Exhibit 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
this 13th day of August, 1998, but effective for accounting purposes as of
August 1, 1998, by and among (i) KCS COMPUTER SERVICES, INC., a Pennsylvania
corporation (the "Company"); (ii) ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (collectively, the "Shareholders" and with
references herein to the Shareholders' Representative being to ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇.); and (iii) ALLIN COMMUNICATIONS CORPORATION, a Delaware corporation (the
"Purchaser").
Recitals
A. The Shareholders own all of the issued and outstanding shares of
capital stock of the Company.
B. The Shareholders desire to sell, transfer and assign to the
Purchaser and the Purchaser desires to purchase from the Shareholders, all of
the issued and outstanding shares of capital stock of the Company, all as herein
provided and on the terms and conditions hereinafter set forth.
Covenants
In consideration of the mutual representations, warranties and
covenants and subject to the conditions herein contained, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
Purchase and Sale of Shares
1.1 Shares. At the Closing (as defined in Section 3.1), each
Shareholder shall sell, convey, transfer, assign and deliver to the Purchaser
and the Purchaser shall purchase from each Shareholder, free and clear of all
liens, mortgages, pledges, security interests, claims, assessments,
restrictions, encumbrances and charges of every kind (collectively, "Liens"), on
the terms and subject to the conditions set forth in this Agreement, the number
of shares of capital stock of the Company set forth opposite the name of such
Shareholder on Schedule 4.3 (collectively, the "Shares").
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ARTICLE II
Purchase Price
2.1 Purchase Price. As consideration for the Shares, Purchaser
shall, subject to and upon the terms and conditions set forth in this Agreement,
make the following payments:
2.1.1 Payment to be Made at Closing. At the Closing, Purchaser shall
deliver to the Shareholders, an aggregate payment (the "Closing Payment") of
$14,190,748, such aggregate payment to consist of cash, promissory notes and
common stock of the Purchaser ("Purchaser Common Stock") as follows:
(i) a cash payment of $2,443,061.28, $882,079 of which will be
paid to ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇., $1,064,306.10 of which will be paid to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, $354,768.70 of which will be paid to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, and $141,907.48 of which will be paid to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
and
(ii) a promissory note in the original principal amount of
$6,200,000 payable to the order of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and
substantially in the form of Exhibit 2.1(a) hereto, which promissory
note shall be secured in accordance with the terms of a security
agreement substantially in the form of Exhibit 2.1(b) hereto (the
"Security Agreement") and guaranteed in accordance with the terms of a
guaranty and suretyship agreement substantially in the form of Exhibit
2.1(c) hereto (the "Guaranty") and shall bear interest at the rate of
5% per annum (the "6.2m Note"), with $3,000,000 of the principal to be
due and payable no later than the earlier to occur of (a) the sale of
a subsidiary of Purchaser or substantially all of the operating assets
of a subsidiary of Purchaser, and (b) December 31, 1998, and with the
other $3,200,000 of the principal to be due and payable no later than
the earlier to occur of (x) the receipt by Purchaser or any affiliate
of Purchaser of one or more loans from one or more third party lenders
in amounts in the aggregate at least equal to $3,200,000 in connection
with the refinancing of the $3,200,000 portion of the 6.2m Note, and
(y) December 31, 1998; and
(iii) a promissory note in the original principal amount of
$2,000,000 payable to the order of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and
substantially in the form of Exhibit 2.1(d) hereto, which promissory
note shall be secured by the Security Agreement and guaranteed by the
Guaranty and shall bear interest at the rate of 6% per annum (the "2m
Note," and together with the 6.2m Note, the "Notes"), with the
principal thereof to be due and payable in full on the second (2nd)
anniversary of the Closing Date (the "Maturity Date"); provided that
if all principal and accrued and unpaid interest (collectively, the
"Unpaid Amount"), is not paid in full on the Maturity Date, then,
subject to the receipt of approval of the shareholders of Purchaser,
the Unpaid Amount shall
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automatically be converted to Purchaser Common Stock, the number of
shares of Purchaser Common Stock to be issued to be determined by
dividing the Unpaid Amount by (a) the average of the bid and asked
prices of Purchaser Common Stock for the thirty (30) days preceding
the earlier of (i) the date of public disclosure of this Agreement or
(ii) the date which is two (2) business days prior to the Closing Date
(the "Average Bid and Asked Price"), or (b) at the option of ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇., the average of the bid and asked prices of Purchaser
Common Stock for the thirty (30) days preceding the Maturity Date (the
"Alternate Average Bid and Asked Price"); provided, however, that if
the Alternate Average Bid and Asked Price is less than $2.00 per share
of Purchaser Common Stock, the Alternate Average Bid and Asked Price
shall be deemed, for purposes of this Agreement, to be $2.00 per share
of Purchaser Common Stock; and
(iv) the issuance to ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. of 724,675 shares of
Purchaser Common Stock which is equal to $3,192,918.30 divided by the
Average Bid and Asked Price of $4.406; and
(v) the issuance to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ of 80,520 shares of
Purchaser Common Stock, which is equal to $354,768.70 divided by the
Average Bid and Asked Price of $4.406.
The cash portion of the Closing Payment will be made on the Closing Date by wire
transfer of immediately available funds to one or more accounts identified by
the Shareholders at least three (3) business days prior to the Closing,
Purchaser hereby acknowledging its timely receipt of all such wire transfer
instructions. Purchaser acknowledges and agrees that the Closing Payment has
already been reduced by $209,252, which represents the total remaining unpaid
amount of the Company's liability for income taxes related to the Company's
change from the cash basis to the accrual basis of accounting (the "Tax
Liability"), and except as set forth in Section 2.2, no further adjustment to
the Purchase Price shall be made on account of the Tax Liability. At the
Closing the Purchaser shall deliver to ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
a certificate executed by the Chief Executive Officer of Purchaser certifying
the Average Bid and Asked Price. The following chart summarizes the Closing
Payment described above:
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Percentage
Ownership Closing Closing Common Promissory
Shareholder of KCS Cash Payment Stock Payment Notes
----------- ----------- -------------- -------------- ----------
1. ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 86.5% $ 882,079.00 $3,192,918.30 $8,200,000
2. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 10.0% $1,064,306.10 $ 354,768.70 - 0 -
3. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 2.5% $ 354,768.70 - 0 - - 0 -
4. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1.0% $ 141,907.48 - 0 - - 0 -
---- ------------- ------------- ----------
Total 100% $2,443,061.28 $3,547,687.00 $8,200,000
2.1.2 Contingent Earn-out Payment. If Adjusted Operating Profit (as
defined in Section 2.1.3) for the period beginning January 1, 1998 and ending
December 31, 1998 is at least $1,671,681, Shareholders shall receive, on the
Earn-out Payment Date (as defined in Section 2.1.4), an aggregate earn-out
payment (the "Earn-out Payment") equal to $4.67 for each dollar by which
Adjusted Operating Profit exceeds $1,671,681, up to a maximum aggregate Earn-out
Payment of $1,200,000 in cash and $400,000 in Purchaser Common Stock. Seventy-
five percent (75%) of the Earn-out Payment shall be paid in cash and twenty-five
percent (25%) of the Earn-out Payment shall be paid in shares of Purchaser
Common Stock, with the number of shares of Purchaser Common Stock to be
determined by dividing (i) a sum equal to 25% of the Earn-out Payment by (ii)
the Average Bid and Asked Price, with each Shareholder to receive up to the
following maximum Earn-out Payments:
Percentage Maximum Maximum
Ownership Contingent Contingent
Shareholder of KCS Cash Payment Stock Payment
----------- ----------- ------------ -------------
1. ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 86.5% $1,024,000 $360,000
2. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 10.0% $ 120,000 $ 40,000
3. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 2.5% $ 40,000 - 0 -
4. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1.0% $ 16,000 - 0 -
---- ---------- --------
Total 100% $1,200,000 $400,000
During the period commencing on the Closing Date and ending on December 31, 1998
(the "Earn-Out Period"), the Company and its business shall at all times be
operated by Purchaser as provided in Section 11.4 of this Agreement.
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2.1.3 Adjusted Operating Profit. The term "Adjusted Operating
Profit" means
(a) the net profit of the Company, determined on an accrual basis
in accordance with generally accepted accounting principles
consistently applied ("GAAP") (Purchaser hereby acknowledges that the
Company has made certain changes in its accounting methods, from the
cash method to the accrual method, such changes being applied in
respect of periods commencing on or after January 1, 1997), before
interest income or expense, loss or gain on the sale of assets, any
prior period adjustments and income taxes,
plus
(b) expenses related to the following items incurred from January
1, 1998 through the Closing Date (the parties hereby acknowledging
that while August 1, 1998 is the Accounting Effective Date, that they
intend the following expenses to be determined through the Closing
Date, not the Accounting Effective Date, as such term is defined in
Section 3.1):
(i) salary, wage taxes, benefits and other expenses
associated with the employment of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., not to
exceed $30,500 per month;
(ii) salaries, wage taxes and benefits associated with the
elimination of the positions of the Company's Administrative
Office Manager and Administrative Support Person which are not
filled prior to December 31, 1998, not to exceed $7,200 per
month; and
(iii) Professional fees for investment bankers, attorneys
and outside accountants incurred by Company prior to June 19,
1998 in connection with the anticipated sale of the Shares.
2.1.4 Accounting Procedures.
(a) For calendar year 1998, Purchaser shall prepare a report
containing a balance sheet of the Company, and a related statement of
income for the twelve (12) months ending December 31, 1998, prepared
in accordance with GAAP consistently applied (Purchaser hereby
acknowledging that the Company has made certain changes in its
accounting methods, from the cash method to the accrual method, such
changes being applied in respect of periods commencing on or after
January 1, 1997), together with a statement setting forth the Earn-out
Payment (including the calculation of Adjusted Operating Profit) and
all other adjustments required to be made to such financial statements
in order to make the calculations required under Section
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2.1.2 (the "Earn-out Determination"). A copy of the Earn-out
Determination shall be delivered to the Shareholders' Representative
not later than February 28, 1999.
(b) If the Shareholders' Representative does not agree that the
Earn-out Determination delivered pursuant to clause (a) above
correctly states the Earn-out Payment, the Shareholders'
Representative shall promptly (but not later than 60 days after the
delivery of such Earn-out Determination) give written notice to
Purchaser of any exceptions thereto (in reasonable detail describing
the nature of the disagreement asserted). If the Shareholders'
Representative and Purchaser reconcile their differences within twenty
(20) days after Purchaser's receipt of such written notice, the Earn-
out Determination shall be adjusted accordingly and shall thereupon
become final and conclusive upon all of the parties hereto and
enforceable in a court of law. If the Shareholders' Representative
and Purchaser are unable to reconcile their differences in writing
within 20 days after written notice of exceptions is received by
Purchaser, the Purchaser shall promptly, but not later than sixty (60)
days after the end of such 20-day period deliver to the Shareholders'
Representative, the financial statements described in Section 2.1.4(a)
above, audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or such other independent accounting
firm then auditing the books of Purchaser (the "Accountants"). If
within a period of thirty (30) additional days after receipt of such
audited financial statements the Shareholders' Representative and the
Purchaser are still unable to resolve or reconcile their differences,
the items in dispute shall be submitted to the Pittsburgh office of
Deloitte & Touche or its successors (the "Arbitrator") for final
determination, and the Earn-out Determination shall be deemed adjusted
in accordance with the determination of the Arbitrator and shall
become final and conclusive upon all of the parties hereto and
enforceable in a court of law. For purposes of this Agreement, any
item not accepted in writing by both Purchaser and the Shareholders'
Representative shall be deemed to be in dispute. Each of the
Shareholders' Representative and Purchaser shall be entitled to submit
items in dispute to the Arbitrator. Both parties shall request in
their initial submissions that the Arbitrator render its decision as
to items in dispute as soon as possible, but in no event later than
sixty (60) days following the initial submission.
(c) In the event the Arbitrator shall have, at any time during
the period it might be called upon to determine a dispute under this
Section 2.1.4, performed auditing or other services for Purchaser or
the Shareholders (other than as an arbitrator in other dispute
proceedings), or for any other reason is unable or unwilling to
perform the services required of it under this Section, then Purchaser
and the Shareholders' Representative agree to select another
accounting firm from among the six largest accounting firms in the
United States in terms of gross revenues to perform the services to be
performed
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under this Section 2.1.4 by the Arbitrator. If the Purchaser and the
Shareholders' Representative fail to select another accounting firm
within 15 days after it is determined that the Arbitrator will not
perform the services required, either Purchaser or the Shareholders'
Representative may request the American Arbitration Association in
Pittsburgh, Pennsylvania to appoint an independent firm of certified
public accountants of recognized national standing to perform the
services required under this Section 2.1.4 by the Arbitrator. For
purposes of this Agreement, the term "Arbitrator" shall include such
other accounting firm chosen in accordance with this clause (c).
(d) The fees and expenses of the Arbitrator shall be shared
equally by Purchaser, on the one hand, and the Shareholders on the
other hand.
(e) The books and records of the Company shall be made available
during normal business hours upon reasonable advance notice at the
principal office of the Company, to Purchaser, the Shareholders and to
the Arbitrator (or if applicable, such other accounting firm selected
in accordance with Section (c) above). Purchaser and the Shareholders
shall use their best efforts to cause all information required by the
Arbitrator to be submitted on a timely basis such that the Arbitrator
will be able to render a decision within sixty (60) days after the
initial submission of items in dispute.
(f) The Earn-out Payment shall be paid within ten (10) days of
the date the Earn-out Determination becomes final. The date on which
the Earn-out Payment is made shall be referred to herein as the "Earn-
out Payment Date."
2.2 Adjustment to Purchase Price. The Closing Payment of $14,190,748
(in cash, Purchaser Common Stock and the Notes) is based on the assumption that
(a) at the Closing the Company will have no indebtedness other than (i) bank
indebtedness not to exceed $675,000, (ii) accounts payable in the ordinary
course of business, and (iii) capital lease obligations existing as of June 18,
1998, all of which are set forth on Schedule 4.5 (all of the foregoing,
collectively, the "Permitted Indebtedness"), and (b) that the Tax Liability
shall not exceed $209,252. If (a) the Company on the Closing Date has
indebtedness other than $675,000 or less of bank indebtedness, accounts payable
other than in the ordinary course of business, or capital lease obligations in
excess of those set forth on Schedule 4.5, or (b) if the Tax Liability exceeds
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$209,252, the cash portion of the Closing Payment shall be reduced dollar for
dollar by the amount of the difference between such indebtedness and the
Permitted Indebtedness, or the difference between (i) the unpaid amount of the
Company's actual liability for income taxes related to the Company's change, as
of January 1, 1997, from the cash basis to the accrual basis of accounting and
(ii) $209,252, as the case may be.
