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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 7, 1999
OFFICELAND INC.
(Exact name of registrant as specified in its charter)
Ontario, Canada
(State or other jurisdiction of incorporation)
86732971
(Canadian Federal Tax Account No.)
312 Dolomite Drive, Suite 212
Downsview, Ontario M3J 2N2
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (416) 736-4000
Item 2. Acquisitions of Assets
Acquisition of Eastern Equipment Brokers, Inc.
Pursuant to a Stock Purchase Agreement made effective January 1, 1999,
Officeland Inc. ("Officeland") acquired from John O'Connor all of the capital
stock of Eastern Equipment Brokers, Inc., a closely-held Connecticut
corporation("EEB"), for the aggregate consideration of U.S. $1,400,000 in cash
and 675,000 shares of Officeland common shares, plus an additional earn-out
amount payable in common shares subject to EEB's future earnings. EEB is in the
business of purchasing and reselling used photocopiers, re-manufacturing used
Xerox and Canon copiers for resale, and selling copier supplies.
Acquisition of Digital Document Solutions, Inc.
Pursuant to an Asset Purchase Agreement made effective January 1, 1999,
Officeland Inc. ("Officeland") acquired all of the assets of Digital Document
Solutions, Inc., a closely-held Connecticut corporation ("DDS"), for the
aggregate consideration of U.S. $600,000 in cash. DDS is in the business of
selling copier supplies, as well as, renting, leasing, selling and servicing
re-manufactured Xerox and Canon copiers to end users.
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Item 7(c). Exhibits
Exhibit Numbers Description of Exhibits
- --------------- -----------------------
2 Stock Purchase Agreement By and Between Officeland Inc. and
John O'Connor, made effective as of January 1, 1999. (1)
2.1 Asset Purchase Agreement By and Among Officeland Inc., Digital
Document Solutions, Inc. and John O'Connor, made effective as
of January 1, 1999. (1)
20 Press release of Officeland Inc. dated March 29, 1999
announcing the acquisitions of all of the capital stock of
Eastern Equipment Brokers, Inc. and all of the assets of
Digital Document Solutions, Inc. (1)
Notes
(1) Filed herewith.
Additional exhibits and financial information will be filed by
amendment.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OFFICELAND INC.
(Registrant)
Dated: April 7, 1999 By: /s/ Marvyn Budd
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Marvyn A. Budd
Chief Executive Officer, President
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EXHIBIT 2 STOCK PURCHASE AGREEMENT
Stock Purchase Agreement made effective as of January 1, 1999 between
Officeland Inc., an Ontario corporation with principal offices located at 312
Dolomite Drive, Downsview, Ontario, Canada M3J 2N2 (the "Buyer"), and John
O'Connor, an individual residing at 141 Fair Oak Drive, Fairfield, Connecticut
06430 (the "Seller"). The Buyer and Seller are referred to herein collectively
as the "Parties," and individually as a "Party."
WHEREAS the Seller owns all of the outstanding capital stock of Eastern
Equipment Brokers, Inc. (the "Subject Shares"), a Connecticut corporation with
principal offices located at 10 Island Brook Avenue, Bridgeport, Connecticut,
06606 (the "Company");
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WHEREAS the Seller, as sole shareholder of the Company, for the purpose
of inducing Buyer to enter into this Agreement, agrees to make certain
representations and covenants concerning the Company and the Subject Shares;
WHEREAS this Agreement contemplates a transaction in which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer, the
Subject Shares for the purchase consideration consisting of cash and Buyer's
common shares;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1 Definitions.
1.1 "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses.
1.2 "Buyer" has the meaning set forth in the preface above.
1.3 "Closing" has the meaning set forth in Section 2.5 below.
1.4 "Closing Date" has the meaning set forth in Section 2.5 below.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Company" has the meaning set forth in the preface above.
1.7 "Confidential Information" means any information concerning
the businesses and affairs of the Company or the Buyer that is not already
generally available to the public.
1.8 "Disclosure Schedule" has the meaning set forth in Section 4
below.
1.9 "Earn-Out Period" has the meaning set forth in Section 2.3
below.
1.10 "Earn-Out Shares" has the meaning set forth in Section 2.3
below.
1.11 "EBITDA" has the meaning set forth in Section 2.3 below.
1.12 "Environmental, Health, and Safety Requirements" shall mean
all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as
amended and as now or hereafter in effect.
1.13 "Financial Statements" has the meaning set forth in Section
4.6 below.
1.14 "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
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1.15 "Indemnified Party" has the meaning set forth in Section 8.2
below.
1.16 "Indemnifying Party" has the meaning set forth in Section 8.2
below.
1.17 "Intellectual Property" means (i) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (ii)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (iii) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (iv) all mask works and all applications,
registrations, and renewals in connection therewith, (v) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (vi) all computer software (including data and related
documentation), (vii) all other proprietary rights, and (viii) all copies and
tangible embodiments thereof (in whatever form or medium).
1.18 "Knowledge" means actual knowledge after reasonable
investigation.
1.19 "Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
1.20 "Most Recent Fiscal Year End" has the meaning set forth in
Section 4.6 below.
1.21 "Most Recent Fiscal Period End" has the meaning set forth in
Section 4.6 below
1.22 "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
1.23 "Party" has the meaning set forth in the preface above.
1.24 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
1.25 "Purchase Consideration" has the meaning set forth in Section
2.2 below.
1.26 "Purchase Shares" has the meaning set forth in Section 2.2
below.
1.27 "Securities Act" means the Securities Act of 1933, as amended.
1.28 "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (i) mechanic's,
materialmen's, and similar liens, (ii) liens for Taxes not yet due and payable
[or for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings], (iii) purchase money liens and liens securing rental payments
under capital lease arrangements, and (iv) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
1.29 "Seller" has the meaning set forth in the preface above.
1.30 "Subject Shares" means all of the outstanding capital stock of
the Company.
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1.31 "Subscription and Registration Rights Agreement" or "Subscription
Agreement" has the meaning set forth in Section 2.2 below and means the
subscription and registration rights agreement & stockholder's certificate
annexed hereto as Exhibit A to be entered into between the Seller and Buyer.
1.32 "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
1.33 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.34 "Third Party Claim" has the meaning set forth in Section 8.2
below.
2 Purchase and Sale of the Subject Shares.
2.1 Basic Transaction. Section 4.2 of the Disclosure Schedule sets
forth the number of Subject Shares owned by the Seller. At the Closing, on and
subject to the terms and conditions of this Agreement, the Seller will transfer,
convey and deliver to the Buyer all of his right, title and interest in and to
all of the Subject Shares for the consideration specified in this Section 2.
2.2 Purchase Consideration. As consideration for the Subject Shares,
the Buyer shall deliver to the Seller the Purchase Consideration, which shall
consist of (i) U.S.$1,400,000 in cash (the "Cash Payment") and (ii) 675,000
shares of Buyer's common shares (the "Purchase Shares"), the issuance of such
shares to be effected according to the terms of a separate Subscription and
Registration Rights Agreement (the "Subscription Agreement") between the Seller
and the Buyer. The Purchase Consideration shall be paid as provided below in
this Section 2.2. At the Closing, and subject to the terms set forth in the
Subscription Agreement, the Buyer shall deliver the Cash Payment. Subject to the
terms set forth in the Subscription Agreement, the Buyer shall deliver the
Purchase Shares to the Seller on January 1, 2001.
2.2.1 Section 338 Election. In the event the Buyer makes an
election under Code Section 338 as set forth in Section 8.1 of this Agreement,
the Buyer agrees to pay interest ("Interest") on the portion of the Tax payment
accelerated and paid by the Seller as a direct result of such election by the
Buyer. The rate of Interest shall equal the prime rate, as set forth in The Wall
Street Journal or similar publication, plus 2%. The Interest shall be payable on
a quarterly basis commencing after such accelerated Tax payment is paid by the
Seller and shall cover the period from the date the accelerated Tax payment is
paid to the date the accelerated Tax payment would have been due if no election
under Section 338 was made. Section 2.2.1 of the Disclosure Schedule sets forth
the estimated accelerated Tax payment and the corresponding estimated Interest
payable by the Buyer under this Agreement.
2.2.2 Tax on Purchase Price Allocation. The Buyer shall pay to
Seller at the Closing an amount set forth in Schedule 2.2.2 attached hereto for
certain Tax incurred by the Seller as a result of certain Purchase Price
allocations made by the Buyer.
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2.3 Additional Consideration. Subject to the terms of the Subscription
Agreement, as additional consideration, Buyer shall pay to Seller up to a
maximum of 350,000 common shares (the "Earn-Out Shares") of the Buyer, to which
the Seller may be become entitled, based upon the Company's audited earnings
before income taxes, depreciation and amortization, excluding inter-company
administration and management charges ("EBITDA") for the three year period
commencing December 1, 1998 (the "Earn-Out Period"). Earn-Out Shares earned in
the years commencing December 1, 1998 and 1999 will be paid to Seller on March
15, 2001 and Earn-Out Shares earned in the year commencing December 1, 2000,
will be paid to Seller on March 15, 2002. The number of Earn-Out Shares to be
paid to Seller, if any, will be based upon the following:
(i) For each U.S.$5.00 of Company EBITDA for the fiscal year
commencing December 1,1998 ("1998 EBITDA") in excess of
U.S.$700,000, Seller will receive one Earn-Out Share;
(ii) For each U.S.$5.00 of Company EBITDA for the fiscal year
commencing December 1, 1999 ("1999 EBITDA") in excess of
U.S.$800,000 or 1998 EBITDA, whichever is greater, Seller will
receive one Earn-Out Share;
(iii) For each U.S.$5.00 of Company EBITDA for the fiscal year
commencing December 1, 2000 in excess of U.S. $900,000, 1998
EBITDA or 1999 EBITDA, whichever is greater, Seller will
receive one Earn-Out Share;
(iv) In the event that during the Earn-Out Period, the Company,
with the consent of the Buyer, acquires or merges with another
business (the "Target"), the Company's EBITDA may be adjusted
for the purposes of determining the amount of Earn-Out Shares
earned by the Seller. Accordingly:
(x) if Target's EBITDA for the fiscal year immediately
preceding the merger or acquisition ("Target's
Initial EBITDA") is exceeded in Target's fiscal
year subsequent to the acquisition or merger (the
"Target's First Excess EBITDA"), then Target's
First Excess EBITDA will be credited to Company's
EBITDA for the year in which it is earned;
(y) if Target's Initial EBITDA plus Target's First
Excess EBITDA is exceeded in Target's second fiscal
year subsequent to the acquisition or merger (the
"Target's Second Excess EBITDA"), then Target's
Second Excess EBITDA will be credited to Company's
EBITDA for the year in which it is earned; and
(z) if Target's Initial EBITDA plus Target's First
Excess EBITDA plus Target's Second Excess EBITDA is
exceeded in Target's third fiscal year subsequent
to the acquisition or merger (the "Target's Third
Excess EBITDA") the Target's Third Excess EBITDA
will be credited to
Company's EBITDA for the year in which it is
earned.
