ASSET PURCHASE AGREEMENT
Agreement made as of the 1st day of August, 1997 by and among AlphaNet
Solutions, Inc., a New Jersey corporation with its principal office at ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Buyer"), The ▇▇▇▇▇ Group,
Inc., a New York corporation with its principal office at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Seller"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇, the sole shareholder
of the Seller (the "Shareholder"). The Seller and the Shareholder are sometimes
collectively referred to herein as the "Selling Parties."
Preliminary Statement
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The Seller is engaged principally in the business of providing computer
consulting services and the sale of computer equipment and systems, and the
installation of local area networks for corporate and individual end users
located throughout the New York metropolitan area (the "Business"). The Buyer
desires to purchase, and the Seller desires to sell, certain of the assets and
the Business of the Seller, for the consideration set forth below and the
assumption of certain of the Seller's liabilities set forth below, subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets
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1.1 Delivery of the Assets.
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(a) Subject to and upon the terms and conditions of this Agreement, except
as specifically provided in Section 1.1(b) hereof, at the closing of the
transactions contemplated by this Agreement (the "Closing"), the Seller shall
sell, transfer, convey, assign and deliver to the Buyer, and the Buyer shall
purchase from the Seller, free and clear of all liens, liabilities, security
interests, leasehold interests and encumbrances of any nature whatsoever (except
as otherwise expressly provided herein), all of the properties, assets and other
claims, rights and interests of the Seller which are necessary to conduct the
Business as it is conducted as of the date hereof of whatever kind, character or
description, whether real, personal or mixed, tangible or intangible, wherever
situated, including without limitation:
(i) all inventories of raw materials, work in process, goods in transit
(i.e., inventories purchased by, but not delivered to, the Seller), finished
goods, office supplies, maintenance supplies, packaging materials, spare parts
and similar items (collectively, the "Inventory");
(ii) those prepaid expenses set forth in Schedule 1.1(a)(ii);
(iii) all rights under the contracts, agreements, leases, licenses,
purchase orders, customer sales agreements and other instruments set forth on
Schedule 2.9(b) and Schedule 2.13(a) attached hereto (collectively, the
"Contract Rights");
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(iv) all books; payment records; accounts; customer lists; environmental
reports or studies; correspondence; production records; technical, accounting,
manufacturing and procedural manuals; engineering data; development and design
data; plans, blueprints, specifications and drawings; employment and personnel
records; and other useful business records, including electronic media, and any
confidential or other information which has been reduced to writing, utilized in
the conduct of or relating to the Business or the Assets (as hereinafter
defined), subject to the Seller's right to retain copies thereof which the
Seller reasonably requires for its ongoing operation, winding-up or dissolution;
(v) all rights of the Seller under express or implied warranties from the
suppliers of the Assets to the extent transferable (but excluding such rights
insofar as the same pertain to liabilities retained by the Seller hereunder);
(vi) the motor vehicles and other rolling stock listed on Schedule
1.1(a)(vi);
(vii) all of the machinery, equipment, tools, dies, tooling, production
fixtures, maintenance machinery and equipment, computers, telecommunication
systems, fittings and other office equipment, furniture, leasehold improvements
and construction in progress on the date hereof whether or not reflected as
capital assets in the accounting records of the Seller which are owned by the
Seller and used or useful in the Business including, but not limited to, all of
the foregoing located at the locations set forth on Schedule 1.l(a)(vii)
(collectively, the "Fixed Assets");
(viii) all right, title and interest of Seller in and to all intangible
property rights relating to the Business, including, but not limited to,
inventions, discoveries, trade secrets, processes, formulas, know-how, United
States and foreign patents, patent applications, trade names, including but not
limited to the names "The ▇▇▇▇▇ Group, Inc." and "Micro Computer Systems, Inc.",
or any derivation thereof and those names listed on Schedule 2.20 attached
hereto, trademarks, trademark registrations, applications for trademark
registrations, copyrights, copyright registrations, certification marks,
industrial designs, technical expertise, research data and other similar
property and the registrations and applications for registration thereof owned
by the Seller or, where not owned, used by the Seller in the Business and all
goodwill associated thereto and all licenses and other agreements to which the
Seller is a party (as licensor or licensee) or by which the Seller is bound
relating to any of the foregoing kinds of property or rights to any "know-how"
or disclosure or use of ideas (collectively, the "Intangible Property");
(ix) all transferable approvals, authorizations, certifications, consents,
variances, permissions, licenses and permits to or from, or filings, notices or
recordings to or with, federal, state, foreign, and local governmental
authorities as held or effected by the Seller in connection with the Assets;
(x) all of the Seller's goodwill and the exclusive right to use the names
of the Seller as all or part of a corporate name;
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(xi) all accounts receivable and notes receivable set forth on Schedule
1.1(a)(xi) (including any security held by the Seller for the payment thereof)
(collectively, the "Accounts Receivable");
(xii) any refunds of federal, state, foreign or local income or other tax
paid by the Seller;
(xiii) cash or cash equivalents ("Cash"); and
(xiv) except as specifically provided in Section 1.1(b) hereof, all other
assets, properties, claims, rights and interests of the Seller which relate to
the Business and exist on the date hereof, of every kind and nature and
description, whether tangible or intangible, real, personal or mixed.
(b) Notwithstanding the provisions of Section 1.1(a) above, the assets to
be transferred to the Buyer under this Agreement shall not include (i) any of
Seller's rights or consideration under this Agreement; (ii) any insurance
policies currently held by the Seller and related premium agreements for general
liability, product liability and workers compensation insurance for periods
prior to the date hereof; or (iii) those assets listed on Schedule 1.1(b)
attached hereto (collectively, the "Excluded Assets").
(c) The Inventory, Contract Rights, Fixed Assets, Intangible Property,
Accounts Receivable, Cash and other properties, assets and business of the
Seller described in Section 1.1(a) above, other than the Excluded Assets, shall
be referred to collectively as the "Assets."
1.2 Further Assurances.
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(a) At the Closing, the Seller shall execute and deliver a ▇▇▇▇ of Sale
(the "▇▇▇▇ of Sale") substantially in the form attached hereto as Exhibit A, and
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the assignments described in Sections 8.14(b) and (c) hereof. At any time and
from time to time after the Closing, at the Buyer's request and without further
consideration, the Selling Parties (or their successors) promptly shall execute
and deliver such assignments of leases and other instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other action, as the
Buyer may reasonably request to more effectively transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the Assets and the
Business, to put the Buyer in actual possession and operating control thereof,
to assist Buyer in exercising all rights with respect thereto and to carry out
the purpose and intent of this Agreement.
(b) The Selling Parties and the Buyer each will use its best efforts to
obtain as promptly as possible written consents to the transfer, assignment or
sublicense to the Buyer of all agreements, commitments, purchase orders,
contracts, licenses, leases, rights and other contract documents being
transferred pursuant to Section 1.1(a) hereof where the approval or other
consent of any other person is required. If any such approval or consent cannot
be obtained, or if the parties hereafter agree in writing that it is not in
their respective best interests to obtain any such approval or other consent,
the Selling Parties will cooperate with the Buyer in any reasonable arrangement
designed to provide the Buyer with substantially the same economic
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benefits as if such approval or other consent had been obtained and the transfer
effected on or before the date hereof.
1.3 Assumption of Liabilities.
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(a) At the Closing, the Buyer shall execute and deliver an Assumption
Agreement (the "Assumption Agreement") substantially in the form attached hereto
as Exhibit B, pursuant to which it shall assume and agree to (i) perform, pay
and discharge all those liabilities and obligations set forth on Schedule
1.3(a)(i) attached hereto which were incurred in the ordinary course of business
of the Business and are outstanding on the date hereof (the obligations set
forth in (i) are collectively, the "Assumed Current Liabilities"); (ii) perform
in accordance with their terms those obligations outstanding on the date hereof
under the Contract Rights; (iii) perform, pay and discharge all those
liabilities and obligations set forth on Schedule 1.3(a)(iii) relating to (A)
the State Insurance Disability Fund, (B) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, and (C) ▇▇▇▇▇ ▇▇▇▇▇
(which liabilities and obligations shall not exceed $200,000 in the aggregate);
and (iv) perform in accordance with their terms those liabilities arising after
the date hereof from any agreement, contract, commitment or other contract
documents which the Buyer has requested be transferred to it pursuant to Section
1.1(a) but which has not been so transferred due to the failure of Seller to
obtain the consent or approval required for such transfer, provided that the
Buyer has received substantially the same economic benefit of such contract as
if such consent or approval had been obtained (the obligations set forth in (i),
(ii), (iii) and (iv) are, collectively, the "Assumed Liabilities").
(b) Except as otherwise provided herein, the Buyer shall not assume any of
the liabilities of the Selling Parties and shall purchase the Assets free and
clear of all liens, mortgages, security interests, encumbrances and claims and
the Selling Parties each represent, warrant and agree that the Buyer shall not
be or become liable for any claims, demands, liabilities or obligations not
expressly assumed in this Agreement of any kind whatsoever arising out of or
relating to the conduct of the Business by Seller or the Assets or Assumed
Liabilities prior to the date hereof. Without limiting the foregoing, the Buyer
shall not at the Closing assume or agree to perform, pay or discharge, and the
Selling Parties shall remain unconditionally liable for, all obligations,
liabilities and commitments, fixed or contingent, of the Selling Parties other
than the Assumed Liabilities, including but not limited to:
(i) except as set forth in Section 1.3(a)(iii)(A) and Section 6 hereof,
severance, termination or other payments or benefits (including but not limited
to post-retirement benefits) including but not limited to those owing under
Seller's severance policy or any employment agreement to any employees (union or
non-union), sales agents or independent contractors employed by the Seller prior
to the Closing (collectively, "Seller's Employees"), liabilities arising under
any federal, state, local or foreign "plant closing law", liabilities accruing
under the Seller's employee benefit plans, vacation pay plans or programs,
retirement plans, and liabilities for any Employee Plan (as defined in Section
2.21 except those liabilities to Seller's Employees who become employees of the
Buyer after the Closing relating solely to and arising solely out of their term
of employment with the Buyer), as the case may be;
(ii) worker's compensation claims arising from events prior to the Closing;
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(iii) stock option or other stock-based awards made to the Seller's
Employees;
(iv) liabilities for any federal, state, local or foreign income taxes
(including interest, penalties and additions to such taxes) or any deferred
income taxes of the Selling Parties;
(v) liabilities for any payroll taxes (including interest, penalties and
additions to such taxes), except those liabilities to Seller's Employees who
become employees of the Buyer after the Closing relating solely to and arising
solely out of their term of employment with the Buyer, as the case may be;
(vi) liabilities incurred for violations of occupational safety, wage,
health, welfare, employee benefit or environmental laws or regulations prior to
the date hereof;
(vii) liabilities to the extent related solely to the Excluded Assets;
(viii) except as provided in Section 12 hereof, any tax (including but not
limited to any federal, state, local or foreign income, franchise, single
business, value added, excise, customs, intangible, sales, transfer, recording,
documentary or other tax) imposed upon, or incurred by, the Selling Parties, if
any, in connection with or related to this Agreement or the transactions
contemplated hereby (including interest, penalties and additions to such taxes);
(ix) liabilities for any commercial rent taxes to the extent accrued but
not paid prior to the date hereof;
(x) other than the Assumed Liabilities, any liabilities of the Seller to
third parties arising out of the failure of the Seller to obtain any necessary
consents to the assignment to the Buyer of contracts or leases to which the
Seller is a party (including damages asserted by third parties for breach of
such contracts or leases due to the failure to obtain such consents);
(xi) liabilities, contingent or otherwise, which are not disclosed on
Schedule 1.3(a)(i) or Schedule 1.3(a)(iii);
(xii) liabilities of the Seller for any state franchise taxes or annual
license or other fees relating to qualification as a foreign corporation or
authorization to do business in such states (including interest, penalties and
additions to such taxes and fees); and
(xiii) any other liabilities of any kind or nature whether now in existence
or arising hereafter not expressly assumed by the Buyer under Section 1.3(a)
hereof.
