Exhibit 99.1
Execution Copy
AGREEMENT AND PLAN OF
MERGER
THIS AGREEMENT AND PLAN OF
MERGER (this
“Agreement”) is dated as of March
, 2007 by and among Bernard Leff
(“Non-Management Stockholder #1”), Jank Partners LLC
(“Non-Management Stockholder #2”), and Amerimedical
Holdings, Inc. (“Non-Management Stockholder #3”, and
collectively with Non-Management Stockholder #1 and Non-Management
Stockholder #2, are the “Non-Management Stockholders”),
Marc Waldman (“Management Stockholder #1”), William
Tobin (“Management Stockholder #2”), Joseph Anastasio
(“Management Stockholder #3”) and Jeanne Wilde
(“Management Stockholder #4”, and collectively with
Management Stockholder #1, Management Stockholder #2 and Management
Stockholder #3, are the “Management Stockholders”,
which collectively with the Non-Management Stockholders, are the
“Stockholders”), Marc Waldman, as agent for the
Stockholders (the “Stockholders’ Representative”
and the “Exchange Agent”), Ortho-Medical Products Inc.,
a New York corporation (the “Corporation”), Andover
Management Services, Inc., a New York corporation (the
“Buyer”), and Andover Medical, Inc., a Delaware
corporation and the sole stockholder of the Buyer (the
“Guarantor”).
W I T N E S S E T
H:
WHEREAS, the Corporation is in the business of
distributing orthopedic durable medical equipment, orthotics and
prosthetics and respiratory equipment (the
“Business”);
WHEREAS, the Stockholders collectively own, directly or
indirectly, 100% of the issued and outstanding shares of common
stock, without par value (the “Stock”), of the
Corporation;
WHEREAS, the Boards of Directors of the Buyer and the
Guarantor have determined that the Merger (defined below) is
consistent with and in furtherance of its long-term business
strategy and fair to, and in the best interest of the Buyer, the
Guarantor and their respective stockholders;
WHEREAS, the Board of Directors of the Corporation has
determined that the Merger is consistent with and in furtherance of
its long-term business strategy and fair to, and in the best
interest of the Corporation and its Stockholders;
WHEREAS, the Board of Directors of each of the Guarantor
(on its own behalf and as the sole stockholder of Buyer), Buyer and
the Corporation have each adopted resolutions approving this
Agreement and the merger of the Buyer with and into the Corporation
(the “Merger”), resulting in the cancellation of all of
the stock of the Buyer and with the Corporation continuing as the
surviving corporation in the Merger in
accordance with the New York
Business Corporation Law (“NYBCL”) and, in each such
case, upon the terms and conditions set forth in this
Agreement;
WHEREAS , each outstanding share of the Stock shall be
exchanged for Merger Consideration (as defined herein);
and
WHEREAS , for U.S. federal income tax purposes, it is
intended that the Merger shall constitute a reorganization within
the meaning of Section 368(a)(1)(A) and (a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the “Code”), and that
this Agreement shall constitute a “plan of
reorganization” within the meaning of Section 368(b) of the
Code.
NOW THEREFORE,
in consideration of the mutual
covenants of the parties as hereinafter set forth and other good
and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the parties hereto hereby agree as
follows:
Section 1. Merger
Transaction.
(a)
The Merger . Upon the terms and subject to the
conditions of this Agreement, the Merger shall be consummated in
accordance with the NYBCL. At the Effective Time, upon the
terms and subject to the conditions of this Agreement, Buyer shall
be merged with and into the Corporation in accordance with the
NYBCL and the separate existence of Buyer shall thereupon cease and
the Corporation, as the surviving corporation in the Merger (the
“Surviving Corporation”), shall continue its corporate
existence under the laws of New York as a wholly-owned subsidiary
of Guarantor.
(b)
Closing; Effective Time .
(i)
The closing of the Merger (the “Closing”) shall take
place at the offices of Phillips Nizer LLP, 666 Fifth Avenue, New
York, New York 10103-0084, or at such other location as may be
agreed to by the parties, at 10:00 A.M. within twenty (20) days of
Buyer’s receipt and acceptance of the Additional Financial
Statements under Sections 4(b)(vii) and 8(g) hereof or at such
other date (the “Closing Date”), but not later than
April 15, 2007. The deliveries to be made by each of the
parties at the Closing are specified in Sections 12 and 13
below.
(ii)
Subject to the provisions of this Agreement, at the Closing, the
parties shall file with the Secretary of State of New York a
certificate of merger (the “Certificate of Merger”) in
accordance with Article 9 of the NYBCL executed in accordance with
the relevant provisions of the NYBCL and shall make all other
filings or recordings required under such law in order to effect
the Merger. The Merger shall become effective for all
purposes as of the close of the Closing Date (the “Effective
Date”).
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(c)
Succession . At the Effective Time, the Buyer shall
succeed to all of the rights, privileges, debts, liabilities,
powers, property and contract rights of the Corporation in the
manner of and as more fully set forth in the NYBCL.
