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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) JANUARY 7, 1999
THE SOURCE INFORMATION MANAGEMENT COMPANY
(Exact name of Registrant as specified in its charter)
MISSOURI
(State or Other Jurisdiction of Incorporation)
0-26238 43-1710906
(Commission File Number) (IRS Employer Identification No.)
11644 LILBURN PARK ROAD, ST. LOUIS, MISSOURI 63146
(Address of principal executive offices) (Zip Code)
(314) 995-9040
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 7, 1999, Registrant acquired U.S. Marketing Services, Inc., a
Delaware corporation ("U.S. Marketing"), in a merger transaction by a subsidiary
of Registrant for 1,926,719 shares of Registrant's Common Stock and 1,473,281
shares of Registrant's Class A Convertible Preferred Stock ("Class A Preferred")
pursuant to an Agreement and Plan of Merger. U.S. Marketing was the holding
company of Brand Manufacturing Corporation, a New York corporation ("Brand"),
and its affiliated companies. The shareholders of U.S. Marketing were Jonathan
J. Ledecky ("Ledecky"), James R. Gillis and Monte Weiner (collectively, "U.S.
Marketing Shareholders"). The purchase price was determined by arm's length
negotiations between the parties. The Class A Preferred will convert into an
equal number of shares of Registrant's Common Stock upon receipt of shareholder
approval of the conversion; if shareholder approval is not received, the Class A
Preferred will be convertible, at the option of the holders thereof, into demand
debt of Registrant aggregating $11,388,462. Registrant will seek shareholder
approval of the conversion into Registrant's Common Stock as soon as
practicable, and a number of Registrant's shareholders have granted S. Leslie
Flegel, Chairman and CEO of Registrant ("Flegel"), and William H. Lee, Jr.,
Chief Operating Officer and Vice Chairman of Registrant, proxies to approve the
conversion. All shares of Common Stock issued pursuant to the U.S. Marketing
acquisition (including shares issuable upon conversion of the Class A Preferred)
are subject to a one-year lock-up agreement with Registrant, and may be
registered under the Securities Act of 1933, as amended, for resale under
certain circumstances upon demand of the U.S. Marketing Shareholders. 1,779,383
of such shares held by Ledecky, and 1,360,617 shares of the Common Stock
issuable to Ledecky upon conversion of the Class A Preferred, are subject to a
two-year voting agreement in favor of Flegel to vote on election of directors
and certain other matters; the voting agreement does not cover certain
fundamental matters such as mergers, tender offers, sales of assets and the
like. The voting agreement will be earlier terminated if Ledecky holds less than
10% of the outstanding Common Stock of Registrant.
Brand designs and manufactures in-store merchandising units and
point-of-purchase displays for retail store chains. Brand's affiliates include
The Vail Companies, Inc., a New Jersey corporation, which contracts for removal
of old fixtures, and T.C.E. Corporation, a Delaware corporation, which is an
in-house trucking company shipping front-end fixtures throughout the United
States. Registrant presently intends to continue operating the businesses of
Brand and its affiliates. Other than in connection with the acquisition, none of
the U.S. Marketing Shareholders, U.S. Marketing or its affiliates has had any
material relationship with Registrant or any of its affiliates, any director or
officer of Registrant or any associate of any such director or officer.
Also on January 7, 1999, Registrant, through a wholly-owned subsidiary,
acquired substantially all the assets and assumed the operating liabilities of
Yeager Industries, Inc., a Pennsylvania corporation ("Yeager"), for $707,718
cash and 164,289 shares of Registrant's Common Stock. In addition, Registrant
repaid approximately $1,642,282 of Yeager debt at closing. The cash portion of
the consideration may be increased by an aggregate of not more than $500,000
based upon the performance of Yeager in fiscal 2000 and 2001. The purchase
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price was determined by arm's length negotiations between the parties. Funds for
the acquisition were provided by Registrant's existing $15 million credit
facility with Wachovia Bank, N.A. Yeager designs and manufactures in-store
merchandising units and point-of-purchase displays for retail store chains.
Registrant presently intends to continue operating the Yeager business. Other
than in connection with the acquisition, Yeager has not had any material
relationship with Registrant or any of its affiliates, any director or officer
of Registrant or any associate of any such director or officer.
Registrant hopes to complete the acquisition of MYCO, Inc. ("MYCO") by the
end of January or early February 1999, and of Chestnut Display Systems, Inc. and
Chestnut Display Systems - North, Inc. (collectively, "Chestnut") as soon as
practicable after completion of the audit of Chestnut's December 31, 1998
financial statements. Registrant has previously announced Letters of Intent to
acquire assets and assume liabilities of MYCO and Chestnut, which, like Brand
and Yeager, are front-end fixture companies. The acquisition of Chestnut remains
subject to negotiation of definitive agreements, due diligence and other
customary conditions, and the acquisition of MYCO is subject to satisfaction of
closing conditions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
At present, it is impractical for Registrant to provide required financial
statements for the U.S. Marketing business, but such financial statements will
be filed by an amendment to this report within 60 days after the required time
for filing for this report. Financial statements are not required for the Yeager
business.
(b) Pro forma financial information.
At present, it is impractical for Registrant to provide required pro forma
financial information relative to the U.S. Marketing business, but such
financial information will be filed by an amendment to this report within 60
days after the required time for filing for this report. Pro forma financial
information is not required for the Yeager business.
(c) Exhibits.
See Exhibit Index attached hereto and incorporated herein by reference.
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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 hereunto duly authorized.
THE SOURCE INFORMATION
MANAGEMENT COMPANY
Date: January 21, 1999 By: /s/ W. Brian Rodgers
-------------------------- ---------------------------
W. Brian Rodgers
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
1. Omitted - inapplicable.
2.1 Agreement and Plan of Merger, dated as of January 7, 1999, by and
among Registrant, Source-U.S. Marketing Services, Inc., U.S.
Marketing and the U.S. Marketing Shareholders, plus identification
of omitted schedules and exhibits and agreement to furnish
supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request.
2.2 Asset Purchase Agreement, dated as of January 7, 1999, between
Registrant and Yeager, plus identification of omitted schedules and
exhibits and agreement to furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange
Commission upon request.
4. Certificate of Designation of Class A Preferred Stock of
Registrant.
16. Omitted - inapplicable.
17. Omitted - inapplicable.
20. Omitted - inapplicable.
23. Omitted - inapplicable.
24. Omitted - inapplicable.
27. Omitted - inapplicable.
99. Registrant's Press Release issued January 11, 1999.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
THE SOURCE INFORMATION MANAGEMENT COMPANY,
SOURCE - U.S. MARKETING SERVICES, INC.,
U.S. MARKETING SERVICES, INC.
JONATHAN J. LEDECKY
JAMES R. GILLIS
AND
MONTE WEINER
JANUARY 7, 1999
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TABLE OF CONTENTS
<TABLE>
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Page
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1. Definitions..............................................................................................1
2. Basic Transaction........................................................................................6
(a) The Merger......................................................................................6
(b) Method of Effecting Merger and Closing..........................................................6
(c) Actions at the Closing..........................................................................6
(d) Conversion of Target Shares.....................................................................6
(e) Effect of Merger................................................................................7
(f) Exchange Procedures.............................................................................7
(g) Transfer Restrictions; Closing of Stock Transfer Books..........................................7
(h) Source Shareholders Meeting.....................................................................8
3. Representations and Warranties Concerning the Transaction................................................8
(a) Representations and Warranties of Target Shareholders...........................................8
4. Representations and Warranties Concerning the Target and Its Subsidiaries...............................11
5. Covenants...............................................................................................32
(a) General........................................................................................32
(b) Notices and Consents...........................................................................32
(c) Regulatory Matters and Approvals...............................................................32
(d) Nasdaq Notification of Source Common Stock Issuance............................................32
(e) Nasdaq Approval of Source Preferred Stock Issuance.............................................32
(f) Operation of Business..........................................................................32
(g) Full Access....................................................................................33
(h) Notice of Developments.........................................................................33
(i) Exclusivity....................................................................................33
(j) Acquisition of 100% Ownership of Subsidiaries..................................................34
(k) Payoff of Debt.................................................................................34
6. Conditions to Obligation to Close.......................................................................34
(a) Conditions to Obligation of the Source and S-US................................................34
(b) Conditions to Obligation of the Target and Target Shareholders.................................35
7. Remedies for Breach of This Agreement...................................................................36
(a) Survival of Representations and Warranties.....................................................36
(b) Indemnification Provisions for Benefit of the Source...........................................37
(c) Indemnification Provisions for Benefit of the Target Shareholders..............................38
(d) Matters Involving Third Parties................................................................38
(e) Other Indemnification Provisions...............................................................39
8. Miscellaneous...........................................................................................39
(a) Press Releases and Public Announcements........................................................39
(b) No Third Party Beneficiaries...................................................................40
(c) Entire Agreement...............................................................................40
(d) Succession and Assignment......................................................................40
(e) Counterparts...................................................................................40
(f) Headings.......................................................................................40
</TABLE>
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<TABLE>
<S> <C> <C>
(g) Notices........................................................................................40
(h) Governing Law..................................................................................42
(i) Amendments and Waivers.........................................................................42
(j) Severability...................................................................................42
(k) Expenses.......................................................................................42
(l) Construction...................................................................................42
(m) Incorporation of Exhibits and Schedules........................................................43
</TABLE>
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TABLE OF CONTENTS
PAGE
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Exhibit A-Certificate of Designation
Exhibit B-Certificate of Merger
Exhibit C-Exceptions to Ledecky Representations and Warranties
Exhibit D-Exceptions to Source Representations and Warranties
Exhibit E-Financial Statements
Exhibit F-Form of Opinion of Counsel to the Target
Exhibit G-Voting Agreement
Exhibit H-Registration Rights and Lock-Up Agreement
Exhibit I-Form of Opinion of Counsel to the Source
Exhibit J-Conversion Voting Agreement
Disclosure Schedule--Exceptions to Representations and Warranties
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of January 7, 1999 by and among The Source
Information Management Company, a Missouri corporation ("Source"); Source- U.S.
Marketing Services, Inc., a Delaware corporation ("S-US"); U.S. Marketing
Services, Inc., a Delaware corporation ("Target"); Jonathan J. Ledecky
("Ledecky"); James R. Gillis ("Gillis"); and Monte Weiner ("Weiner"). Ledecky,
Gillis and Weiner are referred to collectively herein as "Target Shareholders;"
Gillis and Weiner are referred to collectively herein as "Target Management
Shareholders;" and Source, S-US, Target, Ledecky, Gillis and Weiner are referred
to collectively herein as the "Parties".
This Agreement contemplates a tax-free merger of the Target with and
into S-US in a reorganization pursuant to Code Section 368(a)(2)(D). The Target
Shareholders will receive capital stock in the Source in exchange for their
capital stock in the Target.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accounts Receivable" has the meaning set forth in Section 4(p) below.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Audited Balance Sheet Date" has the meaning set forth in Section
4(n)(i) below.
"Authorizations" has the meaning set forth in Section 4(y) below.
"Benefit Plan" has the meaning set forth in Section 4(x) below.
"Brand" means Brand Manufacturing Corporation, a New York corporation.
"Brand and TCE Audited Financial Statements" has the meaning in
Section 4(n)(i) below.
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"CERCLA" has the meaning set forth in Section 4(ii) below.
"Certificate of Designation" means the Certificate of Designation in
the form of Exhibit A attached hereto.
"Certificate of Merger" has the meaning set forth in Section 2(b)(i)
below.
"Closing" has the meaning set forth in Section 2(b)(ii) below.
"Closing Date" has the meaning set forth in Section 2(b)(ii) below.
"Commonly Controlled Entity" has the meaning set forth in Section 4(x)
below.
"Confidential Information" means any information concerning the
businesses and affairs of the Target and its Subsidiaries that is not already
generally available to the public.
"Contracts" has the meaning set forth in Section 4(s) below.
"Definitive Source Proxy Materials" means the definitive proxy
materials relating to the Special Source Meeting.
"Delaware General Corporation Law" means the General Corporation Law of
the State of Delaware, as amended.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Effective Time" has the meaning set forth in Section 2(b)(i) below.
"Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now or hereafter in effect.
"Environmental Permits" has the meaning set forth in Section 4(ii)
below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Statement" has the meaning set forth in Section 4(n)(ii)
below.
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"Flegel" means S. Leslie Flegel.
"Foreign Plans" has the meaning set forth in Section 4(x)(ix)(L)(IV)
below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Gillis" has the meaning set forth in the preface above.
"Governmental Entity" has the meaning set forth in Section 4(w)(iii)
below.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(d)(i) below.
"Indemnifying Party" has the meaning set forth in Section 7(d)(i)
below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Interim Balance Sheet Date" has the meaning set forth in Section
4(n)(ii) below.
"Interim Financial Statements" has the meaning set forth in Section
4(n)(ii) below.
"Ledecky" has the meaning set forth in the preface above.
"Liabilities" has the meaning set forth in Section 4(o) below.
"May 1998 Agreement" has the meaning set forth in Section 7(b)(i)
below.
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"Merger" has the meaning set forth in Section 2(a) below.
"Missouri General Corporation Law" means the General and Business
Corporation Act of the State of Missouri, as amended.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCB" has the meaning set forth in Section 4(ii) below.
"Pension Plan" has the meaning set forth in Section 4(x) below.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Product Liability" has the meaning set forth in Section 4(kk) below.
"Put Transaction" means the consummation of the transaction endorsed to
occur immediately prior to Merger, pursuant to which Target acquires shares of
Brand and TCE held by Gillis and Weiner in exchange for cash and Target Shares.
"Real Property" has the meaning set forth in Section 4(u) below.
"Regulations" has the meaning set forth in Section 4(y) below.
"Release" has the meaning set forth in Section 4(ii) below.
"Requisite Source Shareholder Approval" means the approval of the
holders of a majority of the outstanding Source Common Stock of the issuance of
Source Common Stock upon the conversation of the Class A Convertible Preferred
Stock voting at a shareholders meeting at which a quorum is present held for
such purpose. For purposes of determining such majority vote, shares of Common
Stock held by the holders of the Source Preferred Stock shall be disregarded.
"Securities Act" means the Securities Act of 1933, as amended.
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"Source" has the meaning set forth in the preface above.
"Source Common Stock" means any share of the Common Stock, $.01 par
value per share, of the Source.
"Source Preferred Stock" means any share of the Class A Convertible
Preferred Stock $.01 par value per share, of the Source.
"Special Source Meeting" has the meaning set forth in Section 2(h)
below.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Surviving Corporation" has the meaning set forth in Section 2(a)
below.
"S-US" has the meaning set forth in the preface above.
"Target" has the meaning set forth in the preface above.
"Target Audited Financial Statements" has the meaning set forth in
Section 4(n)(i) below.
"Target Management Shareholders" has the meaning set forth in the
preface above.
"Target Share" means any share of the Common Stock, $.001 par value per
share, of the Target.
"Target Shareholder" has the meaning set forth in the preface above.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section 59
A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TCE" means TCE Corporation, a Delaware corporation.
"Third Party Claim" has the meaning set forth in Section 7(d)(ii)
below.
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"Weiner" has the meaning set forth in the preface above.
"Welfare Plan" has the meaning set forth in Section 4(x) below.
"Year 2000 Compliant" means, with respect to each System, that each
System is designed to be used before, during, and after January 1, 2000, and
will accurately accept date input and process, store and output date data and
date-related data, including, without limitation, calculating, comparing,
sorting and sequencing such data and calculating leap years before, during and
after January 1, 2000 without any manual intervention.
2. Basic Transaction.
(a) The Merger. Subject to the terms and conditions set forth in this
Agreement, on the Closing Date (as hereinafter defined), Target will merge with
and into S-US (the "Merger") pursuant to the provisions of the Delaware General
Corporation Law whereupon the separate corporate existence of Target shall
cease. S-US shall be the surviving corporation of the Merger (sometimes referred
to herein as the "Surviving Corporation") and shall continue to be governed by
the laws of the State of Delaware.
(b) Method of Effecting Merger and Closing. The Merger shall be
effected as follows:
(i) Subject to the satisfaction or waiver of all other conditions
to the Closing (as hereinafter defined), a certificate of merger, in
substantially the form attached hereto as Exhibit B (the "Certificate of
Merger"), duly executed by the proper officers of Target and S-US, shall be
filed with the Secretary of State of Delaware on the Closing Date. The Merger
shall become effective and be consummated immediately upon the filing of the
Certificate of Merger. The date and time of such filing is herein referred to as
the "Effective Time."
(ii) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Richards & O'Neil, L.L.P. in
New York, New York, commencing at 9:00 a.m. local time on the business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
"Closing Date").
(c) Actions at the Closing. At the Closing, (i) the Target will deliver
to the Source the various certificates, instruments, and documents referred to
in Section 6(a) below, and (ii) the Source will deliver to the Target the
various certificates, instruments, and documents referred to in Section 6(b)
below.
(d) Conversion of Target Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof, each Target
Share that is issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive
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.3626 shares of Source Common Stock and .2772 shares of Source Preferred Stock
and each Target Share shall be canceled. No Target Share shall be deemed to be
outstanding or to have any rights after the Effective Time. Immediately after
the Effective Time, the Source will furnish to the Target Shareholders stock
certificates representing the Source Common Stock and Source Preferred Stock
that they have the right to receive pursuant to the conversion of the Target
Shares described above.
(e) Effect of Merger.
(i) Upon consummation of the Merger and pursuant to this Agreement,
the Surviving Corporation shall possess all the rights, privileges, immunities
and franchises, as well as of a public as of a private nature, of S-US and
Target; and all property, whether real, personal or mixed, and all debts due on
whatever account, including subscriptions to shares and all other chooses in
action, and all and every other interest, of or belonging or due to each of the
merging corporations, shall be taken and deemed to be transferred to and vested
in the Surviving Corporation without further act or deed; and the title to any
real estate, or any interest therein, vested in either of such corporations
shall not revert or be in any way impaired by reason of the Merger. The Merger
shall have all further effects as specified in all applicable corporate laws of
the State of Delaware and such other state, if any, the laws of which shall
govern the Merger.
(ii) The Certificate of Incorporation and By-Laws of S-US in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation, except to the extent
amended in the Certificate of Merger in accordance with their respective
provisions and applicable law.
(iii) The officers and members of the Board of Directors of S-US
immediately prior to Effective Time shall be the officers and members of the
Board of Directors of the Surviving Corporation, and such persons will serve
until their respective successors are duly elected and qualified.
(f) Exchange Procedures. On the Closing Date, the Target Shareholders
shall deliver to Source stock certificates representing their Target Shares,
together with such letters of transmittal or other transfer documents as Source
may deem necessary or appropriate. In exchange therefor, the Target Shareholders
shall be entitled to receive the number of shares of Source Common Stock and
Source Preferred Stock described in Section 2(d). After the Effective Time,
there shall be no further transfer on the records of the Target of certificates
representing shares of the Target Shares and after certificates are presented to
the Target for transfer, they shall be canceled against delivery of the shares
of Source Common Stock and Source Preferred Stock provided therefor in this
Agreement.
(g) Transfer Restrictions; Closing of Stock Transfer Books. The stock
transfer books of the Target shall be closed at the close of business on the
date hereof. In the event of a transfer of ownership of the Target Shares which
is not registered in the transfer records prior to the closing of such records,
the Source Common Stock and Source Preferred Stock issuable in
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conversion of such stock pursuant to this Agreement may be delivered to a
transferee, if the certificate representing such Target Shares is presented to
Source, accompanied by all documents required to evidence and effect such
transfer and all applicable stock transfer taxes are paid. Source shall be
entitled to rely upon the stock transfer books of the Target to establish the
identity of Target Shareholders, which books shall be conclusive with respect to
the ownership of such shares.
(h) Source Shareholders Meeting. Immediately after the Closing, Source
will proceed with the preparation of the Definitive Source Proxy Materials in
anticipation of a special meeting of Source shareholders to be held as soon as
practicable (the "Special Source Meeting") to obtain the Requisite Source
Shareholder Approval of the conversion of the Source Preferred Stock into Source
Common Stock pursuant to the terms of the Certificate of Designation, with an
intent to secure the Requisite Source Shareholder Approval by March 31, 1999.
Source agrees to keep counsel to the Target Shareholders informed as to proposed
date for the Special Source Meeting and the preparations therefor. In the event
such Special Source Meeting is not held or the Requisite Source Shareholder
Approval has not been obtained on or before June 30, 1999, the Source Preferred
Stock may be converted into demand notes at the election of the holders of the
Source Preferred Stock pursuant to the terms of the Certificate of Designation.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of Target Shareholders. Each Target
Shareholder represents and warrants to the Source that the statements contained
in this Section 3(a) are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to himself, except as set forth in
Exhibit C attached hereto.