1.4 Purchase Price. In consideration of the transfer of the Business and
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Assets of the Seller to the Buyer hereunder, the Buyer will assume the Assumed
Liabilities and will pay an aggregate purchase price (the "Purchase Price"),
subject to the provisions of Section 1.5, equal
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to $1,000,000 in cash payable to the Seller (the "Cash Consideration") and an
additional $100,000 as set forth in Section 1.5(f).
1.5 The Closing.
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(a) The Closing shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ on the date hereof. The
transfer of the Assets by the Seller to the Buyer shall be deemed to occur on
the date hereof.
(b) At the Closing, the Buyer shall pay the Purchase Price in the following
manner:
(i) by the assumption of the Assumed Liabilities; and
(ii) by tender in payment of the Cash Consideration as follows:
The Buyer shall pay $250,000 of the Cash Consideration to a third
party escrow agent, reasonably acceptable to the Buyer and the Seller, as
"Escrow Agent" pursuant to the Escrow Agreement substantially in the form
of Exhibit C attached hereto (the "Escrow Agreement"), by wire transfer to
the account specified in the Escrow Agreement. The disbursement of amounts
held by the Escrow Agent shall be done in accordance with the terms of
Section 1.5(c) and the Escrow Agreement. The Buyer shall pay the balance of
the Cash Consideration to the Seller by wire transfer to an account to be
specified by the Seller.
(c) At the Closing, the Seller shall deposit $250,000 into an
interest-bearing escrow account to be held by the Escrow Agent. The fees of the
Escrow Agent shall be paid out of the escrowed funds. The distribution of the
escrowed funds shall be made in accordance with the following. On a date 180
days after the Closing (the "Final Balance Sheet Date"), the parties will
mutually determine what the net worth of the Assets was as of the Closing. The
net worth of the Assets shall be defined as the book value of the tangible
assets acquired less the dollar amount of the liabilities assumed and shall be
determined in accordance with the pro forma balance sheet attached in Schedule
1.5(c) subject to the following adjustments:
(i) all Accounts Receivable collected by the Buyer between the Closing and
the Final Balance Sheet Date shall be reflected as an Asset on the balance sheet
prepared at the Final Balance Sheet Date as a separate line item identified as
"Collected Accounts Receivable";
(ii) all of the Accounts Receivable not collected by the Buyer by the Final
Balance Sheet Date shall be valued at zero;
(iii) the value of any rent concession shall not be deemed a liability;
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(iv) any favorable adjustments to the Seller's accounts payable after the
Closing shall be reflected as a reduced liability on the balance sheet prepared
at the Final Balance Sheet Date; and
(v) all deferred tax assets and any other refunds of federal, state,
foreign or local income tax or other tax not received by the Seller by the Final
Balance Sheet Date shall be valued at zero.
The escrowed funds shall be distributed within five days of such mutual
determination. In the event that on the Final Balance Sheet Date, the tangible
net worth of the Assets (as of the date of the Closing) is less than $0, the
amount of such difference shall be paid out of the escrowed funds to the Buyer,
up to the amount of funds available. The remainder of the escrowed funds, if
any, shall be paid to the Seller. In the event that on the Final Balance Sheet
Date, the tangible net worth of the Assets (as of the date of the Closing) is
greater than $0, the escrowed funds shall be paid to the Seller and the excess
shall be divided one-half to the Buyer and one-half to the Seller, with the
Buyer distributing the Seller's portion of such overage within five (5) days of
such determination.
(d) The Buyer shall continue to use its reasonable commercial efforts to
collect the Accounts Receivable following the Final Balance Sheet Date. In the
event that on the Final Balance Sheet Date, all or a portion of the Accounts
Receivable have not been collected by the Buyer, any amounts collected by the
Buyer in payment of the Accounts Receivable after the Final Balance Sheet Date
(the "Post-Closing Proceeds") shall be distributed as follows:
If Tangible Net Worth of the Assets (as of
the date of Closing) plus the Post-Closing
Proceeds is: Distribution of Post-Closing Proceeds:
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less than negative $250,000 to the Buyer until tangible net worth of the
Assets (as of the date of Closing) plus Post
-Closing Proceeds equals negative $250,000;
thereafter
less than zero, but greater than negative to the Seller until tangible net worth of the
$250,000 Assets plus Post-Closing Proceeds equal zero;
thereafter
greater than zero divided equal between the Buyer and the
Seller.
Any distribution to be made by the Buyer to the Seller pursuant to this Section
1.5(d) shall be made on a monthly basis.
(e) The Buyer shall pay an additional $50,000 to the Seller on each of the
first and second anniversary of the Closing.
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1.6 Allocation of Purchase Price. The aggregate amount of the Purchase
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Price shall, for tax purposes only, be allocated among the Assets and Assumed
Liabilities substantially in accordance with the amounts set forth on Schedule
1.6. The Seller and the Buyer agree that they will not take any position which
is materially inconsistent with the allocations provided for in this Agreement
in preparing income, capital or franchise tax returns.
2. Representations of the Seller
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The representations and warranties made by the Seller herein or in any
instrument or document furnished in connection herewith shall survive the
Closing until (and including) the fifth anniversary of the date hereof. The
representations and warranties in this Section 2 or in any document delivered to
the Buyer pursuant to this Agreement are deemed to be material and the Buyer is
entering into this Agreement relying on such representations and warranties. The
Seller represents and warrants to the Buyer as follows (it being understood that
all references in this Section 2 to the Seller shall be deemed to include any of
Seller's subsidiaries, unless the context otherwise requires):
2.1 Organization. The Seller is a corporation duly organized, validly
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existing and in good standing under the laws of the state of its incorporation,
and has all requisite power and authority (corporate and other) to own its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein, and to consummate
the transactions contemplated hereby. Schedule 2.1 sets forth the authorized and
outstanding capital stock of the Seller as well as the record and beneficial
owners thereof. Except as set forth on Schedule 2.1, the Seller does not own or
control, directly or indirectly, any corporation, partnership, association or
business entity. The Seller is duly qualified to do business and in good
standing in all jurisdictions in which its ownership of property or the
character of its business requires such qualification. Schedule 2.1 contains a
true, correct and complete list of all of the jurisdictions in which the
ownership of the property used in the Business or the nature of the Business
requires qualification.
2.2 Authorization. The execution and delivery of this Agreement (and all
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other agreements provided for herein) by the Seller, and the consummation by the
Seller of all transactions contemplated hereby, has been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Seller is a party constitutes the
valid and legally binding obligations of the Seller, enforceable against it, in
accordance with their respective terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally. The execution, delivery and performance by the
Seller of this Agreement and the agreements provided for herein, and the
consummation by the Seller of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice or the passage of time or both,
(a) violate the provisions of any law, rule or regulation applicable to the
Seller; (b) violate the provisions of the Certificate of Incorporation or Bylaws
of the Seller; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator; or (d) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Seller pursuant to, any indenture,
mortgage, deed of trust or other
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instrument or agreement to which any of them is a party or by which any of them
or any of their properties is or may be bound, other than with respect to
obligations of Seller which will be discharged at or prior to Closing. Schedule
2.2 attached hereto sets forth a true, correct and complete list of all
consents, approvals, permissions, licenses, authorizations and other
requirements prescribed by law, rule, regulation or by contract in connection
with the consummation by the Seller of the transactions contemplated by this
Agreement. Except as indicated on Schedule 2.2, all such items have been or will
be, prior to the date hereof, obtained and satisfied.
2.3 Ownership of the Assets. Schedule 2.3 attached hereto sets forth a
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true, correct and complete list of all claims, liabilities, liens, pledges,
charges, encumbrances and equities of any kind affecting their respective Assets
(collectively, the "Encumbrances"). The Seller is, and at the Closing will be,
the true and lawful owner of the Assets, and will have the right to sell and
transfer to the Buyer good and marketable title to all Assets, which at the
Closing will be free and clear of all Encumbrances. The delivery to the Buyer of
the instruments of transfer of ownership contemplated by this Agreement will
vest good and marketable title to all Assets in the Buyer, free and clear of all
liens, mortgages, pledges, security interests, restrictions, prior assignments,
encumbrances and claims of any kind or nature whatsoever. The Assets to be
conveyed to the Buyer hereunder constitute all properties, assets, rights and
claims which are necessary to the conduct of the Business as currently conducted
by the Seller.
2.4 Financial Statements.
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(a) The Seller has previously delivered to the Buyer its audited balance
sheet as of June 30, 1996 (the "June 1996 Balance Sheet") and the related
statements of operations, shareholders' equity and changes in financial position
of the Seller for the fiscal year then ended (collectively, the "June 1996
Financial Statements") and its audited balance sheet as of June 30, 1997 (the
"June 1997 Balance Sheet") and the related audited statements of operations,
shareholders' equity and changes in financial position of the Seller for the
year then ended (the "June 1997 Financial Statements"). The June 1996 Financial
Statements and the June 1997 Statements (collectively, the "Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied consistently with past practice.
(b) The Financial Statements are accurate and complete, and fairly present,
in all material respects, as of their respective dates, the financial condition,
retained earnings (deficit), assets and liabilities of the Seller and the
results of operations of the Seller's business for the periods indicated.
Nothing has come to the attention of the Seller since the date of the Financial
Statements which would lead it to believe that the reserves and accruals shown
thereon are inadequate for all reasonably anticipated losses, costs and expenses
and the Seller reasonably believes that such reserves and accruals are adequate
for all of such losses, costs and expenses.
2.5 Litigation. Except as set forth on Schedule 2.5, the Seller is not a
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party to, or to the Seller's best knowledge threatened with, and none of the
Assets are subject to, any litigation, suit, action, investigation (to the best
of the Seller's knowledge), grievance, arbitration, proceeding, or controversy
or claim before, or any agreement with, any court, administrative agency or
other governmental authority relating to or affecting the Assets or the
business, properties, condition (financial or otherwise) or prospects of the
Business. The Seller is not in
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violation of or in default with respect to any judgment, order, award, writ,
injunction, decree or rule of any court, governmental department, commission,
agency, instrumentality, arbitrator, administrative agency or governmental
authority or any regulation of any administrative agency or governmental
authority, where such violation or default would have a material adverse effect
upon the Assets, the business, properties, condition (financial or otherwise) or
prospects of the Business or the consummation of the transactions contemplated
hereby. The Seller has not received notice of any product liability claim,
warranty claim or other claim whatsoever which, if decided adversely, would have
a material adverse effect on the Assets or the business, condition (financial or
otherwise), properties or prospects of the Business.
