<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 24, 1998
OSAGE SYSTEMS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-22808 95-4374983
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
1661 East Camelback Road
Suite 245
Phoenix, AZ 85016
(Address of principal executive office)
Registrant's telephone number, including area code: (602) 274-1299
(Former name or former address, if changed since last report)
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF OPEN SYSTEM TECHNOLOGIES, INC.
On April 24, 1998, Osage Systems Group, Inc. completed the acquisition
of Open System Technologies, Inc. ("OST"). OST has been in the systems
integration business since 1992 and is headquartered in Pompano Beach, FL, with
a satellite software sales office in Melbourne, FL. OST installs open-system
computer products that provide businesses with comprehensive solutions for
Network Integration, Internet Access, System Security, Network and Systems
Management, including Enterprise-wide Backup. OST is a value-added reseller for
Sun Microsystems, Hewlett-Packard and Lawson Software. Lawson Software is a
provider of client-server accounting, human resources, materials management and
distribution management software and is a leader in web-based financial
applications. In 1997, OST was ranked by the South Florida Business Journal as
the 23rd fastest growing high-tech company and the 28th fastest growing company
in South Florida. OST employs 24 people and during its most recent fiscal year,
realized revenues of $11.9 million.
The OST acquisition was completed for a purchase price of $5.0 million;
payable $2.5 million in cash, $2.0 million in newly issued common shares priced
at $6.00 per share and $500,000 in a key employee retention program.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Acquired Business
It is impracticable at the time of the filing of this Current
Report to provide the historical financial information for OST required
by Regulation S-X. Accordingly, the Company will file the required
historical financial statements under cover of an Amendment to this
Current Report on Form 8-K as soon as practicable, but in any event,
not later than 60 days after the date on which this Current Report must
be filed with the Commission.
(b) Pro Forma Financial Statements of Businesses
It is impracticable at the time of the filing of this Current
Report to provide the pro forma financial information for OST required
by Regulation S-X. Accordingly, the Company will file the required pro
forma financial statements under cover of an Amendment to this Current
Report on Form 8-K as soon as practicable, but in any event, not later
than 60 days after the date on which this Current Report must be filed
with the Commission.
2
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(c) Exhibits (referenced to Item 601 of Regulation S-K).
2.9 Stock Purchase Agreement by and between Osage Systems Group, Inc. and
O. Jack Anderson
10.15 Consulting Agreement by and between Osage Systems Group, Inc. and O.
Jack Anderson
10.16 Noncompetition Agreement by and between Osage Systems Group, Inc. and
O. Jack Anderson
10.17 Registration Rights Agreement by and between Osage Systems Group, Inc.
and O. Jack Anderson
3
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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 thereunto duly authorized.
Dated: May 6, 1998 OSAGE SYSTEMS GROUP, INC.
BY: /s/ Jack R. Leadbeater
------------------------------
Jack R. Leadbeater
Chief Executive Officer
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page Number in
Number Rule 0-3(b)
(Referenced to Sequential
Item 601 of Numbering System
Reg. S-K) Where Exhibit Can
Be Found
<S> <C>
2.9 Stock Purchase Agreement by and between Osage Systems Group, Inc. and
O. Jack Anderson
10.15 Consulting Agreement by and between Osage Systems Group, Inc. and O.
Jack Anderson
10.16 Noncompetition Agreement by and between Osage Systems Group, Inc. and
O. Jack Anderson
10.17 Registration Rights Agreement by and between Osage Systems Group, Inc.
and O. Jack Anderson
</TABLE>
5
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EXHIBIT 2.9
<PAGE> 2
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
OSAGE SYSTEMS GROUP, INC.,
A DELAWARE CORPORATION
AND
O. JACK ANDERSON,
SOLE SHAREHOLDER OF OPEN SYSTEM TECHNOLOGIES, INC.,
A DELAWARE CORPORATION
APRIL 24, 1998
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Article Page
<S> <C>
ARTICLE I: SALE AND TRANSFER OF SHARES...........................................................................1
1.1 Sale and Purchase of the Shares......................................................................1
1.2 Consideration........................................................................................1
1.3 Adjustment Amount....................................................................................2
1.4 Establishment of Escrow Fund.........................................................................2
1.5 Establishment of Retention Plan for Key Employees....................................................3
ARTICLE II: CLOSING..............................................................................................3
2.1 Closing Date.........................................................................................3
2.2 Closing Transactions.................................................................................3
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER.......................................................5
3.1 Organization, Qualification and Status...............................................................6
3.2 Corporate Instruments and Records....................................................................6
3.3 Capitalization.......................................................................................6
3.4 Ownership of Shares..................................................................................7
3.5 No Subsidiary........................................................................................7
3.6 Authority of Shareholder.............................................................................7
3.7 No Violation.........................................................................................7
3.8 Financial Statements.................................................................................8
3.9 Absence of Undisclosed and Contingent Liabilities....................................................9
3.10 No Adverse Changes..................................................................................9
3.11 Guarantees..........................................................................................9
3.12 Tax Matters.........................................................................................9
3.13 Litigation.........................................................................................11
3.14 Leased Real Property...............................................................................11
3.15 Owned Tangible Personal Property...................................................................11
3.16 Condition of Buildings and Tangible Personal Property..............................................12
3.17 Accounts and Notes Receivable......................................................................12
3.18 Material Contracts.................................................................................12
3.19 Inventories .......................................................................................14
3.20 Purchase Commitments and Bids......................................................................14
3.21 Intentionally Omitted..............................................................................14
3.22 Banking and Personnel Matters......................................................................14
3.23 Labor and Employment Matters.......................................................................15
3.24 Termination of Business Relationships..............................................................15
3.25 Customers..........................................................................................16
3.26 Product Warranties.................................................................................16
</TABLE>
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<TABLE>
<S> <C>
3.27 Insurance..........................................................................................16
3.28 Compliance with Laws...............................................................................16
3.29 Licenses and Permits...............................................................................17
3.30 No Interest in Suppliers...........................................................................17
3.31 All Business Conducted by the Company..............................................................17
3.32 Environmental Matters..............................................................................17
3.33 Intellectual Property Matters......................................................................18
3.34 Investment Intent..................................................................................19
3.35 Disclosure.........................................................................................20
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................21
4.1 Organization and Qualification......................................................................21
4.2 Corporate Instruments and Records...................................................................21
4.3 Authorization; Valid and Binding Obligation.........................................................21
4.4 Litigation..........................................................................................22
4.5 Stock Consideration.................................................................................22
4.6 Capitalization......................................................................................22
4.7 SEC Reports.........................................................................................23
4.8 No Violations.......................................................................................23
4.9 Undisclosed Liabilities:............................................................................24
4.10 Disclosure.........................................................................................24
4.11 No Adverse Changes.................................................................................24
4.12 Investment Intent..................................................................................24
ARTICLE V: AGREEMENTS OF THE PARTIES............................................................................24
5.1 Access to Information...............................................................................24
5.2 Confidentiality; No Solicitation....................................................................25
5.3 Interim Operations..................................................................................26
5.4 Permissible Distributions to Shareholder............................................................29
5.5 Consents............................................................................................29
5.6 Filings.............................................................................................29
5.7 All Reasonable Efforts..............................................................................30
5.8 Public Announcements................................................................................30
5.9 Notification of Certain Matters.....................................................................30
5.10 Documents at Closing...............................................................................30
5.11 Satisfaction of Guarantees.........................................................................31
5.12 Prohibition on Trading in Buyer Stock..............................................................31
5.13 Establishment of Retention Plan....................................................................31
5.14 Tax Matters/Section 338(h)(10) Election............................................................31
5.15 Repurchase of Accounts Receivable..................................................................32
5.16 Governmental Authority.............................................................................32
5.17 Absence of Broker or Finder........................................................................33
5.18 Cooperation; Further Assurances....................................................................33
</TABLE>
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<TABLE>
<S> <C>
5.19 Further Mutual Covenants...........................................................................33
5.20 Restrictions on Transfer of Osage Stock............................................................33
ARTICLE VI: CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER....................................................34
6.1 Accuracy of Representations and Warranties; Shareholder Performance. ...............................34
6.2 No Adverse Change...................................................................................34
6.3 No Loss.............................................................................................34
6.4 No Injunction; Consents.............................................................................34
6.5 Deliveries by the Shareholder.......................................................................34
6.6 Uniform Commercial Code Searches....................................................................34
ARTICLE VII: CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDER...................................................35
7.1 Accuracy of Representations and Warranties; Buyer Performance. .....................................35
7.2 No Adverse Change...................................................................................35
7.3 No Loss.............................................................................................35
7.4 No Injunction; Consents.............................................................................35
7.5 Deliveries by Buyer.................................................................................35
7.6 Consents and Proceedings............................................................................35
ARTICLE VIII: TERMINATION.......................................................................................36
8.1 Termination Events..................................................................................36
8.2 Effect of Termination...............................................................................36
8.3 Extension; Waiver...................................................................................37
ARTICLE IX: INDEMNIFICATION/SURVIVAL OF REPRESENTATIONS AND WARRANTIES .........................................37
9.1 Indemnification.....................................................................................37
9.2 Survival............................................................................................37
9.3 Methods of Asserting Claims for Indemnification.....................................................38
9.4 Limitations on Amount...............................................................................39
ARTICLE X: MISCELLANEOUS........................................................................................39
10.1 Exclusive Remedies.................................................................................39
10.2 Notices............................................................................................40
10.3 Entire Agreement; Assignment.......................................................................41
10.4 Binding Effect; Benefit............................................................................41
10.5 Headings...........................................................................................41
10.6 Counterparts.......................................................................................41
10.7 Governing Law......................................................................................41
10.8 Arbitration........................................................................................41
</TABLE>
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<TABLE>
<S> <C>
10.9 Severability.......................................................................................41
10.10 Release and Discharge.............................................................................42
10.11 Expenses..........................................................................................42
10.12 Amendment and Modification........................................................................42
</TABLE>
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<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
A - Registration Rights Agreement
B - Consulting Agreement
C - Noncompetition Agreement
D - Escrow Agreement
</TABLE>
<TABLE>
<CAPTION>
Schedules
- ---------
<S> <C>
3.1 Organization, Qualification and Status
3.6 Authority of Shareholder
3.7 No Violation
3.8 Financial Statements
3.11 Guarantees
3.12 Tax Matters
3.13 Litigation
3.14 Leased Real Property
3.15 Owned Tangible Personal Property
3.17 Accounts and Notes Receivable
3.18 Material Contracts
3.22 Banking and Personnel Matters
3.23 Labor and Employment Matters
3.25 Customers
3.26 Product Warranties
3.27 Insurance
3.29 Licenses and Permits
3.32 Environmental Matters
3.33 Intellectual Property Matters
4.4 Litigation
4.6 Capitalization
5.5 Consents
5.13 Establishment of Retention Plan
</TABLE>
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<PAGE> 8
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), made this
24th day of April, 1998, by and between Osage Systems Group, Inc., a Delaware
corporation, formerly known as Pacific Rim Entertainment, Inc. ("Buyer"), and O.
Jack Anderson, the sole shareholder (the "Shareholder,") of Open System
Technologies, Inc., a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, Shareholder owns 100% of the issued and outstanding
capital stock of the Company, consisting of 10 shares of common stock, no par
value (the "Shares"); and
WHEREAS, Shareholder desires to sell, and Buyer desires to
purchase, all of the Shares for the consideration and on the terms set forth
herein.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements set forth in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE I
SALE AND TRANSFER OF SHARES
1.1 Sale and Purchase of the Shares.
Subject to the terms and conditions of this Agreement, at the "Closing"
(as defined herein), Shareholder shall sell, assign, transfer, convey and
deliver to Buyer, and Buyer shall purchase and accept from Shareholder, the
Shares, in the manner and for the consideration set forth in this Article .
1.2 Consideration.
Shareholder shall deliver to Buyer good and sufficient certificates for
the Shares, duly assigned in blank, with any required transfer stamps or taxes
paid and affixed thereto and cause the entire right, title and interest in and
to the Shares to be transferred of record to Buyer, free and clear of any claim,
suit, proceeding, call, commitment, voting trust, proxy, restriction,
limitation, security interest, pledge, lien or encumbrance of any kind or nature
whatsoever, other than restrictions under the Securities Act of 1933, as amended
(the "Act"), or applicable state securities laws; and in consideration thereof
Buyer shall pay and deliver to Shareholder as the purchase price for the Shares,
the following:
(a) At the Closing, the sum of Two Million Five Hundred
Thousand Dollars ($2,500,000) in cash, cashier's check or by wire transfer to
the account specified in writing to Buyer at least one (1) day prior to Closing.
<PAGE> 9
(b) At the Closing, subject to Section 1.4 relating to the
establishment of the "Escrow Fund" (as defined below), delivery of certificates
representing that number of shares of the common stock, par value $0.01 per
share, of Buyer (the "Osage Stock") having an aggregate Closing value (the
"Closing Value") equal to $2,000,000, such number of shares of Osage Stock is
hereinafter referred to as "Stock Consideration". For purposes of the Agreement,
the Closing Value shall be determined based upon the lesser of: (x) $6.00 per
share of Osage Stock, or (y) the average closing price on the NASDAQ OTC
Bulletin Board of the Osage Stock for the ten (10) trading days ending five (5)
trading days preceding the Closing Date.
(c) Subsequent to Closing, but payable no later than March 31,
1999, the sum of $260,000 in cash, cashier's check or by wire transfer to the
accounts specified in writing to Buyer.
Clauses (a) - (c), together with the Adjustment Amount, as
provided in Section 1.3 herein, shall constitute the "Purchase Price".
1.3 Adjustment Amount.
Buyer agrees to pay to Shareholder, in cash, the difference between (i)
the "Registration Value" (as defined below) of the Stock Consideration on the
"Registration Date" (also as defined below), and (ii) $2,000,000, provided the
Registration Value is lower than $2,000,000 (such lesser amount hereinafter
referred to as the "Adjustment Amount"). The "Registration Value" shall be an
amount equal to the average closing price per share of the Osage Stock on the
principal exchange, market or quotation system upon which such shares regularly
trade at the time, for the twenty (20) trading days preceding the "Registration
Date" multiplied by the number of shares of the Osage Stock included in the
Stock Consideration. The "Registration Date" shall be defined as the earlier of
(i) the date that the public resale of such shares is permitted pursuant to an
effective registration statement filed with the Securities and Exchange
Commission; or (ii) the date that the public resale of some or all of the Shares
is permitted by virtue of Rule 144 promulgated under the Act , to the extent
that Rule 144 permits the public resale of such shares. In the absence of an
effective registration statement, the Adjustment Amount shall only be determined
as to that number of shares of the Stock Consideration that may be publicly
resold pursuant to Rule 144. Payment of the Adjustment Amount shall be made
within fifteen (15) days of the determination thereof.
1.4 Establishment of Escrow Fund.
At the Closing, Buyer shall deposit into escrow with an escrow agent
mutually acceptable to Buyer and Shareholder (the "Escrow Agent"), 50% of the
shares of Osage Stock included in the Stock Consideration (the "Escrow Fund"),
which shall serve on a non-exclusive basis as collateral for the indemnification
obligations of Shareholder pursuant to this Agreement. Buyer consents to the
appointment of Thompson Hine & Flory LLP as the Escrow Agent. The deposit,
maintenance and ultimate disposition of the Escrow Fund shall be governed by the
terms of an escrow agreement, the form of which is attached hereto as Exhibit D
(the "Escrow Agreement").
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1.5 Establishment of Retention Plan for Key Employees.
Following Closing, Buyer shall establish a retention plan for "Key
Employees" of the Company as of the Closing Date, comprised of a "Bonus Pool" of
Five Hundred Thousand Dollars ($500,000), as more fully set forth in Section
5.13 hereof.
ARTICLE II
CLOSING.
2.1 Closing Date.
The purchase and sale (the "Closing") provided for in this Agreement
will take place at the offices of the Company located at 441 South State Road
#7, Suite #1, Pompano Beach, Florida, at 9:30 a.m. (local time) on the later of
(i) April 24, 1997 or (ii) at such other time and place as the parties may
agree. The date of the Closing is hereinafter referred to as the "Closing Date."
