STOCK ACQUISITION AGREEMENT
THIS STOCK ACQUISITION AGREEMENT dated as of the 16th day of April, 1999,
(but effective for accounting purposes as of April 1, 1999), is entered into by
and among INFINITE GROUP, INC., a Delaware corporation (the "Purchaser") and
JOHN T. MONAGHAN of Goshen, Massachusetts ("JM"), RALPH P. LAZZARA of Westfield,
Massachusetts ("RL"), ROGER POIRIER of Easthampton, Massachusetts ("RP") and
ROGER BEAUREGARD of Holyoke, Massachusetts ("RB") (JM, RL, RP and RB being
collectively called the "Shareholders" and individually called a "Shareholder".
BACKGROUND
The Shareholders are the owners of all of the issued and outstanding
capital stock of Osley & Whitney, Inc., a Massachusetts corporation (the
"Company"). The Shareholders wish to sell, and the Purchaser wishes to acquire,
all of the outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. Purchase of Shares
1.1 Transfer. On the terms and subject to the
conditions set forth herein, at the Closing (defined below), each Shareholder
will sell, transfer and assign to the Purchaser the number of Company Shares
(defined below) set forth opposite his name on Exhibit A, free and clear of all
liens, claims and encumbrances whatsoever, in exchange for the portion of the
Purchase Price (defined below) payable to him by the Purchaser.
1.2 Purchase Price. The aggregate consideration payable by the
Purchaser for the Company Shares (the "Purchase Price") shall be $1,500,000,
payable (a) $300,000 by bank check or bank wire transfer and (b) $1,200,000 by
the delivery of the Promissory Notes of the Purchaser (the "Notes" or a "Note")
to the several Shareholders substantially in the forms of Exhibits B-1, B-2, B-3
and B-4 attached hereto. The Purchase Price shall be allocated to each
Shareholder as set forth on Exhibit A.
1.3 Delivery of Certificates. At the Closing, each Shareholder shall
deliver to the Purchaser a certificate or certificates for Company Shares owned
by him, together with properly executed stock powers endorsed in blank.
1.4 Payment. At the Closing, subject to the terms of this Agreement,
the Purchaser shall pay to each Shareholder the portion of the Purchase Price
payable to him set forth on Exhibit A.
2
2. Closing; Closing Date. The closing (the "Closing") of the transactions
contemplated hereby shall take place at the offices of Cameron & Mittleman LLP,
56 Exchange Terrace, Providence, Rhode Island at 10:00 a.m. concurrently with
the execution and delivery hereof or at such other place as the parties shall
agree. The time and date upon which the Closing occurs is called the "Closing
Date".
3. Individual Representations of the Shareholders. Each Shareholder, for
himself only, hereby represents and warrants to, and agrees with the Purchaser,
as follows:
3.1 Ownership. Such Shareholder is the lawful owner of record and
beneficial owner of the number of Company Shares set forth opposite his name in
Exhibit A.
3.2 Liens. The Company Shares owned by such Shareholder are free and
clear of all liens, charges, encumbrances and restrictions of any kind and
nature whatsoever, and, at the time of Closing, none of such Company Shares will
be subject to any written or oral agreement whatsoever with respect to the
voting thereof, the sale or pledge thereof (including, without limitation, any
option or right of first refusal to sell any such shares) or any like matter,
nor has any proxy been granted to any person (defined below) with respect to any
such shares of the Company Common Stock.
3
3.3 Transfer of Title. The delivery by such Shareholder of the
certificate or certificates representing the Company Shares to be sold to the
Purchaser pursuant hereto, when duly endorsed for transfer to Purchaser, will
vest in the Purchaser legal and valid title thereto, free and clear of all
claims, liens, charges, encumbrances and restrictions of any kind and nature
whatsoever.
3.4 Authorization of Agreement. This Agreement has been duly and
validly executed and delivered on behalf of such Shareholder and constitutes a
valid obligation of such Shareholder, enforceable in accordance with its terms,
except to the extent that its enforceability may be limited by applicable
insolvency, bankruptcy or similar laws affecting the enforcement of creditors'
rights generally.
3.5 No Governmental Consents. No consent, authorization or approval
of, exception by, or filing with, any domestic governmental or administrative
authority, or any court, is required to be obtained or made by the Company in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
3.6 Interests in Property or Activities of the Company. Such
Shareholder does not have any material interest (a) in any Property (defined
below), used in or pertaining to the business of
4
the Company (except for personal machinist's tool boxes), or (b) in the conduct
of the business of the Company with its suppliers, customers or any other
person, except to the extent of any indirect interest arising out of any such
Shareholder's association with the Company as an officer, director, employee or
shareholder of the Company.
3.7 Finder. There is no firm, corporation, agency or other person
that is entitled to a finder's fee or any type of brokerage commission in
relation to or in connection with the transactions contemplated by this
Agreement as a result of any such Shareholder.
3.8 Investment Representations of Shareholders.
(a) Such Shareholder is acquiring the Note to be delivered to him
and will acquire any shares of common stock of the Purchaser (the "Purchaser
Common Stock") upon the exercise of any conversion right under the Note (the
Notes and Purchaser Common Stock being called collectively, the "Purchaser
Securities") for his own account for the purpose of investment, and not with a
view to, or sale in connection with, any distribution thereof.
(b) Such Shareholder has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
his proposed investment in the Purchaser
5
Securities. Such Shareholder acknowledges that he, his attorneys, accountants
and other representatives have had, prior to his execution of this Agreement,
the opportunity to ask questions of, and to receive answers from, Purchaser
concerning Purchaser, its affiliates and their business and financial condition.
(c) Such Shareholder understands and acknowledges that all of the
Purchaser Securities to be delivered to him pursuant to the provisions of this
Agreement or the Note will be "restricted securities" within the meaning of the
Securities Act of 1933, as amended (the "1933 Act"), and agrees that the
certificates therefor shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE
REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH
TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
Such Shareholder further understands and acknowledges that stop transfer
instructions will be issued by the Purchaser to its transfer agent with respect
to all of the Purchaser Securities to be delivered to him pursuant to the
provisions of this Agreement.
(d) Such Shareholder understands and acknowledges that none of the
Purchaser Securities to be delivered to him pursuant to
6
the provisions of this Agreement will be registered under the 1933 Act and,
accordingly, such Shareholder recognizes that he may be required to bear the
economic risk of his investment until such shares are registered and, after such
registration, may lapse. Such Shareholder agrees on behalf of himself, and his
heirs, executors, successors and assigns, that he will only sell, transfer,
pledge or hypothecate any of the Purchaser Securities to be acquired by him
pursuant to the provisions of this Agreement pursuant to an effective
registration statement under the 1933 Act or in a transaction wherein
registration under the 1933 Act is not required.
3.9 Disclosure Material. The Purchaser has distributed to such
Shareholder, and such Shareholder represents and warrants to the Purchaser that
he has had an opportunity to review, prior to his execution and delivery of this
Agreement, (a) the reports, documents and other materials filed by the Purchaser
with the Securities and Exchange Commission (the "SEC") listed in Exhibit C (the
"Commission Reports") and (b) such other data in the possession of the Purchaser
as such Shareholder shall have requested.
