Exhibit 10.3
ASSET PURCHASE AGREEMENT BY AND AMONG
JUDGE IMAGING SYSTEMS, INC.,
AUTOMATED OFFICE PRODUCTS OF WESTERN NEW YORK, INC.
d/b/a AOP SOLUTIONS AND
▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
THIS ASSET PURCHASE AGREEMENT is dated as of June 29, 1998 by and among
AUTOMATED OFFICE PRODUCTS OF WESTERN NEW YORK, INC. d/b/a AOP SOLUTIONS, a New
York corporation (the "Seller"), ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
(collectively, the "Shareholders") and JUDGE IMAGING SYSTEMS, INC., a Delaware
corporation (the "Buyer").
BACKGROUND
The parties hereto desire to provide for the acquisition by Buyer of
certain assets of Seller relating to, used or held for use in its document
imaging and document management business (the "Business"), but excluding certain
other assets and liabilities, all on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. ACQUISITION OF ASSETS.
1.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall, and Shareholders shall cause Seller to,
sell, convey, assign, transfer and deliver to Buyer all of Seller's right, title
and interest in and to all of the tangible and intangible properties and assets
owned or held by Seller and relating to or used or held for use in connection
with the Business, free and clear of all liens (except as set forth in the
Disclosure Statement pursuant to Section 4.3 hereof), including, without
limitation, the following assets owned or held by Seller and each of the assets
listed or required to be listed on the Disclosure Statement pursuant to Section
4.12 hereof, but excluding the Excluded Assets (as herein defined) (the
"Purchased Assets"):
(a) Cash in the amount of $50,000;
(b) Accounts Receivable;
(c) all supplies, machinery, furniture, equipment and other
personal property, including those set forth on Schedule 1.1(c) hereto;
(d) All inventions, whether or not patented, know-how,
domestic and foreign letters patents, patent applications, patent licenses,
software licenses and know-how licenses (including but not limited to the name
"AOP"), trade secrets (including but not limited to all results of research and
development), trade names, trademarks, service-marks, copyrights, trademark
registrations and applications, service ▇▇▇▇ registrations and applications,
copyright registrations and applications and rights-to-use (collectively
"Intellectual Property") as set forth on Schedule 1.1(d) hereto;
(e) all right, title and interest in, to and under all
purchase orders, sales agreements, equipment leases, distribution agreements,
licensing agreements and other contracts, agreements and commitments of Seller
("Contracts") identified on Schedule 1.1(e);
(f) copies of all books and records predominantly relating to
the Business and the Purchased Assets (including such books and records as are
contained in computerized storage media), including all inventory, purchasing,
accounting, sales, export, import, manufacturing, marketing, banking and
shipping records and all files, contractor, consultant, customer/client and
supplier lists, records, literature and correspondence, and marketing materials
excluding tax returns;
(g) the lease (the "Lease") related to the facility at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Facility");
(h) any other assets of Seller's Business including those set
forth on Schedule 1.1(h) which are of a nature not customarily reflected in the
books and records of a business, such as assets which have been written off for
accounting purposes but which are still used by or of value to Seller;
(i) all Authorizations (as defined in Section 4.5(b))
associated with the Seller's Business and its operations;
(j) all intangible assets and goodwill associated with the
Seller's Business and its operations; and
(k) any other assets of Seller which are located at the
Facility.
1.2 Excluded Assets. Notwithstanding anything to the contrary in
Section 1.1 of this Agreement, the following rights, properties and assets shall
not be included in the Purchased Assets (the "Excluded Assets"):
(a) All employee records (excluding employment and
non-competition agreements);
(b) Seller's Employee Benefit Plan(s) and all obligations
related thereto;
(c) All ownership, leasehold and other interests in real
property (other than the Lease), in each case together with all buildings
thereon;
(d) Seller's tax returns and records; and
Exhibit 10.3 (cont.)
(e) Cash in excess of $50,000.
1.3 Liabilities to be Assumed by Buyer. Subject to the terms and
conditions of this Agreement, at the Closing, Buyer shall assume and thereafter
in due course pay and fully satisfy all trade liabilities, obligations and
related expenses existing as of the date of the Closing pursuant to the terms of
the Contracts, unearned revenues, and customer deposits recorded on Seller's
books as of the Closing as set forth on Schedule 1.1(e) hereof.
Except as otherwise specifically provided for in this Section
1.3, Buyer shall not assume, or in any way be liable or responsible for, any
liabilities, obligations or debts of Seller of any type or nature, including,
without limitation, liabilities arising under all Contracts not identified on
Schedule 1.1(e), any related unfunded pension liabilities, any medical, life,
disability insurance liabilities, any ▇▇▇▇▇▇▇ compensation claims, any local,
state, federal, payroll or other tax liabilities except as otherwise
specifically provided herein, liabilities relating to claims for damages based
upon the breach by Seller of any federal, state or local environmental or
occupational health and safety laws or regulations, liabilities related to
products liability, tort claims or other litigation, any undisclosed
liabilities, liabilities incurred for the costs and expenses of negotiating and
consummating the transactions contemplated by this Agreement, liabilities
incurred in connection with the termination of any of the Contracts to be
transferred hereunder for which consent of the other party thereto is required
but not obtained, any liabilities related to the classification of independent
contractors, tort claims asserted against Seller or claims against Seller for
breach of contract which are based on acts or omissions of Seller occurring on,
before or after the Closing.
SECTION 2. PURCHASE PRICE AND PAYMENT.
2.1 Purchase Price.
(a) The total consideration for the Purchased Assets shall be
the cash and stock paid at Closing plus the assumption of the specified
liabilities pursuant to Section 1.3 hereof and monies earned or paid as
described under paragraphs (b), (c), (d), (i), (j), (k) and (l) below, if any,
and subject to adjustment as provided in Section 2.2 hereof (the "Purchase
Price").
(b) At Closing $2,050,000.00 of the Purchase Price shall be
paid to Seller by wire transfer pursuant to instructions previously provided by
Seller to Buyer for that purpose and, in addition, 33,333 shares of the
unregistered common stock (the "Shares") of The Judge Group, Inc., a
Pennsylvania corporation ("Parent") bearing an appropriate restrictive legend
shall be delivered to Seller. If such Shares do not have a per share value of
$15.00 or more on the first anniversary of the Closing Date, Buyer will pay the
shortfall to Seller in cash within ten (10) days thereafter.
(c) An additional portion of the Purchase Price shall be paid
in the form of an earnout (the "First Earnout") with respect to the performance
of the Business as conducted by Seller from January 1, to December 31, 1998 (the
"First Earnout Period"). Buyer shall pay Seller 300% of EBIT (as defined in
paragraph (h)) for calendar year 1998 minus $1,250,000.
(d) An additional portion of the Purchase Price shall be paid
in the form of an earnout (the "Second Earnout") with respect to the performance
of the Business conducted by Seller from January 1, to December 31, 1999 (the
"Second Earnout Period"). Buyer shall pay Seller 300% of EBIT for calendar year
1999 minus $1,250,000.
(e) Payment required to be made under paragraph (c) above, if
any, shall be paid within one hundred (100) days of the calendar year end as
follows:
(i) Buyer shall pay Seller $500,000 in cash on
or before April 10th, 1999.
(ii) Buyer shall pay the balance in Shares of the
common stock of Parent, as valued on the NASDAQ National Market using
150% of the closing price of such Shares on December 31, 1998 (the
"1998 Earnout Share Price"). If, one year after the date such Shares
are received, the per share value of such Shares is less then the 1998
Earnout Share Price, Buyer will pay the difference in cash within 15
days of such date.
(f) Payment required to be made under paragraph (d) above, if
any, shall be paid within one hundred twenty (120) days of the calendar 1999
year end in Shares of the common stock of Parent as valued on the NASDAQ
National Market using 150% of the closing price of such common stock on December
31, 1999 ("the "1999 Earnout Share Price"). If , one year after the date such
Shares are received, the per share value of such Shares is less then the 1999
Earnout Price, Buyer will pay the difference in cash within 15 days of such
date.
(g) Payments required to be made under paragraphs (e) and (f)
above, if any, shall be deemed earned and owing to Seller; provided, however,
that (i) no payment shall be made pursuant to paragraph (e) or (f) if ▇▇▇▇ ▇.
▇▇▇▇▇▇ voluntarily terminates his employment with Buyer or if Buyer terminates
his employment pursuant to Sections 4.3(a)(i) or (ii) of the Employment
Agreement, a form of which is attached hereto as Exhibit I, at any time during
the First Earnout Period, and (ii) no payment will be made pursuant to paragraph
(f) if ▇▇▇▇ ▇. ▇▇▇▇▇▇ voluntarily terminates his employment with Buyer or if
Buyer terminates his employment pursuant to Sections 4.3(a)(i) or (ii) of the
Employment Agreement at any time during the Second Earnout Period. If ▇▇▇▇ ▇.
▇▇▇▇▇▇ terminates his employment as a result of death or disability, such
payments shall be deemed earned and owing to Seller as of the date of such
termination and the amount of such payments shall be determined by calculating
the Earnout as if the Earnout Period had ended on the date of such termination.
The immediate foregoing sentence shall not be applicable, however, if ▇▇▇▇▇▇▇
▇▇▇▇▇▇ shall continue to remain as an employee of Buyer at the time of such
death or disability.
(h) For purposes of this Agreement, "EBIT" means the earnings
of the Business (as if it were a wholly owned subsidiary corporation of Buyer)
before interest and taxes, which is accounted for under the accrual method of
accounting in accordance
Exhibit 10.3 (cont.)
with Buyer's regular accounting policies and procedures and GAAP, except that
for calendar year 1998, For purposed hereof, EBIT shall not take into account
any charges made to the Business by Buyer or any affiliate of Buyer except to
the extent such charge relates to an item or service specifically ordered by the
Business.
