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): NOVEMBER 30, 2000
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CGI HOLDING CORPORATION
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(Exact name of registrant as specified in its charter)
NEVADA 33-19980-D 87-0450450
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(State of (Commission file (IRS Employer
incorporation) Number) Identification Number)
8400 BROOKFIELD AVENUE, BROOKFIELD, ILLINOIS 60513
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 387-0900
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Item 2. Acquisition or Disposition of Assets.
Roli Ink Corporation ('RIC'), a Wisconsin corporation and a wholly-owned
subsidiary of CGI Holding Corporation, a Nevada corporation, has sold
substantially all of its assets to Braden-Sutphin Ink Company ('Purchaser'), an
Ohio corporation. The closing of the sale occurred as of November 13, 2000 (the
'Closing Date') and the payment of the purchase price for the assets occurred on
November 15, 2000 (the 'Funding Date'). The assets sold included accounts
receivable, inventory, fixed assets, intellectual property, rights under certain
contracts and goodwill. In exchange for such assets, on the Funding Date RIC
received $2,168,583 in cash and the Purchaser paid down $236,148 of the
liabilities of RIC. The cash received by RIC on the Funding Date was calculated
as follows: (a) $1,700,000, plus (b) $407,955 (the value of the accounts
receivable of RIC as of the Closing Date), plus (c) $212,596 (the value of the
inventory of RIC as of the Closing Date), minus (d) $151,968 ($240,000 less the
amount of the trade payables of RIC as of the Closing Date). The calculation of
the value of the accounts receivable and inventory of RIC as of the Closing Date
is subject to post-closing adjustment.
In addition to the above, RIC shall receive additional consideration for such
assets based upon adjusted 'Earnings Before Taxes of the Business' ('EBTB') for
the twelve months ending December 31, 2000, calculated as follows:
EBTB Additional
(as adjusted) Consideration
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LESS THAN $600,000 $0
$600,000-$670,000 $75,000
GREATER THAN$670,000 $150,000
The terms of the transaction are more particularly set forth in the Asset
Purchase Agreement attached hereto.
TABLE OF CONTENTS
SECTION 1............................DEFINITIONS
1.1...........................................................Code
1.2...................................................Contaminants
1.3........................................................Damages
1.4..........................................Employee Benefit Plan
1.5..........................................................ERISA
1.6...........................................................GAAP
1.7..........................................Intellectual Property
1.8..........................................Interim Balance Sheet
1.9......................................................Inventory
1.10..........................................................Lien
1.11............Material Adverse Effect or Material Adverse Change
1.12..................................................Pension Plan
1.13...........................................Permitted Exception
1.14..........................................................Plan
1.15..........................................[INTENTIONALLY BLANK]
1.16............................................Seller's Knowledge
1.17...........................................................Tax
1.19..................................................Welfare Plan
1.20.......................................Year-End Balance Sheets
1.21.............................Year-End Statements of Cash Flows
1.22.................................Year-End Statements of Income
1.23.................................Year-End Financial Statements
SECTION 2. PURCHASE AND SALE OF ASSETS
2.1..............................................Purchase and Sale
SECTION 3. ASSETS EXCLUDED
3.1................................................Excluded Assets
SECTION 4. PURCHASE PRICE; ADJUSTMENT; PAYMENT
4.1.................................................Purchase Price
4.2......................................Purchase Price Adjustment.
4.3......................................Assumption of Liabilities
4.4...................................Accounts Receivable Turnback.
4.5...................................Allocation of Purchase Price
4.6................................................Closing Payment
4.7.......................................Contingent Consideration
4.8.................................Liabilities Retained by Seller
SECTION 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
5.1....................................Status of Parent and Seller
5.2...........................................[INTENTIONALLY BLANK]
5.3............................................Ownership of Seller
5.4..........................................Authorization of Sale
5.5.................Binding Nature and Enforceability of Agreement
5.6.....................................................Good Title
5.7...........................Compliance with Laws: Authorizations
5.8.........................................Tax Returns and Audits
5.9..................................................No Other Sale
5.10.....................................................Contracts
5.11.............................Compliance with Assumed Contracts
5.12.............................................Financial Matters
5.13....................................Normal Conduct of Business
5.14..........................................[INTENTIONALLY BLANK]
5.15..........................................[INTENTIONALLY BLANK]
5.16..........................................[INTENTIONALLY BLANK]
5.17..........................................[INTENTIONALLY BLANK]
5.18..........................................Purchase Commitments
5.19............................................Employment Matters
5.20........................................Employment Termination
5.21.....................................................Insurance
5.22.......................................No Conflict of Interest
5.23...................................Leased Assets; Other Assets
5.24.................................................Real Property
5.25....................................Tangible Personal Property
5.26.........................................Intellectual Property
5.27.............................................Employee Benefits
5.28.........................................Environmental Matters.
5.29.......................................Business Records Intact
5.30...............................Customer and Supplier Relations
5.31.....................................................Suppliers.
5.32........................................[INTENTIONALLY OMITTED]
5.33......................................Prepayments and Deposits
5.34....................................................Insolvency
5.35......................................................Consents
5.36...........................................Brokers and Finders
5.37.............................................No Foreign Person
SECTION 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER
6.1............................................Status of Purchaser
6.2..........................................Authorization of Sale
6.3.................Binding Nature and Enforceability of Agreement
6.4.......................................................Consents
6.5............................................Brokers and Finders
SECTION 7. SURVIVAL; ACCURACY AND COMPLETENESS; INDEMNITY
7.1.Survival of Representations and Warranties; Accuracy and Completeness
7.2.....................Parent's and Seller's Indemnification and Defense
7.3...............................Purchaser's Indemnification and Defense
7.4........................................Limitations on Indemnification
SECTION 8. RESOLUTION OF CLAIMS AND DISPUTES
8.1.........................................................Claims
8.2.........................................Resolution of Disputes
SECTION 9. RESTRICTIVE COVENANTS OF PARENT AND SELLER
9.1.................................................Noncompetition
9.2...........Nondisclosure and Non Use of Proprietary Information
9.3................................................Noninterference
9.4.......................................................Remedies
9.5.......................................Reformation of Agreement
9.6....................................................Definitions
9.7......................................Independence of Covenants
SECTION 10. [INTENTIONALLY BLANK]
SECTION 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1.....................................Publicity and Disclosure.
11.2.......................Amendment of Articles of Incorporation.
11.3.............................................COBRA Compliance.
11.4...........................................Employment Matters.
11.5.........................................Post-Closing Notices
SECTION 12. PRORATION OF ADVANCED PAYMENTS AND LIABILITIES
SECTION 13. CLOSING
13.1........................................................Time
13.2...................................Deliveries at the Closing
13.3.......................................................Place.
SECTION 14 MISCELLANEOUS
14.1................................................Further Acts
14.2..................................................Assignment
14.3..........................................Situs of Agreement
14.4..........................................Further Assurances
14.5........................Assignment of Contracts, Rights, Etc
14.6...........................................Product Liability
14.7..................Investigation Will Not Constitute A Waiver
14.8................................................Counterparts
14.9..........................................Partial Invalidity
14.10...........................................Entire Agreement
14.11.......................................Additional Documents
14.12...............................................No Amendment
14.13...............................................Time Periods
14.14......................................Rules of Construction
14.15...............................No Third Party Beneficiaries
14.16....................................................Notices
14.17....................................................Binding
November 10, 2000
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ('Agreement') is made as of November 13, 2000, at
Cleveland, Ohio, among CGI HOLDING CORPORATION, a Nevada corporation ('Parent'),
ROLI INK CORPORATION, a Wisconsin corporation ('Seller'), and BRADEN SUTPHIN
INK, an Ohio corporation or its designated wholly-owned subsidiary
('Purchaser').
W I T N E S S E T H:
WHEREAS, Parent owns all of the shares of Seller and will benefit from Seller's
sale of assets provided for in this Agreement; and
WHEREAS, Seller is presently is in the business of manufacturing and selling
custom blended water based flexographic printing inks and conducting related
activities incident to the manufacture and sale thereof (the 'Business'); and
WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to purchase
substantially all of the assets of Seller, including the goodwill and going
concern value of Seller's Business; and
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
1 SECTION . DEFINITIONS
1.1 Code - means the Internal Revenue Code of 1986, as amended.
1.2 Contaminants - means (i) any substance defined as hazardous under CERCLA
@101(14), (ii) any other substance deemed hazardous by the United States
Environmental Protection Agency under CERCLA @102(a), (iii) petroleum (including
crude oil or any fraction), (iv) any substance deemed hazardous pursuant to RCRA
@1004(5), (v) infectious waste, (vi) any material that is or may become
radioactive, or any radon gas, (vii) asbestos-containing material, including
friable asbestos, (viii) transformers or other equipment that contain dielectric
fluid containing polychlorinated biphenyls, or (ix) any other hazardous or toxic
substance, chemical, material, matter, compound, mixture, solution, element,
pollutant, or waste regulated under any Environmental Law.
1.3 Damages - means any claims, actions, demands, losses, costs, expenses,
liabilities, interest and penalties, including reasonable legal counsel fees,
costs of litigation (including discovery costs and reasonable expert fees
incurred during litigation or any dispute resolution proceeding), and fees
reasonably incurred investigating or attempting to avoid any damages, or
opposing the imposition of any costs, expenses, interest or penalties.
1.4 Employee Benefit Plan - means any employee benefit plan within the meaning
of ERISA @ 3(3), other than a Multiemployer Plan.
1.5 ERISA - means the Employee Retirement Income Security Act of 1974, as
amended.
1.6 GAAP - means generally accepted accounting principles as determined by the
Financial Accounting Standards Board. All references in this Agreement to
financial statements prepared in accordance with GAAP means in accordance with
GAAP consistently applied throughout the periods to which reference is made.
1.7 Intellectual Property - means any tradenames, trade marks, service marks,
copyrights and works of authorship, know-how, and all registrations and
applications for the foregoing, and all licenses or license rights related to,
or based upon, the foregoing, software licenses and know-how licenses, trade
secrets, confidential information and other proprietary information, fictitious
names, assumed names, all domestic and foreign patents and patent rights,
industrial models and all United States and foreign patent rights covered by,
disclosed in or otherwise related to any patents, all registrations and
applications for patents, and all reissues, divisions, continuations-in-part,
re-examinations, and extensions of patents, together with the right to sue for
past infringement and improper, unlawful, or unfair use of any of the foregoing.