2.6 Insurance. Schedule 2.6 sets forth a true, correct and complete list of
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all fire, theft, casualty, general liability, workers compensation, business
interruption, environmental impairment, product liability, automobile and other
insurance policies insuring the Assets or business of the Business and of all
life insurance policies maintained for any employees of the Business, specifying
the type of coverage, the amount of coverage, the premium, the insurer and the
expiration date of each such policy (collectively, the "Insurance Policies") and
all claims made under such Insurance Policies since January 1, 1993. True,
correct and complete copies of all of the Insurance Policies have been
previously delivered by the Seller to the Buyer. The Insurance Policies are in
full force and effect and are in amounts and of a nature which are adequate and
customary for the business of the Business. All premiums due on the Insurance
Policies or renewals thereof have been paid and there is no default under any of
the Insurance Policies. Except as set forth on Schedule 2.6, the Seller has not
received any notice or other communication from any issuer of the Insurance
Policies canceling or materially amending any of the Insurance Policies,
materially increasing any deductibles or retained amounts thereunder, or
materially increasing the annual or other premiums payable thereunder, and, to
the best knowledge of the Seller, no such cancellation, amendment or increase of
deductibles, retainers or premiums is threatened.
2.7 Inventory. Schedule 2.7 sets forth a true, correct and complete list of
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the Inventory as of date hereof, including a description and valuation thereof.
At the date hereof, the Inventory will consist of items of a quality and
quantity which are usable or saleable, without discount and at values at least
equal to the values indicated on the latest balance sheet included in the
Financial Statements, in the ordinary course of business, except as otherwise
reserved or provided for in accordance with the procedures set forth on Schedule
2.7, conducted by and within the normal operating cycle of the Business. At the
date hereof, the value of all items of obsolete materials, excess quantities of
materials and of materials of below standard quantity will be reserved for in
accordance with the procedures set forth in Schedule 2.7, and to the extent not
inconsistent, with generally accepted accounting principles. Prior to the
Closing, the Seller shall have conducted a physical inventory observed by a
designee of the Buyer. Such physical inventory shall be certified by the
Seller's Chief Executive Officer and Chief Financial Officer to the Buyer.
2.8 Fixed Assets. Schedule 2.8 sets forth a true, correct and complete list
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of all Fixed Assets as of the date hereof, including a description and the cost
and accumulated depreciation on an aggregate basis with respect to all Fixed
Assets. Except as set forth in Schedule 2.8, as of the date hereof, the Fixed
Assets are in good condition and repair and are sufficiently operational (apart
from ordinary wear and tear) to enable the Buyer to conduct the business in
essentially the
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same manner in which it has heretofore been conducted by the Seller. Prior to
the Closing, the Seller shall have completed a physical inventory of the Fixed
Assets and has identified the Fixed Assets to the reasonable satisfaction of the
Buyer, including without limitation, the inspection thereof.
2.9 Leases. Schedule 2.9(a) attached hereto sets forth a true, correct and
------
complete list as of the date hereof of all leases of real estate, identifying
separately each ground lease, to which the Seller is a party as lessee or tenant
or which the Seller uses in the operations of the Business. Schedule 2.9(b)
attached hereto sets forth a list of all leases of real estate which the Buyer
will assume pursuant to this Agreement (the "Leases"). True, correct and
complete copies of the Leases, and all amendments, modifications and
supplemental agreements thereto, have previously been delivered by the Seller to
the Buyer. The Leases are in full force and effect, are binding and enforceable
against each of the parties thereto in accordance with their respective terms
and, except as set forth on Schedule 2.9(b) attached hereto, have not been
modified or amended since the date of delivery to the Buyer. No party to any
Lease has sent written notice to the other claiming that such party is in
default thereunder, which default remains uncured. Except as set forth on
Schedule 2.9(b) attached hereto, there has not occurred any event which would
constitute a breach of or default in the performance of any material covenant,
agreement or condition contained in any Lease by either party thereto, nor has
there occurred any event which with the passage of time or the giving of notice
or both would constitute such a breach or material default. The Seller is not
obligated to pay any leasing or brokerage commission relating to any Lease and
will not have any enforceable obligation to pay any leasing or brokerage
commission upon the renewal or extension of any Lease. No material construction,
alteration or other leasehold improvement work with respect to any of the Leases
remains to be paid for or to be performed by any party under any Lease. Seller
has fulfilled all material obligations required pursuant to the Leases to have
been performed by Seller and has no reason to believe that it will be unable to
perform, when due, all of its remaining obligations under said Leases after the
date hereof to the Closing. None of the Leases imposes any restrictions that
would materially interfere with the continued operation of the business as
currently conducted on any of the properties that are the subject of the Leases.
There is no pending or, to the best of the Selling Parties' knowledge,
threatened eminent domain taking or condemnation that will or may affect any of
the properties that are the subject of the Leases.
2.10 Change in Financial Condition and Assets. Since June 30, 1997, there
-----------------------------------------
has been no change which materially and adversely affects the Assets or the
business, properties, condition (financial or otherwise) or prospects of the
Business. The Seller has no knowledge of any existing or threatened occurrence,
event or development related to the Assets or the business, properties,
condition (financial or otherwise) or prospects of the Business which could have
a material adverse effect on the Assets or the business, properties, condition
(financial or otherwise) or prospects of the Business.
2.11 Accounts Receivable. Schedule 1.1(a)(xi) sets forth a true, correct
--------------------
and complete list of all Accounts Receivable, including an aging thereof as of
the date hereof. All Accounts Receivable arose out of the sales of inventory or
services in the ordinary course of business.
2.12 Books and Records. The general ledgers and books of account of the
------------------
Seller with respect to the Business, all federal, state, local and foreign
income, franchise, property and other
11
tax returns filed by the Seller, with respect to the Assets, and all other books
and records of the Seller with respect to the Business are in all material
respects complete and correct and have been maintained in accordance with good
business practice and in accordance with all applicable procedures required by
laws and regulations other than any digression from such practice and procedures
which has no material and adverse effect on the Assets or the Business, or the
valuations thereof for the purposes of this Agreement, as conducted as of and
prior to the date hereof.
2.13 Contracts and Commitments.
-------------------------
(a) Schedule 2.13(a) attached hereto contains a true, complete and correct
list and description of the following contracts and agreements, whether written
or oral, which relate to the Business and which are to be assigned from the
Seller to the Buyer at Closing (collectively, the "Contracts"):
(i) all material loan agreements, indentures, mortgages and guaranties to
which the Seller is a party or by which the Seller or its property is bound;
(ii) all pledges, conditional sale or title retention agreements, security
agreements, equipment obligations, personal property leases and lease purchase
agreements relating to any of the Assets to which the Seller is a party or by
which the Seller or any of its property is bound;
(iii) all contracts, agreements, commitments, purchase orders (other than
merchandise deliveries to customers in the normal course of business upon
standard terms) or other understandings or arrangements to which the Seller is a
party or by which any of their respective property is bound which (A) involve
payments or receipts by any of them of more than $5,000 in the case of any
single contract, agreement, commitment, understanding or arrangement under which
full performance (including payment) has not been rendered by all parties
thereto or (B) may materially adversely affect the condition (financial or
otherwise) or the properties, Assets, business or prospects of the Business;
(iv) all collective bargaining agreements, employment and consulting
agreements, non-competition agreements, trust agreements, executive compensation
plans, bonus, 401(k), or profit-sharing plans, deferred compensation agreements,
pension plans, retirement plans, employee stock option or stock purchase plans
and group life, health and accident insurance and other employee benefit plans,
agreements, memoranda of understanding, arrangements or commitments to which the
Seller is a party or by which the Seller or any of its property is bound;
(v) all agency, distributor, sales representative and similar agreements to
which the Seller is a party;
(vi) all material contracts, agreements or other understandings or
arrangements, whether written or oral, between the Seller and any shareholder,
employee, officer or director of the Seller which may affect the Business as
conducted as of and prior to the date hereof or the Assets;
12
(vii) all leases, whether operating, capital or otherwise, under which the
Seller is lessor or lessee;
(viii) all contracts, agreements and other documents or information
relating to past disposal of waste (whether or not hazardous) which are
available;
(ix) all return policies and product warranties relating to products or
goods manufactured or distributed by the Business as the same are currently in
effect or may have been in effect from time to time since June 30, 1997, as well
as any exception to such policies, all cooperative advertising arrangements and
all rebate, discount or allowance arrangements;
(x) all contracts related to operation, maintenance or management of the
leased facilities under any Leases (the "Leased Premises") other than immaterial
contracts which do not constitute a part of Assumed Liabilities; and
(xi) any licensing agreements, franchise agreements and other material
agreement or contract entered into by the Seller.
(b) Except as set forth on Schedule 2.13(b) attached hereto:
(i) each Contract is a valid and binding agreement of the Seller,
enforceable against the Seller in accordance with its terms, and the Seller has
no knowledge that any Contract is not a valid and binding agreement of the other
parties thereto:
(ii) the Seller has fulfilled all material obligations required pursuant to
the Contracts to have been performed by it prior to the date hereof, and the
Seller has no reason to believe that it will not be able to fulfill, when due,
all of its obligations under the Contracts which remain to be performed after
the date hereof to the Closing;
(iii) the Seller is not in breach of or default under any Contract, and no
event has occurred which with the passage of time or giving of notice or both
would constitute such a default, result in a loss of rights or result in the
creation of any lien, charge or encumbrance, thereunder or pursuant thereto (an
"Inchoate Default"); and
(iv) to the best knowledge of the Seller, there is no existing breach or
default by any other party to any Contract, and no Inchoate Default.
(c) Except as set forth on Schedule 2.13(b), the continuation, validity and
effectiveness of each Contract would not be affected by the transfer thereof to
Buyer under this Agreement and all such Contracts are assignable to Buyer
without a consent.
(d) True, correct and complete copies of all of the foregoing contracts and
agreements (other than all unfilled purchase orders and all unfilled customer
orders), including but not limited to the Contracts, and a list of all unfilled
purchase orders and all unfilled
13
customer orders, shall be delivered by the Seller to the Buyer within five days
of the date hereof other than Contracts which will be terminated as of the
Closing.