(d)
Conversion of Securities . At the Effective Time, by
virtue of the Merger and without any action on the part of the
holders of any securities of the Corporation, the Buyer or the
Guarantor:
(i)
All of the issued and outstanding shares of Stock shall
automatically be converted and exchanged for the right to receive
from Guarantor Two Million Five Hundred Thousand Dollars
($2,500,000.00), (i) with twenty percent (20%), or $500,000, being
paid in cash (the “Cash Consideration”), and (ii)
eighty percent (80%) being paid in shares of common stock of
Guarantor (the “Stock Consideration,” and together with
the Cash Consideration, the “Merger Consideration”),
but subject to adjustment pursuant to Section 1(g). For
purposes of determining the number of shares of Stock Consideration
to be issued to a Stockholder, (a) a share of common stock of
Guarantor shall be valued at the average of the closing price of
such stock on each of the last ten (10) trading days immediately
prior to the Closing Date (the “Fair Market Value”) and
(b) any fractional shares issuable to a Stockholder shall be
rounded up to the next whole share.
(ii)
Notwithstanding the foregoing, if the number of shares of Common
Stock of Guarantor comprising the Stock Consideration would exceed
3,000,000 Shares, the Buyer shall have the right under Section
11(d) herein to terminate this Agreement, and if they would be less
then 2,850,000 shares, the Stockholders’ Representative shall
have the right under Section 11(e) herein to terminate this
Agreement.
(iii)
Subject to delivery of a portion of the Merger Consideration into
escrow in accordance with the provisions of Section 1(f), at the
Closing (A) the Stock Consideration shall be delivered to the
Exchange Agent in trust for the Stockholders, pro rata in
accordance with each Stockholder’s percentage ownership of
Stock immediately before the Effective Time, as set forth on
Schedule 1(
d )(iii) (the “Pro Rata
Portions”), upon their surrender, in the manner provided in
Section 1 (i)
(ii) hereof, of
the certificate or certificates which immediately prior to the
Effective Time represents outstanding Stock (the
“Certificates”); and (B) the Cash Consideration shall
be paid directly to Loeb & Loeb LLP, attorneys to the
Corporation, by wire transfer of immediately available funds from
the Guarantor to an account specified in writing by Loeb & Loeb
LLP.
(iv)
With respect to any payment required to be made by a Stockholder to
the Guarantor pursuant to Section 1(g) herein, unless otherwise
provided for in Section 1(g), not more than twenty percent (20%) of
such payment must be made in cash and not less than eighty percent
(80%) of such payment may be made in shares of the Guarantor
received as part of the Merger Consideration, which shares shall be
valued at the average of the closing price of such stock on each of
the past ten (10) trading days immediately prior to the
payment.
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(e)
Treasury Stock . All Stock owned as treasury stock, if
any, shall be cancelled and retired by the Corporation without
payment of any consideration therefor and shall cease to
exist.
(f)
Delivery of Portion of Merger Consideration into Escrow
. At the Closing, Guarantor shall withhold from the Cash
Consideration, Seventy-Five Thousand ($75,000) Dollars (the
“Cash Escrow Amount”) and shall deposit the Cash Escrow
Amount in escrow with Phillips Nizer LLP as escrow agent (the
“Escrow Agent”). At the Closing, the Exchange
Agent shall deposit a number of shares equal to ten percent (10%)
of the Stock Consideration received by the Stockholders (with
fractional shares being rounded down to the next lower whole number
of shares), together with stock powers therefor endorsed in blank,
in escrow with the Escrow Agent (the “Stock Escrow
Amount”, and together with the Cash Escrow Amount, as
adjusted pursuant to the Escrow Agreement, is the “Escrow
Collateral”). The Escrow Collateral shall be held in
escrow by the Escrow Agent pursuant to, and released from escrow in
accordance with, the provisions of this Agreement and the escrow
agreement to be entered into at the Closing by and among Guarantor,
the Stockholders, the Stockholders’ Representative and the
Escrow Agent, substantially in the form attached hereto as
Exhibit A (the “Escrow Agreement”). The
Escrow Collateral is held by the Escrow Agent as security against
the payment and performance of the Stockholders’ obligations
with respect to (i) reductions in the Merger Consideration pursuant
to Section 1(g), subject to the limitations on each
Stockholder’s individual liability set forth in Section 1(g),
and (ii) the indemnification provisions of Section
6(b).
(g)
Adjustments to Merger Consideration .
(i)
The parties hereto agree that the Merger shall be accounted for on
the close of business on the Closing Date. The
Stockholders’ Representative agrees to consult with Buyer on
any material issues, events, conditions or contract relating to the
Corporation prior to the Closing. An adjustment to the Merger
Consideration (the “Adjusted Merger Consideration”)
shall be calculated and agreed to by both the Stockholders’
Representative and the Buyer which shall adjust the Merger
Consideration, as determined pursuant to this Section 1(g).
The Merger Consideration is based upon the Corporation reporting:
(A) accounts receivable of at least $900,000 and inventory and
fixed assets of at least $200,000 as of the close of business on
the Closing Date; and (B) net revenues of at least $3,000,000 and
net income of at least $70,000 for the year ended December 31, 2006
(the “Fiscal 2006”), subject to the provisions of
subsection (iii) below.