(i) Buyer shall pay to Seller, as additional consideration for
the Purchased Assets, an amount equal to the difference between Seller's (or
Shareholders') New York State tax liability with respect to the First and Second
Earnout Periods which will result from Buyer's election to structure this
transaction as an "asset purchase" rather than as a "stock purchase". Seller's
accountants will initially compute the amounts payable under this paragraph (i)
and Seller will furnish the computed amounts to Buyer. If Buyer does not deliver
written objections within thirty (30) days thereafter, the amount computed by
Seller's accountants shall be binding. If Buyer delivers written objections
within the 30 day period, the matter shall be finally determined by an
independent accounting firm selected jointly by Seller and Buyer, and the
determination of such independent accounting firm shall be binding and
conclusive on all parties hereto. Buyer shall pay the appropriate amounts to
Seller at least ten (10) days prior to the due date of any return or quarterly
installment of New York tax to which this paragraph applies.
(j) An additional portion of the Purchase Price shall be paid
in the form of an earnout (the "Third Earnout") with respect to the sale of the
DSS Document Solution software product. Buyer shall pay Seller an amount equal
to 20% of the gross profit from sales of the DSS Document Solution software
product sold to Buyer and/or its other divisions and/or its affiliates and/or to
county, state, municipal or other governmental agencies. Payment required to be
made under this Section 2.1(j), if any, shall be made within one hundred (100)
days of each calendar year end.
(k) An additional portion of the Purchase Price shall be paid
in the form of an earnout (the "Fourth Earnout") with respect to the gross
profit generated by the Business for the period beginning on the Closing Date
and ending on June 30, 1998. Buyer shall pay Seller an amount equal to the
amount of profit over $500,000 for said period. Payment required to be made
under this Section 2.1(k), if any, shall be made by July 31, 1998.
(l) An additional portion of the Purchase Price shall be paid
in the form of an earnout (the "Fifth Earnout") with respect to the EBIT
generated by the Business for the years ending December 31, 1998 and December
31, 1999. Buyer shall pay Seller an amount equal to 10% of EBIT of the Business
for each such year. Payment required to be made under this Section 2.1(l), if
any, shall be made within one hundred (100) days of each such calendar year end.
2.2 Closing Adjustments.
(a) Except as otherwise mutually agreed among the parties
hereto, the following items shall be apportioned and prorated, on a daily basis,
between the Seller and Buyer as of 12:00 midnight on the day before the Closing
Date.
(i) all rent and other payments owing pursuant
to the Lease;
(ii) all general real estate taxes and personal
property taxes;
(iii) all utilities;
(iv) all payroll obligations, including
deductions and payments to appropriate state and federal authorities
for income tax withholding, FICA, FUTA and SUI; and
(v) all commissions payable to staff employees
shall be attributable to the sale to which they relate. The party who
receives revenue associated with a sale will be responsible to pay the
related commission.
(b) At or prior to Closing, Seller shall present to Buyer a
Schedule of the adjustments in Section 2.2(a) showing the computation thereof.
2.3 Allocation of Consideration. The Purchase Price shall be
allocated among the Purchased Assets as set forth on Schedule 2.3 hereto. The
parties shall report this transaction for tax purposes consistently with such
allocation.
SECTION 3. CLOSING.
3.1 Time and Place of Closing. The closing of the purchase and
sale of the Purchased Assets (the "Closing") pursuant to this Agreement shall
take place on June 29, 1998 at the offices of Judge Imaging Systems, Inc.,
located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
commencing at 10:00 A.M., eastern daylight time or at such other date, time or
place as may be jointly agreed to by Buyer and Seller (the "Closing Date").
3.2 Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:
(a) Seller shall deliver, or shall cause to be delivered,
to Buyer the following:
(i) a ▇▇▇▇ of sale satisfactory to Buyer
transferring title to all of the Purchased Assets in the form attached
as Exhibit II hereto;
(ii) such other instruments of transfer as shall
be necessary or appropriate to vest in Buyer good and marketable title
to the Purchased Assets;
(iii) assignments satisfactory to Buyer of all
Contracts identified in Section 4.12 of the Disclosure Statement;
(iv) Opinion letter of Seller's Counsel in the
form attached hereto as Exhibit III; and (v) documents evidencing the
assignment of the Lease.
(b) Buyer shall deliver or cause to be delivered to Seller (i)
the portion of the Purchase Price described in Section 2.1(b) adjusted, if
necessary, in accordance with Section 2.2; and (ii) the Employment Agreements,
executed by Buyer.
(c) Parent shall deliver the Guaranty in the form of Exhibit
IV hereto.
Exhibit 10.3 (cont.)
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND SHAREHOLDERS.
Certain representations and warranties made by Seller and Shareholders
are modified as and to the extent set forth in the Disclosure Statement which is
being delivered to Buyer on the date hereof (the "Disclosure Statement") or as
otherwise provided herein. Shareholders and Seller represent and warrant to
Buyer as of the date of this Agreement and as of the Closing Date as follows:
4.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has all necessary corporate powers to own its properties and to
carry on its business as now owned and operated by it. Seller is duly qualified
to do business and is in good standing in each jurisdiction in which failure to
be so qualified would have an adverse effect on the Business or the Purchased
Assets. The Disclosure Statement sets forth a complete and accurate list with
respect to Seller of all its affiliates, each jurisdiction where it or an
affiliate is authorized to do business, and Seller's capitalization (including
the identity of Seller's stockholders and the number of shares held by each
stockholder).
4.2 Power and Authorization. Seller has full legal right, power
and authority to enter into and perform its obligations under this Agreement and
the other agreements and documents required to be delivered by it prior to or at
the Closing (the "Seller Transaction Documents"). The execution, delivery and
performance by Seller of this Agreement and the Seller Transaction Documents
have been duly authorized by all necessary action. This Agreement has been duly
and validly executed and delivered by Seller and constitutes the legal, valid
and binding obligation of Seller, enforceable against it in accordance with its
terms. When executed and delivered as contemplated herein, each of the Seller
Transaction Documents shall constitute the legal, valid and binding obligation
of Seller, enforceable against it in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or other laws affecting creditors
rights generally, or by legal limitations on the availability of judicial
remedies.
4.3 No Conflict.
(a) Except as described in the Disclosure Statement, the
execution, delivery and performance of this Agreement and the Seller Transaction
Documents do not and will not (with or without the passage of time or the giving
of notice):
(i) violate or conflict with any law, regulation,
permit, license, certificate, judgment, order, award or other decision
or requirement of any arbitrator, court, government or governmental
agency or instrumentality, domestic or foreign, (collectively, "Laws"),
binding upon Shareholders or Seller that may have an adverse effect on
the Business;
(ii) violate or conflict with, result in a breach of,
or constitute a default or otherwise cause any loss of benefit under
any Contract (except that the assignment of certain Contracts to Buyer
may require the consent of third parties), or give to others any rights
(including rights of termination, foreclosure, cancellation or
acceleration) in or with respect to any of the Purchased Assets;
(iii) result in, require or permit the creation or
imposition of any restriction, mortgage, deed of trust, pledge, lien,
security interest or other charge, claim or encumbrance of any nature
upon or with respect to the Purchased Assets that is likely to, either
individually or in the aggregate, have a material adverse effect on the
Purchased Assets;
(iv) cause Buyer to become subject to, or become
liable for the payment of any tax except for Buyer's prorated portion
of accrued taxes described in Section 2.2(a) and accrued sales taxes;
or
(v) cause any of the Purchased Assets to be
reassessed or revalued by any taxing authority or governmental body.
(b) There are no judicial, administrative or other
governmental actions, proceedings or investigations pending against Shareholders
or Seller or, to the knowledge of Shareholders or Seller, threatened, that
question any of the transactions contemplated by, or the validity of, this
Agreement or any of the other agreements or instruments contemplated hereby or
which, if adversely determined, is likely to have an adverse effect upon the
ability of Shareholders or Seller to enter into or perform its obligations under
this Agreement or any such other agreements or instruments. Neither Shareholders
nor Seller have received any request from any governmental agency or
instrumentality for information with respect to the transactions contemplated
hereby.
4.4 Brokers. No person, acting on behalf of Shareholders or Seller
or its affiliates or under the authority of any of the foregoing is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee,
directly or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement.
4.5 Compliance with Laws.
(a) Except as described in the Disclosure Statement, the
operation of the Business and the Purchased Assets is, and at all times during
the last two (2) years has been, in compliance in all material respects with all
applicable Laws; and neither Shareholders nor Seller have had any basis to
expect, and have not received, with respect to the Purchased Assets or the
operation of the Business, during the last two (2) years, any notice, order or
other communication from any governmental, judicial or administrative agency or
instrumentality of any alleged, actual, or potential violation of or failure to
comply with any Law.
(b) All material federal, foreign, state, local and other
governmental consents, licenses, permits, franchises, grants and authorizations
(collectively, "Authorizations") required for the operation of the Business as
currently conducted and as conducted during the last two (2) years are, except
as otherwise described in the Disclosure Statement, in full force and effect
without any
Exhibit 10.3 (cont.)
default or violation thereunder by Seller or by any other party thereto and
neither Shareholders nor Seller have received any notice of any claim or charge
that Seller is or within the last two (2) years has been in violation of or in
default under any such Authorization. Except as described in the Disclosure
Statement, (i) no proceeding is pending or, to the knowledge of Shareholders or
Seller, threatened by any person to revoke or deny the renewal of any
Authorization; and (ii) neither Shareholders nor Seller has been notified that
any such Authorization may not in the ordinary course be renewed upon its
expiration or that by virtue of the transactions contemplated hereby any such
Authorization may not be granted or renewed or transferred to Buyer.
4.6 Securities Laws Matters
(a) Seller acknowledges that the Shares and the obligations of
Buyer under Sections 2.1(b) through 2.1(e) and 2.1(i) through 2.1(l) herein, if
any (the "Securities"), will not be registered under the Securities Act of 1933,
as amended (the "Securities Act"), and must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
such registration becomes or is available.
(b) Seller represents and warrants that its principal place of
business is located in the State of New York and that Buyer did not communicated
with Seller with respect to the offer or sale of the Securities at any time
while Seller was located in any other state.
