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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
NEW ENGLAND BUSINESS SERVICE, INC.
AND
ROMO CORP.
May 1, 1998
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STOCK PURCHASE AGREEMENT
Agreement entered into on May 1, 1998, by and among NEW ENGLAND
BUSINESS SERVICE, INC., a Delaware corporation (the "Buyer"), and ROMO
CORP., a Colorado corporation (the "Seller"). The Buyer and the Seller are
referred to collectively herein as the "Parties."
WITNESSETH:
WHEREAS, the Seller owns all of the issued and outstanding capital
stock of McBee Systems, Inc., a Colorado corporation ("McBee"); and
WHEREAS, McBee produces and sells checks, accounting forms, and other
printed materials; and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer, all
of such issued and outstanding capital stock of McBee in return for cash
and the Buyer Stock (if any);
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties hereto, intending
to become legally bound, hereby agree as follows.
ARTICLE I
DEFINITIONS
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes,
liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses, determined after taking into consideration
all proceeds of insurance collected by or paid to the Indemnified Party.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" means this Stock Purchase Agreement between the Parties,
as the same may be amended from time to time in accordance with the
provisions of Section 11.09 below.
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"Asset Purchase Agreement" means that certain agreement by and among
the Buyer, the Seller, NEBS Business Forms Ltd. and McBee Canada, dated the
date hereof, by which NEBS Business Forms Ltd. agrees to buy substantially
all of the assets, and assume specified liabilities, of McBee Canada.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that reasonably forms the basis for
any specified consequence.
"Business Day" means any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business.
"Buyer" has the meaning set forth in the preface above.
"Buyer Stock" has the meaning set forth in Section 2.02 below.
"Closing" has the meaning set forth in Section 2.03 below.
"Closing Balance Sheet" has the meaning set forth in Section 2.05
below.
"Closing Date" has the meaning set forth in Section 2.03 below.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1986.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Adjusted Net Equity" has the meaning set forth in Section
2.05 below.
"Combined Cash Payment" has the meaning set forth in Section 2.05
below.
"Commission" means the Securities and Exchange Commission.
"Confidential Information" means any information concerning the
businesses and affairs of McBee that is not already generally available to
the public.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
"Disclosure Schedule" has the meaning set forth in the preamble to
Article III below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c)
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qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws
(including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local,
and foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health
and safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fair Value" means the average of the closing price of a share of
Buyer Stock for the twenty (20) successive trading days ending on and
including the third trading day preceding the Closing Date, as reported by
the New York Stock Exchange.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Final Auditor" has the meaning set forth in Section 2.05 below.
"Final Determination" has the meaning set forth in Section 2.05 below.
"Financial Statements" has the meaning set forth in Section 4.07
below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
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"Indemnified Party" has the meaning set forth in Section 8.04 below.
"Indemnifying Party" has the meaning set forth in Section 8.04 below.
"Initial Purchase Price" has the meaning set forth in Section 2.02 below.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever
form or medium).
"Interim Balance Sheet" has the meaning set forth in Section 2.05
below.
"Knowledge" means actual knowledge without any implied duty to
investigate.
"Lease Agreement" means the agreement attached hereto as Exhibit G-2.
"Letter of Interest" means that certain letter agreement between the
Parties dated September 30, 1997.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means a material adverse effect on the
business or financial condition of McBee taken as a whole.
"McBee" has the meaning set forth in the preface above.
"McBee Canada" means McBee Systems of Canada, Inc., an Ontario
corporation.
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"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 4.07 below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4.07 below.
"Most Recent Fiscal Year End" has the meaning set forth in Section
4.07 below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, partnership, limited liability
partnership, corporation, limited liability company, association, joint
stock company, trust, estate, joint venture, unincorporated organization,
or governmental entity (or any department, agency, or political subdivision
thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
"Purchased Share" means any share of the common stock, par value $1.00
per share, of McBee.
"Registration Expenses" has the meaning set forth in Section 6.08
below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and
payable, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of
money.
"Seller" has the meaning set forth in the preface above.
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"Seller Stockholder" means each of the Persons identified on Exhibit B
hereto.
"Seller Stockholders Agreement" means the agreement attached hereto as
Exhibit G-1.
"Seller's Knowledge" means the Knowledge of any of the following
individuals: H. Rex Martin, Abraham M. Zeiderman, Mary Susan Jensen, John
Paukstis, Robert Kane, David Cohen or William Harding.
"Selling Expenses" has the meaning set forth in Section 6.08 below.
"Stockholders' Representative" means the President of the Seller, or
any successor thereto serving in accordance with the Seller Stockholders
Agreement.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.04 below.
"WARN" means the Worker Adjustment and Retraining Notification Act, 29
U.S.C. Section Section 2101-2109, and related regulations.
"Year 2000 Compliant" means that the applicable Person's computer
hardware, software, and other computer or information systems (whether
owned, leased, licensed, or otherwise operated by such Person) will not
terminate operations, malfunction, or otherwise produce any invalid or
incorrect data or information as a result of the input of date data that
includes the year 2000 or later years, or as a result of the passage of
time from the year 1999 to the year 2000.
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ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES
2.01 Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller,
and the Seller agrees to sell to the Buyer, all of the Purchased Shares,
for the consideration specified below in this Article II.
2.02 Initial Purchase Price. The Buyer agrees to pay to the
Seller at the Closing $58,000,000.00 (the "Initial Purchase Price") as
follows: (i) by delivery, at the Buyer's sole discretion, of either cash
in the amount of $12,600,000, or shares of common stock, $1.00 par value
per share, of the Buyer having an aggregate Fair Value equal to $12,600,000
(the "Buyer Stock"), and (ii) by delivery of cash for the balance of the
Initial Purchase Price payable by wire transfer or delivery of other
immediately available funds, after giving credit for the $250,000 deposit
previously made by the Buyer to the Seller upon execution of the Letter of
Interest and to be retained by the Seller upon the Closing hereof.
2.03 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Hill &
Barlow in Boston, Massachusetts, commencing at 9:00 a.m. local time on May
22, 1998, or, if later, but subject to the provisions of Section 10.01
below, the third Business Day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself), or such other date as
the Buyer and the Seller may mutually determine (the "Closing Date").
2.04 Deliveries at the Closing. At the Closing, (i) the Seller
will deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 7.01 below, (ii) the Buyer will deliver to
the Seller the various certificates, instruments, and documents referred to
in Section 7.02 below, (iii) the Seller will deliver to the Buyer stock
certificates representing all of the Purchased Shares, if any, endorsed in
blank or accompanied by duly executed assignment documents, and (iv) the
Buyer will deliver to the Seller the consideration specified in Section
2.02 above.
2.05 Adjustments to Initial Purchase Price. The Initial Purchase
Price payable hereunder and under the Asset Purchase Agreement (the
"Combined Cash Payment") shall be subject to adjustment after the Closing
Date as follows:
(a) Following the Closing Date, the Buyer shall prepare a balance
sheet for each of McBee and McBee Canada, together with a combined balance
sheet for McBee and McBee Canada, for the period ended on the Closing Date
(such combined balance sheet to be referred to as the "Closing Balance
Sheet"), prepared in accordance with GAAP (excluding footnote requirements)
reflecting consistent methodology and practices regarding the establishment
of balance sheet reserves and liabilities and in a manner
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consistent with the August 23, 1997 separate and combined balance sheets of
McBee and McBee Canada (included on Exhibit A hereto) (such combined
balance sheet to be referred to as the "Interim Balance Sheet"), together
with a schedule computing Combined Adjusted Net Equity (as defined below)
based upon the Closing Balance Sheet. Following the preparation of the
Closing Balance Sheet and the computation of Combined Adjusted Net Equity,
which Buyer shall use its commercially reasonable efforts to complete
within 45 calendar days after the Closing Date, the Buyer shall deliver to
the Seller a true and complete copy of such Closing Balance Sheet and
computation of Combined Adjusted Net Equity. The Buyer shall permit the
Seller to review all work papers and computations used by the Buyer in
preparing such Closing Balance Sheet and in computing such Combined
Adjusted Net Equity. Within twenty-one (21) calendar days following the
date of delivery of such Closing Balance Sheet to the Seller, the Seller
shall either accept the Closing Balance Sheet and Combined Adjusted Net
Equity based thereon, or shall propose adjustments thereto; provided that
if the Seller does not propose adjustments within such 21-day period, the
Seller shall be deemed to have accepted the Closing Balance Sheet and
Combined Adjusted Net Equity based thereon. If the Seller accepts (or is
seemed to have accepted) the Closing Balance Sheet and Combined Adjusted
Net Equity based thereon, such determination of Combined Adjusted Net
Equity shall become the "Final Determination". If the Seller shall propose
adjustments to Combined Adjusted Net Equity, and should the Buyer and the
Seller fail to agree on all of the Seller's proposed adjustments within ten
(10) Business Days following the date of delivery by the Seller of notice
of such proposed adjustments, the Parties shall request Price Waterhouse
LLP or, in the event that such firm is unavailable to accept this
assignment, such other nationally recognized firm of auditors as the
Parties mutually agree (the "Final Auditor") to prepare and deliver to the
Buyer and the Seller (i) a final Closing Balance Sheet in accordance with
the terms hereof, adjusting only items in dispute between the Buyer and the
Seller, and (ii) the Final Determination of the Combined Adjusted Net
Equity of McBee on the Closing Date as reflected in such final Closing
Balance Sheet, which Final Determination shall be binding upon the Buyer
and the Seller. Fees for the services of the Final Auditor shall be paid
equally by the Buyer and the Seller.
(b) Upon Final Determination, if the amount of the Final
Determination is less than $15,597,678 (such amount representing Combined
Adjusted Net Equity as reflected in the Interim Balance Sheet), the
Combined Cash Payment shall thereupon be reduced dollar for dollar to the
extent that the Combined Adjusted Net Equity on the Closing Date as so
finally determined is less than $15,597,678, and the Seller shall
immediately remit to the Buyer the amount of such deficiency by wire
transfer in immediately available funds to a bank account designated in
writing by the Buyer.