1.8 Interim Balance Sheet - means Seller's balance sheet dated September 30,
2000, attached as Schedule 1.8.
1.9 Inventory - means all of Seller's raw materials, supplies, work-in-process,
semi-finished and finished goods, rights to goods in transit, but excluding
damaged or defective goods or supplies, obsolete items and items and materials
not usable in the ordinary course of the business.
1.10 Lien - means any mortgage, security interest, adverse judgment, pledge,
encumbrance, charge, imposition of any nature other than a Permitted Exception
on any property securing the payment of a liability.
1.11 Material Adverse Effect or Material Adverse Change - means an event that
has a material adverse effect on, or change in, the condition (financial or
other) business, results of operations, prospects, assets, liabilities, or
operations of the Business or the Purchased Assets.
1.12 Pension Plan - means a'Pension Plan' or an 'Employee Pension Benefit Plan'
or any other retirement plan as defined in ERISA @3(2) and the applicable
Regulations.
1.13 Permitted Exception - means any Lien, Damage, condition, fact or occurrence
listed in Schedule 1.13.
1.14 Plan - means any employment, noncompetition, management, agency, or
consulting agreement, bonus, profit sharing, deferred compensation, incentive,
stock option, stock ownership, or stock purchase plan, or other similar plan,
severance pay plan, policy, or arrangement intended to provide Seller's
employees (or any of them) with an economic benefit, whether in written form,
which does not constitute an Employee Benefit Plan or a Multiemployer Plan.
1.15 [INTENTIONALLY BLANK]
1.16 Seller's Knowledge - means actual knowledge of Seller's Officers listed on
Schedule 1.16.
1.17 Tax - means any Government charge, including any tax, assessment, levy, or
fee, and all associated interest and penalties.
1.18 Transaction - means the sale, transfer and conveyance of the Purchased
Assets and Business in exchange for the purchase price as described in this
Agreement.
1.19 Welfare Plan - means a 'Welfare Plan' or an 'Employee Welfare Benefit Plan'
as defined in ERISA @ 3(1) and the applicable Regulations.
1.20 Year-End Balance Sheets - means the balance sheets for Seller's two fiscal
years ending before the date of the Interim Balance Sheet, attached as Schedule
1.20.
1.21 Year-End Statements of Cash Flows - means the statements of cash flows and
statements of change in financial position, for Seller's two fiscal years ending
before the date of the Interim Balance Sheet, attached as Schedule 1.21.
1.22 Year-End Statements of Income - means the statements of income for Seller's
two fiscal years ending before the date of the Interim Balance Sheet, attached
as Schedule 1.22.
1.23 Year-End Financial Statements - means the aggregate of the Year-End Balance
Sheets, Year-End Income Statements, and Year-End Statements of Cash Flows.
2 SECTION . PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale.
Seller will sell, convey, transfer, and assign to Purchaser, at the Closing, by
bill of sale, assignment, or other appropriate instruments, free of all Liens
(other than Permitted Exceptions), and at the Closing, subject to this
Agreement, Purchaser will purchase and take title to certain property owned by
Seller. The property sold and purchased under this Agreement is collectively
referred to as the 'Purchased Assets.' Except as specifically provided in this
Agreement, the Purchased Assets include all of the following property owned by
Seller as of the Closing Date:
(a) All accounts receivable (billed or unbilled) that arose in the ordinary
course of the Business 'Accounts Receivable'), excluding any amounts owing from
Parent or any entity related to Parent;
(b) All Seller's Inventory;
(c) Prepaid expenses as listed on Schedule 2.1(c), subject to proration as
provided in Section 12;
(d) All other fixed assets, including all machinery, equipment, tooling, and
parts relating to the same, containers, furniture, furnishings, and computer
hardware and software (including source codes). Assets having a book value in
excess of $1,000.00 are listed on Schedule 2.1(d);
(e) All right, title and interest in and to all of Seller's contracts that are
listed on Schedule 5.10;
(f) The customer list of the Business;
(g) All manuals, charts, instructions of application, files, records, signs,
customer and marketing data, engineering data, plans, blueprints, papers,
records pertaining to customers and vendors, and copies of accounting and
employee records and data used in the Business;
(h) All Intellectual Property owned by Parent or Seller and used in the
Business, including that listed on Schedule 2.1(h), specifically including all
rights to the use of the name ROLI INK in any form. Parent and Seller will cause
to be prepared and filed any forms of assignment necessary to transfer and
assign any Intellectual Property;
(i) All assignable federal, state, county, municipal or foreign government
(collectively 'Government') consents, licenses, grants or authorizations
(collectively 'Authorizations') that relate to, or that are used by Seller in
connection with the Business;
(j) All supplies, including stationery and other office supplies;
(k) All rights to any leasehold improvements;
(l) All telephone, fax, and telex numbers, post office box numbers, and listings
pertaining to the Business in all telephone books and directories, stationery,
forms, labels, shipping material, catalogs, brochures, art work, photographs,
and advertising and promotional materials;
(m) All assignable rights under third-party manufacturers' warranties for, to,
or on behalf of Seller;
(n) All claims for or on behalf of Seller as to which Seller is a judgment
creditor;
(o) All chooses in action or claims that pertain to or arise out of the
Purchased Assets or the Business, including those held by Parent;
(p) Any goodwill and going concern value of the Business; and
The list of property set forth above is not intended by the parties to be an
exhaustive or exclusive listing of the Purchased Assets. Rather, the parties
intend that Purchaser acquire all property, property rights, and assets, other
than Excluded Assets described in Section 3, owned by Seller or Parent and used
in the operation of the Business, irrespective of whether the property, assets
or rights are described or disclosed in this Agreement, and regardless of
whether the property or assets have been written off the books and records of
account of Parent or Seller.
3 SECTION . ASSETS EXCLUDED
3.1 Excluded Assets.
This Agreement excludes from purchase and sale the following assets ('Excluded
Assets') owned by Parent or Seller which relate to the Seller, its Business, or
operations:
(a) Seller's cash on hand or in bank or other accounts.
(b) All rights to Tax refunds and prepaid unemployment compensation premiums;
(c) Seller's Corporate minute book, stock records, and tax returns, original
accounting and employee records, and other similar corporate books and records
of Seller, (provided copies of same are included among the Purchased Assets);
(d) Any shares of Seller's capital stock held in its treasury;
(e) Rights in pending litigation;
(f) All prorations and allocations pursuant to Section 12; and
(g) Any account receivable or other indebtedness from Parent or any person or
entity related to Parent.
4 SECTION . PURCHASE PRICE; ADJUSTMENT; PAYMENT
4.1 Purchase Price.
The tentative purchase price for the Purchased Assets ('Tentative Purchase
Price') payable at Closing will be that amount equal to the sum of:
(a) One Million Seven Hundred Thousand Dollars ($1,700,000), plus
(b) The net value of Accounts Receivable, as shown on Seller's books on the
Closing Date, and Inventory as shown on the Interim Balance Sheet, plus
(c) An amount equal to $240,000, minus the amount of trade accounts payable on
the Interim Balance Sheet assumed by Purchaser pursuant to Section 4.3.1.
4.2 Purchase Price Adjustment.
The Tentative Purchase Price will be adjusted after the Closing. No later than
(15) days after the Closing ('Purchase Price Adjustment Date'), Seller will
cause Poulos & Bayer, Ltd., Seller's independent accountants, ('Seller's
Accountants'), to deliver to Purchaser an itemization of the Accounts
Receivable, trade accounts payable, and Inventory of the Seller as of the
Closing Date (the 'Closing Balance Sheet')and a calculation of the net value of
Accounts Receivable and Inventory (the 'Closing Amount').
4.2.1 Inventory. Inventory on the Closing Balance Sheet will be determined by
Purchaser, Seller and Parent conducting an actual physical count of Seller's
Inventory (the'Closing Inventory') beginning on the Friday before the Closing
Date. Immediately thereafter, and not later than the Purchase Price Adjustment
Date, defined in Section 4.2, Seller and Parent will price and value the Closing
Inventory in accordance with Seller's historical practices. The amount of
Inventory so determined will be used by Seller's Accountant's for the Inventory
entry on the Closing Balance Sheet.
4.2.2 Accounts Receivable. Accounts Receivable will be valued at their face
value on the Closing Balance Sheet. Any Accounts Receivable turned back,
pursuant to Section 4.4, will be valued in the same way for purposes of the AR
Resale.
4.2.3 Review and Cooperation. Purchaser, its independent accountants, and its
other representatives will have the right to review the Closing Balance Sheet.
Seller will cooperate in the review process and will provide them reasonable
access to Seller's Accountant's and to all information used in the preparation
of the Closing Balance Sheet.
4.2.4 Dispute Resolution. Pursuant to Purchaser's review, no later than (15)
days after its receipt of the Closing Balance Sheet, if Purchaser disagrees with
the Closing Balance Sheet, Purchaser must deliver to Seller a notice (the
'Dispute Notice') describing any item or amount in the Closing Balance
Sheet that is disputed by Purchaser. If Purchaser does not deliver a Dispute
Notice to Seller, then the Closing Balance Sheet will be deemed to be final and
binding on the parties.
The parties will attempt to resolve any dispute, but if they cannot do so within
30 days after the date of receipt of the Dispute Notice, then the parties will
jointly select an independent accountant to do so. If the parties cannot agree
on the appointment of the independent accountant, the independent accountant
will be selected at random from a list comprised of two firms chosen by Seller
and two firms chosen by Purchaser, which firms must not have been engaged by
Seller, Purchaser or any of their affiliates during the prior 3 years. The
determination of the Closing Amount on the Closing Balance Sheet made by the
independent accountant will be final and binding on the parties. Purchaser, on
the one hand, and Seller, on the other, will share equally the cost of retaining
the independent accountant.
4.2.5 Adjustment Payment. No later than 10 days after the final determination of
the Closing Amount pursuant to Section 4.2.3 above, the following payments, as
applicable, must be made by wire transfer of immediately available funds:
(i) if the Closing Amount allocated for Seller's Accounts Receivable and
Inventory on the Closing Balance Sheet is greater than the portion of Tentative
Purchase Price allocated for Seller's Accounts Receivable and Inventory, then
Purchaser will pay to Seller the difference between the two; or
(ii) if the Closing Amount allocated for Seller's Accounts Receivable and
Inventory on the final Closing Balance Sheet is less than the portion of
Tentative Purchase Price allocated for Seller's Accounts Receivable and
Inventory, then Seller will pay to Purchaser the difference between the two;
provided, however, that in either case no payment will be required by any party
unless the difference between the applicable amounts is at least $1,000.00 (in
which event payment of the full amount of the difference will be required).