For the purpose of calculating the additional Earn-Out Shares
the Seller may be entitled to in connection with any Target
Acquisition, all calculations under this Section 2.3(iv) shall
reflect Target's fiscal year as commencing December 1st during
the Earn-Out Period.
(v) For the sole purpose of clarity and illustration, Schedule 2.3
attached hereto set forth, based upon certain assumptions, the
applications under this Section 2.3.
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2.4 Acceleration of Delivery of Shares. Notwithstanding the dates set
forth above for the delivery of the Purchase Shares and the Earn-Out Shares:
(i) In the event Marvyn Budd ceases to be Chief Executive Officer
of the Buyer prior to January 1, 2001 (a "Budd Event"), then,
at Seller's option, Seller will receive 33 1/3% of the
Purchase Shares on January 1st of the succeeding calendar year
in which the Budd Event occurred, and 33 1/3% of the Purchase
Shares on January 1st of each calendar year thereafter or
until January 1, 2001, when all Purchase Shares will be
received by Seller;
(ii) If prior to the end of Earn-Out Period, Buyer were to be
acquired or merged (the "Acquisition") with another entity in
which Acquisition Buyer would not be the surviving entity,
then Seller, upon the closing of the Acquisition (the
"Acquisition Closing"), will receive all Purchase Shares not
theretofore delivered and a number of Earn-Out Shares, subject
to the limitations set forth in Section 2.3 above, determined
by multiplying (i) the number of Earn-Out Shares theretofore
earned prior to the Acquisition Closing, by (ii) the average
of the bid and asked closing prices of Buyer's Common Shares,
as reported on the Nasdaq SmallCap Market, or any other
exchange or reporting system on which the Buyer's Common
Shares may be quoted (the "Nasdaq Price"), for the thirty (30)
trading days prior to the Acquisition Closing, and subtracting
the result from U.S.$1,750,000 (the "Balance") and dividing
the Balance by the Nasdaq Price for the fifteen (15) trading
days prior to the Acquisition Closing;
(iii) Subject to the terms and conditions of Seller's Employment
Agreement attached hereto as Exhibit C, in the event Seller is
terminated without cause from his employment with Buyer during
the Earn-Out Period, then Seller will be entitled to receive
upon termination all Purchase Shares not theretofore delivered
and the remainder of the 350,000 Earn-Out Shares not
previously earned by Seller.
(iv) For the sole purpose of clarity and illustration, Schedule 2.4
attached hereto sets forth, based upon certain assumptions,
the applications under this Section 2.4.
2.5 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Moskowitz Altman &
Hughes LLP in New York, New York, on March 31, 1999, or upon the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby, commencing at 10:00 A.M. local time (the
"Closing Date").
2.5.1 Termination Fee. In the event the Closing does not occur
prior to 15 business days from the Closing Date as a result of the failure of
the Buyer to satisfy a term or condition under this Agreement, the Buyer shall
pay to Seller a termination fee in the amount of $12,500 within 30 days of the
date of such termination of this Agreement. Immediately after such payment by
the Buyer of the termination fee, this Agreement shall become null and void and
the Parties shall have no further rights and or liabilities under this
Agreement.
2.6 Closing Documents. As of the date hereof, (i) the Seller has
delivered to the Buyer the various certificates, instruments, and documents
referred to in Section 6.1 below, (ii) the Buyer has delivered to the Seller the
various certificates, instruments, and documents referred to in Section 6.2
below, (iii) the Seller has delivered to the Buyer stock certificates
representing all of the Subject Shares, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) the Buyer has delivered to the Seller
the Purchase
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Consideration in accordance with the payment terms set forth in Section 2.2
above.
3 Representations and Warranties Concerning the Transaction.
3.1 Representations and Warranties of the Seller. Seller represents and
warrants to the Buyer that the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3.1).
3.1.1 Authorization of Transaction. Seller has full power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Seller, enforceable in accordance with its terms and conditions. Seller
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
3.1.2 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject, or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by which he
or it is bound or to which any of his or its assets is subject.
3.1.3 Brokers' Fees. Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.1.4 Investment. Subject to the Subscription Agreement, the
Seller (i) understands that the Purchase Shares have not been registered under
the Securities Act, or under any state securities laws, and are being offered
and sold in reliance upon federal and state exemptions for transactions not
involving any public offering, (ii) is acquiring the Purchase Shares solely for
its own account for investment purposes, and not with a view to the distribution
thereof, (iii) is a sophisticated investor with knowledge and experience in
business and financial matters, (iv) has received certain information concerning
the Buyer and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in holding the
Purchase Shares, and (v) is able to bear the economic risk and lack of liquidity
inherent in holding the Purchase Shares.
3.1.5 Subject Shares. The Seller holds of record and owns
beneficially the number of Subject Shares set forth in Section 4.2 of the
Disclosure Schedule, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. The Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the Seller to
sell, transfer, or otherwise dispose of any capital stock of the Company (other
than this Agreement). The Seller is not a party to any voting trust, proxy, or
other agreement or understanding with respect to the voting of any capital stock
of the Company.
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3.2 Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this Section 3.2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3.2).
3.2.1 Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
3.2.2 Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions. The Buyer need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
3.2.3 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject.
3.2.4 Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
3.2.5 Investment. The Buyer is not acquiring the Subject
Shares with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
3.2.6 Subject to the terms and conditions contained in this
Agreement, the Buyer agrees to pay all costs of collection, including reasonable
attorneys' fees, incurred by the Seller as a result of any failure by the Buyer
to deliver the Purchase Consideration and Earn-Out Shares, if any, pursuant to
Section 2.2 and 2.3 set forth above.
3.2.7 Neither the execution and delivery of this Agreement by
the Buyer nor the consummation or performance of any of the transactions
contemplated by this Agreement by the Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the contemplated transactions
pursuant to:
3.2.7.1 any provision of Buyer's charter documents
or other organizational documents;
3.2.7.2 any resolution adopted by the board of
directors or the shareholders of Buyer;
3.2.7.3 any legal requirement, judgment or order
to which the Buyer may be bound.
3.2.8 The Buyer is not and will not be required to obtain any
consent from
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any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the contemplated transactions under
this Agreement.
4 Representations and Warranties Concerning the Company. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 4 are correct and complete in all material respects as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made as of the date of this Agreement), except as set forth in the
disclosure schedule delivered by the Seller to the Buyer on the date hereof and
initialed by the Parties (the "Disclosure Schedule"). Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless the Disclosure Schedule identifies the
exception with particularity and describes the relevant facts in detail to the
best of the Seller's knowledge. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
4.1 Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. The Company has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it, except with respect to all foreign jurisdictions, to the best of
the Seller's knowledge the Company has full corporate power and authority and
all licenses, permits, and authorizations necessary to carry on the businesses
in which it is engaged and to own and use the properties owned and used by it in
such foreign jurisdictions. Section 4.1 of the Disclosure Schedule lists the
directors and officers of the Company. The Seller has delivered to the Buyer
correct and complete copies of the charter and bylaws of the Company (as amended
to date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Company are correct and complete. The Company is not in default under or in
violation of any provision of its charter or bylaws.
4.2 Capitalization. The entire authorized capital stock of the Company
consists of 5,000 shares of common stock, no par value, of which 100 are issued
and outstanding. All of the issued and outstanding shares of the Company's
common stock have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the Seller as set forth in Section 4.2
of the Disclosure Schedule. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Company to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Company.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction
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of any government, governmental agency, or court to which the Company is subject
or any provision of the charter or bylaws of any of the Company or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Company is a party or by which it
is bound or to which any of its assets is subject (or result in the imposition
of any Security Interest upon any of its assets). The Company need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except with respect
to foreign jurisdictions, to the best of the Seller's knowledge, the Company
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement in such
foreign jurisdiction.
4.4 Brokers' Fees. The Company does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
4.5 Title to Assets. The Company has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown in the Financial Statements or acquired after the date
thereof, free and clear of all Security Interests, except for properties and
assets disposed of in the Ordinary Course of Business since the date of the
Financial Statements.
4.6 Financial Statements. Attached hereto as Exhibit B are (i) the
unaudited balance sheet and statements of income, changes in stockholders'
equity, and cash flow (collectively the "Financial Statements") as of and for
the fiscal year ended December 31, 1995 and (ii) the audited Financial
Statements for the fiscal year ended, December 31, 1996, and December 31, 1997
(the "Most Recent Fiscal Year End") for the Company and the unaudited Financial
Statements for the fiscal year ended December 31, 1998 (the "Most Recent Fiscal
Period End") for the Company. The Financial Statements (including the notes that
may be required by GAAP) have been prepared in accordance with GAAP (except the
Financial Statements for the Most Recent Fiscal Period do not contain notes
thereto) applied on a consistent basis throughout the period covered thereby,
present fairly the financial condition and the results of operations of the
Company as of such periods, are correct and complete, and are consistent with
the books and records of the Company (which books and records are correct and
complete), subject, in the case of the Financial Statements for the Most Recent
Fiscal Period, to normal recurring year-end adjustments consistent with the
Company's past practices.
4.7 Events Subsequent to Most Recent Fiscal Year End. Except as set
forth in Section 4.7 of the Disclosure Schedule, since the Most Recent Fiscal
Year End, there has not been any material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
the Company. Without limiting the generality of the foregoing, since that date:
4.7.1 the Company has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business except as to the Accumulated
Adjustments Account distributions the Company will make to Seller prior to
Closing in the amounts set forth in Section 4.7.1 of the Disclosure Schedule;
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4.7.2 the Company has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) outside the Ordinary Course of Business;
4.7.3 no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) outside the
Ordinary Course of Business to which the Company is a party or by which it is
bound;
4.7.4 the Company has not imposed any Security Interest upon
any of its assets, tangible or intangible;
4.7.5 the Company has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of Business;
4.7.6 the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) outside the
Ordinary Course of Business;
4.7.7 the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation outside the Ordinary Course of
Business;
4.7.8 the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
4.7.9 the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business except that the Company will forgive certain loans
by the Company prior to Closing in the amount as set forth in Section 4.7.9 of
the Disclosure Schedule;
4.7.10 the Company has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
4.7.11 there has been no change made or authorized in the
charter or Bylaws of the Company;
4.7.12 the Company has not issued, sold, or otherwise disposed
of any of its capital stock, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
4.7.13 the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
4.7.14 the Company has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its property
outside the Ordinary Course of Business.;
4.7.15 the Company has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
4.7.16 the Company has not entered into any employment
contract or collective bargaining agreement, written or oral, or materially
modified the terms of any existing such contract or agreement;
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4.7.17 the Company has not granted any increase in the base
compensation of the Seller or any of its directors, officers, and employees
outside the Ordinary Course of Business except as set forth in Section 4.7.17 of
the Disclosure Schedule;
4.7.18 the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
4.7.19 the Company has not made any other change in employment
terms for any of its directors, officers, and employees outside the Ordinary
Course of Business;
4.7.20 the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business; and
4.7.21 there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Company.