(c) For purposes of this Section 2.05, "Combined Adjusted Net
Equity" shall mean the sum, after eliminations, of McBee's and McBee
Canada's (i) total stockholders' equity and (ii) payables to the Seller
(including long-term note payable, income taxes
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payable and deferred tax liabilities and all tax liabilities of McBee
Canada accrued on the Closing Balance Sheet and not assumed by NEBS
Business Forms Ltd. under the Asset Agreement), less (iii) the sum of
receivables from the Seller (including income tax assets, deferred tax
assets and all tax assets of McBee Canada included on the Closing Balance
Sheet but not purchased by NEBS Business Forms Ltd. under the Asset
Agreement); where all such terms refer to amounts categorized and
determined consistently with the Interim Balance Sheet, as adjusted in
accordance with Section 2.05(a).
2.06 Intercompany Obligations. Upon consummation of the Closing, all
of McBee's payables to the Seller and receivables from the Seller,
including without limitation with respect to income tax obligations or
assets of the Seller, shall be cancelled and be of no further force and
effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
3.01 Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 3.01 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.01), except as set forth in the
disclosure schedule delivered by the Seller to the Buyer on the date hereof
(the "Disclosure Schedule"). The Disclosure Schedule shall be arranged in
sections corresponding to the lettered and numbered sections in this
Agreement which require the disclosure. Any matter disclosed in one
section of the Disclosure Schedule may be cross-referenced in other
sections of the Disclosure Schedule, and upon such cross-referencing shall
be deemed disclosed for all purposes of the section of the Disclosure
Schedule in which such cross-reference is contained to the extent (i) this
Agreement requires such disclosure and (ii) the relevance and significance
of such disclosure is evident from such disclosure or cross-reference.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Colorado.
(b) Authorization of Transaction. The Seller has full power and
authority to execute and deliver this Agreement and the documents and
certificates delivered in connection herewith and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms.
The Seller need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement, other than the filings required by the Hart-Scott-Rodino Act.
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(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Seller is
subject, or any provision of the Seller's charter or bylaws, or (ii)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the
Seller is a party or by which it is bound or to which any of its assets is
subject.
(d) Brokers' Fees. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer or
McBee could become liable or obligated.
(e) Seller Stockholders. The Persons identified on Exhibit B
hereto are residents of the states indicated on such Exhibit B and own
beneficially all of the issued and outstanding shares of capital stock of
the Seller in the amounts set forth therein.
(f) Stockholders' Representative. Each of the Seller Stockholders
has duly, validly and irrevocably appointed the President of the Seller as
the Stockholder's Representative by means of an enforceable general power
of attorney coupled with an interest, with full power of substitution, and
in accordance with such appointment the Stockholders' Representative has
the full power and authority to execute and deliver any amendments,
modifications or waivers of the Seller Stockholders Agreement on behalf of
each such Seller Stockholder, and in connection therewith to dispute or
refrain from disputing, negotiate and compromise, execute any settlement
agreement or release or other document in connection with any dispute, or
otherwise take any action in connection with such agreements as the
Stockholders' Representative shall in its sole discretion determine to be
appropriate. The Buyer and its representatives may rely on the authority
of the Stockholders' Representative in respect of any action taken by it,
without any liability to, or obligation to inquire of, any of the Seller
Stockholders, notwithstanding any notice to the contrary by any Seller
Stockholder after the date hereof.
(g) Investment. The Seller (i) understands that the Buyer Stock
has not been registered under the Securities Act, or under any state
securities laws, and is being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (ii)
is acquiring the Buyer Stock solely for its own account for investment
purposes, and not with a view to the distribution thereof, (iii) is a
sophisticated investor with knowledge and experience in business and
financial matters, (iv) has received certain information concerning the
Buyer and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in holding
the Buyer Stock, (v) is able to bear the economic risk inherent in holding
the Buyer Stock, and (vi) is an Accredited Investor.
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(h) Purchased Shares. The Seller holds of record and owns
beneficially all of the Purchased Shares, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. The Seller is not a party to any option, warrant, purchase right,
or other contract or commitment that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock of McBee (other than
this Agreement).
3.02 Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller that the statements contained in this
Section 3.02 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.02).
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this Agreement and the documents and
certificates delivered in connection herewith and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Buyer, enforceable in accordance with its terms
and conditions. The Buyer need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated
by this Agreement, other than the filings required by the Hart-Scott-Rodino
Act.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is
subject or any provision of its charter or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under, any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject,
except that the consent of the Buyer's lender is required.
(d) Brokers' Fees. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
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(e) Investment. The Buyer is not acquiring the Purchased Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(f) Financial Statements. Attached hereto as Exhibit C are the
following financial statements of the Buyer: (i) audited balance sheets
and statements of income, stockholders' equity, and cash flow as of and for
the fiscal years ended June 30, 1995, June 29, 1996 and June 28, 1997; and
(ii) an unaudited balance sheet and statement of income and cash flow as of
and for the period ended March 28, 1998. The financial statements attached
hereto as Exhibit C (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
covered thereby, present fairly the financial condition of the Buyer as of
such dates and the results of operations of the Buyer for such periods and
are correct and complete; provided, however, that the unaudited financial
statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items.
(g) Capitalization of Buyer. As of April 30, 1998, the Buyer had
duly authorized 40 million shares of common stock, $1.00 par value per
share, of which 13,845,797 shares were issued and outstanding and 2,756,610
shares were reserved for issuance for various corporate purposes, and
1,000,000 shares of preferred stock, $1.00 par value per share, none of
which was issued and outstanding.
(h) Buyer Stock. The shares of Buyer Stock to be issued to the
Seller hereunder will, when so issued, be duly authorized, validly issued
and outstanding and fully paid and non-assessable.
(i) Buyer SEC Reports. The Buyer has previously furnished the
Seller and the Seller Stockholders with true and complete copies of the
Buyer's Annual Report on Form 10-K for the year ended June 28, 1997, its
proxy statement for the Annual Meeting of Stockholders held October 24,
1997, all communications mailed by the Buyer to its stockholders since June
28, 1997, and all Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K filed after June 29, 1997. The financial statements and schedules
of the Buyer contained in said reports (or incorporated therein by
reference) were prepared in accordance with GAAP applied on a consistent
basis except as noted therein, and fairly present the information purposed
to be shown therein. Such proxy statement and stockholder communications,
Annual Report on Form 10-K, Current Reports on Form 8-K, and Quarterly
Reports on Form 10-Q did not, on the date of mailing in the case of such
proxy statement and stockholder communications, and on the date of filing
in the case of such reports, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Buyer has timely filed all
proxy statements, Annual Reports on Form 10-K,
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Current Reports on Form 8-K, Quarterly Reports on Form 10-Q, and other
statements and reports required to be filed under the Securities Act and
the Securities Exchange Act of 1934, as amended, and as of their respective
dates all such statements and reports complied in all material respects
with the published rules and regulations of the Commission with respect
thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING McBEE
The Seller represents and warrants to the Buyer that the statements
contained in this Article IV are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Article IV), except as set forth in
the Disclosure Schedule.
4.01 Organization, Qualification, and Corporate Power. McBee is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Colorado. McBee is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where
such qualification is required. Each jurisdiction in which McBee is
authorized to conduct business is identified in Section 4.01 of the
Disclosure Schedule. McBee has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on the businesses
in which it is engaged and in which it presently proposes to engage and to
own and use the properties owned and used by it. Section 4.01 of the
Disclosure Schedule lists the directors and officers of McBee. The Seller
has delivered to the Buyer correct and complete copies of the charter and
bylaws of McBee (as amended to date). The minute books (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books, and the
stock record books of McBee are correct and complete. McBee is not in
default under or in violation of any provision of its charter or bylaws.
4.02 Capitalization. The entire authorized capital stock of McBee
consists of 100,000 shares of common stock, par value $0.01 per share, of
which 50,000 shares are issued and outstanding and no shares are held in
treasury. All of the Purchased Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by
the Seller. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights,
or other contracts or commitments that could require McBee to issue, sell,
or otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to McBee. There are no
voting trusts, proxies, or other agreements or understandings with respect
to the voting of the capital stock of McBee.
4.03 Noncontravention. Neither the execution and the delivery of
this Agreement or any other document or certificate executed and delivered
in connection herewith, nor the
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consummation of the transactions contemplated hereby or thereby, upon and
subject to compliance with the Hart-Scott-Rodino Act, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which McBee is subject or any provision of
the charter or bylaws of McBee, or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require
any notice under, any agreement, contract, lease, license, instrument, or
other arrangement to which McBee is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Neither the Seller nor McBee
needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated
by this Agreement.
4.04 Brokers' Fees. McBee has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
4.05 Title to Assets. McBee has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown on the Most Recent Balance Sheet
(including such items as have been fully expensed) or acquired after the
date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since
the date of the Most Recent Balance Sheet.
4.06 Subsidiaries. McBee has no subsidiaries and does not own,
directly or indirectly, any of the capital stock or beneficial interest of
any Person.
4.07 Financial Statements. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"):
(i) audited combined balance sheets and statements of income, shareholders'
investment and cash flows as of and for the fiscal years ended December 28,
1996 and December 27, 1997 (the "Most Recent Fiscal Year End") for McBee;
(ii) unaudited separate and combined balance sheets and statements of
income, shareholders' investment and cash flows (the "Most Recent Financial
Statements") as of and for the three months ended March 28, 1998 (the "Most
Recent Fiscal Month End") for McBee; and (iii) the unaudited Interim
Balance Sheet. The Financial Statements (including the notes thereto)
present fairly the financial position of McBee as of such dates and the
results of operations of McBee for such periods in conformity with GAAP;
provided, however, that the Most Recent Financial Statements are subject to
normal year-end adjustments (which will not, as they relate to periods
prior to March 28, 1998, be material individually or in the aggregate) and
lack footnotes and other presentation items.