4. Additional Representations and Warranties of the Shareholders. Except
as otherwise disclosed in a disclosure
7
statement dated the date hereof (the "Disclosure Statement") executed by the
Shareholders and delivered to the Purchaser concurrently with the execution and
delivery of this Agreement, the Shareholders, jointly and severally, represent
and warrant to the Purchaser as follows:
4.1 Outstanding Capital Stock. The Company is authorized to issue
one thousand (1,000) shares, without par value, of common stock, of which one
hundred (100) shares (the "Company Shares") are issued and outstanding and owned
beneficially and of record by the Shareholders. No other class of capital stock
of the Company is authorized or outstanding. All of the Company Shares are duly
authorized and are legally and validly issued, fully paid and nonassessable.
4.2 Options. There are no outstanding options, warrants, convertible
securities, subscriptions or other commitments or rights of any nature to
acquire any of the Company Shares or any other securities of the Company from
the Company or any of the Shareholders.
4.3 Subsidiaries. The Company does not, directly or indirectly, own
or have the power to vote or the right or obligation to acquire, any securities
or other equity interest of any person.
8
4.4 Due Incorporation and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Massachusetts, and has the corporate power and lawful authority to own, lease
and operate its assets, properties and business and to carry on its business as
now conducted. The Company does not own or lease property in any jurisdiction
other than Massachusetts, and is not required to be qualified or otherwise
authorized to do business in any other jurisdiction in which the failure to be
qualified would have a material adverse effect on the business or properties of
the Company.
4.5 Financial Statements. The Shareholders have delivered to the
Purchaser unaudited financial statements (balance sheet and profit and loss
statement, statement of stockholders' equity and statement of cash flows
including notes thereto) of the Company at July 28, 1996, August 3, 1997 and
August 2, 1998 and for each of the fiscal years then ended and its unaudited
financial statements (balance sheet, profit and loss statement, statement of,
stockholders equity and statement of cash flows) as at, and for the five month
period ended December 27, 1998 (the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP")
9
applied on a consistent basis throughout the periods indicated and with each
other, except that the Financial Statements as at and for the period ending
December 27, 1998 (the "Company Balance Sheet Date"), may not contain all
footnotes and year-end adjustments required by generally accepted accounting
principles. The balance sheet of the Company as at the Company Balance Sheet
Date is referred to as the "Company Balance Sheet". The Financial Statements
fairly and completely present the financial condition and operating results of
the Company as of the dates, and for the periods, indicated therein, subject in
the case of the unaudited Financial Statements as of the Company Balance Sheet
Date, to normal year end adjustments, which alone or in the aggregate will not
have a material adverse effect on the financial condition of the Company. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
4.6 Continuity and No Material Adverse Change. Since the Company
Balance Sheet Date, the Company has operated in conformity with its previous
business practices, and there has been no material adverse change in the assets,
properties, business, prospects or condition, financial or otherwise, of the
Company, and none of the Shareholders knows of any such change which is
10
threatened. Since the Company Balance Sheet Date, there has been no damage,
destruction or loss materially affecting the assets, properties, business,
prospects or condition, financial or otherwise, of the Company, whether or not
covered by insurance.
4.7 Permits. The Company has complied in all material respects with
all federal, state, county, local and foreign laws, ordinances, regulations and
orders applicable to it or its business. The Company holds all licenses,
permits, orders and approvals of governmental and regulatory bodies
(collectively, "Permits") material to or necessary for the conduct of its
business. All Permits are in full force and effect, no violations are or have
been recorded in respect of any Permit, and no proceeding is pending or, to the
knowledge of any of the Shareholders, threatened to revoke or limit any Permit.
4.8 Approvals. No approval or consent of any foreign, federal,
state, county, local or other governmental or regulatory body, and no approval
or consent of any other person, is required in connection with the execution and
delivery by each of the Shareholders of this Agreement and the performance by
each of the Shareholders of the transactions contemplated hereby. The execution
and delivery of this Agreement, the consummation of the transactions
contemplated under this Agreement, and the performance
11
by each of the Shareholders of this Agreement in accordance with its terms and
conditions will not conflict with or result in the breach or violation of, any
of the terms or conditions of, or constitute (or with notice or lapse of time or
both would constitute) a default under: (a) the governing instruments of the
Company; (b) any contract to which any of the Shareholders or the Company is a
party or by or to which it or its assets or properties are bound or subject
(except for contracts that will be terminated at Closing); (c) any statute or
any regulation, order, judgment or decree of any court or governmental or
regulatory body; or (d) any Permit.
4.9 Litigation. The Company is not a party to, or threatened with,
any litigation or judicial, administrative or arbitration proceeding which if
decided adversely to the Company could have a material adverse effect upon the
transactions contemplated hereby or upon its assets, properties, business,
prospects or condition, financial or otherwise. None of the Shareholders knows
of any dispute with any person which materially and adversely affects, or might
materially and adversely affect, the assets, properties, business, prospects or
condition, financial or otherwise of the Company. None of the Shareholders knows
of any present or threatened walkout, strike or any other similar
12
occurrence which materially and adversely affects, or might materially and
adversely affect, the assets, properties, business, prospects or condition,
financial or otherwise, of the Company or of any attempt to organize or
represent the labor force of the Company differently from the manner in which it
is currently organized and represented.
4.10 Contracts. The Disclosure Statement sets forth all of the
following contracts to which the Company is a party or by or to which it or its
assets or properties are bound or subject: (a) contracts with any current or
former officer, director, employee, consultant, advisor or shareholder; (b)
contracts with any labor union or association representing any employee; (c)
contracts for the purchase or acquisition of materials, supplies, equipment,
merchandise or services (other than purchase orders in the ordinary course of
business and other than contracts relating to acquisition, leasing and
maintenance of copiers, telephone and other office equipment arising in the
ordinary course of business and involving annual payments of not more than
$2,500 for each such contract); (d) warehousing, distributorship,
representative, management, marketing, sales agency, printing or advertising
agreements; (e) contracts for the sale of any assets or properties
13
of the Company that have a value of $10,000 or more or that are other than in
the ordinary course of business; (f) contracts for the grant to any person of
any preferential rights to purchase any of the assets or properties of the
Company; (g) joint venture contracts relating to the assets, properties or
business of the Company or by or to which it or its assets or properties are
bound or subject; (h) contracts under which the Company agrees to indemnify or
guarantee the obligations of any party, or to refrain from competing with any
party; and (i) loan agreements and any other material contract whether or not
made in the ordinary course of business. All of the contracts referred to in the
preceding sentence and elsewhere referred to in this Agreement (collectively,
the "Company Contracts") are in full force and effect, and the Company has paid
in full or accrued all amounts due thereunder and has satisfied in full or
provided for all of its liabilities and obligations thereunder, and is not in
material default under any of them, nor is any other party to any Company
Contract in material default thereunder, nor to the knowledge of any of the
Shareholders does any condition exist which with notice or lapse of time or both
would constitute a default thereunder. The Company is not a party to or bound by
any contract which either individually or in the aggregate materially and
adversely affects its assets, properties,
14
business, prospects or condition, financial or otherwise. No approval or consent
of any person is needed in order that the Company Contracts continue in full
force and effect following the consummation of the transactions contemplated by
this Agreement. Each of the contracts referred to in Section 4.10(a) can be
terminated upon not more than one month's notice without payment of premium or
penalty or any other kind of payment. The Disclosure Statement includes a list
of all accounts and agreements of the Company with banking and other financial
institutions and the persons authorized to act thereunder.