(ii)
The Stockholders’ Representative shall deliver to Buyer,
within forty-five (45) days after the Closing Date, and submit for
Buyer’s review, an unaudited balance sheet as of the close of
business on the Closing Date (“Closing Balance
Sheet”) prepared in accordance with generally accepted
accounting principles (“GAAP”), as historically and
consistently applied by the Corporation and as used in preparation
of the Additional Financial Statements (defined in Section
4(b)(vii)). In addition, prior to Closing, the Stockholders
shall have delivered to Buyer the Additional Financial
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Statements, among
which shall be included an audited income statement for Fiscal 2006
(the “2006 Income Statement”).
(iii)
If the 2006 Income Statement reflects net revenues of less than
$2,850,000 (95% of $3,000,000 represented) and/or net income of
less than $66,500 (95% of $70,000 represented) for Fiscal 2006 (in
either case an “Income Statement Shortfall”), then the
Cash Consideration shall be decreased by one dollar for each dollar
of Income Statement Shortfall (the “Income Statement
Shortfall Adjustment”). If the Closing Balance Sheet
reflects accounts receivable of less than $900,000 or inventory and
fixed assets of less than $200,000 as of the Closing Date (in
either case, a “Balance Sheet Shortfall”), then the
Cash Consideration shall be decreased by one dollar for each dollar
of Balance Sheet Shortfall (the “Balance Sheet Shortfall
Adjustment”).
(iv)
Buyer shall have the right, for a period of forty-five (45) days
from receipt of the Closing Balance Sheet to review same. If
the Buyer wishes to dispute the Closing Balance Sheet, then the
Buyer shall, within such forty-five (45) day period, deliver notice
of such dispute to the Stockholders’ Representative, which
notice shall contain an explanation of the Buyer’s dispute
with the Closing Balance Sheet. If no such notice is received
by Stockholders’ Representative within such forty-five (45)
day period, then the Closing Balance Sheet shall be final and
binding on the parties. If such a notice is received by
Stockholders’ Representative within such forty-five (45) day
period, Buyer and Stockholders’ Representative shall attempt,
for a period of forty-five (45) days after delivery of any such
notice, to reach an agreement with respect to the Closing Balance
Sheet, and if agreement is reached, then the Closing Balance Sheet
as so adjusted and agreed shall be final and binding on the
parties. If the Stockholders’ Representative and the
Buyer are unable to determine the matter by mutual agreement within
such forty-five (45) day period, then both parties shall cause the
disagreement to be submitted to binding arbitration as set forth in
Section 19 herein to finally determine the Closing Balance Sheet,
which as so determined shall be final and binding on the
parties. The 2006 Income Statement, in the form delivered to
the Buyer prior to Closing, shall be final and binding on the
parties and shall not be subject to challenge or dispute
hereunder. The Income Statement Shortfall Adjustment and the
Balance Sheet Shortfall Adjustment shall be determined by the
Guarantor and the Stockholders’ Representative from the 2006
Income Statement and the final Closing Balance Sheet within three
(3) days after the Closing Balance Sheet become final, and such
adjustments, if any, shall be paid by the Escrow Agent to the Buyer
from the Cash Escrow Amount in accordance with the terms of the
Escrow Agreement. To the extent the amount payable exceeds
the Cash Escrow Amount, each Stockholder shall be responsible
solely for its Pro Rata Portion of any such refund from the Merger
Consideration received by him or it pursuant to this
Agreement.
(v)
In addition to the adjustment to the Cash Consideration set forth
above, in this subsection, the Merger Consideration may also be
reduced by way of a delivery to Buyer from the Escrow Collateral in
the event that for the six (6) month period commencing the first
full month after the Closing (the “2007 Income
Statement”), the Corporation’s net revenues as
determined by the Corporation’s auditors are less than
$1,350,000 (a “2007 Income Statement Shortfall”) the
Buyer shall be entitled to receive
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from the Escrow
Collateral one dollar for each dollar of 2007 Income Statement
Shortfall (“2007 Income Statement Shortfall
Adjustment”).
(vi)
The Stockholders’ Representative shall have the right, for a
period of forty-five (45) days from receipt of the 2007 Income
Statement to review same. If the Stockholders’
Representative wishes to dispute the 2007 Income Statement
Shortfall Adjustment, then the Stockholders’ Representative
shall, within such forty-five (45) day period, deliver notice of
such dispute to the Guarantor, which notice shall contain an
explanation of the Stockholders’ Representative dispute with
the 2007 Income Statement Shortfall Adjustment. If no such
notice is received by Guarantor within such forty-five (45) day
period, then the 2007 Income Statement Shortfall Adjustment shall
be final and binding on the parities. If such a notice is
received by Guarantor within such forty-five (45) day period, the
Guarantor and Stockholders’ Representative shall attempt, for
a period of forty-five (45) days after delivery of any such notice,
to reach an agreement with respect to the 2007 Income Statement
Shortfall Adjustment, and if agreement is reached, then such 2007
Income Statement as so adjusted and agreed shall be final and
binding on the parties. If the Guarantor and the
Stockholders’ Representative are unable to determine the
matter by mutual agreement within such forty-five (45) day period,
then both parties shall cause the disagreement to be submitted to
binding arbitration as set forth in Section 19 herein to finally
determine the 2007 Income Statement, which as so determined shall
be final and binding on the parties. The final 2007 Income
Statement Shortfall Adjustment, if any, shall be paid by the Escrow
Agent to the Buyer from the Escrow Collateral, in the following
order: first, from the Cash Escrow Amount, and second, from the
Stock Escrow Amount (with each share being valued at the average of
the closing price of such stock on each of the last ten (10)
trading days immediately prior to the payment date and any
fractional shares rounded down to the next lowest whole number), in
each case allocated among the Stockholders in accordance with their
Pro Rata Portions. To the extent the amount payable exceeds
the Escrow Collateral, each Stockholder shall be responsible solely
for its Pro Rata Portion of any such refund from the Merger
Consideration received by him or it pursuant to this
Agreement.