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4.08 Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any material adverse change
in the business, financial condition, operations, results of operations, or
future prospects of McBee. Without limiting the generality of the
foregoing, since that date:
(a) McBee has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than (i) in the Ordinary Course of
Business, (ii) where any such transaction was with an Affiliate of McBee,
for a fair consideration, and (iii) transactions which are, singly and in
the aggregate, immaterial;
(b) McBee has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
either involving more than $250,000 or outside the Ordinary Course of
Business or, in the case of any such transaction with an Affiliate, other
than for a fair consideration;
(c) no party (including McBee) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series
of related agreements, contracts, leases, and licenses) involving more than
$250,000 to which McBee is a party or by which it is bound;
(d) McBee has not imposed any Security Interest upon any of its
assets, tangible or intangible;
(e) McBee has not made any capital expenditure (or series of
related capital expenditures) either involving more than $250,000 or
outside the Ordinary Course of Business;
(f) McBee has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other Person (or series
of related capital investments, loans, and acquisitions) either involving
more than $100,000 or outside the Ordinary Course of Business;
(g) McBee has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligations involving more than $100,000 singly
or $250,000 in the aggregate (other than indebtedness for money borrowed
from the Seller, consistent with past practices);
(h) McBee has not delayed or postponed the payment of accounts
payable and other Liabilities outside the Ordinary Course of Business;
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(i) McBee has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving
more than $100,000 or outside the Ordinary Course of Business;
(j) McBee has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(k) there has been no change made or authorized in the charter or
bylaws of McBee;
(l) McBee has not issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock;
(m) McBee has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital
stock;
(n) McBee has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property;
(o) McBee has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
Ordinary Course of Business, and McBee has not engaged in any transaction
which gives rise to an intercompany obligation between McBee and the Seller
or any of the Seller's Affiliates (other than payables to and receivables
from the Seller which shall be cancelled at the Closing in accordance with
Section 2.06 above);
(p) McBee has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(q) McBee has not granted any increase in the base compensation of
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(r) McBee has not adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees
(or taken any such action with respect to any other Employee Benefit Plan);
(s) McBee has not made any other change in employment terms for
any of its directors, officers, and employees outside the Ordinary Course
of Business;
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(t) McBee has not made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business;
(u) to Seller's Knowledge, except as expressly contemplated by
this Agreement or the Disclosure Schedule, there has not been any other
occurrence, event, incident, action, failure to act, or transaction outside
the Ordinary Course of Business involving McBee; and
(v) McBee has not committed to any of the foregoing.
4.09 Undisclosed Liabilities. McBee has no Liability which must
be shown on the face of a balance sheet prepared in accordance with GAAP
(and to the Seller's Knowledge there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand against any of them giving rise to such Liability), except for
(i) Liabilities set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto), and (ii) Liabilities which have arisen
after the Most Recent Fiscal Month End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature
of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
4.10 Legal Compliance. Each of McBee and its Affiliates for whose
actions McBee may be responsible has complied in all material respects with
all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies
thereof), including specifically all laws governing the escheat of
unclaimed property, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed
or commenced against any of them alleging any failure so to comply.
Notwithstanding the information set forth in Section 4.10 of the Disclosure
Schedule, the escheat obligations of McBee and its Affiliates for whose
actions McBee may be responsible do not exceed the accruals therefor.
4.11 Tax Matters.
(a) McBee has filed all Tax Returns that it was required to file.
All such Tax Returns were correct and complete in all material respects.
All Taxes owed by McBee (whether or not shown on any Tax Return) have been
paid or accrued. McBee is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by
an authority in a jurisdiction where McBee does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of McBee that arose in connection
with any failure (or alleged failure) to pay any Tax.
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(b) McBee has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax Liability of
McBee either (i) claimed or raised by any authority in writing or (ii) to
Seller's Knowledge or the Knowledge of any employee of the Seller or McBee
with functional responsibility for Tax matters, based upon personal contact
with any agent of such authority. Section 4.11 of the Disclosure Schedule
lists all federal, state, local, and foreign income Tax Returns filed with
respect to McBee for taxable periods ended on or after December 31, 1993,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Seller has delivered
to the Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by the Seller (with respect to McBee) since December 31, 1993.
(d) McBee has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) McBee has not filed a consent under Code Section 341(f)
concerning collapsible corporations. McBee has not made any payments, is
not obligated to make any payments, nor is McBee a party to any agreement
that under certain circumstances could obligate it to make any payments,
that will not be deductible under Code Section 280G. McBee has not been a
United States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). McBee has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section
6662. McBee is not a party to any Tax allocation or sharing agreement.
McBee (i) has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was the Seller) or (ii) has no Liability for the Taxes of
any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract,
or otherwise.
(f) The unpaid Taxes of McBee (i) did not, as of the Most Recent
Fiscal Month End, exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (ii) do not exceed
that reserve as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of McBee in filing its Tax
Returns.
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4.12 Real Property.
(a) Section 4.12(a) of the Disclosure Schedule lists and describes
briefly all real property that McBee owns. With respect to each such
parcel of owned real property:
(i) McBee has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for installments of special assessments not yet
delinquent and recorded easements, covenants, and other restrictions which
do not impair the current use, occupancy, or value, or the marketability of
title, of the property subject thereto;
(ii) there are no pending or, to Seller's Knowledge, threatened
condemnation proceedings, lawsuits, or administrative actions relating to
the property or other matters affecting adversely the current use,
occupancy, or value thereof;
(iii) the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described parcels
of land, are not in violation of applicable setback requirements, zoning
laws, and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications), and do not encroach
on any easement which may burden the land, and the land does not serve any
adjoining property for any purpose inconsistent with the use of the land,
and the property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to the
use thereof have not been obtained;
(iv) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the ownership or operation thereof and have been operated and maintained in
all material respects in accordance with applicable laws, rules, and
regulations;
(v) there are no material leases, subleases, licenses, or other
agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real property;
(vi) there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or interest
therein;
(vii) there are no parties (other than McBee) in possession of the
parcel of real property;
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(viii) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are adequate in accordance
with all applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable, appurtenant
easements benefiting the parcel of real property; and
(ix) each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefiting the parcel of real
property, and access to the property is provided by paved public right-of-
way with adequate curb cuts available.
(b) Section 4.12(b) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to McBee. The Seller has
delivered to the Buyer correct and complete copies of the leases and
subleases (as amended to date) listed in Section 4.12(b) of the Disclosure
Schedule. With respect to each lease and sublease required to be listed in
Section 4.12(b) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding and enforceable
against McBee and, to Seller's Knowledge, against any third parties
thereto, and is in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding and enforceable against McBee and, to Seller's Knowledge, against
any third parties thereto, and will continue to be in full force and effect
on identical terms following the consummation of the transactions
contemplated hereby;
(iii) neither McBee nor, to McBee's or the Seller's Knowledge, any
other party to the lease or sublease is in breach or default, and no event
has occurred which, with notice or lapse of time, would constitute a breach
or default or permit termination, modification, or acceleration thereunder;
(iv) neither McBee nor, to McBee's or the Seller's Knowledge, any
other party to the lease or sublease has repudiated any provision thereof;
(v) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
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(vii) McBee has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated
and maintained in all material respects in accordance with applicable laws,
rules, and regulations; and
(ix) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities, and each such facility abuts on and has direct vehicular access
to a public road, or has access to a public road via a permanent,
irrevocable appurtenant easement benefiting the owner of such facility, and
access to each such facility is provided by paved public right-of-way with
adequate curb cuts available.
4.13 Intellectual Property.
(a) McBee has the sole and exclusive right to use the name "McBee
Systems."
(b) Except where failure to do so would not result, either
individually or in the aggregate, in a Material Adverse Effect, McBee owns
or has the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property necessary for the operation of its
business as presently conducted and as presently proposed to be conducted.
Each item of Intellectual Property owned or used by McBee immediately prior
to the Closing hereunder will be owned or available for use by McBee on
identical terms and conditions immediately subsequent to the Closing
hereunder. McBee has taken all commercially reasonable action to maintain
and protect each item of Intellectual Property that it owns or uses.
(c) McBee has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Seller and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of McBee has ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement, misappropriation,
or violation (including any claim that McBee must license or refrain from
using any Intellectual Property rights of any third party) which has not
been finally resolved. To the Knowledge of any of the Seller and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of McBee, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of McBee.
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(d) Section 4.13(d) of the Disclosure Schedule identifies each
patent, copyright and trademark registration which has been issued to McBee
with respect to any of its Intellectual Property, identifies each pending
patent, copyright or trademark application or application for registration
which McBee has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which McBee has
granted to any third party with respect to any of its Intellectual Property
(together with any exceptions). The Seller has delivered to the Buyer
correct and complete copies of all such patents, trademark or copyright
registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer correct and complete
copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. Section 4.13(d) of the
Disclosure Schedule also identifies each trade name or unregistered
trademark used by McBee in connection with its business. With respect to
each item of Intellectual Property required to be identified in Section
4.13(d) of the Disclosure Schedule:
(i) McBee possesses all right, title, and interest in and to the
item, free and clear of any Security Interest, license, or other
restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which challenges
the legality, validity, enforceability, use, or ownership of the item; and
(iv) McBee has never agreed to indemnify any Person for or against
any interference, infringement, misappropriation, or other conflict with
respect to the item.
(e) Section 4.13(e) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that McBee uses
pursuant to license, sublicense, agreement, or permission, including
specifically any item of such Intellectual Property owned by any Affiliate
of McBee. The Seller has delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property
required to be identified in Section 4.13(e) of the Disclosure Schedule:
(i) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect;
(ii) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the Closing;
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(iii) neither McBee nor, to McBee's or the Seller's Knowledge, any
other party to the license, sublicense, agreement, or permission is in
breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) neither McBee nor, to McBee's or the Seller's Knowledge, any
other party to the license, sublicense, agreement, or permission has
repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are true and
correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which challenges
the legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(viii) McBee has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(f) Section 4.13(f) of the Disclosure Schedule sets forth in
detail (i) McBee's current status with respect to becoming Year 2000
Compliant (including, without limitation, a list of compliant and non-
compliant software currently used by McBee), (ii) the remedial actions
being taken and planned to be taken by McBee to become Year 2000 Compliant,
and (iii) the estimated person-hours and costs, and the personnel and
resources, expected to be associated with taking the actions described in
clause (ii). To the Seller's Knowledge and reasonable belief, and to the
Knowledge and reasonable belief of any employee of the Seller or McBee with
functional responsibility for Year 2000 compliance matters, the remedial
actions described pursuant to clause (ii) above are sufficient to cause
McBee to become Year 2000 Compliant to the extent necessary to carry on its
business on and after January 1, 2000 as such business is presently
conducted.