(i) Authorization of Transaction. Each Target Shareholder has full
power and authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of each Target Shareholder, enforceable in accordance with its terms
and conditions. No Target Shareholder need give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement including, without limitation, any premerger notification pursuant to
the HSR Act.
(ii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, notice
requirement, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which any Target
Shareholder is subject or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
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<PAGE> 13
arrangement to which any Target Shareholder is a party or by which he is bound
or to which any of his assets is subject.
(iii) Brokers' Fees. No Target Shareholder has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Source
could become liable or obligated.
(iv) Investment. Each Target Shareholder (A) understands that the
Source Common Stock and the Source Preferred Stock have not been, and will not
be, registered under the Securities Act, or under any state securities laws, and
are being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (B) is acquiring the Source
Common Stock and the Source Preferred Stock solely for his own account for
investment purposes, and not with a view to the distribution thereof, (C) is a
sophisticated investor with knowledge and experience in business and financial
matters, (D) has received certain information concerning the Source and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Source Common Stock and the
Source Preferred Stock, (E) is able to bear the economic risk and lack of
liquidity inherent in holding the Source Common Stock and the Source Preferred
Stock, and (F) is an Accredited Investor as that term is defined in Rule 501(a)
of the Securities Act.
(v) Target Shares. Each Target Shareholder holds of record and owns
beneficially the number of Target Shares set forth next to his name in Section
4(b) of the Disclosure Schedule, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. No Target Shareholder is a party to
any option, warrant, purchase right, or other contract or commitment that could
require such Target Shareholder to sell, transfer, or otherwise dispose of any
capital stock of the Target (other than this Agreement). No Target Shareholder
is a party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of the Target.
(b) Representations and Warranties of the Source. The Source represents
and warrants to the Target Shareholders that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)), except as set forth in Exhibit D attached hereto.
(i) Organization of the Source. The Source is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Source is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required.
(ii) Authorization of Transaction. The Source has full power and
authority (including full corporate power and authority) to (i) execute and
deliver this Agreement and to perform its obligations hereunder (ii) own its
property and conduct its business as it is presently
9
<PAGE> 14
being conducted. This Agreement constitutes the valid and legally binding
obligation of the Source, enforceable in accordance with its terms and
conditions. The Source need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement
including, without limitation, any premerger notification pursuant to the HSR.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Source is subject or any provision of
its charter or bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Source is a party or by which it is bound or to which any of its assets is
subject.
(iv) Brokers' Fees. The Source has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Ledecky could become
liable or obligated.
(v) Organization of S-US. S-US is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(vi) Capitalization. The entire authorized capital stock of the
S-US consists of 3,000 S-US Shares, of which 1,000 S-US Shares are issued and
outstanding and 0 S-US Shares are held in treasury. All of the issued and
outstanding S-US Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the Source. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the S-US to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the S-US. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the S-US.
(vii) Authorization of Transaction. S-US has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of S-US, enforceable in
accordance with its terms and conditions. S-US need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement including, without limitation, any premerger
notification pursuant to the HSR.
(viii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any
10
<PAGE> 15
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which S-US is subject or any provision of its charter or bylaws or (B)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which S-US is a party or by which it is
bound or to which any of its assets is subject.
(ix) Brokers' Fees. S-US has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Target Shareholder could
become liable or obligated.
(x) Source Common Stock and Source Preferred Stock. The shares of
Source Common Stock and Source Preferred Stock to be issued in the Merger will
be, as of the Effective Time, duly and validly issued, fully paid and
nonassessable.
(xi) Source Disclosure Document. The disclosure document dated
January 5, 1999 delivered by the Source to each of the Target Shareholders does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that such representation does not include any information
contained in the disclosure document that was provided to the Source by third
parties.
(xii) As of January 6, 1998, 9,633,596 shares of Source Common
Stock were issued and outstanding and 0 shares of Source Preferred Stock were
issued and outstanding. All of the issued and outstanding shares of Source
Common Stock have been duly authorized, are validly issued, fully paid and
non-assessable. As of January 6, 1998, there were opinions and warrants
outstanding for 1,651,703 shares of Source Common Stock.
4. Representations and Warranties Concerning the Target and Its
Subsidiaries. Ledecky represents and warrants with respect to himself and
Target, and the Target Shareholders represent and warrant with respect to
themselves and the Subsidiaries of the Target, to the Source that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as set forth in the disclosure
schedule delivered by the Target Shareholders to the Source on the date hereof
and initialed by the Parties (the "Disclosure Schedule"). Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other
item shall not be deemed adequate to disclose an exception to a representation
or warranty made herein (unless the representation or warranty has to do with
the existence of the document or other item itself). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4.
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<PAGE> 16
(a) Organization, Qualification, and Corporate Power. Each of the
Target and its Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
Each of the Target and its Subsidiaries is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required. Each of the Target and its Subsidiaries has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Section 4(a) of the Disclosure Schedule
lists the directors and officers of each of the Target and its Subsidiaries.
The Target Shareholders have delivered to the Source correct and complete
copies of the charter and bylaws of each of the Target and its Subsidiaries (as
amended to date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of each of
the Target and its Subsidiaries are correct and complete. None of the Target
and its Subsidiaries is in default under or in violation of any provision of
its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Target
consists of 100,000,000 Target Shares, of which 5,313,854 Target Shares are
issued and outstanding and 0 Target Shares are held in treasury. All of the
issued and outstanding Target Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the Target
Shareholders as set forth in Section 4(b) of the Disclosure Schedule. There are
no outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Target. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock of the Target.
(c) Authorization of Transaction. The Target has full power and
authority (including full corporate power and authority) to execute and deliver
the Agreement and to perform its obligations thereunder. The Agreement
constitutes the valid and legally binding obligation of the Target, enforceable
in accordance with its terms and conditions.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Target and its Subsidiaries is
subject or any provision of the charter or bylaws of any of the Target and its
Subsidiaries or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
any of the Target and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). None of the Target and its Subsidiaries needs
to give any notice to, make any filing with, or obtain any authorization,
12
<PAGE> 17
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
(e) Brokers' Fees. None of the Target and its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(f) Certain HSR Matters. The Target Shareholders represent and warrant
that neither they individually (or as ultimate parent entity of any other person
or entity) nor the Target have net sales or assets of one hundred million
dollars, within the meaning of the HSR Act.
(g) Capital Stock of the Subsidiaries. The authorized capital stock of
each Subsidiary of Target consists solely of the shares shown on the Disclosure
Schedule, of which only the shares shown on such Disclosure Schedule to be
issued and outstanding are issued and outstanding. All of the issued and
outstanding shares of the capital stock of each Subsidiary are owned by the
Target or one of its Subsidiaries as set forth on the Disclosure Schedule, and
are free and clear of all liens, security interests, pledges, charges, voting
trusts. restrictions, encumbrances and claims of every kind. All of the issued
and outstanding shares of the Subsidiaries capital stock are duly authorized and
validly issued, fully paid and nonassessable. None of such shares will have
been, and none of the shares from which they will have derived were, issued in
violation of the preemptive rights of any past or present stockholder, whether
contractual or statutory.
(h) Transactions in Capital Stock. No Subsidiary has acquired any
treasury stock since December 31, 1995. No option, warrant, call, conversion
right or commitment of any kind exists which obligates any Subsidiary to issue
any of its authorized but unissued capital stock. No Subsidiary has an
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any. distribution in respect thereof.
(i) No Bonus Shares. None of the shares of capital stock of the
Subsidiaries was, and none of the shares of the Subsidiaries' capital stock will
be, issued pursuant to awards, grants or bonuses, whether of stock or of options
or other rights.
(j) Subsidiaries. Neither the Target nor any Subsidiary currently owns,
of record or beneficially, or controls, directly or indirectly, any capital
stock, any securities convertible into capital stock or any other equity or
ownership interest in any corporation, association or other business entity.
Neither the Target nor any Subsidiary is directly or indirectly, a participant
in any joint venture, partnership or other noncorporate entity.
(k) Predecessor Status: etc. The Disclosure Schedule lists all names of
all predecessor companies of the Target and each Subsidiary, including the names
of all entities from whom the Target and each Subsidiary previously acquired
significant assets. Except as set
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<PAGE> 18
forth on the Disclosure Schedule, no Subsidiary has ever been a subsidiary or
division of another corporation or been a part of an acquisition which was later
rescinded.
(l) Spin-offs. Since December 31, 1995, there has not been any sale or
spin-off of significant assets of the Target or any Subsidiary other than in the
ordinary course of business.
(m) No Third Party Options. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any properties,
assets or rights of the Target or any Subsidiary or any interest therein.
(n) Financial Statements. Attached hereto as Exhibit E are copies of
the following audited financial statements of the Target:
(i) the consolidated balance sheet of the Target at March 31, 1998
and the related statements of operations, cash flows and changes in
stockholders' equity for the period March 25, 1998 through March 31, 1998,
certified by Ernst & Young, the Target's independent public accountants,
together with the report of such independent public accountants thereon (the
"Target Audited Financial Statements"), the balance sheets of Brand and TCE at
December 31, 1997 (the "Audited Balance Sheet Date"), December 31, 1996 and
December 31, 1995, and the related statements of income, cash flows and changes
in stockholders' equity for the fiscal years then ended, certified by Ernst &
Young LLP with respect to December 31, 1997 and Lopez Edwards Frank & Co. LLP,
the independent public accountants of Brand and TCE, with respect to
December 31, 1996 and December 31, 1995, together with the report of such
independent public accountants thereon (the "Brand and TCE Audited Financial
Statements"); and
(ii) the unaudited balance sheets of Brand and TCE at September 30,
1998 (the "Interim Balance Sheet Date") and September 30, 1997, and the related
statements of income and cash flows for the interim periods then ended (the
"Brand and TCE Interim Financial Statements," and together with the Target
Audited Financial Statements and the Brand and TCE Audited Financial Statements,
the "Financial Statements").
All of the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. All of the balance sheets
included in the Financial Statements, including the related notes, fairly
present the financial position, assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Target, Brand and TCE at the dates
indicated and such statements of income, cash flows and changes in stockholders'
equity fairly present the results of operations, cash flows and changes in
stockholders' equity of the Target, Brand and TCE for the periods indicated. The
Unaudited Financial Statements contain all adjustments, which are solely of a
normal recurring nature, necessary to present fairly the financial position for
the periods then ended.
(o) Liabilities and Obligations.
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<PAGE> 19
(i) The Disclosure Schedule contains an accurate list, as of a date
not more than two days prior to the date of this Agreement, of: (i) all
liabilities incurred after the Interim Balance Sheet Date other than in the
ordinary course of business; and (ii) all material liabilities incurred after
the Interim Balance Sheet Date in the ordinary course of business. Each of the
foregoing liabilities that has not heretofore been paid or discharged is so
noted on the Disclosure Schedule. For purposes of this Agreement, "liabilities"
means liabilities of any kind, character or description, whether accrued,
absolute, secured or unsecured, contingent or otherwise.
(ii) For each such liability for which the amount is not fixed or
is contested, the Disclosure Schedule includes a summary description of the
liability, together with copies of all relevant documentation relating thereto,
detail of all amounts claimed and any other action or relief sought, the names
of the claimant and all other parties to the claim, suit or proceeding, the name
of each court or agency before which such claim, suit or proceeding is pending,
the date such claim, suit or proceeding was instituted, and a best estimate of
the maximum amount, if any, which is likely to become payable with respect to
each such liability. If no estimate is provided the best estimate shall for
purposes of this Agreement be deemed to be zero.
(iii) All of the liabilities reflected on the unaudited
consolidated balance sheet included in the Interim Financial Statements arose
only out of or were incurred only in connection with the conduct of the
respective businesses of the Target. Except as set forth in the Disclosure
Schedule and except for liabilities not required to be set forth thereon
pursuant to Section 4(o)(i), the Target has no liabilities or obligations with
respect to their respective businesses, whether direct or indirect. matured or
unmatured, absolute contingent or otherwise. and there is no condition,
situation or set of circumstances which would reasonably be expected to result
in any such liability.
(p) Accounts and Notes Receivable. The Disclosure Schedule contains a
complete and accurate list, as of January 6, 1999, of the accounts and notes
receivable of the Target (including, without limitation, receivables from and
advances to employees and the Target Shareholders) (collectively, the "Accounts
Receivable"). The Disclosure Schedule contains an aging of all Accounts
Receivable showing amounts due in 30-day aging categories. All Accounts
Receivable represent valid obligations arising from bona fide business
transactions in the ordinary course of business consistent with past practice.
The Accounts Receivable are, and as of the Closing Date will be, current and
collectible net of any respective reserves shown on the Target's books and
records (which reserves are adequate and calculated consistent with past
practice). Subject in the case of Accounts Receivable reflected on the Target's
balance sheet to such reserves reflected on such balance sheet, each of the
Accounts Receivable will be collected in full within one hundred twenty (120)
days after the day on which it first became due and payable. There is no
contest, claim, counterclaim, defense or right of set-off, other than rebates
and returns in the ordinary course of business, under any contract with any
obligor of any Account Receivable relating to the amount or validity of such
Account Receivable. The allowance for collection losses on the Interim Balance
Sheet has been determined in accordance with GAAP consistent with past practice.
15
<PAGE> 20
(q) Permits. Each material Permit, together with the name of the
Governmental Entity issuing, such Permit is set forth on the Disclosure
Schedule. Such Permits are valid and in full force and effect and none of such
Permits will be terminated or impaired or become terminable as a result of the
transactions contemplated by this Agreement.
(r) Real and Personal Property. The Disclosure Schedule contains an
accurate list, including substantially complete descriptions as of the Interim
Balance Sheet Date, of all the real and personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Target and its Subsidiaries, including true and correct copies of leases for
equipment and properties on which are situated buildings, warehouses and other
structures used in the operation of the business of each of the Target and its
Subsidiaries and including an indication as to which assets were formerly owned
by any Target Shareholder or Affiliate of any of the Target or its Subsidiaries.
Except as set forth on the Disclosure Schedule, all of the Target's and its
Subsidiaries' buildings, leasehold improvements, structures, facilities,
equipment and other material items of tangible property and assets are in good
operating condition and repair, subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and conform to all
applicable laws. ordinances, codes, rules and regulations, and Authorizations
relating to their construction, use and operation. All leases set forth on the
Disclosure Schedule have been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the Target or its
Subsidiaries and, to the knowledge of the Target Shareholders, no other party to
any such lease is in default thereunder and such leases constitute the legal,
valid and binding obligations of such other parties. All fixed assets used by
the Target and its Subsidiaries in the operation of its business are either
owned by such entity or leased under an agreement set forth on the Disclosure
Schedule. The Target and the Target Shareholders have heretofore delivered to
the Source copies of all title reports and title insurance policies received or
held by each of the Target and its Subsidiaries. The Target and the Target
Shareholders have indicated on the Disclosure Schedule a summary description of
all plans or projects involving the opening of new operations, expansion of any
existing operations or the acquisition of any real property or existing business
to which management of the Target and its Subsidiaries has devoted any
significant effort or expenditure in the two-year period prior to the date of
this Agreement which, if pursued by the Target and its Subsidiaries would
require additional expenditures of significant efforts or capital.
(s) Contracts and Commitments. The Disclosure Schedule sets forth an
accurate, correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of each of the Target and its Subsidiaries (the
"Contracts"), to which any of the Target or its Subsidiaries is a party or is
bound, or by which any of their respective assets are bound. and which involve
any:
(i) agreement, contract, commitment, arrangement or understanding
with any present or former employee or consultant or for the employment of any
person, including any consultant;
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<PAGE> 21
(ii) agreement, contract, commitment, arrangement or understanding
for the future purchase of, or payment for, supplies or products, or for the
performance of services by a third party involving in any one case $10,000 or
more;
(iii) agreement, contract, commitment, arrangement or understanding
to sell or supply products or to perform services involving in any one case
$10,000 or more;
(iv) agreement, contract, commitment, arrangement or understanding
containing requirements or "take or pay" provisions;
(v) agreement, contract, commitment, arrangement or understanding
not otherwise listed on the Disclosure Schedule and continuing over a period of
more than six months from the date hereof or exceeding $10,000 in value;
(vi) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(vii) agreement, contract, commitment. arrangement or understanding
containing a provision to indemnify any person or entity or assume any tax,
environmental or other liability;
(viii) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities.
(ix) note, debenture, bond, equipment trust agreement, letter of
credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(x) agreement, contract, commitment, arrangement or understanding
for any charitable or political contribution;
(xi) agreement, contract, commitment. arrangement or understanding
for any capital expenditure or leasehold improvement in excess of $10,000;
(xii) agreement, contract, commitment, arrangement or understanding
or restraining any of the Target or its Subsidiaries or any successor thereto,
or to the knowledge of the Target and each Target Shareholder, any employee of
any of the Target or its Subsidiaries or any successor thereto, from engaging or
competing in any manner or in any business;
(xiii) license, franchise, distributorship or other agreement which
relates in whole or in part to any software, patent, trademark, trade name.
service mark or copyright or to any ideas, technical assistance or other
know-how of or used by any of the Target or its Subsidiaries;
17
<PAGE> 22
(xiv) agreement, contract, commitment, arrangement or understanding
to which any of the Target or its Subsidiaries, on the one hand, and any
affiliate, officer, director or stockholder of any of the Target or its
Subsidiaries, on the other hand, are parties; or
(xv) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on the Disclosure Schedule, or not required to be
listed therein because of the amount thereof, is valid and enforceable in
accordance with its terms; the Target and each Subsidiary is, and to the
knowledge of the Target and each Target Shareholder, all other parties thereto
are, in compliance with the provisions thereof. Neither the Target nor any
Subsidiary is, and to the knowledge of Target and each Target Shareholder, no
other party thereto is, in default in the performance, observance or fulfillment
of any material obligation, covenant or condition contained therein, and no
event has occurred which with or without the giving of notice or lapse of time,
or both, would constitute a default thereunder. None of the rights of any of the
Target or its Subsidiaries under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and subject to obtaining
any required consents set forth on the Disclosure Schedule, all such rights will
be enforceable by the Source after the Closing Date without the consent or
agreement of any other party. The Target has delivered accurate and complete
copies of each Contract to the Source. No Contract obligates any party to obtain
any consent in connection with the transactions contemplated hereby.
(t) Government Contracts. Neither the Target nor its Subsidiaries is
now or has ever been a party to any contract with any Governmental Entity
subject to price redetermination or renegotiation.
(u) Title to Real Property. All real property and all other interests
in and rights to real property, that are owned or leased by the Target and its
Subsidiaries and used in connection with their business are set forth on the
Disclosure Schedule (the "Real Property"). The Target and its Subsidiaries do
not occupy or use in the conduct of their business, or have rights in or to, any
Real Property other than the real property, listed in the Disclosure Schedule.
(v) Insurance. The assets, properties and operations of each of the
Target and its Subsidiaries are insured under various policies of general
liability and other forms of insurance, all of which are described in the
Disclosure Schedule, which discloses for each policy the risks insured against.
coverage limits, deductible amounts, all outstanding claims thereunder, and
whether the terms of such policy provide for retrospective premium adjustments.
All such policies are in full force and effect in accordance with their terms,
no notice of cancellation has been received, and there is no existing default or
event which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in amounts which are adequate
in relation to the business and assets of the Target and its Subsidiaries and
all premiums to date have been paid in full. Neither the Target nor its
Subsidiaries has been refused any insurance, nor has the coverage of the Target
and its Subsidiaries been limited, by any insurance
18
<PAGE> 23
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years. The Disclosure Schedule also contains a
true and complete description of all outstanding bonds and other surety
arrangements issued or entered into in connection with the business, assets and
liabilities of the Target and its Subsidiaries.
(w) Employees. The Disclosure Schedule contains the following with
respect to each of the Target and its Subsidiaries:
(i) a list of all employees of each of the Target and its
Subsidiaries (including name, title and position);
(ii) each such employee's length of service; and
(iii) the compensation (including terms of payment. bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed in the Disclosure Schedule with respect to the Target and
its Subisidiares: (A) there have not been in the past five years and, to the
knowledge of the Target and the Target Shareholders, there are not pending, any
labor disputes, work stoppages, requests for representation, pickets or work
slow-downs due to labor disagreements; (B) there are and have been no unresolved
violations of any Laws of any Governmental Entity respecting the employment of
any employees; (Ci) there is no unfair labor practice, charge or complaint
pending, unresolved or, to the knowledge of the Target and the Target
Shareholders, threatened before the National Labor Relations Board or similar
body in any foreign country; (D) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (E) the employees of the Target and its Subsidiaries are not
covered by any collective bargaining agreement; (F) each of the Target and its
Subsidiaries has provided or will timely provide prior to Closing all notices
required by law to be given prior to Closing to all local, state, federal or
national labor, wage-payment, equal employment opportunity, unemployment
insurance and related agencies; (G) each of the Target and its Subsidiaries has
paid or properly accrued in the ordinary course of business all wages and
compensation due to employees, including all vacations or vacation pay, holidays
or holiday pay, sick days or sick pay, and bonuses, and (Hi) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in force or the impact on employees on
plant closing, or sales of businesses. All employees of the Target and its
Subsidiaries are legally able to work in the United States. As used herein, the
term "Governmental Entity" means any court, administrative or regulatory agency
or commission, or other governmental authority or instrumentality, domestic,
foreign or supranational.
