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UNITED STATES
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): November 8, 1999
BUSINESS RESOURCE GROUP
(Exact name of Registrant as specified in its charter)
0-26208
(Commission File Number)
CALIFORNIA 77-0150337
(State or other jurisdiction of (I.R.S. Employer
Identification No.) incorporation)
2150 North First Street, Suite 101
San Jose, CA 95131
(Address of principal executive offices, with zip code)
408-325-3200
(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 of Assets
On November 8, 1999, Business Resource Group, a California
corporation (the "Company"), acquired all of the capital stock of Baquet-
Pastirjak, Inc., a California corporation primarily engaged in the
contract furniture business ("BPI"), pursuant to a Stock Purchase
Agreement dated November 8, 1999, among the Company, BPI and William H.
Baquet, Jr. and Robert G. Pastirjak (collectively, the "Selling
Shareholders"). The consideration paid in the acquisition consisted of:
(i) $2,071,000 in cash, (ii) 50,000 shares of common stock of the Company
at a fair value of $3.50 per share and (iii) an earn out of up to the
aggregate amount of $2,600,000 to be paid over four years based upon
annual net income of BPI (collectively, the "Purchase Price"). The
Purchase Price was determined by arms'-length negotiations among the
parties. The cash paid to the Selling Shareholders in the acquisition
was obtained from a draw down on the Company's $15,000,000 line of credit
with Comerica Bank under the Company's Agreement with Comerica Bank dated
March 25, 1999.
The foregoing description of the Stock Purchase Agreement is
qualified in its entirety by reference to Exhibit 2.1.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business Acquired
None.
(b) Pro Forma Financial Information
None.
(c) Exhibits
2.1 Stock Purchase Agreement dated November 8, 1999, to be
effective as of November 1, 1999, among Business
Resource Group, Baquet-Pastirjak, Inc. and William H.
Baquet, Jr. and Robert G. Pastirjak, including four
separate Promissory Notes maturing December 15, 2000,
2001, 2002 and 2003, respectively*
99.1 Press Release dated November 8, 1999
*Omitted schedules and exhibits to the Stock Purchase
Agreement will be furnished to the Commission upon
request
EXHIBIT INDEX
Number Exhibit
2.1 Stock Purchase Agreement dated November 8, 1999, to be
effective as of November 1, 1999, among Business
Resource Group, Baquet-Pastirjak, Inc. and William H.
Baquet, Jr. and Robert G. Pastirjak, including four
separate Promissory Notes maturing December 15, 2000,
2001, 2002 and 2003, respectively*
99.1 Press Release dated November 8, 1999
*Omitted schedules and exhibits to the Stock Purchase
Agreement will be furnished to the Commission upon
request
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.
BUSINESS RESOURCE GROUP
By: /s/ John M. Palmer
John M. Palmer,
Chief Financial Officer
Dated: November 23, 1999
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and
entered into this 8th day of November, 1999, to be effective as of the 1st
day of November, 1999 (the "Effective Date"), by and among Business
Resource Group, a California corporation (the "Purchaser"), Baquet-
Pastirjak, Inc., a California corporation (the "Company"), and William H.
Baquet, Jr., an individual residing at 133 N. San Gabriel Blvd., Suite,
201, Pasadena, California 91107, and Robert G. Pastirjak, an individual
residing at 4218 Costello Avenue, Sherman Oaks, California 91423, the
sole shareholders of the Company (each individually, a "Shareholder" and
together, the "Shareholders").
RECITALS
The Company is in the business of the sale of office furniture and
related services. The Shareholders are the sole owners of all of the
Company's outstanding capital stock. Purchaser wishes to purchase from
the Shareholders, and the Shareholders wish to sell to Purchaser, all of
the outstanding capital stock of the Company on the terms and conditions
set forth herein (the "Purchase").
AGREEMENT
In consideration of the mutual promises, agreements, warranties and
provisions contained in this Agreement, the parties agree as follows:
SECTION 1
PURCHASE AND SALE OF STOCK
1. Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Purchaser agrees to purchase at the
Closing (as defined below) and the Shareholders agree to sell to the
Purchaser at the Closing, all of the shares of capital stock of the
Company outstanding as of the Closing (the "Shares") in exchange for the
following consideration:
(a) The cash consideration to be delivered at the Closing
Date shall be subject to adjustment and calculated as follows:
(i) If the Net Book Value (as defined below) is
between $521,000 and $821,000, the Purchaser shall deliver $2,071,000 in
cash (the "Cash Consideration").
(ii) If the Net Book Value is less than $521,000, the
Cash Consideration shall be reduced by an amount equal to the difference
between $521,000 and the actual Net Book Value.
(iii) If the Net Book Value is greater than $821,000,
the Cash Consideration shall be increased by an amount equal to the
difference between $821,000 and the actual Net Book Value.
As used herein, the term "Net Book Value" shall mean the
difference obtained by subtracting the total liabilities of the Company
as of November 1, 1999 from the total value of the assets of the Company
as of November 1, 1999.
Solely for purpose of illustration: (1) if the Net Book
Value is $600,000, then the Cash Consideration payable shall be
$2,071,000; (2) if the Net Book Value is $500,000, then the Cash
Consideration payable shall be $2,050,000; and (3) if the Net Book Value
is $900,000, then the Cash Consideration payable shall be $2,150,000.
The parties hereto agree that the Net Book Value is $539,139
and that the Cash Consideration to be delivered at the Closing is
$2,071,000.
The Cash Consideration, as adjusted, shall be distributed to
the Shareholders as follows: 77.5% to William Baquet and 22.5% to Robert
Pastirjak, subject to the escrow provisions set forth in Section 8 below.
(b) 50,000 shares of Purchaser's Common Stock (the
"Purchaser Stock"), which shares shall not be registered under the
Securities Act of 1933, as amended (the "Securities Act"). The Purchaser
Stock shall be issued to the Shareholders as follows: 37,500 Shares to
William Baquet and 12,500 Shares to Robert Pastirjak, subject to the
escrow provisions set forth in Section 8 below; and
(c) $800,000 issued pursuant to four non-interest bearing
promissory notes issued by the Purchaser to the Shareholders. Each note
shall be in the initial principal amount of $200,000 (the "Initial
Principal Amount"), subject to adjustment as set forth in Section 1 of
each such note (the "Adjusted Principal Amount"). The notes shall be
substantially in the forms attached hereto as Exhibit A (the "2000
Note"), Exhibit B (the "2001 Note"), Exhibit C (the "2002 Note") and
Exhibit D (the "2003 Note"). The 2000 Note, 2001 Note, 2002 Note and
2003 Note are collectively referred to herein as the "Notes." The
amounts payable under each note shall be distributed to the Shareholders
as follows: (i) if the Adjusted Principal Amount is greater than or
equal to the Initial Principal Amount, then William Baquet shall receive
40% of the amounts payable thereunder and Robert Pastirjak shall receive
60% of the amounts payable thereunder and (ii) if the Adjusted Principal
Amount is less than the Initial Principal Amount, then William Baquet and
Robert Pastirjak shall each receive 50% of the amounts payable
thereunder.
The Cash Consideration, the Purchaser Stock and the Notes are
collectively referred to herein as the "Purchase Price."
SECTION 2
CLOSING
2. Closing.
2.1 Closing Date. The closing of the Purchase (the
"Closing") shall be held at the offices of Orrick, Herrington & Sutcliffe
LLP, 1020 Marsh Road, Menlo Park, California 94025, at 4:00 p.m.
California time on November 4, 1999, or at such other time and place upon
which the parties shall agree orally or in writing, such time and date
being referred to herein as the "Closing Date."
2.2 Actions at the Closing. At the Closing, the Company,
the Shareholders and Purchaser shall take such actions and execute and
deliver such agreements and other instruments and documents as necessary
or appropriate to effect the transactions contemplated by this Agreement
in accordance with its terms, including without limitation the following:
(a) Each of the Shareholders will deliver to
Purchaser a certificate or certificates representing all of such
Shareholder's Shares, together with stock powers duly endorsed in blank
for transfer of such Shares to Purchaser, and the Shareholders shall
deliver all other documents required of the Shareholders pursuant to this
Agreement;
(b) Purchaser will deliver to each Shareholder by
cashier's check or wire transfer all of the Cash Consideration set forth
in Section 1 above except for the cash to be deposited in escrow pursuant
to Section 8 hereof, which will be so deposited by Purchaser, and will
instruct the Purchaser's transfer agent to issue a certificate or
certificates representing the number of shares of Purchaser Stock owed to
such Shareholder under Section 1 above, which certificates shall be
placed in escrow pursuant to Section 8.2 hereof, and Purchaser will
deliver all other documents required of Purchaser herein; and
(c) Purchaser and each Shareholder shall enter into
an Employment Agreement in form and substance satisfactory to the
Purchaser (the "Employment Agreements").
2.3 Purchase of Capital Stock. The Shares to be purchased
by Purchaser at the Closing shall consist solely of the Company's Capital
Stock, and at such time there shall be no other outstanding securities of
or rights to purchase or otherwise acquire securities of the Company.
SECTION 3
SECURITIES LAW COMPLIANCE
3.1 Securities Act Exemption. The Purchaser Stock to be
issued pursuant to this Agreement shall not be registered under the
Securities Act in reliance upon the exemption contained in Section 4(2)
of the Securities Act and in reliance upon the representations and
warranties of the Shareholders contained in Section 5 below.
3.2 Stock Restrictions. The certificates representing the
shares of Purchaser Stock issued pursuant to this Agreement shall bear a
restrictive legend or legends (and stop transfer orders shall be placed
against the transfer thereof with Purchaser's transfer agent), stating
substantially as follows:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ("THE ACT") AND
ARE "RESTRICTED SECURITIES" AS DEFINED IN THE RULE 144 PROMULGATED UNDER
THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT OR (ii) IN COMPLIANCE WITH RULE
144, OR (iii) PURSUANT TO AN OPINION OF COUNSEL TO THE CORPORATION THAT
SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION."
(b) Any legend required by the securities laws of any
state.
3.3 Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE
OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE
SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100,
25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities
means any material event, change, condition or effect related to the
condition (financial or otherwise), properties, assets (including
intangible assets), liabilities, business, operations, results of
operations or prospects of such entity or group of entities. In this
Agreement, any reference to a "Material Adverse Effect" means, with
respect to any entity or group of entities, any event, change or effect
that, when taken individually or together with all other adverse changes
and effects, is or is reasonably likely to be materially adverse to the
condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of operations or prospects of such entity
and its subsidiaries, taken as a whole, or to prevent or materially delay
consummation of the transactions contemplated under this Agreement or
otherwise to prevent such entity and its subsidiaries from performing
their obligations under this Agreement.
In this Agreement, any reference to a party's "knowledge" means
such party's actual knowledge after due and diligent inquiry of officers,
directors and other employees of such party reasonably believed to have
knowledge of such matters.
Except as disclosed in a document of the same date as this
Agreement and delivered by the Company and the Shareholders to Purchaser
prior to the execution and delivery of this Agreement and referring to
the representations and warranties in this Agreement (the "Company
Disclosure Schedule"), the Company and each Shareholder represent and
warrant to Purchaser as follows:
4.1 Organization Standing and Power; Subsidiaries. The Company
is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. The Company has the
requisite corporate power and authority and all necessary government
approvals to own, lease and operate its properties and to carry on its
business as now being conducted and as proposed to be conducted, except
where the failure to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or
licensed and in good standing that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The Company
does not directly or indirectly own any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, limited
liability company, joint venture or other business association or entity.
4.2 Articles of Incorporation and Bylaws. The Company has
delivered a true and correct copy of the Articles of Incorporation and
Bylaws or other charter documents, as applicable, of the Company each as
amended to date, to Purchaser. The Company is not in violation of any of
the provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents.
4.3 Capital Structure. The authorized capital stock of the
Company consists of 1,000 shares of Capital Stock, of which there were
issued and outstanding as of the close of business on November 4, 1999,
100 shares of Capital Stock (the "Company Capital Stock"). There are no
other outstanding shares of capital stock or voting securities and no
outstanding commitments to issue any shares of capital stock or voting
securities. All outstanding shares of the Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and are free of
any liens or encumbrances other than any liens or encumbrances created by
or imposed upon the holders thereof, and are not subject to preemptive
rights or rights of first refusal created by statute, the Articles of
Incorporation or Bylaws of the Company or any agreement to which the
Company is a party or by which it is bound. All outstanding shares of
the Company Capital Stock were issued in compliance with all applicable
federal and state securities laws. Except for the rights created
pursuant to this Agreement and as set forth in this Section 4.3, there
are no options, warrants, calls, rights, commitments, agreements or
arrangements of any character to which the Company is a party or by which
the Company is bound relating to the issued or unissued capital stock of
the Company or obligating the Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. There are no contracts, commitments or
agreements relating to voting, purchase or sale of the Company's capital
stock (i) between or among the Company and any of its shareholders or
(ii) between or among any of the Company's shareholders.
4.4 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company.