4.14 Tangible Assets. The buildings, machinery, equipment, and
other tangible assets owned or leased by McBee are reasonably sufficient
for the conduct of McBee's businesses as presently conducted. To Seller's
Knowledge, each such tangible asset is in reasonably good operating
condition and repair (subject to normal wear and tear).
-23-
4.15 Inventory. McBee's inventory consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods reasonably expected to be used in the Ordinary Course of Business,
subject only to the reserve for inventory write-down as reflected in the
Most Recent Balance Sheet, as adjusted for the passage of time through the
Closing Date in accordance with GAAP.
4.16 Contracts. Section 4.16 of the Disclosure Schedule lists the
following contracts and other agreements to which McBee is a party:
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments in
excess of $100,000 per annum;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, or
involve consideration in excess of $200,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $50,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(e) any agreement concerning confidentiality or noncompetition, or
which otherwise restricts in any material manner the free use by McBee of
its assets or data made available to it in the Ordinary Course of Business;
(f) any agreement with any of the Seller, any Seller Stockholder,
or any Affiliates thereof (other than McBee);
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of McBee's current or former directors,
officers, and employees, or for which McBee may otherwise be solely or
jointly liable;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a full-
time, part-time, consulting, or other basis providing annual compensation
in excess of $50,000 or providing severance benefits;
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(j) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(k) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of McBee;
(l) all contracts to which the Seller or its Affiliates (other
than McBee) is a party and which provides a material benefit or detriment
to McBee; and
(m) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $200,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement (as amended to date) listed in Section 4.16 of the
Disclosure Schedule. With respect to each agreement required to be
identified in Section 4.16 of the Disclosure Schedule: (w) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (x) the
agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (y) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration,
under the agreement; and (z) neither the Seller nor McBee nor, to McBee's
or the Seller's Knowledge, any other party has repudiated any provision of
the agreement.
4.17 Notes and Accounts Receivable. All notes and accounts
receivable of McBee are reflected properly on its books and records, and
are receivables incurred in the Ordinary Course of Business, subject only
to the reserve for bad debts and returns and allowances reflected in the
Most Recent Balance Sheet, as adjusted for the passage of time through the
Closing Date in accordance with GAAP.
4.18 Powers of Attorney and Banking Matters. There are no
outstanding powers of attorney executed on behalf of McBee. Section 4.18
of the Disclosure Schedule sets forth and describes all arrangements which
McBee has with any banking institution, and identifies the Person or
Persons authorized to make deposits, withdrawals, or otherwise take actions
in respect thereof.
4.19 Insurance. Section 4.19 of the Disclosure Schedule sets
forth the following information with respect to each insurance policy
(including policies providing property, automobile, casualty, liability,
umbrella, and workers' compensation coverage and bond and surety
arrangements) to which McBee has been a party, a named insured, or
otherwise the beneficiary of coverage at any time since July 1, 1993:
(a) the name, address, and telephone number of the agent;
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(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the general type of coverage (including an indication of
whether the coverage was on a claims made, occurrence, or other basis) and
amount (including any deductibles and ceilings) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each insurance policy required to be disclosed in Section
4.19 of the Disclosure Schedule: (i) the policy is legal, valid, binding,
and enforceable by and in favor of McBee, and in full force and effect;
(ii) the policy will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the transactions contemplated hereby, and will provide coverage to McBee
following the Closing Date for claims relating to the period prior to the
Closing Date; (iii) neither the Seller nor McBee nor, to McBee's or the
Seller's Knowledge, any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (iv) no party to the
policy has repudiated any provision thereof. Section 4.19 of the
Disclosure Schedule describes any self-insurance or co-insurance
arrangements affecting McBee.
4.20 Litigation. Section 4.20 of the Disclosure Schedule sets
forth each instance in which McBee (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge, or (ii) to McBee's
or the Seller's Knowledge, is a party or is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
4.21 Product Warranty. To Seller's Knowledge, each product
manufactured, sold, leased, or delivered by McBee has been in conformity
with all applicable contractual commitments and all express and implied
warranties, and McBee has no Liability for replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for
product warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with McBee's past custom and
practice. Section 4.21 of the Disclosure Schedule includes copies of the
standard terms and conditions of sale or lease for McBee (containing
applicable guaranty, warranty, and indemnity provisions).
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4.22 Product Liability. To McBee's and the Seller's Knowledge,
McBee has no Liability arising out of any injury to individuals or property
as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by McBee.
4.23 Employees. To the Seller's Knowledge, and to the Knowledge
of any employee of the Seller or McBee with functional responsibility for
employment matters, no executive, key employee, or group of employees has
any plans to terminate employment with McBee. McBee is not a party to or
bound by any collective bargaining agreement, nor has McBee experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. McBee has not committed any unfair labor practice.
None of the Seller and the directors and officers (and employees with
responsibility for employment matters) of McBee has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of McBee.
4.24 Employee Benefits.
(a) Section 4.24 of the Disclosure Schedule lists each Employee
Benefit Plan that either of the Seller or McBee maintains or to which McBee
contributes, and in which employees or former employees of McBee
participates.
(i) Each Employee Benefit Plan required to be listed in Section
4.24 of the Disclosure Schedule (and each related trust, insurance
contract, or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and other
applicable laws.
(ii) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B
of Title 1 of ERISA and of Code Section 4980B have been met with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(iii) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan
and all contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each such Employee Pension Benefit
Plan or accrued in accordance with McBee's past custom and practice. All
premiums or other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
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(iv) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code
Section 401(a).
(v) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan equals or exceeds the
present value of all vested and nonvested Liabilities thereunder determined
in accordance with PBGC methods, factors, and assumptions applicable to an
Employee Pension Benefit Plan terminating on the date for determination.
(vi) The Seller has delivered to the Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each such Employee
Benefit Plan.
(b) With respect to each Employee Benefit Plan that McBee and the
Controlled Group of Corporations which includes McBee maintains or ever has
maintained or to which any of them contributes, ever has contributed, or
ever has been required to contribute:
(i) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
instituted or threatened.
(ii) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for breach
of fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect
to the administration or the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or, to
McBee's or the Seller's Knowledge, threatened. None of the Seller and the
directors and officers (and employees with responsibility for employee
benefits matters) of McBee and its Subsidiaries has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or investigation.
(iii) McBee has not incurred, and none of the Seller and the
directors and officers (and employees with responsibility for employee
benefits matters) of McBee has any reason to expect that McBee will incur,
any Liability to the PBGC
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(other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with respect to any
such Employee Benefit Plan which is an Employee Pension Benefit Plan.
(c) Neither McBee nor any member of the Controlled Group of
Corporations that includes McBee contributes to, ever has contributed to,
or ever has been required to contribute to any Multiemployer Plan or has
any Liability (including withdrawal Liability) under any Multiemployer
Plan.
(d) McBee neither maintains nor ever has maintained nor
contributes, nor ever has contributed, nor ever has been required to
contribute to any Employee Welfare Benefit Plan providing medical, health,
or life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their dependents (other
than in accordance with Code Section 4980B).
4.25 Guaranties. McBee is not a guarantor or co-borrower in
respect of any Liability or obligation and is not otherwise liable for any
Liability or obligation (including indebtedness) of any other Person.
4.26 Environment, Health, and Safety.
(a) Each of McBee and its predecessors and Affiliates has complied
with all Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure
so to comply. Without limiting the generality of the preceding sentence,
each of McBee and its predecessors and Affiliates has obtained and been in
compliance with all of the terms and conditions of all permits, licenses,
and other authorizations which are required under, and has complied in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety
Laws.
(b) McBee and its Subsidiaries have no Liability for damage to any
site, location, or body of water (surface or subsurface), for any illness
of or personal injury to any employee or other individual, or for any
reason under any Environmental, Health, and Safety Law.
(c) There are no underground storage tanks on any premises owned
by or leased to McBee.
(d) All properties and equipment used in the business of McBee,
its predecessors and Affiliates have been free of PCBs, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans,
Extremely
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Hazardous Substances and, to the Seller's Knowledge and the Knowledge of
employees of the Seller and McBee with functional responsibility for
environmental matters, asbestos which is friable or otherwise requires
removal or notification of any hazard to any Person.
4.27 Certain Business Relationships with McBee. None of the
Seller and its Affiliates (other than McBee) are involved in any business
arrangement or relationship with McBee, the continuation of which is
material to the business and operations of McBee, and none of the Seller
and its Affiliates (other than McBee) owns any asset, tangible or
intangible, which is used in the business of McBee and is material to the
business and operations of McBee. There are no intercompany obligations
between McBee and the Seller or any of the Seller's Affiliates, other than
(i) payables to and receivables from the Seller which shall be cancelled at
the Closing in accordance with Section 2.06 above, and (ii) rent accrued in
respect of the property which is the subject of the Lease Agreement.
4.28 Disclosure. The representations and warranties contained in
this Article IV do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
and information contained in this Article IV not misleading.
ARTICLE V
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
5.01 General. Each of the Parties will use its commercially
reasonable efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but
not waiver, of the closing conditions set forth in Article VII below).
5.02 Notices and Consents. The Seller will cause McBee to give
any notices to third parties, and will cause McBee to use its commercially
reasonable efforts to obtain any third party consents, that the Buyer may
request in connection with the matters referred to in Section 4.03 above.