(c) Seller represents and warrants that:
(i) It is well versed in financial matters and
has such knowledge and experience in financial and business matters and
that it is fully capable of understanding the merits and risks of the
investment being made in the Securities and the risks involved in
connection therewith;
(ii) It is acting herein for its own account and
is acquiring the Securities for investment without a view to the resale
or other distribution thereof. It is financially able to hold the
Securities for long-term investment, believes that the nature and
amount of the Securities to be acquired hereunder is consistent with
its overall investment program and financial position, and recognizes
that there are substantial risks involved in an investment in the
Securities;
(iii) It has received and reviewed the annual
report on Form 10-K of the Parent for the year ended December 31, 1997.
(d) Seller acknowledges and agrees that Buyer may, if it so
desires, permit transfers, or authorize its transfer agent to permit transfers,
of the Securities only when such Securities have been registered under the
Securities Act or when the request for transfer is accompanied by satisfactory
assurance (including, if requested, an opinion of counsel reasonably acceptable
to Buyer) that the sale or proposed transfer does not require registration under
the Securities Act, and Seller agrees that a legend to such effect will be
placed on the Securities.
4.7 Litigation. Except as described in the Disclosure Statement,
there are no, and during the last two (2) years there have not been any, claims,
actions, suits, proceedings (arbitration or otherwise) or investigations
involving or affecting the Business or the Purchased Assets before or by any
court or governmental agency or instrumentality, or before an arbitrator of any
kind; and no pending claim, action, suit, proceeding or investigation, if
determined adversely, would either individually or in the aggregate have a
material adverse effect on the Business, or would result in a liability in
excess of $5,000 in the case of any single action or $10,000 in the case of all
such actions in the aggregate. To the knowledge of Shareholders and Seller,
except as described in the Disclosure Statement, no such claim, action, suit,
proceeding or investigation is presently threatened or contemplated, and there
are no facts which could reasonably serve as a basis for any such claim, action,
suit, proceeding or investigation. There are no unsatisfied judgments, penalties
or awards against or affecting the Business.
4.8 Financial Statements.
(a) The statements of income of Seller for the 12-month
periods ended December 31, 1996 and December 31, 1997, reviewed by Freed ▇▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇, PC, correct and complete copies of which are attached hereto
as part of Schedule 4.8, are true and correct in all material respects and
present fairly the financial position of the Business of the Seller and the
results of its operations for the fiscal periods then ended, in conformity with
GAAP consistently applied in accordance with past practice, and include all
adjustments which are necessary for a fair presentation of the information
shown.
(b) The internal statement of income of Seller for the
five-month period ended May 31, 1998, a correct and complete copy of which is
attached hereto as part of Schedule 4.8, is true and correct in all material
respects and presents fairly the financial position of the Business of the
Seller and the results of its operations for the period then ended, in
conformity with GAAP applied on a consistent basis, and includes all adjustments
which are necessary for a fair presentation of the information shown.
(c) The internal balance sheet of Seller at May 31, 1998 (the
"Balance Sheet"), a correct and complete copy of which is attached hereto as
part of Schedule 4.8, is true and complete in all material respects and presents
fairly the assets and liabilities of the Business of the Sellers as of such
date, in conformity with GAAP applied on a consistent basis, and includes all
adjustments which are necessary for a fair presentation of the information
shown.
(d) Within 15 days after the Closing Date, Seller will deliver
to Buyer the balance sheet of Seller as of the Closing Date, reviewed by Freed
▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇, PC. Such financial statements, when prepared and
delivered, will be true and correct in all material respects and present fairly
the financial position of Seller as of the Closing Date and the results of its
operations for the period then ended, in conformity with GAAP applied on a
consistent basis.
Exhibit 10.3 (cont.)
4.9 Accounts Receivable. All accounts receivable reflected on the
Balance Sheet and included in the Purchased Assets have been acquired or have
arisen only in the ordinary course of business, consistent with past practice,
and are not subject to defenses, set-offs or counterclaims. All of such accounts
receivable are generally due within 30 days after being accrued on the books of
the Seller and have been collected, or are collectible within 180 days after
billing, in the full aggregate recorded amounts. Schedule 4.9 lists the
Business's accounts receivable as of May 31, 1998, and specifies, for each
account receivable, the account debtor, the face amount of the receivable and
the age of the receivable.
4.10 Personal Property. Except as described in the Disclosure
Statement: (a) Seller has good and valid title to all of the Purchased Assets
free and clear of any restriction, mortgage, deed of trust, pledge, lien,
security interest or other charge, claim or encumbrance; and (b) all Purchased
Assets owned or leased by Seller are in the possession or under the control of
Seller are suitable for the purposes for which they are currently being used and
are of a condition, nature and quantity sufficient for the conduct of the
Business as it is presently conducted.
4.11 List of Properties, Contracts, etc. The Disclosure Statement
lists or adequately describes the following:
(a) Each vehicle, item of machinery, equipment and other
tangible asset (other than real property) included in the Purchased Assets with
a fair market or book value in excess of $1,000 in respect of any item, and
location thereof;
(b) Each Authorization employed in the Business;
(c) Each (i) fictitious business name, trade name, registered
and unregistered trademark, service ▇▇▇▇ and related application (the "Marks"),
(ii) patent, patent right and patent application (collectively, "Patents"),
(iii) copyright in published and material unpublished works ("Copyrights"),
computer programs and software, including Seller's website ("Software"), (iv)
proprietary formula, trade secret, formulation and invention ("Trade Secrets"),
and (v) license and permit issued or granted by any person relating to any of
the foregoing; in each case included in the Purchased Assets and owned, leased,
used or held by, granted to or licensed by Seller as either licensor or
licensee, together with all other interests therein granted by Seller to any
other person and all agreements with respect to any of the foregoing to which
Seller is a party. Notwithstanding anything herein to the contrary. Seller makes
no representation or warranty that it has exclusive right to the use of "AOP".
(d) Each contract, agreement or commitment which restricts or
purports to restrict any business activities or freedom of Seller or the
officers, employees or consultants of Seller to engage in the Business or to
compete with any person;
(e) Each Contract involving the performance of services or
delivery of goods or materials by or to Seller providing for purchases or sales
of $5,000 or more per year;
(f) Each contract, agreement or commitment relating to the
Business to which Seller is a party or is otherwise bound providing for payments
(contingent or otherwise) to or by any person or entity based on sales,
purchases or profits, other than direct payments for goods, and each other
contract, agreement or commitment relating to the Business to which Seller is a
party or by which it or any Purchased Assets are otherwise bound which is
material to its business, operation, financial condition or prospects;
(g) Each form of contract, employee non-disclosure and
non-competition agreement or commitment used by Seller as a standard form in the
ordinary course of the Business;
(h) A summary of each policy and binder of insurance, owned
by, or maintained in the preceding two (2) years for the benefit of, or with
respect to which any premiums are paid directly or indirectly by Seller relating
to the Business;
(i) Each insurance claim made or loss incurred in the
preceding two (2) years pursuant to any workmen's compensation, liability or
other insurance policy for a claim in excess of $5,000; and
(j) Each outstanding power-of-attorney or similar power
relating to the Business granted by Seller for any purpose whatsoever.
(k) Seller has furnished or, on request, will furnish or make
available to Buyer true and complete copies of each agreement, plan and other
document required to be disclosed on the Disclosure Statement.
4.12 Contracts. Except as described in the Disclosure Statement,
each Contract was entered into in the ordinary course of business, is in full
force and effect and is valid, binding and enforceable against the parties
thereto in accordance with its terms. Except as described in the Disclosure
Statement, Seller has performed all obligations required to be performed by it
under each such Contract, and no condition exists or event has occurred which
with notice or lapse of time would constitute a default or a basis for delay or
non-performance by Seller or, to the best knowledge of Seller, by any other
party thereto. Seller has no liabilities, whether fixed or contingent (other
than contractual obligations pursuant to the terms of such contracts), relating
to or arising out of contracts with the United States government or any agency
thereof or any other customers, including, but not limited to, claims arising
out of pricing provisions therein. There is no contractual or other requirement
for any employee of the Business to obtain or maintain a security clearance with
respect to any governmental agency or instrumentality. The Disclosure Statement
identifies each each other party to such a Contract who has consented or been
given sufficient notice (where such consent or notice is necessary) that the
same shall remain in full force and effect following the Closing.
4.13 Intellectual Property. Except as otherwise described in the
Disclosure Statement, Seller is the sole owner or has the exclusive perpetual
right to use without consideration, all Intellectual Property, free and clear of
any lien, security interest, restriction, encumbrance or other adverse claim;
Seller has not granted or licensed to any person any rights with respect to any
Intellectual Property, and no other person has any rights in or to any of the
Intellectual Property (including, without limitation, any rights to market or
distribute
Exhibit 10.3 (cont.)
any of the Intellectual Property); the rights of Seller in and to any of the
Intellectual Property will not be limited or otherwise affected by reason of any
of the transactions contemplated hereby; and the Intellectual Property is
sufficient for the conduct of the Business as it is presently conducted. The
Intellectual Property does not infringe and, to Seller's knowledge, is not
alleged to have infringed any trademark, copyright, patent or other proprietary
right of any person.
4.14 Customers and Suppliers. No present customer or supplier has
terminated or materially reduced, or has given notice that it intends to
terminate or materially reduce, the amount of business done with Seller with
respect to the Business. Neither Shareholders nor Seller is aware of any such
intention on the part of any such customer, supplier or vendor, whether or not
in connection with the transactions contemplated hereunder. There are no, and
during the last two (2) years there have not been, any disputes or controversies
involving, in the aggregate, more than $5,000 between Seller and any customer,
supplier or other person regarding the quality, merchantability or safety of, or
involving a claim of breach of warranty which has not been fully resolved with
respect to, warranties provided by the Business.