In no event shall the Closing take place later than May 4, 1998 (the
"Termination Date"). Subject to the provisions of Article 8, failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 2.1 will not result in
the termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
2.2 Closing Transactions.
At the Closing, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
(a) The Shareholder will deliver, or shall cause to be
delivered, to the Buyer, the following documents and shall take the following
actions:
(1) The Shareholder shall surrender and deliver to the Buyer
the certificate or certificates representing all of the Shares;
(2) A certificate shall be executed by the
Shareholder to the effect that: (i) all representations and warranties made by
the Shareholder under this Agreement are true and correct as of the Closing, as
though originally given to Buyer on said date; and (ii) the conditions precedent
identified at Sections 6.2 and 6.3 have been satisfied;
(3) A certificate of good standing shall be delivered
by the Shareholder from the Secretary of State of the State of Delaware, dated
at or about the Closing, to the effect that the Company is in good standing
under the laws of such state;
(4) An incumbency certificate shall be delivered by
the Shareholder signed by all of the officers of the Company dated at or about
the Closing;
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(5) Certified Certificate of Incorporation shall be
delivered by the Shareholder dated at or about the Closing and a copy of the
Bylaws of the Company certified by the Secretary of the Company dated at or
about the Closing;
(6) A registration rights agreement (the
"Registration Rights Agreement"), the form of which is attached hereto as
Exhibit A, shall be executed and delivered by the Shareholder;
(7) A consulting agreement (the "Consulting
Agreement"), the form of which is attached hereto as Exhibit B, shall be
executed and delivered by Shareholder;
(8) A noncompetition agreement (the "Noncompetition
Agreement"), the form of which is attached hereto as Exhibit C, shall be
executed and delivered by Shareholder;
(9) The Escrow Agreement, in the form of Exhibit D,
shall be executed and delivered by the Shareholder, Buyer and the Escrow Agent;
(10) The Shareholder shall deliver the Escrow Fund
into escrow pursuant to the terms of the Escrow Agreement;
(11) Each of the officers and directors of the
Company shall have tendered their resignation in form and substance satisfactory
to Buyer, and concurrently therewith, Shareholder shall be elected to serve on
the board of directors of the Company along with two of Buyer's appointees;
(12) The delivery of an opinion of counsel of the
Shareholder in form and substance satisfactory to the Buyer;
(13) Shareholder executed Internal Revenue Form 8023
as more fully set forth in Section 5.14; and
(14) Each of the parties to this Agreement shall have
otherwise executed whatever documents and agreements, provided whatever consents
or approvals and taken all such actions as are required under this Agreement.
(b) Buyer will deliver, or shall cause to be delivered, to the
Shareholder, the following documents and shall take the following actions:
(1) Buyer shall deliver or shall cause to be
delivered to the Shareholder a certificate or certificates representing the
Stock Consideration;
(2) Buyer shall deliver or shall cause to be
delivered to the Shareholder, $2,500,000 by wire transfer of immediately
available funds to the bank account designated in writing by the Shareholder at
least one (1) day prior to Closing;
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(3) A certificate shall be executed by the Buyer's
Chief Executive Officer to the effect that all representations and warranties of
the Buyer under this Agreement are true and correct as of the Closing, as though
originally given to the Shareholder on said date;
(4) A certificate of good standing and certified
copies of Buyer's certificate of incorporation shall be delivered by Buyer from
the Secretary of the State of Delaware dated at or about the Closing that the
Buyer is in good standing under the laws of said state;
(5) Certified board resolutions shall be delivered by
the Buyer dated at or about the Closing authorizing the transactions
contemplated under this Agreement;
(6) An incumbency certificate shall be delivered by
Buyer signed by all of the officers thereof dated at or about the Closing;
(7) Buyer will execute and deliver a Consulting
Agreement with Shareholder, the form of which is attached hereto as Exhibit B;
(8) Buyer will execute and deliver a Noncompetition
Agreement with Shareholder, the form of which is attached hereto as Exhibit C;
(9) Buyer will execute and deliver the Registration
Rights Agreement with the Shareholder, the form of which is attached hereto as
Exhibit A;
(10) The delivery of an opinion of counsel of Buyer
in form and substance satisfactory to the Shareholder;;
(11) Execution of Internal Revenue Form 8023 as more
fully set forth in Section 5.14; and
(12) Each of the parties to this Agreement shall have
otherwise executed whatever documents and agreements, provided whatever consents
or approvals and shall have taken all such actions as are required under this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER.
As a material inducement to Buyer to execute this Agreement and
consummate the transactions contemplated hereby, the Shareholder hereby makes
the following representations and warranties to Buyer. The representations and
warranties are true and correct in all material respects at this date, and will
be true and correct in all material respects on the Closing as though made on
and as of such date.
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3.1 Organization, Qualification and Status.
The Company is a corporation duly incorporated and organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has full corporate power and authority to own, lease and use its
properties and to carry on its business as presently conducted. The Company is
duly qualified or licensed to do business and in good standing as a foreign
corporation in each of the jurisdictions in which the nature of its business or
the character of the properties and assets which it owns or leases makes such
qualification or licensing necessary.
Except as set forth on Schedule 3.1 hereto, the Company has not, during
the six- (6-) year period immediately preceding the date hereof, changed its
name (other than from Computer Health & Safety, Inc.), been the surviving entity
of a merger, consolidation or other reorganization, or acquired all or
substantially all of the assets of any person or entity. Schedule 3.1 also sets
forth all fictitious names under which the Company or such predecessors have
conducted business.
3.2 Corporate Instruments and Records.
The copies of the Company's certificate of incorporation and bylaws,
each certified by the Secretary of the Company and heretofore furnished to
Buyer, are true, correct and complete and each include all amendments to the
date hereof. The Company's minute books, as made available to Buyer, contain a
true, complete and correct record of all corporate action taken on or prior to
the date hereof at the meetings of its shareholders and directors and committees
thereof. The stock certificate books and ledgers of the Company, as made
available to Buyer for inspection, are true, correct and complete, and
accurately reflect, at the date hereof, the ownership of the outstanding capital
stock of the Company by the Shareholder.
3.3 Capitalization.
The authorized capital stock of the Company consists of 750 shares of
common stock, no par value per share, of which 10 shares are issued and
outstanding and constitute the Shares. The Shares are held beneficially and of
record by the Shareholder, and 0 shares are held in the treasury of the Company.
All of the Shares are validly issued, fully paid and non-assessable and entitled
to vote at shareholder meetings, and none of the Shares has been issued in
violation of any preemptive rights of shareholders or transferred in violation
of any transfer restrictions relating thereto. There are no authorized or
outstanding options, warrants, convertible securities, subscription rights,
puts, calls, unsatisfied pre-emptive rights or other rights of any nature to
purchase or otherwise receive, or to require the Company to purchase, redeem or
acquire, any shares of the capital stock or other securities of the Company and
there is no outstanding security of any kind convertible into such capital
stock. There are no existing shareholder agreements, voting agreements or voting
trusts respecting any shares of the capital stock of the Company. None of the
shares of capital stock or other securities of the Company were issued in
violation of the Act or any other legal requirement.
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3.4 Ownership of Shares.
Shareholder owns and holds, beneficially and of record, the entire
right, title and interest in and to the Shares, free and clear of any claim,
suit, proceeding, call, commitment, voting trust, proxy, restriction,
limitation, security interest, pledge or lien or encumbrance of any kind or
nature whatsoever, and has full power and authority to vote said Shares and to
approve the transactions contemplated by this Agreement, such Shares
constituting, in the aggregate, all of the issued and outstanding shares of
capital stock of the Company. Shareholder has full power and authority to vote,
transfer and dispose of the Shares, free and clear of any claim, suit,
proceeding, call, voting trust, proxy, restriction, security interest, lien or
other encumbrance of any kind or nature whatsoever other than restrictions under
the Act and applicable state securities laws.
3.5 No Subsidiary.
The Company does not have any subsidiary or any ownership interest in
any other entity. The Company is not a party to any joint venture arrangement
and does not have the right to acquire any securities of or ownership interests
in any other person or entity.
3.6 Authority of Shareholder.
Shareholder has full power and authority to enter into this Agreement,
and to consummate the transactions contemplated hereby, without the consent of
or notice to any third-party, and to comply with the terms, conditions and
provisions hereof. This Agreement has been duly authorized, executed and
delivered by Shareholder and is, and each other agreement or instrument of
Shareholder contemplated by it will be, the legal, valid and binding agreement
of the Shareholder, enforceable against the Shareholder in accordance with its
terms. The execution, delivery and performance of this Agreement and the other
agreements of the Shareholder contemplated hereby (collectively, the
"Shareholder's Agreements") do not require the consent of or notice to any
third-party. Neither the execution and delivery of the Shareholder's Agreements
nor the consummation of the transactions contemplated thereby will conflict with
or result in any violation of or constitute a default under any term of the
certificate of incorporation or bylaws of the Company, or any agreement,
mortgage, debt instrument, indenture, or other instrument, judgment, decree,
order, award, law or regulation by which the Company or the Shareholder is
bound, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the assets of the Company, or result in the
cancellation, modification, revocation or suspension of any license,
certificate, permit or authorization held by the Company, except as set forth in
Schedule 3.6.
3.7 No Violation.
The Company is not in default under or in violation of any provision of
(a) its certificate of incorporation or bylaws, or (b) any agreement,
understanding, arrangement, indenture, contract, lease, sublease, loan
agreement, note, restriction, obligation or liability to which it is a party or
by which it is bound or to which it or its assets are subject (individually, an
"Instrument"
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and collectively, the "Instruments"). Except as set forth in Schedule 3.7,
neither the execution and delivery of this Agreement by the Shareholder, nor the
consummation of the transactions contemplated hereby or thereby, nor compliance
with the terms hereof or thereof, will (i) conflict with or result in a breach
of any of the terms, conditions or provisions of the certificate of
incorporation or bylaws of the Company, nor (ii) violate, conflict with or
result in a breach of or default under any of the terms, conditions or
provisions of any Instrument, nor (iii) accelerate or give to others any
interests or rights, including rights of acceleration, termination, modification
or cancellation, under any Instrument or in or with respect to the business or
assets of the Company, nor (iv) result in the creation of any lien, claim,
charge or encumbrance on the assets, capital stock or properties of the Company,
nor (v) conflict with, violate or result in a breach of or constitute a default
under any law, statute, rule, judgment, order, decree, injunction, ruling or
regulation of any government, governmental agency, authority or instrumentality,
court or arbitration tribunal to which the Company or any of its assets or
properties is subject, nor (vi) require the Company to give notice to, or obtain
an authorization, approval, order, license, franchise, declaration or consent
of, or make a filing with, any foreign, federal, state, county, local or other
governmental or regulatory body or other person, other than any filings required
to be made with the Federal Trade Commission ("FTC") and Antitrust Division of
the Department of Justice ("Justice Department") of Notification and Report
Forms pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended ("HSR Act") and the rules promulgated thereunder.
3.8 Financial Statements.
Schedule 3.8 hereto contains true and correct and complete copies of
the following financial statements of the Company at the dates and for the
periods specified:
Audited financial statements of the Company for its two most recently
completed fiscal years ended December 31, 1996 and December 31, 1997 (the
"Audited Financial Statements") and unaudited financial statements as of the
comparative three month periods ended March 31, 1998 and March 31, 1997 (the
"Interim Financial Statements"). Unless otherwise referred to, the Audited
Financial Statements and the Interim Financial Statements shall be referred to
as the "Financial Statements." The Audited Financial Statements have been
prepared in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis, and present fairly the financial position and
results of operations and cash flows of the Company at the dates and for the
periods specified. The Interim Financial Statements have been prepared on the
basis of the Company's books and records and are true and accurate in all
material respects. All liabilities and obligations of the Company outstanding as
of the dates of the Financial Statements required to be reflected as liabilities
in accordance with GAAP have been included in the Financial Statements. There
have been no material changes in the financial condition, assets or liabilities
of the Company from the date of the Interim Financial Statement to the date
hereof, except changes in the ordinary course of business, none of which, either
singly or in the aggregate, has been materially adverse. Since the date of the
Interim Financial Statement, the Company has conducted its business in a normal
and customary manner. The books and records
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of the Company from which the Financial Statements were prepared properly and
accurately record the transactions and activities which they purport to record.
3.9 Absence of Undisclosed and Contingent Liabilities.
Except for obligations arising in the ordinary course of business after
March 31, 1998, and other obligations of the Company under the Material
Contracts and contracts that would be Material Contracts except for the amount
involved, the Shareholder knows of no basis for the assertion against the
Company by any person of a valid claim based on a liability which is not
disclosed within the Financial Statements.
3.10 No Adverse Changes.
Since the date of the Interim Financial Statements the Company has been
operated in the ordinary course and there has not been a material adverse change
in the condition (financial or otherwise), properties, assets, liabilities,
rights, operations or business of the Company.
3.11 Guarantees.
(a) The Company has not guaranteed, become surety or contingent obligor
for or assumed any obligation, debt or dividend of any person or entity. No
assets owned by the Company are or have been pledged, hypothecated, delivered
for safekeeping, subjected to a security interest or otherwise provided in any
way as security for payment or performance of any obligation of a person other
than the Company.
(b) Schedule 3.11 identifies all obligations and liabilities of the
Company for which the Shareholder has provided or been caused to incur personal
guarantees thereof.
3.12 Tax Matters.
Except as set forth on Schedule 3.12 attached hereto:
(a) The Company (i) has timely and properly filed or caused to
be filed all tax returns which it is or has been required to file on or prior to
the date hereof, by any jurisdiction to which it is or has been subject, all
such tax returns being true and correct and complete in all respects, (ii) has
timely paid or caused to be paid in full all taxes which are or have become due
and payable to all taxing authorities with respect to such returns and periods,
(iii) has made or caused to be made all withholdings of taxes required to be
made by it, and such withholdings have either been paid to the appropriate
governmental agency or set aside in appropriate accounts for such purpose, and
(iv) has otherwise satisfied, in all material respects, all applicable laws and
agreements with respect to the filing of tax returns and the payment of taxes.
(b) The Company has properly accrued and reflected within its
Financial Statements, and has thereafter to the date hereof properly accrued,
and will from the date hereof
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through the Closing Date properly accrue, all liabilities for taxes and
assessments, all such accruals being in the aggregate sufficient for payment of
all such taxes and assessments.
(c) There are no unassessed tax deficiencies proposed or
threatened against the Company, nor are there any agreements, waivers, or other
arrangements providing for extension of time with respect to the assessment or
collection of any tax against the Company or any actions, suits, proceedings,
investigations or claims now pending against the Company with respect to any
tax, or any matter under discussion with any federal, state, local or foreign
authority relating to any taxes.
(d) The Company is not and has never been a member of an
affiliated group of corporations (within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")). (e)
The Company is not a party to, is not bound by, and does not have any obligation
under any tax sharing, tax indemnity, or similar agreement.
(f) The Company has not made and will not make a change in
method of accounting for a taxable year beginning on or before the Closing Date,
which would require it to include any adjustment under Section 481(a) of the
Internal Revenue Code in taxable income for any taxable year beginning on or
after the Closing Date.
(g) Shareholder is not a foreign person so that Section 897
and 6039C of the Internal Revenue Code are not applicable to the transactions
provided for hereunder.
(h) The Company, since its inception, has been a qualified "S
Corporation" as that term is defined in the Internal Revenue Code, and has never
revoked or terminated such election, no has it taken any action which would
threaten, jeopardize or disqualify the Company from its S Corporation status. In
accordance with the Section 338(h)(10) election, the Company's final "S
Corporation" return shall report any gain or loss from the deemed sale under
Section 338.