4.3 Assumption of Liabilities.
Purchaser will assume, be responsible for and indemnify, hold harmless and
defend Seller from and against the following liabilities (collectively, the
'Assumed Liabilities'):
4.3.1 Trade accounts payable, shown on the Interim Balance Sheet and as finally
determined on the Closing Balance Sheet;
4.3.2 Liabilities of Seller incurred after the Interim Balance Sheet through the
Closing Date of the nature of the liabilities described in Section 4.3.1 so long
as the liabilities described in Section 4.3.1, plus 4.3.2, together with
payments made pursuant to Section 4.1(c), do not exceed $240,000.00;
4.3.3 Liabilities under Contracts designated on Schedule 5.10 as Assumed
Contracts or otherwise relating to the ownership of the Purchased Assets or the
operation of the Business arising from events after the Closing Date;
4.3.4 Liabilities relating to product liabilities described in Section 14.6 that
are listed on Schedule 4.3.4.
4.4 Accounts Receivable Turnback.
Notwithstanding any payments by Purchaser, finality of the Closing Balance Sheet
or other provisions of Section 4.2, all or any part of the Accounts Receivable
sold to Purchaser that have not been paid by the 61st day after the Closing
Date, at Purchaser's option, may be transferred back to Seller and Parent (the
'AR Resale') at one or more times on or before the 120th day after the Closing
Date at a purchase price equal to the amount remaining unpaid on each account
receivable that is the subject of each AR Resale.
4.5 Allocation of Purchase Price.
Purchaser and Seller will make an allocation of the Purchase Price among the
Purchased Assets in accordance with Exhibit 4.5 Purchaser and Seller will
prepare and file tax returns consistent with Exhibit 4.5.
4.6 Closing Payment
The Tentative Purchase Price will be paid by Purchaser to Seller in cash wire
transfer at Closing.
4.7 Contingent Consideration.
4.7.1 In addition to the above, Purchaser will pay Seller additional
consideration for the Purchased Assets based on the 'Earnings Before Taxes of
the Business' ('EBTB') for the twelve months ending December 31, 2000, adjusted
as provided in Section 4.7.2.
4.7.2 For the purposes of calculating the additional consideration, EBTB is
adjusted as follows:
a) All transactions not in Seller's ordinary course of business will be
excluded.
b) The salary paid to John Giura and the car lease payments paid on his behalf
will be added back to EBTB to the extent the foregoing items were deducted in
arriving at EBTB.
4.7.3 The amount of the additional consideration is as follows:
EBTB
Additional
(as adjusted) Consideration
less then $600,000 $ 0
$600,000-$670,000 $ 75,000
greater then $670,000 $150,000
4.7.4 Additional consideration for the Purchased Assets will be due and payable
ten (10) days after Seller delivers to Purchaser documentation reasonably
calculating and supporting the calculation of any amount due. For the purposes
of calculating EBTB and for the purposes of calculating any additional
consideration, EBTB will be calculated for any time the Business is owned by
Purchaser in the same manner as if Seller had continued to own and operate the
Business.
4.8 Liabilities Retained by Seller.
Purchaser is not liable for the payment or performance of any of the following
which are retained by Seller and/or Parent (collectively 'Retained
Liabilities');
4.8.1 Any liabilities and amounts owed to Seller's employees, agents,
contractors, or sales representatives, arising out of employment or agency
relationships prior to the Date of Closing, including welfare or pension plans,
sick pay, personal leave, vacation plans, bonuses, commissions, severance pay
obligations, expenses, or collective bargaining agreements;
4.8.2 Liabilities for workers compensation claims for injuries occurring prior
to the Date of Closing;
4.8.3 Except for taxes or charges on accounts receivable purchased and collected
by Purchaser for sales, liabilities, property, income, excise, workers or
unemployment compensation taxes, charges or claims, incurred in connection with
the sale of the Purchased Assets, or incurred in connection with the Business
based upon a transaction or occurrence on or before the Closing Date;
4.8.4 Liabilities arising out of, or related to the presence of any Contaminant,
or any condition arising out of, or related to any Contaminant to the extent
known by Seller on or prior to the Closing Date;
4.8.5 Liabilities for fees for professional, brokerage and finders services
incurred by Seller in connection with this transaction;
4.8.6 Damages to any person, entity or property arising out of:
(a) any breach of warranty, expressed or implied, or breach of contract, on the
part of Seller in connection with the Business, arising from an event occurring
before the Closing Date;
(b) goods delivered to customers or in transit to customers before the Closing
Date, including Product Liability in accordance with Section 14.6; or
(c) for tortious conduct of Seller, or any of its employees or agents, including
negligence, fraud, strict tort or willful misconduct in connection with the
Business, arising from an event occurring before the Closing Date.
5 SECTION . REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Parent and Seller, jointly and severally, represent and warrant to Purchaser as
follows:
5.1 Status of Parent and Seller.
Seller and Parent are corporations, duly incorporated, validly existing, and in
good standing under the Laws of the States of Wisconsin and Nevada,
respectively. Seller has all requisite corporate power and authority to carry on
the Business and own the Purchased Assets.
5.2 [INTENTIONALLY BLANK]
5.3 Ownership of Seller.
All of the issued and outstanding shares of the capital stock of Seller are
owned of record and beneficially by Parent.
5.4 Authorization of Sale.
Parent's and Seller's officers who sign and deliver this Agreement and the
schedules and exhibits have the capacity, power, and authority to do so. The
board of directors of Parent (as sole shareholder of Seller) and the board of
directors of Seller have authorized this Agreement and have authorized their
respective officers to sign, deliver and perform this Agreement, and all related
documents needed for and the performance of the Transaction. The signing,
delivery, and performance of this Agreement by Seller does not as of the Closing
Date:
(a) except as disclosed on Schedule 5.4(a), violate any contract to which Parent
or Seller is a party or that gives rise to a right of termination or
acceleration under any contract by which Parent or Seller is bound, except where
the violation or right would not have Material Adverse Effect and except as
otherwise noted in this Agreement or on any Schedule to this Agreement;
(b) violate any provisions of the Articles of Incorporation, Regulations,
by-laws, if any, or any other governing instruments or corporate documents of
Parent or Seller;
(c) violate any federal, state or local law or regulation (collectively 'Law')
of any Government, the violation of which would have a Material Adverse Effect;
(d) violate any order of any court binding upon Parent or Seller or affecting
the Purchased Assets or the Business; or
(e) constitute an event that, after notice or lapse of time, or both, will
result in any of the foregoing.
5.5 Binding Nature and Enforceability of Agreement.
This Agreement, and all other documents delivered to Purchaser at the Closing,
are legally binding, upon and enforceable against, Parent and Seller.
5.6 Good Title.
Seller has good and marketable title to the Purchased Assets, free and clear of
all Liens, other than Permitted Exceptions.
5.7 Compliance with Laws: Authorizations.
Seller is not in violation of any Law, relating to its ownership of, or use of,
the Purchased Assets or the operation of the Business. To Seller's Knowledge,
there are not, and Seller has not received any written notice of any allegations
of, or inquiries concerning, any violations of Law by Seller.
Parent and Seller have (or individual employees of Seller have) all
Authorizations necessary for the operation of the Business, all of which are
valid and continuing. No proceeding, audit, inquiry, investigation, judicial or
administrative process (collectively 'Proceeding') of any Government is pending
to revoke or limit any of Seller's Authorizations or otherwise impose any
conditions or obligations on the possession or transfer of any of them.
5.8 Tax Returns and Audits.
All Tax returns required by any Government, to be filed by or on behalf of
Seller have been duly filed. Parent or Seller have paid, or will timely pay all
Taxes owed by Parent or Seller with respect to the Business and Purchased
Assets, that are due and payable, before or as of the Closing Date, including
all social security Taxes, withholding Taxes, sales and use Taxes, property and
income Taxes, unemployment insurance or workers compensation Taxes, and excise
taxes under ERISA, but excluding any Taxes which, if due, (i) are not yet
delinquent, or (ii) are being contested in good faith or have not been finally
determined and are disclosed in Schedule 5.8.
5.9 No Other Sale.
Excluding this Agreement, and other agreements with Purchaser, Parent or Seller
has not entered into any contract to sell (other than sales of Seller's
inventory in the ordinary course of business) all or any portion of the Business
or of the Purchased Assets.
5.10 Contracts.
Schedule 5.10 lists every written or oral contract ('Contract') regarding the
Business entered into by Seller, or Parent on behalf of Seller that involves the
total receipt or payment of consideration during the contract period in excess
of $1,000.00. Schedule 5.10 also indicates every Contract that is to be assumed
by Purchaser ('Assumed Contracts'). Schedule 5.10 includes contracts pertaining
to:
(a) Collective bargaining;
(b) Licensing;
(c) Advertising or public relations;
(d) Distribution of Seller's products or services;
(e) Redetermination of price or cost reimbursement;
(f) Royalty agreements;
(g) Consulting;
(h) Employees, manufacturer's representative, independent contractors sales,
professional services;
(i) Non-compete, business limitation or non-solicitation of employees or
customers;
(j) Confidentiality with respect to information furnished or received by Parent
or Seller concerning the Seller's Business;
(k) Intellectual Property;
(l) Past, present or future disposal of Contaminants; and
(m) Repair and maintenance of the Purchased Assets.
Except as disclosed on Schedule 5.10, all of the Assumed Contracts are
assignable to Purchaser without any requirement to obtain the consent of any
person or Entity. In the course of Purchaser's due diligence, Parent and Seller
have delivered to Purchaser accurate and complete copies of each written
Contract, and an accurate and complete written description of each oral
Contract, in each case with all related modifications and amendments.
5.11 Compliance with Assumed Contracts.
Except for any failure to obtain consents to contact assignments disclosed as
required on Schedules 5.10, (i) Parent and Seller have complied with all
provisions of all Assumed Contracts; (ii) to Seller's Knowledge, with respect to
Assumed Contract, there is no basis for a claim of default on Seller's part, nor
has any event has occurred that, but for the passage of time or the giving of
notice or both, would constitute a default by Parent or Seller; and (iii) to
Seller's Knowledge, no party to an Assumed Contract, regarding the Business, is
in default.
