<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31, 1997
-------------------------------
Radiant Systems, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 0-22065 11-2749765
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1000 Alderman Drive, Alpharetta, Georgia 30202
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 772-3000
-----------------------------
Not applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 31, 1997, Radiant Systems, Inc., a Georgia corporation (the
"Company"), consummated the acquisition of RapidFire Software, Inc., an Oregon
corporation ("RapidFire"), and Equilease Financial Services, Inc., an Oregon
corporation ("Equilease"). Pursuant to a Stock Purchase Agreement (the
"Purchase Agreement"), dated as of October 23, 1997, by and among the Company,
RapidFire, Equilease and the sole shareholder of RapidFire and Equilease (the
"Shareholder"), all the outstanding Common Stock of RapidFire and Equilease was
acquired by the Company whereby RapidFire and Equilease each became a
wholly-owned subsidiary of the Company. Pursuant to the Purchase Agreement, the
Shareholder received an aggregate of 102,230 shares of Common Stock of the
Company, a non-negotiable promissory note in the principal amount of $6.0
million (due October 31, 2005, unless earlier accelerated upon the attainment
by RapidFire of certain financial targets, and bearing no interest) and cash of
$4.2 million. Separately, the Company has agreed to loan up to $1.5 million to
the Shareholder, which debt matures October 31, 2005 and bears interest at a
rate of 5.0% per annum. The Company has also entered into a five-year
employment agreement with the Shareholder.
Silmutaneously with the acquisition, the Company issued options to
purchase approximately 426,000 shares of Common Stock to the employees of
RapidFire. These options were granted at an exercise price equal to not less
than the fair market value of the Common Stock of the Company on the date of
grant.
RapidFire is principally engaged in the design, marketing and
installation of point of sale systems to the pizza industry and other delivery
restaurants. Equilease provides lease financing to certain customers of
RapidFire.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired:
At the present time, it is impractical to provide the required
financial statements for RapidFire and Equilease as required by this Item 7 of
Form 8-K. The Company will file such required financial statements under cover
of Form 8-K/A as soon as practicable, but not later than January 16, 1998 (60
days after this Report is required to be filed).
(b) Pro Forma Financial Information:
At the present time, it is impractical to provide the pro forma
financial information relative to the RapidFire and Equilease acquisition as
required by Article 11 of Regulation S-X and this Item 7 of Form 8-K. The
Company will file such pro forma financial information under cover of Form
8-K/A as soon as practicable, but not later than January 16, 1998 (60 days
after this Report is required to be filed).
-2-
<PAGE> 3
(c) Exhibits:
2.1 - Stock Purchase Agreement, dated as of October 23, 1997, by
and among Radiant Systems, Inc., Kevin Eldredge, RapidFire
Software, Inc. and Equilease Financial Services, Inc.
-3-
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
RADIANT SYSTEMS, INC.
By:/s/ John H. Heyman
-------------------------------
John H. Heyman
Executive Vice President and
Chief Financial Officer
Dated: November 7, 1997
-----------------
-4-
<PAGE> 5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
2.1 Stock Purchase Agreement, dated as of October 23, 1997, by
and among Radiant Systems, Inc., Kevin Eldredge, RapidFire
Software, Inc. and Equilease Financial Services, Inc.
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BETWEEN
RADIANT SYSTEMS, INC.
AS BUYER
AND
KEVIN ELDREDGE
AS SELLER
FOR THE PURCHASE AND
SALE OF ALL ISSUED AND OUTSTANDING
CAPITAL STOCK OF
RAPIDFIRE SOFTWARE, INC.
AND
EQUILEASE FINANCIAL SERVICES, INC.
DATED AS OF OCTOBER 23, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
SALE OF STOCK
<S> <C> <C>
1.1 Sale of Stock..................................................................................-1-
1.2 Purchase Price.................................................................................-2-
1.3 Closing of Purchase and Sale...................................................................-2-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
2.1 Due Incorporation and Qualification............................................................-2-
2.2 Outstanding Capital Stock......................................................................-3-
2.3 Options or Other Rights........................................................................-3-
2.4 Title To Stock.................................................................................-3-
2.5 Subsidiaries and Investments...................................................................-3-
2.6 Articles of Incorporation and By-Laws..........................................................-3-
2.7 Books and Records..............................................................................-4-
2.8 Authority of Seller and the Company............................................................-4-
2.9 Financial Statements...........................................................................-5-
2.10 No Undisclosed Liabilities.....................................................................-5-
2.11 Inventories....................................................................................-5-
2.12 Litigation.....................................................................................-6-
2.13 Taxes..........................................................................................-6-
2.14 Title to Properties; Assets Complete...........................................................-8-
2.15 Compliance with Laws...........................................................................-8-
2.16 Contracts and Other Agreements.................................................................-8-
2.17 Software......................................................................................-10-
2.18 Leases........................................................................................-11-
2.19 Accounts and Notes Receivable.................................................................-11-
2.20 Fixed Assets..................................................................................-12-
2.21 Trade Name and Other Intangibles..............................................................-12-
2.22 Suppliers and Customers.......................................................................-12-
2.23 Labor Relations; Employees....................................................................-13-
2.24 Employee Benefit Plans........................................................................-13-
2.25 Insurance.....................................................................................-15-
2.26 Environmental Matters.........................................................................-15-
2.27 Officers, Directors and Key Employees.........................................................-16-
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
2.28 Restrictive Documents.........................................................................-16-
2.29 Franchises and Licenses.......................................................................-17-
2.30 Transactions with Affiliated Parties..........................................................-17-
2.31 Bank Accounts and Powers of Attorney..........................................................-17-
2.32 Warranties and Product Returns................................................................-17-
2.33 No Changes Prior to Closing Date..............................................................-17-
2.34 Disclosure....................................................................................-18-
2.35 Broker's or Finder's Fees.....................................................................-18-
2.36 Copies of Documents...........................................................................-18-
ARTICLE III
REPRESENTATIONS OF BUYER
3.1 Incorporation and Qualification...............................................................-18-
3.2 Articles of Incorporation and By-Laws.........................................................-19-
3.3 Authority of Buyer............................................................................-19-
3.4 Securities Acknowledgment.....................................................................-20-
3.5 Pending Actions...............................................................................-21-
3.6 Capital Stock.................................................................................-21-
3.7 Absence of Changes............................................................................-22-
3.8 Accuracy of SEC Documents.....................................................................-22-
3.9 Broker's or Finder's Fees.....................................................................-22-
ARTICLE IV
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
4.1 Operation in Ordinary Course..................................................................-22-
4.2 Notice of Events..............................................................................-22-
4.3 Exclusive Dealing.............................................................................-23-
4.4 Examinations and Investigations...............................................................-23-
4.5 Affiliate Indebtedness Owed to the Company....................................................-23-
4.6 Affiliate Indebtedness Owed by the Company....................................................-24-
4.7 Release of Guaranties.........................................................................-24-
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE
5.1 Representations and Covenants.................................................................-24-
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
5.2 Litigation....................................................................................-24-
5.3 Cancellation of Options.......................................................................-24-
5.4 Lease.........................................................................................-24-
5.5 Release Agreement.............................................................................-25-
5.6 Governmental Permits and Approvals............................................................-25-
5.7 Third-Party Consents..........................................................................-25-
5.8 Transfer Taxes................................................................................-25-
5.9 Estoppel Certificates.........................................................................-25-
5.10 No Material Adverse Change....................................................................-25-
5.11 Books and Records.............................................................................-25-
5.12 Seller Employment Agreement...................................................................-25-
5.13 Non-Compete Agreement.........................................................................-26-
5.14 Silicon Valley Release........................................................................-26-
5.15 Good Standing Certificates, Etc...............................................................-26-
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE
6.1 Representations and Covenants.................................................................-26-
6.2 Litigation....................................................................................-26-
6.3 Governmental Permits and Approvals............................................................-26-
6.4 Resolutions...................................................................................-26-
6.5 Good Standing Certificates, etc...............................................................-27-
6.6 Seller Employment Agreement...................................................................-27-
6.7 Lease.........................................................................................-27-
ARTICLE VII
ACTIONS TO BE TAKEN AT THE CLOSING
7.1 Stock Certificates............................................................................-27-
7.2 Purchase Price................................................................................-27-
7.3 Opinion of Counsel to the Seller..............................................................-27-
7.4 Opinion of Counsel to the Buyer...............................................................-27-
7.5 Resignations of Directors and Officers........................................................-27-
7.6 Closing Certificate of the Seller.............................................................-27-
7.7 Closing Certificate of the Buyer..............................................................-27-
7.8 Other Documents and Certificates..............................................................-28-
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
<S> <C> <C>
8.1 Survival of Representations and Warranties....................................................-28-
8.2 Seller's Indemnity Agreement..................................................................-28-
8.3 Buyer's Indemnity Agreement...................................................................-29-
8.4 Indemnification Procedure.....................................................................-30-
8.5 Set-off.......................................................................................-31-
8.6 Limitations on Liability of Seller and Buyer..................................................-31-
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 Termination...................................................................................-31-
9.2 Survival......................................................................................-32-
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SELLER
IN CONNECTION WITH OFFER OF BUYER'S STOCK
10.1 Accredited Investor...........................................................................-32-
10.2 Acquisition for Investment....................................................................-32-
10.3 Unregistered Securities.......................................................................-33-
10.4 Disclosure....................................................................................-33-
ARTICLE XI
CERTAIN POST-CLOSING MATTERS
11.1 [INTENTIONALLY OMITTED].......................................................................-34-
11.2 Certain Securities Matters....................................................................-34-
11.3 Options.......................................................................................-35-
11.4 Tax Matters...................................................................................-35-
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<CAPTION>
ARTICLE XII
MISCELLANEOUS
<S> <C> <C>
12.1 Publicity.....................................................................................-36-
12.2 Knowledge.....................................................................................-36-
12.3 Gender........................................................................................-37-
12.4 Expenses......................................................................................-37-
12.5 Entire Agreement..............................................................................-37-
12.6 Waivers and Consents..........................................................................-37-
12.7 Notices.......................................................................................-37-
12.8 Rights of Third Parties.......................................................................-38-
12.9 Headings......................................................................................-38-
12.10 Governing Law.................................................................................-38-
12.11 Jurisdiction..................................................................................-38-
12.12 Parties in Interest...........................................................................-39-
12.13 Counterparts..................................................................................-39-
12.14 Severability..................................................................................-39-
12.15 Arbitration...................................................................................-39-
</TABLE>
<TABLE>
<CAPTION>
LIST OF SCHEDULES
<S> <C> <C>
Schedule 2.1 - Due Incorporation and Qualification
Schedule 2.2 - Outstanding Capital Stock
Schedule 2.3 - Options or Other Rights
Schedule 2.4 - Liens on Stock
Schedule 2.6 - Articles of Incorporation and By-Laws
Schedule 2.7 - Control of Books and Records
Schedule 2.8 - Consents Required for Seller
Schedule 2.9 - Financial Statements
Schedule 2.11 - Recent Developments
Schedule 2.12 - Litigation
Schedule 2.13 - Taxes
Schedule 2.14 - Permitted Liens
Schedule 2.15 - Compliance with Laws
Schedule 2.16 - Contracts and Other Agreements
Schedule 2.17 - Software
Schedule 2.18 - Leases
Schedule 2.19 - Accounts Receivable
Schedule 2.20 - Fixed Assets
</TABLE>
(v)
<PAGE> 7
<TABLE>
<S> <C> <C>
Schedule 2.21 - Trade Names and Other Intangibles
Schedule 2.22 - Suppliers and Customers
Schedule 2.24 - Employee Benefit Plans
Schedule 2.25 - Insurance
Schedule 2.26 - Environmental Matters
Schedule 2.27 - Officers, Directors and Key Employees
Schedule 2.29 - Franchises and Licenses
Schedule 2.30 - Transactions with Affiliated Parties
Schedule 2.31 - Bank Accounts and Powers of Attorney
Schedule 2.32 - Warranties
Schedule 2.33 - Dividends and Other Distributions
Schedule 3.2 - Articles of Incorporation and Bylaws of Buyer
Schedule 4.6 - Affiliate Debt Not to Be Canceled Prior to Closing
Schedule 11.3 - Buyer Options
</TABLE>
<TABLE>
<CAPTION>
LIST OF EXHIBITS
<S> <C>
Exhibit A-1 - Form of Note
Exhibit A-2 - Form of Option
Exhibit B - Form of Lease
Exhibit C - Form of Estoppel Agreement
Exhibit D - Form of Release Agreement
Exhibit E - Form of Employment Agreement
Exhibit F - Form of Non-Compete Agreement
Exhibit G - Form of Opinion of Counsel to Seller
Exhibit H - Form of Opinion of Counsel to Buyer
</TABLE>
**Certain schedules and exhibits are not included with this filing. A copy of
any omitted exhibit or schedule will be furnished supplementally to the
Commission upon request.**
(vi)
<PAGE> 8
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of the 23rd day of October, 1997, by
and between RADIANT SYSTEMS, INC., a Georgia corporation ("Buyer"), KEVIN
ELDREDGE, an individual resident of Oregon ("Seller"), and the owner of all the
issued and outstanding shares of capital stock of RAPIDFIRE SOFTWARE, INC., an
Oregon corporation ("RFS"), and EQUILEASE FINANCIAL SERVICES, INC., an Oregon
corporation ("EL") (RFS and EL are sometimes referred to hereinafter
collectively as the "Companies" or individually as a "Company").
