<PAGE> 1
As filed with the Securities and Exchange Commission on January _____, 1994
Registration No. 33-________
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE REYNOLDS AND REYNOLDS COMPANY
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of incorporation or organization)
31-0421120
(I.R.S. Employer Identification No.)
115 South Ludlow Street
Dayton, Ohio 45402
(513) 443-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ADAM M. LUTYNSKI, ESQ.
The Reynolds and Reynolds Company
115 South Ludlow Street
Dayton, Ohio 45402
(513) 443-2000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of the Registration Statement
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
Title of each Amount to be Proposed Proposed Amount of
class of registered maximum maximum registration
securities to offering price aggregate fee*
be registered per share* offering price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Shares 306,346 shares $ 43.0625 $ 13,192,024 $ 4,548.97
$.625 par value
- ---------------------------------------------------
</TABLE>
* Calculated pursuant to Section 6 of the Securities Act of 1933, as amended,
and Rule 457(c) promulgated thereunder based upon the average of the high and
low prices of the Class A Common Shares $.625 par value, on the New York Stock
Exchange on January 10, 1994, as reported in The Wall Street Journal.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE> 2
THE REYNOLDS AND REYNOLDS COMPANY
115 SOUTH LUDLOW STREET
DAYTON, OHIO 45402
(513)443-2000
306,346 Class A Common Shares
($.625 par value)
PROSPECTUS
This Prospectus covers the resale of 306,346 Class A Common Shares, $.625 par
value ("Shares"), of The Reynolds and Reynolds Company (the "Company"), from
time to time on the New York Stock Exchange or in the over-the-counter market
at prices current at the time of sale by Seagate Sisilli, Inc., fka Law
Printing Company, Inc. ("LPC" or "Seagate"), C. Vincent Sisilli and Patricia
L. Sisilli, individually and as joint tenants, (jointly, the "Sisillis" and
collectively with Seagate, the "Selling Shareholders"). This Prospectus also
covers any interim distribution by LPC to the Sisillis. See "SELLING
SHAREHOLDERS." The Shares include rights to purchase from the Company a unit
consisting of one one-thousandth of a share of the Company's Series A
Participating Preferred Shares, without par value, at a price of $80, subject
to adjustments under certain circumstances (individually, a "Right" and
collectively, the "Rights"). Since May 17, 1991, the Company issues one
Right with each Class A Common Share that becomes outstanding. The Selling
Shareholders hereunder have not entered into any arrangement or agreements with
any broker or dealer for the offering or sale of the Shares. In any
transaction, a Selling Shareholder may be deemed an "underwriter" as defined in
the Securities Act of 1933, as amended. The Company will receive no part of
the proceeds of any such resales.
The Shares are traded on the New York Stock Exchange ("NYSE"). On January 10,
1994, the reported high and low sale prices of the Class A Common Shares on
the NYSE were $ 43.25 and $ 42.875 per share.
No person has been authorized in connection with this offering to give any
information or to make any representations, other than as contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon. This Prospectus is not an offer or solicitation in any
jurisdiction to any person to whom such offer may not lawfully be made.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, creates any implication that there has been no change
in the affairs of the Company since the date hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
_________________________
The date of this Prospectus is January ___, 1994.
2
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith, files reports,
proxy and information statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy and information
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
regional offices at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60621-2511, and at 75 Park Place, Room 1228, New
York, New York 10007; and copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. The Company's Class A Common
Shares are listed on the New York Stock Exchange and reports, proxy and
information statements and other information concerning the Company can be
inspected at such exchange at 20 Broad Street, New York, New York 10005.
A Registration Statement on Form S-3 under the Securities Act of 1933, as
amended, has been filed by the Company with the Commission with respect to the
Shares. This Prospectus does not contain all the information set forth in such
registration statement, amendments thereto and exhibits thereto which the
Company has filed with the Commission. For further information with respect to
the Company and the securities to which this Prospectus relates, reference is
made to such Registration Statement including the exhibits thereto.
The Company's principal executive offices are located at 115 South Ludlow
Street, Dayton, Ohio 45402, and its telephone number at that address is
513/443-2000.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, all of which have been filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"),
are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K (including financial
statements together with the report of independent certified public
accountants thereon) for the fiscal year ended September 30, 1993
(File Number 0-132).
(b)(1) The "Description of Registrant's Securities to be Registered" on pages
2 and 3 of the Company's Registration Statement on Form 8-A which
became effective on January 12, 1989 (File No. 1-10147).
(b)(2) The "Description of Registrant's Securities to be Registered" on pages
2 through 6 of the Company's Registration Statement on Form 8-A which
was filed on May 8, 1991 (File No. 1-10147).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act, subsequent to the date of this Prospectus and prior to
the termination of the offering of the Shares hereunder, shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of any such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified by or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
A copy of any document or part thereof incorporated by reference in the
registration statement of which this Prospectus constitutes a part (not
including exhibits to the information that is incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
that the registration statement incorporates) shall be provided without charge
to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, upon written or oral request made to the Company at
115 South Ludlow Street, Dayton, Ohio 45402, Attention: General Counsel and
Secretary, (513) 443-2000.
3
<PAGE> 4
SELLING SHAREHOLDERS
On January 3, 1994, the Company acquired from Law Printing Company, Inc. (nka
Seagate Sisilli, Inc.), a California corporation ("LPC" or "Seagate"),
substantially all of the assets of LPC. The purchase price for such assets was
paid by the Company in Class A Common Shares, resales of which are, to the
extent disclosed in the table below, covered by this Prospectus.
The Selling Shareholders named herein have informed the Company that they
desire to be in a position to sell the Shares set forth opposite their names
from time to time on the NYSE or in the over-the-counter market at prices
current at the time of sale. The Selling Shareholders have not entered into
any arrangements or agreements with any broker or dealer for the offering or
sale of the Shares.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OWNED SHARES TO BE
AS OF OFFERED FOR OWNER'S
JANUARY 10, 1994(1) ACCOUNT (1)
<S> <C> <C> <C>
Seagate Sisilli, Inc. (2) 31610 Broad Beach Boulevard 306,346 306,346
Malibu, California 92065
C. Vincent Sisilli (2) (3) (5) 31610 Broad Beach Boulevard 0 0
Malibu, California 92065
C. Vincent Sisilli and 0 0
Patricia L. Sisilli, husband and wife,
as joint tenants (2) (3) (4) (5) 31610 Broad Beach Boulevard
Malibu, California 92065
Patricia L. Sisilli (2) (4) (5) 31610 Broad Beach Boulevard 0 0
Malibu, California 92065
<FN>
- -------------------------------------------
(1) Certain of these shares are subject to escrow provisions and may not
be sold until released from such escrow arrangements in the future.
(2) Seagate is wholly owned by C. Vincent Sisilli and Patricia L. Sisilli,
individually and jointly. Shares owned by Seagate are expected to be
distributed by such entity to such persons and such persons are listed
above as Selling Shareholders. This Prospectus covers resales by such
persons.
(3) C. Vincent Sisilli has been President, Chief Financial Officer,
Secretary and a Director of LPC for more than three years. C. Vincent
Sisilli has made certain loans to LPC, the principal balance of which,
as of January 3, 1994, was approximately $434,916. C. Vincent
Sisilli has acquired, by assignment from Union Bank, certain
indebtedness of LPC to Union Bank; as of January 3, 1994, the
principal balance of such indebtedness was approximately $410,000.
(4) Patricia L. Sisilli has been a Director of LPC for more than three
years.
(5) C. Vincent Sisilli and Patricia L. Sisilli leased certain improved
real property to LPC under a lease that terminated January 3, 1994.
</TABLE>
4
<PAGE> 5
RECENT DEVELOPMENTS
On January 3, 1994, the Company acquired substantially all of the assets and
assumed certain liabilities of Law Printing Company, Inc., nka Seagate Sisilli,
Inc. ("LPC" or "Seagate"). LPC supplied business forms primarily to automobile
dealerships. The Company has incorporated the LPC business into its Business
Forms Division. The purchase price for the LPC assets was $13,074,783, plus
the assumption of certain liabilities (approximately $1,013,508). The
negotiated purchase price was paid by delivery of 306,346 Shares. A total of
23,431 Shares was deposited into two escrow funds as security for the
obligations of LPC to indemnify the Company from certain losses and to pay the
amount of any purchase price adjustment based upon the balance sheet for the
acquired assets and assumed liabilities as of the opening of business on
January 4, 1994.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report
on Form 10-K have been audited by Deloitte & Touche, independent auditors, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
5
<PAGE> 6
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
An estimate of such expenses, none of which shall be borne by the Selling
Shareholders, is as follows:
<TABLE>
<S> <C>
Registration fee - Securities and Exchange Commission $ 4,549
Accountants' fees and expenses $ 2,500
Legal fees and expenses $ 5,000
Financial printer fees $ 500
--------
Total $ 12,549
</TABLE>
The Selling Shareholders shall bear brokerage fees incurred in connection with
the resale of the registered securities, as well as any federal or state income
taxes on the proceeds of any such resale.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 1701.13(E) of the Ohio Revised Code, the Company is
permitted to indemnify any director, officer, employee or agent of the Company
against costs and expenses incurred in connection with any action, suit or
proceeding brought against any such person by reason of his having served the
Company in such capacity, provided that he meets certain "good faith" tests
provided by law, and provided further that, with respect to suits brought on
behalf of the Company, he is not adjudged to be liable for negligence or
misconduct unless the relevant court finds indemnification to be nevertheless
appropriate in view of all the circumstances. The statute also provides that
in the event an officer or director has been successful on the merits in
defense of any such action, suit or proceeding, such officer or director shall
be indemnified by the Company against actual and reasonable expenses in
connection therewith.
Article Ninth of the Company's Amended Articles of Incorporation provides that,
as more specifically set forth in the Company's Consolidated Code of
Regulations, the Company may provide to any director, officer, other employee
or agent of the Company or any person who serves at the request of the Company
as a director, trustee, other employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, the maximum
indemnification permitted under Section 1701.13(E) of the Ohio Revised Code,
including amendments thereto, or any comparable provisions of any future Ohio
statute.
Paragraph B of Section 1 of Article IX of the Company's Consolidated Code of
Regulations provides for indemnification of directors, officers and employees
of the Company, and persons who, at the request of the Company, act as a
director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
actually and reasonably incurred in connection with any action as to which he
was or is or may be made a party by reason of his acting in such capacity,
involving a matter as to which it shall be determined, as provided therein,
that he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal matter or proceeding, in addition, that he had no reasonable cause to
believe that his conduct was unlawful; provided, however, that in the case of
an action by or in the right of the Company to procure a judgment in its favor,
no such indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged liable for negligence or
misconduct in the performance of his duty to the Company unless, and only to
the extent that, the Court of Common Pleas or other court where such action was
brought shall determine such indemnification to be proper.
ITEM 16. EXHIBITS
See Exhibit Index on page 10.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by
the
6
<PAGE> 7
registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are
incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
7
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dayton, State of Ohio, on January 10, 1994.
THE REYNOLDS AND REYNOLDS COMPANY
By /s/ David R. Holmes
--------------------------------------------
David R. Holmes, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints David R. Holmes and Adam M. Lutynski, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all future amendments to this
Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<S> <C>
/s/ David R. Holmes January 10, 1994
- ---------------------------------------------------------------------------------
David R. Holmes, Chairman of the Board, President
and Chief Executive Officer (Principal Executive Officer)
and Director
/s/ Dale L. Medford January 10, 1994
- ---------------------------------------------------------------------------------
Dale L. Medford, Vice President, Corporate Finance
and Chief Financial Officer (Principal Financial and Accounting Officer)
and Director
/s/ Joseph N. Bausman January 10, 1994
- ---------------------------------------------------------------------------------
Joseph N. Bausman, President, Computer Systems Division and Director
/s/ David E. Fry January 10, 1994
- ---------------------------------------------------------------------------------
Dr. David E. Fry, Director
/s/ Richard H. Grant, Jr. January 10, 1994
- ---------------------------------------------------------------------------------
Richard H. Grant, Jr. Chairman of the Steering Committee and Director
/s/ Richard H. Grant, III January 10, 1994
- ---------------------------------------------------------------------------------
Richard H. Grant, III, Senior Vice President International,
Computer Systems Division and Director
/s/ Robert C. Nevin January 10, 1994
- ---------------------------------------------------------------------------------
Robert C. Nevin, President, Business Forms Division and Director
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C>
/s/ Gayle B. Price January 10, 1994
- ---------------------------------------------------------
Gayle B. Price, Jr., Director
/s/ William H. Seall January 10, 1994
- ---------------------------------------------------------
William H. Seall, Director
/s/ Kenneth W. Thiele January 10, 1994
- ---------------------------------------------------------
Kenneth W. Thiele, Director
/s/ Martin D. Walker January 10, 1994
- ---------------------------------------------------------
Martin D. Walker, Director
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
<S> <C>
(1) Inapplicable
(2) Asset Purchase Agreement dated December 29, 1993 among The Reynolds
and Reynolds Company, Law Printing Company, Inc., C. Vincent Sisilli,
and Patricia L. Sisilli*
(4)(a) Specimen Certificate for Class A Common Shares ($.625 par value) of the Company incorporated
by reference to Exhibit (4)(c) to the Company's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on March 4, 1992 (Registration No. 33-46222).
(4)(b) Amended Articles of Incorporation of the Company, incorporated by reference to Exhibit A to
the Company's definitive proxy statement dated January 8, 1990,and filed with the Securities
and Exchange Commission.
(4)(c) Amendment to Amended Articles of Incorporation of the Company, incorporated by reference to
Exhibit 4(c) to the Company's Registration Statement on Form S-8 filed with the Securities
and Exchange Commission on August 23, 1991 (Registration No. 33-42411).
(4)(d) Amendment to Amended Articles of Incorporation of the Company*
(4)(e) Consolidated Code of Regulations of the Company, incorporated by
reference to Exhibit B to the Company's definitive proxy statement
dated January 8, 1990, and filed with the Securities and Exchange Commission.
(4)(f) Shareholder Rights Plan incorporated by reference to Exhibit 1 to the Company's Form 8-A
(File No. 1-10147), which was adopted on May 6, 1991, and filed with the Securities and
Exchange Commission on May 8, 1991.
(5) Opinion of Coolidge, Wall, Womsley & Lombard regarding legality of
securities*
(8) Inapplicable
(12) Inapplicable
(15) Inapplicable
(23)(a) Consent of Coolidge, Wall, Womsley & Lombard (incorporated by reference to Exhibit 5
hereto).
(23)(b) Consent of Deloitte & Touche, independent auditors*
(24) Inapplicable
(25) Inapplicable
(26) Inapplicable
(27) Inapplicable
(28) Inapplicable
(29) Inapplicable
<FN>
- -----------------
* Filed herein.