Each of the Parties will (and the Seller will cause McBee to) give any
notices to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3.01(b),
Section 3.02(b), and Section 4.03 above. Without limiting the generality of
the foregoing, each of the Parties will file (and the Seller will cause
McBee to file) any Notification and Report Forms and related material that
it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act, will use its best efforts to obtain (and the Seller
will cause McBee to use its best efforts to obtain) an early termination of
the applicable waiting period, and will make
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(and the Seller will cause McBee to make) any further filings pursuant
thereto that may be necessary, proper, or advisable in connection
therewith.
5.03 Operation of Business. The Seller will cause McBee to
conduct its operations in the Ordinary Course of Business and not cause or
permit McBee to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Seller will not cause or permit McBee to
engage in any practice, take any action, or enter into any transaction of
the sort described in Section 4.08 above.
5.04 Preservation of Business. The Seller will cause McBee to use
commercially reasonably efforts to keep its business and properties
substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
5.05 Full Access. The Seller will permit, and the Seller will
cause McBee to permit, representatives of the Buyer and its lenders to have
full access to all premises, properties (including subsurface testing),
personnel, books, records (including Tax records), contracts, and other
documents and data, of or pertaining to McBee. McBee will provide the
Buyer with such copies of such documents as the Buyer shall reasonably
request. Until such time as a Closing occurs hereunder, the Buyer will
treat and hold as such any Confidential Information it receives from any of
the Seller and McBee in the course of the reviews contemplated by this
Section 5.05, will not use any of the Confidential Information except in
connection with this Agreement, and if this Agreement is terminated for any
reason whatsoever, will return to the Seller or McBee, as the case may be,
all tangible embodiments (and all copies) of the Confidential Information
which are in its possession.
5.06 Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material adverse development causing a breach of
any of the representations and warranties in Article IV above. Each Party
will give prompt written notice to the others of any material adverse
development causing a breach of any of its own representations and
warranties in Article III above. No disclosure by any Party pursuant to
this Section 5.06, however, shall be deemed to amend or supplement the
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
5.07 Exclusivity. The Seller will not (and the Seller will not
cause or permit McBee or any Seller Shareholder to) (i) solicit, initiate,
or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of, McBee (including
any acquisition structured as a merger, consolidation, or share exchange)
or (ii) participate in any discussions or negotiations regarding, furnish
any information with respect to, assist or participate in, or facilitate in
any other manner any effort or attempt by any Person to do or seek any of
the foregoing. The Seller will not vote in favor of any such acquisition
structured as a merger, consolidation, or share exchange. The
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Seller will notify the Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
5.08 Employee Benefit Plans. The arrangements of the Seller and the
Buyer in respect of McBee's Employee Benefit Plans are described in Exhibit
J hereto. As contemplated therein, the Seller will take the following
actions before the Closing Date in respect of the Employee Benefit Plans
described below:
(a) Employee Welfare Benefit Plans. All plans, provisions,
assets (including insurance policies) and Liabilities of Employee Welfare
Benefit Plans covering active employees of McBee, and former employees of
McBee to the extent McBee has any continuing obligations to such employees
under COBRA, will be transferred to McBee, as set forth in Exhibit J.
(b) Employee Pension Benefit Plans. The ROMO Corp. Savings
Plus Plan will be adopted by McBee as the sole sponsoring employer, and
account balances relating to participants who are not or were not, prior to
termination of their employment, employees of McBee, will be transferred
out of the Plan. The ROMO Corp. Employees' Retirement Plan will be
retained by the Seller. Any obligations to pay deferred compensation to
current employees of McBee will be transferred by the Seller to McBee as
described in Exhibit J, together with assets sufficient to fund such
obligations, the determination of such sufficiency to be based upon the
assumptions set forth in Exhibit J.
(c) Other Employee Benefit Plans. The Seller will retain all
Liabilities relating to plans providing postretirement medical benefits and
postemployment benefits to prior employees of McBee and its Affiliates.
ARTICLE VI
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing.
6.01 General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any
other Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to
indemnification therefor under Article VIII below). The Seller
acknowledges and agrees that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to McBee.
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6.02 Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement, or
(ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving McBee, each of the
other Parties will cooperate with it and its counsel in the contest or
defense, make available their personnel, and provide such testimony and
access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting
or defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article VIII below).
6.03 Transition. The Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor,
licenser, customer, supplier, or other business associate of McBee from
maintaining the same business relationships with McBee after the Closing as
it maintained with McBee prior to the Closing.
6.04 Confidentiality. For a period of three years from and after
the Closing Date, the Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly
to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which
are in its possession. In the event that the Seller is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, the Seller will
notify the Buyer promptly of the request or requirement so that the Buyer
may seek an appropriate protective order or waive compliance with the
provisions of this Section 6.04. If, in the absence of a protective order
or the receipt of a waiver hereunder, the Seller is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for contempt, the Seller may disclose the Confidential
Information to the tribunal; provided, however, that the Seller shall use
its best efforts to obtain, at the request of the Buyer, an order or other
assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as the Buyer shall
designate.
6.05 Covenant Not to Compete. For a period of three years from
and after the Closing Date, the Seller will not engage directly or
indirectly in any business that McBee conducts as of the Closing Date in
any geographic area in which McBee conducts that business as of the Closing
Date; provided, however, that no owner of less than 1% of the outstanding
stock of any publicly traded corporation shall be deemed to engage solely
by reason thereof in any of its businesses. If the final judgment of a
court of competent jurisdiction declares that any term or provision of this
Section 6.05 is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable
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and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may
be appealed.
6.06 Use of Intellectual Property. The Seller acknowledges and
agrees that as a result of the consummation of the transaction contemplated
hereby, the Buyer is acquiring the exclusive right to use the Intellectual
Property owned or used by McBee immediately prior to the Closing Date,
including the names "McBee" and "McBee Systems", for which the Seller will
receive full and adequate consideration, and that neither the Seller nor
any Affiliate of the Seller will use such Intellectual Property or such
names or any similar names subsequent to the Closing. Immediately
following the Closing the Seller will cause McBee Color Express to change
its name to "USA Color Express."
6.07 Buyer Stock. Each certificate for Buyer Stock will be
imprinted with a legend substantially in the following form:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED TO ANY PERSON
OTHER THAN A SELLER STOCKHOLDER UPON LIQUIDATION OF THE SELLER UNTIL (I) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE
OPINION OF COUNSEL, ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE ACT
OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER.
No share of Buyer Stock may be pledged, hypothecated, sold, or otherwise
transferred without (i) an effective registration statement for such share
under the Securities Act and applicable state securities laws or (ii) an
opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Buyer and its counsel, that registration is not
required under the Securities Act or under any applicable state securities
laws.
6.08 Registration of the Buyer Common Stock.
(a) Registration Procedures and Expenses. The Buyer shall use all
reasonable efforts to effect the registration of the shares of Buyer Common
Stock issued to the Seller hereunder under and in compliance with the
Securities Act for sale as expeditiously as reasonably possible following
the Closing by performing the following:
(i) Following the Closing, the Buyer shall prepare and file with
the Commission a registration statement on Form S-3 with respect to the
shares of Buyer Stock issued to the Seller hereunder and use
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commercially reasonable efforts to cause such registration statement to
become effective within forty-five (45) days following the Closing and to
remain effective for a period of two years from the Closing Date (or such
shorter period as the Seller Stockholders and the Buyer may agree) and
shall take such action as is necessary under applicable state securities
laws to permit the sale of such shares of the Buyer Stock thereunder. The
Seller's and each Seller Stockholder's plan of distribution with respect to
such shares of the Buyer Stock shall be as follows: (a) sale of shares
from time to time by the Seller, any Seller Stockholder or by pledgees,
donors, transferees or other successors in interest; (b) a block trade in
which the broker or dealer so engaged will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (c) purchases by a broker or dealer as
principal and resale by such broker or dealer for its own account, (d)
regular brokerage transactions executed on the New York Stock Exchange, (e)
negotiated transactions effected at such prices as may be obtainable and as
may be satisfactory to a Seller Stockholder, or (f) other means. If the
Securities Act requires that such registration statement or the prospectus
forming a part thereof be amended or supplemented in order to properly
reflect the Seller Stockholder's plan of distribution, the Seller
Stockholder will promptly notify the Buyer of such matters and cooperate
with the Buyer in effecting such amendment or supplement. If any Seller
Stockholder transfers any shares of the Buyer Stock to a broker or dealer,
he shall advise such transferee of the fact that the shares are sold or to
be sold pursuant to such registration statement and of the provisions of
this Section 6.08. The registration statement shall permit delayed or
continuous offerings pursuant to Rule 415 under the Securities Act until
the expiration of the period set forth above.
(ii) The Buyer shall prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to update and
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale of all securities
covered by such registration statement. Notwithstanding anything else to
the contrary contained herein, the Buyer shall not be required to disclose
any confidential information concerning pending acquisitions or other
material information not otherwise required to be disclosed.
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(iii) The Buyer shall furnish to each Seller Stockholder such
number of copies of the registration statement, each amendment and
supplement thereto, the prospectus included in the registration statement
(including each preliminary prospectus and each amendment or supplement
thereto), and such other publicly-available documents such Seller
Stockholder may reasonably request in order to facilitate the disposition
of the shares of Buyer Stock covered by the registration statement.
Subject to the Buyer's performance of its obligations under clause (iv)
below, each Seller Stockholder shall comply with all prospectus delivery
requirements under the Securities Act.
(iv) The Buyer shall notify each Seller Stockholder, at any time
when a prospectus relating to the registration statement is required to be
delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in the registration statement
contains an untrue statement of a material fact or omits any fact necessary
to make the statements therein not misleading, and, at the request of the
Seller or the Seller Stockholder, but subject to the provisions of Clause
(ii) above, the Buyer will promptly prepare, complete, and file as
necessary (and, when completed, give notice to each Seller Stockholder) a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of such shares of Buyer Stock, such prospectus will not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading.
(v) The Buyer shall cause all of the shares of Buyer Stock issued
to the Seller hereunder to be listed on each securities exchange on which
securities of the same class issued by the Buyer are then listed.