W I T N E S S E T H :
WHEREAS, Seller owns all of the issued and outstanding shares of the
capital stock of the Companies (the "Stock"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the
Stock pursuant to this Agreement; and
WHEREAS, it is the intention of the parties hereto that upon
consummation of the purchase and sale of the Stock pursuant to this Agreement,
Buyer shall own all of the issued and outstanding shares of capital stock of
the Companies;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto covenant and agree as follows:
ARTICLE I
SALE OF STOCK
1.1 Sale of Stock. Subject to the terms and conditions of this
Agreement, and on the basis of the representations and warranties hereinafter
set forth, at the Closing (as hereinafter defined), Seller agrees to sell,
assign, transfer and deliver the Stock to Buyer, and Buyer agrees to purchase
the Stock from Seller. The certificates representing the Stock shall be duly
endorsed in blank, or accompanied by stock powers duly executed in blank by
Seller, with all necessary transfer tax and other revenue stamps, if any,
acquired at the Seller's expense, affixed and canceled. Seller agrees at any
time after Closing, without further compensation, to cure any deficiencies with
respect to the endorsements of the certificates representing the Stock, or with
respect to the stock power accompanying any such certificates, and to take any
other actions necessary to fully and completely transfer ownership of the Stock
to Buyer free and clear of all liens, encumbrances, restrictions, claims and
obligations (other than the pledge and security interest of Silicon Valley
Bank, if the Buyer elects to accept the Stock subject to such pledge pursuant
to Section 7.9(ii)).
<PAGE> 9
1.2 Purchase Price. In full consideration for the purchase by Buyer
of the Stock, Buyer shall pay to Seller the following (the "Purchase Price"):
(a) 102,230 shares of the Buyer's common stock to be issued to
Seller at Closing (the "Common Stock Consideration"). Of the shares issued as
Common Stock Consideration, 92,226 shares shall be subject to a prohibition
against any transfer other than by the laws of descent and distribution
("Transfer Prohibition"), which Transfer Prohibition shall expire as to 30,742
of such shares on each of the third, fourth and fifth anniversaries of Closing
Date; provided that the Transfer Prohibition is in addition to the general
restrictions applicable to all shares of the Common Stock Consideration as
unregistered securities as described in more detail in Article 10 below, which
restrictions shall, to the extent applicable, continue to apply to any
unregistered securities notwithstanding the expiration of the Transfer
Prohibition.
(b) Buyer's non-negotiable promissory note in the original
principal amount of $6,000,000, in the form attached hereto as Exhibit A-1, to
be delivered at Closing (the "Note").
(c) An option to acquire 276,690 shares of Buyer's Common
Stock, in the form attached hereto as Exhibit A-2, to be delivered at Closing
(the "Option").
(d) $4,180,000 payable in immediately available funds at
Closing (the "Cash Consideration").
1.3 Closing of Purchase and Sale. The closing of the purchase and
sale provided for herein (the "Closing") shall take place at the offices of
Smith, Gambrell & Russell, LLP, Suite 3100, Promenade II, 1230 Peachtree
Street, NE, Atlanta, Georgia 3039-3592, beginning at 8:00 A.M. on October 31,
1997, or at such other time and place as the parties shall mutually agree upon.
The date upon which the Closing actually occurs shall be referred to in this
Agreement as the "Closing Date".
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
Buyer shall rely thereon, the Seller represents and warrants to Buyer the
following (both as of the Closing Date and as of the date hereof):
2.1 Due Incorporation and Qualification. Each of the Companies is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Oregon, and has the corporate power and lawful authority
to carry on its respective businesses as now being conducted, and to own or
lease and operate its respective properties and assets as now owned, leased or
operated by each of them respectively. Each of the Companies is duly qualified
or otherwise authorized as a foreign corporation to transact business and is in
good standing in each jurisdiction set forth on
-2-
<PAGE> 10
Schedule 2.1 annexed hereto. Except as set forth on Schedule 2.1 annexed
hereto, neither of the Companies files, and neither is required to file,
franchise, income or other tax returns in any other jurisdiction based upon the
ownership or use of property therein or the conduct of business or derivation
of income therefrom. Neither of the Companies owns or is a lessee of property
or maintains any resident employee in any jurisdiction other than the
jurisdictions set forth on Schedule 2.1 annexed hereto.
2.2 Outstanding Capital Stock. The title, par value, number of
authorized shares and number of issued and outstanding shares of each class of
capital stock of each of the Companies are described on Schedule 2.2 annexed
hereto. No other class of capital stock of either Company is authorized or
outstanding. All of the issued and outstanding shares of the Stock are duly
authorized and are validly issued, fully paid and non-assessable.
2.3 Options or Other Rights. Except as described on Schedule 2.3
annexed hereto, there is no outstanding right, subscription, warrant,
conversion right, call, unsatisfied preemptive right, commitment, option or
other agreement or right of any kind pursuant to which any person or entity has
the right or option to purchase or otherwise to receive from the Companies or
Seller any shares of the Stock or any shares of the capital stock or any other
security of the either of the Companies and there is no outstanding security of
any kind convertible into or redeemable or exchangeable for any shares of the
capital stock or any other security of either of the Companies. There is no
shareholders' agreement, voting trust or similar agreement or arrangement to
which either of the Companies or Seller is a party which affects or restricts
in any way the Seller's rights and obligations with respect to the Stock.
2.4 Title To Stock. Except as described on Schedule 2.4 annexed
hereto, the Seller beneficially and of record owns, and has full power and
authority to convey free and clear of all liens, encumbrances, restrictions,
claims and obligations of every kind ("Liens"), all of the shares of Stock and,
upon delivery of and payment for such Stock as herein provided, Buyer will
acquire good and marketable title to the Stock, free and clear of all Liens.
2.5 Subsidiaries and Investments. Neither of the Companies has any
subsidiaries and neither Company owns, directly or indirectly, any capital
stock or other equity or ownership or proprietary interest in, or has any
investment in, any other corporation, partnership, association, trust, joint
venture or other entity.
2.6 Articles of Incorporation and By-Laws. Schedule 2.6 annexed
hereto contains true and complete copies of the Articles of Incorporation of
each of the Companies, including all amendments thereto (certified by the
Secretary of State of Oregon, and By-laws of each of the Companies, including
all amendments thereto (certified by its corporate secretary), as in effect on
the date hereof, and such By-Laws and Articles of Incorporation will not be
amended, rescinded or otherwise modified between the date hereof and the
Closing Date.
-3-
<PAGE> 11
2.7 Books and Records. The corporate minute books, stock
certificate books, stock registers and other corporate records of each of the
Companies are true, correct and complete in all material respects, and the
signatures appearing on all documents contained therein are the true signatures
of the persons purporting to have signed the same. The corporate minute books
of each of the Companies contain in all material respects true and complete
records of all meetings, and consents in lieu of meetings, of the Board of
Directors and Stockholders of each of the Companies since their respective
incorporations. All actions reflected in said books and records were duly and
validly taken in compliance with the laws of Oregon. Except as described on
Schedule 2.7 annexed hereto, none of the Companies' respective records,
systems, controls, data or information are recorded, stored, maintained or
operated by, or otherwise are wholly or partly dependent upon or held by, any
person or entity or media (including any electronic, mechanical or photographic
process) which are not under the exclusive ownership and direct control of the
Companies including all means of access.
2.8 Authority of Seller and the Company. The Seller has full power
and legal capacity to execute and deliver this Agreement and the other
agreements required to be executed and delivered by the Seller hereunder (the
"Seller Documents") and to carry out the transactions contemplated hereby. The
Seller Documents are valid and binding agreements of Seller enforceable against
Seller in accordance with their respective terms. Except as described in
Schedule 2.8 annexed hereto, no consent, authorization or approval of, or
declaration, filing or registration with, any governmental or regulatory
authority, or any consent, authorization or approval of any other third party,
is necessary in order to enable Seller to enter into and perform his
obligations under the Seller Documents, and neither the execution and delivery
of the Seller Documents nor the consummation of the transactions contemplated
thereby will:
(i) conflict with, require any consent under, result in the
violation of, constitute a breach of, or accelerate the performance required on
the part of the Seller or either of the Companies by the terms of, any evidence
of indebtedness or agreement to which the Seller or either of the Companies is
a party, in each case with or without notice or lapse of time or both,
including any mortgage or deed of trust or other agreement creating a lien,
charge or encumbrance to which any property either of the Companies or the
Stock is subject, or permit the termination of any such agreement by another
person;
(ii) result in the creation or imposition of any Lien upon,
or restriction on the use of, any property or assets of either of the Companies
or the Stock under any agreement or commitment to which either of the Companies
or Seller is bound;
(iii) accelerate, or constitute an event entitling, or which
would, on notice or lapse of time or both, entitle the holder of any
indebtedness of either of the Companies or the Seller to accelerate, the
maturity of any such indebtedness;
-4-
<PAGE> 12
(iv) conflict with or result in the breach or violation of
any writ, judgment, order, injunction, decree or award of any court or
governmental body or agency or arbitration tribunal that is binding on either
of the Companies or the Seller;
(v) constitute a violation by either of the Companies or
the Seller of any statute, law or regulation of any jurisdiction; or
(vi) violate or cause any revocation of or limitation on any
Permit (as defined in Section 2.29 hereof).
2.9 Financial Statements. Seller has heretofore furnished Buyer
with (i) true and complete copies of the unaudited balance sheets and related
statements of income and retained earnings and changes in financial position of
each of the Companies as of and for the fiscal years ended on December 31,
1994, December 31, 1995 and December 31, 1996, and (ii) unaudited balance
sheets of each of the Companies (the "Latest Balance Sheets") as of September
30, 1997 (the "Balance Sheet Date") and the related unaudited statements of
income and retained earnings for the Company for the period then ended
(hereinafter, the financial statements referred to in sub sections (i) and
(ii), together with the footnotes and supporting schedules thereto, are
referred to as the "Financial Statements"). Copies of the Financial Statements
have been annexed hereto as Schedule 2.9. Except as described in Schedule 2.9,
the Financial Statements, including the footnotes thereto, if any, have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated, except, in the case of
the unaudited Financial Statements described in (ii) above, for the absence of
footnote disclosure and ordinary and recurring year end adjustments, none of
which will be material in amount or significance. The Financial Statements
fairly present the financial condition of the respective Companies at the dates
thereof and, except as indicated therein, reflect all claims against, and all
debts and liabilities of, the respective Companies, fixed or contingent, as at
the dates thereof, and the related statements of income and retained earnings
and changes in financial position, fairly present the results of the operations
of the respective Companies and the changes in its financial position for the
periods indicated.
2.10 No Undisclosed Liabilities. Except as reflected and reserved
against in the Latest Balance Sheets, as of the Balance Sheet Date neither of
the Companies had any liabilities or obligations (whether long term or current
and whether accrued, absolute or contingent) and, except for liabilities and
obligations incurred since the Balance Sheet Date in the ordinary course of
business and disclosed to Buyer in writing as of the Closing Date, neither of
the Companies had or will have any liabilities or obligations (whether long
term or current and whether accrued, absolute or contingent) which,
individually or in the aggregate, are material to such Company.
2.11 Inventories. Except as described on Schedule 2.11, all
inventories of raw materials, work-in-process and finished goods set forth or
reflected in the Latest Balance Sheets or acquired by the Companies since the
Balance Sheet Date, consist of a quality and quantity usable and saleable in
the ordinary course of the Companies' respective businesses, except for
slow-moving, damaged or obsolete items and materials of below standard quality,
all of which have been written down to net
-5-
<PAGE> 13
realizable market value or in respect of which adequate reserves have been
provided, in each case as reflected in the Latest Balance Sheets. The value at
which inventories are carried on the Latest Balance Sheets reflect the normal
inventory valuation policy of the respective Companies, as applicable, in
accordance with generally accepted accounting principles and on a basis
consistent with that of preceding periods, of stating inventory at the lower of
cost or market value on a first in, first out basis. Seller has no reason to
believe that the Companies will experience in the foreseeable future any
difficulty in obtaining, in the desired quantity and quality, the inventory
necessary to conduct their respective businesses in the manner proposed to be
conducted, including, without limitation, inventory which historically has been
imported.
2.12 Litigation. Except as described in Schedule 2.12 annexed
hereto, there is no action, suit, proceeding at law or in equity by any person
or entity, or any arbitration, or any administrative or other proceeding by or
before any governmental or other instrumentality or agency, pending, or, to the
knowledge of Seller, threatened, against or affecting either of the Companies
or any of their respective properties, assets or rights, and the Seller knows
of no valid basis for any such action, proceeding or investigation. Neither of
the Companies is subject to any judgment, order, award or decree entered in any
lawsuit or proceeding which may have an adverse effect on any of its
operations, business practices or on its ability to acquire any property or
conduct business in any area.
2.13 Taxes.
(a) For purposes of this Agreement, (i) "Taxes" shall mean all federal,
state, local and foreign income, gross receipts, profits, windfall profits,
capital gains, franchise, sales, use, license, occupation, property, property
transfer, capital stock, premium, excise, employment, payroll, withholding,
estimated, severance, stamp, environmental, customs duties, social security,
unemployment, disability, registration, value added, alternative or add-on
minimum and other taxes, assessments or governmental charges of any nature,
kind or character, and including any interest, additions to tax and penalties
thereon; and (ii) "Tax Returns" shall mean all returns, declarations, reports
and forms, claims for refunds, or information returns and reports relating to
Taxes, including any schedule or attachment thereto, and including any
amendments thereof.