</TABLE>
10
<PAGE> 1
Exhibit 2
ASSET PURCHASE AGREEMENT
AMONG
THE REYNOLDS AND REYNOLDS COMPANY
LAW PRINTING COMPANY INC.,
C. VINCENT SISILLI,
AND
PATRICIA L. SISILLI
dated as of December 29, 1993
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 BOOKS AND RECORDS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 LICENSES AND PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 OTHER ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 CERTAIN PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 SAVINGS ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 CERTAIN PREPAID EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 THIS AGREEMENT AND RELATED AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CERTAIN BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CERTAIN THIRD PARTY OBLIGATIONS AND CLAIMS OR CAUSES OF ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 CERTAIN CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 TYPES OF LIABILITIES ASSUMED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 SATISFACTION OF PURCHASER'S OBLIGATIONS WITH RESPECT TO CERTAIN ASSUMED LIABILITIES. . . . . . . . . . . . . . . . . 4
4. EXCLUDED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 PRODUCT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4 AFFILIATE PAYABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.5 TAX LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.6 EMPLOYEE-RELATED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.7 TRANSACTION EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.8 OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. CONSIDERATION AND DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2 DELIVERY OF PURCHASER'S SHARES TO SELLER AND ESCROW AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 TRANSFER TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. PURCHASER'S SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.1 ISSUANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 EXEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 SECURITIES FILINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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7. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 POWER AND CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2 NO CONFLICT WITH OTHER AGREEMENTS OR LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1 CORPORATE ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.2 NO CONFLICT WITH OTHER AGREEMENTS OR LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.3 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.4 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.5 FINANCIAL STATEMENTS AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.6 RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.7 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.8 ABSENCE OF CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.9 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.10 PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.11 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.12 AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.13 LITIGATION; COMPLIANCE WITH LAWS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.14 LABOR RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.15 LICENSES AND PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.16 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.17 TITLE TO PROPERTIES; ENCUMBRANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.18 INTELLECTUAL PROPERTY INTANGIBLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.19 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.20 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.21 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.22 CUSTOMERS AND SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.23 WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.24 BANK ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.25 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.26 ENVIRONMENTAL PROTECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.27 INVESTMENT INTENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.28 TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.29 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 CORPORATE ACTION; CORPORATE POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 NO CONFLICT WITH OTHER AGREEMENTS OR LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.3 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.4 SPECIAL TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5 PURCHASER'S FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.6 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 CONDUCT OF BUSINESS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 NOTIFICATION OF MATERIAL ADVERSE CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3 OTHER TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 CONSENTS, WAIVERS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.5 SUPPLEMENTAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.6 ADDITIONAL REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.7 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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10.8 PURCHASER'S DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.9 COVENANTS OF PURCHASER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.1 REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.2 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.3 NO INJUNCTION, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 INCUMBENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.5 CONSENTS, WAIVERS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.6 ABSENCE OF MATERIAL ADVERSE CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.7 CERTIFIED RESOLUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.8 INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.9 INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.10 BASIC CORPORATE DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.11 INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.12 NON-COMPETITION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.13 ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.14 TRADE NAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.15 INSTRUMENTS OF TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.16 CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.17 UNION BANK TERMINATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.18 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.1 REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.2 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.3 CERTIFIED RESOLUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.4 NO INJUNCTION, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.5 CONSENTS, WAIVERS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.6 INCUMBENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.7 ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.8 NON-COMPETITION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.9 INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.10 ABSENCE OF MATERIAL ADVERSE CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.11 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13. MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.1 PRE-CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.2 TAX REPORTING AND FINANCIAL ACCOUNTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.3 COOPERATION AND EXCHANGE OF INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.1 TIME AND PLACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.2 TRANSACTIONS AT THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.3 DEFAULT AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15. EMPLOYEES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.1 SELLER'S COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.2 TERMINATION OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.3 TERMINATION-RELATED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
16. SURVIVAL OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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17. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
18. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
19. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
19.1 SEVERAL INDEMNIFICATION BY THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
19.2 JOINT AND SEVERAL INDEMNIFICATION BY SELLER AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
19.3 INDEMNIFICATION BY PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
19.4 PROCEDURES FOR INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
19.5 DEFENSE OF THIRD PARTY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
19.6 SETTLEMENT OF THIRD PARTY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
19.7 LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
19.8 TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
20. TRANSACTION EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
20.1 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
20.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
21. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
21.1 PRESERVATION OF RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
21.2 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
21.3 ASSIGNMENT; BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
21.4 HEADINGS; EXHIBITS AND SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
21.5 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
21.6 INTEGRATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
21.7 TIME OF ESSENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
21.8 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
21.9 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
21.10 PARTIAL ILLEGALITY OR UNENFORCEABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
21.11 RIGHT TO PROCEED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
21.12 EFFECT OF INVESTIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
21.13 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
21.14 "KNOWLEDGE." . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
21.15 SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
21.16 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
21.17 COLLECTION OF RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
22. TAX INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
22.1 INDEMNIFICATION BY SELLER AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
22.2 INDEMNIFICATION BY PURCHASER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
22.3 TAX CONTESTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
22.4 TIME OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
22.5 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
22.6 FLOOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
23. CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
LIST OF SCHEDULES AND EXHIBITS
[THESE SCHEDULES AND EXHIBITS HAVE BEEN OMITTED, BUT COPIES WILL BE FURNISHED SUPPLEMENTALLY TO THE COMMISSION UPON REQUEST]
A. SCHEDULES
<S> <C>
1. Escrow Agreement
B. EXHIBITS
2.1 Excluded Personal Property Assets
2.8 Excluded Contracts
3.2 11/30/93 Balance Sheet
4.8 Certain Excluded Liabilities
8.3 Foreign Qualifications; Articles and Bylaws
8.4 Subsidiaries
8.5(a) Financial Statements
8.5(b) Liabilities
8.5(c) Defaults
8.6 Problem/Uncollectible Receivables
8.7 Insurance
8.8 Changes
8.10(c) Defects
8.11 Leased Real Property
8.12 Affiliates
8.13 Litigation
8.14 Labor Relations
8.16 Contracts
8.17 Title to Properties; Encumbrances
8.18 Intellectual Property Intangibles
8.19 Employee Benefit Plans
8.21 Consents and Approvals (Seller)
8.22 Customers and Suppliers
8.23 Warranties
8.24 Bank Accounts
8.26 Environmental Protection
8.28(a) Tax Matters
9.6 Consents and Approvals (Purchaser)
11.12 Non-competition Agreement
11.18 Lease
19.3(b) Shareholder Guaranties of Assumed Liabilities
21.12 Exceptions to Waiver
</TABLE>
v
<PAGE> 7
ASSET PURCHASE AGREEMENT
THE REYNOLDS AND REYNOLDS COMPANY ("PURCHASER"), LAW PRINTING COMPANY, INC.
(the "SELLER"), C. VINCENT SISILLI ("V. SISILLI") and PATRICIA L. SISILLI ("P.
SISILLI"), (V. Sisilli and P. Sisilli shall be sometimes referred to
individually as a "SHAREHOLDER" and collectively as the "SHAREHOLDERS") agree
as follows:
RECITALS:
Seller is a producer of pre-printed forms (the "BUSINESS").
Shareholders are the owners of all of the issued and outstanding capital
stock of Seller.
The parties intend that this Agreement constitute a plan of reorganization
and that the transfer by Seller of substantially all of its assets and certain
of its liabilities qualify for Federal income tax purposes as a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "CODE").
A portion of the Purchaser's Shares (as defined in Section 5.1) will be
placed in escrow by Seller to be maintained by a party to be agreed to by the
parties (the "ESCROW AGENT") and will be subject to possible return to
Purchaser under conditions specified in an escrow agreement in the form of the
attached Schedule 1 (the "ESCROW AGREEMENT") and in this agreement (the
"AGREEMENT") as a mechanism to secure the performance by Seller and
Shareholders of their obligations to Purchaser under this Agreement.
The parties intend that notwithstanding such escrow arrangement, immediately
after the Closing Time (as defined in Section 14.1), Seller (and subsequent to
Seller's distribution of Purchaser's Shares [including its interest in the
escrowed Purchaser's Shares] to its Shareholders as contemplated in this
Agreement, the Shareholders) shall be considered the beneficial owner of the
escrowed Purchaser's Shares for Federal income tax purposes so that the
Purchaser's Shares will be treated as received by Seller at that time for
Federal income tax purposes.
The parties intend that by virtue of utilizing such escrow arrangement, no
interest income will be imputed under Section 483 (or any other provision) of
the Code to Seller or Shareholders upon receipt of the Purchaser's Shares out
of escrow.
1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of this
Agreement, Purchaser agrees to purchase and Seller agrees to sell at the
Closing Time, all of the rights and assets of Seller used in the Business,
except for the Excluded Assets (as defined in Section 2), as such rights and
assets may
<PAGE> 8
change in the ordinary course through the Closing Time, and including without
limitation, the following:
1.1 INVENTORY. All raw materials, work-in-progress, finished goods, samples
and supplies (collectively, the "INVENTORY") and rights with respect to any
rebates or similar payments with respect to purchases of Inventory.
1.2 PERSONAL PROPERTY. All furniture, fixtures, machinery, equipment,
vehicles and other personal property, and all related warranties (collectively,
the "PERSONAL PROPERTY").
1.3 CONTRACTS. All contracts, agreements, leases, purchase orders, sale
orders or commitments (individually, a "CONTRACT" and collectively, the
"CONTRACTS").
1.4 BOOKS AND RECORDS, ETC. All books, records, accounts, customer lists,
files, catalogues, sales materials, employment records and related materials,
but excluding all of Seller's corporate minute books, stock records and other
documents which are not reasonably of use to Purchaser in the conduct of the
Business (collectively, the "BOOKS AND RECORDS").
1.5 LICENSES AND PERMITS. To the extent permitted under applicable law or
regulation, all licenses, permits, certificates and governmental authorizations
of Seller.
1.6 RECEIVABLES. All accounts, notes or other receivables (collectively, the
"RECEIVABLES").
1.7 INTELLECTUAL PROPERTY. All Intellectual Property Intangibles (as
defined in Section 8.18) including, without limitation, the "Law Printing
Company" name, and all goodwill associated with the Intellectual Property
Intangibles.
1.8 OTHER ASSETS. All other assets (except the Excluded Assets), wherever
located, tangible or intangible, including cash, cash equivalents and
securities, prepaid property tax, causes of action and claims and demands.
All of the foregoing items are collectively referred to herein as the
"ACQUIRED ASSETS".
2. EXCLUDED ASSETS. Purchaser shall not acquire any right or interest of
Seller in the following assets:
2.1 CERTAIN PERSONAL PROPERTY. The personal property located in V. Sisilli's
office (all of which is identified on Exhibit 2.1).
2.2 SAVINGS ACCOUNT. Any cash in Seller's savings account maintained with
Union Bank.
2
<PAGE> 9
2.3 CERTAIN PREPAID EXPENSES. Prepaid Franchise tax, prepaid Federal income
tax and prepaid insurance.
2.4 LEASE. Seller's real property lease with respect to the Oxnard facility
and any related deposits.
2.5 THIS AGREEMENT AND RELATED AGREEMENTS. This Agreement and any
agreement entered into in connection with this Agreement or the transactions
contemplated hereby.
2.6 CERTAIN BOOKS AND RECORDS. Seller's corporate minute books, stock
records and other documents which are not reasonably of use to Purchaser in the
conduct of the Business.
2.7 CERTAIN THIRD PARTY OBLIGATIONS AND CLAIMS OR CAUSES OF ACTION. Amounts
owed to Seller (except as provided in Section 1.6 and prepaid property tax) or
claims or causes of action of Seller against third parties; provided in each
case that such amounts, claims or causes of action are attributable to an
Excluded Asset (as defined in this Section) or Excluded Liability (as defined
in Section 4).
2.8 CERTAIN CONTRACTS. Those contracts identified on Exhibit 2.8.
All of the foregoing items are collectively referred to herein as the
"EXCLUDED ASSETS".
If, after the Closing Time, Purchaser receives any Excluded Asset, Purchaser
shall promptly deliver the same to Seller and the Shareholders. If, after the
Closing Time, Seller or the Shareholders receive any Acquired Asset, Seller or
the Shareholders shall promptly deliver the same to Purchaser.
3. ASSUMED LIABILITIES.
3.1 TYPES OF LIABILITIES ASSUMED. Subject to the terms and conditions of
this Agreement, as of the Closing Time, Purchaser shall, without any further
responsibility or liability of or recourse to Seller or the Shareholders
(provided that the foregoing shall not limit any remedy of Purchaser for a
breach by Seller or Shareholders of any of their respective representations,
warranties, covenants or agreements in this Agreement or in any agreement or
certificate delivered by Seller or the Shareholders in connection with this
Agreement or any of the transactions contemplated hereby) assume responsibility
for the performance and satisfaction of the following liabilities of Seller as
of the Closing Time:
(a) the executory obligations of Seller under the Contracts, excluding any
obligations or liabilities arising from any breach or default thereunder by
Seller;
3
<PAGE> 10
(b) those liabilities of Seller identified in Seller's unaudited balance
sheet as of November 30, 1993 (the "11/30/93 BALANCE SHEET"), a copy of which
is attached as Exhibit 3.2, as such liabilities may change in the ordinary
course of business through the Closing Time, except for (i) the "notes payable
- - officer", (ii) the "notes payable - Union Bank" and (iii) those liabilities
which are identified in Section 4;
(c) those liabilities to be assumed by Purchaser pursuant to Section 15.3;
and
(d) the following obligations of Seller with respect to the Distributor
Agreements (as defined in Section 8.16):
(i) any obligation to pay commissions, rebates, incentives, or other
amounts with respect to the period after the Closing Time;
(ii) any obligation to repurchase inventory; and
(iii) any liability arising out of or in connection with termination of
the Distributor Agreements pursuant to Section 10.11.
All of the foregoing items are collectively referred to herein as the
"ASSUMED LIABILITIES".
3.2 SATISFACTION OF PURCHASER'S OBLIGATIONS WITH RESPECT TO CERTAIN ASSUMED
LIABILITIES. Notwithstanding anything to the contrary in this Agreement or
otherwise, it is the intention of the parties that with respect to each of
those Assumed Liabilities identified in this Section 3.2, Seller shall retain
the actual obligation to the payee and Purchaser shall assume only the
obligation to pay the amount of the Assumed Liability to Seller. Seller shall
either (a) notify Purchaser prior to the due date of any such Assumed Liability
and Purchaser shall pay the amount assumed to Seller promptly upon receipt of
Seller's demand, or (b) pay the Assumed Liability and request reimbursement
from Purchaser in writing (which shall promptly be paid by Purchaser). The
following Assumed Liabilities shall be subject to this Section 3.2: (a) payroll
taxes payable, (b) sales tax payable, (c) accrued payroll and vacation, (d)
property taxes payable, (e) accounts payable, and (f) those liabilities
described in Sections 3.1(c) and 3.1(d).
4. EXCLUDED LIABILITIES. Except as set forth in Section 3 of this Agreement,
Purchaser shall not assume or become liable for any liabilities of Seller of
any kind or character, whether currently existing or arising after the date of
this Agreement, including without limitation the following:
4
<PAGE> 11
4.1 UNDISCLOSED LIABILITIES. Any liabilities or obligations of Seller not
reflected in the 11/30/93 Balance Sheet, whether known or unknown, absolute,
contingent or otherwise, except for the executory obligations described in
Section 3.1(a) and those liabilities described in Sections 3.1(c) and 3.1(d),
and including, without limitation, any liability related to or arising out of
any Environmental Law (as defined in Section 8.26).
4.2 DEFAULTS. Any obligation or liability arising from or relating to any
breach or default by Seller under any Contract.
4.3 PRODUCT LIABILITIES. Any liability or obligation arising out of or
related to any product produced by or service rendered by Seller prior to the
Closing Time (including without limitation claims for breach of warranty or
products liability).
4.4 AFFILIATE PAYABLES. Any liabilities of Seller required to be disclosed
on Exhibit 8.12 pursuant to Section 8.12(b).
4.5 TAX LIABILITIES. Any liabilities or obligations arising out of or
related to local, state, federal or foreign taxes or assessments, except those
tax liabilities assumed by Purchaser pursuant to Sections 3.1(b) and 5.4.
4.6 EMPLOYEE-RELATED LIABILITIES. Except as provided in Sections 3.1(b) and
3.1(c), any liabilities or obligations arising out of or related to employees
or former employees (and their dependents) of Seller, including without
limitation liabilities or obligations for unpaid wages, salaries, benefits,
vacation pay, sick pay, or holiday pay, withholding, unemployment or workers
compensation taxes, and contributions to any employee benefit plan or
arrangement or obligations under any self-funded employee benefit plan or
arrangement.
4.7 TRANSACTION EXPENSES. Any expenses incurred by Seller or Shareholders
in connection with the authorization, preparation, negotiation and consummation
of this Agreement, including without limitation, fees and expenses of counsel,
brokers and accountants.
4.8 OTHER LIABILITIES. Those liabilities identified in Exhibit 4.8.
All of the foregoing items are collectively referred to as the "EXCLUDED
LIABILITIES".
5. CONSIDERATION AND DELIVERY.
5.1 CONSIDERATION. The consideration for the Acquired Assets, in addition
to the assumption of the Assumed Liabilities by Purchaser, and subject to
adjustment pursuant to Section 5.3, shall be the number of Purchaser's class A
common shares, $0.625 par value (the "PURCHASER'S SHARES"), determined by
dividing (a)
5
<PAGE> 12
$13,074,783, by (b) the Base Price (as defined in this Section), rounded up to
the next whole number. "BASE PRICE" means the average closing price for the
Purchaser's Shares on the New York Stock Exchange for the thirty (30) trading
days immediately preceding the fifth (5th) trading day prior to the Closing.
5.2 DELIVERY OF PURCHASER'S SHARES TO SELLER AND ESCROW AGENT.
(a) At the Closing Time, Purchaser shall deliver to Seller certificates
for that number of Purchaser's Shares determined by dividing (i) $12,074,783,
by (ii) the Base Price and rounded up to the next whole share. At the Closing
Time, Purchaser shall deliver to Escrow Agent certificates representing the
balance of the Purchaser's Shares issuable under Section 5.1 (the "ESCROW
SHARES") to be held in the Escrow Funds (as defined in the Escrow Agreement) in
accordance with the Escrow Agreement.