For purposes of this Agreement, "tax" and "taxes" shall include all
income, gross receipts, franchise, excise, transfer, severance, value added, ad
valorum, sales, use, wage, payroll, workmen's compensation, employment,
occupation, and real and personal property taxes; taxes measured by or imposed
on capital; levies, imposts, duties, license and legislation fees; other taxes
imposed by a federal, state, municipal, local, foreign or other governmental
authority or agency, including assessments in the nature of taxes; including
without limitation, interest, penalties, fines, assessments and deficiencies
relating to any tax or taxes; and including transferee or secondary liability
for taxes and any taxes due as a result of being a member of any affiliated,
consolidated, combined or unitary group or any liability in respect of taxes
under a tax sharing, tax allocation, tax indemnity or other agreement.
For purposes of this Agreement, "tax return" or "tax returns" shall
mean all returns, reports, estimates, schedules, declarations, information
statements and documents relating to or
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required to be filed in connection with any taxes pursuant to the statutes,
rules or regulations of any federal, state, local or foreign government taxing
authority.
3.13 Litigation.
Except as set forth on Schedule 3.13, there are no actions, suits or
proceedings at law or in equity, or arbitration proceedings, or claims, demands
or investigations, pending or threatened against or involving the Company, or
state of facts existing which is reasonably likely to give rise to any such
action, suit, proceeding, claim, demand or investigation; there are no
proceedings pending or threatened against or involving the Company by or before
any governmental board, department, commission, bureau, instrumentality or
agency (including but not limited to any federal, state, local or foreign
governmental agency or body concerned with control of foreign exchange, energy,
environmental protection or pollution control, franchising or other distribution
arrangements, antitrust or trade regulation, civil rights, labor or
discrimination, wages and hours, safety or health, zoning or land use), or state
of facts existing which is reasonably likely to give rise to any such
proceedings; and the Company is not in violation of any order, ruling, decree or
judgment of any court or arbitration tribunal or governmental board, department,
commission, bureau, instrumentality or agency.
3.14 Leased Real Property.
The Company is the lessee under the real estate leases described on
Schedule 3.14 hereto. True, correct and complete copies of said leases and any
amendments, extensions and renewals thereof have heretofore been delivered by
the Company to Buyer. The Company now enjoys and on the Closing Date will enjoy
quiet and undisturbed possession under each of said leases. The Company's
interest in each of such leases is free and clear of any mortgages and liens
created by the Company, is not subject to any deeds of trust, assignments,
subleases or rights of any third parties created by the Company, other than the
lessor thereof. To the knowledge of the Shareholder, such leased real estate is
free and clear of any zoning or use or building restriction or any pending,
proposed or threatened zoning or use or building restriction which would now, or
on the Closing Date or thereafter, interfere with the present or any intended
use by the Company of any of such leased real estate. Said leases now are, and
on the Closing Date will be, valid and binding and in full force and effect, and
are not now, and on the Closing Date will not be, in default as to the payment
of rent or otherwise. The consummation of the transactions contemplated by this
Agreement will not constitute an event of default under any of said leases and
the continuation, validity and effectiveness of such leases will not be
adversely affected by the transactions contemplated by this Agreement.
3.15 Owned Tangible Personal Property.
Schedule 3.15 sets forth a list of the tangible personal property of
the Company (the "Tangible Personal Property"). Except as set forth on Schedule
3.15 hereto and except for property disposed of in the ordinary course of
business of the Company, the Company has and will have at the Closing all right,
title and interest in, and good title to, the Tangible Personal Property free
and clear of any claim, lease, pledge, mortgage, security interest, conditional
sale
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agreement or other title retention agreement, restriction, lien or encumbrance
of any kind or nature whatsoever. True, complete and correct copies of all
leases and licenses relating to the Tangible Personal Property have heretofore
been delivered by the Company to Buyer.
3.16 Condition of Buildings and Tangible Personal Property.
To the knowledge of the Shareholder, all of the premises occupied, and
the items of Tangible Personal Property are in operating condition and repair,
comply in all respects with applicable laws, regulations and ordinances,
including but not limited to zoning, building and fire codes and are suitable
and sufficient for the present conduct of the Company's business. Each item of
Tangible Personal Property is adequately covered by one of the insurance
policies described in Section hereto.
3.17 Accounts and Notes Receivable.
Each of the accounts receivable of the Company referred to on the
Financial Statements constitutes a valid claim in the full amount thereof
against the debtor charged therewith on the books of the Company to which each
such account is payable and has been acquired in the ordinary course of
business. Except as set forth in Schedule 3.17, Shareholder is not aware of any
reason that each account receivable is not fully collectible to the extent of
the face value thereof (less the amount of the allowance for the doubtful
accounts reflected on the Interim Financial Statements) no later than ninety
(90) days after such account receivable is due. To the best of Shareholder's
knowledge, no account debtor has any valid setoff, deduction or defense with
respect thereto, and no account debtor has asserted any such setoff, deduction
or defense. There are no accounts receivable which arise pursuant to an
agreement with the United States Government or any agency or instrumentality
thereof.
3.18 Material Contracts.
(a) Schedule 3.18 contains a list of all of the material
contracts of the Company (the "Material Contracts") which shall consist of all
contracts, whether oral, written or implied, or other agreements, leases, surety
arrangements or other commitments to which the Company is a party, under which
the Company may become subject to any obligation or liability, or by which the
Company or any of its assets may become bound that satisfy any of the following:
(i) each arrangement, agreement, contract or understanding
that involves performance of services or delivery of goods or materials by the
Company in an amount or for a value in excess of $25,000;
(ii) each arrangement, agreement, contract or understanding
that was not entered into in the ordinary course of business and that involves
expenditures or receipts by the Company in excess of $25,000;
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(iii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other arrangement, agreement,
contract or understanding affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements having
a value per item or aggregate payments of less than $25,000 and with terms of
less than one year);
(iv) each licensing agreement or other arrangement, agreement,
contract or understanding with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current or former
employees, consultants, or contractors regarding the appropriation or the
nondisclosure of any intellectual property assets of the Company;
(v) each collective bargaining agreement or other arrangement,
agreement, contract or understanding with any labor union or other employee
representative of a group of employees;
(vi) each joint venture, partnership, and other arrangement,
agreement, contract or understanding (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any other person;
(vii) each arrangement, agreement, contract or understanding
containing covenants that in any way purport to restrict the business activity
of the Company;
(viii) each arrangement, agreement, contract or understanding
providing for payments to or by any person based on sales, purchases, or
profits, other than direct payments for goods;
(ix) each power of attorney that is currently effective and
outstanding;
(x) each arrangement, agreement, contract or understanding for
capital expenditures in excess of $25,000;
(xi) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company
other than in the ordinary course of business; and
(xiii) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) The Material Contracts constitute all of the material
agreements and instruments which are necessary to operate the business as
currently conducted by the Company. True, correct and complete copies of each
Material Contract described and listed under subsection 3.18(a) have been made
available to Buyer prior to the date hereof. The term "Material Contract"
excludes purchase orders entered into in the ordinary course for personality
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or inventory which may be returned to the vendor without penalty. All of the
Material Contracts are valid, binding and enforceable against the respective
parties thereto in accordance with their respective terms. Neither the Company
and, to the best of the Shareholder's knowledge, nor any other party, is in
default or in arrears under the terms thereof, and no condition exists or event
has occurred which, with the giving of notice or lapse of time or both, would
constitute a default thereunder.
3.19 Inventories.
All of the Company's inventories are reflected in the Financial
Statements at cost or market, whichever is lower; now are and on the Closing
Date will be good and salable or usable in the ordinary course of the business
of the Company; now are and on the Closing Date will be of sufficient quality
for the normal operation of the Company's business; did not on the date of the
Interim Financial Statements contain, do not now contain, and on the Closing
Date will not contain, any obsolete items.
3.20 Purchase Commitments and Bids.
All accepted and unfulfilled orders for the sale of merchandise or
services entered into by the Company in the operation of its business, and the
aggregate of all commitments for the purchase of merchandise or supplies by the
Company were made in the ordinary course of the operations of the Company. There
are no claims against the Company or the Shareholder to return merchandise by
reason of alleged overshipments, defective merchandise or otherwise, or of
merchandise in the hands of customers under an understanding that such
merchandise would be returnable. Each outstanding bid, proposal, commitment or
unfulfilled order which relates to the operations of the Company was priced upon
terms consistent with the Company's past practices.
3.21 Intentionally Omitted.
3.22 Banking and Personnel Matters.
Schedule 3.22 hereto contains a true, complete and correct list of: (i)
the names of all banks and other financial institutions (with account numbers)
in which the Company has an account or safe deposit box, and of all brokerage
firms and other entities and persons holding funds or investments of the
Company, and the names of all persons authorized to draw thereon or have access
thereto; (ii) the names of all incumbent directors and officers of the Company;
(iii) the names and job designations, descriptions and locations of all
employees, consultants and agents of the Company, the current remuneration of
each.
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3.23 Labor and Employment Matters.
(a) Schedule 3.23 contains a complete list of all employment
arrangements, all pension, retirement, profit sharing and bonus plans, and all
deferred compensation, health, welfare, all severance management, and other
similar plans for the benefit of any employees of the Company, including
employee plans ("Employee Benefit Plan"). subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")). The Company at present is
not, and during the five (5) year period preceding the Closing Date, has not
been a sponsor of, party to or obligated to contribute to any employee benefit
plan (as defined in Section 3(3) of ERISA), and has not been a party to any
collective bargaining agreement currently in effect or in effect during the
five-year period preceding the Closing Date, except as set forth on Schedule
3.23 hereto. The Company has never been a member of a "controlled group of
corporations" within the meaning of Internal Revenue Code Section 414(b) or (c)
is or has ever maintained a defined benefit pension plan or contributed to a
multiemployer plan as defined in Section 3(37) of ERISA. True, correct and
complete copies of each Employee Benefit Plan has heretofore been delivered by
the Company to Buyer.
(b) With respect to each Employee Benefit Plan,
(1) there is no litigation, disputed claim (other
than routine claims for benefits), governmental proceeding, inquiry or
investigation pending or threatened with respect to each such Plan, its related
trust, or any fiduciary, administrator or sponsor of such Plan;
(2) each such Plan has been established, maintained,
funded and administered in all material respects in accordance with its
governing documents, and any applicable provisions of ERISA, the Internal
Revenue Code, other applicable law, and all regulations promulgated thereunder.
(c) Except as disclosed on Schedule 3.23, the Company is not
obligated to and does not (directly or indirectly) provide death benefits or
health care coverage to any former employees or retirees.
(d) The Company has complied with all applicable provisions of
the Immigration Reform and Control Act of 1986.
3.24 Termination of Business Relationships.
No supplier of the Company which cannot be replaced on commercially
reasonable terms has evidenced to the Company any intention to cancel or
terminate its business relationship with the Company. No key employee of the
Company has notified the Company or Shareholder of his/her intent or desire to
terminate employment with the Company.
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3.25 Customers.
Set forth on Schedule 3.25 is a list of the five largest customers the
Company based on the percentage of revenue represented by those customers for
the fiscal year ended December 31, 1997. The relationship of the Company with
its suppliers and customers are good commercial working relationships, and after
due inquiry, no supplier or customer of the Company has canceled, curtailed or
otherwise terminated or threatened to cancel or otherwise terminate, his or its
relationship with the Company, except that the mix of the Company's customers
changes from time to time in the ordinary course of the Company's business.
3.26 Product Warranties.
Except as set forth on Schedule 3.26, there are no liabilities of or
claims against the Company or the Shareholder, and no liabilities or claims are
threatened against the Company or the Shareholder, with respect to any product
liability (or similar claim) or product warranty (or similar claim) claim that
relates to any product manufactured or sold by the Company or the Shareholder in
the operations of the Company, except for standard warranty and maintenance
obligations made in the ordinary course of the operations of the Company to
purchasers of its products and services
3.27 Insurance.
Schedule 3.27 sets forth a list of all the Company's insurance
policies. The Company maintains insurance covering its assets, business,
equipment, properties, operations and employees with such coverage, in such
amounts, and with such deductibles and premiums as are consistent with insurance
coverage provided for other companies of comparable size and in comparable
industries. All of such policies are in full force and effect and all premiums
payable have been paid in full and the Company is in full compliance with the
terms and conditions of such policies. The Company has not received any notice
from any issuer of such policies of its intention to cancel or refusal to renew
any policy issued by it or of its intention to renew any such policy based on a
material increase in premium rates other than in the ordinary course of
business. None of such policies are subject to cancellation by virtue of the
Agreement or the consummation of the other transactions contemplated herein.
There is no claim by the Company pending under any of such policies as to which
coverage has been questioned or denied.
3.28 Compliance with Laws.
The Company has complied in all material respects with all applicable
laws, statutes, rules and regulations, orders of federal, state, local and
foreign governments and governmental agencies applicable to it and its business,
assets, properties and operations and no claim of any such laws or regulations
exists on the date hereof.
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3.29 Licenses and Permits.
The Company has secured all licenses, franchises, permits and other
authorizations from federal, state, local and other governmental or
administrative authorities (an "Authority") applicable to its assets, properties
and operations or necessary for the conduct of its business (the "Permits"),
except for any of the foregoing, the absence of which, either alone or in the
aggregate, would not have a material adverse effect upon the business or
financial condition of the Company. Except as set forth in Schedule 3.29, (a)
each of said Permits is in full force and effect, (b) the Company (or other
designated permittee or licensee thereunder) is in compliance with the terms,
provisions and conditions thereof, (c) there are no outstanding violations,
notices of noncompliance therewith, judgments, consent decrees, orders or
judicial or administrative action(s) or proceedings(s) affecting any of said
Permits and (d) no condition exists and no event has occurred which (whether
with or without notice, lapse of time or the occurrence of any other event)
would permit the suspension or revocation of any of said permits other than by
expiration of the term set forth therein. To the knowledge of the Shareholder,
consummation of the transactions contemplated by this Agreement will not affect
the validity, enforceability or effectiveness of any such Permit and no filing
with or consent authorization or approval of any Authority is required in
connection with the consummation of the transactions contemplated hereby
3.30 No Interest in Suppliers.
Neither the Company nor the Shareholder has any direct or indirect
equity interest in, or power to control the business or affairs of, or intention
to acquire such interest in or control of, any person that is a manufacturer,
supplier, lender, lessor or provider of services or equipment to the Company.
3.31 All Business Conducted by the Company.
The business and operations of the Company are conducted exclusively by
the Company, and not by the Shareholder or any other business entity whether or
not affiliated with the Company.
3.32 Environmental Matters.
Except as set forth on Schedule 3.32 hereto, (i) the Company is
currently in compliance with all applicable Environmental Laws, and has obtained
all permits and other authorizations from, and submitted all forms, fees,
registrations, reports and similar filings to, the appropriate person or
governmental agency needed, or required, to operate its facilities in compliance
with the applicable Environmental Laws; (ii) the Company has not violated any
applicable Environmental Law; (iii) the Shareholder is unaware of any present
requirement of any applicable Environmental Law which is due to be imposed upon
it which will increase its cost of complying with the Environmental Laws; (iv)
all past on-site generation, treatment, processing, storage and disposal of
Waste, including Hazardous Waste, by the Company and its predecessors have been
done in compliance with the currently applicable Environmental Laws; (v) all
past off-
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site transportation, treatment, processing, storage and disposal of Waste,
including Hazardous Waste, generated by the Company and its predecessors have
been done in compliance with the currently applicable Environmental Laws; (vi)
the Company and its predecessors have not released, spilled, leaked or otherwise
discharged into the environment any Regulated Substance except as expressly
authorized by the applicable Environmental Laws; and (vii) the Company and its
predecessors have not used or otherwise managed any Regulated Substance except
in strict compliance with all applicable Environmental Laws.
As used in this Agreement, the terms (i) "Environmental Laws" include
but are not limited to any federal, state, foreign or local law, statute,
charter or ordinance, and any rule, regulation, binding interpretation, binding
policy, permit, order, court order or consent decree issued pursuant to any of
the foregoing, which pertains to, governs or otherwise regulates any of the
following activities: (a) the emission, discharge, release or spilling of any
Regulated Substance into the air, surface water, groundwater, soil or substrata
and (b) the manufacturing, processing, sale, generation, treatment,
transportation, storage, disposal, labeling or other management of any Waste,
including any Hazardous Waste or Regulated Substance; (ii) "Waste" and
"Hazardous Waste" include any substance defined as such by any applicable
Environmental Law; and (iii) "Regulated Substances" include any substance the
manufacturing, processing, sale, generation, treatment, transportation, storage,
disposal, labeling or other management or use of which is regulated by any
applicable Environmental Law.