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2.3 Retained Liabilities of Shareholders. Notwithstanding anything
in this Agreement to the contrary, Shareholders shall retain all liability for
(a) all sales and use tax obligations of the Company through the Closing Date to
the extent not reserved for on the Company's Financial Statements (as defined in
Section 4.4), (b) severance obligations payable to the Company's Administrative
Office Manager and Administrative Support Person and (c) any Tax Liability in
excess of $209,252 which is not deducted from the Purchase Price as provided in
Section 2.2 ("Retained Liabilities").
2.4 Closing Payment Adjustment Mechanism. Not fewer than two
business days before the Closing Date, the Shareholders and the Company will
prepare and deliver to Purchaser a balance sheet (together with notes thereto
and any related schedules) of the Company (the "Closing Balance Sheet")
reflecting, among other things, the Shareholders' best estimate of the
indebtedness of the Company (which for purposes of this Section 2.4 shall mean
indebtedness of the types described in clause (a) of Section 2.2 hereof) as of
11:59 p.m. on the Accounting Effective Date. Based on the foregoing, the
Shareholders and the Company shall prepare and deliver a certificate
("Shareholders' Balance Sheet Certificate") to Purchaser certifying that, to the
best knowledge of the Shareholders and the Company, the Closing Balance Sheet
fairly sets forth the indebtedness of the Company estimated as of 11:59 p.m. on
the Accounting Effective Date in accordance with GAAP applied in a manner
consistent with the Last Balance Sheet (as defined in Section 4.4 hereof). In
the event Purchaser disagrees with any item on the Shareholders' Balance Sheet
Certificate and Purchaser and the Shareholders' Representative are unable to
resolve such disagreement within thirty (30) days after the Closing, then
Purchaser shall have the right to cause ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "Auditor"), within
60 days after the Closing, to audit the Closing Balance Sheet in accordance with
GAAP applied in a manner consistent with the Last Balance Sheet and make any
adjustments thereto that are necessary, in the Auditor's professional opinion,
to render the Closing Balance Sheet as fairly representing the indebtedness of
the Company as of 11:59 p.m. on the Accounting Effective Date (the Closing
Balance Sheet, as so adjusted by the Auditor, the "Adjusted Closing Balance
Sheet.") If Purchaser elects to have the Auditor audit the Closing Balance
Sheet, the Auditor shall, within 60 days after the Closing Date, deliver to
Purchaser and the Shareholders the Adjusted Closing Balance Sheet, notes thereto
and auditor's report thereon. Within 60 days of receipt of the Adjusted Closing
Balance Sheet, the Shareholders will either accept the Adjusted Closing Balance
Sheet or provide Purchaser with written objections thereto. If the Shareholders
accept the Adjusted Closing Balance Sheet as presented or fail to object within
the 60-day period, then the Adjusted Closing Balance Sheet and the indebtedness
of the Company reflected therein will be deemed to be final and binding on the
parties. In such event, if the indebtedness of the Company as of 11:59 p.m. on
the Accounting Effective Date reflected on the Adjusted Closing Balance Sheet
exceeds the Permitted Indebtedness, then the Shareholders shall, within 30 days
after the acceptance by the Shareholders of the Adjusted Closing Balance Sheet
or the expiration without objection thereto within such 60-day period, as the
case may be, pay by wire transfer to the Purchaser, any amounts needed to adjust
the Closing Payment as provided in Section 2.2 hereof in order to reflect the
changes made from the estimated indebtedness of the Company set forth in the
Shareholders' Balance Sheet Certificate caused
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by the Adjusted Closing Balance Sheet as so audited by the Auditor. Any
disagreement between the Purchaser and the Shareholders that cannot be resolved
within 30 days after receipt of the Shareholders' written objections will be
resolved by the Shareholders selecting a firm of certified public accountants of
national reputation to resolve the dispute. If the Auditor and the
Shareholders' accountants cannot resolve the dispute within 30 days after
submission to them, then the Auditor and the Shareholders' accountants shall
select a third firm of certified public accountants of national reputation and
the amount of indebtedness of the Company as of 11:59 p.m. on the Accounting
Effective Date shall be the average of (a) the median of the three
determinations of indebtedness and (b) whichever of the remaining two
determinations is closest to such median, and such amount shall be binding on
the parties and subject to judicial enforcement, and the Shareholders shall,
within 30 days after the expiration of such 30-day period, pay by wire transfer
to the Purchaser, any amounts needed to adjust the Closing Payment as provided
in Section 2.2 hereof in order to reflect the changes made from the estimated
indebtedness of the Company set forth in the Shareholders' Balance Sheet
Certificate caused by the Adjusted Closing Balance Sheet as so determined.
Purchaser, on the one hand, and the Shareholders, on the other hand, shall bear
all costs of its or their own accountants and one-half of the cost of the third
accounting firm, if any.
ARTICLE III
Closing
3.1 Time and Place of the Closing. Subject to and after the
fulfillment or waiver of the conditions set forth in Articles IX and X, the
closing of the purchase and sale of the Shares shall take place at the offices
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, within two business days after the fulfillment
or waiver of the conditions set forth in Articles IX and X or on such other date
and at such other time and place as the parties may agree, but in any event on
or before August 14, 1998. In this Agreement, such event is referred to as the
"Closing" and such date and time are referred to as the "Closing Date." The
Closing shall be effective at 12:01 a.m., prevailing time on the Closing Date;
provided, however, that for accounting purposes only, the Closing shall be
effective as of 12:01 a.m., prevailing time, on August 1, 1998 (the "Accounting
Effective Date"), so that all revenues and expenses of the Company for the
period from August 1, 1998 until the Closing Date shall be for the account of
Purchaser.
ARTICLE IV
Representations and Warranties
of the Company and the Shareholders
To induce the Purchaser to enter into this Agreement and to consummate
the transactions contemplated hereby, the Company and the Shareholders jointly
and severally make the following representations and warranties, which
representations and warranties shall survive the Closing for a period of twenty-
four (24) months after the Closing Date:
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4.1 Organization, Power and Authority; Subsidiaries. The Company is
a corporation duly organized, validly existing and subsisting under the laws of
the Commonwealth of Pennsylvania and has all requisite corporate power and
authority (i) to own or lease its properties and to carry on its business as it
is now being conducted; (ii) to enter into this Agreement; and (iii) to carry
out the other transactions and agreements contemplated hereby. Except as set
forth on Schedule 4.1, the Company is legally qualified to transact business as
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a foreign corporation in each of the jurisdictions in which its business or
property is such as to require that it be thus qualified, and it is in good
standing in each of the jurisdictions in which it is so qualified. The Company
does not own, directly or indirectly, of record or beneficially, or have any
right to acquire, any capital stock or equity interest or investment in any
corporation, partnership, limited liability company, joint venture, association
or other business entity, and has no right to control the management of any
corporation, partnership, limited liability company, joint venture, association
or other business entity, whether by agreement or otherwise.
4.2 Due Authorization; Binding Obligation; No Conflicts; Consents.
The execution, delivery and performance of this Agreement and each of the other
agreements contemplated hereby and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
of the Company. This Agreement has been duly executed and delivered by the
Company and the Shareholders and is a valid and binding obligation of the
Company and the Shareholders, enforceable against each of them in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other
similar laws of general application now or hereafter in effect relating to the
enforcement of creditors' rights generally, and except that remedies of specific
performance, injunction and other forms of equitable relief are subject to
certain tests of equity jurisdiction, equitable defenses and the discretion of
the court before which any proceeding therefor may be brought. The execution
and delivery of this Agreement by the Company and the Shareholders do not, and
the consummation of the transactions contemplated hereby will not: (i) violate
or conflict with any provision of the Company's charter or by-laws; (ii) violate
or conflict with any federal, state or local law, statute, ordinance, rule,
regulation or any decree, writ, injunction, judgment or order of any court or
administrative or other governmental body or of any arbitration award which is
either applicable to, binding upon or enforceable against the Company, any of
the Shareholders or the Shares; (iii) except as set forth on Schedule 4.2,
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conflict with, result in any breach of, or constitute a default (or an event
which would, with the passage of time or the giving of notice or both,
constitute a default) under, or give rise to a right to terminate, amend,
modify, abandon or accelerate, any material mortgage, contract, agreement,
lease, license, indenture, will, trust or other instrument which is either
binding upon or enforceable against the Company, any of the Shareholders or the
Shares; (iv) except as set forth on Schedule 4.2, violate any legally protected
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right arising in the operation of the Company's business of any person or entity
or give to any person or entity (including in each case any shareholder) a right
or claim against the Purchaser, the Company or the Shares or property of the
Company; (v) except as set forth on Schedule 4.2, result in or require the
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creation or imposition of any Lien upon or with respect to the Shares or
property of the
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Company; or (vi) except as set forth on Schedule 4.2, require the consent,
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approval or authorization of or the registration, recording, filing or
qualification with, or notice to, or the taking of any other action in respect
of, any governmental authority or any other person or entity (all of which
consents shall have been obtained as of the Closing Date).
4.3 Company Capital Structure; Shareholders.
4.3.1 The authorized capital stock of the Company consists of 500,000
shares of common stock, $1.00 par value per share, of which 1,040 shares
are outstanding. There are no (i) existing preemptive rights, options,
warrants, calls or other rights or other agreements or commitments
obligating the Company to issue, transfer or sell any shares of capital
stock of the Company or (ii) voting trusts or other agreements or
understandings to which the Company or any Shareholder is a party with
respect to the voting of capital stock of the Company.
4.3.2 The Shareholders have full power, authority and capacity to
enter into this Agreement and to carry out the transactions and agreements
contemplated hereby to be carried out by them. Each Shareholder owns the
Shares set forth opposite such Shareholder's name on Schedule 4.3, free and
------------
clear of all Liens. The Shares set forth on Schedule 4.3 in the aggregate
------------
constitute all of the outstanding shares of capital stock of the Company.
The Shares owned by each Shareholder have been duly and validly authorized
and issued and are fully paid and nonassessable.
4.4 Financial Statements. The Company and the Shareholders
previously have furnished to the Purchaser the following financial
statements of the Company, including the notes pertaining thereto
(collectively, the "Financial Statements"):
(a) reviewed balance sheets at December 31, 1997 and June 30,
1998, and compiled balance sheets at December 31, 1996;
(b) balance sheet at June 30, 1998 (the "Last Balance Sheet");
(c) reviewed statements of income at December 31, 1997 and June
30, 1998, and compiled statements of income for the year ended
December 31, 1996; and
(d) statement of income for the 6-month period ended June 30,
1998.
The Financial Statements present fairly and in all material respects are true,
correct and complete statements of the financial position of the Company, at
each of the said balance sheet dates and the results of operations for each of
the said periods covered, and, except as set forth on Schedule 4.4, they have
------------
been prepared in accordance with GAAP consistently
-11-
applied. The books and records of the Company properly and accurately reflect
in all material respects all transactions, properties, assets and known
liabilities of the Company.
4.5 Liabilities. The Company has no liabilities or obligations,
either accrued, absolute, contingent or otherwise, except: (i) to the extent
reflected or taken into account in determining net worth in the Last Balance
Sheet and not heretofore paid or discharged; (ii) capital lease obligations
existing as of June 18, 1998 and bank indebtedness not to exceed $675,000, all
as set forth on Schedule 4.5 to this Agreement; (iii) accounts payable incurred
in the ordinary course of business since the date of the Last Balance Sheet, and
(iv) the Tax Liability.
4.6 Tax Matters.
4.6.1 The Company has timely filed all tax returns and reports
required to be filed by it in connection with the Company's tax years 1994
through 1997, including all federal, state, local and foreign tax returns
in respect of such years, and except as set forth on Schedule 4.6, has paid
------------
in full or made adequate provision by the establishment of reserves for all
taxes and other charges which have become due. Except as set forth on
Schedule 4.6, all tax returns and reports have been prepared in accordance
------------
with applicable laws and accurately reflect the taxable income (or other
measure of tax) of the Company for the periods set forth therein. To the
knowledge of the Company and the Shareholders, except as set forth on
Schedule 4.6, there is no tax deficiency proposed or threatened against the
------------
Company. There are no tax liens upon any property or assets of the
Company. The Company has made all payments of estimated taxes when due in
amounts sufficient to avoid the imposition of any penalty.
4.6.2 All taxes and other assessments and levies which the Company
was required by law to withhold or to collect have been duly withheld and
collected and have been paid over to the proper governmental entity, are
being contested in good faith by the Company (with adequate reserves having
been established therefor), or are being held by the Company in separate
bank accounts for such payment. All such withholdings and collection and
all other payments due in connection therewith as of the date of the Last
Balance Sheet are duly reflected on the Last Balance Sheet.
4.6.3 Except as set forth on Schedule 4.6, none of the federal,
------------
state or local income tax returns of the Company have been examined by any
applicable tax authorities. There are no outstanding agreements or
waivers extending the statute of limitations applicable to any federal,
state or local income, sales/use or similar tax returns of the Company for
any period.
-12-
4.7 Real Estate.
4.7.1 The Company owns no real estate.
4.7.2 Schedule 4.7 is an accurate and complete list of each lease
------------
agreement with respect to premises leased by the Company (the "Leasehold
Premises") and sets forth: (i) the lessor and lessee thereof and the date
and term of the lease governing such property; (ii) the location, including
address, thereof, and (iii) the purpose for which the Company uses such
premises. A true and complete copy of each lease agreement listed on
Schedule 4.7, including all amendments thereto and modifications thereof
------------
(collectively, the "Leases"), has been delivered to the Purchaser prior to
the date hereof. Schedule 4.7 also sets forth a description of the nature
------------
and amount of all Liens on the Company's interest in the Leasehold
Premises. The Leases are in full force and effect, the Company is not in
material default or breach under any Lease and to the knowledge of the
Company and the Shareholders, no event has occurred which with the passage
of time or the giving of notice or both would cause a material breach of or
default under any Lease. To the knowledge of the Company and the
Shareholders, there is no breach or anticipated breach of any Lease by any
other party to such Lease.