(b) Each of the Companies has filed all Tax Returns that such Company
was required to file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by either of the Companies (whether or not
shown on any Tax Return) have been paid. Except as set forth in Schedule
2.13(b) annexed hereto, neither of the Companies is currently the beneficiary
of any extension of time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where either Company does not file
Tax Returns that such non-filing Company is or may be subject to taxation by
that jurisdiction. There are no Liens on any of the assets of the Companies
that arose in connection with any failure (or alleged failure) to pay any Tax.
(c) The Companies have withheld and paid all Taxes required to have
been withheld and paid by such entity in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other third
party.
-6-
<PAGE> 14
(d) None of the Seller, or the Companies (or any employee of the
Companies responsible for Tax matters) has any reason to believe that any
authority may assess any additional Taxes for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax liability of
either Company either (i) claimed or raised by any authority in writing or (ii)
as to which the Seller (or any employee of the Companies responsible for Tax
matters) has knowledge. Schedule 2.13(d) annexed hereto lists all federal,
state, local, and foreign income Tax Returns filed with respect to the
Companies for taxable periods ended on or after December 31, 1994 and indicates
those Tax Returns that have been audited and those Tax Returns that currently
are the subject of an audit. The Seller has delivered to Buyer correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by any of the
Companies since December 31, 1994.
(e) Neither of the Companies has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(f) Neither of the Companies has filed a consent under Section 341(f)
of the Internal Revenue Code, as amended (the "Code") concerning collapsible
corporations. Neither of the Companies has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code. Neither of the Companies has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Neither of the Companies is a party to any Tax
allocation or sharing agreement. Neither of the Companies (i) has been a member
of an affiliated group filing a consolidated federal income Tax Return (other
than a group the common parent of which was either of the Companies) or (ii)
has any liability for the Taxes of any person or entity (other than the
Companies) under Reg. ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(g) The unpaid Taxes of the Companies (A) did not, as of the Balance
Sheet Date, exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Latest Balance Sheets (rather than in any
notes thereto) and (B) do not exceed that reserve as adjusted for the passage
of time through the Closing Date in accordance with the past custom and
practice of the Companies in filing their Tax Returns.
(h) Each Company has been an electing S corporation within the meaning
of Sections 1361 and 1362 of the Code at all times since its incorporation, and
each Company will remain an S corporation through the Closing Date.
(i) Neither Company will be liable for any Tax under Section 1374 of
the Code in connection with the deemed sale of the Company's assets caused by
the Section 338(h)(10) Election (as defined in Section 11.4). Neither Company
has in the past ten (10) years (A) acquired assets from another corporation in
a transaction in which the Company's Tax basis for the acquired assets was
-7-
<PAGE> 15
determined, in whole or in part, by reference to the Tax basis of acquired
assets (or any other property) in the hands of the transferor or (B) acquired
the stock of any corporation which is a qualified subchapter S corporation
under the Code.
2.14 Title to Properties; Assets Complete. Each of the Companies has
good, valid and marketable title to all of their respective material properties
and assets (tangible and intangible), including without limitation, all
properties and assets shown on the Latest Balance Sheets and all properties and
assets purchased or acquired by each of the Companies since the Balance Sheet
Date; in each case subject to no Liens, except for (i) Liens reflected on the
Latest Balance Sheets (ii) Liens for current taxes, assessments or governmental
charges or levies on property not yet due or delinquent and (iii) Liens
described on Schedule 2.14 hereto ("Permitted Liens"). Except for software
licenses described in Schedule 2.16, leases for real and personal property
described in Schedules 2.16 and 2.18 or the other items listed on Schedule
2.14, each of the Companies owns outright, and is in exclusive possession of,
all assets, properties or rights currently used in its respective business.
2.15 Compliance with Laws. Neither of the Companies is in violation
of any applicable order, judgment, injunction, award or decree of any court or
governmental or regulatory body or agency, or arbitration tribunal. Except as
described on Schedule 2.15 annexed hereto, neither of the Companies is in
violation of any federal, state, local or foreign law, ordinance, rule,
directive, or regulation, or any other requirement of any governmental or
regulatory body or agency, court or arbitrator applicable to the business of
the Company. Without limiting the generality of the fore going, except as
described on Schedule 2.15 annexed hereto, (i) there is not pending, or to the
knowledge of the Seller threatened, any notification of any governmental or
regulatory body, agency or authority that either of the Companies is not in
compliance with applicable laws and regulations respecting employment and
employment practices, occupational safety and health laws and regulations, and
laws or regulations relating to the quality of the environment neither the
Seller knows of no basis therefor, and (ii) neither of the Companies has
received any such notification of past violations of such laws or regulations
that can reasonably be expected to result in future claims against either of
the Companies, and the Seller knows of no basis therefor.
2.16 Contracts and Other Agreements. Schedule 2.16 annexed hereto
contains a complete and accurate list of all of the following contracts and
other agreements to which either of the Companies is a party or by or to which
they or their respective assets or properties are bound or subject or which are
necessary for either of the Companies to conduct their business as presently
conducted:
(i) contracts and other agreements with any current or former officer,
director, employee, consultant, agent or other representative or with
any person or entity in which any of the foregoing has an interest,
including any "Affiliate" or "Associate" of such person or entity, as
such terms are defined in the Securities Act of 1933 and the rules
and regulations published thereunder;
-8-
<PAGE> 16
(ii) contracts and other agreements with any labor union or association
representing any employee;
(iii) contracts and other agreements for the supply to any person of all or a
portion of such person's requirements of any product or service sold by
either of the Companies;
(iv) contracts and other agreements for the sale of any of their respective
assets or properties other than in the ordinary course of business or
for the grant to any person of any preferential rights to purchase any
of its assets or properties;
(v) joint venture or partnership agreements;
(vi) contracts or other agreements under which either of the Companies
agrees to indemnify any party or to share tax liability of any party;
(vii) contracts or other agreements of guaranty or relating to matters of
suretyship to which either of the Companies is a party or by which its
assets or properties are subject or bound,
(viii) contracts and other agreements calling for an aggregate price or fee,
or payments in any one year, of more than $10,000 excluding purchase or
sales orders entered into by either of the Companies as a purchaser or
a seller in the ordinary course of business;
(ix) contracts and other agreements that cannot be canceled without
liability, premium or penalty upon thirty (30) days' notice;
(x) contracts and other agreements with customers or suppliers for the
sharing of fees, the rebating of charges or other similar arrangements;
(xi) contracts and other agreements containing obligations or liabilities of
any kind to holders of either of the Companies' securities (including,
without limitation, an obligation to register any of such securities
under any federal or state securities laws);
(xii) contracts and other agreements containing covenants of either of the
Companies not to compete in any line of business or with any person in
any geographical area or covenants of any other person or entity not to
compete with either of the Companies in any line of business or in any
geographical area;
(xiii) contracts and other agreements relating to the acquisition by either of
the Companies of any operating business or the capital stock of any
other person, corporation or other entity;
(xiv) contracts or agreements relating to Intellectual Property (as defined
in Section 2.21) owned, licensed or used by either of the Companies in
the course of its business, including without
-9-
<PAGE> 17
limitation all contracts and agreements relating to the development and
use of Software (as defined in Section 2.17);
(xv) contracts and other agreements requiring the payment to any person of a
royalty, override or similar commission or fee;
(xvi) contracts and other agreements relating to the borrowing of money by
either of the Companies or subjecting any assets or properties of
either of the Companies to security interests, liens or other
liabilities or obligations,
(xvii) any agreement, contract or commitment which might reasonably be
expected to have a potential adverse impact on the business or
operations of either of the Companies,
(xviii) any contract or other agreement not made in the ordinary course of
business; or
(xix) any other material contract or other agreement whether or not made in
the ordinary course of business.
There have been delivered or made available to the Buyer true and complete
copies of all of the written contracts and other agreements described on
Schedule 2.16. Except as described in Schedule 2.16, all of such contracts and
other agreements are valid and binding upon the Company that is party thereto
in accordance with their terms, and the Company that is party thereto has
performed all contractual obligations required to be performed by it to date
and is not in default under any such contracts and has not taken any action
which constitutes or with notice or lapse of time or both would constitute a
default under such contracts. To the knowledge of the Seller, no other party to
any such contract is in default in the performance of its obligations
thereunder or has taken any action which constitutes, or with notice or lapse
of time or both would constitute, a breach or anticipatory breach thereof.
Except as separately identified on Schedule 2.16, no approval or consent of any
person is needed in order that the contracts and other agreements set forth on
Schedule 2.16 or on any other Schedule continue in full force and effect
following the consummation of the transactions contemplated by this Agreement.
As used in this Agreement, the term "contract" or "agreement" includes any
written or oral agreement, commitment, understanding or arrangement to which
either of the Companies is a party with respect to their respective businesses
of or by which their respective assets are bound.
2.17 Software. Schedule 2.17 annexed hereto contains a complete list
of all computer software which is material to the business of either Company
and which has been designed specifically for use by either Company or as to
which either Company claims any proprietary rights (the "Software"). Schedule
2.17 lists all employees and independent contractors who participated
materially in the creation or material modification of the Software. Except as
described in Schedule 2.17, the Company is the exclusive owner of all patents,
copyrights, trademarks, intellectual property rights, trade secrets and other
proprietary information, processes, and formulae used in connection with the
Software. All work performed by employees, independent contractors or others
-10-
<PAGE> 18
in connection with the Software on behalf of either Company has been either (i)
pursuant to a "work-for-hire" arrangement or agreement with the Company in
accordance with applicable state and federal law, that has accorded the Company
full, effective, exclusive and original ownership of all tangible and
intangible property arising thereby or (ii) subject to an executed instrument
of assignment in favor of such Company that has conveyed to such Company full,
effective and exclusive ownership of all tangible and intangible property
arising in connection with the work performed. The Companies have exclusive
ownership, possession and control of all source codes, system documentation,
statements of principles of operation, and schematics for all the Software that
may be necessary to render such materials understandable and usable by a
trained computer programmer. Each of the Companies has taken adequate measures
consistent with industry practice to safeguard the confidentiality of any
confidential information or trade secrets relating to the Software. The
Software is not in the public domain. The Software performs in accordance with
the documentation and other written material used in connection with the
Software and is free from material defects in programming or operation. The
function and utility of the Software will not be affected adversely by any
"year 2000" problems.
2.18 Leases. Schedule 2.18 annexed hereto contains a complete and
accurate list of any real property lease binding either of the Companies or to
which either of the Companies is a party ("Leases"). Each such Lease is in full
force and effect, and each of the Companies has fully performed all of their
respective obligations to be performed to date under said Leases. Each of the
Companies is current with respect to the payment of all rents and other charges
due thereunder and their use and occupancy of the premises which are the
subject matter of such leases does not violate any of the terms of such Leases,
is in conformity with all applicable building, zoning, health, fire, safety and
other laws, ordinances, codes and regulations and is not violative of the
conditions of any of the Companies' respective policies of insurance. All of
the buildings, structures and appurtenances situated on such leased premises
are, and as of the Closing Date, will be, in good operating condition and state
of maintenance and repair and will be adequate and suitable for the purposes
for which they are presently being or are intended to be used, and each of the
Companies has adequate rights of ingress and egress and utility services for
the operation of their respective businesses in the ordinary course. No lessor
or landlord under any Lease is in default in the performance of its obligations
thereunder and neither of the Companies has received notice from any such
lessor or landlord of its intention to exercise any option thereunder which
would adversely affect or terminate such Company's use or occupancy of the
demised premises under such Lease. Except as specifically disclosed in Schedule
2.18, all of the leases permit the consummation of the transactions
contemplated hereby without modification of the terms thereof and without the
consent of the applicable lessor or landlord. Neither of the Companies owns any
real property and neither of the Companies has ever owned any real property.
2.19 Accounts and Notes Receivable. All accounts and notes
receivable reflected on the Latest Balance Sheets, and all accounts and notes
receivable arising subsequent to the Balance Sheet Date, have arisen in the
ordinary course of business of the respective Companies, represent valid
obligations due to the respective Companies and, subject only to the reserve
for bad debts shown on each Company's books and records and computed in a
manner consistent with generally accepted accounting principals and such
Company's past practice, are collectible in the ordinary course of
-11-
<PAGE> 19
business of such Company in the aggregate recorded amounts thereof in
accordance with their terms and in any event not later than 90 days from the
Closing Date. None of such notes and accounts receivable or other debts is or
will at the Closing Date be subject to any counterclaim or set-off except to
the extent of the aforementioned reserve, or is or at the Closing will be
subject to any lien, claim, encumbrance, charge or restriction whatsoever. For
purposes of this Section 2.19, the collectibility of accounts and notes
receivable shall be determined by applying customers' remittances based upon
the specific invoices to which such remittances relate, or in the absence of
any indication of same, on a first-in, first-out basis. There has been no
material change since the Balance Sheet Date in the amount of accounts
receivable or other debts due the Company or the reserves for bad debts
relating thereto from that reflected in the Latest Balance Sheets.
2.20 Fixed Assets. Schedule 2.20 annexed hereto contains a complete
and accurate list of all machinery, equipment, tools, furniture, leasehold
improvements, trade fixtures, vehicles, struc tures, or any related capitalized
items and other tangible property material to the operation of the business of
each of the Companies (the "Fixed Assets") and all such Fixed Assets are
reflected in the Latest Balance Sheets (except any such tangible property
acquired since the Balance Sheet Date by the Companies). Since the Balance
Sheet Date neither of the Companies has disposed of any Fixed Assets except in
the ordinary course of such Company's business. The Fixed Assets are in good
operating condition and repair, subject to normal wear and tear from normal use
thereof, and neither of the Companies has received notice that any of the Fixed
Assets or such Company's use thereof is in violation of any existing law or any
building, zoning, health, fire, safety or other ordinance, code or regulation.