(vi) The Buyer shall provide a transfer agent and registrar for
all of the shares of Buyer Stock issued to the Seller hereunder not later
than the effective date of the registration statement.
(vii) In the event of the issuance of any stop order suspending
the effectiveness of the registration statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any shares of Buyer Stock included in the registration
statement for sale in any jurisdiction, the Buyer shall use commercially
reasonable efforts promptly to obtain the withdrawal of such order.
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All expenses incurred by Buyer in complying with this subsection (a),
including, without limitation, all registration and filing fees, printing
expenses, and fees and disbursements of counsel for the Buyer, are herein
called "Registration Expenses". All Seller commissions applicable to the
sales of the Buyer Stock and all fees and disbursements of counsel for any
Seller Stockholder are herein called "Seller Expenses".
(b) Allocation of Expenses. The Buyer will pay all Registration
Expenses in connection with registration pursuant to this Section 6.08.
All Seller Expenses in connection with such registration shall be borne by
the Seller Stockholder.
(c) Indemnification. In connection with the registration of shares of
the Buyer Stock under the Securities Act pursuant to this Section 6.08, the
Buyer will indemnify and hold harmless the seller of such shares of Buyer
Stock, each underwriter of such shares of Buyer Stock and each other
person, if any, who controls such seller or underwriter within the meaning
of Section 15 of the Securities Act, against any losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and
disbursements), joint or several, to which such seller, underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon (i) any
untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement under which such shares of Buyer Stock were
registered under the Securities Act pursuant to this Section 6.08, or any
post-effective amendment thereof, or the omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) any untrue statement (or
alleged untrue statement) of a material fact contained in any final
prospectus (as amended or supplemented, if the Buyer shall have filed with
the Commission any amendment thereof or supplement thereto), or the
omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading; and will reimburse such seller, underwriter and each such
controlling person for any legal or other expenses reasonably incurred by
such seller, underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
expense, provided, however, that the Buyer will not be liable in any such
case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon any untrue statement (or alleged untrue
statement) or omission (or alleged omission) of a material fact made in
said registration statement, said preliminary prospectus or said prospectus
or said amendment or supplement, in reliance upon and in conformity with
written information furnished to the Buyer through an instrument duly
executed by such seller or underwriter specifically for use in the
preparation thereof. In connection with the registration of shares of the
Buyer Stock under the Securities Act pursuant to this Section 6.08, each
seller of such shares of Buyer Stock, severally and not jointly, will
indemnify and hold harmless the Buyer, each person, if any, who controls
the Buyer within the meaning of Section 15 of the Securities Act, each
officer of the Buyer who signs the registration statement, each director of
the
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Buyer, each underwriter and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against any losses,
claims, damages, liabilities or expenses (including reasonable attorneys'
fees and disbursements), joint or several, to which the Buyer or such
officer, director, underwriter or controlling person may become subject
under the Securities Act or otherwise, and will reimburse the Buyer or such
officer, director, underwriter or controlling person for any legal or other
expenses reasonably incurred by the Buyer or such officer, director,
underwriter or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or expense, but only
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon any untrue
statement (or alleged untrue statement) or omission (or alleged omission)
of a material fact referred to in clause (i) or (ii) of this subsection
(c), and provided, however, that this paragraph shall apply if and only if
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) was made in reliance upon and in conformity with information
furnished in writing to the Buyer by or on behalf of such seller
specifically for use in such registration statement or prospectus. It
shall be a condition of the Buyer's obligations to effect registration of
the shares of Buyer Stock hereunder that the sellers participating in such
registration provide the Buyer and the underwriters, if any, with all
material facts, including, without limitation, furnishing such
certificates, questionnaires and legal opinions as may be required by the
Buyer or such underwriters, concerning such participating sellers which are
reasonably required to be stated in the registration statement or in the
prospectus or are otherwise required in connection with the offering. If
any third party shall notify any Party with respect to any matter that may
give rise to a claim for indemnification against any other Party under this
Section 6.08(c), the Parties' respective defense, settlement,
participation, and other procedural rights with respect to that matter
shall be determined by applying, mutatis mutandis, the procedures set forth
in the Indemnification Agreement. The indemnification provided for in this
Section 6.08 shall remain in full force and effect following the Closing
regardless of any investigation made by or on behalf of the indemnified
party or any officer, director, or controlling person of the indemnified
party, and shall survive the transfer of the Buyer Stock covered by the
applicable registration statement.
6.09 Hart-Scott-Rodino Filing Fees. The Seller agrees to reimburse the
Buyer, upon demand, for one-half of any filing fees paid by the Buyer in
connection with any filings required under the Hart-Scott-Rodino Act,
without regard to whether or not a Closing occurs hereunder.
6.10 Severance. For a period of twelve (12) months following the
Closing, the Buyer shall cause McBee to pay severance to those employees of
McBee identified on Exhibit E attached hereto whose employment is
terminated by McBee after the Closing Date, on the terms and in the amounts
described in such Exhibit E.
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ARTICLE VII
CONDITIONS TO OBLIGATION TO CLOSE
7.01 Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section 3.01
and Article IV above (taken collectively and individually) shall be true
and correct in all material respects (and each of the representations and
warranties contained in Sections 3.01(g), 4.10 and 4.28 shall be true in
all respects) at and as of the Closing Date, as though made again at and as
of such date, without giving any effect to any amendment of the Disclosure
Schedule delivered to the buyer after the date of this Agreement;
(b) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) McBee shall have procured all of the third party consents
specified in Section 5.02 above, McBee shall have used commercially
reasonable efforts to cause Litton Business Systems, Inc. to assign to
McBee the Intellectual Property identified with an asterisk in Section
4.13(d) of the Disclosure Schedule, McBee shall have been released from any
Liability with respect to the loan arrangements with the Colorado National
Bank (and all Security Interests in connection therewith shall be
discharged) and the guaranties of any obligations of the Seller or any
Affiliate of the Seller, and all employees of McBee shall have been
released from any obligations to the Seller of any Affiliate of the Seller
(other than McBee) in respect of noncompetition covenants;
(d) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) affect adversely
the right of the Buyer to own Purchased Shares and to control McBee, or
(iv) have a Material Adverse Effect on the right of McBee to own its assets
and to operate its businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(e) the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Section 7.01(a)
through (d) is satisfied in all respects;
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(f) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated, and the Parties and McBee shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3.01(b), 3.02(b), 3.02(c) and 4.03 above;
(g) an estoppel certificate or landlord's acknowledgment from the
lessor under the respective leases for the properties leased by McBee in
Damascus, Virginia and Parsippany, New Jersey, confirming the matters set
forth in Section 4.12(b);
(h) the Seller's Secretary shall have executed and delivered to the
Buyer a certificate in form and substance as set forth in Exhibit F
attached hereto regarding the Seller's charter, by-laws, authorizing
resolutions, and incumbency of officers;
(i) the Seller shall deliver to the Buyer a good standing
certificate in respect of itself and McBee issued by the Secretary of State
of Colorado, and a certificate of good standing issued by the Secretary of
State of each state in which McBee is qualified to do business as a foreign
corporation;
(j) the relevant parties shall have entered into side agreements
in form and substance as set forth in Exhibits G-1 and G-2 attached hereto,
and the same shall be in full force and effect;
(k) the Buyer shall have received from counsel to the Seller and
the Seller Stockholders an opinion in form and substance as set forth in
Exhibit H attached hereto, addressed to the Buyer, and dated as of the
Closing Date;
(l) the Buyer shall have received the resignations, effective as
of the Closing Date, of each director and officer of McBee other than those
whom the Buyer shall have specified in writing at least five business days
prior to the Closing;
(m) the Buyer shall have obtained, on terms and conditions
satisfactory to it in its sole discretion, all of the financing it needs in
order to consummate the transactions contemplated hereby and to fund the
working capital requirements of McBee after the Closing Date;
(n) concurrent with the consummation of the transactions
contemplated hereby, an Affiliate of the Buyer shall acquire substantially
all the assets of McBee Canada;
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(o) the Buyer's Board of Directors shall have received a fairness
opinion from Tucker Anthony regarding the transactions contemplated herein
and in the Asset Agreement, in form and substance satisfactory to such
Board of Directors in its sole discretion;
(p) the Buyer shall have satisfied itself, in its sole discretion,
that both the remedial actions planned to be taken by McBee to become Year
2000 Compliant, and the person and dollar budget described in connection
therewith, as set forth in Section 4.13(f) of the Disclosure Schedule, are
adequate; and
(q) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance
to the Buyer.
The Buyer may waive any condition specified in this Section 7.01 if it
executes a writing so stating at or prior to the Closing.
7.02 Conditions to Obligation of the Seller. The obligation of
the Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Section 3.02
above shall be true and correct in all material respects at and as of the
Closing Date, as though made again at and as of such date;
(b) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(d) the Buyer shall have delivered to the Seller a certificate to
the effect that each of the conditions specified above in Section 7.02(a)
through (c) is satisfied in all respects;
(e) All applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated, and the Parties and
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McBee shall have received all other authorizations, consents, and approvals
of governments and governmental agencies referred to in Section 3.01(b),
3.02(b), 3.02(c) and 4.03 above;
(f) the relevant parties shall have entered into side agreements
in form and substance as set forth in Exhibits G-1 and G-2 attached hereto,
and the same shall be in full force and effect;
(g) the Seller shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit I attached hereto,
addressed to the Seller, and dated as of the Closing Date;
(h) concurrent with the consummation of the transactions
contemplated hereby, an Affiliate of the Buyer shall acquire substantially
all the assets of McBee Canada; and
(i) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance
to the Seller.
The Seller may waive any condition specified in this Section 7.02 if it
executes a writing so stating at or prior to the Closing, and any such
waiver shall be binding upon the Stockholder's Representative.
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT
8.01 Survival of Representations and Warranties. All of the
representations and warranties of the Seller contained in Sections 4.01
through 4.10 and 4.12 through 4.28 of this Agreement, and of the Buyer
contained in Sections 3.02(f) and 3.02(i) of this Agreement, shall survive
the Closing hereunder (even if the damaged Party knew or had reason to know
of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of two years thereafter.
