions hereinafter set forth,
OCC wishes to engage the services of the Executive and Executive desires to
serve OCC as OCC's Senior Vice President, Corporate Development, or in any other
similar capacity as may be designated by OCC's President from time to time and
at his discretion;
WHEREAS, OCC and Executive desire to terminate that certain
Consulting Agreement dated January 1, 1998 and to incorporate and otherwise
merge all of their respective rights and obligation into this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties hereto agree
as follows:
1. PERFORMANCE OF DUTIES. Executive shall become a Senior Vice
President of OCC. Executive shall report to the President of OCC, or his
designee, and shall assume such duties and responsibilities as may be assigned
to him by OCC. Executive's primary business location shall be within the greater
Dallas metropolitan area and Executive may not be permanently relocated without
his prior written consent which he may withhold for any reason in his sole
discretion. OCC shall establish an office in Dallas,
<PAGE> 2
Texas for Executive's use on behalf of OCC and provide reasonable secretarial
and administrative support facilities to Executive at OCC's reasonable expense.
2. COMPENSATION. As compensation for his services hereunder,
the Executive shall be entitled to receive:
(a) An annual salary equal to $200,000 per year, such
amount to be paid to the Executive semi-monthly, or otherwise in accordance with
OCC's normal payroll practices (the "BASE SALARY");
(b) An annual bonus (the "Performance Bonus"), to be
paid within sixty (60) days of the close of each applicable year, predicated
upon meeting or exceeding certain annual performance objectives established by
OCC, with input from Executive (the "ANNUAL OBJECTIVE"), as follows:
Annual Performance Bonus
- ------------------ -----
120% of Annual Objective 100% of Annual Base Salary
110% of Annual Objective 90% of Annual Base Salary
100% of Annual Objective 80% of Annual Base Salary
90% of Annual Objective 40% of Annual Base Salary
(c) A yearly salary review by the OCC Board of
Directors, or their designee, to determine if said Base Salary shall be
increased, but in no event shall said salary be decreased;
(d) Entitlement to receive options to purchase up to
300,000 shares of common stock of OCC, at the exercise price attributed to such
shares by Marshal &
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<PAGE> 3
Stevens, Inc. as at December 1, 1997, namely $2.65, to vest ratably on an
annual basis over a three year period at January 1 of each applicable year,
commencing with options to purchase up to 100,000 shares on January 1, 1999,
and exercisable until December 1, 2007, and Executive shall be credited with
the term of services provided to OCC under that certain Consulting Agreement
dated January 1, 1998 (the "Consulting Agreement"). In the event of a reverse
split in the common stock of OCC, the exercise price will be increased
accordingly, but the number of shares, namely 300,000, will remain the same.
(e) Eligibility to participate in all stock option
plans generally available to senior OCC executives; and
(f) All amounts paid to Executive under the
Consulting Agreement shall be credited against OCC's obligations under this
Section 2 of this Agreement. Any pro-rated annual performance objectives
remaining outstanding or unfulfilled under the Consulting Agreement shall be
transferred to, incorporated by, or otherwise credited to Executive under this
Agreement.
3. FRINGE BENEFITS. The Executive shall be entitled to the
following fringe benefits;
(a) AUTOMOBILE ALLOWANCE. The Executive shall be
entitled to an automobile allowance of $500.00 per month.
(b) SALARY CONTINUATION DURING DISABILITY. If for any
reason the Executive becomes disabled, so that he is unable to perform his
duties hereunder, in the reasonable opinion of OCC, due to physical or mental
illness or other cause for either (i) a period of 90 consecutive days, or (ii)
180 days during any 360-day period ("DISABLED"), the Executive's employment
under this Agreement shall terminate. Under such circumstances,
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<PAGE> 4
OCC shall nevertheless continue to pay Executive periodic Base Salary payments
to the same extent that-Executive would have been entitled to receive under
Section 2(b) until the time that this Agreement would have expired but for such
termination.
(c) VACATION. Executive shall be- entitled to receive
paid vacation per year to the same extent as granted to other senior executives
of OCC, at present four (4) weeks.
(d) OTHER BENEFITS. The Executive shall be entitled
to such other benefits, including health, hospitalization, dental, disability,
life and other insurance, as are granted to other senior executives of OCC. All
unused benefits under Section 3 of the Consulting Agreement shall be transferred
to and incorporated by this Agreement.
4. EXPENSE REIMBURSEMENT. Subject to compliance with the OCC's
policy, rules and practices relating to expense reimbursement, the Executive
shall be entitled to the use of a corporate phone card and credit card for
business expenses and shall be entitled to reimbursement from OCC for all
reasonable out-of-pocket business expenses incurred by him in connection with
the performance of his duties.
5. DURATION AND TERMINATION OF EMPLOYMENT.
(a) Unless the Executive's employment under this
Agreement is otherwise terminated, the term of this Agreement is three (3) years
from the effective date, less the term of the Consulting Agreement (the "Term").
The "Effective Date" shall be defined as that date upon which Executive's status
as a consultant, as described in the Consulting Agreement, shall be terminated
by OCC and changed to employee. At least six
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<PAGE> 5
months prior to expiration of the Term, OCC shall notify Executive in writing as
to whether OCC intends to renew this Agreement and, if so, under what
circumstances and terms.
(b) OCC may terminate the employment of the Executive
for Cause (defined herein) and notice of such termination shall be sent to
Executive. "CAUSE" shall mean the Executive's (i) willful misconduct, (ii)
grossly negligent misconduct in the performance of his duties to OCC, (iii)
material breach of his obligations under this Agreement, (iv) failure to comply
with the lawful instructions of the Board of Directors, the President of OCC, or
any of their designees, (v) conviction of, or plea of nolo contendere to, a
felony; or conviction of, or plea of nolo contendere to, a crime involving moral
turpitude under federal, state or local laws. Notwithstanding the foregoing, a
crime involving tax matters shall not be considered a crime involving moral
turpitude.
(c) If, at any time, OCC terminates the employment of
the Executive for Cause, the Executive resigns his position for any reason, or
the Executive dies, the Executive (or his estate) shall only be entitled to
receive the unpaid portion of his Base Salary that has accrued to the date of
such termination, resignation or death, less any damages sustained by OCC as a
result of such termination or of the Executives's activities leading thereto and
for so long as Executive is otherwise in compliance with his obligation under
this Agreement. OCC shall have no further obligations to Executive.
(d) If, at any time, OCC terminates the employment of
the Executive for any reason other than for Cause ("NON-CAUSE TERMINATION"), the
Executive shall be entitled to receive the unpaid Base Salary otherwise due
Executive as prescribed by
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<PAGE> 6
Section 2(a) for the entire unexpired term of this Agreement, and the earned but
unpaid Performance Bonus, but only to the extent of that Performance Bonus
remaining unpaid during the year of termination, as a lump sum payment paid
within thirty (30) business days of such termination (the "ACCELERATION DATE"),
and shall be entitled to receive all options to purchase stock identified in
Sections 2(d) and 2(e), on or prior to the Acceleration Date.
6. COVENANTS OF THE EXECUTIVE.
(A) NONCOMPETITION. Executive hereby acknowledges that he has
received adequate consideration, including payment of a bonus, allocated annual
compensation of the Base Salary, eligibility for a special Performance Bonus,
and the granting of stock purchase options, to which he would not have been
otherwise entitled to receive but for payments made to him for his performance
of his obligations under this Section 6 of the Agreement:
(i) Except as authorized in writing by the President of OCC,
during the term of this Agreement and through the Non-compete Termination Date
(as defined below), the Executive shall not, whether as a director, officer,
employee, agent, consultant, owner, independent contractor or otherwise, provide
any services, directly or indirectly, to any person or entity whose primary
business activity in the United States of America is competitive with the
primary activity of OCC.
(ii) OCC and the Executive hereby acknowledge that nothing
contained herein shall prohibit the Executive from making investments in other
entities or businesses, provided, that such entities or businesses are not
engaged in activities which are competitive with the business and activities of
OCC and its subsidiaries. During the Term through the
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<PAGE> 7
non-compete Termination Date, the Executive shall refrain from making any
investment in, or receiving compensation or other payment from, any entity or
business which is competitive with the business or activities of OCC and its
subsidiaries. Notwithstanding the foregoing, the Executive's beneficial
ownership of less than 1% of the outstanding capital stock of a publicly traded
company, whether or not such company is competitive with OCC and its
subsidiaries, shall not, in and of itself, be deemed to be activities which are
competitive with the business and activities of OCC and its subsidiaries.
(iii) "Non-compete Termination Date" shall mean:
(A) If the Executive's services are terminated for
cause or if Executive terminates this Agreement for any reason, the first
anniversary of the effective date of such termination subsequent to the
expiration of the Term; and
(B) If the Executive's employment is terminated by
OCC pursuant to a non-cause termination, one year from the effective date of
such termination.
(iv) In the event OCC terminates Executive's employment with
OCC for Non-Cause Termination pursuant to Section 5(d), OCC shall pay Executive
his Base Salary for the period of OCC's intention for Executive to comply with
the obligations set forth in this Section 6(a).
(b) NONSOLICITATION. From the date hereof through the
Non-compete Termination Date, the Executive shall not, and shall cause each
business or entity with which he shall become associated in any capacity
including any other entity to which he renders any services not to, directly or
indirectly (i) solicit for employment or employ any person who is
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<PAGE> 8
then, or who was at any time six months prior to the date of such termination,
employed by OCC or its subsidiaries, (ii) solicit business from any current
customer or supplier of OCC its subsidies or any person or entity who was a
customer or supplier of OCC or its subsidiaries at any time within six months
prior to the date of such termination, or (iii) cause any such employee,
customer or supplier to cease employment or business relationship with OCC.
(c) CONFIDENTIALITY. The Executive agrees and acknowledges
that the Confidential Information (as defined below) of OCC and its subsidiaries
is valuable, special and unique to its business that such business depends on
such Confidential Information and that OCC wishes to protect such Confidential
Information:
(i) the Executive agrees to keep any and all
Confidential Information in trust for the exclusive use and benefit of OCC and
its subsidiaries;
(ii) the Executive agrees that, except as required by
applicable law or as authorized in writing by OCC, he will not, at any time
prior to the third anniversary of the termination of this Agreement for any
reason, disclose, directly or indirectly, any Confidential Information of OCC or
its subsidiaries;
(iii) the Executive agrees to take all reasonable
steps necessary, or reasonably requested by OCC, to ensure that all Confidential
Information is kept confidential for the use and benefit of OCC and its
subsidiaries; and
(iv) the Executive agrees that, upon termination of
this Agreement, or at any other time as OCC may in writing request, he will
promptly deliver to OCC all
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<PAGE> 9
materials constituting Confidential Information (including all copies thereof)
that are in his possession or under his control. The Executive further agrees
that, if requested by OCC to return any Confidential Information pursuant to
this section (iv), he will not make or retain any copy or extract from such
materials.
For purposes of this Section, "Confidential Information" means
any and all information developed by or for OCC and its subsidiaries of which
the Executive gains or has acquired knowledge during or prior to the terms of
this Agreement that is (A) not generally known in any industry in which OCC and
its subsidiaries is or may become enraged, or (B) not publicly available.
Confidential Information includes, but is not limited to, any and all
information developed by or for OCC and its subsidiaries concerning plans,
marketing and sales methods, customer lists, materials, proceeds, software,
procedures, devices, plans for development of products, services or expansion
into new areas or markets, internal operations, and any trade secrets and
proprietary information of any type owned by OCC and its subsidiaries, together
with all written, graphic, electronic and other materials relating to all or any
part of the same.
(d) Remedies. The Executive acknowledges and agrees that the
covenants and obligations of the Executive contained in this Section 6 relate to
special, unique and extraordinary matters and are reasonable and necessary to
protect the legitimate interests of OCC and that a breach of any of the terms of
such covenants and obligations will cause OCC irreparable injury for which
adequate remedies at law are not available. Therefore, the Executive agrees that
OCC shall be entitled, in addition to any of the remedies available to it
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<PAGE> 10
in law or equity, to an injunction, restraining order, or other equitable relief
from any court of competent jurisdiction, restraining the Executive from any
such breach or threatened breach. OCC's rights and remedies under this Section 6
of the Agreement are cumulative and are in addition to any other rights and
remedies OCC may have at law or in equity, including to obtain monetary damages
suffered by OCC as a result of Executive's breach of any of the provisions
contained in this Agreement.
7. NON-ASSIGNABILITY. Except as provided herein, neither party
shall assign its rights and obligations under this contract without the written
approval of the other party, which approval may be withheld by OCC for any
reason or no reason and by Executive in reasonable good faith.
8. INDEMNITY. To the fullest extent permitted by applicable
law, OCC shall indemnify Executive and hold him harmless for all acts or
decisions made by Executive in the course of his employment for OCC under this
Agreement. OCC shall also use its best efforts to obtain coverage for him under
any insurance policy now in force or hereafter obtained during the term of this
Agreement covering the other similarly situated against lawsuits. OCC shall pay
all expenses including attorney's fees, incurred by the Executive in connection
with the defense of such act suit or proceeding and in connection with any
related appeal including the cost of settlement.
9. TIME TO CURE. Except as otherwise provided herein, in the
event either party fails to perform any of its respective obligations hereunder
and if such failure would otherwise constitute a default under this agreement,
the non-defaulting party shall give
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<PAGE> 11
written notice specifying such obligations to the defaulting party who shall
have ten (10) business days after receipt of such notice to cure the specified
default; PROVIDED that an action or failure to act that constitutes a default
and that has been described with reasonable particularity may not be cured more
than once.
10. ARBITRATION. Any controversy or claim arising out of, or
relating to this Agreement, or its breach, shall be settled by arbitration in
the City of New York in accordance with the then governing rules of the American
Arbitration Association. Judgment upon the award rendered may be entered and
enforced in any court of competent jurisdiction. The prevailing party shall be
entitled to reasonable attorneys' fees and expenses.
11. Notices. Any written notice required or permitted to be
given under any provision of this Agreement shall be deemed to have been given
(a) if to the Executive, when sent by Registered or Certified Mail (return
receipt requested) in a sealed envelope addressed to him at his last known
residence address as shown on OCC's records or when delivered by hand to him or,
in his absence, in a sealed envelope to an adult member of his household, and
(b) if to OCC, when sent by Registered or Certified Mail (return receipt
requested) in a sealed envelope addressed to the OCC or delivered by hand at its
then existing executive offices, ATTENTION: Counsel.
12. ENTIRE AGREEMENT; ENFORCEABILITY; PARTIAL INVALIDITY.
(a) This Agreement contains the entire agreement of
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them relating to its subject matter. No
modification or waiver of any of the
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<PAGE> 12
provisions of this Agreement shall be effective unless set forth in a writing
signed by the party against whom the same is sought to be enforced. The waiver
by either party of any breach of this Agreement by the other party shall not
operate or be construed as a waiver of any subsequent breach hereof by such
other party.
(b) The above notwithstanding, until May 6, 1998,
Executive shall be permitted by OCC to provide reasonable consulting services,
not on behalf of OCC, to Maclean-Fogg, an automotive and power company based in
Mundelein IL, and Jameson Company, a telecommunications company based in
Charlotte, NC;
(c) the above notwithstanding, Executive shall be
permitted to continue to serve on an advisory board for Commtech International,
Inc. and the Board of Directors of Heath Watch, Inc., and shall be permitted, by
written acknowledgment, to serve on the Board of Directors of other companies;
provided, as determined by the President of OCC, or his designee, any such
duties and activities do not conflict or otherwise interfere
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<PAGE> 13
with Executive's obligations to OCC under this Agreement; and
(d) The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions,
and this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
13. INTERPRETATION OF AGREEMENT. This Agreement is made in the
State of New York and its validity and interpretation shall be governed by the
laws of such state, without giving effect to conflicts of law principles. The
section and subsequent headings in this Agreement are for convenience only and
shall be disregarded in any interpretation of this Agreement.
IN WITNESS WHEREOF, OCC has caused this Agreement to be
executed in its name and on its behalf by its Chairman and the Executive has
signed this Agreement as of the day and year first above written.
OFFICE CENTRE CORPORATION
By: /s/ R.J. Gillon, Jr.
------------------------------------
ROBERT J. GILLON, JR.
EXECUTIVE
/s/ RICHARD CASE
------------------------------------
RICHARD CASE
Dated: New York, New York
February 23, 1998
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<PAGE> 1
Exhibit 10.11
CONSULTING AGREEMENT
--------------------
This Agreement is made effective the 1st day of February, 1997 by and
between BENCHMARK ASSOCIATES, INC., 5353 Manhattan Circle, Suite 201, Boulder,
Colorado 80303 (the "Consultant"), and OFFICE CENTRE CORPORATION, (the
"Company"), with its principal place of business in care of The King Group
located at 38 East 32nd Street New York, NY 10016.
R E C I T A L S
WHEREAS, the Consultant represents to the Company that it has broad
experience in providing technical and economic advice concerning business
development; rendering advice to the Company to achieve the Company's goals
through various business combinations including, but not limited to, capital
formation, mergers/acquisitions, joint ventures, licensing, and corporate
partnerships; and
WHEREAS, the Company desires to obtain such services from Consultant
and the Company agrees to provide compensation for such services to Consultant
pursuant to the terms contained herein below.
NOW THEREFORE, the parties do hereinafter agree as follows:
1. DUTIES OF CONSULTANT. The Company hereby retains the Consultant to
perform those duties delineated below and Consultant agrees to perform the
following activities on behalf of the Company:
(a) Suggest revisions to and make recommendations to the
Company's business plan;
(b) Participate in the Company's Acquisition Program, the
mission of which is to secure appropriate acquisitions by aiding in the
following activities: (i) locate, (ii) negotiate terms; (iii) complete letter of
intent; (iv) perform due diligence; (v) complete definitive agreement; (vi)
develop transition plan; and (vii) assist in closing.
These specific objectives may be altered, modified or revised based on
the Company's needs or new developments and as may be directed by the Company.
<PAGE> 2
2. COMPENSATION OF CONSULTANT.
(a) In consideration of the services to be provided by
Consultant herein, the Company will compensate and pay Consultant on a monthly
basis at the rate of Five Thousand Dollars ($5,000) per month, plus expenses
during the term of this Agreement. The Company shall pay Consultant the monthly
fee of $5,000 on the first day of each calendar month commencing February 1,
1997.
(b) In addition, Consultant shall receive and the Company
shall pay fees ("Consultant's Fee") based upon the following terms:
(i) Upon the closing of an Initial Public Offering
("IPO") of the Company's stock, the Consultant's Fee shall be due and payable
at the closing of the IPO as follows:
(A) Consultant shall receive the sum of
$425,000 in the form of cash plus $162,500 in the form of the Company's
unregistered shares of stock calculated at a price per share which is 50% of the
IPO price of the stock.
(B) (This subparagraph intentionally left
blank)
(ii) Upon the closing of a merger transaction in
which the Company is merged into another entity prior to the occurrence of an
IPO, then the Consultant's Fee shall be due and payable at the closing of the
merger transaction as follows:
(A) In the event the surviving entity is a
privately held entity or a natural person, Consultant shall receive a
Consultant's fee in the amount of $700,000 payable in the form of cash and due
immediately upon the closing of the merger transaction; or
(B) In the event the surviving entity is a
publicly held company with registered, freely tradeable shares of stock,
Consultant shall receive a Consultant's Fee in the form of cash in the amount of
$250,000 plus $250,000 in the form of the surviving company's registered shares
of stock with no restrictions calculated at a price per share which is 50% of
the value of the surviving company's stock on the date of closing the merger
transaction. However, at the Company's sole option, the Company may elect to pay
Consultant the Consultant's Fee due under this subparagraph (B) in the form of
cash in the amount of $700,000.
(iii) If none of the transactions described in
Section 2(b)(i)(A) or 2(b)(ii) above occur prior to the first anniversary of the
earlier of (a) the normal expiration term of this Agreement or (b) the early
termination of this Agreement for any reason and except as otherwise provided in
this Agreement, the Consultant's Fee shall be the greater of (1) $125,000 if one
Acquisition Transaction as defined below (other than an acquisition involving
UDI Corp., UDI II Corp. or King Office Supplies, Inc.) finally closed during the
term of this Agreement or within the twelve month period following the
termination of this Agreement; (2) $250,000 if two or more Acquisition
Transactions (other than an acquisition involving UDI Corp., UDI II Corp. or
King Office Supplies, Inc.) are finally closed during the term of this
Agreement or within the twelve
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<PAGE> 3
month period following the termination of this Agreement or (3) the product of
$750,000 multiplied by a fraction, the numerator of which shall be equal to the
combined product and service sales volumes (calculated as described in Section
2(c))of all Acquisition Transactions actually closed during the term of this
Agreement and within the twelve month period following the termination of this
Agreement (excluding the UDI Corp., UDI II Corp. and King Office Supply, Inc.
transactions), and the denominator of which shall be $150 million. The
Consultant's Fee payable under this Section 2(b)(iii) shall be due and payable
within thirty days following the twelve month period immediately following the
termination of this Agreement.