2.14 Compliance with Laws. The Seller has all requisite licenses, permits
--------------------
and certificates, including health and safety permits, from federal, state,
local and foreign authorities necessary to conduct the Business and own and
operate the Assets (collectively, the "Permits"). Schedule 2.14 sets forth a
true, correct and complete list of all such Permits, copies of which previously
have been (or within five business days hereof will be) delivered by the Seller
to the Buyer. The Seller has not engaged in any activity which would cause or,
to the knowledge of the Seller, permit revocation or suspension of any such
Permit and no action or proceeding looking to or contemplating the revocation or
suspension of any such Permit is pending or threatened. There are no existing
defaults or Inchoate Defaults by the Seller under any Permit. The Seller has no
knowledge of any default or claimed or purported or alleged default or Inchoate
Defaults on the part of any party in the performance of any obligation to be
performed or paid by any party under any Permit. Except as set forth in Schedule
2.14, the consummation of the transactions contemplated by this Agreement will
in no way affect the continuation, validity or effectiveness of the Permits or
require the consent of any third party under any such Permit. The Seller is not
in violation of any law, regulation or ordinance (including but not limited to
laws, regulations or ordinances relating to building, zoning, land use or
similar matters) relating to its properties, the violation of which could have a
material adverse effect on the Assets or the business, properties, condition
(financial or otherwise) or prospects of the Seller. The business of the Seller
does not violate, in any material respect, and the Seller is not in violation
of, any federal, state, local or foreign laws, regulations or orders, the
violation or enforcement of which would have a material and adverse effect on
the Assets, business, properties, condition (financial or otherwise) or
prospects of the Seller. Except as set forth on Schedule 2.14, the Seller has
not received any notice or communication from any federal, state, foreign, or
local governmental or regulatory authority or otherwise of any such violation or
noncompliance and has not received any notice prior to such time of any
violation that has not been cured.
2.15 Employee Relations.
------------------
(a) The Seller is in compliance with all material federal, state, local and
foreign laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and is not engaged in any unfair
labor practice, and there are no arrears in the payment of wages or taxes or
workers compensation assessments or penalties.
(b) Except as set forth on Schedule 2.15:
(i) none of Seller's Employees are represented by any labor union;
(ii) there is no unfair labor practice complaint against the Seller pending
before the National Labor Relations Board or any state, foreign, or local agency
affecting the Seller;
(iii) there is no pending labor strike or other material labor trouble
affecting the Seller (including but not limited to any organizational campaign);
14
(iv) there is no material labor grievance pending against or affecting the
Seller;
(v) there is no pending organizing activities respecting the Seller's
Employees;
(vi) there are no pending arbitration proceedings arising out of or under
any collective bargaining agreement to which the Seller is a party, or to the
best knowledge of the Seller, any basis for which a claim may be made under any
collective bargaining agreement to which the Seller is a party affecting the
Seller's Employees; and
(vii) there is no pending litigation, or other proceeding or basis for an
unasserted claim against the Seller by any employee or group of employees or
independent contractor or group of independent contractors which is based on
claims arising out of any employee's or group of employees' employment
relationship with the Seller or any independent contractor's or group of
independent contractors' independent consulting relationship with the Seller
(insofar as such relationship pertains to the Business of the Seller), including
but not limited to claims for contract, tort, discrimination, employee benefits,
commissions, wrongful termination, age discrimination, sexual harassment, sexual
discrimination and any and all common law or statutory claims.
2.16 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------
2.16, since June 30, 1997, the Seller has not entered into any transaction which
is not in the usual and ordinary course of business, and, without limiting the
generality of the foregoing, the Seller has not:
(a) Mortgaged, pledged or subjected to lien, charge or other encumbrance
any of the Assets;
(b) Sold or purchased, assigned or transferred any of its Assets (except
for Inventory sold in the ordinary course of business);
(c) Made any material amendment to or termination of any Contract or done
any act or omitted to do any act which would cause the breach of any Contract;
(d) Suffered any casualty losses, whether insured or uninsured, and whether
or not in the control of the Seller, in excess of $5,000 in the aggregate, or
waived any rights of any value unless such loss or waiver is reflected in the
Financial Statements;
(e) Authorized or issued recall notices for any of its products relating to
the Business or initiated any safety investigations relating to the Business;
(f) Merged or consolidated with or into any corporation or other entity;
(g) Made, accrued or become liable for any bonus, profit sharing or
incentive payment, except for accruals under existing plans, if any, or increase
the rate of compensation
15
payable or to become payable by it to any of its officers, or, except in
accordance with past practice and the ordinary course of business, its
employees;
(h) Waived, forgiven, released or compromised any rights of material
(individually or in the aggregate) value to the Business, including without
limitation any indebtedness owed to the Seller;
(i) Failed to use best efforts to (i) preserve the possession, control and
good condition of the Assets and Business, (ii) keep in faithful service its
present officers and key employees, and (iii) preserve the goodwill of its
customers, suppliers, agents, brokers and others having business relations with
it;
(j) Failed to operate the Business and maintain its books, accounts and
records in the customary manner and in accordance with past practice;
(k) Materially altered the terms, status or funding condition of any
Employee Plan except as contemplated by this Agreement;
(l) Entered into any collective bargaining contract, or any joint venture,
partnership or other arrangement for the conduct of the Business;
(m) Declared or paid any dividend or other distribution in respect of
shares of capital stock other than normal distributions for the payment of
income taxes occasioned by subchapter S tax election;
(n) Made any purchase, redemption or other acquisition, directly or
indirectly, of any outstanding shares of its capital stock;
(o) Forgiven, released or compromised any indebtedness owed to the Seller
by any employee or other person except upon full payment or, in the case of any
customer, returns and allowances made in the ordinary course of business
consistent with past practices;
(p) Purchased any assets or securities of any person, other than in the
ordinary course of business;
(q) Commenced any legal proceeding in bankruptcy or any other action
seeking reorganization, liquidation, dissolution, winding-up arrangement,
composition or readjustment of its debts or any other relief under any
bankruptcy, insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect or make any other assignment for the
benefit of its creditors; or
(r) Received notice of any litigation, warranty claim or products liability
claims relating to the Business.
2.17 Customers. Schedule 2.17 sets forth a true, correct and complete list
---------
of the names and addresses of all customers of the Seller. None of the 15
customers which accounted for the largest dollar volume of purchases from the
Seller for the twelve month period ended June 30,
16
1997, has notified the Seller that it intends to discontinue its relationship
with the Seller nor, to the best of the Seller's knowledge, does there exist any
actual or threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship of the Seller with any such
customer nor does there exist a present condition or state of facts or
circumstances known to the Seller involving such customers which would
materially adversely affect the Business or prevent the Buyer from conducting
the Business after the consummation of the transactions contemplated by this
Agreement in essentially the same manner in which it has heretofore been
conducted by the Seller. The Seller has no consignment sales in effect as of the
date hereof and no customer has any return rights except as set forth on
Schedule 2.13(a).
2.18 Suppliers. Schedule 2.18 sets forth a true, correct and complete list
---------
of the names and addresses of the ten suppliers of the Seller which accounted
for the largest dollar volume of purchases by the Seller for the twelve month
periods ended the date hereof and twelve months prior to the date hereof,
respectively. The Seller is not a party to any requirements contract relating to
the purchase of inventory, finished goods or other property used in the conduct
of the Business. None of the Seller's suppliers has notified the Seller that it
intends to discontinue its relationship with the Seller, nor raise its prices so
as to materially adversely affect the Business nor, to the best of the Seller's
knowledge, does there exist any actual or threatened termination, cancellation
or limitation of, or any modification or change in, the business relationship of
the Seller with any such supplier, nor does there exist a present condition or
state of facts or circumstances known to the Seller involving such suppliers
which would materially adversely affect the Business or prevent the Buyer from
conducting the Business after the consummation of the transactions contemplated
by this Agreement in essentially the same manner in which it has heretofore been
conducted by the Seller.
2.19 Prepayments and Deposits. Except as set forth on Schedule 2.19, the
-------------------------
Seller has no prepayments or deposits from customers for products to be shipped,
or services to be performed, by the Seller after the date hereof.
2.20 Trade Names and Other Intangible Property.
-----------------------------------------
(a) Schedule 2.20 attached hereto sets forth a true, correct and complete
list and a description of all Intangible Property. True, correct and complete
copies of all licenses and other agreements relating to the Intangible Property
have been previously delivered by the Seller to the Buyer. The Seller has no
knowledge of any default or claimed or purported or alleged default or state of
facts which with notice or lapse of time or both would constitute a default on
the part of any party in the performance of any obligation to be performed or
paid by any party under any such license or agreement. During the past five
years the only name by which the Seller has been known or which the Seller has
used is its corporate name set forth in the preamble of this Agreement.
(b) Except as otherwise disclosed in Schedule 2.20 attached hereto, the
Seller is the sole and exclusive owner, free and clear of all liens, claims and
restrictions, of all Intangible Property and all designs, permits, labels and
packages used on or in connection therewith. The Intangible Property owned by
the Seller is sufficient to conduct the Business, as presently conducted. The
Seller has received no notice of, and has no knowledge of any basis for, a claim
against it that any of its operations, activities, products or publications
infringes on
17
any patent, trademark, trade name, copyright or other property right of a third
party, or that it is illegally or otherwise using the trade secrets, formulae or
any property rights of others. Except as otherwise disclosed in Schedule 2.20,
the Seller (i) has no disputes with or claims against any third party for
infringement by such third party of any trade name or other Intangible Property
of the Seller, and (ii) is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any patent, trademark, trade name, copyright
or other property right, with respect to the use thereof or in connection with
the conduct of the Business or otherwise. The Seller has taken all steps
reasonably necessary to protect its right, title and interest in and to the
Intangible Property. Except as set forth in Schedule 2.20, the consummation of
the transactions contemplated by this Agreement (including any required
financing) will in no way affect the continuation, validity or effectiveness of
the Intangible Property or require the consent of any third party in respect of
the Intangible Property.
2.21 Employee Benefit Plans.
----------------------
(a) ERISA. Except as set forth on Schedule 2.21, neither the Seller nor any
person, firm, corporation or entity which is (or within the past five years has
been) a member with the Seller of a "controlled or affiliated group", within the
meaning of Section 414(b), (c), (m), (n) or (o) of the Internal Revenue Code of
1986, as amended (the "Code"), has maintained, sponsored or contributed to any
"pension plan" within the meaning of Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), any "welfare plan" within the
meaning of Section 3(1) of ERISA, or any other employee benefit plan, program,
practice or arrangement, whether or not subject to ERISA (a "non-ERISA plan")
(such pension plans, welfare plans and non-ERISA plans of the Seller being
herein referred to as the "Employee Plans"). Except as set forth on Schedule
2.21, the Seller has provided the Buyer with a true, correct and complete copy
of each pension plan, each welfare plan and each non-ERISA plan listed on such
Schedule, together with a copy of the most recent summary plan description and
annual report (if applicable) with respect to each such plan. Except as set
forth on Schedule 2.21, each pension plan listed on such Schedule is a
"qualified plan" within the meaning of Section 401 of the Code. Except as set
forth on Schedule 2.21, each pension plan, each welfare plan and each non-ERISA
plan listed on such Schedule has been administered in accordance with its terms,
and each pension plan and welfare plan has been operated and administered in
accordance with all applicable requirements of ERISA and the Code. Without
limiting the generality of the foregoing, no trustee, administrator, sponsor, or
other party-in-interest or disqualified person, has engaged or participated in
any "prohibited transaction", as that term is defined in Section 4975(c)(1) of
the Code, with respect to any pension plan or welfare plan listed on Schedule
2.21. Without limiting the generality of the foregoing, in connection with all
welfare or non-ERISA plans which are subject to continuation coverage under
Section 4980B of the Code, all notices and elections with respect to such
coverage have been made in compliance with the requirements of Section 4980B.