(x) Employee Benefit Plans and Arrangements. The Disclosure Schedule
sets forth a complete and accurate list of each Benefit Plan covering any
present or former officers, employees or directors of the Target and its
Subsidiaries. "Benefit Plan" means each "employee pension benefit plan" (as
defined in Section 3(2) of ERISA hereinafter a "Pension Plan"), "employee
welfare benefit plan" (as defined in Section 3(l) of ERISA. hereinafter a
"Welfare
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<PAGE> 24
Plan") and each other plan or arrangement (written or oral) relating to
deferred compensation, bonus, performance compensation, stock purchase, stock
option. stock appreciation, severance, vacation, sick leave, holiday pay, fringe
benefits, personnel policy, reimbursement program, incentive, insurance, welfare
or similar plan, program. policy or arrangement, in each case maintained or
contributed to, or required to be maintained or contributed to, by or for which
there otherwise is, or may be any liability as of the Closing Date, of the
Target and its Subsidiaries or their respective affiliates or any other person
or entity that, together with the Target and its Subsidiaries, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (each,
together with the Target and its Subsidiaries, a "Commonly Controlled Entity")
for the benefit of any present or former officer. employee or director. The
Target and its Subsidiaries have no intent or commitment to create any
additional Benefit Plan or amend any Benefit Plan so as to increase benefits
thereunder. The Target and its Subsidiaries have not created any Benefit Plan or
declared or paid any bonus compensation in contemplation of the reactions
contemplated by this Agreement. A current, accurate and complete copy of each
Benefit Plan and related contracts has been made available to the Source. Except
as disclosed on the Disclosure Schedule:
(i) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(ii) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Target and the Target
Shareholders, no condition exists that would adversely affect any such
determination;
(iii) neither any Benefit Plan, nor any of the Target or its
Subsidiaries, nor any Commonly Controlled Entity, nor any trustee or agent has
been or is presently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
applicable which could subject any Company to the tax or penalty imposed by
Section 4975 of the Code or Section 502 of ERISA;
(iv) there is no event or condition existing which could be deemed
a "reportable event" (within the meaning of Section 4043 of ERISA) with respect
to which the thirty day notice requirement has not been waived; to the knowledge
of the Target and the Target Shareholders, no condition exists which could
subject any Company to a penalty under Section 4071 of ERISA;
(v) The plan marked as a "Multiemployer Plan" on the Disclosure
Schedule is the only Benefit Plan that is a Multiemployer Plan. Each of the
Target and its Subsidiaries and each Commonly Controlled Entity has made all
required contributions to the Multiemployer Plan: neither the Target, its
Subsidiaries or Commonly Controlled Entity has incurred any withdrawal liability
with respect to a Multiemployer Plan; and no condition exists that is likely to
cause any of the Target and its
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Subsidiaries or any Commonly Controlled Entity to incur any withdrawal liability
with respect to a Multiemployer Plan. If any of the Target and its Subsidiaries
or Commonly Controlled Entity incurred a complete withdrawal from the
Multiemployer Plan as of December 31, 1998, the aggregate withdrawal liability
of the Target and its Subsidiaries or Commonly Controlled Entity with respect to
the Multiemployer Plan would not exceed $0 and to the knowledge of the Target
and its Subsidiaries or Commonly Controlled Entity, nothing has occurred prior
to the Closing Date which would change the foregoing;
(vi) except as set forth in the Disclosure Schedule, true and
correct copies of (i) the most recent annual report on Form 5500 and any
attached schedules for each Benefit Plan (if any such report was required by
applicable law), (ii) the most recent summary plan description for each Benefit
Plan and (iii) the most recent determination letter issued by the Internal
Revenue Service for each Pension Plan have been provided to the Source;
(vii) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Target and the Target Shareholders,
threatened against any Benefit Plan, any of the Target and its Subsidiaries, any
Commonly Controlled Entity or any trustee or agent of any Benefit Plan; and
(viii) with respect to each Benefit Plan to which any of the Target
and its Subsidiaries or any Commonly Controlled Entity is a party which
constitutes a group health plan subject to Section 4980B of the Code, each such
Benefit Plan substantially complies, and in each case has substantially
complied, with all applicable requirements of Section 4980B of the Code.
(ix) Except as set forth on the Disclosure Schedule:
(A) there is no outstanding liability (except for premiums
that have not become due) under Title IV of ERISA with respect to any Pension
Plan and no condition exists that could be expected to result in the Target and
its Subsidiaries incurring liability under Title IV of ERISA either directly or
with respect to any Commonly Controlled Entity. All premiums payable to the PBGC
have been paid when due;
(B) neither the PBGC nor any of the Target or its Subsidiaries
nor any Commonly Controlled Entity has instituted proceedings to terminate any
Pension Plan and the PBGC has not informed any of the Target and its
Subsidiaries of its intent to institute proceedings to terminate any Pension
Plan;
(C) full payment has been made of all amounts which any of the
Target and its Subsidiaries or any Commonly Controlled Entity was required to
have paid as a contribution to the Pension Plans as of the last day of the most
recent fiscal year of each of the Pension Plans ended prior to the date of this
Agreement, and none of the Pension Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
such Pension Plan ended prior to the date of this Agreement;
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(D) to the knowledge of the Target and the Target
Shareholders, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such Pension
Plan) are reasonable. Copies of the most recent actuarial reports have been
furnished to the Source. Based on such actuarial assumptions, as of the Interim
Balance Sheet Date, the fair market value of the assets or properties held under
each such Pension Plan exceeds the actuarially determined present value of all
accrued benefits of such Pension Plan (whether or not vested) determined on an
ongoing basis;
(E) each of the Benefit Plans is, and its administration is
and at all times has been in substantial compliance with, and neither the Target
nor its Subsidiaries has received any claim or notice that any such Benefit Plan
is not in compliance with, all applicable laws and orders and prohibited
transaction exemptions, including without limitation, to the extent applicable,
the requirements of ERISA and the Code;
(F) neither the Target nor its Subsidiaries and no Commonly
Controlled Entity is in default in performing any of its contractual obligations
under any of the Benefit Plans or any related trust agreement or insurance
contract.
(G) there are no material outstanding liabilities of any
Benefit Plan other than liabilities for benefits to be paid to participants in
Benefit Plan and their beneficiaries in accordance with the terms of Benefit
Plan;
(H) each Benefit Plan may be amended or modified or terminated
by the applicable Target or its Subsidiaries or Commonly Controlled Entity at
any time without liability except under any defined pension benefit plan;
(I) no Benefit Plan other than a Pension Plan, retiree medical
plan or severance plan provides benefits to any individual after termination of
employment;
(J) the consummation of the transactions contemplated by this
Agreement will not (in and of itself): (I) entitle any employee of any of the
Target or its Subsidiaries to severance pay, unemployment compensation or any
other payment or benefit; (II) accelerate the time of payment or vesting, or
increase the amount of compensation due to any such employee; (III) result in
any liability under Title IV of ERISA; (IV) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available; or (V) result (either alone or in conjunction with
any other event) in the payment or series of payments by any of the Target or
its Subsidiaries or any of its affiliates to any person of an "excess parachute
payment" within the meaning of Section 280G of the Code;
(K) with respect to each Benefit Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been paid
to date under the insurance
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policy have been paid, all premiums required to be paid under the insurance
policy through the Closing Date will have been paid on or before the Closing
Date and as of the Closing Date, there will be no liability of any of the Target
or its Subsidiaries or any Commonly Controlled Entity under any insurance policy
or ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date;
(L) (I) each Benefit Plan that constitutes a "welfare benefit
plan," within the meaning of Section 3(l) of ERISA, and for which contributions
are claimed by any of the Target or its Subsidiaries or any Commonly Controlled
Entity as deductions under any provision of the Code is in material compliance
with all applicable requirements pertaining to such deduction;
(II) with respect to any welfare benefit fund (within the
meaning of Section 419 of the Code) related to a welfare benefit plan, there is
no disqualified benefit (within the meaning of Section 4976(b) of the Code) that
would result in the imposition of a tax under Section 4976(a) of the Code; and
(III) all welfare benefit funds intended to be exempt from tax
under Section 501(a) of the Code have been determined by the Internal Revenue
Service to be so exempt and no event or condition exists which would adversely
affect any such determination; and
(IV) all benefit plans outside of the United States, if any
(the "Foreign Plans"), are in compliance with all applicable laws and
regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Closing Date have been made or will
be made prior to the Closing Date.
(V) all persons classified by any of the Target or its
Subsidiaries or any Commonly Controlled Entity as independent contractors
satisfy and have at all times satisfied the requirements of applicable law to be
so classified; each of the Target and its Subsidiaries and each Commonly
Controlled Entity has fully and accurately reported their compensation on IRS
Forms 1099 when required to do so; and none of the Target or its Subsidiaries or
any Commonly Controlled Entity has any obligation to provide benefits with
respect to such persons under any Benefit Plan or otherwise.
(y) Compliance with Law; Authorizations. Each of the Target and its
Subsidiaries has complied with each, and is not in violation of any, law,
ordinance, or governmental or regulatory rule or regulation, whether federal,
state, local or foreign, to which such entity's business, operations, assets or
properties is subject ("Regulations"). The Target and its Subsidiaries have not
received notice, and, expect as set forth on the Disclosure Schedule, has no
reason to believe, that the Real Property, or any improvements erected or
situate thereon relating to their business, or the uses conducted thereon or
therein, violate any Regulations applicable
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thereto. Each of the Target and its Subsidiaries owns, holds, possesses or
lawfully uses in the operation of its business all franchises, licenses,
permits, easements, rights, applications, filings, registrations and other
authorizations ("Authorizations") which are in any manner necessary for it to
conduct its business as now or previously conducted or for the ownership and use
of the assets owned or used by such entity in the conduct of the business of
such entity, free and clear of all liens, charges, restrictions and encumbrances
and in compliance with all Regulations. All such Authorizations are listed and
described on the Disclosure Schedule. None of the Target or its Subsidiaries is
in default, nor has any of the Target or its Subsidiaries received any notice of
any claim of default, with respect to any such Authorization. All such
Authorizations are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees. None of such Authorizations
will be adversely affected by consummation of the transactions contemplated
hereby. No Target Shareholder and no director, officer, employee or former
employee of any of the Target or its Subsidiaries or any affiliates of any of
the Target or its Subsidiaries, or any other person, firm or corporation. owns
or has any proprietary, financial or other interest (direct or indirect) in any
Authorization which such entity owns, possesses or uses in the operation of the
business of such entity as now or previously conducted.
(z) Transactions With Affiliates. No Target Shareholder and no
director, officer or employee of any of the Target or its Subsidiaries, or any
member of his or her immediate family or any other of its, his or her
affiliates, owns or has a 5% or more ownership interest in any corporation or
other entity that is or was during the last three years a party to, or in any
property which is or was during the last three years the subject of, any
contract, agreement or understanding, business arrangement or relationship with
such entity.
(aa) Litigation. (i) Except as set forth on the Disclosure Schedule, no
litigation, including any arbitration, investigation or other proceeding of or
before any court, arbitrator or governmental or regulatory official, body or
authority is pending or, to the knowledge of the Target and the Target
Shareholders, threatened against any of the Target or its Subsidiaries or which
relates to the Target or its Subsidiaries or the transactions contemplated by
this Agreement.
(ii) None of the Target or any Target Shareholder knows of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Section 4(b)(xxi)(A).
(iii) None of the Target or its Subsidiaries is a party to or
subject to the provisions of any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory, official, body or
authority.
(bb) Restrictions. None of the Target or its Subsidiaries is a party to
any indenture, agreement, contract, commitment, lease, plan, license, permit,
authorization or other instrument, document or understanding, oral or written,
or subject to any charter or other corporate restriction or any judgment, order,
writ injunction, decree or award which materially adversely
24
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affects or materially, restricts or, so far as the Target or any of the Target
Shareholders can now reasonably foresee, may in the future materially adversely
affect or materially restrict, the business, operations, assets, properties,
prospects or condition (financial or otherwise) of the Target or its
Subsidiaries after consummation of the transactions contemplated hereby.
(cc) Taxes. All Tax Returns with respect to any Taxes have been timely
filed with the appropriate governmental agencies in all jurisdictions in which
such Tax Returns are required to be filed. and all such Tax Returns properly
reflect the liabilities of the Target and its Subsidiaries for Taxes for the
periods, property or events covered thereby. All Taxes, including without
limitation those which are called for by the Tax Returns, required to be paid,
withheld or accrued by the Target and its Subsidiaries and any deficiency
assessments, penalties and interest have been timely paid, withheld or accrued.
The accruals for Taxes contained in the Interim Balance Sheet are adequate to
cover the Tax liabilities of the Target and its Subsidiaries as of that date and
include adequate provision for all deferred Taxes, and nothing has occurred
subsequent to that date to make any of such accruals inadequate. The Target's
Tax basis in its assets for purposes of determining its future amortization,
depreciation and other federal income tax deductions is accurately reflected on
the Target's Tax books and records. None of the Target or its Subsidiaries is or
has at any time ever been a party to a Tax sharing, Tax indemnity or Tax
allocation agreement, and none of the Target or its Subsidiaries has assumed any
Tax liability of any other person or entity under contract. None of the Target
or its Subsidiaries has received any notice of assessment or proposed assessment
in connection with any Tax Returns and there are not pending tax examinations of
or tax claims asserted against any of the Target or its Subsidiaries or any of
its assets or properties. The Target and its Subsidiaries have not extended, or
waived the application of, any statute of limitations of any jurisdiction
regarding the assessment or collection of any Taxes. There are now (and as of
immediately following the Closing there will be) no Liens (other than any Lien
for current Taxes not yet due and payable) on any of the assets or properties of
the Target or its Subsidiaries relating to or attributable to Taxes. To the
knowledge of the Target and the Target Shareholders, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of any of the Target or its
Subsidiaries or other-wise have an adverse effect on any of the Target or its
Subsidiaries or their business, operations, assets, properties, prospects or
condition (financial or otherwise). Neither the Target nor the Target
Shareholders have any knowledge of any basis for any additional assessment of
any Taxes. All Tax payments related to employees, including income tax
withholding, FICA, FUTA, unemployment and worker's compensation, required to be
made by the Target or its Subsidiaries have been fully and properly paid,
withheld, accrued or recorded. There are no contracts, agreements, plans or
arrangements. including but not limited to the provisions of this Agreement,
covering any employee or former employee of any of the Target or its
Subsidiaries that, individually or collectively, could give rise to any payment
(or portion thereof) that would not be deductible pursuant to Sections 280G, 404
or 162 of the Code. Two correct and complete copies of (a) all Tax examinations,
(b) all extensions of statutory limitations and (c) all federal, state and local
income tax returns and franchise tax returns of each of the Target or its
Subsidiaries for the last five fiscal years, or such shorter period of time as
any of them shall have existed, have heretofore been delivered by the Target and
the Target Shareholders to the Source. Each of the
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Target or its Subsidiaries made an election to be taxed under the provisions of
Subchapter S of the Code within 75 days of its original organization and has at
no time immediately prior to the Closing Date been taxed under the provisions of
Subchapter C of the Code. Each such of the Target and its Subsidiaries has a
taxable year ended December 31 and none of the Target or its Subsidiaries has
made an election to retain a fiscal year other than December 31 under Section
444 of the Code. Each of the Target and its Subsidiaries currently utilizes the
accrual method of accounting for income tax purposes and has not changed its
method of accounting for income tax purposes in the past five years.
(dd) Intellectual Property Matters.
(i) None of the Target or its Subsidiaries has utilized or
currently utilizes any Intellectual Property except for those listed on the
Disclosure Schedule, all of which are owned by the Target or its Subsidiaries
free and clear of any liens, claims, charges or encumbrances. The Intellectual
Property constitutes all such assets. properties and rights which are used or
held for use in, or are necessary for, the conduct of the business of the Target
and its Subsidiaries.
(ii) There are no royalty, commission or similar arrangements, and
no licenses, sublicenses or agreements, pertaining to any of the Intellectual
Property or products or services of the Target or its Subsidiaries.
(iii) None of the Target or its Subsidiaries infringes upon or
unlawfully or wrongfully uses any patent, trademark, trade name, service mark,
copyright or trade secret owned or claimed by another. No action, suit,
proceeding or investigation has been instituted or, to the knowledge of the
Target and the Target Shareholders, threatened relating to any, patent,
trademark, trade name, service mark, copyright or trade secret formerly or
currently used by any of the Target or its Subsidiaries. None of the
Intellectual Property is subject to any outstanding order decree or judgment.
None of the Target or its Subsidiaries has agreed to indemnity any person or
entity for or against any infringement of or by the Intellectual Property.
(iv) No present or former employee of any of the Target or its
Subsidiaries and no other person or entity owns or has any proprietary,
financial or other interest, direct or indirect, in whole or in part, in any
patent, trademark, trade name, service mark or copyright, or in any application
therefor, or in any trade secret, which any of the Target or its Subsidiaries
owns, possesses or uses in its operations as now or heretofore conducted. The
Disclosure Schedule lists all confidentiality or non-disclosure agreements to
which each of the Target and its Subsidiaries or any of their employees is a
party.
(v) All registrable items of Intellectual Property that are
material to the business of the Target and the Subsidiaries have been duly
registered in, filed in or issued by the United States Copyright Office or the
United States Patent and Trademark Office, the appropriate offices in the
various states of the United States and the appropriate offices of the
jurisdictions indicated on the Disclosure Schedule.
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(vi) All rights of the Target and its Subsidiaries in the
Intellectual Property shall vest in the Source pursuant to the transactions
contemplated hereby without any consent or other approval.
(vii) All Intellectual Property in the form of computer software
that is utilized by the Target or its Subsidiaries in the operations of their
business (including computer software utilized by third parties in providing
services to the Target and its Subsidiaries) is capable of processing date data
between and within the twentieth and twenty-first centuries.
(ee) Completeness; No Violations. The certified copies of the
Certificate of Incorporation and Bylaws, both as amended to date, of each of the
Target and its Subsidiaries, and the copies of all leases, instruments,
agreements, licenses, permits, certificates or other documents which are
included on schedules attached hereto or which have been delivered to the Source
in connection with the transactions contemplated hereby, are complete and
correct; neither the Target nor its Subsidiaries nor, to the knowledge of the
Target Shareholders, any other party to any of the foregoing is in material
default thereunder; and, except as set forth in the schedules and documents
attached to this Agreement, the rights and benefits of each of the Target and
its Subsidiaries thereunder will not be materially and adversely affected by the
reactions contemplated hereby, and the execution of this Agreement and the
performance of the obligations hereunder will not result in a material violation
or breach or constitute a material default under any of the terms or provisions
thereof. Except as set forth on the Disclosure Schedule, none of such leases,
instruments, agreements, contracts, licenses, permits, certificates or other
documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
(ff) Existing Condition. Except as set forth on Disclosure Schedule,
since March 31, 1998, the Target has not and since December 31, 1997, the
Subsidiaries have not:
(i) incurred any liabilities, other than liabilities incurred in
the ordinary course of business consistent with past practice, or discharged or
satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(ii) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of any of the Target or its
Subsidiaries or any interest therein;
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(iii) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever;
(iv) made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan to which it is a party or by
which it is bound, or canceled, modified or waived any substantial debts or
claims held by it or waived any rights of substantial value, whether or not in
the ordinary course of business;
(v) declared, set aside or paid any dividend or made or agreed to
make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests;
(vi) suffered any damage, destruction or loss, whether or not
covered by insurance, (A) materially and adversely affecting its business,
operations, assets, properties or prospects or (B) of any item or items carried
on its books of account individually or in the aggregate at more than $10,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(vii) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise);
(viii) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(ix) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $10,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
(x) increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled;
(xi) changed any of the accounting principles followed by it or
the methods of applying such principles;
(xii) entered into any transaction other than in the ordinary
course of business consistent with past practice;
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(xiii) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(xix) agreed to take any of the actions referred to above.
(gg) Deposit Accounts; Powers of Attorney. The Disclosure Schedule
includes an accurate list, as of the date of this Agreement, of:
(i) the name of each financial institution in which each of the
Target and its Subsidiaries has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account;
(iv) the name of each person authorized to draw thereon or have
access thereto; and
(v) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from each of the Target and its
Subsidiaries and a description of the terms of such power.