(c) If an event described in Sections 2(b)(i) or 2(b)(ii)
occurs during the term of this Agreement, and the combined product and service
sales volumes of completed Acquisition Transactions (excluding UDI Corp., UDI II
Corp. and King Office Supply, Inc.) made prior to the occurrence of any event
described in Sections 2(b)(i) or 2(b)(ii) and during the term of this Agreement
exceed $150 million in gross annual revenues, Consultant shall receive an
additional fee equal to 1% of the value of all Acquisition Transactions finally
closed during the term of this Agreement prior to the occurrence of an event
described in Section 2(b)(i) or 2 (b)(ii) which resulted in such product and
service sales volumes exceeding the $150 million threshold. If a target in an
Acquisition Transaction (the "Straddler") has such product and service sales
volumes in an amount which, when added together with all such product and
service sales volumes of targets in previously consummated Acquisition
Transactions (excluding UDI Corp., UDI II Corp. and King Office Supply, Inc.),
exceed $150 million, the additional 1% fee with respect to the Straddler shall
be equal to the product of (i) 1% of the value of the Acquisition Transaction
involving the Straddler multiplied by (ii) a fraction, the numerator of which
equals the difference between (A) the combined product and service sales volumes
of completed Acquisition Transactions at that date (including the Straddler) and
(B) $150 million, and the denominator of which is such product and service sales
volumes of the Straddler. The value of such Acquisition Transactions shall be
equal to the purchase price of all such Acquisition Transactions paid by the
Company in whatever form the purchase price is payable including cash, debt
assumed, notes, stock, and all deferred payments. In the event any portion of
the purchase price of any such Acquisition Transaction is paid or is payable in
property of a kind other than cash, assumed debt, notes, stock or deferred
payments, the parties shall negotiate in good faith to determine the
Consultant's Fee payable to Consultant with respect to such other property, with
the valuation to be determined based on the valuation that the parties to the
Acquisition Transaction in question ascribed to such property in reaching their
agreement effecting such Acquisition Transaction. In the event the parties
cannot reach an agreement as a result of such good faith negotiations, the issue
of the Consultant's Fee payable with respect to such other property shall be
submitted to arbitration under paragraph 7 of this Agreement. For purposes of
this Agreement, an Acquisition Transaction shall be a transaction in which the
Company purchases the assets or the stock of another person or entity and for
which Consultant actively participates in the negotiation. However, the
Company's acquisition of UDI Corp., UDI II Corp. and King Office Supply, Inc.
shall not be included within the definition of Acquisition Transactions for
purposes of this Agreement, and therefore no fee shall be paid for such
acquisitions. In addition, any compensation paid to the principals of the
acquisition targets for services actually to be performed by those principals
shall not be included in such calculation of Consultant's Fee. The determination
whether gross annual revenues in fact exceeds $150 million shall be based on,
for each Acquisition Transaction, the most recent 12-month figures set forth in
- 3 -
<PAGE> 4
the audited financial statements used at the closing of such Acquisition
Transaction. All fees and compensation due Consultant under Paragraph 2(c) of
this Agreement shall be due and payable within 15 days after the earlier of (1)
the date on which the IPO closes, (2) the date on which the transaction
described in paragraph 2(b)(ii)(A) closes, or (3) the date on which the
transaction described in paragraph 2(b)(ii)(B) closes.
(d) In the event of a disagreement related to any of the
Consultant's Fees payable under this Agreement, Company and Consultant agree to
be guided by GAAP (Generally Accepted Accounting Principles) with such dispute
to be submitted to arbitration pursuant to section 7 hereto.
(e) The Consultant's Fee described in Sections 2(b)(i)(A),
2(b)(ii) and 2(c) shall be in addition to, and exclusive of the monthly fees
payable by the Company to Consultant described in subparagraph 2(a) of this
Agreement.
(f) The Company shall reimburse Consultant the Consultant's
reasonable and customary business expenses incurred by Consultant in connection
with its performance of the services described in this Agreement. The Company
shall deliver the actual reimbursement funds to Consultant within 10 days
following Consultant's delivery to Company of a written expense report
containing reasonable detail of the expenses for which Consultant seeks
reimbursement together with receipts evidencing such expenses.
3. INTENTIONALLY DELETED.
4. PAYMENT OF CONSIDERATION AFTER TERMINATION.
(a) The parties agree that the initial acquisition candidates
(each being a "Target") will be the companies as set forth on Annex A hereto.
Upon mutual agreement of the Company and Consultant, Annex A may be amended from
time to time to add or subtract Targets. If this Agreement expires or otherwise
is terminated pursuant to Section 8 for any reason other than by the Company for
just cause as described in paragraph 8(b) and if any relevant IPO or merger
transaction as described in Sections 2(b)(i)(A) and 2(b)(ii) closes within one
year of the expiration or other such early termination of this Agreement,
Consultant shall be entitled to receive the full Consultant's Fee described in
said Sections 2(b)(i)(A) and 2(b)(ii) less the amounts, if any, actually
received by Consultant pursuant to Section 2(b)(iii). If, after the expiration
or other such termination of this Agreement, any of the Acquisition Transactions
are finally closed within the twelve month period following such expiration or
other such early termination of this Agreement, with any Target with whom
Consultant was participating as a part of the Acquisition Team prior to the
expiration or other such early termination of this Agreement, Consultant shall
be entitled to receive the Consultant's Fee (if applicable) described in Section
2(b)(iii) with respect to such Acquisition Transaction.
(b) In the event the Company terminates this Agreement for
just cause as described in Section 8(b) of this Agreement, and except as
otherwise provided in this Section 4(b) Consultant only shall be entitled to
receive a Consultant's Fee if the Company closes an IPO or merger transaction as
described in Sections 2(b)(i)(A) and 2(b)(ii) within the twelve month
- 4 -
<PAGE> 5
period immediately following the effective date of termination. The Consultant's
Fee payable in that event shall be equal to the Consultant's Fee described in
either Section 2(b)(i)(A) or Section 2(b)(ii), as appropriate, times a fraction
the denominator of which shall be the total combined product and service sales
volume of completed Acquisition Transactions at the time of the closing of the
IPO or merger transaction and the numerator of which shall be the total combined
product and service sales volume of Acquisition Transactions under either
contract or letter of intent (but not yet closed) which actually close prior to
or at the closing the of the IPO or merger transaction. In the event the Company
terminates this Agreement for just cause as described in Section 8(b) of this
Agreement and the Company does not close an IPO or merger transaction as
described in Sections 2(b)(i)(A) and 2(b)(ii) within the twelve-month period
immediately following the effective date of termination, Consultant shall be
entitled only to receipt of a Consultant's Fee in an amount described in Section
2(b)(iii).
5. OBLIGATIONS OF COMPANY. The Company will make available to
Consultant copies of all correspondence exchanged between Company, and any
Target as well as any entity described in paragraph 2(b) and Company will, in
general, keep Consultant apprised in a timely fashion of the nature of any such
proposed transactions.
6. RESTRICTIVE COVENANTS. The following restrictive covenants shall be
in full force and effect during the term of this Agreement and for a period of
one (1) year after this Agreement has been terminated:
(a) Consultant will take all action necessary to insure that
all information provided by the Company to Consultant shall be kept in strictest
confidence by Consultant; and
(b) During the term of this restrictive covenant, Consultant
agrees not to, directly or indirectly, solicit any of the Company's Targets or
any other parties whose names have been identified by the Acquisition Team as
potential Targets for any other entity other than on behalf of the Company.
7. MANDATORY ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. In the
event either party utilizes an attorney in order to enforce the terms of this
Agreement and such party prevails, then the losing party shall reimburse the
prevailing party for the costs of said action including, but not limited to,
reasonable attorneys fees.
8. TERM. (a) Unless otherwise terminated in accordance with the
provisions contained in subparagraphs (b) or (c) of this paragraph 8, the term
of this Agreement shall be twelve months commencing on the date of this
Agreement.
(b) The Company may terminate this Agreement for just cause
which shall include the following:
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<PAGE> 6
(i) Repeated failure by the Consultant, following
not less than 30 days' prior written warning, to perform duties and obligations
pursuant to this Agreement in a correct, timely and expeditious manner;
(ii) Conviction or pleas of guilty or NOLO CONTENDRE
to any crime which constitutes a felony under the laws of any state or the laws
of the United States by any of the Consultant's principals;
(iii) Engaging in activities by Consultant which
constitutes a material breach of the
provisions contained in paragraph 6 of this Agreement.
In the event the Company elects to terminate this Agreement for just
cause pursuant to this subparagraph 8(b), Consultant shall not be entitled to
any of the monthly fees described in paragraph 2(a) accruing after the effective
date of termination nor any of the Consultant Fees which otherwise would be due
and owing for the consummation of Acquisition Transactions following the
effective date of the termination of this Agreement except as provided in
Section 4(b).
In the event the Company terminates this Agreement for any reason other
than for just cause, Company shall remain obligated to pay and shall pay
Consultant an amount equal to 50% of the monthly fee described in paragraph 2(a)
of this Agreement for the remaining term of this Agreement as well as the
Consultants Fees and the additional fees described in Section 4(a) of this
Agreement.
(c) Consultant may terminate this Agreement for just cause which
shall include the following:
(i) The Company fails to pay any of the fees due and payable
to Consultant under this Agreement and such failure continues for a period of
thirty days following Consultant's delivery of written notice of such failure to
Company;
(ii) The Company breaches any other provision of this
Agreement and fails to cure such breach within thirty days following
Consultant's delivery of written notice of such breach to the Company;
(iii) The Company fails to pursue with reasonable diligence
any of the prospective Acquisition Transactions with the Targets and the Company
continues its failure to do so during the thirty days following Consultant's
delivery of written notice thereof to Company;
(iv) The Company becomes insolvent during the term of this
Agreement.
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<PAGE> 7
In the event Consultant elects to terminate this Agreement for proven,
just cause pursuant to this subparagraph 8(c), Consultant shall be entitled to
receive and the Company shall remain obligated to pay and shall pay Consultant
the amounts to which Consultant otherwise would be entitled to receive under
subparagraphs 2(a), 2(b), 2(c) and 4(a) of this Agreement.
9. AUTHORITY TO ACT. Each party hereby represents and warrants that the
individual who executes this Agreement on behalf of such party has been granted
the requisite authority to do so by such party.
10. INDEMNIFICATION. Each party will indemnity and hold the other party
and its agents, officers, directors and employees harmless from any and all
claims arising from its activities under this Agreement except in the event that
actions or inactions of such party are deemed to involve negligence or willful
misconduct. Such indemnification shall include, but not be limited to, the
non-breaching party's attorneys fees.
11. NOTICE. Any notice required hereunder shall be complete upon
certified mailing of the notice to the party at the address appearing herein, or
at the address which shall from time to time be provided to the other party. The
parties shall notify the other of any alteration or change in address
hereinafter occurring.
12. COUNTERPARTS. This Agreement may be executed in multiple
counterparts. Each executed counterpart shall be considered an original, and
taken together, shall constitute one and the same document. Any signature,
notice or other communication with respect to the subject matter hereof may be
given by telex, telecopy or other facsimile transmission and relied upon to the
same extent as if it were an original.
13. SEVERABILITY. If any provision, paragraph or subparagraph of this
Agreement is adjudged by any court to be void or unenforceable in whole or in
part, this adjudication shall not affect the validity of the remainder of the
Agreement, including any other provision, paragraph or subparagraph. Each
provision, paragraph or subparagraph of this Agreement is separable from every
other provision, paragraph and subparagraph and constitutes a separate and
distinct covenant.
14. GOVERNING LAW. This Agreement shall be subject to and governed by
the laws of the State of New York.
15. AMENDMENT. This Agreement may only be amended in writing, duly
endorsed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement,
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<PAGE> 8
effective the date first written above.
CONSULTANT:
BENMARK ASSOCIATES, INC.
By: /s/ Richard T. Case
-----------------------------------
Richard T. Case
Its duly authorized President
-----------
OFFICE CENTRE CORPORATION
By: /s/ R.J. Gillon, Jr.
-----------------------------------
Robert J. Gillon, Jr.
Its duly authorized CEO
For value received, the sufficiency of which hereby is acknowledged by
UDI Corp. and by UDI II Corp, UDI Corp. and UDI II Corp. join this Agreement
solely for the purpose of guaranteeing Office Centre Corporation performance of
its obligations under this Agreement. The guarantee of UDI Corp. and of UDI II
Corp. is one of performance and not merely of collection.
UDI CORP. UDI II CORP.
By: /s/ Walter Gordenstein By: /s/ Walter Gordenstein
------------------------------ --------------------------------
Walter Gordenstein Walter Gordenstein
Its duly authorized Pres. Its duly authorized Pres.
------------- ----------------
- 8 -
<PAGE> 1
EXHIBIT 10.12
AGREEMENT
---------
AGREEMENT made this 9TH day of JANUARY, 1998 by and between
OFFICE CENTRE CORPORATION, a Delaware corporation (hereinafter referred to as
"OCC"), with an office in New York City and JOHN DAVIE (hereinafter referred to
as "Davie"), with an office in New York City.
WHEREAS, Davie owns all right, title and interest permitted by
law in a concept known as "Smart Consumer" (hereinafter referred to as "Smart
Consumer"); and
WHEREAS, OCC wishes to license an interest in Smart Consumer
from Davie.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties hereto agree
as follows:
1. Davie hereby grants OCC a royalty-free, perpetual license
to use Smart Consumer in the office products, office service and office
furniture industries (the "Licensed Industries") worldwide, and to use the name
"Smart Consumer" in promotional advertising in connection with OCC or its
products (collectively, the "License"). All other rights whatsoever in Smart
Consumer are hereby expressly reserved by Davie. Davie shall have no right to
sublicense, transfer or otherwise authorize others to use Smart Consumer with
respect to the Licensed Industries in any manner without the express prior
written consent of OCC. Davie also agrees, at no cost to OCC, to spend up to ___
hours with OCC at a time to be scheduled by OCC, to explain Smart Consumer in
person to OCC employees and train such employees in the use of Smart Consumer.
2. The one-time licensing fee for the License shall be the
issuance by OCC of 100,000 shares of its common stock (the "OCC Stock") to
Davie. If OCC exploits the License in the Republic of China (Taiwan) ("Taiwan"),
however, OCC shall pay an additional fee of 15% of all profits which can be
demonstrated are directly attributable to such exploitation in Taiwan.
3. In the event that OCC does not spend reasonable amounts of
time and money which indicate a long term commitment to develop and use the
License within eighteen (18) months from the date of an initial public offering
of OCC's equity securities (the "IPO"), Davie shall have the option to
repurchase the License from OCC for a purchase price of either, at the choice of
Davie, $500,000 in cash or 50,000 shares of OCC common stock (such number of
shares to be adjusted for stock splits, stock dividends, combinations or similar
events), provided, however, that following such repurchase, nothing herein shall
prevent or restrict OCC from exercising any rights to use ideas or concepts
similar or identical to Smart Consumer, except only
<PAGE> 2
to the extent that Davie exclusively owns such rights (as determined by a court
of law) notwithstanding any representations herein. If Davie does not exercise
the repurchase option set forth in this Section 3 within 30 days of the 18-
month anniversary of the IPO, such repurchase option shall automatically expire
and be of no further force and effect.
In the event of this repurchase, OCC shall not prevent Davie
from using OCC's dealer network for the exploitation of Smart Consumer by Davie
(but not any assignee or third party licensee of Davie).
4. Davie hereby represents and warrants to OCC as follows: A
description of Smart Consumer is attached hereto as Exhibit A. Davie is the sole
owner of Smart Consumer, free and clear of all liabilities, obligations, claims,
security interests, leases, liens, pledges, rights of first refusal, options,
conditional sales or other title retention agreements, UCC-1 financing
statements, licenses, encumbrances, restrictions, covenants, rights and defects
in title of any nature whatsoever, including, without limitation, any
restriction on use, transfer, receipt of income, or exercise of any other
attribute of ownership. No claims are currently being asserted by any person or
entity involving or questioning Davie's sole ownership of Smart Consumer. The
use of Smart Consumer by OCC and/or its subsidiaries in accordance with the
License will not infringe the rights of any person or entity, nor is any
infringing right currently ongoing by any person or entity. Davie has the
authority to grant the License as contemplated by this Agreement.
5. Davie hereby represents and warrants to OCC that he is
acquiring the OCC Stock for his own account for investment purposes only and not
with a view to, or for sale in connection with, any distribution thereof. Davie
hereby agrees not to resell the OCC Stock except pursuant to Section 3 or in
compliance with the registration requirements of the Securities Act of 1933, as
amended, or in a transaction exempted therefrom.
6. Simultaneously with the execution of this Agreement, Davie
will deliver to OCC all books and records relating to Smart Consumer. Davie
hereby represents and warrants to OCC that there are no other books and records
relating to Smart Consumer.
7. Covenants of Davie.
(a) NONCOMPETITION. From the date hereof through the
date on which Davie may repurchase the License pursuant to Section 3 (the
"Repurchase Date"), Davie shall not, directly or indirectly, engage in or be
associated with any entity which engages in the Licensed Industries within a 25
mile radius of any business location of OCC or any of its subsidiaries, whether
as a director, officer, employee, agent, consultant, partner, owner, independent
contractor or otherwise. OCC and Davie hereby acknowledge that nothing contained
herein shall prohibit Davie from making investments in other entities or
businesses, PROVIDED, that such entities or businesses are not engaged in the
Licensed Industries within a 25 mile radius of OCC or any of its subsidiaries.
Davie shall refrain from making any investment in, or receiving compensation or
other payment from, any entity or business in the Licensed
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<PAGE> 3
Industries within a 25 mile radius of OCC or any of its subsidiaries.
Notwithstanding the foregoing, Davie's beneficial ownership of less than 1% of
the outstanding capital stock of a publicly traded company shall not, in and of
itself, be deemed to violate this Section 7(a).
(b) NONSOLICITATION. At all times from the date
hereof through the Repurchase Date, Davie shall not, and shall cause each
business or entity with which he shall become associated in any capacity not to,
(i) solicit for employment or employ any person who is at such time, or who was
at any time within six months prior to such time, employed by OCC or its
subsidiaries or (ii) solicit business which is competitive with OCC's business
from any person or entity who is at such time a customer or supplier of OCC or
its subsidiaries or any person or entity who was a customer or supplier of OCC
or its subsidiaries within six months prior to such time.
(c) CONFIDENTIALITY. Davie agrees and acknowledges
that the Confidential Information (as defined below) of OCC and its subsidiaries
is valuable, special and unique to its business; that such business depends on
such Confidential Information; and that OCC wishes to protect such Confidential
Information by keeping it confidential for the use and benefit of OCC and its
subsidiaries. Based on the foregoing, Davie agrees that he will not, without the
prior written consent of OCC, disclose any Confidential Information to any
person or entity (a "Person") that does business in the Licensed Industries. If
Davie discloses any Confidential Information to any Person (a "Disclosee") that
does not do business in the Licensed Industries, Davie shall ensure through a
written confidentiality agreement that such Disclosee will prevent the
Confidential Information from being disclosed to any Person engaged in the
Licensed Industries. Davie shall be responsible for any subsequent disclosure by
any Person of Confidential Information to any Person engaged in business in the
Licensed Industries.
For purposes of Section 7(c), "Confidential Information" means
any and all information relating to Smart Consumer.
(d) REMEDIES. Davie acknowledges and agrees that the
covenants and obligations of Davie contained in this Section 7 relate to
special, unique and extraordinary matters and are reasonable and necessary to
protect the legitimate interests of OCC and that a breach of any of the terms of
such covenants and obligations will cause OCC irreparable injury for which
adequate remedies at law are not available. Therefore, Davie agrees that OCC
shall be entitled to an injunction, restraining order, or other equitable relief
from any court of competent jurisdiction, restraining Davie from any such
breach. OCC's rights and remedies under this Section 7(d) are cumulative and are
in addition to any other rights and remedies OCC may have at law or in equity.
8. (a) Davie shall indemnify, hold harmless and defend OCC,
its subsidiaries and their respective directors, officers, employees and agents
at all times after the date of this Agreement, against and in respect of any and
all liabilities, losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) arising out of or in connection
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<PAGE> 4
with or based upon the inaccuracy of any representation or warranty made by
Davie herein or the breach by Davie of any agreement or covenant made herein.
(b) OCC shall indemnify, hold harmless and defend
Davie at all times after the date of this Agreement, against and in respect of
any and all liabilities, losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) arising out of or in connection
with or based upon the inaccuracy of any representation or warranty made by OCC
herein or the breach by OCC of any agreement or covenant made herein.
(c) This Section 8 shall survive the termination of
this Agreement and any repurchase pursuant to Section 3.
9. This Agreement shall be governed by and construed according
to the laws of the State of New York without regard to its choice of law rules,
irrespective of the forum in which any action or proceeding related to this
Agreement may be instituted.
10. This Agreement contains the entire understanding of the
parties and supersedes all previous verbal and written agreements; there are no
other agreements, representations or warranties not set forth herein.
11. The parties agree that any disputes or questions arising
hereunder, including the construction or application of this Agreement, shall be
settled by binding arbitration in New York, New York, in accordance with the
rules of the American Arbitration Association then in force. If the parties
cannot agree upon an arbitrator within ten (10) days after written demand by
either of them, either or both may request the American Arbitration Association
to name a panel of five (5) arbitrators. OCC and Davie shall each strike two (2)
names and the remaining name shall be the sole arbitrator. In the event either
party does not strike two names within five (5) days after receipt of the list,
the other party shall have the right to strike up to four (4) names until one
name remains. The decision of the arbitrator shall be final and binding upon the
parties both as to law and to fact, and judgment upon any awarded, which may
include an award of damages, may be entered by the highest State or Federal
Court having jurisdiction. Nothing contained herein shall in any way deprive OCC
or Davie of their right to obtain injunction or other equitable relief.
12. In the event any provision of this Agreement shall be
determined to be invalid or unenforceable by the laws of the State or place
where it is to be performed, this Agreement shall be considered divisible as to
such provision, and such provisions shall be inoperative and shall not be part
of the consideration moving from either party to the other, and the remaining
provisions of this Agreement shall be valid and binding and of like effect as
though such provisions were not included herein.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement
in multiple counterparts, each of which shall be considered and original.