4.8 Undisclosed Liabilities. The Company does not have any Liability
(and there is no present basis for any present and future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability and to the best of Seller's knowledge,
there is no basis for future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Financial
Statements (rather than in any notes thereto) and (ii) Liabilities which have
arisen after the Most Recent Fiscal Year End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
4.9 Legal Compliance. To the best of the Seller's knowledge, each of
the Company, and its predecessors and affiliates has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply.
4.10 Tax Matters.
4.10.1 The Company has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any Tax Return)
have been paid. The Company is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Company does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
4.10.2 The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
4.10.3 Neither the Seller nor any director or officer (or
employee responsible
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for Tax matters) of the Company expects any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax Liability of the Company either (i) claimed or
raised by any authority in writing or (ii) as to which any of the Seller and the
directors and officers (and employees responsible for Tax matters) of the
Company has Knowledge based upon personal contact with any agent of such
authority. Section 4.10 of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to the Company for
taxable periods ended on or after October 31, 1993, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the
subject of audit. The Seller has delivered to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since October 31,
1993.
4.10.4 The Company has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
4.10.5 The Company has not filed a consent under Code Section
341(f) concerning collapsible corporations. The Company has not made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code Section 280G. The Company has not been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). The
Company has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662. The Company is not a party to any
Tax allocation or sharing agreement. The Company (i) has not been a member of an
Affiliated Group (within the meaning of Code Section 1504(a) or similar
provision of state, local or foreign law) filing a consolidated federal income
Tax Return (other than a group the common parent of which was the Company) or
(ii) does not have any Liability for the Taxes of any Person (other than the
Company ) under Reg. Section 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise.
4.10.6 Section 4.10 of the Disclosure Schedule sets forth the
following information with respect to the Company as of the most recent
practicable date: (i) the basis of the Company in its assets; and (ii) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to the
Company.
4.10.7 The unpaid Taxes of the Company (i) did not, as of the
Most Recent Fiscal Year End, exceed the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Financial Statements (rather
than in any notes thereto) and (ii) do not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Company in filing its Tax Returns.
4.10.8 The Company, and any predecessor of the Company, has
been a validly electing S corporation within the meaning of Code Sections 1361
and 1362 at all times during its existence and the Company will be an S
corporation up to and including the Closing Date.
4.10.9 The Tax Disclosure Schedule identifies each Company
Subsidiary that is a "qualified subchapter S subsidiary" within the meaning of
Code Section 1361(b)(3)(B).
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Each Subsidiary so identified has been a qualified subchapter S subsidiary at
all time since the date shown on such schedule up to and including the Closing
Date.
4.10.10 The Company will not be liable for any Tax under Code
Section 1374 in connection with the deemed sale of the Company's assets
(including the assets of any qualified subchapter S subsidiary) caused by the
Section 338(h)(10) Election. Neither the Company nor any qualified subchapter S
subsidiary of the Company has, in the past 10 years, (A) acquired assets from
another corporation in a transaction in which the Company's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor or (B) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.
4.11 Intellectual Property.
4.11.1 The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property, free
and clear of any Security Interest or other restriction, necessary or desirable
for the operation of the business of the Company as presently conducted. Each
item of Intellectual Property owned or used by the Company immediately prior to
the Closing hereunder will be owned or available for use by the Company on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Company has taken all necessary and desirable action to maintain and protect
each item of Intellectual Property that it owns or uses.
4.11.2 The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Seller and the directors and officers
(and employees with responsibility for Intellectual Property matters) of the
Company has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of any of the
Seller and the directors and officers (and employees with responsibility for
Intellectual Property matters) of the Company, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
4.11.3 Section 4.11 of the Disclosure Schedule (i) lists all
of the trademarks, unregistered trademarks, service marks, trade dress, logos,
trade names, and corporate names used in the Company's business, together with
all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; (ii) identifies each
license, agreement, or other permission which the Company has granted to any
third party with respect to any of its Intellectual Property; and (iii)
identifies each item of Intellectual Property that any third party owns and that
the Company uses pursuant to license, sublicense, agreement, or permission.
4.12 Tangible Assets. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets required for the conduct of its
business as presently conducted. Each such tangible asset, except for used
equipment held for resale, is free from defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the
purposes for which it presently is used.
4.13 Inventory. The inventory of the Company consists of used
equipment, raw materials and supplies, manufactured and purchased parts, goods
in process, and finished
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goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory write down set forth on
the face of the Financial Statements (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company. Section 4.13 of the Disclosure Schedule
lists and describes the condition of the inventory of the Company as of the Most
Recent Fiscal Period End. At Closing, there is no change in the inventory of the
Company set forth in Section 4.13 of the Disclosure Schedule other than changes
in the Ordinary Course of Business.
4.14 Contracts. Section 4.14 of the Disclosure Schedule lists the
following contracts and other agreements to which the Company is a party:
4.14.1 any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
4.14.2 any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a material
loss to the Company, or involve consideration in excess of $25,000;
4.14.3 any agreement concerning a partnership or joint
venture;
4.14.4 any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $25,000 or
under which it has imposed a Security Interest on any of its assets, tangible or
intangible;
4.14.5 any agreement concerning confidentiality or
noncompetition;
4.14.6 any agreement with any of the Seller or its affiliates
(other than the Company);
4.14.7 any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
4.14.8 any collective bargaining agreement;
4.14.9 any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $25,000 or providing severance benefits;
4.14.10 any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees;
4.14.11 any agreement under which the consequences of a
default or termination could reasonably likely have a material adverse effect on
the business, financial condition, operations, results of operations, or future
prospects of the Company; or
4.14.12 any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $25,000.
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The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 4.14 of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 4.14 of the Disclosure Schedule. With
respect to each such agreement: (i) to the best of the Seller's knowledge, the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(ii) the agreement will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (iii) to the best of the Seller's knowledge,
no party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (iv) no party has
repudiated any provision of the agreement.
4.15 Notes and Accounts Receivable. All notes and accounts receivable
of the Company are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Financial
Statements (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Company.
4.16 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
4.17 Insurance. Section 4.17 of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past
five years:
4.17.1 the name, address, and telephone number of the agent;
4.17.2 the name of the insurer, the name of the
policyholder, and the name of each covered insured;
4.17.3 the policy number and the period of coverage;
4.17.4 the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
4.17.5 a description of any retroactive premium adjustments
or other loss-sharing arrangements.
To the best of the Seller's knowledge, with respect to each such insurance
policy: (i) the policy is legal, valid, binding, enforceable, and in full force
and effect; (ii) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (iii) neither the Company
nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (iv) no party to the policy has repudiated any provision thereof.
The Company has been covered during the past five years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period.
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Section 4.17 of the Disclosure Schedule describes any self-insurance
arrangements affecting the Company.
4.18 Litigation. Section 4.18 of the Disclosure Schedule sets forth
each instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None of
the actions, suits, proceedings, hearings, and investigations set forth in
Section 4.18 of the Disclosure Schedule could result in any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of the Company. None of the Seller and the directors and
officers (and employees with responsibility for litigation matters) of the
Company has any reason to believe that any such action, suit, proceeding,
hearing, or investigation may be brought or threatened against the Company.
4.19 Product Warranty. To the best of the Seller's knowledge, each
product manufactured, sold, leased, or delivered by the Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and the Company has no Liability (and there is no basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Company giving rise to any Liability)
for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of
the Financial Statements (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company. No product manufactured, sold, leased, or delivered by
the Company is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Section 4.19 of the
Disclosure Schedule sets forth the standard terms and conditions of sale or
lease of the Company (containing applicable guaranty, warranty, and indemnity
provisions).
4.20 Product Liability. To the best of the Seller's knowledge, the
Company does not have any Liability (and there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Company giving rise to any Liability) arising out
of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
the Company.
4.21 Employees. To the best of Seller's knowledge, and the directors
and officers (and employees with responsibility for employment matters) of the
Company, no executive, key employee, or group of employees has any plans to
terminate employment with the Company. The Company is not a party to or bound by
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Company has not committed any unfair labor practice. None of the
Seller and the directors and officers (and employees with responsibility for
employment matters) of the Company has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Company.
4.22 Employee Benefits.
4.22.1 Definitions. For the purpose of this Section 4.22, the
following terms shall have the meanings set forth below:
i. "Employee Benefit Plan" means any (i)
nonqualified deferred compensation or
retirement plan or arrangement, (ii)
qualified
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defined contribution retirement plan or
arrangement which is an Employee Pension
Benefit Plan, (iii) qualified defined
benefit retirement plan or arrangement which
is an Employee Pension Benefit Plan
(including any Multi employer Plan), or (iv)
Employee Welfare Benefit Plan or material
fringe benefit or other retirement, bonus,
or incentive plan or program.
ii. "Employee Pension Benefit Plan" has the
meaning set forth in ERISA Section 3(2).
iii. "Employee Welfare Benefit Plan" has the
meaning set forth in ERISA Section 3(1).
iv. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
v. "ERISA Affiliate" means each entity which is
treated as a single employer with Seller for
purposes of Code Section 414.
vi. "Multi employer Plan" has the meaning set
forth in ERISA Section 3(37).
vii. "PBGC" means the Pension Benefit Guaranty
Corporation.
4.22.2 Section 4.22 of the Disclosure Schedule lists each
Employee Benefit Plan that the Company maintains or to which the Company
contributes.
4.22.2.1 Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form and in operation in
all respects with the applicable requirements of ERISA and the Code.
4.22.2.2 All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
4.22.2.3 Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan has received a determination letter from the
Internal Revenue Service to the effect that it meets the requirements of Code
Section 401(a).
4.22.2.4 As of the last day of the most recent prior
plan year, the market value of assets under each such Employee Benefit Plan
which is an Employee Pension Benefit Plan (other than any Multi employer Plan)
equaled or exceeded the present value of liabilities thereunder (determined in
accordance with then current funding assumptions).
4.22.2.5 The Seller has delivered to the Buyer
correct and complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
4.22.3 With respect to each Employee Benefit Plan that the
Company or any ERISA Affiliate maintains or has maintained during the prior six
years or to which any of them contributes, or has been required to contribute
during the prior six years:
4.22.3.1 No action, suit, proceeding, hearing, or
investigation with
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respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims for benefits) is
pending.
4.22.3.2 The Company has not incurred any liability
to the PBGC (other than PBGC premium payments) or otherwise under Title IV of
ERISA (including any withdrawal liability) with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan.
4.23 Guaranties. The Company is not a guarantor and is not otherwise
liable for any Liability or obligation (including indebtedness) of any other
Person.
4.24 Environmental, Health, and Safety Matters.
4.24.1 Each of the Company and its predecessors and affiliates
has complied and is in compliance with all Environmental, Health, and Safety
Requirements.
4.24.2 Without limiting the generality of the foregoing, each
of the Company and its predecessors and affiliates has obtained and complied
with, and is in compliance with, all permits, licenses and other authorizations
that are required pursuant to Environmental, Health, and Safety Requirements for
the occupation of its facilities and the operation of its business. Section 4.24
of the Disclosure Schedule lists all such permits, licenses and other
authorizations.