All of the other representations and warranties of the Parties contained in
this Agreement shall survive the Closing (even if the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect, subject to any
applicable statutes of limitations.
8.02 Indemnification Provisions for Benefit of the Buyer Prior to
the Closing. In the event that the Seller breaches (or in the event any
third party alleges facts that, if true, would mean the Seller has
breached) any of its representations, warranties, and covenants contained
herein, provided that the Buyer makes a written claim for indemnification
against the Seller
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pursuant to Section 11.07 below, then the Seller agrees to protect, defend,
hold harmless and indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach), including all Adverse Consequences arising out of the enforcement
of this Section 8.02; provided, however, that the Seller shall not have any
obligation to compensate the Buyer in respect of any Adverse Consequences
resulting from any breaches or alleged breaches of the representations and
warranties contained in Section 3.01 and Article IV of this Agreement
(other than breaches or alleged breaches of the representations and
warranties contained in Section 4.11 above with respect to the federal and
state income taxes of McBee, for which the Buyer will be fully
compensated), until the Buyer has suffered aggregate Adverse Consequences,
by reason of all such breaches under this Agreement and all applicable
breaches under the Asset Purchase Agreement, in excess of $1,200,000, at
which point the Seller will be obligated to indemnify the Buyer from and
against all Adverse Consequences in excess of that amount.
8.03 Indemnification Provisions for Benefit of the Seller. In the
event the Buyer breaches (or in the event any third party alleges facts
that, if true, would mean the Buyer has breached) any of its
representations, warranties, and covenants contained herein, and, if there
is an applicable survival period pursuant to Section 8.01 above, provided
that the Seller makes a written claim for indemnification against the Buyer
pursuant to Section 11.07 below within such survival period, then the Buyer
agrees to protect, defend, hold harmless and indemnify the Seller from and
against the entirety of any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Seller may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach), including all Adverse
Consequences arising out of the enforcement of this Section 8.04; provided,
however, that the Buyer shall not have any obligations to compensate the
Seller in respect of any Adverse Consequences resulting from any breaches
or alleged breaches of the representations and warranties contained in
Section 3.02 of this Agreement until the Seller has suffered aggregate
Adverse Consequences, by reason of all such breaches under this Agreement
and all applicable breaches under the Asset Purchase Agreement, in excess
of $1,200,000, at which point the Buyer will be obligated to indemnify the
Seller from and against all Adverse Consequences in excess of that amount.
In addition, the Buyer shall indemnify the Seller for any failure by McBee
to comply with WARN or any analogous state law as a result of any actions
taken by the Buyer or McBee following the Closing.
8.04 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Article VIII, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying Party from any
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obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 30
calendar days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim (it being understood
by the Parties that the Indemnified Parties may take such actions as are
reasonable in connection with its defense until it receives such notice
from the Indemnifying Party), (ii) the Third Party Claim involves only
monetary damages and does not seek an injunction or other equitable relief,
and (iii) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice adverse to the
continuing business interests of the Indemnified Party; provided, however,
that if the Indemnified Party is covered, in whole or in part, by an
insurance policy with respect to any Third Party Claim, then the
Indemnifying Party's defense against such Third Party Claim shall be
limited or precluded as required by the terms of the applicable insurance
policy.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8.04(b) above, and subject
to the provisions of any applicable insurance policies of the Indemnified
Party, (i) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party Claim,
(ii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (iii) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 8.04(b) above is
or becomes unsatisfied, or if otherwise required under the terms of any
applicable insurance policy of the Indemnified Party, however, (i) the
Indemnified Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third Party
Claim in any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any Indemnifying
Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys'
fees and expenses), and (iii) the Indemnifying Parties will remain
responsible for any Adverse Consequences the
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Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Article VIII.
8.05 Indemnification for the Benefit of the Buyer After Closing. In
addition to the rights of the Buyer set forth herein, if the Seller (i)
refuses to assume a third-party claim within the time periods set forth in
this Article VIII, (ii) fails to provide reasonable evidence (such as a
payment or performance bond), within 30 calendar days after receiving a
written claim, that it is financially or otherwise able to pay in full the
amount set forth in such claim, (iii) fails to pay amounts due under this
Article VIII as agreed by the Parties or as determined by a court of
competent jurisdiction or (iv) has ceased to exist as a corporate entity,
the Buyer has rights of indemnification for breaches after the Closing by
the Seller of any of its representations, warranties or covenants herein as
set forth in the Seller Stockholders Agreement.
8.06 Determination of Adverse Consequences. All indemnification
payments under this Article VIII shall be deemed adjustments to the
Purchase Price, and the Parties agree that they will not take any positions
or other actions (including reporting adjustments on their applicable Tax
Returns) inconsistent with this treatment. No Purchase Price adjustment
pursuant to Section 2.05, however, will be subject to the provisions of
Article VIII to the extent of the amount of such adjustment.
8.07 Exclusive Remedy. Except as set forth in this Section 8.07,
in the Seller Stockholders Agreement or in the Lease Agreement, the
indemnification provided in this Article VIII shall be the sole and
exclusive remedy for any inaccuracy or breach of any representation,
warranty or covenant made by any Party in this Agreement. Nothing herein
shall limit any Party's remedy for fraud or intentional breach of covenant.
The foregoing indemnification provisions are in addition to, and not in
derogation of, any equitable remedy any Party may have for breach of any
covenant, and any rights any Party may have under the Seller Stockholders
Agreement or the Lease Agreement. The Seller hereby agrees that it will
not make any claim for indemnification against McBee by reason of the fact
that it or any of its employees or agents was a director, officer,
employee, or agent of any such entity or was serving at the request of any
such entity as a partner, trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties,
fines, costs, amounts paid in settlement, losses, expenses, or otherwise
and whether such claim is pursuant to any statute, charter document, bylaw,
agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Buyer against such Seller
(whether such action, suit, proceeding, complaint, claim, or demand is
pursuant to this Agreement, applicable law, or otherwise).
ARTICLE IX
TAX MATTERS
The following provisions shall govern the allocation of responsibility
as between the Buyer and the Seller for certain tax matters following the
Closing Date:
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9.01 Section 338(h)(10) Election. The Seller will join with the
Buyer in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local, or foreign tax law) with
respect to the purchase and sale of the Purchased Shares hereunder. Seller
will pay any Tax, including any liability of McBee for Tax resulting from
the application to it of Treasury Regulation Section 1.338(h)(10)-1(e)(5),
attributable to the making of such election and will indemnify the Buyer
and McBee against any Adverse Consequences arising out of any failure to
pay such Tax. Seller will also pay any state, local, or foreign Tax (and
indemnify the Buyer and McBee against any Adverse Consequences arising out
of any failure to pay such Tax) attributable to an election under state,
local or foreign law similar to the election available under Section 338(g)
of the Code (or which results from the making of an election under Section
338(g) of the Code) with respect to the purchase and sale of the Purchased
Shares hereunder.
9.02 Income Tax Periods Ending on or Before the Closing Date. The
Seller shall prepare or cause to be prepared and file all Tax Returns for
McBee in respect of Taxes based upon income for all periods ending on or
prior to the Closing Date. The Seller shall pay all Taxes based upon
income in respect of the periods covered by such Tax Returns, whether or
not shown as due on such Tax Returns, and McBee shall have no liability in
respect of such Taxes.
9.03 Non-Income Tax Periods Ending on or Before the Closing Date.
The Seller shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns (other than returns for Taxes based upon income) for
McBee for all periods ending on or prior to the Closing Date. The Seller
shall immediately reimburse McBee for any Taxes payable by McBee in respect
of such periods in excess of any related reserves for Taxes set forth in
the Closing Balance Sheet. The Buyer shall immediately reimburse the
Seller for the amount of any Taxes paid by Seller in respect of such
periods prior to the Closing for which the Buyer receives a corresponding
refund or credit for overpayment, to the extent such amount exceeds any
related Tax assets set forth in the Closing Balance Sheet.
9.04 Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer shall prepare or cause to be prepared and file or cause to
be filed any Tax Returns of McBee for Tax periods which begin before the
Closing Date and end after the Closing Date. The Seller shall pay to the
Buyer within fifteen (15) days after the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such Taxes which
relates to the portion of such Taxable period ending on the Closing Date to
the extent such Taxes are not accrued on the Closing Balance Sheet or were
not paid previously by Seller. The Buyer shall reimburse the Seller for
the amount of any excess Taxes paid by Seller in respect of the period
prior to the Closing Date upon receipt of a corresponding refund or credit
for overpayment, to the extent such amount exceeds any related Tax assets
set forth in the Closing Balance Sheet. For purposes of this Section, in
the case of any Taxes that are imposed on a periodic basis and are payable
for a Taxable period that includes (but does not end on) the Closing Date,
the portion of such Tax which relates to the portion of such Taxable period
ending on the Closing Date shall (x)
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in the case of any Taxes other than Taxes based upon or related to income
or receipts, be deemed to be the amount of such Tax for the entire Taxable
period multiplied by a fraction the numerator of which is the number of
days in the Taxable period ending on the Closing Date and the denominator
of which is the number of days in the entire Taxable period, and (y) in the
case of any Tax based upon or related to income or receipts be deemed equal
to the amount which would be payable if the relevant Taxable period ended
on the Closing Date (in such latter case, any net operating loss
carryovers, tax credit carryovers, and similar tax attribute carryovers
from a Tax period ending before the Closing Date to a Tax period which
begins before the Closing Date and ends after the Closing Date shall be
applied first to the period through the Closing Date).
9.05 Cooperation on Tax Matters.
(a) The Buyer, McBee and the Seller shall cooperate fully, as and
to the extent reasonably requested by the other Party, in connection with
the filing of Tax Returns pursuant to this Section and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other Party's request) the
provision of records and information which are reasonably relevant to any
such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. McBee and the Seller agree
(i) to retain all books and records with respect to Tax matters pertinent
to McBee relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent
notified by the Buyer or the Seller, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other party
reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, McBee or
the Seller, as the case may be, shall allow the other party to take
possession of such books and records.