OFFICE CENTRE CORPORATION
By: /s/ Robert J. Gillon, Jr.
---------------------------------
Robert J. Gillon, Jr.
/s/ John Davie
-------------------------------------
JOHN DAVIE
-5-
<PAGE> 1
EXHIBIT 10.13
AGREEMENT
AGREEMENT, dated as of April 15, 1998, between OFFICE CENTRE
CORPORATION, a Delaware corporation having its principal place of business at 38
East 32nd Street, New York, New York 10016 (the "Company") and WALTER
GORDENSTEIN, an individual residing at 208 Tanglewood Drive, Longmeadow,
Massachusetts 01106 (the "Shareholder").
W I T N E S S E T H:
--------------------
WHEREAS, on this date, the Shareholder is the owner of
1,847,608 shares of the Company's common stock, $.001 par value (the "Common
Stock");
WHEREAS, the Company intends to make an initial public
offering of shares of Common Stock (the "IPO") pursuant to the Securities Act of
1933, as amended (the "Securities Act"); and
WHEREAS, in order to facilitate the IPO and as an inducement
to the Company to pursue the IPO, the parties are entering into this Agreement
to establish various rights and obligations in connection with the transfer of
the Common Stock held by the Shareholder upon the terms and conditions herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants contained herein and for other good and valuable
consideration, receipt of which is hereby acknowledged, the parties agree as
follows:
1. RESTRICTIONS ON TRANSFER.
(a) At all times from the date hereof until the date of the
closing of the IPO (the "IPO Closing Date"), the Shareholder shall not directly
or indirectly sell, assign, pledge, hypothecate, give or transfer (each, a
"Transfer") any Common Stock to any person or entity.
(b) The Shareholder hereby agrees to execute and deliver any
"lock-up" agreement or other agreement restricting the transfer of his shares of
Common Stock as may be requested by the underwriters in connection with the IPO
(the "Lock-up Agreement") provided such Lock-up Agreement contains the same
terms and conditions as the Lock-up Agreements applicable to other founding
shareholders of the Company.
(c) From and after the date of termination of the Lock-up
Agreement (the "Lock-up Termination Date"), the Shareholder hereby agrees that
he shall not Transfer any shares of Common Stock that were subject to the
Lock-up Agreement (the "Lock-up Shares") except as follows:
<PAGE> 2
(i) From the date of the Lock-up Termination Date
through the date which is 6 months from the Lock-up Termination Date, the
Shareholder may Transfer up to 25% of the initial Lock-up Shares;
(ii) From the date which is 6 months from the Lock-up
Termination Date through the date which is 12 months from the Lock-up
Termination Date, the Shareholder may Transfer up to 25% of the Lock-up
Shares;
(iii) From the date which is 12 months from the
Lock-up Termination Date through the date which is 18 months from the Lock-up
Termination Date, the Shareholder may Transfer up to 25% of the Lock-up
Shares;
(iv) From the date which is 18 months from the
Lock-up Termination Date through the date which is 24 months from the Lock-up
Termination Date, the Shareholder may Transfer up to 25% of the Lock-up Shares;
and
(v) After the date which is 24 months after Lock-up
Termination Date, the Shareholder may Transfer up to 100% of the Lock-up Shares.
All transfers permitted pursuant to this Section 1(c) shall be made only (i) in
transactions which are exempt from registration under Section 5 of the
Securities Act (provided that the transferee agrees in writing to become a party
to the Agreement and to be bound by the restrictions contained herein); and (ii)
through brokerage transactions as defined in Rule 144(g) under the Securities
Act and, if required, otherwise in accordance with Rule 144 under the Securities
Act ("Rule 144").
(d) Notwithstanding anything contained in Section 1(a) or
Section 1(c) above to the contrary: (i) the Shareholder may Transfer the shares
of Common Stock to a family trust, family limited partnership or other similar
vehicle established and maintained by the Shareholder for tax and/or estate
planning purposes; provided, that as a condition to any such Transfer, the
transferee agrees in writing to be bound by the terms of this Agreement; and
(ii) Transfers of shares of Common Stock by the Shareholder made in accordance
with Section 1(c) above are subject to applicable federal and state securities
laws, including, without limitation, any applicable holding period, volume
limitation and other restrictions set forth in Rule 144.
(e) Any Transfer not expressly permitted by the terms and
provisions of this Agreement shall be void ab initio.
2. LEGEND. At all times during the term of this Agreement all
certificates representing shares of Common Stock owned by the Shareholder shall
have conspicuously written, stamped or printed thereon the following legend:
"THE SHARES OF STOCK REPRESENTED BY THIS
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<PAGE> 3
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MUST BE HELD INDEFINITELY UNLESS
SUBSEQUENTLY REGISTERED UNDER SAID ACT OR UNLESS AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. THE SALE, ASSIGNMENT,
PLEDGE, ENCUMBRANCE, GIFT OR OTHER TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF AN AGREEMENT, DATED AS OF APRIL 15, 1998, AMONG
THE CORPORATION AND CERTAIN HOLDERS OF SHARES OF THE STOCK OF
SUCH CORPORATION. SUCH AGREEMENT RESTRICTS TRANSFER OF THE
SHARES EVIDENCED BY THIS CERTIFICATE. COPIES OF SUCH AGREEMENT
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION."
3. SALE OF SHARES IN THE IPO. Except as hereinafter provided,
the Company shall include in the Registration Statement filed with respect to
the IPO up to 50% of the shares of Common Stock of the Company owned by the
Shareholder, which shares will be included in such Registration Statement at the
same price (and subject to the same underwriters' discounts and commissions) as
the shares of Common Stock sold by the Company, Clifford M. Davie and the Davie
IRA Trust in the IPO. Notwithstanding the foregoing, if the representative of
the underwriters for the IPO determines, in its sole and absolute discretion,
that, due to market or other conditions, the successful completion of the IPO
could be adversely affected by the inclusion in the IPO of all, or any portion
whatsoever, of the shares of Common Stock owned by the Shareholder, then the
Company shall reduce the percentage of the shares of Common Stock owned by the
Shareholder which are to be included in the IPO from 50% to such percentage
(which may be zero) as the representative of the underwriters so determines;
provided, however, in no event may such reduction result in Clifford M. Davie
and The Davie IRA Trust, in the aggregate, selling a higher percentage of his
shares of Common Stock in the IPO than the percentage sold by the Shareholder.
If shares of Common Stock of the Company are to be sold by the Shareholder in
the IPO: (i) the Shareholder shall cooperate with the Company and the
underwriters selected by the Company for the IPO in the preparation of the
Registration Statement, to the extent reasonably requested by the Company, the
underwriters or their representative; (ii) the Shareholder promptly shall
provide the Company and the underwriters with information about himself for
inclusion in the Registration Statement; (iii) the Shareholder shall execute an
underwriting agreement with the underwriters, in substantially the form
attached, with respect to the sale of his shares in the IPO; and (iv) the
Shareholder shall pay his proportionate share of the IPO expenses (including,
without limitation, the Company's legal and accounting fees, printing expenses
and blue sky fees and expenses) on the basis of the number of shares he sells in
the IPO as compared with the total number of shares sold
-3-
<PAGE> 4
in the IPO. The Shareholder shall be solely responsible for the fees of any
counsel retained by the Shareholder in connection with the Registration
Statement and any transfer taxes or underwriting discounts, commissions or fees
applicable to the shares sold by the Shareholder pursuant thereto.
4. NONCOMPETITION; CONFIDENTIALITY.
(a) For and in consideration of the agreements of the Company
set forth herein, the Shareholder agrees that he will not, for a period of five
years beginning on the date hereof (the "Non-Competition Term"), directly or
indirectly, own, manage, operate, join, control, be employed by, or participate
in the ownership, management, operation or control, or be connected in any
manner (including, but not limited to, holding the positions of stockholder
(excepting less than 1% stock holdings for investment purposes in securities of
publicly held and traded companies), member, director, officer, consultant,
independent contractor, employee, partner or investor) with, any person or
entity engaged in a business or operation in the United States of America,
Canada or Europe which operates any office products distribution business(es)
and/or office products buying group(s) or is a consolidator of any of the
foregoing businesses. The Shareholder agrees that, during the Non-Competition
Term, he will not interfere with the Company's or its subsidiaries' relationship
with, or endeavor to employ or entice away from the Company or any of its
subsidiaries, any person or entity who or which is an employee, customer or
supplier, or maintains a business relationship with, the Company or any of its
subsidiaries.
(b) The Shareholder agrees and understands that given his
positions with the Company and its subsidiaries, the Shareholder has been
exposed to and has received information relating to the confidential affairs of
the Company and its subsidiaries, including, but not limited to, business and
marketing plans, strategies, customer information, other information concerning
the products, promotions, development, financing, expansion plans, business
policies and practices, and other forms of information considered by the Company
and its subsidiaries to be confidential and in the nature of trade secrets. The
Shareholder agrees that, during the Non-Competition Term and thereafter, he will
keep such information confidential and not disclose such information, either
directly or indirectly, to any person or entity without the prior written
consent of the Company, unless required to do so by law or court order and then
only to the extent so required. This confidentiality covenant has no temporal,
geographical or territorial restriction. Upon the request to the Company, the
Shareholder promptly will supply to the Company, all property, keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence,
tapes, disks, cards, surveys, maps, logs, technical data or any documents
relating to the Company, its subsidiaries or their respective businesses which
have been produced by, received by or otherwise submitted to the Shareholder
during or prior to the Non-Competition Term.
-4-
<PAGE> 5
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The
Shareholder hereby represents and warrants to the Company as follows:
(a) The Shareholder has the legal capacity to execute, deliver
and perform this Agreement. This Agreement constitutes the legal, valid and
binding obligation of the Shareholder, enforceable against the Shareholder in
accordance with its terms.
(b) Neither the execution and delivery by the Shareholder of
this Agreement nor the performance by the Shareholder of his obligations
hereunder will (i) violate, be in conflict with, require the consent of any
other party to, or constitute a breach of, any contract, agreement, arrangement
or understanding to which the Shareholder is a party or is otherwise bound, or
(ii) violate or conflict with, any law or any judgment, decree or order of any
governmental authority to which the Shareholder may be subject or bound.
(c) As of the date hereof, the Shareholder owns of record and
beneficially 1,847,608 shares of Common Stock and no other shares of common
stock of the Company, and such shares of Common Stock are owned free and clear
of any lien, encumbrance, pledge or restriction other than the restrictions
imposed on the Common Stock by this Agreement or under the Company's charter or
bylaws. As of the date hereof, the Shareholder has no options, warrants,
subscriptions, calls, preemptive or any other rights whatsoever for the purchase
or receipt of capital stock of the Company.
6. TERMINATION. This Agreement shall terminate upon the
earlier of (i) the mutual agreement of the parties hereto or (ii) December 31,
1998, if the IPO is not consummated by such date, whereupon all obligations of
the parties under this Agreement shall terminate.
7. RELEASE AND INDEMNITY.
(a) For and in consideration of the agreements of the Company
set forth herein, Shareholder hereby releases and forever discharges the Company
and its subsidiaries (now and in the future) and their respective affiliates,
absolutely and forever, of and from any and all direct or indirect liabilities,
claims, losses, damages, costs, expenses, deficiencies, obligations,
responsibilities, demands, benefits, accounts, liens, rights of action, claims
for relief, and causes of action, of every nature and kind whatsoever, in law
and in equity, known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise (collectively, "Claims"), which the Shareholder had, has, or may
have against any of them for, upon or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the date hereof other than the
rights of Shareholder arising under (i) this Agreement; or (ii) the Employment
Agreement of even date between Shareholder and the Company (the "Employment
Agreement").
-5-
<PAGE> 6
(b) For an in consideration of the agreements of Shareholder
set forth herein, the Company and its subsidiaries (the "Company Releasors"),
hereby release and forever discharge Shareholder (now and in the future) and his
heirs and estate, absolutely and forever, of and from any and all Claims, which
they and their affiliates had, have, or may have against the Shareholder and his
heirs and estate for, upon or by reason of any matter, cause or thing whatsoever
from the beginning of the world to the date hereof other than (i) the rights of
the Company or its subsidiaries arising under this Agreement; (ii) the rights of
the Company under the Employment Agreement; or (iii) embezzlement, fraud,
wrongful taking or misappropriation of property, theft or any other crime
involving dishonesty.
(c) Each party hereby represents that he or it has not
transferred, conveyed or assigned any Claim or any portion thereof or interest
therein. Each party further represents that in executing this release it or he
has not relied upon any representation or statement made by any other party with
regard to the subject matter, basis or effect of this release, except such
representations as are set forth in this Agreement.
8. INDEMNIFICATION. In the event the Shareholder breaches any
of the representations or warranties set forth in Section 5 above, then the
Shareholder shall indemnify the Company from and against the entirety of any
loss, liability or expense (including reasonable attorneys' fees) the Company
may suffer or incur resulting from, arising out of, relating to, in the nature
of or caused by the breach. In the event the Company breaches any of the
representations or warranties set forth in this Agreement, then the Company
shall indemnify the Shareholder from and against the entirety of any loss,
liability or expense (including reasonable attorneys' fees) the Shareholder may
suffer or incur resulting from, arising out of, relating to, in the nature of or
caused by the breach.
9. INJUNCTIVE RELIEF. The Shareholder acknowledges that any
breach or imminent breach by the Shareholder of the covenants, terms or
provisions of this Agreement (other than the representations and warranties set
forth in SECTION 5 above) may cause irreparable injury and harm to the Company,
and that remedies at law for the breach or imminent breach may be inadequate.
Accordingly, in the event of a breach hereof by the Shareholder, or in the event
that the Company, in good faith and upon reasonable cause, determines that a
breach hereof appears imminent, the Company shall be entitled to obtain specific
performance, temporary and permanent injunctive relief and such other relief to
which it may be entitled at law or in equity without the necessity of posting
bond or of proving actual damage. The Company shall be entitled to recover all
reasonable costs and attorneys' fees incurred by it in the event it is
successful in obtaining any such relief. In the event that the Company is
unsuccessful in obtaining any relief under this section, then the Company shall
reimburse the Shareholder for his reasonable costs and attorneys' fees incurred
in defense of such action.
-6-
<PAGE> 7
10. MISCELLANEOUS.
(a) This Agreement may not be amended, modified, supplemented
or waived except by a written instrument signed by either of the parties hereto
(or, in the case of a waiver, by the party granting such waiver). No waiver of
any of the terms or provisions of this Agreement shall be deemed to be or shall
constitute a waiver of any other term or provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver. No failure of a
party hereto to insist upon strict compliance by another party hereto with any
obligation, covenant, agreement or condition contained in this Agreement shall
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
(b) All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and mailed or
facsimiled or delivered by hand or courier service to the appropriate address
set forth in the preamble hereto. All notices and other communications required
or permitted under this Agreement which are addressed as provided herein (i) if
delivered personally against proper receipt or by confirmed facsimile
transmission shall be effective upon delivery and (ii) if delivered (A) by
certified or registered mail with postage prepaid shall be effective five
business days or (B) by Federal Express or similar courier service with courier
fees paid by the sender, shall be effective two business days following the date
when mailed or couriered, as the case may be. Either party hereto may from time
to time change its address for the purpose of notices to such party by a similar
notice specifying a new address, but no such change shall be deemed to have been
given until it is actually received by the party sought to be charged with its
contents.
(c) This Agreement may not be assigned by the Shareholder
without the prior written consent of the Company. This Agreement shall be
binding upon the heirs, personal representatives, successors, assigns and
affiliates of each party hereto.
-7-
<PAGE> 8
(d) This Agreement shall be governed by the laws of the State
of New York, without giving effect to the conflicts of laws principles thereof.
Each party to this Agreement hereby irrevocably submits to the exclusive
jurisdiction of any New York State or Federal Court sitting or located in the
County of New York (a "New York Court") in any action arising out of or relating
to this Agreement, and each such party hereby irrevocably agrees that all claims
in respect of such action shall be heard and determined in such New York Court.
Each party, to the extent permitted by applicable laws, hereby expressly waives
any defense or objection to jurisdiction or venue based on the doctrine of FORUM
NON CONVENIENS, and stipulates that any New York Court shall have IN PERSONAM
jurisdiction and venue over such party for the purpose of litigating any dispute
or controversy between the parties arising out of or related to this Agreement.
In the event any party shall commence or maintain any action arising out of or
related to this Agreement in a forum other than a New York Court, the other
party shall be entitled to request the dismissal or stay of such action, and
each such party stipulates for itself that such action shall be dismissed or
stayed. To the extent that any party to this Agreement has or hereafter may
acquire any immunity from jurisdiction of any New York Court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, each such party hereby irrevocably waives such immunity. Each party
irrevocably consents to the service of process of any of the New York Courts in
any such action by any means permitted by the rules applicable in such New York
Court.
(e) This Agreement embodies the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, commitments, arrangements, negotiations or
understandings, whether oral or written, between the parties hereto. There are
no agreements, covenants or undertakings with respect to the subject matter of
this Agreement other than those expressly set forth or referred to herein.
(f) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which, when
taken together, shall constitute one and the same instrument.
(g) In case any one or more of the provisions contained in
this Agreement shall be adjudged invalid, illegal or unenforceable by a New York
Court of competent jurisdiction, such invalidity, illegality or unenforceability
shall be limited to such provisions and the remainder of this Agreement shall be
valid and binding upon the Company and the Shareholder; provided, however, that
in the event a particular provision of this Agreement is determined to be
unreasonable by such New York Court, the parties agree to use their best efforts
to reform that provision in such a manner so as to preserve as closely as
possible the original intent of the parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
OFFICE CENTRE CORPORATION
By: /s/R.J. Gillon, Jr.
-------------------------------------
Robert J. Gillon, Jr.
/s/Walter Gordenstein
----------------------------------------
Walter Gordenstein
<PAGE> 1
EXHIBIT 10.14
AMENDMENT NO. 1 TO AGREEMENT
AMENDMENT, dated as of May 14, 1998, by and between Office
Centre Corporation, a Delaware corporation (the "Company"), and Walter
Gordenstein (the "Shareholder").
W I T N E S S E T H :
---------------------
WHEREAS, the Company and the Shareholder are parties to that
certain agreement, dated as of April 15, 1998 (the "Original Agreement"); and
WHEREAS, the parties desire to amend the Original Agreement in
accordance with the terms set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. SECTION 3. Section 3 to the Original Agreement is
hereby deleted in its entirety and replaced with the following:
"3. SALE OF SHARES IN THE IPO.
(a) Except as hereinafter provided, the Company shall
include in the Registration Statement filed with respect to
the IPO 225,000 shares of Common Stock of the Company owned by
the Shareholder (after giving effect to any reverse stock
split), which shares will be included in such Registration
Statement at the same price (and subject to the same
underwriters' discounts and commissions) as the shares of
Common Stock sold by the Company, Clifford M. Davie and the
Davie IRA Trust in the IPO. Notwithstanding the foregoing, if
the representative of the lead managing underwriter for the
IPO determines, in its sole and absolute discretion, that, due
to market or other conditions, the successful completion of
the IPO could be adversely affected by the inclusion in the
IPO of all, or any portion whatsoever, of the shares of Common
Stock owned by the Shareholder, then the Company shall reduce
the number shares of Common Stock owned by the Shareholder
which are to be included in the IPO (which may be zero) as the
representative of the underwriters so determines; provided,
however, in no event may such reduction result in Clifford M.
Davie and The Davie IRA Trust, in the aggregate, selling a
higher percentage of his shares of Common Stock in the IPO
than the percentage sold by the Shareholder. In addition, to
cover over-
<PAGE> 2
allotments, the Shareholder shall grant the underwriters in
the IPO options to purchase such number of shares of Common
Stock owned by the Shareholder as may be requested by the
underwriters; provided, that in no event shall the total
number of shares of Common Stock sold by the Shareholder in
IPO (whether in the offering or to cover over-allotments)
exceed 80% of the total number of shares of Common Stock owned
by the Shareholder on the date hereof (after giving effect to
any reverse stock split). If shares of Common Stock of the
Company are to be sold by the Shareholder in the IPO: (i) the
Shareholder shall cooperate with the Company and the
underwriters selected by the Company for the IPO in the
preparation of the Registration Statement, to the extent
reasonably requested by the Company, the underwriters or their
representative; (ii) the Shareholder promptly shall provide
the Company and the underwriters with information about
himself for inclusion in the Registration Statement; (iii) the
Shareholder shall execute an underwriting agreement with the
underwriters, in substantially the form attached, with respect
to the sale of his shares in the IPO; and (iv) the Shareholder
shall pay (in addition to the underwriters' discounts and
commissions with respect to shares of Common Stock sold by him
in the IPO) all incremental expenses related to the
preparation and filing of the Company's Registration Statement
on Form S-1 (including any amendments thereto) and the sale of
Common Stock thereunder (including, without limitation, SEC
registration and NASD filing fees and expenses) which are
attributable to the inclusion of the shares of Common Stock to
be sold by the Shareholders in the IPO. The Shareholder shall
be solely responsible for the fees of any counsel retained by
the Shareholder in connection with the Registration Statement
and any transfer taxes or underwriting discounts, commissions
or fees applicable to the shares sold by the Shareholder
pursuant thereto.