2.21 Trade Name and Other Intangibles. Schedule 2.21 annexed hereto
contains a complete and accurate list of all patents, patent rights, licenses,
trade secrets, trademarks, trademark rights, trade names, trade name rights,
service marks, service mark rights, copyrights or similar rights ("Intellectual
Property") (other than Software listed separately on Schedule 2.17) which are
either (i) wholly or partly owned or licensed by either Company, or (ii) used
in the conduct of the business of either Company. Except as described on
Schedule 2.21 annexed hereto, no person or entity, other than the Companies,
has any rights under or in respect of, and to the knowledge of the Seller, no
person is infringing or otherwise acting adversely with respect to, the
Companies' respective rights under or in respect of the Intellectual Property,
and the Companies are exclusive owners of such rights and there is no claim for
damages or any proceeding pending or to the knowledge of Seller threatened,
with respect thereto. Neither of the Companies is infringing or otherwise
acting adversely to the right of any person under or in respect to Intellectual
Property, and there is no claim for damages or any proceeding pending, or to
the knowledge of Seller threatened, with respect thereto.
2.22 Suppliers and Customers. Schedule 2.22 annexed hereto contains
a complete and accurate list with respect to each Company of (i) any licensor
or supplier from whom either Company purchased or to which such Company paid
$10,000 or more during the last fiscal year of such Company and the amount paid
by such Company to such suppliers, and (ii) any customer or client which
purchased during the last fiscal year of such Company $10,000 or more in goods
or services from such Company. Each Company enjoys good relations with all its
respective customers required
-12-
<PAGE> 20
to be listed on Schedule 2.22, and no customer required to be listed on
Schedule 2.22 has notified such Company or the Seller of such customer's
intention to terminate or materially reduce the purchase or use the goods or
services, and the Seller has no reason to believe any such customer is likely
to terminate the services of either Company on account of the transactions
contemplated hereunder.
2.23 Labor Relations; Employees. Other than amounts which have not
yet become payable in accordance with the Companies' respective customary
practices, which will be paid in a timely manner, (a) each of the Companies has
paid in full to its full and part-time employees all wages, salaries,
commissions, bonuses and other direct compensation for all services performed
by them to date, and (b) each of the Companies has paid, or will pay in a
timely manner, all severance pay, if any, and benefits, FICA, withholding taxes
and vacation pay, if any, for all of its employees and is not subject to any
claim for non-payment or non-performance of any of the foregoing. Each of the
Companies is in compliance with all federal, state and local laws and
regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours. Neither of the Companies has
improperly characterized as an independent contractor or consultant, any
individual who should have been treated as an employee of such Company for tax
withholding or any other purpose. There is no unfair labor practice complaint
against either of the Companies pending before the National Labor Relations
Board or any comparable state or local agency. There is no labor strike,
dispute, slowdown or stoppage pending, or to the knowledge of the Seller,
threatened, against or involving either of the Companies. No grievance which
might have an adverse effect on either of the Companies or the conduct of its
business or proceeding alleging discriminatory practices or sexual harassment
is pending and no claim therefor has been asserted. No collective bargaining
representative is certified to represent any group of employees of either of
the Companies under the Labor-Management Relations Act of 1947; no petition for
election of a collective bargaining representative for all or any portion of
the business of either of the Companies is pending or in respect of any other
group of employees; the Seller has no knowledge of any organizational effort or
campaign by any labor union that affects or might affect employment of any
employee of either of the Companies; and neither of the Companies is a party to
any collective bargaining agreement with respect to any of its employees.
2.24 Employee Benefit Plans. Except as described on Schedule 2.24
annexed hereto, neither of the Companies is a party to, nor makes or is
required to make employer contributions to, nor has any current or future
obligation or liability with respect to, any pension, profit sharing,
retirement, deferred compensation, bonus, stock purchase, severance,
hospitalization, medical insurance, life insurance, vacation policy or other
employee benefit plan or program providing benefits for its current or former
employees, other than salaries or cash wages for straight time, overtime or
shift differential (a "Plan"). Except as described on Schedule 2.24, each of
the Companies has complied with all of its obligations under each Plan and, to
the knowledge of the Seller, all other parties have complied with all of their
respective obligations under each Plan. Each of the Companies has made or
provided for all payments due under or with respect to each Plan up to and
including the Closing Date, and all amounts properly accrued up to and
including the Closing Date as liabilities of each of the Companies under each
Plan have been recorded on the books of the Company to which
-13-
<PAGE> 21
such Plan pertains. Except as described on Schedule 2.24, no Plan is a
"multiemployer plan" (within the meaning of section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and except as so
set forth, neither of the Companies has made, or has been required to make, any
contributions to any "multiemployer plan" within the last five (5) years.
Except as described on Schedule 2.24, no Plan listed on Schedule 2.24 (other
than any "multiemployer plan") is subject to Title IV of ERISA.
Each Plan listed on Schedule 2.24 has received a determination letter
from the Internal Revenue Service to the effect that it qualified under section
401(a) of the Code, and that each trust established under such Plan is exempt
from taxation under section 501(a) of the Code, and nothing has occurred which
would cause the loss of such qualifications or exemptions. No "reportable
event" (within the meaning of section 4043(b) of ERISA) has occurred with
respect to any pension plan that is subject to Title IV of ERISA maintained by
any trade or business (whether or not incorporated) that is under common
control with either of the Companies, within the meaning of section 414(c) of
the Code and the regulations thereunder (hereinafter any such plan shall be
referred to as an "Affiliate Plan" and any such trade or business shall be
referred to as an "ERISA Affiliate"), and no "reportable event" will occur with
respect to any Plan or Affiliate Plan as a result of any transaction
contemplated by this Agreement.
Neither of the Companies would be subject to any withdrawal liability
with respect to any "multiemployer plan" listed on Schedule 2.24 if such
Company were to withdraw from any such plan as of the date hereof. Except as
described on Schedule 2.24, each of the Companies has satisfied all material
reporting and disclosure requirements and all other requirements applicable to
it under the Code or ERISA, and the Department of Labor and the Internal
Revenue Service regulations promulgated thereunder, with respect to the Plans.
Neither of the Companies, nor, to the knowledge of the Seller, any other "party
in interest" or "disqualified person" (within the meaning of section 3(14) of
ERISA or section 4975(e)(2) of the Code, respectively) with respect to any Plan
has engaged in any "prohibited transaction" (within the meaning of section 406
of ERISA or section 4975 of the Code) which could subject any Plan, the Buyer,
either Company or any trustee, administrator or other fiduciary of any Plan, to
any penalty or excise tax imposed on prohibited transactions by section 502(i)
of ERISA or section 4975 of the Code. There are no material actions, suits or
claims pending (other than routine claims for benefits) or, except as described
on Schedule 2.24, to the knowledge of the Seller, threatened, against any Plan
or against the assets of any Plan. No Plan which is subject to Part III of
Subtitle B of Title I of ERISA or section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in ERISA), whether or not waived.
Except as described on Schedule 2.24, no Plan or Affiliate Plan that is or was
subject to Title IV of ERISA has been terminated and, to the knowledge of the
Seller, no proceeding has been initiated to terminate any such Plan or
Affiliate Plan. None of the Companies, any ERISA Affiliates, or the Seller have
incurred, nor reasonably expects to incur as a result of any event occurring on
or prior to the Closing Date, any liability to the Pension Benefit Guaranty
Corporation (except for required premium payments, none of which payments are
overdue) or any withdrawal liability under Title IV of ERISA.
-14-
<PAGE> 22
With respect to each Plan that is an "employee benefit plan," within
the meaning of Section 3(3) of ERISA, true and complete copies of (i) the
documents embodying the Plan, any related trust and all amendments thereto,
(ii) the summary plan description and all modifications thereto, (iii) the last
filed Annual Report (Form 5500 Series) and Schedules A and B thereto, (iv) the
most recent Internal Revenue Service determination letter, if applicable, (v)
the most recent actuarial valuation report, if any, and (vi) the most recent
annual and periodic financial statements, have been delivered or made available
to the Buyer and are correct in all material respects.
2.25 Insurance. Schedule 2.25 annexed hereto contains a list and
brief description (specifying the insurer, the policy number or covering note
number with respect to binders and the amount of any deductible, describing
each pending claim thereunder of more than $10,000, setting forth the aggregate
amounts paid out under each such policy through the date hereof and the
aggregate limit, if any, of the insurer's liability thereunder) of all policies
or binders of fire, liability, product liability, workmen's compensation,
vehicular, unemployment and other insurance held by or on behalf of either of
the Companies. Such policies and binders are valid and enforceable in
accordance with their terms, are in full force and effect, and insure against
risks and liabilities to the extent and in the manner reasonably determined by
each of the Companies to be appropriate and sufficient and are adequate to
protect such Company and its assets and properties. Each Company has paid all
premiums due thereon and is not in default with respect to any provision
contained in any such policy or binder and has not failed to give any notice or
present any claim under any such policy or binder in due and timely fashion.
Except for claims described on Schedule 2.25, there are no outstanding unpaid
claims under any such policy or binder. Neither of the Companies has notice of
cancellation or non-renewal of any such policy or binder. None of the policies
listed on Schedule 2.25 provides that premiums paid in respect of the periods
prior to the Closing Date may be adjusted or recomputed based on claims-paying
experience of such policies or otherwise. Neither of the Companies has notice
from any of its insurance carriers that any insurance premiums will be
increased in the future or that any insurance coverage listed on Schedule 2.25
will not be available in the future on the same terms as now in effect.
2.26 Environmental Matters.
(a) Except as described in Schedule 2.26, (i) neither of
the Companies has ever generated, transported, used, stored, treated, disposed
of, or managed any Hazardous Waste (as defined below); (ii) no Hazardous
Material (as defined below) has ever been or is threatened to be spilled,
released, or disposed of by either of the Companies or, to the knowledge of
Seller, by any other party, at any site presently or formerly owned, operated,
leased or used by either of the Companies, or, to the knowledge of Seller, has
ever come to be located in the soil or groundwater at any such site; (iii) no
Hazardous Material has ever been transported by or at the direction of either
of the Companies from any site presently or formerly owned, operated, leased,
or used by either of the Companies for treatment, storage, or disposal at any
other place; and (iv) to the knowledge of Seller, no Lien has ever been imposed
by any governmental agency on any property, facility, machinery, or equipment
owned, operated, leased, or used by either of the Companies in connection with
the presence of any Hazardous Material.
-15-
<PAGE> 23
(b) Neither of the Companies has any liability under, nor
has it ever violated, any Environmental Law (as defined below); each of the
Companies, and, to the knowledge of Seller, any property owned, operated,
leased, or used by each of the Companies, and any facilities and operations
thereon are presently in compliance with all applicable Environmental Laws;
neither of the Companies has ever entered into or has been subject to any
judgment, consent decree, compliance order, or administrative order with
respect to any environmental or health and safety matter or received any
request for information, notice, demand letter, administrative inquiry, or
formal or informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental Law; and the
Seller has no knowledge or reason to know that any of the items enumerated in
the immediately preceding clause of this paragraph will be forthcoming.
(c) To the knowledge of Seller, no site currently owned,
operated, leased, or used by either of the Companies contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, any underground storage tanks, or any urea formaldehyde foam
insulation.
(d) The Seller has provided to Buyer copies of all
documents, records, and information available to the Seller or either of the
Companies concerning any environmental or health and safety matter relevant to
either of the Companies, whether generated by the Companies or others,
including, without limitation, environmental audits, environmental risk
assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to
environmental or health and safety matters issued by any governmental agency.
(e) For purposes of this Agreement, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance which may pose a threat to the environment or
to human health or safety, as defined or regulated under any Environmental Law;
(ii) "Hazardous Waste" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; (iii) "Environmental Law" shall mean any
environmental or health and safety-related law, regulation, rule, ordinance, or
by-law at the foreign, federal, state, or local level, existing at any time
prior to the Closing Date and which could, subsequent to the Closing Date,
subject the Buyer or either of the Companies, their respective properties and
assets, of their officers, directors, employees, contractors or agents, to
liability thereunder for violations occurring at any time prior to the Closing
Date.
2.27 Officers, Directors and Key Employees. Schedule 2.27 describes
with respect to each of the Companies the name and total annual compensation
(and benefit costs) from such Company of each officer and director of such
Company and of each other employee, consultant, agent or other representative
of such Company whose current annual rate of compensation exceeds $25,000. Such
Company has not made a commitment or agreement to increase the compensation or
to modify the conditions or terms of employment of any such person. None of
such persons has communicated to such Company or to any of its officers or
directors that such person intends to cancel or otherwise
-16-
<PAGE> 24
terminate such person's relationship with such Company as a result of the
consummation of the transactions described in this Agreement.
2.28 Restrictive Documents. Neither of the Companies nor the Seller
is subject to, or a party to, any charter, by-law, mortgage, lien, lease,
license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind,
which adversely affects the business practices, operations or condition of the
Companies or any of their respective assets or property, or which would prevent
consummation of the transactions contemplated by this Agreement, compliance by
the Seller with the terms, conditions and provisions hereof, or the continued
operation of the Companies' respective businesses after the date hereof or the
Closing Date on substantially the same basis as heretofore operated or which
would restrict the ability of either of the Companies to acquire any property
or conduct business in any area.