4.7.3 The Company has valid leasehold interests in the Leasehold
Premises, free and clear of any Liens, covenants and easements or title
defects of any nature whatsoever of which the Company is aware, except for
(i) liens set forth on Schedule 4.7; (ii) liens for real estate taxes not
------------
yet due and payable; and (iii) such imperfections of title and
encumbrances, if any, as are not material in character, amount or extent
and do not detract from the value, or interfere with the present use, of
such properties or otherwise impair the Company's business operations in
any material respect ("Permitted Liens"), it being acknowledged by
Purchaser that neither the Company nor the Shareholders have conducted any
investigation related to the matters set forth in clauses (ii) and (iii)
hereof.
4.7.4 The portions of the buildings located on the Leasehold
Premises that are used in the Company's business are each in good operating
condition and repair, normal wear and tear excepted, and are in the
aggregate sufficient to satisfy the Company's current business activities
as conducted thereat.
4.7.5 Each of the Leasehold Premises (i) has access to public
roads, such access being sufficient to satisfy the current and reasonably
anticipated normal transportation requirements of the Company's business as
presently conducted at such parcel; and (ii) is served by all utilities in
such quantity and quality as are sufficient to satisfy the Company's
current business activities as conducted at such parcel.
4.7.6 The Company has not received written notice of (i) any
condemnation proceeding with respect to any portion of the Leasehold
Premises or any access
-13-
thereto, and, to the knowledge of the Company and the Shareholders, no such
proceeding is currently contemplated by any governmental authority; or (ii)
any special assessment which may affect any of the Leasehold Premises, and,
to the knowledge of the Company and the Shareholders, no such special
assessment is currently contemplated by any governmental authority.
4.8 Good Title to and Condition of the Assets.
4.8.1 The Company has good and marketable title to all of its
properties and assets (other than the Leasehold Premises and personal
property which is leased or licensed by the Company, which Leasehold
Premises and leased or licensed personal property the Company has valid
leases or licenses to use), free and clear of any Liens other than those
Liens described on Schedule 4.8.
------------
4.8.2 The machinery, equipment, tools, supplies, leasehold
improvements, construction in progress, furniture and fixtures of the
Company currently in use or necessary for the business of Company as
presently conducted are in good operating condition and repair, normal wear
and tear excepted.
4.8.3 The inventory of the Company consists of items of a quality
and quantity usable and saleable in the ordinary course of the Company's
business, at values in the aggregate not materially less than the values at
which such items are carried on its books. The inventory of the Company as
of the date of the Last Balance Sheet and as reflected therein does not
include any unreasonable accumulation of slow moving inventory or inventory
of below standard quality. All of the inventory of the Company is located
at the locations indicated on Schedule 4.8.3.
--------------
4.9 Receivables. The Company has no accounts receivable, notes
receivable or insurance proceeds receivable other than as set forth on Schedule
--------
4.9. All of the Company's receivables are valid and legally binding, represent
---
bona fide transactions and arose in the ordinary course of business of the
Company. Except as set forth on Schedule 4.9, the Company and the Shareholders
------------
have no knowledge that any of the Company's receivables would not be fully
collectible within 120 days without resort to litigation provided that the
collection methods historically and customarily used by the Company to collect
its accounts receivable are used.
4.10 Licenses and Permits. The Company possesses all licenses and
required governmental or official approvals, permits or authorizations
(collectively, the "Permits") necessary for the business and operations of the
Company. All such Permits are valid and in full force and effect, the Company
is in material compliance with their requirements, and no proceeding is pending
or, to the best knowledge of the Company and the Shareholders, threatened, to
revoke or amend any of them. Schedule 4.10 contains a complete list of all such
-------------
material Permits. Except as indicated on Schedule 4.10, none of
-------------
-14-
such Permits is or will be impaired or in any way affected by the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
4.11 Intellectual Property. Set forth on Schedule 4.11 is a list of
-------------
all trade names, assumed names, service marks and trademarks, logos, patents,
copyrights, rights and applications therefor and other intellectual property of
Company, including without limitation, trade secrets, technology, know-how,
formulae, designs, drawings, computer software, slogans, and operating rights,
and all registrations and filings thereof ("Intellectual Property"). Except as
set forth on Schedule 4.11, Company holds all Intellectual Property or other
-------------
intellectual properties which it uses in its business free and clear of all
Liens and requires no rights in such properties that it does not have to conduct
its business as presently conducted. Except as set forth on Schedule 4.11, no
-------------
proceedings have been instituted or are pending or, to the knowledge of Company
or the Shareholders threatened or contemplated, which assert the invalidity,
abuse, misuse or unenforceability of any such rights, and to the knowledge of
the Company and the Shareholders, there are no grounds for the same. Except as
disclosed in Schedule 4.11, Company has not licensed anyone to use any
-------------
Intellectual Property. Neither Company nor any Shareholder has knowledge of the
infringing use of such proprietary rights by any other person. Except as set
forth on Schedule 4.11, neither Company nor any Shareholder has received any
-------------
written notice of conflict with the asserted rights of others in or to any
intellectual properties. To the knowledge of the Company and the Shareholders,
and other than as set forth on Schedule 4.11, the conduct of the business of
-------------
Company has not infringed any asserted rights of others.
4.12 Adequacy of the Assets; Relationships with Customers and
Suppliers. The property and assets of the Company constitute, in the aggregate,
all of the property necessary for the conduct of the business of the Company in
the manner in which and to the extent to which it is currently being conducted.
Except as set forth on Schedule 4.12, the Company is not aware that:
-------------
4.12.1 any current customer of the Company which accounted for over
5% of the total consolidated revenue of the Company for the year ended
December 31, 1997 will terminate its business relationship with the
Company; or
4.12.2 any current supplier to the Company of items essential to the
conduct of its business, which items cannot be replaced by the Company at
comparable cost to the Company and the loss of which would result in a
Material Adverse Change (as defined in Section 4.16), will terminate its
business relationship with the Company. Neither the Company nor any of its
Affiliates (as defined in Section 11.2.1) has any direct or indirect
interest in any customer, supplier or competitor of the Company, or in any
person or entity from whom or to whom the Company leases real or personal
property, or in any person or entity with whom the Company is doing
business. Except as set forth on Schedule 4.12, the Company is not
-------------
restricted by agreement from carrying on its business anywhere in the
world.
-15-
4.13 Documents of and Information with Respect to the Company.
4.13.1 Schedule 4.13 is an accurate and complete list of the
-------------
following: (i) each policy of insurance in force with respect to the
assets and properties of the Company and each of the performance or other
surety bonds maintained by the Company in the conduct of its business; (ii)
each loan, credit agreement, guarantee, security agreement or similar
document or instrument to which the Company is a party or by which it is
bound; (iii) each lease of personal property to which the Company is a
party or by which it is bound; (iv) any other agreement, contract or
commitment to which the Company is a party or by which it is bound which
involves a future commitment by the Company in excess of $5,000 and which
cannot be terminated without liability on 30 days or less notice; (v) the
name and current annual salary or hourly wages of each officer or other
employee of the Company and the profit sharing, bonus or any other form of
compensation (other than salary or hourly wages) paid or payable by the
Company to or for the benefit of each such person for the year ended
December 31, 1997, and any employment or other agreement of the Company
with any of its officers or employees; (vi) the names of the directors of
the Company; and (vii) the name of each bank in which the Company has an
account or safe-deposit box, the name in which the account or box is held
and the names of all persons authorized to draw thereon or to have access
thereto. The Company and the Shareholders have previously furnished the
Purchaser with an accurate and complete copy of each such agreement,
contract or commitment listed on Schedule 4.13. Except as set forth on
-------------
Schedule 4.13, there has not been any breach of or default in any
-------------
obligation to be performed by the Company under any such agreement,
contract or commitment. All of such agreements, contracts and commitments
are valid, binding and enforceable and in full force and effect in
accordance with their respective terms.
4.13.2 The Company carries insurance, which is adequate in character
and amount, with reputable insurers, covering all of its assets, properties
and business, and it has provided all required performance or other surety
bonds. All premiums and other payments which have become due under the
policies of insurance listed on Schedule 4.13 have been paid in full, all
-------------
of such policies are now in full force and effect and the Company has not
received written notice from any insurer, agent or broker of the
cancellation of, or any increase in premium with respect to, any of such
policies or bonds. Except as set forth on Schedule 4.13, the Company has
-------------
not received any written notification from any insurer, agent or broker
denying or disputing any claim made by the Company or denying or disputing
any coverage for any such claim or the amount of any claim. Except as set
forth on Schedule 4.13, the Company has no claim against any of its
-------------
insurers under any of such policies pending or anticipated and there has
been no occurrence of any kind which, to the knowledge of the Company and
the Shareholders, would give rise to any such claim.
-16-
4.14 Litigation. Except as set forth on Schedule 4.14, there are no
-------------
actions, suits, claims, governmental investigations or arbitration proceedings
pending or, to the knowledge of the Company and the Shareholders, threatened
against or affecting the Company, the Shares or any of the assets or liabilities
of the Company, or which question the validity or enforceability of this
Agreement or any action contemplated hereby, and to the knowledge of the Company
and the Shareholders, there is no basis for any of the foregoing. Except as set
forth on Schedule 4.14, there are no outstanding orders, decrees or stipulations
-------------
issued by any federal, state, local or foreign judicial or administrative
authority in any proceeding to which the Company is or was a party or which
affect the Shares or any of the assets or liabilities of the Company.
4.15 Records. The Company's records are accurate and complete in all
material respects and there are no material matters as to which appropriate
entries have not been made in such records. A record of all action taken by the
shareholders and the board of directors of the Company and all minutes of its
meetings are contained in the minute books of the Company and are accurate and
complete in all material respects. The stock ledger of the Company contains an
accurate and complete record of all issuances, transfers and cancellations of
shares of capital stock of the Company.
4.16 No Material Adverse Change. Since the date of the Last Balance
Sheet, there has not been (i) any change in the business or properties of the
Company, or in the financial condition of the Company, other than changes
occurring in the ordinary course of business which have not had a material
adverse effect on the business, properties, financial condition, business
prospects or operating results of the Company; or (ii) to the best knowledge of
the Company and the Shareholders, any threatened or prospective event or
condition of any character whatsoever which could materially and adversely
affect the assets, business, financial condition or results of operations of the
Company (a "Material Adverse Change").
4.17 Absence of Certain Acts or Events. Except as disclosed in
Schedule 4.17, since the date of the Last Balance Sheet, the Company has not (i)
-------------
authorized or issued any of its shares of capital stock (including any held in
its treasury) or any other securities; (ii) declared or paid any dividend or
made any other distribution of or with respect to its shares of capital stock or
other securities or purchased or redeemed any of its shares of capital stock or
other securities; (iii) paid any bonus or increased the rate of compensation of
any of its employees except as may be contractually required or consistent with
the Company's past employment practices; (iv) sold or transferred any of its
assets other than in the ordinary course of business (including, without
limitation, sales of inventory made in the ordinary course); (v) made or
obligated itself to make capital expenditures aggregating more than $20,000;
(vi) incurred any material obligations or liabilities (including any
indebtedness) or entered into any material transaction, except for this
Agreement and the transactions contemplated hereby; (vii) suffered any theft,
damage, destruction or casualty loss in excess of $5,000; (viii) suffered any
extraordinary losses; or (ix) waived any right of material value.
-17-
4.18 Compliance with Laws.
4.18.1 The Company is in substantial compliance with all laws,
regulations and orders applicable to it or its assets or business. Except
as set forth on Schedule 4.18, the Company has not been cited, fined or
-------------
otherwise notified in writing of any asserted past or present failure to
comply with any laws and, to the best knowledge of the Company and the
Shareholders, no proceeding with respect to any such violation is
contemplated.
4.18.2 Neither the Company nor any employee of the Company has made
any payment of funds in connection with the business of the Company
prohibited by law, and no funds have been set aside to be used in
connection with the business of the Company for any payment prohibited by
law.
4.18.3 Except as set forth on Schedule 4.18, the Company is and at
-------------
all times has been in full compliance with the terms and provisions of the
Immigration Reform and Control Act of 1986 (the "Immigration Act"). With
respect to each Employee (as defined in 8 C.F.R. 274a.1(f)) of the Company
for whom compliance with the Immigration Act by the Company as employer is
required, the Company and the Shareholders have supplied to the Purchaser
an accurate and complete copy of (i) each Employee's Form I-9 (Employment
Eligibility Verification Form) and (ii) all other records, documents or
other papers prepared, procured and/or retained by the Company pursuant to
the Immigration Act. The Company has not been cited, fined, served with a
Notice of Intent to Fine or with a Cease and Desist Order, nor has any
action or administrative proceeding been initiated or, to the best
knowledge of the Company and the Shareholders threatened, against the
Company by reason of any actual or alleged failure to comply with the
Immigration Act.
4.19 Environmental Matters.
4.19.1 The Company has not transported, stored, handled, treated or
disposed of, nor has it allowed or arranged for any third parties to
transport, store, handle, treat or dispose of, Hazardous Substances or
other waste to or at any location other than a site lawfully permitted to
receive such Hazardous Substances or other waste for such purposes, nor has
it performed, arranged for or allowed by any method or procedure such
transportation, storage, treatment or disposal in violation of any laws or
regulations. The Company has not stored, handled, treated or disposed of,
or allowed or arranged for any third parties to store, handle, treat or
dispose of, Hazardous Substances or other waste upon property owned or
leased by it, except as permitted by law. For purposes of this Section
4.19, the term "Hazardous Substances" shall mean and include: (i) any
"Hazardous Substance," "Pollutant" or "Contaminant" as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601, et seq., or the regulations promulgated
-- ---
thereunder ("CERCLA"); (ii) any hazardous waste as that
-18-
term is defined in applicable state or local law; (iii) any substance
containing petroleum, as that term is defined in Section 9001(8) of the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6991(8) or in 40 C.F.R. Section 280.1; or (iv) any other substance for
which any governmental entity with jurisdiction over the Leasehold Premises
requires special handling in its generation, handling, use, collection,
storage, treatment or disposal.