(b) Notwithstanding anything contained herein to the
contrary, without the consent of the Shareholder, the Company
shall not complete an IPO in which (i) the portion of the IPO
Valuation attributable to the shares of Common Stock owned by
the Founding Shareholders (as hereinafter defined) at the time
the IPO is less than $10 million; or (ii) the percentage of
the outstanding shares owned by the Shareholder after giving
effect to the IPO, but before giving effect to any sale by the
Shareholder of shares in the IPO, is less than the applicable
percentage of shares set forth opposite the name of the
Shareholder as set forth on Schedule 1 hereto, as such
schedule may be modified to reflect immaterial changes in the
number of shares to be issued to the "Founding Companies" as
set forth on such schedule. All such shares sold by the
Shareholder in the IPO shall be
<PAGE> 3
at the IPO price (subject to underwriters' discounts and
commissions). For purposes of this Section 3, the term (i)
"IPO Valuation" shall mean the product of (1) the number of
shares of the Company outstanding immediately after the IPO,
multiplied by (2) the IPO price per share; and (ii) Founding
Shareholders mean those shareholders who on the date hereof
own all of the outstanding shares of the Company Common Stock
(i.e., the Shareholder, Clifford Davie, the Davie IRA Trust,
John Kaweske, John Davie and Joseph Hajjar). At the request of
the Company, the Shareholder shall sell in the IPO the number
of shares of Common Stock of the Company which they are
permitted to sell under this Section 3 at the IPO price
(subject to underwriters' discounts and commissions)."
2. The Company hereby agrees to reimburse the Shareholder
(upon presentation of invoices) for all reasonable attorney's fees and expenses
incurred in connection with the Shareholder's negotiations with the Company up
to a maximum of $35,000.
3. The Company hereby represents to the Shareholder that it
has not made any payments to Clifford Davie in connection with the IPO except as
disclosed in the Company's Prospectus.
4. The Original Agreement, as hereby amended, shall remain in
full force and effect.
5. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which counterparts together shall constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered
this instrument as of the date and year first above written.
OFFICE CENTRE CORPORATION
By: /s/R.J. Gillon, Jr.
--------------------------
Robert J. Gillon, Jr.
/s/Walter Gordenstein
--------------------------
Walter Gordenstein
<PAGE> 1
EXHIBIT 10.15
AGREEMENT
AGREEMENT, dated as of May 13, 1998, between OFFICE CENTRE
CORPORATION, a Delaware corporation having its principal place of business at 38
East 32nd Street, New York, New York 10016 (the "Company"), DEAN WITTER
REYNOLDS, INC., CUSTODIAN FOR THE IRA ROLLOVER OF CLIFFORD M. DAVIE DTD 12/15/94
(the "IRA"), and CLIFFORD M. DAVIE, an individual residing at 20 Royal Palm Way,
Unit 103, Boca Raton, Florida 33432 ("Davie" and, together with the IRA and any
heirs, personal representatives, successors and assigns to the extent provided
for herein, the "Shareholders").
W I T N E S S E T H:
--------------------
WHEREAS, on this date, Davie and the IRA together are the
owners of 2,650,336 shares of the Company's common stock, $.001 par value (the
"Common Stock");
WHEREAS, the Company intends to make an initial public
offering of shares of Common Stock (the "IPO") pursuant to the Securities Act of
1933, as amended (the "Securities Act"); and
WHEREAS, in order to facilitate the IPO and as an inducement
to the Company to pursue the IPO, the parties are entering into this Agreement
to establish various rights and obligations in connection with the transfer of
the Common Stock held by the Shareholders upon the terms and conditions herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants contained herein and for other good and valuable
consideration, receipt of which is hereby acknowledged, the parties agree as
follows:
1. TERMINATION OF AGREEMENTS.
(a) Effective immediately, that certain agreement, dated
January 15, 1998, among the Company, Davie, Robert J. Gillon and John Kaweske
regarding certain restrictions on transferability and voting of shares of Common
Stock is hereby terminated and is of no further force or effect.
(b) Effective immediately, that certain letter agreement,
dated January 15, 1998, between Davie and the Company regarding Davie's ability
to transfer shares of Common Stock (the "January 15 Letter Agreement") is hereby
terminated and is of no further force or effect.
(c) Effective on the date of the closing of the IPO (the "IPO
Closing Date"), that certain employment/consulting agreement, dated July 20,
1995 (the "Employment Agreement"), among Davie, Buying Group Services, Inc., UDI
Corp. and UDI II Corp. shall be terminated and be of no further force or effect;
provided, however, that in the event that the Shareholders do not
<PAGE> 2
receive at least $1.5 million in gross proceeds from the sale of their shares of
Common Stock of the Company in the IPO, the Employment Agreement will be
reinstated and remain in effect until the Lock-up Termination Date, on which
date the Employment Agreement shall terminate.
2. RESIGNATION. Effective immediately, Davie hereby resigns
from the Board of Directors of the Company and all subsidiaries of the Company.
Davie agrees that he shall not serve on the Board of Directors of the Company or
any of its subsidiaries during the term of this Agreement. Effective
immediately, Davie also resigns from any and all offices he may hold with the
Company or any of its subsidiaries.
3. RESTRICTIONS ON TRANSFER.
(a) At all times from the date hereof until the IPO Closing
Date, the Shareholders shall not directly or indirectly sell, assign, pledge,
hypothecate, give or transfer (each, a "Transfer") any Common Stock to any
person or entity.
(b) The Shareholders hereby agree to execute and deliver any
"lock-up" agreement or other agreement as requested by the underwriters in the
IPO restricting the transfer of their shares of Common Stock for a period of 180
days (the "Lock-up Agreement") provided such Lock-up Agreement contains the same
terms and conditions as the Lock-up Agreements applicable to other founding
shareholders of the Company.
(c) From and after the date of termination of the Lock-up
Agreement (the "Lock-up Termination Date"), the Shareholders hereby agree that
they shall not Transfer any shares of Common Stock subject to the Lock-up
Agreement (the "Lock-up Shares") except as follows:
(i) From the Lock-up Termination Date through the
date which is 6 months from the Lock-up Termination Date, the Shareholders may
Transfer 25% of the Lock-up Shares;
(ii) From the date which is 6 months from the Lock-up
Termination Date through the date which is 12 months from the Lock-up T
ermination Date, the Shareholders may Transfer 25% of the Lock-up Shares;
(iii) From the date which is 12 months from the
Lock-up Termination Date through the date which is 18 months from the Lock-up
Termination Date, the Shareholders may Transfer 25% of the Lock-upShares;
(iv) From the date which is 18 months from the
Lock-up Termination Date through the date which is 24 months from the Lock-up
Termination Date, the Shareholders may Transfer 25% of the Lock-up Shares; and
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<PAGE> 3
(v) After the date which is 24 months after Lock-up
Termination Date, the Shareholders may Transfer 100% of the Lock-up Shares.
All transfers permitted pursuant to this SECTION 3(c) shall be made only through
brokers' transactions as defined in Rule 144(g) under the Securities Act.
(d) Notwithstanding anything contained in SECTION 3(a) OR
SECTION 3(c) above to the contrary: (i) the Shareholders may Transfer the shares
of Common Stock to each other or to a family trust, family limited partnership
or other similar vehicle established and maintained by the Shareholder for tax
and/or estate planning purposes; provided, that as a condition to any such
Transfer, the transferee agrees in writing to be bound by the terms of this
Agreement; and (ii) Transfers of shares of Common Stock by the Shareholders are
subject to applicable federal and state securities laws, including, without
limitation, the holding period and volume limitation restrictions set forth in
Rule 144 of the Securities Act.
(e) Any Transfer not expressly permitted by the terms and
provisions of this Agreement shall be void AB INITIO.
4. LEGEND. At all times during the term of this Agreement all
certificates representing shares of Common Stock owned by the Shareholders shall
have conspicuously written, stamped or printed thereon substantially the
following legend:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MUST BE HELD INDEFINITELY UNLESS SUBSEQUENTLY REGISTERED
UNDER SAID ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE. THE SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE, GIFT
OR OTHER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF AN AGREEMENT, DATED AS
OF APRIL 15, 1998, AMONG THE CORPORATION AND CERTAIN HOLDERS
OF SHARES OF THE STOCK OF SUCH CORPORATION. SUCH AGREEMENT
RESTRICTS TRANSFER OF THE SHARES EVIDENCED BY THIS
CERTIFICATE. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION."
5. VOTING. At all times from the IPO Closing Date through
December 31, 2002,
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<PAGE> 4
in respect of all questions and matters (including the
election of directors) upon which the shareholders of the Company have a right
to vote under the Certificate of Incorporation or By-laws of the Company or
under the laws of the State of Delaware, the Shareholders shall vote all Common
Stock owned or held of record by them and shall cause all Common Stock of which
they are the beneficial owner, as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, to be voted in the same proportion as the
votes cast by holders of common stock of the Company other than the Shareholders
in respect of such questions and matters. In order to effectuate the foregoing,
the Shareholders hereby appoint the President and the Chairman of the Board of
the Company, and each of them, as their duly authorized proxy to vote all shares
of the Common Stock held by the Shareholders at any meeting of stockholders
(including any action to be taken by the consent of stockholders) in accordance
with the foregoing provisions. The provisions of this Section 5 represent a
power coupled with an interest, and this proxy is irrevocable.
6. OTHER COVENANTS. At all times from the IPO Closing Date
through December 31, 2002, the Shareholders shall not:
(a) acquire, offer to acquire or agree to acquire, directly or
indirectly, alone or in concert with others, beneficially or of record, by
purchase or otherwise, alone or in concert with others, any capital stock of the
Company, any securities convertible into capital stock of the Company, any
warrants or options to purchase capital stock of the Company, or any debt
instruments of the Company;
(b) nominate, or in any way participate, directly or
indirectly, alone or in concert with others, in any nomination of any director
of the Company or any subsidiary or seek to advise or influence any person or
entity with respect to the nomination of any director;
(c) make, or in any way participate, directly or indirectly,
alone or in concert with others, in any "solicitation" of "proxies" (as such
terms are used in the proxy rules of the Securities and Exchange Commission) or
seek to advise or influence any person or entity with respect to the voting or
acquisition of any securities of the Company;
(d) in any way participate in, or seek to control or
influence, directly or indirectly, alone or in concert with others, the
management or operations of the Company or any of its subsidiaries, including,
without limitation, holding any position as director, officer, consultant,
advisor, representative or agent of the Company or any of its subsidiaries;
(e) directly or indirectly, alone or in concert with others,
encourage, initiate, solicit or participate in, any inquiries or proposals or
engage in any discussions or negotiations, concerning any of the foregoing; or
(f) agree to do any of the foregoing.
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<PAGE> 5
7. SALE OF SHARES IN THE IPO.
(a) Except as hereinafter provided, the Company shall include
in the Registration Statement filed with respect to the IPO 200,000 shares of
Common Stock of the Company owned by the Shareholders (after giving effect to
any reverse stock split of the Company's shares). Notwithstanding the foregoing,
but subject to Section 7(b) below, if the representative of the lead managing
underwriter for the IPO determines, in its sole and absolute discretion, that,
due to market or other conditions, the successful completion of the IPO could be
adversely affected by the inclusion in the IPO of all, or any portion
whatsoever, of the shares of Common Stock owned by the Shareholder, then the
Company shall reduce the number of shares of Common Stock owned by the
Shareholder which are to be included in the IPO (which may be zero) as the
representative of the lead managing underwriter so determines.
(b) Notwithstanding anything contained herein to the contrary,
without the consent of Davie, the Company shall not complete an IPO in which (i)
the portion of the IPO Valuation attributable to the shares of Common Stock
owned by the Founding Shareholders (as hereinafter defined) at the time the IPO
is less than $10 million; or (ii) the percentage of the outstanding shares owned
by the Shareholders after giving effect to the IPO, but before giving effect to
any sale by the Shareholders of shares in the IPO, is less than the applicable
percentage of shares set forth opposite the name of the Shareholders as set
forth on Schedule 1 hereto, as such schedule may be modified to reflect
immaterial changes in the number of shares to be issued to the "Founding
Companies" as set forth on such schedule. All such shares sold by the
Shareholders in the IPO shall be at the IPO price (subject to underwriters'
discounts and commissions). For purposes of this Section 7, the term (i) "IPO
Valuation" shall mean the product of (1) the number of shares of the Company
outstanding immediately after the IPO, multiplied by (2) the IPO price per
share; and (ii) Founding Shareholders mean those shareholders who on the date
hereof own all of the outstanding shares of the Company Common Stock (i.e., the
Shareholders, Walter Gordenstein, John Kaweske, John Davie and Joseph Hajjar).
At the request of the Company, the Shareholders shall sell in the IPO the number
of shares of Common Stock of the Company which they are permitted to sell under
this Section 7 at the IPO price (subject to underwriters' discounts and
commissions).
(c) If shares of Common Stock of the Company are to be sold by
the Shareholders in the IPO: (i) the Company shall include such shares in the
Registration Statement filed with respect to the IPO; (ii) the Shareholders
shall cooperate with the Company and the underwriters selected by the Company
for the IPO in the preparation of the Registration Statement to the extent
reasonably requested by the Company, the underwriters, or their representatives;
(iii) the Shareholders promptly shall provide the Company and the underwriters
with information about themselves for inclusion in the Registration Statement;
(iv) the Shareholders shall execute an underwriting agreement with the
underwriters, in form reasonably acceptable to the parties, with respect to the
sale of their shares in the IPO; and (v) the Shareholders shall pay (in addition
to the underwriters' discounts and commissions with respect to shares of Common
Stock sold by them in
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<PAGE> 6
the IPO) all incremental expenses related to the preparation and filing of the
Company's Registration Statement on Form S-1 (including any amendments thereto)
and the sale of Common Stock thereunder (including, without limitation, SEC
registration and NASD filing fees and expenses) which are attributable to the
inclusion of the shares of Common Stock to be sold by the Shareholders in the
IPO. The Shareholders shall be solely responsible for the fees of any counsel
retained by the Shareholders in connection with the Registration Statement and
any transfer taxes or underwriting discounts, commissions or fees applicable to
the shares sold by the Shareholders pursuant thereto.
8. NONCOMPETITION; CONFIDENTIALITY.
(a) For and in consideration of the agreements of the Company
set forth herein, Davie agrees that he will not, for a period of five years
beginning on the date hereof (the "Non-Competition Term"), directly or
indirectly, own, manage, operate, join, control, be employed by, or participate
in the ownership, management, operation or control, or be connected in any
manner (including, but not limited to, holding the positions of stockholder
(excepting less than 1% stock holdings for investment purposes in securities of
publicly held and traded companies), member, director, officer, consultant,
independent contractor, employee, partner or investor) with, any person or
entity engaged in a business or operation in the United States of America,
Canada or Europe which operates any office products distribution business(es)
and/or office products buying group(s) or is a consolidator of any of the
foregoing businesses. Davie agrees that, during the Non-Competition Term, he
will not interfere with the Company's or its subsidiaries' relationship with, or
endeavor to employ or entice away from the Company or any of its subsidiaries,
any person or entity who or which is an employee, customer or supplier, or
maintains a business relationship with, the Company or any of its subsidiaries.
(b) Davie agrees and understands that given his positions with
the Company and its subsidiaries, Davie has been exposed to and has received
information relating to the confidential affairs of the Company and its
subsidiaries, including, but not limited to, business and marketing plans,
strategies, customer information, other information concerning the products,
promotions, development, financing, expansion plans, business policies and
practices, and other forms of information considered by the Company and its
subsidiaries to be confidential and in the nature of trade secrets. Davie agrees
that, during the Non-Competition Term and thereafter, he will keep such
information confidential and not disclose such information, either directly or
indirectly, to any person or entity without the prior written consent of the
Company, unless required to do so by law or court order. This confidentiality
covenant has no temporal, geographical or territorial restriction. Upon the
request to the Company, Davie promptly will supply to the Company, all property,
keys, notes, memoranda, writings, lists, files, reports, customer lists,
correspondence, tapes, disks, cards, surveys, maps, logs, technical data or any
documents relating to the Company, its subsidiaries or their respective
businesses which have been produced by, received by or otherwise submitted to
Davie during or prior to the Non-Competition Term.
-6-
<PAGE> 7
9. RELEASE.
(a) For and in consideration of the agreements of the Company
set forth herein, Davie and the IRA, as a shareholder, resigning
employee/consultant and/or resigning director of the Company or its subsidiaries
(the "Davie Releasors"), hereby release and forever discharge the Company and
its subsidiaries (now and in the future) (the "Davie Released Parties") and
their respective affiliates, absolutely and forever, of and from any and all
direct or indirect liabilities, claims, losses, damages, costs, expenses,
deficiencies, obligations, responsibilities, demands, benefits, accounts, liens,
rights of action, claims for relief, and causes of action, of every nature and
kind whatsoever, in law and in equity, known or unknown, fixed or unfixed,
choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, contingent or otherwise ("Davie Claims"), which the Davie Releasors
and their affiliates had, have, or may have against any Davie Released Party
and/or his or its affiliates for, upon or by reason of any matter, cause or
thing whatsoever from the beginning of the world to the date hereof other than
the rights of Davie and the IRA arising under this Agreement.
(b) For and in consideration of the agreements of Davie and
the IRA set forth herein, the Company and its subsidiaries (the "Company
Releasors"), hereby release and forever discharge Davie and the IRA (now and in
the future) (the "Company Released Parties") and their affiliates, absolutely
and forever, of and from any and all direct or indirect liabilities, claims,
losses, damages, costs, expenses, deficiencies, obligations, responsibilities,
demands, benefits, accounts, liens, rights of action, claims for relief, and
causes of action, of every nature and kind whatsoever, in law and in equity,
known or unknown, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise
("Company Claims"), which the Company Releasors and their affiliates had, have,
or may have against any Company Released Party and/or his or its affiliates for,
upon or by reason of any matter, cause or thing whatsoever from the beginning of
the world to the date hereof other than (i) the rights of the Company or its
subsidiaries arising under this Agreement; (ii) the rights of the Company under
the Stock Purchase Agreements dated as of May 23, 1997 between the Company, the
IRA and Walter Gordenstein relating to UDI Corp. and UDI II Corp.; and (iii)
actions taken by the Company Released Parties on behalf of the Company or any of
its subsidiaries which were not authorized by appropriate corporate action.
Notwithstanding the foregoing, Davie and the IRA agree to provide to the Company
Releasors all information about them and their affiliates which the Company
determines is necessary for inclusion in a Registration Statement.
(c) Each Davie Releasor and Company Releasor hereby represents
that he or it has not transferred, conveyed or assigned any Davie Claim or
Company Claim or any portion thereof or interest therein. Each Davie Releasor
and Company Releasor further represents that in executing this release it or he
has not relied upon any representation or statement made by any Davie Released
Party, Company Released Party, or its or his affiliates with regard to the
subject matter, basis or effect of this release, except such representations as
are set forth in this Agreement.
-7-
<PAGE> 8
10. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Each of
the Shareholders hereby represents and warrants to the Company as follows:
(a) Each Shareholder has the legal capacity to execute,
deliver and perform this Agreement. The trustee of the IRA has the legal trust
power and authority to execute this Agreement and the IRA has taken all actions
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement constitutes the legal, valid and binding obligation of
each Shareholder, enforceable against each Shareholder in accordance with its
terms.
(b) Neither the execution and delivery by each Shareholder of
this Agreement nor the performance by such Shareholder of his obligations
hereunder will (i) violate, be in conflict with, require the consent of any
other party to, or constitute a breach of, any contract, agreement, arrangement
or understanding to which such Shareholder is a party or is otherwise bound, or
(ii) violate or conflict with, any law or any judgment, decree or order of any
governmental authority to which such Shareholder may be subject or bound.
(c) As of the date hereof, Davie and the IRA together own of
record and beneficially 2,650,336 shares of Common Stock and no other shares of
common stock of the Company, and all such shares of Common Stock are owned free
and clear of any lien, encumbrance, pledge or other restriction other than the
restrictions imposed upon the Common Stock by this Agreement. As of the date
hereof, neither Shareholder has any options, warrants, subscriptions, calls,
preemptive or any other rights whatsoever for the purchase or receipt of capital
stock of the Company. Davie or the IRA has the sole voting power over all such
Common Stock and there are no proxies, voting trusts or other agreements or
understandings to which Davie or the IRA is a party or bound or that requires
that his or its Common Stock be voted in any specific manner other than as set
forth in this Agreement.
11. TERMINATION. This Agreement shall terminate upon the
earlier of
(a) the mutual agreement of the parties hereto; or
(b) December 31, 1998, if the IPO is not consummated by such
date.
If this Agreement is terminated pursuant to this SECTION 11, then
notwithstanding anything contained herein to the contrary, all obligations of
the Shareholders and the Company under this Agreement shall terminate.
12. INDEMNIFICATION. In the event a Shareholder breaches any
of the representations or warranties set forth in SECTION 10 above, then such
Shareholder shall indemnify the Company from and against the entirety of any
loss, liability or expense (including reasonable attorneys' fees) the Company
may suffer or incur resulting from, arising out of, relating to, in the
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<PAGE> 9
nature of or caused by the breach.
13. INJUNCTIVE RELIEF. Each Shareholder acknowledges that any
breach or imminent breach by a Shareholder of the covenants, terms or provisions
of this Agreement (other than the representations and warranties set forth in
SECTION 10 above) may cause irreparable injury and harm to the Company, and that
remedies at law for the breach or imminent breach may be inadequate.