(b) The Buyer and the Seller further agree, upon request, to use
commercially reasonable efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby).
(c) The Buyer and the Seller further agree, upon request, to
provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
9.06 Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving McBee shall be terminated
as of the Closing Date and, after the Closing Date, McBee shall not be
bound thereby or have any liability thereunder.
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9.07 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by the
Seller when due, and the Seller will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, if required by applicable law, the Buyer will, and will cause
its Affiliates to, join in the execution of any such Tax Returns and other
documentation.
9.08 Allocation of Purchase Price. The Buyer and the Seller shall
negotiate in good faith an allocation of the Purchase Price in accordance
with Treas. Reg. Section 1.338(b)-2T and 3T with reference to an appraisal
obtained by the Buyer from a nationally recognized appraisal firm, the cost
of the appraisal to be paid by the Buyer, which appraisal shall be binding
on the Parties.
ARTICLE X
TERMINATION
10.01 Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(a) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time at least three Business Days prior to the
Closing if the Buyer is not satisfied with the results of its continuing
business, legal, and accounting due diligence regarding McBee;
(c) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing (i) in the event the
Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Buyer has notified
the Seller of the breach, and the breach has continued without cure until
the earlier of the Closing or 30 days after the notice of breach, or (ii)
if the Closing shall not have occurred on or before June 26, 1998, by
reason of the failure or inability to satisfy any condition precedent under
Section 7.01; and
(d) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (i) in the event the
Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Seller has notified
the Buyer of the breach, and the breach has continued without cure until
the earlier of the Closing or 30 days after the notice of breach, or (ii)
if the Closing shall not have occurred on or before June 26, 1998, by
reason of the failure of any condition precedent under Section 7.02.
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10.02 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 10.01 above, all rights and obligations of
the Parties hereunder shall terminate without any Liability of any Party to
any other Party (except for any Liability of any Party then in breach),
except that the Buyer shall be entitled to its $250,000 deposit made in
connection with the Letter of Interest only if the Agreement is terminated
pursuant to Section 10.01(c)(i) hereof.
ARTICLE XI
MISCELLANEOUS
11.01 Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior
written approval of the Buyer and the Seller; provided, however, that any
Party may make any public disclosure it believes in good faith is required
by applicable law or any listing agreement concerning its publicly-traded
securities (in which case the disclosing Party will use commercially
reasonable efforts to advise the other Parties prior to making the
disclosure).
11.02 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns.
11.03 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof. The Letter of Interest is expressly
terminated hereby.
11.04 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either
this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Seller; provided,
however, that the Buyer may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one
or more of its Affiliates to perform its obligations hereunder (in any or
all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
11.05 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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11.06 Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.07 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Seller: ROMO Corp.
7333 West Jefferson, Suite 210
Lakewood, Colorado 80235
Attn: H. Rex Martin, President
with a copy to: Lentz, Evans & King
Lincoln Center Building, Suite 2000
1660 Lincoln Street
Denver, Colorado 80264
Attn: Francis P. King, Esq.
If to the Buyer: New England Business Service, Inc.
500 Main Street
Groton, Massachusetts 01471
Attn: John F. Fairbanks, Vice President
with a copy to: Hill & Barlow
One International Place
Boston, Massachusetts 02110
Attn: Terrence W. Mahoney, Esq.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the
manner herein set forth.
11.08 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law
provision or rule (whether of The Commonwealth of
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Massachusetts or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than The Commonwealth of
Massachusetts.
11.09 Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and
signed by the Buyer, the Seller and the Stockholders' Representative. No
waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach
of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
11.10 Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
11.11 Expenses. Each of the Parties will bear his or its own
costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
The Seller agrees that McBee has not borne nor will bear any of the
Seller's or the Stockholders' Representative's costs and expenses
(including any of their legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby.
11.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of
the relative levels of specificity) which the Party has not breached shall
not detract from or mitigate the fact that the Party is in breach of the
first representation, warranty, or covenant.
11.13 Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits and Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
11.14 Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly,
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each of the Parties agrees that the other Parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 11.15 below), in
addition to any other remedy to which they may be entitled, at law or in
equity.
11.15 Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any state or federal court sitting in Suffolk County,
Massachusetts, in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court. Each Party also
agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any defense
of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be
required of any other Party with respect thereto. Any Party may make
service on any other Party by sending or delivering a copy of the process
to the Party to be served at the address and in the manner provided for the
giving of notices in Section 11.07 above. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may
be enforced by suit on the judgment or in any other manner provided by law
or at equity.
* * * * *
[END OF PAGE - SIGNATURE PAGE IMMEDIATELY FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Stock
Purchase Agreement as an instrument under seal on the date first above
written.
NEW ENGLAND BUSINESS SERVICE, INC.
By:/s/ John F. Fairbanks
---------------------------
Title:Vice-President - Finance
ROMO CORP.
By:/s/ H. Rex Martin
---------------------------
H. Rex Martin, President
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TABLE OF CONTENTS
Page No.
--------
ARTICLE I - DEFINITIONS 1
ARTICLE II - PURCHASE AND SALE OF PURCHASED SHARES 7
2.01 Basic Transaction 7
2.02 Initial Purchase Price 7
2.03 The Closing 7
2.04 Deliveries at the Closing 7
2.05 Adjustments to Initial Purchase Price 7
2.06 Intercompany Obligations 9
ARTICLE III - REPRESENTATIONS AND WARRANTIES CONCERNING THE
TRANSACTION 9
3.01 Representations and Warranties of the Seller 9
3.02 Representations and Warranties of the Buyer 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES CONCERNING McBEE 13
4.01 Organization, Qualification, and Corporate Power 13
4.02 Capitalization 13
4.03 Noncontravention 13
4.04 Brokers' Fees 14
4.05 Title to Assets 14
4.06 Subsidiaries 14
4.07 Financial Statements 14
4.08 Events Subsequent to Most Recent Fiscal Year End 15
4.09 Undisclosed Liabilities 17
4.10 Legal Compliance 17
4.11 Tax Matters 17
4.12 Real Property 19
4.13 Intellectual Property 21
4.14 Tangible Assets 23
4.15 Inventory 24
4.16 Contracts 24
4.17 Notes and Accounts Receivable 25
4.18 Powers of Attorney and Banking Matters 25
4.19 Insurance 25
4.20 Litigation 26
4.21 Product Warranty 26
4.22 Product Liability 27
4.23 Employees 27
4.24 Employee Benefits 27
4.25 Guaranties 29
4.26 Environment, Health, and Safety 29
4.27 Certain Business Relationships with McBee 30
4.28 Disclosure 30
ARTICLE V - PRE-CLOSING COVENANTS 30
5.01 General 30
5.02 Notices and Consents 30
5.03 Operation of Business 31
5.04 Preservation of Business 31
5.05 Full Access 31
5.06 Notice of Developments 31
5.07 Exclusivity 31
5.08 Employee Benefit Plans 32
ARTICLE VI - POST-CLOSING COVENANTS 32
6.01 General 32
6.02 Litigation Support 33
6.03 Transition 33
6.04 Confidentiality 33
6.05 Covenant Not to Compete 33
6.06 Use of Names "McBee," McBee Systems" 34
6.07 Buyer Stock 34
6.08 Registration of the Buyer Common Stock 34
6.09 Hart-Scott-Rodino Filing Fees 38
6.10 Severance 38
ARTICLE VII - CONDITIONS TO OBLIGATION TO CLOSE 39
7.01 Conditions to Obligation of the Buyer 39
7.02 Conditions to Obligation of the Seller 41
ARTICLE VIII - REMEDIES FOR BREACHES OF THIS AGREEMENT 42
8.01 Survival of Representations and Warranties 42
8.02 Indemnification Provisions for Benefit of the Buyer Prior
to the Closing 42
8.03 Indemnification Provisions for Benefit of the Seller 43
8.04 Matters Involving Third Parties 43
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8.05 Indemnification for the Benefit of the Buyer After Closing 45
8.06 Determination of Adverse Consequences 45
8.07 Exclusive Remedy 45
ARTICLE IX - TAX MATTERS 45
9.01 Section 338(h)(10) Election 46
9.02 Tax Periods Ending on or Before the Closing Date 46
9.03 Tax Periods Beginning Before and Ending After the Closing Date 46
9.04 Cooperation on Tax Matters 47
9.05 Tax Sharing Agreements 47
9.06 Certain Taxes 48
9.07 Allocation of Purchase Price 48
ARTICLE X - TERMINATION 48
10.01 Termination of Agreement 48
10.02 Effect of Termination 49
ARTICLE XI - MISCELLANEOUS 49
11.01 Press Releases and Public Announcements 49
11.02 No Third Party Beneficiaries 49
11.03 Entire Agreement 49
11.04 Succession and Assignment 49
11.05 Counterparts 49
11.06 Headings 50
11.07 Notices 50
11.08 Governing Law 50
11.09 Amendments and Waivers 51
11.10 Severability 51
11.11 Expenses 51
11.12 Construction 51
11.13 Incorporation of Exhibits, Annexes, and Schedules 51
11.14 Specific Performance 51
11.15 Submission to Jurisdiction 52
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EXHIBITS
Exhibit A Interim Balance Sheet (Section 2.05)
Exhibit B Seller Stockholders (Section 3.01)
Exhibit C Buyer Financial Statements (Section 3.02)
Exhibit D McBee Financial Statements (Section 4.07)
Exhibit E Severance Arrangements (Section 6.10)
Exhibit F Seller's Secretary's Certificate (Section 7.01)
Exhibit G-1 Seller Stockholders Agreement(Article I)
Exhibit G-2 Lease Agreement for Athens, Ohio (Section 7.01)
Exhibit H Opinion of Seller and Seller Stockholders' Counsel
(Section 7.01)
Exhibit I Opinion of Buyer's Counsel (Section 7.02)
Exhibit J Employee Benefit Plans
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