2.29 Franchises and Licenses. Each of the Companies possesses all
franchises, concessions, permits, licenses, orders, and other governmental
authorizations and approvals ("Permits") required to permit such Company to
carry on its business as it is presently being conducted. All such Permits
described on Schedule 2.29 annexed hereto, are in the name of such Company and
are in full force and effect, and no modification, termination, suspension or
cancellation of any of them is threatened. Except as described in Schedule 2.29
all such Permits permit the consummation of the transactions contemplated
hereby without modification thereof and without the consent of the issuing
authority.
2.30 Transactions with Affiliated Parties. Except as described on
Schedule 2.30 annexed hereto no Associate or Affiliate of either Company or the
Seller (i) has any ownership interest, directly or indirectly, in any
competitor, supplier or customer of either Company, (ii) has any outstanding
loan to or receivable in either event to or from either Company, or (iii) is a
party to or has any interest in any contract or agreement with either Company.
2.31 Bank Accounts and Powers of Attorney. Schedule 2.31 annexed
hereto contains an accurate and complete list showing (i) the name and address
of each bank in which either of the Companies has an account or safe deposit
box, the number of any such account or any such box and the names of all
persons authorized to draw thereon or to have access thereto, and (ii) the
names of all persons, if any, holding powers of attorney from either of the
Companies and a summary statement of the terms thereof.
2.32 Warranties and Product Returns. Schedule 2.32 annexed hereto
contains (i) a true and complete description of all warranties granted or made
with respect to products or services sold by each of the Companies during the
three years prior to the date hereof; and (ii) a true and complete description
of each Company's product returns and warranty experience for the same period.
The Seller has no reason to believe that product returns or warranty claims for
the Companies will in the forseeable future exceed historical levels to any
material extent.
2.33 No Changes Prior to Closing Date. During the period from the
Balance Sheet Date to and including the Closing Date, except as expressly
contemplated hereby, neither of the Companies will
-17-
<PAGE> 25
have (i) incurred any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except in the ordinary course of business,
(ii) permitted any of its assets to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind, (iii) sold,
transferred or otherwise disposed of any assets except product inventory sold
in the ordinary course of business, (iv) made any capital expenditure or
commitment therefor, (v) except as described in Schedule 2.33 annexed hereto
and Section 5.3 below, declared or paid any dividend or made any distribution
on any shares of its capital stock, or redeemed, purchased or otherwise
acquired any shares of its capital stock or granted or canceled any option,
warrant or other right to purchase or acquire any such shares, (vi) made any
bonus or profit sharing distribution or similar payment of any kind, (vii)
increased its indebtedness for borrowed money, or made any loan to any person,
(viii) except in the ordinary course of business, consistent with past
practices of such Company, made or permitted any amendment or termination of
any contract, agreement or license to which such Company is a party or by which
it or any of its assets and properties are subject or bound, (ix) entered into
any agreement or arrangement granting any preferential rights to purchase any
of such Company's assets or properties or requiring the consent of any party to
the transfer and assignment of any of such Company's assets or properties, (x)
written off as uncollectible any notes or accounts receivable, except
write-offs in the ordinary course of business charged to applicable reserves,
none of which individually or in the aggregate is material to such Company,
(xi) granted any increase in the rate of wages, salaries, bonuses or other
remuneration of any executive employee or other employees, except in the
ordinary course of business, (xii) canceled or waived any claims or rights of
substantial value, (xiii) made any change in any method of accounting or
auditing practice, (xiv) otherwise conducted its business or entered into any
transaction, except in the usual and ordinary manner and in the ordinary course
of its business, or (xv) agreed, whether or not in writing, to do any of the
foregoing.
2.34 Disclosure. To the Seller's knowledge, neither this Agreement,
nor any Schedule, Exhibit or certificate delivered in accordance with the terms
hereof by or on behalf of the Seller, or by any of the Companies' respective
directors or officers, in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit any statement of a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact known
to the Seller which materially and adversely affects the business, prospects
(financial or otherwise) or financial condition of the Company or its
respective properties or assets, which has not been set forth in this Agreement
or in the Schedules or Exhibits or certificates furnished in connection with
the transactions contemplated by this Agreement.
2.35 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Sellers or the Company is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated herein.
2.36 Copies of Documents. The Seller has caused to be made available
for inspection and copying by Buyer and its advisors, true, complete and
correct copies of all documents referred to in this Article II or in any
Schedule furnished by the Seller to the Buyer.
-18-
<PAGE> 26
ARTICLE III
REPRESENTATIONS OF BUYER
3.1 Incorporation and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia, and has the corporate power and lawful authority to carry on its
business as now being conducted, and to own, lease and operate its properties
and assets as now owned, leased or operated by it.
3.2 Articles of Incorporation and By-Laws. Schedule 3.2 annexed
hereto contains true and complete copies of the Articles of Incorporation of
the Buyer, including all amendments thereto (certified by the Secretary of
State of its jurisdiction of incorporation), and By-Laws of the Company,
including all amendments thereto (certified by its corporate Secretary), as in
effect on the date hereof and such By-Laws and Articles of Incorporation will
not be amended, rescinded or otherwise modified between the date hereof and the
Closing Date.
3.3 Authority of Buyer. Buyer has full power and legal capacity to
execute and deliver this Agreement and the other agreements required to be
executed and delivered by Buyer hereunder (the "Buyer Documents") and to carry
out the transactions contemplated hereby. The execution, delivery and
performance of the Buyer Documents by Buyer have been duly authorized by all
necessary action on the part of Buyer. The Buyer Documents are valid and
binding agreements of Buyer enforceable against Buyer in accordance with their
respective terms. No consent, authorization or approval of, or declaration,
filing or registration with, any governmental or regulatory authority, or any
consent, authorization or approval of any third party, is necessary in order to
enable Buyer to enter into and perform Buyer's obligations under the Buyer
Documents, and neither the execution and delivery of the Buyer Documents nor
the consummation of the transactions contemplated thereby will:
(a) conflict with, require any consent under, result in the
violation of, or constitute a breach of any provision of the Articles of
Incorporation or By-Laws of the Buyer;
(b) conflict with, require any consent under, result in the
violation of, constitute a breach of, or accelerate the performance required on
the part of Buyer by the terms of, any evidence of indebtedness or agreement to
which the Buyer is a party, in each case with or without notice for lapse of
time or both, including any mortgage or deed of trust or other agreement
creating a lien, charge or encumbrance to which any property of the Buyer is
subject, or permit the termination of any such agreement by another person;
(c) result in the creation or imposition of any security
interest, lien, charge or other encumbrance upon, or restriction on the use of,
any property or assets of the Buyer under any agreement or commitment to which
the Buyer is bound;
-19-
<PAGE> 27
(d) accelerate, constitute an event entitling, or which
would, on notice or lapse of time or both, entitle the holder of any
indebtedness of the Buyer to accelerate the maturity of such indebtedness;
(e) conflict with or result in the breach of or violation
of any writ, judgment, order, injunction, decree or award of any court of
governmental body or agency or arbitration tribunal that is binding on the
Buyer;
(f) constitute a violation by the Buyer of any statute,
law, or regulation of any jurisdiction.
3.4 Securities Acknowledgment.
(a) Buyer is acquiring the Stock solely for Buyer's own
account for investment purposes and not with a view to or an interest in
participating, directly or indirectly, in the resale thereof. Buyer's principal
place of business is located in the State of Georgia. Buyer acknowledges that
all Stock acquired by Buyer will be sold to Buyer without registration and
reliance upon certain exemptions under the federal Securities Act of 1933 as
amended, in reliance upon certain exemptions from registration requirements and
under applicable state securities laws. Buyer will make no transfer or
assignment of any of the stock except in compliance with the Securities Act of
1933, as amended, and any other applicable securities laws, or pursuant to
applicable exemptions from the aforementioned laws.
(b) Neither the Seller nor any person acting on its behalf
has offered the Stock to Buyer by means of general or public solicitation or
general or public advertising, such as newspaper or magazine advertisements, by
broadcast media, or at any seminar or meeting whose attendees were solicited by
such means.
(c) Buyer has reviewed this Agreement, including all
Schedules, and acknowledges it is experienced in evaluating and investing in
companies similar to the Companies, can bear the economic risk of purchasing
the Stock, including a complete loss of the investment, for an indefinite
period of time, and has enough knowledge and experience in financial and
business matters to evaluate the merits and risks of its purchase of stock in
reliance upon the representations and warranties of the Buyer given hereunder.
Buyer acknowledges that it has received or been given access to all information
Buyer considers necessary or appropriate for evaluating its investment in the
Stock. Buyer has, to Buyer's knowledge, been given the opportunity to ask
questions and to receive answers from Seller and all personnel of the
Companies, regarding the terms and conditions of this Agreement, the Schedules
and the Companies' business and financial affairs and has had the opportunity,
to Buyer's knowledge, to obtain from Seller or the Companies any information in
the possession of the Companies or the Seller, necessary to verify the accuracy
of the information furnished. Notwithstanding the foregoing, the Seller
acknowledges that Buyer, in making its decision to purchase the Stock, is
relying as a material inducement to such decision, upon the representations and
warranties of the Seller hereunder, and upon the Seller's obligation to
indemnify the Buyer under
-20-
<PAGE> 28
the circumstances described in Article VIII. The Seller acknowledges that none
of Buyer's representations under this subsection (c), or elsewhere in this
Agreement, or any investigation by Buyer, (or failure to investigate by Buyer),
of the business and affairs of the Companies, shall in any way diminish or
obviate any of the representations, warranties, covenants or agreements of
Seller hereunder, or affect in any way Buyer's rights under Article VIII of
this Agreement.
(d) Buyer consents, agrees and acknowledges that the
certificate or certificates representing the Stock will be inscribed with the
following legend, or another legend to the same effect, and agrees to the
restrictions set forth therein:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any other jurisdiction, in
reliance upon exemptions from the registration requirements of
such laws. The shares represented by this certificate may not
be sold or otherwise transferred, nor will any assignee or
endorsee hereof be recognized as an owner of the shares by the
issuer unless: (i) a registration statement of the Securities
Act of 1933 and other applicable securities laws with respect
to the shares and the transfer shall then be in effect; or (ii)
in the opinion of counsel satisfactory to the issuer, the
shares are transferred in a transaction which is exempt from
the registration requirements of such laws.
3.5 Pending Actions. There are no actions, suits, claims or
proceedings pending, or to the knowledge of Buyer, threatened against Buyer or
any of its subsidiary companies at law or in equity or by any governmental
agency or instrumentality, domestic or foreign, which materially adversely
affect or are likely to materially adversely affect, (i) Buyer's financial
condition, or (ii) Buyer's right or ability to carry on its business
substantially as now conducted, considering such condition in business as being
the condition in business of Buyer and its subsidiary companies taken as a
whole.
3.6 Capital Stock. The authorized capital stock of Buyer consists
of 30,000,000 shares of common stock, no par value per share, and 5,000,000
shares of preferred stock, no par value. As of the date of this Agreement,
15,254,134 shares of common stock are outstanding and no shares of preferred
stock of the Buyer are outstanding. All the outstanding shares of the common
stock have been duly and validly authorized and issued and are fully paid and
non-assessable. Except for options described on Schedule 3.6 annexed hereto,
there are no outstanding subscriptions, contracts, conversion privileges,
options, warrants, calls or other rights obligating Buyer to issue, sell or
otherwise dispose of, or to purchase, redeem or otherwise acquire any shares of
capital stock of Buyer, other than in connection with this Agreement. The
shares of common stock of Buyer to be issued in connection with this Agreement,
will, upon such issuance and delivery to the recipients designated under the
terms of this Agreement, be duly authorized, validly issued, fully paid and
non-assessable, and free of any preemptive rights.
-21-
<PAGE> 29
3.7 Absence of Changes. Except as set forth on Schedule 3.7 annexed
hereto, and except as otherwise set forth in the Buyer's Proxy Statement, 10-K
and 10-Q's (each as defined in Section 10.4 hereof) (collectively, the "SEC
Documents") since September 30, 1997 there has not been (i) any material change
in the financial condition, assets, liabilities, business or prospects of the
Buyer, (ii) any material damage, destruction, or loss, not fully covered by
insurance, affecting the properties or business of the Buyer, or (iii) any
other event or condition that, individually or in the aggregate, has been
materially adverse in relation to the financial condition, business or
prospects of the Buyer.
3.8 Accuracy of SEC Documents. The financial statements and
schedules of Buyer contained in the SEC Documents (or incorporated therein by
reference) were prepared in accordance with generally accepted accounting
principles, consistently applied, except as noted therein and, except as set
forth in the SEC Documents, fairly present the information purported to be
shown therein. Each such SEC Document did not, on the date of its mailing (in
the case of the Proxy Statement) or the date of its filing with the SEC (in the
case of the 10-K and 10-Q's) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading. The Buyer has filed all reports with the SEC required to
be so filed by it since December 31, 1996.