4.19.2 To the knowledge of the Company and the Shareholders, there
has not occurred, nor is there presently occurring, a Release (as
hereinafter defined) of any Hazardous Substance on, into or beneath the
surface of any parcel of the Leasehold Premises. For purposes of this
Section 4.19, the term "Release" shall have the meaning given it in CERCLA.
4.19.3 To the knowledge of the Company and the Shareholders, the
Company has not shipped, transported or disposed of, nor has it allowed or
arranged, by contract, agreement or otherwise, for any third parties to
ship, transport or dispose of, any Hazardous Substance or other waste to or
at a site which, pursuant to CERCLA or any similar state law, (i) has been
placed on the National Priorities List or its state equivalent; or (ii) the
Environmental Protection Agency or the relevant state agency has proposed
or is proposing to place on the National Priorities List or its state
equivalent. The Company has not received written notice, nor does it have
knowledge of any facts which could give rise to any notice, that the
Company is a potentially responsible party for a federal or state
environmental cleanup site or for corrective action under CERCLA or any
other applicable law or regulation. The Company has not submitted nor was
required to submit any notice pursuant to Section 103(c) of CERCLA with
respect to the Leasehold Premises. The Company has not received any
written or oral request for information in connection with any federal or
state environmental cleanup site. The Company has not been required to and
has not undertaken any response or remedial actions or clean-up actions of
any kind at the request of any federal, state or local governmental entity,
or at the request of any other person or entity.
4.19.4 The Company does not use, and has not used, any Underground
Storage Tanks (as hereinafter defined), and to the knowledge of the Company
and the Shareholders there are not now nor have there ever been any
Underground Storage Tanks on the Leasehold Premises. For purposes of this
Section 4.19, the term "Underground Storage Tanks" shall have the meaning
given it in the Resource Conservation and Recovery Act (42 U.S.C. Sections
6901 et seq.).
-- ---
4.19.5 There are no laws, regulations, ordinances, licenses, permits
or orders relating to environmental or worker safety matters requiring any
work, repairs, construction or capital expenditures with respect to the
assets or properties of the Company. There are no violations of
environmental law relating to (i) the Leasehold
-19-
Premises or to the knowledge of the Company and the Shareholders any
property or parcel adjacent thereto or (ii) the Company's use of the
Leasehold Premises.
4.19.6 Schedule 4.19 identifies (i) all environmental audits,
-------------
assessments or occupational health studies undertaken by the Company or its
agents or, to the knowledge of the Company and the Shareholders, undertaken
by governmental agencies relating to or affecting the Company or any of the
Leasehold Premises; (ii) the results of any ground, water, soil, air or
asbestos monitoring undertaken by the Company or its agents or, to the
knowledge of the Company and the Shareholders, undertaken by governmental
agencies relating to or affecting the Company or any of the Leasehold
Premises; (iii) all written communications between the Company and
environmental agencies; and (iv) all citations issued under the
Occupational Safety and Health Act (29 U.S.C. Sections 651 et seq.)
-- ---
relating to or affecting the Company or any of the Leasehold Premises.
4.20 Labor Relations. The Company is not a party to or bound by any
collective bargaining agreement or any other agreement with a labor union, and
to the knowledge of the Company and the Shareholders there has been no effort by
any labor union during the 24 months prior to the date hereof to organize any
employees of the Company into one or more collective bargaining units. There is
not pending or, to the knowledge of the Company and the Shareholders threatened,
any labor dispute, strike or work stoppage which affects or which would
reasonably be expected to affect the business of the Company or which would
reasonably be expected to interfere with its continued operation. Except as set
forth on Schedule 4.20, neither the Company nor any agent, representative or
-------------
employee of the Company has within the last 24 months committed any unfair labor
practice as defined in the National Labor Relations Act, as amended, and there
is not now pending or, to the knowledge of the Company and the Shareholders,
threatened, any charge or complaint against the Company by or with the National
Labor Relations Board or any representative thereof. There has been no strike,
walkout or work stoppage involving any of the employees of the Company during
the 24 months prior to the date hereof. The Company is not aware that any
executive or key employee or group of employees has any plans to terminate his,
her or their employment with the Company.
4.21 Employee Benefits.
4.21.1 Except as set forth on Schedule 4.21, the employees of Company
-------------
do not participate (and have not participated in the preceding five
calendar years) in any "employee benefit plan", as defined in section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), nor in any other retirement, profit-sharing, deferred
compensation, bonus, stock option, stock purchase or similar plan, program
or arrangement of Company (any of the foregoing being hereinafter referred
to as a "Plan"). Each Plan which is intended by the Company to be a
qualified plan under section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code") has been determined by the Internal Revenue Service
("IRS") to be
-20-
qualified under section 401(a) of the Code, each trust related to any such
Plan has been determined to be exempt from federal income tax under section
501(a) of the Code and to the knowledge of the Company and the
Shareholders, no event has occurred or condition exists which is likely to
adversely affect such determinations. With respect to all Plans (whether
or not subject to ERISA and whether or not qualified under section 401(a)
of the Code), all employer contributions (including any contributions by
the Company to any trust account or payments due from the Company under any
life insurance policy) previously declared or otherwise required by law or
contract to have been made have been paid by the Company and all employer
contributions (including any contributions by the Company to any trust
account or payments due from the Company under any life insurance policy)
accrued have been paid as required by law or contract. No Prohibited
Transaction has occurred with respect to any Plan. For purposes of this
Agreement, the term "Prohibited Transaction" means any transaction
described in section 406 of ERISA which is not exempt by reason of section
408 of ERISA or the transitional rules set forth in section 414(c) of
ERISA, and any transaction described in section 4975(c) of the Code which
is not exempt by reason of section 4975(c)(2) or section 4975(d) of the
Code or the transactional rules of section 2003(c) of ERISA.
4.21.2 Company has not terminated and will not terminate before the
Closing Date, any Plan subject to Title IV of ERISA. Company has not
incurred any termination or withdrawal liability under Title IV of ERISA.
4.21.3 Except as set forth on Schedule 4.21, Company has never
-------------
contributed to any "multiemployer plan" as defined in section 414(f) of the
Code or section 3(37) of ERISA. No Plan has incurred any accumulated
funding deficiency as defined in section 412 of the Code and section 302 of
ERISA.
4.21.4 Company has never (i) failed to make a required installment
under section 302(e) of ERISA or (ii) been required to provide security to
any employee benefit plan or the Pension Benefit Guaranty Corporation under
section 306 or 307 of ERISA.
4.21.5 There are no actions, suits or claims pending (other than
routine claims for benefits) or to the knowledge of the Company and the
Shareholders, overtly threatened against a Plan or the assets of any Plan.
4.21.6 No Plan which is an "employee welfare benefit plan," as
defined in section 3(1) of ERISA, provides employer-paid benefits to
retirees or former employees, except for continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
4.21.7 Except as set forth on Schedule 4.21 (which obligations are
-------------
Retained Liabilities), to the knowledge of the Company and the
Shareholders, the Company is
-21-
not obligated, as of the date of this Agreement, to pay any severance
benefits to any employee whose employment may be terminated on or after the
date of this Agreement.
4.22 Computer Programs and Software. All computer programs and
software currently being used in the business of Company (the "Software") are
owned by Company or held under valid license agreements. Company has not
licensed anyone to use any of the Software nor does Company have knowledge of
any infringing use of the Software or claim of infringing use. The Software is
sufficient for the conduct of the business of Company as now operated.
4.23 Brokers. Neither any Shareholder nor Company has paid or become
obligated to pay any fee or commission of any broker, finder or intermediary,
other than ▇▇▇▇▇▇▇▇/Penn Group and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. for or on account of
the transactions provided for in this Agreement. The Shareholders shall be
solely responsible (and neither the Company nor Purchaser shall have any
liability) for the fees and/or commissions of ▇▇▇▇▇▇▇▇/Penn Group or ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇.
4.24 Business Locations. As of the date hereof, Company does not
have any office or place of business other than as identified on Schedule 4.7.
------------
Company's principal place of business and its chief executive offices are
indicated on Schedule 4.24, and all locations where Company's equipment,
-------------
inventory, chattel paper and books and records are located as of the date hereof
are fully identified on Schedule 4.7.
------------
4.25 Accuracy of Information Furnished. No representation, statement
or information made or furnished by the Company or the Shareholders to the
Purchaser, including those contained in this Agreement and the other information
and statements referred to herein and previously furnished by the Company or the
Shareholders to the Purchaser pursuant hereto, contains or shall contain any
untrue statement of a material fact or omits or shall omit any material fact
necessary to make the information contained herein or therein not misleading.
ARTICLE V
Representations and Warranties of the Purchaser
To induce the Company and the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, the Purchaser
makes the following representations and warranties, which representations and
warranties shall survive the Closing for a period of twenty-four (24) months
after the Closing Date:
5.1 Organization, Power and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
enter into this Agreement
-22-
and all other agreements contemplated hereby and to perform its obligations
hereunder and thereunder.
5.2 Due Authorization; Binding Obligation; No Conflicts. The
execution, delivery and performance of this Agreement and all other agreements
contemplated hereby and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action of the Purchaser.
This Agreement has been duly executed and delivered by the Purchaser and is a
valid and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws of general application now or hereafter in
effect relating to the enforcement of creditors' rights generally, and except
that remedies of specific performance, injunction and other forms of equitable
relief are subject to certain tests of equity jurisdiction, equitable defenses
and the discretion of the court before which any proceeding therefor may be
brought. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) violate or
conflict with any provision of the Certificate of Incorporation or by-laws of
the Purchaser; (ii) violate or conflict with any federal, state or local law,
statute, ordinance, rule, regulation or any decree, writ, injunction, judgment
or order of any court or administrative or other governmental body or of any
arbitration award which is either applicable to, binding upon or enforceable
against the Purchaser or any of the shares of the Purchaser Common Stock; (iii)
except as set forth on Schedule 5.2, conflict with, result in any breach of or
------------
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under any material mortgage,
contract, agreement, lease, license, indenture, trust or other instrument which
is either binding upon or enforceable against the Purchaser or any of the shares
of the Purchaser Common Stock; (iv) except as set forth on Schedule 5.2, violate
------------
any legally protected right arising in the operation of Purchaser's business of
any person or entity or give to any person or entity (including in each case any
shareholder) a right or claim against Purchaser, any Shareholder or any of the
shares of the Purchaser Common Stock; (v) result in or require the creation or
imposition of any Lien upon or with respect to any of the shares of the
Purchaser Common Stock; or (vi) except as set forth on Schedule 5.2, require the
------------
consent, approval or authorization of, or the registration, recording, filing or
qualification with or notice to or the taking of any other action in respect of,
any governmental authority or any other person or entity (all of which consents,
except for the shareholder approval referred to in Section 2.1.1 (iii), shall
have been obtained as of the Closing Date).
5.3 Purchaser Capital Structure. The authorized capital stock of
Purchaser consists of 20,000,000 shares of common stock, $0.01 par value per
share, of which 5,182,267 shares are issued and outstanding, and 100,000 shares
of preferred stock, $0.01 par value per share, of which 40,000 shares have been
designated Series A Convertible Redeemable Preferred Stock, of which 25,000
shares are issued and outstanding, and 5,000 shares of which will be designated
as Series B Redeemable Preferred Stock, of which 2,750 shares will be issued and
outstanding on the Closing Date. Except as set forth on Schedule
--------
-23-
5.3, there are no (i) existing preemptive rights, options, warrants, calls or
---
other rights or other agreements or commitments obligating Purchaser to issue,
transfer or sell any shares of capital stock of Purchaser or (ii) voting trusts
or other agreements or understandings to which Purchaser or, to the knowledge of
Purchaser, any shareholder of Purchaser is a party with respect to the voting of
capital stock of Purchaser. Except for the issuance of the Series B Redeemable
Preferred Stock, and as disclosed in Schedule 5.3, since December 31, 1997
------------
Purchaser has not (i) authorized or issued any shares of its capital stock
(including any held in its treasury); or (ii) declared or paid any dividend
payable in shares of its capital stock or purchased or redeemed any of its
shares of capital stock, and no stock split or recapitalization has occurred.
All of the issued and outstanding shares of Purchaser's capital stock are, and
as of the Closing Date will be, and upon issuance to certain of the Shareholders
as provided herein, all of the shares of Purchaser Common Stock to be issued to
such Shareholders pursuant to this Agreement will be, duly and validly
authorized and issued, and fully paid and nonassessable. All of the shares of
Purchaser Common Stock to be issued to certain of the Shareholders pursuant to
this Agreement will be issued to such Shareholders free and clear of all Liens.
5.4 Litigation. Except as set forth on Schedule 5.4, there are no
------------
actions, suits, claims, governmental investigations or arbitration proceedings
pending or, to the knowledge of Purchaser, threatened against or affecting
Purchaser, the shares of Purchaser's capital stock, any shares of the Purchaser
Common Stock to be issued to certain of the Shareholders pursuant to this
Agreement or any of the assets or liabilities of Purchaser, or which question
the validity or enforceability of this Agreement or any action contemplated
hereby, and to the knowledge of Purchaser there is no basis for any of the
foregoing. Except as set forth on Schedule 5.4, there are no outstanding
------------
orders, decrees or stipulations issued by any federal, state, local or foreign
judicial or administrative authority in any proceeding to which Purchaser is or
was a party or which affects any shares of Purchaser's capital stock, any shares
of the Purchaser Common Stock to be issued pursuant to this Agreement or any of
the assets or liabilities of Purchaser.
5.5 Records. Purchaser's records are accurate and complete in all
material respects and there are no material matters as to which appropriate
entries have not been made in such records. A record of all material action
taken by the shareholders and the board of directors of Purchaser and all
minutes of its meetings are contained in the minute books of Purchaser and are
accurate and complete in all material respects. The stock ledger of Purchaser
contains in all material respects, an accurate and complete record of all
issuances, transfers and cancellations of shares of capital stock of Purchaser.