4.15 Taxes. All federal, state, local and foreign income, profits,
franchise, sales, use, value added, payroll, premium, occupancy, property,
severance, excise, withholding, customs, unemployment, transfer and other taxes,
including interest, additions to tax and penalties (collectively "Taxes")
relating to the Business due or properly shown to be due on any return filed by
Seller with respect to taxable periods ending on or prior to, and the portion of
any interim period up to, the date hereof have been either fully accrued or
fully and timely paid; and there are no levies, liens or other encumbrances
relating to Taxes existing, threatened or pending with respect to any Purchased
Asset.
4.16 Employee Benefits.
(a) The Disclosure Statement contains a complete and correct
list of all benefit plans, arrangements, commitments and payroll practices
(whether or not employee benefit plans) (collectively, the "Employee Benefit
Plans") as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), including, without limitation, sick leave,
vacation pay, severance pay, salary continuation for disability, consulting or
other compensation arrangements, retirement, deferred compensation, bonus,
incentive compensation, stock purchase, stock option, health, including
hospitalization, medical and dental, life insurance and scholarship programs
maintained for the benefit of any present or former employees of the Business.
(b) With respect to each Employee Benefit Plan required to be
listed on the Disclosure Statement: (i) each Employee Benefit Plan has been
administered in compliance with its terms, and is in compliance in all material
respects with the applicable provisions of ERISA, the Internal Revenue Code of
1986, as amended (the "Code"), and all other applicable Laws (including, without
limitation, the funding and prohibited transaction provisions of ERISA and the
Code, continuation coverage obligations pursuant to Title V of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and the Family
and Medical Leave Act of 1993 ("FMLA")); (ii) Seller has made or provided for
all contributions required under the terms of such Employment Benefit Plans;
(iii) there are and during the past three (3) years there have been no
inquiries, proceedings, claims or suits pending or threatened by any
governmental agency or authority or by any participant or beneficiary against
any of the Employee Benefit Plans, the assets of any of the trusts under such
Plans or the Plan sponsor or the Plan administrator, or against any fiduciary of
any of such Employee Benefit Plans with respect to the design or operation of
the Employee Benefit Plans; (iv) each Employee Pension Benefit Plan (as defined
in Section 3(2) of ERISA) which is intended to be "qualified" within the meaning
of Section 401(a) of the Code is and has from its inception been so qualified,
and any trust created pursuant to any such Employee Pension Benefit Plan is and
has been from its inception exempt from federal income tax under Section 501(a)
of the Code and the IRS has issued each such Plan a favorable determination
letter which is currently applicable or an application for such a determination
letter shall be made prior to the expiration of the applicable remedial
amendment period; (v) neither Seller nor any ERISA Affiliate is aware of any
circumstance or event which would jeopardize the tax-qualified status of any
such Employee Pension Benefit Plan or the tax-exempt status of any related
trust; and (vi) Seller and its ERISA Affiliates have, prior to the Closing,
delivered to Buyer, with respect to all Employee Benefit Plans listed in the
Disclosure Statement, true, complete and correct copies of the following: all
plan documents, handbooks, manuals, collective bargaining agreements and similar
documents governing employment policies, practices and procedures; all the most
recent summary plan descriptions and any subsequent summaries of material
modifications and all other material employee communications discussing any
employee benefit; Forms 5500 (including audit reports) as filed with the IRS for
the most recent four (4) plan years; the most recent report of the enrolled
actuary for all plans requiring actuarial valuation; all trust agreements with
respect to employee benefit plans; plan contracts with service providers and
plan contracts with insurers providing benefits for participants or liability
insurance for fiduciaries and other parties in interest or bonding; most recent
annual audit and accounting of plan assets for all funded plans; and most recent
IRS determination letter for all plans qualified under Section 401(a) of the
Code. As used herein, "ERISA Affiliate" shall refer to any trade or business,
whether or not incorporated, under common control with the Seller within the
meaning of Section 414(b), (c), (m) or (o) of the Code.
(c) Neither Seller nor any ERISA Affiliate maintains or has
ever maintained or been obligated to contribute to a "Multiemployer Plan" (as
such term is defined by Section 4001(a)(3) of ERISA), and Seller is not bound by
any collective bargaining agreement or legally binding arrangement to maintain
or contribute to any Employee Benefit Plan.
(d) Neither Seller nor any ERISA Affiliate maintains or has
ever maintained or been obligated to contribute to a Defined Benefit Plan (as
defined in Section 3(35) of ERISA).
(e) All reports and information required to be filed with the
United States Department of Labor and IRS or with
Exhibit 10.3 (cont.)
plan participants and their beneficiaries with respect to each Employee Benefit
Plan required to be listed on the Disclosure Statement have been filed and all
annual reports (including Form 5500 series) of such Plans were certified, if
applicable, without qualification by each Plan's accountants and actuaries.
There has been no material change with regard to any such Employee Benefit Plan
since June 1, 1998.
(f) All Employee Benefit Plans required to be listed on the
Disclosure Statement may, without liability, be amended, terminated or otherwise
discontinued except as specifically prohibited by federal law.
(g) Any bonding required under ERISA with respect to any
Employee Benefit Plan required to be listed on the Disclosure Statement has been
obtained and is in full force and effect and no funds held by or under the
control of Seller or any ERISA Affiliate are plan assets.
(h) Neither Seller nor any ERISA Affiliate maintains any
retired life and/or retired health insurance plans which provide for continuing
benefits or coverage for any employee or any beneficiary of an employee after
such employee's termination of employment.
(i) Neither Seller nor any ERISA Affiliate is bound by any
collective bargaining agreement of legally binding arrangement to maintain or
contribute to any Employee Benefit Plan.
(j) There has been no material violation of the "continuation
coverage requirements" of "group health plans" of former section 162(k) of the
Code (as in effect for tax years beginning on or before December 31, 1988) and
of section 4980B of the Code (as in effect for tax years beginning on and after
January 1, 1989) and Part 6 of Subtitle B of Title I of ERISA with respect to
any group health plan to which such continuation coverage requirements apply.
(k) There has been no material violation of the health
insurance obligation is imposed by section 9801 of the Code and Part 7 of
Subtitle B of Title I of ERISA ("HIPAA") with respect to any Employee Benefit
Plan which is a group health plan (as defined under Section 5000(b) (1) of the
Code or Part 6 of Subtitle B of Title I of ERISA) to which such insurance
obligations apply.
4.17 Labor Matters.
(a) Except as described in the Disclosure Statement: (i) to
the knowledge of Shareholders and Seller, no application or petition for
certification of a collective bargaining agent is pending and none of the
employees of Seller engaged in the Business are, or during the last two (2)
years have been, represented by any union or other bargaining representative;
(ii) to the knowledge of Shareholders and Seller, during the last two (2) years,
no union has attempted to organize any group of the employees of Seller engaged
in the Business, and no group of the employees of Seller engaged in the Business
has sought to organize themselves into a union or similar organization for the
purpose of collective bargaining; (iii) during the last two (2) years there has
not been and there is not currently pending any labor arbitration or proceeding
in respect of the grievance of any employee engaged in the Business, any
application, charge or complaint filed by any employee or union with the
National Labor Relations Board or any comparable state or local agency, any
strike, slowdown, picketing or work stoppage by any employees at the Facility,
any lockout of any such employees or any labor trouble or other labor-related
controversy, occurrence or condition; (iv) no agreement restricts Seller from
relocating or closing the Facility or any portion thereof; and (v) to the
knowledge of Shareholders and Seller, no such agreement, action, proceeding or
occurrence is threatened or contemplated by any person.
(b) Except as described in the Disclosure Statement with
respect to the Business and the Facility, Seller has not been cited for
violations of the Occupational Safety and Health Act of 1970, 29 U.S.C. sec. 651
et seq. ("OSHA"), any regulation promulgated pursuant to OSHA, or any other
statute, ordinance, rule or regulation establishing standards of workplace
safety, or paid any fines or penalties with respect to any such citation. Except
as described in the Disclosure Statement: (i) there have not been any
inspections of the Facility by representatives of the Occupational Safety and
Health Administration or any other government agency vested with authority to
enforce any statute, ordinance, rule or regulation establishing standards of
workplace safety; (ii) to the knowledge of Shareholders and Seller, no
representative of any such government agency has attempted to conduct any such
inspection or sought entry to the Facility for that purpose; (iii) Seller has
been notified of any complaint or charge filed by any employee or employee
representative with any such government agency which alleges that Seller has
violated OSHA or any other statute, ordinance, rule or regulation establishing
standards of workplace safety; (iv) Seller has not been notified that any
employee or employee representative of the Business has requested that any such
government agency conduct an inspection of the Facility to determine whether
violations of OSHA or any other such statute, ordinance, rule or regulation may
exist; and (v) Seller doe not maintain any condition, process, practice or
procedure at the Facility which would be deemed a material violation of OSHA or
any other statute, ordinance, regulation or rule establishing standards on
workplace safety.
(c) Attached to the Disclosure Statement are true and correct
copies of each OSHA Form No. 200 completed and maintained by Seller at the
Facility for the last two (2) years.
4.18 Employees. The Disclosure Statement sets forth the following
information for each employee of Seller engaged in the Business (including each
such person on leave or layoff status) (collectively, the "Employees"): employee
name and job title; current annual rate of compensation (identifying bonuses
separately) and any change in compensation since December 31, 1997; vacation
accrued and service credited for purposes of vesting and eligibility to
participate in applicable Employee Benefit Plans; description of any material
pre-existing condition known to Seller with respect to any applicable Employee
Benefit Plan; and any automobile leased or owned by Seller primarily for use by
any of the foregoing persons. Except as described in the Disclosure Statement,
none of Employees is a party to, or is otherwise bound by, any agreement or
arrangement with any person or entity other than Seller which limits or
adversely affects the
performance of his or her duties, the ability of Seller to conduct the Business,
or his or her freedom to engage in the Business (including, without limitation,
any confidentiality, non-competition, non-solicitation or proprietary rights
agreement). The Disclosure Statement lists or describes each employment,
severance, change of control, consulting, commission, agency and representative
agreement or arrangement relating to the Business to which Seller is a party or
is otherwise bound, including, without limitation, all agreements and
commitments relating to wages, hours or other terms or conditions of employment
including, but not limited to, any oral or written agreements or promises
relating to the granting of an ownership or profit-sharing interest in the
Business (other than unwritten employment arrangements terminable at will
without payment of any contractual severance or other amount). Seller has
properly classified as "employees," and has paid all required withholding taxes
with respect to, all persons who qualify as employees under the Code and the
rules and regulations promulgated thereunder.