With respect to each "defined benefit pension plan", as defined in Section 3(35)
of ERISA, identified on Schedule 2.21: (i) the fair market value of the assets
thereof as of the date hereof is as set forth on such Schedule; (ii) the present
value of all accrued benefits thereunder, determined as if such pension plan
terminated on the date hereof, is as set forth on Schedule 2.21; (iii) if any
such plan is a "multiemployer plan", as defined in Section 3(37) of ERISA, the
present value of the contingent liability of the Seller both in the event of the
termination of such plan and in the event that the Seller withdraws therefrom is
as set forth on
18
Schedule 2.21; (iv) no such plan has incurred an "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA, and (v) no such
pension plan has terminated, nor has any "reportable event", within the meaning
of Section 4043 of ERISA, occurred with respect to such plan. All contributions
for all periods ending prior to the date hereof (including periods from the
first day of the current plan year to the date hereof) will be made prior to the
date hereof by the Seller in accordance with past practice with respect to
pension plans, welfare plans and non-ERISA plans. All insurance premiums
(including premiums to the Pension Benefit Guaranty Corporation) have been paid
in full, subject only to normal retrospective adjustments in the ordinary course
of business, with regard to applicable plans for policy years or other
applicable policy periods ending on or before the date hereof.
(b) Claims and Litigation. Except as set forth on Schedule 2.21, to the
best of the Seller's knowledge, there are no threatened or pending claims, suits
or other proceedings by present or former employees of Seller, plan
participants, beneficiaries or spouses of any of the above, the Internal Revenue
Service, the Pension Benefit Guaranty Corporation, or any other pension or
entity involving any Employee Plan, including claims against the assets of any
trust, involving any Employee Plan, or any rights or benefits thereunder, other
than ordinary and usual claims for benefits to participants or beneficiaries,
including claims pursuant to domestic relations orders and there is no basis for
any legal action, proceeding or investigation with respect to such plans.
2.22 Leased Premises.
---------------
(a) Schedule 2.22 contains a true, correct and complete list of the address
of all Leased Premises.
(b) Except as set forth on Schedule 2.22, no work has been performed on or
materials supplied to the Leased Premises within any applicable statutory period
which could give rise to mechanics or materialmen's liens; all bills and claims
for labor performed and materials furnished to or for the benefit of the Leased
Premises for all periods prior to the Closing shall be paid in full, and the
Seller has no knowledge of any mechanic's or materialmen's liens, whether or not
perfected, on or affecting any portion of the Leased Premises.
(c) There is no pending or threatened condemnation or eminent domain
proceeding with respect to the Leased Premises.
(d) Except as set forth on Schedule 2.22, there are no taxes or betterment
or special assessments other than ordinary real estate taxes pending or payable
against the Leased Premises and there are no contingencies existing under which
any assessment for real estate taxes may be retroactively filed against the
Leased Premises; the Seller has no knowledge of any proposed special assessment
that may affect the Leased Premises or any part thereof; there are no penalties
due with respect to real estate taxes and/or impositions, and all real estate
taxes and/or impositions (excepting those for the current year that are not yet
due and payable) with respect to the Leased Premises have been paid in full;
there are no taxes or levies, permit fees or connection fees which must be paid
respecting existing curb cuts, sewer hookups, water-main hookups or services of
a like nature.
19
(e) The Leased Premises comply with the requirements of all building,
zoning, subdivision, health, safety, environmental, pollution control, waste
products, sewage control and all other applicable statutes, laws, codes,
ordinances, rules, orders, regulations and decrees (collectively, the
"Government Regulations") of any and all government agencies. To the extent set
forth in Schedule 2.14, the Seller has obtained and provided to the Buyer all
consents, permits, licenses and approvals required by such Government
Regulations, such consents, permits, licenses and approvals are in full force
and effect, have been properly and validly issued, and on or prior to the date
hereof will be assigned to the Buyer by the Seller to the extent the same are
assignable. Except as set forth in Schedule 2.14, there is no uncured breach of
any condition or requirement imposed by, or pursuant to, any permit or license
issued with respect to the Leased Premises. There is no action pending or, to
the best of the Seller's knowledge, threatened by any government agencies
claiming that the Leased Premises violates such Government Regulations or
threatening to shut down the Business or the use of the Assets or to prevent the
Assets from being used as presently used.
(f) Except as set forth on Schedule 2.22, there are no actions, suits,
petitions, notices or proceedings pending, given or, to the best of the Seller's
knowledge, threatened by any persons or government agencies before any court,
government agencies or instrumentalities, administrative or otherwise, which if
given, commenced or concluded would have a material adverse effect on the value,
occupancy, use or operation of the Leased Premises.
(g) The structural components of all of the buildings located on the Leased
Premises are in good condition and repair, normal wear and tear excepted.
(h) The Seller (i) has not received notice and (ii) has no knowledge of the
existence of any outstanding notice:
(A) from any federal, state, county, municipal or foreign authority
alleging any health, safety, pollution, environmental, zoning or other violation
of law with respect to the Leased Premises or any part thereof that has not been
entirely corrected; or
(B) from any insurance company or bonding company with respect to any
defects or inadequacies in the Leased Premises or any part thereof that would
adversely affect the insurability of same or cause the imposition of
extraordinary premiums or charges therefor or any termination or threatened
termination of any policy of insurance or bond relating thereto.
If the Seller obtains knowledge of any such notice prior to the date hereof, the
Seller shall promptly notify Buyer thereof.
2.23 Disclosure. No representation or warranty by the Seller in this
----------
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading. The Seller has
disclosed to the Buyer all material facts pertaining to the transactions
contemplated by this Agreement.
20
2.24 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried on by the Seller without the
intervention of any other person in such manner as to give rise to any valid
claim for a finder's fee, brokerage commission or other like payment.
2.25 Preservation of Assets. The Seller has not sold, assigned or
------------------------
transferred any of the Assets, other than in the ordinary course of business, or
declared or paid any dividend or other distribution in respect of shares of
capital stock or made any purchase, redemption or other acquisition, directly or
indirectly, of any outstanding shares of its capital stock, since June 30, 1997.
2.26 Environmental Compliance.
------------------------
(a) The Seller has obtained all permits, licenses and other authorizations
required under Federal, state and local laws, relating to protection of the
Environment (as defined below), including laws relating to any Release (as
defined below) of or presence of pollutants, contaminants, or hazardous or toxic
materials or wastes into or in soil, surface waters, groundwaters, land, stream
sediments, surface or subsurface strata, ambient air, and/or any environmental
medium (the "Environment") or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or waste. Schedule 2.26
hereto sets forth a complete and accurate list of all such permits, licenses and
other authorizations obtained by the Seller, copies of which have been delivered
to the Buyer. The Seller is in full compliance with all terms and conditions of
such permits, licenses and other authorizations.
(b) Except as indicated on Schedule 2.26 neither the Seller has, and, to
the best of the Seller's knowledge, after due inquiry, none of the Seller's
employees, agents, contractors or subcontractors have, used, generated,
processed, stored, transported, recycled, Released or otherwise handled any
Hazardous Materials (as defined below) except as permitted by law on or about
any real property related to the Seller's business or the Seller's contractual
relations with any such agents, contractors or subcontractors, including, but
not limited to, real property formerly owned by the Seller (collectively, the
"Seller Real Property") and the facilities now or formerly leased or operated by
the Seller (collectively, the "Seller Facilities"). Additionally, except as
indicated on Schedule 2.26, and, to the best of the Seller's knowledge, after
due inquiry neither the Seller Facilities nor the Seller Real Property is being
used or has ever previously been used for the generation, use, processing,
storage, transportation, recycling, Release or handling of any Hazardous
Materials, except as such use may have been permitted by law. In addition,
except as indicated on Schedule 2.26, and, to the best of the Seller's
knowledge, after due inquiry neither the Seller Facilities nor the Seller Real
Property has ever been affected by any Hazardous Materials Contamination or
Environmental Condition. The Seller, in the conduct of its business, is and has
been in compliance with all Environmental Laws. Notwithstanding any statement or
representation to the contrary in any affidavit or other document, the Seller
affirmatively represents that as of the date hereof, the Seller has made all
filings required by RCRA and that there have been no failures by the Seller to
timely report under CERCLA Section 103 or RCRA Section 304. The Seller has not
received any written notice from any governmental authority or any other person
respecting or related to any actual, threatened or potential Release or presence
of any Hazardous Materials or any non-compliance with any
21
Environmental Laws as to which any such claimed noncompliance presently exists.
Notwithstanding the preceding sentence, the Seller has not received any notice
from any governmental authority respecting noncompliance with RCRA. No
investigation, administrative proceeding, consent order or agreement, limitation
or settlement with respect to Hazardous Materials, Hazardous Materials
Contamination or Environmental Condition is, to the best of the Seller's
knowledge, proposed, threatened, anticipated or in force with respect to its
business, nor has such property ever been on any Federal or state "Superfund" or
"Super Lien" list.
As used in this Section 2.26, "due inquiry" shall mean that Seller has made
inquiry of all of Seller's executives, corporate officers and directors and any
employee or agent of Seller with responsibility for environmental matters.
As used herein "Hazardous Materials" include any (i) "Hazardous Waste" as
defined by The Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section
6901 et seq.), as amended from time to time ("RCRA"), and regulations
promulgated thereunder; and "Hazardous Substance" as defined by The
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.), as amended from time to time ("CERCLA"), and
regulations promulgated thereunder; (ii) asbestos; (iii) polychlorinated
biphenyls; (iv) any substance, the presence of which on the premises of the
Seller's business, is prohibited by applicable law; (v) oil, petroleum or any
petroleum products or by-products; (vi) any other substance which, according to
applicable law, requires special handling or notification of any Federal, state
or local governmental entity in its collection, processing, handling, storage,
transport, treatment or disposal or exposure thereto; (vii) any substance, which
if not properly disposed of, may pollute, contaminate, harm or have any
detrimental effect on the Environment; (viii) underground storage tanks, whether
empty, filled or partially filled with any substance; and (ix) any other
pollutant, toxic substance, hazardous substance, hazardous waste, hazardous
material or hazardous substance as regulated by or defined in or pursuant to any
Environmental law or any other Federal, state, or local environmental law,
regulation, ordinance, rule, or by-law, whether existing on or prior to the date
hereof.
As used herein, "Hazardous Materials Contamination" shall mean, with
respect to any premises, building or facilities or, the Environment,
contamination by a Release or the presence of Hazardous Materials.
As used herein, "Environmental Condition" shall mean any condition with
respect to the Environment on or off the Seller Real Property and Seller
Facilities, whether or not yet discovered, which could or does result in any
damage, loss, cost, expense, claim, demand, order, or liability to or against
the parties hereto by any third party (including, without limitation, any
government entity), including, without limitation, any condition resulting from
the operation of Seller's business and/or the operation of the business of any
other property owner or operator in the vicinity of the Seller Real Property and
Seller Facilities and/or any activity or operation formerly conducted by any
person or entity on or off the Seller Real Property and Seller Facilities.
As used herein, "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing.