4.24.3 Neither the Company, its predecessors or affiliates,
nor the Seller has received any written or oral notice, report or other
information regarding any actual or alleged violation of Environmental, Health,
and Safety Requirements, or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to any of them or
its facilities arising under Environmental, Health, and Safety Requirements.
4.25 Certain Business Relationships with the Company. Except as set
forth in Section 4.25 of the Disclosure Schedule, the Seller has not been
involved in any business arrangement or relationship with the Company within the
past 12 months.
4.26 Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
5 Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
5.1 General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as the other Party may request, all
at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 6 below). Seller
acknowledges and agrees that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company.
5.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
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occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, the other Party will cooperate with
him or it and his or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 7 below).
5.3 Transition. Seller shall not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company from maintaining the same
business relationships with the Company after the Closing as it maintained with
the Company prior to the Closing.
5.4 Confidentiality. Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of the Confidential Information which are in his possession. In the
event that the Seller requests or is required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Seller will notify the Buyer promptly of the request or requirement
so that the Buyer may seek an appropriate protective order or waive compliance
with the provisions of this Section 5.4. If, in the absence of a protective
order or the receipt of a waiver hereunder, the Seller is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or
else stand liable for contempt, Seller may disclose the Confidential Information
to the tribunal; provided, however, that Seller shall use his best efforts to
obtain, at the request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
5.5 Covenant Not to Compete. In consideration of $30,000, an amount
which is included in the Purchase Consideration, for a period of five (5) years
from and after the Closing Date, or two (2) years following the termination of
Seller's employment with the Company, whichever period is shorter, the Seller
will not engage directly or indirectly in any business that the Company conducts
as of the Closing Date in any geographic area in which the Company conducts that
business as of the Closing Date; provided, however, that in the event the Seller
owns any common shares of the Buyer or less than 1% of the outstanding stock of
any publicly-traded corporation, the Seller shall not be deemed to engage solely
by reason thereof in any of its businesses. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section 5.5
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
5.6 Purchase Shares and Earn-Out Shares. Subject to the Subscription
Agreement, the certificate or certificates representing the Purchase Shares and
Earn-Out Shares, if any, shall be imprinted with a legend substantially in the
following form:
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT
BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED UNLESS
(i) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT WITH RESPECT TO
THE SECURITIES OR (ii) THERE IS AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED OR THAT SUCH TRANSFER
MAY BE MADE PURSUANT TO RULE 144 OR RULE 144A OF THE ACT."
The Seller may not transfer his Purchase Shares and Earn-Out Shares, if any,
until they have first furnished the Buyer with (i) a written opinion
satisfactory to the Buyer in form and substance from counsel satisfactory to the
Buyer by reason of experience to the effect that the Seller may transfer his
Purchase Shares as desired without registration under the Securities Act and
(ii) a written undertaking executed by the desired transferee satisfactory to
the Buyer in form and substance agreeing to be bound by the transfer contained
herein. Transfer of the Purchase Shares by the Seller is further restricted as
provided below.
5.7 Lock-up of Buyer's Common Shares. In the event the directors,
principal shareholders and principal officers of the Buyer, for the purpose of
furthering the business and capital needs of the Buyer, unanimously agree to a
binding "lock-up" of Buyer's common shares owned by them, the Seller shall
accede to and comply with such "lock-up" with respect to Buyer's common shares
(including the Purchase Shares) owned by the Seller.
6 Conditions to Obligation to Close.
6.1 Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
6.1.1 the representations and warranties set forth in Section
3.1 and Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
6.1.2 the Seller shall have performed and complied with all of
his covenants hereunder in all material respects through the Closing;
6.1.3 no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of the Buyer
to own the Subject Shares and to control the Company, or (iv) affect adversely
the right of the Company to own its assets and to operate its business (and no
such injunction, judgment, order, decree, ruling, or charge shall be in effect);
6.1.4 the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in Section
6.1.1 through 6.1.3 is satisfied in all respects;
6.1.5 the Company shall have received all authorizations,
consents, and approvals of governments and governmental agencies referred to in
Section 3.1.2, Section 3.2.3, and Section 4.3 above;
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6.1.6 the Seller shall have delivered or caused to be
delivered to the Buyer stock certificates representing the Subject Shares,
endorsed in blank or accompanied by duly executed assignment documents;
6.1.7 the Seller shall have entered into the Subscription and
Registration Rights Agreement & Stockholder's Certificate with the Buyer
substantially in the form set forth in Exhibit A attached hereto and the same
shall be in full force and effect;
6.1.8 Seller shall have entered into an Employment Agreement
with the Buyer substantially in the form set forth in Exhibit C attached hereto
and the same shall be in full force and effect;
6.1.9 the Buyer shall have received from counsel to the Seller
an opinion in form and substance as set forth in Exhibit D attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
6.1.10 the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Company other
than those whom the Buyer shall have specified in writing prior to the Closing;
6.1.11 the Buyer shall have received all corporate books and
records of the Company; and
6.1.12 all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 if it executes a
writing so stating at or prior to the Closing.
6.2 Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by him in connection with
the Closing is subject to satisfaction of the following conditions:
6.2.1 the representations and warranties set forth in Section
3.2 above shall be true and correct in all material respects at and as of the
Closing Date;
6.2.2 the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
6.2.3 no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
6.2.4 the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in Section
6.2.1 through 6.2.3 is satisfied in all respects;
6.2.5 Each Selling Shareholder shall have entered into the
Subscription and Registration Rights Agreement and Stockholder's Certificate
with the Buyer substantially in the
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form set forth in Exhibit A attached hereto and the same shall be in full force
and effect;
6.2.6 Seller shall have entered into an Employment Agreement
with the Buyer substantially in the form set forth in Exhibit C attached hereto
and the same shall be in full force and effect;
6.2.7 the Seller shall have received from counsel to the Buyer
an opinion in form and substance as set forth in Exhibit E attached hereto,
addressed to the Seller, and dated as of the Closing Date;
6.2.8 all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller;
6.2.9 the Buyer shall have received all authorizations,
consents, and approvals of governments and governmental agencies referred to in
Section 3.2.3 above; and
6.2.10 the Buyer shall have delivered to Seller the Purchase
Consideration.
The Seller may waive any condition specified in this Section 6.2 if he executes
a writing so stating at or prior to the Closing.
7 Remedies for Breaches of This Agreement.
7.1 Indemnification Provisions. In the event either Party breaches (or
in the event any third party alleges facts that, if true, would mean such Party
has breached) any of its representations, warranties, and covenants contained
herein, and provided that a claiming Party makes a written claim within a
reasonable time for indemnification against the breaching Party pursuant to
Section 9.7 below, then the breaching Party agrees to indemnify the claiming
Party from and against the entirety of any Adverse Consequences the claiming
Party may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach). All of the representations and warranties by the
Seller contained in Section 4 (excluding Section 4.10) above shall survive the
Closing hereunder (even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of three years thereafter. All of the other
representations and warranties of the Parties contained in this Agreement
(including the representations and warranties of Seller contained in Section
4.10 above) shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect forever thereafter subject to any
applicable statutes of limitations; provided, however, that the Sellers shall
not have any obligation to indemnify the Buyer from and against any Adverse
Consequences resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or alleged breach) of any representation or warranty of
the Sellers contained in Section 4 (excluding Section 4.10) above until the
Buyer has suffered Adverse Consequences by reason of all such breaches (or
alleged breaches) in excess of a $50,000 aggregate threshold, and only to the
extent of such excess, after taking into account any income tax benefits
realizable by Buyer or it successors or survivors on account of such breach and
directly attributable thereto at which point the Sellers will be obligated to
indemnify the Buyer from and against all such Adverse Consequences. The
liability of Seller under this indemnity (except with respect to claims based on
products liability arising during periods of time in which Seller is or was not
the beneficiary of a products liability
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insurance policy) shall not exceed the total value of the Purchase
Consideration, as defined in Section 2.2 above, as of the closing, together with
all cumulated or paid dividends thereon. Notwithstanding anything contrary
contained in this Section 7.1, Buyer shall not be entitled to make any claim
under the provisions of this Section 7.1 in respect of Adverse Consequences
accruing or incurred in the ordinary course of business of the Company
subsequent to the Closing Date. Notwithstanding the foregoing, neither Party
shall be required to indemnify the other with respect to any breach of warranty,
representation, agreement or covenant contained herein or in the attached
documents unless the Party seeking indemnification (the "Indemnitee") shall,
with reasonable promptness, provide the Party (the "Indemnitor") with copies of
any claims or other documents received and shall otherwise make available to the
Indemnitor all relevant information material to the defense of any claim against
the Indemnitee which shall serve as the basis for a claim by the Indemnitee
pursuant to the terms hereof. The Indemnitor shall have the election to join in
the defense of any such claim and the Indemnitee shall not settle or compromise
any such claim unless it shall have first obtained the written consent of the
Indemnitor or unless suit shall have been instituted against the Indemnitee and
the Indemnitor shall have failed, after the lapse of a reasonable time after
written notice to the Indemnitor of such suit, to take action to defend the
same; provided however, that the Indemnitee's failure to give prompt notice or
to provide copies of documents or to furnish relevant data shall not constitute
a defense (in whole or in part) to any claim by the Indemnitee unless such
failure causes a material prejudice to the Indemnitor.
7.2 Matters Involving Third Parties.
7.2.1 If any third party shall notify either Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the other Party (the
"Indemnifying Party") under this Section 7, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
7.2.2 An Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within fifteen days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (iii) such equitable
relief sought by the Third Party Claim, if any, would not, if granted, result in
a material adverse effect on the Indemnified Party's business, and (iv) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
7.2.3 So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.2.2 above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
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Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
7.2.4 In the event any of the conditions in Section 7.2.2
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not obtain the consent of the
Indemnifying Party in connection therewith), (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 7.
7.3 Character of Indemnification Payments. All indemnification payments
under this Section 7 shall be deemed adjustments to the Purchase Consideration.
7.4 Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy (including without limitation any such remedy
arising under Environmental, Health, and Safety Requirements) either Party may
have with respect to the Company or the transactions contemplated by this
Agreement. The Seller hereby agrees that it will not make any claim for
indemnification against the Company by reason of the fact that he or it was a
director, officer, employee, or agent of the Company or was serving at the
request of the Company as a partner, trustee, director, officer, employee, or
agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such claim is pursuant to any statute, charter document,
bylaw, agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Buyer against such Seller (whether
such action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
8 Certain Tax Matters.
8.1 Section 338 Election. At the Buyer's option, the Company and the
Seller will join with Buyer in making an election under Code Section 338 of the
Code (and any corresponding election under state, local, and foreign tax law)
with respect to the purchase and sale of the stock of the Company hereunder (a
"Section 338 Election"). Seller will include any income, gain, loss, deduction,
or other tax items resulting from the Section 338 Election on his Tax Returns to
the extent permitted by applicable law. Seller shall also pay any Tax imposed on
the Company or its Subsidiaries attributable to the making of the Section 338
Election, including, but not limited to, (i) any Tax imposed under Code Section
1374, (ii) any tax imposed under Reg. Section 1.338(h)(10)-1(e)(5), or (iii) any
state, local or foreign Tax imposed on the Company's or its Subsidiaries' gain,
and Seller shall indemnify Buyer, the Company and its Subsidiaries against any
Adverse Consequences arising out of any failure to pay any such Taxes.