5.12 Financial Matters.
Parent and/or Seller have delivered to Purchaser complete and accurate copies of
the financial statements of Seller listed on Schedule 5.12 (collectively the
'Financial Statements'). The Financial Statements have been prepared (i) in
conformity with GAAP, except as expressly noted in those statements, and (ii)
from the Seller's accounting books and records. The Financial Statements fairly
present, in all material respects, the financial condition of Seller at the
indicated dates, (including a reserve for all Seller Taxes and liabilities
accrued, but not yet payable), the results of Seller's Business for the periods
covered, and the changes in the financial position of Seller for the periods
covered in all material respects.
Except as disclosed on Schedule 5.12, since the date of Seller's Interim Balance
Sheet, there has not occurred:
(a) any adverse change in the Seller's Business;
(b) any damage or destruction to Assets of the Business in the nature of a
casualty loss, even if covered by insurance;
(c) any increase in the compensation payable to any employee of Seller or any
increase in employee benefit costs or in any Plan made for or with or covering
any employee of Seller;
(d) any extraordinary loss (as defined by GAAP) suffered by Seller that,
individually or in the aggregate, adversely affects the Business or the
Purchased Assets, or any waiver by Seller of any rights that, singly or in the
aggregate, adversely affects the Business or the Purchased Assets;
(e) any written notice of claims of third persons or entities against Seller
that may result in any claims against or liabilities of Seller that, singly or
in the aggregate, may result now or after Closing (i) in a reduction in the net
worth of Seller, (ii) in a charge against the net earnings of Seller, or (iii)
in any adverse change in the Business;
(f) any commencement of, settlement, or agreement to settle, any (i) private
lawsuit, arbitration, mediation or other adversary proceeding or (ii) Government
Proceeding, relating to the Business;
(g) any receipt of notification of termination of any Assumed Contract;
(h) any capital expenditures or commitments for capital expenditures;
(i) any sale or other disposition or dissipation of any fixed assets of Seller;
or
(j) excluding general economic and public events, to Selle's Knowledge, any
other event, condition or state of facts that would have a Material Adverse
Effect on the Business.
5.13 Normal Conduct of Business.
Since the date of the Interim Balance Sheet:
5.13.1 Seller has only engaged in transactions that arose in the ordinary course
of the Business.
5.13.2 Seller has continued:
(a) to pay its liabilities, including trade payables, on a timely basis, and in
a manner consistent with past practice;
(b) to collect its receivables, in a manner consistent with past practice; and
(c) to replenish its inventory, in a manner consistent with past practice.
5.13.3 Seller has not accepted from its customers advanced payments for goods or
services, or preinvoiced customers for goods or services to be delivered or
rendered in the future.
5.14 [INTENTIONALLY BLANK.]
5.15 [INTENTIONALLY BLANK.]
5.16 [INTENTIONALLY BLANK.]
5.17
5.18 [INTENTIONALLY BLANK.]
5.19 Purchase Commitments.
Seller's purchase commitments (i) are not in excess of the normal, ordinary, and
usual requirements of the Business, and (ii) are not inconsistent with past
practices, and (iii) do not contain terms and conditions that are materially
different from those usual and customary to Seller's historical practices.
5.20 Employment Matters.
Schedule 5.19 lists the names, dates of hire, current annual compensation rates,
social security numbers, and other compensation arrangements of all of Seller's
employees. Seller does not use or pay for any leased employees or use or pay for
any independent contractors on a regular basis.
Except as disclosed in Schedule 5.19:
(a) To Seller's Knowledge, there are not any controversies, pending or
threatened, between Seller and Seller's employees, including sexual harassment
and discrimination claims, or claims arising under workers' compensation Law
(collectively'Employee Claims'), and there is not any state of facts that could
reasonably be expected to form the basis for any Employee Claims. There have not
been any Employee Claims in the past three years.
(b) No charges have been filed against Seller by any Government or individuals
within the past three years with respect to the Business that are pending
alleging any violation of any anti-discrimination employment Law. Seller or
Parent have not entered into any settlement or consent agreements with the Equal
Employment Opportunity Commission or any comparable state agency with respect to
the Business that may bind a successor business. Seller has not undergone any
Government Proceeding regarding a violation or potential violation of the Fair
Labor Standards Act with respect to the Business that is pending as of the
Closing.
(c) As defined in ERISA, Seller is not an 'Employer' with an 'obligation to
contribute' to any Plan and is not a member of a 'controlled group' (as defined
in ERISA) in which any member of the controlled group has an 'obligation' to
contribute to any Plan or Multiemployer Plan. The transaction will not result in
a complete or partial withdrawal from any Plan or Multiemployer Plan.
(d) With respect to the Business, there is no union representation or collective
bargaining agreement of Seller's employees, and to Seller's Knowledge, there has
been no attempt by a labor organization to organize Seller's employees into a
collective bargaining unit and there is no basis to believe that there is any
imminent threat of an attempt to organize a union.
(e) Since the date of the Interim Balance Sheet, there has not been any
increases made or promised in the level or rate of wages, salaries or other
compensation, (including bonuses) of any employee, director, representative, or
agent of Seller.
5.21 Employment Termination.
Upon the termination of the employment of Seller's employees, Purchaser will not
be liable to any of Seller's employees for so-called 'severance pay,' vacation
pay, sick pay, bonuses, if any, or any other compensation, benefits or payments
by reason of anything done before or at the Closing Date.
5.22 Insurance.
Schedule 5.21 lists all insurance policies maintained for or by the Seller,
including those which pertain to any Plans, and identifies for each policy (i)
the underwriter, (ii) the policy number, (iii) the coverage type, (iv) the
annual premium, (v) the expiration date, (vi) the coverage amount, and (vii) the
amount of the deductible. All of the policies are in full force and effect and
all premiums have been paid. Except for amounts that are deductible under
policies of insurance described in Schedule 5.21, there is no liability as a
self-insurer.
5.23 No Conflict of Interest.
Except as disclosed in Schedule 5.22, neither Parent or Seller, nor any of their
shareholders, directors, officers, nor, to Seller's Knowledge, any management or
supervisory employees of either own any interest in any Entity or have any
business relationship with any person engaged in any business competitive with
the Business or has any interest in any Entity that does business with Seller,
has any interest in any property, asset or right that is used by Seller in the
conduct of the Business, or has any contractual relationship with Seller
respecting the Business.
5.24 Leased Assets; Other Assets.
Schedule 5.23 lists all property that is rented or leased, and used in
connection with the Business. There is no non-real property used in the conduct
of the Business or without which the Business could not be conducted, as
presently conducted, that is not included in the Purchased Assets or disclosed
as a rented or leased asset in Schedule 5.23, except for non-real property, the
absence of which would not have a Material Adverse Effect.
5.25 Real Property.
Schedule 5.24 contains a complete and accurate list of all real property,
including an accurate legal description, that is currently owned or leased by
Parent or Seller and is used or required for the conduct of the Business. Parent
or Seller holds a fee or leasehold estate (and will continue to do so at
Closing) in all real property that is necessary for the conduct of the Business
(collectively 'Real Property').
5.24.1 All of the improvements to the Real Property are in good operating
condition, suitable for the purposes for which they are currently being used,
and none of the improvements are in need of maintenance or repair, except for
ordinary, routine maintenance and repair, which are not significant in nature or
cost.
5.24.2 To Seller's Knowledge, there does not exist any state of facts from which
it is reasonable to conclude that any improvements owned or leased, or any
appurtenance or fixture in the improvements, or the operation or maintenance of
the improvements, violates any (i) Contract; (ii) restrictive covenants; (iii)
provisions of any Law, including any zoning regulation, building code or
environmental law; or (iv) court order, which violation would have a Material
Adverse Effect on the use of any improvement.
5.24.3 To Seller's Knowledge, (i) no condemnation proceeding is pending or
threatened against the Real Property; nor is any change in any Law pending or
threatened that, may interfere with the present use of any of the Real Property;
(ii) no Government Proceeding has commenced, with respect to the Real Property
from which it is reasonable to conclude that a Government is considering any
action that will result in a Material Adverse Effect upon the Business, (iii) no
improvement of the Real Property encroaches upon any adjacent real property, and
no improvement of any adjacent real property encroaches upon the Real Property;
and (iv) no easement rights over or with respect to the Real Property are
required in order to continue to use the Real Property in the same manner as the
current use with respect to the conduct of the Business.
5.24.4 Parent or Seller does not have any duty to remove any improvements made
upon the Real Property.
5.24.5 In the past three years there has been no interruption in the delivery of
adequate service of any utilities or other public authorities required in the
operation of the Business which has resulted in a Material Adverse Effect on the
Business. The Real Property has water supply, storm and sanitary sewage
facilities, telephone, gas, electricity, fire protection, and other public
utilities which are sufficient to conduct the Business, except where the absence
would not have a Material Adverse Effect.
5.24.6 No improvements have been made to the Real Property before the Closing
Date such that any person or entity may obtain a mechanic's lien against the
Real Property by reason of services rendered or materials furnished that have
not been paid when due.
5.24.7 All water charges and sewer charges pertaining to the Real Property that
are or become due and payable before Closing will be prorated and allocated as
provided for in Section 12.1.
5.24.8 No person or entity is in possession or has a right of possession, either
present or future, and with respect to the Real Property, there are no
outstanding variances or special use permits affecting the Real Property, the
improvements, or the use of the Real Property.
5.26 Tangible Personal Property.
With respect to the tangible personal property included within the Purchased
Assets, all of the tangible personal property is in good working condition, and
is capable of being used for its intended purpose. All machinery and equipment
has been maintained according to prudent business practices, consistent with
industry standards, and as required by Law.
All tangible personal property included within the Purchased Assets is located
at Seller's place of business.
5.27 Intellectual Property.
Parent or Seller have the unrestricted right to use (which right will cease as
of the Closing), free and clear of any rights or claims of others, all of the
Intellectual Property and the customer lists currently owned. Seller has the
right to sell any products and services currently sold or furnished by it.
Parent and Seller have the unrestricted right to use the name 'Roli Ink' as it
is currently being used, free and clear of any rights or claims of others.
5.28 Employee Benefits.
5.27.1 With respect to the Business, Schedule 5.27 contains a list of each
employee benefit provided to employees of the Seller, whether by written or oral
contract or plan, to any one or more of Seller's employees or agents, including
all Employee Benefit Plans and all other Plans, all qualified retirement plans,
voluntary employee beneficiary associations, life insurance, death benefits,
vacation pay benefits, health insurance or medical care benefits, disability
insurance or benefits, accident travel insurance or benefits, accidental death
and dismemberment insurance or benefits, unqualified deferred compensation or
retirement benefits, retiree insurance or benefits, any phantom stock, stock
appreciation right or stock option programs, supplemental benefit programs,
split dollar insurance, golden parachute programs or Contracts that comply with
Code @ 280G, and severance pay plans.