4.19 Full Disclosure.
(a) All documents and other papers delivered by or on behalf
of Shareholders and Seller in connection with the transactions contemplated by
this Agreement are accurate and complete in all material respects and are
authentic. No representation or warranty of Shareholders or Seller contained in
this Agreement or the Disclosure Statement contains any untrue statement of a
material fact or omits to state a fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading in any material respect.
(b) Except as described in this Agreement or the Disclosure
Statement, there is no fact known to Shareholders or Seller (other than general
economic or industry conditions) which materially adversely affects or, so far
as Shareholders or Seller can reasonably foresee, materially threatens, the
assets, business, prospects, financial condition or results of operations of the
Business or the ability of Shareholders or Seller to perform this Agreement.
4.20 Absence of Changes or Events. Except as described on the
Disclosure Statement and except for actions taken after the date hereof pursuant
to a specific covenant hereunder, since January 1, 1998, Seller has not:
(a) declared or paid any dividend or other distribution or
payment in respect of the shares of capital stock of Seller or any repurchase or
redemption of any such shares of capital stock or other securities;
(b) discharged or satisfied any lien or encumbrance, or paid
any liabilities, other than in the ordinary course of business consistent with
past practice, or failed to pay or discharge when due any liabilities which the
failure to pay or discharge has caused or will cause any material damage or risk
of material loss to Purchased Assets or the Business;
(c) sold, assigned or transferred any of its Assets or
properties except in the ordinary course of business consistent with past
practice;
(d) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected to any Lien, any of its
Purchased Assets, other than the liens, if any, for current taxes not yet due
and payable;
(e) made or suffered any amendment or termination of any
Contract to which it is a party or by which it is bound or canceled, modified or
waived any debts or claims held by it, other than in the ordinary course of
business consistent with past practice, or waived any right of substantial
value, whether or not in the ordinary course of business;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, of any item carried on its books of account at more than
$1,000, or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility services required to conduct its Business;
(g) suffered any decrease in its retained earnings or working
capital, or any material adverse change in its Business;
(h) suffered any adverse change or any threat of an adverse
change in its relation with, or any loss or threat of loss of, any of its
customers other than usual attrition in the ordinary course of customers that
are not individually or in the aggregate material to the Business;
(i) made any capital expenditure or capital addition or
betterment except such as may be involved in ordinary repair, maintenance and
replacement of its Purchased Assets;
(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its shareholders, directors, officers, employees or independent
contractors, or made any increase in, or any addition to, other benefits to
which any of its shareholders, directors, officers or employees may be entitled;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles; or
(l) entered into any material transaction or any transaction
other than in the ordinary course of business consistent with past practice.
4.21 Affiliate Agreements. Except as described in the Disclosure
Statement, there are no agreements, arrangements or understandings between
Seller on the one hand and Shareholders or any present or former director,
shareholders or officer of Seller or any member of the immediate family of or
any person or entity controlling or controlled by any of such persons (a
"Related Party").
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Shareholders and Seller as of
the date of this Agreement and as of the Closing Date as follows:
Exhibit 10.3 (cont.)
5.1 Organization and Good Standing. Buyer is a Delaware
corporation duly organized and validly existing under the laws of the State of
Delaware and has all necessary corporate power and authority to carry on its
business as presently conducted, to own and lease the assets which it owns and
leases and to perform all its obligations under each agreement and instrument by
which it is bound.
5.2 Power and Authorization. Buyer has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Buyer Transaction Documents")
required to be delivered by it prior to or at the Closing and thereafter as
provided in this agreement. The execution, delivery and performance by Buyer of
this Agreement and the Buyer Transaction Documents have been duly authorized by
all necessary corporate action. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency or other laws affecting
creditors rights generally, or by legal limitations on the availability of
judicial remedies. When executed and delivered as contemplated herein, each of
the Buyer Transaction Documents shall constitute the legal, valid and binding
obligation of Buyer, enforceable against it in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency or other laws affecting
creditors rights generally, or by legal limitations on the availability of
judicial remedies; and the Guaranty shall constitute the legal, valid and
binding obligation of Parent, enforceable against it in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency or other
laws affecting creditors rights generally, or by legal limitations on the
availability of judicial remedies.
5.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement
and the Buyer Transaction Documents do not and will not (with or without the
passage of time or the giving of notice):
(i) violate or conflict with any provision of
Buyer's Articles of Incorporation, by-laws or of any Law binding upon
Buyer; or
(ii) violate or conflict with, result in a breach of,
or constitute a default or otherwise cause any loss of benefit under
any material agreement or other material obligation to which Buyer is a
party.
(b) No consents or approvals of, or registrations,
notifications, filings and/or declarations with, any court, government or
administrative agency or instrumentality, creditor, lessor or other person are
required to be given or made by Buyer in connection with the execution, delivery
and performance of this Agreement and the other agreements and instruments
contemplated herein, other than such as have been obtained or made or which the
failure to obtain would not have a material adverse effect on Buyer's ability to
consummate the transactions contemplated herein and therein.
(c) There are no judicial, administrative or other
governmental actions, proceedings or investigations pending or, to the knowledge
of Buyer, threatened, that question any of the transactions contemplated by this
Agreement or the validity of this Agreement or any of the other agreements or
instruments contemplated hereby or which, if adversely determined, would have a
material adverse effect upon the ability of Buyer to enter into or perform its
obligations under this Agreement or any of the other agreements or instruments
contemplated hereby. Buyer has not received any request from any governmental
agency or instrumentality for information with respect to the transactions
contemplated hereby.
(d) All Shares issued in connection with this Agreement and
the Employment Agreements will be, upon issuance, duly authorized, validly
issued, fully paid and non-assessable.
5.4 Brokers. No person acting on behalf of Buyer or any of its
affiliates or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee, directly
or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement, other than Argentum Partners, whose
fees and expenses shall be paid by Buyer.
5.5 Deliveries to Seller. Buyer has delivered to Seller and
Shareholders a true and correct copy of all of Parent's filings with the United
States Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act") since January 1, 1998.
There has been no material adverse change in the business, financial condition
or results of Parent since the dates of such filings, except as disclosed
therein.
SECTION 6. EMPLOYEE BENEFITS AND EMPLOYMENT.
6.1 Employment.
(a) Buyer will offer employment to each employee of the
Business listed on Schedule 6.1 attached hereto at a rate of pay at least equal
to such employee's rate of pay (base and bonus) in effect on, and with such
benefits as shall be, in the aggregate, generally comparable to such employee's
benefits immediately prior to, the Closing Date. Employees who accept such
employment shall be referred to as "Transferred Employees" for purposes of this
Agreement. Seller shall be responsible for any severance pay obligations with
respect to individuals employed in the Business who are not Transferred
Employees and whose employment with Seller is terminated. Anything contained in
or implied by the provisions of this Section 6.1 to the contrary
notwithstanding, the provisions of this Section shall not create any third-party
beneficiary rights in any person, including any Transferred Employee.
6.2 Employee Pension Benefit Plans. The benefits under any
Employee Pension Benefit Plan (as defined in Section 3(2) of ERISA) maintained
by Seller which have accrued to any Transferred Employee as of the Closing Date
shall be frozen as of a date not later than 15 days after the Closing Date and
no further benefits shall accrue under any such Employee Pension Benefit Plan
with respect to
Exhibit 10.3 (cont.)
such Transferred Employee. Buyer assumes no responsibility with respect to any
such Employee Pension Benefit Plan.
6.3 Employee Welfare Benefit Plans. Buyer shall assume and
continue the Employee Welfare Benefit Plans (as defined in Section 3(1) of
ERISA) maintained by Seller as of the Closing Date with respect to the
Transferred Employees in accordance with the terms and conditions of this
Section 6.3 and such Employee Welfare Benefit Plans. However, Buyer reserves the
right to modify, amend, suspend or terminate such Employee Welfare Benefit Plans
at any time after the Closing Date. Notwithstanding the foregoing, Seller shall
remain responsible and liable for any acts or omissions by Seller with respect
to such Employee Welfare Benefit Plans occurring prior to the Closing Date.
In addition, Seller shall remain responsible for any injury sustained
prior to the Closing Date that is related to a ▇▇▇▇▇▇▇'▇ compensation claim
prior to the Closing Date.
6.4 Vacation and Holidays. Buyer will provide to the Transferred
Employees the same vacations and holidays as provided by Seller through December
31, 1998 except that Buyer will not permit the use of any vacation carried over
from 1997 or prior years.
6.5 Health Continuation Coverage. Seller shall be responsible for
all health continuation coverage requirements of the Code and ERISA for all
periods prior to the Closing Date. Buyer shall be responsible for all health
continuation coverage requirements of the Code and ERISA for Transferred
Employees for all periods subsequent to the Closing Date.
6.6 Health Insurance Portability and Accountability Act. Seller
shall be responsible for all health insurance obligations imposed by HIPAA with
respect to any Employee Welfare Benefit Plan which is a group health plan (as
defined under Section 5000(b)(1) of the Code or Part 6 of Subtitle B of Title I
of ERISA) for all periods prior to the Closing Date. Buyer shall be responsible
for all HIPAA obligations with respect to any Employee Welfare Benefit Plan
which is a group health plan and which is assumed by Buyer for Transferred
Employees for all periods subsequent to the Closing Date.
6.7 Reporting and Disclosure Requirements. Seller shall be
responsible for filing all annual reports and satisfying all other reporting and
disclosure requirements with respect to any Employee Benefit Plan for all Plan
Years ending prior to the Closing Date.