5.6 Financial Statements. Purchaser previously has furnished to the
Shareholders the following financial statements of Purchaser, including the
notes pertaining thereto (collectively, "Purchaser's Financial Statements"):
(a) audited balance sheets at December 31, 1997 and December 31, 1996;
-24-
(b) balance sheet at June 30, 1998;
(c) audited statements of income for the years ended December 31,
1997 and December 31, 1996; and
(d) statement of income for the 6-month period ended June 30, 1998.
The Purchaser's Financial Statements present fairly and in all material
respects are true, correct and complete statements of the financial
position of Purchaser, at each of the said balance sheet dates and the
results of operations for each of the said periods covered, and they have
been prepared in accordance with GAAP consistently applied. The books and
records of Purchaser properly and accurately reflect in all material
respects all transactions, properties, assets and known liabilities of
Purchaser.
5.7 No Material Adverse Change. Since December 31, 1997 there has
not been any Material Adverse Change with respect to Purchaser or any of its
shares of capital stock.
5.8 Compliance with Laws. Purchaser is in substantial compliance
with all laws, rules, regulations and orders, and all listing agreements and
similar arrangements and requirements, applicable to it, its assets, businesses
or shares of capital stock.
5.9 Brokers. Except as set forth on Schedule 5.9 (which is the sole
------------
responsibility of Purchaser), Purchaser has not paid or become obligated to pay
any fee or commission to any broker, finder or intermediary for or on account of
the transactions provided for in this Agreement. Purchaser shall be solely
responsible (and neither the Company nor the Shareholders shall have any
liability) for the fees and/or commissions of any entity identified on Schedule
5.9.
5.10 Accuracy of Information Furnished. No representation, statement
or information made or furnished by Purchaser to the Company or the
Shareholders, including those contained in this Agreement and the other
information and statements referred to herein and previously furnished by
Purchaser to the Company or the Shareholders pursuant hereto, contains or shall
contain any untrue statement of a material fact or omits or shall omit any
material fact necessary to make the information contained herein or therein not
misleading.
5.11 Purchaser's Pre-Closing Investigation. On the basis of its due
diligence investigation of the Company and its assets, liabilities, businesses
and operations, and the Shares, Purchaser has not affirmatively determined and
concluded that, as of the date of this Agreement, Purchaser has any claim
against the Shareholders which would give rise to indemnification rights under
Section 12.1 of this Agreement. Nothing contained in the preceding sentence
shall in any way limit, restrict or otherwise modify the rights of Purchaser to
indemnification under Section 12.1, but a breach hereof shall permit the
Shareholders to exercise rights under Section 12.2 hereof.
-25-
ARTICLE VI
Additional Covenants of the Company
6.1 Commercially Reasonable Efforts. The Company will use its
commercially reasonable efforts to cause to be satisfied as soon as practicable
and on or before August 14, 1998, all of the conditions set forth in Article IX
to the obligation of the Purchaser to purchase the Shares hereunder.
6.2 Conduct of Business Pending the Closing. From and after the
execution and delivery of this Agreement and until the Closing Date, except as
otherwise provided by the prior written consent of the Purchaser, which consent
shall not be unreasonably withheld, delayed or conditioned:
6.2.1 The Company will in all material respects conduct its business
and operations in the manner in which the same have heretofore been
conducted, including without limitation, ordinary course (a) collection of
accounts receivable, (b) maintenance of inventory levels, (c) payment of
accounts payable, and (d) payment of other indebtedness, including bank
indebtedness. The Company will use all commercially reasonable efforts to
(i) preserve its business organization intact; (ii) keep available to the
Purchaser the services of its officers, employees, agents and distributors;
(iii) preserve its relationships with customers, suppliers and others
having dealings with the Company; and (iv) maintain in all material
respects the quantity, quality and condition of the Company's assets and
the quality of the Company's services to customers in accordance with past
practices; and
6.2.2 The Company will maintain all of its properties in customary
repair, order and condition, reasonable wear and use and damage by
unavoidable casualty excepted, and will maintain insurance of such types
and in such amounts upon all of its properties and with respect to the
conduct of its business as are in effect on the date of this Agreement; and
6.2.3 The Company will not (i) authorize or issue any shares of its
capital stock (including any held in its treasury) or any other securities;
(ii) declare or pay any dividend or make any other distribution of or with
respect to its shares of capital stock or other securities or purchase or
redeem any shares of its capital stock or other securities; (iii) pay any
bonus or increase the rate of compensation of, any of its employees except
as may be contractually required or consistent with the Company's past
employment practices, or other than as may be required in connection with
the conduct of the Company's business, enter into any new employment
agreement which is not terminable upon 30 days notice without penalty to
the Company or amend any existing employment agreement to increase any
bonus or rate of compensation payable by the Company thereunder; (iv) incur
or pay in excess of an average of $30,500 per month for salary, wage taxes,
benefits and other expenses associated with the
-26-
employment of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.; (v) sell or transfer any of its assets
or acquire assets, other than in the ordinary course of business (including
without limitation, sales of inventory made in the ordinary course); (vi)
make or obligate itself to make capital expenditures aggregating more than
$20,000; (vii) incur any material obligations or liabilities or enter into
any material transaction in excess of $20,000; (viii) incur any
indebtedness to Shareholders or any third party other than (a) trade
accounts payable in the ordinary course of business, (b) bonuses,
reimbursements and compensation payable to those Shareholders who are
employees of the Company, in accordance with employment arrangements
currently in effect with such Shareholders; and (c) bank indebtedness not
to exceed $675,000; (ix) amend its charter or by-laws; or (ix) waive any
right of material value.
6.3 Access to Properties and Records. From and after the execution
and delivery of this Agreement, the Company will afford to representatives of
the Purchaser access, during normal business hours and upon reasonable notice,
to the Company's premises sufficient to enable the Purchaser to inspect the
assets, and the Company will furnish to such representatives during such period
all such information relating to the foregoing investigation as the Purchaser
may reasonably request; provided, however, that any furnishing of such
information to the Purchaser and any investigation by the Purchaser shall not
affect the right of the Purchaser to rely on the representations and warranties
made by the Company and the Shareholders in or pursuant to this Agreement. All
such inspections will be conducted by Purchaser in a manner that minimizes
interference with the Company's ongoing conduct of business.
6.4 No Disclosure. Without the prior written consent of the
Purchaser, neither the Company nor any representative of the Company will, prior
to the Closing Date, disclose the existence of or any term or condition of this
Agreement to any person or entity, except that such disclosure may be made if
required by applicable law, rule, regulation or court order, or to any lender to
or other person or entity in a business relationship with the Company to whom
such disclosure is necessary in order to satisfy any of the conditions to the
consummation of the purchase and sale of the Shares which are set forth in this
Agreement, or if prior to the date of disclosure the information disclosed has
become available to the public through no fault of the Company.
6.5 No Other Discussions. Neither the Company nor any representative
of the Company will, prior to August 15, 1998, or the earlier termination of
this Agreement pursuant to Section 14.3, enter into discussions or negotiate
with or entertain or accept the unsolicited offer of any other party concerning
the potential sale of all or any part of the assets or shares of the Company to,
or the merger or consolidation or other business combination of the Company
with, any person or entity other than the Purchaser.
-27-
ARTICLE VII
Additional Covenants of the Shareholders
7.1 No Disclosure. Without the prior written consent of the
Purchaser, neither the Shareholders nor any representative of any Shareholder,
will, prior to the Closing Date, disclose the existence of or any term or
condition of this Agreement to any person or entity, except that such disclosure
may be made if required by applicable law, rule, regulation or court order, or
to any lender to or other person or entity in a business relation ship with the
Company to whom such disclosure is necessary in order to satisfy any of the
conditions to the consummation of the purchase and sale of the Shares which are
set forth in this Agreement, or if prior to the date of disclosure the
information disclosed has become available to the public through no fault of any
Shareholder.
7.2 No Other Discussions. Neither the Shareholders nor any
representative of any Shareholder will, prior to August 15, 1998, or the earlier
termination of this Agreement pursuant to Section 14.3, enter into discussions
or negotiate with or entertain or accept the unsolicited offer of any other
party concerning the potential sale of all or any part of the assets or shares
of the Company to, or the merger or consolidation or other business combination
of the Company with, any person or entity other than the Purchaser.
7.3 Retention of Shares. The Shareholders will not, prior to the
Closing Date, sell, assign, transfer, pledge, encumber or otherwise dispose any
of the shares of capital stock of the Company which they own or any of their
voting rights with respect thereto.
7.4 Commercially Reasonable Efforts. The Shareholders will use their
commercially reasonable efforts (i) to cause to be satisfied as soon as
practicable and on or before August 14, 1998, all of the conditions set forth in
Article IX to the obligation of the Purchaser to purchase the Shares hereunder
and (ii) to cause the Company to satisfy all of its obligations hereunder.
ARTICLE VIII
Additional Covenants of the Purchaser
8.1 Commercially Reasonable Efforts. The Purchaser will use its
commercially reasonable efforts to cause to be satisfied as soon as practicable
and on or before August 14, 1998, all of the conditions set forth in Article X
to the obligation of the Shareholders to sell the Shares hereunder.
8.2 Capitalization of Purchaser Pending the Closing. From and after
the execution and delivery of this Agreement and until the Closing Date, except
as otherwise provided by the prior written consent of the Shareholders'
Representative, which consent
-28-
shall not be unreasonably withheld, delayed or conditioned, Purchaser will not
(a) except in connection with the financing of the cash portion of the Closing
Payment, authorize or issue any shares of its capital stock (including any held
in its treasury); (b) declare or pay any dividend payable in shares of its
capital stock or undergo any stock split or recapitalization, or purchase or
redeem any shares of its capital stock; (c) merge or consolidate with any other
entity, or enter into any other business combination with any other entity, in
which Purchaser is not the entity surviving such merger, consolidation or
business combination; or (d) enter into any division.
8.3 No Disclosure. Without the prior written consent of the
Shareholders' Representative, neither Purchaser nor any representative of
Purchaser will, prior to the Closing Date, disclose the existence of or any term
or condition of this Agreement to any person or entity, except that such
disclosure may be made if required by applicable law, rule, regulation or court
order, or to any lender to, underwriter for or other person or entity in a
business relationship with Purchaser to whom such disclosure is necessary in
order to satisfy any of the conditions to the consummation of the purchase and
sale of the Shares which are set forth in this Agreement, or if prior to the
date of disclosure the information disclosed has become available to the public
through no fault of Purchaser.
ARTICLE IX
Conditions to Obligations of the Purchaser
The obligation of the Purchaser to purchase the Shares shall be
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions (it being understood that if the Closing occurs despite the
failure to occur of any such condition, that condition shall be deemed to be
waived by the Purchaser):
9.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Company and the
Shareholders contained in this Agreement shall have been true and correct in all
material respects at and as of the date hereof, and they shall be true and
correct in all material respects at and as of the Closing Date with the same
force and effect as though made at and as of that time. The Company and the
Shareholders shall have performed and complied with all of their obligations
required by this Agreement to be performed or complied with at or prior to the
Closing Date. The Company and the Shareholders shall have delivered to the
Purchaser a certificate, dated as of the Closing Date and signed by an executive
officer of the Company and by the Shareholders, certifying that such
representations and warranties were true and correct in all material respects at
and as of the date hereof, and are true and correct in all material respects at
and as of the Closing Date with the same force and effect as though made at and
as of that time, and that all such obligations have been thus performed and
complied with.
-29-
9.2 Receipt of Necessary Consents. All necessary consents or
approvals of third parties to any of the transactions contemplated hereby, the
absence of which would materially affect the Purchaser's rights hereunder
(including the consents identified on Schedules 4.2 and 5.2), shall have been
---------------------
obtained and shown by written evidence satisfactory to the Purchaser. The form
and substance of such consents shall be reasonably satisfactory to the
Purchaser.
9.3 No Adverse Litigation. There shall not be pending any action or
proceeding by or before any court or other governmental body which shall seek to
restrain, prohibit or invalidate the sale of the Shares to the Purchaser or any
other transaction contemplated hereby, or which if adversely determined would
reasonably be expected to affect the right of the Purchaser to own, operate in
their entirety or control the Shares and the property and assets of the Company,
and which, in the reasonable judgment of the Purchaser, makes it inadvisable to
proceed with the transactions contemplated hereby.
9.4 [Intentionally omitted]
9.5 Indebtedness/Liens. The Company shall have no indebtedness other
than (a) bank indebtedness not to exceed $675,000, (b) accounts payable in the
ordinary course of business, (c) capital lease obligations existing as of June
18, 1998 and listed on Schedule 4.5, and (d) the Tax Liability. There shall be
no Liens on the assets and properties of the Company other than Permitted Liens
on the Leasehold Premises and the Liens described on Schedule 4.8, which liens
------------
arise from the bank indebtedness described in clause (a).
9.6 No Material Adverse Changes or Destruction of Property. Between
the date hereof and the Closing Date, (i) there shall have been no Material
Adverse Change with respect to the Company, (ii) there shall have been no
adverse federal, state or local legislative or regulatory change affecting in
any material respect the services, products or business of the Company, and
(iii) none of the properties and assets of the Company shall have been damaged
by fire, flood, casualty, act of God or public enemy or other cause, regardless
of insurance coverage for such damage, and there shall have been delivered to
Purchaser a certificate to that effect, dated the Closing Date and signed by the
Shareholders and the President of the Company.
9.7 Corporate Certificates. Company and the Shareholders shall have
delivered to Purchaser (a) true, correct and complete copies of the charter and
bylaws of the Company, (b) a certificate of subsistence issued by the Secretary
of State of the Commonwealth of Pennsylvania and each state in which Company is
qualified to do business, in each case dated as of a reasonably recent date, and
(c) a certificate of the Secretary of the Company and the Shareholders
certifying the foregoing and the incumbency and signatures of the officers of
the Company executing this Agreement and the other certificates and agreements
contemplated hereby.
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9.8 Opinion of Counsel. Purchaser shall have received a written
opinion of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C., counsel for ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇. and the Company, dated the Closing Date and in form and substance reasonably
satisfactory to Purchaser and its counsel, as to the matters set forth on
Exhibit 9.8, and any other matters related to the transactions contemplated by
this Agreement as the Purchaser shall reasonably request.
9.9 Share Certificates. The Shareholders shall have delivered to the
Purchaser stock certificates evidencing the Shares, accompanied by appropriate
stock powers duly endorsed.