5.27.2 Purchaser has been provided accurate and complete copies of each of the
written Employee Benefit Plans and other Plans, an accurate and complete written
description of each oral Employee Benefit Plan and other Plan. Each Pension
Plan, Welfare Plan, and other Plan maintained for employees of the Seller has
been operated in accordance with its terms and applicable Law in all material
respects. Except as otherwise set forth on Schedule 5.27, no Employee Benefit
Plan or other Plan provides benefits for persons who are not active employees or
directors of Seller.
5.27.3 Parent or Seller have not, and to the knowledge of either no other person
or entity has, engaged in any prohibited transaction (within the meaning of
ERISA @ 406 and Code @ 4975, excluding any transactions that are exempt under
ERISA @ 408 or Code @ 4975) with respect to any Employee Benefit Plan
maintained, or to which Parent or Seller contributes for the employees of the
Seller, which could subject Parent or Seller or any other person or Entity to
any Liability and no event has occurred and no condition exists that would
subject Seller to any Tax under Code @@ 4971, 4972, 4977 or 4979, or to a fine
under ERISA @@ 502(c) or 502(1). No pension Plan for Seller's employees has an
Accumulated Funding Deficiency.
5.27.4 Parent does not maintain any Employee Benefit Plan or other Plan under
which it would be obligated to pay benefits because of the consummation of the
Transaction.
5.27.5 Except as disclosed on Schedule 5.27.5, Seller has no liability for any
withdrawals from a Multi-employer Plan (as defined in ERISA);
5.29 Environmental Matters.
Except as set forth on Schedule 5.28, to Seller's Knowledge, the Business has
been conducted, and currently is conducted, in a manner to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer, produce
or process all Contaminants, that complies with all applicable environmental
Laws, except where this failure would have no Material Adverse Effect. Except as
set forth on Schedule 5.28, to Seller's Knowledge, the Seller has not been
engaged, at any time, and currently is not engaging in any activity (nor is
failing to act) in a manner that has resulted or may result in a release, or
threat of a release, into the environment of a Contaminant in any quantity
prohibited or regulated by Law. Except as set forth on Schedule 5.28, or except
where this failure would have no Material Adverse Effect, to Seller's Knowledge,
(a) no Contaminant has been disposed of, generated on, treated on, buried
beneath, or percolated beneath, and no disposal, generation, treatment, burial
or percolation has been threatened in or near any real property previously or
currently owned, leased or used by Seller;
(b) no real property previously or currently owned, leased or used by Seller,
contains or has contained any underground storage tank.
(c) Parent or Seller has not received any notice of any nature from the
Government pertaining to any asserted violation of any Law relating to the
Business.
5.30 Business Records Intact.
With respect to the Business, all accounting books and records and all business
records (collectively 'Records'), including all customer, and vendor records, of
the Business are intact, complete, and accurate, except where the incompleteness
or inaccuracy would not have a Material Adverse Effect.
5.31 Customer and Supplier Relations.
To Seller's Knowledge, none of the customers of the Business to whom more than
$25,000.00 of sales were made by Seller in calendar years 1999 or 2000 have
terminated, or have threatened in writing to terminate, their relationship with
Seller or has during the past 12 months decreased or delayed or threatened in
writing to decrease or delay, in any significant respect, its usage of Seller's
services or products. Except as otherwise set forth in Schedule 5.30, in order
to conduct business with its customers, Seller is not required to be an approved
or a certified supplier for any of its customers, resulting from any approval or
certification process required by a customer.
5.32 Suppliers.
With respect to Seller's Business, Schedule 5.31 contains a complete list of all
suppliers of the Business as of the Closing that accounted for more than one
percent of Seller's purchases in any one of the past three fiscal years
('Significant Suppliers'). No Significant Supplier or any supplier who is the
Business's sole source of supply of any product or service has terminated, or
threatened in writing to terminate, its relationship with Seller or the Business
or has during the past twelve months decreased or delayed, or threatened in
writing to decrease or delay, in any significant respect, its sale of products
or services to Seller or the Business.
5.33 [INTENTIONALLY OMITTED.]
5.34 Prepayments and Deposits.
Since the date of the Interim Balance Sheet, Parent or Seller have not received
any prepayments or deposits from customers for products to be shipped, or
services to be performed by Seller, in the future. Seller is not required, in
the ordinary course of business, to provide any bonding or any other financial
security arrangements in connection with any transactions with any customers or
suppliers of the Business.
5.35 Insolvency.
No insolvency proceedings of any type including bankruptcy, receivership,
reorganization, composition or arrangement with creditors, customers or
suppliers, voluntary or involuntary, under any Law are pending or threatened
against Seller.
5.36 Consents.
No authorization, approval, consent or order of, or registration, declaration or
filing with, any court, Government, entity or person is required in connection
with the signing, delivery or performance of this Agreement, any exhibit, or any
other agreement, instrument or document to be delivered by, or on behalf of,
Seller or Parent in connection with this transaction.
5.37 Brokers and Finders.
Messirow Financial is the only broker and/or finder used by Parent and/or Seller
in connection with this transaction. Parent and/or Seller will be solely
responsible for payment of said broker's/finder's commission or fee and will
indemnify and hold Purchaser harmless with regard to such payment or claim
therefor.
5.38 No Foreign Person.
Parent or Seller is not a 'foreign person' as contemplated by Code @ 1445(a).
6 SECTION . REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Parent and Seller as follows:
6.1 Status of Purchaser.
Purchaser is a corporation that is duly organized, duly incorporated, validly
existing, and in good standing under the laws of the State of Ohio, and has all
requisite corporate power and authority to sign and perform this Agreement.
6.2 Authorization of Sale.
The officers of Purchaser who sign and deliver this Agreement and all
instruments and agreements ancillary hereto or contemplated hereby have the
capacity, power, and authority to do so. The Board of Directors of Purchaser has
authorized Purchaser's officers to sign and deliver this Agreement and all
related documents needed for the performance of this transaction. Except as
disclosed on Schedule 6.2, and except for consents to Contract assignments
disclosed on Schedules 2.1(e) and 5.10, the signing, delivery and performance of
this Agreement, and all such related documents, by Purchaser through its
officers, and the performance of this transaction does not:
(a) violate any contract to which Purchaser is a party;
(b) violate any provisions of Purchaser's Articles of Incorporation,
Regulations, by-laws, if any, or any of Purchaser's other governing documents or
corporate documents;
(c) violate any law or regulation;
(d) violate any order of any court binding upon Purchaser or affecting the
Purchased Assets, including Purchaser's Business;
(e) constitute an event that, after notice or lapse of time or both, will result
in any of the foregoing.
6.3 Binding Nature and Enforceability of Agreement.
This Agreement, and all other documents delivered to Parent or Seller at the
Closing and signed by Purchaser are binding upon and enforceable against
Purchaser, in all respects.
6.4 Consents.
No Authorization of, or registration, declaration or filing with, any court,
Government, entity or person is required in connection with the signing,
delivery or performance by Purchaser of this Agreement, any exhibit, or any
other agreement, instrument or document to be delivered by or on behalf of
Purchaser in connection with this transaction.
6.5 Brokers and Finders.
No broker, finder or other person or entity acting in a similar capacity has
acted on behalf of Purchaser in bringing about this transaction.
7 SECTION . SURVIVAL; ACCURACY AND COMPLETENESS; INDEMNITY
7.1 Survival of Representations and Warranties; Accuracy and Completeness.
7.1.1 The representations and warranties of Purchaser, or Parent and Seller,
will survive the Closing of the Transaction for 18 months after the Closing
Date.
7.1.2 No representation made or warranty given in this Agreement, and no
statement contained in any Schedule or Exhibit delivered pursuant to this
Agreement, will be enforceable more than 18 months after the Closing Date.
7.1.3 No representation made or warranty given will knowingly contain any untrue
statement of a fact or knowingly omit to state a fact necessary to make the
representations and warranties contained in this Agreement, in light of the
circumstances in which they are made, not misleading.
7.1.4 The parties acknowledge that the representations and warranties contained
in this Agreement are a significant inducement to the parties entering into this
transaction.
7.2 Parent's and Seller's Indemnification and Defense.
Parent and Seller will indemnify Purchaser for any Damages, suffered by or
resulting to Purchaser arising from any of the following:
(a) Any inaccurate representation made by either pursuant to this Agreement;
(b) Any breach of warranty given by either pursuant to this Agreement;
(c) Any default in the performance by either of any of the covenants to be
performed by either under this Agreement, including any exhibits; and
(d) Any failure to comply with any bulk transfer laws.
Parent and Seller will also defend Purchaser at their cost(s), for any claim of
any nature which results from the above.
7.3 Purchaser's Indemnification and Defense.
Purchaser will indemnify Parent and Seller for any Damages, suffered by or
resulting to Parent or Seller arising from, any of the following:
(a) Any inaccurate representation made by Purchaser pursuant to this Agreement;
(b) Any breach of warranty given by Purchaser pursuant to this Agreement;
(c) Any default in the performance by Purchaser of any of the covenants to be
performed by it under this Agreement, including any exhibits;
(d) The failure of Purchaser to discharge, perform or pay in full when due any
liabilities of Parent assumed by Purchaser pursuant to the provisions of this
Agreement; or
(e) The failure by Purchaser to pay in full when due any amounts payable by
Purchaser to Parent or Seller pursuant to this Agreement.
Purchaser will also defend Parent and Seller, at its cost, for any claim of any
nature which results from the above.
7.4 Limitations on Indemnification.
7.4.1 The obligations of indemnification of Seller or Parent under Section 7.2,
and Purchaser under Section 7.3 are subject to the limitations and procedures as
provided for in Articles 8 and/or 9.
7.4.2 Purchaser's sole remedies for breaches of representations and warranties
in this Agreement will be to pursue indemnification remedies provided in this
Agreement.
7.4.3 A further limitation on Seller's and Parent's obligations of
indemnification is that notwithstanding any other provisions in this Agreement,
Purchaser will not be entitled to assert any Claims for fraud, misrepresentation
or similar causes of action for immaterial breaches of representations or
warranties contained in this Agreement.