3.9 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Buyer is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
ARTICLE IV
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and
the Closing Date:
4.1 Operation in Ordinary Course. From the date hereof to the
Closing Date, Seller shall cause each Company to, and each Company shall, (i)
conduct its business only in the ordinary course and in substantially the same
manner as conducted at the date hereof, (ii) use its reasonable best efforts to
preserve its business organization intact and to retain the services of its
present officers, key employees, purchasing and sales personnel and
representatives, (iii) use its reasonable best efforts to preserve favorable
relations with its employees, customers, suppliers and others having business
relations with it, (iv) use its reasonable best efforts to comply with all
laws, ordinances and regulations applicable to it in the conduct of its
business, (v) not enter into, amend in any material respect or terminate any
lease, contract or agreement, and (vi) conduct its business in such a manner
that the representations and warranties contained in Article II shall continue
to be true and correct on and as of the Closing Date as if made on and as of
the Closing Date.
-22-
<PAGE> 30
4.2 Notice of Events. The Seller shall promptly notify the Buyer of
(i) any event, condition or circumstance occurring from the date hereof through
the Closing Date that would constitute a violation or breach of this Agreement,
(ii) any event, occurrence, transaction or other item which would have been
required to have been disclosed on any Schedule or statement delivered
hereunder, had such event, occurrence, transaction or item existed on the date
hereof, other than items arising in the ordinary course of business which would
not render any representation or warranty of the Seller inaccurate or
misleading, and (iii) any lawsuits, claims, proceedings or investigations which
after the date hereof are threatened or commenced against Seller or against
either of the Companies or any of their respective officers, directors,
employees, consultants, agents or shareholders with respect to the affairs of
such Company.
4.3 Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, the Seller shall not take, and Seller shall
cause each of the Companies to refrain from taking, any action to directly or
indirectly encourage, initiate or engage in discussions or negotiations with,
or provide any information to, any corporation, partnership, person, or other
entity or group, other than Buyer, concerning the merger of either Company with
any other entity, the purchase and sale of the assets and properties of either
Company, the purchase and sale of the Stock, or any transaction similar to the
foregoing involving either of the Companies or Seller.
4.4 Examinations and Investigations. Prior to the Closing Date,
Buyer shall be entitled, through its employees and representatives, including,
without limitation, its counsel, Smith, Gambrell & Russell, LLP, and Buyer's
accountants, to make such investigation of the assets, properties, business and
operations of the Company, and such examination of the books, records and
financial condition of the Companies as Buyer wishes. Any such investigation
and examination shall be conducted at reasonable times and under reasonable
circumstances and Seller shall cause the Companies to cooperate fully therein.
No investigation by Buyer (or failure to conduct such an investigation) shall
diminish or obviate any of the representations, warranties, covenants or
agreements of Seller under this Agreement, or Buyer's rights under Article VIII
of this Agreement. In order that Buyer may have full opportunity to make such
business, accounting and legal review, examination or investigation as it may
wish of the business and affairs of the Companies, Seller shall furnish, and
shall cause each Company to furnish, the representatives of Buyer during such
period with all such information and copies of such documents concerning the
affairs of such Company as such representatives may reasonably request and
cause its officers, employees, consultants, agents, accountants and attorneys
to cooperate fully with such representatives in connection with such review and
examination. If this Agreement terminates, Buyer, its employees and
representatives shall keep confidential and shall not use in any manner any
information or documents obtained from either Company or the Seller concerning
their respective assets, properties, business and operations, unless readily
ascertainable from public or published information, or trade sources, or
subsequently developed by Buyer independent of any investigation of the
Companies, or received from a third party not under an obligation to the
Companies or Seller to keep such information confidential. If this Agreement
terminates, any documents obtained from Seller or either of the Companies shall
be returned.
-23-
<PAGE> 31
4.5 Affiliate Indebtedness Owed to the Company. At or prior to the
Closing, the Seller shall, and shall cause each Affiliate of the Seller to, pay
to the Companies any amounts owed by such person to either Company and any
amounts owed by Seller or any such Affiliate to any other person if such
indebtedness is guaranteed by, or secured by any of the assets or properties
of, either Company.
4.6 Affiliate Indebtedness Owed by the Company. Except as described
in Schedule 4.6, any and all indebtedness of either Company to Seller, and any
Affiliate of the Seller and any director, officer or employee of any of the
foregoing (including all intercompany accounts) shall be repaid or contributed
to the capital of such Company as of the Closing Date.
4.7 Release of Guaranties. The Buyer shall use its commercially
reasonable best efforts to secure the release of Seller from any guaranties
entered into by Seller or his wife on behalf of either of the Companies,
contingent upon the Closing (which efforts shall include, if necessary,
offering to substitute Buyer as guarantor of the obligations subject to such
guaranties).
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE
The obligation of the Buyer to enter into and complete the Closing is
subject, at Buyer's option, to the fulfillment on or prior to the Closing Date
of the following conditions, any one or more of which may be waived by Buyer
only in writing:
5.1 Representations and Covenants. The representations and
warranties of Seller contained in this Agreement shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. Seller shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by the Seller on or prior to the
Closing Date. The Seller shall deliver to the Buyer a certificate dated the
Closing Date to such effect.
5.2 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the transactions contemplated by this Agreement or
to seek damages or a discovery order in connection with such transactions, or
that has or could reasonably be expected to have a materially adverse effect on
the assets, properties, business, operations or financial condition of either
of the Companies.
5.3 Cancellation of Options. On or prior to the Closing Date, all
holders of options to acquire RFS common stock shall have agreed to cancel such
options in exchange for Buyer's agreement to issue to such holders, options to
acquire common stock of Buyer as described in Section 11.3 hereof.
-24-
<PAGE> 32
5.4 Lease. RFS shall have entered into a Sublease with KEE
Holdings, LLC for the premises located at 5529 NW Five Oaks Drive, Hillsboro,
Oregon ("Premises") in the form attached hereto as Exhibit B (the "Sublease"),
and Volkswagen of America, Inc., the landlord for the master lease of the
Premises ("Landlord") shall have executed and delivered to RFS and Buyer the
Consent and Estoppel Agreement attached hereto as Exhibit C (the "Estoppel
Agreement").
5.5 Release Agreement. The Seller shall have executed and delivered
to the Buyer a Release Agreement in the form attached hereto as Exhibit D.
5.6 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation
of the Closing and the continued operation of the business of the Companies
shall have been obtained.
5.7 Third-Party Consents. All consents, permits, waivers and
approvals from parties to material contracts or other agreements with either of
the Companies or with Seller that may be required in connection with the
performance by the Seller of its obligations under this Agreement or the
continuance of such contracts or other agreements with either of the Companies
without material modification after the Closing shall have been obtained (with
satisfactory written evidence thereof, and with recordable form where
necessary, to be furnished to the Buyer at the Closing).
5.8 Transfer Taxes. Seller shall have paid, or caused to be paid,
all stock transfer and other taxes, if any, required to be paid in connection
with the sale and delivery to Buyer of the Stock, and shall have caused all
appropriate stock transfer tax stamps to be affixed to the certificates
representing the Stock.
5.9 Estoppel Certificates. Buyer shall have received such estoppel
certificates from parties to any or all of the Leases, as Buyer may reasonably
request.
5.10 No Material Adverse Change. Prior to the Closing Date, there
shall be no material adverse change in the assets or liabilities, the business
or condition, (financial or otherwise) of either of the Companies or their
respective employees or customers regardless of reason, including, but not
limited, to those changes that are as a result of any legislative or regulatory
change, the announcement of the transactions described herein, revocation of
any license or rights to do business, failure to obtain any environmental
permits at the normal time or in the manner applied for by the Companies, fire,
explosion, accident, casualty, labor trouble, flood, riot, storm, condemnation
or act of God or other public force or otherwise. Seller shall have delivered
to Buyer a certificate, dated the Closing Date, to such effect.
5.11 Books and Records. Buyer shall have received the minute books,
stock certificate books, stock transfer books, corporate seals, books of
account and all books, papers, records, correspondence and instruments of, or
relating to, each of the Companies and their respective businesses.
-25-
<PAGE> 33
5.12 Seller Employment Agreement. Simultaneously with the Closing of
the transactions contemplated hereby, Seller shall have executed and delivered
to the Buyer an Employment Agreement in the form attached hereto as Exhibit E
hereto.
5.13 Non-Compete Agreement. Simultaneously with the Closing of the
transactions contemplated hereby, the Seller shall have executed and delivered
to the Company an Agreement Ancillary to Sale of Business in substantially the
form attached as Exhibit F hereto.
5.14 Silicon Valley Release. Silicon Valley Bank shall have released
the Stock from its pledge and security interest, provided Buyer elects to cause
RFS to pay off the debt to Silicon Valley Bank as provided in Section 7.9
below.
5.15 Good Standing Certificates, Etc. Seller shall have delivered
all certified resolutions, certificates, documents or instruments with respect
to each Company's corporate existence and authority as the Buyer may have
reasonably requested prior to the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE
The obligation of the Seller to enter into and complete the Closing is
subject, at Seller's option, to the fulfillment of the following conditions,
any one or more of which may be waived by Seller only in writing:
6.1 Representations and Covenants. The representations and
warranties of Buyer contained in this Agreement shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. Buyer shall have performed and complied
with in all material respects all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. Buyer shall deliver to Seller a certificate dated the Closing Date to
such effect signed by an executive officer of Buyer.
6.2 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the transactions contemplated hereby, or to seek
damages or a discovery order in connection with such transaction, or that has
or could reasonably be expected to have a materially adverse effect on the
assets, properties, business, operations or financial condition of Buyer.
6.3 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation
of the Closing and the continued operation of the business of the Companies
shall have been obtained.
-26-
<PAGE> 34
6.4 Resolutions. There shall have been delivered to the Seller a
copy of the resolutions duly adopted by the board of directors of Buyer,
certified accurate by an executive officer of Buyer as of the Closing Date,
authorizing and approving the execution and delivery by Buyer of this
Agreement, and the consummation by the Buyer of the transactions contemplated
hereby.
6.5 Good Standing Certificates, etc. Buyer shall have delivered all
such certified resolutions, certificates, documents or instruments with respect
to Buyer's corporate existence and authority as Seller's counsel may have
reasonably requested prior to the Closing Date.
6.6 Seller Employment Agreement. Simultaneously with the Closing of
the transactions contemplated hereby, the Buyer shall have executed and
delivered to Seller an Employment Agreement in the form attached hereto as
Exhibit E.
6.7 Lease. RFS and KEE Holdings, LLC shall have entered into the
Lease and the Landlord shall have executed and delivered the Estoppel Agreement
to RFS and Buyer.
ARTICLE VII
ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which
shall be conditioned on completion of all the others and all of which shall be
deemed to have taken place simultaneously:
7.1 Stock Certificates. Seller shall deliver to Buyer stock
certificate(s) representing all of the Stock, duly endorsed in blank or
accompanied by stock powers duly executed in blank, in proper form for
transfer, in accordance with the terms of Section 1.1 of this Agreement.
7.2 Purchase Price. Buyer shall deliver to Seller the Purchase
Price in accordance with the terms of this Agreement, including the Cash
Consideration, the Common Stock Consideration, the Option and the Note.
7.3 Opinion of Counsel to the Seller. The Seller shall deliver to
Buyer an opinion of Tarlow, Jordan and Schrader, counsel to Seller, dated the
Closing Date, substantially in the form attached hereto as Exhibit G.
7.4 Opinion of Counsel to the Buyer. Buyer shall deliver to Seller
an opinion of Smith, Gambrell & Russell, LLP, counsel to Buyer, dated the
Closing Date, substantially in the form attached hereto as Exhibit H.
7.5 Resignations of Directors and Officers. Seller shall deliver
signed resignations of any director and officer of the Company requested by
Buyer dated the Closing Date.
-27-
<PAGE> 35
7.6 Closing Certificate of the Seller. Seller shall deliver to
Buyer a closing certificate signed by Seller, dated the Closing Date, in a form
reasonably satisfactory to the Buyer.
7.7 Closing Certificate of the Buyer. Buyer shall deliver to Seller
a closing certificate signed by an executive officer of Buyer, dated the
Closing Date, in a form reasonably satisfactory to Seller.
7.8 Other Documents and Certificates. Buyer and Seller shall
deliver, or with respect to Seller cause the Companies to deliver,
certificates, agreements, permits, approvals and other documents reasonably
requested by counsel for Buyer or Seller, as the case may be, to satisfy, or to
evidence the satisfaction of, as the case may be, the conditions precedent to
Closing set forth in Articles V and VI.
7.9 Payoff of Silicon Valley Debt. Simultaneously with the Closing,
at Buyer's option, either (i) Buyer shall contribute to the capital of RFS
sufficient funds for RFS to pay off all RFS indebtedness to Silicon Valley Bank
and RFS shall pay off such indebtedness; or (ii) Seller shall transfer the
Stock to Buyer subject to the pledge and security interest of Silicon Valley
Bank.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 Survival of Representations and Warranties. All of the
representations and warranties of Seller and Buyer contained in this Agreement
shall survive the Closing for the following periods:
(a) indefinitely, with respect to the representations and
warranties contained in Sections 2.2, 2.3, 2.4, 2.13, 3.4, 3.6 and Article X.
(b) for a period of three years after the Closing Date with
respect to the representations and warranties contained in Sections 2.17, 2.23,
2.24 and 2.26.
(c) for a period of 18 months following the Closing Date
with respect to all other representations and warranties.
provided, however, that any representation, warranty, covenant or agreement
that would otherwise expire in accordance with subsections (b) or (c) of this
Section 8.1 shall survive to the extent it is the subject of a valid Notice of
Claim given prior to the date of expiration pursuant to Section 8.4, solely for
purposes of the matters described in such Notice of Claim and until such Notice
of Claim is resolved.