22
As used herein, "Environmental Laws" shall mean any environmental or health
and/or safety-related law, regulation, rule, ordinance, or by-law at the
Federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted, including but not limited to: (i)
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USCA
9601 et seq.; (ii) Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984, 42 USCA 6901 et seq.; (iii) Federal Water Pollution
Control Act of 1972 as amended by the Clean Water Act of 1977, as amended, 33
USCA 1251 et seq.; (iv) Toxic Substances Control Act of 1976, as amended, 15
USCA 2601 et seq.; (v) Emergency Planning and Community Right-to-Know Act of
1986, 42 ▇▇▇▇ ▇▇▇▇▇ et seq.; (vi) Clean Air Act of 1966, as amended by the Clean
Air Act of 1986, as amended by the Clean Air Act Amendments of l990, 42 USCA
7401 et seq.; (vii) National Environmental Policy Act of 1970, as amended, 42
USCA 4321 et seq.; (viii) Rivers and Harbors Act of 1970, as amended, 33 USCA
401 et seq.; (ix) Endangered Species Act of 1973, as amended, 16 USCA 1531, et
seq; (x) Occupational Safety and Health Act of 1970, as amended, 29 USCA 651 et
seq.; (xi) Safe Drinking Water Act of 1974, as amended, 42 USCA 300 et seq., and
any other federal, state, or local law, regulation, rule, ordinance or order
currently in existence which governs:
(i) the existence, cleanup and/or remediation of toxic or hazardous
materials;
(ii) the Release, emission, discharge or presence of Hazardous Materials
into or in the Environment;
(iii) the control of Hazardous Materials; or
(iv) the use, generation, transport, treatment, storage, disposal, removal
or recovery of Hazardous Materials.
3. Representations of the Shareholder
----------------------------------
Representations and warranties made by the Shareholder herein or in any
instrument or document furnished in connection herewith shall survive the
Closing until (and including) the fifth anniversary of the date hereof. The
Shareholder represents and warrants to the Buyer as follows:
3.1 Authorization. The Shareholder has the full power, authority and legal
-------------
right to execute and deliver this Agreement, and to perform his covenants and
agreements hereunder, and this Agreement constitutes the valid and legally
binding obligation of the Shareholder, enforceable against him, in accordance
with its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally. The execution, delivery and performance by the Shareholder of this
Agreement and the agreements provided for herein, and the consummation by the
Shareholder of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Shareholder; (b)
violate any judgment, decree, order or award of any court, governmental body
23
or arbitrator; or (c) conflict with or result in the breach or termination of
any term or provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Shareholder pursuant to, any indenture,
mortgage, deed of trust or other instrument or agreement to which he is a party
or by which he or any of his properties is or may be bound, other than with
respect to obligations of Shareholder which will be discharged at or prior to
Closing.
3.2 Ownership of the Assets. The Seller is, and at the Closing will be, the
-----------------------
true and lawful owner of the Assets, and will have the right to sell and
transfer to the Buyer good and marketable title to all Assets, which at the
Closing will be free and clear of all Encumbrances. The delivery to the Buyer of
the instruments of transfer of ownership contemplated by this Agreement will
vest good and marketable title to all Assets in the Buyer, free and clear of all
liens, mortgages, pledges, security interests, restrictions, prior assignments,
encumbrances and claims of any kind or nature whatsoever. The Assets to be
conveyed to the Buyer hereunder constitute all properties, assets, rights and
claims which are necessary to the conduct of the Business as currently conducted
by the Seller.
4. Representations of the Buyer
----------------------------
Representations and warranties made by the Buyer herein or in any
instrument or document furnished in connection herewith shall survive the
Closing until (and including) the fifth anniversary of the date hereof. The
Buyer represents and warrants to the Seller as follows:
4.1 Organization and Authority. The Buyer is duly organized and validly
----------------------------
existing and in good standing under the laws of the State of New Jersey, and has
requisite power and authority to own its properties and to carry on its business
as now being conducted. The Buyer has full power to execute and deliver this
Agreement, and the Assumption Agreement and to consummate the transactions
contemplated hereby and thereby.
4.2 Authorization. The execution and delivery of this Agreement by the
-------------
Buyer and the agreements provided for herein to which it is a party, and the
consummation by the Buyer of all transactions contemplated hereby, have been
duly authorized by all requisite corporate action. This Agreement and all such
other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby constitute the respective
valid and legally binding obligations of the Buyer, enforceable against it in
accordance with their respective terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors rights generally. The execution, delivery and performance of this
Agreement and the agreements provided for herein, and the consummation by the
Buyer of the transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Buyer; (b) violate
the provisions of the organizational documents of the Buyer; (c) violate any
judgment, decree, order or award of any court, governmental body or arbitrator
applicable to the Buyer; or (d) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Buyer pursuant to, any indenture, mortgage,
deed of trust or other agreement or instrument to which it or its properties is
a party or by which the Buyer is or may be bound. Schedule 4.2 attached
24
hereto sets forth a true, correct and complete list of all consents and
approvals of third parties that are required of the Buyer in connection with the
consummation by the Buyer of the transactions contemplated by this Agreement.
4.3 Regulatory Approvals. All consents, approvals, authorizations and other
--------------------
requirements prescribed by any law, rule or regulation which must be obtained or
satisfied by the Buyer and which are necessary for its consummation by the Buyer
of the transactions contemplated by this Agreement have been, or will be prior
to the date hereof, obtained and satisfied.
4.4 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried on by the Buyer without the
intervention of any other person in such manner as to give rise to any valid
claim for a finder's fee, brokerage commission or other like payment.
5. Confidentiality; Public Announcements
-------------------------------------
5.1 Confidentiality. All information not previously disclosed to the public
---------------
or not generally known to persons engaged in the business of the Seller or the
Buyer which shall have been furnished by the Buyer or the Seller to the other
party in connection with the transactions contemplated hereby shall not be
disclosed by such receiving party to any person other than their respective
employees, directors, attorneys, accountants or financial advisors or other than
as contemplated herein. In the event that the transactions contemplated by this
Agreement shall not be consummated, all such information which shall be in
writing shall be returned to the party furnishing the same, including, to the
extent reasonably practicable, all copies or reproductions thereof which may
have been prepared, and neither party shall at any time thereafter disclose to
third parties, or use, directly or indirectly, for its own benefit, any such
information, written or oral, about the business of the other party hereto.
5.2 Public Announcements. The parties will cooperate in the issuance of any
--------------------
press releases or otherwise in the making of any public statements with respect
to the transactions contemplated hereby.
6. Employee Matters
----------------
6.1 Seller's Employees. The Seller has furnished to the Buyer a list
-------------------
containing the names of all its employees (hereinafter collectively called the
"Seller's Employees"), including each such employee's status, social security
number and current compensation. If any such employee's employment is terminated
or status changed prior to the date hereof, the Seller shall promptly notify the
Buyer of such termination or status change and, in the case of termination, if
such employee is replaced, the name, date of hire and compensation of the
individual replacing such employee.
6.2 Future Changes. Subject to Section 8.13, nothing in this Section 6
---------------
shall require the Buyer to retain any of Seller's Employees for any period of
time after the date hereof. Subject to requirements of applicable law, the Buyer
reserves the right at any time after the date hereof to terminate such
employment and amend, modify or terminate any term or condition of
25
employment, including without limitation, any employee benefit plan, program,
policy, practice or arrangement.
6.3 Plant Closing. None of the Selling Parties has, directly or indirectly,
-------------
taken or omitted to take any action which may result in the Seller's or the
Buyer's liability to any person or entity under the Worker Adjustment and
Retraining Notification Act of ▇▇▇▇ (▇▇▇ "▇▇▇▇ ▇▇▇"). The term "any action" does
not include the sale and acquisition contemplated by this Agreement and the
liability under the WARN Act, if any, which results from the Seller's
termination of employees in connection with such sale and acquisition is the
sole responsibility of the Seller.
6.4 Reporting of Data. The Buyer and the Seller shall compile and furnish
-----------------
to each other such actuarial and employee data as shall be required from time to
time for each party to perform and fulfill its obligations under this Section 6.
6.5 Pending Litigation. With respect to any litigation pending, or to the
-------------------
knowledge of the Seller threatened, as set forth in Schedule 2.21 hereto, which
claim alleges violation of any nondiscrimination laws, collective bargaining
agreements, employment contract and termination thereof or wage and hour laws,
Seller shall fully defend such claim. Subject to Section 1.3(a)(iii) Seller
shall be responsible for any monetary damages awarded in connection therewith.
It is understood by the parties that if Seller chooses to settle any matter
relating to any of the foregoing, including the terms and conditions thereof of
any back pay claims, such settlement shall be at the sole discretion of Seller
and Seller shall be solely responsible for the payment or performance of any
such settlement terms.
7. Best Efforts to Obtain Satisfaction of Conditions
-------------------------------------------------
The Selling Parties and the Buyer covenant and agree to use their best
efforts to obtain the satisfaction of the conditions specified in this
Agreement.
8. Conditions to Obligations of the Buyer
--------------------------------------
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the date hereof, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer:
8.1 Continued Truth of Representations and Warranties of the Selling
----------------------------------------------------------------------
Parties: Compliance with Covenants and Obligations. The representations and
----------------------------------------------------
warranties of the Selling Parties shall be true on and as of the date hereof.
The Seller shall have performed and complied in all material respects with all
covenants required by this Agreement to be performed or complied with by it
prior to or at the date hereof.
8.2 Corporate Proceedings. All corporate and other proceedings required to
---------------------
be taken on the part of the Seller to authorize or carry out this Agreement and
to convey, assign, transfer and deliver the Assets shall have been taken.
26
8.3 Other Governmental Approvals. All courts of law, governmental agencies,
----------------------------
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Seller of the transactions contemplated
by this Agreement and the operation of the Seller's business by the Buyer, shall
have consented to, authorized, permitted or approved such transactions including
but not limited to, all clearance certificates required pursuant to any
applicable retail sales tax legislation required in connection with the
completion of the transactions contemplated herein.
8.4 Consents of Lenders, Lessors and Other Third Parties. The Seller shall
-----------------------------------------------------
have received the consents and approvals of all lenders, lessors and other third
parties whose consent or approval is required in order for the Seller to
consummate the transactions contemplated by this Agreement, including without
limitation, the landlord at the premises at each of ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ and ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇.
8.5 Adverse Proceedings. No action or proceeding by or before any court or
-------------------
other governmental body shall have been instituted by any governmental body or
person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Buyer to own or use the Assets after the date hereof.
8.6 Opinion of Counsel. The Buyer shall have received an opinion of ▇▇▇▇▇
------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel to the Seller, dated as of the date
hereof, substantially in the form attached hereto as Exhibit D (the "Opinion of
Seller's Counsel").
8.7 Board of Directors and Shareholder Approval. The directors and
------------------------------------------------
shareholders of the Seller shall have duly authorized the transactions
contemplated by this Agreement.
8.8 Title to Assets. At the Closing, the Buyer shall receive good and
---------------
marketable title to all Assets, free and clear of all liens, mortgages, pledges,
security interests, restrictions, prior assignments, encumbrances and claims of
any kind or nature whatsoever.