8 SECTION . RESOLUTION OF CLAIMS AND DISPUTES
9.1 Claims.
8.1.1 If any party ('Claiming Party') determines that it has a reason for
indemnification ('Claim') for any item under Section 7.2 or 7.3, then the
Claiming Party will send a written notice ('Charge Notice') to the other within
30 days after making its determination describing the nature and the amount of
the Claim. While the Claiming Party will make a good faith effort to give the
other party prompt notice, the failure of the Claiming Party to notify the other
party within the 30 day period, does not relieve the other party from any
liability for indemnification, except to the extent the other party was
prejudiced by the delay.
8.1.2 No Claim will be asserted against any party until the aggregate amount of
Claims for indemnification exceeds $20,000.00 and then the Claim will be only to
the extent the reasons for indemnification exceed $20,000.00
8.1.3 No party will be liable to any other party for Damages pursuant to
indemnification or otherwise, that, in an amount in excess of sum of (i) the
Purchase Price as adjusted; plus (ii) the liabilities assumed under Section
4.3.1; plus (iii) any contingent consideration under Section 4.7; minus any
payment made under Section 4.4.
9.2 Resolution of Disputes
All disputes that cannot be resolved among the parties will be litigated in the
state or federal courts located in Cleveland, Ohio. Parent and Seller agree to
voluntarily submit to the jurisdiction and venue of courts located in Cleveland,
Ohio for the purposes of resolving disputes and Claims under this Agreement.
10 SECTION . RESTRICTIVE COVENANTS OF PARENT AND SELLER
10.1 Noncompetition.
During a period of five consecutive years commencing on the Closing Date (the
'Noncompetition Term'), if Purchaser will not have violated the provisions of
this Agreement or any agreement or instruments related hereto, Parent and
Seller, alone or in association with others, will not within any geographic area
in which Seller has conducted business at any time, or any geographic area in
which Purchaser is, now or in the future, conducting business at any time
(collectively the 'Restricted Area'), directly or indirectly:
(a) establish, own, engage in, or operate any business that is engaged, in whole
or in part, in any activity that is competitive with the business of Purchaser,
its subsidiaries or parent as of the Closing Date ('Prohibited Activity'); or
(b) become associated with, or advise or assist, any business, firm,
partnership, individual, corporation or any other entity represented in or
conducting business in the Restricted Area if that business entity is engaged,
in whole or in part, in any Prohibited Activity.
10.2 Nondisclosure and Non Use of Proprietary Information.
Parent and Seller will transfer and assign to Purchaser, on the Closing Date,
all of the trade secrets and other confidential and proprietary information
regarding the Business, operations, customer lists, vendors, properties,
research and development, accounts, books and records, data, business plans,
operating results, sales, know-how, inventions, patents, copyrights, techniques
for sales (marketing and otherwise), profits, products, products under
development, customers, agreements with customers, suppliers, distributors,
costs and financial data, memoranda, methods, devices, use of equipment,
processes, procedures, formulas, pricing and other similar corporate properties
of Parent or Seller (collectively 'Proprietary Information'). Parent and Seller
recognize that the Proprietary Information constitutes valuable, special and
unique assets and that the disclosure or improper use of the Proprietary
Information will cause serious and irreparable injury to Purchaser, or the
subsidiaries or the parent corporation of Purchaser.
Accordingly, as a material inducement for Purchaser to enter into this
Agreement, Parent and Seller, at all times, will keep secret and confidential,
and may not disclose, furnish, divulge, directly or indirectly any Proprietary
Information unless and until such information enters the public domain. The
provisions of this Section 9.2 will not apply to information (a) available to
Parent or Seller from a source other than Purchaser, or (b) required to be
disclosed by Law. If the Proprietary Information enters the public domain as the
result of Parent's or Seller's act (or failure to act), then Parent and Seller
will continue to keep the Proprietary Information both secret and confidential.
Parent and Seller may not use or make use of the Proprietary Information for any
purpose, at any time after the Closing Date.
If Parent or Seller is requested or required (by deposition, interrogatories,
requests for information or other such documents, subpoena, civil investigation
or similar process) to disclose any Proprietary Information, then Parent or
Seller will provide an authorized officer of Purchaser with immediate notice of
the request so that Purchaser at its costs may seek an appropriate protective
order or waive compliance with the provisions of this Agreement.
10.3 Noninterference.
During the Noncompetition Term, Parent or Seller may not within the Restricted
Area solicit business from customers of Purchaser, divert or attempt to divert
any business from Purchaser, induce, attempt to induce, any customer,
distributor or supplier of Purchaser to modify or terminate its relationship
with Purchaser, induce, attempt to induce, or assist others in inducing or
attempting to induce any employee, agent, or independent contractor of Purchaser
to modify or terminate his relationship with Purchaser, or employ or engage, or
cause to employ or engage, or assist others to do the same.
10.4 Remedies.
If Parent or Seller breaches of any of its obligations under this Section 9,
then, Purchaser may (i) institute and prosecute proceedings in any court of
competent jurisdiction, either in law or in equity, to obtain Damages for the
breach of any of the terms of this section; (ii) seek a court order to enjoin
Parent or Seller from performing any acts prohibited by this section, without
the necessity of showing any damages, it being understood and agreed to by
Parent and Seller that the performance by either of any acts prohibited by this
section will cause and result in damage, and irreparable harm, to Purchaser; and
(iii) take any other action and seek any other remedies available in law or in
equity to Purchaser in addition to the actions and remedies set forth in this
Agreement.
The taking of any action, or the seeking of any remedy, by Purchaser pursuant to
this section is not exclusive of, nor does it constitute the waiver of, any
other action or remedy available in law or in equity to Purchaser. Purchaser's
right of recovery of any profits, compensation or revenues resulting from a
violation of this Section 9 from Parent or Seller is not the exclusive remedy of
Purchaser.
10.5 Reformation of Agreement.
The parties believe that the terms set forth in this Section 9 are reasonable.
However, if any of the covenants contained in this Section 9 are found by a
court of competent jurisdiction to be invalid or unenforceable for any reason,
then the parties will request that the court exercise its discretion, to reform
the covenant to the end that Parent and/or Seller is subject to those
noncompetition, nondisclosure, or noninterference covenants that are reasonable
under the circumstances and are enforceable by Purchaser.
10.6 Definitions.
As used in this Section 9, the phrase 'directly or indirectly' means either
personally or through any person, firm or other entity with which Parent or
Seller is associated or connected, in any capacity, including as a principal,
agent, employer, stockholder, copartner, consultant, manager, member,
co-venturer, advisor, lessor, representative, agent, independent contractor,
lender, investor, or in any other capacity whatsoever in any venture, business
or enterprise that engages in any Prohibited Activity. Nothing herein will
prohibit Parent or Seller from owning less than five percent (5%) of the shares
of any entity whose shares are publicly traded.
10.7 Independence of Covenants.
If Parent or Seller breaches or violates any of Parent's or Seller's obligations
contained in this Section 9, then Parent and Seller will extend its obligations
on the same terms and conditions for an additional period of time equal to the
time that elapsed from the commencement of the breach or violation to the later
of (i) the termination of the breach or violation or (ii) the final resolution
of any private litigation stemming from the breach or violation.
11 SECTION . [INTENTIONALLY BLANK]
12 SECTION . ADDITIONAL COVENANTS OF THE PARTIES
12.1 Publicity and Disclosure.
Except to the extent required by applicable laws, Parent or Seller may not make
any general announcement or press release concerning the Transaction without the
prior written consent of Purchaser.
The parties may not disclose to any person or entity any of the terms or
provisions of this Agreement or the Schedules or Exhibits, at any time, either
before or after Closing, without first obtaining the written consent of all
parties, except as required by a Court Order or as required by Law, in which
event the party required to make the disclosure will immediately notify all
other parties of the impending disclosure.
12.2 Amendment of Articles of Incorporation.
Within 7 days after the Closing Date, Seller will amend its Articles of
Incorporation changing its corporate name to a name dissimilar to, and not
infringing upon, the name acquired by Purchaser.
12.3 COBRA Compliance.
Parent and Seller will timely take all action to comply with and will be
responsible for all costs, and liabilities with respect to Part 6 of Subtitle B
of Title I of ERISA or Code @ 4980B(f) ('COBRA') and any similar state law.
Parent or Seller will continue the health benefit coverage required by COBRA and
any similar state law and the provisions of this Agreement irrespective of the
termination or elimination of any health benefit plan of Seller.
12.4 Employment Matters.
Upon Closing, Seller will terminate the employment of its employees. Purchaser
may offer employment, on terms and conditions that Purchaser determines, to the
employees of Seller, but Purchaser is not required to offer employment to any
Seller's employees. Parent and Seller will cooperate with Purchaser by
permitting Purchaser throughout the period before the Closing to meet with
Seller's employees at any reasonable times that are approved by a representative
of Seller, and to distribute to Seller's employees those forms and other
documents relating to employment by Purchaser after the Closing that Purchaser
reasonably requests. Parent and/or Seller will pay the cost of any compensation,
severance or other benefits that are payable to Seller's employees pursuant to a
contractual arrangement, if any, to whom Purchaser does not offer employment, or
who do not accept employment with Purchaser. Nothing in this Section will be
deemed to require Purchaser to retain any of Seller's employees it hires for any
period of time or at any particular compensation rate or in any particular
position.
12.5 Executive Bonus. On or before December 25, 2000, Parent will cause Seller
to pay to Ann Knaack and Edward Alvarez the amount of any bonuses and other
special compensation due to them, pursuant to Seller's customary bonus and
compensation arrangements with Ms. Knaack and Mr. Alvarez.
12.6 Post-Closing Notices. For a period of three (3) years after Closing, Parent
and Seller will use its best efforts to deliver promptly to Purchaser all
notices or notifications received by either pertaining to Seller's Business or
the Purchased Assets.
13 SECTION . PRORATION OF ADVANCED PAYMENTS AND LIABILITIES
In order that Seller and Purchaser fairly allocate between themselves, in
accordance with GAAP, the economic benefit of:
(a) Advanced payments received by Seller from customers for products or services
to be supplied by Purchaser after the Closing;
(b) Utility and other service charges related to the Business;
(c) The cost to Purchaser for any products to be sold (or services to be
rendered) by Purchaser, or for contractual obligations performed by Purchaser
after Closing for which Seller or Parent received the economic benefit before
the Closing; and
(d) Parent's and Seller's Deposits and prepaid expenses.