(b) The Escrow Shares shall serve as collateral security for the
satisfaction by the Seller and Shareholders of their obligations under this
Agreement (including the payment of a Purchaser's Shares Adjustment Claim as
defined in Section 5.3). Seller authorizes Purchaser to deliver to the Escrow
Agent certificates representing the Escrow Shares. Seller shall deliver to
Escrow Agent stock powers endorsed in blank by Seller and such further
documentation as shall be required by the Escrow Agent to effect, if necessary,
the transfer of all or a portion of the Escrow Shares to Purchaser in
satisfaction of an Indemnification Claim or a Purchaser's Shares Adjustment
Claim.
(c) The specific terms and conditions of the Escrow Agreement and related
provisions of this Agreement have been expressly negotiated with Seller and the
Shareholders so as to satisfy, to the extent possible, the specific
requirements of the relevant case law as well as Section 3.06 of the IRS
Revenue Procedure 77-37, as such revenue procedure has been subsequently
amplified and interpreted by the IRS ("REV. PROC. 77- 37"), which establishes
the circumstances under which the IRS will issue advance private letter rulings
on escrow as well in transactions which are intended to qualify as
"reorganizations" under Section 368(a) of the Code. Accordingly, the parties
agree that, pursuant to the terms and conditions of this Agreement and the
Escrow Agreement, and, if not otherwise provided therein, the parties agree
here that: (i) there is a valid business reason for establishing the escrow
arrangement; (ii) all the Escrow Shares will be issued to and registered in the
Seller's name on the Closing Date and will be legally outstanding under Ohio
law after the Closing; (iii) all dividends paid on the Escrow Shares will be
distributed currently to the Seller; (iv) all voting rights of the Escrow
Shares will be exercisable by or on behalf of the Seller (or its authorized
agent); (v) none of the Escrow Shares will be subject to restrictions requiring
their return to Purchaser because
6
<PAGE> 13
of death, failure to continue employment or similar restrictions; (vi) the
Escrow Shares will be released from the escrow arrangement within five years
from the Closing Date (except when there is a bona fide dispute as to whom the
Escrow Shares should be released); (vii) at least 50% of the number of
Purchaser's Shares issued to Seller are not subject to the escrow arrangements;
(viii) the return of the Escrow Shares will not be triggered by an event, the
occurrence or nonoccurrence of which is within the control of Seller or the
Shareholders; (ix) the return of Escrow Shares will not be triggered by the
payment of additional tax or reduction of tax paid as a result of an IRS audit
of Seller or the Shareholders with respect to the transactions described in
this Agreement; and (x) the mechanism pursuant to this Agreement and the Escrow
Agreement for the calculation of the number of the Escrow Shares that may have
to be returned to Purchaser in satisfaction of a Claim (as defined in the
Escrow Agreement) is objective and readily ascertainable. Further, the parties
intend that by virtue of utilizing such an escrow arrangement, no interest
income will be imputed under Section 483 (or any other provision) of the Code
to Seller upon receipt of the Escrow Shares out of such escrow. For purposes
of this Section 5.2(c), all references to Seller shall mean the Shareholders
after the Seller distributes the Purchaser's Shares (including its interest in
the Escrow Shares) to its Shareholders as contemplated in this Agreement.
5.3 ADJUSTMENT. The Purchaser's Shares issuable under Section 5.1 shall be
adjusted as follows:
(a) Purchaser shall deliver to Seller and Shareholders, not later than
sixty (60) days after the Closing Time, a balance sheet (the "OPENING BALANCE
SHEET") for the Acquired Assets and Assumed Liabilities as of the opening of
business on the next day immediately following the Closing Time. The Opening
Balance Sheet shall be accompanied by Purchaser's determination of the amount
of any adjustment required pursuant to Section 5.3(b). Seller and Shareholders
shall have fifteen (15) business days from receipt of the Opening Balance Sheet
and adjustment determination to object to either by written notice to
Purchaser. If Purchaser does not receive notice of an objection within such
time, the Opening Balance Sheet and adjustment determination prepared by
Purchaser shall be final and binding on the parties. If Seller and
Shareholders timely notify Purchaser of an objection, the parties shall have
thirty (30) days from the date of Seller's notice to resolve the objection. If
the parties do not resolve the objection within such time, the certified public
accounting firm of Arthur Andersen (the "INDEPENDENT AUDITORS"), shall resolve
the objection within thirty (30) days after expiration of such 30-day period
and such resolution shall be final and binding on the parties. In the event
the Independent Auditors resolve all objections in the manner proposed by
either Purchaser or Seller and the Shareholders, the fees and expenses of
Independent Auditors shall be paid solely by the other. In all other events,
Seller and the Shareholders and
7
<PAGE> 14
Purchaser shall each bear fifty percent (50%) of such fees and expenses.
(b) "ACQUIRED NBV" shall mean the difference of the Acquired Assets less
the Assumed Liabilities as shown on the Opening Balance Sheet. If the Acquired
NBV is less than such amount as the parties shall mutually agree prior to the
Closing Time (the "MINIMUM NET WORTH"), the number of Purchaser's Shares
issuable pursuant to Section 5.1 shall be reduced (if the Acquired NBV is equal
to or greater than the Minimum Net Worth, no adjustment shall be made). The
amount of the reduction shall be determined by dividing (i) the difference of
(A) the Minimum Net Worth, less (B) the Acquired NBV, by (ii) the Base Price,
and rounding down to the next whole number.
(c) If, upon final determination (whether by Seller's and Shareholder's
failure to object, agreement of the parties or determination by the Independent
Auditors) there is an adjustment required by Section 5.3(b), Purchaser and
Seller and the Shareholders shall promptly thereafter make a joint claim
pursuant to the Escrow Agreement (a "PURCHASER'S SHARES ADJUSTMENT CLAIM"). If
the balance of the Purchaser's Shares Adjustment Claim Escrow Fund (as defined
in the Escrow Agreement) is insufficient to satisfy any Purchaser's Shares
Adjustment Claim, Seller and the Shareholders shall remain jointly and
severally liable for the deficiency and shall promptly pay the deficiency by
transferring back to Purchaser that number of Purchaser's Shares equal to the
deficiency divided by the Base Price and rounded down to the next whole number.
5.4 TRANSFER TAXES. Purchaser shall bear all sales and other transfer
taxes, recording fees and similar fees or charges (including penalties and
interest unless attributable to Seller's failure to timely file the applicable
returns and pay the tax shown on such return) attributable to, arising out of,
or resulting from the sale of the Acquired Assets. The parties agree that for
purposes of paying sales tax, the tangible Acquired Assets shall be allocated a
value equal to their value on the Opening Balance Sheet. Seller will assign to
Purchaser any right to refund associated with the amounts paid by Purchaser
pursuant to this Section. Seller will timely file all applicable returns
related to the Taxes described in this Section (provided Seller shall first
allow Purchaser reasonable time to review such returns prior to filing).
6. PURCHASER'S SHARES.
6.1 ISSUANCE. The Purchaser's Shares to be issued pursuant to Section 5.1
may be newly issued or treasury shares, at Purchaser's election, provided that
Purchaser will comply with the following provisions of this Section 6. In any
event, Purchaser represents and warrants that all of the Purchaser's Shares so
8
<PAGE> 15
issued will be duly and validly authorized and issued, fully paid and
nonassessable and, not later than 15 days after the Closing Time, covered by an
effective listing application with the New York Stock Exchange ("NYSE").
6.2 EXEMPTIONS. Seller acknowledges that the parties intend that the
issuance of Purchaser's Shares pursuant to Section 5.1 and the distribution of
the Purchaser's Shares so issued to the Shareholders upon dissolution of Seller
as contemplated by this Agreement qualify as exempt transactions under (a)
Section 4(2) of the Securities Act of 1933, as amended (the "ACT"), and (b)
applicable state securities laws (collectively, the "EXEMPTIONS"). All
certificates for the Purchaser's Shares issued pursuant to Section 5.1 shall
bear the legends restricting the sale, transfer or disposition of the
Purchaser's Shares necessary to assure compliance with the Exemptions. Such
restrictions shall be removed as soon as the listing application with the NYSE
and the registration statement described in Section 6.3 become effective.
6.3 SECURITIES FILINGS. Purchaser shall, at its expense, and within ten
(10) business days following the Closing Time, prepare and file with the
Securities and Exchange Commission a registration statement and any amendments
(including post-effective amendments thereto or supplements to any prospectus
contained therein), relating to the resale of the Purchaser's Shares issued
pursuant to Section 5.1. Within such period, Purchaser shall also make such
filings with each "Blue Sky" or other administrative agency of any state of the
United States as required to permit Seller to sell or otherwise dispose of the
Purchaser's Shares in those states. Purchaser will use its best efforts to
cause such registration statement and prospectus and state filings to become
and remain effective for a period of not less than three (3) years from the
Closing Time.
6.4 COOPERATION. Seller and Shareholders will cooperate with Purchaser and
provide such information in connection with any registration statement, report
of sale or other document reasonably required by Purchaser in the performance
of its obligations under Section 5.1 and this Section 6.
7. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Each of the
Shareholders severally represents and warrants with respect to himself/herself
as follows:
7.1 POWER AND CAPACITY. Shareholder has the power and authority to execute
and consummate this Agreement. This Agreement and each other agreement
contemplated hereby which is executed by Shareholder constitute the valid and
legally binding obligations of Shareholder, enforceable in accordance with
their terms, except that enforceability may be limited by applicable equitable
principles or bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors rights generally.
9
<PAGE> 16
7.2 NO CONFLICT WITH OTHER AGREEMENTS OR LAWS. The execution and
consummation by Shareholder of this Agreement and each other agreement
contemplated hereby which is executed by Shareholder will not (a) violate the
terms of any agreement, instrument, judgment or decree to which Shareholder is
a party or by which Shareholder or any of Shareholder's properties is bound,
(b) be in conflict with, or result in a breach of or constitute (with giving of
notice or lapse of time or both) a default under any such agreement,
instrument, judgment or decree, or (c) violate any applicable federal, state,
local or foreign law, regulation or order.
8. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS. Seller and the
Shareholders jointly and severally represent and warrant to Purchaser as
follows:
8.1 CORPORATE ACTION. This Agreement has been duly approved by the board of
directors and shareholders of Seller. Seller has taken all other action
required by its Articles of Incorporation and Bylaws or otherwise to authorize
the execution and consummation of this Agreement and the other transactions of
Seller contemplated by this Agreement. This Agreement and each other agreement
contemplated hereby which is executed by Seller will constitute the valid and
legally binding obligations of Seller, enforceable in accordance with their
terms, except that enforceability may be limited by applicable equitable
principles or bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors rights generally.
8.2 NO CONFLICT WITH OTHER AGREEMENTS OR LAWS. The execution and
consummation by Seller and Shareholders of this Agreement and each other
agreement contemplated hereby will not (except as to instruments or agreements
for which third-party consents may be required, and, as to which, Seller and
Purchaser have elected not to seek such consents), (a) violate the terms of
Seller's Articles of Incorporation or Bylaws or any instrument, agreement,
judgment or decree to which Seller is a party, or by which Seller or any of its
properties is bound, (b) be in conflict with, result in a breach of or
constitute (with giving of notice or lapse of time or both) a default under any
such instrument, agreement, judgment or decree, (c) result in the creation or
imposition of any lien upon Seller or its properties or assets, or (d) violate
any applicable federal, state, local or foreign law, regulation or order, if
the result of such violation, conflict, breach, default or lien would have a
material adverse affect on Seller or the Business.
8.3 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. Seller has full power and authority to carry on its business as it
is now being conducted, to own and lease the properties and assets which it now
owns or leases and to consummate this Agreement and each other transaction of
Seller contemplated by this Agreement. Seller is duly qualified to
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transact business and is in good standing as a foreign corporation in each
jurisdiction in which the ownership of its property or the conduct of its
business requires it to be so qualified as a foreign corporation, except for
jurisdictions in which such failure to be so qualified or in good standing
would not in the aggregate have a material adverse effect on Seller. Those
jurisdictions in which Seller is licensed to transact business are identified
in Exhibit 8.3. Except for marketable securities and instruments issued by
financial institutions, Seller does not own any securities of or investment or
interest in any other entity or person. Complete and correct copies of
Seller's Articles of Incorporation and Bylaws (including all amendments to
either to date) are attached in Exhibit 8.3.
8.4 SUBSIDIARIES. Seller has no subsidiaries. Seller does not control, and
is not controlled by or under common control with any person, firm,
corporation, partnership, association or entity, and Seller is not a partner or
participant in any partnership or joint venture or other arrangement of any
kind other than as described in Exhibit 8.4. Seller is controlled by V.
Sisilli.
8.5 FINANCIAL STATEMENTS AND TAXES.
(a) Attached as Exhibit 8.5(a) hereto are copies of (i) the 11/30/93
Balance Sheet and an unaudited profit and loss statement for Seller from
December 1, 1992 to the close of business on November 30, 1993 (the 11/30/93
Balance Sheet and the profit and loss statement for such period shall be
referred to herein as the "11/30/93 FINANCIAL STATEMENTS"), and (ii) Seller's
annual financial statements as of November 30, 1992 and November 30, 1991 (such
financial statements shall be referred to herein as the "ANNUAL FINANCIAL
STATEMENTS"; the 11/30/93 Financial Statements and the Annual Financial
Statements shall be collectively referred to as the "FINANCIAL STATEMENTS").
The Financial Statements (i) are true and correct in all material respects,
(ii) have been prepared on a consistent basis, (iii) fairly present the
financial condition of Seller as of the respective dates thereof and the
results of operation of Seller for such periods, and (iv) to Seller's and the
Shareholders' knowledge, disclose all material liabilities of Seller, whether
absolute, contingent, accrued, or otherwise. Except as disclosed in Exhibit
8.5(a), the Financial Statements do not contain any items of nonrecurring
income or loss or other income or loss not earned or incurred in the ordinary
course of business.
(b) Except as disclosed in Exhibit 8.5(b) hereto and except for (i) the
liabilities of Seller disclosed or reserved against in the 11/30/93 Balance
Sheet, and (ii) current liabilities incurred in the ordinary course of business
since November 30, 1993, to Seller's and Shareholders' knowledge, Seller has no
material liability or obligation, whether accrued, absolute, contingent or
otherwise.
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(c) Except as disclosed in Exhibit 8.5(c) hereto, no default exists as to
any of the material (either individually or in the aggregate) liabilities of
Seller.
8.6 RECEIVABLES. (a) Except as set forth on Exhibit 8.6 hereto, all of the
Receivables reflected on the 11/30/93 Balance Sheet (as the same will change in
the ordinary course of business through the Closing Time) have been (and will
have been) generated in the ordinary course of business and represent (and will
represent) valid debts due and owing to Seller. Except as set forth in
Exhibit 8.6, to Seller's or the Shareholders' knowledge, no Receivable is
subject to any counterclaim or any right of setoff. Seller and Shareholders
have made available to Purchaser at Seller's offices a detailed aging of the
Receivables.
(b) Except as set forth on Exhibit 8.6 and except for Receivables from any
distributors of Seller with whom Purchaser declines to do business after the
Closing, all of the Receivables as of the Closing Time will be collected on or
before July 1, 1994 in the aggregate recorded amounts thereof.
8.7 INSURANCE. Except as set forth in Exhibit 8.7, there are no outstanding
requirements or recommendations by any current insurer or underwriter with
respect to the Acquired Assets or otherwise which requires or recommends
changes in the conduct of the Business, or requires any repairs or other work
to be done with respect to any of the Acquired Assets.