9.10 Corporate Action. The Company shall have taken all corporate
action necessary to authorize its execution, delivery and performance of this
Agreement and the transactions contemplated hereby, and shall have furnished
Purchaser with certified copies of resolutions duly adopted by its directors in
form and substance satisfactory to counsel for the Purchaser in connection with
the foregoing.
9.11 Closing Balance Sheet. Purchaser shall have received the Closing
Balance Sheet and the Shareholders' Balance Sheet Certificate.
ARTICLE X
Conditions to Obligations of the Shareholders
The obligations of the Shareholders to sell the Shares shall be
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions (it being understood that if the Closing occurs despite the
failure to occur of any such condition, that condition shall be deemed to be
waived by the Shareholders):
10.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Purchaser contained in
this Agreement shall have been true and correct in all material respects at and
as of the date hereof, and they shall be true and correct in all material
respects at and as of the Closing Date with the same force and effect as though
made at and as of that time. The Purchaser shall have performed and complied
with all of its obligations required by this Agreement to be performed or
complied with at or prior to the Closing Date. The Purchaser shall have
delivered to the Shareholders a certificate, dated as of the Closing Date and
signed by an executive officer of the Purchaser, certifying that such
representations and warranties were true and correct in all material respects at
and as of the date hereof, and are true and correct in all material respects at
and as of the Closing Date with the same force and effect as though made at and
as of that time, and that all such obligations have been thus performed and
complied with.
-31-
10.2 Receipt of Necessary Consents. All necessary consents or
approvals of third parties to any of the transactions contemplated hereby, the
absence of which would materially affect the rights of the Shareholders
hereunder (and including the consents identified on Schedules 4.2 and 5.2),
---------------------
shall have been obtained and shown by written evidence satisfactory to the
Shareholders' Representative. The form and substance of such consents shall be
reasonably satisfactory to the Shareholders' Representative.
10.3 No Adverse Litigation. There shall not be pending any action or
proceeding by or before any court or other governmental body which shall seek to
restrain, prohibit or invalidate the sale of the Shares to Purchaser or any
other transaction contemplated hereby, or which if adversely determined would
reasonably be expected to affect the right or ability of the Shareholders to
sell the Shares, and which, in the reasonable judgment of the Shareholders'
Representative, makes it inadvisable to proceed with the transactions
contemplated hereby.
10.4 ▇▇▇▇▇ to Serve as Director of Purchaser. ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
shall have been invited to join the Board of Directors of Purchaser to serve
until the re-election of the full Board of Directors at Purchaser's next annual
meeting of shareholders, scheduled for May, 1999.
10.5 No Material Adverse Changes or Destruction of Property. Between
the date hereof and the Closing Date, (i) there shall have been no Material
Adverse Change with respect to the Purchaser, (ii) there shall have been no
adverse federal, state or local legislative or regulatory change affecting in
any material respect the services, products or business of Purchaser, and (iii)
none of the properties and assets of Purchaser shall have been damaged by fire,
flood, casualty, act of God or public enemy or other cause, regardless of
insurance coverage for such damage, and there shall have been delivered to the
Shareholders a certificate to that effect, dated the Closing Date and signed by
the President of Purchaser.
10.6 Corporate Certificates. Purchaser shall have delivered to the
Shareholders (a) true, correct and complete copies of the charter and bylaws of
the Purchaser, (b) a certificate of good standing from the Secretary of State of
the State of Delaware dated as of a reasonably recent date, (c) a certificate of
subsistence issued by the Secretary of State of the Commonwealth of
Pennsylvania, and a certificate of good standing issued by each state in which
Purchaser is qualified to do business, in each case dated as of a reasonably
recent date, and (d) a certificate of the Secretary of Purchaser certifying the
foregoing and the incumbency and signatures of the officers of Purchaser
executing this Agreement and the other certificates and agreements contemplated
hereby.
10.7 Corporate Action. The directors and (if necessary) the
shareholders of Purchaser shall have taken all corporate action necessary to
authorize Purchaser's execution, delivery and performance of this Agreement and
the transactions contemplated hereby, and Purchaser shall have furnished
Shareholders with certified copies of resolutions duly adopted
-32-
by its directors (and if necessary, its shareholders) in form and substance
satisfactory to counsel for the Shareholders, in connection with the foregoing.
10.8 Opinion of Counsel. Shareholders shall have received a written
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC, counsel for the Purchaser,
dated the Closing Date and in form and substance reasonably satisfactory to
Shareholders and their counsel, as to the matters set forth on Exhibit 10.8, and
any other matters related to the transactions contemplated by this Agreement as
the Shareholders shall reasonably request.
10.9 Payment of Purchase Price. Purchaser shall have delivered to
Shareholders the Closing Payment, consisting of a cash payment of $2,443,061.28,
$3,547,687 of Purchaser Common Stock, (to be evidenced by an appropriate
instruction letter to the Purchaser's Transfer Agent), the Notes, the Security
Agreement and such UCC-1 financing statements as are reasonably required by
Shareholders.
10.10 Release of Certain Obligations. The Company's obligations to
PNC Bank, National Association in the amount of $675,000 or less shall have been
satisfied by Purchaser.
10.11 Delivery of the Guaranty. Each of the parties thereto shall
have executed and delivered to ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. the Guaranty.
10.12 Termination of Trustee Status. Purchaser and the Company shall
have accepted the resignation of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. as trustee of the Company's
401(k) plan and the Company shall have appointed a substitute trustee.
10.13 Certification of Average Bid and Asked Price. ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have received a certificate signed by an
executive officer of Purchaser certifying the Average Bid and Asked Price.
ARTICLE XI
Certain Actions After the Closing
11.1 Execution of Further Documents. From and after the Closing, upon
the reasonable request of the Purchaser or the Shareholders, as the case may be,
each party shall execute, acknowledge and deliver to any requesting party all
such further acts, deeds, assignments, transfers, conveyances, powers of
attorney and assurances as may be required to convey and transfer to and vest in
the Purchaser and protect its right, title and interest in all of the Shares, to
convey and transfer to and vest in ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and
protect their respective rights, title and interest in all of the Purchaser
Common Stock to be issued to such Shareholders pursuant to this Agreement, and
as may be
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required or otherwise appropriate to carry out the transactions contemplated by
this Agreement.
11.2 Employment Matters.
11.2.1 The Shareholders shall use their reasonable efforts to aid the
Purchaser and the Company in retaining such of the Company's employees as
are employed on the Closing Date whom the Purchaser and the Company desire
to retain after the Closing Date. Except with the written consent of the
Purchaser, neither the Shareholders nor any Affiliate (as hereinafter
defined) of the Shareholders shall solicit or cause, directly or
indirectly, to be solicited, nor attempt to induce, for a period of five
years after the Closing Date, any person employed by the Company at or at
any time within 180 days prior to the Closing Date, unless such person was
either not retained by the Purchaser or the Company or was terminated by
the Purchaser or the Company, (i) to refuse to continue his or her
employment with the Company or the Purchaser, (ii) if such employment is
continued after the Closing, to terminate his or her employment with the
Company or the Purchaser, or (iii) to work, directly or indirectly, with or
for any Shareholder or any of their Affiliates. As used in this Agreement,
the term "Affiliate" means, with respect to a specified person or entity,
any other person or entity which directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common
control with, the person or entity specified and, with respect to any
natural person, shall include such person's spouse, children,
grandchildren, and any spouses and children of the foregoing.
11.2.2 The Purchaser shall have no obligation to cause the Company to
continue to employ any of the persons currently employed by the Company or
to continue, or institute any replacement or substitution for, any
vacation, severance, incentive, bonus, profit sharing, pension or other
employee benefit plan or program of the Company other than as may be
required by applicable law, rule, regulation or court order with respect to
any such plan or program of the Company, or as contractually required.
11.3 Restrictive Covenants.
11.3.1 To assure that Purchaser will realize the value and goodwill
inherent in Company:
11.3.1.1 Neither ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. nor ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
shall, directly or indirectly, for a period of five years following the
Closing Date (the "Restricted Period"), engage in or have any interest in
any business, firm, person, partnership, corporation, limited liability
company, or other entity (as an owner, shareholder, partner, manager,
member, employee, agent, security holder, creditor, consultant or
otherwise) that engages in any activity that is the same or similar to, or
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competitive with, any activity engaged in by Company or any of its
Affiliates of which such Shareholder is consciously aware on the Closing
Date, or by the Company or any Affiliate of the Company of which such
Shareholder is consciously aware during the Restricted Period; (a) provided
that the prohibition contained in this Section 11.3.1.1 shall not apply to
any activity in which the Company for a period of more than 180 consecutive
days ceases to be engaged, (b) provided that the ownership, beneficially or
of record, of less than five percent (5%) of the outstanding shares of any
class of stock of any issuer listed on a national securities exchange shall
not be a breach of this Agreement and (c) provided that neither the
ownership of shares of Purchaser Common Stock to be issued to ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ pursuant to this Agreement, nor any
activities of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. conducted by him on behalf of Purchaser
(whether as a member of Purchaser's Board of Directors or otherwise) or the
Company from and after the Closing shall be a breach of this Agreement.
11.3.1.2 Unless required by law or unless the use thereof is
necessary or appropriate in connection with any claim made for
indemnification under this Agreement, no Shareholder shall, directly or
indirectly, at any time following the Closing Date, divulge, communicate,
use to the detriment of Company or any Affiliates of Company, or for the
benefit of any other business, firm, person, partnership, limited liability
company or corporation, the confidential information, data, intellectual
property or trade secrets of Company, including but not limited to those
items identified on Schedule 4.11, and the business records, financial
information and the customer, supplier and personnel information of
Company.
11.3.1.3 No Shareholder shall, directly or indirectly, for a
period of five years following the Closing Date: (i) induce any customer of
Company at the Closing Date to patronize any business (other than the
Company) similar to any of those described in Section 11.3.1.1; (ii)
canvass, solicit or accept from any customer of Company at the Closing Date
any business similar to any of those described in Section 11.3.1.1 other
than on behalf of the Company; or (iii) request or advise any individual or
entity which is a customer of Company at the Closing Date to withdraw,
curtail or cancel any such customer's business with the Company.
11.3.1.4 No Shareholder shall, directly or indirectly, for a
period of five years following the Closing Date, solicit (or employ or
cause to be employed other than by the Company) employees of Company or any
Affiliate or subsidiary of Company of which such Shareholder is consciously
aware, directly or indirectly, for the purpose of enticing them to leave
their employment with Company, or any such Affiliate or subsidiary of
Company.
11.3.1.5 No Shareholder shall, directly or indirectly, for a
period of five years following the Closing Date, request or advise any
individual or entity
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which is a supplier or vendor of Company at the Closing Date to withdraw,
curtail or cancel any such supplier's or vendor's business with Company.
11.3.2 The Shareholders agree and acknowledge that the restrictions
contained in Section 11.3.1 have been specifically negotiated by
sophisticated parties and agree that all such provisions are reasonable and
necessary in territorial scope and in duration to adequately protect
Purchaser and the Company after the Closing. If, however, any provision of
Section 11.3.1, as applied to any party or to any circumstances, is
adjudged by a court of competent jurisdiction to be invalid or
unenforceable, the same will in no way affect any other provision of
Section 11.3 or any other part of this Agreement, the application of such
provision in any other circumstances or the validity or enforceability of
this Agreement. If any such provision, or any part thereof, is held to be
unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination will
have the power to modify the duration and/or area of such provision, and/or
to delete specific words or phrases, and in its modified form such
provision will then be enforceable and will be enforced. It is further
agreed that a breach or violation of any provision of Section 11.3.1 will
result in immediate and irreparable injury to Purchaser and the Company and
that money damages will be an inadequate remedy. Accordingly, in addition
to such damages as Purchaser and the Company can demonstrate they have
sustained by reason of such breach or violation, and in addition to any
other remedy that Purchaser or the Company may have, Purchaser and the
Company shall each be entitled to both temporary and permanent injunctive
relief to enforce the specific performance of this Section 11.3.
11.3.3 The period of time during which a Shareholder is prohibited
from engaging in certain activities pursuant to the terms of this Section
11.3 shall be extended by the length of time during which such Shareholder
is in breach of the terms of this Section 11.3.
11.3.4 Notwithstanding the foregoing, neither ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ nor
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be bound by the terms of Section 11.3.1.3 hereof
at any time after the employment of such Shareholder by the Company is
terminated by the Company or Purchaser after the Closing.
11.4 Conduct of Business During Earn-Out Period. At all times
during the Earn-Out Period, except as otherwise provided by the prior written
consent of the Shareholders' Representative, which consent shall not be
unreasonably withheld, delayed or conditioned, Purchaser agrees on behalf of
itself and the Company that:
11.4.1 The Company will in all material respects, as a separate
corporation and with no consolidation of its business or operations (or the
results thereof) with those of Purchaser or any other entity, and with no
charge to the Company for any corporate overhead or other operating
expenses of Purchaser or any other entity other
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than such charges as are solely attributable to the Company and its
business and operations (or if any such charge to the Company is made in
respect of expenses of Purchaser or any other entity, all such charges are
to be completely disregarded for purposes of the calculation of the Earn-
Out Payment), conduct its business and operations in the manner in which
the same have heretofore been conducted, including without limitation,
ordinary course (a) collection of accounts receivable, (b) maintenance of
inventory levels, (c) payment of accounts payable, and (d) payment of other
indebtedness, including bank indebtedness. The Company will use all
commercially reasonable efforts to (i) preserve its business organization
intact; (ii) keep available to the Company the services of its officers,
employees, agents and distributors; (iii) preserve its relationships with
customers, suppliers and others having dealings with the Company; and (iv)
maintain in all material respects the quantity, quality and condition of
the Company's assets and the quality of the Company's services to customers
in accordance with past practices; and
11.4.2 The Company will maintain all of its properties in customary
repair, order and condition, reasonable wear and use and damage by
unavoidable casualty excepted, and will maintain insurance of such types
and in such amounts upon all of its properties and with respect to the
conduct of its business as are in effect on the Closing Date; and
11.4.3 The Company will not (i) authorize or issue any shares of its
capital stock (including any held in its treasury) or any other securities,
or take any other action which would dilute the percentages of Purchaser
Common Stock to be respectively held by ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ pursuant to this Agreement; (ii) declare or pay any dividend or make
any other distribution of or with respect to its shares of capital stock or
other securities or purchase or redeem any shares of its capital stock or
other securities; (iii) pay any bonus or increase the rate of compensation
of, any of its employees except as may be contractually required or
consistent with the Company's past employment practices as of the Closing
Date, or other than as may be required in connection with the conduct of
the Company's business, enter into any new employment agreement or amend
any existing employment agreement to increase any bonus or rate of
compensation payable by the Company thereunder; (iv) employ or otherwise
retain any person to serve as the Chief Executive Officer, President,
Administrative Office Manager or Administrative Support Person of the
Company, or any position analogous thereto; (v) sell or transfer any of its
assets or acquire assets, other than in the ordinary course of business
(including, without limitation, sales of inventory made in the ordinary
course); (vi) make or obligate itself to make capital expenditures
aggregating more than $50,000; (vii) incur any material obligations or
liabilities or enter into any material transaction in excess of $100,000;
or (viii) waive any rights of material value.