(h)
Release of Merger Consideration from Escrow . In the
event that the Closing Balance Sheet as finally determined in
accordance with Section 1(g)(iv) does not require an adjustment to
the Merger Consideration, then the Escrow Agent shall promptly
release one-half of the Stock Escrow Amount (with any fractional
shares rounded up to the next highest whole number) to the
Stockholders in accordance with the terms and conditions of the
Escrow Agreement. On the first anniversary of the Closing
Date, in the event: (a) no claims for indemnification under Section
6(b) of this Agreement made by Buyer are outstanding at such time,
or, if any such claims are outstanding, the aggregate amount of
Losses claimed thereof is less than $50,000, and (b) no payment
obligation by the Stockholders for any 2007 Income Statement
Shortfall Adjustment remains outstanding or in dispute, then the
Escrow Agent shall release the remaining Escrow Collateral, plus
accrued interest, if any, on the Cash Escrow Amount, to the
Exchange Agent within five (5) business days following the first
anniversary of the Closing Date in accordance with the terms and
conditions of the Escrow Agreement.
(i)
Tender of and Payment for Certificates .
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(i)
Appointment of Exchange Agent . The Stockholders shall
designate Marc Waldman to act as Exchange Agent for the
Stockholders in connection with the Merger to receive in trust for
the Stockholders, pro rata, in accordance with each
Stockholder’s Pro Rata Portions, the Merger Consideration,
including final adjustments thereto in accordance with the
provisions of Section 1(g), to which the Stockholders shall become
entitled pursuant to this Agreement. If Marc Waldman becomes
unable to serve as Exchange Agent, another Stockholder or other
person, as may be designated by a majority of the Stockholders,
shall succeed as the Exchange Agent.
(ii)
Exchange Procedures . Promptly at Closing, each
Stockholder holding a Certificate or Certificates whose Stock was
exchanged pursuant to Section 1(d) hereof for the Merger
Consideration, upon surrender of the Certificates for the Stock and
delivery of such Certificates to the Exchange Agent, shall receive
in exchange therefor the Merger Consideration for each share of
Stock formerly represented by such Certificate, and the Certificate
so surrendered shall forthwith be delivered by the Exchange Agent
to the Guarantor. Until surrendered as contemplated by this Section
1(i), each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive its Pro Rata
Portion of the Merger Consideration as contemplated by Section 1(d)
hereof.
(iii)
Transfer Books; No Further Ownership Rights in the Stock
. At the Effective Time, the stock transfer books of the
Corporation shall be closed, and thereafter there shall be no
further registration of transfers of the Stock on the records of
the Corporation by the Stockholders. From and after the
Effective Time, the holders of Certificates evidencing ownership of
the Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Stock, except as
otherwise provided for herein or by applicable law. If, after
the Effective Time, Certificates are presented to the Exchange
Agent for any reason, they shall be cancelled and exchanged as
provided in this Section 1(i)(iii).
(iv)
Lost, Stolen or Destroyed Certificates . In the event
any Certificate(s) shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such
Certificate(s) to be lost, stolen or destroyed and, if required by
the Buyer, the posting by such person of a bond in such sum as the
Buyer may reasonably direct as indemnity against any claim that may
be made against any party hereto or the Buyer with respect to such
Certificate(s), the Guarantor will issue in exchange for such lost,
stolen or destroyed Certificate(s) the Merger Consideration to be
paid in respect of the Stock represented by such lost, stolen or
destroyed Certificate(s).
(j)
Directors and Officers . At and after the Effective
Time, the officers of the Corporation immediately prior to the
Effective Time shall be the officers of the Surviving Corporation
until the expiration of their respective terms and until their
successors have been elected and qualified. Immediately after
the Effective Time, the directors of the Surviving Corporation
shall be the persons mutually agreed to by the parties hereto prior
to the Closing, or such other persons as the Guarantor may
elect. If, at the Effective Time, a vacancy shall exist on
the Board of Directors or in any office of the Surviving
Corporation, such vacancy may thereafter be filled in the manner
provided by law.
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(k)
Other Effects of Merger . At and after the Effective
Time, title to all property owned by each of the Corporation and
the Buyer shall vest in the Surviving Corporation without reversion
or impairment, and the Surviving Corporation shall automatically
have all of the liabilities of each of the Corporation and the
Buyer. The Merger shall have all further effects as specified
in the applicable provisions of the NYBCL.
(l)
Additional Actions . If at any time after the
Effective Time, the Surviving Corporation shall consider or be
advised that any deeds, bills of sale, assignments, assurances or
any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Corporation or otherwise carry out
this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name
and on behalf of Corporation or the Buyer, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name
and on behalf of Corporation or the Buyer, all such other actions
and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.