8.8 ABSENCE OF CHANGES. Since April 30, 1993 and except as disclosed on
Exhibit 8.8 hereto and except for the transactions contemplated by this
Agreement, Seller has not:
(a) engaged in any activity other than in the ordinary course (as to both
type and amount), including without limitation, the sale, transfer or
conveyance of any assets, entering into any Contract or the making of or
committing to make any capital expenditures in an aggregate amount greater than
$5,000;
(b) suffered any material adverse change in (i) the Business or (ii) the
Acquired Assets, Assumed Liabilities, or Seller's financial condition, and, to
Seller's and the Shareholders' knowledge, no fact or condition exists, or has
been threatened, which is reasonably likely to cause such a change in the
future;
(c) incurred any material lien, encumbrance or claim upon any of the
Acquired Assets, except for any lien with respect to taxes not yet due and
payable;
(d) discharged or reduced any material lien or encumbrance other than as
required by its terms, paid any material liability other than current
liabilities incurred in the ordinary
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course of business and paid in accordance with their terms, or delayed payment
of any material account payable or other material liability of the Business
beyond its due date;
(e) incurred any default in any material liability (accrued or otherwise);
(f) made any change materially adverse to it in the terms of any agreement
or instrument to which it is a party;
(g) declared or made any distribution or other payment to its security
holders, or issued any additional securities or redeemed, purchased or
otherwise acquired any of its securities, or made any change in its capital
structure;
(h) paid any bonus to or granted any increase in the rates of pay or any
increase in the pension, retirement or other benefits of its directors,
officers or other employees, other than normal cost-of-living and merit salary
increases made in accordance with regular company policies;
(i) introduced any new method of accounting;
(j) incurred or agreed to incur any material indebtedness or entered into
any material (alone or in the aggregate) capitalized leases.
8.9 INVENTORY. The inventory of Seller is, in the aggregate, of a quality
and quantity usable and saleable in the ordinary course of business. Such
inventory has been acquired only in bona fide transactions entered into in the
ordinary course of business.
8.10 PERSONAL PROPERTY.
(a) Seller has made available to Purchaser at Seller's offices a true and
correct list which generally describes the Personal Property.
(b) Seller has made available to Purchaser at Seller's offices a true and
correct list of all items of furniture, fixtures, vehicles, machinery,
equipment or other personal property leased by Seller pursuant to an operating
lease.
(c) Except as identified in Exhibit 8.10(c) and except for normal wear and
tear, each item of property required to be identified in Exhibit 8.10(a) or
Exhibit 8.10(b) is in good condition and repair.
8.11 REAL PROPERTY. Exhibit 8.11 hereto sets forth a true and correct list
of all real property leased or used by Seller. Seller does not own any real
property.
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8.12 AFFILIATES.
(a) Except as set forth in Exhibit 8.12, none of the Shareholders, nor any
subsidiary or affiliate (as defined in Exhibit 8.12; an "AFFILIATE") of any
Shareholder owns, of record, or beneficially, any outstanding voting securities
or other equity interests, or any other securities exchangeable, convertible or
exercisable for or into, whether or not for any additional consideration, any
voting securities or other equity interests, in any corporation, partnership,
joint venture or other entity (except the Seller) which is involved in or
related to the Business, except for securities or interests which do not
represent more than five percent (5%) of the voting power of any such
corporation, partnership, joint venture or other entity.
(b) Except as set forth in Exhibit 8.12, Seller is not indebted to any
current or former shareholder, Affiliate of any shareholder, or to any
director, officer, employee or agent of the Seller except for amounts due as
normal salaries, wages, benefits or reimbursement of ordinary current business
expenses, and no current or former shareholder, Affiliate of any shareholder or
director, officer, employee or agent of Seller is indebted to Seller except for
ordinary business expense advances.
8.13 LITIGATION; COMPLIANCE WITH LAWS, ETC. Except as set forth in Exhibit
8.13, there is no action, claim or investigation pending, or, to the Seller's
or Shareholders' knowledge, threatened, against Seller, nor is there any
judgment of any court, governmental agency, instrumentality, or arbitration
outstanding against Seller. Seller has not received any notice of any
violation of any law, regulation or ordinance applicable to the Seller, its
properties or assets (whether owned or leased) or the Business. Except as set
forth in Exhibit 8.13, the Seller and the Acquired Assets have complied in all
respects with all applicable laws, regulations, covenants, restrictions and
ordinances (including, without limitation, Environmental Laws, laws relating to
occupational health and safety, zoning and land use regulations and
restrictions and the terms and conditions of those licenses, permits, approvals
and authorizations which are required to be identified on Exhibit 8.15), except
where the consequences of the failure to comply would not, alone or in the
aggregate, have a material adverse effect on Seller or the Acquired Assets or
Assumed Liabilities.
8.14 LABOR RELATIONS. Except as set forth in Exhibit 8.14:
(a) no labor union represents or purports to represent any employees of
Seller, and during the past three (3) years, Seller has not been the subject of
any union organizational activity or labor dispute;
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(b) there are no material controversies pending between Seller and any of
its employees, nor, to the Seller's or Shareholders' knowledge, are any such
material controversies threatened;
(c) Seller has complied with all laws and regulations relating to
employment, including any provisions thereof relating to wages, hours,
collective bargaining, discrimination in employment and the payment of social
security, withholding and similar taxes, except where the failure to comply
would likely not have a material adverse effect on Seller;
(d) Seller is not liable for any arrears of wages or taxes or any
penalties for failure to comply with any of the foregoing;
(e) Seller is not a party to any express oral or written agreement with any
of its employees regarding the length or conditions of employment, except that
Seller understands that all of its employees are employed subject to
termination at will pursuant to its policies and practices, and to Seller's and
the Shareholders' knowledge, there are no implied-in-fact agreements
inconsistent with the foregoing;
(f) Seller has no policy or past practice and is not a party to any
agreement relating to payment of any severance upon termination of employment;
and
(g) except for (i) payment of accrued and unpaid wages and salaries, (ii)
payment of wages and benefits as may be required under the Workers' Adjustment
and Retraining Notification Act (the "WARN ACT"), (iii) those benefits required
under COBRA, and (iv) payment of accrued but unused vacation, no employees of
Seller will be entitled to payment of any severance, holiday pay, sick pay or
vacation pay and no employees will be entitled to any medical insurance, life
insurance or other fringe benefit upon termination of employment as
contemplated by Section 15.
8.15 LICENSES AND PERMITS. Seller holds all licenses and permits from all
appropriate federal, state, foreign and other public authorities, necessary for
the conduct of Seller's business except where the failure to hold any such
license or permit would not have a material adverse effect on Seller, the
Acquired Assets or the Assumed Liabilities or the conduct of the Business.
8.16 CONTRACTS. Except for the Contracts identified in Exhibits 2.8 and 8.16
and the Employee Benefit Plans identified in Exhibit 8.19, the Seller is not a
party or subject to any contracts, commitments, agreements, leases, purchase
orders, sales orders or licenses of any of the following types, whether written
or oral:
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(a) contracts or commitments entered into other than in the ordinary
course of business;
(b) employment contracts or arrangements with any officer, consultant,
director, or employee;
(c) plans or contracts or other arrangements providing for insurance for
any employee or former employee or members of their families;
(d) plans, contracts or other arrangements providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit- sharing
or other benefits for employees or former employees, including without
limitation bonuses or other amounts payable upon a sale of substantially all
the assets of Seller;
(e) leases of real or personal property (whether Seller is lessor or
lessee);
(f) sales agency, manufacturers representation, broker, distribution or
similar contracts;
(g) instruments or arrangements evidencing or related to indebtedness or
money loaned or to be loaned, whether directly or indirectly, by way of
purchase money obligation, guaranty, conditional sale, lease-purchase, or
otherwise;
(h) joint venture contracts or arrangements or any other agreements
involving a sharing of profits;
(i) license agreements;
(j) policies of insurance;
(k) contracts relating to software or system research and/or development
by any other party;
(l) voting, repurchase, buy-sell, shareholders, redemption, option, stock
appreciation right, warrant or other agreement regarding the transfer, voting
or issuance of any capital stock, ownership interest or other security of
Seller;
(m) any customer agreements or other agreements for sale or management of
business forms or related services, except agreements entered into in the
ordinary course of business;
(n) agreements for the purchase of products or services except agreements
and purchase orders entered into in the ordinary course of business;
(o) agreements or undertakings to indemnify any person or entity; or
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(p) powers of attorney.
Except as set forth in Exhibit 8.16, all Contracts are in full force and effect
and are valid and binding obligations enforceable against the parties thereto,
except as may be limited by applicable equitable principles or bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally. Correct and complete copies of all Contracts have been delivered or
made available to Purchaser. Except as set forth in Exhibit 8.16, Seller is
not in material breach under and no condition exists with respect to Seller
which, with notice or the passage of time, or both, would constitute a material
breach by Seller under any of the Contracts. None of the distributor
agreements identified in Exhibit 2.8 (those agreements described in item 2 of
Exhibit 2.8 are referred to herein as the "DISTRIBUTOR AGREEMENTS") have been
modified by any oral modification, written modification not provided to
Purchaser, custom, or trade usage. Seller is not subject to any agreement
requiring it to obtain all or substantially all of its supply of any goods or
services from another person.
8.17 TITLE TO PROPERTIES; ENCUMBRANCES. Seller has good and marketable title
to all of the Acquired Assets, free and clear of any liens or encumbrances
except (a) those items disclosed on Exhibit 8.17; (b) liens for current
personal and real property taxes assessed but not yet due and payable; and (c)
such minor liens or other encumbrances or imperfections of title as do not
materially detract from the value of or interfere with the use of such
properties and assets. Those items described in clauses (a), (b) and (c) of
the preceding sentence (except for the security interests in favor of Union
Bank) are referred to herein as the "PERMITTED ENCUMBRANCES".
8.18 INTELLECTUAL PROPERTY INTANGIBLES.
(a) The following items are described more fully in Exhibit 8.18 and true
and correct copies of documents reflecting such items have been provided or
made available to Purchaser:
(i) All United States, common law and foreign patents, trademarks, trade
names, service marks and copyrights (including without limitation,
applications, registrations, and, if applicable, goodwill for all of the
foregoing), mask works, trade secrets, disclosures, know- how, formulations,
trade dress, designs, drawings, logos, technology, mailing lists, inventions,
uses of ideas, software rights, confidential information, industrial and
commercial property, whether any of the foregoing is owned, licensed or held
for use, all without geographical limitation and including, without limitation,
any of the foregoing which are owned by, or registered in the name of, a
Shareholder and the right to infringement and other claims related thereto and
used in or
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relating to the Business (collectively, the "INTELLECTUAL PROPERTY
INTANGIBLES");
(ii) Agreements to which Seller is a party relating to Intellectual
Property Intangibles; and
(iii) All registered, assumed or fictitious names under which Seller is
conducting business.
(b) Seller and Shareholders further warrant and represent as follows:
(i) All Intellectual Property Intangibles are to the extent applicable
in good standing and, to Seller's and Shareholders' knowledge, without any
challenge.
(ii) The Intellectual Property Intangibles have been in continuous use
since the date of their adoption and first use as shown in Exhibit 8.18.
(iii) All copyrights described in Exhibit 8.18 are original works of
authorship of Seller or Seller has acquired all rights thereto.
(iv) Any trademarks, service marks or trade names which have been
obtained through transfer or assignment include the associated goodwill.
(v) Seller and Shareholders have no knowledge of any infringement or
unlawful use of any of the Intellectual Property Intangibles or any use of the
same or similar item so as to create a likelihood of confusion.
(vi) To Seller's and Shareholders' knowledge, no infringement of any
Intellectual Property Intangibles has occurred or results from operation of the
Business.
(vii) Except as set forth in Exhibit 8.18, Seller and Shareholders have
not received notice of, or have knowledge of any basis for, a claim against the
Seller that the Business infringes any intellectual property rights of others.
(viii) No proceedings or claims are pending or, to Seller's or
Shareholders' knowledge, threatened, with respect to the validity or ownership
of the Intellectual Property Intangibles.
8.19 EMPLOYEE BENEFIT PLANS.
(a) Except for the medical and dental plans identified in Exhibit 8.19 and
referred to herein as the "EMPLOYEE PLANS", no material plans, policies,
arrangements or contracts, whether written or oral, including, without
limitation, employee benefit
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plans as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), are in effect at the date hereof providing or relating to
any retirement, profit sharing, stock bonus, stock option,incentive
compensation, deferred compensation, fringe benefit or welfare benefit to or on
behalf of employees or former employees of Seller. Seller has provided
Purchaser with summary plan or other descriptions of the Employee Plans, and
will, prior to the Closing, make available to Purchaser, upon request, copies
of the Employee Plans and any related documents, including, without limitation,
agreements with third-party service providers. Each summary plan description,
Employee Plan or other document provided or made available pursuant to the
preceding sentence is correct and complete in all material respects.
(b) Except as disclosed in Exhibit 8.19: (i) each of the Employee Plans
is and has been at all times in compliance with ERISA and all other applicable
laws, except for violations thereof which would not in the aggregate give rise
to a material obligation to pay money; (ii) no claims are pending against
Seller in respect of an Employee Plan except for payment of benefits in the
normal course of business, and no employee of Seller and no beneficiary or
dependent of an employee has pending or to Seller's or Shareholders' knowledge
has threatened any material appeal or litigation regarding any denial of
benefits under any Employee Plan; (iii) neither Seller nor any corporation or
other trade or business (whether or not incorporated) which together with
Seller is an "employer" as defined in Section 4001(a) of ERISA (an "ERISA
AFFILIATE") has engaged in any material transaction prohibited by Section 406
of ERISA or Section 4975 of the Code; and (iv) the Seller has complied with the
health care continuation coverage requirements of Section 4980(B) of the Code
in respect of employees and former employees of Seller and their dependents and
beneficiaries.
(c) Except as set forth in Exhibit 8.19, no person has asserted any claim
under which Seller has any liability under any health insurance, sickness, life
insurance, disability, medical, surgical, hospital, death benefit, or any other
Employee Plan (whether or not disclosed on Exhibit 8.19) maintained by the
Seller or to which Seller is a party or may be bound, or under any worker's
compensation or similar law, which is not fully covered by insurance maintained
with responsible insurers or reserved for under the 11/30/93 Balance Sheet.
(d) Except as otherwise required by COBRA or disclosed on Exhibit 8.19,
Seller does not provide benefits to retirees or former employees.
8.20 CONDUCT OF BUSINESS. Since April 30, 1993, Seller has used its best
efforts to conduct the Business in such manner as to maintain and preserve its
assets and business organization, to retain customers, suppliers and employees
and to promote customer
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goodwill, to keep and maintain the Personal Property in good operating
condition and repair and to keep the Contracts in full force and effect.
8.21 CONSENTS AND APPROVALS. Except as set forth in Exhibit 8.21, and,
except for any consents which may be required in connection with Purchaser's
assumption of the Contracts and as to which Purchaser and Seller have elected
not to seek such consents, no waiver, consent or approval from or filing with
any party (governmental or otherwise) is required on the part of Seller to
consummate this Agreement.
8.22 CUSTOMERS AND SUPPLIERS.
(a) Seller has made available to Purchaser at Seller's offices a list of
Seller's customers. Except as identified on Exhibit 8.22, Seller and
Shareholders have no knowledge that any of such customers intends to reduce or
has threatened to reduce materially its purchases from or business dealings
with Seller whether by reason of the consummation of this Agreement or
otherwise.
(b) Seller has made available to Purchaser at Seller's offices a list of
Seller's suppliers. Except as identified on Exhibit 8.22, Seller and
Shareholders have no knowledge that any of such suppliers intends to alter or
has threatened to alter materially the terms of supply to Seller whether by
reason of the consummation of this Agreement or otherwise.
8.23 WARRANTIES. Except for the warranties under the standard form customer
agreements or as otherwise specifically identified in Exhibit 8.16 hereto and
except for any warranties which may be implied by law, there are no other
warranties or guaranties now in effect issued by Seller or outstanding with
respect to the products or services of Seller. Except as set forth on Exhibit
8.23: (a) there are no existing, or, to Seller's or Shareholders' knowledge,
threatened material claims against Seller related to products or services of
Seller which have been alleged to be defective or which are otherwise alleged
to have caused any third party any damage; (b) Seller has not received a notice
by any governmental or regulatory body stating that any of Seller's products or
services are defective or otherwise have caused any third party any damages;
(c) there have been no recalls ordered by any such governmental or regulatory
body with respect to any products sold by or services rendered by Seller; and
(d) to Seller's or Shareholders' knowledge there is no (i) fact relating to any
of the such products or services that may impose upon Seller a duty to recall
any such products or services, or a duty to warn customers of a defect in any
such products or services or (ii) latent or overt defects in any such products
or services, in each such case not fully reflected in the 11/30/93 Balance
Sheet.
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8.24 BANK ACCOUNTS. Exhibit 8.24 sets forth the name, location and account
number of each bank, trust company, savings and loan association or other
financial institution in which Seller has an account or safe deposit box and
the names of the persons authorized to draw thereon or having access thereto.