The Company's Board of Directors has approved this Agreement and the
Purchase. This Agreement has been duly executed and delivered by the
Company and assuming due authorization, execution and delivery by
Purchaser, constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
4.5 No Conflicts; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company does not, and the consummation of the transactions contemplated
hereby will not, conflict with, or result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to
a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (i) any provision of the Articles of
Incorporation or Bylaws of the Company, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company or any of
their properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality
("Governmental Entity") is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for such
consents, authorizations, filings, approvals and registrations which, if
not obtained or made, would not have a Material Adverse Effect on the
Company and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
4.6 Financial Statements. Section 4.6 of the Company Disclosure
Schedule includes a true, correct and complete copy of the Company's
unaudited financial statements for the fiscal year ended June 30, 1999,
and its unaudited financial statements (balance sheet and statement of
operations) on a consolidated basis as at, and for the four-month period
ended October 31, 1999 (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except that the unaudited
financial statements do not have notes thereto) applied on a consistent
basis throughout the periods indicated and with each other. The
Financial Statements accurately set out and describe in all material
respects the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein. The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP.
4.7 Absence of Undisclosed Liabilities. The Company has no
material obligations or liabilities of any nature (matured or unmatured,
fixed or contingent) other than (i) those set forth or adequately
provided for in the Balance Sheets for the period ended June 30, 1999 and
October 31, 1999 (the "Company Balance Sheets"), (ii) those incurred in
the ordinary course of business and not required to be set forth in the
Company Balance Sheets under GAAP, (iii) those incurred in the ordinary
course of business since the Company Balance Sheet Dates and consistent
with past practice, and (iv) those incurred in connection with the
execution of this Agreement.
4.8 Absence of Certain Changes. Since June 30, 1999 and October
31, 1999 ( the "Company Balance Sheet Dates") there has not been,
occurred or arisen any:
(a) transaction by the Company except in the ordinary
course of business as conducted on that date and consistent with past
practices;
(b) amendments or changes to the Articles of Incorporation
or Bylaws of the Company;
(c) capital expenditure or commitment by the Company in any
individual amount exceeding $5,000, or in the aggregate, exceeding
$15,000, except for computers and related software;
(d) destruction of, damage to, or loss of any assets
(including, without limitation, intangible assets), business or customer
of the Company (whether or not covered by insurance) which, individually
or in the aggregate, would have a Material Adverse Effect;
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including
any change in depreciation or amortization policies or rates, any change
in policies in making or reversing accruals) by the Company;
(g) revaluation by the Company of any of their respective
assets;
(h) declaration, setting aside, or payment of a dividend or
other distribution in respect to the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition by the
Company of any of its capital stock, except repurchases of the Company
Capital Stock from terminated Company employees or consultants at the
original per share purchase price of such shares;
(i) increase in the salary or other compensation payable or
to become payable by the Company to any officers, directors, employees or
consultants of the Company, except in the ordinary course of business
consistent with past practice, or the declaration, payment, or commitment
or obligation of any kind for the payment by the Company of a bonus or
other additional salary or compensation to any such person except as
otherwise contemplated by this Agreement, or other than as set forth in
Section 4.16 below, the establishment of any bonus, insurance, deferred
compensation, pension, retirement, profit sharing, stock option
(including without limitation, the granting of stock options, stock
appreciation rights, performance awards), stock purchase or other
employee benefit plan;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company in excess of $5,000, except in the
ordinary course of business;
(k) termination or material amendment of any material
contract, agreement or license (including any distribution agreement) to
which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, or
guaranty by the Company of any loan, except for (i) travel or similar
advances made to employees in connection with their employment duties in
the ordinary course of business, consistent with past practices and
(ii) trade payables which are in the ordinary course of business,
consistent with past practices and (iii) trade payables which are not in
the ordinary course and which are not in excess of $10,000 in the
aggregate;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of
the Company, in excess of $10,000 in the aggregate;
(n) commencement or notice or threat of commencement of any
lawsuit or proceeding against or, to the Company's or the Company's
officers' or directors' knowledge, investigation of the Company or its
affairs;
(o) notice of any claim of ownership by a third party of
the Company's Intellectual Property (as defined in Section 4.13 below) or
of infringement by the Company of any third party's Intellectual Property
rights;
(p) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(q) change in pricing or royalties set or charged by the
Company to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property to the
Company, other than in the ordinary course of business;
(r) any event or condition of any character that has or
could reasonably be expected to have a Material Adverse Effect on the
Company; or
(s) agreement by the Company or any officer or employee of
the Company on its behalf to do any of the things described in the
preceding clauses (a) through (r) (other than negotiations with Purchaser
and its representatives regarding the transactions contemplated by this
Agreement).
4.9 Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any
agency, court or tribunal, foreign or domestic, or, to the Company's and
each Shareholder's knowledge, threatened against the Company or any of
their respective properties or any of their respective officers or
directors (in their capacities as such) that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect
on the Company. There is no judgment, decree or order against the
Company or, to the Company's and each Shareholder's knowledge, any of
their respective directors or officers (in their capacities as such),
that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on the Company. All
litigation to which the Company is a party (or, to the knowledge of the
Company or the Shareholders, threatened to become a party) is disclosed
in the Company Disclosure Schedule.
4.10 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon the Company which has
or could reasonably be expected to have the effect of prohibiting or
materially impairing any current or future business practice of the
Company, any acquisition of property by the Company or the overall
conduct of business by the Company as currently conducted or as proposed
to be conducted by the Company. The Company has not entered into any
agreement under which the Company is restricted from selling, licensing
or otherwise distributing any of its products to any class of customers,
in any geographic area, during any period of time or in any segment of
the market.
4.11 Permits; Company Products; Regulation.
(a) The Company is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders necessary for the Company,
to own, lease and operate its properties or to carry on its business as
it is now being conducted (the "Company Authorizations") and no
suspension or cancellation of any Company Authorization is pending or, to
the Company's and each Shareholder's knowledge, threatened, except where
the failure to have, or the suspension or cancellation of, any Company
Authorization would not have a Material Adverse Effect on the Company.
The Company is not in conflict with, or in default or violation of,
(i) any laws applicable to the Company or by which any property or asset
of the Company is bound or affected, (ii) any Company Authorization or
(iii) any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any property or asset of
the Company is bound or affected, except for any such conflict, default
or violation that would not, individually or in the aggregate have a
Material Adverse Effect on the Company.
(b) Except as would not have a Material Adverse Effect on
the Company, there have been no written notices, citations or decisions
by any governmental or regulatory body that any product produced,
manufactured, marketed or distributed at any time by the Company (the
"Products") is defective or fails to meet any applicable standards
promulgated by any such governmental or regulatory body. The Company has
complied in all material respects with the laws, regulations, policies,
procedures and specifications with respect to the design, manufacture,
labeling, testing and inspection of the Products. Except as disclosed in
Section 4.11(b) of the Company Disclosure Schedule, there have been no
recalls, field notifications or seizures ordered or, to the Company's and
each Shareholder's knowledge, threatened by any such governmental or
regulatory body with respect to any of the Products.
(c) The Company has obtained, in all countries where the
Company is marketing or has marketed its Products, all applicable
licenses, registrations, approvals, clearances and authorizations
required by local, state or federal agencies in such countries regulating
the safety, effectiveness and market clearance of the Products currently
or previously marketed by the Company in such countries, except for any
such failures as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company has identified and
made available for examination by Purchaser all information relating to
regulation of its Products, including licenses, registrations, approvals,
permits, device listing, inspections, the Company's recalls and product
actions and audits. The Company has identified in writing to Purchaser
all international locations where regulatory information and documents
are kept.
4.12 Title to Property.
(a) The Company has good and marketable title to all of its
respective properties, interests in properties and assets, real and
personal, reflected in the Company Balance Sheets or acquired after the
Company Balance Sheet Dates (except properties, interests in properties
and assets sold or otherwise disposed of since the Company Balance Sheet
Dates in the ordinary course of business), or with respect to leased
properties and assets, valid leasehold interests in, free and clear of
all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (i) the lien of current taxes not yet due and payable,
(ii) such imperfections of title, liens and easements as do not and will
not materially detract from or interfere with the use of the properties
subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing
debt which is reflected on the Company Balance Sheets. The plants,
property and equipment of the Company that are used in the operations of
its business are in good operating condition and repair. All properties
used in the operations of the Company are reflected in the Company
Balance Sheets to the extent GAAP requires the same to be reflected.
Section 4.12(a) of the Company Disclosure Schedule sets forth a true,
correct and complete list of all real property owned or leased by the
Company, the name of the lessor, the date of the lease and each amendment
thereto and the aggregate annual rental and other fees payable under such
lease. Such leases are in good standing, are valid and effective in
accordance with their respective terms, and there is not under any such
leases any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default).
(b) Section 4.12(b) of the Company Disclosure Schedule also
sets forth a true, correct and complete list of all equipment (the
"Equipment") owned or leased by the Company and such Equipment is, taken
as a whole, (i) adequate for the conduct of the Company's business,
consistent with its past practice and (ii) in good operating condition
(except for ordinary wear and tear).
4.13 Intellectual Property. The Company owns or possesses
sufficient legal rights to all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, licenses, information and
proprietary rights and processes necessary for the conduct of its
business without any conflict with, or infringement of, the rights of
others. Neither the Company nor the Shareholders have received any
communications alleging that the Company has violated or, by conducting
its business, would violate any of the patents, trademarks, service
marks, tradenames, copyrights, trade secrets or other proprietary rights
or processes of any other person or entity. Neither the Company nor the
Shareholders are aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court
or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interest of the Company or that
would conflict with the Company's business. Neither the execution or
delivery of this Agreement, nor the carrying on of the Company's business
by the employees of the Company, will, to the best knowledge of the
Company and the Shareholders after reasonable investigation, conflict
with or result in a breach of the terms, conditions, or provisions of, or
constitute a default under, any contract, covenant or instrument under
which any such employee is now obligated. Neither the Company nor the
Shareholders believe it is or will be necessary to use any inventions of
any of the Company's employees (or persons it currently intends to hire)
made prior to their employment by the Company.
4.14 Environmental and Safety Laws. The Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety and no material
expenditures are or, to the best knowledge of the Company and the
Shareholders after reasonable investigation, will be required in order to
comply with any such existing statute, law or regulation. No Hazardous
Materials (as defined below) are used or have been used, stored or
disposed of by the Company or, to the best knowledge of the Company and
the Shareholders after reasonable investigation, by any other person or
entity on any property owned, leased or used by the Company. For the
purposes of the preceding sentence, "Hazardous Materials" shall mean
(i) materials which are listed or otherwise defined as "hazardous" or
"toxic" under any applicable local, state, federal and/or foreign laws
and regulations that govern the existence and/or remedy of contamination
on property, the protection of the environment from contamination, the
control of hazardous wastes, or other activities involving hazardous
substances, including, but not limited to, building materials, or
(ii) any petroleum products.
4.15 Taxes.
(a) For purposes of this Section 4.15 and other provisions
of this Agreement relating to Taxes, the following definitions shall
apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax
that may become payable in respect thereof, (A) imposed by any federal,
territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include,
without limiting the generality of the foregoing, all income or profits
taxes (including but not limited to, federal, state and foreign income
taxes), payroll and employee withholding taxes, unemployment insurance
contributions, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes, withholding
taxes, business license taxes, occupation taxes, real and personal
property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, and other obligations of the same or of a similar
nature to any of the foregoing, which are required to be paid, withheld
or collected, (B) any liability for the payment of amounts referred to in
(A) as a result of being a member of any affiliated, consolidated,
combined or unitary group, or (C) any liability for amounts referred to
in (A) or (B) as a result of any obligations to indemnify another person.
(ii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements and
returns required to be filed in connection with any Taxes, including
information returns with respect to backup withholding and other payments
to third parties.
(b) All Returns required to be filed by or on behalf of the
Company have been duly filed on a timely basis and such Returns are true,
complete and correct. All Taxes shown to be payable on such Returns or
on subsequent assessments with respect thereto, and all payments of
estimated Taxes required to be made by or on behalf of the Company under
Section 6655 of the Code or comparable provisions of state, local or
foreign law, have been paid in full on a timely basis, and no other Taxes
are payable by the Company with respect to items or periods covered by
such Returns (whether or not shown on or reportable on such Returns).
The Company has withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and
backup withholding in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party. There
are no liens on any of the assets of the Company with respect to Taxes,
other than liens for Taxes not yet due and payable or for Taxes that the
Company is contesting in good faith through appropriate proceedings. The
Company has no subsidiaries and has not at any time been a member of an
affiliated group of corporations filing consolidated, combined or unitary
income or franchise tax returns for a period for which the statute of
limitations for any Tax potentially applicable as a result of such
membership has not expired.
(c) The amount of the Company's liabilities for unpaid
Taxes for all periods through the date of the Financial Statements do
not, in the aggregate, exceed the amount of the current liability
accruals for Taxes reflected on the Financial Statements, and the
Financial Statements properly accrue in accordance with GAAP all
liabilities for Taxes of the Company and its Subsidiaries payable after
the date of the Financial Statements attributable to transactions and
events occurring prior to such date. No liability for Taxes of the
Company has been incurred (or prior to Closing will be incurred) since
such date other than in the ordinary course of business.
(d) Purchaser has been furnished by the Company with true
and complete copies of (i) all relevant portions of income tax audit
reports, statements of deficiencies, closing or other agreements received
by or on behalf of the Company relating to Taxes, and (ii) all federal,
state and foreign income or franchise tax returns and state sales and use
tax Returns for or including the Company and its Subsidiaries for all
periods since the Company's and such Subsidiaries' inception.