(m)
Taking of Necessary Action; Further Action . If, at
any time after the Effective Time, any further action is necessary
or desirable to carry out the purposes of this Agreement and to
vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and
franchises of the Buyer, the officers and directors of the
Surviving Corporation are fully authorized in the name of the Buyer
or otherwise to take, and will take, all such lawful and necessary
action.
(n)
Certificate of Incorporation, By-Laws .
(i)
At the Effective Time, the Certificate of Incorporation (the
“Certificate of Incorporation”) of the Corporation, as
in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until
thereafter amended, as provided by law.
(ii)
At the Effective Time, the By-Laws of the Corporation, as in effect
immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended as provided by
law.
(o)
Intent . The parties intend that, for federal income
tax purposes, the Merger qualify as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code, and
that this Agreement constitutes a plan of reorganization within the
meaning of Section 368(b) of the Code. Each party shall treat
the Merger consistently with the foregoing, including filing the
information and maintaining the records required by Treasury
Regulations Section 1.368-3, and shall not take any position
inconsistent therewith. No party shall take any action that
would cause the Merger not to qualify as a reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the
Code.
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Section 2. Intentionally
Omitted.
Section 3. Other Agreements.
(a)
Employment Agreement . As an additional and material
inducement to Buyer to enter into this Agreement, at Closing,
Joseph Anastasio and Jeanne Wilde shall each enter into an
employment agreement (in substantially the form attached hereto as
Exhibit B ) providing for, among other matters, a one-year
post-employment non-compete period or three (3) years from the
Closing, whichever is greater, to apply in the event of voluntary
termination by the employee or termination for cause, during which
he shall not engage in any activity competitive with the Surviving
Corporation (other than his ownership of less than five (5%)
percent of an entity which may be engaged in an activity
competitive with the Surviving Corporation), and including
customary provisions regarding his non-solicitation of the
Surviving Corporation’s personnel and non-interference with
the Surviving Corporation’s relationship with its current
vendors or customers.
(b)
Consulting Agreements . As an additional and material
inducement to Buyer to enter into this Agreement, at Closing, Marc
Waldman and William Tobin shall each enter into a financial
consulting agreement with Guarantor and a Consulting Agreement with
the Corporation (in substantially the forms attached hereto as
Exhibit C and D ), respectively, providing for, among other
matters, a one-year post-consulting non-compete period or three (3)
years from the Closing, whichever is greater, to apply in the event
of voluntary termination by the employee or termination for cause,
during which he shall not engage in any activity competitive with
the Surviving Corporation (other than his ownership of less than
five (5%) percent of an entity which may be engaged in an activity
competitive with the Surviving Corporation), and including
customary provisions regarding his non-solicitation of the
Surviving Corporation’s personnel and non-interference with
the Surviving Corporation’s relationship with its current
vendors or customers.
(c)
Non-Competition Agreements . As an additional and
material inducement to Buyer to enter into this Agreement, at
Closing each Non-Management Stockholder shall enter into a
non-competition agreement (in substantially the form attached
hereto as Exhibit E ) providing for, among other matters, a
three-year post-Closing non-compete period during which neither he
nor any affiliated entity shall engage in any activity competitive
with the Surviving Corporation (other than his ownership of less
than five (5%) percent of an entity which may be engaged in an
activity competitive with the Surviving Corporation), including
customary provisions regarding his non-solicitation of the
Surviving Corporation’s personnel and non-interference with
the Surviving Corporation’s relationship with its current
vendors or customers.
(d)
The Guaranty . As an additional and material
inducement to the Stockholders to enter into this Agreement and to
accept the Stock Consideration from the Guarantor as part of the
Merger Consideration, at Closing, the Guarantor shall issue and
deliver to the Stockholders’ Representative an unconditional
and irrevocable guaranty in favor of each of the Stockholders in
substantially the form attached hereto as Exhibit F
,
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providing for,
among other matters, the guarantee by the Guarantor of the
performance of all of the Buyer’s obligations to the
Stockholders under this Agreement and the Other Agreements (as
defined below).
Section 4.
Representations and
Warranties of the Stockholders .
(a)
Each of the Stockholders, individually on its own behalf on a
several, but not joint basis, represents and warrants to the Buyer
as of the Closing Date as follows:
(i)
Ownership of Shares . Such Stockholder is the direct
or indirect owner (as applicable), beneficially and of record, of
the shares of Stock set forth opposite its name in
Schedule 4(a)(i)
hereto (the
“Stockholder’s Shares”). Such
Stockholder’s Shares are not pledged, mortgaged or otherwise
encumbered in any way and there is no lien, mortgage, charge,
claim, liability, security interest or encumbrance of any nature
against the Stockholder’s Shares arising from such
Stockholder’s actions. Except as set forth on
Schedule 4(a)(i)
hereto,
Stockholder is not party to any outstanding options, warrants,
rights of subscription or conversion, calls, commitments,
agreements, arrangements, understandings, plans, contracts,
proxies, voting trusts, voting agreements or instruments of any
kind or character, oral or written, relating to the issuance,
voting or sale of such Stockholder’s Shares or of any
securities representing the right to purchase or otherwise receive
any such Shares. Such Stockholder is not party to any
stockholders agreements, preemptive rights or other agreements,
arrangements, commitments or understandings, oral or written,
relating to the voting, issuance, acquisition or disposition of the
Stockholder’s Shares or the conduct or management of the
Corporation by its Board of Directors, other than as set forth
on Schedule
4(a)(i) hereto. At the Closing,
the Stockholder shall have good and marketable title to the
Stockholder’s Shares and full right to transfer title to such
Shares, subject to any restrictions imposed by state or federal
securities laws, free and clear of all liens, mortgages, charges,
liabilities, claims, security interests or encumbrances of every
type whatsoever. The, conveyance, transfer and delivery of
the Stockholder’s Shares by the Stockholder to the Buyer
pursuant to this Agreement, against receipt of the Merger
Consideration therefor in accordance with the terms hereof, will
transfer full legal and equitable right, title and interest in the
Stockholder’s Shares to the Buyer, free and clear of all
liens, mortgages, charges, claims, liabilities, security interests
and encumbrances of any nature whatsoever other than as
contemplated by this Agreement and the other agreements and
instruments to be entered into in connection with the transactions
contemplated hereby (the “Other
Agreements”).