(hh) Books of Account. The books, records and accounts of each of the
Target and its Subsidiaries accurately and fairly reflect, in reasonable detail,
the transactions and the assets and liabilities of such entity. None of the
Target or its Subsidiaries has engaged in any transaction, maintained any bank
account or used any of the funds of such entity except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of the business.
(ii) Environmental Matters. (i) Each of the Target and its Subsidiaries
has secured, and is in compliance with, all Environmental Permits (as defined
below), with respect to any premises on which its business is operated. all of
which Environmental Permits shall vest in the Source upon consummation of the
transactions contemplated hereby. Each of the Target and its Subsidiaries is in
compliance with all Environmental, Health and Safety Requirements.
As used herein. the term "Release" means any spill, emission, leaking, pumping,
injection. deposit, disposal. discharge, dispersal, leaching, emanation or
migration of any Hazardous Substance in, into, onto or through the environment
(including ambient air, surface water, ground water, soils, land surface,
subsurface strata, workplace or structure). As used herein, the term "CERCLA"
means the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. Section 9601 et seq. As used herein the term "Environmental Permits"
mean all permits, licenses, approvals or authorizations from any Governmental
Entity required under Environmental Laws for the operation of the business of
the applicable Company.
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(ii) None of the Target or its Subsidiaries nor Target Shareholder
has received any communication from any Governmental Entity that alleges that
any of the Target or its Subsidiaries is not in compliance with any
Environmental Laws or Environmental Permits.
(iii) None of the Target or its Subsidiaries has entered into or
agreed to any court decree or order, and none of the Target or its Subsidiaries
is subject to any judgment, decree or order, relating to compliance with any
Environmental Law or to investigation or cleanup of a Hazardous Substance under
any Environmental Law.
(iv) No lien, charge, interest or encumbrance has been attached,
asserted, or to the knowledge of the Target and the Target Shareholders,
threatened to or against any assets or properties of any of the Target or its
Subsidiaries pursuant to any Environmental Law.
(v) There has been no treatment, storage, disposal or release of
any Hazardous Substance on any property owned, operated or leased by any of the
Target or its Subsidiaries.
(vi) None of the Target or its Subsidiaries has received a CERCLA
104(e) information request or has been named a potentially responsible party for
any National Priorities List site under CERCLA or any site under analogous state
law or received an analogous notice or request from any non-U.S. Governmental
Entity, which notice, request or any resulting inquiry or litigation has not
been fully and finally resolved without possibility of reopening.
(vii) Except as set forth on the Disclosure Schedule, there are no
aboveground tanks or underground storage tanks on, under or about any property
owned, operated or leased by any of the Target or its Subsidiaries and any
former aboveground or underground tanks on any property owned, operated or
leased by any of the Target or its Subsidiaries have been removed in accordance
with all Environmental Laws and no residual contamination, if any, remains at
such sites in excess of applicable standards.
(viii) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by any of the Target or its Subsidiaries and there are no
such articles, containers or equipment containing PCBs, and there is no asbestos
containing material in a condition or location currently constituting a
violation of any Environmental Law at, on, under or within any property owned,
operated or leased by any of the Target or its Subsidiaries.
(ix) The Target and the Target Shareholders have provided to the
Source true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the of the Target and its Subsidiaries during the past five
years.
(jj) No Illegal Payment. None of the Target or its Subsidiaries and, to
the knowledge of the Target and the Target Shareholders, no affiliate, officer,
agent or employee thereof, directly or indirectly, has, during the past five
years, on behalf of or with respect to any of the
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Target or its Subsidiaries or any affiliate thereof. (a) made any unlawful
domestic or foreign political contributions, (b) made any payment or provided
services which were not legal to make or provide or which any of the Target or
its Subsidiaries or any affiliate thereof or any such officer, agent or employee
should have known were not legal for the payee or the recipient of such services
to receive, (c) received any payment or any services which were not legal for
the paver or the provider of such services to make or provide, (d) had any
transactions or payments related to the Target or its Subsidiaries which are not
recorded in their accounting books and records or (e) had any off-book bank or
cash accounts or "slush funds" related to the Target or its Subsidiaries.
(kk) Product Warranties and Liabilities. Each of the Target or its
Subsidiaries has no forms of warranties or Guarantees of its products and
services that are in effect or proposed to be used by it. The Disclosure
Schedule sets forth a description of each pending or, to the knowledge of each
of the Target and its Subsidiaries, threatened suit, claim. action, proceeding
or investigation under any warranty or guaranty against each of the Target and
its Subsidiaries. None of the Target or its Subsidiaries has incurred, nor does
any of the Target or its Subsidiaries know or have any reason to believe there
is any basis for alleging, any material liability, damage, loss, cost or expense
as a result of any material defect or other deficiency (whether of design,
materials, workmanship, labeling instructions or otherwise) ("Product
Liability") with respect to any product sold or services rendered by or on
behalf of any of the Target or its Subsidiaries (including any lessee thereof),
whether such Product Liability is incurred by reason of any express or implied
warranty (including, without limitation, any warranty of merchantability or
fitness), any doctrine of common law (tort, contract or other), any statutory
provision or otherwise and irrespective of whether such Product Liability is
covered by insurance.
(ll) Inventory. The inventory of each of the Target and its
Subsidiaries consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods, all of which is merchantable and
fit for the purpose for which it was procured or manufactured, and none of which
is slow-moving, obsolete, damaged, or defective, subject only to the reserve for
inventory writedown set forth on the face of the Interim Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of each of the
Target and its Subsidiaries.
(mm) Disclosure. Each of the Target and its Subsidiaries has delivered
to the Source true and complete copies of each agreement, contract, commitment
or other document (or, in the case of any such document not in the possession of
reasonably available to the Target or the Target Shareholders, accurate and
complete summaries thereto that is referred to in the schedules to this
Agreement or that has been requested by the Source or its representatives.
Without limiting any exclusion, exception or other limitation contained in any
of the representations and warranties made herein, this Agreement and the
schedules hereto and all other documents and information furnished to the Source
and its representatives pursuant hereto do not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements herein and therein not misleading.
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5. Covenants. The Parties agree as follows with respect to the period
from and after the execution of this Agreement:
(a) General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 6 below).
(b) Notices and Consents. The Target will give any notices (and will
cause each of its Subsidiaries to give any notices) to third parties, and will
use its reasonable best efforts to obtain (and will cause each of its
Subsidiaries to use its reasonable best efforts to obtain) any third party
consents, that the Source reasonably may request in connection with the matters
referred to in Section 4(d) above.
(c) Regulatory Matters and Approvals. Each of the Parties will (and the
Target will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3(a)(ii), Section 3(b)(ii) and Section
4(d) above.
(d) Nasdaq Notification of Source Common Stock Issuance. The Source
will notify Nasdaq of the issuance of the Source Common Stock in the Merger as
soon as practicable after the Closing.
(e) Nasdaq Approval of Source Preferred Stock Issuance. The Source will
obtain the formal approval of Nasdaq of the issuance of the Source Preferred
Stock in the Merger prior to the Effective Time.
(f) Operation of Business. The Target will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing:
(i) none of the Target and its Subsidiaries will authorize or
effect any change in its charter or bylaws;
(ii) none of the Target and its Subsidiaries will grant any
options, warrants, or other rights to purchase or obtain any of its capital
stock or issue, sell, or otherwise dispose of any of its capital stock (except
upon the conversion or exercise of options, warrants, and other rights currently
outstanding);
(iii) none of the Target and its Subsidiaries will declare, set
aside, or pay any dividend or distribution with respect to its capital stock
(whether in cash or in kind), or redeem, repurchase, or otherwise acquire any of
its capital stock, in either case outside the Ordinary Course of Business;
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<PAGE> 37
(iv) none of the Target and its Subsidiaries will issue any note,
bond, or other debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation outside the
Ordinary Course of Business;
(v) none of the Target and its Subsidiaries will impose any
Security Interest upon any of its assets outside the Ordinary Course of
Business;
(vi) none of the Target and its Subsidiaries will make any capital
investment in, make any loan to, or acquire the securities or assets of any
other Person outside the Ordinary Course of Business;
(vii) none of the Target and its Subsidiaries will make any change
in employment terms for any of its directors, officers, and employees outside
the Ordinary Course of Business; and
(viii) none of the Target and its Subsidiaries will commit to any
of the foregoing.
(g) Full Access. The Target will (and will cause each of its
Subsidiaries to) permit representatives of the Source to have full access to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to each of the Target and its
Subsidiaries. The Source will treat and hold as such any Confidential
Information it receives from any of the Target and its Subsidiaries in the
course of the reviews contemplated by this Section 5(g), will not use any of the
Confidential Information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, agrees to return to the
Target all tangible embodiments (and all copies) thereof which are in its
possession.
(h) Notice of Developments. Each Party will give prompt written notice
to the other of any material adverse development causing a breach of any of its
own representations and warranties in Section 3 and Section 4 above. No
disclosure by any Party pursuant to this Section 5(h), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(i) Exclusivity. The Target will not (and will not cause or permit any
of its Subsidiaries to) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of any of the Target and its
Subsidiaries (including any acquisition structured as a merger, consolidation,
or share exchange). The Target shall notify the Source immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
(j) Acquisition of 100% Ownership of Subsidiaries. Target will
effectuate the Put Transaction prior to the Effective Time.
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(k) Payoff of Debt. Ledecky will have received payoff letters with
respect to all of the indebtedness of the Subsidiaries outstanding as of the
Closing from Banker's Trust prior to the Effective Time.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Source and S-US. The obligation of
the Source and S-US to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) this Agreement and the Merger shall have received the approval
of the Target board of directors and the Target Shareholders;
(ii) the Target and its Subsidiaries shall have procured all of the
third party consents specified in Section 5(b) above;
(iii) the representations and warranties set forth in Section 3(a)
and Section 4 above shall be true and correct in all material respects at and as
of the Closing Date;
(iv) the Target shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(v) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Surviving
Corporation to own the former assets, to operate the former businesses, and to
control the former Subsidiaries of the Target, or (D) affect adversely the right
of any of the former Subsidiaries of the Target to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(vi) this Agreement and the Merger shall have received the approval
of the Source board of directors;
(vii) the Source shall have received from each of counsel to the
Target and Ledecky and counsel to the Target Shareholders an opinion in form and
substance as set forth in Exhibit F attached hereto, addressed to the Source,
and Dated as of the Closing Date;
(viii) Ledecky shall have entered into the Voting Agreement in the
form and substance as set forth in Exhibit G attached hereto and the same shall
be in full force and effect;
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(ix) The Target Shareholders shall have entered into the
Registration Rights and Lock-Up Agreement in the form and substance as set forth
in Exhibit H attached hereto and the same shall be in full force and effect;
(x) Source shall have completed its due diligence investigation of
Target, its business, condition, properties, financial results and other matters
to the satisfaction of Source; and
(xi) all actions to be taken by the Target in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Source.
The Source and S-US may waive any condition specified in this Section
6(a) if they execute a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Target and Target Shareholders. The
obligation of the Target and Target Shareholders to consummate the transactions
to be performed by them in connection with the Closing is subject to
satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the approval
of Source board of directors, the S-US board of directors and the S-US
shareholders;
(ii) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(iii) the Source shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Surviving
Corporation to own the former assets, to operate the former businesses, and to
control the former Subsidiaries of the Target, or (D) affect adversely the right
of any of the former Subsidiaries of the Target to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(v) the Target shall have received from counsel to the Source an
opinion in form and substance as set forth in Exhibit I attached hereto,
addressed to the Target, and dated as of the Closing Date;
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<PAGE> 40
(vi) Flegel shall have entered into the Voting Agreement in the
form and substance as set forth in Exhibit G attached hereto and the same shall
be in full force and effect;
(vii) Source shall have entered into the Registration Rights and
Lock-Up Agreement in the form and substance as set forth in Exhibit H attached
hereto and the same shall be in full force and effect;
(viii) Flegel and other holders of Source Common Stock holding an
aggregate of at least 51% of Source Common Stock shall have entered into the
Conversion Voting Agreement in the form and substance as set forth in Exhibit J
attached hereto and the same shall be in full force and effect;
(ix) The Target Shareholders shall have completed their due
diligence investigation of Source, its business, condition, properties,
financial results and other matters to the satisfaction of the Target
Shareholders; and
(x) all actions to be taken by the Source in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Target Shareholders.
The Target and the Target Shareholders may waive any condition
specified in this Section 6(b) if they execute a writing so stating at or prior
to the Closing.
7. Remedies for Breach of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of Target Shareholders contained in Section
4(g)-(z), Section 4(bb), and Section 4(dd)-(mm) of this Agreement shall survive
the Closing (even if the Source knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for the periods set forth in Section 7 (b)(ii) below. All
of the other representations and warranties of the Source and the Target
Shareholders contained in this Agreement (including the representations and
warranties of the and Target Shareholders contained in Section 3(a), Section
4(a)-(f), Section 4(aa) and Section 4(cc) thereof) shall survive the Closing
(even if the damaged Party knew or had reason to know of any misrepresentation
or breach of warranty at the time of Closing) and continue in full force and
effect until the expiration of any applicable statutes of limitations.
(b) Indemnification Provisions for Benefit of the Source. (i)
Notwithstanding the provisions of Section 7(a), the Parties acknowledge that
the Source will succeed to the rights of the Target under that Stock
Acquisition Agreement by and among Target, certain companies listed on the
signature page thereof and the stockholders of such companies listed on the
signature page thereof dated as of May 20, 1998 (the "May 1998 Agreement"), and
the Source agrees that in the event the former shareholders of Brand and TCE
breach (or in the event any third party alleges facts that, if true, would mean
the former shareholders of Brand and TCE have breached) any of
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<PAGE> 41
their representations, warranties and covenants contained in the May 1998
Agreement or contained in Section 4(g)-(mm) of this Agreement but which relates
solely to events or circumstances on or prior to May 20, 1998, then the Source
shall be indemnified by the former shareholders of Brand and TCE from and
against the entirety of any Adverse Consequences the Source may suffer through
and after the date of the claim for indemnification on the terms and conditions
of and subject to the May 1998 Agreement.
(ii) In the event the Target Shareholders breach (or in the event
any third party alleges facts that, if true, would mean Target Shareholders have
breached) any of their representations, warranties, and covenants contained in
this Agreement, and, if there is an applicable survival period pursuant to
Section 7(a) above, provided that the Source makes a written claim for
indemnification against Target Shareholders pursuant to Section 8(h) below
within such survival period, then Target Shareholders agree to indemnify the
Source from and against the entirety of any Adverse Consequences the Source may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences the Source may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach); provided, however, that the
Target Shareholders shall not have any obligation to indemnify the Source from
and against any Adverse Consequences resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or alleged breach) of any
representation or warranty contained in Section 4(g)-(z), Section 4(bb), and
Section 4(dd)-(mm) of this Agreement until the Source has suffered Adverse
Consequences by reason of all such breaches (or alleged breaches) in excess of
a $210,000 aggregate threshold (at which point the Target Shareholders will be
obligated to indemnify the Source from and against all such Adverse
Consequences above such threshhold for the following amounts and in the
following time periods: (A) 1,400,000 (in addition to any indemnification
rights in favor of Source pursuant to Section 7(b)(i) above) for any and all
claims made from the Closing Date through January 31, 2000; and (B) $700,000
for claims made after January 2000 and through April 30, 2000. Any claim for
indemnification shall survive until finally resolved and shall not be affected
by the reduction in the indemnification amount pursuant to Section 7(b)(ii)(B).
Liability for such indemnification shall be allocated among the Target
Shareholders in the following percentages: Ledicky, 70%; Weiner, 20%; and
Gillis, 10%. Such indemnification shall be paid at each Target Shareholder's
option in cash or in shares of Source Common Stock at a value of $7.73. The
Target Shareholders shall only be obligated to indemnify the Source pursuant to
this Section 7(b)(ii) for breaches and alleged breaches of the representations,
warranties and covenants contained in Section 4 of this Agreement that relate
solely to events or circumstances after May 20, 1998. In no event shall the
aggregate indemnification by the Target Shareholders under this Section
7(b)(ii) exceed $26,282,000.
(c) Indemnification Provisions for Benefit of the Target Shareholders.
(i) In the event the Source breaches (or in the event any third
party alleges facts that, if true, would mean the Source has breached) any of
its representations, warranties, and covenants contained in this Agreement, and,
if there is an applicable survival period pursuant to Section 7(a) above,
provided that the Target Shareholders make a written claim for indemnification
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<PAGE> 42
against the Source pursuant to Section 8(h) below within such survival period,
then the Source agrees to indemnify the Target Shareholders from and against
the entirety of any Adverse Consequences the Target Shareholders may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences Ledecky may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach).
(ii) Any indemnification by the Source under this Section 7(c)
shall not exceed $2.5 million.
(d) Matters In-volving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within fifteen (15) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 7(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party
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<PAGE> 43
Claim without the prior written consent of the Indemnified Party (not to be
withheld unreasonably).
(iv) In the event any of the conditions in Section 7(d)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith), (B) the Indemnifying Parties
will reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys' fees and
expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 7.
(e) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant. The Target Shareholders hereby agree that they will not
make any claim for indemnification against the Source by reason of the fact that
they were a director, officer, employee, or agent of Target or its Subsidiaries
or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought by the Source
against the Target Shareholders (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable law, or
otherwise).
8. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
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(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
(e) Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile), each of which shall be deemed an original
but all of which together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Ledecky:
Building One Services Corporation
800 Connecticut Avenue, N.W., Suite 1111
Washington, D.C. 20006
Attn: Jonathan J. Ledecky
Copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attn: J. Hovey Kemp, Esq.
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If to Gillis:
73-15 Weaver Street
Greenwich, CT 06831
Copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
Attn: Jonathan M. Peterson
If to Weiner:
735 Turf Road
North Woodmere, NY 11581
Copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
Attn: Jonathan M. Peterson
If to the Source or S-US:
The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
Attn: S. Leslie Flegel, Chairman & CEO
Copy to:
Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square
St. Louis, Missouri 63102
Attn: John L. Gillis, Jr., Esq.
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Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Missouri without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Missouri or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Missouri.
(i) Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by both of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
*****
42
<PAGE> 47
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
The Source Information Management Company
By: /s/ S. Leslie Flegel
------------------------
S. Leslie Flegel
Chairman and CEO
Source - U.S. Marketing Services, Inc.
By: /s/ S. Leslie Flegel
------------------------
S. Leslie Flegel
President
U.S. Marketing Service, Inc.
By: /s/ Jonathan J. Ledecky
-------------------------
Jonathan J. Ledecky
Chief Executive Officer
/s/ Jonathan J. Ledecky
- ----------------------------
Jonathan J. Ledecky
/s/ James R. Gillis
- -----------------------------
James R. Gillis
/s/ Monte Weiner
- ------------------------------
Monte Weiner
43
<PAGE> 48
A list briefly identifying the contents of all omitted schedules ane exhibits to
the Agreement and Plan of Merger (the "Agreement") dated as of January 7, 1999
by and among The Source Information Management Company ("Registrant"),
Source-U.S. Marketing Services, Inc., U.S. Marketing Services, Inc., Jonathan J.
Ledecky, James R. Gillis and Monte Weiner appears in the Table of Contents to
the Agreement. Registrant will furnish supplementally a copy of any omitted
schedule or exhibit to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2.2
================================================================================
ASSET PURCHASE AGREEMENT
BETWEEN
THE SOURCE INFORMATION MANAGEMENT COMPANY
AND
YEAGER INDUSTRIES, INC.