3.33 Intellectual Property Matters.
(a) The corporate name of the Company and the trade names and
service marks listed on Schedule 3.33 are the only names and service marks which
are used by the Company in the operation of its business (the "Names and Service
Marks"). The Company owns, or has enforceable rights to use all intellectual
property presently in use by it and necessary for the operation of its business
as now being conducted, which intellectual property includes, but is not limited
to, patents, trademarks, trade names, service marks, copyrights, trade secrets,
customer lists, inventions, formulas, methods, processes and other proprietary
information (the "Intellectual Property"). There are no outstanding licenses or
consents granting third parties the right to use the Intellectual Property owned
by the Company. The Company has received no notice of any adversely held patent,
invention, trademark, copyright, service mark or tradename of any person, or any
claims of any other person relating to any of the Intellectual Property subject
hereto. There is no presently known threatened use or encroachment of any such
intellectual property. To the knowledge of the Shareholder, the manufacture,
sale or use of any products now or heretofore manufactured or sold by the
Company did not and does not infringe (nor has any claim been made that any such
action infringes) the intellectual property rights of others.
(b) To the knowledge of Shareholder, all Intellectual Property
of the Company is Millennium Compliant. "Millennium Compliant" shall mean the
ability of software to provide all of the following functions: (a) consistently
handle date information before, during, and after January 1, 2000, including but
not limited to accepting date input, providing date output, and
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performing calculations on dates or portions of dates; (b) function accurately,
in accordance with the published documentation, and without interruption before,
during, and after January 1, 2000, without any change in operations associated
with the advent of the new century; (c) respond to two-digit year-date input in
a way that resolves any ambiguity as to century in a disclosed, defined, and
predetermined manner; and (d) store and provide output of date information in
ways that are unambiguous as to century.
3.34 Investment Intent.
(a) Except with respect to the registration rights granted to
the Shareholder pursuant to the terms of the Registration Rights Agreement, the
shares included in the Stock Consideration are not being registered under the
Act on the basis of the statutory exemption provided by Section 4(2) thereof,
relating to transactions not involving a public offering, and the Buyer's
reliance on the statutory exemption thereof is based in part on the
representations contained in this Agreement.
(b) The Shareholder represents (i) that he has, or as of the
Closing, will have reviewed such quarterly, annual and periodic reports of the
Buyer as have been filed with the Securities and Exchange Commission since
December 22, 1997 (the "Reports") and that he has such knowledge and experience
in financial and business matters that he is capable of utilizing the
information set forth therein, concerning Buyer to evaluate the risk of
investing in the Buyer; (ii) that he has been advised that the Stock
Consideration to be issued to him by the Buyer will not be registered under the
Act, except as otherwise provided in this Agreement, and accordingly, the
Shareholder may only be able to sell or otherwise dispose of such shares in
accordance with Rule 144, an applicable exemption from registration under the
Act, or except as otherwise provided in this Agreement; (iii) that the Osage
Stock will be held for investment and not with a view to, or for resale in
connection with the public offering or distribution thereof; (iv) that the Osage
Stock so issued will not be sold without registration thereof under the Act
(unless such shares are subject to registration or in the opinion of counsel to
the Buyer an exemption from such registration is available, and in the event
that counsel for the Buyer does not provide such opinion to Shareholder within
ten (10) days of Shareholder's request, Shareholder may engage counsel
experienced in matters governed by the Act and in the reasonable opinion of the
Company is qualified to render such opinion), or in violation of any law; and
(v) that the certificate or certificates representing the Osage Stock to be
issued will be imprinted with a legend in form and substance substantially as
follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE
ACT"). THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION, UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN
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OPINION LETTER OF COUNSEL FOR THE COMPANY (IN THE EVENT THAT
COUNSEL FOR THE COMPANY DOES NOT PROVIDE SUCH OPINION TO
SHAREHOLDER WITHIN TEN (10) DAYS OF SHAREHOLDER'S REQUEST,
SHAREHOLDER MAY ENGAGE COUNSEL EXPERIENCED IN MATTERS GOVERNED
BY THE ACT AND IN THE REASONABLE OPINION OF THE COMPANY IS
QUALIFIED TO RENDER SUCH OPINION) OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION.
and Buyer is hereby authorized to notify its transfer agent of the status of the
Stock Consideration to place a "stop-transfer" order on the transfer agent's
books and records to assure compliance with the Act.
(c) The Shareholder has either upon the date hereof or before
the Closing hereunder, been afforded the opportunity to review and is familiar
with the Reports and has based his decision to invest solely on the information
contained therein, and the information contained within this Agreement and the
associated exhibits and schedules, and has not been furnished with any other
literature, prospectus or other information except as included in the Reports or
this Agreement.
(d) Shareholder has been given the opportunity to ask
questions about the Company and is satisfied that any information about the
Buyer and Osage Stock have been answered to Shareholder's satisfaction.
(e) The Shareholder is able to bear the economic risks of an
investment in the Stock Consideration and warrants that his overall commitment
to his investments which are not readily marketable is not disproportionate to
his net worth.
(f) The Shareholder understands that no federal or state
agency has approved or disapproved the Stock Consideration, passed upon or
endorsed the merits of the transfer of such shares set forth within this
Agreement or made any finding or determination as to the fairness of such shares
for investment.
3.35 Disclosure.
Neither this Agreement nor any other document, certificate, exhibit,
statement or schedule furnished or to be furnished by or on behalf of the
Company to Buyer in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the factual statements
contained therein, in light of the circumstances under which made, not
misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to the Shareholder to execute this Agreement
and to consummate the transactions contemplated hereby, Buyer hereby makes the
following representations and warranties to the Shareholder.
4.1 Organization and Qualification.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer has the corporate power
and authority to carry on its business as presently conducted. Buyer is duly
qualified or licensed to do business and in good standing as a foreign
corporation in each of the jurisdictions in which the nature of its business or
the character of the properties and assets which it owns or leases makes such
qualification or licensing necessary.
4.2 Corporate Instruments and Records.
The copies of the Buyer's certificate of incorporation and bylaws, each
certified by the Secretary of the Buyer and heretofore furnished to Shareholder,
are true, correct and complete and each include all amendments to the date
hereof. The Buyer's minute books, as made available to Shareholder, contain a
true, complete and correct record of all corporate action taken on or prior to
the date hereof at the meetings of its shareholders and directors and committees
thereof.
4.3 Authorization; Valid and Binding Obligation.
Buyer has full corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement has been
duly executed and delivered by Buyer and constitutes, and the other documents to
be executed and delivered pursuant hereto when executed and delivered by Buyer
will constitute, the legal, valid and binding obligations of Buyer, enforceable
against it in accordance with its terms. The execution, delivery and performance
of this Agreement and the other agreements of the Buyer contemplated hereby
(collectively, the "Buyer's Agreements") do not require the consent of or notice
to any third-party. Neither the execution and delivery of the Buyer's Agreements
nor the consummation of the transactions contemplated thereby will conflict with
or result in any violation of or constitute a default under any term of the
certificate of incorporation or bylaws of the Buyer, or any agreement, mortgage,
debt instrument, indenture, or other instrument, judgment, decree, order, award,
law or regulation by which the Buyer is bound, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the assets of the
Buyer, or result in the cancellation, modification, revocation or suspension of
any license, certificate, permit or authorization held by the Buyer.
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4.4 Litigation.
Except as set forth on Schedule 4.4, there are no actions, suits or
proceedings at law or in equity, or arbitration proceedings, or claims, demands
or investigations, pending or threatened against or involving the Buyer, or
state of facts existing which could give rise to any such action, suit,
proceeding, claim, demand or investigation; there are no proceedings pending or
threatened against or involving the Buyer by or before any governmental board,
department, commission, bureau, instrumentality or agency (including but not
limited to any federal, state, local or foreign governmental agency or body
concerned with control of foreign exchange, energy, environmental protection or
pollution control, franchising or other distribution arrangements, antitrust or
trade regulation, civil rights, labor or discrimination, wages and hours, safety
or health, zoning or land use), or state of facts existing which could give rise
to any such proceedings; and the Buyer is not in violation of any order, ruling,
decree or judgment of any court or arbitration tribunal or governmental board,
department, commission, bureau, instrumentality or agency.
4.5 Stock Consideration.
Shares to be issued as Stock Consideration pursuant to this Agreement
will be, upon issuance, duly authorized, validly issued, fully paid and
non-assessable with no liability on the part of the holders thereof.
4.6 Capitalization.
(a) As of the date hereof, the outstanding capital stock of
the Buyer consists solely of shares of: (A) 6,270,000 shares of Buyer's common
stock par value $0.01 per share (the "Common Stock"); (B) 122 shares of Series A
Preferred Stock; (C) 50 shares of Series B $3.00 Convertible Preferred Stock;
(D) 105.3 shares of Series C $3.00 Convertible Preferred Stock; and (E) Options
to purchase 1,300,000 shares of the Common Stock. All outstanding shares of
capital stock of Buyer have been duly authorized and validly issued and are
fully paid and nonassessable and free of preemptive rights. Except as otherwise
set forth herein, within the Buyer's SEC Reports or on Schedule 4.6, there are
no outstanding or presently authorized warrants, preemptive rights, subscription
rights, options or related commitments or agreements of any nature to issue any
of Buyer's securities or to sell, pledge, assign or otherwise transfer such
securities.
(b) Buyer has a sufficient number of its authorized but
unissued shares of Common Stock to permit it to issue the Stock Consideration
due in connection with the Agreement, assuming trading prices of Buyer's Common
Stock remain at current levels, as well as all of Buyer's other obligations to
issue shares of its Common Stock upon exercise of any option, warrant or other
right to acquire the same, based upon the same assumption.
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4.7 SEC Reports.
Buyer has heretofore delivered to Shareholder copies of its Annual
Report on Form 10-KSB for the year ended December 31, 1997, and all Current
Reports on Form 8-K since December 22, 1997 (the "Buyer's SEC Reports"). As of
their date of filing, the Buyer's SEC Reports did not contain any untrue
statements of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Furthermore, except as
otherwise disclosed in Buyer's SEC Reports, Buyer has experienced no material
adverse change in its financial condition, properties, business or prospects
since the date thereof. The Buyer's SEC Reports have been prepared in compliance
with all applicable securities laws, rules and regulations, and the financial
statements included therein had been prepared in accordance with general
accepted accounting principles, consistently applied, and fairly presented the
financial condition of Buyer as of the date and for the periods covered thereby.
4.8 No Violations.
The Buyer is not in default under or in violation of any provision of
(a) its certificate of incorporation or bylaws, or (b) any agreement,
understanding, arrangement, indenture, contract, lease, sublease, loan
agreement, note, restriction, obligation or liability to which it is a party or
by which it is bound or to which it or its assets are subject (individually, an
"Instrument" and collectively, the "Instruments"). Neither the execution and
delivery of this Agreement by the Buyer, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance with the terms
hereof or thereof, will (i) conflict with or result in a breach of any of the
terms, conditions or provisions of the certificate of incorporation or bylaws of
the Buyer, nor (ii) violate, conflict with or result in a breach of or default
under any of the terms, conditions or provisions of any Instrument, nor (iii)
accelerate or give to others any interests or rights, including rights of
acceleration, termination, modification or cancellation, under any Instrument or
in or with respect to the business or assets of the Buyer, nor (iv) result in
the creation of any lien, claim, charge or encumbrance on the assets, capital
stock or properties of the Buyer, nor (v) conflict with, violate or result in a
breach of or constitute a default under any law, statute, rule, judgment, order,
decree, injunction, ruling or regulation of any government, governmental agency,
authority or instrumentality, court or arbitration tribunal to which the Buyer
or any of its assets or properties is subject, nor (vi) require the Buyer to
give notice to, or obtain an authorization, approval, order, license, franchise,
declaration or consent of, or make a filing with, any foreign, federal, state,
county, local or other governmental or regulatory body or other person, other
than any filings required to be made with the Federal Trade Commission ("FTC")
and Antitrust Division of the Department of Justice ("Justice Department") of
Notification and Report Forms pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act") and the rules promulgated
thereunder.
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4.9 Undisclosed Liabilities:
Except as otherwise disclosed in this Agreement or any Schedules
thereto, Buyer does not have any liabilities or obligations of any nature, fixed
or contingent, that will not be shown or otherwise provided for in the Buyer SEC
Reports, except for liabilities and obligations arising subsequent to the date
of such Buyer's SEC Reports in the ordinary course of business, none of which
individually or in the aggregate will be materially adverse to the business or
financial condition of Buyer. There are no material loss contingencies (as such
term is used in Statement of Financial Accounting Standards No. 5 of the
Financial Accounting Standards Board) of Buyer that will not be adequately
provided for.
4.10 Disclosure.
No representation or warranty of Buyer in this Agreement contains any
untrue statement of a material fact, or omits to state a material fact necessary
to make the factual statements contained herein, in light of the circumstances
under which such statements are made, not misleading.
4.11 No Adverse Changes.
Since the date of the most recent Buyer's SEC Reports to the date of
this Agreement, the business of the Buyer has been operated in the ordinary
course and there has not been any materially adverse change in the business,
condition (financial or otherwise), results of operations, properties, assets,
liabilities, earnings or net worth of Buyer.
4.12 Investment Intent.
(a) The Buyer represents (i) that it has, or as of the Closing, will
have such knowledge and experience in financial and business matters that he is
capable of evaluating the risk of purchasing the Shares; (ii) that it has been
advised that the Shares purchased by it will not be registered under the Act,
except as otherwise provided in this Agreement; and (iii) that the Shares will
be held for investment and not with a view to, or for resale in connection with
the public offering or distribution thereof.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 Access to Information.
At all times prior to the Closing or the earlier termination of this
Agreement in accordance with the provisions of Article 8, and in each case
subject to Section 5.2 below, each of the parties hereto shall provide to the
other parties (and the other parties' authorized representatives) full access
during normal business hours and upon reasonable prior notice to the
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premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of or
relating to such party (including without limitation all written proprietary and
trade secret information and documents, and other written information and
documents relating to intellectual property rights and matters), and will
cooperate with the other party in conducting its due diligence investigation of
such party.
5.2 Confidentiality; No Solicitation.
(a) With respect to information concerning the Company that is
made available to Buyer pursuant to the terms of this Agreement, Buyer agrees
that it shall hold such information in strict confidence, shall not use such
information except for the sole purpose of evaluating the Agreement and related
transactions and shall not disseminate or disclose any of such information other
than to its directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Agreement and the related transactions (each of whom shall be
informed in writing by Buyer of the confidential nature of such information and
directed by Buyer in writing to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Section 8, Buyer shall
immediately return all such information, all copies thereof and all information
prepared by Buyer based upon the same; provided, however, that one copy of all
such material may be retained by Buyer's outside legal counsel for purposes only
of resolving any disputes under this Agreement. The above limitations on use,
dissemination and disclosure shall not apply to information that (i) is learned
by Buyer from a third party entitled to disclose it; (ii) becomes known publicly
other than through Buyer or any party who received the same through Buyer,
provided that Buyer has no knowledge that the disclosing party was subject to an
obligation of confidentiality; (iii) is required by law or court order to be
disclosed by Buyer; or (iv) is disclosed with the express prior written consent
thereto of the Shareholder. Buyer shall undertake all necessary steps to ensure
that the secrecy and confidentiality of such information will be maintained in
accordance with the provisions of this paragraph (a). Notwithstanding anything
contained herein to the contrary, in the event a party is required by court
order or subpoena to disclose information which is otherwise deemed to be
confidential or subject to the confidentiality obligations hereunder, prior to
such disclosure, the disclosing party shall: (i) promptly notify the
non-disclosing party and, if having received a court order or subpoena, deliver
a copy of the same to the non-disclosing party; (ii) cooperate with the
non-disclosing party, at the expense of the non-disclosing party in, obtaining a
protective or similar order with respect to such information; and (iii) provide
only such of the confidential information as the disclosing party is advised by
its counsel is necessary to strictly comply with such court order or subpoena.