8.25 BOOKS AND RECORDS. All of the Books and Records are true and correct.
8.26 ENVIRONMENTAL PROTECTION.
(a) Except as set forth on Exhibit 8.26, Seller has obtained all permits,
licenses and other authorizations which are required under Federal, state and
local statutory and common laws, regulations or orders relating to pollution or
protection of the environment, pollutants, contaminants, hazardous or toxic
materials, wastes or nuisance (collectively, the "ENVIRONMENTAL LAWS"), and the
transactions contemplated hereby will not alter or impair any such permits,
licenses and authorizations.
(b) There are no circumstances or plans by Seller which would be
reasonably likely to interfere with or prevent compliance or continued
compliance by Seller with any Environmental Laws, or which may give rise to any
liability of Seller, including, without limitation, liability of Seller under
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or similar state or local laws, or otherwise form the basis of any
claim, notice of violation, or investigation against Seller, based on or
related to a violation by Seller of any Environmental Laws. Without in any way
limiting the foregoing, no release, emission or discharge into the environment
of any hazardous substance (as that term is currently defined under CERCLA or
any applicable analogous state law) has occurred or is currently occurring in
connection with the conduct of the Business which is in violation of applicable
Environmental Laws or, to Seller's or Shareholder's knowledge, at any site to
which such substances from Seller may have been taken at any time in the past.
(c) Seller has not received any notification from any government or
political subdivision thereof that any of the properties, assets or operations
owned or used by Seller are in violation of any Environmental Laws.
8.27 INVESTMENT INTENT. Seller and Shareholders acknowledge that the
Purchaser's Shares to be issued pursuant to Section 5.1 will be issued
pursuant to the Exemptions, and that Purchaser is relying on the
representations and warranties of Seller and the Shareholders in this Section
8.27 as the basis for Purchaser's determination that the Exemptions are
available. Accordingly, Seller and the Shareholders jointly and severally
represent and warrant that:
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(a) they are acquiring the Purchaser's Shares for investment purposes only
and without a view to the resale thereof until such time as such resale has
been registered (or exemptions from registration perfected) under the Act and
all applicable state securities laws, and they will not sell, encumber, dispose
or otherwise transfer (collectively, "TRANSFER") any right or interest in the
Purchaser's Shares, whether voluntarily, by gift, operation of law,
testamentary disposition or otherwise, except for the distribution of the
Purchaser's Shares to Shareholders upon dissolution of Seller or surrender of
Purchaser's Shares to Purchaser in satisfaction of an Indemnification Claim or
Purchaser's Shares Adjustment Claim, unless such Transfer has been registered
(or an exemption from registration has been perfected) under the Act and
applicable state securities laws.
(b) Seller and the Shareholders are experienced investors and are aware of
the risks inherent in an investment in the Purchaser's Shares.
(c) Seller and the Shareholders have had access to such information about
Purchaser and its operations as they deem necessary to evaluate fully an
investment in the Purchaser's Shares and Seller and the Shareholders are
relying solely on the information provided by their advisors and information
publicly available regarding Purchaser and its operations and not upon any
statement of or information supplied by any employee, agent, contractor or
representative of Purchaser.
(d) Seller is a California corporation. Shareholders are residents of the
State of California.
Nothing in this Section shall affect the obligations of Purchaser under
Section 6.
8.28 TAX MATTERS.
(a) Except as disclosed in Exhibit 8.28(a) hereto: Seller has timely filed
all federal, state, and local tax returns (including, without limitation,
income, franchise, excise, withholding, property, social security, employment,
sales and use tax returns) required to be filed by it and has timely paid all
taxes shown on such returns; each such return was prepared in the manner
required by applicable law and is true, correct and complete in all material
respects; all assessments of tax made against the Seller with respect to such
returns have been timely paid; no assessments or notices of deficiency have
been received by Seller or, to Seller's or Shareholders' knowledge, threatened
against Seller with respect to any such return which have not been paid or
fully reserved against in the 11/30/93 Balance Sheet; Seller has fully accrued
on the 11/30/93 Balance Sheet all taxes that were not due and payable as of
November 30, 1993; Seller has not agreed to an extension of the statute of
limitations as to any tax return;
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and no amendments or applications for refund have been filed or are planned
with respect to any such return. The last audit of the federal tax return of
Seller was for the fiscal year ended __________, 19__.
(b) To Seller's and the Shareholders' knowledge, the fair market value of
the Purchaser's Shares that each Shareholder will receive in exchange for his
or her stock in the Seller will be approximately equal to the fair market value
of such stock.
(c) There is no plan or intention by the Shareholders to sell, exchange, or
otherwise dispose of a number of shares of Purchaser's Shares distributed to
Shareholders from Seller that would reduce the Shareholders' ownership of
Purchaser's Shares to a number of shares having a value, as of the Closing
Time, of less than 50% of the value of all of the formerly outstanding stock of
Seller as of the same date.
(d) To Seller's and the Shareholders' knowledge, Purchaser will acquire at
least 90% of the fair market value of the net assets and at least 70% of the
fair market value of the gross assets held by Seller immediately prior to the
Closing Time. For purposes of this representation, amounts used by Seller to
pay its reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by Seller immediately preceding the
transfer will be included as assets of Seller held immediately prior to the
Closing Time.
(e) Intentionally omitted.
(f) The liabilities of Seller assumed by Purchaser and the liabilities to
which the transferred assets of Seller are subject were incurred by Seller in
the ordinary course of its business.
(g) Seller and the Shareholders will pay their respective expenses, if any,
incurred in connection with the transaction.
(h) There is no intercorporate indebtedness existing between Purchaser and
Seller that was issued, acquired, or will be settled at a discount.
(i) Seller is not an investment company as defined in Section 368(a)(2)(F)
of the Code.
(j) The fair market value of the assets of Seller transferred to Purchaser
will equal or exceed the sum of the liabilities assumed by Purchaser, plus the
amount of liabilities, if any, to which the transferred assets are subject.
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(k) Seller is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
(l) None of the compensation received by any Shareholder who is also an
employee of or lessor to the Seller (a "SHAREHOLDER/ EMPLOYEE") will be
separate consideration for, or allocable to, any of their common shares in
Seller; none of the Purchaser's Shares to be received by a Shareholder/Employee
upon distribution from Seller will be separate consideration for, or allocable
to, any employment, consulting, lease or other agreement with Seller or
Purchaser, and the compensation to be paid (or deemed paid for whatever reason
for Federal income tax purposes) to any Shareholder/Employee following this
transaction will be for services actually rendered or property sold or leased
and is anticipated to be commensurate with amounts paid to third parties
bargaining at arm's length for similar services, property or use of property.
8.29 DISCLOSURE. No representation or warranty by Seller contained in this
Agreement, and no statement contained in any certificate, exhibit, list or
other instrument furnished by the Seller to Purchaser pursuant to the
provisions hereof contains or will contain any untrue statement of material
fact or omits or will omit to state a material fact necessary in order to make
the statement contained herein or therein, in light of the circumstances in
which they are being made, not misleading.
9. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller and Shareholders as follows:
9.1 CORPORATE ACTION; CORPORATE POWER AND AUTHORITY. This Agreement has
been duly approved by the board of directors of Purchaser. Purchaser has taken
all other action required by its Articles of Incorporation and Code of
Regulations or otherwise to authorize the execution and consummation of this
Agreement and the other transactions of Purchaser contemplated by this
Agreement. This Agreement and each other agreement contemplated hereby which
is executed by Purchaser constitutes the valid and legally binding obligation
of Purchaser, enforceable in accordance with their terms, except that
enforceability may be limited by applicable equitable principles or bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors rights
generally.
9.2 NO CONFLICT WITH OTHER AGREEMENTS OR LAWS. The execution and
consummation by Purchaser of this Agreement and each other agreement
contemplated hereby will not (a) violate the terms of Purchaser's Articles of
Incorporation or Code of Regulations or similar charter documents or any
instrument, agreement, judgment or decree to which Purchaser is a party, or by
which Purchaser or any of its properties is bound, (b) be in conflict with,
result in a breach of or constitute (with giving of notice or lapse of time or
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both) a default under any such instrument, agreement, judgment or decree, (c)
result in the creation or imposition of any lien upon Purchaser or its
properties or assets, or (d) violate any applicable federal, state, local or
foreign law, regulation or order if the result of such violation, conflict,
breach, default or lien would have a material adverse affect on Purchaser.
9.3 ORGANIZATION AND QUALIFICATION. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and has full power and authority to carry on its business as it is now
being conducted, to own and lease the properties and assets which it now owns
or leases and to consummate this Agreement. Purchaser is duly qualified to
transact business and is in good standing as a foreign corporation in each
jurisdiction in which the ownership of its property or the conduct of its
business requires it to be so qualified as a foreign corporation, except for
jurisdictions in which such failure to be so qualified or in good standing
would not in the aggregate have a material adverse effect on the financial
condition of Purchaser.
9.4 SPECIAL TAX MATTERS. (a) Purchaser has no plan or intention to
reacquire any of the Purchaser's Shares issued in this transaction except: (i)
as may occur pursuant to the terms and conditions of the Escrow Agreement, and
(ii) as may occur through Purchaser's ongoing program of repurchasing its stock
from unidentified sellers in the open market.
(b) Purchaser has no plan or intention to sell or otherwise dispose of
any of the assets of Seller acquired in this transaction, except for
dispositions made in the ordinary course of business.
(c) Following this transaction, Purchaser will continue the historic
business of Seller or use a significant portion of Seller's historic business
assets in a business, all within the meaning of Treasury Regulation Section
1.368-1(d).
(d) Purchaser will pay its expenses, if any, incurred in connection with
the transaction.
(e) Purchaser is not an investment company as defined in Section
368(a)(2)(F) of the Code.
(f) Purchaser does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any stock of Seller.
(g) The Purchaser's Shares issued pursuant to this Agreement will
constitute "voting stock" within the meaning of Section 368(a)(1)(C) of the
Code.
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9.5 PURCHASER'S FINANCIAL STATEMENTS. The financial statements of
Purchaser as of and for the year ended September 30, 1992 which appeared in the
Annual Report of Purchaser on Form 10-K for the year ended September 30, 1992,
and the financial statements of Purchaser as of and for the quarters ended
December 31, 1992, March 31, 1993 and June 30, 1993 which appeared in the
Quarterly Report of Purchaser on Form 10-Q for each of those respective
quarters, all of which are publicly available to Seller, are true, correct and
complete in all material respects, have been prepared in accordance with
generally accepted accounting principles consistently applied, and present
fairly Purchaser's financial condition and the results of its operations for
the periods indicated. Since June 30, 1993, there have been no developments
materially and adversely affecting the operations or properties (in each case
in the aggregate) of Purchaser.
9.6 CONSENTS AND APPROVALS. Except as set forth in Exhibit 9.6, no waiver,
consent or approval from or filing with any party (governmental or otherwise)
is required on the part of Purchaser to consummate this Agreement.
10. COVENANTS. The parties covenant and agree as follows:
10.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Until the Closing, and unless
Purchaser shall otherwise consent in writing, Seller shall take the following
actions:
(a) operate the Business substantially as previously operated and only in
the ordinary course, and use its best efforts to preserve intact Seller's
goodwill, reputation, present business organization and relationships with
persons having business dealings with it;
(b) maintain all the Personal Property in good order and condition,
reasonable wear and use excepted, and maintain all policies of insurance
covering such properties in effect on the date hereof;
(c) pay Seller's accounts payable and attempt to collect the Receivables in
a manner consistent with past business practices;
(d) comply with all laws applicable to the conduct of the Business where
the failure to comply would likely have a material adverse effect on Seller,
the Acquired Assets or the Assumed Liabilities; and
(e) maintain Seller's books and records in the usual, regular and ordinary
manner on a basis consistent with past practices.
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10.2 NOTIFICATION OF MATERIAL ADVERSE CHANGES. Between the date hereof and
the Closing Time, Seller shall promptly notify Purchaser in writing of the
occurrence of any of the matters described in Section 8.8.
10.3 OTHER TRANSACTIONS. So long as this Agreement is in effect, Seller and
the Shareholders shall deal exclusively and in good faith with Purchaser
regarding the sale of the Acquired Assets, the capital stock of Seller or a
merger involving Seller (a "SALE TRANSACTION") and will not, and will direct
the Seller's officers, partners, directors, financial advisors, accountants,
agents and counsel not to, (i) solicit submission of offers from any person
relating to a Sale Transaction, (ii) participate in any discussions or
negotiations regarding, or furnish any nonpublic information to any person
regarding any Sale Transaction by any person other than Purchaser, or (iii)
enter into any agreement or understanding, whether oral or written, that would
have the effect of preventing consummation of this Agreement. If Seller or the
Shareholders or their representatives or agents should receive any proposal for
a Sale Transaction or any inquiry regarding such proposal from a third party,
Seller will promptly so inform Purchaser.
10.4 CONSENTS, WAIVERS AND APPROVALS. Each party shall use its best efforts
to obtain prior to the Closing all consents, waivers, approvals, and releases
of liens or encumbrances necessary to effect the transactions contemplated
herein and the operation of the Business after the Closing Time in the ordinary
course substantially as operated by Seller prior to Closing, free and clear of
any and all liens or encumbrances except the Permitted Encumbrances. All such
consents, waivers, releases and approvals will be in writing and in form and
substance satisfactory to the parties, and executed counterparts thereof will
be delivered to the parties promptly after receipt thereof but in no event
later than the Closing.
10.5 SUPPLEMENTAL DISCLOSURE. Each party shall have the continuing
obligation up to and including the Closing Time to supplement promptly or amend
its Exhibits with respect to any matter hereafter arising or discovered which,
if existing or known at the date of this Agreement, would have been required to
be set forth or listed in its Exhibits. For the purpose of the rights and
obligations of the parties hereunder, any such supplemental disclosure shall be
deemed to have been disclosed as of the date of this Agreement if Purchaser
proceeds with the Closing of the transactions contemplated herein following
receipt of such supplemental or amended Exhibits.
10.6 ADDITIONAL REPORTS. Promptly after they become available, Seller will
deliver to Purchaser copies of all management and control reports (including
agings of accounts receivable, listings of accounts payable and inventory
control
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reports) and financial statements furnished to the management of Seller.
10.7 CONDITIONS PRECEDENT. Each party shall use its best efforts in good
faith to satisfy the conditions to closing of the other parties.
10.8 PURCHASER'S DUE DILIGENCE. Seller and Shareholders shall give Purchaser
and its counsel, accountants and other representatives full access during
normal business hours to all of the books, records, files, documents, assets,
properties, contracts, and commitments of Seller, provided that such
examinations shall be conducted in such a manner so as not to disrupt the
normal business operations of Seller, and Seller shall furnish Purchaser with
such information concerning the affairs of Seller which Purchaser may
reasonably request, so that Purchaser may have a full opportunity to verify the
representations and warranties contained in this Agreement and to ascertain
such other matters concerning the financial condition, operations, employees,
business or prospects of Seller as Purchaser may deem necessary or appropriate.
Seller shall deliver or make available to Purchaser correct and complete copies
of all documents referred to in the Exhibits.
10.9 COVENANTS OF PURCHASER. Purchaser covenants and agrees with Seller and
the Shareholders as follows:
(a) After the Closing Time, Purchaser will continue the historic business of
Seller or use a significant portion of Seller's historic assets in a business,
all within the meaning of Treasury Regulations 1.368-1(d).
(b) After the Closing Time, Purchaser shall not transfer all or any portion
of the Assumed Liabilities to any individual, trust, estate, partnership,
association, company, corporation or other entity.
(c) At the request of Seller, Purchaser shall, or shall cause its transfer
agent to, issue separate certificates of Purchaser's class A common shares in
exchange for one or more certificates for an equal number of Purchaser's Shares
for the purpose of permitting Seller to deliver such certificates to its
separate creditors and Shareholders pursuant to its plan of liquidation.
10.10 COVENANTS OF SELLER. As soon as practicable after the Closing Time,
Seller will adopt a plan of liquidation and, no later than four (4) months
after the Closing Time, Seller will dissolve under state law and distribute to
its creditors and the Shareholders the Purchaser's Shares it receives in the
transaction and its other properties pursuant to the plan of liquidation.
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10.11 TERMINATION OF DISTRIBUTOR AGREEMENTS. Seller shall send notices of
elective termination of the Distributor Agreements. Such notices shall be in
such form as Seller and Purchaser mutually agree.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligation of
Purchaser to consummate this Agreement shall be subject to the satisfaction, on
or before the Closing Time, of the following conditions, all or any of which
may be waived by Purchaser (the consequences of Purchaser's waiver shall be as
described in Section 21.11).