4.11 Real Estate.
4.11.1 Ownership of Premises. The Company is the owner of
good, marketable and insurable fee title to the land referred to in Section 3 of
the Disclosure Statement and to all of the buildings, structures and other
improvements located thereon (collectively, the "Company Real Property") free
and clear of all liens or other encumbrances (as defined below). The Company
Real Property constitutes all of the real property owned by the Company.
4.11.2 Leased Properties. The Company does not lease,
sublease, use or occupy any real property or improvements except the Company
Real Property.
4.11.3 Entire Premises. All of the land,
15
buildings, structures and other improvements used by the Company in the conduct
of its business are included in the Company Real Property.
4.11.4 Space Leases. The Company is not a party to any lease,
sublease, license or other contract granting to any person any right to the
possession, use, occupancy or enjoyment of the Company Real Property or any
portion thereof.
4.11.5 No Options. The Company does not own or hold, and is
not obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell or dispose of the Company Real
Property or any portion thereof or interest therein.
4.11.6 Condition and Operation of Improvements. All components
of all buildings, structures and other improvements included within the Company
Real Property (the "Company Improvements") are in good and normal working order
and repair.
4.11.7 Real Property Permits and Insurance. All certificates
of occupancy, permits, licenses, franchises, approvals and authorizations
(collectively, the "Company Real Property Permits") of all governmental
authorities having jurisdiction over the Company Real Property, and from all
insurance companies and
16
fire rating and other similar boards and organizations (collectively, "insurance
organizations"), required or appropriate have been issued to the Company to
enable the Company Real Property to be lawfully occupied and used for all of the
purposes for which they are currently occupied and used, have been lawfully
issued and are, as of the date hereof, in full force and effect. All policies of
liability and casualty insurance (collectively, the "Company Insurance
Policies") currently or previously issued or customarily maintained with respect
to other similar properties in the region, or required in connection with the
ownership, leasing, use occupancy or operation of the Company Real Property as
currently used, occupied and operated, have been issued to the Company by
reputable insurance companies and are currently in full force and effect. The
Company has not received, or been informed by a third party of the receipt by
it, of any notice from any governmental authority having jurisdiction over the
Company Real Property or from any insurance organization threatening a
suspension, revocation, modification or cancellation of any the Company Real
Property Permits or the Company Insurance Policies, as the case may be, and, to
the knowledge of each of the Shareholders, there is no basis for the issuance of
any such notice or the taking of any such action.
17
4.11.8 Compliance with Law. To the knowledge of each of the
Shareholders, the Company Real Property is in compliance in all material
respects with all applicable building, zoning, environmental and other land use
and similar laws, codes, ordinances, rules, regulations and orders of
governmental authorities (collectively, "Real Property Laws"), and none of the
Shareholders and the Company has received any notice of violation or claimed
violation of any Real Property Law.
4.11.9 Condemnation. None of the Shareholders and the Company
has received notice of, and none has any knowledge of any pending, threatened or
contemplated condemnation proceeding affecting the Company Real Property or any
part thereof or of any sale or other disposition of the Company Real Property or
any part thereof in lieu of condemnation.
4.11.10 Casualty. No portion of the Company Real Property has
suffered any material damage by fire or other casualty which has not been
completely repaired and restored to its original condition.
4.11.11 Encroachments. To the knowledge of each of the
Shareholders, there are no encroachments or other facts or conditions affecting
any parcel of the Company Real Property that would be revealed by an accurate
survey thereof which would,
18
individually or in the aggregate, (a) interfere in any material respect with the
use, occupancy or operation thereof as currently used, occupied and operated or
as intended to be used, occupied and operated or (b) materially reduce the fair
market value thereof below the fair market value such parcel would have had but
for such encroachment or other fact or condition. To the knowledge of each of
the Shareholders, no portion of any of the Company Improvements encroaches upon
any property not included within the Company Real Property or upon the area of
any easement affecting the Company Real Property.
4.12 Accounts and Notes Receivable. All accounts and notes
receivable reflected on the Company Balance Sheet and all accounts and notes
receivable arising subsequent to the Company Balance Sheet Date have or will
have arisen in the ordinary course of business and represent valid obligations
to the Company.
4.13 Inventory. The inventory of the Company as set forth on the
Company Balance Sheet was, and the inventory of the Company on the date hereof
and on the Closing Date will be, in good and merchantable condition, reasonably
in balance and in useable or saleable condition in the ordinary course of
business, except for obsolete or defective materials and any excess stock items
which alone and in the aggregate are not material. Such inventory does
19
not include any material amounts of any item that was at any prior time written
off or written down by the Company. To the knowledge of the Shareholders, there
is no adverse condition affecting the supply of materials or inventories
available to the Company.
4.14 Tangible Property. The Company owns or leases all plant,
machinery, equipment, furniture, improvements, fixtures, vehicles, structures,
any related capitalized items and other tangible property material to its
business and necessary to the continued conduct of business in the ordinary
course by the Company (collectively, the "Company Tangible Property"). All
material leases, conditional sale contracts, franchises or licenses pursuant to
which the Company may hold or use any interest owned or claimed by it
(including, without limitation, options) in or to the Company Tangible Property
are listed in the Disclosure Statement and are in full force and effect. There
is no material default or event of default or event which with notice or lapse
of time or both would constitute a material default under any such lease,
contract, franchise or license. The Company Tangible Property is in good and
normal operating condition and repair, and the Company has not received notice,
and none of the Shareholders has any knowledge, that any of it is in material
violation of any existing law or any building, zoning, health, safety or other
ordinance, code or
20
regulation.
4.15 Intangible Property. The Disclosure Statement sets forth all
patents, copyrights, trademarks, service marks, trade names and franchises of
the Company (collectively, the "Company Intangible Property"), all applications
for the Company Intangible Property, and all permits, grants and licenses or
other rights running to or from the Company relating to the Company Intangible
Property which are material to or used in the business of the Company. All of
the Company Intangible Property is owned by the Company free and clear of any
liens or other encumbrances. The Company has no notice of any adversely held
patent, invention, copyright, trademark, service mark or trade name of any other
person or notice of any claim of any other person relating to any of the Company
Intangible Property or any process or confidential information of the Company
and none of the Shareholders knows of any basis for any such charge or claim.
4.16 Liens. The Company owns and will on the Closing Date own
outright and has and will have good and marketable title to all of its assets
and properties, including, without limitation, all of the assets and properties
reflected on the Company Balance Sheet, in each case free and clear of any lien
or other encumbrance, except for: (i) immaterial assets and properties; and
21
(ii) liens or other encumbrances securing taxes, assessments, governmental
charges or levies, or the claims of materialmen, carriers and like persons,
which are not yet due and payable.
4.17 Suppliers and Customers. Subject to normal fluctuations in
orders from customers in the ordinary course of business, the relationships of
the Company with its suppliers and customers are good commercial working
relationships, and no such supplier or customer has canceled or threatened to
cancel its relationship with the Company or has during the last 12 months
decreased materially, or threatened to decrease or limit materially, its
services, supplies or materials to the Company or its usage of the Company's
services or products. The Company does not have any notice, and none of the
Shareholders has any knowledge, that any such supplier or customer intends to
cancel or otherwise modify its relationship with the Company or to decrease
materially or limit its services, supplies or materials to the Company or its
usage of the services or products of the Company, and the sale of the Company
Common Stock to the Purchaser will not, to the best of the knowledge and belief
of each of the Shareholders, adversely affect the relationship with any such
supplier or customer.