8.9 Environmental Reports; Compliance with Laws. The Buyer shall not have
---------------------------------------------
received unsatisfactory environmental reports from its environmental consultants
and at any time prior to the Closing shall not have discovered that any Leased
Premises fails to comply in any material respect with all applicable federal,
foreign, state or local environmental, zoning, land use, and wetlands laws,
rules and regulations.
8.10 Fire, Casualty or Eminent Domain. If any of the Assets are, prior to
---------------------------------
the date hereof, either damaged by fire or other casualty insured against or
taken, in whole or in part, by eminent domain proceedings, then the Buyer shall
have the right to accept said Assets in their damaged or diminished condition
together with an assignment to Buyer of all insurance and/or condemnation
proceeds payable with respect to such fire, casualty or loss or terminate this
Agreement.
8.11 Due Diligence Review. The Buyer shall have completed a due diligence
---------------------
review of the Business, the results of which review are satisfactory to the
Buyer.
27
8.12 Employment Agreement. The Shareholder shall have entered into the
---------------------
Employment Agreement with the Buyer in the form attached hereto as Exhibit E,
(the "Employment Agreement").
8.13 Seller's Employees. Each of the Seller's Employees listed on Schedule
------------------
8.13 has agreed to be employed by the Buyer as of the date hereof and has
executed an agreement with the Buyer which contains invention assignment,
non-competition and non-solicitation provisions.
8.14 Closing Deliveries. The Buyer shall have received at or prior to the
-------------------
Closing each of the following documents:
(a) a ▇▇▇▇ of sale substantially in the form attached hereto as Exhibit A,
executed by the Seller;
(b) such instruments of conveyance, assignment and transfer, and motor
vehicle transfers and safety inspection certificates, if any, in form and
substance satisfactory to the Buyer, as shall be appropriate to convey, transfer
and assign to, and to vest in, the Buyer, good and marketable title to the
Assets other than the Intangible Property;
(c) such instruments of conveyance, assignment and transfer in form and
substance satisfactory to the Buyer and in a form appropriate to file, if
required, with the United States Office of Patents and Trademarks, sufficient to
convey, transfer and assign to, and to vest in, the Buyer, good and marketable
title to the Intangible Property;
(d) all technical data, formulations, product literature and other
documentation relating to the Seller's business, all in form and substance
satisfactory to the Buyer;
(e) such contracts, files and other data and documents pertaining to the
Assets or the Business as the Buyer may reasonably request;
(f) copies of the general ledgers and books of account of the Seller
related to the Business, and all federal, state, local and foreign income,
franchise, capital, property and other tax returns filed by the Seller with
respect to the Assets since June 30, 1997.
(g) such certificates of the Seller's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 8 as the
Buyer shall reasonably request;
(h) certificate of the Secretary of the Seller attesting to the incumbency
of the Seller's officers, respectively, and the authenticity of the resolutions
authorizing the transactions contemplated by the Agreement;
(i) estoppel certificates from each lessor under the Leases set forth in
Schedule 2.9(b) attached hereto (i) consenting to the assignment of such Lease
to the Buyer; (ii) representing that there are no outstanding claims against the
Seller under any such Lease, and no outstanding defaults or events which, with
the passage of time, may become defaults; (iii)
28
specifying the commencement and termination dates under the Lease; and (iv)
providing that any purchase right, purchase option, right of first refusal,
renewal right or other similar provision is enforceable by the Buyer and
specifying the rental rates under the Lease and any other matters that Buyer may
reasonably require;
(j) the originals, if in Seller's possession, of all building permits,
certificates of occupancy, and other governmental licenses, permits and
approvals, and all plans and specifications relating to the Leased Premises not
previously delivered to the Buyer;
(k) the Employment Agreement executed by the Shareholder;
(l) the Opinion of Seller's Counsel;
(m) the Amendment of the Certificate of Incorporation of the Seller to
discontinue the use of the name "The ▇▇▇▇▇ Group, Inc." and to file any
instruments as may be necessary with any governmental authority to change their
corporate names and foreign qualifications; and
(n) such other documents, instruments or certificates as the Buyer may
reasonably request in order to evidence the accuracy of the Selling Parties'
representations or compliance by Seller with its covenants hereunder.
9. Conditions to Obligations of the Seller
---------------------------------------
The obligations of the Seller under this Agreement are subject to the
fulfillment, at the date hereof, of the following conditions precedent, each of
which may be waived in writing at the sole discretion of the Seller:
9.1 Continued Truth of Representations and Warranties of the Buyer;
----------------------------------------------------------------------
Compliance with Covenants and Obligations. The representations and warranties of
-----------------------------------------
the Buyer in this Agreement shall be true on and as of the date hereof. The
Buyer shall have performed and complied with all covenants required by this
Agreement to be performed or complied with by each of them prior to or at the
date hereof.
9.2 Corporate Proceedings. All corporate, legal and other proceedings
----------------------
required to be taken on the part of the Buyer to authorize or carry out this
Agreement shall have been taken.
9.3 Approvals. All other governmental agencies, departments, bureaus,
---------
commissions and similar bodies, the consent, authorization or approval of which
is necessary under any applicable law, rule, order or regulation for the
consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions.
9.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer shall
-----------------------------------------------------
have received all requisite and material consents and approvals of all lenders,
lessors and other third parties whose consent or approval is required in order
for the Buyer to consummate the
29
transactions contemplated by this Agreement, including but not limited to those
set forth on Schedule 4.2 attached hereto.
9.5 Adverse Proceedings. No action or proceeding by or before any court or
-------------------
other governmental body shall have been instituted by any governmental body or
person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Seller to transfer the Assets or would affect the right of the Buyer to
acquire the Assets.
9.6 Release of Personal Guaranties. The Buyer shall use its best efforts to
------------------------------
obtain the release of all personal guaranties of the Shareholder relating to the
Assumed Liabilities.
9.7 Closing Deliveries. The Seller shall have received at or prior to the
-------------------
Closing each of the following documents:
(a) such certificates of the Buyer's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 9 as the
Seller shall reasonably request;
(b) a certificate of the Secretary of the Buyer attesting to the incumbency
of the Buyer's officers, the authenticity of the resolutions authorizing the
transactions contemplated by this Agreement;
(c) the Assumption Agreement executed by the Buyer and accepted by the
Seller;
(d) payment of the portion of Purchase Price due on the date hereof,
including the Cash Consideration;
(e) the Employment Agreement, executed by the Buyer; and
(f) such other documents, instruments or certificates as the Seller may
reasonably request.
10. Post-Closing Agreements
-----------------------
10.1 Proprietary Information.
-----------------------
(a) The Seller shall hold in confidence, and use its best efforts to have
all officers, shareholders, directors and personnel hold in confidence, all
knowledge and information of a secret or confidential nature with respect to the
Business, and shall not disclose, publish or make use of the same without the
consent of the Buyer, except to the extent that such information shall have
become public knowledge other than by breach of this Agreement by the Seller or
by any other persons who have agreed not to disclose, publish or make use of
such information.
30
(b) The Seller agrees that the remedy at law for any breach of this Section
10.1 would be inadequate and that the Buyer shall be entitled to injunctive
relief in addition to any other remedy it may have upon breach of any provision
of this Section 10.1.
10.2 No Solicitation or Hiring of Former Employees. Except as provided by
----------------------------------------------
law or with the written consent of Buyer, for a period of two (2) years after
the date of termination of the Shareholder's employment with the Buyer, the
Seller and any persons or entities that are not natural persons, that directly
or indirectly, through one or more intermediaries, control, are controlled by,
or are under common control with, the Seller (the "Corporate Affiliates"), shall
not solicit any person who was a Seller's Employee on the date hereof, and has
been employed, and not terminated without cause, by the Buyer, to terminate his
employment with the Buyer or to become an employee of the Seller or its
Corporate Affiliates or hire any person who was such an employee on the date
hereof or on the date hereof.
10.3 Non-Competition Agreement.
-------------------------
(a) For a period of two (2) years after the date of termination of the
Shareholder's employment with the Buyer, neither the Seller nor any Corporate
Affiliate thereof shall directly or indirectly (i) manufacture, market or sell
any product which has the same or substantially the same function and primary
application as any existing or proposed product manufactured by the Seller on or
prior to the date hereof or (ii) engage in, manage, operate, be connected with
or acquire any interest in, as an employee, consultant, advisor, agent, owner,
partner, co-venturer, principal, director, shareholder, lender or otherwise, any
business competitive with the business of the Seller as conducted on the date
hereof (a "Competitive Business"), in the United States or any other country in
which the Seller conducted business during the two years prior to the date
hereof, except that the Seller and its Corporate Affiliates may own, in the
aggregate, not more than 1% of the outstanding shares of any publicly held
corporation which is a Competitive Business which has shares listed for trading
on a securities exchange registered with the Securities and Exchange Commission
or through the automatic quotation system of a registered securities
association.
(b) The parties hereto agree that the duration and geographic scope of the
non-competition provision set forth in this Section 10.3 are reasonable. In the
event that any court determines that the duration or the geographic scope, or
both, are unreasonable and that such provision is to that extent unenforceable,
the parties hereto agree that the provision shall remain in full force and
effect for the greatest time period and in the greatest area that would not
render it unenforceable. The parties intend that this non-competition provision
shall be deemed to be a series of separate covenants, one for each and every
county of each and every state of the United States of America and each and
every political subdivision of each and every country outside the United States
of America where this provision is intended to be effective. The Seller agrees
that damages are an inadequate remedy for any breach of this provision and that
the Buyer shall, whether or not it is pursuing any potential remedies at law, be
entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened breach
of this non-competition provision. If the Seller or any Corporate Affiliate
shall violate this Section 10.3, the duration of this Section 10.3 automatically
shall be extended as against such violating party for a period equal to the
period during which such party shall have
31
been in violation of this Section 10.3. The covenants contained in this Section
10.3 are deemed to be material and the Buyer is entering into this Agreement
relying on such covenants.
10.4 Sharing of Data. The Seller shall have the right for a period of seven
---------------
years following the date hereof to have reasonable access to such books, records
and accounts, including financial and tax information, correspondence,
production records, employment records and other similar information as are
transferred to the Buyer pursuant to the terms of this Agreement for the limited
purposes of concluding its involvement in the business of the Seller prior to
the date hereof and for complying with its obligations under applicable
securities, tax, environmental, employment or other laws and regulations. The
Buyer shall have the right for a period of seven years following the date hereof
to have reasonable access to those books, records and accounts, including
financial and tax information, correspondence, production records, employment
records and other records which are retained by the Seller pursuant to the terms
of this Agreement to the extent that any of the foregoing relates to the
Business transferred to the Buyer hereunder or is otherwise needed by the Buyer
in order to comply with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations.