(e) No audit of the Returns of or including the Company by
a government or taxing authority is in process, threatened or, to the
Company's and each Shareholder's knowledge, pending (either in writing or
verbally, formally or informally). No deficiencies exist or have been
asserted (either in writing or verbally, formally or informally) or are
expected to be asserted with respect to Taxes of the Company and the
Company has not received notice (either in writing or verbally, formally
or informally) nor does it expect to receive notice that it has not filed
a Return or paid Taxes required to be filed or paid. The Company is not
a party to any action or proceeding for assessment or collection of
Taxes, nor has such event been asserted or threatened (either in writing
or verbally, formally or informally) against the Company, or any of its
respective assets. No waiver or extension of any statute of limitations
is in effect with respect to Taxes or Returns of the Company. The
Company has disclosed on their federal and state income and franchise tax
returns all positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Code Section 6662 or
comparable provisions of applicable state tax laws.
(f) The Company is not (nor has it been) a party to any tax
sharing agreement.
(g) The Company is not, nor has it been, a United States
real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. The Company is not a "consenting
corporation" under Section 341(f) of the Code. The Company has not
entered into any compensatory agreements with respect to the performance
of services which payment thereunder would result in a nondeductible
expense to the Company pursuant to Section 280G of the Code or an excise
tax to the recipient of such payment pursuant to Section 4999 of the
Code. The Company has not agreed to, nor is it required to make, other
than by reason of the purchase of the Shares by Purchaser, any adjustment
under Code Section 481(a) by reason of, a change in accounting method,
and the Company will not otherwise have any income reportable for a
period ending after the Closing Date attributable to a transaction or
other event (e.g., an installment sale) occurring prior to the Closing
Date with respect to which the Company received the economic benefit
prior to the Closing Date. The Company is not now, nor has it been, a
"reporting corporation" subject to the information reporting and record
maintenance requirements of Section 6038A and the regulations thereunder.
(h) The Company Disclosure Schedule contains accurate and
complete information regarding the Company's net operating losses for
federal and each state tax purposes. The Company has no net operating
losses or credit carryovers or other tax attributes currently subject to
limitation under Sections 382, 383, or 384 of the Code.
4.16 Employee Benefit Plans.
(a) Schedule 4.16 lists, with respect to the Company,
(i) all employee benefit plans, (ii) each loan to a non-officer employee
in excess of $5,000, loans to officers and directors and any stock
option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision
care, disability, employee relocation, cafeteria benefit or dependent
care, life insurance or accident insurance plans, programs or
arrangements, (iii) all contracts and agreements relating to employment
that provide for annual compensation in excess of $50,000 and all
severance agreements, with any of the directors, officers or employees of
the Company (other than, in each case, any such contract or agreement
that is terminable by the Company at will or without penalty or other
adverse consequence), (iv) all bonus, pension, profit sharing, savings,
deferred compensation or incentive plans, programs or arrangements,
(v) other fringe or employee benefit plans, programs or arrangements that
apply to senior management of the Company and that do not generally apply
to all employees, and (vi) any current or former employment or executive
compensation or severance agreements, written or otherwise, as to which
unsatisfied obligations of the Company of greater than $5,000 remain for
the benefit of, or relating to, any present or former employee,
consultant or director of the Company (together, the "Company Employee
Plans").
(b) The Company has furnished to Purchaser a copy of each
of the Company Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary
plan descriptions and other authorizing documents, and, to the extent
still in its possession, any material employee communications relating
thereto).
(c) (i) None of Company Employee Plans promises or
provides retiree medical or other retiree welfare or life insurance
benefits to any person; (ii) each Company Employee Plan has been
administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations,
except as would not have, in the aggregate, a Material Adverse Effect,
and the Company has performed all obligations required to be performed by
it under, is not in any material respect in default, under or violation
of, and has no knowledge of any material default or violation by any
other party to, any of the Company Employee Plans; and (iii) all material
contributions required to be made by the Company to any Company Employee
Plan have been made on or before their due dates and a reasonable amount
has been accrued for contributions to each Company Employee Plan for the
current plan years. No suit, administrative proceeding, action or other
litigation has been brought, or to the best knowledge of the Company is
threatened, against or with respect to any such Company Employee Plan,
including any audit or inquiry by the IRS or United States Department of
Labor.
(d) With respect to each Company Employee Plan, the Company
has complied with (i) the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the proposed regulations thereunder and (ii) the applicable
requirements of the Family Leave Act of 1993 and the regulations
thereunder, except to the extent that failure to comply would not, in the
aggregate, have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or
other service provider of the Company to severance benefits or any other
payment (including, without limitation, unemployment compensation, golden
parachute or bonus), except as expressly provided in this Agreement, or
(ii) accelerate the time of payment or vesting of any such benefits, or
increase the amount of compensation due any such employee or service
provider.
(f) There has been no amendment to, written interpretation
or announcement (whether or not written) by the Company relating to, or
change in participation or coverage under, any Company Employee Plan
which would materially increase the expense of maintaining such Plan
above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in the Company's Financial Statements.
4.17 Certain Agreements Affected by the Purchase of the Shares by
Purchaser. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in
any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any
director or employee of the Company (ii) materially increase any benefits
otherwise payable by the Company or (iii) result in the acceleration of
the time of payment or vesting of any such benefits.
4.18 Employee Matters. The Company is in compliance in all
material respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions
of employment, wages, hours and occupational safety and health and
employment practices, and is not engaged in any unfair labor practice.
There are no pending claims against the Company under any workers'
compensation plan or policy or for long term disability. The Company has
no material obligations under COBRA with respect to any former employees
or qualifying beneficiaries thereunder. There are no controversies
pending or, to the Company's and each Shareholder's knowledge,
threatened, between the Company and any of its employees, which
controversies have or could reasonably be expected to have a Material
Adverse Effect on the Company. The Company and the Shareholders consider
the Company's relations with its employees to be good and is not aware of
any key employee that presently intends to terminate his or her
employment relationship with the Company. The Company is not a party to
any collective bargaining agreement or other labor unions contract nor
does the Company know of any activities or proceedings of any labor union
or organize any such employees.
4.19 Material Contracts.
(a) Subsections (i) through (ix) of Section 4.19(a) of the
Company Disclosure Schedule contain a list of all contracts and
agreements to which the Company is a party and that are material to the
business, results of operations, or condition (financial or otherwise),
of the Company (such contracts, agreements and arrangements as are
required to be set forth in Section 4.19(a) of the Company Disclosure
Schedule being referred to herein collectively as the "Material
Contracts"). "Material Contracts" shall include, without limitation, the
following and shall be categorized in the Company Disclosure Schedule as
follows:
(i) each contract and agreement (other than routine
purchase orders and pricing quotes in the ordinary course of business
covering a period of less than one year) for the purchase of inventory,
spare parts, other materials or personal property with any supplier or
for the furnishing of services to the Company under the terms of which
the: (A) paid or otherwise gave consideration of more than $25,000 in
the aggregate during the fiscal year ended June 30, 1999, (B) is likely
to pay or otherwise give consideration of more than $25,000 in the
aggregate during the fiscal year ended June 30, 2000, (C) is likely to
pay or otherwise give consideration of more than $50,000 in the aggregate
over the remaining term of such contract or (D) cannot be canceled by the
Company without penalty or further payment;
(ii) each customer contract and agreement (other than
routine purchase orders, pricing quotes with open acceptance and other
tender bids, in each case, entered into in the ordinary course of
business and covering a period of less than one year) to which the
Company is a party which (A) paid or otherwise gave consideration of more
than $25,000 in the aggregate during the fiscal year ended June 30, 1999,
(B) is likely to pay or otherwise give consideration of more than $25,000
in the aggregate during the fiscal year ended June 30, 2000, (C) is
likely to pay or otherwise give consideration of more than $50,000 in the
aggregate over the remaining term of such contract or (D) cannot be
canceled by the Company without penalty or further payment;
(iii) (A) all distributor, manufacturer's
representative, broker, franchise, agency and dealer contracts and
agreements to which the Company is a party (specifying on a matrix, in
the case of distributor agreements, the name of the distributor, product,
territory, termination date and exclusivity provisions) and (B) all sales
promotion, market research, marketing and advertising contracts and
agreements to which the Company is a party which: (1) involved
consideration of more than $25,000 in the aggregate during the fiscal
year ended June 30, 1999 or (2) are likely to involve consideration of
more than $25,000 in the aggregate during the fiscal year ended June 30,
2000 or (3) are likely to involve consideration of more than $50,000 in
the aggregate over the remaining term of the contract;
(iv) all management contracts with independent
contractors or consultants (or similar arrangements) to which the Company
is a party and which (A) involved consideration or more than $25,000 in
the aggregate during the fiscal year ended June 30, 1999, (B) are likely
to involve consideration of more than $25,000 in the aggregate during the
fiscal year ended June 30, 2000, or (C) are likely to involve
consideration of more than $50,000 in the aggregate over the remaining
term of the contract;
(v) all contracts and agreements (excluding routine
checking account overdraft agreements involving petty cash amounts) under
which the Company has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness or under which the
Company has imposed (or may impose) a security interest or lien on any of
their respective assets, whether tangible or intangible, to secure
indebtedness;
(vi) all contracts and agreements that limit the
ability of the Company or, after the Closing Date, Purchaser or any of
its affiliates, to compete in any line of business or with any person or
in any geographic area or during any period of time, or to solicit any
customer or client;
(vii) all contracts and agreements between or among the
Company, on the one hand, and any affiliate of the Company, on the other
hand;
(viii) all contracts and agreements to which the
Company is a party under which it has agreed to supply products to a
customer at specified prices, whether directly or through a specific
distributor, manufacturer's representative or dealer; and
(ix) all other contracts or agreements (A) which are
material to the Company or the conduct of its business or (B) the absence
of which would have a Material Adverse Effect on the Company or (C) which
are believed by the Company to be of unique value even though not
material to the business of the Company.
(b) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, each Company license and
each Material Contract is a legal, valid and binding agreement, and none
of the Company licenses or Material Contracts is in default by its terms
or has been canceled by the other party; the Company is not in receipt of
any claim of default under any such agreement; and the Company does not
anticipate any termination of or change to, or receipt of a proposal with
respect to, any such agreement as a result of the purchase of the Shares
by Purchaser or otherwise. The Company has furnished Purchaser with true
and complete copies of all such agreements together with all amendments,
waivers or other changes thereto.
4.20 Interested Party Transactions. The Company is not indebted
to any director, officer, employee or agent of the Company (except for
amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses), and no such person is indebted to the Company.
4.21 Insurance. The Company has policies of insurance and bonds
of the type and in the amounts customarily carried by persons conducting
businesses or owning assets similar to those of the Company. There is no
material claim pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such
policies and bonds have been paid and the Company is otherwise in
compliance with the terms of such policies and bonds. The Company has no
knowledge of any threatened termination of, or material premium increase
with respect to, any of such policies.
4.22 Compliance With Laws. The Company has complied with, is not
in violation of, and has not received any notices of violation with
respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership
or operation of its business, except for such violations or failures to
comply as could not reasonably be expected to have a Material Adverse
Effect on the Company.
4.23 Minute Books. The minute books of the Company made available
to Purchaser contain a complete summary of all meetings of directors and
shareholders or actions by written consent since the time of
incorporation of the Company through the date of this Agreement, and
reflect all transactions referred to in such minutes accurately in all
material respects.
4.24 Complete Copies of Materials. The Company has delivered or
made available true and complete copies of each document which has been
requested by Purchaser or its counsel in connection with their legal and
accounting review of the Company.
4.25 Brokers' and Finders' Fees. The Company has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or investment bankers' fees or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
4.26 Board Approval. The Board of Directors of the Company has
unanimously (i) approved this Agreement and the purchase of the Shares by
Purchaser and (ii) determined that the purchase of the Shares by
Purchaser is in the best interests of the shareholders of the Company and
is on terms that are fair to such shareholders.
4.27 Inventory. The inventories shown on the Financial Statements
or thereafter acquired by the Company consist of items of a quantity and
quality usable or salable in the ordinary course of business. Since
Company Balance Sheet Dates, the Company has continued to replenish
inventories in a normal and customary manner consistent with past
practices. The Company has not received written or oral notice that it
will experience in the foreseeable future any difficulty in obtaining, in
the desired quantity and quality and at a reasonable price and upon
reasonable terms and conditions, the raw materials, supplies or component
products required for the manufacture, assembly or production of its
products. The values at which inventories are carried reflect the
inventory valuation policy of the Company, which is consistent with its
past practice and in accordance with GAAP applied on a consistent basis.
Since the Company Balance Sheet Dates, due provision has been made on the
books of the Company in the ordinary course of business consistent with
past practices to provide for all slow-moving, obsolete, or unusable
inventories at their estimated useful scrap values and such inventory
reserves are adequate to provide for such slow-moving, obsolete or
unusable inventory and inventory shrinkage. All of the inventories of the
Company reflected in the Financial Statements and the Company's books and
records on the date hereof were purchased, acquired or produced in the
ordinary and regular course of business and in a manner consistent with
the Company's regular inventory practices and are set forth on the
Company's books and records in accordance with the practices and
principles of the Company consistent with the method of treating said
items in prior periods. No material amount of the inventory of the
Company reflected on the Financial Statements or on the Company's books
and records as of the date hereof (in either case net of the reserve
therefor) is obsolete, defective or in excess of the needs of the
business of the Company reasonably anticipated for the normal operation
of the business consistent with past practices and outstanding customer
contracts. The presentation of inventory on the Financial Statements
conforms to GAAP and such inventory is stated at the lower of cost
(determined using the first-in, first-out method) or net realizable
value. For purposes of this Section 4.27, inventory shall exclude
showroom furniture and fixed assets.