8.2 Allocation of Purchase Price. Buyer, the Company and Sellers agree
that the Purchase Price and the liabilities of the company and its qualified
subchapter S subsidiaries (plus other relevant items) will be allocated to the
assets of the Company and its qualified
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subchapter S subsidiaries for all purposes (including Tax and financial
accounting) as shown on the Allocation Schedule attached hereto. Buyer, the
Company, the Company's Subsidiaries, and Seller will file all Tax Returns
(including amended returns and claims for refund) and information reports in a
manner consistent with such allocation.
8.3 S Corporation Status. The Company and Seller will not revoke the
Company's election to be taxed as an S corporation within the meaning of Code
Sections 1361 and 1362. The Company and Seller will not take or allow any action
other than the sale of the Company's stock pursuant to this agreement that would
result in the termination of Target's status as a validly electing S corporation
within the meaning of Code Sections 1361 and 1362.
8.4 Tax Periods Ending on or before the Closing Date. Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and its Subsidiaries for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Buyer shall permit Seller
to review and comment on each Tax Return described in the preceding sentence
prior to filing.
8.5 Cooperation on Tax Matters.
8.5.1 Buyer, the Company and its Subsidiaries and Seller shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company and its Subsidiaries and Seller agree
(i) to retain all books and records with respect to Tax matters pertinent to the
Company and its Subsidiaries relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered into
with any taxing authority, and (ii) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so request, the Company and its Subsidiaries or
Seller, as the case may be, shall allow the other party to take possession of
such books and records.
8.5.2 Buyer and Seller further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed including, but not limited to,
with respect to the transactions contemplated hereby.
8.6 Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company and its Subsidiaries shall
be terminated as of the Closing Date and, after the Closing Date, the Company
and its Subsidiaries shall not be bound thereby or have any liability
thereunder.
8.7 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees including any penalties and interest
incurred in connection with this Agreement including any corporate-level gains
tax triggered by the sale of the Company stock, Connecticut Transfer Tax and any
similar tax imposed in other states or subdivisions, shall be paid by the Seller
when due, and Seller will, at his own expense, fill all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and cause
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its affiliates to, join in the execution of any such Tax Returns and other
documentation.
9 Miscellaneous.
9.1 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that the Buyer may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the Buyer will use its reasonable best
efforts to advise the Seller prior to making the disclosure).
9.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
9.3 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may (i) assign
any or all of its rights and interests hereunder to one or more of its
affiliates and (ii) designate one or more of its affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
9.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Copies to:
John O'Connor, President Alexander W. Samor, Esq.
c/o Eastern Equipment Brokers, Inc. Kleban & Samor, P.C.
10 Island Brook Avenue 2425 Post Road, P.O. Box 763
Bridgeport, Connecticut, 06606 Southport, Connecticut 06490
Telephone (203) 330-2891 Telephone (203) 254-8920
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If to the Buyer: Copy to:
Marvyn Budd, President Stanley Moskowitz, Esq.
Officeland Inc. Moskowitz Altman & Hughes LLP
312 Dolomite Drive 11 East 44th Street, Suite 504
Downsview, Ontario, Canada M3J 2N2 New York, NY 10017
Telephone (416) 736-4000 Telephone (212) 953-1121
Either Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Either
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule. The Parties agree to the
exclusive jurisdiction of the courts of (i) New York or the United States
District Court for the Southern District of New York in the event an action is
commenced hereunder by the Seller ; or (ii) Connecticut or any United States
District Court sitting in Connecticut in the event an action is commenced
hereunder by Buyer. Each of the Parties hereto agrees that process may be served
upon them in any manner authorized by the laws of the jurisdiction determined in
accordance with the previous sentence and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
9.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Party to be charged. No waiver by either Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
9.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.11 Expenses. Each of the Parties and the Company will bear his or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, the Seller hereby assumes and agrees to reimburse
the Company within five days of the Closing Date for (i) all sums in excess of
$45,000 paid by the Company prior to the Closing for legal fees and expenses and
(ii) all sums in excess of $45,000 paid by the Company prior to the Closing for
accounting fees and expenses. The Seller agrees that the Company has not borne
and will not bear any of the Seller's costs and
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expenses (including any of his legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby.
9.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If either Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
9.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
9.14 Specific Performance. Seller acknowledges and agrees that the
Buyer would be damaged irreparably in the event Seller breaches his covenant not
to compete set forth in Section 5.5 above and in his Employment Agreement.
Accordingly, Seller agrees that the Buyer shall be entitled to an injunction or
injunctions to prevent breaches of said covenant not to compete and to enforce
specifically said covenant not to compete in any action instituted in any state
or federal court sitting in the State of Connecticut.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
made effective as of January 1, 1999.
Officeland Inc.
By: /s/ Marvyn Budd /s/ John O'Connor
----------------------- -----------------
Marvyn Budd, President John O'Connor
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EXHIBIT 2.1 ASSET PURCHASE AGREEMENT
Asset Purchase Agreement made effective as of January 1, 1999 by and
among Officeland Inc., an Ontario corporation with principal offices located at
312 Dolomite Drive, Downsview, Ontario, Canada M3J 2N2 (the "Buyer"), Digital
Document Solutions, Inc., a Connecticut corporation with principal offices
located at 10 Island Brook Avenue, Bridgeport, Connecticut (the "Seller") and
John O'Connor ("O'Connor"), an individual residing at 141 Fair Oak Drive,
Fairfield, Connecticut 06430. The Buyer, Seller and O'Connor are referred to
collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer will
purchase substantially all of the assets (and assume certain of the liabilities)
of the Seller, which is wholly owned by O'Connor, in return for cash.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1 Definitions.
1.1 "Acquired Assets" means all of the right, title, and interest that
the Seller possesses in and to all of the Seller's properties, assets and
business of every kind and description, tangible and intangible, and wherever
located, including, without limitation all assets shown or reflected on the
Financial Statements and including all of the Seller's (i) tangible personal
property (such as equipment, inventories, furniture and motor vehicles) and
leases and rights therein; (ii) intellectual property, goodwill associated
therewith, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions; (iii) agreements,
contracts, instruments, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (iv) accounts, notes, and other
receivables; (v) claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment (including any such item relating to the payment of taxes); (vi)
franchises, approvals, permits, licenses, orders, registrations, certificates,
variances, and similar rights obtained from governments and governmental
agencies; (vii) books, records, ledgers, files, documents, correspondence,
lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, studies, reports, and other
printed or written materials; (viii) cash and cash equivalents; (ix) all right,
title and interest in and to the use of the trade name "Digital Document
Solutions, Inc." and other similar name and derivatives therefrom in connection
with any business enterprise, and (x) all other assets that constitute Seller's
business as a going concern; provided, however, that the Acquired Assets shall
not include (i) the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of the Seller as a corporation or
(ii) any of the rights of the Seller under this Agreement (or under any side
agreement between the Seller on the one hand and the Buyer on the other hand
entered into on or after the date of this Agreement).
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1.2 "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
1.3 "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
1.4 "Affiliated Group" means any affiliated group within the meaning
of Code 1504(a) or any similar group defined under a similar provision of state,
local, or foreign law.
1.5 "Assumed Liabilities" means (a) the liabilities and obligations of
the Seller as set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto), (b) the liabilities of the Seller which have arisen
after the Most Recent Fiscal Month End in the Ordinary Course of Business (other
than any liability resulting from, arising out of, relating to, in the nature
of, or caused by any breach of contract, breach of warranty, tort, infringement,
violation of law, or environmental matter, including without limitation those
arising under Environmental, Health, and Safety Requirements), and (c) the
obligations of the Seller under the agreements, contracts, leases, licenses, and
other arrangements referred to in the definition of Acquired Assets either (i)
to furnish goods, services, and other non-Cash benefits to another party after
the Closing or (ii) to pay for goods, services, and other non-Cash benefits that
another party will furnish to it after the Closing; provided, however, that the
Assumed Liabilities shall not include (i) any liability of the Seller for Income
Taxes, (ii) any liability of the Seller for transfer, sales, use, and other
taxes arising in connection with the consummation of the transactions
contemplated hereby, (iii) any liability of the Seller for the unpaid taxes of
any Person (other than the Seller) under Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise, (iv) any obligation of the Seller to indemnify any
Person by reason of the fact that such Person was a director, officer, employee,
or agent of the Seller or was serving at the request of any such entity as a
partner, trustee, director, officer, employee, or agent of another entity
(whether such indemnification is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such indemnification is pursuant to any statute, charter document, bylaw,
agreement, or otherwise), (v) any liability of the Seller for costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, or (vi) any liability or obligation of the Seller under this Agreement
(or under any side agreement between the Seller on the one hand and the Buyer on
the other hand entered into on or after the date of this Agreement).
1.6 "Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
1.7 "Buyer" has the meaning set forth in the preface above.
1.8 "Cash" means cash and cash equivalents (including marketable
securities and short term investments) calculated in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
1.9 "Closing" has the meaning set forth in Section 2.4 below.
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1.10 "Closing Date" has the meaning set forth in Section 2.4 below.
1.11 "Confidential Information" means any information concerning the
businesses and affairs of the Seller that is not already generally available to
the public.
1.12 "Disclosure Schedule" has the meaning set forth in Section 3
below.
1.13 "Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation.
1.14 "Excluded Liabilities" means any liability or obligation of the
Seller except for the Assumed Liabilities.
1.15 "Financial Statement" has the meaning set forth in Section 3.7
below.
1.16 "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
1.17 "Income Tax" means any federal, state, local, or foreign income
tax, including any interest, penalty, or addition thereto, whether disputed or
not.
1.18 "Income Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Income Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
1.19 "Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
1.20 "Knowledge" means actual knowledge after reasonable
investigation.
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1.21 "Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
1.22 "Most Recent Financial Statements" has the meaning set forth in
Section 3.7 below.
1.23 "Most Recent Fiscal Month End" has the meaning set forth in
Section 3.7 below.
1.24 "Most Recent Fiscal Year End" has the meaning set forth in
Section 3.7 below.
1.25 "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
1.26 "Party" has the meaning set forth in the preface above.
1.27 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
1.28 "Purchase Price" has the meaning set forth in Section 2.3 below.
1.29 "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due and payable
[or for taxes that the taxpayer is contesting in good faith through appropriate
proceedings], (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
1.30 "Seller" has the meaning set forth in the preface above.
1.31 "Seller Stockholder" means O'Connor, the sole shareholder of the
Seller.
2 Basic Transaction.
2.1 Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 2.
2.2 Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. The Buyer will not assume or
have any responsibility, however, with respect to any other obligation or
liability of the Seller not included within the definition of Assumed
Liabilities.