January 7, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Definitions.........................................................................1
<S> <C>
2 Basic Transaction..........................................................9
(a) Purchase and Sale of Assets..............................9
(b) Assumption of Liabilities................................9
(c) Initial Purchase Price..................................10
(d) The Closing.............................................10
(e) Deliveries at the Closing...............................10
(f) Purchase Price Adjustment...............................10
(g) Additional Purchase Price...............................11
(h) Allocation..............................................12
3 Representations and Warranties of Seller..................................12
(a) Organization of Seller..................................13
(b) Authorization of Transaction............................13
(c) Noncontravention........................................13
(d) Brokers' Fees...........................................14
(e) Title to Assets.........................................14
(f) Subsidiaries............................................14
(g) Financial Statements....................................14
(h) Events Subsequent to Most Recent Fiscal Year End........14
(i) Undisclosed Liabilities.................................18
(j) Legal Compliance........................................18
(k) Tax Matters.............................................18
(l) Real Property...........................................20
(m) Intellectual Property...................................24
(n) Tangible Assets.........................................27
(o) Inventory...............................................27
(p) Contracts...............................................28
(q) Notes and Accounts Receivable...........................30
(r) Powers of Attorney......................................30
(s) Insurance...............................................30
(t) Litigation..............................................31
(u) Product Warranty........................................31
(v) Product Liability.......................................32
(w) Employees...............................................32
(x) Employee Benefits.......................................32
(y) Guaranties..............................................35
(z) Environment, Health, and Safety.........................35
(aa) Certain Business Relationships With Seller..............36
(ab) Disclosure..............................................37
</TABLE>
i
<PAGE> 3
<TABLE>
<S><C>
(ac) Investment..............................................37
4 Representations and Warranties of Buyer...................................37
(a) Organization of Buyer...................................37
(b) Authorization of Transaction............................37
(c) Noncontravention........................................38
(d) Brokers' Fees...........................................38
5 Pre-Closing Covenants.....................................................38
(a) General.................................................38
(b) Notices and Consents....................................38
(c) Operation of Business...................................39
(d) Preservation of Business................................39
(e) Full Access.............................................39
(f) Notice of Developments..................................39
(g) Exclusivity.............................................40
(h) Title Insurance.........................................40
(i) Surveys.................................................41
6 Conditions to Obligation to Close.........................................41
(a) Conditions to Obligation of Buyer.......................41
(b) Conditions to Obligation of Seller......................43
7 Termination ........................................................44
(a) Termination of Agreement................................44
(b) Effect of Termination...................................45
8 Miscellaneous ........................................................45
(a) Survival of Representations and Warranties..............45
(b) Press Releases and Public Announcements.................45
(c) No Third Party Beneficiaries............................46
(d) Entire Agreement........................................46
(f) Counterparts............................................46
(g) Headings................................................46
(h) Notices.................................................46
(i) Governing Law...........................................48
(j) Amendments and Waivers..................................48
(k) Severability............................................48
(l) Expenses................................................48
(m) Incorporation of Exhibits and Schedules.................49
(n) Specific Performance....................................49
(o) Bulk Transfer Laws......................................49
</TABLE>
ii
<PAGE> 4
Exhibit A -- Agreement with Seller Stockholders
Exhibit B -- Allocation Schedule
Exhibit C -- Forms of Assignments
Exhibit D -- Form of Assumption
Exhibit E -- EBITDA Schedule
Exhibit F -- Historical Financial Statements
Exhibit G -- Form of Employment and Noncompetition Agreement (Gary Yeager)
Exhibit H -- Form of Opinion of Counsel to Seller
Exhibit I -- Form of Opinion of Counsel to Buyer
Disclosure Schedule -- Exceptions to Representations and Warranties
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of January 7, 1999, by and between THE SOURCE INFORMATION MANAGEMENT
COMPANY, a Missouri corporation ("Buyer"), and YEAGER INDUSTRIES, INC., a
Pennsylvania corporation ("Seller"). Buyer and Seller are hereinafter
collectively referred to as the "Parties."
This Agreement contemplates a transaction in which Buyer will purchase
all of the assets of Seller and assume all of the liabilities reflected on the
books of Seller in return for cash and stock.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1 Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of Seller, including all of its (a) real property, leaseholds and
subleaseholds therein, improvements, fixtures, and fittings thereon, and
easements, rights-of-way, and other appurtenants thereto (such as appurtenant
rights in and to public streets), (b) tangible personal property (such as
machinery, equipment, inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies), (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all
<PAGE> 6
jurisdictions, (d) leases, subleases, and rights thereunder, (e) agreements,
contracts, indentures, mortgages, instruments, Security Interests, guaranties,
other similar arrangements, and rights thereunder, (f) accounts, notes, and
other receivables, (g) securities, (h) claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery, rights of set off, and
rights of recoupment (including any such item relating to the payment of Taxes),
(i) franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
governmental agencies, (j) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials, (k) Cash, (l) rights in and with respect to
the assets associated with its Employee Benefit Plans and in the name "Yeager
Industries, Inc."; provided, however, that the Acquired Assets shall not include
(i) the corporate charters, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of Seller as a corporation or (ii)
any of the rights of Seller under this Agreement (or under any side agreement
between Seller on the one hand and Buyer on the other hand entered into on or
after the date of this Agreement).
"Additional Purchase Price" has the meaning set forth in Section 2(g)
below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
"Agreement with Seller Stockholders" means the Agreement with Seller
Stockholders entered into concurrently herewith and attached hereto as Exhibit
A.
2
<PAGE> 7
"Assumed Liabilities" means (a) all Liabilities of Seller set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto),
(b) all Liabilities of Seller which have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (other than any Liability resulting
from, arising out of, relating to, in the nature of, or caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law), (c) all
Liabilities of Seller for unpaid Taxes with respect to periods prior to the
Closing for which the return is due after the Closing up to an amount computed
in accordance with the past custom and practice of Seller in filing its Tax
Returns, (d) all obligations of Seller under the agreements, contracts, leases,
licenses, and other arrangements referred to in the definition of Acquired
Assets either (i) to furnish goods, services, and other non-Cash benefits to
another party after the Closing or (ii) to pay for goods, services, and other
non-Cash benefits that another party will furnish to it after the Closing, (e)
all Liabilities and obligations of Seller under its Employee Benefit Plans, and
(f) all other Liabilities and obligations of Seller set forth in an appendix to
the Disclosure Schedule under an express statement (that Buyer has initialed) to
the effect that the definition of Assumed Liabilities will include the
Liabilities and obligations so disclosed; provided, however, that the Assumed
Liabilities shall not include (i) any Liability of Seller for income, transfer,
sales, use, and other Taxes arising in connection with the consummation of the
transactions contemplated hereby (including any income Taxes arising because
Seller is transferring the Acquired Assets, or because Seller has deferred gain
on any Deferred Intercompany Transaction), (ii) any Liability of Seller for the
unpaid Taxes of any Person (other than Seller) under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise, (iii) any obligation of
Seller to indemnify any Person (including any of Seller Stockholders) by reason
of the fact that such Person was a director, officer, employee, or agent of
Seller or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such
indemnification is for judgments, damages, penalties, fines, costs, amounts paid
in settlement, losses, expenses, or otherwise and whether such indemnification
is pursuant to any statute, charter document, bylaw, agreement, or otherwise)
(iv) any Liability of Seller for costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, or (v) any Liability or
obligation of Seller
3
<PAGE> 8
under this Agreement (or under any side agreement between Seller on the one hand
and Buyer on the other hand entered into on or after the date of this
Agreement).
"Auditor" has the meaning set forth in Sections 2(f) and 2(g) below.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer has the meaning set forth in the preface above.
"Buyer Stock" means common stock, par value $.01 per share, of Buyer.
"Calculation" has the meaning set forth in Section 2(g) below.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
"Deferred Intercompany Transaction" has the meaning set forth in Treas.
Reg. Section 1.1502-13.
4
<PAGE> 9
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"EBITDA" has the meaning set forth on Exhibit E hereto.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
5
<PAGE> 10
"Excess Loss Account" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 3(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Indebtedness" means any and all debt and other obligations of Seller
for the repayment of borrowed money, including without limitation any and all
principal, interest, fees and charges, to any individual or entity, including
without limitation banks or other similar institutions, and including without
limitation the obligations of borrower to First Union National Bank pursuant to
(i) that certain commercial term loan in the original principal amount of Three
Hundred Thousand Dollars ($300,000.00), evidenced in part by a promissory note
in that same amount dated June 13, 1997, (ii) that certain commercial term loan
in the original principal amount of Eight Hundred Thousand Dollars
($800,000.00), evidenced in part by a promissory note in that same amount dated
November 12, 1998, and (iii) that certain line of credit in the available amount
of One Million Five Hundred Thousand Dollars ($1,500,000.00), evidenced in part
by a promissory note in the original principal amount of One Million Dollars
($1,000,000.00) dated June 13, 1997, as amended by that certain Replacement Line
of Credit Note in the original principal amount of One Million Five Hundred
Thousand Dollars ($1,500,000.00) dated January 5, 1998.
"Initial Purchase Price" has the meaning set forth in Section 2(c)
below.
6
<PAGE> 11
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
3(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
3(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3(g)
below.
7
<PAGE> 12
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Seller Share" means any share of the Capital Stock of Seller.
8
<PAGE> 13
"Seller Stockholder" means any person who or which holds any Seller
Shares.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Survey" has the meaning set forth in Section 5(i) below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2 Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller
agrees to sell, transfer, convey, and deliver to Buyer, all of the Acquired
Assets at the Closing for the consideration specified below in this Section 2.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Buyer agrees to assume and become responsible for
all of the Assumed Liabilities from and after the Closing. Buyer will not assume
or have any responsibility, however, with
9
<PAGE> 14
respect to any other obligation or Liability of Seller not included within the
definition of Assumed Liabilities.
(c) Initial Purchase Price. Buyer agrees to pay to Seller at the
Closing Five Hundred Thousand Dollars ($500,000.00) in cash and 142,860 shares
of Buyer Stock (the "Initial Purchase Price").
(d) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Armstrong,
Teasdale, Schlafly & Davis in St. Louis, Missouri, commencing at 9:00 a.m. local
time on January 7, 1999 or such other date as the Parties may mutually determine
(the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) Seller will
deliver to Buyer the various certificates, instruments, and documents referred
to in Section 6(a) below; (ii) Buyer will deliver to Seller the various
certificates, instruments, and documents referred to in Section 6(b) below;
(iii) Seller will execute, acknowledge (if appropriate), and deliver to Buyer
(A) assignments (including real property and Intellectual Property transfer
documents) in the forms attached hereto as Exhibit C and (B) such other
instruments of sale, transfer, conveyance, and assignment as Buyer and its
counsel reasonably may request; (iv) Buyer will execute, acknowledge (if
appropriate), and deliver to Seller (A) an assumption in the form attached
hereto as Exhibit D and (B) such other instruments of assumption as Seller and
its counsel reasonably may request; and (v) Buyer will deliver to Seller the
consideration specified in Section 2(c) above.
(f) Purchase Price Adjustment. The Initial Purchase Price shall
be adjusted on the Closing Date (the "Purchase Price Adjustment") on a
dollar-for dollar basis by the amount by which Seller's Indebtedness calculated
as of the Closing Date (the "Actual Indebtedness"), is greater or less than Two
Million Dollars ($2,000,000.00) (the "Threshold Indebtedness"). If the Actual
Indebtedness is less than the Threshold Indebtedness, the Initial Purchase Price
shall be increased, on a dollar-for-dollar basis, by an amount equal to the
Threshold Indebtedness minus the Actual Indebtedness. If the Actual Indebtedness
is more than the Threshold Indebtedness, the
10
<PAGE> 15
Initial Purchase Price shall be reduced, on a dollar-for-dollar basis, by an
amount equal to the Actual Indebtedness minus the Threshold Indebtedness. Fifty
percent (50%) of any such Purchase Price Adjustment shall be in cash and the
remaining fifty percent (50%) of such Purchase Price Adjustment shall be in
shares of Buyer Stock. For purposes of any such Purchase Price Adjustment, each
share of Buyer Stock will be valued at $7.00 per share.
In the event of a dispute between the Parties in connection with the
calculation or amount of Actual Indebtedness or Purchase Price Adjustment, the
Purchase Price Adjustment, as calculated by Buyer, shall be deposited in an
interest-bearing escrow account, which escrow account shall be held at an
institution insured by the Federal Deposit Insurance Corporation, and the
Parties shall retain the services of an independent accounting firm of national
reputation (the "Purchase Price Adjustment Auditor") to determine the amount of
the Actual Indebtedness and the Purchase Price Adjustment. Buyer and Seller
shall each bear 50% of the fees and other expenses of the Purchase Price
Adjustment Auditor. All Parties shall cooperate with the Purchase Price
Adjustment Auditor and provide it with all records and documentation the
Purchase Price Adjustment Auditor may reasonably request in order to determine
the amount of the Actual Indebtedness and the Purchase Price Adjustment. The
determination of the Purchase Price Adjustment Auditor shall be final and
binding on all Parties.
(g) Additional Purchase Price. Seller will be entitled to receive as
additional consideration hereunder (the "Additional Purchase Price") cash equal
to: (i) the amount by which EBITDA for the fiscal year ending January 31, 2000
exceeds Seven Hundred Thousand Dollars ($700,000.00) (the "Year 2000 Earn-Out");
and (ii) the amount by which EBITDA for the fiscal year ending January 31, 2001
exceeds Nine Hundred Thousand Dollars ($900,000.00) (the "Year 2001 Earn-Out");
provided, however, that neither the Year 2000 Earn-Out nor the Year 2001
Earn-Out shall exceed Two Hundred Fifty Thousand Dollars ($250,000.00).
Buyer shall calculate the Year 2000 Earn-Out on or before April 15,
2000, and shall provide Seller with such calculation and supporting
documentation evidencing such calculation on or before April 15, 2000 (the "Year
2000 Calculation"). Buyer shall calculate the
11
<PAGE> 16
Year 2001 Earn-Out on or before April 15, 2001, and shall provide Seller with
such calculation and supporting documentation evidencing such calculation on or
before April 15, 2001 (the "Year 2001 Calculation") (the Year 2000 Calculation
and the Year 2001 Calculation are hereinafter individually referred to as a
"Calculation"). If Seller notifies Buyer in writing that it accepts a
Calculation, or if Seller fails to object thereto in writing on or prior to the
15th day after the date on which such Calculation is delivered to it, such
Calculation shall be deemed to have been accepted by Seller, and Buyer shall
deliver to Seller the Year 2000 Earn-Out or the Year 2001 Earn-Out, as the case
may be, on or prior to the 15th day after written notice from Buyer or
expiration of the 15-day period set forth above, as the case may be.
If Seller, prior to the 15th day after delivery to it of a Calculation,
delivers a written objection thereto to Buyer and if the Parties are unable to
agree to such Calculation within fifteen (15) days after such written objection,
the Parties shall retain the services of an independent accounting firm of
national reputation (the "Earn-Out Auditor") to determine the amount of the Year
2000 Earn-Out or the Year 2001 Earn-Out, as the case may be. In any event, Buyer
shall deliver to Seller the undisputed portion of the Year 2000 Earn-Out or the
Year 2001 Earn-Out, as the case may be, within fifteen (15) days after the
retention of the Earn-Out Auditor. Buyer and Seller shall each bear 50% of the
fees and other expenses of the Earn-Out Auditor. All Parties shall cooperate
with the Earn-Out Auditor and provide it with all records and documentation the
Earn-Out Auditor may reasonably request in order to determine the amount of the
Year 2000 Earn-Out or the Year 2001 Earn-Out, as the case may be. The
determination of the Earn-Out Auditor shall be final and binding on all Parties.
(h) Allocation. The Parties agree to allocate the Initial Purchase
Price, as adjusted pursuant to the Purchase Price Adjustment, and the Additional
Purchase Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in accordance
with the allocation schedule attached hereto as Exhibit B.
12
<PAGE> 17
3 Representations and Warranties of Seller. Seller represents and
warrants to Buyer that the statements contained in this Section 3 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3), except as
set forth in the disclosure schedule accompanying this Agreement and initialed
by the Parties (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of Seller. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of Seller and Seller
Stockholders of Seller have duly authorized the execution, delivery, and
performance of this Agreement by Seller. This Agreement constitutes the valid
and legally binding obligation of Seller, enforceable in accordance with its
terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or any provision of the
charter or bylaws of Seller or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Seller is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any Security Interest upon any of its
assets). Seller does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions
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contemplated by this Agreement (including the assignments and assumptions
referred to in Section 2 above).
(d) Brokers' Fees. Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Buyer could become liable
or obligated.
(e) Title to Assets. Seller has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on its Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of such
Most Recent Balance Sheet. Without limiting the generality of the foregoing,
Seller has good and marketable title to all of its Acquired Assets, free and
clear of any Security Interest or restriction on transfer.
(f) Subsidiaries. Seller does not have any Subsidiaries.
(g) Financial Statements. Attached hereto as Exhibit F are the
following financial statements (collectively the "Financial Statements"): (i)
reviewed balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1996 and
1997 (the "Most Recent Fiscal Year End") for Seller; and (ii) unaudited balance
sheets and statements of income, changes in stockholders' equity, and cash flow
(the "Most Recent Financial Statements") as of and for the ________ months ended
________________, 1998 (the "Most Recent Fiscal Month End") for Seller. The
Financial Statements (including the Notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of Seller as of such
dates and the results of operations of Seller for such periods, are correct and
complete, and are consistent with the books and records of Seller (which books
and records are correct and complete).
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(h) Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any material adverse change in
the business, financial condition, operations, results of operations, or future
prospects of Seller. Without limiting the generality of the foregoing, since
that date:
(i) Seller has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) Seller has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $10,000 or outside the
Ordinary Course of Business;
(iii) no party (including Seller) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $10,000 to which Seller is a party or by
which Seller is bound;
(iv) Seller has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) Seller has not made any capital expenditure (or series
of related capital expenditures) either involving more than $10,000 or
outside the Ordinary Course of Business;
(vi) Seller has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and
acquisitions) either involving more than $10,000 or outside the
Ordinary Course of Business;
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(vii) Seller has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving
more than $10,000;
(viii) Seller has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) Seller has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $10,000 or outside the Ordinary Course of
Business;
(x) Seller has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the
charter or bylaws of Seller;
(xii) Seller has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiii) Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xiv) Seller has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
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(xv) Seller has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(xvi) Seller has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvii) Seller has not adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xviii) Seller has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xix) Seller has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(xx) Seller has not paid any amount to any third party
with respect to any Liability or obligation (including any costs and
expenses Seller has incurred or may incur in connection with this
Agreement and the transactions contemplated hereby) which would not
constitute an Assumed Liability if in existence as of the Closing;
(xxi) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving Seller; and
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(xxii) Seller has not committed to any of the foregoing.
(i) Undisclosed Liabilities. Seller has no Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (ii) Liabilities which have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
(j) Legal Compliance. To the Knowledge of Seller, Seller has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against it alleging any failure so
to comply.
(k) Tax Matters.
(i) Seller has filed all Tax Returns that it was required
to file. To the Knowledge of Seller, all such Tax Returns were correct
and complete in all respects, and all Taxes owed by Seller (whether or
not shown on any Tax Return) have been paid. Seller is not currently
the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where Seller does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any
of the assets of Seller that arose in connection with any failure (or
alleged failure) to pay any Tax.
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(ii) Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other
third party.
(iii) Neither Seller nor any director or officer (or employee
responsible for Tax matters) of Seller expects any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
Seller either (A) claimed or raised by any authority in writing or (B)
as to which any of Seller Stockholders and the directors and officers
(and employees responsible for Tax matters) of Seller has Knowledge
based upon personal contact with any agent of such authority. Section
3(k) of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to Seller for taxable
periods ended on or after December 31, 1993, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Seller has delivered to Buyer
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against
or agreed to by Seller since January 1, 1994.
(iv) Seller has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) The unpaid Taxes of Seller (A) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (B)
do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of
Seller in filing its Tax Returns.
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(vi) None of the Assumed Liabilities is an obligation to make a
payment that will not be deductible under Code Section 280G. Seller is not a
party to any Tax allocation or sharing agreement. Seller (A) has not been a
member of an Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Seller) or (B) has no
Liability for the Taxes of any Person (other than Seller) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(vii) Section 3(k) of the Disclosure Schedule sets forth the
following information with respect to Seller as of the most recent practicable
date: (A) the basis of Seller in its assets; and (B) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to Seller.
(l) Real Property.
(i) Section 3(l)(i) of the Disclosure Schedule lists and describes
briefly all real property that Seller owns. With respect to each such parcel of
owned real property:
(A) Seller has good and marketable title to the parcel of
real property, free and clear of any Security Interest, easement,
covenant, or other restriction, except for installments of special
assessments not yet delinquent and recorded easements, covenants, and
other restrictions which do not impair the current use, occupancy, or
value, or the marketability of title, of the property subject thereto;
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(B) there are no pending or, to the Knowledge of any of
Seller Stockholders and the directors and officers (and employees with
responsibility for real estate matters) of Seller, threatened
condemnation proceedings, lawsuits, or administrative actions relating
to the property or other matters affecting adversely the current use,
occupancy, or value thereof;
(C) to the Knowledge of Seller, the legal description for the
parcel contained in the deed thereof describes such parcel fully and
adequately, the buildings and improvements are located within the
boundary lines of the described parcels of land, are not in violation
of applicable setback requirements, zoning laws, and ordinances (and
none of the properties or buildings or improvements thereon are subject
to "permitted non-conforming use" or "permitted non-conforming
structure" classifications), and do not encroach on any easement which
may burden the land, and the land does not serve any adjoining property
for any purpose inconsistent with the use of the land, and the property
is not located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the use
thereof have not been obtained;
(D) to the Knowledge of Seller, all facilities have received
all approvals of governmental authorities (including licenses and
permits) required in connection with the ownership or operation thereof
and have been operated and maintained in accordance with applicable
laws, rules, and regulations;
(E) there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties the
right of use or occupancy of any portion of the parcel of real
property;
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(F) there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion thereof
or interest therein;
(G) there are no parties (other than Seller) in possession of
the parcel of real property, other than tenants under any leases
disclosed in Section 3(l)(i) of the Disclosure Schedule who are in
possession of space to which they are entitled;
(H) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation
of such facilities, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are adequate in
accordance with all applicable laws, ordinances, rules, and regulations
and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefitting the parcel of real property; and
(I) each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of
real property, and access to the property is provided by paved public
right-of-way with adequate curb cuts available.