4.18 Insurance. The Disclosure Statement sets forth all
22
policies or binders of fire, liability, workers' compensation, product
liability, vehicular or other insurance held by or on behalf of the Company
(describing each pending claim thereunder), other than workers compensation
claims and personal injury claims fully covered by insurance and arising in the
ordinary course of business). Such policies and binders are in full force and
effect. The Company is not in default with respect to any provision contained in
any such policy or binder and neither has failed to give any notice or present
any claim under any such policy or binder in due and timely fashion. None of the
Shareholders or the Company has received a notice of cancellation or non-renewal
of any such policy or binder.
4.19 Officers, Directors and Employees. The Disclosure Statement
sets forth a correct and complete list of all officers, directors and employees
of the Company as of the date thereof. There has been no material change in such
list since such date.
4.20 Operations of the Company. Since the Company Balance Sheet
Date, the Company has not:
(a) merged with or into or consolidated with any other person,
or changed or agreed to change in any manner the character of its business;
(b) entered into or amended any employment
23
agreement, entered into any agreement with any labor union or association
representing any employee or entered into or amended any Company Benefit Plan
(as defined in Section 4.24);
(c) incurred any indebtedness for borrowed money, except in
the ordinary course of business under existing agreements (except for
indebtedness incurred to the Purchaser);
(d) declared or paid any dividends or declared or made any
distributions of any kind to its shareholders;
(e) increased the aggregate amount of indebtedness and other
liabilities of the Company to the Shareholders or any of them and all entities
owned or controlled by the Shareholders or any of them;
(f) waived any right of material value to its business;
(g) materially changed any of its business policies,
including, without limitation, advertising, marketing, pricing, purchasing,
personnel, sales, returns, budget or product acquisition policies;
(h) made any wage or salary increase or bonus, or increase in
any other direct or indirect compensation, for or to any officer, employee,
consultant or agent, or any accrual for or commitment or agreement to make or
pay the same, other than to
24
persons not officers, directors or shareholders of the Company made in the
ordinary course of business;
(i) made any loan or advance to any of its officers,
directors, employees, consultants, agents or shareholders, other than travel
advances made in the ordinary course of business;
(j) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, employees, consultants or
agents, other than to persons not officers, directors or shareholders of the
Company made in the ordinary course of business;
(k) except in the ordinary course of business: entered into
any lease (as lessor or lessee); sold, abandoned or made any other disposition
of any of its assets or properties; granted or suffered any lien or other
encumbrance on any of its assets or properties; entered into or amended any
contract to which it is a party or by or to which it or its assets or properties
are bound or subject or pursuant to which it agrees to indemnify any party or
refrain from competing with any party;
(l) except for indebtedness to the Purchaser and except in the
ordinary course of business, incurred or assumed any debt, obligation or
liability (whether absolute or contingent,
25
whether or not currently due and payable and whether with an affiliate or
otherwise);
(m) except for inventory or equipment acquired in the ordinary
course of business, made any acquisition of all or any part of the assets,
properties, capital stock or business of any other person;
(n) except in the ordinary course of business, entered into
any other material contract or other agreement or other material transaction; or
(o) except in the ordinary course of business, otherwise paid
or transferred to any person any cash or cash equivalents of the Company.
4.21 Potential Conflicts of Interest. No officer, director or
shareholder of the Company: (a) owns, directly or indirectly, any interest in
(excepting not more than 1% stock holdings for investment purposes in securities
of publicly held and traded companies) or is an officer, director, employee or
consultant of any person which is a competitor, lessor, lessee, customer or
supplier of the Company; (b) owns, directly or indirectly, in whole or in part,
any copyright, trademark, trade name, service mark, franchise, patent,
invention, permit, license or secret or confidential information which the
Company is using or
26
the use of which is necessary for the business of the Company; or (c) has any
cause of action or other claim whatsoever against, or owes any amount to, the
Company, except for claims in the ordinary course of business, such as for
accrued vacation pay, accrued benefits under any Company Benefit Plan and
similar matters and agreements existing on the date hereof.
4.22 Full Disclosure. All documents and other papers delivered by or
on behalf of the Shareholders to the Purchaser in connection with this Agreement
and the transactions contemplated hereby are and will be complete and correct in
all material respects; and all contracts to which the Company is a party are
valid, subsisting and binding on the parties thereto in accordance with their
terms. The information furnished by or on behalf of the Shareholders to the
Purchaser in connection with this Agreement and the transactions contemplated
hereby does not and will not contain any untrue statement of a material fact and
does not and will not omit to state any material fact necessary to make the
statements made, in the context in which made, not false or misleading.
4.23 Liabilities. As at the Company Balance Sheet Date, the Company
had no direct or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, known or unknown, fixed, inchoate,
liquidated or unliquidated,
27
secured or unsecured, accrued, absolute, contingent or otherwise, including,
without limitation, liabilities on account of Taxes (as defined in Section 12),
other governmental charges or lawsuits brought, whether or not of a kind
required by GAAP to be set forth on a financial statement ("Liabilities"), which
are not fully and adequately reflected on the Company Balance Sheet. The Company
has no Liabilities, other than (a) Liabilities fully and adequately reflected on
the Company Balance Sheet, and (b) normal or recurring liabilities incurred
since the Company Balance Sheet Date in the ordinary course of business
consistent with past practice. None of the Shareholders has any knowledge of any
circumstances, conditions, events or arrangements which may hereafter give rise
to any Liabilities of the Company or any successor to the business of the
Company except in the ordinary course of business.
4.24 Employee Benefit Plans.
(a) The Shareholders have delivered to the Purchaser complete
and correct copies of: (a) all plan texts, agreements and material employee
communications relating to each Company Benefit Plan; (b) all summary plan
descriptions (whether or not required to be furnished pursuant to ERISA), the
most recent annual report (including all schedules thereto) and the most recent
annual and periodic accounting of related plan assets with respect
28
to each Company Benefit Plan which is an "employee benefit plan" (within the
meaning of section 3(3) of ERISA); and (c) the most recent actuarial valuation
and the most recent determination letter received from the Internal Revenue
Service with respect to each Pension Plan.
(b) To the knowledge of any Shareholder, no event has
occurred, and there exists no condition or set of circumstances in connection
with which the Company or any Company Benefit Plan or the Purchaser, directly or
indirectly, could be subject to any liability under ERISA, the Code or any other
law, regulation or governmental order with respect to any employee benefit plan
described in section 3(3) of ERISA. Each Company Benefit Plan conforms to, and
its administration is in compliance with, all applicable laws and regulations,
including but not limited to ERISA and the Code. There are no actions, suits or
claims pending (other than routine claims for benefits) or threatened with
respect to any Company Benefit Plan or against the assets of any Company Benefit
Plan.
(c) No Company Benefit Plan provides medical or death benefits
(whether or not insured) with respect to current or former employees of the
Company beyond their retirement or other termination of service (other than (i)
coverage mandated by law or
29
(ii) death benefits under any Pension Plan).
(d) There are no reserves, assets, surplus or prepaid premiums
under any Company Benefit Plan which is a "welfare plan" (as defined in section
3(l) of ERISA).