(ii)
Capacity . Such Stockholder has full capacity to enter
into and perform its respective obligations under this Agreement
and all Other Agreements to which it is a party, and to consummate
such transactions. No consent of any other persons or
corporations is required to be obtained by such Stockholder as a
condition to its ability to consummate such transactions. The
Stockholder has no equity interest in any entity engaged in any
businesses competitive with those of the Corporation. This
Agreement and each of the Other Agreements to which such
Stockholder is a party have been duly executed and delivered by
such Stockholder. This Agreement and each of the Other
Agreements to which such Stockholder is a party constitute the
legal, valid and binding obligation of such Stockholder enforceable
against such Stockholder in
10
accordance with
their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights generally or by
general equitable principles.
(iii)
Investment Intent . Each Stockholder is acquiring the
shares comprising the Stock Consideration for investment purposes
and has no present intent to sell such shares. No Stockholder
has any knowledge of any other Stockholder’s present intent
to sell any shares to be received by such other
Stockholder.
(b)
Each of the Management Stockholders, on a joint and several basis
with each of the other Management Stockholders, represents and
warrants to the Buyer as of the Closing Date as follows. As
used herein, “best knowledge” or “to the best
knowledge” shall mean information actually known by the
relevant party or what should be known to such party after due
inquiry or in the exercise of reasonable care in the performance of
the duties of his office.
(i)
The Stock . The shares of Stock set forth on
Schedule 4(a)(i)
hereto
constitute one hundred percent (100%) of the issued and outstanding
shares of capital stock of the Corporation. The Stock is the
sole voting stock of the Corporation and is duly authorized,
validly issued, fully paid and non-assessable. The Stock is
not subject to any pledge, mortgage or other encumbrance arising by
or through any act of the Corporation, and to the knowledge of the
Management Stockholders, there is no lien, mortgage, charge, claim,
liability, security interest or encumbrance of any nature against
the Stock. There are no outstanding options, warrants, rights of
subscription or conversion, calls, commitments, agreements,
arrangements, understandings, plans, contracts, proxies, voting
trusts, voting agreements or instruments of any kind or character,
oral or written, to which the Corporation is party or, to the
knowledge of the Management Stockholders, by which the Corporation
is bound, relating to the issuance, voting or sale of the Stock or
any authorized but unissued shares of capital stock of the
Corporation or of any securities representing the right to purchase
or otherwise receive any such shares of capital stock. Except
as set forth in Schedule
4(a)(i), the Corporation is not party
to any stockholders agreements, preemptive rights or other
agreements, arrangements, commitments or understandings, oral or
written, relating to the voting, issuance, acquisition or
disposition of the Stock or the conduct or management of the
Corporation by its Board of Directors.
(ii)
Organization; Standing; Capitalization . The
Corporation has full capacity to enter into and perform its
obligations under this Agreement and all Other Agreements to which
it is a party, and to consummate such transactions. Except as
set forth on Schedule
4(b)(ii) of this Agreement, the
Corporation has no subsidiaries and the Corporation does not hold
any equity interest in any entity that is engaged in businesses
competitive with those of the Corporation. This Agreement and
each of the Other Agreements to which the Corporation is a party
have been duly executed and delivered by the Corporation.
This Agreement and each of the Other Agreements to which the
Corporation is a party constitute the legal, valid and binding
obligation of the Corporation, enforceable against it in accordance
with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization,
11
moratorium and
similar laws affecting creditors’ rights generally or by
general equitable principles. The Corporation is duly
organized and validly existing under the laws of the State of New
York, has full corporate power and authority to conduct its
business as it is now being conducted and is duly qualified to do
business in each jurisdiction where the nature of the property
owned or leased, or the nature of the business conducted by the
Corporation requires such qualification, except where the failure
to have such power and authority or to so qualify would not have a
material adverse effect on the Corporation. The Certificate
of Incorporation of the Corporation, as amended, and the By-laws,
as amended, and the minutes and stock records of the Corporation
delivered to the Buyer are complete and correct. The
Corporation has all necessary licenses and authority to operate its
business as now being conducted, except where the failure to have
such licenses or authority would not have a material adverse effect
on the Corporation. The authorized capital stock of the
Corporation consists of five hundred (500) shares of voting common
stock, without par value, of which four hundred (400) shares are
issued and outstanding.