(ii) Section 3(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to Seller.
Seller has delivered to Buyer correct and complete copies of the
leases and subleases listed in Section 3(l)(ii) of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease
listed in Section 3(l)(ii) of the Disclosure Schedule:
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(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2
above);
(C) neither Seller nor, to the Knowledge of Seller, any other
party to the lease or sublease is in breach or default, and no event
has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
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(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are true and
correct with respect to the underlying lease;
(G) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
(H) to the Knowledge of Seller, all facilities leased or
subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection
with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations; and
(I) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation
of said facilities.
(m) Intellectual Property.
(i) Seller owns or has the right to use pursuant to license,
subl-icense, agreement, or permission all Intellectual Property necessary
for the operation of the businesses of Seller as presently conducted. Each
item of Intellectual Property owned or used by Seller immediately prior to
the Closing hereunder will be owned or available for use by Buyer on
identical terms and conditions immediately subsequent to the Closing
hereunder. Seller has taken all necessary action to maintain and protect
each item of Intellectual Property that it owns or uses.
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(ii) to the Knowledge of Seller, Seller has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of Seller
Stockholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Seller has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that Seller must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of any of Seller
Stockholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Seller, no third party
has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of Seller.
(iii) Section 3(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to Seller with respect to any
of its Intellectual Property, identifies each pending patent application or
application for registration which Seller has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). Seller has
delivered to Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date). Section 3(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark used by Seller in
connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in Section 3(m)(iii) of the
Disclosure Schedule:
(A) Seller possesses all right, title, and interest in and to
the item, free and clear of any Security Interest, license, or other
restriction;
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(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of
any of Seller, Stockholders and the directors and officers (and
employees with responsibility for Intellectual Property matters) of
Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) Seller has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iv) Section 3(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that Seller
uses pursuant to license, sublicense, agreement, or permission. Seller has
delivered to Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect
to each item of Intellectual Property required to be identified in
Section 3(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and
assumptions referred to in Section 2 above);
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(C) neither Seller nor, to the Knowledge of Seller, any other
party to the license, sublicense, agreement, or permission is in
breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, or enforceability of the underlying
item of Intellectual Property; and
(H) Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(v) To the Knowledge of Seller, Stockholders and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of Seller, Seller will not interfere with, infringe upon,
misappropriate, or
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otherwise come into conflict with, any Intellectual Property rights of
third parties as a result of the continued operation of its businesses as
presently conducted.
(n) Tangible Assets. Seller owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. Each such tangible asset is free from known defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
(o) Inventory. The inventory of Seller consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory write-down set forth on
the face of the Most Recent Balance Sheet (rather than in any Notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of Seller.
(p) Contracts. Section 3(p) of the Disclosure Schedule lists the
following contracts and other agreements to which Seller is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease
payments in excess of $10,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a loss to Seller, or involve consideration in excess
of $10,000;
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(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
Seller has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $10,000 or
under which Seller has imposed a Security Interest on any of its assets,
tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement involving any of Seller Stockholders and their
Affiliates (other than Seller);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of Seller's current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $20,000 or providing severance benefits;
(x) any agreement under which Seller has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial condition,
operations, results of operations, or future prospects of Seller; or
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(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
Seller has delivered to Buyer a correct and complete copy of each written
agreement listed in Section 3(p) of the Disclosure Schedule (as amended to date)
and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 3(p) of the Disclosure Schedule. With respect
to each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in Section 2 above); (C) neither
Seller nor, to the Knowledge of Seller, any other party is in breach or default,
and no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement; and (D) no party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
Seller are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Seller.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of Seller.
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(s) Insurance. Section 3(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which Seller has been a party, a named insured,
or otherwise the beneficiary of coverage at any time within the past three (3)
years:
(i) the name, address, and telephone number of the agent; and
(ii) the name of the insurer.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in Section 2
above); (C) neither Seller nor, to the Knowledge of Seller, any other party to
the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. Seller has been covered
since its inception by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned period.
Section 3(s) of the Disclosure Schedule describes any self-insurance
arrangements affecting Seller.
(t) Litigation. Section 3(t) of the Disclosure Schedule sets forth each
instance in which Seller (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or is threatened to be made
a party to any action, suit, proceeding,
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hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 3(t) of the Disclosure Schedule could result
in any material adverse change in the business, financial condition, operations,
results of operations, or future prospects of Seller.
(u) Product Warranty. To the Knowledge of Seller, each product
manufactured, sold, leased, or delivered by Seller has been in conformity with
all applicable contractual commitments and all express and implied warranties,
and Seller has no Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Seller giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for product warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Seller. No product manufactured, sold, leased, or delivered by Seller is subject
to any guaranty, warranty, or other indemnity beyond the applicable standard
terms and conditions of sale or lease. Section 3(u) of the Disclosure Schedule
includes copies of the standard terms and conditions of sale or lease for Seller
(containing applicable guaranty, warranty, and indemnity provisions).
(v) Product Liability. To the Knowledge of Seller, Seller has no
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
Seller giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by Seller.
(w) Employees. To the Knowledge of Seller Stockholders and the
directors and officers (and employees with responsibility for employment
matters) of Seller, no executive, key employee, or group of employees has any
plans to terminate employment with Seller. Seller is not a party to or bound by
any collective bargaining agreement, nor has Seller experienced any
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strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. Seller has not committed any unfair labor practice. None of
Seller Stockholders and the directors and officers (and employees with
responsibility for employment matters) of Seller has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of Seller.
(x) Employee Benefits.
(i) Section 3(x) of the Disclosure Schedule lists
each Employee Benefit Plan that Seller maintains or to which Seller
contributes.
(A) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form
and in operation in all respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Section 4980B have been met with
respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past
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<PAGE> 38
custom and practice of Seller. All premiums or other payments
for all periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code Section 401(a) and has received,
within the last two years, a favorable determination letter
from the Internal Revenue Service.
(E) The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan) equals or exceeds the
present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
(F) Seller has delivered to Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received
from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each
such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that
Seller maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has
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<PAGE> 39
been completely or partially terminated or been the subject of
a Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate
any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or, to the Knowledge
of any of Seller Stockholders and the directors and officers
(and employees with responsibility for employee benefits
matters) of Seller is threatened.
(B) There have been no Prohibited Transactions
with respect to any such Employee Benefit Plan. No Fiduciary
has any Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration
or investment of the assets of any such Employee Benefit Plan.
No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to the Knowledge of any of Seller
Stockholders and the directors and officers (and employees
with responsibility for employee benefits matters) of Seller
is threatened. None of Seller Stockholders and the directors
and officers (and employees with responsibility for employee
benefits matters) of Seller has any Knowledge of any Basis for
any such action, suit, proceeding, hearing, or investigation.
(C) Seller has not incurred, and none of Seller
Stockholders and the directors and officers (and employees
with responsibility for employee benefits matters) of Seller
has any reason to expect that Seller will incur; any Liability
to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal Liability)
or under the Code with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit Plan.
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(iii) Seller does not contribute to, never has
contributed to, and never has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
(iv) Seller does not maintain or contribute to, and
never has maintained or contributed to, and never has been required to
contribute to any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B).
(y) Guaranties. Seller is not a guarantor nor is Seller
otherwise liable for any Liability or obligation (including indebtedness) of any
other Person.
(z) Environment, Health, and Safety.
(i) Seller and, to the Knowledge of Seller, its
predecessors have complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply. Without limiting the
generality of the preceding sentence, Seller and, to the Knowledge of
Seller, its predecessors have obtained and been in compliance with all
of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
(ii) To the Knowledge of Seller, Seller has no
Liability (and neither Seller nor, to the Knowledge of Seller, its
predecessors has handled or disposed of any substance, arranged for the
disposal of any substance, exposed any
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employee or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could form the
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Seller
giving rise to any Liability) for damage to any site, location, or body
of water (surface or subsurface), for any illness of or personal injury
to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the
business of Seller and, to the Knowledge of Seller, its respective
predecessors have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(aa) Certain Business Relationships With Seller. None of
Seller Stockholders and their Affiliates has been involved in any business
arrangement or relationship with Seller within the past twelve (12) months, and
none of Seller Stockholders and their Affiliates owns any asset, tangible or
intangible, which is used in the business of Seller.
(ab) Disclosure. The representations and warranties contained
in this Section 3 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
(ac) Investment. Seller (i) understands that the shares of
Buyer Stock to be delivered to Seller hereunder have not been, and will not be,
registered under the Securities Act, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is acquiring Buyer Stock
solely for its own account for investment purposes, and not with a view to the
distribution thereof (except to Seller Stockholders), (iii) is a sophisticated
investor with knowledge and experience in business and financial matters, (iv)
has received certain information concerning Buyer and has had the opportunity to
obtain additional information as desired in order to evaluate the merits and the
<PAGE> 42
risks inherent in holding Buyer Stock, (v) is able to bear the economic risk and
lack of liquidity inherent in holding Buyer Stock, and (vi) is an Accredited
Investor for the reasons set forth in Section 3(ac) of the Disclosure Schedule.
4 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller that the statements contained in this Section 4 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except as
set forth in the Disclosure Schedule. The Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
(a) Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Authorization of Transaction. Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Buyer is a party or by which it is bound or to which any of its assets is
subject. Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate
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the transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 2 above).
(d) Brokers' Fees. Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Seller could become liable
or obligated.
5 Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary in order to consummate
and make effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 7
below).
(b) Notices and Consents. Seller will give any notices to third
parties, and Seller will use its reasonable best efforts to obtain any third
party consents, that Buyer may request in connection with the matters referred
to in Section 3(c) above. Each of the Parties will give any notices to, make any
filings with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3(c) and Section 4 above. Without
limiting the generality of the foregoing, each of the Parties will file any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act, will use its
reasonable best efforts to obtain an early termination of the applicable waiting
period, and will make any further filings pursuant thereto that may be necessary
in connection therewith.
(c) Operation of Business. Seller will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, Seller
will not (i) declare, set aside, or pay any dividend or make
<PAGE> 44
any distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock, (ii) pay any amount to any third
party with respect to any Liability or obligation (including any costs and
expenses Seller has incurred or may incur in connection with this Agreement and
the transactions contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing, and (iii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 3(h) above.
(d) Preservation of Business. Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) Full Access. Seller will permit representatives of Buyer to have
full access to all premises, properties, personnel, books, records (including
Tax records), contracts, and documents of or pertaining to Seller.
(f) Notice of Developments. Each Party will give prompt written
notice to the other Parties of any material adverse development causing a breach
of any of its own representations and warranties in Section 3 and Section 4
above.
(g) Exclusivity. Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of any capital stock or other voting securities, or any substantial
portion of the assets, of Seller (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Seller will notify Buyer immediately
if any Person makes any proposal, offer, inquiry, or contact with respect to any
of the foregoing.
(h) Title Insurance. Buyer will obtain in preparation for the Closing
an ALTA Owner's Policy of Title Insurance Form B-1987 (or equivalent policy
reasonably acceptable to
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<PAGE> 45
Buyer if the real property is located in a state in which an ALTA Owner's Policy
of Title Insurance Form B-1987 is not available) issued by a title insurer
reasonably satisfactory to Buyer, in such amount as Buyer reasonably may
determine to be the fair market value of such real property (including all
improvements located thereon), insuring title to such real property to be in
Buyer as of the Closing (subject only to the title exceptions described above in
Section 3(l)(i) and in Section 3(l)(i) of the Disclosure Schedule). Each title
insurance policy delivered under Section 5(h) shall (A) insure title to the real
property and all recorded easements benefitting such real property, (B) contain
an "extended coverage endorsement" insuring over the general exceptions
contained customarily in such policies, (C) contain an ALTA Zoning Endorsement
3.1 (or equivalent), (D) contain an endorsement insuring that the real property
described in the title insurance policy is the same real estate as shown on the
Survey delivered with respect to such property, (E) contain an endorsement
insuring that each street adjacent to the real property is a public street and
that there is direct and unencumbered pedestrian and vehicular access to such
street from the real property, and (F) contain a "non-imputation" endorsement to
the effect that title defects known to the officers, directors, and stockholders
of the owner prior to the Closing shall not be deemed "facts known to the
insured" for purposes of the policy.
(i) Surveys. With respect to each parcel of real property that
Seller owns and as to which a title insurance policy is to be procured pursuant
to Section 5(h) above, Buyer will procure in preparation for the Closing a
current survey of the real property certified to Buyer, prepared by a licensed
surveyor and conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements, easements, party
walls, sidewalks, roadways, utility lines, and other matters shown customarily
on such surveys, and showing access affirmatively to public streets and roads
(the "Survey"). The Survey shall not disclose any survey defect or encroachment
from or onto the real property which has not been cured or insured over prior to
the Closing.
6 Conditions to Obligation to Close.
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(a) Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) Seller shall have procured all of the third party consents
specified in Section 5(b) above, and Buyer shall have procured all of
the title insurance commitments, policies, and riders specified in
Section 5(h) above, and all of the surveys specified in Section 5(i)
above, all of which title insurance commitments, policies and riders,
and surveys, shall be in form and substance satisfactory to Buyer in
Buyer's sole discretion;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (C) affect adversely the right of Buyer to own the
Acquired Assets, to operate the former businesses of Seller (and no
such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) Seller shall have delivered to Buyer a certificate to the
effect that each of the conditions specified above in Section 6(a)(i)
through Section 6(a)(iv) is satisfied in all respects;
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(vi) Buyer shall have entered into a side agreement in form and
substance as set forth in Exhibit G attached hereto with Gary Yeager
and the same shall be in full force and effect;
(vii) Buyer shall have received from counsel to Seller an opinion
in form and substance as set forth in Exhibit H attached hereto,
addressed to Buyer, and dated as of the Closing Date;
(viii) all actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Buyer.
Buyer may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state,
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local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) Buyer shall have delivered to Seller a certificate to the
effect that each of the conditions specified above in Section 6(b)(i)
through Section 6(b)(iii) is satisfied in all respects;
(v) Buyer shall have entered into a side agreement in form and
substance as set forth in Exhibit G attached hereto with Gary Yeager
and the same shall be in full force and effect;
(vi) Seller shall have received from counsel to Buyer an opinion
in form and substance as set forth in Exhibit I attached hereto,
addressed to Seller, and dated as of the Closing Date; and
(vii) all actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Seller.
Seller may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
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7 Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) Buyer and Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written
notice to Seller on or before January 7, 1999, if Buyer is not
satisfied with the results of its continuing business, legal, and
accounting due diligence regarding Seller;
(iii) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing (A) in the event
Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Buyer has notified
Seller of the breach, and the breach has continued without cure for a
period of fifteen (15) days after the notice of breach or (B) if the
Closing shall not have occurred on or before February 1, 1999, by
reason of the failure of any condition precedent under ss.6(a) hereof
(unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(iv) Seller may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event Buyer
has breached any material representation, warranty, or covenant
contained in this
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Agreement in any material respect, Seller has notified Buyer of the
breach, and the breach has continued without cure for a period of
fifteen (15) days after the notice of breach or (B) if the Closing
shall not have occurred on or before February 1, 1999, by reason of the
failure of any condition precedent under Section 6(b) hereof (unless
the failure results primarily from a Seller breaching any
representation, warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 7(a) above, all rights and obligations of the
Parties hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach).
8 Miscellaneous.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder as and to the extent provided in the Agreement
With Seller Stockholders.
(b) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the other Party; provided, however, that Buyer may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case Buyer
will use its reasonable best efforts to advise Seller prior to making the
disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
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(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that Buyer may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder, and any
portion of either of the Year 2000 Earn-Out and/or the Year 2001 Earn-Out to be
paid in Buyer Stock shall be paid in the stock of Buyer and not the stock of any
assignee corporation).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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If to Seller:
Yeager Industries, Inc.
2001 West Erie Avenue
Philadelphia, PA 19140
Attn: Gary Yeager, President
Copy to:
Smith & Giacometti
1420 Walnut Street, Suite 806
Philadelphia, PA 19102
Attn: David B. Smith, Esq.
If to Buyer:
The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
Attn: S. Leslie Flegel, Chairman & CEO
Copy to:
Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square
St. Louis, Missouri 63102
Attn: John L. Gillis, Jr., Esq.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other
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communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Pennsylvania
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Pennsylvania or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Pennsylvania.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. Seller may consent to any such amendment at any time prior to the
Closing with the prior authorization of its boards of directors. No waiver by
any Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of Buyer, Seller, and Seller Stockholders will
bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. Buyer and Seller agree that each will pay one-half (1/2) of the transfer
taxes arising in connection with the transfer of real estate located in the
State of Pennsylvania, which transfer occurs as part of the transactions
contemplated hereby. Seller also agrees that it has not paid any amount to any
third party, and will not pay any amount to any third party until after the
Closing, with respect to any of the costs and expenses of Seller
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and Seller Stockholders (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
Parties and the matter in dispute, in addition to any other remedy to which it
may be entitled, at law or in equity.
(o) Bulk Transfer Laws. Buyer acknowledges that Seller will not
comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
AS OF the date first above written.
THE SOURCE INFORMATION MANAGEMENT COMPANY
By:/s/ S. Leslie Flegel
--------------------------------------------
S. Leslie Flegel
Chairman and Chief Executive Officer
YEAGER INDUSTRIES, INC.
By:/s/ Gary Yeager
--------------------------------------------
Gary Yeager
President
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A list briefly identifying the contents of all omitted schedules and exhibits to
the Asset Purchase Agreement (the "Agreement") dated as of January 7, 1999, by
and between The Source Information Management Company ("Registrant"), and Yeager
Industries, Inc. appears in the Table of Contents to the Agreement. Registrant
will furnish supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request.
52
<PAGE> 1
EXHIBIT 2.2
================================================================================
ASSET PURCHASE AGREEMENT
BETWEEN
THE SOURCE INFORMATION MANAGEMENT COMPANY
AND
YEAGER INDUSTRIES, INC.
January 7, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Definitions.........................................................................1
<S> <C>
2 Basic Transaction..........................................................9
(a) Purchase and Sale of Assets..............................9
(b) Assumption of Liabilities................................9
(c) Initial Purchase Price..................................10
(d) The Closing.............................................10
(e) Deliveries at the Closing...............................10
(f) Purchase Price Adjustment...............................10
(g) Additional Purchase Price...............................11
(h) Allocation..............................................12
3 Representations and Warranties of Seller..................................12
(a) Organization of Seller..................................13
(b) Authorization of Transaction............................13
(c) Noncontravention........................................13
(d) Brokers' Fees...........................................14
(e) Title to Assets.........................................14
(f) Subsidiaries............................................14
(g) Financial Statements....................................14
(h) Events Subsequent to Most Recent Fiscal Year End........14
(i) Undisclosed Liabilities.................................18
(j) Legal Compliance........................................18
(k) Tax Matters.............................................18
(l) Real Property...........................................20
(m) Intellectual Property...................................24
(n) Tangible Assets.........................................27
(o) Inventory...............................................27
(p) Contracts...............................................28
(q) Notes and Accounts Receivable...........................30
(r) Powers of Attorney......................................30
(s) Insurance...............................................30
(t) Litigation..............................................31
(u) Product Warranty........................................31
(v) Product Liability.......................................32
(w) Employees...............................................32
(x) Employee Benefits.......................................32
(y) Guaranties..............................................35
(z) Environment, Health, and Safety.........................35
(aa) Certain Business Relationships With Seller..............36
(ab) Disclosure..............................................37
</TABLE>
i
<PAGE> 3
<TABLE>
<S><C>
(ac) Investment..............................................37
4 Representations and Warranties of Buyer...................................37
(a) Organization of Buyer...................................37
(b) Authorization of Transaction............................37
(c) Noncontravention........................................38
(d) Brokers' Fees...........................................38
5 Pre-Closing Covenants.....................................................38
(a) General.................................................38
(b) Notices and Consents....................................38
(c) Operation of Business...................................39
(d) Preservation of Business................................39
(e) Full Access.............................................39
(f) Notice of Developments..................................39
(g) Exclusivity.............................................40
(h) Title Insurance.........................................40
(i) Surveys.................................................41
6 Conditions to Obligation to Close.........................................41
(a) Conditions to Obligation of Buyer.......................41
(b) Conditions to Obligation of Seller......................43
7 Termination ........................................................44
(a) Termination of Agreement................................44
(b) Effect of Termination...................................45
8 Miscellaneous ........................................................45
(a) Survival of Representations and Warranties..............45
(b) Press Releases and Public Announcements.................45
(c) No Third Party Beneficiaries............................46
(d) Entire Agreement........................................46
(f) Counterparts............................................46
(g) Headings................................................46
(h) Notices.................................................46
(i) Governing Law...........................................48
(j) Amendments and Waivers..................................48
(k) Severability............................................48
(l) Expenses................................................48
(m) Incorporation of Exhibits and Schedules.................49
(n) Specific Performance....................................49
(o) Bulk Transfer Laws......................................49
</TABLE>
ii
<PAGE> 4
Exhibit A -- Agreement with Seller Stockholders
Exhibit B -- Allocation Schedule
Exhibit C -- Forms of Assignments
Exhibit D -- Form of Assumption
Exhibit E -- EBITDA Schedule
Exhibit F -- Historical Financial Statements
Exhibit G -- Form of Employment and Noncompetition Agreement (Gary Yeager)
Exhibit H -- Form of Opinion of Counsel to Seller
Exhibit I -- Form of Opinion of Counsel to Buyer
Disclosure Schedule -- Exceptions to Representations and Warranties
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of January 7, 1999, by and between THE SOURCE INFORMATION MANAGEMENT
COMPANY, a Missouri corporation ("Buyer"), and YEAGER INDUSTRIES, INC., a
Pennsylvania corporation ("Seller"). Buyer and Seller are hereinafter
collectively referred to as the "Parties."