4.28 Accounts Receivable.
(a) The Company has made available to Purchaser a list of
all accounts receivable of the Company reflected on the Financial
Statements ("Accounts Receivable") along with a range of days elapsed
since invoice.
(b) All Accounts Receivable of the Company arose in the
ordinary course of business and are carried at values determined in
accordance with GAAP consistently applied. No person has any lien on any
of such Accounts Receivable and no request or agreement for deduction or
discount has been made with respect to any of such Accounts Receivable.
4.29 Customers and Suppliers. As of the date hereof, no customer
which individually accounted for more than 2% of the Company's gross
revenues during the 12 month period preceding the date hereof, and no
material supplier of the Company, has through the Closing canceled or
otherwise terminated, or made any written threat to the Company to cancel
or otherwise terminate its relationship with the Company, or has at any
time on or after Company Balance Sheet Dates decreased materially its
services or supplies to the Company in the case of any such supplier, or
its usage of the services or products of the Company in the case of such
customer, and to the Company's and each Shareholder's knowledge, no such
supplier or customer intends to cancel or otherwise terminate its
relationship with the Company or to decrease materially its services or
supplies to the Company or its usage of the services or products of the
Company, as the case may be. No customer which individually accounted
for more than 2% of the Company's gross revenues during the 12 month
period preceding the Closing Date, has canceled or otherwise terminated,
or made any written threat to the Company to cancel or otherwise
terminate, for any reason, including without limitation the consummation
of the transactions by this Agreement, its relationship with the Company,
and to the Company's and each Shareholder's knowledge, no such customer
intends to cancel or otherwise terminate its relationship with the
Company or to decrease materially its usage of the services or products
of the Company. The Company has not breached any material agreement
with, or engaged in any fraudulent conduct with respect to, any customer
or supplier of the Company.
4.30 Third Party Consents. No consent or approval is needed from
any third party in order to effect the purchase of the Shares by
Purchaser, this Agreement or any of the transactions contemplated hereby.
4.31 No Commitments Regarding Future Products. The Company has
made no sales to customers that are contingent upon providing future
enhancements of existing products, to add features not presently
available on existing products or to otherwise enhance the performance of
its existing products. The products the Company has delivered to
customers substantially comply with published specifications for such
products and the Company has not received material complaints from
customers about its products that remain unresolved.
4.32 Sole Shareholders. The Shareholders are the sole
shareholders of the Company and no other person or entity has any right,
warrant or option to acquire any shares of capital stock of the Company.
4.33 Employees. All employees of the Company and each such
employee's respective compensation arrangement are set forth on Exhibit E
hereto.
4.34 Representations Complete. None of the representations or
warranties made by the Company or the Shareholders in this Agreement or
in any attachment hereto, including the Company Disclosure Schedule, or
certificate furnished by the Company pursuant to this Agreement, when all
such documents are read together in their entirety, contains or will
contain at the Closing Date any untrue statement of a material fact, or
omits or will omit at the Closing Date to state any material fact
necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which they were made, not
misleading.
SECTION 5
FURTHER REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants to Purchaser, as to
himself, as follows:
5.1 Power, Authorization and Validity. The Shareholder has all
requisite legal and, to the extent applicable, corporate power, and
authority to enter into and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved and
authorized by all necessary action, including, if applicable, corporate
action, by or on behalf of such Shareholder. This Agreement has been
duly executed and delivered by such Shareholder and constitutes a valid
and binding obligation of the Shareholder, subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief and
equitable remedies. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is
required by or with respect to the Shareholder in connection with the
execution and delivery of this Agreement by the Shareholder or the
consummation by the Shareholder of the transactions contemplated hereby.
5.2 Title to Stock. The Shareholder is the sole owner of the
Shares reflected next to such Shareholder's name on Exhibit F and has or
will have, as of the Closing, good, valid and marketable title to such
Shares free and clear of all restrictions, claims, liens, charges,
encumbrances and equities whatsoever. The Shareholder represents that
he, she or it has or will have, as of the Closing, full right, power and
authority to sell, transfer and deliver such Shares to Purchaser, and,
upon delivery of the certificate or certificates therefor duly endorsed
for transfer to Purchaser and Purchaser's payment for and acceptance
thereof, will transfer to Purchaser good, valid and marketable title
thereto free and clear of any restriction, claim, lien, charge,
encumbrance or equity whatsoever. The Shareholder is not party to any
voting trust, agreement or arrangement affecting the exercise of the
voting rights of the Shares. There is no action, proceeding, claim or,
to the Shareholder's knowledge, investigation against the Shareholder or
the Shareholder's assets, properties or, as applicable, any of the
Shareholder's respective officers or directors, pending or, to the
Shareholder's knowledge, threatened, at law or in equity, or before any
court, arbitrator or other tribunal, or before any administrative law
judge, hearing officer or administrative agency relating to or in any
other manner impacting upon the Shares held by such Shareholder.
5.3 No Violation. The execution, delivery and performance of
this Agreement, and the consummation of the Purchase and the other
transactions contemplated by this Agreement do not and will not conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, or constitute a default
or result in the creation or imposition of any lien, charge or
encumbrance upon any of the Shareholder's Shares under, (a) any
instrument, indenture, lease, mortgage or other agreement or contract to
which the Shareholder is a party or to which such Shareholder or any of
such Shareholder's assets or properties may be subject or (b) any
federal, state, local or foreign judgment, writ, decree, order,
ordinance, statute, rule or regulation applicable to the Shareholder or
the Shareholder's assets or properties. The consummation of the Purchase
and the other transactions contemplated by this Agreement will not
require the consent of any third person with respect to the rights,
licenses, franchises, leases or agreements of the Shareholder.
5.4 Acknowledgment. The Shareholder hereby acknowledges that the
Shareholder has read this Agreement, the Escrow Agreement and the other
documents to be delivered in connection with the consummation of the
transactions contemplated hereby and has made an independent examination
of the transactions contemplated hereby (including the tax consequences
thereof). The Shareholder acknowledges that the Shareholder has had an
opportunity to consult with and has relied solely upon the advice, if
any, of the Shareholder's legal counsel, financial advisors, or
accountants with respect to the transactions contemplated hereby to the
extent the Shareholder has deemed necessary, and has not been advised or
directed by Purchaser, the Company or their respective legal counsel or
other advisors in respect of any such matters and has not relied on any
such parties in connection with this Agreement and the transactions
contemplated hereby.
5.5. Representations and Warranties Regarding the Purchaser Stock.
(a) Each Shareholder represents and warrants to the
Purchaser as follows with respect to the Purchaser Stock:
(i) Each Shareholder is aware of the Purchaser's
business affairs and financial condition and has acquired sufficient
information about the Purchaser to reach an informed and knowledgeable
decision to acquire the Purchaser Stock. Each Shareholder is acquiring
the Purchaser Stock for investment for each Shareholder's own account
only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act").
(ii) Each Shareholder understands that the Purchaser
Stock constitutes "restricted securities" and has not been registered
under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
each Shareholder's investment intent as expressed herein. Each
Shareholder further acknowledges and understands that the Purchaser is
under no obligation to register the Purchaser Stock. Each Shareholder
understands that the certificate evidencing the Purchaser Stock will be
imprinted with a legend which prohibits the transfer of the Purchaser
Stock unless it is registered or such registration is not required in the
opinion of counsel for the Purchaser.
(iii) Each Shareholder is aware of the provisions of
Rule 144 promulgated under the Securities Act, which in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof (or from an affiliate of such issuer),
in a non-public offering subject to the satisfaction of certain of the
conditions specified by Rule 144, including, among other things: (1) the
resale occurring not less than one year after the party has purchased,
and made full payment for, within the meaning of Rule 144, the securities
to be sold; and, in the case of an affiliate of the Purchaser, or of a
non-affiliate who has held the securities less than two years, (2) the
availability of certain public information about the Purchaser, (3) the
sale being made through a broker in an unsolicited "broker's transaction"
or in transactions directly with a market maker (as such term is defined
under the Securities Exchange Act of 1934, as amended), and (4) the
amount of securities being sold during any three-month period not
exceeding the specified limitations stated therein, if applicable.
(iv) Each Shareholder further understands that at the
time the Shareholder wishes to sell the securities there may be no public
market upon which to make such a sale, and that, even if such a public
market then exists, the Purchaser may not be satisfying the
current public information requirements of Rule 144, and that, in such
event, such Shareholder would be precluded from selling the securities
under Rule 144 even if the applicable holding period had been satisfied.
(v) Each Shareholder further understands that in the
event all of the applicable requirements of Rule 144 are not satisfied,
registration under the Securities Act, compliance with Regulation A or
some other registration exemption will be required; and that,
notwithstanding the fact that Rule 144 is not exclusive, the staff of the
Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial
burden of proof establishing that an exemption from registration is
available for such offers or sales and that such persons and their
respective brokers who participate in such transactions do so at their
own risk.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company and the
Shareholders as follows:
6.1 Organization, Standing and Power. Purchaser and its
Subsidiaries (the "Subsidiaries") are corporations duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of organization. Purchaser and its Subsidiaries each have
the corporate power to own its respective properties and to carry on its
respective business as now being conducted and as proposed to be
conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good
standing would have a Material Adverse Effect on Purchaser or the
Subsidiary, as the case may be.
6.2 Authority. Purchaser has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Purchaser.
Purchaser's Board of Directors has approved this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by Purchaser and constitutes the valid and binding
obligation of Purchaser enforceable against the Purchaser in accordance
with its terms.
6.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
benefit under (i) any provision of the Articles of Incorporation or
Bylaws of Purchaser, as amended, or (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Purchaser or its properties
or assets, except that the Purchaser must obtain the consent of Comerica
Bank in connection with the transactions contemplated hereby pursuant to
the terms of the Purchaser's credit facility therewith.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is
required by or with respect to Purchaser in connection with the execution
and delivery of this Agreement by Purchaser or the consummation by
Purchaser of the transactions contemplated hereby, except for (i) the
filing of a Form 8-K with the Securities and Exchange Commission ("SEC")
and National Association of Securities Dealers within 15 days after the
Closing Date, (ii) any filings as may be required under applicable state
securities laws and the securities laws of any foreign country,
(iii) such filings as may be required under the HSR Act, (iv) the filing
with the Nasdaq National Market of a Notification Form for Listing of
Additional Shares with respect to the shares of Purchaser Common Stock
issuable pursuant to this Agreement and (v) consents, authorizations,
filings, approvals and registrations which, if not obtained or made,
would not have a Material Adverse Effect on Purchaser and would not
prevent, materially alter or delay any the transactions contemplated by
this Agreement.
6.4 Governmental Authorization. Each of Purchaser and its
subsidiaries has obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity that is required for the operation of Purchaser's or
any of its subsidiaries' business ("Purchaser Authorizations"), and all
of such Purchaser Authorizations are in full force and effect, except
where the failure to obtain or have any of such Purchaser Authorizations
could not reasonably be expected to have a Material Adverse Effect on
Purchaser.
6.5 Compliance With Laws. Each of Purchaser and each of its
subsidiaries has complied with, is not in violation of, and has not
received any notices of violation with respect to, any federal, state,
local or foreign statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not reasonably be
expected to have a Material Adverse Effect on Purchaser.
6.6 Broker's and Finders' Fees. Purchaser has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or investment bankers' fees or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
6.7 Information Regarding Purchaser. The Purchaser's most recent
filings with the Securities and Exchange Commission on Form 10-K and
Schedule 14A, and all filings by the Purchaser on Form 10-Q and/or Form
8-K since the date of the Purchaser's most recent
Form 10-K through the Closing, as such may have been amended prior to
Closing, when taken together, do not contain any untrue statement of a
material fact or omit, or will omit at the Closing, to state any material
fact necessary in order to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading.
6.8 Representations Complete. None of the representations or
warranties made by Purchaser herein or in any attachment hereto or any
certificate furnished by Purchaser pursuant to this Agreement, when all
such documents are read together in their entirety, contains or will
contain at the Closing any untrue statement of a material fact, or omits
or will omit at the Closing to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 7
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Each Party. The respective
obligations under this Agreement of each party hereto shall be subject to
the satisfaction on or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, by agreement of all
the parties:
(a) Conditions to Obligations of Each Party. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the
transactions contemplated hereby shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending; nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transactions contemplated hereby, which makes
the consummation of such transactions illegal.
(b) Governmental Approval. Purchaser, its Subsidiaries and
the Company shall have timely obtained from each Governmental Entity all
approvals, waivers and consents, if any, necessary for consummation of or
in connection with the transactions contemplated hereby, including,
without limitation, such approvals, waivers and consents as may be
required under the HSR Act, under the Securities Act and under any state
securities laws.
(c) Escrow Agreement. Purchaser, the Company, a
representative of the Shareholders and the Escrow Agent shall have
entered into an Escrow Agreement substantially in the form attached
hereto as Exhibit G.
7.2 Additional Conditions to Obligations of the Company and the
Shareholders. The obligations of the Company and the Shareholders under
this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived,
in writing, by the Company and by William Baquet and Robert Pastirjak.