Accordingly, in the event of a breach hereof by a Shareholder, or in the event
that the Company, in good faith and upon reasonable cause, determines that a
breach hereof appears imminent, the Company shall be entitled to obtain specific
performance, temporary and permanent injunctive relief and such other relief to
which it may be entitled at law or in equity without the necessity of posting
bond or of proving actual damage. The Company shall be entitled to recover all
reasonable costs and attorneys' fees incurred by it in the event it is
successful in obtaining any such relief. In the event that the Company is
unsuccessful in obtaining any relief under this section, then the Company shall
reimburse the Shareholder for his or its reasonable costs and attorneys' fees
incurred in defense of such action.
14. MISCELLANEOUS.
(a) This Agreement may not be amended, modified, supplemented
or waived except by a written instrument signed by all of the parties hereto
(or, in the case of a waiver, by the party granting such waiver). No waiver of
any of the terms or provisions of this Agreement shall be deemed to be or shall
constitute a waiver of any other term or provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver. No failure of a
party hereto to insist upon strict compliance by another party hereto with any
obligation, covenant, agreement or condition contained in this Agreement shall
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
(b) All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and mailed or
facsimiled or delivered by hand or courier service to the appropriate address
set forth in the preamble hereto. All notices and other communications required
or permitted under this Agreement which are addressed as provided herein (i) if
delivered personally against proper receipt or by confirmed facsimile
transmission shall be effective upon delivery and (ii) if delivered (A) by
certified or registered mail with postage prepaid shall be effective five
business days or (B) by Federal Express or similar courier service with courier
fees paid by the sender, shall be effective two business days following the date
when mailed or couriered, as the case may be. Any party hereto may from time to
time change its address for the purpose of notices to such party by a similar
notice specifying a new address, but no such change shall be deemed to have been
given until it is actually received by the party sought to be charged with its
contents.
(c) This Agreement may not be assigned by the Shareholders
without the prior written consent of the Company. This Agreement shall be
binding upon the heirs, personal
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<PAGE> 10
representatives, successors, assigns and affiliates of each of the Shareholders
and the Company.
(d) This Agreement shall be governed by the laws of the State
of New York, without giving effect to the conflicts of laws principles thereof.
Each party to this Agreement hereby irrevocably submits to the exclusive
jurisdiction of any New York State or Federal Court sitting or located in the
County of New York (a "New York Court") in any action arising out of or relating
to this Agreement, and each such party hereby irrevocably agrees that all claims
in respect of such action shall be heard and determined in such New York Court.
Each party, to the extent permitted by applicable laws, hereby expressly waives
any defense or objection to jurisdiction or venue based on the doctrine of FORUM
NON CONVENIENS, and stipulates that any New York Court shall have IN PERSONAM
jurisdiction and venue over such party for the purpose of litigating any dispute
or controversy between the parties arising out of or related to this Agreement.
In the event any party shall commence or maintain any action arising out of or
related to this Agreement in a forum other than a New York Court, the other
party shall be entitled to request the dismissal or stay of such action, and
each such party stipulates for itself that such action shall be dismissed or
stayed. To the extent that any party to this Agreement has or hereafter may
acquire any immunity from jurisdiction of any New York Court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, each such party hereby irrevocably waives such immunity. Each party
irrevocably consents to the service of process of any of the New York Courts in
any such action by any means permitted by the rules applicable in such New York
Court.
(e) This Agreement embodies the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, commitments, arrangements, negotiations or
understandings, whether oral or written, between the parties hereto. There are
no agreements, covenants or undertakings with respect to the subject matter of
this Agreement other than those expressly set forth or referred to herein.
(f) In case any one or more of the provisions contained in
this Agreement shall be adjudged invalid, illegal or unenforceable by a New York
Court of competent jurisdiction, such invalidity, illegality or unenforceability
shall be limited to such provisions and the remainder of this Agreement shall be
valid and binding upon the Company and the Shareholders; provided, however, that
in the event a particular provision of this Agreement is determined to be
unreasonable by such New York Court, the parties agree to use their best efforts
to reform that provision in such a manner so as to preserve as closely as
possible the original intent of the parties.
(g) The Company hereby agrees to reimburse Davie (upon
presentation of invoices) for all reasonable attorney's fees and expenses
incurred in connection with Davie's negotiations with the Company up to a
maximum of $35,000.
(h) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which, when
taken together, shall constitute one and
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<PAGE> 11
the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
OFFICE CENTRE CORPORATION
By: /s/R.J. Gillon, Jr.
----------------------------------------
Robert J. Gillon, Jr.
DEAN WITTER REYNOLDS, INC., CUSTODIAN FOR
THE IRA ROLLOVER OF CLIFFORD M. DAVIE DTD
12/15/94
By:/s/Ira Miller 5/15/98
----------------------------------------
Ira Miller
SVP
/s/Clifford M. Davie
------------------------------------------
CLIFFORD M. DAVIE
With respect to Section 1 only:
/s/R.J. Gillon, Jr.
- --------------------
Robert J. Gillon
/s/John D. Kaweske
- -------------------------
John Kaweske
BUYING GROUP SERVICES, INC.
By:/s/Clifford M. Davie
-----------------------
Clifford M. Davie
UDI CORP.
By:/s/R.J. Gillon, Jr.
-----------------------
Robert J. Gillon, Jr.
UDI II CORP.
By:/s/R.J. Gillon, Jr.
----------------------
Robert J. Gillon, Jr.
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<PAGE> 1
EXHIBIT 10.16
FINANCIAL ADVISORY AGREEMENT
----------------------------
This Agreement is made effective as of the 1st day of
February, 1997 by and between R.K. GRACE & COMPANY, Douglas Centre, Suite 150,
2600 Douglas Road, Coral Gables, Florida 33134 (the "R.K. Grace"), JOHN D.
KAWESKE, having an address at the same office, and OFFICE CENTRE CORPORATION
("OCC" or the "Company"), with its principal place of business in care of The
King Group located at 38 East 32nd Street, New York, New York 10016.
R E C I T A L S
WHEREAS, R.K. Grace represents to the Company that it has
broad experience in providing technical and economic advice concerning business
development; rendering advice to the Company to achieve the Company's goals
through various business combinations including, but not limited to, capital
formation, mergers/ acquisitions, joint ventures, licensing, and corporate
partnerships;
WHEREAS, the Company desires to obtain such services from R.K.
Grace and the Company agrees to provide compensation for such services to R.K.
Grace pursuant to the terms contained herein below; and
WHEREAS, this agreement will replace all existing agreements
whether oral or written relating to the subject matter covered hereby between
R.K. Grace and/or John D. Kaweske, on the one hand, and UDI Corp., UDI II Corp.
and/or the Company on the other hand.
NOW THEREFORE, the parties do hereinafter agree as follows:
1. DUTIES OF R.K. GRACE. The Company hereby retains R.K. Grace
to perform those duties delineated below and R.K. Grace agrees to perform the
following activities on behalf of the Company:
(a) Suggest revisions to and make recommendations to the
Company's business plan;
(b) Participate in the Company's Acquisition Program, the
mission of which is to secure appropriate acquisitions by aiding in the
following activities: (i) locate, (ii) negotiate terms; (iii) complete letter of
intent; (iv) perform due diligence; (v) complete definitive agreement; (vi)
develop
<PAGE> 2
transition plan; and (vii) assist in closing.
These specific objectives may be altered, modified or revised
based on the Company's needs or new developments and as may be directed by the
Company.
2. COMPENSATION OF R.K. GRACE.
(a) In consideration of the services to be provided by R.K.
Grace herein, the Company will compensate and pay R.K. Grace on a monthly basis
at the rate of Five Thousand Dollars ($5,000) per month, plus expenses during
the term of this Agreement. The Company shall pay R.K. Grace the monthly fee of
$5,000 on the first day of each calendar month commencing February 1, 1997. If
John D. Kaweske receives any director's fee from the Company during any month,
the fees otherwise payable on the first day of the following month shall be
reduced by the amount of such director's fee, and John D. Kaweske shall waive
any director's fee otherwise owing to him during the last month of the term of
this Agreement.
(b) In addition, R.K. Grace shall receive and the Company
shall pay a fee ("M&A Fee") based upon the following terms:
(i) Upon the closing of an Initial Public Offering
("IPO") of the Company's stock during the term of this Agreement (subject to
Section 4), the M&A Fee shall be due and payable at the closing of the IPO as
follows:
A. R.K. Grace shall receive the sum of
$587,500 in the form of cash plus $1,175,000 in the form of the Company's
unregistered shares of stock calculated at a price per share which is the IPO
price of the stock.
B. (This subparagraph intentionally left
blank).
(ii) Upon the closing of a merger transaction during
the term of this Agreement (subject to Section 4) in which the Company is merged
into another entity prior to the occurrence of an IPO, then instead of the fee
described in (b)(i) above, the M&A Fee shall be due and payable at the closing
of the merger transaction as follows:
A. In the event the surviving entity is a
privately held entity or a natural person, R.K. Grace shall receive an M&A Fee
in the amount of $1,400,000 payable in the form of cash and due immediately upon
the closing of the merger
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<PAGE> 3
transaction; or
B. In the event the surviving entity is a
publicly held company with registered, freely tradeable shares of stock, R.K.
Grace shall receive an M&A Fee in the form of cash in the amount of $500,000,
plus $500,000 in the form of the surviving company's registered shares of stock
with no restrictions calculated at a price per share which is 50% of the value
of the surviving company's stock on the date of closing the merger transaction.
However, at the Company's sole option, the Company may elect to pay R.K. Grace
the M&A Fee due under this subparagraph (B) in the form of cash in the amount of
$1,400,000.
(iii) If none of the transactions described in Section
2(b)(i)(A) or 2(b)(ii) above occur prior to the normal expiration of the term of
this Agreement and except as otherwise provided in this Agreement, the M&A Fee
shall be the lesser of $1,400,000 or an amount equal to 2% of the value of all
Acquisition Transactions finally closed during the term of the Agreement;
provided however, in any event R.K. Grace shall receive an M&A Fee equal to a
minimum of (i) $250,000 if one Acquisition Transaction (other than an
acquisition involving UDI Corp. or UDI II Corp.) is finally closed during the
term of this Agreement or, in the alternative, (ii) $500,000 if two or more
Acquisition Transactions (other than an acquisition involving UDI Corp. or UDI
II Corp.) are finally closed during the term of this Agreement. The value of
such Acquisition Transactions shall be equal to the purchase price of all such
Acquisition Transactions paid by the Company in whatever form the purchase price
is payable including cash, debt assumed, notes, stock, or property, and all
deferred payments. In the event any portion of the purchase price of any such
Acquisition Transaction is paid or is payable in property of a kind other than
cash, assumed debt, notes, stock or deferred payments, the parties shall
negotiate in good faith to determine the M&A Fee payable to R.K. Grace with
respect to such other property, with the valuation to be determined based on the
valuation that the parties to the Acquisition Transaction in question ascribed
to such property in reaching their agreement effecting such Acquisition
Transaction. In the event the parties cannot reach an agreement as a result of
such good faith negotiations, the issue of the M&A Fee payable with respect to
such other property shall be submitted to arbitration under paragraph 7 of this
Agreement. For purposes of this Agreement, an Acquisition Transaction shall be a
transaction in which the Company purchases the assets or the stock of another
person or entity. However, the Company's acquisition of UDI Corp. and UDI II
Corp. shall not be included within the definition of Acquisition Transactions
for purposes of this Agreement, and therefore no fee shall be paid for such
acquisitions. In addition, any compensation paid to the
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<PAGE> 4
principals of the acquisition targets for services actually to be performed by
those principals shall not be included in such calculation of the M&A Fee. The
M&A Fee payable under this Section 2(b)(iii) shall be due and payable within
thirty days following December 31, 1998.
(c) If an event described in Sections 2(b)(i) or 2(b)(ii)
occurs during the term of this Agreement, and the combined product and service
sales volumes of completed Acquisition Transactions (excluding UDI Corp. and UDI
II Corp.) made prior to the occurrence of any event described in Sections
2(b)(i) or 2(b)(ii) and during the term of this Agreement exceed $150 million in
gross annual revenues, R.K. Grace shall receive an additional fee equal to 1% of
the value of all Acquisition Transactions finally closed during the term of this
Agreement which resulted in such product and service sales exceeding the $150
million threshold. The value of such Acquisition Transactions shall be
calculated in the same manner described in subparagraph 2(b)(iii) above, and the
determination whether gross annual revenues in fact exceeds $150 million shall
be based on, for each Acquisition Transaction, the most recent 12-month figures
set forth in the audited financial statements used at the closing of such
Acquisition Transaction. If a target in an Acquisition Transaction (the
"Target") has such product and service sales volumes in an amount which, when
added together with all such product and service sales volumes of targets in
previously consummated Acquisition Transactions (excluding UDI Corp. and UDI II
Corp.), exceed $150 million, the additional 1% fee with respect to the Target
shall be equal to the product of (a) 1% of the value of the Acquisition
Transaction involving the Target multiplied by (b) a fraction, the numerator of
which equals the difference between (x) the combined product and service sales
volumes of completed Acquisition Transactions at that date (including the
Target) and (y) $ 150 million, and the denominator of which is such product and
service sales volumes of the Target. All fees and compensation due R.K. Grace
under Paragraph 2(c) of this Agreement shall be due and payable within 15 days
after the earlier of (a) the date on which the IPO closes, (b) the date on which
the transaction described in paragraph 2(b)(ii)(A) closes, or (c) the date on
which the transaction described in paragraph 2(b)(ii)(B) closes.
(d) In the event of a disagreement related to any of the M&A
Fees payable under this Agreement, Company and R.K. Grace agree to be guided by
GAAP (Generally Accepted Accounting Principles) with such dispute to be
submitted to arbitration pursuant to Section 7 hereto.
(e) The M&A Fees described in Sections 2(b)(i)(A), 2(b)(ii)
and 2(c) shall be in addition to and exclusive of the
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<PAGE> 5
monthly fees payable by the Company to R.K. Grace described in subparagraph 2(a)
of this Agreement.
(f) The Company shall reimburse R.K. Grace's reasonable and
customary business expenses incurred by R.K. Grace in connection with its
performance of the services described in this Agreement. The Company shall
deliver the actual reimbursement funds to R.K. Grace within 10 days following
R.K. Grace's delivery to Company of a written expense report containing
reasonable detail of the expenses for which R.K. Grace seeks reimbursement
together with receipts evidencing such expenses.
(g) The Company shall issue 164,229 shares of its common stock
to John D. Kaweske individually; provided that if, by August 8, 1998, there has
been no IPO, and the Company has not consummated any Acquisition Transactions,
the Company shall have the right (the "Right") to purchase, and John D. Kaweske
shall sell and agrees to cause his affiliates and assignees to sell, to OCC any
shares of capital stock of OCC that have been issued to John D. Kaweske or his
affiliates on or before the exercise date of the Right, at par value. In
addition, upon exercise of the Right, for no additional consideration, John D.
Kaweske shall cancel, and shall cause his affiliates and assignees to cancel,
any options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the capital stock of
OCC or obligating OCC to issue or sell any shares of capital stock of, or any
other interest in, OCC, to John D. Kaweske or any of his affiliates or
assignees.
(h) If R.K. Grace is involved in negotiating a line of credit
for the Company, and such line of credit is entered into by the Company during
the term of this Agreement with an amount equal to at least $10,000,000, OCC
shall pay to R.K. Grace $25,000 (the "Credit Payment") at the time such line of
credit is entered if such line of credit is entered into prior to any payments
being made to R.K. Grace pursuant to Section 2(b). If the Credit Payment is
made, any payment made to R.K. Grace under Section 2(b) shall be reduced by the
amount of the Credit Payment.
3. INTENTIONALLY DELETED.
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<PAGE> 6
4. PAYMENT OF CONSIDERATION AFTER TERMINATION.
(a) If this Agreement is terminated pursuant to Section 8 for
any reason other than by the Company for just cause as described in Paragraph
8(b) and if any relevant IPO or merger transaction as described in Sections
2(b)(i)(A) and 2(b)(ii) closes by December 31, 1998, R.K. Grace shall be
entitled to receive the full M&A Fee described in said Sections 2(b)(i)(A) and
2(b)(ii) less the amounts, if any, actually received by R.K. Grace pursuant to
Section 2(b)(iii). If, after the early termination of this Agreement, any of the
Acquisition Transactions are consummated prior to December 31, 1998, R.K. Grace
shall be entitled to receive the M&A Fee (if applicable) described in Section
2(b)(iii) with respect to such Acquisition Transaction.
(b) In the event the Company terminates this Agreement for
just cause as described in Section 8(b) of this Agreement, and except as
otherwise provided in this Section 4(b), R.K. Grace only shall be entitled to
receive an M&A Fee if the Company closes an IPO or merger transaction as
described in Sections 2(b)(i)(A) and 2(b)(ii) by December 31, 1998. The M&A Fee
payable in that event shall be equal to the M&A Fee described in either Section
2(b)(i)(A) or Section 2(b)(ii), as appropriate, times a fraction the denominator
of which shall be the total combined product and service sales volume of
completed Acquisition Transactions at the time of the closing of the IPO or
merger transaction and the numerator of which shall be the total combined
product and service sales volume of Acquisition Transactions under either
contract or letter of intent (but not yet closed) which actually close prior to
or at the closing of the IPO or merger transaction. In the event the Company
terminates this Agreement for just cause as described in Section 8(b) of this
Agreement and the Company does not close an IPO or merger transaction as
described in Sections 2(b)(i)(A) and 2(b)(ii) by December 31, 1998, R.K. Grace
shall be entitled only to receipt of an M&A Fee in an amount described in
Section 2(b)(iii) for all Acquisition Transactions closed prior to December 31,
1998.
5. OBLIGATIONS OF COMPANY. The Company will make available to
R.K. Grace copies of all correspondence exchanged between Company, and any
Target as well as any entity described in Paragraph 2(b) and Company will, in
general, keep R.K. Grace apprised in a timely fashion of the nature of any such
proposed transactions.
6. RESTRICTIVE COVENANTS. The following restrictive covenants
shall be in full force and effect during the term of
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<PAGE> 7
this Agreement and for a period of one (1) year after this Agreement has been
terminated:
(a) R.K. Grace and John D. Kaweske will take all action
necessary to insure that all information provided by the Company to R.K. Grace
and John D. Kaweske shall be kept in strictest confidence by R.K. Grace and John
D. Kaweske; and
(b) During the term of this restrictive covenant, R.K. Grace
and John D. Kaweske agree not to, directly or indirectly, solicit any of the
parties whose names have been identified by the Acquisition Team as potential
Targets for any other entity other than on behalf of the Company.
7. MANDATORY ARBITRATION. Any controversy or claim arising out
of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by arbitrator(s)
may be entered in any court having jurisdiction thereof. In the event either
party utilizes an attorney in order to enforce the terms of this Agreement and
such party prevails, then the losing party shall reimburse the prevailing party
for the costs of said action including, but not limited to, reasonable attorneys
fees.
8. TERM. (a) Unless otherwise terminated in accordance with
the provisions contained in subparagraphs (b) or (c) of this Paragraph 8, the
term of this Agreement shall be from February 1, 1997 through December 31, 1998.
(b) The Company may terminate this Agreement for just cause
which shall include the following:
(i) Repeated failure by R.K. Grace, following not
less than 30 days' prior written warning, to perform duties and obligations
pursuant to this Agreement in a correct, timely and expeditious manner;
(ii) Conviction or please of guilty or nolo contendre
to any crime which constitutes a felony under the laws of any state or the laws
of the United Stated by any of R.K. Grace's principals;
(iii) Engaging in activities by R.K. Grace which
constitutes a material breach of the provisions contained in Paragraph 6 of this
Agreement.
In the event the Company elects to terminate this Agreement
for just cause pursuant to this subparagraph 8(b), R.K.
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<PAGE> 8
Grace shall not be entitled to any of the monthly fees described in Paragraph
2(a) accruing after the effective date of termination nor any of the M&A Fees
which otherwise would be due and owing for the consummation of Acquisition
Transactions following the effective date of the termination of this Agreement
except as provided in Section 4(b).
In the event the Company terminates this Agreement for any
reason other than for just cause, Company shall remain obligated to pay and
shall pay R.K. Grace an amount equal to 50% of the monthly fee described in
paragraph 2(a) of this Agreement for the remaining term of this Agreement as
well as M&A Fees and the additional fees described in Section 4(a) of this
Agreement.
(c) R.K. Grace may terminate this Agreement for just cause
which shall include the following:
(i) The Company fails to pay any of the fees due and
payable to R.K. Grace under this Agreement and such failure continues for a
period of thirty days following R.K. Grace's delivery of written notice of such
failure to Company;
(ii) The Company breaches any other provision of this
Agreement and fails to cure such breach within thirty days following R.K.
Grace's delivery of written notice of such breach to Company;
(iii) The Company fails to pursue with reasonable
diligence any of the prospective Acquisition Transactions with the Targets and
Company continues its failure to do so during the thirty days following R.K.
Grace's delivery of written notice thereof to Company;
(iv) The Company becomes insolvent during the term of
this Agreement.
In the event R.K. Grace elects to terminate this Agreement for proven, just
cause pursuant to this subparagraph 8(c), R.K. Grace shall be entitled to
receive and the Company shall remain obligated to pay and shall pay R.K. Grace
the amounts to which R.K. Grace otherwise would be entitled to received under
subparagraphs 2(a), 2(b), 2(c) and 4(a) of this Agreement.
9. AUTHORITY TO ACT. each party hereby represents and warrants
that the individual who executes this Agreement on behalf of such party has been
granted the requisite authority to do so by such party.
10. INDEMNIFICATION. Each party will indemnify and hold the
other party and its agents, officers, directors and
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<PAGE> 9
employees harmless from any and all claims arising from its activities under
this Agreement except in the event that actions or inactions of such party are
deemed to involve negligence or willful misconduct. Such indemnification shall
include, but not limited to, the non-breaching party's attorneys fees.