11.5 Other Matters During Earn-Out Period. At all times during the
Earn-Out Period, except as otherwise provided by the prior written consent of
the
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Shareholders' Representative, which consent shall not be unreasonably withheld,
delayed or conditioned, Purchaser will not (a) except in connection with the
financing of the cash portion of the Closing Payment, authorize or issue any
shares of its capital stock (including any held in its treasury), (b) declare or
pay any dividend payable in shares of its capital stock or undergo any stock
split or recapitalization, or purchase or redeem any shares of its capital
stock, (c) merge or consolidate with any other entity, or enter into any other
business combination with any other entity, in which Purchaser is not the entity
surviving such merger, consolidation or business combination; or (d) or enter
into any division.
11.6 Access to Records. For a period of seven years following the
Closing, and for so long thereafter as any one or more of the Shareholders is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with any
indemnification claim made against such Shareholders as set forth in Section
12.1 hereof, neither Purchaser nor the Company, nor any successor to Purchaser
or the Company, shall discard, destroy or otherwise dispose of any records,
documents or data relating to the Company without first making such records,
documents and data available to each Shareholder for inspection and copying.
ARTICLE XII
Indemnification
12.1 Agreement by the Shareholders to Indemnify. The Shareholders
shall jointly and severally indemnify and hold the Company and the Purchaser
harmless in respect of, the aggregate of all Indemnifiable Damages (as herein
defined) of the Company and Purchaser, up to a maximum aggregate payment equal
to (a) $14,190,748 plus the Earn-out Payment, minus (b) amounts past due under
the 6.2m Note and any past due cash payments with respect to the Earn-out
Payment (the "Cap").
12.1.1 "Indemnifiable Damages" means, without duplication, the
aggregate of all expenses, losses, costs, deficiencies, liabilities and
damages of Purchaser or the Company (including reasonable related counsel
and paralegal fees and expenses) incurred or suffered by the Company or
Purchaser (i) resulting from any breach of a representation or warranty of
the Shareholders in or pursuant to this Agreement, (ii) resulting from any
breach of the covenants or agreements of the Company or the Shareholders in
this Agreement, (iii) relating to a Retained Liability, (iv) relating to
the payment or non-payment of taxes payable by Company for the period prior
to the Closing Date, (v) relating to a Plan (or the administration thereof)
for the period prior to the Closing Date, (vi) relating to any failure of
Company to comply with applicable laws prior to the Closing Date, (vii)
relating to a failure by the Company to qualify as a foreign corporation in
any state where Company was required, prior to the Closing Date, to be so
qualified, and (viii) resulting from any claim, action or proceedings
brought against the Company by a third party (including any governmental
authority) relating to the conduct of the business of the Company prior to
the Closing Date.
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12.1.2 The Company and the Purchaser each agree to give prompt
written notice to the Shareholders of any claim against the Company or the
Purchaser which might give rise to a claim by the Company or the Purchaser
against the Shareholders based on the indemnity agreement set forth in
Section 12.1 hereof, stating the nature and basis of the first-mentioned
claim and the amount thereof. Subject to the last sentence of this Section
12.1.2, the Shareholders shall have full responsibility and authority with
respect to the payment, settlement, compromise or other disposition of any
third party dispute, action, suit or proceeding subject to indemnification
by the Shareholders hereunder, including, without limitation, the right to
conduct and control all negotiations with respect to the settlement,
compromise or other disposition thereof, and the Company and the Purchaser
each agree to cooperate with the Shareholders in any reasonable manner
requested by the Shareholders in connection with any such negotiations. The
Company and the Purchaser, as the case may be, shall have the right,
without prejudice to the Shareholders' rights under this Agreement, at the
Company's and the Purchaser's sole expense, to be represented by counsel of
its or their own choosing and with whom counsel for the Shareholders shall
confer in connection with the defense of any such dispute, action, suit or
proceeding. The parties agree to render to each other such assistance as
may reasonably be requested in order to insure the proper and adequate
defense of any such dispute, action, suit or proceeding. Notwithstanding
the foregoing, the Shareholders may compromise and settle any claim, action
or suit for which they must indemnify the Company and/or the Purchaser
hereunder, provided that they give the Company and/or the Purchaser, as the
case may be, advance notice of any proposed compromise or settlement and
shall obtain the consent of the Company and/or the Purchaser, as the case
may be, to such proposed compromise or settlement, which consent shall not
be unreasonably withheld, delayed or conditioned.
12.2 Agreement by Purchaser to Indemnify. Purchaser shall
indemnify and hold harmless the Shareholders in respect of, the aggregate of all
Losses (as defined below) of the Shareholders, up to a maximum aggregate payment
equal to the Cap.
12.2.1 "Losses" means, without duplication, the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including
reasonable related counsel and paralegal fees and expenses) incurred or
suffered by the Shareholders (i) resulting from any breach of a
representation or warranty of the Purchaser in or pursuant to this
Agreement, or (ii) resulting from any breach of the covenants or agreements
of the Purchaser in this Agreement.
12.2.2 The Shareholders each agree to give prompt written notice to
the Company and the Purchaser of any claim against the Shareholders, or any
of the Shareholders, which might give rise to a claim by the Shareholders
against the Company and the Purchaser based on the indemnity agreement set
forth in Section 12.2 hereof, stating the nature and basis of the first-
mentioned claim and the amount thereof. Subject to the last sentence of
this Section 12.1.2, the Company and
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the Purchaser shall have full responsibility and authority with respect to
the payment, settlement, compromise or other disposition of any third party
dispute, action, suit or proceeding subject to indemnification by the
Company and the Purchaser hereunder, including, without limitation, the
right to conduct and control all negotiations with respect to the
settlement, compromise or other disposition thereof, and the Shareholders
each agree to cooperate with the Company and the Purchaser in any
reasonable manner requested by the Company and the Purchaser in connection
with any such negotiations. The Shareholders shall have the right, without
prejudice to the rights of the Company and Purchaser under this Agreement,
at the Shareholders' sole expense, to be represented by counsel of their
own choosing and with whom counsel for the Company and the Purchaser shall
confer in connection with the defense of any such dispute, action, suit or
proceeding. The parties agree to render to each other such assistance as
may reasonably be requested in order to insure the proper and adequate
defense of any such dispute, action, suit or proceeding. Notwithstanding
the foregoing, the Company and the Purchaser may compromise and settle any
claim, action or suit for which they must indemnify the Shareholders
hereunder, provided that they give the Shareholders advance notice of any
proposed compromise or settlement and shall obtain the consent of the
Shareholders to such proposed compromise or settlement, which consent shall
not be unreasonably withheld, delayed or conditioned.
12.3 Right of Set Off. Without limiting all other remedies available
to Purchaser, Purchaser shall have the right to set off Indemnifiable Damages
actually sustained by Purchaser or the Company against the Earn-out Payment (but
in no event against amounts due under the Notes).
12.4 Limitations on Indemnification Obligations. Any claim for
indemnification made under this Article XII, whether such claim is made by the
Company and/or Purchaser in respect of Indemnifiable Damages, or by the
Shareholders in respect of Losses, must be brought within a period of twenty-
four (24) months after the Closing Date. In addition, neither the Shareholders
nor the Company and/or Purchaser shall be liable for any Indemnifiable Damages
or Losses, as applicable, until the aggregate amount thereof exceeds $100,000,
but the indemnifying party shall be liable for the entire excess up to the
amount of the Cap.
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ARTICLE XIII
SECURITIES LAW MATTERS
The Shareholders, the Company and Purchaser agree as follows with
respect to the sale or other disposition after the Closing of the Purchaser
Common Stock by ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and in the case of
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. only, of the Notes:
13.1 Representations and Warranties. Each of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ represents and warrants that:
(a) he is an "Accredited Investor" as that term is defined in
Regulation D under the Securities Act of 1933, as amended (the
"Securities Act");
(b) the Purchaser Common Stock, and in the case of ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇. only, the Notes, are being acquired and will be acquired for his
own account and will not be sold or otherwise disposed of except
pursuant to (i) an exemption or exclusion from the registration
requirements under the Securities Act, which does not require the
filing by Purchaser with the Securities and Exchange Commission
("Commission") of any registration statement, offering circular or
other document, in which case such Shareholder shall first supply to
Purchaser an opinion of counsel (which opinion of counsel shall be
satisfactory to Purchaser) that such exemption or exclusion is
available or (ii) a registration statement filed by Purchaser with the
Commission under the Securities Act;
(c) such Shareholder has been furnished, and he or his authorized
representative has carefully read, the Purchaser's Confidential Private
Placement Memorandum with respect to the Purchaser Common Stock and the
Notes dated August 10, 1998 as supplemented August 11, 1998 and as
further supplemented August 12, 1998 (the "Purchaser Memorandum").
Such Shareholder further acknowledges that he is aware that there are
substantial risks incident to investing in the Purchaser Common Stock
including, but not limited to, those risks summarized under the caption
"Certain Risk Factors" in the Purchaser Memorandum;
(d) in the case of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. only, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
represents and warrants that he has been furnished, and he or his
authorized representative has carefully read, the Purchaser Memorandum
with respect to the Notes. ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. further acknowledges
that he is aware that there are substantial risks incident to investing
in the Notes, including, but not limited to, those risks summarized
under the caption "Certain Risk Factors" in the Purchaser Memorandum;
and
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(e) such Shareholder has been advised by the Purchaser to consult
such Shareholder's own legal, financial and tax advisors concerning an
investment in the Parent Common Stock and in the case of ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇. only, the Notes. Such Shareholder has reviewed the risks
and merits of an investment in the Parent Common Stock, and in the case
of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. only, the Notes, with tax, legal and investment
advisors to the extent deemed advisable by such Shareholder.
13.2 Legend. The certificates for the Purchaser Common Stock received
and the Notes shall bear the following legend:
[The shares represented by this certificate have] [This Note has] not
been registered under the Securities Act of 1933, as amended, and may
not be sold, transferred or otherwise disposed of by the holder without
an effective registration statement being filed under and pursuant to
said Act or receipt of an opinion of counsel in form and substance
satisfactory to the [issuer] [maker] that an exemption from
registration is available.
and Purchaser may, unless (a) an exemption or exclusion from the registration
requirements of the Securities Act is available and Purchaser has received a
satisfactory opinion of counsel with respect thereto, or (b) a registration
statement covering such shares is in effect, place stop transfer orders with its
transfer agents with respect to such certificates.
13.3 Registration Rights for Purchaser Common Stock.
13.3.1 Demand Registration Rights.
13.3.1.1 Purchaser Common Stock Issued at Closing. At any
time following the Closing Date and prior to the Earn-out Payment Date,
and on one occasion only, Purchaser shall, as soon as practicable but
in any event within ninety (90) days following a written request from
the Shareholders' Representative to register the shares of Purchaser
Common Stock held by ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, file a
registration statement with the Commission with respect to the shares
of Purchaser Common Stock issued pursuant to Section 2.1.1.
13.3.1.2 Earn-out Common Stock. At any time following the
Earn-out Payment Date, and on one occasion only, Purchaser shall as
soon as practicable but in any event within ninety (90) days following
a written request from the Shareholders' Representative to register the
shares of Purchaser Common Stock held by ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ (whether received at the Closing or on the Earn-out Payment
Date), file a registration statement with the Commission with respect
to the shares of Purchaser Common Stock held by such Shareholders.
Notwithstanding anything in this Agreement to the contrary, if such
Shareholders have not exercised the demand registration right provided
in Section 13.3.1.1 as of the Earn-out Payment Date, such demand
registration right shall
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terminate on the Earn-out Payment Date and Shareholders shall have only
the demand registration right described in this Section 13.3.1.2 and
the piggyback registration rights described in Section 13.3.2.
13.3.2 Piggyback Registration Rights. At any time following the
Closing Date, whenever Purchaser proposes to register any Purchaser Common
Stock for its own or others' account under the Securities Act, other than
registrations relating to Plans, Purchaser shall give the Shareholders'
Representative prompt written notice of its intent to do so. Upon the
written request of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ given by the
Shareholders' Representative within 30 days after receipt of such notice,
Purchaser shall cause to be included in such registration all of the
Purchaser Common Stock issued to such Shareholders pursuant to this
Agreement which any such Shareholder requests, provided that, if Purchaser
is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under this Section 13.3.2 that the number of shares
to be sold by persons other than Purchaser is greater than the number of
such shares which can be offered without adversely affecting the offering,
Purchaser may reduce pro rata the number of shares offered for the accounts
of such persons (other than Purchaser) (based upon the number of shares
proposed to be sold by each such person) to a number deemed satisfactory by
such managing underwriter.