2.3 Purchase Price. The Buyer agrees to pay to the Seller at the
Closing cash in the amount of U.S.$600,000 (the "Purchase Price") by wire
transfer or delivery of other immediately available funds.
2.3.1 Interests in Certain Accounts Receivable. As additional
consideration for entering into this Agreement, Buyer agrees to transfer to
Seller up to $150,000 received by Buyer from Seller's outstanding accounts
receivable (the "Collections"), which Collections shall be transferred to Seller
immediately upon receipt by Buyer, subject to the following terms and
conditions:
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2.3.1.1 Each of the Seller and Buyer makes no representation
or warranty regarding the collectibility of these outstanding account
receivables;
2.3.1.2 In the event Buyer collects accounts receivable in
the amount greater than $100,000 in the aggregate prior to 6 months from the
Closing Date, Buyer shall immediately pay to Seller or Seller's designee the
difference between $150,000 and the amount previously collected and transferred
to Seller under this Section 2.3.1.
2.3.1.3 In the event Buyer collects accounts receivable in
the amount less than $100,000 in the aggregate prior to 6 months from the
Closing Date, the Parties agree that no additional Collections shall be due to
Seller or Seller's designee under this Agreement.
2.3.2 Tax on Purchase Price Allocation. The Buyer shall pay
to Seller at the Closing an amount set forth in Schedule 2.3.2 attached
hereto for certain Tax incurred by the Seller as a result of certain
Purchase Price allocations made by the Buyer.
2.4 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on March 31, 1999 at the offices of
Moskowitz Altman & Hughes LLP, 11 East 44th Street, New York, NY commencing at
10:00 a.m. local time or such other place and date as the Parties may mutually
determine (the "Closing Date").
2.4.1 Termination Fee. In the event the Closing does not
occur prior to 15 business days from the Closing Date as a result of the failure
of the Buyer to satisfy a term or condition under this Agreement, the Buyer
shall pay to Seller a termination fee in the amount of $12,500 within 30 days of
the date of such termination of this Agreement. Immediately after such payment
by the Buyer of the termination fee, this Agreement shall become null and void
and the Parties shall have no further rights and or liabilities under this
Agreement.
2.5 Deliveries at the Closing. At the Closing, (i) the Seller has
delivered to the Buyer the various certificates, instruments, and documents
referred to in Section 5.1 below; (ii) the Buyer has delivered to the Seller the
various certificates, instruments, and documents referred to in Section 5.2
below; (iii) the Buyer has executed, acknowledged, and delivered to the Seller
(A) an assumption in the form attached hereto as Exhibit A and (B) such other
instruments of assumption as the Seller and its counsel reasonably may request;
and (iv) the Buyer has delivered to the Seller the consideration specified in
Section 2.3 above.
3 Representations and Warranties of the Seller. The Seller and O'Connor,
jointly and severally, represent and warrant Buyer that the statements contained
in this Section 3 are correct and complete as of the date of this Agreement and
the Closing Date, except as set forth in the disclosure schedule accompanying
this Agreement and initialed by the Parties (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 3.
3.1 Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
3.2 Authorization of Transaction. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its
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obligations hereunder. Without limiting the generality of the foregoing, the
board of directors of the Seller and the Seller Stockholder have duly authorized
the execution, delivery, and performance of this Agreement by the Seller. This
Agreement constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions.
3.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject or any provision of
the charter or bylaws of the Seller or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of the Seller or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. The Seller need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 2 above), except where the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Seller or on the ability of
the Parties to consummate the transactions contemplated by this Agreement.
3.4 Brokers' Fees. The Seller has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.5 Title to Assets. The Seller has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by them, located on
their premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet. Without limiting the generality of the foregoing, the
Seller has good and marketable title to all of the Acquired Assets, free and
clear of any Security Interest or restriction on transfer. 1.1
3.6 No Subsidiaries. Seller does not control directly or indirectly or
has any direct or indirect equity participation in any corporation, partnership,
trust, or other business association or entity.
3.7 Financial Statements. Attached hereto as Exhibit B are the
following financial statements (collectively the "Financial Statements"): (i)
unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1995, December 31, 1996 and December 31, 1997 ( "Most Recent Fiscal
Year End"); and (ii) unaudited consolidated balance sheets and statements of
income,
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changes in stockholders' equity, and cash flow (the "Most Recent Financial
Statements") as of and for the 12 months ended December 31, 1998 ("Most Recent
Fiscal Month End"). The Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, present fairly the financial condition of the
Seller as of such dates and the results of operations of the Seller for such
periods; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which adjustments will not be material
individually or in the aggregate) and lack footnotes and other presentation
items.
3.8 Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Seller outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, since that date:
3.8.1 the Seller has not sold, leased, transferred, or
assigned any material assets, tangible or intangible, outside the Ordinary
Course of Business except as to the Accumulated Adjustments Account
distributions the Seller will make to O'Connor prior to Closing in the amounts
set forth in Section 3.8.1 of the Disclosure Schedule;
3.8.2 the Seller has not entered into any material agreement,
contract, lease, or license outside the Ordinary Course of Business;
3.8.3 no party (including the Seller) has accelerated,
terminated, made material modifications to, or canceled any material
agreement, contract, lease, or license to which the Seller is a party
or by which any of them is bound;
3.8.4 the Seller has not imposed any Security Interest upon
any of its assets, tangible or intangible;
3.8.5 the Seller has not made any material capital
expenditures outside the Ordinary Course of Business;
3.8.6 the Seller has not made any material capital investment
in, or any material loan to, any other Person outside the Ordinary
Course of Business;
3.8.7 the Seller has not created, incurred, assumed, or
guaranteed more than $5,000 in aggregate indebtedness for borrowed
money and capitalized lease obligations;
3.8.8 the Seller has not granted any license or sublicense of
any material rights under or with respect to any Intellectual Property;
3.8.9 there has been no change made or authorized in the
charter or bylaws of the Seller;
3.8.10 the Seller has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock;
3.8.11 the Seller has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
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3.8.12 the Seller has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
3.8.13 the Seller has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
3.8.14 the Seller has not entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
3.8.15 the Seller has not granted any increase in the base
compensation of O'Connor or any of its directors, officers, and employees
outside the Ordinary Course of Business except as set forth in Schedule
3.8.15 of the Disclosure Schedule;
3.8.16 the Seller has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
3.8.17 the Seller has not made any other material change in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
3.8.18 the Seller has not paid any amount to any third party
with respect to any liability or obligation (including any costs and expenses
the Seller has incurred or may incur in connection with this Agreement and the
transactions contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing; and
3.8.19 the Seller has not committed to any of the foregoing.
3.9 Undisclosed Liabilities. The Seller has no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes), except for
(i) liabilities set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) and (ii) liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business.
3.10 Legal Compliance. To the best of the Seller's knowledge, the
Seller has complied in all material respects with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against the Seller alleging any failure so to comply, except
where the failure to comply would not have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of the Seller.
3.11 Tax Matters.
3.11.1 The Seller has filed all Income Tax Returns that it
was required to file. All such Income Tax Returns were correct and complete in
all material respects. All Income Taxes owed by the Seller (whether or not shown
on any Income Tax Return) have been paid. The Seller is not currently the
beneficiary of any extension of time within which to file any
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Income Tax Return.
3.11.2 There is no material dispute or claim concerning any
Income Tax liability of the Seller either (A) claimed or raised by any authority
in writing or (B) as to which directors and officers of the Seller has Knowledge
based upon personal contact with any agent of such authority.
3.11.3 Section 3.11 of the Disclosure Schedule lists all
federal, state, local, and foreign Income Tax Returns filed with respect to the
Seller for taxable periods ended on or after December 31, 1997, indicates those
Income Tax Returns that have been audited, and indicates those Income Tax
Returns that currently are the subject of audit. The Seller has delivered to the
Buyer correct and complete copies of all federal Income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Seller since January 1, 1995. The Seller has not waived any statute of
limitations in respect of Income Taxes or agreed to any extension of time with
respect to an Income Tax assessment or deficiency.
3.11.4 The Seller has not filed a consent under Code Section
341(f) concerning collapsible corporations. The Seller has not made any material
payments, is obligated to make any material payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
material payments that will not be deductible under Code Section 280 G. The
Seller has not been a United States real property holding corporation within the
meaning of Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). The Seller is not a party to any tax allocation or
sharing agreement. The Seller (A) has not been a member of an Affiliated Group
filing a consolidated federal Income Tax Return (other than a group the common
parent of which was the Seller) or (B) has any liability for the taxes of any
Person (other than the Seller) under Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
3.11.5 The unpaid Income Taxes of the Seller (A) did not, as
of the Most Recent Fiscal Month End, exceed by any material amount the reserve
for Income Tax liability (rather than any reserve for deferred taxes established
to reflect timing differences between book and tax income) set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto) and (B) will
not exceed by any material amount that reserve as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practice of the Seller in filing their Income Tax Returns.
3.11.6 The Seller has been a validly electing S corporation
within the meaning of Code Sections 1361 and 1362 at all times during its
existence and the Seller will be an S corporation up to including the Closing
Date.
3.12 Real Property.
3.12.1 Section 3.12 of the Disclosure Schedule lists and describes
briefly all real property that the Seller owns. With respect to each such parcel
of owned real property:
3.12.1.1 the identified owner has good and marketable title
to the parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for installments of special
assessments not yet delinquent, recorded easements, covenants, and other
restrictions, and utility easements, building restrictions, zoning restrictions,
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and other easements and restrictions existing generally with respect to
properties of a similar character which do not affect materially and adversely
the current use, occupancy, or value, or the marketability of title, of the
property subject thereto;
3.12.1.2 there are no pending or, to the Knowledge of any of
the Seller Stockholder and the directors and officers of the Seller, threatened
condemnation proceedings, lawsuits, or administrative actions relating to the
property or other matters affecting materially and adversely the current use,
occupancy, or value thereof;
3.12.1.3 the legal description for the parcel contained in
the deed thereof describes such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described parcels of
land, are not in material violation of applicable setback requirements, zoning
laws, and ordinances (and none of the properties or buildings or improvements
thereon are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), and do not encroach on any easement
which may burden the land;
3.12.1.4 all facilities have received all approvals of
governmental authorities (including material licenses and permits) required in
connection with the ownership or operation thereof, and have been operated and
maintained in accordance with applicable laws, rules, and regulations in all
material respects;
3.12.1.5 there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the parcel of real
property;
3.12.1.6 there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion thereof
or interest therein;
3.12.1.7 there are no parties (other than the Seller) in
possession of the parcel of real property, other than tenants under any leases
disclosed in Section 3.12.1 of the Disclosure Schedule who are in possession of
space to which they are entitled.