(a) Representations, Warranties and Covenants (i) Each of
the representations and warranties of Purchaser in this Agreement that is
expressly qualified by a reference to materiality shall be true in all
respects as so qualified, and each of the representations and warranties
of Purchaser in this Agreement that is not so qualified shall be true and
correct in all material respects, on and as of the Closing as though such
representation or warranty had been made on and as of the Closing (except
that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date), and
(ii) Purchaser shall have performed and complied in all material respects
with all covenants, obligations and conditions of this Agreement required
to be performed and complied with by Purchaser as of the Closing.
(b) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or
otherwise), properties, assets (including intangible assets),
liabilities, business, operations, results of operations or prospects of
Purchaser and its Subsidiaries, taken as a whole.
7.3 Additional Conditions to the Obligations of Purchaser. The
obligations of Purchaser under this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, by Purchaser:
(a) Representations, Warranties and Covenants. (i) Each of
the representations and warranties of the Company and the Shareholders in
this Agreement that is expressly qualified by a reference to materiality
shall be true in all respects as so qualified, and each of the
representations and warranties of the Company and the Shareholders in
this Agreement that is not so qualified shall be true and correct in all
material respects, on and as of the Closing as though such representation
or warranty had been made on and as of the Closing (except that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date), and
(ii) the Company and the Shareholders shall have performed and complied
in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by them as
of the Closing.
(b) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or
otherwise), properties, assets (including intangible assets),
liabilities, business, operations, results of operations or prospects of
the Company.
(c) Teknion Dealer Status. The Company shall have been
approved as an official Teknion distributor prior to the Closing Date.
(d) Kimball Product Line. The Company shall have received
the consent of Kimball to continue to distribute substantially all of the
Kimball product line.
(e) Certificates of the Company and the Shareholders.
(i) Compliance Certificate of the Company. Purchaser
shall have been provided with a certificate executed on behalf of the
Company by its President and its Chief Financial Officer to the effect
that, as of the Closing, each of the conditions set forth in Section
7.3(a) through (d) above has been satisfied.
(ii) Compliance Certificate of Shareholders.
Purchaser shall have been provided with a certificate executed by each
Shareholder to the effect that, as of the Closing, each of the conditions
set forth in Section 7.3(a) through (d) above has been satisfied.
(iii) Certificate of Secretary of the Company.
Purchaser shall have been provided with a certificate executed by the
Secretary of the Company certifying:
(A) resolutions duly adopted by the Board of
Directors of the Company authorizing the execution of this Agreement and
the execution, performance and delivery of all agreements, documents and
transactions contemplated hereby; and
(B) the Articles of Incorporation and Bylaws of
the Company, as in effect immediately prior to the Closing, including all
amendments thereto.
(f) Third Party Consents. Purchaser shall have been
furnished with evidence satisfactory to it that the Company has obtained
those consents, waivers, approvals or authorizations of those
Governmental Entities and third parties whose consent or approval are
required in connection with this Agreement.
(g) Injunctions or Restraints; Conduct of Business. No
proceeding brought by any administrative agency or commission of other
governmental authority or instrumentality, domestic or foreign, seeking
to prevent the consummation of the transactions contemplated by this
Agreement shall be pending. In addition, no temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint provision
limiting or restricting Purchaser's conduct or operation of the business
of the Company and its subsidiaries, following the Closing shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(h) Legal Opinion. Purchaser shall have received a legal
opinion from the Company's legal counsel, in substantially the form of
Exhibit H.
(i) Resignation of Directors and Officers. Purchaser shall
have received letters of resignation from each of the directors and
officers of the Company in office immediately prior to the Closing, which
resignations in each case shall be effective as of the Closing.
(j) Employment Agreements. Each Shareholder shall have
executed an Employment Agreement in a form and substance satisfactory to
the Purchaser.
SECTION 8
ESCROW AND INDEMNIFICATION
8.1 Survival of Representations and Warranties. All covenants to
be performed by the Company, the Shareholders or Purchaser prior to the
Closing Date, and all representations and warranties of the Company, the
Shareholders or Purchaser in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the consummation of
the Purchase and (except to the extent that survival is necessary to
effectuate the intent of such provisions) shall terminate on the first
anniversary of the Closing Date (the "Indemnity Termination Date");
provided that if any claims for indemnification have been asserted with
respect to any such representations and warranties prior to the Indemnity
Termination Date, the representations and warranties on which any such
claims are based shall continue in effect until final resolution of any
claims; provided further that representations, warranties and covenants
relating to Taxes shall survive until 30 days after expiration of all
applicable statutes of limitations relating to such Taxes. All covenants
to be performed after the Closing Date shall continue indefinitely.
8.2 Share Escrow Fund. As soon as practicable after the Closing
Date, all of the shares of Purchaser Stock that Shareholders are entitled
to receive in the Purchase in exchange for the Shares (the "Initial
Escrow Shares") shall, without any act of any Shareholder, be registered
in the name of, and be deposited with, Chase Manhattan Bank and Trust
Company, National Association (or other institution selected by Purchaser
with the reasonable consent of Company) as escrow agent (the "Escrow
Agent"), such deposit to constitute the share escrow fund (the "Share
Escrow Fund") and to be governed by the terms set forth herein and in the
Escrow Agreement attached hereto as Exhibit G (the "Escrow Agreement").
In addition, from time to time thereafter, Purchaser shall deposit with
Escrow Agent additional shares of Purchaser Stock or other equity
securities issued or distributed by Purchaser upon a stock split, stock
dividend or other distribution in respect of the Initial Escrow Shares
(the "New Shares" and, together with the Initial Escrow Shares, the
"Escrow Shares"). In the event that any Damages (as defined below)
arise, the Share Escrow Fund shall be available to compensate the
Indemnified Persons (defined below) pursuant to the indemnification
obligations of the Company and Shareholders pursuant to Section 8.4 and
in accordance with the Escrow Agreement.
8.3 Cash Escrow Fund. Immediately after the Closing, Purchaser
shall deposit with the Escrow Agent $100,000 of the Cash Consideration
that the Shareholders would otherwise be entitled to receive in the
Purchase in exchange for the Shares, 77.5% of which will be deducted from
the Cash Consideration otherwise to be received by William Baquet and
22.5% of which will be deducted from the Cash Consideration otherwise to
be received by Robert Pastirjak, such deposit to constitute the cash
escrow fund (the "Cash Escrow Fund") and to be governed by the terms set
forth herein and in the Escrow Agreement. In the event that any
Uncollected Receivables (as defined below) mature, the Cash Escrow Fund
shall be available to reimburse Purchaser pursuant to the obligations of
the Company and Shareholders pursuant to Section 8.7 and in accordance
with the Escrow Agreement. The Cash Escrow Fund and Share Escrow Fund
shall be collectively referred to as the "Escrow Fund."
8.4 Indemnification of Purchaser.
(a) Indemnified Damages. Subject to the limitations set
forth in this Section 8, from and after the Closing Date, the Company and
Shareholders shall protect, defend, indemnify and hold harmless Purchaser
and its affiliates, officers, directors, employees, shareholders,
representatives and agents (each an "Indemnified Person" and collectively
"Indemnified Persons") from and against any and all losses, costs,
damages, liabilities, fees (including without limitation attorneys' fees)
and expenses (collectively, the "Damages"), that any of the Indemnified
Persons incurs or reasonably anticipates incurring by reason of or in
connection with any claim, demand, action or cause of action (i) alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of the Company
contained in this Agreement, including any exhibits or schedules attached
hereto, and (ii) arising out of, relating to or in connection with a
breach of a lease set forth on Exhibit I hereto, which breach existed at
the Closing Date (whether or not continuing at the Closing Date), based
upon any claim or violation relating to an invalid, unauthorized or
otherwise improper sublease, assignment or other transfer of such lease,
which become known to Purchaser at any time on or prior to the Indemnity
Termination Date. Damages in each case shall be net of the amount of any
insurance proceeds and indemnity and contribution actually recovered by
Purchaser or the Company.
(b) Nonexclusive Remedy and Limitations. Purchaser,
Shareholders and Company each acknowledge that Damages, if any, would
relate to unresolved contingencies existing at the Closing Date, which if
resolved at the Closing Date would have led to a reduction in the total
consideration Purchaser would have agreed to pay in connection with the
Purchase. Resort to the Share Escrow Fund shall not be Purchaser's
exclusive remedy, contractual or otherwise, for any Damages. The maximum
liability of any Shareholder for any breach of a representation, warranty
or covenant of the Company shall not be limited to the Escrow Shares in
which such Shareholder has an interest that are held pursuant to the
Escrow Agreement.
8.5 Indemnification of Shareholders. Subject to the limitations
set forth in this Section 8, from and after the Closing Date, Purchaser
shall protect, defend, indemnify and hold harmless Shareholders and their
successors, representatives and agents (each an "Indemnified Shareholder
Person" and collectively "Indemnified Shareholder Persons") from and
against any Damages that any of the Indemnified Shareholder Persons
incurs or reasonably anticipates incurring by reason of or in connection
with any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of Purchaser
contained in this Agreement, which become known to Shareholders at any
time on or prior to the Indemnity Termination Date. Damages in each case
shall be net of the amount of any insurance proceeds and indemnity and
contribution actually recovered by the Shareholders.
8.6 Damages Threshold. Notwithstanding the foregoing, Purchaser
may not receive any amount of the Escrow Shares from the Escrow Fund or
any other amount directly from either Shareholder unless and until a
certificate signed by an officer of Purchaser (an "Officer's
Certificate") identifying Damages in the aggregate amount in excess of
$50,000 has been delivered to each Shareholder and, if during the Escrow
Period (as defined below), to the Escrow Agent, and such amount is
determined pursuant to this Section 8 to be payable, in which case
Purchaser shall receive Escrow Shares equal in value to the full amount
of such Damages without deduction. Notwithstanding the foregoing,
Shareholders may not receive any amount from Purchaser unless and until a
certificate signed by an Indemnified Shareholder Person identifying
Damages in the aggregate amount in excess of $50,000 has been delivered
to Purchaser and Purchaser has agreed to pay such Damages or resolution
of any conflict has been determined in accordance with the provisions of
Section 4(d) of the Escrow Agreement (without reference to actions by the
Escrow Agent), in which case Shareholder shall receive a payment equal in
value to the full amount of such Damages without deduction within thirty
days. In determining the amount of any Damages attributable to a breach,
any materiality standard contained in a representation, warranty or
covenant of Purchaser, the Company or the Shareholders, as applicable,
shall be disregarded.
8.7 Reimbursement for Uncollected Receivables . For purposes of
this Section, "Uncollected Receivables" shall consist of accounts
receivable that as of the Effective Date were (i) past due more than 90
days and that had not been collected, in cash, on or before the last day
of the sixth calendar month after the Effective Date (the "Six Month
Uncollected Receivables") or (ii) past due 90 days or less and that had
not been collected, in cash, on or before the last day of the ninth
calendar month after the Effective Date (the "Nine Month Uncollected
Receivables"). Purchaser shall be entitled to reimbursement of
Uncollected Receivables from the Cash Escrow Fund (i) in the case of the
Six Month Uncollected Receivables, after the expiration of six calendar
months after the Effective Date and upon delivery to the Escrow Agent of
a certificate certifying as to the amount of Six Month Uncollected
Receivables for which reimbursement is due and (ii) in the case of the
Nine Month Uncollected Receivables, after the expiration of nine calendar
months after the Effective Date and upon delivery to the Escrow Agent of
a certificate certifying as to the amount of Nine Month Uncollected
Receivables for which reimbursement is due. Any payments received by
Company in respect of accounts receivable for which Purchaser has
received reimbursement out of the Cash Escrow Fund shall promptly be paid
to Shareholders; provided, however, that Company shall have no obligation
to make any such payments to Shareholders unless and until the aggregate
amount of accounts receivable that existed as of the Effective Date and
that have not since been collected is less than $100,000.
8.8 Share Escrow Period. Subject to the following requirements,
the Escrow Fund shall remain in existence (the "Share Escrow Period")
until one year after the Closing Date (the "Escrow Termination Date").
Upon the expiration of the Share Escrow Period, the Share Escrow Fund
shall terminate with respect to all Escrow Shares; provided, however,
that the number of Escrow Shares, which, in the reasonable judgment of
Purchaser, subject to the subsequent arbitration of the claim in the
manner provided in the Escrow Agreement, are necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate delivered to
the Escrow Agent prior to the expiration of such Share Escrow Period with
respect to facts and circumstances existing on or prior to the Escrow
Termination Date shall remain in the Share Escrow Fund (and the Share
Escrow Fund shall remain in existence) until such claims have been
resolved. As soon as all such claims have been resolved, the Escrow
Agent shall deliver to the Shareholders all Escrow Shares and other
property remaining in the Share Escrow Fund and not required to satisfy
such claims. Deliveries of Escrow Shares to the Shareholders pursuant to
this Section 8.8 and the Escrow Agreement shall be made in proportion to
their respective original contributions to the Share Escrow Fund.
8.9 Cash Escrow Period. Subject to the following requirements,
the Cash Escrow Fund shall remain in existence (the "Cash Escrow Period")
until ten months after the Closing Date. Upon the expiration of the Cash
Escrow Period, the Cash Escrow Fund shall terminate with respect to all
cash remaining in the Cash Escrow Fund. At such time, the Escrow Agent
shall deliver to the Shareholders all cash remaining in the Cash Escrow
Fund. Deliveries of cash in the Cash Escrow Fund to the Shareholders
pursuant to this Section 8.9 and the Escrow Agreement shall be made in
proportion to their respective original contributions to the Cash Escrow
Fund.