11. NOTICE. Any notice required hereunder shall be complete
upon certified mailing of the notice to the party at the address appearing
herein, or at the address which shall from time to time be provided to the other
party. The parties shall notify the other of any alteration or change in address
hereinafter occurring.
12. COUNTERPARTS. This Agreement may be executed in multiple
counterparts. Each executed counterpart shall be considered an original, and
taken together, shall constitute one and the same document. Any signature,
notice of other communication with respect to the subject matter hereof may be
given by telex, telecopy or other facsimile transmission and relied upon to the
same extent as if it were an original.
13. SEVERABILITY. If any provision, paragraph or subparagraph
of this Agreement is adjudged by any court to be void or unenforceable in whole
or in part, this adjudication shall not affect the validity of the remainder of
the Agreement, including any other provision, paragraph or subparagraph. Each
provision, paragraph or subparagraph of this Agreement is separable from every
other provision, paragraph and subparagraph and constitutes a separate and
distinct covenant.
14. GOVERNING LAW. This Agreement shall be subject to and
governed by the laws of the State of New York.
15. AMENDMENT. This Agreement may only be amended in writing,
duly endorsed by the parties hereto.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
understandings, whether oral or written, between R.K. Grace and/or John D.
Kaweske, on the one hand, and UDI Corp., UDI II Corp. and/or the Company on the
other hand.
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement,
effective the date first written above.
R.K. GRACE & COMPANY
By: /s/John D. Kaweske
----------------------------------
Name: John D. Kaweske
Title: CEO
/s/John D. Kaweske
-------------------------------------
John D. Kaweske, individually
OFFICE CENTRE CORPORATION
By: /s/R.J. Gillon, Jr.
----------------------------------
Name: Robert J. Gillon, Jr.
Title: CEO
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<PAGE> 11
For value received, the sufficiency of which hereby is
acknowledged by UDI Corp. and by UDI II Corp., UDI Corp. and UDI II Corp. join
this Agreement solely for the purpose of guaranteeing Office Centre
Corporation's performance of its obligations under this Agreement. The guarantee
of UDI Corp. and Of UDI II Corp. is one of performance and not merely of
collection.
UDI CORP. UDI II. CORP.
By: By:
------------------------ ---------------------------
Name: Name:
Title: Title:
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<PAGE> 1
EXHIBIT 10.17
FORM OF
INDEMNIFICATION AGREEMENT
-------------------------
INDEMNIFICATION AGREEMENT, made as of the ___ day of ________,
1998, by and between Office Centre Corporation, a Delaware corporation, located
at 38 East 32nd Street, New York, New York 10016 (the "Company"), and _________
___________, an individual, residing at _____________________________,
_________________ (the "Indemnitee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to have Indemnitee serve the
Company as a director and/or executive officer;
WHEREAS, Indemnitee is concerned about serving the Company as
a director and/or executive officer without assurance that indemnities will be
available to him and will be adequate to protect him against the risks
associated with his service to the Company;
WHEREAS, the Company, in order to induce Indemnitee to serve
the Company and in order to attract new directors to serve the Company, has
agreed to provide Indemnitee with the benefits contemplated by this Agreement,
which benefits are intended to provide Indemnitee with the maximum possible
protection permitted by law; and
WHEREAS, as a result of the provision of such benefits and in
reliance thereon, Indemnitee will serve as a director and/or executive officer
of the Company.
NOW, THEREFORE, in consideration of the foregoing and the
promises, conditions, representations and warranties set forth herein, the
Company and Indemnitee hereby agree as follows:
1. DEFINITIONS. The following terms, as used herein, shall
have the following respective meanings:
(a) "Covered Act" means: (i) any actual or alleged
action taken or attempted by Indemnitee (including, without limitation, any
breach of duty, neglect, error, misstatement or misleading statement) (A) in his
capacity as, or otherwise by reason of, or arising out of his being, a director,
or officer, of the Company or any subsidiary of the Company, or (B) by reason of
the fact that he is or was serving at the request of the Company as a director,
officer, employee, agent or trustee of another corporation, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise; or (ii) any inaction or omission on Indemnitee's part while acting
in any of the foregoing capacities.
<PAGE> 2
(b) "D&O Insurance" means directors' and officers'
liability insurance issued by one or more reputable insurers with a Best
Insurance Reports rating.
(c) "Excluded Claim" means any payment for Losses or
Expenses in connection with any claim: (i) for the return by Indemnitee of any
remuneration which is illegal; (ii) resulting from Indemnitee's knowingly
fraudulent, deliberately dishonest or intentional misconduct; (iii) for an
accounting of profits in fact made from the purchase or sale by Indemnitee of
securities of the Company within the meaning of Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or similar provisions of
any state law, if the Company is in fact entitled to recover such profits; or
(iv) the payment of which by the Company under this Agreement is not permitted
by applicable law. Any facts pertaining to any other director, officer, employee
or agent of the Company shall not be imputed to Indemnitee for the purpose of
determining an Excluded Claim.
(d) "Expenses" means any reasonable expenses incurred
by Indemnitee as a result of a claim or claims whether brought by or in the
right of the Company (e.g., derivatively by stockholders of the Company for the
benefit of the Company) or otherwise and whether of a civil, criminal,
administrative or investigative nature made against him for, or being a witness
in, or otherwise in respect of, Covered Acts including, without limitation,
counsel fees, costs of bonds, and other costs of proceedings or appeals.
(e) "Loss" means any amount which Indemnitee pays or
is obligated to pay as a result of a claim or claims whether brought by or in
the right of the Company (e.g., derivatively by stockholders of the Company for
the benefit of the Company) or otherwise and whether of a civil, criminal,
administrative or investigative nature made against him for, or otherwise in
respect of, Covered Acts including, without limitation, damages, judgments, sums
paid in settlement of such claim or claims, sums paid in respect of any
deductible under any applicable policy of D&O Insurance, counsel fees, experts'
fees, travel expenses and fines and penalties other than fines and penalties for
which indemnification is not permitted by applicable law.
2. D&O INSURANCE. The Company shall maintain D&O Insurance so
long as Indemnitee shall continue as a director or officer of the Company and
thereafter so long as Indemnitee shall be subject to any possible claim for
which a claim for indemnification may be sought. In all policies of D&O
Insurance, Indemnitee shall be named as an insured in such a manner as to
provide Indemnitee the same rights and benefits, subject to the same
limitations, as are accorded to the Company's directors or officers most
favorably insured by such policy.
3. INDEMNIFICATION.
(a) OBLIGATION. The Company, at the request of
Indemnitee, shall indemnify Indemnitee and hold him harmless to the full extent
authorized or permitted by the applicable provisions of the Delaware General
Corporation Law and the Company's Certificate of Incorporation and By-laws, as
the same exists or may hereafter be amended.
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<PAGE> 3
(b) REQUESTED. In addition, the Company, at the
request of Indemnitee, shall indemnify Indemnitee and hold him harmless from any
and all Losses and Expenses subject, in each case, to the further provisions of
this Agreement.
(c) SOURCE. If indemnification is sought by
Indemnitee under this Agreement, Indemnitee may seek such indemnification under
statutory law, a policy of D&O Insurance, the provisions of SECTION 3(b) above,
or otherwise as Indemnitee sees fit, and concurrently or in such sequence as
Indemnitee may choose, in his sole discretion.
(d) NO PRESUMPTIONS. For purposes of this Agreement,
the termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law.
4. EXCLUDED COVERAGE. The Company shall have no obligation to
indemnify Indemnitee for and hold him harmless from any Loss or Expense which
constitutes an Excluded Claim.
5. INDEMNIFICATION PROCEDURES.
(a) NOTIFICATION. Promptly after receipt by
Indemnitee of notice of any claim or threatened claim of any action, suit or
proceeding, Indemnitee shall notify the Company of the commencement or threat
thereof, but the omission so to notify or delay in notifying the Company will
not relieve it from any liability which it may have to Indemnitee except to the
extent that the Company is actually prejudiced by any such omission or delay.
(b) TO INSURERS. The Company shall give prompt notice
of the commencement of such action, suit or proceeding to the insurers on the
D&O Insurance, if any, in accordance with the procedures set forth in the
respective policies in favor of Indemnitee. The Company shall thereafter take
all necessary or desirable action to cause such insurers to pay, on behalf of
Indemnitee, all amounts payable as a result of such action, suit or proceeding
in accordance with the terms of such policies.
(c) DEFENSE. In the event such action, suit or
proceeding is other than by or in the right of the Company, Indemnitee may, at
his option, either control the defense thereof himself, require the Company to
defend him, or accept the defense provided under the D&O Insurance, if any;
PROVIDED, HOWEVER, that Indemnitee may not control the defense thereof himself
or require the Company to defend him if such decision would jeopardize the
coverage provided by the D&O Insurance, if any, to the Company and/or the other
directors and officers covered thereby. In the event that Indemnitee requires
the Company to defend him, or in the event that Indemnitee proceeds under a
policy of D&O Insurance but Indemnitee determines that the insurers under such
D&O Insurance are unable or unwilling to adequately defend, contest and
protect Indemnitee against any such action, suit or proceeding, the Company
shall promptly undertake to defend any such
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<PAGE> 4
action, suit or proceeding, at the Company's sole cost and expense, utilizing
counsel of Indemnitee's choice who has been approved by the Company. If
appropriate, the Company shall have the right to participate in the defense of
such action, suit or proceeding.
(d) COMPANY ACTION. In the event such action, suit or
proceeding is by or in the right of the Company, Indemnitee may, at his option,
either control the defense thereof himself or accept the defense provided under
the D&O Insurance, if any; PROVIDED, HOWEVER, that Indemnitee may not control
the defense himself if such decision would jeopardize the coverage provided by
the D&O Insurance, if any, to the Company and/or the other directors and
officers covered thereby.
(e) COMPROMISE. In the event the Company shall fail
timely to defend, contest or otherwise protect Indemnitee against any such
action, suit or proceeding which is not by or in the right of the Company,
Indemnitee shall have the right to do so, including without limitation, the
right to make any compromise or settlement thereof, and to recover from the
Company all counsel fees, reimbursements and all amounts paid as a result
thereof.
(f) PAYMENT. Expenses and Losses incurred or to be
incurred by Indemnitee from time to time as a result of any action, suit or
proceeding covered by the indemnity provisions of this Agreement (including,
without limitation, an action, suit or proceeding by or in the right of the
Company) which have not been paid by the insurers under the D&O Insurance, if
any, shall be paid or advanced by the Company within 30 days of the written
request of the Indemnitee, whether or not the Company believes that such
Expenses and Losses may constitute an Excluded Claim. Advances of Losses and
Expenses to Indemnitee in his capacity as an officer or director of the Company
shall be made upon receipt of an undertaking by or on behalf of Indemnitee to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Company under this Agreement. Advances of Losses and
Expenses to Indemnitee in his capacity as an employee or agent of the Company
shall be made upon such terms and conditions, if any, as the Board of Directors
of the Company deems appropriate.
6. SETTLEMENT. Except as otherwise provided in SECTION 5(e)
above, Indemnitee shall not settle any action, suit or proceeding without the
Company's prior written consent. The Company shall not settle any action, suit
or proceeding, in any manner which would impose any obligation on Indemnitee
which is not covered by indemnification hereunder without Indemnitee's prior
written consent. Neither the Company nor Indemnitee shall unreasonably withhold
its or his consent to any proposed settlement.
7. RIGHTS NOT EXCLUSIVE. The rights provided hereunder shall
not be deemed exclusive of any other rights to which Indemnitee may be entitled
under any D&O Insurance, the Company's Certificate of Incorporation or By-Laws,
agreement, vote of stockholders or Board of Directors or otherwise. The
protection afforded to Indemnitee hereunder is intended to supplement the other
protections presently available to Indemnitee under statutory law, the Company's
Certificate of Incorporation, By-Laws, and any D&O Insurance or otherwise, and
all of such protections are intended to be cumulative. Nothing herein shall be
deemed to diminish or otherwise
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<PAGE> 5
restrict Indemnitee's right to reimbursement under any D&O Insurance or
indemnification under statutory law, the Company's Certificate of Incorporation,
By-Laws, agreements or otherwise.
8. ENFORCEMENT; CHOICE OF FORUM; CONSENT TO JURISDICTION.
(a) DELAWARE. Any action, suit or proceeding under
this Agreement shall be enforceable only in the state courts of the State of
Delaware. Indemnitee and the Company each hereby consent to the jurisdiction of
the state courts of the State of Delaware for all purposes in connection with
any action, suit or proceeding which arises out of or relates to this Agreement.
The burden of proving that indemnification is not appropriate shall be on the
Company and any actual determination by the Company (including any determination
made by its Board of Directors or stockholders, or by independent legal counsel)
that Indemnitee is not entitled to indemnification hereunder shall not be a
defense to such action, suit or proceeding or create a presumption that
Indemnitee has not met the applicable standard for indemnification. If
Indemnitee commences an action, suit or proceeding in any such court to enforce
this Agreement, or the Company commences an action, suit or proceeding for an
adjudication that Indemnitee is not entitled to indemnification under this
Agreement, the Company shall nevertheless be obligated, subject to Indemnitee's
obligation to reimburse the Company contained in SECTION 5(f) above, to pay
Expenses and Losses from time to time as incurred by Indemnitee until a
determination shall have been made by a final judgment or other final
adjudication of such court that Indemnitee is not entitled to be indemnified by
the Company for such Losses and Expenses.
(b) FEES. In the event of any action, suit or
proceeding under this Agreement, all court costs and expenses, including
reasonable counsel fees, incurred or to be incurred by Indemnitee with respect
to such action, suit or proceeding shall be paid by the Company to Indemnitee
within 30 days of written request by Indemnitee, unless and until the court
determines that each of the material assertions made by Indemnitee as a basis
for such action, suit or proceeding were not made in good faith or were
frivolous.
(c) PERIOD OF COVERAGE. All agreements and
obligations of the Company contained herein shall continue during the period
Indemnitee is a director, officer, employee or agent of the Company (or is
serving at the request of the Company as a director, officer, employee, agent or
trustee of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise), and shall continue thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative,
by reason of the fact that Indemnitee was a director, officer, employee, agent
or trustee of the Company or serving in any other capacity referred to herein.
(d) TIME OF CLAIM. The Company's indemnity
obligations hereunder shall be applicable to any and all claims made after the
date hereof regardless of when the facts upon which such claims are based
occurred, including times prior to the date hereof.
(e) COMPANY AGREEMENT. The Company expressly confirms
and agrees that it has entered into this Agreement and assumed the obligations
imposed on the Company hereby,
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<PAGE> 6
in order to induce Indemnitee to serve as a director or officer of the Company,
and acknowledges that Indemnitee is relying upon this Agreement in agreeing to
serve or in continuing to serve in such capacity.
9. PROVISIONS OF AGREEMENT NOT TO INURE TO BENEFIT OF
INSURERS. It is the intention of the parties in entering into this Agreement
that the insurers under the D&O Insurance, if any, shall be obligated ultimately
to pay any claims by Indemnitee which are covered by such D&O Insurance, and
nothing herein shall be deemed to diminish or otherwise restrict the Company's
or Indemnitee's right to proceed or collect against any insurers under such D&O
Insurance or to give such insurers any rights against the Company under or with
respect to this Agreement, including, without limitation, any right to be
subrogated to Indemnitee's rights hereunder, unless otherwise expressly agreed
to by the Company in writing and the obligation of such insurers to the Company
and Indemnitee shall not be deemed reduced or impaired in any respect by virtue
of the provisions of this Agreement. In the event of payment under this
Agreement, the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of Indemnitee, who shall execute all papers required
and shall do everything that may be necessary to secure such rights.
10. SEVERABILITY. In the event that any provision of this
Agreement is determined by a court to require the Company to do or to fail to do
any act which is in violation of applicable law, such provision shall be limited
or modified in its application to the minimum extent necessary to avoid a
violation of law and, as so limited or modified, such provision and the balance
of this Agreement shall be enforceable in accordance with their terms. Without
limiting the generality of the foregoing, if this Agreement or any portion
thereof shall be invalidated on any ground, the Company shall nevertheless
indemnify Indemnitee to the full extent permitted by any applicable portion of
this Agreement that shall not have been invalidated.
11. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses and Losses but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such Expenses and Losses to which Indemnitee is entitled to indemnification.
12. CHOICE OF LAW. The validity, construction, performance and
enforcement of this Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
13. NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for in this Agreement and all legal
process in regard to this Agreement will be validly given, made or served, if in
writing and delivered personally, by telecopy (except for legal process) or sent
by overnight delivery service providing a receipt for delivery or by registered
mail postage paid to the appropriate address set forth in the preamble hereto or
to such other address or telecopy number as any party may, from time to time,
designate in a written notice given in a like manner. Notice by telecopy shall
be deemed delivered on the day telephone confirmation of receipt is given.
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<PAGE> 7
14. SUCCESSORS AND ASSIGNS. This Agreement shall be (i)
binding upon and enforceable by the Company and all successors and assigns of
the Company (including any transferee of all or substantially all of its assets
and any successor by merger or otherwise by operation of law) and (ii) binding
on and inure to the benefit of Indemnitee and the heirs, personal
representatives and estate of Indemnitee. This Agreement shall continue in
effect regardless of whether Indemnitee continues to serve as an officer or
director of the Company.
15. AMENDMENT. This Agreement sets forth the entire agreement
between the parties hereto as to the subject matter herein, and supersedes any
prior agreements or understandings as to the subject matter herein. No
amendment, modification, termination or cancellation of this Agreement shall be
effective unless made in a writing signed by each of the parties hereto.
16. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which taken together shall constitute one instrument.
IN WITNESS WHEREOF, the Company and Indemnitee have executed
this Agreement as of the day and year first above written.
OFFICE CENTRE CORPORATION
By:
-----------------------------------
Name:
Title:
-----------------------------------
-7-
<PAGE> 1
CoreStates Bank, N.A. Exhibit 10.20
PO Box 7618
Philadelphia PA 19101-7618
CoreStates
December 15, 1997 Bank
Mr. Joseph E. Hajjar
Chief Financial Officer
Office Centre Corporation
38 East 32nd Street
New York, NY 10016
Dear Joe:
CoreStates Bank is pleased to confirm it has approved the following commitment
of Office Centre Corporation as outlined below.
BORROWER: Office Centre Corporation ("OCC"), UDI CORP
("UDI") and UDI II ("UDI II") (collectively, the
"Borrowers")
GUARANTORS: UDI A.R.T., UDI Canada and all other
existing or future subsidiaries of OCC.
FACILITY AMOUNT: $25,000,000 secured revolving credit
facility.
PURPOSE: Provide working capital and acquisition
financing, fees and expenses associated with
OCC's initial public offering and other
corporate purposes.
MATURITY: Three years from closing.
INTEREST RATE: Interest will be calculated in accordance
with the following grid. Funded Debt: Tangible
Net Worth will be measured quarterly and after
each acquisition.
<TABLE>
<CAPTION>
Funded Debt: Tangible Net Worth Libor Plus Prime Plus
- ------------------------------- ---------- ----------
<S> <C> <C>
** 1.0 175 bp -- bp
* 1.0 ** 2.5 225 bp .25 bp
* 2.5 ** 5.0 275 bp .50 bp
* 5.0 325 bp .75 bp
<FN>
* Greater than
** Less than or equal to
</TABLE>
1
<PAGE> 2
FEES AND EXPENSES: Loan Origination fee of $150,000. Of this
fee $50,000 will be payable upon execution of
documentation, with the balance due upon
successful completion of the IPO. Borrowers are
also responsible for all of CoreStates' legal
and out-of-pocket expenses associated with this
transaction. Legal fee estimate to be provided
prior to commencement of documentation.
Commitment fee of 3/8% per annum on the daily average unused commitment,
payable quarterly in arrears.
LEGAL FEE DEPOSIT: Upon acceptance of this commitment letter,
OCC shall make payable a $35,000 deposit to be
applied toward Bank's legal expenses. To the
extent excess funds remain after Bank's legal
expenses are paid, such excess shall be applied
toward the Loan Original Fee. If this
transaction fails to close, Bank shall return
$17,500 of this deposit.
DEFAULT RATE: Default interest at 2% above rate otherwise
applicable. Default interest not to apply to the
extent such default cannot be cured within 10
days.
COLLATERAL: Perfected first lien security interest in
all Borrowers' tangible and intangible assets.
AVAILABILITY OF BORROWERS 85% of eligible accounts receivables, up to
60 days from due date,
AND GUARANTORS: plus 60% of eligible inventory.
Eligible accounts receivable are defined as volume rebates,
domestic, and canadian trade accounts receivable,
excluding inter-company accounts, contras, charge-back,
tainted accounts, and other ineligible accounts as
defined within the loan documents, such terms and
conditions being typical to those found in comparable
loan documents.
Eligible inventory is defined finished goods on-hand in
Borrowers' facilities. Ineligible inventory includes
work-in-process, supplies, packaging materials and other
ineligible inventory determined by the Bank.
ACQUISITIONS: Pro forma maintenance of covenant and
availability levels after acquisitions. Pre-IPO,
acquisitions with cash consideration in excess
of $7,500,000 require pre-approval by Bank.
After OCC's IPO, acquisitions with total
consideration in excess of $20,000,000 require
pre-approval by Bank.
REPORTING Borrowers will provide weekly borrowing
base certificates. Monthly
REQUIREMENTS: reporting package to include accounts
receivable and accounts
2
<PAGE> 3
payable agings, inventory and other such reports
as CoreStates may reasonably request.