6.8 Employee Records. Seller shall grant Buyer full access to all
employee records relating to the Transferred Employees.
SECTION 7. CERTAIN CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
The obligation of Buyer to consummate the acquisition of the Purchased
Assets is subject to the fulfillment by or at the Closing of each of the
following conditions:
7.1 Representations and Warranties. The representations and
warranties of Shareholders and Seller contained in this Agreement shall be
deemed to have been made again at and as of the Closing and shall then be true
and correct in all material respects.
7.2 Shareholders and Seller shall have performed or complied with
all of the agreements, covenants and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing.
7.3 Approvals. The consent or approval of all persons necessary
for the consummation of the transactions contemplated hereby shall have been
obtained and no such consent or approval: (a) shall have been conditioned upon
the modification, cancellation or termination of any lease, commitment,
agreement, easement, right or Authorization included in the Purchased Assets; or
(b) shall impose on Buyer, any condition, provision or requirement not presently
imposed upon Seller, and which is described in the Disclosure Statement, or any
condition that would be more restrictive after the Closing on Buyer, than the
conditions presently imposed on Seller.
7.4 Legal Matters. The Closing shall not violate any order or
decree of any court or governmental body of competent jurisdiction and no suit,
action, proceeding or investigation shall have been brought or threatened by any
person (other than Buyer or an affiliate of Buyer) which questions the validity
or legality of this Agreement or the transactions contemplated hereby.
7.5 No Material Adverse Change. There shall not have been any
material adverse change or threat of material adverse change in the Business or
the Purchased Assets since April 30, 1998, or in any development of a nature
that is, or is likely to be, materially adverse to the Business or the Purchased
Assets since that date.
7.6 Opinion of Counsel. Buyer shall have received the opinion
satisfactory to Buyer of ▇▇▇▇▇ Swados ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP,
counsel for Shareholders and Seller, in the form attached hereto as Exhibit III
dated as of the Closing.
7.7 Closing Certificates. Buyer shall have received certificates
from Seller, dated the Closing Date, certifying in such detail as Buyer may
reasonably request that the conditions specified in Sections 7.1, 7.2 and 7.3
hereof have been fulfilled.
SECTION 8. CERTAIN CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDERS
AND SELLER.
The obligation of Shareholders and Seller to consummate the sale of the
Purchased Assets is subject to the fulfillment by or at the Closing of each of
the following conditions:
8.1 Representations and Warranties. Buyer's representations and
warranties contained in this Agreement shall be deemed to have been made again
at and as at the Closing and shall then be true and correct in all material
respects.
8.2 Performance of Covenants. Buyer and Guarantor shall have
performed or complied with all of the agreements, covenants and conditions
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
8.3 Approvals. The consent or approval of all persons described on
the Disclosure Statement pursuant to Sections 4.5(b) shall have been obtained.
8.4 Legal Matters. The Closing shall not violate any order or
decree of any court or governmental body of competent
Exhibit 10.3 (cont.)
jurisdiction and no suit, action, investigation, or legal or administrative
proceeding shall have been brought or threatened by any person (other than
Seller or an affiliate of Seller) which questions the validity or legality of
this Agreement or the transactions contemplated hereby.
8.5 Lease. Buyer shall have entered into the Lease.
8.6 Closing Certificates. Seller shall have received certificates
from Buyer, dated the Closing Date, certifying in such detail as Seller may
reasonably request that the conditions specified in Sections 8.1 and 8.2 hereof
have been fulfilled.
SECTION 9. CERTAIN POST-CLOSING MATTERS; COVENANTS.
9.1 Confidential Information. From and after the Closing, unless
expressly consented to in writing by Buyer, Shareholders and Seller shall not,
and shall use best efforts to cause all Transferred Employees and others not to,
directly or indirectly, use or disclose to any third person, any trade secret,
financial data, customer list, pricing or marketing policies or plans or other
proprietary or confidential information relating to the Business.
9.2 Covenant Not to Compete. Shareholders agree that, unless
acting with the prior written consent of Buyer, they will not, directly or
indirectly:
(a) for a period of two (2) years after the Closing Date,
within 100 miles of any office location for which Shareholders have management
responsibility, or for a period of one (1) year after the Closing Date and
within 100 miles of a location in which there is any office or facility of the
Buyer: (i) without the prior written approval of Buyer, which approval may be
granted or denied in the sole discretion of the Buyer, directly or indirectly,
own, manage, operate, control, be employed by, consult with, participate in, or
be connected in any manner with the ownership, management, operation or control
of any business which engages, directly or indirectly, in the document imaging,
document management or business process consulting services in competition with
the Buyer's business as conducted on the date hereof; (ii) be or become a
stockholder, partner, owner, officer, director or employee or agent of, or a
consultant to or give financial or other assistance to, any person or entity
considering engaging in any such activities or so engaged; (iii) seek in
competition with the business of Buyer to procure orders from or do business
with any customer of Buyer for which Buyer has provided services in the
preceding twelve (12) months; (iv) solicit, or contact with a view to the
engagement or employment by, any person or entity of any person who is an
employee or contractor of Buyer; (v) seek to contract with or engage (in such a
way as to adversely affect or interfere with the business of Buyer) any person
or entity who has been contracted with or engaged to manufacture, assemble,
supply or deliver products, goods, materials or services to Buyer; (vi) engage
in or participate in any effort or act to induce any of the customers,
associates, consultants or employees of Buyer or any of its affiliates to take
any action which is materially disadvantageous to Buyer or any of its
affiliates; provided, however, that nothing herein shall prohibit the
Shareholders and their affiliates from owning as passive investors, in the
aggregate not more than 5% of the outstanding publicly traded stock of any
corporation so engaged; and
(b) for a period of two (2) years after the Closing Date, in
any manner contact, induce, solicit or influence any client of the Business or
of Buyer or any of its affiliates to cause such client to terminate its
relationship with the Business and/or Buyer. In the event that the provisions of
this Section 9.2 should ever be deemed to exceed the time or geographic
limitations or any other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum permitted by applicable law. Shareholders and Seller specifically
acknowledge and agree that the foregoing restrictions are reasonable and
necessary to protect the legitimate interests of Buyer, that Buyer would not
have entered into this Agreement in the absence of such restrictions, that any
violation of such restrictions will result in irreparable injury to Buyer, that
the remedy at law for any breach of the foregoing restrictions will be
inadequate, and that, in the event of any such breach, Buyer, in addition to any
other relief available to it, shall be entitled to temporary injunctive relief
before trial from any court of competent jurisdiction as a matter of course and
to permanent injunctive relief without the necessity of quantifying actual
damages.
(c) If Buyer shall fail to pay Seller any amount required to
be paid by Buyer hereunder and such failure shall be continuing for 90 days
after written notice from Seller to Buyer, Seller shall be released from the
non-competition provision set forth in this Section 9.2; provided, however, that
the exercise by Buyer of any right of set-off as provided in Section 10.6 hereof
shall not release Seller from the non-competition provision set forth in this
Section 9.2.
9.3 Pursuit of Authorizations. Shareholders and Seller shall use
his, her or its best efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to transfer any Intellectual Property to Buyer and, at the expense of Buyer,
to permit Buyer to obtain promptly all governmental consents, licenses, permits,
franchises, grants or other authorizations which are used in the Business
("Authorizations") and are required for the Business and operations of Buyer
after the Closing.
9.4 Assignment of Purchased Assets; Consents. Prior to the Closing
Date and for a period of one year thereafter, Shareholders, Seller and Buyer
shall cooperate and use reasonable efforts to obtain all non-governmental
approvals, consents or waivers necessary to assign to Buyer the Purchased Assets
(the "Interests"), as soon as practicable; provided, however, Shareholders and
Seller shall not be obligated to pay any consideration therefor to the third
party from whom such approval, consent or waiver is requested. To the extent any
of the approvals, consents or waivers referred to above have not been obtained
by Shareholders and Seller, Seller's and Shareholders' only obligations with
respect thereto shall be to use its reasonable efforts during the remaining term
of such Interest to: (i) cooperate with Buyer in any reasonable and lawful
arrangements designed to provide the benefits of such Interest to Buyer so long
as
Exhibit 10.3 (cont.)
Buyer reimburses Seller for all payments, charges or other liabilities made or
suffered by Seller in connection therewith; and (ii) enforce, at the request of
Buyer and for the account and at the expense of Buyer, any rights of Seller
arising from such Interest against such issuer thereof or the other party or
parties thereto (including the right to elect to terminate any such Interest in
accordance with the terms thereof upon the written advice of Buyer).
9.5 Rule 144. Buyer covenants that (i) it will cause Parent to use
its best efforts to comply with the current public information requirements of
Rule 144(c)(1) under the Securities Act; (ii) at all such times as Rule 144 is
available for use by the holders of the Securities, Buyer will furnish each such
holder upon request with all information within the possession of Buyer or
Parent required for the preparation and filing of Form 144; and (iii) Buyer will
furnish each such holder, upon his or her or its request, with a written
statement by Parent as to its compliance with the reporting requirements of Rule
144 under the Securities Act.
9.6 Audited Financial Statements. Upon the request of Buyer,
Shareholders and Seller shall, at the expense of Buyer, take, or cause to be
taken by their accountants, such action as is necessary to provide to Buyer
audited financial statements of Seller, and appropriate accountant's consents,
that comply with the requirements of Regulation S-X under the Exchange Act.
9.7 Notwithstanding anything to the contrary in this Agreement,
the parties agree that all sales by Buyer or its affiliates or licensees of the
"Department of Social Services Document Image Solution", and all associated
proprietary rights, shall be credited to the Business for purposes of SECTION 2
of this Agreement.