11.1 REPRESENTATIONS. The representations and warranties made by Seller and
Shareholders in Sections 7 and 8 hereof shall be true and correct in all
material respects at the Closing Time as though such representations and
warranties had been made on such date (except for changes permitted by this
Agreement) and Seller and Shareholders shall deliver to Purchaser a certificate
dated as of the Closing Time to the foregoing effect.
11.2 COVENANTS. Seller and Shareholders shall have duly performed in all
material respects all of the covenants, acts and undertakings to be performed
by them on or prior to the Closing Time, and Seller and the Shareholders shall
deliver to Purchaser a certificate dated as of the Closing Time to the
foregoing effect.
11.3 NO INJUNCTION, ETC. No proceeding, investigation, or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, or prohibit, or to obtain substantial
damages in respect of this Agreement, or which is related to the Acquired
Assets or the Assumed Liabilities, which, in the reasonable judgment of
Purchaser, would make it inadvisable to consummate this Agreement.
11.4 INCUMBENCY. Seller shall have delivered a certificate of incumbency
executed by the president and secretary of Seller listing each officer and
director of Seller and the persons authorized to execute this Agreement and the
other agreements, documents or instruments to be executed by Seller pursuant to
this Agreement.
11.5 CONSENTS, WAIVERS AND APPROVALS. Purchaser shall have received a true
and correct copy of each consent, waiver or approval required to be identified
in Exhibit 8.21 hereto or otherwise required pursuant to Section 10.4.
11.6 ABSENCE OF MATERIAL ADVERSE CHANGES. Prior to the Closing Time, there
has not been, in Purchaser's reasonable judgment, any development known to
Purchaser on such date and not known to Purchaser on the date of this Agreement
which materially and adversely affects or is reasonably likely to materially
and
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adversely affect, the Acquired Assets, the Assumed Liabilities or the Business.
11.7 CERTIFIED RESOLUTIONS. Seller shall have delivered to Purchaser a
certificate executed by a duly authorized officer of Seller containing true and
correct copies of the resolutions duly adopted by the board of directors and
shareholders of Seller approving and authorizing this Agreement and its
consummation and the other actions required of Seller hereunder. Such officer
shall also certify that such resolutions have not been revoked or modified and
remain in full force and effect.
11.8 INTENTIONALLY OMITTED.
11.9 INTENTIONALLY OMITTED.
11.10 BASIC CORPORATE DOCUMENTS. Purchaser shall have received copies of
the Seller's Articles of Incorporation, certified as of a date within 30 days
prior thereto by the Secretary of State of Seller's state of incorporation,
Seller's Bylaws, certified as of such a date by Seller's Secretary, and
certificates of good standing (long-form where available) or authority from the
Secretary of State of the state of incorporation and those other jurisdictions
identified in Exhibit 8.3.
11.11 INTENTIONALLY OMITTED.
11.12 NON-COMPETITION AGREEMENT. V. Sisilli shall have executed a
Non-competition Agreement in substantially the form of Exhibit 11.12 (the
"NON-COMPETITION AGREEMENT").
11.13 ESCROW AGREEMENT. Seller, the Shareholders and the Escrow Agent shall
have executed the Escrow Agreement.
11.14 TRADE NAMES. Seller shall have ceased to use in any manner the name
"Law Printing Company" and any other Trade Names, except in connection with tax
returns, filings with other governmental authorities and for similar purposes
and, at the Closing, shall deliver to Purchaser evidence of a duly executed
amendment to Seller's Articles of Incorporation to change Seller's corporate
name.
11.15 INSTRUMENTS OF TRANSFER. Seller shall have delivered to Purchaser at
the Closing Time such bills of sale, endorsements, assignments, deeds,
certificates of title and other instruments of transfer as are provided for
herein, or as otherwise necessary to vest in Purchaser all of Seller's title
and rights with respect to the Acquired Assets (including, without limitation,
any Intellectual Property Intangibles owned by or registered in the name of the
Shareholder at the date of this Agreement), free and clear of all liens or
encumbrances (except the Permitted Encumbrances).
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11.16 CERTIFICATES. Seller shall have delivered to Purchaser all such
certificates, dated as of the Closing Time, as Purchaser shall reasonably
request to evidence the fulfillment by Seller, or other satisfaction as of the
Closing Time, of the terms and conditions of this Agreement.
11.17 UNION BANK TERMINATIONS. Seller and the Shareholders shall have
delivered to Purchaser such termination statements or other documents as
reasonably required to terminate the security interests of Union Bank in any of
the Acquired Assets.
11.18 LEASE. All of the required parties shall have executed a lease in
substantially the form of Exhibit 11.18 (the "LEASE").
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND THE SHAREHOLDERS. The
obligation of Seller and the Shareholders to consummate this Agreement shall be
subject to the satisfaction, on or before the Closing Time, of the following
conditions, all or any of which may be waived by Seller and the Shareholders
(the consequences of their waiver shall be as described in Section 21.11).
12.1 REPRESENTATIONS. The representations and warranties made by Purchaser
in Section 9 hereof shall be true and correct in all material respects at the
Closing Time with the same force and effect as though such representations and
warranties had been made on and as of such date (except for matters permitted
by this Agreement) and Purchaser shall deliver to Seller and the Shareholders a
certificate dated as of the Closing Time to the foregoing effect for Purchaser.
12.2 COVENANTS. Purchaser shall have duly performed in all material respects
all of the covenants, acts or undertakings to be performed by it on or before
the Closing Time, and Purchaser shall deliver to Seller and Shareholders
certificates dated as of the Closing Time to the foregoing effect for
Purchaser.
12.3 CERTIFIED RESOLUTIONS. Purchaser shall have delivered to Seller and
Shareholders certificates executed by a duly authorized officers of Purchaser
containing a true and correct copy of resolutions duly adopted by Purchaser's
Board of Directors approving and authorizing this Agreement and its
consummation. Such officers shall also certify that such resolutions have not
been revoked or modified and remain in full force and effect.
12.4 NO INJUNCTION, ETC. No proceeding, investigation or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, or prohibit, or to obtain substantial
damages in respect of this Agreement or which is related to or arises out of
the Business of Purchaser, which, in the reasonable judgment of Seller and the
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Shareholders, would make it inadvisable to consummate this Agreement.
12.5 CONSENTS, WAIVERS AND APPROVALS. Seller and Shareholders shall have
received a true and correct copy of each consent, waiver or approval required
to be identified in Exhibit 9.6 hereto or otherwise required pursuant to
Section 10.4.
12.6 INCUMBENCY. Purchaser shall have delivered a certificate of incumbency
executed by the president and secretary of Purchaser listing each officer and
director of Purchaser and the persons authorized to execute this Agreement and
the other agreements, documents or instruments to be executed by Purchaser
pursuant to this Agreement.
12.7 ESCROW AGREEMENT. Purchaser and the Escrow Agent shall have executed
the Escrow Agreement.
12.8 NON-COMPETITION AGREEMENT. Purchaser shall have executed the
Non-competition Agreement.
12.9 INTENTIONALLY OMITTED.
12.10 ABSENCE OF MATERIAL ADVERSE CHANGES. Prior to the Closing Time,
there has not been, in Seller's reasonable judgment, any development known to
Seller on such date and not known to Seller on the date of this Agreement which
materially and adversely affects or is reasonably likely to materially and
adversely affect Purchaser's business or operations.
12.11 LEASE. All of the required parties shall have executed the Lease.
12.12 UNION BANK TERMINATIONS. Seller shall have received from Union Bank
the documents required by Section 11.17.
13. MUTUAL COVENANTS.
13.1 PRE-CLOSING. Each of the parties hereto shall refrain from taking any
action which would render any representation or warranty contained in Sections
8 or 9 of this Agreement inaccurate as of the Closing Time. Each party shall
promptly notify the other of any action or proceeding that shall be instituted
or threatened against such party to restrain, prohibit or otherwise challenge
the legality of any transaction contemplated by this Agreement. Seller shall
promptly notify Purchaser of any lawsuit, claim or investigation that may be
threatened or brought against Seller which would have been listed on Exhibit
8.13 if such lawsuit, claim or investigation had arisen prior to the date
hereof.
13.2 TAX REPORTING AND FINANCIAL ACCOUNTING. The parties will prepare their
books and records, file their respective tax returns,
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and issue their financial statements and reports on the basis that (i) the
acquisition of the Acquired Assets by the Purchaser in exchange for the
Purchaser's Shares pursuant to this Agreement qualifies as a tax-free
reorganization under sections 368(a)(1)(C) and 368(a)(2)(B) of the Code; (ii)
no interest is imputed under section 483 (or any other provision) of the Code
to Seller or the Shareholders on or before receipt of the Escrow Shares out of
escrow, and (iii) the parties' allocation of the consideration paid by
Purchaser for the Acquired Assets, covenant not to compete and the lease of
real property, all as set forth in this Agreement, the Non-competition
Agreement and the Lease is correct. No party shall take a position
inconsistent with the foregoing, directly or indirectly, orally or in writing,
in the course of any audit, administrative proceeding, appeal, litigation, or
otherwise (whether or not related to the determination of tax), unless such
inconsistent position has been determined by a decision of a court of competent
jurisdiction that has become final or by any other event that constitutes a
"determination" as defined in Section 1313(a) of the Code. The Purchaser shall
notify the Shareholders and the Shareholders shall notify the Purchaser, as the
case may be, in writing, as soon as reasonably practicable, of any audit
adjustment or proposed audit adjustment by any taxing authority that affects or
relates to any of the items described in the first sentence of this Section
13.2.
13.3 COOPERATION AND EXCHANGE OF INFORMATION. Seller and the Shareholders,
on the one hand, and Purchaser, on the other, will provide the other parties
with such cooperation and information as any of them reasonably may request in
connection with the filing of any tax return, amended tax return, or claim for
tax refund, determining a tax liability or right to a refund of a tax,
participating in or conducting any audit or other proceeding in respect to
taxes, or making representations to or furnishing information to any taxing
authority. Such cooperation and information shall include providing copies of
relevant tax returns or portions thereof, together with accompanying schedules,
related workpapers and documents relating to rulings or other determinations by
taxing authorities. The Shareholders shall make themselves, and the Purchaser
shall make its employees and agents, available on a mutually convenient basis
to provide explanations of any documents or information provided hereunder.
Seller and the Shareholders shall cooperate with Purchaser to enable Purchaser
to identify the tax attributes that carry over to Purchaser from Seller under
section 381 of the Code, and Seller and the Shareholders shall provide
Purchaser with Seller's tax basis information and all relevant records related
thereto. All costs and expenses reasonably incurred by a party in responding
to a request for information or assistance pursuant to this Section 13.3 shall
be borne by the party requesting such information or assistance.
14. CLOSING.
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14.1 TIME AND PLACE. The closing (the "CLOSING") shall be held at the
offices of Dewey Ballantine, Los Angeles, on January 3, 1994, at 11:00 a.m.
(local time), or at such other place or time or on such other date as the
parties hereto may mutually agree. The close of business on the date on which
the Closing is held is referred to in this Agreement as the "CLOSING TIME."
14.2 TRANSACTIONS AT THE CLOSING. At the Closing, each of the following
transactions shall occur:
(a) Seller and the Shareholders shall deliver to Purchaser the following:
(i) all instruments of transfer, duly executed and in recordable form,
where appropriate, reasonably satisfactory in form and substance to Purchaser
and its counsel;
(ii) the certificates, agreements and documents required of Seller and/or
the Shareholders described in Section 11;
(iii) copies of the consents, waivers and approvals described in Section
11.5;
(iv) the updated Exhibits required by Section 10.5;
(v) the certificate of Seller and the Shareholders required by
Section 21.12; and
(vi) such other evidence of the performance of all covenants and
satisfaction of all conditions required of the Seller and the Shareholders by
this Agreement, at or prior to the Closing, as Purchaser or its counsel may
reasonably require.
(b) Purchasers shall deliver to Seller, the Shareholders, the Escrow Agent
or certain other parties, as applicable, the following:
(i) certificates for the Purchaser's Shares required under Section 5.2
shall be delivered to Seller and the Escrow Agent;
(ii) the certificates, agreements and documents required by Section 12;
(iii) copies of the consents, waivers and approvals described in Section
12.5;
(iv) the updated Exhibits required by Section 10.5;
(v) the certificate of Purchaser required by Section 21.12;
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(vi) a certificate of good standing of Purchaser from the Secretary of
State of Ohio as of the most recent practicable date; and
(vii) such other evidence of the performance of all the covenants and
satisfaction of all of the conditions required of the Purchaser by this
Agreement, at or before the Closing, as Seller and the Shareholders or their
counsel may reasonably require.
14.3 DEFAULT AT CLOSING. If Seller or Shareholders shall fail or refuse to
consummate the transactions set forth in this Agreement on or prior to the
Closing Time, and if Purchaser shall not then be in material breach under terms
of this Agreement, all other conditions to the Closing shall have been
satisfied and Purchaser shall stand ready, willing and able to make tender of
its deliveries required under Section 12, then, in addition to any other
remedies available to Purchaser, Purchaser may invoke any equitable remedies to
cause the consummation of the transactions set forth in this Agreement,
including, without limitation, an action or suit for specific performance.
15. EMPLOYEES OF SELLER.
15.1 SELLER'S COVENANT. From the date hereof to the Closing Seller will use
its best efforts to maintain its existing relations with its employees and not
to alter current personnel policies and practices.
15.2 TERMINATION OF EMPLOYEES. At the Closing Time, Seller shall terminate
all of its employees and shall permit Purchaser to hire any of such employees;
provided, however, that this Agreement shall not be construed as an obligation
of Purchaser to hire any of Seller's former employees or to offer any specific
terms, benefits or compensation.
15.3 TERMINATION-RELATED LIABILITIES. Pursuant to Section 3.1(c), Purchaser
shall assume, without cost or expense to Seller or the Shareholders (provided,
that the foregoing shall not limit any remedy of Purchaser for a breach by
Seller or the Shareholders of any of their respective representations,
warranties, covenants or arguments in this Agreement or in any agreement or
certificate delivered by Seller or the Shareholders in connection with this
Agreement or any of the transactions contemplated hereby), all liabilities and
obligations of Seller (a) resulting solely from the termination of Seller's
employees at the Closing Time (including, without limitation, any liabilities
arising under the WARN Act in connection with such termination), or (b) arising
out of the failure of Purchaser to offer employment to any of those persons
employed by Seller immediately prior to the Closing Time. Seller and the
Shareholders shall cooperate with Purchaser, without cost or expense to Seller
or the Shareholders, as Purchaser may
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reasonably request to reduce or eliminate such liabilities and obligations
including without limitation securing continued health care coverage, at
Purchaser's expense, for former employees. This Section shall not limit
Seller's retention of any COBRA liability to employees, former employees or
their dependents or any other termination-related liabilities attributable to
the period prior to the Closing Time.
16. SURVIVAL OF REPRESENTATIONS. All statements contained in any agreement or
certificate delivered by or on behalf of Seller, the Shareholders or Purchaser,
as the case may be, pursuant hereto, shall be deemed representations and
warranties hereunder by Seller, the Shareholders or Purchaser, as the case may
be. All representations and warranties shall survive the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby only for a two-year period ending on the second anniversary
of the Closing Time, except that (i) the representations and warranties in
Sections 8.28 and 9.4 with respect to any tax shall survive until the later to
occur of (A) the lapse of the statute of limitations for assessment of such
tax, and (B) sixty (60) days after the final judicial or administrative
determination of such tax, and (ii) the representations and warranties in
Section 8.17 shall survive without limit; provided, however, that no claim for
breach of a representation or warranty (including an Indemnification Claim
arising from such breach) may be brought under this Agreement by any person
unless written notice of such claim shall have been given on or prior to the
last day of the applicable survival period (in which event each representation
and warranty with respect to any asserted claim shall survive until such claim
is finally resolved and all obligations with respect thereto are fully
satisfied).
17. TERMINATION. This Agreement may be terminated, and the transactions
contemplated herein abandoned (a) by the mutual written consent of Seller and
Purchaser; (b) by either Seller or Purchaser upon the failure of the other to
comply substantially with its or their conditions precedent to Closing and
other obligations set forth herein on or before January 31, 1994, or such later
date as the parties may mutually agree; or (c) automatically at 5:00 p.m.