(e) The present value of all "benefit liabilities" (as defined
in section 4001(a)(16) of ERISA) under each Pension Plan which is a "defined
benefit plan" (as defined in section 3(35) of ERISA) did not exceed as of the
most recent plan actuarial valuation date the then current fair market value of
the assets of such plan. There has been no material diminution in the fair
market value of such assets since the most recent plan valuation date. For
purposes of determining the present value of benefit liabilities under any such
plan, the actuarial assumptions and methods used under such plan for the most
recent plan actuarial valuation shall be used, except that the interest and
mortality assumptions utilized by the Pension Benefit Guaranty Corporation for
valuing liabilities of Pension Plans terminating as of the Closing Date shall be
substituted for the interest and mortality assumptions used by such plan, and
all benefits provided under such plan shall be deemed to be fully vested.
(f) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or
30
former employee of the Company to severance pay, unemployment compensation or
any similar payment or (ii) accelerate the time of payment or vesting, or
increase the amount of any compensation due to any such employee or former
employee.
(g) No Company Benefit Plan is a "multiple employer plan,"
within the meaning of the Code or ERISA or the regulations promulgated
thereunder, and the Company has not made any contributions to or participated in
any "multiple employer plan".
(h) Whenever any of the terms set forth below is used in this
Section 4.24 or elsewhere in this Agreement it shall have the following meaning:
(i) "Company Benefit Plan" shall mean any plan, agreement, arrangement or
commitment which is an employment, consulting or deferred compensation
agreement, or an executive compensation, incentive bonus, employee pension,
profit-sharing, savings, retirement, stock option, stock purchase, or severance
pay plan, or a life, health, disability or accident insurance plan, or a
holiday, vacation, Christmas or other bonus practice or other employee benefit
plan, agreement, arrangement or commitment, including, without limitation, any
"employee benefit plan," as defined in section 3(3) of ERISA, maintained by or
with respect to which the Company has or in the future may have, any liability
or obligation with respect to any current or former
31
employees of the Company, or their beneficiaries; (ii) "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended; and (iii) "Pension
Plan" shall mean a Company Benefit Plan which is a "pension plan," as defined in
section 3(2) of ERISA.
32
4.25 Tax Matters.
(a) The Company has: (i) timely paid all Taxes required to be paid
by it through the date hereof and shall timely pay all Taxes required to be paid
by it after the date hereof and through the Closing Date; and (ii) timely filed
all returns, declarations, reports, information returns and statements in
respect of Taxes ("Tax Returns") required to be filed through the date hereof,
and shall prepare and timely file all Tax Returns required to be filed after the
date hereof and through the Closing Date. All Tax Returns filed pursuant to the
preceding clause (ii) after the date hereof shall, in each case, be prepared and
filed in a manner consistent (including elections and accounting methods and
conventions) with the Tax Return most recently filed in the relevant
jurisdiction prior to the date hereof, except as otherwise required by law or
agreed to by the Purchaser.
(b) No audit relating to Tax liability of the Company is in
progress, no extension of time is in force with respect to any date on which any
Tax Return of the Company was or is to be filed and no waiver or agreement is in
force for the extension of time for the assessment or payment of any Tax by the
Company, nor will any such extension of time or waiver or agreement be filed by
or in effect for the Company at any time through the Closing Date.
33
(c) The Company has not agreed and is not required to make, and will
not at any time through the Closing Date agree to be required to make, any
adjustment under (or in the manner provided by) section 481(a) of the Code by
reason of a change in accounting method or otherwise.
(d) Neither the Company nor any predecessor has, at any time,
consented under section 314(f)(1) of the Code, or agreed under section 314(f)(3)
of the Code, or will at any time through the Closing Date consent or agree, to
have the provisions of section 314(f)(2) of the Code apply.
4.26 Environmental Matters.
(a) To the knowledge of any Shareholder, as of the date hereof, no
underground storage tanks are present under any property that the Company or any
affiliate now owns or any property that the Company or any affiliate has at any
time owned, operated, occupied or leased. As of the date hereof, no substance
that has been designated by any federal, state or local governmental agency,
board or authority (a "Governmental Entity") or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the
34
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation Recovery Act of 1976, as amended, or any state law, and
the regulations promulgated pursuant to said laws, (a "Hazardous Material"), but
excluding office and janitorial supplies, is present, as a result of the actions
of the Company or to the knowledge of any of the Shareholders, any actions of
any third party or otherwise, in, on or under any property, including the land
and the improvements, ground water and surface water, that the Company or any
affiliate has at any time owned, operated, occupied or leased.
(b) At no time has the Company or an affiliate transported, stored,
used, manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date. Neither the Company or any affiliate has disposed of, transported, sold,
or manufactured any product containing a Hazardous Material (collectively,
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity, which violation
would have a material adverse effect on the Company.
35
(c) The Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of its Hazardous Material Activities and other
businesses as such activities and businesses are currently being conducted, the
absence of which would have a material adverse effect on the Company.
(d) No action, proceeding, revocation proceeding, amendment
procedure, writ injunction or claim is pending or, to the knowledge of any of
the Shareholders or the Company, threatened concerning any Environmental Permit
or any Hazardous Materials Activity of the Company. None of the Shareholders or
the Company is aware of any fact or circumstance which could involve the Company
in any environmental litigation or impose upon the Company any environmental
liability which would have a material adverse effect on the Company.
4.27 Articles and Bylaws. The Company has delivered to the Purchaser
true and correct copies of the Articles of Organization and Bylaws of the
Company, and all amendments thereto, certified as true and correct by the Clerk
of the Company (collectively, the "Company Organization Documents").
4.28 Year 2000. The Company has taken all reasonable action to
access, evaluate and correct all of the hardware,
36
software, embedded microchips and other processing capabilities it uses,
directly or indirectly, to ensure that they will be able to function accurately
and without interruption or ambiguity using date information before, during and
after January 1, 2000.
4.29 Books and Records.
(a) The books of account and other financial records of the Company
are, in all respects, complete and correct and are maintained in accordance with
good business practices, and are accurately reflected in the Financial
Statements.
(b) The Company has not engaged in any transaction, maintained any
bank account or used any corporate funds except for transactions, bank accounts
and funds which have been and are reflected in the normally maintained books and
records of the Company.
(c) The minute books of the Company contain accurate records of all
meetings and accurately reflect all other corporate action of the stockholders
and directors and any committees of directors of the Company.
5. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company and to the Shareholders as follows:
5.1 Organization. The Purchaser is a corporation duly
37
organized, validly existing and in good standing under the laws of Delaware.
5.2 Authorization of Transaction. The Purchaser has all requisite
power and authority to execute and deliver this Agreement and the other
instruments and agreements to be delivered pursuant hereto, including the Notes,
and to perform its obligations hereunder and thereunder. The execution, delivery
and performance of this Agreement by the Purchaser and the consummation of the
transactions contemplated hereby have been or will have been on the Closing
Date, duly and validly authorized by all necessary corporate action on the part
of the Purchaser. This Agreement has been duly and validly executed and
delivered by the Purchaser and constitutes, and each Note when executed and
delivered will be, a valid and binding obligation of the Purchaser enforceable
against Purchaser in accordance with its terms, except to the extent
enforceability may be limited by applicable insolvency, bankruptcy or similar
laws affecting the enforcement of creditors' rights generally.