SECTION 10. INDEMNIFICATION
10.1 Indemnification by Seller. Seller shall indemnify and hold
Buyer and Buyer's officers, directors, employees and shareholders harmless
against and in respect of any and all losses, costs, expenses, claims, damages,
obligations and liabilities, including interest, penalties and reasonable
attorneys fees and disbursements ("Damages"), which Buyer or any such person may
suffer, incur or become subject to arising out of, based upon or otherwise in
respect of: (i) any inaccuracy in or breach of any representation or warranty of
Shareholders or Seller made in or pursuant to this Agreement, or any Seller
Transaction Document; (ii) any breach or nonfulfillment of any covenant or
obligation of Shareholders or Seller contained in this Agreement or any Seller
Transaction Document; (iii) any liability or other obligation of Seller not
expressly assumed by Buyer pursuant to Section 1.3.
10.2 Indemnification by Buyer. Buyer shall indemnify and hold
Seller and Seller's officers, directors and shareholders harmless against and in
respect of any and all Damages which Seller may suffer, incur or become subject
to arising out of, based upon or otherwise in respect of: (a) any inaccuracy in
or breach of any representation or warranty of Buyer made in or pursuant to this
Agreement or any Buyer Transaction Document; (b) any breach or nonfulfillment of
any covenant or obligation of Buyer contained in this Agreement or any Buyer
Transaction Document; and (c) the operation or failure to perform by Buyer of
the Business and the Purchased Assets after the Closing Date, including any
liability or other obligation of Seller assumed by Buyer pursuant to Section 1.3
herein.
10.3 Inter-Party Claims. Any party seeking indemnification pursuant
to this Section 10 (the "Indemnified Party") shall notify the other party or
parties from whom such indemnification is sought (the "Indemnifying Party") of
the Indemnified Party's assertion of such claim for indemnification, specifying
the basis of such claim. The Indemnified Party shall thereupon give the
Indemnifying Party reasonable access to the books, records and assets of the
Indemnified Party which evidence or support such claim or the act, omission or
occurrence giving rise to such claim and the right, upon prior notice during
normal business hours, to interview any appropriate personnel of the Indemnified
Party related thereto.
10.4 Third Party Claims.
(a) Each Indemnified Party shall promptly notify the
Indemnifying Party of the assertion by any third party of any claim with respect
to which the indemnification set forth in this Section relates (which shall also
constitute the notice required by Section 10.3). The Indemnifying Party shall
have the right, upon notice to the Indemnified Party within twenty (20) business
days after the receipt of any such notice, to undertake the defense of or, with
the consent of the Indemnified Party (which consent shall not unreasonably be
withheld), to settle or compromise such claim. The failure of the Indemnifying
Party to give such notice and to undertake the defense of or to settle or
compromise such a claim shall constitute a waiver of the Indemnifying Party's
rights under this Section 10.4(a) and shall preclude the Indemnifying Party from
disputing the manner in which the Indemnified Party may conduct the defense of
such claim or the reasonableness of any amount paid by the Indemnified Party in
satisfaction of such claim.
(b) The election by the Indemnifying Party, pursuant to
Section 10.4(a), to undertake the defense of a third-party claim shall not
preclude the party against which such claim has been made also from
participating or continuing to participate in such defense, so long as such
party bears its own legal fees and expenses for so doing.
10.5 Limitations.
(a) Seller shall have no obligation to indemnify Buyer or any
other person against Damages pursuant to Section 10.1(a) of this Agreement
arising out of or based upon any inaccuracy in or breach of any representation
or warranty made in or pursuant to this Agreement or any Transaction Document
unless and until the aggregate of all such Damages suffered or incurred by Buyer
and such persons exceeds $10,000; in which event Buyer and such persons shall be
entitled to indemnification for the full amount of all Damages suffered or
incurred.
(b) In no event shall Seller or Shareholders be liable to
Buyer pursuant to or in connection with a claim for indemnity under Section
10.1(a)(i) of this Agreement for an amount in excess of the Purchase Price.
Exhibit 10.3 (cont.)
(c) No claim for indemnity under Section 10.1(a)(i) or Section
10.1 (a)(ii) hereunder may be made by any party unless notice of such claim, as
provided in Section 10.3 or Section 10.4(a), as the case may be, is delivered
within two (2) years after the Closing Date except that the representations and
warranties set forth in Section 4.15 shall remain in force for a period
corresponding to that of the applicable statute of limitations.
10.6 Right of Set-Off.
(a) Upon the terms and subject to the conditions set forth in
this Section 10.6, Buyer shall have the right to set-off, against any amount
which may be owed by Buyer to Seller pursuant to this Agreement any amount owed
by Seller to Buyer, or any other person pursuant to this Agreement. The exercise
of such right of set-off by Buyer shall not constitute an event of default under
any obligation owed by Buyer to Seller.
(b) In the event that Buyer elects to exercise the right of
set-off provided for herein, Buyer shall provide Seller with at least 14 days
prior written notice of such election. If (i) Seller fails to pay to Buyer the
amount claimed to be owed (and for which Buyer seeks to exercise its right of
set-off pursuant to this Section 10.6), and (ii) prior to the expiration of such
14 day period, Seller notifies Buyer in writing of its disagreement with Buyer's
exercise of the right of set-off provided for herein, Buyer shall be entitled,
upon the expiration of such 14 day period, to exercise its right of set-off
provided for herein by delivering the amount sought to be set-off by Buyer to an
escrow account (the "Escrow Account") pending resolution of such dispute
pursuant to arbitration, as provided for in Section 11.7 hereof. Such escrowed
funds, including all interest accruing thereon, if any, shall be held in the
Escrow Account until such time as the dispute is resolved as provided in Section
11.7 hereof, and shall be released by the escrow agent only as expressly
directed in the order or agreement resolving such dispute.
SECTION 11. MISCELLANEOUS.
11.1 Knowledge. All references in this Agreement to Shareholders'
or Seller's knowledge respecting a particular matter shall conclusively be
deemed and presumed to include, without limitation, all facts, circumstances and
conditions known to Shareholders or Seller regarding such matter.
11.2 Survival of Representations, Warranties and Obligations.
(a) The representations and warranties made by the parties in
this Agreement and in the certificates, documents, Schedules and Exhibits
delivered pursuant hereto as well as all obligations of Buyer and Seller that
cannot be fully performed prior to closing shall survive the consummation of the
transactions herein contemplated for a period of two (2) years, except that the
representations and warranties set forth in Section 4.15 shall remain in force
for a period corresponding to that of the applicable statute of limitations.
Anything in this Agreement to the contrary notwithstanding, the representations
and warranties of Shareholders and Seller hereunder, and the right of Buyer to
indemnification for breach thereof, shall not be affected by any investigation
of Seller or its subsidiaries made by Buyer or its agents or representatives.
(b) The disclosures in the Disclosure Statement shall relate
only to the representations and warranties to which they expressly refer and to
no other representation or warranty in this Agreement. In the event of any
inconsistency between the statements made in the body of this Agreement and
those contained in the Disclosure Statement (other than an express exception to
a specifically identified statement), those in this Agreement shall control.
11.3 Further Assurances. Each party hereto shall use best efforts
to comply with all requirements imposed hereby on such party and to cause the
transactions contemplated hereby to be consummated as contemplated hereby, and
shall, from time to time and without further consideration, either before or
after the Closing, execute such further instruments, and take such other
actions, as any other party hereto shall reasonably request in order to fulfill
its obligations under this Agreement and to effectuate the purposes of this
Agreement and to provide for the orderly and efficient transition of the
Business to Buyer. Each party shall promptly notify the other parties of any
event or circumstance known to such party that could prevent or delay the
consummation of the transactions contemplated by this Agreement, or which would
indicate a breach or non-compliance with any of the terms, conditions,
representations, warranties or agreements of any of the parties to this
Agreement.
11.4 Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith. Any and
all transfer, documentary and similar taxes and recording and filing fees (other
than sales and use taxes which shall be borne by Buyer) incurred in connection
with the transactions contemplated herein shall be borne equally by Seller and
by Buyer, except that any filing fees required by the United States Patent and
Trademark Office with respect to the assignments of the patents and patent
applications included in the Intellectual Property shall be borne by Buyer.
11.5 Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below, or if sent by
documented overnight delivery service or registered or certified mail, postage
prepaid, return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others.
Any such notice or communication shall be deemed to have been given as
of the date received, in the case of personal delivery, or on the date shown on
the receipt or confirmation therefor in all other cases.
Exhibit 10.3 (cont.)
To Buyer:
Judge Imaging Systems, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Vice President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To Seller and Shareholders:
Automated Office Products of Western New York, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Mr. and ▇▇▇. ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.6 Assignment and Benefit.
(a) Neither Shareholders nor Seller shall assign this
Agreement or any rights hereunder, or delegate any obligations hereunder,
without the prior written consent of Buyer. The foregoing notwithstanding,
subject to compliance with all applicable federal and state securities laws,
Seller shall have the right to assign, pledge or hypothecate the Securities.
Subject to the foregoing, this Agreement and the rights and obligations set
forth herein shall inure to the benefit of, and be binding upon, the parties
hereto, and each of their respective successors, heirs and assigns.
(b) This Agreement shall not be construed as giving any
person, other than the parties hereto and their permitted successors, heirs and
assigns, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any of the provisions herein contained, this Agreement and all
provisions and conditions hereof being intended to be, and being, for the sole
and exclusive benefit of such parties, and permitted successors, heirs and
assigns and for the benefit of no other person or entity
11.7 Settlement of Disputes. The parties will attempt in good faith
to resolve any and all controversies of every kind and nature between the
parties to this Agreement arising out of or in connection with the existence,
construction, validity, interpretation or meaning, performance, non-performance,
enforcement, operation, breach, continuance or termination of this Agreement
(each, a "Dispute") promptly by negotiations between senior executives of the
parties who have authority to settle the Dispute. The disputing party shall give
the other party written notice of the Dispute. Within twenty (20) days after
receipt of said notice, the receiving party shall submit to the disputing party
a written response. The notice and response shall include (a) a statement of
each position and a summary of the evidence and arguments supporting its
position, and (b) the name and title of the executive who will represent that
party. The executives shall meet at a mutually acceptable time and place within
thirty days of the date of the disputing party's notice and thereafter as often
as they reasonably deem necessary to exchange relevant information and to
attempt to resolve the Dispute. If the matter has not been resolved within sixty
(60) days of the disputing party's notice, or if the party receiving said notice
will not meet within thirty (30) days, the Dispute shall be submitted to
arbitration in accordance with the rules of the American Arbitration
Association. The parties further agree that all matters shall be governed by the
laws of the Commonwealth of Pennsylvania. The parties further agree that any
arbitration conducted pursuant to this section shall be held in Buffalo, New
York before a panel of three (3) arbitrators, one selected each of the parties
and the third select by the arbitrators selected by the parties. All deadlines
specified in this Section may be extended by mutual agreement.