(b) With respect to information concerning Buyer that is made
available to the Shareholder pursuant to the provisions of this Agreement, the
Shareholder agrees that he shall hold such information in strict confidence,
shall not use such information except for the sole purpose of evaluating the
Agreement and the related transactions, and shall not disseminate or disclose
any of such information other than to the Company's directors, officers,
employees, affiliates, agents and representatives who need to know such
information for the sole purpose of
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evaluating the Agreement and the related transactions (each of whom shall be
informed in writing by the Shareholder of the confidential nature of such
information and directed by such party in writing to treat such information
confidentially). If this Agreement is terminated pursuant to the provisions of
Section 8, the Shareholder agrees to return immediately all such information,
all copies thereof and all information prepared by either of Shareholder or the
Company based upon the same; provided, however, that one copy of all such
material may be retained by the Shareholder's legal counsel for purposes only of
resolving any disputes under this Agreement. The above limitations on use,
dissemination and disclosure shall not apply to information that (i) is learned
by the Shareholder from a third party entitled to disclose it; (ii) becomes
known publicly other than through the Shareholder or any party who received the
same through the Shareholder, provided that the Shareholder has no knowledge
that the disclosing party was subject to an obligation of confidentiality; (iii)
is required by law or court order to be disclosed by the Shareholder; or (iv) is
disclosed with the express prior written consent thereto of Buyer. The
Shareholder agrees to undertake all necessary steps to ensure that the secrecy
and confidentiality of such information will be maintained in accordance with
the provisions of this paragraph (b). Notwithstanding any thing contained herein
to the contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party at the
expense of the non- disclosing party in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
5.3 Interim Operations.
During the period from the date of this Agreement and continuing until
the Closing:
(a) The Shareholder agrees (except as expressly contemplated
by this Agreement, including any Exhibits and Schedules hereto, or to the extent
that Buyer shall otherwise consent in writing) that as to the Company:
(1) The Company shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it;
(2) The Company shall not and shall not propose to:
(a) declare, set aside or pay any dividend, on, or make other distributions in
respect of, any of its capital stock, or purchase or redeem any shares of its
capital stock other than a cash dividend to be distributed to the Shareholder in
an amount equal to the Shareholder's liability for federal and state taxes on
the earnings from operations of the Company during 1998 through the Closing Date
(exclusive
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of any income or gain on sale associated with the transactions covered by this
Agreement) as more fully described at Section 5.4 hereafter; (b) split, combine
or reclassify any of its capital stock or issue, authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; (c) redeem, repurchase or otherwise acquire any
shares of its capital stock; or (d) otherwise change its capitalization.
(3) Except as contemplated by this Agreement, the Company
shall not sell, issue, pledge, authorize or propose the sale or issuance of,
pledge or purchase or propose the purchase of, any shares of its capital stock
of any class or securities convertible into, or rights, warrants or options to
acquire, any such shares or other convertible securities.
(4) The Company shall not amend its certificate of
incorporation or its Bylaws.
(5) The Company shall not sell, lease, pledge, encumber or
otherwise dispose of or agree to sell, lease, pledge, encumber or otherwise
dispose of, any of its assets that are material or any other assets except in
the ordinary course of business consistent with prior practice and in no event
amounting in the aggregate to more than $25,000.
(6) The Company shall not incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities of
the Company or guarantee any debt securities of others other than in the
ordinary course of business consistent with prior practice and in no event
amounting in the aggregate to more than $25,000.
(7) The Company shall not adopt or amend in any material
respect any collective bargaining agreement or Employee Benefit Plan.
(8) The Company shall not grant to any executive officer any
increase in compensation or in severance or termination pay, or enter into any
employment agreement with any executive officer.
(9) The Company shall not acquire (by merger, consolidation or
acquisition of stock or assets or otherwise) any corporation, partnership or
other business organization or subdivision thereof, or make any investment by
either purchase of stock or securities, contributions to capital, property
transfer or, except in the ordinary course of business, purchase of any property
or assets, of any other individual or entity.
(10) The Company shall not make any material tax election or
settle or compromise any material federal, state, local or foreign tax
liability.
(11) The Company shall not waive, release, grant or transfer
any rights of material value or modify or change in any material respect any
Material Contract other than in the ordinary course of business and consistent
with past practice.
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(12) The Company shall not enter into any agreement or
arrangement to do any of the foregoing. The Company shall not take any action,
or fail to take any action, that is reasonably likely to result in any of the
representations and warranties of the Company set forth in this Agreement
becoming untrue in any material respect.
(b) Buyer agrees (except as expressly contemplated by this Agreement,
including any Exhibits and Schedules hereto, or to the extent that the
Shareholder shall otherwise consent in writing or to the extent required to
permit Buyer to meet its obligations under this Section 5) that:
(1) Buyer shall carry on its business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted
and, to the extent consistent with such business, use all reasonable efforts to
preserve intact its present business organization (provided that such obligation
shall not relate to the officers and employees of Buyer or any of its
subsidiaries) and preserve its relationships with customers, suppliers and
others having business dealings with it.
(2) As part of its overall business strategy, Buyer is
presently in negotiations with other companies that may be suitable acquisition
targets. Buyer may, therefore, make one or more acquisitions prior to the
Closing, and in connection therewith, may be caused to issue additional
securities, of whatever nature and number, in connection with such acquisitions.
In addition, Buyer may also be caused to issue additional securities, of
whatever nature and number, in connection with certain private placement
transactions which may be undertaken between the date hereof and the Closing.
(3) Buyer shall not (and shall not propose to) (a) declare or
pay any dividend, on, or make other distributions in respect of, any of its
capital stock, (b) split, combine or reclassify any of its capital stock or
issue, authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, (c) repurchase or
otherwise acquire any shares of its capital stock or (d) otherwise change its
capitalization.
(4) Buyer shall not sell, lease, pledge, encumber or otherwise
dispose of, or agree to sell, lease, pledge, encumber or otherwise dispose of,
any of its assets that are material, or any other assets except in the ordinary
course of business consistent with prior practice.
(5) Buyer shall not adopt or amend in any material respect any
collective bargaining agreement or Employee Benefit Plan (as defined herein).
(6) Buyer shall not enter into any agreement or arrangement to
do any of the foregoing. Buyer shall not take any action, or fail to take any
action, that is reasonably likely to result in any of their representations and
warranties set forth in this Agreement becoming untrue in any material respect.
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5.4 Permissible Distributions to Shareholder.
In recognition of the Company's status as an S Corporation, Buyer
has agreed to permit the Shareholder to withdraw from the Company funds to
assist the Shareholder in the payment of Shareholder's federal and state income
tax liability for the taxable earnings of the Company from January 1, 1998
through the Closing Date, exclusive of any income or gains resulting from the
Section 338(h)(10) election, to the extent such distributions have not already
been withdrawn by the Shareholder. Pursuant to that end, the Shareholder may
withdraw, in total, funds from the Company in an amount equal to the Company's
taxable income earned through the Closing Date, exclusive of any income or gains
resulting from the Section 338(h)(10) election, multiplied by the Shareholder's
tax bracket historically associated with the Company's earnings from operations.
As of the date of this Agreement, the Company has paid the Shareholder a cash
dividend of $56,357 on April 16, 1998 for purposes of satisfying the
Shareholder's April 15, 1998 estimated tax obligation relating to federal income
on earnings of the Company for tax year 1998. All amounts not previously
distributed to the Shareholder to cover the taxes described herein, shall be
distributed to the Shareholder once all parties are satisfied as to the
determination of such amounts, however, in no event later than the due date of
the final S-Corporation tax return for the taxable period January 1, 1998
through the Closing Date. In the event that the amounts withdrawn by the
Shareholder on or before the Closing Date exceed the amounts the Shareholder is
entitled to withdraw under this section after notice from the Buyer, the
Shareholder shall have an obligation to refund to the Company, any and all such
excess distributions within thirty (30) days thereafter, and in the absence
thereof, the Buyer may setoff such excess amounts against any and all other
amounts due to the Shareholder hereunder, including an offset against the Escrow
Fund to the extent of shares of Buyer's Common Stock valued at 50% of the per
share price utilized in connection with computing the Closing Value.
5.5 Consents.
Buyer understands that the consents listed on Schedule 5.5 have not been
obtained prior to the Closing, and Buyer agrees to bear the risk of loss or
damage to the business of the Company, if any, that may result from the failure
to obtain such consents. Buyer acknowledges that the Shareholder was willing to
delay entering into this Agreement or the holding of the Closing for the purpose
of allowing him to have time to solicit and obtain such consents, and that Buyer
determined, for its own reasons, to consummate the transactions contemplated in
this Agreement, without such consents having been obtained. After the Closing,
the Shareholder will cooperate with the Company and Buyer in its efforts to
obtain such consents, but Buyer agrees that the obtaining of such consents shall
be the responsibility of the Buyer and the Company.
5.6 Filings.
Buyer and the Shareholder shall, as promptly as practicable, make any
required filing, and any other required submissions, under any law, statute,
order rule or regulation with respect to the Agreement and the related
transactions and shall cooperate with each other with respect to
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the foregoing. After the Closing, Buyer shall timely file a current report on
Form 8-K relating to the Agreement and the transactions contemplated hereby.
5.7 All Reasonable Efforts.
Subject to the terms and conditions of this Agreement and to the fiduciary
duties and obligations of the boards of directors of the parties hereto to their
respective shareholders, as advised by their counsel, each of the parties to
this Agreement shall use all reasonable efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, or to remove any injunctions or
other impediments or delays, legal or otherwise, as soon as reasonable
practicable, to consummate the transactions contemplated by this Agreement.
5.8 Public Announcements.
Neither the Shareholder nor the Buyer shall disclose to the public or to
any third party the existence of this Agreement or the transactions contemplated
hereby or any other material non-public information concerning or relating to
the other party hereto, other than with the express prior written consent of the
other party hereto, except as may be required by law or court order or to
enforce the rights of such disclosing party under this Agreement, in which event
the contents of any proposed disclosure shall be discussed with the other party
before release; provided, however, that notwithstanding anything to the contrary
contained in this Agreement, any party hereto may disclose this Agreement to any
of its directors, officers, employees, shareholders, affiliates, agents and
representative who need to know such information for the sole purpose of
evaluating the Agreement, and to any party whose consent is required in
connection with this Agreement. The parties anticipate issuing a mutually
acceptable, joint press release announcing the execution of this Agreement and
the consummation of the transactions provided for herein.
5.9 Notification of Certain Matters.
The Shareholder shall give prompt notice to Buyer, and Buyer shall give
prompt notice to Shareholder, of (a) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which would cause any of its
representations or warranties in this Agreement to be untrue or inaccurate in
any material respect, as to the Company or the Shareholder, at or prior to the
Closing, and, as to Buyer, as of the Closing and (b) any material failure of the
Shareholder, on the one hand, or Buyer, on the other hand, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by them under this Agreement; provided, however, the delivery
of any notice pursuant to this Section shall not limit or otherwise affect the
remedies available to the party receiving such notice under this Agreement as
expressly provided in this Agreement.
5.10 Documents at Closing.
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Each party to this Agreement agrees to execute and deliver at the Closing
the Exhibits and other documents identified in Section 2.2.
5.11 Satisfaction of Guarantees.
Buyer agrees to satisfy or assume in full the guarantees of Shareholder
identified on Schedule 3.11 hereto and as a result, to have the Shareholder
released from such guarantees.
5.12 Prohibition on Trading in Buyer Stock.
The Shareholder acknowledges that the United States securities laws
prohibit any person who has received material non-public information concerning
the matters which are the subject matter of this Agreement from purchasing or
selling the securities of the Buyer, or from communicating such information to
any person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell securities of the Buyer. Accordingly, the
Shareholder agrees that he will not purchase or sell any securities of the
Buyer, or communicate such information to any other person under circumstances
in which it is reasonably foreseeable that such person is likely to purchase or
sell securities of the Buyer, until no earlier than 72 hours following the
dissemination of a Current Report on Form 8-K to the SEC announcing the Closing
pursuant to this Agreement provided that the Form 8-K is required and timely
filed.
5.13 Establishment of Retention Plan.
Following Closing, the Buyer shall establish a retention plan for
the key employees of the Company as of the Closing Date and who are identified
upon Schedule 5.13 hereto, who continue in the employment of Buyer for two years
from Closing (the "Key Employees"). Within thirty (30) days following the end of
the twenty-fourth month following Closing (the "Distribution Date"), Buyer will
deliver and the Key Employees shall be entitled to receive bonuses in an
aggregate amount of $500,000 (the "Bonus Pool"). The Bonus Pool shall be
comprised of $250,000 in cash, and the remaining $250,000 in value shall be
comprised of shares of Buyer's Common Stock having a value equal to the lower
of: (i) the Closing Value; or (ii) the average closing price of the Buyer's
Common Stock (on the principal exchange, market or quotation system upon which
such shares regularly trade at the time) for the twenty (20) trading days
preceding the end of the twenty-fourth month following Closing. Allocation of
the Bonus Pool among the Key Employees shall be agreed upon by Buyer and
Shareholder promptly following Closing.
5.14 Tax Matters/Section 338(h)(10) Election.
(a) The Shareholder will timely and properly file or cause to be
filed all tax returns of the Company which are due or which will become due for
periods ending through the Closing Date, all such tax returns to be true and
correct and complete in all material respects, and the Shareholder will pay or
cause to be paid in full when due all taxes, if any, which become due and
payable pursuant to such returns, or assessments received by him on or before
the Closing Date; in that regard, the Company shall provide Shareholder with
such reasonable access to the
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books and records of the Company as is necessary to complete and file such tax
returns. Shareholder shall present for Buyer's review and Buyer shall be
entitled to review all final federal and state S-corporation returns which shall
include gains, if any, resulting from the Section 338(h)(10) election to be
filed by the parties hereto, thirty (30) days prior to the filing of any such
return. In addition, Shareholder agrees that any and all costs of preparing such
return shall be borne exclusively by the Shareholder.
(b) The Shareholder and Buyer shall jointly make an election on a
timely basis with respect to the Company under Section 338(h)(10) of the
Internal Revenue Code (the "Code") on Form 8023 or in such other manner as may
be required by rule or regulation of the Internal Revenue Service, and shall
jointly make an election in the manner required under any analogous provision of
state or local law as the Buyer shall designate or as shall be required,
concerning the transactions contemplated by this Agreement. The Buyer shall,
with the assistance and cooperation of the Shareholder, prepare all such Section
338(h)(10) forms required as attachments to Form 8023 (and all forms under
analogous provisions of state or local law) in accordance with applicable tax
laws and shall on such Form 8023 allocate the Purchase Price in a manner
consistent with Section 338 of the Code, and the Buyer shall deliver such forms
and related documents to the Shareholder at least 60 days prior to the due date
of filing. The Shareholder shall deliver to the Buyer at least 30 days prior to
the due date of filing such completed forms as are required to be filed under
Section 338(h)(10) of the Code (and analogous provisions of state or local law).
The Shareholder shall not be obligated to indemnify the Buyer or the Company for
any amount of Delaware capital stock tax attributable to the Section 338(h)(10)
election. The Shareholder and Buyer shall jointly execute any amended Form
8023's (and all forms under analogous provisions of state or local law) as may
become necessary after the initial filing to the extent post-closing adjustments
to Purchase Price arise under the provisions of this Agreement.