8.10 Additional Damages. Any additional Damages following
exhaustion of the Share Escrow Fund or following distribution of the
Share Escrow Fund upon termination of the Escrow shall be paid by the
Shareholders to Purchaser within thirty days following receipt by the
indemnifying parties of the Officer's Certificate or, if there is a
conflict as to any Damages payable to Purchaser, within thirty days
following the issuance of the decision by the arbitrator regarding such
conflict. Resolution of any conflict as to any Damages payable to
Purchaser shall be resolved substantially in accordance with the
provisions of Section 4(d) of the Escrow Agreement (without reference to
actions by the Escrow Agent).
8.11 Method of Asserting Claims. All claims for indemnification
by any Indemnified Person or Indemnified Shareholder Person pursuant to
this Section 8 shall be made in accordance with the provisions of this
Section 8 and, in the case of an Indemnified Person, the Escrow
Agreement, and following exhaustion of the Share Escrow Fund or following
distribution of the Share Escrow Fund upon expiration of the Share Escrow
Period, in accordance with this Section 8.
SECTION 9
COVENANTS OF PARTIES
9.1 Public Announcements. All parties hereto agree that
Purchaser will be responsible for any press release or publication with
respect to the existence of this Agreement or the transactions
contemplated hereby, provided that no press release shall be issued with
respect to this Agreement or the transactions contemplated hereby until
after November 8, 1999, and further agree to cooperate in good faith with
respect to any such press release or public statement, and, except as may
be required by law, further agree not to issue any such press release or
public statement without the prior written consent of Purchaser (in the
case of a publication proposed by the Company and/or a Shareholder).
Purchaser agrees to provide any such press release or public statement to
the Company and the Shareholders in advance of publication and provide
the Company and the Shareholders a reasonable opportunity to review and
comment on such publication.
9.2 Cooperation. Each party hereto will fully cooperate with the
other parties, their counsel and accountants in connection with any steps
required to be taken as part of its obligations under this Agreement.
Each party will use reasonable efforts to cause all conditions to this
Agreement to be satisfied as promptly as possible and to obtain all
consents and approvals necessary for the due and punctual performance of
this Agreement and for the satisfaction of the conditions hereof. No
party will undertake any course of action inconsistent with this
Agreement or which would make any representations, warranties or
agreements made by such party in this Agreement untrue or any conditions
precedent to this Agreement unable to be satisfied at or prior to the
Closing. The Company and the Shareholders will use their best efforts to
assist Purchaser as may be necessary to comply with the securities and
blue sky laws of all jurisdictions that are applicable in connection with
the issuance of Purchaser Stock pursuant hereto.
9.3 Further Acts. After the Closing Date, each party hereto, at
the request of and without any further cost or expense to the other
parties will take any further actions necessary or desirable to carry out
the purposes of this Agreement and to vest in Purchaser full title to all
properties, assets and rights of the Company. In addition, without in
any way limiting the generality of the foregoing, the Company and, to the
extent required, the Shareholders hereby agree to take any and all
further actions necessary or desirable to carry out the assignment to
Purchaser of all Intellectual Property.
9.4 Maintenance of Acquired Business. Until December 15, 2003,
Purchaser and the Company agree as follows:
(a) Purchaser shall maintain the operations of the Company
as such operations exist on the Closing Date as a separate entity or
operating unit (hereinafter referred to as the "Acquired Business") in
order that the operating income of the Acquired Business can be
determined for purposes of the Notes.
(b) The operating income of the Acquired Business shall be
determined in good faith by the Company in accordance with generally
accepted accounting principles and shall be calculated as follows:
revenues minus cost of goods sold, minus operating expenses and minus
operating interest, but before acquisition interest and goodwill.
(c) Any charges by Purchaser or an affiliate of Purchaser
to the Acquired Business for corporate shared resources that Purchaser
applies to substantially all of its subsidiaries, such as costs incurred
by Purchaser in making generally available its human resources manager,
sales manager and other resource persons to the Acquired Business, shall
be ignored in determining the operating income of the Acquired Business
for purposes of the Notes.
9.5 Personal Guarantees by Shareholders. As soon as practicable
after the Closing, Purchaser and the Company shall take all actions
reasonably necessary to cause each Shareholder to be removed as a
guarantor with respect to any obligations of the Company. Without
limiting the foregoing, the Company agrees to indemnify and hold
Shareholders harmless from and against any liabilities, costs, damages,
fees (including without limitation attorneys' fees) and expenses that a
Shareholder incurs after the Closing by reason of a personal guaranty by
such Shareholder of an obligation of the Company.
SECTION 10
COVENANTS OF SHAREHOLDERS AND THE COMPANY
10.1 Conduct of Business of the Company. During the period from
the date of this Agreement and continuing until the Closing Date, the
Company agrees and the Shareholders agree to cause the Company (except to
the extent expressly contemplated by this Agreement or as consented to in
writing by Purchaser), to carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted,
to pay debts and Taxes when due subject (i) to good faith disputes over
such debts or Taxes and (ii) to Purchaser's consent to the filing of
material Tax Returns if applicable, to pay or perform other obligations
when due, and to use all reasonable efforts consistent with past practice
and policies to preserve intact its present business organization, keep
available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it to the
end that its goodwill and ongoing businesses shall be unimpaired at the
Closing Date. The Company agrees to promptly notify Purchaser of any
event or occurrence not in the ordinary course of its or its
Subsidiaries' business, and of any event which could have a Material
Adverse Effect. Without limiting the foregoing, except as expressly
contemplated by this Agreement, the Company shall not do, cause or permit
any of the following, without the prior written consent of Purchaser:
(a) Charter Documents. Cause or permit any amendments to
its Articles of Incorporation or Bylaws;
(b) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or
propose the purchase of, any shares of its capital stock or securities
convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating
it to issue any such shares or other convertible securities;
(c) Dividends; Changes in Capital Stock. Declare or pay
any dividends on or make any other distributions (whether in cash, stock
or property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, or repurchase or otherwise acquire, directly
or indirectly, any shares of its capital stock except from former
employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination
of service to it or its Subsidiaries;
(d) Material Contracts. Enter into any material contract
or commitment, or violate, amend or otherwise modify or waive any of the
terms of any of its material contracts, other than in the ordinary course
of business consistent with past practice;
(e) Intellectual Property. Transfer to any person or
entity any rights to its intellectual property other than in the ordinary
course of business consistent with past practice;
(f) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products
or technology;
(g) Dispositions. Sell, lease, license or otherwise
dispose of or encumber any of its properties or assets which are
material, individually or in the aggregate, to its and its Subsidiaries'
business, taken as a whole, except in the ordinary course of business
consistent with past practice;
(h) Indebtedness. Incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others;
(i) Leases. Enter into any operating lease;
(j) Payment of Obligations. Pay, discharge or satisfy in
an amount in excess of $5,000 in any one case or $50,000 in the
aggregate, any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise) arising other than in
the ordinary course of business, other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in the Company
Financial Statements;
(k) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course
of business and consistent with past practice;
(l) Insurance. Materially reduce the amount of any
material insurance coverage provided by existing insurance policies;
(m) Termination or Waiver. Terminate or waive any right of
substantial value;
(n) Employee Benefit Plans; New Hires; Pay Increases.
Adopt or amend any employee benefit or stock purchase or option plan, or
hire any new director level or officer level employee (except that it may
hire a replacement for any current director level or officer level
employee if it first provides Purchaser advance notice regarding such
hiring decision), pay any special bonus or special remuneration to any
employee or director, or increase the salaries or wage rates of its
employees;
(o) Severance Arrangement. Grant any severance or
termination pay (i) to any director or officer or (ii) to any other
employee except payments made pursuant to standard written agreements
outstanding on the date hereof;
(p) Lawsuits. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material
impairment of a valuable aspect of its business, provided that it
consults with Purchaser prior to the filing of such a suit, or (iii) for
a breach of this Agreement;
(q) Acquisitions. Acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets;
(r) Taxes. Other than in the ordinary course of business,
make or change any material election in respect of Taxes, adopt or change
any accounting method in respect of Taxes, file any material Tax Return
or any amendment to a material Tax Return, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent
to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(s) Notices. Fail to give any notices or other information
required to be given to the employees of the Company, any collective
bargaining unit representing any group of employees of the Company, and
any applicable government authority under the National Labor Relations
Act, the Code, the Consolidated Omnibus Budget Reconciliation Act, and
other applicable law in connection with the transactions provided for in
this Agreement;
(t) Revaluation. Revalue any of its assets, including
without limitation writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of
business; or
(u) Other. Take, or agree in writing or otherwise to take,
any of the actions described in Sections 10.1(a) through (t) above, or
any action which would make any of its representations or warranties
contained in this Agreement untrue or incorrect or prevent it from
performing or cause it not to perform its covenants hereunder.
10.2 Access; Confidentiality. The Company agrees to make
available all books, records, facilities, employees, non-employee agents
(such as patent and regulatory counsel) and information necessary for
Purchaser to evaluate the business, operations, properties and financial
condition of the Company. Purchaser shall keep confidential and shall
not make use of any information treated by the other party as
confidential (including, without limitation, the existence of this
Agreement), obtained from the other party concerning the assets,
properties, business or operations of the other party other than to legal
counsel, consultants, financial advisors, key employees, lenders and
investment bankers where such disclosure is related to the performance of
obligations under this Agreement or the consummation of the transactions
contemplated under this Agreement (all of whom shall be similarly bound
by the provisions of this Section 10.2), except as may be required to be
disclosed by applicable law. Notwithstanding the foregoing, the
foregoing confidentiality restrictions shall not apply to any information
which (a) becomes generally available to the public through no fault of
the receiving party or its employees, agents or representatives; (b) is
independently developed by the receiving party without benefit of the
above-described information (and such independent development is
substantiated in writing), or rightfully received from another source on
a non-confidential basis; (c) when such disclosure is required by a court
or governmental authority or is otherwise required by law (including,
without limitation, filings required to be made with the SEC, or any
other governmental or regulatory agency) or is necessary to establish
rights under this Agreement or any agreement contemplated hereby(and the
disclosing party has taken all reasonable efforts to limit the scope of
such disclosure and to protect the confidential nature of the information
disclosed).
10.3 Public Announcements. All parties hereto agree that
Purchaser will be responsible for any press release or publication with
respect to the existence of this Agreement or the transactions
contemplated hereby and further agree to cooperate in good faith with
respect to any such press release or public statement, and, except as may
be required by law, further agree not to issue any such press release or
public statement without the prior written consent of Purchaser (in the
case of a publication proposed by the Company and/or a Shareholder).
10.4 Cooperation. Each Party hereto will fully cooperate with the
other parties, their counsel and accountants in connection with any steps
required to be taken as part of its obligations under this Agreement.
Each party will use reasonable efforts to cause all conditions to this
Agreement to be satisfied as promptly as possible and to obtain all
consents and approvals necessary for the due and punctual performance of
this Agreement and for the satisfaction of the conditions hereof. No
party will undertake any course of action inconsistent with this
Agreement or which would make any representations, warranties or
agreements made by such party in this Agreement untrue or any conditions
precedent to this Agreement unable to be satisfied at or prior to the
Closing.
10.5 Employees of the Business. Between the date of this
Agreement and the Closing Date, the Company shall allow Purchaser to have
free access to all employees of the Company for discussions regarding
employment with Purchaser after the Closing Date.
10.6 Notification of Claims. From the date of this Agreement to
and including the Closing Date, the Company and/or the Shareholders shall
promptly notify Purchaser in writing of the commencement or threat of any
claims, litigation or proceedings against or affecting the Company of
which the Company and/or the Shareholders have knowledge.
10.7 Further Acts. After the Closing Date, each party hereto, at
the request of and without any further cost or expense to the other
parties will take any further actions necessary or desirable to carry out
the purposes of this Agreement and to vest in Purchaser full title to all
properties, assets and rights of the Company.
SECTION 11
MISCELLANEOUS
11.1 Arbitration. Any dispute or claim arising out of or in
connection with this Agreement will be finally settled by binding
arbitration in San Jose, California in accordance with the commercial
rules of the American Arbitration Association by one arbitrator appointed
in accordance with said rules. The arbitrator shall apply California
law, without reference to rules of conflicts of law or rules of statutory
arbitration, to the resolution of any dispute. Judgment on the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Notwithstanding the foregoing, the parties may
apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this
paragraph, without breach of this arbitration provision.
11.2 Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or by courier, overnight delivery service or
confirmed facsimile, or forty-eight (48) hours after being deposited in
the regular mail as certified or registered mail (airmail if sent
internationally) with postage prepaid, if such notice is addressed to the
party to be notified at such party's address or facsimile number as set
forth below, or as subsequently modified by written notice,
(a) if to Purchaser, to:
Business Resource Group
2150 North First Street, Suite 101
San Jose, CA 95131
Attention: J. W. Peth, President
Facsimile No.: (650) 325-3202
Telephone No.: (650) 325-3199
with a copy to:
Orrick, Herrington & Sutcliffe LLP
1020 Marsh Road
Menlo Park, CA 94025
Attention: Peter Cohn
Facsimile No.: (650) 614-7401
Telephone No.: (650) 614-7420
(b) if to the Company, to:
Baquet-Pastirjak, Inc.