8.2 Seller's Indemnity Agreement. Subject to the provisions of
Section 8.6 hereof, the Seller shall defend, indemnify and hold harmless the
Buyer and the Companies (and their respective directors, officers, employees,
agents, affiliates, successors and assigns) from and against any and all
-28-
<PAGE> 36
direct or indirect requests, demands, claims, payments, defenses, obligations,
recoveries, deficiencies, fines, penalties, interest, assessments, actions,
liens, causes of action, suits, pro ceedings, judgments, losses, damages
(including without limitation punitive, exemplary or consequential damages,
lost income and profits, interruptions of business, liabilities, costs, and
expenses of any kind (including without limitation (i) interest, penalties and
reasonable attorneys' fees and expenses, (ii) attorneys' fees and expenses
necessary to enforce their rights to indemnification hereunder, and (iii)
consultants' fees and other costs of defending or investigating any claim
hereunder), and interest on any amount payable as a result of the foregoing,
whether accrued, absolute, contingent, known, unknown, or otherwise as of the
Closing Date or thereafter asserted against, imposed upon or incurred by Buyer,
either Company or any of their respective directors, officers, employees,
agents, affiliates, successors or assigns (a "Loss of Buyer") by reason of,
resulting from, arising out of, based upon, awarded or asserted against in
respect of or otherwise in respect of:
(a) any breach of any representation and warranty contained
in this Agreement (without giving effect to any materiality qualifications
contained in any such representations or warranties) or any misrepresentation
in or omission on the part of Seller contained in any certificate furnished or
to be furnished to Buyer by Seller pursuant to this Agreement;
(b) any breach or nonfulfillment on the part of Seller of
any covenant contained in this Agreement;
(c) any failure of the Seller to transfer the Stock to
Buyer, free and clear of all liens, encumbrances, restrictions, claims and
obligations (other than the security interest of Silicon Valley Bank, if Buyer
elects not to cause RFS to pay off its indebtedness to Silicon Valley Bank as
provided in Section 7.9(ii));
(d) the failure of Seller to obtain, prior to the Closing
Date, any consents, approvals and waivers of governmental agencies or entities,
lessors, landlords, suppliers, and other third parties as may be necessary to
permit the consummation of the transactions contemplated hereby and to permit
Buyer to continue to operate the business of the Company in the manner
presently conducted after the Closing Date;
(e) any tax, including any interest and penalties thereon,
claimed to be due from either of the Companies with respect to any period prior
to the Closing Date, and claimed to be due from the Seller for any period;
(f) any claims with respect to brokers' or finders' fees
due with respect to the transactions contemplated herein and alleged to arise
from any contract, agreement or arrangement entered into by the Seller or the
Companies; and
(g) Any default by KEE Holdings, Inc. under the master
lease for the Premises between KEE Holdings, Inc. and the Landlord.
-29-
<PAGE> 37
8.3 Buyer's Indemnity Agreement. Buyer shall defend, indemnify and
hold harmless Seller from and against any and all direct or indirect requests,
demands, claims, payments, defenses, obligations, recoveries, deficiencies,
fines, penalties, interest, assessments, actions, liens, causes of action,
suits, proceedings, judgments, losses, damages (including without limitation
punitive, exemplary or consequential damages and lost income and profits and
interruptions of business), liabilities, costs, and expenses of any kind
(including without limitation (i) interest, penalties and reasonable attorneys'
fees and expenses (ii) attorneys' fees and expenses necessary to enforce their
rights to indemnification hereunder, and (iii) consultants' fees and other
costs of defending or investigating any claim hereunder, and interest on any
amount payable as a result of the foregoing) whether accrued, absolute,
contingent, known, unknown or otherwise as of the Closing Date or thereafter
asserted against, imposed upon or incurred by Seller or its respective
representatives, agents or assigns, (a "Loss of Seller") by reason of,
resulting from, arising out of, based upon, awarded or asserted against in
respect of or otherwise in respect of:
(a) any breach of any representation and warranty or
nonfulfillment of any covenant or agreement on the part of the Buyer contained
in this Agreement (without giving effect to any materiality qualifications
contained in any such representations or warranties), or any misrepresentation
in or omission from or nonfulfillment of any covenant on the part of the Buyer
contained in any certificate furnished or to be furnished to Seller by Buyer
pursuant to this Agreement;
(b) any guaranties entered into by Seller or his wife on
behalf of the Companies which are not released prior to Closing; or
(c) any claims with respect to brokers' or finders' fees
due with respect to the transactions contemplated herein and alleged to arise
from any contract, agreement or arrangement entered into by the Buyer.
8.4 Indemnification Procedure.
(a) Upon obtaining knowledge thereof, the party to be
indemnified hereunder (the "Indemnitee") shall promptly notify the indemnifying
party hereunder (the "Indemnitor") in writing of any damage, claim, loss,
liability or expense or other matter which the Indemnitee has determined has
given or could give rise to a claim for which indemnification rights are
granted hereunder (such written notice referred to as the "Notice of Claim").
The Notice of Claim shall specify, in all reasonable detail, the nature and
estimated amount of any such claim giving rise to a right of indemnification,
to the extent the same can reasonably be estimated. Any failure on the part of
an Indemnitee to give timely notice to the Indemnitor of a claim shall not
affect the right of the Indemnitee to obtain indemnification from the
Indemnitor with respect to such claim unless the Indemnitor is actually harmed
by such failure to notify, and only to the extent of such actual harm.
(b) With respect to any matter set forth in a Notice of
Claim relating to a third party claim the Indemnitor shall defend, in good
faith and at its expense, any such claim or demand, and
-30-
<PAGE> 38
the Indemnitee, at its expense, shall have the right to participate in the
defense of any such third party claim. So long as Indemnitor is defending, in
good faith, any such third party claim, the Indemnitee shall not settle or
compromise such third party claim. The Indemnitee shall make available to the
Indemnitor or its representatives all records and other materials reasonably
required by them for use in contesting any third party claim and shall
cooperate fully with the Indemnitor in the defense of all such claims. If the
Indemnitor does not defend any such third party claim or if the Indemnitor does
not provide the Indemnitee with prompt and reasonable assurances that the
Indemnitor will satisfy the third party claim, the Indemnitee may, at its
option, elect to defend any such third party claim, at the Indemnitor's
expense. An Indemnitor may not settle or compromise any claim without obtaining
a full and unconditional release of the Indemnitee, unless the Indemnitee
consents in writing to such settlement or compromise. Notwithstanding the
foregoing, if there is a reasonable probability that a third party claim for
which an Indemnitee has indemnification rights against an Indemnitor hereunder
will materially and adversely affect the Indemnitee other than as a result of
money damages or other payments, Indemnitee shall be entitled to conduct the
defense of such claim at Indemnitor's expense.
8.5 Set-off. Buyer shall have the right to set-off and apply
against all amounts due and owing Seller under this Agreement, and under any
other agreement between Buyer and Seller, including without limitation the Note
(other than Seller's Base Salary as defined in Seller's Employment Agreement
with Buyer), all sums in respect of which Seller is finally adjudicated liable
pursuant to Section 8.2 hereof, such right of set-off to be in addition to and
not in lieu of or an election against any and all other remedies available to
the Buyer under this Agreement or at law or in equity.
8.6 Limitations on Liability of Seller and Buyer. Seller shall have
no liability with respect to Losses of Buyer subject to indemnification under
subparagraph 8.2 (a) until the total of all Losses of Buyer exceeds $50,000,
and then only for the amount by which such Losses of Buyer exceed such $50,000
threshold; provided, however, that such $50,000 threshold shall not apply to
any Losses of Buyer subject to indemnification under Section 8.2(a) which Buyer
can demonstrate arose from a knowing and intentional breach of Seller's
representations or warranties. In no event shall the aggregate liability of
either the Seller or the Buyer under this Article VIII exceed an aggregate with
respect to each such party of $12,000,000; provided, however, that to the
extent Seller's liability hereunder exceeds the Cash Consideration paid to
Seller pursuant to Section 1.2(a), and any of the shares of Common Stock
Consideration are not, at the time payment is due from Seller hereunder,
readily tradeable by Seller on the public securities markets, Seller may
discharge his liability for such amounts in excess of the Cash Consideration by
transferring shares of Common Stock Consideration, for which Seller shall be
credited $21.685 per share.
-31-
<PAGE> 39
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated prior to the
Closing only as follows:
(a) at the election of Seller, if any one or more of the
conditions to the obligations of Seller to close as described in Article VI has
not been fulfilled as of the Closing Date, or if the Buyer has breached in any
material respect any representation, warranty, covenant or agreement contained
in this Agreement;
(b) at the election of Buyer, if any one or more of the
conditions to the obligations of Buyer to close as described in Article V has
not been fulfilled as of the Closing Date, or if Seller has breached in any
material respect any representation, warranty, covenant or agreement contained
in this Agreement;
(c) at the election of Seller or Buyer, if any legal
proceeding is commenced or threatened by any governmental or regulatory body or
other person directed against the consummation of the Closing or any other
transaction contemplated under this Agreement and either Seller or Buyer, as
the case may be, reasonably and in good faith deem it impractical or
inadvisable to proceed in view of such legal proceeding or threat thereof;
(d) at any time on or prior to the Closing Date, by mutual
written consent of the parties hereto;
(e) at any time after November 30, 1997, at the election of
either the Buyer or the
Seller; or
(f) at any time prior to the Closing Date, by either Buyer
or Seller upon written notice to the other party, if the closing bid price for
Buyer's common stock as reported in the consolidated transaction reporting
system on the NASDAQ National Market Reporting System is less than $15 per
share and remains at less than $15 per share through the date such notice of
termination is given.
9.2 Survival. If this Agreement is terminated pursuant to Section
9.1, this Agreement shall become void and of no further force and effect,
except for the provisions of Section 4.4 relating to the obligation of the
Buyer to keep certain information confidential, Section 12.4 (relating to
expenses), Section 12.1 (relating to publicity), and none of the parties hereto
shall have any liability in respect of such termination, except that any party
shall be liable to the extent that failure to satisfy the conditions of Article
V, VI or VII results from such party acting in bad faith or from the
intentional or willful violation of the representations, warranties, covenants
or agreements of such party under this Agreement.
-32-
<PAGE> 40
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SELLER
IN CONNECTION WITH OFFER OF BUYER'S STOCK
Seller represents and warrants to the Buyer as follows:
10.1 Accredited Investor. Seller is an "accredited investor" as such
term is defined under Rule 501 under the federal Securities Act of 1933, as
amended (the "Securities Act"), and is an individual with his principal
residence, and the location in which it entered into and accepted this
Agreement, in Oregon.
10.2 Acquisition for Investment. The shares of Buyer's common stock
which Seller may acquire pursuant to the terms of this Agreement (the
"Acquisition Shares") are being acquired by Seller solely for the account of
Seller, for investment and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act. Neither the Buyer nor any person acting on its behalf has
offered the Acquisition Shares to Seller by means of general or public
solicitation or general or public advertising, such as newspaper or magazine
advertisements, by broadcast media, or at any seminar or meeting whose
attendees were solicited by such means.
10.3 Unregistered Securities. Seller understands and acknowledges
that the Acquisition Shares have not been registered under the Securities Act
or under the Oregon Securities Law of 1973, as amended (the "Oregon Act") or
the 'blue sky' laws of any other state, and will not at the time of issuance
and delivery of such shares as contemplated by the terms of this Agreement have
been so registered, in reliance upon certain exemptions from the registration
and prospectus delivery requirements of the Securities Act and the Oregon Act.
Seller understands that the Acquisition Shares so acquired by Seller must be
held by Seller indefinitely, and that Seller must therefore bear the economic
risk of such investment indefinitely, unless a subsequent disposition thereof
is registered under the Securities Act and the Oregon Act, or is exempt from
such registration. Seller further understands that the availability of the
exemptions described in the first sentence of this Section depend upon, among
other things, the bona fide nature of Seller's investment intent expressed
herein, upon which the Buyer hereby expressly relies. In addition to the
Transfer Prohibition described in Section 1.2(a) with respect to the Common
Stock Consideration, Buyer will make no transfer or assignment of any of the
Acquisition Shares except in compliance with the Securities Act of 1933, as
amended, and any other applicable securities laws, or pursuant to applicable
exemptions from the aforementioned laws. Seller consents, agrees and
acknowledges that the certificate or certificates representing the Acquisition
Shares will be inscribed with the following legend, or another legend to the
same effect, and agrees to the restrictions set forth therein:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any other jurisdiction, in
reliance upon exemptions from the registration requirements of
such laws. The shares represented by this certificate may not
be sold or
-33-
<PAGE> 41
otherwise transferred, nor will any assignee or
endorsee hereof be recognized as an owner of the shares
by the issuer unless: (i) a registration statement of
the Securities Act of 1933 and other applicable
securities laws with respect to the shares and the
transfer shall then be in effect; or (ii) in the
opinion of counsel satisfactory to the issuer, the
shares are transferred in a transaction which is exempt
from the registration requirements of such laws.
10.4 Disclosure.
(a) Seller has previously been furnished by the
Buyer, and hereby acknowledges that Seller has had the opportunity to review
(i) the definitive Proxy Statement for the Buyer's Annual Meeting of
Shareholders held September 11, 1997 (the "Proxy Statement"); (ii) the Buyer's
Annual Report to Shareholders for the fiscal year ended December 31, 1996 (the
"ARS"); (iii) the Buyer's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "10-K") as filed with the United States Securities and
Exchange Commission (the "SEC") pursuant to the requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"); (iv) the Buyer's quarterly
reports on Form 10-Q for the fiscal quarters ended March 31, 1997 and June 30,
1997 respectively (the "10-Q's"), as filed with the SEC pursuant to the
requirements of the 1934 Act; (v) the Buyer's Prospectus dated July 16, 1997;
and (vi) the Buyer's Current Reports on Form 8-K dated May 23, 1997 and May 30,
1997, each as amended.