This Agreement contemplates a transaction in which Buyer will purchase
all of the assets of Seller and assume all of the liabilities reflected on the
books of Seller in return for cash and stock.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1 Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of Seller, including all of its (a) real property, leaseholds and
subleaseholds therein, improvements, fixtures, and fittings thereon, and
easements, rights-of-way, and other appurtenants thereto (such as appurtenant
rights in and to public streets), (b) tangible personal property (such as
machinery, equipment, inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies), (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all
<PAGE> 6
jurisdictions, (d) leases, subleases, and rights thereunder, (e) agreements,
contracts, indentures, mortgages, instruments, Security Interests, guaranties,
other similar arrangements, and rights thereunder, (f) accounts, notes, and
other receivables, (g) securities, (h) claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery, rights of set off, and
rights of recoupment (including any such item relating to the payment of Taxes),
(i) franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
governmental agencies, (j) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials, (k) Cash, (l) rights in and with respect to
the assets associated with its Employee Benefit Plans and in the name "Yeager
Industries, Inc."; provided, however, that the Acquired Assets shall not include
(i) the corporate charters, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of Seller as a corporation or (ii)
any of the rights of Seller under this Agreement (or under any side agreement
between Seller on the one hand and Buyer on the other hand entered into on or
after the date of this Agreement).
"Additional Purchase Price" has the meaning set forth in Section 2(g)
below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
"Agreement with Seller Stockholders" means the Agreement with Seller
Stockholders entered into concurrently herewith and attached hereto as Exhibit
A.
2
<PAGE> 7
"Assumed Liabilities" means (a) all Liabilities of Seller set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto),
(b) all Liabilities of Seller which have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (other than any Liability resulting
from, arising out of, relating to, in the nature of, or caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law), (c) all
Liabilities of Seller for unpaid Taxes with respect to periods prior to the
Closing for which the return is due after the Closing up to an amount computed
in accordance with the past custom and practice of Seller in filing its Tax
Returns, (d) all obligations of Seller under the agreements, contracts, leases,
licenses, and other arrangements referred to in the definition of Acquired
Assets either (i) to furnish goods, services, and other non-Cash benefits to
another party after the Closing or (ii) to pay for goods, services, and other
non-Cash benefits that another party will furnish to it after the Closing, (e)
all Liabilities and obligations of Seller under its Employee Benefit Plans, and
(f) all other Liabilities and obligations of Seller set forth in an appendix to
the Disclosure Schedule under an express statement (that Buyer has initialed) to
the effect that the definition of Assumed Liabilities will include the
Liabilities and obligations so disclosed; provided, however, that the Assumed
Liabilities shall not include (i) any Liability of Seller for income, transfer,
sales, use, and other Taxes arising in connection with the consummation of the
transactions contemplated hereby (including any income Taxes arising because
Seller is transferring the Acquired Assets, or because Seller has deferred gain
on any Deferred Intercompany Transaction), (ii) any Liability of Seller for the
unpaid Taxes of any Person (other than Seller) under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise, (iii) any obligation of
Seller to indemnify any Person (including any of Seller Stockholders) by reason
of the fact that such Person was a director, officer, employee, or agent of
Seller or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such
indemnification is for judgments, damages, penalties, fines, costs, amounts paid
in settlement, losses, expenses, or otherwise and whether such indemnification
is pursuant to any statute, charter document, bylaw, agreement, or otherwise)
(iv) any Liability of Seller for costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, or (v) any Liability or
obligation of Seller
3
<PAGE> 8
under this Agreement (or under any side agreement between Seller on the one hand
and Buyer on the other hand entered into on or after the date of this
Agreement).
"Auditor" has the meaning set forth in Sections 2(f) and 2(g) below.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer has the meaning set forth in the preface above.
"Buyer Stock" means common stock, par value $.01 per share, of Buyer.
"Calculation" has the meaning set forth in Section 2(g) below.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
"Deferred Intercompany Transaction" has the meaning set forth in Treas.
Reg. Section 1.1502-13.
4
<PAGE> 9
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"EBITDA" has the meaning set forth on Exhibit E hereto.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
5
<PAGE> 10
"Excess Loss Account" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 3(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Indebtedness" means any and all debt and other obligations of Seller
for the repayment of borrowed money, including without limitation any and all
principal, interest, fees and charges, to any individual or entity, including
without limitation banks or other similar institutions, and including without
limitation the obligations of borrower to First Union National Bank pursuant to
(i) that certain commercial term loan in the original principal amount of Three
Hundred Thousand Dollars ($300,000.00), evidenced in part by a promissory note
in that same amount dated June 13, 1997, (ii) that certain commercial term loan
in the original principal amount of Eight Hundred Thousand Dollars
($800,000.00), evidenced in part by a promissory note in that same amount dated
November 12, 1998, and (iii) that certain line of credit in the available amount
of One Million Five Hundred Thousand Dollars ($1,500,000.00), evidenced in part
by a promissory note in the original principal amount of One Million Dollars
($1,000,000.00) dated June 13, 1997, as amended by that certain Replacement Line
of Credit Note in the original principal amount of One Million Five Hundred
Thousand Dollars ($1,500,000.00) dated January 5, 1998.
"Initial Purchase Price" has the meaning set forth in Section 2(c)
below.
6
<PAGE> 11
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
3(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
3(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3(g)
below.
7
<PAGE> 12
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Seller Share" means any share of the Capital Stock of Seller.
8
<PAGE> 13
"Seller Stockholder" means any person who or which holds any Seller
Shares.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Survey" has the meaning set forth in Section 5(i) below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2 Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller
agrees to sell, transfer, convey, and deliver to Buyer, all of the Acquired
Assets at the Closing for the consideration specified below in this Section 2.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Buyer agrees to assume and become responsible for
all of the Assumed Liabilities from and after the Closing. Buyer will not assume
or have any responsibility, however, with
9
<PAGE> 14
respect to any other obligation or Liability of Seller not included within the
definition of Assumed Liabilities.
(c) Initial Purchase Price. Buyer agrees to pay to Seller at the
Closing Five Hundred Thousand Dollars ($500,000.00) in cash and 142,860 shares
of Buyer Stock (the "Initial Purchase Price").
(d) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Armstrong,
Teasdale, Schlafly & Davis in St. Louis, Missouri, commencing at 9:00 a.m. local
time on January 7, 1999 or such other date as the Parties may mutually determine
(the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) Seller will
deliver to Buyer the various certificates, instruments, and documents referred
to in Section 6(a) below; (ii) Buyer will deliver to Seller the various
certificates, instruments, and documents referred to in Section 6(b) below;
(iii) Seller will execute, acknowledge (if appropriate), and deliver to Buyer
(A) assignments (including real property and Intellectual Property transfer
documents) in the forms attached hereto as Exhibit C and (B) such other
instruments of sale, transfer, conveyance, and assignment as Buyer and its
counsel reasonably may request; (iv) Buyer will execute, acknowledge (if
appropriate), and deliver to Seller (A) an assumption in the form attached
hereto as Exhibit D and (B) such other instruments of assumption as Seller and
its counsel reasonably may request; and (v) Buyer will deliver to Seller the
consideration specified in Section 2(c) above.
(f) Purchase Price Adjustment. The Initial Purchase Price shall
be adjusted on the Closing Date (the "Purchase Price Adjustment") on a
dollar-for dollar basis by the amount by which Seller's Indebtedness calculated
as of the Closing Date (the "Actual Indebtedness"), is greater or less than Two
Million Dollars ($2,000,000.00) (the "Threshold Indebtedness"). If the Actual
Indebtedness is less than the Threshold Indebtedness, the Initial Purchase Price
shall be increased, on a dollar-for-dollar basis, by an amount equal to the
Threshold Indebtedness minus the Actual Indebtedness. If the Actual Indebtedness
is more than the Threshold Indebtedness, the
10
<PAGE> 15
Initial Purchase Price shall be reduced, on a dollar-for-dollar basis, by an
amount equal to the Actual Indebtedness minus the Threshold Indebtedness. Fifty
percent (50%) of any such Purchase Price Adjustment shall be in cash and the
remaining fifty percent (50%) of such Purchase Price Adjustment shall be in
shares of Buyer Stock. For purposes of any such Purchase Price Adjustment, each
share of Buyer Stock will be valued at $7.00 per share.
In the event of a dispute between the Parties in connection with the
calculation or amount of Actual Indebtedness or Purchase Price Adjustment, the
Purchase Price Adjustment, as calculated by Buyer, shall be deposited in an
interest-bearing escrow account, which escrow account shall be held at an
institution insured by the Federal Deposit Insurance Corporation, and the
Parties shall retain the services of an independent accounting firm of national
reputation (the "Purchase Price Adjustment Auditor") to determine the amount of
the Actual Indebtedness and the Purchase Price Adjustment. Buyer and Seller
shall each bear 50% of the fees and other expenses of the Purchase Price
Adjustment Auditor. All Parties shall cooperate with the Purchase Price
Adjustment Auditor and provide it with all records and documentation the
Purchase Price Adjustment Auditor may reasonably request in order to determine
the amount of the Actual Indebtedness and the Purchase Price Adjustment. The
determination of the Purchase Price Adjustment Auditor shall be final and
binding on all Parties.
(g) Additional Purchase Price. Seller will be entitled to receive as
additional consideration hereunder (the "Additional Purchase Price") cash equal
to: (i) the amount by which EBITDA for the fiscal year ending January 31, 2000
exceeds Seven Hundred Thousand Dollars ($700,000.00) (the "Year 2000 Earn-Out");
and (ii) the amount by which EBITDA for the fiscal year ending January 31, 2001
exceeds Nine Hundred Thousand Dollars ($900,000.00) (the "Year 2001 Earn-Out");
provided, however, that neither the Year 2000 Earn-Out nor the Year 2001
Earn-Out shall exceed Two Hundred Fifty Thousand Dollars ($250,000.00).
Buyer shall calculate the Year 2000 Earn-Out on or before April 15,
2000, and shall provide Seller with such calculation and supporting
documentation evidencing such calculation on or before April 15, 2000 (the "Year
2000 Calculation"). Buyer shall calculate the
11
<PAGE> 16
Year 2001 Earn-Out on or before April 15, 2001, and shall provide Seller with
such calculation and supporting documentation evidencing such calculation on or
before April 15, 2001 (the "Year 2001 Calculation") (the Year 2000 Calculation
and the Year 2001 Calculation are hereinafter individually referred to as a
"Calculation"). If Seller notifies Buyer in writing that it accepts a
Calculation, or if Seller fails to object thereto in writing on or prior to the
15th day after the date on which such Calculation is delivered to it, such
Calculation shall be deemed to have been accepted by Seller, and Buyer shall
deliver to Seller the Year 2000 Earn-Out or the Year 2001 Earn-Out, as the case
may be, on or prior to the 15th day after written notice from Buyer or
expiration of the 15-day period set forth above, as the case may be.
If Seller, prior to the 15th day after delivery to it of a Calculation,
delivers a written objection thereto to Buyer and if the Parties are unable to
agree to such Calculation within fifteen (15) days after such written objection,
the Parties shall retain the services of an independent accounting firm of
national reputation (the "Earn-Out Auditor") to determine the amount of the Year
2000 Earn-Out or the Year 2001 Earn-Out, as the case may be. In any event, Buyer
shall deliver to Seller the undisputed portion of the Year 2000 Earn-Out or the
Year 2001 Earn-Out, as the case may be, within fifteen (15) days after the
retention of the Earn-Out Auditor. Buyer and Seller shall each bear 50% of the
fees and other expenses of the Earn-Out Auditor. All Parties shall cooperate
with the Earn-Out Auditor and provide it with all records and documentation the
Earn-Out Auditor may reasonably request in order to determine the amount of the
Year 2000 Earn-Out or the Year 2001 Earn-Out, as the case may be. The
determination of the Earn-Out Auditor shall be final and binding on all Parties.
(h) Allocation. The Parties agree to allocate the Initial Purchase
Price, as adjusted pursuant to the Purchase Price Adjustment, and the Additional
Purchase Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in accordance
with the allocation schedule attached hereto as Exhibit B.
12
<PAGE> 17
3 Representations and Warranties of Seller. Seller represents and
warrants to Buyer that the statements contained in this Section 3 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3), except as
set forth in the disclosure schedule accompanying this Agreement and initialed
by the Parties (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of Seller. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of Seller and Seller
Stockholders of Seller have duly authorized the execution, delivery, and
performance of this Agreement by Seller. This Agreement constitutes the valid
and legally binding obligation of Seller, enforceable in accordance with its
terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or any provision of the
charter or bylaws of Seller or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Seller is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any Security Interest upon any of its
assets). Seller does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions
13
<PAGE> 18
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 2 above).
(d) Brokers' Fees. Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Buyer could become liable
or obligated.
(e) Title to Assets. Seller has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on its Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of such
Most Recent Balance Sheet. Without limiting the generality of the foregoing,
Seller has good and marketable title to all of its Acquired Assets, free and
clear of any Security Interest or restriction on transfer.
(f) Subsidiaries. Seller does not have any Subsidiaries.
(g) Financial Statements. Attached hereto as Exhibit F are the
following financial statements (collectively the "Financial Statements"): (i)
reviewed balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1996 and
1997 (the "Most Recent Fiscal Year End") for Seller; and (ii) unaudited balance
sheets and statements of income, changes in stockholders' equity, and cash flow
(the "Most Recent Financial Statements") as of and for the ________ months ended
________________, 1998 (the "Most Recent Fiscal Month End") for Seller. The
Financial Statements (including the Notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of Seller as of such
dates and the results of operations of Seller for such periods, are correct and
complete, and are consistent with the books and records of Seller (which books
and records are correct and complete).
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(h) Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any material adverse change in
the business, financial condition, operations, results of operations, or future
prospects of Seller. Without limiting the generality of the foregoing, since
that date:
(i) Seller has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) Seller has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $10,000 or outside the
Ordinary Course of Business;
(iii) no party (including Seller) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $10,000 to which Seller is a party or by
which Seller is bound;
(iv) Seller has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) Seller has not made any capital expenditure (or series
of related capital expenditures) either involving more than $10,000 or
outside the Ordinary Course of Business;
(vi) Seller has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and
acquisitions) either involving more than $10,000 or outside the
Ordinary Course of Business;
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(vii) Seller has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving
more than $10,000;
(viii) Seller has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) Seller has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $10,000 or outside the Ordinary Course of
Business;
(x) Seller has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the
charter or bylaws of Seller;
(xii) Seller has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiii) Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xiv) Seller has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
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(xv) Seller has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(xvi) Seller has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvii) Seller has not adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xviii) Seller has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xix) Seller has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(xx) Seller has not paid any amount to any third party
with respect to any Liability or obligation (including any costs and
expenses Seller has incurred or may incur in connection with this
Agreement and the transactions contemplated hereby) which would not
constitute an Assumed Liability if in existence as of the Closing;
(xxi) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving Seller; and
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(xxii) Seller has not committed to any of the foregoing.
(i) Undisclosed Liabilities. Seller has no Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (ii) Liabilities which have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
(j) Legal Compliance. To the Knowledge of Seller, Seller has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against it alleging any failure so
to comply.
(k) Tax Matters.
(i) Seller has filed all Tax Returns that it was required
to file. To the Knowledge of Seller, all such Tax Returns were correct
and complete in all respects, and all Taxes owed by Seller (whether or
not shown on any Tax Return) have been paid. Seller is not currently
the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where Seller does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any
of the assets of Seller that arose in connection with any failure (or
alleged failure) to pay any Tax.
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(ii) Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other
third party.
(iii) Neither Seller nor any director or officer (or employee
responsible for Tax matters) of Seller expects any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
Seller either (A) claimed or raised by any authority in writing or (B)
as to which any of Seller Stockholders and the directors and officers
(and employees responsible for Tax matters) of Seller has Knowledge
based upon personal contact with any agent of such authority. Section
3(k) of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to Seller for taxable
periods ended on or after December 31, 1993, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Seller has delivered to Buyer
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against
or agreed to by Seller since January 1, 1994.
(iv) Seller has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) The unpaid Taxes of Seller (A) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (B)
do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of
Seller in filing its Tax Returns.
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(vi) None of the Assumed Liabilities is an obligation to make a
payment that will not be deductible under Code Section 280G. Seller is not a
party to any Tax allocation or sharing agreement. Seller (A) has not been a
member of an Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Seller) or (B) has no
Liability for the Taxes of any Person (other than Seller) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(vii) Section 3(k) of the Disclosure Schedule sets forth the
following information with respect to Seller as of the most recent practicable
date: (A) the basis of Seller in its assets; and (B) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to Seller.
(l) Real Property.
(i) Section 3(l)(i) of the Disclosure Schedule lists and describes
briefly all real property that Seller owns. With respect to each such parcel of
owned real property:
(A) Seller has good and marketable title to the parcel of
real property, free and clear of any Security Interest, easement,
covenant, or other restriction, except for installments of special
assessments not yet delinquent and recorded easements, covenants, and
other restrictions which do not impair the current use, occupancy, or
value, or the marketability of title, of the property subject thereto;
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(B) there are no pending or, to the Knowledge of any of
Seller Stockholders and the directors and officers (and employees with
responsibility for real estate matters) of Seller, threatened
condemnation proceedings, lawsuits, or administrative actions relating
to the property or other matters affecting adversely the current use,
occupancy, or value thereof;
(C) to the Knowledge of Seller, the legal description for the
parcel contained in the deed thereof describes such parcel fully and
adequately, the buildings and improvements are located within the
boundary lines of the described parcels of land, are not in violation
of applicable setback requirements, zoning laws, and ordinances (and
none of the properties or buildings or improvements thereon are subject
to "permitted non-conforming use" or "permitted non-conforming
structure" classifications), and do not encroach on any easement which
may burden the land, and the land does not serve any adjoining property
for any purpose inconsistent with the use of the land, and the property
is not located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the use
thereof have not been obtained;
(D) to the Knowledge of Seller, all facilities have received
all approvals of governmental authorities (including licenses and
permits) required in connection with the ownership or operation thereof
and have been operated and maintained in accordance with applicable
laws, rules, and regulations;
(E) there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties the
right of use or occupancy of any portion of the parcel of real
property;
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(F) there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion thereof
or interest therein;
(G) there are no parties (other than Seller) in possession of
the parcel of real property, other than tenants under any leases
disclosed in Section 3(l)(i) of the Disclosure Schedule who are in
possession of space to which they are entitled;
(H) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation
of such facilities, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are adequate in
accordance with all applicable laws, ordinances, rules, and regulations
and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefitting the parcel of real property; and
(I) each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of
real property, and access to the property is provided by paved public
right-of-way with adequate curb cuts available.
(ii) Section 3(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to Seller.
Seller has delivered to Buyer correct and complete copies of the
leases and subleases listed in Section 3(l)(ii) of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease
listed in Section 3(l)(ii) of the Disclosure Schedule:
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(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2
above);
(C) neither Seller nor, to the Knowledge of Seller, any other
party to the lease or sublease is in breach or default, and no event
has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
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(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are true and
correct with respect to the underlying lease;
(G) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
(H) to the Knowledge of Seller, all facilities leased or
subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection
with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations; and
(I) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation
of said facilities.