3.12.2 Section 3.12.2 of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to the Seller. The
Seller has delivered to the Buyer correct and complete copies of the leases and
subleases listed in Section 3.12.2 of the Disclosure Schedule (as amended to
date). With respect to each material lease and sublease listed in Section 3.12.2
of the Disclosure Schedule:
3.12.2.1 the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect in all material respects;
3.12.2.2 no party to the lease or sublease is in material
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a material breach or default or permit termination,
modification, or acceleration thereunder;
3.12.2.3 no party to the lease or sublease has repudiated any
material provision thereof;
3.12.2.4 there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
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3.12.2.5 the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold
or subleasehold; and
3.12.2.6 all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including material licenses
and permits) required in connection with the operation thereof, and have been
operated and maintained in accordance with applicable laws, rules, and
regulations in all material respects.
3.13 Intellectual Property.
3.13.1 The Seller has not interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property rights of third
parties in any material respect, and neither O'Connor nor the directors and
officers of the Seller has ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that the Seller must license or refrain from
using any Intellectual Property rights of any third party). To the Knowledge of
O'Connor and the directors and officers of the Seller, no third party has
interfered with, infringed upon, misappropriated, or violated any material
Intellectual Property rights of the Seller in any material respect.
3.13.2 Section 3.13.2 of the Disclosure Schedule identifies
each patent or registration which has been issued to the Seller with respect to
any of its Intellectual Property, identifies each pending patent application or
application for registration which the Seller has made with respect to any of
its Intellectual Property, and identifies each material license, agreement, or
other permission which the Seller has granted to any third party with respect to
any of its Intellectual Property (together with any exceptions). The Seller has
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date). Section 3.13.2 of the Disclosure Schedule also identifies each
material trade name or unregistered trademark used by the Seller in connection
with any of its businesses. With respect to each item of Intellectual Property
required to be identified in Section 3.13.2 of the Disclosure Schedule:
3.13.2.1 the Seller possess all right, title, and interest in
and to the item, free and clear of any Security Interest, license, or
other restriction;
3.13.2.2 the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
3.13.2.3 no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of O'Connor
and the directors and officers of the Seller, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item; and
3.13.2.4 the Seller has not ever agreed to indemnify any
Person for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
3.13.3 Section 3.13.3 of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and that the
Seller uses pursuant to license, sublicense, agreement, or permission. The
Seller has delivered to the Buyer correct and complete
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copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each such item of used Intellectual Property
required to be identified in Section 3.13.3 of the Disclosure Schedule:
3.13.3.1 the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect in all material respects;
3.13.3.2 no party to the license, sublicense, agreement, or
permission is in material breach or default, and no event has occurred which
with notice or lapse of time would constitute a material breach or default or
permit termination, modification, or acceleration thereunder;
3.13.3.3 no party to the license, sublicense, agreement, or
permission has repudiated any material provision thereof; and
3.13.3.4 the Seller has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
3.14 Tangible Assets. The buildings, machinery, equipment,
and other tangible assets that the Seller owns and leases, except for used
equipment held for resale, are free from material defects (patent and latent),
have been maintained in accordance with normal industry practice, and are in
good operating condition and repair (subject to normal wear and tear).
3.15 Inventory. The inventory of the Seller consists of used equipment,
raw materials and supplies, manufactured and processed parts, work in process,
and finished goods, all of which is merchantable and fit for the purpose for
which it was procured or manufactured, and none of which is slow-moving,
obsolete, damaged, or defective, subject only to the reserve for inventory
writedown set forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto) as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of the Seller.
Section 3.15 of the Disclosure Schedule lists and describes the condition of the
inventory of the Seller as of the Most Recent Financial Statements.
3.16 Contracts. Section 3.16 of the Disclosure Schedule lists the
following contracts and other agreements, outside the Ordinary Course of
Business, to which the Seller is a party:
3.16.1 any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $25,000 per annum;
3.16.2 any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year or involve
consideration in excess of $25,000;
3.16.3 any agreement concerning a partnership or joint
venture including the joint venture agreement with Stamford Wrecking
Office Furniture Outlet;
3.16.4 any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$25,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
3.16.5 any material agreement concerning confidentiality or
noncompetition;
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3.16.6 any material agreement involving the Seller and his
Affiliates;
3.16.7 any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
3.16.8 any collective bargaining agreement;
3.16.9 any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual compensation
in excess of $25,000 or providing material severance benefits;
3.16.10 any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
3.16.11 any agreement under which the consequences of a
default or termination could have a material adverse effect on the
business, financial condition, operations, results of operations, or
future prospects of the Seller; or
3.16.12 any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $25,000.
3.16.13 the Seller has delivered to the Buyer a correct and
complete copy of each written agreement listed in Section 3.16 of the Disclosure
Schedule (as amended to date) and a written summary setting forth the material
terms and conditions of each oral agreement referred to in Section 3.16 of the
Disclosure Schedule. With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect in all material
respects; (B) no party is in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a material breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (C) no party has repudiated any material provision of the
agreement.
3.17 Notes and Accounts Receivable. All notes and accounts receivable
of the Seller are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of the Seller.
3.18 Powers of Attorney. To the Knowledge of any of the Seller
Stockholder and the directors and officers of the Seller , there are no material
outstanding powers of attorney executed on behalf of the Seller.
3.19 Insurance. Section 3.19 of the Disclosure Schedule sets forth the
following information with respect to each material insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) with respect to which the Seller is a
party, a named insured, or otherwise the beneficiary of coverage:
3.19.1 the name, address, and telephone number of the agent;
3.19.2 the name of the insurer, the name of the policyholder,
and the name of each covered insured;
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3.19.3 the policy number and the period of coverage;
3.19.4 the scope (including an indication of whether the
coverage is on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
3.19.5 a description of any retroactive premium adjustments
or other material loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all material respects; (B)
neither the Seller nor any other party to the policy is in material breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a material breach or default, or permit termination,
modification, or acceleration, under the policy; and (C) no party to the policy
has repudiated any material provision thereof. Section 3.19 of the Disclosure
Schedule describes any material self-insurance arrangements affecting the
Seller.
3.20 Litigation. Section 3.20 of the Disclosure Schedule sets
forth each instance in which the Seller (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or, to
the Knowledge of any of the Seller Stockholder and the directors and officers of
the Seller, is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator.
3.21 Product Warranty. Substantially all of the products
manufactured, sold, leased, and delivered by the Seller has conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties, and the Seller has no material liability (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due) for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Seller. Substantially all of
the products manufactured, sold, leased, and delivered by the Seller are subject
to standard terms and conditions of sale or lease. '4(u) of the Disclosure
Schedule includes copies of the standard terms and conditions of sale or lease
for each of the Seller (containing applicable guaranty, warranty, and indemnity
provisions).
3.22 Product Liability. The Seller has no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by the Seller.
3.23 Employees. To the Knowledge of any of the Seller
Stockholder and the directors and officers of the Seller , no executive, key
employee, or significant group of employees plans
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to terminate employment with the Seller during the next 12 months. The Seller is
not a party to or bound by any collective bargaining agreement, nor has any of
them experienced any strike or material grievance, claim of unfair labor
practices, or other collective bargaining dispute within the past [three] years.
The Seller has not committed any material unfair labor practice. Neither
O'Connor nor any of the directors and officers of the Seller has any Knowledge
of any organizational effort presently being made or threatened by or on behalf
of any labor union with respect to employees of the Seller.
3.24 Employee Benefits.
3.24.1 Definitions. For the purpose of this Section 3.24 ,
the following terms shall have the following meanings set forth below:
3.24.1.1 "COBRA" means the requirements of Part 6 of
Subtitle B of Title I of ERISA and Code Section 4980B;
3.24.1.2 "Code" means the Internal Revenue Code of
1986, as amended;
3.24.1.3 "Employee Benefit Plan" means any (a)
nonqualified deferred compensation or retirement plan or arrangement, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan [or material fringe
benefit or other retirement, bonus, or incentive plan or program];
3.24.1.4 "Employee Pension Benefit Plan" has the
meaning set forth in ERISA Section 3(2);
3.24.1.5 "Employee Welfare Benefit Plan" has the
meaning set forth in ERISA Section 3(1);
3.24.1.6 "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended;
3.24.1.7 "ERISA Affiliate" means each entity which
is treated as a single employer with Seller for purposes of Code Section 414;
3.24.1.8 "Fiduciary" has the meaning set forth in
ERISA Section 3(21);
3.24.1.9 "Multiemployer Plan" has the meaning set
forth in ERISA Section 3(37);
3.24.1.10 "PBGC" means the Pension Benefit Guaranty
Corporation;
3.24.1.11 "Prohibited Transaction" has the meaning
set forth in ERISA Section 406 and Code Section 4975; and
3.24.1.12 "Reportable Event" has the meaning set
forth in ERISA Section 4043;
3.24.2 Section 3.24 of the Disclosure Schedule
lists each Employee Benefit
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Plan that the Seller maintains or to which the Seller contributes or has any
obligation to contribute.
3.24.2.1 Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation in all
material respects with the applicable requirements of ERISA, the Code, and other
applicable laws.
3.24.2.2 All required reports and descriptions (including
Form 5500 Annual Reports, summary annual reports, PBGC-1's, and summary plan
descriptions) have been timely filed and distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of COBRA have been met in
all material respects with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
3.24.2.3 All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending on or before the
Closing Date which are not yet due have been paid to each such Employee Pension
Benefit Plan or accrued in accordance with the past custom and practice of the
Seller. All premiums or other payments for all periods ending on or before the
Closing Date have been paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
3.24.2.4 Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan" under Code
Section 401(a), has received, within the last two years, a favorable
determination letter from the Internal Revenue Service that it is a "qualified
plan," and Seller is not aware of any facts or circumstances that could result
in the revocation of such determination letter.
3.24.2.5 The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested and
nonvested liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
3.24.2.6 The Seller has delivered to the Buyer correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each such Employee
Benefit Plan.
3.24.3 With respect to each Employee Benefit Plan that any
of the Seller or any ERISA Affiliate maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever has been required
to contribute:
3.24.3.1 No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been completely or
partially terminated or been the subject of a Reportable Event as to which
notices would be required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or, to the Knowledge of any
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of the Seller Stockholder and the directors and officers of the Seller,
threatened.
3.24.3.2 There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has any liability for
material breach of fiduciary duty or any other material failure to act or comply
in connection with the administration or investment of the assets of any such
Employee Benefit Plan. No action, suit, proceeding, hearing, or investigation
with respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending or, to
the Knowledge of any of the Seller Stockholder and the directors and officers of
the Seller, threatened.
3.24.3.3 The Seller has not incurred any material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) to the PBGC (other than PBGC premium payments)
or otherwise under Title IV of ERISA (including any withdrawal liability as
defined in ERISA Section 4201) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
3.24.3.4 The Seller does not maintain or ever has maintained
or contributes, ever has contributed, or ever has been required to contribute to
any Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Code Section 4980B).
3.25 Guaranties. Except as set forth in Section 3.25 of the Disclosure
Schedule, the Seller is not a guarantor or otherwise is responsible for any
liability or obligation (including indebtedness) of any other Person.
3.26 Environmental, Health, and Safety Matters.
3.26.1 The Seller and its respective predecessors and
Affiliates have complied and are in compliance, in each case in all material
respects, with all Environmental, Health, and Safety Requirements.