10.5 Cooperation in Litigation. Each party hereto will fully cooperate with
-------------------------
the other in the defense or prosecution of any litigation or proceeding already
instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the Business prior to or after the
date hereof (other than litigation arising out of the transactions contemplated
by this Agreement and except as otherwise expressly provided herein). The party
requesting such cooperation shall pay the out-of-pocket expenses (including
legal fees and disbursements) of the party providing such cooperation and of its
officers, directors, employees and agents reasonably incurred in connection with
providing such cooperation, but shall not be responsible to reimburse the party
providing such cooperation for such party's time spent in such cooperation or
the salaries or costs of fringe benefits or similar expenses paid by the party
providing such cooperation to its officers, directors, employees and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
10.6 Communications with Customers. Except as may be reasonably necessary
-----------------------------
to collect the Accounts Receivable, neither the Selling Parties, nor any
Corporate Affiliate, shall directly or indirectly communicate with any customer
set forth on Schedule 2.17.
10.7 Unaudited Financial Statements. If the Closing occurs on or after July
------------------------------
31, 1997, the Seller shall deliver, its unaudited balance sheet as of July 31,
1997 (the "July 1997 Balance Sheet") and the related unaudited statements of
operations, shareholders' equity and changes in financial position of the Seller
for the month then ended (the "July 1997 Financial Statements" and,
collectively, with the July 1997 Balance Sheet, the "Unaudited Financial
Statements"). The Unaudited Financial Statements shall be delivered no later
than August 31, 1997 and shall be prepared in accordance with generally accepted
accounting principles applied consistently with past practice and shall be
certified by the Seller's Chief Executive Officer and Chief Financial Officer.
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11. Indemnification and Reimbursement
---------------------------------
11.1 Indemnification.
---------------
(a) The Seller shall indemnify, defend and hold harmless the Buyer and any
parent, subsidiary or affiliate thereof and all directors, officers, employees,
agents and consultants of each of the foregoing (collectively, the "Buyer
Group") from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities (whether absolute, accrued, contingent
or otherwise), costs and expenses, including but not limited to, interest,
penalties and attorneys' fees and expenses (collectively, "Damages"), asserted
against, imposed upon or incurred by the Buyer Group or any member thereof,
directly or indirectly, by reason of or resulting from or relating to any of the
following (but in any event excluding the Assumed Liabilities):
(i) liability and obligation of the Seller;
(ii) misrepresentation or breach of warranty or covenant or agreement by
the Seller made or contained in this Agreement or in any certificate or other
instrument furnished or to be furnished to the Buyer under this Agreement;
(iii) failure to comply with any bulk sales or similar laws applicable to
the transactions contemplated hereby; and
(iv) litigation or other claim arising from acts, failures to act or events
which occurred prior to the date hereof including, without limitation, the
remediation of environmental conditions attributable to the conduct of the
Business at any of the Seller Facilities, prior to the date hereof and claims
for product failure or defect (including but not limited to claims for personal
injury, property damages and breach of warranty) which relate to any product
manufactured or sold prior to the date hereof.
(b) The Buyer shall indemnify, defend and hold harmless the Seller and any
parent, subsidiary or affiliate thereof and all directors, officers, employees,
agents and consultants of each of the foregoing (collectively, the "Seller
Group") from and against all Damages asserted against, imposed upon or incurred
by the Seller Group or any member thereof, directly or indirectly, by reason of
or resulting from or relating to any of the Assumed Liabilities.
11.2 CERCLA. Nothing contained in this Agreement shall be deemed a waiver
------
of the right of the Buyer to maintain a private party cost recovery action under
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq.
11.3 Notice and Defense of Claims. The Seller's obligations and liabilities
----------------------------
hereunder with respect to claims resulting from the assertion of liability by
the Buyer or third parties shall be subject to the following terms and
conditions:
(a) Notice. The Buyer shall give prompt written notice to the Seller of any
claim or event known to it which does or may give rise to a claim by the Buyer
against the Seller for which the Buyer believes it is entitled to
indemnification pursuant to this Section 10 of this
33
Agreement, stating the nature and basis of said claims or events and the amounts
thereof, to the extent known, and in the case of any claim, action, suit or
proceeding brought by any third party, a copy of any claim, process or legal
pleadings with respect thereto promptly after any such documents are received by
the indemnified party. Such notice shall be given in accordance with Section 13
hereof.
(b) Third Party Claims or Actions.
(i) In the event any claim, action, suit or proceeding is made or brought
by any third party against the Buyer, with respect to which the Seller may have
liability for Damages under this Section 11 of this Agreement, the Seller shall,
at its own expense, be entitled to participate in and, to the extent that it
shall wish, jointly and with any other indemnifying party, to assume the
defense, with independent counsel reasonably satisfactory to the Buyer, provided
that in assuming the defense of any such third party claim, action, suit or
proceeding, the Seller acknowledges in writing to the Buyer that the Seller
shall thereafter be liable for any Damage with respect to such claim, action,
suit or proceeding.
(ii) If the Seller elects to assume control of such defense or settlement,
it shall conduct such defense or settlement in a manner reasonably satisfactory
and effective to protect the Buyer fully; such company and its counsel will keep
the Buyer fully advised as to its conduct of such defense or settlement, and no
compromise or settlement shall be agreed or made without the written consent of
the Buyer. In any case, the Buyer shall have the right to employ its own counsel
and such counsel may participate in such action, but the reasonable fees and
expenses of such counsel shall be at the expense of the Buyer, when and as
incurred, unless (A) the employment of counsel by the Buyer has been authorized
in writing by the Seller, (B) the Buyer shall have reasonably concluded that
there may be a conflict of interest between the Seller and the Buyer in the
conduct of the defense of such action, (C) the Seller shall not in fact have
employed independent counsel reasonably satisfactory to the Buyer to assume the
defense of such action and shall have been so notified by the Buyer, (D) the
Buyer shall have reasonably concluded and specifically notified the Seller
either that there may be specific defenses available to it which are different
from or additional to those available to it or that such claim, action, suit or
proceeding involves or could have a material adverse effect upon it beyond the
financial resources of the Seller or the scope of this Agreement, or (E) the
Seller fails to conduct such defense or settlement in a manner reasonably
satisfactory to protect the Buyer fully. If clause (B), (C), (D) or (E) of the
preceding sentence shall be applicable, then counsel for the Buyer shall have
the right to direct the defense of such claim, action, suit or proceeding on
behalf of the Buyer and the reasonable fees and disbursements of such counsel
shall constitute Damages hereunder.
(iii) If the Seller does not elect to assume the defense of any such claim,
or if it fails to conduct said defense or settlement in a manner reasonably
satisfactory to protect the Buyer fully, the Buyer may engage independent
counsel selected by the Buyer to assume the defense and may contest, pay, settle
or compromise any such claim on such terms and conditions as the indemnified
party may determine. The reasonable fees and disbursements of such counsel shall
constitute Damages hereunder.
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(iv) The Buyer and the Seller, as the case may be, shall be kept fully
informed of such claim, action, suit or proceeding at all stages thereof whether
or not such party is represented by its own counsel.
11.4 Cooperation. The parties hereto agree to render to each other such
-----------
assistance as they may reasonably require of each other and to cooperate in good
faith with each other in order to ensure the proper and adequate defense of any
claim, action, suit or proceeding brought by any third party. Where counsel has
been selected by the Seller or by the Buyer pursuant to Section 11.3, the Seller
or the Buyer, as the case may be, shall be entitled to rely upon the advice of
such counsel in the conduct of the defense.
11.5 Confidentiality. The parties agree to cooperate in such a manner as to
---------------
preserve in full the confidentiality of all confidential business records and
the attorney-client and work-product privileges. In connection therewith, each
party agrees that (a) it will use its best efforts, in any action, suit or
proceeding in which it has assumed or participated in the defense, to avoid
production of confidential business records and (b) all communications between
any party hereto and counsel responsible for or participating in the defense of
any action, suit or proceeding shall, to the extent possible, be made so as to
preserve any applicable attorney-client or work-product privilege.
12. Transfer and Sales Tax
----------------------
The Seller shall be responsible for and pay all filing and recording taxes
and fees, and all sales, use and transfer taxes and fees, if any, upon the sale
and transfer of the Assets hereunder.
13. Notices
-------
Any notices or other communications required or permitted hereunder shall
be sufficiently given if in writing (including telecommunications) and delivered
personally or sent by telex, telecopy or other wire transmission (with request
for assurance in a manner typical with respect to communications of that type),
federal express or other overnight air courier (postage prepaid), registered or
certified mail (postage prepaid with return receipt requested), addressed as
follows or to such other address of which the parties may have given notice:
To the Seller: The ▇▇▇▇▇ Group, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zizmor, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
35
To the Buyer: AlphaNet Solutions, Inc.
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇ Gang, President
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally or by wire
transmission; (b) on the next business day after mailing or deposit with an
overnight air courier; or (c) five business days after being sent, if sent by
registered or certified mail.
14. Successors and Assigns
----------------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Neither the Seller
nor the Buyer may assign all or a portion of its rights and obligations
hereunder without the prior written consent of the other party, except that the
Buyer may assign all or a portion of its rights and obligations hereunder to an
Affiliate of Buyer, provided that Buyer shall remain liable for the performance
of the Buyer's obligations under this Agreement. Any assignment in contravention
of this provision shall be void.
15. Entire Agreement; Amendments; Attachments
-----------------------------------------
(a) This Agreement, all Schedules and Exhibits hereto, and all agreements
and instruments to be delivered by the parties pursuant hereto represent the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof and supersede all prior oral and written and all
contemporaneous oral negotiations, commitments and understandings between such
parties except as expressly provided herein. The Buyer and the Seller, by the
consent of their respective Boards of Directors, or officers authorized by such
Boards, may amend or modify this Agreement, in such manner as may be agreed
upon, by a written instrument executed by the Buyer and the Seller.
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
36
16. Expenses
--------
Except as otherwise expressly provided herein, the Buyer and the Seller
shall each pay their own expenses in connection with this Agreement and the
transactions contemplated hereby. It is understood and agreed that the Seller's
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including, but not limited to, professional fees, shall be
paid from a portion of the proceeds of the Cash Consideration paid to the Seller
at the Closing.
17. Legal Fees
----------
In the event that legal proceedings are commenced by the Buyer against the
Seller, or by the Seller against the Buyer, in connection with this Agreement or
the transactions contemplated hereby, the party or parties which do not prevail
in such proceedings shall pay the reasonable attorneys' fees and other costs and
expenses, including investigation costs, incurred by the prevailing party in
such proceedings.
18. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey, without reference to conflicts of laws rules or
principles.
19. Section Headings
----------------
The section headings are for the convenience of the parties and in no way
alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
20. Severability
------------
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement.
21. Counterparts
------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be one and the same
document.
22. Currency
--------
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in United States funds.
37
23. Ambiguity in Negotiations
-------------------------
Each party shall have been deemed to have participated equally in the
negotiation of this Agreement and the agreements contemplated hereby and any
ambiguity in any such contracts shall not be construed against any purported
author thereof.
38
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
(Corporate Seal) SELLER:
ATTEST: THE ▇▇▇▇▇ GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------- -----------------
Secretary Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
SHAREHOLDER:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
(Corporate Seal) BUYER:
ATTEST: ALPHANET SOLUTIONS, INC.
By: /s/ ▇▇▇▇ Gang
------------------------------- ------------------
Secretary Name: ▇▇▇▇ Gang
Title: President
39