5.15 Repurchase of Accounts Receivable.
After the Closing Date, Buyer shall provide Shareholder with written
notice in the event that certain of the accounts and notes receivable of the
Company as of the Closing Date are not collected in full within ninety (90) days
after the Closing Date, less any allowance for doubtful accounts reflected in
the Interim Financial Statements. Shareholder shall thereafter have ninety (90)
days from the date of such notification to collect in full on behalf of the
Company all such outstanding accounts and notes receivable; and to the extent
that any such accounts and notes receivable remain outstanding (less the
allowance for doubtful accounts reflected in the Interim Financial Statements),
Shareholder shall, within ten (10) days thereafter, purchase from the Company,
for cash, the face value of all such outstanding accounts and notes receivable.
5.16 Governmental Authority.
If so required, the parties shall have filed with the Federal Trade
Commission and the Antitrust Division of the Department of Justice notification
and report forms with respect to the
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transactions contemplated hereby pursuant to the HSR Act and the rules
promulgated thereunder, and the waiting period required to expire under the HSR
Act and rules, including any extension thereof, shall have expired.
5.17 Absence of Broker or Finder.
There is no investment banker, broker, finder or other similar
intermediary which has been retained by, or is authorized by, the Shareholder to
act on its behalf who might be entitled to any fee or commission from the Buyer
or the Company; there is no investment banker, broker, finder or other similar
intermediary which has been retained by, or is authorized by, the Buyer to act
on its behalf who might be entitled to any fee or commission from the
Shareholder or the Company upon consummation of the transactions contemplated by
this Agreement.
5.18 Cooperation; Further Assurances.
Each party to this Agreement agrees to cooperate fully with the other
parties hereto and their counsel and accountants and other representatives, will
use best efforts to cause satisfaction of the conditions to consummation of the
transactions contemplated herein as promptly as possible, and will refrain from
a course of action inconsistent with this Agreement. Each party shall, upon
request of any of the other parties hereto, at any time and from time to time
execute, acknowledge, deliver and perform all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and instruments of
further assurances as may be necessary or appropriate to carry out the
provisions and intent of this Agreement.
5.19 Further Mutual Covenants.
Buyer and the Shareholder shall refrain from taking any action which would
render any representations or warranties contained in Articles 3 or 4 of this
Agreement inaccurate as of the Closing Date and shall promptly notify the other
party upon the happening of any event or taking of any action which renders any
such representation or warranty inaccurate. Each party shall promptly notify the
other of any action, suit or proceeding that shall be instituted or threatened
against such party to restrain, prohibit, or otherwise challenge the legality of
any transaction contemplated by this Agreement.
5.20 Restrictions on Transfer of Osage Stock.
Buyer agrees not to sell, transfer or otherwise dispose of the Osage Stock
(including private sales or sales under Rule 144) until the effective date of
the "Registration Statement" (as defined in Section 1(f) of the Registration
Rights Agreement).
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ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
The obligations of Buyer hereunder shall be subject to the following
conditions, any or all of which may be waived in writing by Buyer:
6.1 Accuracy of Representations and Warranties; Shareholder Performance.
Each of the representations and warranties of the Shareholder contained
herein shall be true and correct in all respects on and as of the Closing Date
with the same effect as though made on and as of such date and the Shareholder
shall have performed and complied in all respects with each of the agreements,
covenants, stipulations, terms and conditions contained herein and required to
be performed or complied with by it on or prior to the Closing Date.
6.2 No Adverse Change.
Since the date of the Interim Financial Statements, there shall have been
no adverse change in the financial condition, assets or liabilities of the
Company.
6.3 No Loss.
Since the date of the Interim Financial Statements, the Company shall not
have suffered any loss on account of fire, flood, accident, strike or other
calamity which has had or is likely to have an adverse effect on the financial
condition or any assets of the Company, whether or not such loss shall have been
covered by insurance.
6.4 No Injunction; Consents.
No action, proceeding or investigation shall have been instituted or
threatened to set aside the transactions provided for herein or to enjoin or
prevent the consummation of the transactions contemplated hereby and all
required consents and approvals for the consummation of the transactions
contemplated hereby shall have been secured.
6.5 Deliveries by the Shareholder.
The Shareholder shall have executed and delivered to Buyer at Closing,
those Exhibits and other documents identified in Section 2.2 hereof.
6.6 Uniform Commercial Code Searches.
Uniform Commercial Code searches (which searches shall be made or caused
to be made by and at the expense of Buyer) of filings made pursuant to Article 9
thereof in all jurisdictions where any assets of the Company are located, in
form, scope and substance reasonably satisfactory to Buyer and its counsel,
shall not disclose any liens, claims, security interests or encumbrances against
any of such assets disclosed thereby except liens, claims, security interests
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or encumbrances that are disclosed in Financial Statements, this Agreement, or
are otherwise released or terminated by the Company prior to or at the time of
Closing.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDER
The obligations of the Shareholder shall be subject to the following
conditions, any or all of which may be waived in writing by the Shareholder:
7.1 Accuracy of Representations and Warranties; Buyer Performance.
Each of the representations and warranties of Buyer set forth in Article 4
hereof shall be true and correct in all respects on and as of the Closing Date
with the same effect as though made on and as of such date and Buyer shall have
in all respects performed and complied with each of the agreements, covenants,
stipulations, terms and conditions contained herein and required to be performed
or complied with by Buyer on or prior to the Closing Date.
7.2 No Adverse Change.
Since the date of the most recent Buyer's SEC Report there shall have been
no adverse change in the financial condition, assets or liabilities of the
Buyer.
7.3 No Loss.
Since the date of the most recent Buyer's SEC Report, the Buyer shall not
have suffered any loss on account of fire, flood, accident, strike or other
calamity which has had or is likely to have an adverse effect on the financial
condition or any assets of the Buyer, whether or not such loss shall have been
covered by insurance.
7.4 No Injunction; Consents.
No action, proceeding or investigation shall have been instituted or
threatened to set aside the transactions provided for herein or to enjoin or
prevent the consummation of the transactions contemplated hereby and all
required consents and approvals for the consummation of the transactions shall
have been secured.
7.5 Deliveries by Buyer.
Buyer shall have executed and delivered to the Shareholder those Exhibits
and other documents identified in Section 2.2 hereof.
7.6 Consents and Proceedings.
The Buyer shall have obtained all of the consents, authorizations, orders
or approvals required in order to execute and deliver this Agreement and to
perform its obligations hereunder and thereunder and all actions, proceedings,
instruments and documents deemed necessary or
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appropriate by Shareholder and its counsel to effectuate this Agreement and the
consummation of the transactions contemplated hereby, or incidental thereto,
shall have been obtained and all other related legal matters shall have been
approved by such counsel.
ARTICLE VIII
TERMINATION
8.1 Termination Events
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Shareholder if a material breach of any
provision of this Agreement has been committed by the other party and such
breach has not been waived;
(b) by Buyer if any of the conditions in Article 6 have not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement), and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Shareholder, if any of the conditions in
Article 7 have not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Shareholder to comply with his obligations under this Agreement), and
Shareholder has not waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Shareholder; or
(d) by either Buyer or Shareholder if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before the
Termination Date, or such later date as the parties may agree upon.
8.2 Effect of Termination
Each party's right of termination under Section 8.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 8.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 10.11,
and 5.2 and 5.8 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
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8.3 Extension; Waiver.
Any time prior to the Closing, the parties may (a) extend the time for the
performance of any of the obligations or other acts of any other party under or
relating to this Agreement; (b) waive any inaccuracies in the representations or
warranties by any other party or (c) waive compliance with any of the agreements
of any other party or with any conditions to its own obligations. Any agreement
on the part of any other party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE IX
INDEMNIFICATION/SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1 Indemnification.
(a) The Shareholder shall indemnify, defend and hold harmless Buyer
from and against any and all demands, claims, actions or causes of action,
judgments, assessments, losses, liabilities, damages or penalties and reasonable
attorneys' fees and related disbursements (collectively, "Claims") incurred by
Buyer which arise out of or result from a misrepresentation, breach of warranty,
or breach of any covenant or agreement of the Shareholder contained herein or in
the Schedules annexed hereto or in any deed, exhibit, closing certificate,
schedule or any ancillary certificates or other documents or instruments
furnished by the Shareholder pursuant hereto or in connection with the
transactions contemplated hereby or thereby.
(b) Buyer shall indemnify, defend and hold harmless the Shareholder
from and against any and all Claims, as defined at subsection 9.1(a) above,
incurred by the Shareholder which arise out of or result from a
misrepresentation, breach of warranty or breach of any covenant of Buyer
contained herein or in the Schedules annexed hereto or in any deed, exhibit,
closing certificate, schedule or any ancillary certificates or other documents
or instruments furnished by Buyer pursuant hereto or in connection with the
transactions contemplated hereby or thereby.
(c) The right to indemnification, payment of damages or other remedy
based on any representations, warranties, covenants and obligations contained
within this Agreement will not be affected by any investigation conducted with
respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of damages, or other remedy based on such
representations, warranties, covenants and obligations.
9.2 Survival.
(a) All representations and warranties contained in or made pursuant
to this Agreement or in any agreement, certificate, document or statement
delivered pursuant hereto
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shall survive the Closing for a period of two (2) years from the Closing Date,
unless otherwise specified in such agreement, certificate or document; provided,
however, that notwithstanding the foregoing, (i) the representations and
warranties set forth in Section 3.33 (relating to environmental matters) and
3.12 (relating to taxes) and all covenants and agreements of the parties
relating to the subject matter(s) thereof shall survive the Closing for the
period equal to the statute of limitations applicable to Claims arising under
such subject matters.
9.3 Methods of Asserting Claims for Indemnification.
All claims for indemnification under this Agreement shall be asserted as
follows:
(a) Third Party Claims. In the event that any Claim for which a
party (the "Indemnitee") would be entitled to indemnification under this
Agreement is asserted against or sought to be collected from the Indemnitee by a
third party the Indemnitee shall promptly notify the other party (the
"Indemnitor") of such Claim, specifying the nature thereof, the applicable
provision in this Agreement or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim Notice"). The
Indemnitor shall have thirty (30) days (or, if shorter, a period to a date not
less than ten (10) days prior to when a responsive pleading or other document is
required to be filed but in no event less than ten (10) days from delivery or
mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a)
whether or not it disputes the Claim and (b) if liability hereunder is not
disputed, whether or not it desires to defend the Indemnitee. If the Indemnitor
elects to defend by appropriate proceedings, such proceedings shall be promptly
settled or prosecuted to a final conclusion in such a manner as to avoid any
risk of damage to the Indemnitee; and all costs and expenses of such proceedings
and the amount of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but not control, any such
defense or settlement, it may do so at its sole cost and expense. If the
Indemnitor has disputed the Claim, as provided above, and shall not defend such
Claim, the Indemnitee shall have the right to control the defense or settlement
of such Claim, in its sole discretion, and shall be reimbursed by the Indemnitor
for its reasonable costs and expenses of such defense. Neither Indemnitee nor
Indemnitor shall be liable for any settlement of any Claim without the prior
written consent of the other party.
(b) Non-Third Party Claims. In the event that the Indemnitee should
have a Claim for indemnification hereunder which does not involve a Claim being
asserted against it or sought to be collected by a third party, the Indemnitee
shall promptly send a Claim Notice with respect to such Claim to the Indemnitor.
If the Indemnitor does not notify the Indemnitee in writing within thirty (30)
days of the date of the Claim Notice, then such Claim shall be submitted to
arbitration pursuant to Section 10.8 hereof. If the Indemnitor disputes the
amount of such Claim, the controversy in question shall be submitted to
arbitration pursuant to Section 9.8 hereafter.
(c) Right of Set-Off. Subject to the terms of the Escrow Agreement,
in the event a Claim arises pursuant to subparagraph 9.1(a), in addition to any
of its other rights under this paragraph 9, Buyer shall have the right to apply
the amount of the Claim which is agreed to
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by the other party against the amounts identified at subparagraph 1.4; provided,
however, that this subparagraph shall not be the exclusive remedy of Buyer in
the event a Claim arises pursuant to subparagraph 9.1(a).
9.4 Limitations on Amount.
(a) Notwithstanding the provisions of this Article 9, the Indemnitor
shall not be required to indemnify the Indemnitee with respect to Claims (other
than Claims relating to tax matters and environmental matters and all costs of
defense for any such Claim), until the aggregate amount of such Claims shall
exceed $20,000 (the "Indemnitor's Floor"); provided, however, if such Claims in
the aggregate exceed the amount of the Indemnitor's Floor, the Indemnitor shall
indemnify Indemnitee for all Claims irrespective of the Indemnitor's Floor. The
Indemnitor's Floor shall not be applicable for Claims as they relate to tax
matters and environmental matters and all costs of defense for any such Claims.
(b) Notwithstanding the provisions of this Article 9, the Buyer's
liability with respect to matters set forth in subsection 9.1(b) above for
damages shall be limited to the sum of One Million Dollars ($1,000,000). The
Shareholder's liability with respect to matters set forth in subsection 9.1(a)
shall also be limited to One Million Dollars ($1,000,000), except for damages
arising out of a breach of the representations and warranties at Sections 3.1 to
3.6 inclusive, Sections 3.12 and 3.32, and any and all fraudulent actions and
statements or intentional misrepresentations, in which case the maximum
liability of the Shareholder shall be limited to the Purchase Price.
ARTICLE X
MISCELLANEOUS
10.1 Exclusive Remedies.
The right to indemnification under Article IX of the Agreement shall
be the exclusive remedy for a breach of a representation, warranty, covenant or
other provision of this Agreement except that Buyer and the Shareholder shall
have the right to obtain injunctive relief to restrain any breach or otherwise
to specifically enforce the provisions of this Agreement, it being agreed by the
parties that money damages alone would be inadequate to compensate Buyer or the
Shareholder, as the case may be, for such breach or other failure to perform the
obligations under this Agreement.
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10.2 Notices.
All notices requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date if delivered personally, or
upon the second business day after it shall have been deposited by certified or
registered mail with postage prepaid, or sent by telex, telegram or telecopier,
as follows (or at such other address or facsimile number for a party as shall be
specified by like notice):
if to the Shareholder:
Mr. O. Jack Anderson
1560 S.E. 14th Court
Deerfield Beach, FL 33441
Telephone: (954) 429-3016
with a copy to:
Joseph M. Rigot, Esquire
Thompson Hine & Flory LLP
2000 Courthouse Plaza, NE
Dayton, OH 45401-8801
Fax: (937) 443-6635
and
if to Buyer, to it at:
Mr. Jack Leadbeater, Chief Executive Officer
Osage Systems Group, Inc.
1661 E. Camelback Road, Suite 245
Phoenix, AZ 85016
Fax: (602) 274-1295
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, P.C.
Eleven Penn Center, 14th Floor
Philadelphia, PA 19103
Fax: (215) 665-8760
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<PAGE> 48
10.3 Entire Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto, constitutes
the entire Agreement among the parties with respect to its subject matter and
supersedes all prior agreements and understandings, both written and oral, among
the parties or any of them with respect to such subject matter and shall not be
assigned by operation of law or otherwise.
10.4 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and assigns. Nothing in this Agreement
is intended to confer on any person other than the parties to this Agreement or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
10.5 Headings.
The descriptive headings of the sections of this Agreement are inserted
for convenience only, do not constitute a part of this Agreement and shall not
affect in any way the meaning or interpretation of this Agreement.
10.6 Counterparts.
This Agreement may be executed in two or more counterparts and delivered
via facsimile, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
10.7 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida, without regard to the laws that might otherwise
govern under principles of conflicts of laws applicable thereto.
10.8 Arbitration.
If a dispute arises as to the interpretation of this Agreement, it shall
be decided finally in an arbitration proceeding conforming to the Rules of the
American Arbitration Association applicable to commercial arbitration then in
effect at the time of the dispute. The arbitration shall take place in Broward
County, Florida. The decision of the Arbitrators shall be conclusively binding
upon the parties and final, and such decision shall be enforceable as a judgment
in any court of competent jurisdiction. The parties shall share equally the
costs of the arbitration.
10.9 Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void,
unenforceable or against its
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<PAGE> 49
regulatory policy, the remainder of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
10.10 Release and Discharge.
By virtue of his execution of this Agreement, as of the Closing and
thereafter, the Shareholder hereby agrees to release, remise and forever
discharge the Company from and against any and all debts, obligations,
liabilities and amounts owing from the Company to the Shareholder prior to the
Closing, and the Company is not obligated to take any action or make any
payments to third parties on behalf of the Shareholder.