133 N. San Gabriel Blvd., Suite 201
Pasadena, CA 91107
Attention: President
(c) if to the Shareholders, to:
William H. Baquet, Jr.
878 Monte Verde Drive
Arcadia, CA 91007
Facsimile No.: (626) 449-0913
Telephone No.:((626) 449-1056
And:
Robert G. Pastirjak
4218 Costello Avenue
Sherman Oaks, CA 91423
Facsimile No.: (818) 784-9095
Telephone No.: (818) 784-9094
with a copy to:
Case, Knowlson, Burnett & Wright LLP
2049 Century Park East, Suite 3350
Los Angeles, CA 90067
Attention: Edward T. Swanson
Facsimile No.: (310) 552-3229
Telephone No.: (310) 552-2766
and, with a copy to:
Robert A. Graham, Jr.
717 N.W. 5th Street
Grants Pass, OR 97526
Facsimile No.: (541) 471-2488
Telephone No.: (541) 472-1625
11.3 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an original
and all of which together shall constitute one and the same instrument.
11.4 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents referred to herein are the product of all of
the parties hereto, and constitute the entire agreement between such
parties pertaining to the subject matter hereof and thereof, and merge
all prior negotiations and drafts of the parties with regard to the
transactions contemplated herein and therein.
11.5 Severability. If a court or an arbitrator of competent
jurisdiction holds any provision of this Agreement to be illegal,
unenforceable or invalid in whole or in part for any reason, such
provision shall be adjusted rather than voided, if possible, to achieve
the intent of the parties to the extent possible, and, in any event, the
validity and enforceability of the remaining sections shall not be
affected unless an essential purpose of this Agreement would be defeated
by the loss of the illegal, unenforceable or invalid provision.
11.6 Remedies Cumulative. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party
of any one remedy will not preclude the exercise of any other remedy.
11.7 Governing Law. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto
shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of
conflicts of law.
11.8 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore,
waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
11.9 Waiver of Restrictions. The Company hereby consents to the
transfers of the Shares that are the subject of this Agreement and waives
any restrictions on transfer applicable to such Shares with respect to
the transfers contemplated by this Agreement.
11.10 Amendments and Waivers. Any term of this Agreement may be
amended or waived only with the written consent of the parties or their
respective successors and assigns. Any amendment or waiver effected in
accordance with this Section 11.10 shall be binding upon the parties and
their respective successors and assigns.
[Signature Page Follows]
The parties have duly executed this Stock Purchase Agreement
as of the date first above written.
THE PURCHASER: THE COMPANY:
BUSINESS RESOURCE GROUP BAQUET-PASTIRJAK, INC.
By: /s/ J. W. Peth By: /s/ William H. Baquet, Jr.
J. W. Peth, President William H. Baquet, Jr.,
President
THE SHAREHOLDERS:
WILLIAM H. BAQUET, JR. ROBERT G. PASTIRJAK
/s/ William H. Baquet, Jr. /s/ Robert G. Pastirjak
COMPANY DISCLOSURE SCHEDULE
EXHIBIT A
2000 Note
PROMISSORY NOTE
$200,000 November 8, 1999
(subject to adjustment) San Jose, California
For value received, Business Resource Group, a California
corporation (the "Company"), promises to pay to William H. Baquet, Jr.
and Robert G. Pastirjak (together, the "Holder"), the principal amount of
Two Hundred Thousand Dollars ($200,000) (the "Initial Principal Amount"),
subject to adjustment (the "Adjusted Principal Amount") as set forth in
Section 1 below. Interest shall not accrue thereon. This Note is the
first in a series of four Notes issued to the Holder containing
substantially identical terms and conditions (other than the adjustment
terms applicable to the respective principal amounts as set forth in
Section 1 of each Note), issued pursuant to that certain Stock Purchase
Agreement (the "Agreement") dated November 8, 1999, to be effective as of
November 1, 1999, by and among the Company, Baquet-Pastirjak, Inc. (the
"Acquired Business"), and William H. Baquet, Jr. and Robert G. Pastirjak,
the sole shareholders of the Acquired Business. This Note is subject to
the following terms and conditions.
1. Maturity; Adjustment to Principal Amount. This Note will
mature and become due and payable on December 15, 2000 (the "Maturity
Date"). Interest shall not accrue on the principal amount due under this
Note. The principal amount of this Note shall be subject to adjustment
on the Maturity Date based on the operating income of the Acquired
Business (or any successor entity or business unit as operated by the
Company) as set forth on Schedule A attached hereto. The operating
income of the Acquired Business shall be determined in good faith by the
Company in accordance with generally accepted accounting principles and
shall be calculated as follows: revenues minus cost of goods sold, minus
operating expenses and minus operating interest, but before acquisition
interest and goodwill. Any dispute regarding the adjustment to be made
shall be resolved by arbitration pursuant to Section 11.1 of the
Agreement. The amount payable to the Holder on the Maturity Date shall
be distributed by the Company to the Holder as follows: (i) if the
Adjusted Principal Amount is greater than or equal to the Initial
Principal Amount, then William Baquet shall receive 40% of the amounts
payable thereunder and Robert Pastirjak shall receive 60% of the amounts
payable thereunder and (ii) if the Adjusted Principal Amount is less than
the Initial Principal Amount, then William Baquet and Robert Pastirjak
shall each receive 50% of the amounts payable thereunder.
2. Payment. Payment on this Note shall be made in lawful money
of the United States of America at such place as the Holder hereof may
from time to time designate in writing to the Company.
3. Transfer; Successors and Assigns. The terms and conditions
of this Note shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Notwithstanding the
foregoing, the Holder may not assign, pledge, or otherwise transfer this
Note without the prior written consent of the Company.
4. Governing Law. This Note and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto
shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of
conflicts of law.
5. Notices. Any notice required or permitted by this Note shall
be in writing and shall be deemed sufficient upon delivery, when
delivered personally or by a nationally-recognized delivery service (such
as Federal Express or UPS), or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
6. Amendments and Waivers. Any term of this Note may be amended
only with the written consent of the Company and the Holder. Any
amendment or waiver effected in accordance with this Section 6 shall be
binding upon the Company, the Holder and each transferee of the Note.
7. Officers and Directors Not Liable. In no event shall any
officer or director of the Company be liable for any amounts due or
payable pursuant to this Note.
8. Action to Collect on Note; Disputes. If action is instituted
to collect on this Note, the Company promises to pay all costs and
expenses, including reasonable attorney's fees, incurred in connection
with such action. In the event of a dispute regarding the adjustment to
the principal amount of the Note, including, without limitation, the
determination of the operating income of the Acquired Business, the
prevailing party shall be entitled to reimbursement for all reasonable
out-of-pocket costs and expenses, including reasonable attorney's fees of
one counsel.
[Signature Page Follows]
COMPANY:
BUSINESS RESOURCE GROUP
By: /s/ J. W. Peth
J. W. Peth, President
Address: 2150 North First
Street
Suite 101
San Jose, CA 95131
AGREED TO AND ACCEPTED:
WILLIAM H. BAQUET, JR.
/s/ William H. Baquet, Jr.
878 Monte Verde Drive
Arcadia, CA 91007
ROBERT G. PASTIRJAK
/s/ Robert G. Pastirjak
4218 Costello Avenue
Sherman Oaks, CA 91423
Schedule A
Principal Amount Adjustment Schedule for
Promissory Note for the Year Ended October 31, 2000
If the Operating Income of
the Acquired Business for
the Period from November
1, 1999 to
October 31, 2000 is:
Then the Adjusted
Principal Amount of Note
shall be:
$1,350,000 and above
$650,000
$1,250,000 to
$1,349,999.99
$575,000
$1,150,000 to
$1,249,999.99
$500,000
$1,050,000 to
$1,149,999.99
$425,000
$950,000 to $1,049,999.99
$350,000
$850,000 to $949,999.99
$275,000
$750,000 to $849,999.99
$200,000 (no adjustment)
$650,000 to $749,999.99
$150,000
$550,000 to $649,999.99
$100,000
$450,000 to $549,999.99
$50,000
$0 to $449,999.99
$0.00
EXHIBIT B
2001 Not
PROMISSORY NOTE
$200,000 November 8, 1999
(subject to adjustment) San Jose, California
For value received, Business Resource Group, a California
corporation (the "Company"), promises to pay to William H. Baquet, Jr.
and Robert G. Pastirjak (together, the "Holder"), the principal amount of
Two Hundred Thousand Dollars ($200,000) (the "Initial Principal Amount"),
subject to adjustment (the "Adjusted Principal Amount") as set forth in
Section 1 below. Interest shall not accrue thereon. This Note is the
second in a series of four Notes issued to the Holder containing
substantially identical terms and conditions (other than the adjustment
terms applicable to the respective principal amounts as set forth in
Section 1 of each Note), issued pursuant to that certain Stock Purchase
Agreement (the "Agreement") dated November 8, 1999, to be effective as of
November 1, 1999, by and among the Company, Baquet-Pastirjak, Inc. (the
"Acquired Business"), and William H. Baquet, Jr. and Robert G. Pastirjak,
the sole shareholders of the Acquired Business. This Note is subject to
the following terms and conditions.
1. Maturity; Adjustment to Principal Amount. This Note will
mature and become due and payable on December 15, 2001 (the "Maturity
Date"). Interest shall not accrue on the principal amount due under this
Note. The principal amount of this Note shall be subject to adjustment
on the Maturity Date based on the operating income of the Acquired
Business (or any successor entity or business unit as operated by the
Company) as set forth on Schedule A attached hereto. The operating
income of the Acquired Business shall be determined in good faith by the
Company in accordance with generally accepted accounting principles and
shall be calculated as follows: revenues minus cost of goods sold, minus
operating expenses and minus operating interest, but before acquisition
interest and goodwill. Any dispute regarding the adjustment to be made
shall be resolved by arbitration pursuant to Section 11.1 of the
Agreement. The amount payable to the Holder on the Maturity Date shall
be distributed by the Company to the Holder as follows: (i) if the
Adjusted Principal Amount is greater than or equal to the Initial
Principal Amount, then William Baquet shall receive 40% of the amounts
payable thereunder and Robert Pastirjak shall receive 60% of the amounts
payable thereunder and (ii) if the Adjusted Principal Amount is less than
the Initial Principal Amount, then William Baquet and Robert Pastirjak
shall each receive 50% of the amounts payable thereunder.
2. Payment. Payment on this Note shall be made in lawful money
of the United States of America at such place as the Holder hereof may
from time to time designate in writing to the Company.
3. Transfer; Successors and Assigns. The terms and conditions
of this Note shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Notwithstanding the
foregoing, the Holder may not assign, pledge, or otherwise transfer this
Note without the prior written consent of the Company.
4. Governing Law. This Note and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto
shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of
conflicts of law.
5. Notices. Any notice required or permitted by this Note shall
be in writing and shall be deemed sufficient upon delivery, when
delivered personally or by a nationally-recognized delivery service (such
as Federal Express or UPS), or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
6. Amendments and Waivers. Any term of this Note may be amended
only with the written consent of the Company and the Holder. Any
amendment or waiver effected in accordance with this Section 6 shall be
binding upon the Company, the Holder and each transferee of the Note.
7. Officers and Directors Not Liable. In no event shall any
officer or director of the Company be liable for any amounts due or
payable pursuant to this Note.
8. Action to Collect on Note; Disputes. If action is instituted
to collect on this Note, the Company promises to pay all costs and
expenses, including reasonable attorney's fees, incurred in connection
with such action. In the event of a dispute regarding the adjustment to
the principal amount of the Note, including, without limitation, the
determination of the operating income of the Acquired Business, the
prevailing party shall be entitled to reimbursement for all reasonable
out-of-pocket costs and expenses, including reasonable attorney's fees of
one counsel.
[Signature Page Follows]
COMPANY:
BUSINESS RESOURCE GROUP
By: /s/ J. W. Peth
J. W. Peth, President
Address: 2150 North First
Street
Suite 101
San Jose, CA 95131
AGREED TO AND ACCEPTED:
WILLIAM H. BAQUET, JR.
/s/ William H. Baquet, Jr.
878 Monte Verde Drive
Arcadia, CA 91007
ROBERT G. PASTIRJAK
/s/ Robert G. Pastirjak
4218 Costello Avenue
Sherman Oaks, CA 91423
Schedule A
Principal Amount Adjustment Schedule for
Promissory Note for the Year Ended October 31, 2001
If the Operating Income of
the Acquired Business for
the Period from November
1, 2000 to
October 31, 2001 is:
Then the Adjusted
Principal Amount of Note
shall be:
$1,450,000 and above
$650,000
$1,350,000 to
$1,449,999.99
$575,000
$1,250,000 to
$1,349,999.99
$500,000
$1,150,000 to
$1,249,999.99
$425,000
$1,050,000 to
$1,149,999.99
$350,000
$950,000 to $1,049,999.99
$275,000
$850,000 to $949,999.99
$200,000 (no adjustment)
$750,000 to $849,999.99
$150,000
$650,000 to $749,999.99
$100,000
$550,000 to $649,999.99
$50,000
$0 to $549,999.99
$0.00
EXHIBIT C
2002 Note
PROMISSORY NOTE
$200,000 November 8, 1999
(subject to adjustment) San Jose, California
For value received, Business Resource Group, a California
corporation (the "Company"), promises to pay to William H. Baquet, Jr.
and Robert G. Pastirjak (together, the "Holder"), the principal amount of
Two Hundred Thousand Dollars ($200,000) (the "Initial Principal Amount"),
subject to adjustment (the "Adjusted Principal Amount") as set forth in
Section 1 below. Interest shall not accrue thereon. This Note is the
third in a series of four Notes issued to the Holder containing
substantially identical terms and conditions (other than the adjustment
terms applicable to the respective principal amounts as set forth in
Section 1 of each Note), issued pursuant to that certain Stock Purchase
Agreement (the "Agreement") dated November 8, 1999, to be effective as of
November 1, 1999, by and among the Company, Baquet-Pastirjak, Inc. (the
"Acquired Business"), and William H. Baquet, Jr. and Robert G. Pastirjak,
the sole shareholders of the Acquired Business. This Note is subject to
the following terms and conditions.