Purchaser and Parent will allocate those items, if possible, on the Closing
Balance Sheet (see Section 4.2), but in all events within 60 days following the
Closing. Parent will pay, in cash to Purchaser, or Purchaser will pay in cash to
Seller, the net amount owed, if any. The parties will resolve any dispute that
they have, as to the proper allocation and proration amount, in accordance with
the provisions of Section 4.2.3.
14 SECTION . CLOSING
14.1 Time
The transfers and deliveries contemplated by this Agreement (the 'Closing') will
be deemed effective as of the actual Closing Date which is also the signing date
of this Agreement first written above, or any other date, time or place that the
parties agree upon in writing. For financial accounting purposes, Parent and/or
Seller has the economic benefit (and will incur the economic detriment) of
Parent's Business through 2,400 hours (local time at Business's location) the
day before the Closing Date. Thereafter Purchaser has the economic benefit and
will incur the economic detriment, except to the extent Purchaser is entitled to
indemnification under this Agreement. The transfers and deliveries described in
this Agreement are mutually interdependent and will be regarded as occurring
simultaneously. No transfer or delivery becomes effective until all of the other
transfers and deliveries provided for in this Agreement have also been
consummated.
14.2 Deliveries at the Closing.
At the Closing, Parent and/or Seller and Purchaser will deliver to the other
those items set forth in the Closing Agenda attached as Exhibit 13.
14.3 Place.
The parties contemplate the Closing occurring through exchange of facsimile
documents and wire transfers to be followed by Federal Express delivering of any
original documents not previously delivered.
15 SECTION MISCELLANEOUS
15.1 Further Acts.
The parties will perform any acts, and sign and deliver any other documents that
are reasonably necessary to carry out the intent and the terms of the
Transaction and of this Agreement.
15.2 Assignment.
No assignment by any party of this Agreement, or any right or obligation under
this Agreement may be made without the prior written consent of all other
parties, and any assignment attempted without that consent is void.
15.3 Situs of Agreement
The situs of this Agreement is Cleveland, Ohio. All matters pertaining to the
validity, construction, and effect of this Agreement are governed by the
internal laws of Ohio, without giving effect to any principles or rules of
conflict of laws that applies the laws of another jurisdiction.
15.4 Further Assurances.
Effective immediately upon Closing of the Transaction, Parent and Seller appoint
Purchaser the attorney-in-fact of Parent and Seller with full power of
substitution, in the name of Purchaser, or the name of Parent or Seller, on
behalf of and for the benefit of Purchaser,
(a) To collect all receivables and other items transferred and assigned to
Purchaser, and to endorse, without recourse, all checks in the name of Seller,
the proceeds of which will be credited to Purchaser under this Agreement;
(b) To prosecute, in the name of Parent or Seller, all proceedings that
Purchaser deems proper to enforce any claim of any kind in or to the Purchased
Assets; provided, however, that Purchaser will not be required to commence any
litigation.
(c) To defend and compromise all actions, in respect of any of the Purchased
Assets; and
(d) To do everything in relation to the collection of the receivables as
Purchaser reasonably deems advisable.
The preceding powers are coupled with an interest and Parent or Seller may not
revoke any of those powers, directly or indirectly, including by reason of the
dissolution of Seller. Purchaser may retain for its own account any amounts
collected pursuant to the foregoing powers, and Parent or Seller will pay or
transfer to Purchaser, if and when received, any amounts that are received by
Parent or Seller after the Closing in respect of any receivables or other assets
or rights transferred to Purchaser. Upon the request of Purchaser, and at
Parent's or Seller's expense, Parent or Seller will perform all further acts
that are reasonably required to further transfer, assign, and confirm to
Purchaser, or to aid and assist Purchaser in the collection, gaining of
possession by Purchaser of, or maintaining, any of the Purchased Assets, or to
vest in Purchaser good and marketable title to the personal property included in
the Purchased Assets.
15.5 Assignment of Contracts, Rights, Etc.
Despite anything to the contrary contained in this Agreement or the bill of
sale, this Agreement or the bill of sale do not constitute an agreement to
assign any contract, or any right or benefit arising under, or resulting from,
any contract, if an attempted assignment, without the consent of a third party,
would constitute a breach of the contract, or if it would affect the rights of
Purchaser under the contract. Parent and Seller will use commercially reasonable
efforts to obtain the consent of the third party to any assignment of a contract
to Purchaser in all cases in which consent of the third party is required for
the assignment or transfer.
15.6 Product Liability.
(a) Parent and Seller, as applicable, will be responsible for all product
warranty and product liability claims arising from the sale of such finished
goods ('Product Liability') for goods delivered or in transit on or prior to the
Date of Closing ('Parent's Product Liability'); Purchaser will be responsible
for Product Liability for goods shipped after the Date of Closing ('Purchaser's
Product Liability').
(b) Parent and Seller will indemnify, defend and hold Purchaser harmless from
and against any and all Damages arising from Parent's Product Liability of which
notice is given within six months after the Date of Closing; Purchaser will
indemnify, defend and hold Parent and Seller harmless from and against any and
all Damages arising from Purchaser's Product Liability. Indemnification pursuant
to this Section 14.6 is not subject to any of the time or amount limitations
provisions contained in Article 7.
(c) Parent will have the right to sell and to retain any proceeds from sales of
returned product.
(d) The procedure for indemnification under this Section 14.6 will be the
procedure contained in Article 8 of this Agreement.
15.7 Investigation Will Not Constitute A Waiver.
No investigation, or lack of an investigation, by Purchaser, or by any of its
agents, will be deemed to constitute or imply a waiver of any rights that
Purchaser has, including any right to indemnification as the result of any
misrepresentation, breach of warranty, breach of a covenant in favor of
Purchaser, or any other right of indemnification provided in this Agreement.
15.8 Counterparts.
The parties may sign several counterparts to this Agreement. Each counterpart,
when signed, is an original for all purposes.
15.9 Partial Invalidity.
If any provision of this Agreement is invalid, is held illegal, or is
unenforceable, then notwithstanding any invalidity, illegality, or
unenforceability of the provision, the remainder of this Agreement will subsist
and will be in full force and effect as though the invalid, illegal or
unenforceable provision had been omitted from this Agreement.
15.10 Entire Agreement.
14.10.1 This Agreement embodies the entire agreement of the parties as to the
subject matter contained in this Agreement. There are no promises, terms,
conditions, or obligations between the parties regarding the subject matter of
this Agreement other than those contained in this Agreement and the Schedules
and Exhibits.
14.10.2 All Schedules and Exhibits are part of, and are incorporated into this
Agreement by reference and are to be considered a part of this Agreement.
14.10.3 This Agreement supersedes all previous communications, representations,
or agreements, either verbal or written, between the parties. Without limiting
the generality of foregoing, no letter, telegram, or other communication passing
between the parties, concerning any matter during the negotiation of this
Agreement, is a part of this Agreement, nor does it have the effect of modifying
or adding to this Agreement.
15.11 Additional Documents.
Each party will sign and deliver to all of the other parties after the Closing
any other documents or instruments that are reasonably necessary to effectuate
the provisions and purpose of the Transaction and this Agreement. Parent and
Seller will perform all reasonable acts to cause any Authorizations issued to
Parent or Seller to be assigned or transferred to Purchaser in order that
Purchaser may conduct Seller's Business after the Closing.
15.12 No Amendment.
No amendment, modification, change or discharge of any term or provision of this
Agreement will be valid or binding unless it is in writing and signed by all of
the parties. No waiver of any of the terms of this Agreement will be valid
unless signed by the parties against whom the waiver is asserted.
15.13 Time Periods.
Any action required to be taken within a certain number of days will be taken
within that number of calendar days; provided, however, that if the last day for
taking the action falls on a weekend or a holiday, then the period during which
the action may be taken is automatically extended to the next business day.
15.14 Rules of Construction.
14.14.1 All terms and words used in this Agreement, regardless of the number and
gender of their use, will be construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context or
sense of this Agreement requires, as if the words were fully and properly
written in the required number and gender.
14.14.2 Section headings are for reference purposes only and do not affect the
meaning of this Agreement, in any manner.
14.14.3 Each party having fully considered and negotiated the terms of this
Agreement, with the benefit of legal counsel, this Agreement may not be
construed against either party.
14.14.4 The word 'including' means 'including, but not limited to' and is
intended to provide examples without intending to limit the generality of any
preceding phrase.
15.15 No Third Party Beneficiaries.
The parties do not intend to confer any legal or contractual rights or benefits
upon any persons or Entities who are not parties to this Agreement, either
directly or incidentally. All legal rights, duties, and obligations set forth in
this Agreement bind and benefit only the parties to this Agreement.
15.16 Notices.
Any notice or demand required or permitted to be given under this Agreement,
must be in writing, signed by the party giving or making the same, and must be
delivered by certified mail, return receipt requested, or by personal hand
delivery, to all parties at their respective addresses set forth below. If the
delivery of any notice or demand cannot be effected as required, then the notice
or demand may be served by any method authorized for the service of legal
process as set forth in the Ohio Rules of Civil Procedure. Any party has the
right to change the place to which any notice or demand, or other written
instrument will be sent to it by similar notice sent in a like manner to all
parties. The date of mailing of any notice or demand, if applicable, will be
deemed to be the date of the notice or demand and is effective from that date.
The addresses of the parties to this Agreement are as shown below:
To Parent: CGI Holding Corporation and Roli Ink Corporation
and Seller 8410 Brookfield Avenue
Brookfield, Illinois 60513
Fax: 708-387-9872
Attn: John Giura
Copy to: Goodsmith, Gregg & Unruh
300 S. Wacker Drive, Suite 3100
Chicago, Illinois 60606
Fax: 312-322-0056
Attn: Marilee C. Unruh
To Purchaser: Braden Sutphin Ink Company
3650 E. 93rd Street
Cleveland, OH 44105
Attn: James Leitch, Chief Executive Officer
Copy to: Walter & Haverfield LLP
1300 Terminal Tower
Cleveland, OH 44113
Fax: 216-575-0911
Attn: James P. Conroy, Esq.
15.18 Binding.
This Agreement binds and inures to the benefit of the parties, and their
respective assigns, personal representatives, and successors.
[SIGNATURES ON FOLLOWING PAGE]
1
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
above written.
PARENT:
CGI HOLDING CORPORATION
By: /s/JOHN GIURA
Print Name: JOHN GIURA
Its: PRESIDENT
SELLER:
ROLI INK CORPORATION
By: /s/JOHN GIURA
Print Name: JOHN GIURA
Its: PRESIDENT
PURCHASER:
BRADEN-SUTPHIN INK COMPANY
By:/S/ JAMES S LEITCH
Print Name: JAMES L LEITCH
Its: CEO, TREASURER
PERMITTED EXCEPTIONS
None.