Standard financial reporting shall include annual financial
statements audited by an accounting firm acceptable to
CoreStates within 90 days of fiscal year end, unaudited
quarterly financial statements within 45 days of quarter
end, monthly P & L reports, annual budgets or
projections, and other financial information which
CoreStates may reasonably request.
AUDITS: We expect to perform semiannual audits of the company. The costs
of the initial audit will be covered by non-refundable,
$7,500 deposit. All future audits shall be paid by the
company in accordance with the Bank's customary fee
schedule, plus out-of-pocket expenses.
TERMS AND CONDITIONS: To include but not limited to the following:
1. Legal documentation satisfactory to the Bank and
its outside counsel.
2. Minimum excess availability of $2,000,000 at
closing.
3. CoreStates to be utilized as Borrowers' primary
operating bank of account. All remittances to be
directed to a CoreStates' lockbox and applied
directly to repay the loan.
4. No material adverse change in the financial
condition of the Borrowers.
5. Finalize discussions currently underway
surrounding financial covenants.
6. Prior to OCC's successful completion of its IPO,
which shall raise at minimum $20,000,000 in new
equity for the Borrower, borrowings in excess of
$15,000,000 under the Facility shall require
Bank's prior written approval.
7. If OCC fails to successfully complete its IPO by
December 31, 1998, outstandings under the facility
attributable to availability from UDI's
receivables shall be reduced in accordance with
the following schedule:
<TABLE>
<CAPTION>
Date Maximum Outstandings
- ---- attributable to UDI's A/R
--------------------------
<S> <C>
March 31, 1999 $6,000,000
June 30, 1999 5,000,000
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
September 30, 1999 4,000,000
December 31, 1999 3,000,000
and thereafter
</TABLE>
8. Other terms and conditions typically found in
comparable credit facilities and deemed necessary
by the Bank's legal counsel.
FUNDING DATE: December 31, 1997
- ------------
Sincerely,
CoreStates Bank, N.A.
/s/ Marcus F. Brown
- ---------------------------
Marcus F. Brown
Vice President
CONFIDENTIAL
------------
The terms and conditions set forth above are confidential and may not be
disclosed to any third party, except for Borrowers and their confidential
disclosure to professional advisors.
ACCEPTED AND AGREED
Office Centre Corporation on behalf of itself and its subsidiaries
/s/ Joseph E. Hajjar
- ------------------------------------
Joseph E. Hajjar
Chief Financial Officer
4
<PAGE> 1
FC 1-8-4-18 EXHIBIT 10.21
1339 Chestnut Street
Philadelphia PA 19107-3579
215 973 3679
Fax 215 973 6680
MARCUS F BROWN
Vice President
Asset Bassed/
Structured Finance Division
CoreStates
March 16, 1998 Bank
Mr. Joseph E. Hajjar
Chief Financial Officer
Office Centre Corporation
38 East 32nd Street
New York, NY 10016
Re: Extension of Commitment Date
----------------------------
Dear Joe:
With reference to CoreStates' Commitment Letter dated December
15, 1997 outlining our $25,000,000 Credit Facility to be extended to OCC, UDI
and UDI II, please accept this as our acknowledgment that the terms and
conditions outlined therein remain in effect, and in addition, that the
commitment date has been extended through April 30, 1998.
Very truly yours,
/s/ Marcus F. Brown
Marcus F. Brown
Vice President
<PAGE> 1
CoreStates Bank, N.A. Exhibit 10.22
PC 1-8-4-2
1345 Chestnut Street
PO Box 7618
Philadelphia PA 19101-7618
215 973 8033
Fax 215 973 5831
MARCUS F BROWN
Vice President
Division Manager
New England Division
CoreStates
May 18, 1998 Bank
Mr. Joseph E. Hajjar CoreStates Bank, N.A.
Chief Financial Officer has merged into
Office Centre Corporation First Union National Bank
38 East 32nd Street
New York, NY 10016
Re: Second Extension of Commitment Date
Dear Joe:
With reference to CoreStates' Commitment Letter dated December 15, 1997
outlining our $25,000,000 Credit Facility to be extended to OCC, UDI and UDI II,
please accept this as our acknowledgment that the Funding Date has been extended
to June 30, 1998 subject to:
1. The absence of material adverse change in the financial
condition of the Borrowers, in the Bank's sole discretion.
2. Satisfactory review by the Bank of the Borrowers' financial
projections and consolidation plans, in the Bank's sole
discretion.
Except as stated above, the terms and conditions of our Commitment Letter remain
in effect. We look forward to our meeting with you on May 28 to receive the
projections and hear about your consolidation efforts.
Very truly yours,
/s/ Marcus F. Brown
Marcus F. Brown
Vice President
<PAGE> 1
EXHIBIT 10.23
CoreStates Bank, N.A.
PC 1-8-4-2
1345 Chestnut Street
PO Box 7618
Philadelphia PA 19101-7618
215 973 8033
Fax 215 973 5831
R THOMAS ESSER
Vice President
Division Manager
New England Division
CoreStates
December 5, 1997 Bank
Mr. Joseph E. Hajjar
Sr. Vice President - Chief Financial Officer
Office Centre Corporation
38 East 32nd Street
New York, New York 10016
Dear Joe:
I am pleased to confirm our approval of the increase from $6
million to $10 million in the demand facility available to UDI Corporation and
UDI II Corporation.
This new amount is available immediately upon return of the
executed note which I have enclosed. Along with the increase in the dollar
amount I have increased the rate of advance on accounts receivable from 75% to
85% and raised the permitted advances to OCC from $3,500,000 to $7,500,000. All
of the conditions precedent to closing in the September 25, 1997 Summary of
Terms and conditions have been deleted.
There is no fee associated with this $4 million increase to
the line of credit, however the Bank will move forward immediately to audit the
books and records of UDI Corporation at the company's expense. New to the
reporting requirement section is a weekly borrowing certificate. And in addition
to CoreStates remaining as UDI's deposit bank, all remittances must be applied
on a daily basis to reduce the line. All of the terms and conditions are
outlined below:
BORROWERS: UDI Corporation and UDI II Corporation
GUARANTORS: Office Centre Corporation
LENDER: CoreStates Bank, N.A.
FACILITY: Ten Million Dollar ($10,000,000) secured line of credit
COLLATERAL: The facility shall be secured by a perfected first
priority security interest in the accounts receivable
and inventory and general
<PAGE> 2
intangibles and an assignment of the rebate checks
from the wholesalers due to UDI Corporation and
UDI - II Corporation.
USE OF PROCEEDS: For working capital of both UDI Corporations and IPO
related expenses of Office Centre Corporation,
including an investment of $1,500,000 in the Supply
Room and other Bank approved acquisitions.
ADVANCE FORMULA: Up to 85% of accounts receivable not exceeding 90 days
from invoice, excluding any contras, charge backs,
offsets or inter- company receivables.
INTEREST RATE: Prime Rate, to float.
INTEREST PAYMENTS: Interest shall be payable monthly in arrears on the
first business day of each month.
MINIMUM DRAWDOWN: Drawdown shall be in minimum increments of $250,000.
REPORTING REQUIREMENTS:
(1) Audited statements for the period ended
September 30, 1997 for UDI Corporation and
UDI - II Corporation by December 31, 1997
and there after quarterly consolidated
unaudited financial statements within 45
days of the respective quarter end.
2) Annual audited consolidated financial
statements within 120 days of year-end.
3) Borrower will provide weekly borrowing base
certificates and monthly reporting package
to include accounts receivables and accounts
payable agaings, inventory and other such
reports as CoreStates may reasonably
request.
OTHER CONDITIONS:
1) Restriction on guaranties and indebtedness
outside of this facility.
2) Restriction on dividends and distributions.
3) Advances to parent not to exceed $7,500,000
unless agreed to by Bank.
4) The Bank will audit the books and records of
UDI Corporation immediately. Cost to the
borrower will not exceed $7,500 per audit.
5) CoreStates Bank will remain primary bank of
account for UDI
<PAGE> 3
Corporation. All remittances must be
directed to a CoreStates Lockbox and applied
on a daily basis to reduce the loan.
6) Definitive acquisition agreements between
OCC and Supply Room, King Group, SOS Office
Supply, Greenwood, and other dealers as they
become available.
7) Employment agreement limiting the annual
compensation of Walter Gordonstein and Cliff
Davies to $200,000 each.
This commitment is accepted for and on behalf of UDI
Corporation this 10th day of December, 1997.
CoreStates Bank, N.A.
/s/ R. Thomas Esser
- -------------------------------------
R. Thomas Esser, Vice President
ACCEPTED: UDI Corporation DATE:______________
NAME:/s/ Walter Gordenstein
--------------------------------
Walter Gordenstein
TITLE: Pres.
-------------------------------
ACCEPTED: UDI-II Corporation DATE:______________
NAME:/s/ Walter Gordenstein
--------------------------------
Walter Gordenstein
TITLE: Pres.
-------------------------------
ACCEPTED: Office Centre Corporation DATE:______________
NAME:/s/ R.J. Gillon, Jr.
--------------------------------
Robert J. Gillon, Jr.
TITLE: Chairman
------------------------------
<PAGE> 1
EXHIBIT 10.27
S.P. RICHARDS CO.(TM)
1998 UDI CORPORATION
BUYING GROUP AGREEMENT
Applications must be mailed or faxed to your group headquarters address, as
shown below, by DECEMBER 31, 1997.
Mr. Walter Gordenstein
UDI Corporation
90 Tapley Street
Springfield, MA 01101
PROGRAM QUALIFICATIONS
Dealer must be a first call account of the S.P. Richards Company from January 1,
1998 through December 31, 1998. First call is defined as 60% of the dealer's
total wholesale purchases.
* First Call status is subject to the verification of S.P. Richards Company
local management. If you cease as a first call customer during the program year,
you will be removed from the program retroactive to January 1, 1998.
Order a minimum of 510 of the S.P. Richards Company's 1998 General Line catalog
by April 3, 1998.
Complete all sections of the Buying Group Application and submit it to your
buying group headquarters by DECEMBER 31, 1997.
Open (or maintain) an open credit account with the S.P. Richards Company.
GROUP VOLUME REBATE
Dealers meeting the program qualifications of our 1998 Buying Group program are
eligible to participate in our Group Volume Rebate based on the following
conditions:
REBATE TIERS AND PAYMENT
- ------------------------
* Non-first call dealers will receive rebate accrual in any month that purchases
exceed $50,000.
<PAGE> 2
TOTAL ANNUAL QUALIFYING GROUP VOLUME RATE
<TABLE>
<CAPTION>
<S> <C>
$10,000,000 1%
$20,000,000 2%
$30,000,000 3%
</TABLE>
GROUP VOLUME REBATE -- CONT'D
Rebate is paid on discounted purchases only; no rebate is paid on Net/Net
purchases. Net/Net purchases count toward reaching the volume rebate tiers.
Rebate will be paid by the end of February, 1999.
Any bad debt of group members will be deducted from the group's Total Qualifying
Volume before determining the rebate tier achieved for 1998.
DEALER REBATE QUALIFICATIONS
- ----------------------------
Dealer's total (Discountable and Net/Net) merchandise purchases, less credits,
must be $20,000 per month or greater. In any month that dealer's total volume is
less than $20,000, dealer does not receive rebate accrual and the volume does
not count toward reaching the group's rebate tier.
GROUP VOLUME REBATE QUALIFICATIONS
- ----------------------------------
The following adjustments will be made if overall group volume declines in 1998
versus 1997.
If group volume declines by 5%, the Group Volume Rebate is reduced by 1% point.
If group volume declines by 10%, the Group Volume Rebate is reduced by 2%
points. If group volume declines by 20%, the Group Volume Rebate is reduced by
3% points.
The maximum effect of a 20% decline in volume would be a 0% rebate. All account
history will transfer with a group member either into the group or out of the
group to insure total fairness in the program.
BASE VOLUME CALCULATION
- -----------------------
The group's Base Volume will be reduced to eliminate the effect of dealers who
cancel their affiliation with the group or are acquired by a dealer not
belonging to the group. Conversely, the group's Base Volume will be increased to
reflect the prior year purchases of dealers joining the group.
SPECIAL CATALOG PRICE
Dealers meeting the qualifications of the S.P. Richards Company Buying Group
Program are eligible for the special price of $6.95 per catalog; minimum order
of 510 catalogs is required.
<PAGE> 3
S.P. RICHARDS CO.(TM)
1998 BUYING GROUP PROGRAM
APPLICATION
Mail or fax this form to your buying group headquarters no later than DECEMBER
31, 1997. Your group headquarters will then forward it to the S.P. Richards
Company.
------------------------------------------------------------
- ---------------- UDI CORP. P.O. Box 5064 - Springfield, MA 01101-5064
BUYING GROUP NAME Fax signed page to: (413)732-333 or (413)781-4789
------------------------------------------------------------
- --------------------------------------------------------------------------------
DEALERSHIP NAME
- --------------------------------------------------------------------------------
DEALER STREET AND/OR P.O. BOX NO.
- --------------------------------------------------------------------------------
DEALER CITY AND STATE
- --------------------------------------------------------------------------------
DEALER'S FAX NUMBER
- --------------------------------------------------------------------------------
DEALER'S S.P. RICHARDS COMPANY ACCOUNT NUMBER
[ ] First call customer of S.P. Richards Company.
[ ] Not first call with S.P. Richards, but expect to have monthly purchases in
excess of $50,000.
- -------------------------------- ------------------------------------
DEALER AUTHORIZED SIGNATURE DATE
/s/ Walter Gordenstein 12/1/97
- -------------------------------- ------------------------------------
WALTER GORDENSTEIN S.P. RICHARDS COMPANY
BUYING GROUP APPROVAL AUTHORIZED SIGNATURE
AUTHORIZED SIGNATURE
<PAGE> 1
EXHIBIT 10.28
UNITED
STATIONERS(R)
- --------------------------------------------------------------------------------
1998
UDI
AGREEMENT
- --------------------------------------------------------------------------------
United Stationers is pleased to once again offer a financial incentive program
to your group for 1998. The objectives of our program continue to be to:
- - Recognize dealers who have made an annual first call commitment to
United Stationers.
- - Provide your group's management with the ability to readily predict
year end results and the financial benefits that accompany them.
ATTENTION...
- --------------------------------- ----------------------------------
Please carefully read this entire agreement and provide complete information as
requested on page 5. Then mail or fax the last page with your signature to:
UDI
P.O. Box 5064
Springfield, MA 01101-5064
Fax: 413-732-3333
AGREEMENT MUST BE RECEIVED BY YOUR GROUP BY DECEMBER 31, 1997
-------------------------------------------------------------
IN ORDER TO ENSURE FULL BENEFITS.
---------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
1998 AFFILIATED GROUP PROGRAM
- --------------------------------------------------------------------------------
PARTICIPATION REQUIREMENTS
In order to participate in United Stationers' 1998 Affiliated Group program, for
the period from January 1, 1998 to December 31, 1998, the dealer who is a group
member must be designated as a First Call United Stationers' customer. This
includes meeting the following criteria:
A. Submit to United a credit application and resale tax certificate,
unless you already have an active account with United Stationers Supply
Co. or Micro United. United reserves the right to establish (or not to
establish) lines of open account credit for its dealers as determined
by the dealer's experience, record of trade payments, financial
conditions, amount of credit needed, etc.
B. Use United for at least 60% of your wholesale purchases.
C. Be designated as a First Call customer by local United Stationers'
management from January 1, 1998 through December 31, 1998. IF YOU CEASE
AS A FIRST CALL CUSTOMER DURING THE PROGRAM YEAR, YOU WILL BE REMOVED
FROM THE PROGRAM RETROACTIVE TO JANUARY 1, 1998.
D. Purchase at least $20,000 per month from United Stationers. Qualified
purchases are those that count toward your VCD/DBP bracket -- regular,
promotional and alliance. In a month where you do not meet this $20,000
requirement, your purchases will not count towards the attainment of
the group's annual volume target and will not receive the Group Year
End Volume Rebate. You will, however, have the potential to receive
VCD/DBP for the month and Advertising Allowance if you meet the
standard discount and Advertising Allowance terms.
E. In order to receive monthly VOLUME CASH DISCOUNT OR DEALER BUYING PLAN,
(VCD/DBP), United's regular discount terms must be met: Payment must be
received in our bank by the 15th of the month subsequent to billing.
F. In order to receive the GROUP YEAR END VOLUME REBATE, your account must
be kept 100% current as of the 20th of each month. This requires
payment in full with one check and without deductions. In a month where
this requirement is not met, you will not earn Group Volume Rebate for
that month. In addition, your volume in that month will not count
toward the group's year end volume target.
G. Purchase a minimum of 500 United General Line Catalogs by April 4,
1998. If you do not meet this minimum requirement, you will be removed
from the entire program retroactive to January 1, 1998.
H. Satisfy all other terms and conditions as specified in United
Stationers' current Dealer Net Pricer.
I. In order to be considered as an active member of your group for all of
1998, page 5 of this agreement must be completed in full and forwarded
to your group's headquarters by December 31, 1997. Agreements received
after this date will be activated on the first of the month following
receipt, with the earliest possible start date being February 1, 1998.
J. Notify United by means of letter on your letterhead and a signed copy
of this agreement for your new group, at least 60 days prior to
changing from one Affiliated Group to
<PAGE> 3
- --------------------------------------------------------------------------------
1998 AFFILIATED GROUP PROGRAM
- --------------------------------------------------------------------------------
another. The Group Year End Volume Rebate will begin to accrue for your
new group on the first of the month subsequent to United's receipt of
your letter and new signed agreement. Prior to then, it will continue
to accrue with your old group.
BENEFITS
END COLUMN PRICING
Affiliated group members meeting all the participation requirements
will receive end column pricing on regular merchandise purchases.
VCD/DBP
A qualified dealer will receive monthly VCD/DBP based on United's
Enhanced, (First Call), schedule and terms. This is paid on both
regular and qualified promotional purchases.
ADVERTISING ALLOWANCE
A 2 1/2% Advertising Allowance will be paid subject to the terms of
United's current Advertising Allowance program. It will be based on
purchases from December 1, 1997 through November 30, 1998. It will be
paid in the form of a credit on your December 1998 United Stationers'
statement. General Line Catalog invoices for 1999 will be payable at
the same time. Any excess allowance that you may have has no cash
value.
GENERAL LINE CATALOG PRICE
As in past years, you will receive a special price on the 1999 General
Line Catalog. This price will be announced when catalog production and
material costs are finalized for the next edition.
GROUP YEAR END VOLUME REBATE
This will be paid by February 15, 1999 to your group's headquarters. No
additional claims will be honored after April 15, 1999. Qualifying
volume requirements will be based on the combined annual merchandise
purchases of group members. These include regular, promotional and
net/net purchases, excluding PrimeSource, Smart Buy and Micro United
volume. The rebate will be paid on regular and qualified promotional
merchandise purchases. United Stationers reserves the right to deduct
any bad debt or other individual member volume that does not meet these
qualifications. Please remember that any month in which you do not meet
the payment and volume criteria along with a First Call position
described on the previous page, your volume will not count toward your
group's annual volume target. The group volume requirements for 1998
are presented on the following page.
<PAGE> 4
- --------------------------------------------------------------------------------
GROUP YEAR END VOLUME REBATE
- --------------------------------------------------------------------------------
REQUIREMENTS
In 1998 your group will be able to earn up to 3% in year end rebates based on
the combined qualifying purchases of members who are registered as first call
with United Stationers. Qualifying purchases include those of regular,
promotional and net/net merchandise but exclude PrimeSource, Smart Buy and Micro
United volume. The rebate will be paid on regular and qualified promotional
merchandise purchases.
There are two parts to the 1998 requirements. The first consists of three volume
brackets and the second is a minimum requirement to maintain prior year volume.
<TABLE>
<CAPTION>
REBATE GROUP PERFORMANCE
<S> <C>
1% Maintain prior year group volume and achieve at
least $10 million in qualified 1998 group
purchases.
2% Maintain prior year group volume and achieve at
least $20 million in qualified 1998 group
purchases.
3% Maintain prior year group volume and achieve at
least $30 million in qualified 1998 group
purchases.
</TABLE>
Your group headquarters can provide you with an estimate of the 1997 group
volume that will have to be maintained in 1998. An actual amount will be
provided by United Stationers in January of 1998.
There is no requirement that your group's volume with United Stationers grow to
receive these rebates. There will be a reduction in the year end rebate
percentage if your group's 1998 purchases decline from 1997, based on the
following schedule:
- A 5% decrease in total group volume versus 1997, will result in the
loss of 1 percentage point of group rebate, even if the total volume is
still greater than the next lower fixed bracket.
- A 10% decrease in total group volume versus 1997, will result in the
loss of 2 percentage points of group rebate, even if the total volume
is still greater than the next lower fixed bracket.
- A 20% decrease in total group volume versus 1997, will result in the
loss of 3 percentage points of group rebate, even if the total volume
is still greater than the next lower fixed bracket.
Obviously, the maximum potential impact of these reductions will be a zero
rebate, versus a negative amount. In addition, the 1997 group base will be
adjusted downward on an ongoing basis to nullify the impact of dealers who leave
your group to go to another, simply drop out or are acquired by a non-member.
Thus the only reductions in volume that will have an impact are those that are
due to members diverting volume to other sources or purchasing less overall.
Similarly, the base for your group will be adjusted upward to include the 1997
United Stationers' volume of a new member. This ensures that new members have
the same incentive to support your group that you do. The $10 million, $20
million and $30 million brackets will still apply in determining the maximum
potential rebate amount.