(b) Seller has been given a reasonable opportunity
to request copies of any documents or other exhibits which are listed as
exhibits therein to any of the Proxy Statement, the 10-K or 10-Qs and 8-Ks, and
if requested, copies of such documents or other exhibits have been provided to
Seller a reasonable time prior to Seller's execution of this Agreement.
(c) Seller has been given the opportunity, at a
reasonable times prior to the execution of this Agreement, to ask questions of
the executive officers and other personnel of the Buyer concerning the terms
and conditions of such seller's acquisition of the Acquisition Shares in the
transactions contemplated by this Agreement, and concerning the subject matter
of the representations and warranties of the Buyer contained herein, as well as
to obtain any additional information which the Buyer possesses or can obtain
without unreasonable effort or expense that is necessary to verify the
information contained in the representations and warranties of Buyer set forth
in this Agreement or the information contained in the documents and reports
described in subparagraph (a) of this Section. Notwithstanding the foregoing,
the Buyer acknowledges that Seller, in making its decision to purchase the
Stock, is relying as a material inducement to such decision, upon the
representations and warranties of the Buyer hereunder, and upon Buyer's
obligation to indemnify the Seller under the circumstances described in Article
VIII. The Buyer acknowledges that none of the Seller's representations under
this subsection (c) or elsewhere in this Agreement, or any investigation by
Seller (or failure to investigate by Seller) shall in any way diminish or
deviate any of the representations, warranties, covenants or agreements of
Buyer hereunder, or affect in any way Seller's rights under Article VIII of
this Agreement.
ARTICLE XI
CERTAIN POST-CLOSING MATTERS
11.1 [INTENTIONALLY OMITTED]
11.2 Certain Securities Matters. The Buyer hereby agrees to:
-34-
<PAGE> 42
(a) Make and keep public information available concerning
the Buyer, as those terms are understood and defined in Rule 144 under the
Securities Act;
(b) File with the SEC in a timely manner all reports and
other documents required of the Buyer under the Securities Act and the Exchange
Act; and
(c) So long as Seller owns any Acquisition Shares, furnish
to Seller forthwith upon request a written statement by the Buyer as to its
compliance with the reporting requirements of said Rule 144, and of the
Securities Act and the 1934 Act, (i) an opinion of counsel addressed to the
Buyer's transfer agent necessary to the effect the transfer of any and all
Acquisition Shares sold by the Seller; and (ii) a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company, and such other reports and documents so filed as the
-35-
<PAGE> 43
Seller may reasonably request in availing itself of any rule or regulation of
the SEC allowing the Seller to sell any such Acquisition Shares without
registration.
11.3 Options. Within 30 days following the Closing Date, Buyer shall
offer to each holder of options to acquire common stock of RFS ("RFS Options")
the right to receive options to purchase common stock of Buyer ("Buyer
Options") in the amounts and on the terms attached as Schedule 11.3 annexed
hereto. The Buyer Options shall vest according to the same vesting schedule as
the RFS Options which are cancelled pursuant to Section 5.3 hereof.
11.4 Tax Matters.
(a) Each Company and the Seller will join with the Buyer in
making an election under Section 338(h)(10) of the Code (and any corresponding
election under applicable state, local or foreign Tax law) with respect to the
purchase and sale of the Stock hereunder (a "Section 338(h)(10) Election").
Seller will include any income, gain, loss, deduction or other Tax item
resulting from the 338(h)(10) Election on their Tax Returns to the extent
permitted by applicable law. Seller shall also pay any Tax imposed on either
Company attributable to the Section 338(h)(10) Election, including, without
limitation, (i) any Tax imposed under Section 1374 of the Code, (ii) any Tax
imposed under Reg. ss.1.338(h)(10)-1(e)(5) or (iii) any state, local or foreign
Tax imposed on either Company's gain, and Seller hereby agrees to indemnify
Buyer and the Companies from any adverse consequence arising out of any failure
to pay such Taxes. Seller also agrees to pay any Taxes and will, jointly and
severally, indemnify Buyer and the Companies against any Taxes imposed under
any state or local Tax law with respect to the purchase of the Stock hereunder
in the event that the state or local jurisdiction (i) does not recognize the
Section 338(h)(10) Election or (ii) does not apply its provision corresponding
to Section 338(h)(10) of the Code to the purchase of the Stock hereunder.
(b) Buyer, the Companies and Seller agree that the Purchase
Price and the liabilities of the Company (plus other relevant items) will be
allocated to the assets of the Company for all purposes (including Tax and
financial accounting) as shown on Schedule11.4(b) annexed hereto. Buyer, the
Companies and Seller will file all Tax Returns (including amended returns and
claims for refund) and information reports in a manner consistent with such
allocation.
(c) The Companies and Seller will not revoke the Companies'
election to be taxed as an S corporation within the meaning of Sections 1361
and 1362 of the Code. The Companies and Seller will not take or allow any
action that would result in the termination of the Company's status as a
validly electing S corporation within the meaning of Sections 1361 and 1362 of
the Code.
(d) Seller shall prepare or cause to be prepared and file
or cause to be filed all Tax Returns for the Companies for all periods ending
on or prior to the Closing Date which are to be filed after the Closing Date.
Seller shall permit Buyer to review and comment on each such Tax Return
described in the preceding sentence prior to filing and shall make such
revisions to such Tax Returns as may be reasonably requested by Buyer. To the
extent permitted by applicable law, Seller shall include any income, gain,
loss, deduction or other tax items for such periods on their Tax Returns in
-36-
<PAGE> 44
a manner consistent with the Schedule K-1s furnished by the Companies to the
Seller for such periods.
(e) (i) Buyer, the Companies and Seller shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section 11.4 and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the request of any other party) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Seller agrees (A) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Buyer or Seller, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the Buyer and the Companies reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
Buyer or Companies so request, the Seller shall allow the Buyer to take
possession of such books and records. (ii) Buyer and Seller further agree, upon
request, to use their reasonable best efforts to obtain any certificate or
other document from any governmental authority or any other person or entity as
may be necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, without limitation, with respect to the transactions contemplated
hereby).
(f) All tax sharing agreements or similar agreements, if
any, with respect to or involving Companies shall be terminated as of the
Closing Date and, after the Closing Date, the Companies shall not be bound
thereby or have any liability thereunder.
(g) All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the transfer of the Stock (including any
corporate-level gains tax triggered by the sale of the Stock and any similar
tax imposed in other states or subdivisions), shall be paid by Seller when due,
and Seller will, at his sole cost and expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
ARTICLE XII
MISCELLANEOUS
12.1 Publicity. Except as otherwise required by law or stock
exchange rules, none of the parties hereto shall issue any press release or
make any other public statement, in each case relating to or in connection with
or arising out of this Agreement or the matters contained herein, without
obtaining the prior written approval of all parties hereto as to the contents
and manner of presentation and publication thereof, which consent shall not be
unreasonably withheld.
12.2 Knowledge. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the
knowledge, information or belief of the Seller, Seller confirms
-37-
<PAGE> 45
that he has made due and diligent inquiry as to the matters that are the
subject of such representations and warranties.
12.3 Gender. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the identity of
the person or persons may require.
12.4 Expenses. The Buyer shall pay its expenses, including
the fees and disbursements of their respective counsel in connection with the
negotiation, preparation and execution of this Agreement and the consummation
of the transactions contemplated hereby. The Seller's expenses in connection
with the negotiation, preparation and execution of this Agreement and the
consummation of the transactions contemplated hereby, up to the limit of
$50,000, shall be borne by RFS. Any expenses of Seller in excess of such
$50,000 limit shall be borne by Seller.
12.5 Entire Agreement. This Agreement, including all
schedules and exhibits hereto, constitutes the entire agreement of the parties
with respect to the subject matter hereof, supersedes all prior agreements,
negotiations or letters of intent, and may not be modified, amended or
terminated except by a written instrument specifically referring to this
Agreement signed by each of the parties hereto.
12.6 Waivers and Consents. All waivers and consents given
hereunder shall be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereof by any other party shall be deemed a
waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar, on the part of the same or any
other party.
12.7 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given only if and when (i)
personally delivered or (ii) three (3) business days after mailing, postage
prepaid, by certified mail or (iii) when delivered (as evidenced by a receipt)
by a nationally recognized overnight delivery service, addressed in each case
as follows:
(a) If to the Seller to:
Kevin Eldredge
9730 N.W. Old Cornelius Pass Road
Hillsboro, Oregon 97124
with a copy in like manner to:
Tarlow, Jordan & Schrader, P.C.
P.O. Box 230669
Portland, Oregon 97281
Attention: Aaron J. Bell
-38-
<PAGE> 46
(b) If to the Buyer to
Radiant Systems, Inc.
1000 Alderman Drive
Alpharetta, Georgia 30202
Attn: John Heyman
with a copy in like manner to:
Smith, Gambrell & Russell, LLP
1230 Peachtree Street, NE
Suite 3100, Promenade II
Atlanta, Georgia 30309-3592
Attention: Richard G. Greenstein
Each party may change its address for the giving of notices and communications
to it, and/or copies thereof, by written notice to the other parties in
conformity with the foregoing.
12.8 Rights of Third Parties. Except for parties listed as
beneficiaries of the indemnification rights described in Article VIII, all
conditions of the obligations of the parties hereto, and all undertakings
herein, are solely and exclusively for the benefit of the parties hereto and
their respective successors and assigns, and no other person or entity shall
have standing to require satisfaction of such conditions or to enforce such
undertakings in accordance with their terms, or be entitled to assume that any
party hereto will refuse to consummate the purchase and sale contemplated
hereby in the absence of strict compliance with any or all thereof, and no
other person or entity shall, under any circumstances, be deemed a beneficiary
of such conditions or undertakings, any or all of which may be freely waived in
whole or in part, by mutual consent of the parties hereto at any time, if in
their sole discretion they deem it desirable to do so.
12.9 Headings. The Table of Contents and Article and Section
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
12.10 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Oregon.
12.11 Jurisdiction. Any judicial proceeding brought against any of
the parties to this Agreement on any dispute arising out of this Agreement or
any matter related hereto may be brought, in the case of claims brought against
Buyer, in the courts of the State of Georgia, or in the United States District
Court for the Northern District of Georgia, and in the case of claims brought
against Seller, in the courts of the State of Oregon, or in the United States
District Court for the District of Oregon, and, by execution and delivery of
this Agreement, each of the parties to this Agreement accepts for himself the
exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
-39-
<PAGE> 47
12.12 Parties in Interest. Prior to the Closing, Buyer may assign its
rights hereunder to any wholly-owned subsidiary of Buyer; provided, however,
that such assignment shall not relieve Buyer of any of Buyer's obligations
hereunder. After the Closing the Buyer may transfer and assign this Agreement
and its rights hereunder and under any agreement to be executed in connection
with the Closing, to any purchaser of, or other successor to, the business or
assets of the Company; provided, however, that such assignment shall not
relieve Buyer of any of Buyer's obligations hereunder. Except as expressly
stated above, this Agreement may not be transferred, assigned, pledged or
hypothecated by either party hereto, other than by operation of law or with the
consent of the other party. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
12.13 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
12.14 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
12.15 Arbitration.
(a) Any controversy or claim arising out of or relating to
this Agreement, the agreements to be entered into between or among the parties
hereto pursuant to this Agreement or the transactions contemplated hereby and
thereby, shall be submitted to and be finally resolves by arbitration pursuant
to the provisions of the United States Arbitration Act (9 U.S.C. ss. 1 et
seq.), to be conducted by Judicial Arbitration and Mediation Services, or its
successors ("JAMS"), with such arbitration to be held in a forum within the
jurisdiction against whom the claim has been brought or asserted in accordance
with the JAMS's commercial arbitration rules then in effect. Each party hereby
irrevocably agrees that service of process, summons, notices or other
communications related to the arbitration procedure shall be deemed served and
accepted by the other party if given in accordance with Section 12.7. The
arbitrators shall render a judgment of default against any party who fails to
appear in a properly noticed arbitration proceeding. The arbitration shall be
conducted by a panel of three arbitrators selected pursuant to JAMS rules. Any
award or decision rendered in such arbitration shall be final and binding on
both parties, and judgment may be entered thereon in any court of competent
jurisdiction if necessary.
-40-
<PAGE> 48
(b) Notwithstanding subsection (a) above to the contrary,
any party may seek temporary or preliminary injunctive relief against the other
party at any court or proper jurisdiction with respect to any and all
preliminary injunctive or restraining procedures pertaining to this Agreement
or the breach thereof, pending the outcome of any arbitration proceeding.
IN WITNESS WHEREOF, the parties have executed this agreement under seal
as of the date first above written.
BUYER
RADIANT SYSTEMS, INC.
By: /s/ John H. Heyman
---------------------------------------
Title: Executive Vice President
------------------------------------
Attest: /s/ Alon Goren
-----------------------------------
Title: Secretary
------------------------------------
[CORPORATE SEAL]
SELLER
/s/ Pamela A. Selis /s/ Kevin Eldredge (L.S.)
- ----------------------------- ------------------------------------
Witness Kevin Eldredge