(iii)
Legal Proceedings . Except as disclosed in
Schedule 4(b)(iii)
:
(A)
None of the Management Stockholders in their capacity as officers
or directors of the Corporation, nor the Corporation, is a party to
any pending litigation, arbitration, administrative proceeding or,
to the best of Management Stockholders’ knowledge, to any
investigation related to the business of the Corporation, and to
the best of Management Stockholders’ knowledge, no such
litigation, arbitration, administrative proceeding or investigation
that, if adversely decided, would result in a material adverse
change in the financial condition, business or properties of the
Corporation, is threatened.
(B)
The Management Stockholders have no knowledge of and have not
received written notice of any claims, threats, plans or intentions
to discontinue commercial relations or transactions from any major
customer of the Corporation, any purchaser of a material amount of
goods or services from the Corporation, any employee or independent
contractor significant to the conduct or operation of the
Corporation or its businesses or any party to any material
agreement to which the Corporation is a party that, if resulting in
the actual discontinuance of such commercial relations or
transaction, would result in a material adverse change in the
financial condition, business or properties of the Corporation
.
(C)
The Management Stockholders have received no written notice of any
claim (whether on whatever theory) relating directly or indirectly
to any product manufactured or sold, or any services performed by
the Corporation asserting that the Corporation is liable for an
alleged deficiency in such product or services that, if adversely
decided, would result in a material adverse change in the financial
condition, business or properties of the Corporation.
(D)
The Corporation is under no obligation with respect to the return
of goods in the possession of customers except for those occurring
in the ordinary course of business, which are not in the aggregate
material to the
12
Corporation’s
business, or against which the Corporation has established a
reserve on its financial statements.
(iv)
Encumbrances . Except as disclosed in
Schedule 4(b)(iv)
, to the
knowledge of the Management Stockholders, there are no liens,
mortgages, deeds of trust, claims, charges, security interests or
other encumbrances or liabilities of any type whatsoever to which
any of the assets of the Corporation, including, but not limited to
the land, building, improvements and equipment (the “Fixed
Assets”), or the Corporation’s inventory (the
“Inventory”), are subject, except for those (A) arising
in the ordinary course of business or by operation of law, and/or
(B) which do not materially interfere with the ownership or
operation of such assets.
(v)
Trade Names . The Corporation owns, free of any
Encumbrances, or holds the license rights to use, the trade names,
trademarks, service marks, assumed names, copyrights and
registrations therefor, if any (collectively
“Trademarks”) specified in Schedule 4(b)(v) . To the best knowledge
of the Management Stockholders, the Trademarks have been duly
issued and have not been canceled, abandoned or otherwise
terminated except as otherwise indicated in Schedule 4(b)(v) . The Corporation has
not received any written notice that it is in default under any of
the licenses or agreements relating to the Trademarks as listed
in Schedule
4(b)(v) and all of such licenses and
agreements are in effect. The Corporation has not granted
licenses or other rights to use such Trademarks. No other
Trademarks are either owned or used by the Corporation. To
the best knowledge of the Management Stockholders, the operation of
the Corporation’s business does not infringe on the
Trademarks of any third party, and no written claim has been
received by the Corporation that there is any such
infringement. To the best of the Management
Stockholder’s knowledge, no Trademark of any other person
infringes the Trademarks of the Corporation.
(vi)
Patents . The Corporation owns, or holds license
rights to use, the inventions, letters patent, applications for
letters patent and patent license rights, inventions, processes,
designs, formulas, trade secrets, know-how and other intellectual
property rights (collectively “Patents”) necessary for
the conduct of its business, as specified in Schedule 4(b)(vi) . To the best
knowledge of the Management Stockholders, the Patents have been
duly issued and have not been canceled, abandoned or otherwise
terminated except as otherwise indicated in Schedule 4(b)(vi) . The Corporation has
not received any written notice that it is in default under any of
the licenses or agreements relating to the Patents as listed
in Schedule
4(b)(vi) and all of such licenses and
agreements are in effect. The Corporation has not granted
licenses or other rights to use such Patents. No other
Patents are owned or used by the Corporation. To the best
knowledge of the Management Stockholders, the operation of the
Corporation’s business does not infringe on the Patent rights
of any third party, and no written claim has been received by the
Corporation that there is any such infringement. To the best
of the Management Stockholder’s knowledge, no Patent of any
person infringes the Patents of the Corporation.
13
(vii)
Audited and Unaudited Financial Statements .
(A)
The unaudited financial statements of the Corporation as of and for
the years ended December 31, 2006, 2005 and 2004, together with the
related notes and schedules, if any (collectively, the
“Available Financial Statements”), true, correct and
complete copies of which the Corporation has previously delivered
to Buyer (a copy of which is attached hereto as Exhibit G ),
(A) have been prepared in accordance with GAAP; (B) subject to
normal auditing adjustments, present fairly, and are true, correct
and complete statements in all material respects of the financial
condition and the results of operations, retained earnings,
shareholders’ equity and cash flows of the Corporation as at
and for the periods therein specified; (C) subject to normal
auditing adjustments, do not contain any untrue statements of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the periods
covered thereby; and (D) have been prepared from and are in
accordance with the accounting Books and Records of the
Corporation. The Corporation has delivered to Buyer (or will
deliver prior to Closing) copies of all letters from its auditors
during the thirty-six (36) months preceding the execution of this
Agreement, together with copies of all responses
thereto.