SCHEDULE 1.16
SELLER'S KNOWLEDGE
Eduardo Alvarez
John Giura
Ann Knaack
SCHEDULE 1.20
YEAR-END BALANCE SHEETS
ROLI INK CORPORATION
COMPARATIVE BALANCE SHEET
DECEMBER 31, 1999 AND 1998
ASSETS
DECEMBER 31
1999 1998
--------------- -------------------
CURRENT ASSETS
Cash $26,559 $11,640
Accounts Receivable 392,603 280,233
Inventory 278,207 179,203
Prepaid Insurance - 2,868
Prepaid State Income Taxes - 14,341
---------- ---------
TOTAL CURRENT ASSETS $697,369 $488,285
FIXED ASSETS
Cost Basis $512,850 $442,175
Less: Accumulated Depreciation 304,891 269,094
---------- ---------
NET FIXED ASSETS 207,959 173,081
OTHER ASSETS
Inter-Company - CGI Holding $564,080 $82,197
Inter-Company - SECO - 176,414
---------- ---------
TOTAL OTHER ASSETS 564,080 258,611
---------- ----------
TOTAL ASSETS $1,469,408 $919,977
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable $117,972 $91,015
Commissions Payable 41,488 35,526
Accrued Corporate Taxes 21,312 -
Notes Payable-Current Portion 273,536 180,700
---------- --------
TOTAL CURRENT LIABILITIES $454,308 $307,241
LONG-TERM LIABILITIES
Notes Payable $384,613 $199,831
Less: Current Portion 273,536 180,700
--------- ---------
Subtotal $111,077 $19,131
Deferred Corporate Taxes 10,960 10,740
--------- ---------
TOTAL LONG-TERM LIABILITES 122,037 29,871
STOCKHOLDER'S EQUITY
Capital Stock $1,682 $1,682
Additional Paid In Capital 359,308 359,308
Retained Earnings 672,073 361,874
Treasury Stock (140,000) (140,000)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY 893,063 582,864
---------- ---------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $1,469,408 $919,977
========== =========
SCHEDULE 1.21
YEAR-END STATEMENTS OF CASH FLOW
ROLI INK CORPORATION
COMPARATIVE CASH FLOW STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1999 AND 1998
TWELVE MONTHS ENDED
DECEMBER 31
1999 1998
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit $310,198 $120,936
Adjustments to Reconcile Net Profit with Net Cash
Depreciation 47,474 47,205
Other Changes:
Change in Accounts Receivable (112,370) 66,423
Change in Inventory (99,004) 11,306
Change in Prepaid Expenses 2,868 259
Change in Accounts Payable 26,957 18,556
Change in Accrued Expenses 5,962 (15,539)
Change in Accrued Income Taxes 35,653 (86,878)
Change in Deferred Income Taxes 220 918
Change in Inter-Company Receivables (305,469) (258,611)
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES ($87,510) ($95,425)
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed Assets Acquired (82,352) (14,972)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change In Notes Payable $184,782 $117,845
------------- ------------
NET CASH CHANGE FROM FINANCING ACTIVITIES $184,782 $117,845
------------- ------------
NET CASH CHANGE $14,919 $7,448
CASH BALANCE: JANUARY 1 11,640 4,192
------------- ------------
CASH BALANCE: DECEMBER 31 $26,559 $11,640
============= ============
Supplemental Information
Interest Paid $25,168 $5,706
Income Taxes Paid 15,000 102,357
SCHEDULE 1.22
YEAR-END STATEMENTS OF INCOME
ROLI INK CORPORATION
COMPARATIVE STATEMENT OF PROFIT AND LOSS
TWELVE MONTHS ENDED DECEMBER 31, 1999 AND 1998
TWELVE MONTHS ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
SALES $3,095,158 $2,350,329
LESS: COST OF OPERATIONS 1,600,140 1,299,307
------------ ------------
GROSS PROFIT $1,495,018 $1,051,023
LESS: OPERATING EXPENSES 946,638 854,111
------------ ------------
NET PROFIT ON OPERATIONS $548,380 $196,911
LESS: INTEREST EXPENSE 25,168 5,706
------------ ------------
NET PROFIT BEFORE
CORPORATE INCOME TAXES $523,212 $191,205
LESS: CORPORATE INCOME TAXES 213,014 70,269
------------ ------------
NET PROFIT $310,198 $120,936
============ ============
SCHEDULE 2.1(c)
PREPAID EXPENSES
Rent and Taxes $2,310
Cars 844
Insurance 2,508
Garbage Pick Up 105
Security 46
Don Manly 667
---------
$6,480
=========
SCHEDULE 2.1(d)
FIXED ASSETS
See list of Fixtures and Equipment on the attached.
SCHEDULE 2.1(h)
INTELLECTUAL PROPERTY
Roli is a licensee of the following software programs:
Batchmaster 4.6
Peachtree 11.0
Microsoft Windows
Lotus 3.1
Label Right 3.0
Microsoft Works
SCHEDULE 4.3.4
ADDITIONAL LIABILITIES ASSUMED BY PURCHASER
Liabilities relating to product liabilities described in Section 14.6 of the
Agreement.
SCHEDULE 5.4(a)
CONTRACTS TERMINABLE UPON
TRANSFER OF ASSETS TO PURCHASER
See Contracts listed under 'Contracts Requiring Consent to Assignment' on
Schedule 5.10.
SCHEDULE 5.8
TAX RETURNS AND AUDITS
None.
SCHEDULE 5.10
CONTRACTS
Contracts Regarding the Business
i. Contract, dated January 31, 2000, between Seller and JADEnterprises.
ii Letter Agreement, dated July 14, 1000, between Seller and George Karounos
(Geopak Incorporated).
iii. Proposal, dated September 15, 2000, between Seller and William Schneider.
iv. Lease Agreement, dated June 12, 1997, between Seller and Western States
Envelope Company.
v. Lease Agreement, dated March 24, 1999, between Seller and Ambassador Envelope
Company, including Addendum 1 to Lease Agreement.
vi. Service Agreement, dated January 1, 2000 between Roli and Nexus Management
Solutions, LLC
vii. Agreement Number 125695/137832 between Seller and First Sierra Financial,
Inc. - Bridgewater.
viii. Service Agreement, dated August 21, 2000, between the Seller and Superior
Services - Hartland, a division of Superior of Wisconsin, Inc.
ix. Freedom Lease (Wisconsin Motor Vehicle Lease Agreement - Closed End), dated
February 8, 1999, between Seller and Lexus of Brookfield.
x. Audi Financial Services Illinois Motor Vehicle Lease Agreement, dated April,
29, 1999, between Seller and Continental Audi Inc.
xi. Lease Agreement, dated September 22, 1992, between Seller and Norman
Security Systems, Inc., as amended by the Amendment to Lease Agreement, dated
June 16, 1997.
xii. Lease Number 01-300-23617-02-39001 between Seller and Mercedez-Benz Credit
Corporation.
xiii. Manufacturer's Representative Agreement, dated October 8, 1998, between
Seller and Jack Tusk (d/b/a Jetco).
xiv. Lease, dated December 1, 2000 among Nancy H. Glassner, Betty Burns and
Seller.
Assumed Contracts
See Contracts i through xi and xiv listed under 'Contracts Regarding the
Business'.
Contracts that Require Consent to Assignment
See Contract vii through xiv listed under 'Contracts Regarding the Business'.
SCHEDULE 5.12
FINANCIAL MATTERS
Financial Statements Delivered by Seller
i. Interim Balance Sheet, attached as Schedule 1.9.
ii. Year-End Balance Sheets, attached as Schedule 1.20.
iii. Year-End Statements of Cash Flow, attached as Schedule 1.21.
iv. Year-End Statements of Income, attached as Schedule 1.22.
SCHEDULE 5.19
EMPLOYMENT MATTERS
Schedule of employees and wage rate attached.
SCHEDULE 5.21
INSURANCE
Copies of insurance documents attached.
SCHEDULE 5.22
NO CONFLICT OF INTEREST
See the matters disclosed under Item 12 of the Form 10-KSB of Parent for the
period ended December 31, 1999.
Agreement between Nexus Management Solutions LLC and Roli with respect to
payroll and insurance for employees. John Giura is a member of Nexus Management
Solutions.
SCHEDULE 5.23
LEASED ASSETS; OTHER ASSETS
See Schedule 5.24.
Equipment leased pursuant to Agreement Number 125695/137832 between Seller and
First Sierra Financial, Inc. - Bridgewater:
- QA Master 'MicroSoft Windows' based quality control software
- Color-Mail Software for the electronic transfer of colorimetric data
- InkMaster formulation & correction software
- QuickLink Software for the downloading of data from InkMaster to QuickInk
Equipment leased pursuant to Lease Agreement, dated September 22, 1992, between
Seller and Norman Security Systems, Inc., as amended by the Amendment to Lease
Agreement, dated June 16, 1997
- 2 motion detectors
- 1 door contact
- 1 space block for the above
1999 Lexus RX300
1999 Audi A4 Quattro
SCHEDULE 5.24
REAL PROPERTY
Property commonly known as 4010 W. Douglas Avenue, Milwaukee, WI 53209 and
legally described as follows:
(See attached)
SCHEDULE 5.27
EMPLOYEE BENEFIT MATTERS
Nexus Management Solutions Health Plan
Nexus Management Solutions Vision Plan
Nexus Management Solutions Dental Plan
Nexus Management Solutions Long-Term Disability Insurance Plan
CGI 401(k) Profit Sharing Plan
SCHEDULE 5.28
ENVIRONMENTAL MATTERS
None.
SCHEDULE 5.30
CUSTOMER AND SUPPLIER RELATIONS
None.
SCHEDULE 5.31
SUPPLIERS
Wolstenholme International
CDR Pigments & Dispersions
Commerce Industrial Chemicals
Hevcotech Ltd.
Illing Co. Inc.
SC Johnson Polymer
Knight Colors & Chemicals
Fuchs Lubricants Co.
Morton International Inc.
Magruder Color Company
Quantum Colors Technology
Rohm & Haas Company
Resinall Corporation
Bub Polifus Enterprises
Sacco Midstates Inc.
Shamrock Technologies Inc.
Solutions Dispersions Inc.
Sun Chemicals Corporation
Van Waters & Rogers Inc.
Midwest Graphics Sales Inc.