5.3 Noncontravention. Neither the execution and delivery of this
Agreement by the Purchaser, nor the consummation by the Purchaser of the
transactions contemplated hereby will (a) conflict with or violate any provision
of the charter or By-laws of the
38
Purchaser, (b) require on the part of the Purchaser any filing with, or permit,
authorization, consent or approval of, any governmental entity, other than any
filing, permit, authorization, consent or approval which if not obtained or made
would not have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Purchaser or on the
ability of the parties to consummate the transactions contemplated by this
Agreement, (c) conflict with, result in breach of, constitute (with or without
due notice or lapse of time or both) a default under, result in the acceleration
of, create in any party any right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, security interest or other
arrangement to which the Purchaser is a party or by which the Purchaser is bound
or to which any of its assets are subject other than any conflict, breach,
default, acceleration, termination, modification or cancellation which
individually or in the aggregate would not have a material adverse effect on the
assets, business, financial condition, results of operations or future prospects
of the Purchaser or on the ability of the parties to consummate the transactions
39
contemplated by this Agreement or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Purchaser or any of its
properties or assets.
5.4 Commission Reports. The Commission Reports constitute all of the
documents required to be filed by the Purchaser under Section 13 of the Exchange
Act with the SEC since January 1, 1997. As of their respective dates, the
Commission Reports did not 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. The audited financial statements and unaudited interim
financial statements of the Purchaser included in the Commission Reports (a)
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (b) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby (except as may be indicated therein
or in the notes thereto, and in the case of quarterly financial statements, as
permitted by Form 10-Q under the Securities Exchange Act of 1934, as amended),
(c) fairly present the consolidated financial condition, results of operations
and cash flows of the Purchaser as
40
of the respective dates thereof and for the periods referred to therein, and (d)
are consistent with the books and records of the Purchaser.
5.5 Absence of Material Litigation or Adverse Changes. Neither the
Purchaser nor any of its subsidiaries is a party to, or threatened with, any
litigation or judicial, administrative or arbitration proceeding which if
decided adversely could have a material adverse effect upon the transactions
contemplated hereby or upon the assets, properties, business, prospects or
condition, financial or otherwise, of the Purchaser and its subsidiaries, taken
as a whole. Since December 31, 1998, there has not been any material adverse
change in the assets, business, outstanding capital stock, indebtedness,
financial condition or results of operations of the Purchaser, nor has there
occurred any event or development which could reasonably be foreseen to result
in such a material adverse change in the future.
5.6 Brokers' Fees. The Purchaser has not dealt with any broker,
finder or agent with respect to the transactions contemplated by this Agreement.
6. Covenants and Agreements. The parties covenant and agree as follows:
6.1 Conduct of Business. (a) From the date hereof
41
through the Closing Date, the Shareholders shall cause the Company to conduct
its business in the ordinary course and, without the prior written consent of
the Purchaser, not undertake any of the actions specified in Section 4.20. From
the date hereof through the Closing Date, except in the ordinary course of
business, the Shareholders shall not permit the Company to enter into or permit
the Company or its assets to become bound by or subject to, any contracts of the
type required to be disclosed pursuant to Section 4.10. From the date hereof
through the Closing Date, the Shareholders shall cause the Company to continue
to manage its inventories, accounts receivable, accounts payable, and payroll in
accordance with past practice in the ordinary course of business. In the event
that, in the ordinary course of business, the Company enters into, or the
Company or its assets becomes bound by or subject to, any contracts of the type
required to be disclosed pursuant to Section 4.10, the Shareholders shall give
the Purchaser written notice thereof.
(b) From the date hereof through the Closing Date, the
Purchaser shall conduct its business in the ordinary course.
6.2 Insurance. From the date hereof through the Closing Date, the
Shareholders shall cause the Company to maintain in force (including necessary
renewals thereof) the insurance policies
42
listed in the Disclosure Statement, except to the extent that they may be
replaced with equivalent policies appropriate to insure its assets and business
to the same extent as currently insured at the same or lower rates or at the
rates approved by the Purchaser.
6.3 Preservation of Business. From the date hereof through the
Closing Date, the Shareholders shall cause the Company to preserve its business
organization intact, keep available the services of its present officers,
employees, consultants and agents, maintain its present suppliers and customers
and preserve its goodwill.
6.4 Litigation. From the date hereof through the Closing Date, the
Shareholders shall notify promptly the Purchaser of any actions or proceedings,
after the date hereof, of the type described in Section 4.9 commenced or
threatened against the Company or against any officer, director, employee,
consultant, agent, shareholder or other representative of the Company with
respect to the affairs of the Company.
6.5 Continued Effectiveness of Representations and Warranties. From
the date hereof through the Closing Date, the Shareholders shall cause the
Company to, and the Purchaser shall, respectively, conduct its business in such
a manner so that the representations and warranties contained in Sections 4 and
5,
43
respectively, shall continue to be true and correct on and as of the Closing
Date as if made on and as of the Closing Date. Each party shall promptly be
given notice by the other of any event, condition or circumstance occurring from
the date hereof through the Closing Date that would constitute a violation or
breach of this Agreement.
6.6 Corporation Examinations and Investigations. Prior to the
Closing Date, the Shareholders shall cause the Company to permit the Purchaser,
through its employees and representatives, including, without limitation, its
counsel and accountants, to make such investigation, including, without
limitation, environmental assessments and studies, of the assets, properties,
business and operations of the Company, and such examination of the books,
records and financial condition of the Company as they wish. Any such
investigation and examination shall be conducted at reasonable times and under
reasonable circumstances, and each party shall cooperate fully therein. The
Shareholders shall cause the Company make available to the representatives of
the Purchaser all such information and copies of such documents concerning the
affairs of the Company as such representatives may reasonably request and cause
its officers, employees, consultants, agents, accountants and attorneys to
cooperate fully with such representatives in
44
connection with such review and examination. All such information disclosed to
the Purchaser shall be kept confidential until the Closing, except as required
to be disclosed by applicable law.
6.7 Related Parties. Except for obligations of RL under the Split
Dollar Agreement (defined in the Disclosure Statement), the Shareholders shall,
prior to the Closing, pay or cause to be paid to the Company all indebtedness
and other amounts owed to the Company by the Shareholders, or by any entity
owned or controlled by the Shareholders.
6.8 Expenses of Sale. Each of the parties hereto agrees that each
shall bear its own direct and indirect expenses incurred in connection with the
negotiation and preparation of this Agreement and the consummation and
performance of the transactions contemplated hereby, ("Transaction Fees"),
except that the Company may pay, or reimburse the Shareholders for, such
Transaction Fees incurred by them as Purchaser may reasonably approve.
6.9 Further Assurances. Each of the Shareholders shall execute after
the date hereof such documents and other papers and perform such further acts as
may be reasonably required or desirable to satisfy the conditions precedent set
forth in Section 7 and to carry out the provisions hereof and the transactions
contemplated hereby. The Purchaser shall execute after the date
45
hereof such documents and other papers and perform such further acts as may be
reasonably required or desirable to satisfy the conditions precedent set forth
in Section 8 and to carry out the provisions hereof and the transactions
contemplated hereby.
6.10 Amendment to Documents. Each of the Shareholders agrees to take
no action to amend, or permit the amendment of, any of the Company Organization
Documents without the prior written consent of the Purchaser, which consent
shall not be unreasonably withheld.
7. Conditions Precedent to the Obligation of the Purchaser. The
obligations of the Purchaser to enter into and complete the Closing are subject,
at its option, to the fulfillment on or prior to the Closing Date of the
following conditions, any one or more of which may be waived:
7.1 Representations and Covenants. The representations and
warranties of the Shareholders contained in this Agreement shall be true in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date. Each of the Shareholders shall
have performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied by each on or
prior to the Closing Date. Each of the Shareholders shall have
46
delivered to the Purchaser a certificate, dated the Closing Date and signed by
the Shareholders to the foregoing effect.