11.8 Amendment, Modification and Waiver. The parties may, by mutual
agreement, amend or modify this Agreement in any respect, and Buyer and Seller
may: (a) extend the time for the performance of any of the obligations of the
other, (b) waive any inaccuracies in representations and warranties by the
other, (c) waive compliance by the other with any of the obligations contained
in this Agreement, and (d) waive the fulfillment of any condition precedent to
the performance under this Agreement of the waiving party. Any such amendment,
modification, extension or waiver shall be in writing. The waiver by a party of
any breach of any provision of this Agreement shall not constitute or operate as
a waiver of any other breach of such provision or of any other provision hereof,
nor shall any failure to enforce any provision hereof operate as a waiver of
such provision or of any other provision hereof.
11.9 Governing Law; Consent to Jurisdiction. This Agreement is made
pursuant to, and shall be construed and enforced in accordance with, the laws of
the Commonwealth of Pennsylvania (and United States federal law, to the extent
applicable), irrespective of the principal place of business, residence or
domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of law. Any of the parties, before or during
the arbitration contemplated by Section 11.7, may apply to a court as set forth
below for a temporary restraining order or preliminary injunction or similar
equitable relief to protect its interests pending completion of such arbitration
proceedings and, in particular, to enforce the provisions of Section 11.7 and to
aid the arbitration contemplated thereby. For this purpose, each party agrees
that suit may be instituted in any federal court in the Eastern District of
Pennsylvania or in ▇▇▇▇▇▇▇▇▇▇ County state court in the Commonwealth of
Pennsylvania, and each party waives any objection which such party may now or
hereafter have to the laying of the venue of any such action, suit or proceeding
(except that Seller and Shareholders do not waive their right to argue that
venue should lay in a court in which they have commenced suit instead of such
courts in Pennsylvania), and irrevocably submits to the non-exclusive
jurisdiction of any such court. Any and all service of process and any other
notice in any such action, suit or proceeding shall be effective against any
party if given as provided in Section 11.5 herein. Nothing contained herein or
in any Transaction Document shall prevent or delay Buyer, Shareholders or Seller
from seeking, in any court of competent jurisdiction, specific performance or
other equitable
Exhibit 10.3 (cont.)
remedies, or damages, in the event of any breach or intended breach by
Shareholders, Seller or Buyer of any of his or her or its obligations hereunder.
11.10 Section Headings and Defined Terms. The section headings
contained herein are for reference purposes only and shall not in any way affect
the meaning and interpretation of this Agreement. The terms defined herein and
in any agreement executed in connection herewith include the plural as well as
the singular and the singular as well as the plural. Except as otherwise
indicated, all agreements defined herein refer to the same as from time to time
amended or supplemented or the terms thereof waived or modified in accordance
herewith and therewith.
11.11 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
11.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
11.13 Entire Agreement, etc. This Agreement, together with the
Disclosure Statement and the agreements, Exhibits, Schedules, appendices and
certificates referred to herein or delivered pursuant hereto, constitute the
entire agreement between the parties hereto with respect to the purchase and
sale of the Purchased Assets and supersede all prior agreements and
understandings. All Schedules, Exhibits and appendices attached hereto and
referred to herein are hereby incorporated herein and made a part hereof as if
fully set forth herein. The submission of a draft of this Agreement or portions
or summaries thereof does not constitute an offer to purchase or sell the
Purchased Assets, it being understood and agreed that neither Buyer,
Shareholders nor Seller shall be legally obligated with respect to such a
purchase or sale or to any other terms or conditions set forth in such draft or
portion or summary unless and until this Agreement has been duly executed and
delivered by all parties.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, all as of the date first above written.
JUDGE IMAGING SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Secretary
AUTOMATED OFFICE PRODUCTS OF WESTERN NEW YORK, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
SHAREHOLDERS:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Exhibit 10.3 (cont.)
AMENDMENT AND SETTLEMENT AGREEMENT
AGREEMENT, dated as of August ___, 1998 by and among AUTOMATED OFFICE
PRODUCTS OF WESTERN NEW YORK, INC. d/b/a AOP SOLUTIONS, a New York corporation
(the "Seller"), ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the
"Shareholders") and JUDGE IMAGING SYSTEMS, INC., a Delaware corporation (the
"Buyer").
WITNESSETH
WHEREAS, the parties heretofore entered into an Asset Purchase
Agreement dated as of June 29, 1998 (the "Agreement"), pursuant to which the
Seller agreed to sell to the Buyer a substantial portion of the assets and
liabilities of the Seller; and
WHEREAS, the parties now wish to amend the Agreement so as to change
the effective date of the sale and purchase of such assets and liabilities and
for certain other purposes; and
WHEREAS, certain disputes have arisen under the Agreement concerning
the components of the Purchased Assets and certain other matters, and the
parties wish to finally settle and resolve such disputes;
NOW THEREFORE, in view of the premises and in consideration of the
agreements and mutual covenants hereafter set forth, the parties agree as
follows:
1. Meaning of Terms. As used herein:
(a) The "Effective Date" means May 31, 1998.
(b) All other capitalized terms used herein shall have the meanings
given to them in the Agreement.
2. Sale and Purchase as of the Effective Date.
Notwithstanding the provisions of Section 1 of the Agreement,
the parties hereby agree that the Purchased Assets and the liabilities
assumed by Buyer pursuant to the agreement shall be determined as of
the Effective Date, except as otherwise provided in this Amendment and
Settlement Agreement. Specifically, and without limitation of the
foregoing, the parties agree that:
(a) The trade liabilities, obligations and related expenses
pursuant to the terms of the Contracts, unearned revenues,
customer deposits and payroll expense of the Seller which are
assumed by the Buyer pursuant to Section 1.3 shall be those
existing as of the Effective Date, and that the Buyer shall be
responsible for all liabiliites of the Business on and after
the Effective Date.
(b) The closing adjustments described in Section 2.2 of the
Agreement shall be computed as of 12:00 midnight on the day
before the Effective Date. The Seller will deliver a schedule
of adjustments by August 4, 1998.
(c) Notwithstanding the foregoing, the parties agree that any
accounts receivable of the Seller which existed as of the
Effective Date, but which were paid to the Seller during June
1998 shall remain the property of the Seller, except to the
extent included in the $50,000 of cash which is assigned and
transferred to the Buyer pursuant to Section 1.1(a) of the
Agreement.
3. Assignment of Cash.
The parties agree that Section 1.1(a) of the Agreement shall
be implemented in the manner set forth in Schedule 1.1(a) hereto, and
that (notwithstanding any other provision of the Agreement) neither
party will make any further claim relating to the computation of the
cash of the Seller which is to be assigned to Buyer, but will treat
Schedule 1.1(a) as a final and conclusive resolution of such issue.
4. Earnouts.
(a) The parties agree that the Fourth Earnout shall be in the
amount of $214,204, and that Buyer shall pay such amount to
Seller by August 4, 1998.
(b) The parties agree that Buyer will pay Seller the sum of
$75,000 by August 4, 1998 as part payment of the Fifth
Earnout.
(c) The balance of the Fifth Earnout and all of the First, Second
and Third Earnouts will be paid when due.
5. Additional Payment for Purchased Assets.
The parties agree that Buyer will pay Seller the sum of
$50,322 by August 4, 1998, as an addition to the Purchase Price.
6. Certain Fees and Expenses.
Notwithstanding Section 11.4 of the Agreement, the parties
agree that Buyer will pay the reasonable professional fees and expenses
of Seller's legal counsel and accountants relating to the subject
matter of this
Exhibit 10.3 (cont.)
Amendment and Settlement Agreement, in amounts not in excess of $10,000
to Seller's legal counsel and $17,500 to Seller's accountants, promptly
after receipt of an appropriate statement or invoice.
7. Allocation of Consideration.
Schedule 2.3 to the Agreement is amended by changing "Closing
Date" to "Effective Date" everywhere such term occurs in Schedule 2.3.
8. Seller Balance Sheet.
Notwithstanding Section 4.8(d) of the Agreement, the parties
hereby agree that the balance sheet of the Seller described therein
shall be as of the Effective Date and shall be prepared and delivered
to the Buyer by August 4, 1998.
9. Disclaimer.
The Buyer acknowledges and agrees that neither the Sellers nor
any Shareholder shall have any liability or obligation whatsoever
arising out of (a) the parties' agreement with respect to the Effective
Date, or (b) the accounting treatment of the sales, expenses, assets
and liabilities of the Business on the books and records of Buyer.
10. Payment of Net Obligation.
The net amount owed by Buyer to Seller under paragraphs 3, 4
and 5, which is set forth in Schedule 2 hereto, shall be paid by Buyer
to Seller not later than August 4, 1998.
11. Disclosure by Seller.
Buyer acknowledges and agrees that Seller has notified Buyer
that one of Seller's customers, National MD, made a duplicate payment
to Seller in June in the approximate amount of $20,000; that such
amount must be repaid to such customer; and that Buyer will not make
any claim with respect to same.
IN WITNESS WHEREOF, the parties have executed this Amendment and
Settlement Agreement as of the date written below.
JUDGE IMAGING SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ Person
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▇▇▇▇▇ Person, Chief Executive Officer
AUTOMATED OFFICE PRODUCTS OF WESTERN NEW YORK, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇, President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
SHAREHOLDERS
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