Dayton, Ohio time on January 31, 1994, if the Closing has not been completed
by that time. Termination pursuant to this Section shall relieve the parties
of their obligations hereunder with each party responsible for its own fees,
costs and expenses; provided, however that if the Agreement is terminated
pursuant to (b) or (c) above because one party fails to use its reasonable best
efforts to fulfill its obligations hereunder, such party shall remain liable to
the other party for all losses, costs, expenses (including attorney's fees) and
liabilities incurred by such other party as a result of such failure.
18. INTENTIONALLY OMITTED.
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19. INDEMNIFICATION. For purposes of this Section 19, "LOSSES" shall mean all
damages, losses, costs, expenses (including attorneys' fees), interest,
penalties charges and liabilities.
19.1 SEVERAL INDEMNIFICATION BY THE SHAREHOLDERS. Each Shareholder severally
agrees to indemnify, defend and hold harmless Purchaser from and against any
and all Losses incurred by Purchaser arising out of a breach of the individual
representations and warranties made by such Shareholder in Section 7 of this
Agreement or in any agreement or certificate pertaining solely to such
Shareholder delivered to Purchaser in connection with this Agreement or the
transactions contemplated hereby.
19.2 JOINT AND SEVERAL INDEMNIFICATION BY SELLER AND SHAREHOLDERS. Seller
and Shareholders jointly and severally agree to indemnify, defend and hold
harmless Purchaser from and against any Loss incurred by Purchaser arising out
of (a) the breach of any of the warranties, representations, covenants or
agreements of Seller or the Shareholders in this Agreement or in any agreement
or certificate delivered to Purchaser in connection with this Agreement or any
of the transactions contemplated hereby, or (b) any Excluded Liability or
Excluded Asset.
19.3 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify and hold
harmless Seller and the Shareholders from and against any Loss incurred by any
of them arising out of (a) the breach of any of the warranties,
representations, covenants or agreements of Purchaser in this Agreement or in
any agreement or certificate delivered to Seller or the Shareholders in
connection with this Agreement or any of the transactions contemplated hereby,
(b) the enforcement, as a result of Purchaser's failure to satisfy any Assumed
Liability when due, of any personal guaranties by Shareholders of any of the
Assumed Liabilities (including without limitation the guaranties identified in
Exhibit 19.3(b)), (c) ownership of the Acquired Assets or the operation of the
Business after the Closing Time, (d) the Assumed Liabilities, and (e) changes
by Purchaser after the Closing Time in the terms of employment of those former
employees of Seller who are offered and accept employment with Purchaser.
19.4 PROCEDURES FOR INDEMNIFICATION. "INDEMNITOR" shall mean the party
against whom indemnity is sought, and "INDEMNITEE" shall mean the party seeking
indemnification.
(a) A claim for indemnification hereunder ("INDEMNIFICATION CLAIM") shall
be made by Indemnitee by delivery of a written declaration to Indemnitor (with
a copy being contemporaneously forwarded to the Escrow Agent if the Indemnitor
is Seller or Shareholders) requesting indemnification and specifying the basis
on which indemnification is sought and the amount of asserted Losses and, in
the case of a Third Party Claim (as defined in Section 19.5 hereof), containing
such other
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information as Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 19.5 hereof shall be observed by Indemnitee and
Indemnitor.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor shall have thirty (30) days to object to such
Indemnification Claim by delivery of a written notice of such objection to
Indemnitee (with a copy being forwarded contemporaneously to the Escrow Agent
if the Indemnitor is the Seller or the Shareholders) specifying in reasonable
detail the basis for such objection. Failure to timely so object shall
constitute acceptance of the Indemnification Claim by the Indemnitor and the
Indemnification Claim shall be paid in accordance with Section 19.4(d). If any
objection is timely interposed by the Indemnitor and the dispute is not
resolved within thirty (30) days from the date Indemnitee (and the Escrow Agent
if the Indemnitee is the Seller or the Shareholders) receives such objection,
such dispute will be resolved as provided in Section 21.13 of this Agreement.
(d) Upon determination of the amount of an Indemnification Claim, whether
by agreement between Indemnitor and Indemnitee, by an arbitration award or
otherwise, Indemnitor shall pay the amount of such Indemnification Claim within
fifteen (15) days of the date such amount is determined; provided,however, if
the Indemnitor is Seller or the Shareholders, it shall cause the Escrow Agent
to pay the amount of such claim to the Indemnitee in accordance with the Escrow
Agreement from the General Escrow Fund (as defined in the Escrow Agreement).
All Indemnification Claims payable by Seller or the Shareholders shall be paid
by transferring back to Purchaser the appropriate number of Purchaser's Shares
(to the extent thereof) using the Base Price as the value of the Purchaser's
Shares (subject to adjustment in the Base Price as described in Section 19 of
the Escrow Agreement), with any balance payable in cash.
19.5 DEFENSE OF THIRD PARTY CLAIMS. Should any claim be made, or suit or
proceeding (including, without limitation, a binding arbitration) be instituted
against Indemnitee which, if prosecuted successfully, would be a matter for
which Indemnitee is entitled to indemnification under this Agreement (a "THIRD
PARTY CLAIM"), the obligations and liabilities of the parties with respect to
such Third Party Claim shall be subject to the following terms and conditions.
(a) The Indemnitee shall give the Indemnitor written notice of any such
claim promptly after receipt by the Indemnitee of actual notice thereof, and
the Indemnitor will undertake the defense thereof by representatives of its own
choosing reasonably
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acceptable to the Indemnitee and will confirm such in writing to Indemnitee
within ten (10) days after receipt of Indemnitee's notice. The assumption of
the defense of any such claim by the Indemnitor shall be an acknowledgement by
the Indemnitor of its obligation to indemnify the Indemnitee with respect to
such claim, and if the Indemnitor is Seller or the Shareholders, Indemnitee
shall, within such ten (10) day period, file with the Escrow Agent a notice
pursuant to the Escrow Agreement. If, however, the Indemnitor fails or refuses
to undertake the defense of such claim (or fails to object by written notice to
Indemnitee, and Escrow Agent where Indemnitor is Seller or the Shareholders, to
a claim for which the Indemnitee has undertaken defense pursuant to the first
sentence of this Section 19.5(a)) within such ten (10) day period, the
Indemnitee shall have the right to undertake the defense, compromise and,
subject to Section 19.6, settlement of such claim with counsel of its own
choosing. In the circumstances described in the preceding sentence, the
Indemnitee shall promptly, upon its assumption of the defense of such claim,
make an Indemnification Claim as specified in Section 19.4(a).
(b) The Indemnitee and Indemnitor shall cooperate with each other in all
reasonable respects in connection with the defense of any Third Party Claim,
including making available records relating to such claim and furnishing,
without expense to the Indemnitor, management employees of the Indemnitee as
may be reasonably necessary for the preparation of the defense of any such
claim or for testimony as a witness in any proceeding relating to such claim.
19.6 SETTLEMENT OF THIRD PARTY CLAIMS. No settlement of a Third Party Claim
shall be made without the prior written consent of the Indemnitor, which
consent shall not be unreasonably withheld, conditioned or delayed. Consent
shall be presumed in the case of settlements of $5,000 or less where the
Indemnitor has not responded within ten (10) business days of notice of a
proposed settlement. In the event of any dispute regarding the reasonableness
of any proposed settlement, the party that will bear the larger financial loss
resulting from such settlement shall make the final determination in respect
thereto which determination shall be final and binding on all parties.
19.7 LIMITATIONS.
(a) All notices of Loss must be delivered to the Indemnitor prior to
expiration of the applicable periods for the warranties and representations as
set forth in Section 16 hereof.
(b) Notwithstanding anything to the contrary herein, except for (i) the
obligations under Section 19.1, (ii) those obligations under Section 19.2 with
respect to Excluded Liabilities, and (iii) those obligations under Sections
19.3(b), (c), (d) and (e) (collectively, the "EXEMPT INDEMNIFICATION
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OBLIGATIONS"), neither Seller and Shareholders (collectively) nor Purchaser, as
an Indemnitor, shall have any obligation until the aggregate of all Losses
payable by the Indemnitor to the Indemnitee exceeds $100,000 (the "FLOOR").
Upon the aggregate of all Losses payable by Seller and Shareholders or
Purchaser (except the Exempt Indemnification Obligations) as Indemnitor
exceeding the Floor, Seller and Shareholders or Purchaser, as applicable, shall
be liable to the Indemnitee on a dollar-for-dollar basis, for the amount above
the Floor.
(c) With respect to the Exempt Indemnification Obligations, Seller and
Shareholders or Purchaser, as applicable, shall be liable for all such Losses
from the first dollar in any event.
(d) The payment of any Loss hereunder shall constitute an additional
adjustment to the consideration paid pursuant to Section 5.1. Notwithstanding
anything to the contrary in this Agreement or the Escrow Agreement, in the
event there remain any Losses for which Seller or the Shareholders are
obligated to indemnify the Purchaser under Section 19.2 in excess of the
balance of the Escrow Fund, Seller and Shareholders shall remain jointly and
severally liable for the balance.
(e) Notwithstanding anything to the contrary in this Agreement, the
maximum aggregate liability of Seller and the Shareholders under this Section
19 shall be an amount equal to the number of Purchaser's Shares issued pursuant
to Section 5.1 (as adjusted pursuant to Section 5.3), multiplied by the Base
Price.
(f) An adjustment, pursuant to Section 5.3, to the number of Purchaser's
Shares issued pursuant to Section 5.1 shall not be an Indemnification Claim and
shall not be subject to the Floor.
19.8 TAX MATTERS. Notwithstanding anything to the contrary in this Section
19, the rights and obligations of the parties with respect to the
indemnification for any and all Taxes (defined in Section 22.5) shall be
governed by Section 22.
20. TRANSACTION EXPENSES.
20.1 BROKERS. Purchaser, Seller and Shareholders each represent and warrant
to the other that no broker or finder has acted for it or them in connection
with this Agreement.
20.2 EXPENSES. All expenses incurred by the parties in connection with or
related to the authorization, preparation, negotiation and consummation of this
Agreement shall be borne solely by the party which has incurred the same.
21. MISCELLANEOUS.
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21.1 PRESERVATION OF RECORDS. Purchaser and Seller agree that each of them
shall preserve and keep the records of the Business for the period prior to the
Closing Time which are held by it for a period of five (5) years from the
Closing Time, or for any longer period as may be required by any government
agency or ongoing litigation, and shall make such records and personnel
available to the other and affiliates thereof for review or copying, upon
receipt of reasonable advance notice and during normal business hours, as may
be reasonably required by such party in connection with, among other things,
any insurance claims by, legal proceedings against or governmental
investigations of Seller or Purchaser or any of their affiliates, or in order
to enable Seller or Purchaser to comply with their respective obligations under
this Agreement and the other agreements contemplated hereby. Purchaser shall
have the right, at Purchaser's sole expense, to copy the records of Seller that
are part of the Excluded Assets. In the event Seller or Purchaser wishes to
transfer or destroy such records after such time, such party shall first give
sixty (60) days prior written notice to the other and such other party shall
have the right at its option and expense, upon prior written notice given to
such party within that sixty (60) day period, to take possession of the records
within ninety (90) days after the date of such notice.
21.2 NOTICE. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given and received (a) on the
date of delivery when delivered by hand or when transmitted by confirmed
simultaneous telecopy, (b) on the following business day when sent by receipted
overnight courier, or (c) three (3) business days after deposit in the United
States Mail when mailed by registered or certified mail, return receipt
requested, first class postage prepaid, as follows:
(a) If to Seller or Shareholders to:
C. Vincent Sisilli
31610 Broad Beach Boulevard
Malibu, California 92065
Fax: (310) 457-0978
With a copy to:
Kathy T. Wales, Esq.
Dewey Ballantine
333 S. Hope Street
Los Angeles, California 90071
Fax: (213) 625-0562
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(b) If to Purchaser to:
The Reynolds and Reynolds Company
Business Forms Division
3555 S. Kettering Blvd.
Dayton, Ohio 45439
ATTN: Daniel W. Dittman
Fax: (513) 290-7270
With a copy to:
Jeffry A. Melnick, Esq.
Coolidge, Wall, Womsley & Lombard
600 IBM Building
Dayton, Ohio 45402
FAX: (513) 223-6705
Any party may change the address to which notices are to be sent to it by
giving written notice of such change of address to the other parties in the
manner above provided for giving notice.
21.3 ASSIGNMENT; BINDING EFFECT. This Agreement may not be assigned by any
of the parties hereto without the prior written consent of the other parties
hereto; provided, however, that Seller's rights hereunder may be assigned to
Shareholders without Purchaser's prior written consent. This Agreement shall
be binding upon the parties hereto and their respective permitted successors,
assigns and transferees.
21.4 HEADINGS; EXHIBITS AND SCHEDULES. The Section, Subsection and other
headings in this Agreement are inserted solely as a matter of convenience and
for reference, and are not a part of this Agreement. The Exhibits and
Schedules attached hereto are a material part of this Agreement and are
incorporated herein by this reference.
21.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one counterpart has been signed by each party and
delivered to the other party hereto.
21.6 INTEGRATION OF AGREEMENT. This Agreement supersedes all prior
agreements, oral and written, between the parties hereto with respect to the
subject matter hereunder; provided, however, that the Non-Disclosure Agreement
between Purchaser and Seller dated as of March 24, 1993 shall survive execution
of this Agreement and consummation of the transactions contemplated hereby,
and, provided further, that if the Closing occurs, Reynolds shall be permitted,
after the Closing Time, to use and disclose such "Law Confidential Information"
as reasonably required to conduct the Business in the ordinary course. Neither
this Agreement, nor any provision hereof, may be changed, waived, discharged,
supplemented or terminated orally, but only by an agreement in writing signed
by the party
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against which the enforcement of such change, waiver, discharge or termination
is sought.
21.7 TIME OF ESSENCE. Time is of the essence in this Agreement.
21.8 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California.
21.9 DISCLOSURE. Purchaser, Seller and the Shareholders each agree not to
issue any press release or make any public announcement or other disclosure to
competitors, customers, employees or any other person (except to employees and
agents on a need-to-know basis in order to complete transactions and who agree
to bound hereby) concerning this Agreement except as required by law or with
the advance written approval of the other party, which approval shall not be
unreasonably withheld.
21.10 PARTIAL ILLEGALITY OR UNENFORCEABILITY. Wherever possible, each
provision hereof shall be interpreted in such manner as to be effective under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be illegal or unenforceable in any respect,
such illegality or unenforceability shall not affect any other provisions of
this Agreement, and this Agreement shall be construed as if such illegal or
unenforceable provision or provisions had never been contained herein unless
the deletion of such provision or provisions would result in such a material
change as to cause completion of the transactions contemplated hereby to be
unreasonable.
21.11 RIGHT TO PROCEED. If any of the conditions specified in Section 11
hereof have not been satisfied (provided that such conditions are specified in
the certificate delivered pursuant to Section 21.12), Purchaser shall have the
right to proceed with the transactions contemplated hereby, but Purchaser shall
be deemed to have waived its rights hereunder with respect to such failed
conditions. If any of the conditions specified in Section 12 hereof have not
been satisfied (provided that such conditions are specified in a certificate
delivered pursuant to Section 21.12), Seller and the Shareholders shall have
the right to proceed with the transactions contemplated hereby, but Seller and
Shareholders shall be deemed to have waived their rights hereunder with respect
to such failed conditions.
21.12 EFFECT OF INVESTIGATION. Any inspection, preparation or compilation of
information or Exhibits or audit of the inventories, properties, financial
condition or other matters relating to the Seller, the Acquired Assets, the
Assumed Liabilities, the Business, Purchaser or Purchaser's financial condition
or operations conducted by or on behalf of Purchaser, Seller or the
Shareholders shall in no way limit, affect or impair the ability of Purchaser,
Seller or the Shareholders to rely upon the representations,
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warranties, covenants and agreements of the other parties set forth herein.
Notwithstanding the foregoing sentence, (a) Seller and Shareholders shall
deliver to Purchaser at Closing a certificate identifying with specificity any
breaches (or events which with notice, lapse of time or both would become
breaches) to their knowledge of the representations, warranties, covenants or
agreements of Seller and the Shareholders or Purchaser and any of the
conditions specified in Sections 11 and 12 which have not been satisfied, and
(b) Purchaser shall deliver to Seller and the Shareholders at Closing a
certificate identifying with specificity any breaches (or events which with
notice, lapse of time or both would become breaches) to its knowledge of the
representations, warranties, covenants or agreements of Seller and the
Shareholders or Purchaser and any of the conditions specified in Sections 11
and 12 which have not been satisfied. Such notices shall set forth all
material facts related to such breaches, conditions or events. If Purchaser
proceeds with the Closing following receipt of such certificate, Purchaser
shall be deemed to have waived its rights hereunder with respect to such
breaches, conditions or events except for the matters described in Exhibit
21.12. If Seller and the Shareholders proceed with the Closing following
receipt of such certificate, they shall be deemed to have waived their rights
hereunder with respect to such breaches, conditions or events except for the
matters described in Exhibit 21.12.