13.3.3 Registration Procedures. All expenses incurred in connection
with a registration of Purchaser Common Stock held by ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ under Section 13.3.1 (including all registration,
filing, qualification, legal, printer and accounting fees, and underwriting
commissions and discounts with respect to any Purchaser Common Stock sold on
behalf of such Shareholders ("Expenses")), shall be borne by ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, provided, however, that such Shareholders shall
not be responsible for Expenses in excess of $30,000, and all Expenses in
excess of such amount shall be borne by Purchaser. All Expenses incurred in
connection with a registration statement under Section 13.3.2 shall be borne
pro rata by ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in the proportion that
the number of shares of Purchaser Common Stock being registered on behalf of
such Shareholders bears to the total number of shares of Purchaser Common
Stock included in such registration statement. Furthermore, in the event
that the Purchaser Common Stock held by such Shareholders is registered
together with shares of Purchaser Common Stock held by third parties
(whether in a piggyback registration or a demand registration), the terms
under which such Shareholders and such other holders of Purchaser Common
Stock reimburse Purchaser for the Expenses associated with such registration
shall be consistent. In connection with registrations under Section 13.3,
Purchaser shall (i) use its best efforts to cause each such registration
statement, after filing, to promptly become and remain effective for a
period of at least 120 days (or such shorter period during which ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have sold all Purchaser Common Stock
which they requested to be registered); (ii) use its best efforts to
register and qualify the Purchaser Common Stock covered by such registration
statement under applicable state
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securities laws as such Shareholders shall reasonably request for the
distribution of the Purchaser Common Stock; (iii) take all actions necessary
to have the Purchaser Common Stock covered by such registration listed or
quoted on the exchange or automated quotation system on which the Purchaser
Common Stock trades at the time of registration; and (iv) take such other
actions as are reasonable and necessary to comply with the requirements of
the Securities Act and the regulations thereunder.
13.3.4 Underwriting Agreement. In connection with each registration
pursuant to Section 13.3 covering an underwritten registered public
offering, Purchaser and ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ agree to
enter into a written agreement with the managing underwriters in such form
and containing such provisions as are reasonably acceptable to ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and customary in the securities business for
such an arrangement between such managing underwriters and companies of
Company's size and investment stature, provided that the indemnification
provisions thereof shall be limited to provide that ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall not indemnify such managing underwriters for any
liability resulting from, or arising out of, or in connection with, any
misrepresentation by the Purchaser to the underwriters or in any
registration statement or prospectus.
13.3.5 Availability of Rule 144. Purchaser shall not be obligated to
register shares of Purchaser Common Stock held by ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. or
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ at any time when the resale provisions of Rule 144(k) (or
any successor provision) promulgated under the Securities Act are available
to ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ for such shares.
13.3.6 Market Standoff. In consideration of the granting to ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ of the registration rights under this
Section 13.3, such Shareholders agree that they will not sell, transfer or
otherwise dispose of, including without limitation through put or short sale
arrangements, shares of Purchaser Common Stock in the 10 days prior to the
effectiveness of any registration of Purchaser Common Stock for sale to the
public and for up to 180 days following the effectiveness of such
registration; provided, however, that during the 180-day period following
the effectiveness of such registration the Shareholders shall be entitled to
sell, transfer or otherwise dispose of any or all of their shares of
Purchaser Common Stock that are registered pursuant to such registration.
ARTICLE XIV
Miscellaneous
14.1 Transaction Expenses; Brokers' Fees. Each party shall bear its
own expenses including without limitation legal, accounting and other
transaction expenses incurred in connection with the transactions contemplated
hereby, except that the Shareholders shall bear the expenses of the Company
incurred after June 14, 1998 in connection herewith, and the Company shall bear
the expenses of the Shareholders incurred on or prior to June 14, 1998 in
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connection with the transactions contemplated hereby. The parties hereto
expressly acknowledge and agree that the Company, and not the Shareholders,
shall bear the fees and expenses of the Company's accountants ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ &
Ford, LLP in respect of such accountants' review of the preparation of the
Company's financial statements for the period ended June 30, 1998. The
Purchaser will indemnify and hold harmless the Shareholders from the commission,
fee or claim of any person or entity employed or retained or claiming to be
employed or retained by the Purchaser to bring about, or to represent it in, the
transactions contemplated hereby. The Shareholders will indemnify and hold
harmless the Purchaser from the commission, fee or claim of any person or entity
employed or retained or claiming to be employed or retained by the Company or
the Shareholders to bring about, or to represent any of them in, the
transactions contemplated hereby, including without limitation, any claims of
Penn/▇▇▇▇▇▇▇▇ Group or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
14.2 Amendment and Modification. The parties hereto may amend, modify
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
14.3 Termination.
14.3.1 Anything to the contrary herein notwithstanding, this Agreement
may be terminated and the transactions contemplated hereby may be abandoned:
(a) by the mutual written consent of all of the parties hereto
at any time prior to the Closing Date;
(b) by the Purchaser at any time prior to the Closing Date if
there shall be a pending action or proceeding by or before any court or
other governmental body which shall seek to restrain, prohibit or
invalidate the sale of the Shares to the Purchaser or any other
transaction contemplated hereby, or which if adversely determined would
reasonably be expected to affect the right of the Purchaser to own,
operate in their entirety or control the Shares and the properties and
assets of the Company and which, in the reasonable judgment of the
Purchaser, makes it inadvisable to proceed with the transactions
contemplated by this Agreement;
(c) by Purchaser in the event of the material breach by Company
or any Shareholder of any provision of this Agreement, which breach is
not remedied by the breaching party within 30 days after receipt of
written notice of such breach from the Purchaser;
(d) by the Shareholders' Representative (on behalf of himself,
the other Shareholders and the Company) in the event of a material
breach by Purchaser of any provision of this Agreement, which breach is
not remedied by Purchaser within thirty (30) days after receipt of
written notice of such breach from the Shareholders' Representative;
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(e) by the Shareholders' Representative (on behalf of himself,
the other Shareholders and Company) at any time prior to the Closing
Date if there shall be a pending action or proceeding by or before any
court or other governmental body which shall seek to restrain, prohibit
or invalidate the sale of the Shares to the Purchaser or any other
transaction contemplated hereby, or which if adversely determined would
reasonably be expected to affect the right or ability of the
Shareholders to sell the Shares and which, in the reasonable judgment
of the Shareholders' Representative, makes it inadvisable to proceed
with the transactions contemplated by this Agreement; or
(f) by the Purchaser or the Shareholders' Representative (on
behalf of himself, the other Shareholders and the Company), if for any
reason or no reason the transactions contemplated by this Agreement
have not been consummated on or before August 14, 1998.
If this Agreement is terminated pursuant to clause (a), (b), (e) or (f) of
this paragraph 14.3.1, no party shall have any liability for any costs or
expenses, or any further obligation for breach of warranty or otherwise to
any other party to this Agreement. Any termination of this Agreement
pursuant to clause (c) or (d) of this paragraph 14.3.1 shall be without
prejudice to any other rights or remedies of the respective parties. Within
ten days after any termination of this Agreement, Purchaser shall return to
the Company and the Shareholders all documents and other written information
(and all copies thereof, regardless of medium) received by Purchaser, its
legal counsel, accountants or other representatives in respect of the
Company, whether received from the Company, any Shareholder or the Company's
legal counsel, accountants or other representative, and Purchaser shall not
use or disclose any such information for any purpose at any time after such
termination.
14.3.2 The risk of any loss to the properties or assets of the Company
and all liability with respect to injury and damage occurring in connection
therewith shall be the sole responsibility of the Company and the
Shareholders until the completion of the Closing. If any material part of
said properties and assets shall be damaged by fire or other casualty prior
to the completion of the Closing hereunder, the Company and the Shareholders
shall so notify the Purchaser and the Purchaser shall have the right and
option:
(a) to terminate this Agreement, without liability to any party
hereto; or
(b) to proceed with the Closing hereunder, in which event such
casualty shall not constitute a breach by the Company or the
Shareholders of any representation, warranty or covenant in this
Agreement, and the Purchaser shall be entitled to receive and retain
the insurance proceeds arising from such casualty.
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14.4 Entire Agreement. This Agreement, including the exhibits and
schedules, contains the entire agreement of the parties hereto with respect to
the purchase of the Shares and the other transactions contemplated hereby, and
supersedes all prior understandings and agreements (oral or written) of the
parties with respect to the subject matter hereof. The parties expressly
represent and warrant that in entering into this Agreement they are not relying
on any prior representations made by any other party concerning the terms,
conditions or effects of this Agreement which terms, conditions or effects are
not expressly set forth herein. Any reference herein to this Agreement shall be
deemed to include the schedules and exhibits. Any item which is disclosed to
Purchaser in any schedule in response to the provisions of any section of this
Agreement that also responds to the provisions of any other section of this
Agreement shall apply to such other section, regardless of whether such other
section is specifically identified.
14.5 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be to an article, section, paragraph, clause, schedule or exhibit of this
Agreement unless otherwise indicated. The headings contained herein and on the
schedules are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement or the schedules. References to
pronouns shall be deemed to include the masculine, feminine and neuter versions
thereof. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." This Agreement shall not be construed more strictly against
Purchaser by reason of Purchaser having drafted this Agreement.
14.6 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
14.7 Notices. Any notice, consent, approval, request, acknowledgment,
other communication or information to be given or made hereunder to any of the
parties by any other party shall be in writing and (a) delivered personally, (b)
sent by certified mail, postage prepaid, or (c) sent by facsimile as follows:
If to the Company or the Shareholders, addressed to:
KCS Computer Services, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Shareholders' Representative
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇ ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser, addressed to:
Allin Communications Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman and Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC
▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the address to which notices hereunder are to be sent to
such party by giving written notice of such change of address in the manner
herein provided for giving notice. Any notice delivered personally shall be
deemed to have been given on the date it is so delivered, any notice delivered
by registered or certified mail shall be deemed to have been given on the date
it is received, and any notice sent by facsimile shall be deemed to have been
given on the date it was sent (so long as the sender receives confirmation of
transmission and a hard copy of such notice is sent by U.S. mail).
14.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
contracts made and to be performed therein.
14.9 Confidentiality; Publicity. Except as may be required by law or
as otherwise permitted or expressly contemplated hereby, no party hereto or
their respective affiliates, employees, agents or representatives shall disclose
to any third party prior to the Closing Date, the subject matter or terms of
this Agreement without the prior consent of the Purchaser in the case of
Shareholders or the Company, and the Shareholders' Representative in the case of
the Purchaser. No press release or other public announcement related to this
Agreement or the transactions contemplated hereby will be issued by any party
hereto without
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the prior approval of the Purchaser and the Shareholders' Representative, except
that any party hereto may make such public disclosure which he or it believes in
good faith to be required by law or by the terms of any listing agreement with a
securities exchange. In addition, Purchaser is specifically authorized to
disclose and discuss this Agreement and the transactions contemplated hereby in
filings with the United States Securities and Exchange Commission.
14.10 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the greatest extent possible.
14.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior consent of the other parties hereto; provided, however,
that the Purchaser may assign its rights hereunder to any Affiliate of or
successor-in-interest to the Purchaser without the consent of the other parties
hereto.
14.12 Binding Effect; No Third Party Beneficiaries. This Agreement
shall inure to the benefit of, be binding upon and be enforceable by and against
the Company, the Shareholders and the Purchaser and their respective heirs,
representatives, successors and permitted assigns, and nothing herein expressed
or implied shall be construed to give any other person or entity any legal or
equitable rights hereunder.
14.13 Additional Representations. Each party hereto expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself or himself of the terms,
contents, conditions and effects of this Agreement; (b) said party has relied
solely and completely upon its or his own judgment in executing this Agreement;
(c) said party has had the opportunity to seek and has obtained the advice of
counsel before executing this Agreement; (d) said party has acted voluntarily
and of its or his own free will in executing this Agreement; (e) said party is
not acting under duress, whether economic or physical, in executing this
Agreement; and (f) this Agreement is the result of arm's-length negotiations
conducted by and among the parties and their counsel.
14.14 Appointment as Shareholders' Representative and Attorney-in-
Fact. Each of the Shareholders hereby irrevocably appoints ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
as the Shareholders' Representative and as such Shareholder's attorney-in-fact
for purposes of sending and receiving notices, resolving disputes hereunder, and
taking all other actions, both prior and subsequent to the Closing Date, which
are necessary or advisable to carry out the purposes of this Agreement. The
Purchaser shall be entitled to rely upon, and each of the Shareholders shall be
bound by,
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any and all actions, notices or communications taken or made by ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇., as the Shareholders' Representative, pursuant to the power of attorney
granted herein, which is coupled with an interest and therefore irrevocable.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the day and year first above written.
Company:
KCS COMPUTER SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------
Name Printed: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
---------------------
Title:
---------------------------
Shareholders:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Purchaser:
ALLIN COMMUNICATIONS
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Name Printed: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman/CEO
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INDEX OF SCHEDULES AND EXHIBITS
TO
STOCK PURCHASE AGREEMENT
------------------------
Schedules
---------
Company and Shareholders
------------------------
Schedule 4.1 Organization; Subsidiaries; Exceptions to Foreign
Qualifications
Schedule 4.2 Consents
Schedule 4.3 Capitalization; Shareholder Information
Schedule 4.4 Exceptions to GAAP
Schedule 4.5 Capital Lease Obligations and Bank Indebtedness
Schedule 4.6 Tax Matters
Schedule 4.7 Real Estate
Schedule 4.8 Liens
Schedule 4.8.3 Inventory Locations
Schedule 4.9 Receivables
Schedule 4.10 Licenses and Permits
Schedule 4.11 Intellectual Property
Schedule 4.12 Restrictions on Doing Business
Schedule 4.13 Documents and Information
Schedule 4.14 Litigation
Schedule 4.17 Acts or Events since Date of Last Balance Sheet
Schedule 4.18 Compliance with Laws
Schedule 4.19 Environmental Audits, Tests, Communications and Citations
Schedule 4.20 Labor Relations
Schedule 4.21 Employee Benefit Plans
Schedule 4.24 Principal Place of Business and Chief Executive Offices
Purchaser
---------
Schedule 5.2 Consents
Schedule 5.3 Capital Structure
Schedule 5.4 Litigation
Schedule 5.9 Brokers
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Exhibits
--------
Exhibit 2.1(a) Form of 6.2m Note
Exhibit 2.1(b) Form of Security Agreement
Exhibit 2.1(c) Form of Guaranty and Suretyship Agreement
Exhibit 2.1(d) Form of 2m Note
Exhibit 9.8 Form of Opinion of Counsel to Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Exhibit 10.8 Form of Opinion of Counsel to Purchaser
[Pursuant to Regulation S-K, Item 602(b)(2), Registrant agrees to furnish
supplementally a copy of the foregoing schedules and exhibits to the Securities
and Exchange Commission upon request.]
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