1. Maturity; Adjustment to Principal Amount. This Note will
mature and become due and payable on December 15, 2002 (the "Maturity
Date"). Interest shall not accrue on the principal amount due under this
Note. The principal amount of this Note shall be subject to adjustment
on the Maturity Date based on the operating income of the Acquired
Business (or any successor entity or business unit as operated by the
Company) as set forth on Schedule A attached hereto. The operating
income of the Acquired Business shall be determined in good faith by the
Company in accordance with generally accepted accounting principles and
shall be calculated as follows: revenues minus cost of goods sold, minus
operating expenses and minus operating interest, but before acquisition
interest and goodwill. Any dispute regarding the adjustment to be made
shall be resolved by arbitration pursuant to Section 11.1 of the
Agreement. The amount payable to the Holder on the Maturity Date shall
be distributed by the Company to the Holder as follows: (i) if the
Adjusted Principal Amount is greater than or equal to the Initial
Principal Amount, then William Baquet shall receive 40% of the amounts
payable thereunder and Robert Pastirjak shall receive 60% of the amounts
payable thereunder and (ii) if the Adjusted Principal Amount is less than
the Initial Principal Amount, then William Baquet and Robert Pastirjak
shall each receive 50% of the amounts payable thereunder.
2. Payment. Payment on this Note shall be made in lawful money
of the United States of America at such place as the Holder hereof may
from time to time designate in writing to the Company.
3. Transfer; Successors and Assigns. The terms and conditions
of this Note shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Notwithstanding the
foregoing, the Holder may not assign, pledge, or otherwise transfer this
Note without the prior written consent of the Company.
4. Governing Law. This Note and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto
shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of
conflicts of law.
5. Notices. Any notice required or permitted by this Note shall
be in writing and shall be deemed sufficient upon delivery, when
delivered personally or by a nationally-recognized delivery service (such
as Federal Express or UPS), or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
6. Amendments and Waivers. Any term of this Note may be amended
only with the written consent of the Company and the Holder. Any
amendment or waiver effected in accordance with this Section 6 shall be
binding upon the Company, the Holder and each transferee of the Note.
7. Officers and Directors Not Liable. In no event shall any
officer or director of the Company be liable for any amounts due or
payable pursuant to this Note.
8. Action to Collect on Note; Disputes. If action is instituted
to collect on this Note, the Company promises to pay all costs and
expenses, including reasonable attorney's fees, incurred in connection
with such action. In the event of a dispute regarding the adjustment to
the principal amount of the Note, including, without limitation, the
determination of the operating income of the Acquired Business, the
prevailing party shall be entitled to reimbursement for all reasonable
out-of-pocket costs and expenses, including reasonable attorney's fees of
one counsel.
[Signature Page Follows]
COMPANY:
BUSINESS RESOURCE GROUP
By: /s/ J. W. Peth
J. W. Peth, President
Address: 2150 North First
Street
Suite 101
San Jose, CA 95131
AGREED TO AND ACCEPTED:
WILLIAM H. BAQUET, JR.
/s/ William H. Baquet, Jr.
878 Monte Verde Drive
Arcadia, CA 91007
ROBERT G. PASTIRJAK
/s/ Robert G. Pastirjak
4218 Costello Avenue
Sherman Oaks, CA 91423
Schedule A
Principal Amount Adjustment Schedule for
Promissory Note for the Year Ended October 31, 2002
If the Operating Income of
the Acquired Business for
the Period from November
1, 2001 to
October 31, 2002 is:
Then the Adjusted
Principal Amount of Note
shall be:
$1,550,000 and above
$650,000
$1,450,000 to
$1,549,999.99
$575,000
$1,350,000 to
$1,449,999.99
$500,000
$1,250,000 to
$1,349,999.99
$425,000
$1,150,000 to
$1,249,999.99
$350,000
$1,050,000 to
$1,149,999.99
$275,000
$950,000 to $1,049,999.99
$200,000 (no adjustment)
$850,000 to $949,999.99
$150,000
$750,000 to $849,999.99
$100,000
$650,000 to $749,999.99
$50,000
$0 to $649,999.99
$0.00
EXHIBIT D
2003 Note
PROMISSORY NOTE
$200,000 November 8, 1999
(subject to adjustment) San Jose, California
For value received, Business Resource Group, a California
corporation (the "Company"), promises to pay to William H. Baquet, Jr.
and Robert G. Pastirjak (together, the "Holder"), the principal amount of
Two Hundred Thousand Dollars ($200,000) (the "Initial Principal Amount"),
subject to adjustment (the "Adjusted Principal Amount") as set forth in
Section 1 below. Interest shall not accrue thereon. This Note is the
fourth in a series of four Notes issued to the Holder containing
substantially identical terms and conditions (other than the adjustment
terms applicable to the respective principal amounts as set forth in
Section 1 of each Note), issued pursuant to that certain Stock Purchase
Agreement (the "Agreement") dated November 8, 1999, to be effective as of
November 1, 1999, by and among the Company, Baquet-Pastirjak, Inc. (the
"Acquired Business"), and William H. Baquet, Jr. and Robert G. Pastirjak,
the sole shareholders of the Acquired Business. This Note is subject to
the following terms and conditions.
1. Maturity; Adjustment to Principal Amount. This Note will
mature and become due and payable on December 15, 2003 (the "Maturity
Date"). Interest shall not accrue on the principal amount due under this
Note. The principal amount of this Note shall be subject to adjustment
on the Maturity Date based on the operating income of the Acquired
Business (or any successor entity or business unit as operated by the
Company) as set forth on Schedule A attached hereto. The operating
income of the Acquired Business shall be determined in good faith by the
Company in accordance with generally accepted accounting principles and
shall be calculated as follows: revenues minus cost of goods sold, minus
operating expenses and minus operating interest, but before acquisition
interest and goodwill. Any dispute regarding the adjustment to be made
shall be resolved by arbitration pursuant to Section 11.1 of the
Agreement. The amount payable to the Holder on the Maturity Date shall
be distributed by the Company to the Holder as follows: (i) if the
Adjusted Principal Amount is greater than or equal to the Initial
Principal Amount, then William Baquet shall receive 40% of the amounts
payable thereunder and Robert Pastirjak shall receive 60% of the amounts
payable thereunder and (ii) if the Adjusted Principal Amount is less than
the Initial Principal Amount, then William Baquet and Robert Pastirjak
shall each receive 50% of the amounts payable thereunder.
2. Payment. Payment on this Note shall be made in lawful money
of the United States of America at such place as the Holder hereof may
from time to time designate in writing to the Company.
3. Transfer; Successors and Assigns. The terms and conditions
of this Note shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Notwithstanding the
foregoing, the Holder may not assign, pledge, or otherwise transfer this
Note without the prior written consent of the Company.
4. Governing Law. This Note and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto
shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of
conflicts of law.
5. Notices. Any notice required or permitted by this Note shall
be in writing and shall be deemed sufficient upon delivery, when
delivered personally or by a nationally-recognized delivery service (such
as Federal Express or UPS), or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
6. Amendments and Waivers. Any term of this Note may be amended
only with the written consent of the Company and the Holder. Any
amendment or waiver effected in accordance with this Section 6 shall be
binding upon the Company, the Holder and each transferee of the Note.
7. Officers and Directors Not Liable. In no event shall any
officer or director of the Company be liable for any amounts due or
payable pursuant to this Note.
8. Action to Collect on Note; Disputes. If action is instituted
to collect on this Note, the Company promises to pay all costs and
expenses, including reasonable attorney's fees, incurred in connection
with such action. In the event of a dispute regarding the adjustment to
the principal amount of the Note, including, without limitation, the
determination of the operating income of the Acquired Business, the
prevailing party shall be entitled to reimbursement for all reasonable
out-of-pocket costs and expenses, including reasonable attorney's fees of
one counsel.
[Signature Page Follows]
COMPANY:
BUSINESS RESOURCE GROUP
By: /s/ J. W. Peth
J. W. Peth, President
Address: 2150 North First
Street
Suite 101
San Jose, CA 95131
AGREED TO AND ACCEPTED:
WILLIAM H. BAQUET, JR.
/s/ William H. Baquet, Jr.
878 Monte Verde Drive
Arcadia, CA 91007
ROBERT G. PASTIRJAK
/s/ Robert G. Pastirjak
4218 Costello Avenue
Sherman Oaks, CA 91423
Schedule A
Principal Amount Adjustment Schedule for
Promissory Note for the Year Ended October 31, 2003
If the Operating Income of
the Acquired Business for
the Period from November
1, 2002 to
October 31, 2003 is:
Then the Adjusted
Principal Amount of Note
shall be:
$1,650,000 and above
$650,000
$1,550,000 to
$1,649,999.99
$575,000
$1,450,000 to
$1,549,999.99
$500,000
$1,350,000 to
$1,449,999.99
$425,000
$1,250,000 to
$1,349,999.99
$350,000
$1,150,000 to
$1,249,999.99
$275,000
$1,050,000 to
$1,149,999.99
$200,000 (no adjustment)
$950,000 to $1,049,999.99
$150,000
$850,000 to $949,999.99
$100,000
$750,000 to $849,999.99
$50,000
$0 to $749,999.99
$0.00
EXHIBIT E
Employee List
EXHIBIT F
Shareholder List
EXHIBIT G
Form of Escrow Agreement
EXHIBIT H
Opinion of Company Counsel
EXHIBIT I
Leases
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PRESS RELEASE
Contact: John Palmer
Vice President of Finance
Chief Financial Officer
Business Resource Group
(408) 325-3210
[email protected]
For Immediate Release
BUSINESS RESOURCE GROUP ACQUIRES $15 MILLION
LOS ANGELES FURNITURE DEALERSHIP
Company Expands Operations into Major New Market
SAN JOSE, Calif. -- November 9, 1999 -- Business Resource Group (BRG)
(Nasdaq:BRGP), a nationwide provider of single-sourced workspace products
and service solutions, today announced that is has acquired Baquet-
Pastirjak, Inc. (doing business as "Furniture Source"), a contract
furniture dealership in Los Angeles. While the terms of the transaction
were not disclosed, BRG believes that the acquisition of Furniture Source
will be accretive to BRG earnings. Furniture Source will be operated as a
wholly-owned subsidiary of BRG.
Furniture Source has annual revenues of approximately $15 million and was
formed in September, 1998 by the combination of three established
contract furniture dealers, Hirsch Business Interiors, In The Works, and
Office Furniture Source. The company has 34 employees, operates out of
three sales offices in the greater Los Angeles area, and is a leading
dealer for Kimball Office Furniture Group.
Bill Baquet, president, and Bob Pastirjak, Executive Vice President, of
Furniture Source will continue in their respective capacities with the
new subsidiary.
"We are very excited about adding Furniture Source to the BRG family of
companies," commented John W. Peth, president and chief executive officer
of BRG. "This acquisition provides BRG with a strong presence in one of
the nation's largest furniture markets, a market where we see the
opportunity for substantial future growth. Furniture Source and its
predecessor companies have a very experienced management team, a
successful operating track record and have established an excellent
reputation in the greater Los Angeles market."
- -more-
"The management and employees of Furniture Source are very enthusiastic
about becoming part of the BRG organization," commented Bill Baquet. "We
believe that BRG's strategy of providing single-sourced workspace
solutions and the resources they provide can be utilized to leverage
Furniture Source's market presence in Los Angeles to achieve significant
growth."
Business Resource Group
BRG is a publicly traded provider of comprehensive, single-sourced
workspace product and service solutions, specializing in the cost-
effective management of changes in business facilities. BRG's customer
base includes industry leaders across multiple segments, such as Cisco
Systems, CompUSA, Deloitte & Touche, Excel Communications, Fujitsu
Computer Products, Infoseek, Motorola, Primeco Leasing, the San Jose
Sharks, Silicon Valley Bank, and Sony Electronics. Headquartered in San
Jose, California, BRG has additional offices in Dallas, Phoenix, San
Diego, San Francisco, Los Angeles, and Raleigh/Greensboro.
# # #
The matters discussed herein include forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and are subject to certain risks and uncertainties that could
cause the actual results to differ materially from those projected.
Factors that could cause actual results to differ materially include, but
are not limited to, the continued strength of sales to Cisco Systems,
Inc. and other major customers; the timely availability, delivery and
acceptance of new products and services; the impact of competitive
products, services and pricing; the management of growth and
acquisitions; and other risks detailed from time to time in the Company's
reports filed with the Securities and Exchange Commission and news
releases, copies of which are available from the Company on request.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to release publicly the results of any revisions
to these forward-looking statements, which may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