21.13 ARBITRATION.
(a) Any controversy, dispute or claim arising out of or relating to this
Agreement shall be submitted to arbitration in accordance with the commercial
rules of the American Arbitration Association ("AAA"), by which each party will
be bound.
(b) If the parties have not agreed during their negotiations on a single
arbitrator to whom the controversy, dispute or claim will be submitted, either
party may select an arbitrator and send written notice to the other party of
the selection. The party receiving such notice will have 10 days from the date
such party receives such notice of such selection to select a second arbitrator
and send notice of such to the party who selected the first arbitrator.
Failure to select the second arbitrator and to send timely notice, as provided
above, empowers the arbitrator first selected to resolve the controversy. If
both arbitrators have been duly named, they will as soon as is reasonably
practicable (but within 30 days from the date the latter of the two arbitrators
is named) name a third arbitrator. The provisions of the Federal Rules of
Civil Procedure which provide for discovery shall be applicable to any such
arbitration. The parties agree that such discovery must be completed within
six (6) months after the claim has been filed with the AAA and service on the
other party effected.
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(c) Any arbitration proceedings will be conducted in Los Angeles,
California unless the parties otherwise agree.
(d) The parties agree to be bound by the decision of the arbitrator and
the decision thereof to be entered into any appropriate court or other
jurisdiction. Unless otherwise provided in this Agreement, the prevailing
party in the arbitration shall be promptly reimbursed for its reasonable costs
and fees (including attorneys' fees) incurred in connection with the
arbitration and shall not be responsible for the costs of arbitration.
21.14 "KNOWLEDGE." For purposes of this Agreement, "to the best of
________'s knowledge" or "to ______________'s knowledge" shall mean the actual
knowledge of the subject party after due inquiry (including, where appropriate,
consultation with responsible employees of Seller) into the subject matter;
provided, further, that each person which is not a natural person shall be
charged with the actual knowledge of its directors and officers.
21.15 SELLER'S OBLIGATIONS. Shareholders hereby jointly and severally
guarantee the prompt performance by Seller of its obligations under this
Agreement. This guaranty is one of payment, not collection. Upon the
dissolution of Seller, Shareholders shall automatically and without further
action assume all obligations of the Seller hereunder.
21.16 FURTHER ASSURANCES. The parties agree that after the Closing Time they
will execute such documents and certificates and take such other actions as may
be reasonably requested by any other party to carry out the purposes of this
Agreement and to evidence the consummation of the transactions contemplated
hereby or the fulfillment or waiver of any of the conditions to closing set
forth in Sections 11 or 12.
21.17 COLLECTION OF RECEIVABLES. Purchaser agrees to attempt to collect all
Receivables as of the Closing Time (the "CLOSING TIME RECEIVABLES") in a manner
consistent with the past practices of Seller. In addition, Purchaser agrees to
permit V. Sisilli to monitor and assist in such collection efforts and to
provide to V. Sisilli monthly reports as to the status of collection of the
Closing Time Receivables. If, after the Closing Time, Purchaser conducts any
additional business with any debtor under a Closing Time Receivable, all
amounts received from that Debtor which are not specifically allocated to a
particular invoice will be applied to outstanding invoices from that debtor in
chronological order, beginning with the oldest outstanding invoice. In the
event that Seller or the Shareholders satisfy any Indemnification Claim for a
breach of Section 8.6(b), Purchaser shall assign to the Indemnitor all rights
of Purchaser with respect to the associated uncollected Closing Time
Receivables.
22. TAX INDEMNIFICATION.
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22.1 INDEMNIFICATION BY SELLER AND SHAREHOLDERS. Seller and the Shareholders
jointly and severally agree to indemnify, defend, and hold harmless Purchaser
and its successors and assigns from and against: (a) any and all Taxes (as
defined in Section 22.5) and Tax Losses (as defined in Section 22.5) that are
Excluded Liabilities or that arise out of the breach of any representation or
warranty set forth in Section 8.28 or any covenant set forth in Section 10.10
or Section 13.2, and (b) any and all Taxes imposed on Seller for all taxable
periods or portions thereof ending on or before the Closing Time (except those
Taxes which are Assumed Liabilities and those Taxes described in Section 5.4)
and all related Tax Losses incurred by Purchaser;PROVIDED, HOWEVER, that the
Taxes and Tax Losses described in this Section 22.1 shall not include the Taxes
and Tax Losses described in Section 22.2 to the extent that Purchaser is
obligated to indemnify Seller and/or the Shareholders under Section 22.2 for
such Taxes and Tax Losses, and nothing in this Section 22.1 shall reduce,
limit, or otherwise affect Purchaser's obligation to indemnify Seller and/or
the Shareholders pursuant to Section 22.2.
22.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify, defend,
and hold harmless Seller and its successors and assigns from and against:
(a) any and all sales, use, and similar transfer Taxes and Tax Losses
imposed in connection with any of the transactions contemplated by this
Agreement;
(b) any and all Taxes and Tax Losses imposed on the Seller (and any
liability for such Taxes imposed on the Shareholders by reason of their being
the transferees or successors of Seller) arising out of the breach of any of
the representations and warranties set forth in Sections 9.4(c) and 9.4(g) or
the covenants in Sections 10.9(a), 10.9(b) and 13.2, if a court of competent
jurisdiction determines that Purchaser's acquisition of the Acquired Assets
does not qualify as a reorganization described in section 368(a) of the Code
solely by reason of Purchaser's breach of any of such representations and
warranties or covenants; and
(c) any and all Taxes and Tax Losses (other than Taxes and Tax Losses
described in Section 22.2(b)) imposed on Seller (and any liability for such
Taxes imposed on the Shareholders by reason of their being the transferees or
successors of Seller) with respect to any gain realized and recognized by
Seller on the transfer of the Acquired Assets to Purchaser pursuant to a
Determination that Purchaser's acquisition of the Acquired Assets does not
qualify as a reorganization described in section 368(a) of the Code, but not in
an amount in excess of the Disqualification Tax Benefits.
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22.3 TAX CONTESTS.
(a) After the Closing, Purchaser shall notify the Shareholders, and the
Shareholders shall notify Purchaser, as the case may be, in writing of any
written notice of a proposed assessment of Tax or claim for Tax raised in an
audit or administrative or judicial proceeding that, if determined adversely to
the taxpayer, would be grounds for indemnification under this Section 22. Any
failure of one party to give timely notice to the other pursuant to this
Section 22.3 shall preclude any claim for indemnification for such Tax if such
failure materially prejudices such other.
(b) In the event of a proposed assessment of Tax described in Section
22.1, Seller or the Shareholders shall have the sole right to participate in
and control the audit or other proceeding for the determination of such Tax.
(c) In the event of a proposed assessment of Tax described in Section
22.2(a), Purchaser shall have the sole right to participate in and control the
audit or other proceeding for the determination of such Tax.
(d) In the event of a proposed assessment of Tax described in Sections
22.2(b) and 22.2(c), Seller and the Shareholders shall have the right to
participate in and the sole right to control the audit or proceeding for the
determination of such Tax. Purchaser shall have the right, at its expense, to
participate in such audit or proceeding, but shall not have any right to
control all or any portion of such audit or proceeding.
(e) Seller, the Shareholders, and Purchaser agree to cooperate in the
defense against or the compromise of a proposed assessment of Tax described in
Section 22.1 or Section 22.2.
22.4 TIME OF PAYMENT. Payment of any Tax for which a party is entitled to
indemnification under Section 22.1 or Section 22.2 shall be made on or before
the later to occur of (a) five (5) business days following an agreement
between the Shareholders and the Purchaser that one party is obligated to
indemnify the other for such Tax, and (b) five (5) business days before the due
date for the payment of such Tax to the relevant taxing authority, PROVIDED,
HOWEVER, that the Purchaser shall not be required to pay the Disqualification
Tax Benefits to the Shareholders prior to the Determination Date.
22.5 DEFINITIONS. For all purposes of this Section 22, the following terms
shall have the following meanings:
(a) "DETERMINATION" means (i) any one of the four events described in
paragraphs (1) through (4) of section 1313(a) of the Code or (ii) a written
agreement between Purchaser and the Shareholders.
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(b) "DETERMINATION DATE" means (i) with respect to each of the four
Determinations described in section 1313(a) of the Code, the date such
Determination becomes "final" for purposes of section 1313 and the Treasury
regulations promulgated thereunder or (ii) with respect to a Determination
which is an agreement between the Purchaser and the Shareholders, the date of
such agreement.
(c) "DISQUALIFICATION TAX BENEFITS" means (i) the excess of (A) the
present value of the federal and state income and franchise Taxes that would
likely be imposed on the Purchaser if the Purchaser's acquisition of the
Acquired Assets were to qualify as a tax-free reorganization as defined in
section 368(a) of the Code over (B) the present value of federal and state
income and franchise Taxes that will likely be imposed on the Purchaser as a
result of a Determination that Purchaser's acquisition of the Acquired Assets
does not qualify as a reorganization, as defined in Section 368(a) of the Code,
plus (ii) the present value of the reduction in Taxes attributable to the
increase in purchase price for the Acquired Assets by the amount described in
(i). For purposes of computing Disqualification Tax Benefits pursuant to the
preceding sentence (and notwithstanding any fact to the contrary), the parties
shall assume that (i) Purchaser has tax bases in the Acquired Assets on the day
following the Closing Time in the amounts of their fair market values based
upon the total consideration paid hereunder; (ii) Purchaser elects to recover
the cost of such assets through depreciation, amortization, or inventory
costing based on the methods actually used by Purchaser; (iii) all such
depreciation, amortization, or other cost recovery deductions or allowances
reduce the taxable income of Purchaser in the year in which such deductions or
allowances are allowable to Purchaser; (iv) Purchaser is subject to the highest
federal income rate under section 11 of the Code during all its taxable years
ending after the Closing Time; (v) Purchaser is subject to the highest state
and local income or franchise tax rates during all its taxable years ending
after the Closing Time; (vi) Purchaser files a separate company (rather than
consolidated, combined, or unitary) Tax return; (vii) no Purchaser claim for
credit or refund of federal and state income or franchise Tax for Purchaser's
taxable periods ending after the Closing Time is barred by the statute of
limitations or otherwise; (viii) the federal or state income or franchise tax
law in effect for the relevant Tax periods is used and that there will occur no
change in such laws with respect to the Purchaser's taxable periods ending
after the Determination Date; (ix) the reductions (or deemed reductions) of
federal and state income or franchise Tax for Purchaser's taxable periods or
portions thereof ending on or before the Determination Date shall be increased
by an interest factor, compounded monthly, of six percent (6%); and (x)
Purchaser never disposes of the Acquired Assets. In making present value
calculations, a seven percent (7%) compounded monthly discount rate shall be
used. The parties acknowledge that any payment of Disqualification Tax
Benefits or other indemnity from Purchaser under Section 22.2 shall be subject
to section 1274 of the Code if required by law.
48
<PAGE> 55
(d) "TAX" or "TAXES" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to the tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority including,
without limitation, taxes or other charges on or with respect to income and
franchises, property, sales, use, employment, social security and withholding.
(e) "TAX LOSS" means all related damages, losses, costs and expenses
(including reasonable attorneys' fees) incurred with respect to any Taxes for
which a party is entitled to indemnification under Sections 22.1 and 22.2.
22.6 FLOOR. Claims for indemnification pursuant to this Section 22 shall not
be subject to the Floor and shall be payable from the first dollar.
23. CONSTRUCTION. Each party has reviewed and revised this Agreement and,
therefore, the rule of construction requiring that any ambiguity be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement.
[SIGNATURES ON FOLLOWING PAGE]
49
<PAGE> 56
The parties have executed this Agreement as of the 29th day of December, 1993.
LAW PRINTING COMPANY, INC.
BY /S/ C. VINCENT SISILLI
---------------------------------------
TITLE: PRESIDENT
-----------------------------------
THE REYNOLDS AND REYNOLDS COMPANY
BY /S/ THOMAS E. SUTTMILLER
---------------------------------------
TITLE: SENIOR V.P. & G.M.
-----------------------------------
/S/ C. VINCENT SISILLI
-----------------------------------------
C. VINCENT SISILLI
/S/ PATRICIA L. SISILLI
-----------------------------------------
PATRICIA L. SISILLI
50
<PAGE> 1
Exhibit 4(d)
CERTIFICATE OF AMENDMENT
BY SHAREHOLDERS
TO AMENDED ARTICLES OF INCORPORATION
OF
THE REYNOLDS AND REYNOLDS COMPANY
David R. Holmes, President, and Adam M. Lutynski, Secretary, of The Reynolds
and Reynolds Company, an Ohio for profit corporation (the "Corporation"), do
hereby certify that a meeting of the shareholders was duly called for the
purpose of adopting this amendment and held on February 11, 1993, at which
meeting a quorum of the shareholders was present in person or by proxy, and by
the affirmative vote of the holders of shares entitling them to exercise
87.774% of the voting power of the corporation, the following resolutions to
amend the amended articles were adopted:
RESOLVED, that Article FOURTH, Section 1 of the Amended Articles of
Incorporation of THE REYNOLDS AND REYNOLDS COMPANY (the "Corporation") be,
and hereby is, amended to read as follows:
The total number of shares of capital stock that the Corporation is
authorized to issue is 150,000,000, divided into three classes as follows:
(i) 60,000,000 Class A Common Shares, par value $0.625 per share
(hereafter referred to as "Class A Common Shares");
(ii) 30,000,000 Class B Common Shares, par value $0.03125 per share
(hereafter referred to as "Class B Common Shares" and referred to
collectively with the Class A Common Shares as "Common Shares"); and
(iii) 60,000,000 Preferred Shares, no par value (hereafter referred to as
"Preferred Shares").
FURTHER RESOLVED, that the officers of the Corporation be, and each of them
hereby is, authorized and directed to take all action necessary to implement
the foregoing resolution, including, without limitation, causing a
Certificate of Amendment of Articles of Incorporation to be filed with the
Ohio Secretary of State.
IN WITNESS WHEREOF, the above named officers, acting for and on behalf of the
Corporation, have hereto subscribed their names this 25th day of February,
1993.
By /s/ David R. Holmes
--------------------------
David R. Holmes
President
By /s/ Adam M. Lutynski
--------------------------
Adam M. Lutynski
Secretary
<PAGE> 1
Exhibit 5
January 10, 1994
The Reynolds and Reynolds Company
115 South Ludlow Street
Dayton, Ohio 45402
Gentlemen:
As counsel for The Reynolds and Reynolds Company (the "Company"), we are
familiar with the Amended Articles of Incorporation of the Company under the
laws of the State of Ohio, its Consolidated Code of Regulations, and the
respective actions taken by the Shareholders and by the Board of Directors in
connection therewith, and all subsequent corporate proceedings with respect
thereto.
In addition, we are familiar with the preparation of Form S-3 Registration
Statement currently being filed with the Securities and Exchange Commission.
We are also acquainted with the business activities of the Company and have
examined corporate minute books, records and such other documents as we have
deemed necessary in order to render to you the following option.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly organized and is a validly existing corporation in
good standing under the laws of the State of Ohio.
2. As of January 10, 1994, the 306,346 Class A Common Shares proposed to be
sold by the Selling Shareholders, as defined in such Registration Statement
have been duly authorized and validly issued, and are fully paid and
nonassessable as described in such Registration Statement.
We hereby consent to the references to our firm in the Registration Statement
and in the Prospectus constituting a part thereof, and to the use of this
opinion as an exhibit to such Registration Statement.
Very truly yours,
COOLIDGE, WALL, WOMSLEY & LOMBARD CO., L.P.A.
<PAGE> 1
Exhibit 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement of
The Reynolds and Reynolds Company on Form S-3 of our report dated November 15,
1993, which includes an explanatory paragraph concerning a change in the method
of accounting for post-retirement benefits other than pensions in 1993 and a
change in the method of accounting for income taxes in 1992, appearing in the
Annual Report on Form 10-K of The Reynolds and Reynolds Company for the year
ended September 30, 1993 and to the reference to us under the heading "Experts"
in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE
Dayton, Ohio
January 10, 1993