(m) Intellectual Property.
(i) Seller owns or has the right to use pursuant to license,
subl-icense, agreement, or permission all Intellectual Property necessary
for the operation of the businesses of Seller as presently conducted. Each
item of Intellectual Property owned or used by Seller immediately prior to
the Closing hereunder will be owned or available for use by Buyer on
identical terms and conditions immediately subsequent to the Closing
hereunder. Seller has taken all necessary action to maintain and protect
each item of Intellectual Property that it owns or uses.
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(ii) to the Knowledge of Seller, Seller has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of Seller
Stockholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Seller has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that Seller must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of any of Seller
Stockholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Seller, no third party
has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of Seller.
(iii) Section 3(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to Seller with respect to any
of its Intellectual Property, identifies each pending patent application or
application for registration which Seller has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). Seller has
delivered to Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date). Section 3(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark used by Seller in
connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in Section 3(m)(iii) of the
Disclosure Schedule:
(A) Seller possesses all right, title, and interest in and to
the item, free and clear of any Security Interest, license, or other
restriction;
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(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of
any of Seller, Stockholders and the directors and officers (and
employees with responsibility for Intellectual Property matters) of
Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) Seller has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iv) Section 3(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that Seller
uses pursuant to license, sublicense, agreement, or permission. Seller has
delivered to Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect
to each item of Intellectual Property required to be identified in
Section 3(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and
assumptions referred to in Section 2 above);
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(C) neither Seller nor, to the Knowledge of Seller, any other
party to the license, sublicense, agreement, or permission is in
breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, or enforceability of the underlying
item of Intellectual Property; and
(H) Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(v) To the Knowledge of Seller, Stockholders and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of Seller, Seller will not interfere with, infringe upon,
misappropriate, or
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otherwise come into conflict with, any Intellectual Property rights of
third parties as a result of the continued operation of its businesses as
presently conducted.
(n) Tangible Assets. Seller owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. Each such tangible asset is free from known defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
(o) Inventory. The inventory of Seller consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory write-down set forth on
the face of the Most Recent Balance Sheet (rather than in any Notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of Seller.
(p) Contracts. Section 3(p) of the Disclosure Schedule lists the
following contracts and other agreements to which Seller is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease
payments in excess of $10,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a loss to Seller, or involve consideration in excess
of $10,000;
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(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
Seller has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $10,000 or
under which Seller has imposed a Security Interest on any of its assets,
tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement involving any of Seller Stockholders and their
Affiliates (other than Seller);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of Seller's current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $20,000 or providing severance benefits;
(x) any agreement under which Seller has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial condition,
operations, results of operations, or future prospects of Seller; or
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(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
Seller has delivered to Buyer a correct and complete copy of each written
agreement listed in Section 3(p) of the Disclosure Schedule (as amended to date)
and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 3(p) of the Disclosure Schedule. With respect
to each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in Section 2 above); (C) neither
Seller nor, to the Knowledge of Seller, any other party is in breach or default,
and no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement; and (D) no party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
Seller are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Seller.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of Seller.
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(s) Insurance. Section 3(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which Seller has been a party, a named insured,
or otherwise the beneficiary of coverage at any time within the past three (3)
years:
(i) the name, address, and telephone number of the agent; and
(ii) the name of the insurer.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in Section 2
above); (C) neither Seller nor, to the Knowledge of Seller, any other party to
the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. Seller has been covered
since its inception by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned period.
Section 3(s) of the Disclosure Schedule describes any self-insurance
arrangements affecting Seller.
(t) Litigation. Section 3(t) of the Disclosure Schedule sets forth each
instance in which Seller (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or is threatened to be made
a party to any action, suit, proceeding,
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hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 3(t) of the Disclosure Schedule could result
in any material adverse change in the business, financial condition, operations,
results of operations, or future prospects of Seller.
(u) Product Warranty. To the Knowledge of Seller, each product
manufactured, sold, leased, or delivered by Seller has been in conformity with
all applicable contractual commitments and all express and implied warranties,
and Seller has no Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Seller giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for product warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Seller. No product manufactured, sold, leased, or delivered by Seller is subject
to any guaranty, warranty, or other indemnity beyond the applicable standard
terms and conditions of sale or lease. Section 3(u) of the Disclosure Schedule
includes copies of the standard terms and conditions of sale or lease for Seller
(containing applicable guaranty, warranty, and indemnity provisions).
(v) Product Liability. To the Knowledge of Seller, Seller has no
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
Seller giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by Seller.
(w) Employees. To the Knowledge of Seller Stockholders and the
directors and officers (and employees with responsibility for employment
matters) of Seller, no executive, key employee, or group of employees has any
plans to terminate employment with Seller. Seller is not a party to or bound by
any collective bargaining agreement, nor has Seller experienced any
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strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. Seller has not committed any unfair labor practice. None of
Seller Stockholders and the directors and officers (and employees with
responsibility for employment matters) of Seller has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of Seller.
(x) Employee Benefits.
(i) Section 3(x) of the Disclosure Schedule lists
each Employee Benefit Plan that Seller maintains or to which Seller
contributes.
(A) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form
and in operation in all respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Section 4980B have been met with
respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past
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custom and practice of Seller. All premiums or other payments
for all periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code Section 401(a) and has received,
within the last two years, a favorable determination letter
from the Internal Revenue Service.
(E) The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan) equals or exceeds the
present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
(F) Seller has delivered to Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received
from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each
such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that
Seller maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has
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<PAGE> 39
been completely or partially terminated or been the subject of
a Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate
any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or, to the Knowledge
of any of Seller Stockholders and the directors and officers
(and employees with responsibility for employee benefits
matters) of Seller is threatened.
(B) There have been no Prohibited Transactions
with respect to any such Employee Benefit Plan. No Fiduciary
has any Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration
or investment of the assets of any such Employee Benefit Plan.
No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to the Knowledge of any of Seller
Stockholders and the directors and officers (and employees
with responsibility for employee benefits matters) of Seller
is threatened. None of Seller Stockholders and the directors
and officers (and employees with responsibility for employee
benefits matters) of Seller has any Knowledge of any Basis for
any such action, suit, proceeding, hearing, or investigation.
(C) Seller has not incurred, and none of Seller
Stockholders and the directors and officers (and employees
with responsibility for employee benefits matters) of Seller
has any reason to expect that Seller will incur; any Liability
to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal Liability)
or under the Code with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit Plan.
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<PAGE> 40
(iii) Seller does not contribute to, never has
contributed to, and never has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
(iv) Seller does not maintain or contribute to, and
never has maintained or contributed to, and never has been required to
contribute to any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B).
(y) Guaranties. Seller is not a guarantor nor is Seller
otherwise liable for any Liability or obligation (including indebtedness) of any
other Person.
(z) Environment, Health, and Safety.
(i) Seller and, to the Knowledge of Seller, its
predecessors have complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply. Without limiting the
generality of the preceding sentence, Seller and, to the Knowledge of
Seller, its predecessors have obtained and been in compliance with all
of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
(ii) To the Knowledge of Seller, Seller has no
Liability (and neither Seller nor, to the Knowledge of Seller, its
predecessors has handled or disposed of any substance, arranged for the
disposal of any substance, exposed any
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<PAGE> 41
employee or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could form the
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Seller
giving rise to any Liability) for damage to any site, location, or body
of water (surface or subsurface), for any illness of or personal injury
to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the
business of Seller and, to the Knowledge of Seller, its respective
predecessors have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(aa) Certain Business Relationships With Seller. None of
Seller Stockholders and their Affiliates has been involved in any business
arrangement or relationship with Seller within the past twelve (12) months, and
none of Seller Stockholders and their Affiliates owns any asset, tangible or
intangible, which is used in the business of Seller.
(ab) Disclosure. The representations and warranties contained
in this Section 3 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
(ac) Investment. Seller (i) understands that the shares of
Buyer Stock to be delivered to Seller hereunder have not been, and will not be,
registered under the Securities Act, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is acquiring Buyer Stock
solely for its own account for investment purposes, and not with a view to the
distribution thereof (except to Seller Stockholders), (iii) is a sophisticated
investor with knowledge and experience in business and financial matters, (iv)
has received certain information concerning Buyer and has had the opportunity to
obtain additional information as desired in order to evaluate the merits and the
<PAGE> 42
risks inherent in holding Buyer Stock, (v) is able to bear the economic risk and
lack of liquidity inherent in holding Buyer Stock, and (vi) is an Accredited
Investor for the reasons set forth in Section 3(ac) of the Disclosure Schedule.
4 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller that the statements contained in this Section 4 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except as
set forth in the Disclosure Schedule. The Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
(a) Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Authorization of Transaction. Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Buyer is a party or by which it is bound or to which any of its assets is
subject. Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate
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<PAGE> 43
the transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 2 above).
(d) Brokers' Fees. Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Seller could become liable
or obligated.
5 Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary in order to consummate
and make effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 7
below).
(b) Notices and Consents. Seller will give any notices to third
parties, and Seller will use its reasonable best efforts to obtain any third
party consents, that Buyer may request in connection with the matters referred
to in Section 3(c) above. Each of the Parties will give any notices to, make any
filings with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3(c) and Section 4 above. Without
limiting the generality of the foregoing, each of the Parties will file any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act, will use its
reasonable best efforts to obtain an early termination of the applicable waiting
period, and will make any further filings pursuant thereto that may be necessary
in connection therewith.
(c) Operation of Business. Seller will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, Seller
will not (i) declare, set aside, or pay any dividend or make
<PAGE> 44
any distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock, (ii) pay any amount to any third
party with respect to any Liability or obligation (including any costs and
expenses Seller has incurred or may incur in connection with this Agreement and
the transactions contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing, and (iii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 3(h) above.
(d) Preservation of Business. Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) Full Access. Seller will permit representatives of Buyer to have
full access to all premises, properties, personnel, books, records (including
Tax records), contracts, and documents of or pertaining to Seller.
(f) Notice of Developments. Each Party will give prompt written
notice to the other Parties of any material adverse development causing a breach
of any of its own representations and warranties in Section 3 and Section 4
above.
(g) Exclusivity. Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of any capital stock or other voting securities, or any substantial
portion of the assets, of Seller (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Seller will notify Buyer immediately
if any Person makes any proposal, offer, inquiry, or contact with respect to any
of the foregoing.
(h) Title Insurance. Buyer will obtain in preparation for the Closing
an ALTA Owner's Policy of Title Insurance Form B-1987 (or equivalent policy
reasonably acceptable to
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<PAGE> 45
Buyer if the real property is located in a state in which an ALTA Owner's Policy
of Title Insurance Form B-1987 is not available) issued by a title insurer
reasonably satisfactory to Buyer, in such amount as Buyer reasonably may
determine to be the fair market value of such real property (including all
improvements located thereon), insuring title to such real property to be in
Buyer as of the Closing (subject only to the title exceptions described above in
Section 3(l)(i) and in Section 3(l)(i) of the Disclosure Schedule). Each title
insurance policy delivered under Section 5(h) shall (A) insure title to the real
property and all recorded easements benefitting such real property, (B) contain
an "extended coverage endorsement" insuring over the general exceptions
contained customarily in such policies, (C) contain an ALTA Zoning Endorsement
3.1 (or equivalent), (D) contain an endorsement insuring that the real property
described in the title insurance policy is the same real estate as shown on the
Survey delivered with respect to such property, (E) contain an endorsement
insuring that each street adjacent to the real property is a public street and
that there is direct and unencumbered pedestrian and vehicular access to such
street from the real property, and (F) contain a "non-imputation" endorsement to
the effect that title defects known to the officers, directors, and stockholders
of the owner prior to the Closing shall not be deemed "facts known to the
insured" for purposes of the policy.
(i) Surveys. With respect to each parcel of real property that
Seller owns and as to which a title insurance policy is to be procured pursuant
to Section 5(h) above, Buyer will procure in preparation for the Closing a
current survey of the real property certified to Buyer, prepared by a licensed
surveyor and conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements, easements, party
walls, sidewalks, roadways, utility lines, and other matters shown customarily
on such surveys, and showing access affirmatively to public streets and roads
(the "Survey"). The Survey shall not disclose any survey defect or encroachment
from or onto the real property which has not been cured or insured over prior to
the Closing.
6 Conditions to Obligation to Close.
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<PAGE> 46
(a) Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) Seller shall have procured all of the third party consents
specified in Section 5(b) above, and Buyer shall have procured all of
the title insurance commitments, policies, and riders specified in
Section 5(h) above, and all of the surveys specified in Section 5(i)
above, all of which title insurance commitments, policies and riders,
and surveys, shall be in form and substance satisfactory to Buyer in
Buyer's sole discretion;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (C) affect adversely the right of Buyer to own the
Acquired Assets, to operate the former businesses of Seller (and no
such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) Seller shall have delivered to Buyer a certificate to the
effect that each of the conditions specified above in Section 6(a)(i)
through Section 6(a)(iv) is satisfied in all respects;
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<PAGE> 47
(vi) Buyer shall have entered into a side agreement in form and
substance as set forth in Exhibit G attached hereto with Gary Yeager
and the same shall be in full force and effect;
(vii) Buyer shall have received from counsel to Seller an opinion
in form and substance as set forth in Exhibit H attached hereto,
addressed to Buyer, and dated as of the Closing Date;
(viii) all actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Buyer.
Buyer may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state,
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<PAGE> 48
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) Buyer shall have delivered to Seller a certificate to the
effect that each of the conditions specified above in Section 6(b)(i)
through Section 6(b)(iii) is satisfied in all respects;
(v) Buyer shall have entered into a side agreement in form and
substance as set forth in Exhibit G attached hereto with Gary Yeager
and the same shall be in full force and effect;
(vi) Seller shall have received from counsel to Buyer an opinion
in form and substance as set forth in Exhibit I attached hereto,
addressed to Seller, and dated as of the Closing Date; and
(vii) all actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Seller.
Seller may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
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7 Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) Buyer and Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written
notice to Seller on or before January 7, 1999, if Buyer is not
satisfied with the results of its continuing business, legal, and
accounting due diligence regarding Seller;
(iii) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing (A) in the event
Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Buyer has notified
Seller of the breach, and the breach has continued without cure for a
period of fifteen (15) days after the notice of breach or (B) if the
Closing shall not have occurred on or before February 1, 1999, by
reason of the failure of any condition precedent under ss.6(a) hereof
(unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(iv) Seller may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event Buyer
has breached any material representation, warranty, or covenant
contained in this
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<PAGE> 50
Agreement in any material respect, Seller has notified Buyer of the
breach, and the breach has continued without cure for a period of
fifteen (15) days after the notice of breach or (B) if the Closing
shall not have occurred on or before February 1, 1999, by reason of the
failure of any condition precedent under Section 6(b) hereof (unless
the failure results primarily from a Seller breaching any
representation, warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 7(a) above, all rights and obligations of the
Parties hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach).
8 Miscellaneous.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder as and to the extent provided in the Agreement
With Seller Stockholders.
(b) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the other Party; provided, however, that Buyer may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case Buyer
will use its reasonable best efforts to advise Seller prior to making the
disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
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(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that Buyer may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder, and any
portion of either of the Year 2000 Earn-Out and/or the Year 2001 Earn-Out to be
paid in Buyer Stock shall be paid in the stock of Buyer and not the stock of any
assignee corporation).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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<PAGE> 52
If to Seller:
Yeager Industries, Inc.
2001 West Erie Avenue
Philadelphia, PA 19140
Attn: Gary Yeager, President
Copy to:
Smith & Giacometti
1420 Walnut Street, Suite 806
Philadelphia, PA 19102
Attn: David B. Smith, Esq.
If to Buyer:
The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
Attn: S. Leslie Flegel, Chairman & CEO
Copy to:
Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square
St. Louis, Missouri 63102
Attn: John L. Gillis, Jr., Esq.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other
48
<PAGE> 53
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Pennsylvania
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Pennsylvania or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Pennsylvania.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. Seller may consent to any such amendment at any time prior to the
Closing with the prior authorization of its boards of directors. No waiver by
any Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of Buyer, Seller, and Seller Stockholders will
bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. Buyer and Seller agree that each will pay one-half (1/2) of the transfer
taxes arising in connection with the transfer of real estate located in the
State of Pennsylvania, which transfer occurs as part of the transactions
contemplated hereby. Seller also agrees that it has not paid any amount to any
third party, and will not pay any amount to any third party until after the
Closing, with respect to any of the costs and expenses of Seller
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<PAGE> 54
and Seller Stockholders (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
Parties and the matter in dispute, in addition to any other remedy to which it
may be entitled, at law or in equity.
(o) Bulk Transfer Laws. Buyer acknowledges that Seller will not
comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
AS OF the date first above written.
THE SOURCE INFORMATION MANAGEMENT COMPANY
By:/s/ S. Leslie Flegel
--------------------------------------------
S. Leslie Flegel
Chairman and Chief Executive Officer
YEAGER INDUSTRIES, INC.
By:/s/ Gary Yeager
--------------------------------------------
Gary Yeager
President
51
<PAGE> 56
A list briefly identifying the contents of all omitted schedules and exhibits to
the Asset Purchase Agreement (the "Agreement") dated as of January 7, 1999, by
and between The Source Information Management Company ("Registrant"), and Yeager
Industries, Inc. appears in the Table of Contents to the Agreement. Registrant
will furnish supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request.
52
<PAGE> 1
EXHIBIT 99
FOR IMMEDIATE RELEASE:
Contact: W. Brian Rodgers
The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
314-995-9040
THE SOURCE INFORMATION MANAGEMENT COMPANY
ANNOUNCES CLOSING OF ACQUISITIONS OF
BRAND MANUFACTURING COMPANY AND
YEAGER INDUSTRIES, INC.
St. Louis, January 11, 1999 - The Source Information Management Company
(NASD:SORC) ("Source") announced today that it has closed the
previously-announced acquisitions of U.S. Marketing Services, Inc. ("U.S.
Marketing"), parent company of Brand Manufacturing Corporation ("Brand") and its
affiliated companies, and of Yeager Industries, Inc. ("Yeager"). Brand and
Yeager both design and manufacture in-store merchandising units and
point-of-purchase displays for retail store chains. Brand's affiliates include
The Vail Companies, Inc., which contracts for removal of old fixtures, and
T.C.E. Corporation, which is an in-house trucking company shipping front-end
fixtures throughout the United States.
U.S. Marketing was acquired in a merger transaction by a subsidiary of Source
for 1,926,719 shares of Source common stock and 1,473,281 shares of Series A
Convertible Preferred Stock ("Series A Preferred") of Source. The Series A
Preferred will be convertible into an equal number of shares of Source common
stock upon receipt of shareholder approval of the conversion; if shareholder
approval is not received, the Series A Preferred will be convertible into demand
debt of Source aggregating $11,388,462. Source will seek shareholder approval of
the conversion into Source common stock as soon as practicable. All common
shares issued pursuant to the U.S. Marketing transaction (including shares
issuable upon conversion of the Series A Preferred) are subject to a one-year
lock-up agreement with Source. 1,779,383 of such shares held by the
<PAGE> 2
former principal shareholder of U.S. Marketing, and 1,360,617 of the common
shares issuable upon conversion of the Series A Preferred, are subject to a
two-year voting agreement in favor of Leslie Flegel, Chairman of the Board and
Chief Executive Officer of Source, to vote on election of directors and certain
other matters; the voting agreement does not cover certain fundamental matters
such as mergers, tender offers, sales of assets and the like. The voting
agreement will be earlier terminated if the shareholder holds less than 10% of
the outstanding common stock of Source.
In the Yeager transaction, Source acquired the assets and assumed the operating
liabilities of Yeager for $707,718 cash and 164,289 shares of Source common
stock. In addition, Source repaid approximately $1,642,282 of Yeager debt at
closing. The cash portion of the consideration may be increased by an aggregate
of not more than $500,000 based upon performance of Yeager in fiscal 2000 and
2001. After closing, neither U.S. Marketing nor Yeager had any outstanding
indebtedness.
James R. Gillis, former Chief Executive Officer of Brand, has been elected
President of Source with primary responsibility for Source's front-end fixture
subsidiaries. Mr. Gillis will report to William Lee, who is now Vice-Chairman
and Chief Operating Officer of Source.
Source hopes to complete the acquisition of MYCO, Inc. ("MYCO") by the end of
January, 1999 and of Chestnut Display Systems, Inc. and Chestnut Display Systems
- - North, Inc. (collectively, "Chestnut") as soon as practicable after completion
of the audit of Chestnut's December 31, 1998 financial statements. Source has
previously announced Letters of Intent to acquire assets and assume liabilities
of MYCO and Chestnut, which, like Brand and Yeager, are front-end fixture
<PAGE> 3
companies. The acquisitions of MYCO and Chestnut remain subject to negotiation
of definitive agreements, due diligence and other customary conditions.