<PAGE> 5
UNITED
STATIONERS(R)
1998 AFFILIATED GROUP PROGRAM
To participate in the 1998 Affiliated Group Program, please complete the
following in full and send to your group's headquarters, they will then forward
it to United Stationers.
THIS FORM MUST BE RECEIVED BY YOUR GROUP NO LATER THAN DECEMBER
31, 1997
- --------------------------------------------------------------------------------
UDI CORP. P.O. Box 5064 - Springfield, MA 01101-5064
Fax signed page to: (413)732-3333 or (413)781-4789
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Affiliated Group Name
- --------------------------------------------------------------------------------
Dealer Company
- --------------------------------------------------------------------------------
Dealer City and State
- --------------------------------------------------------------------------------
Dealer Phone Number
- --------------------------------------------------------------------------------
Dealer Fax Number
- --------------------------------------------------------------------------------
Dealer's United Account Number
- --------------------------------------------------------------------------------
Dealer Principal Signature/Date
/s/ Walter Gordenstein 12/1/97
- --------------------------------- ----------------------------------
Walter Gordenstein Affiliated Group Approval
United tationers Approval
<PAGE> 1
EXHIBIT 10.29
FORM OF
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
this day of __________, 1998, but effective as of _________, 1997 ("Effective
Date") by and between OFFICE CENTRE CORPORATION, a corporation with offices
located at New York, New York (the "Company") and YANCEY S. JONES ("Executive")
of THE SUPPLY ROOM COMPANIES, INC., a subsidiary of the Company ("TSRC").
RECITALS:
WHEREAS, Executive was previously employed as President and together
with related persons was the primary stockholder of TSRC; and
WHEREAS, a subsidiary of the Company has acquired, through merger, the
entire business and assets of TSRC, which business shall be conducted as an
integral subsidiary of the Company; and
WHEREAS, Executive was a key executive in TSRC with expertise in the
sales of TSRC products and knowledge of the operation of the business including,
but not limited to, sales and customer relation makers; and
WHEREAS, the Company desires to assure continuance of Executive's
service in connection with such business; and
WHEREAS, the parties agree that a covenant not to compete is essential
to the growth and stability of the business of TSRC as a subsidiary of the
Company for a period of time after its acquisition by the Company and to the
continuing viability of such business whenever the employment to which this
Agreement relates is terminated.
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth and the purchase price for TSRC, the parties agree as follows:
1. DUTIES. Upon the Effective Date, the Company shall employ and the
Executive agrees to be employed as President of TSRC, a subsidiary of the
Company, and as such to supervise and direct the entire operation of such
subsidiary and perform such different or other duties related to the business as
may from time to time be delegated by the Company. In addition, the Executive
will be responsible for identifying acquisition opportunities for the Company in
the office furniture industry, and will have the authority to negotiate and
enter into investment or acquisition agreements for consideration up to
$2,000,000 with each such company or companies, subject to the approval of the
president of the Company, such approval not to be unreasonably withheld. The
Executive shall devote substantially all of his time to such duties, except for
reasonable vacation periods, and shall observe and abide by the reasonable
corporate policies and decisions of the Company in all business matters and
shall be
<PAGE> 2
responsible to the Chief Executive Officer Company. The Executive shall perform
his duties from offices located in Richmond, Virginia.
2. TERM. The Executive's employment hereunder shall continue for a
period of three (3) years, beginning on the Effective Date of this Agreement
unless earlier terminated pursuant to the terms of this Agreement.
3. COMPENSATION. The Company shall pay and the Executive shall accept
as full consideration for the services to be rendered hereunder compensation
consisting of the following:
(a) An annual base salary of One Hundred Fifty Thousand
Dollars ($150,000) which may be increased by the Board of Directors of the
Company during the term of this Agreement and which shall be paid by the Company
in semi-monthly installments starting __________ ,19_;
(b) An annual bonus ranging from 0-100% of base salary
dependent on achievement of profitability objectives for the Executive's
division according to the following schedule:
<TABLE>
<CAPTION>
Achievement Cash Bonus
----------- ----------
<S> <C>
130% of profitability objective 100% of annual salary
115% of profitability objective 40% of annual salary
100% of profitability objective 25% of annual salary
Less than 100% of profitability objective No bonus awarded
</TABLE>
(c) Transferable (subject to federal and state securities law
restrictions) stock options for 50,000 shares, exercisable at the initial public
offering price of the Company, for a period of ten (10) years from the date of
grant, which vest ratably over a three (3) year period. The number of stock
options granted, but not the exercise price, shall be subject to adjustments for
any stock splits, stock dividends, combinations or subdivisions. Other stock
options may be granted yearly in the discretion of the Company's Compensation
Committee and approved by the Board of Directors of the Company;
(d) A Satellite Acquisition Bonus for actively assisting the
Company in acquiring other target companies identified by Executive and the
Company (including, but not limited to, conducting research, performing due
diligence, reviews of the acquirees and contributing to negotiating in
connection with any such acquisition) as follows:
.5% of the annualized sales in the twelve months preceding the
closing date of the Satellite Acquisition.
2
<PAGE> 3
(e) An automobile allowance of $600 per month for use at the
Executive's discretion to cover automobile expenses, including but not limited
to the following: automobile purchase or lease payments; gas, oil and
lubrication; insurance and routine maintenance; tire purchases; major repairs;
and traffic violations.
(f) Payment of 100% of medical insurance premiums for
Executive and Executive's spouse and family.
(g) Continuation of the $500,000 split-dollar life insurance
policy selected by the Company with Executive's designated beneficiary; month;
(h) A disability insurance policy with a total benefit of
$ ________ per month;
(i) Such other benefits as may be made available from time to
time to other management employees of the Company with similar years of service
as Executive;
(j) A minimum of three (3) weeks paid vacation each year;
(k) At Executive's option, attendance at such trips, meetings,
conferences or other activities offered by vendors of the Company or TSRC,
provided, however, that such activities do not interfere with Executive's duties
herewith; and
(I) Such other items as may be agreed upon by Executive and
the Company from time to time, including but not limited to, expense accounts.
4. ILLNESS, INCAPACITY OR DEATH.
(a) If at any time during the term of this Agreement, the
Executive becomes Disabled (as defined herein) and he has not breached any of
the provisions of this Agreement, compensation shall continue to be paid to him
as provided in Paragraph 3 above but only as to the first 90-day period during
which he shall be so disabled. The Company may, at its sole option, continue
payment of Executive's salary until he is able to return to work or for such
period greater than 90 days as the Company elects, or may terminate this
Agreement. For purposes of this section "Disabled" shall mean, with respect to
Executive, the inability of Executive, by reason of injury, illness or other
similar cause (as determined by a licensed physician, selected by the Executive
or his representative and approved by the President of the Company), to have
performed his duties and responsibilities for a period of one hundred eighty
(180) consecutive days.
(b) If Executive should die during the term of this Agreement,
Executive's employment and the Company's obligations hereunder shall terminate
as of the end of the month in which his death occurs.
3
<PAGE> 4
5. COVENANT NOT TO COMPETE AND NON-DISCLOSURE OF INFORMATION.
(a) COVENANT NOT TO COMPETE. The Executive acknowledges and
recognizes the highly competitive nature of the Company's business and the
goodwill, continued patronage, and specifically the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial asset of the
Company having been acquired through considerable time, money and effort.
Accordingly, in consideration of the execution of this Agreement, the Executive
agrees to the following:
(i) Subject to Section 7 of this Agreement, that during the
Restricted Period (as hereinafter defined) and within the
Restricted Area (as hereinafter defined), the Executive will
not, individually or in conjunction with others, directly or
indirectly, engage in any Business Activities (as hereinafter
defined), whether as an officer, director, proprietor,
employer, partner, independent contractor, investor (other
than as a holder solely as an investment of less than one
percent (1%) of the outstanding capital stock of a publicly
traded corporation), consultant, advisor, agent or otherwise.
(ii) That during the Restricted Period and within the
Restricted Area, the Executive will not, directly or
indirectly, compete with the Company by soliciting, inducing
or influencing any of the Company's clients which have a
business relationship with the Company at the time during the
Restricted Period to discontinue or reduce the extent of such
relationship with the Company.
(iii) That during the Restricted Period and within the
Restricted Area, the Executive will not (A) directly or
indirectly recruit, solicit or otherwise influence any
employee or agent of the Company to discontinue such
employment or agency relationship with the Company, or (B)
employ or seek to employ, or cause or permit any business
which competes directly or indirectly with the Business
Activities of the Company (the "Competitive Business") to
employ or seek to employ for any Competitive Business any
person who is then (or was at any time within six (6) months
prior to the date Executive or the Competitive Business
employs or seeks to employ such person) employed by the
Company.
(v) That during the Restricted Period the Executive will not
interfere with, or disrupt or attempt to disrupt any past,
present or prospective relationship, contractual or otherwise,
between the Company and any customer, employee or agent of the
Company.
(b) NON-DISCLOSURE OF INFORMATION. The Executive acknowledges
that the Company's trade secrets, private or secret processes, methods and
ideas, as they exist
4
<PAGE> 5
from time to time, customer lists and information concerning the Company's
products, services, training methods, development, technical information,
marketing activities and procedures, credit and financial data concerning the
Company and/or the Company's Clients (the "Proprietary information") are
valuable, special and unique assets of the Company, access to and knowledge of
which are essential to the performance of the Executive hereunder. In light of
the highly competitive nature of the industry in which the Company's business is
conducted, the Executive agrees that all Proprietary Information, heretofore or
in the future obtained by the Executive as a result of the Executive's
association with the Company shall be considered confidential.
In recognition of this fact, the Executive agrees that the
Executive, during the Restricted Period, will not use or disclose any of such
Proprietary Information for the Executive's own purposes or for the benefit of
any person or other entity or organization (except the Company) under any
circumstances unless such Proprietary Information has been publicly disclosed
generally or, unless upon written advice of legal counsel reasonably
satisfactory to the Company, the Executive is legally required to disclose such
Proprietary Information. Documents (as hereinafter defined) prepared by the
Executive or that come into the Executive's possession during the Executive's
association with the Company are and remain the property of the Company, and
when this Agreement terminates, such Documents shall be returned to the Company
at the Company's principal place of business, as provided in the Notice
provision (Section 9) of this Agreement.
(c) DOCUMENTS. "Documents" shall mean all original written,
recorded, or graphic makers whatsoever, and any and all copies thereof,
including, but not limited to: papers; books; records; tangible things;
correspondence; communications; telex messages; memoranda; work-papers; reports;
affidavits; statements; summaries; analyses; evaluations; client records and
information; agreements; agendas; advertisements; instructions; charges;
manuals; brochures; publications; directories; industry lists; schedules; price
lists; client lists; statistical records; training manuals; computer printouts;
books of account, records and invoices reflecting business operations; all
things similar to any of the foregoing however denominated. In all cases where
originals are not available, the term "Documents" shall also mean identical
copies of original documents or non-identical copies thereof.
(d) COMPANY'S CLIENTS. The "Company's Clients" shall be deemed
to be any persons, partnerships, corporations, professional associations or
other organizations for whom the Company has performed Business Activities.
(e) RESTRICTIVE PERIOD. The "Restrictive Period" shall be
deemed to be during the term of Executive's employment with the Company and two
(2) years following termination of the Executive's employment with the Company.
5
<PAGE> 6
(f) RESTRICTED AREA. The Restricted Area shall be deemed to
mean any state in which Company does business and within any other county of any
state in which the Company is providing service at the time of termination.
(g) BUSINESS ACTIVITIES. "Business Activities" shall be deemed
to include any business activities concerning selling, distributing,
manufacturing or marketing of office supply products or office furniture or
office related products provided by the Company and any additional activities
which the Company or any of its affiliates may engage in during the term of this
Agreement.
(h) COVENANTS AS ESSENTIAL ELEMENTS OF THIS AGREEMENT. It is
understood by and between the parties hereto that the foregoing covenants
contained in Paragraphs 5(a) and 5(b) are essential elements of this Agreement,
and that but for the agreement by the Executive to comply with such covenants,
the Company would not have agreed to enter into this Agreement. Such covenants
by the Executive shall be construed to be agreements independent of any other
provisions of this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this Agreement, or
otherwise, as a result of the relationship between the parties shall not
constitute a defense to the enforcement of such covenants against the Executive.
6. COVENANTS TO SURVIVE THIS AGREEMENT. The covenants of Executive
contained in Paragraphs 5(a) and 5(b) hereof shall each be construed as an
agreement independent of any other provision in this Agreement and shall survive
the expiration or termination of this Agreement or any part thereof without
regard to the reason therefor. The existence of any claim or cause of action of
Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
either covenant. Both parties hereby expressly agree and contract that it is not
the intention of either party to violate any public policy, statutory or common
law, and that if any sentence, paragraph, clause, or combination of the same of
Paragraphs 5(a) or 5(b) (including the provisions incorporated by reference) is
in violation of the law of any state where applicable, such sentence, paragraph,
clause, or combination of the same shall be void in the jurisdictions where it
is unlawful, and the remainder of such paragraph and this Agreement shall remain
binding on the parties hereto. It is the intention of both parties to make the
covenants of Paragraphs 5(a) and 5(b) binding only to the extent that it may be
lawfully done under existing applicable laws. In the event that any part of any
covenant of Paragraphs 5(a) or 5(b) is determined by a court of law to be overly
broad thereby making the covenant unenforceable, the parties hereto agree, and
it is their desire, that such court shall substitute a reasonable, judicially
enforceable limitation in place of the offensive part of the covenant and as so
modified the covenant shall be as fully enforceable as set forth herein by the
parties themselves in the modified form.
6
<PAGE> 7
7. AFFILIATION WITH MEGA FURNITURE. L.L.C. Notwithstanding Paragraph
5(a) above, Executive shall have the authority to act as Chairman of the Board
and Chief Executive Officer of Mega Office Furniture, L.L.C. ("Mega") and to
continue to engage in the sale, distribution, manufacture and marketing of
office furniture on behalf of Mega.
8. TERMINATION OF EMPLOYMENT.
(a) BY THE COMPANY. The Company may terminate the employment
of the Executive for Cause (as defined herein) and notice of such termination
shall be sent to Executive. "Cause" shall mean the Executive's (i) willful
misconduct, (ii) grossly negligent misconduct in the performance of his duties
to the Company, (iii) material breach of his obligations under this Agreement,
(iv) failure to comply with the lawful instructions of the Board of Directors or
(v) conviction of, or plea of nolo contendere to a crime involving moral
turpitude under federal, state or local laws. Notwithstanding the foregoing, a
crime involving tax makers shall not be considered a crime involving moral
turpitude.
(b) BY THE EXECUTIVE. Subject to the Company's rights pursuant
to Section 8(a)(i), (ii) and (v), at any time prior to the expiration of the six
(6) month period following the date hereof, the Executive may terminate the
Executive's employment under this Agreement for Good Reason (as hereafter
defined) by giving not less than thirty (30) days written notice to the Company
setting forth the grounds stating there is "Good Reason." In such event,
(i) The Executive shall be paid for the remainder of the then
current term of this Agreement, at such times as payment was
theretofore made, the salary required under Section 3 that the
Executive would have been entitled to receive during the
remainder of the then current term of this Agreement had such
termination not occurred; and
(ii) The Company shall maintain in full force and effect for
the continued benefit of the Executive for the remainder of
the then current term of this Agreement, all employee benefit
plans and programs or arrangements in which the Executive was
entitled to participate immediately prior to such termination,
provided that continued participation is possible under the
general terms and provisions of such plans and programs. In
the event that Executive's participation in any such plan or
program is barred, the Corporation shall arrange to provide
the Executive with benefits substantially similar to those
which the Executive was entitled to receive under such plans
and programs;
(iii) All options received by Executive pursuant to Paragraph
3(i) hereof shall immediately vest and shall be exercisable in
accordance with the terms thereof; and
7
<PAGE> 8
(iv) The Executive shall receive the sum of Three Million
Dollars ($3,000,000) as satisfaction of the earnout
obligations set forth in the Amended and Restated Merger
Agreement dated as of April 29, 1998 between the Company and
TSRC.
For purposes of this Agreement, "Good Reason" shall mean:
(i) The assignment of duties to the Executive by the
Corporation which are materially different from the
Executive's duties on the date hereof, any diminution of
responsibility or other actions taken by the Company which
result in the Executive having significantly less authority
and/or responsibility than he had heretofore; or
(ii) The removal of the Executive from or any failure to
re-elect him to the position of President of TSRC.
It shall be within the Executive's sole and absolute
discretion and judgment whether Good Reason exists, and such determination shall
be conclusive absent bad faith.
9. WITHHOLDING. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or the Executive's
estate or beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other arrangements
pursuant to which it is satisfied that such tax and other payroll obligations
will be satisfied in a manner complying with applicable law or regulation.
1O. MISCELLANEOUS.
(a) Governing law. The validity, construction, interpretation
and enforceability of this Agreement and the capacity of the parties shall be
determined and governed by the laws of the State of Virginia.
(b) Assignment. This Agreement is personal to each of the
parties hereto, and neither party may assign or delegate any of the rights or
obligations hereunder without first obtaining a written consent of the other
party.
(c) Rights and Remedies. The parties hereto recognize that the
services to be rendered under this Agreement by Executive are special, unique,
and of extraordinary character. Either party may, at its option, terminate this
Agreement or elect to institute and prosecute proceedings in any court of
competent jurisdiction, either in law or equity, to obtain damages, to enforce
specific performance of the Agreement, to
8
<PAGE> 9
enjoin the other party as appropriate and to recover reasonable attorneys' and
costs of prosecuting such action in the event of the occurrence of any of the
following:
(1) if there is a substantial breach by either party
of any of the terms and conditions of this Agreement (other
than those set forth in paragraphs 5 and 6 herein), and such
breach remains uncured after the expiration of sixty (60) days
from the date of receipt of written notice by other party, or
(2) if there is a breach by Executive of any of the
covenants of paragraphs 5 and 6 of this Agreement.
(d) Collateral Agreements. This Agreement constitutes the
entire Agreement between the parties respecting the employment of Executive, and
there are no representations, warranties or commitments, except as set forth
herein. This Agreement may be amended only by an instrument in writing executed
by the parties hereto.
(e) Notices. Any notice, request, demand or other
communication hereunder shall be in writing and shall be deemed to be duly given
when personally delivered to an officer of the Company or to Executive, as the
case may be, or when delivered by mail at the following addresses:
If to the Company:
OFFICE CENTRE CORPORATION
38 East 32nd Street
New York, New York 10016
Attention: Robert J. Gillon, Jr., President
If to the Executive:
YANCEY S. JONES
11311 Dairy Lane
Ashland, VA 23005
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first written above.
COMPANY:
OFFICE CENTRE CORPORATION
By:
-----------------------------------
Robert J. Gillon, Jr., President
EXECUTIVE:
--------------------------------------
YANCEY S. JONES
10
<PAGE> 1
EXHIBIT 21.01
SUBSIDIARIES OF OFFICE CENTRE CORPORATION
Name of Entity State of Incorporation
- -------------- ----------------------
UDI Corp. Massachusetts
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports accompanying the financial statements of the
companies and for the dates as indicated in the accompanying table; such
reports are contained in the Registration Statement and Prospectus.
<TABLE>
<CAPTION>
Company Report Date
- ------- -----------
<S> <C>
Office Centre Corporation and Subsidiaries February 6, 1998
(except for Note C, as to which
the date is March 16, 1998)
The Supply Room Companies, Inc. February 19, 1998
New England Office Supply, Inc. February 9, 1998
(except for Notes C
and D, as to which the
date is April 9, 1998)
King Office Supply, Inc. and Subsidiary February 9, 1998
Sierra Office Systems and Products, Inc. April 30, 1998
Office Solutions Business Products and Services, Inc. February 13, 1998
Greenwood Outfitters, Inc. January 30, 1998
Georgia Impression Products, Inc. March 13, 1998
Mega Office Furniture, L.L.C. February 25, 1998
</TABLE>
We consent to the use of the aforementioned reports in the Registration
Statement and Prospectus, and to the use of our name as it appears under the
caption "Experts."
/S/ GRANT THORNTON LLP
GRANT THORNTON LLP
New York, New York
May 21, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001059432
<NAME> OFFICE CENTRE CORPORATION
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 371,146 1,394,704
<SECURITIES> 0 0
<RECEIVABLES> 20,100,058 16,319,447
<ALLOWANCES> 341,292 383,489
<INVENTORY> 0 0
<CURRENT-ASSETS> 471,612 825,197
<PP&E> 606,812 640,368
<DEPRECIATION> 200,493 224,957
<TOTAL-ASSETS> 25,466,615 24,025,961
<CURRENT-LIABILITIES> 24,955,756 23,965,951
<BONDS> 0 0
0 0
0 0
<COMMON> 1,405 1,434
<OTHER-SE> 391,220 (59,658)
<TOTAL-LIABILITY-AND-EQUITY> 25,466,615 24,025,961
<SALES> 0 0
<TOTAL-REVENUES> 11,001,688 2,599,751
<CGS> 5,488,514 1,306,878
<TOTAL-COSTS> 10,469,981 3,533,321
<OTHER-EXPENSES> 104,774 84,305
<LOSS-PROVISION> 109,943 42,197
<INTEREST-EXPENSE> 189,410 100,986
<INCOME-PRETAX> 426,933 (1,017,875)
<INCOME-TAX> 244,099 (302,026)
<INCOME-CONTINUING> 182,834 (715,849)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 182,834 (715,849)
<EPS-PRIMARY> .13 (.50)
<EPS-DILUTED> .13 (.50)
</TABLE>