7.2 Opinion of Counsel to the Shareholders. The Purchaser shall have
received the opinion of Gary E. Martinelli & Associates, P.C., counsel to the
Shareholders, dated the date of the Closing, addressed to the Purchaser, in form
and substance reasonably acceptable to the Purchaser and its counsel.
7.3 Employment and Consulting Agreements. Concurrently with the
Closing, JM and RP shall have entered into an Employment Agreement with the
Purchaser (the "Employment Agreement") substantially in the form attached hereto
as Exhibit D, and RL shall have entered into a Consulting Agreement with the
Purchaser (the "Consulting Agreement"), substantially in the form attached
hereto as Exhibit E.
7.4 Confidentiality and Non-Competition Agreement. Concurrently with
the Closing, each of the Shareholders shall have executed and delivered to the
Purchaser a Confidentiality and Non-Competition Agreement substantially in the
form attached hereto as Exhibit F.
7.5 Consents and Approvals. The Purchaser shall have received,
without expense to it, executed originals of any and all consents, approvals
and/or waivers required under any agreement,
47
contract or undertaking to which the Company is a party or by which it is bound
in order to permit the consummation of the transactions provided for herein
without causing or resulting in a default, event of default, acceleration event
or termination event under any of such documents and without entitling any party
to any of such documents to exercise any other right or remedy adverse to the
interests of the Purchaser or the Company thereunder. Each such consent,
approval and/or waiver shall be in form satisfactory to counsel for the
Purchaser.
7.6 FIRPTA Affidavit. If requested by the Purchaser, the Purchaser
shall have received an affidavit of the Company and the Shareholders, sworn to
under penalty of perjury, setting forth the name, address and Federal tax
identification number and stating that none is a "foreign person" within the
meaning of Section 1445 of the Code.
7.7 Satisfaction of Review. The matters contained in the Disclosure
Statement and the results of the investigation of the business properties and
affairs of the Company by the Purchaser shall be satisfactory in all material
respects to the Purchaser and its counsel.
7.8 Lenders' Consents. The Purchaser shall have received the
written consents of its lenders, if required.
48
7.9 Loan Agreements. The Company, at the prior written request of
the Purchaser, shall have validly terminated the loan agreements between the
Company and BankBoston, N.A. to permit the repayment of all indebtedness
thereunder on the Closing Date, in each case without premium, penalty or other
payment or consideration, and the Purchaser shall have arranged for the
extension of credit on the Closing Date to the Company by the Purchaser's
lender, on terms and conditions reasonably satisfactory to the Purchaser, for
the purpose of repaying the indebtedness owed by the Company to BankBoston, N.A.
and providing working capital to the Company.
7.10 Audited Financial Statement. The Shareholders shall have caused
the Company to deliver Financial Statements as of and for the periods ending
August 3, 1997 and August 2, 1998 (the "Audited Financial Statements") prepared
and audited by Pricewaterhouse Coopers LLP or other independent certified
accountants acceptable to the Purchaser, and the Audited Financials Statements,
and the accountants' report thereon shall be reasonably satisfactory to the
Purchaser.
7.11 Resignations. The Shareholders shall have caused such directors
of the Company specified by the Purchaser to resign from such office, effective
the Closing.
49
8. Conditions Precedent to the Obligation of the Shareholders. The
obligation of the Shareholders to enter into and complete the Closing is
subject, at their option, to the fulfillment of the following conditions, any
one or more of which may be waived:
8.1 Representations and Covenants. The representations and
warranties of the Purchaser contained in this Agreement shall be true in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date. The Purchaser shall have paid the
Purchase Price and shall have performed and complied in all material respects
with all other covenants and agreements required by this Agreement to be
performed or complied with by the Purchaser on or prior to the Closing Date. The
Purchaser shall have delivered to the Company a certificate, dated the Closing
Date and signed by an officer of the Purchaser, to the foregoing effect.
8.2 Opinion of Counsel to the Purchaser. The Shareholders shall have
received the opinion of Cameron & Mittleman LLP counsel to the Purchaser, dated
the date of the Closing, addressed to the Shareholders in form and substance
reasonably acceptable to the Shareholders and their counsel.
8.3 Employment and Consulting Agreements. Each of the
50
Employment Agreements and the Consulting Agreement shall have been executed and
delivered by each of the parties thereto.
9. Survival of Representations and Warranties. Notwithstanding any right
of any party fully to investigate the affairs of the Company and the Purchaser,
and notwithstanding any knowledge of facts determined or determinable by either
party pursuant to such investigation or right of investigation, each party has
the right to rely fully upon the representations, warranties, covenants and
agreements of the other party contained in this Agreement or in any document
delivered in connection with the transactions contemplated by this Agreement.
All of the representations, warranties, covenants and agreements of the
Shareholders and the Purchaser shall survive the Closing for a period of two (2)
years, except with respect to the provisions of Sections 3, 4.25 and 4.26, which
shall survive until the earlier of seven (7) years from the date hereof or the
expiration of the applicable statutes of limitations.
10. Indemnification.
10.1 Obligation of the Shareholders to Indemnify. The Shareholders,
jointly and severally, shall indemnify, defend and hold harmless the Purchaser,
its successors in interest and its affiliates and assigns from and against any
losses, liabilities,
51
damages or deficiencies (including interest, penalties and reasonable attorneys'
fees) ("Losses") based on, arising out of or due to an inaccuracy in, or breach
of, any of the representations, warranties and agreements of the Shareholders
contained in this Agreement.
10.2 Obligation of the Purchaser to Indemnify. The Purchaser shall
indemnify, defend and hold harmless the Shareholders from and against any Losses
based on, arising out of or due to an inaccuracy in, or breach of, any of the
representations, warranties and agreements of the Purchaser contained in this
Agreement.
10.3 Notice to Indemnifying Party. If any party (the "Indemnitee")
receives notice of any claim or other commencement of any action or proceeding
with respect to which any other party (or parties) is obligated to provide
indemnification (the "Indemnifying Party") pursuant to Section 10.1, or 10.2,
the Indemnitee shall promptly give the Indemnifying Party notice thereof prior
to the expiration of the applicable representation, warranty, covenant or
agreement provided in Section 9. Such notice shall not be a condition precedent
to any liability of the Indemnifying Party under the provisions for
indemnification contained in this
52
Agreement. The Indemnifying Party may compromise or defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, any such
matter involving the asserted liability of the Indemnitee. In the event that the
Indemnifying Party elects not to compromise or defend such matter, then the
Indemnitee, at the Indemnifying Party's expense, but by the Indemnitee's
counsel, may defend such matter. The Indemnitee may not compromise the defense
of any such matter without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. In any event, the Indemnitee,
the Indemnifying Party and the Indemnifying Party's counsel (and, if applicable,
the Indemnitee's counsel) shall cooperate in the compromise of, or defense
against, any such asserted liability. If the Indemnifying Party answers the
defense of such an action, no compromise or settlement thereof may be effected
by the Indemnifying Party without the Indemnitee's consent, which shall not be
unreasonably withheld and the Indemnifying Party shall have no liability with
respect to any compromise or settlement thereof effected without its consent,
which shall not be unreasonably withheld. If the Indemnifying Party chooses to
defend any claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are
53
necessary or appropriate for such defense.