10.11 Expenses.
Except as set forth in this Article 10, the Shareholder shall pay all fees
and expenses incurred by him and the Company in connection with the transactions
provided for hereunder, including the fees and expenses of Shareholder's counsel
and accountants; and Buyer shall pay all expenses incurred by it in connection
with the transactions provided for hereunder, including the fees and expenses of
its counsel and accountants.
10.12 Amendment and Modification.
This Agreement may be amended, by written agreement of Buyer and the
Shareholder. This Agreement may not be amended except by an instrument in
writing signed on behalf of Buyer and the Shareholder.
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IN WITNESS WHEREOF, each of the parties has executed or caused this
Agreement to be executed as of the date first above written.
ATTEST: OSAGE SYSTEMS GROUP, INC.
__________________________ By:__________________________
Secretary Jack Leadbeater,
Chief Executive Officer
WITNESS: SHAREHOLDER
__________________________ _____________________________
O. Jack Anderson,
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<PAGE> 1
EXHIBIT 10.15
<PAGE> 2
CONSULTING AGREEMENT
This Agreement is made this 24th day of April, 1998 between OPEN SYSTEM
TECHNOLOGIES, INC., a Delaware corporation ("Open System"), and O. JACK ANDERSON
("Consultant") under the following circumstances:
A. Consultant is the founder, President and Chief Executive Officer,
and sole stockholder of Open System;
B. Pursuant to a Stock Purchase Agreement of even date herewith (the
"Purchase Agreement"), Osage Systems Group, Inc., a Delaware corporation
("Osage"), is purchasing all of the outstanding capital stock of Open
System from Consultant;
C. Upon the terms and conditions set forth below, Open System desires
to have available to it, and Consultant is willing to provide to Open
System, advice and assistance in connection with planning for the continued
growth and development of its business, the maintenance and enhancement of
its relationships with major customers and suppliers, the development and
evaluation of its personnel, and the resolution of any transition issues
that arise in connection with the change in ownership of Open System
("Consulting Services");
NOW, THEREFORE, the parties agree as follows:
1. Engagement of Consultant. Open System hereby engages Consultant to
perform the Consulting Services and Consultant hereby agrees to render the
Consulting Services to Open System upon the terms and conditions of this
Agreement. Consultant shall render the Consulting Services from time to time as
the Board of Directors of Open System may reasonably request. The Consulting
Services shall be rendered at such places or locations as Consultant desires,
but Consultant shall, when requested by Open System, be available to participate
in person in conferences and meetings involving subjects within the scope of the
Consulting Services, provided that Consultant is given reasonable notice of the
dates, times, and locations of such meetings and conferences. Consultant has no
obligation to work any particular hours or days, but is only obligated to be
available to render the Consulting Services when requested by Open System. Open
System agrees that, without the consent of Consultant, the number of days during
which Consultant shall be requested to perform Consulting Services will not
exceed 15 days per calendar month during the first six calendar months of this
Agreement and 10 days per calendar month during the last six calendar months of
this Agreement.
2. Relationship Between Parties. Consultant's relationship to Open System
during the term of this Agreement is that of independent contractor. Consultant
is in no respect an
<PAGE> 3
agent, employee or legal representative of Open System and shall have no power
or authority to bind Open System or to assume or create any obligation or
responsibility, express or implied, on behalf of or in Open System's name.
Consultant shall not sign Open System's name to any instrument for any purpose.
3. Term. This Agreement shall commence on the date first above written
and shall expire on the first annual anniversary date of such date unless
earlier terminated as provided in Section 8 hereof.
4. Compensation. Open System shall pay Consultant a consulting fee of
$50,004, payable in 12 monthly payments of $4,167, with the first payment being
due and payable on May 15, 1998 and an additional payment being due on the 15th
day of each succeeding month until a total of 12 payments have been made.
5. Expenses. Upon submission of receipts or other supporting
documentation, Open System shall reimburse Consultant for all reasonable and
necessary business expenses properly incurred in performing services for Open
System pursuant to this Agreement. Reasonable expenses would include, for
example, the cost of coach airfare if Consultant is requested to perform
Consulting Services at a particular location and Consultant is not otherwise in
the area on the dates when the Consulting Services are requested to be rendered.
6. Retiree Medical Coverage. During the 12 month period beginning May 1,
1998, retiree medical coverage, in the form of coverage under the group health
plan provided to active employees of Open System, shall be provided to
Consultant and his eligible dependents, the cost of such coverage during such
initial 12 month period to be paid in its entirety by Open System; provided,
however that such coverage may take into account Medicare coverage to which
Consultant or any of his eligible dependents may be entitled during such
initial 12 month period. For the 12 month period beginning May 1, 1999,
Consultant may elect to continue to receive such retiree medical coverage for
himself and his eligible dependents; provided, however, that during such second
12 month period, Consultant shall pay the entire premium cost for such coverage
or, if the Open System group health plan is then self-insured, the estimated
premium cost of such coverage if said group health plan were an insured plan.
7. Office. During the term of this Agreement, Open System shall provide
Consultant an office at Open System's headquarters in Pompano Beach, Florida
similar to the office provided to him immediately prior to his sale of stock to
Osage pursuant to the Purchase Agreement.
8. Return of Property. Upon termination of this Agreement, Consultant
shall immediately surrender and turn over to Open System all books, forms,
records, customer's lists and all other papers and writings relating to Open
System and its affiliates and all other property belonging to Open System and
its affiliates which he may have in his possession, it being understood and
agreed that the same are the sole property of Open System; provided, however,
that this provision shall not be construed to include personal items of
Consultant.
2
<PAGE> 4
9. Termination. This Agreement may be terminated as follows:
(a) By Consultant upon 90 days prior notice to Open System given any
time after August 31, 1998;
(b) By Open System immediately upon written notice in the event of
(i) Consultant's material breach of any of his obligations under this
Agreement or (ii) any dishonest or criminal act or fraud by Consultant; and
(c) Immediately upon the death of Consultant; provided, however, that
in the event of Consultant's death, Open System shall continue to pay the
compensation due under Section 3 of this Agreement for a period of four
months to Consultant's spouse, or if his spouse does not survive him, to
his estate.
10. Assignment of Benefit. This Agreement shall be binding upon and
assignable by, and inure to the benefit of, Open System, its successors and
assigns. This Agreement is personal to Consultant and shall not be assigned by
him but shall inure to the benefit of and be enforceable by Consultant's
executors, administrators, successors, heirs, distributees, devisees and
legatees in the event of Consultant's death.
11. Notice. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given when
delivered personally or when deposited in the United States Mail, certified and
with proper postage prepaid, addressed as follows:
If to Open System:
Open System Technologies, Inc.
441 South State Road 7, Suite #1
Pompano Beach, Florida 33068
Attention: President
If to Consultant:
O. Jack Anderson
1560 S.E. 14th Court
Deerfield Beach, Florida 33441
Any party may change the address to which notices or other communications
are to be directed to it by giving notice of such change to the other party in
the manner provided in this Paragraph 11.
3
<PAGE> 5
12. Waiver. No waiver or any breach of any provision of this Agreement
shall be deemed to be a waiver of any later or other breach thereof or as a
waiver of any such or other provision of this Agreement.
13. Governing Law. This Agreement shall be construed in accordance with
and the legal relations between the parties shall be governed by the laws of
the State of Florida as applicable to agreements executed and fully performed
in the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Consulting Agreement as
of the date first above written.
"Open System"
OPEN SYSTEM TECHNOLOGIES, INC.
By /s/ Jack Leadbeater
---------------------------
Title CEO
------------------------
"Consultant"
/s/ O. Jack Anderson
------------------------------
O. Jack Anderson
4
<PAGE> 1
EXHIBIT 10.16
<PAGE> 2
NONCOMPETITION AGREEMENT
THIS AGREEMENT is made as of the 24th day of April, 1998, by and between
OSAGE SYSTEMS GROUP, INC., a Delaware corporation (hereinafter "Company"), and
O. JACK ANDERSON, an individual (hereinafter "Anderson").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Stock Purchase Agreement ("SPA") dated
April 24, 1998, the Company is acquiring 100% of the stock of Open System
Technologies, Inc. ("OST"), a Delaware corporation, of whom Anderson .was a 100%
owner; and
WHEREAS, as a substantial part of the consideration that the Company has
bargained for in exchange for its promises set forth in the SPA, Anderson has
agreed that he will enter into a binding agreement appropriately limiting his
ability to compete with the Company or OST following the sale of OST to the
Company;
NOW, THEREFORE, in consideration of the mutual premises and covenants
of the parties contained within the SPA and in this Agreement, the parties
hereto do hereby agree as follows:
1. Acknowledgment of Necessity for Protections of Company's Business.
Anderson recognizes and acknowledges that it is essential, for the
proper protection of the business of OST, and of the investment by the Company
in acquiring OST, that Anderson be reasonably restrained: (a) from soliciting or
inducing any employee of the Company or OST to leave the employ of the Company
or OST; (b) from hiring or attempting to hire any employee of the Company or
OST; (c) from soliciting the trade of, or trading with, the customers or
suppliers of the Company or OST for any business purpose other than that of the
<PAGE> 3
Company or OST; and (d) from competing against the Company or OST for a
reasonable period of time and within a reasonable geographic area following the
Company's acquisition of OST.
2. Restrictions on Competition.
Anderson covenants and agrees that, for and in consideration of the
consideration he is receiving under the SPA, the sufficiency and receipt of
which is hereby acknowledged, during a period of five (5) years following the
execution of the SPA, Anderson shall not, within a 200-mile radius of any of the
places of business of the Company or OST, or of any of either of their
subsidiaries or affiliates (the "Restricted Area"), engage, directly or
indirectly, whether as principal, or as agent, officer, director, employee,
consultant, shareholder, or otherwise, alone or in association with any other
person, corporation or other entity, in any "Competing Business". For purposes
of this Agreement, the term "shareholder" shall exclude any interest owned by
Anderson in a public company to the extent that Anderson owns less than five
percent (5%) of any such company's outstanding common stock or has an investment
in such company of less than $250,000. For the further purposes of this
Agreement, the term, "Competing Business", shall mean any person, corporation or
other entity that is engaged in a business that competes with, or is similar to,
the business of the Company and/or OST on the date hereof; provided, however,
that in order to be construed as a "Competing Business", such person,
corporation or other entity must be engaging in a competitive business that
acquires at least fifty (50%) percent or more of its products/services for
resale from: (i) Sun Microsystems, Inc. ("SUN") or any affiliate, predecessors
or successors of Sun; or (ii) any aggregators, distributors or wholesalers who
acquire products from, or are acting as agents for, Sun, or any affiliates,
predecessors or successors of Sun; or (iii) any manufacturers, aggregators,
distributors or wholesalers who, at the
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<PAGE> 4
time of the execution of the SPA, provide the Company and/or OST with at least
fifty (50%) percent of its products/services for resale.
3. Anderson's Abilities.
Anderson represents that Anderson's experience and capabilities, and
the limited provisions of the immediately-preceding Section 2, are such that he
will not be prevented by this Agreement from earning his livelihood in
businesses similar to that of the Company and/or OST, other than the "Competing
Businesses", as specifically defined in the immediately preceding Section 2.
Anderson acknowledges that there are a significant number of businesses for
which his qualifications and experience would render him qualified for
employment that are within the 200-mile radius referred to in Section 2 and that
do not constitute a "Competing Business", such that his ability to become
employed after the execution of the SPA would not be impaired by this Agreement.
4. Non-Solicitation of Customers and Suppliers.
Anderson agrees that for a period of five (5) years following the
execution of the SPA, he shall not, directly or indirectly, solicit the trade
of, or trade with, any past, present or prospective customer or supplier of the
Company and/or OST for any business purpose that competes with the business
being undertaken by the Company and/or OST or any of their subsidiaries or
affiliates in the Restricted Area.
5. Non-Solicitation of Employees.
Anderson agrees that, for a period of five (5) years following the
execution of the SPA, Anderson shall not, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any employee of the Company and/or OST
to leave the Company and/or OST for any reason
-3-
<PAGE> 5
whatsoever, or assist or participate in the hiring of any employee of the
Company and/or OST to work for another entity.
6. Remedies.
In the event of a breach by Anderson of any of the terms of this
Agreement, the Company and/or OST shall be entitled, if either of them shall so
elect, to institute legal proceedings to obtain damages for any such breach, or
to enforce the specific performance of this Agreement by Anderson and to enjoin
Anderson from any further violation of this Agreement, and to exercise such
remedies cumulatively or in conjunction with all other rights and remedies
provided by law. Anderson acknowledges and agrees that money damages for any
breach by him of any of the provisions of this Agreement may be inadequate to
compensate the Company and/or for the injuries either of them may suffer as the
result of any such breach, and accordingly that the Company shall be entitled to
injunctive relief against Anderson, in addition to money damages, in the event
of any such breach by Anderson.
7. Review by Counsel.
Anderson expressly acknowledges and represents that Anderson has been
given a full and fair opportunity to review this Agreement with an attorney of
Anderson's choice, and that Anderson has satisfied himself, with or without
consulting with counsel, that the terms and provisions of this Agreement,
specifically including, but not limited to, the restrictive covenant and related
provisions of Sections 2 through 5 hereof, are reasonable and enforceable.
8. Notices.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or
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<PAGE> 6
registered mail, return receipt requested, with postage prepaid, at the
following addresses or to such other address as either party may designate by
like notice:
A. If to Anderson, to:
Mr. O. Jack Anderson
1560 S.E. 14th Court
Deerfield Beach, FL 33441
Telephone: (954) 429-3016
with a copy to:
Joseph Rigot, Esquire
Thompson, Hine & Flory, LLP
2000 Courthouse Plaza, NE
Dayton, OH 45401-8801
Fax: (937) 443-6635
and
if to Company, to it at:
Mr. Jack Leadbeater, Chief Executive Officer
Osage Systems Group, Inc.
1661 E. Camelback Road, Suite 245
Phoenix, AZ 85016
Fax: (602) 274-1295
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, P.C.
Eleven Penn Center, 14th Floor
Philadelphia, PA 19103
Fax: (215) 665-8760
-5-
<PAGE> 7
9. Additional Provisions.
A. This Agreement, including without limitation its
confidentiality, restrictive covenant and related provisions, shall inure to the
benefit of, and be binding upon, the Company and OST and their successors and
assigns, and Anderson, his heirs, executors, administrators and legal
representatives, subject to the provisions of Section 9.F. hereof, which
expressly prohibits the assignment or delegation of any of Anderson's personal
rights or obligations hereunder.
B. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof, and cannot be modified
orally. This Agreement supersedes all prior and contemporaneously-made written
or oral agreements between the parties relating to the subject matter hereof. No
modification or waiver of any of the provisions hereof shall be effective unless
set forth in a writing that specifically states that it is intended to be a
modification of this Agreement and that is signed by the President of the
Company and/or OST.
C. If any provision(s) of this Agreement shall be or shall
become illegal or unenforceable in whole or in part, for any reason whatsoever,
the remaining provisions shall nevertheless be deemed valid, binding and
subsisting, and any invalid or unenforceable provision(s) shall be deemed
modified to the least extent possible so as to make them valid and enforceable
and so as to give the maximum effect allowable by law to the parties' original
intent as expressed by the terms hereof.
D. No failure on the part of the Company to exercise, and
no delay by the Company in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise by
the Company of any right, power or remedy hereunder,
-6-
<PAGE> 8
preclude any other or further exercise thereof, or the exercise of any other
right, power or remedy by the Company.
E. "Person" as used herein shall mean a natural person,
joint venture, corporation, partnership, trust, estate, sole proprietorship,
governmental agency or authority or other juridical entity.
F. This is a personal services contract and the rights and
obligations set forth herein may not be assigned or delegated by Anderson.
G. The headings of the several sections of this
Agreement have been inserted for convenience of reference only and shall in no
way be used to restrict, modify, or explain any of the terms or provisions
hereof.
H. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Florida, without regard
to its, or any other sovereignty's, conflicts of laws principles. The parties
agree that any claims brought pursuant to this Agreement shall be brought in a
court of competent jurisdiction located in Broward, Florida.
I. Tolling Period. The non-competition and non-solicitation
obligations contained in Sections 2 through 5 of this Agreement shall be
extended by the length of time during which Anderson shall have been in breach
of any of the provisions of such Sections, regardless of whether the Company or
OST knew or should have known of such breach.
J. Company and/or OST Violation Not a Defense. In an action
by the Company and/or OST to enforce any provision of this Agreement, any claims
asserted by Anderson against the Company and/or OST shall not constitute a
defense to the Company's and/or OST's action.
-7-
<PAGE> 9
K. Construction. This Agreement shall be construed
according to the plain meaning of its terms, and not strictly for or against
either party hereto.
L. Counterparts. This Agreement may be executed in
counterparts, and the counterparts, taken together, shall constitute the entire
Agreement. The Agreement may further be executed by facsimile transmission, and
the facsimile signatures may be deemed original signatures for all purposes,
including for purposes of the Best Evidence Rule and all other rules or
doctrines of similar effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first above written.
IMPORTANT NOTICE: THIS AGREEMENT RESTRICTS ANDERSON'S RIGHTS TO OBTAIN
OTHER EMPLOYMENT FOLLOWING HIS EMPLOYMENT WITH THE COMPANY. BY SIGNING IT,
ANDERSON ACKNOWLEDGES THIS FACT, AND FURTHER ACKNOWLEDGES THAT HE HAS BEEN
ADVISED BY THE COMPANY TO READ THE AGREEMENT CAREFULLY, AND/OR TO CONSULT
WITH COUNSEL OF HIS CHOICE CONCERNING THE LEGAL EFFECTS OF SIGNING THE
AGREEMENT, PRIOR TO SIGNING IT.
OSAGE SYSTEMS GROUP, INC.
By:________________________________ Dated:______________________________
Chairman, Board of Directors
O. JACK ANDERSON
By:________________________________ Dated:______________________________
O. JACK ANDERSON, on his
own behalf
WITNESS:
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<PAGE> 10
______________________________
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<PAGE> 1
EXHIBIT 10.17
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of April
24, 1998 by and between Osage Systems Group, Inc., a Delaware corporation (the
"Company") and O. Jack Anderson (the "Holder"), the sole shareholder of Open
System Technologies, Inc., a Delaware corporation ("OST").
W I T N E S E T H:
WHEREAS, the Company and the Holder are parties to a stock purchase
agreement dated as of April 24, 1998 (the "Stock Purchase Agreement") pursuant
to which the Company will acquire all of the issued and outstanding shares of
the common stock, no par value, of OST;
WHEREAS, pursuant to the Stock Purchase Agreement, the Holder is to
receive certain shares of the Company's $.01 par value common stock (the "Common
Stock"); and
WHEREAS, the parties hereto desire to set forth their agreement concerning
the registration under the Securities Act of 1933, as amended, of the Common
Stock issued to the Holder pursuant to the Stock Purchase Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENT
1. Definitions.
(a) "Closing" shall mean that date upon which a closing of the Stock
Purchase Agreement occurs.
(b) "Company" shall mean Osage Systems Group, Inc.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934.
(d) "Holder" shall mean O. Jack Anderson, the former shareholder of
OST, who has received, or may receive subsequent to the date hereof, shares of
the Company's Common Stock pursuant to the Stock Purchase Agreement.
(e) "Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
(f) "Registration Statement" shall mean the Registration Statement
of the Company filed with the SEC pursuant to the provisions of Section 2 of
this Agreement which
<PAGE> 3
covers the resale of the Restricted Stock on an appropriate form then permitted
by the SEC to be used for such registration and the sales contemplated to be
made thereby under the Securities Act, and all amendments and supplements to
such Registration Statement, including any pre-and post- effective amendments
thereto, in each case including the prospectus contained therein, all exhibits
thereto and all materials incorporated by reference therein.
(g) "Restricted Stock" shall mean all or any shares of Common Stock
or other equity securities of the Company that may be issued to the Holder
pursuant to subparagraph 1.2(b) of the Stock Purchase Agreement, and any
additional shares of Common Stock or other equity securities of the Company
issued or issuable after the date hereof in respect of any such securities (or
other equity securities issued in respect thereof) by way of a stock dividend or
stock split, in connection with a combination, exchange, reorganization,
recapitalization or reclassification of Company securities, or pursuant to a
merger, division, consolidation or other similar business transaction or
combination involving the Company; provided that: as to any particular shares of
Restricted Stock, such securities shall cease to constitute Restricted Stock (i)
when a registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall have
been disposed of thereunder; or (ii) when and to the extent such securities are
permitted to be distributed pursuant to Rule 144 (or any successor provision to
such Rule) under the Securities Act; or (iii) when such securities are otherwise
freely transferable to the public without further registration under the
Securities Act.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
any relevant time.
(j) "SEC" shall mean the United States Securities and Exchange
Commission.
(k) "Trading Day" shall mean any day on which the New York Stock
Exchange is open for trading.
Capitalized terms used in this Agreement and not otherwise defined herein
shall have the same meaning ascribed to them in the Stock Purchase Agreement.
2. Shelf Registration.
(a) The Company shall use it best efforts to prepare and file, not
later than May 25, 1999 , a Registration Statement with the SEC and use its best
efforts to, as promptly as possible have such Registration Statement declared
effective for the purpose of facilitating the public resale of the Restricted
Stock.
(b) Notwithstanding anything to the contrary contained herein, the
Company's obligation in subparagraph 2(a) above shall extend only to the
inclusion of the Restricted Stock in a Registration Statement filed under the
Securities Act. The Company shall have no obligation to assure the terms and
conditions of distribution, to obtain a commitment from an underwriter relative
to the sale of the Restricted Stock or to otherwise assume any responsibility
for the manner, price or terms of the distribution of the Restricted Stock.
Furthermore, the
2
<PAGE> 4
Company shall not be restricted in any manner from including within the
Registration Statement the distribution, issuance or resale of any of its or any
other securities, unless there is a reasonable probability in the opinion of
counsel experienced in such matters governed by the Securities Act, that the
inclusion of securities other than Restricted Stock would materially delay the
effectiveness of the Registration Statement.
(c) If at the time the Company is obligated to file a Registration
Statement hereunder, it has commenced the preparation of a registration
statement or has otherwise secured a commitment from a managing underwriter in
connection with an underwritten primary offering to be undertaken by the Company
(the "Primary Offering"), and the managing underwriter of such Primary Offering
advises the Company that the public resale of the Restricted Stock would be
likely to have a material adverse effect on the consummation of the Primary
Offering, then and in that event, the Company may delay the filing of the
Registration Statement with the SEC until ninety (90) days after the completion
of the Primary Offering, and the Holder agrees not to sell, transfer or
otherwise dispose of the Restricted Stock (including private sales or sales
under Rule 144) until the effective date of the Registration Statement.
3. Registration Procedures. Whenever it is obligated to register any
Restricted Stock pursuant to this Agreement, the Company shall:
(a) prepare and file with the Commission a Registration Statement
with respect to the Restricted Stock in the manner set forth at Section 2 hereof
and use its best efforts to cause such Registration Statement to become
effective as promptly as possible and to remain effective for that period
identified in subparagraph 3(g) hereafter;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the period specified in subparagraph 3(g) below and to comply with the
provisions of the Securities Act with respect to the disposition of all
Restricted Stock covered by such Registration Statement in accordance with the
Holder's intended method of disposition set forth in such Registration Statement
for such period;
(c) furnish to the Holder and to each underwriter, if any, such
number of copies of the Registration Statement and the prospectus included
therein (including each preliminary prospectus), as such persons may reasonably
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such Registration Statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such Registration Statement under the securities or blue sky laws of
such jurisdictions as the Holder, or, in the case of an underwritten public
offering, the managing underwriter shall reasonably request; provided, however,
that the Company shall not for any such purpose be required to qualify generally
to transact business as a foreign corporation in any jurisdiction where it is
not so qualified or to consent to general service of process in any such
jurisdiction;
(e) immediately notify the Holder under such Registration Statement
and each underwriter, at any time when a prospectus relating thereto is required
to be delivered under the
3
<PAGE> 5
Securities Act, of the happening of any event as a result of which the
prospectus contained in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required or necessary to be stated therein in order to make the statements
contained therein not misleading in light of the circumstances under which they
were made;
(f) make available for inspection by the Holder, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by the Holder or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by the Holder, underwriter, attorney,
accountant or agent in connection with such Registration Statement;
(g) for purposes of subparagraphs 3(a) and 3(b) above, the period of
distribution of Restricted Stock shall be deemed to extend until the earlier of:
(A) in an underwritten public offering of all of the Restricted Stock, the
period in which each underwriter has completed the distribution of all
securities purchased by it; (B) in any other registration, the period in which
all shares of Restricted Stock covered thereby shall have been sold; and (C) a
period of two (2) years from the effective date of the Registration Statement
filed by the Company with the SEC pursuant to this Agreement.
(h) if the Common Stock is listed on any securities exchange or
automated quotation system, the Company shall use its best efforts to list (with
the listing application being made at the time of the filing of such
Registration Statement or as soon thereafter as is reasonably practicable) the
Restricted Stock covered by such Registration Statement on such exchange or
automated quotation system;
(i) enter into normal and customary underwriting arrangements or an
underwriting agreement and take all other reasonable and customary actions if
the Holder sells his shares of Restricted Stock pursuant to an underwriting
(however, in no event shall the Company, in connection with such underwriting,
be required to undertake any special audit of a fiscal period in which an audit
is normally not required);
(j) notify the Holder if there are any amendments to the
Registration Statement, any requests by the SEC to supplement or amend the
Registration Statement, or of any threat by the SEC or state securities
commission to undertake a stop order with respect to sales under the
Registration Statement; and
(k) cooperate in the timely removal of any restrictive legends from
the shares of Restricted Stock in connection with the resale of such shares
covered by an effective Registration Statement.
4. Expenses.
(a) For the purposes of this Section (4), the term "Registration
Expenses" shall mean: all expenses incurred by the Company in complying with
Section (2) of this
4
<PAGE> 6
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, "blue sky" fees, fees of the National Association
of Securities Dealers, Inc. ("NASD"), fees and expenses of listing shares of
Restricted Stock on any securities exchange or automated quotation system on
which the Company's shares are listed and fees of transfer agents and
registrars. The term "Selling Expenses" shall mean: all underwriting discounts
and selling commissions applicable to the sale of Restricted Stock and all
accountable or non-accountable expenses paid to any underwriter in respect of
the sale of Restricted Stock.
(b) Except as otherwise provided herein, the Company will pay all
Registration Expenses in connection with the Registration Statement filed
pursuant to Section (2) of this Agreement. All Selling Expenses in connection
with any Registration Statement filed pursuant to Section (2) of this Agreement
shall be borne by the Holder unless the sale of other securities is covered by
such Registration Statement, in which event the Selling Expenses shall be borne
by the Holder in proportion to the number of shares sold by him or by such
persons other than the Company (except to the extent the Company may be a
seller) as they may agree.
5. Obligations of the Holder.
(a) In connection with the registration hereunder, the Holder will
furnish to the Company in writing such information with respect to Holder and
the securities held by Holder, and the proposed distribution by him as shall be
reasonably requested by the Company in order to assure compliance with federal
and applicable state securities laws, as a condition precedent to including the
Holder's Restricted Stock in the Registration Statement. The Holder also shall
agree to promptly notify the Company of any changes in such information included
in the Registration Statement or prospectus as a result of which there is an
untrue statement of material fact or an omission to state any material fact
required or necessary to be stated therein in order to make the statements
contained therein not misleading in light of the circumstances then existing.
(b) In connection with the registration pursuant to this Agreement,
the Holder will not effect sales thereof pursuant to the Registration Statement
until notified by the Company of the effectiveness of the Registration
Statement, and thereafter will suspend such sales after receipt of telegraphic
or written notice from the Company to suspend sales to permit the Company to
correct or update a Registration Statement or prospectus. At the end of any
period during which the Company is obligated to keep a Registration Statement
current, the Holder shall discontinue sales of shares pursuant to such
Registration Statement upon receipt of notice from (i) the Company of its
intention to remove from registration the shares covered by such Registration
Statement which remain unsold, and the Holder shall notify the Company of the
number of shares registered which remain unsold immediately upon receipt of such
notice from the Company.
6. Information Blackout.
At any time when a Registration Statement effected pursuant to
Section 2 relating to Restricted Stock is effective, upon written notice from
the Company to the Holder that the
5
<PAGE> 7
Company has determined in good faith that sale of Restricted Stock pursuant to
the Registration Statement would require disclosure of non-public material
information, the Holder shall suspend sales of Restricted Stock pursuant to such
Registration Statement until such time as the Company notifies the Holder that
such material information has been disclosed to the public or has ceased to be
material or that sales pursuant to such Registration Statement may otherwise be
resumed.
7. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law,
the Holder against all losses, claims, damages, liabilities and expenses joint
or several, to which an indemnified person may become subject under the
Securities Act or any other statute or at common law, insofar as such liability
(or action in respect thereof) arises out of or is based upon (a) any alleged
untrue statement of material fact contained in any Registration Statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or (b) any alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or state securities or other blue
sky laws applicable to the Company in connection with such registration, except
insofar as the same are caused by or contained in any information furnished to
the Company by the Holder for use therein or by such Holder's failure to deliver
a copy of the Registration Statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Holder with a sufficient
number of copies of the same.
(b) In connection with any Registration Statement in which a Holder
is participating, the Holder shall furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such Registration Statement or prospectus and, to the extent
permitted by law, shall indemnify the Company, its directors and officers and
each Person who controls the Company (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting from:
(i) any untrue statement of material fact contained in the Registration
Statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is contained in any
information or affidavit so furnished by such Holder; and (ii) any manner of
sale or distribution of the Restricted Stock by the Holder not in compliance
with the method of distribution permitted in the Registration Statement or
otherwise in violation of applicable securities laws; provided that the
obligation to indemnify shall be limited to the net amount of proceeds received
by the Holder from the sale of Restricted Stock pursuant to such Registration
Statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably
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satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party shall not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
8. Miscellaneous Provisions.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
(b) Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
without the written consent of the Company and the Holder.
(d) Notices. All communications under this Agreement shall be
sufficiently given if delivered by hand or by overnight courier or mailed by
registered or certified mail, postage prepaid, addressed,
(i) if to the Company, to:
Mr. Jack Leadbeater
Chief Executive Officer
Osage Systems Group, Inc.
1661 Camelback Road, Suite 245
Phoenix, Arizona 85016
Telephone Number: (602) 241-5782
Telecopy Number: (602) 274-1295
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with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, P.C.
Eleven Penn Center
1835 Market Street, 14th Floor
Philadelphia, PA 19103
Telephone Number: (215) 665-3873
Telecopy Number: (215) 665-8760
(ii) if to the Holder:
Mr. O. Jack Anderson
1560 S.E. 14th Court
Deerfield Beach, FL 33441
Telephone Number: (954) 429-3016
with a copy to:
Joseph M. Rigot, Esquire
Thompson Hine & Flory LLP
2000 Courthouse Plaza, N.E.
Dayton, OH 45401-8801
Telephone Number: (937) 443-6586
Telecopy Number: (937) 443-6635
or, at such other address as any of the parties shall have furnished in writing
to the other parties hereto.
(e) Successors and Assigns; Holders as Beneficiaries. This Agreement
shall inure to the benefit of and be binding upon the parties and their
respective successors and assigns, and the agreements of the Company herein
shall inure to the benefit of the Holder and his respective successors and
assigns.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Entire Agreement; Survival; Termination. This Agreement is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
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ATTEST: OSAGE SYSTEMS GROUP, INC.
By:________________________ By:________________________
Name:
Title:
___________________________
O. Jack Anderson
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