3.26.2 Without limiting the generality of the foregoing, each
of the Seller and its respective Affiliates, have obtained, have complied, and
are in compliance with, in each case in all material respects, all material
permits, licenses and other authorizations that are required pursuant to
Environmental, Health, and Safety Requirements for the occupation of its
facilities and the operation of its business; a list of all such material
permits, licenses and other authorizations is set forth on the attached
"Environmental and Safety Permits Schedule."
3.26.3 The Seller and its respective Affiliates have received any
written or oral notice, report or other information regarding any actual or
alleged material violation of Environmental, Health, and Safety Requirements, or
any material liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any material
investigatory, remedial or corrective obligations, relating to any of them or
its facilities arising under Environmental, Health, and Safety Requirements.
3.26.4 Except as set forth on the attached "Environmental and Safety
Matters Schedule," none of the following exists at any property or facility
owned or operated by the Seller: (1) underground storage tanks, (2)
asbestos-containing material in any friable and
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damaged form or condition, (3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills, surface impoundments, or disposal areas.
3.26.5 Neither the Seller or its respective predecessors or Affiliates
has treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any hazardous substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a manner
that has given or would give rise to material liabilities, including any
material liability for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or the Solid Waste Disposal Act, as amended ("SWDA") or any
other Environmental, Health, and Safety Requirements.
3.26.6 Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any material obligations
for site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
3.27 Certain Business Relationships With the Seller. O'Connor has not
been involved in any material business arrangement or relationship with the
Seller within the past 12 months, and O'Connor does not own any material asset,
tangible or intangible, which is used in the business of the Seller.
3.28 Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
4 Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 4),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
4.1 Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or
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bylaws or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the Buyer is
a party or by which it is bound or to which any of its assets is subject. The
Buyer does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in Section 2
above).
4.4 Brokers' Fees. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
5 Conditions to Obligation to Close.
5.1 Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
5.1.1 the representations and warranties set forth in Section
3 above shall be true and correct in all material respects at and as of
the Closing Date;
5.1.2 the Seller shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
5.1.3 no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or, (C) affect adversely the right of the Buyer to own
the Acquired Assets, to operate the former businesses of the Seller;
5.1.4 the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in Section
5.1.1 through 5.1.3 is satisfied in all respects;
5.1.5 the Buyer shall have received from counsel to the
Seller an opinion in form and substance as set forth in Exhibit C attached
hereto, addressed to the Buyer, and dated as of the Closing Date; and
5.1.6 all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
The Buyer may waive any condition specified in this Section 5.1 if it executes a
writing so stating at or prior to the Closing.
5.2 Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
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5.2.1 the representations and warranties set forth in Section
4 above shall be true and correct in all material respects at and as of
the Closing Date;
5.2.2 the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
5.2.3 no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
5.2.4 the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in Section
5.2.1 to 5.2.3 is satisfied in all respects;
5.2.5 the Seller shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit D attached
hereto, addressed to the Seller, and dated as of the Closing Date; and
5.2.6 all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 5.2 if it
executes a writing so stating at or prior to the Closing.
6 Indemnification.
6.1 Survival of Representations and Warranties. All of the
representations and warranties of Seller and Buyer contained herein shall
survive the Closing and continue in full force and effect for a period ending on
the third anniversary of the Closing Date, except that the representations and
warranties by the Seller set forth in Section 3.11 shall survive the Closing.
All covenants of Seller and Buyer contained herein shall survive the Closing and
continue in full force and effect in accordance with their respective terms.
6.2 Indemnification Provisions for Benefit of the Buyer. Provided that
the Buyer makes a written claim for indemnification against the Seller pursuant
to Section 7.8 below within the survival period set forth in Section 6.1 above,
each of Seller and O'Connor, jointly and severally, agree to indemnify the Buyer
from and against any Adverse Consequences incurred by the Buyer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of any applicable survival
period) that are determined by a final arbitration award or judgment as having
resulted from, arisen out of, or been caused by (i) a breach of any of Seller's
representations, warranties or covenants contained herein, or (ii) any Excluded
Liability.
6.3 Indemnification Provisions for Benefit of the Seller. Provided
that the Seller makes a written claim for indemnification against the Buyer
pursuant to Section 7.8 below within the survival period set forth in Section
6.1 above, Buyer agrees to indemnify the Seller from and
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against the entirety of any Adverse Consequences incurred by the Seller through
and after the date of the claim for indemnification (including any Adverse
Consequences the Seller may suffer after the end of any applicable survival
period) that are determined by a final arbitration award or judgment as having
resulted from, arisen out of, or been caused by (i) a breach of any of Buyer's
representations, warranties or covenants contained herein or (ii) any Assumed
Liability.
6.4 Matters Involving Third Parties.
6.4.1 If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 6, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
6.4.2 Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within fifteen (15) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with
evidence acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (v) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
6.4.3 So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 6.4.2 above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, and (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably).
6.4.4 In the event any of the conditions in Section 6.4.2 above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it may deem appropriate, provided that
the Indemnified Party shall not settle such Third Party claim without the
consent of the Indemnifying Party (not to be unreasonably withheld) and (ii) the
Indemnifying Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Section 6.
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6.5 Limitations. Notwithstanding anything else contained in this
Agreement:
6.5.1 Seller shall not be obligated to indemnify Buyer
pursuant to this Section 6 unless and until the aggregate monetary amount of
such Adverse Consequences exceeds $50,000, at which point Seller shall be
responsible for indemnifying the Buyer only for the amount of such Adverse
Consequences in excess $50,000.
6.6 General Provisions. Claims for indemnification under this Section
6 shall be paid or otherwise satisfied by Indemnifying Persons within ten
business days after notice thereof is given by the Indemnified Person. Any
amount which may become due and payable to the Buyer under this Section 6 and
which is not paid within thirty days after notice may be recovered by Buyer from
either Seller or O'Connor, jointly and severally.
7 Miscellaneous.
7.1 Change of Corporate Name. The Seller shall immediately after the
Closing Date file a certificate of amendment to its certificate of incorporation
whereby it shall change its name dissimilar to "Digital Document Solutions,
Inc."
7.2 Press Releases and Public Announcements. The Seller and O'Connor
shall not issue any press release or make any public announcement relating to
the subject matter of this Agreement [prior to the Closing] without the prior
written approval of the Buyer. 16.3 No Third-Party Beneficiaries. This Agreement
shall not confer any rights or remedies upon any Person other than the Parties
and their respective successors and permitted assigns.
7.4 Entire Agreement. This Agreement including the documents referred
to herein constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
7.5 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may (i) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
7.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.7 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.8 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered
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or certified mail, return receipt requested, postage prepaid, and addressed to
the intended recipient as set forth below:
If to the Seller: Copy to:
John O'Connor, President Alexander W. Samor, Esq.
Digital Document Solutions, Inc. Kleban & Samor, P.C.
10 Island Brook Avenue 2425 Post Road, P.O. Box 763
Bridgeport, CT 06606 Southport, CT 06490
Telephone (203) 330-2891 Telephone (203) 254-8920
If to the Buyer: Copy to:
Marvyn Budd, President Stanley Moskowitz, Esq.
Officeland Inc. Moskowitz Altman & Hughes LLP
312 Dolomite Drive 11 East 44th Street
Downsview Ontario Suite 504
Canada M3J 2N2 New York, NY 10017
Telephone (416) 736-4000 Telephone (212) 953-1121
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
7.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule. The Parties agree to
the exclusive jurisdiction of the courts of (i) New York or the United States
District Court for the Southern District of New York in the event an action is
commenced hereunder by either of the Seller ; or (ii) Connecticut or any United
States District Court sitting in Connecticut in the event an action is commenced
hereunder by Buyer. Each of the Parties hereto agrees that process may be served
upon them in any manner authorized by the laws of the jurisdiction determined in
accordance with the previous sentence and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
7.10 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
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7.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
7.12 Expenses. Each of the Buyer, the Seller, and O'Connor will bear
his or its own costs and expenses (including legal fees and expenses) incurred
in connection with this Agreement and the transactions contemplated hereby. The
Seller agrees that it has not paid any amount to any third party, and will not
pay any amount to any third party until after the Closing, with respect to any
of the costs and expenses of the Seller and O'Connor (including any of their
legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby.
7.13 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
7.14 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement made
effective as of January 1, 1999.
OFFICELAND INC.
By: /S/ Marvyn Budd
--------------------------
Marvyn Budd, President
DIGITAL DOCUMENT SOLUTIONS, INC.
By: /s/ John O'Connor /s/ John O'Connor
-------------------------- --------------------------
John O'Connor, John O'Connor, Individually
President and Sole Shareholder
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EXHIBIT 20 PRESS RELEASE DATED MARCH 29, 1999
Company Press Release -- Monday March 29, 8:31 am Eastern Time
SOURCE: Officeland Inc.
Officeland Inc. Completes Purchase of Eastern Equipment Brokers, Inc.
TORONTO, March 29 /PRNewswire/ -- Officeland Inc. (Nasdaq: OFLD - news, OFLDU -
news) announced today that it has completed the acquisitions of all of the
outstanding shares of EasternEquipment Brokers, Inc. ("EEB"), and all of the
assets of Digital Document Solutions, Inc. ("DDS"), both of Bridgeport,
Connecticut. EEB is a leading wholesaler and re-manufacturer of used
photocopiers. DDS is engaged in the business of selling, leasing and servicing
re-manufactured Xerox and Canon photocopiers. EEB and DDS have combined annual
revenue of approximately $7.6 million. Officeland paid a combination of cash and
Officeland's common shares for the outstanding capital stock of EEB and all of
the assets of DDS.
Marvyn Budd, President of Officeland Inc., stated, "In addition to an immediate
contribution of revenue and gross profits, these acquisitions provide Officeland
with new sales channels plus additional sources of product, and also allow us to
integrate within our family of companies a re-manufacturing capability that we
currently outsource."
John O'Connor, President of EEB and DDS, added, "We are very pleased to join the
Officeland group of companies. Officeland's extensive range of products and
services combined with Officeland's diverse channels of distribution, including
e-commerce, should ensure a dominant position in our industry."
Officeland Inc. is a leading reseller of used photocopiers in North America,
selling to original equipment manufacturer (OEM) dealer networks, commercial,
professional and institutional users, and other wholesalers of photocopiers. To
facilitate both buying and selling used copiers the company maintains strategic
relationships with Xerox, Ricoh, Canon, Konica, Minolta, and other major
industry players.
Forward-looking statements and comments in this press release are made pursuant
to the safe-harbor provisions of Section 21E of the Securities Exchange Act of
1934. Such statements relating to, among other things, the prospects for the
company to increase the level of sales and maintain profitability, are
necessarily subject to risks and uncertainties, some of which are significant in
scope and nature, including risks related to the demand for used photocopiers,
competition, availability of capital and continuation of sales levels. These
risks are further discussed in the periodic reports and registration statements
filed by the company from time to time with the Securities and Exchange
Commission.
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