10.4 Set-Off. In addition to any other rights or remedies which the
Purchaser may have, at law or equity, the Purchaser shall have the right to
set-off the amount of any and all Losses (which have been finally determined)
against any amounts due and owing under the Notes or otherwise due the
Shareholders under this Agreement. If a claim for indemnification shall arise in
an unliquidated amount, then in addition to any other rights or remedies which
the Purchaser may have, at law or in equity, the Purchaser shall have the right
to pay any amounts owed under the Notes into a segregated, interest bearing
account (the "Account") the Purchaser's bank, until the amount of the Loss is
determined or resolved.
54
11. Termination.
11.1 Termination. This Agreement may be terminated at any time on or
prior to the Closing Date by written notice as follows: (a) by mutual written
consent of the Shareholders and the Purchaser; (b) by either the Purchaser or
the Shareholders if any of the conditions to the performance of its obligations
set forth in Section 7 or 8, respectively, has not been satisfied or waived on
or before the Closing Date; or (c) by the Shareholders or the Purchaser, if
there has been a material breach of any representation, warranty, covenant or
agreement on the part of the other party set forth in this Agreement, which
breach shall not have been cured within ten (10) business days following receipt
by the breaching party of written notice of such breach from the other party, or
prior to the Closing Date, whichever is earlier.
11.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 11.1, this Agreement shall immediately become
void, and there shall be no liability or obligation on the part of the
Shareholders or the Purchaser or its officers, directors, stockholders or
affiliates except to the extent that such termination results from the willful
breach by a party of any of its representations, warranties or covenants set
forth in this Agreement or from the fraud of such party; provided
55
that the provisions of Section 6.8 shall remain in full force and effect and
survive any termination of this Agreement.
12. Miscellaneous.
12.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
(a) "affiliate," with respect to any person, means and
includes any person controlling, controlled by or under common control with such
person.
(b) "contracts" means and includes all contracts, agreements,
indentures, bonds, leases, mortgages, franchises, licenses, commitments or
binding arrangements, express or implied.
(c) "document or other papers" means and includes any
document, agreement, instrument, certificate, notice, consent, affidavit,
letter, telegram, telex, statement, schedule (including any Schedule to this
Agreement), exhibit (including any Exhibit to this Agreement) or any other paper
relating to this Agreement.
(d) "knowledge" means, with respect to the Purchaser, the
current actual knowledge of the President of the Purchaser, and with respect to
the Shareholders, the current actual knowledge of the Shareholders or any of
them.
(e) "lien or other encumbrance" means and includes
56
any lien, pledge, mortgage, security interest, deed of trust, claim, lease,
charge, option, right of first refusal, easement, restrictive covenant,
encroachment or other survey defect or any other encumbrance whatsoever.
(f) "person" means any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, trust, unincorporated
organization or other entity.
(g) "Property" means real, personal or mixed property.
(h) "Taxes" means all federal, state, county, local, foreign
and other taxes (including, without limitation, income, profits, premium,
estimated, excise, sales, use occupancy, gross receipts, franchise, ad valorem,
severance, capital levy, production, transfer, withholding, employment and
payroll related, and property taxes, import duties and other governmental
charges and assessments), whether or not measured in whole or in part by net
income, and including related interest, additions to tax and penalties.
12.2 Publicity. The Purchaser may release or announce to the public
the transactions set forth in this Agreement concurrently with or after the
execution and delivery of this Agreement, the form and substance thereof to be
determined by the
57
Purchaser. The Shareholders shall make no public announcement with respect to
this Agreement without the prior written consent of the Purchaser.
12.3 Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and shall be delivered personally,
sent by facsimile transmission or sent by certified, registered or express mail,
postage prepaid, and shall be deemed given when so delivered personally, sent by
facsimile transmission, or if mailed, three days after the date of mailing (two
days in the case of express mail), but excluding Saturdays, Sundays and
holidays, as follows:
(a) if to the Purchaser, to:
Infinite Group, Inc.
2364 Post Road
Warwick, Rhode Island 02886
Attention: Clifford G. Brockmyre, President
with a copy to:
Cameron & Mittleman LLP
56 Exchange Terrace
Providence, Rhode Island 02903
Telecopier No.: 401-331-5787
Attention: Joseph F. Whinery, Esq.
And to:
Kenneth S. Rose, Esq.
Morse, Zelnick, Rose & Lander
450 Park Avenue - Suite 902
New York, New York 10022
58
Telecopier No.: 212-838-9190
(b) if to the Shareholders, to:
Ralph P. Lazzara
20 Wintergreen Lane
Westfield, MA 02085
John T. Monaghan
74 Sears Road
Goshen, MA 02032
Roger Beauregard
132 Jarvis Avenue
Holyoke, MA 01040
Roger Poirier
22 Sterling Drive
Easthampton, MA 01027
with a copy to:
Gary E. Martinelli & Associates, P.C.
1500 Main Street
P.O. Box 15407
Springfield, Massachusetts 01115
Telecopier No.: 413-747-3928
Attention: Gary E. Martinelli, Esq.
12.4 Entire Agreement. This Agreement (including the Exhibits hereto
and the Disclosure Statement) contains the entire agreement among the parties
with respect to the acquisition of the Company Shares and related transactions
and supersedes all prior agreements, written or oral, with respect thereto.
12.5 Waivers and Amendments. This Agreement may be
59
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived only by a written instrument signed by the
parties or, in the case of a waiver, the party waiving compliance. No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which any party may otherwise have at law or
in equity. The rights and remedies of any party arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty, covenant
or agreement contained in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties) as to which there is
no inaccuracy or breach. Time is of the essence in the payment and performance
of all agreements and obligations of
60
the parties under this Agreement.
12.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State.
12.7 No Assignment. This Agreement is not assignable by any of the
Shareholders except by operation of law. The Purchaser may assign its rights and
obligations hereunder to any wholly-owned subsidiary of the Purchaser. The
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, administrators, executors and permitted assigns.
12.8 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.10 Headings. The headings in this Agreement are intended solely
for convenience of reference and shall be given no effect in the interpretation
of this Agreement.
61
13. Company Pension Plan. Notwithstanding anything to the contrary
contained herein, to the extent commercially reasonable and permitted by
applicable laws, the Purchaser agrees (a) to cause the Company to maintain in
effect for a period of at least ten (10) years the Osley & Whitney Retirement
Plan (the "Plan") as described in the Summary Plan Description dated July, 1995,
and (b) to make no material changes to the benefits under the Plan during such
period without, in each case, the written consent of at least two (2) of the
Shareholders, which consent shall not be unreasonably delayed and which consent
shall not be withheld if the requested change will not alter any vested benefits
of a Plan participant and is reasonably shown to be in the best interests of the
Company and the Plan participants. In addition, Purchaser (a) shall not permit
the trustees under the Plan to purchase shares of Purchaser and (b) for as long
as he remains an employee of the Company, Purchaser shall cause the Company to
appoint John T. Monaghan as a trustee of the Plan in accordance with the terms
thereof.
[The following page is the signature page]
62
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
INFINITE GROUP, INC.
By:_____________________________________
Clifford G. Brockmyre
SHAREHOLDERS:
________________________________________
John T. Monaghan
________________________________________
Ralph P. Lazzara
________________________________________
Roger Poirier
________________________________________
Roger Beauregard
63