(B)
As provided in Section 8(g), below, the Corporation will hereafter
cause to be delivered to the Buyer prior to Closing (x) a copy of
the audited financial statements of the Corporation as of and for
the years ended December 31, 2006, 2005 and 2004 (the
“Audited Financial Statements”), together with the
related notes and schedules (if any), which Audited Financial
Statements shall be issued without qualification by the auditors,
and (y) a copy of the unaudited financial statements of the
Corporation as of and for the two-month period ended February 28,
2007 (the “Unaudited Stub Financial Statements”),
together with the related notes and schedules (if any) (together
with the Audited Financial Statements, the “Additional
Financial Statements”).
(C)
Except as and to the extent shown or provided for in the Available
Financial Statements or as disclosed in any of the Schedules to
this Agreement, and except as and to the extent it may be hereafter
shown or provided for in the Additional Financial Statements, or
such current liabilities as may have been incurred since February
28, 2007 in the ordinary course of business, the Corporation has no
material liabilities or obligations (whether accrued, absolute,
contingent or otherwise). As of February 28, 2007, there was
no material asset used by the Corporation in its operations that
has not been reflected in the Available Financial Statements or
will not hereafter be reflected in the Additional Financial
Statements, and, except as set forth in the Unaudited Stub
Financial Statements or disclosed in any Schedule to this
Agreement, no material assets have been acquired by the Corporation
since such date except those acquired in the ordinary course of
business.
(D)
There has been not been a decrease in stockholders’ equity of
5% or greater as compared with the amount shown for such
stockholders’
14
equity at
February 28, 2007, as reflected in the Unaudited Stub Financial
Statements.
(viii)
Absence of Certain Changes . Except as disclosed
on Schedule
4(b)(viii) , since February 28, 2007,
there has not been any material adverse change in the condition
(financial or otherwise), operations, assets, liabilities,
earnings, business or results of operations of the
Corporation.
(ix)
Tax Matters . Except as otherwise expressly provided
or unless the context otherwise requires:
“Laws” means all laws,
statutes, rules, regulations, ordinances and other pronouncements
having the effect of law of the United States, any foreign country
or any domestic or foreign state, county, city or other political
subdivision or of any governmental or regulatory
authority.
“Reportable Transaction”
means any transaction listed in Treasury Regulation Section
1.6011-4(b).
“Tax” or
“Taxes” means (a) any foreign, federal, state or local
income, earnings, profits, gross receipts, franchise, capital
stock, net worth, sales, use, value added, occupancy, escheat,
general property, real property, personal property, intangible
property, transfer, bulk transfer, fuel, excise, payroll,
withholding, unemployment compensation, social security, retirement
or other tax or governmental charge of any nature; (b) any foreign,
federal, state or local organization fee, qualification fee, annual
report fee, filing fee, occupation fee, assessment, sewer rent or
other fee or charges of any nature; or (c) any deficiency, interest
or penalty imposed with respect to any of the foregoing.
“Tax Returns” means all
federal, state, local, foreign and other Tax returns and reports,
information returns, statements, declarations, schedules, notices,
notifications, forms, elections, certificates or other documents
the Corporation is required to file or submit to any Taxing
Authority with respect to the determination, assessment, collection
or payment of any Tax or in connection with the administration,
implementation or enforcement of or compliance with any Law
relating to any Tax (including any amendments thereto) or relating
to the reporting of cash received.
“Taxing Authority” means
any governmental agency, board, bureau, body, department or
authority of any United States federal, state or local jurisdiction
or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
Except as set forth on
Schedule 4(b)(ix) :
(a)
The Corporation has duly and timely filed all Tax Returns that it
was required to file under applicable Laws. All such Tax
Returns were correct and complete in all respects and were prepared
in compliance with all applicable Laws. All Taxes owed by the
Corporation (whether or not shown on any Tax Return) have
been
15
timely paid or a
reserve which does not exceed $15,000 will be reflected in
the Additional Financial Statements. For purposes of this
Section 4(b)(ix), the word “timely” shall mean that
such Tax Returns were filed within the time prescribed by Law
(including extensions) for the filing thereof.
(b)
The reserve for Taxes (as opposed to any reserve for deferred taxes
established to reflect timing differences between book and Tax
income) which will be reflected in the Additional Financial
Statements will exceed the amount of unpaid Taxes of the
Corporation, whether or not disputed. As of the Closing Date,
such reserve, will be in excess of the unpaid Taxes of the
Corporation, whether or not disputed.
(c)
The Corporation is not a party to any agreement extending, or
having the effect of extending, the time within which to file any
Tax Return or the period of assessment or collection of any
Taxes. The Corporation has not received any written notice
from or ruling of a Taxing Authority related to Taxes or entered
into any written and legally binding agreement with a Taxing
Authority relating to Taxes.
(d)
(i) No Taxing Authority is now asserting or threatening to assert
against the Corporation any deficiency, claim or liability for
additional Taxes, or any adjustment of Taxes, and there is no
reasonable basis for any such assertion, and (ii) no issues have
been raised in any examination by any Taxing Authority with respect
to the Corporation for a Tax period which, by application of
similar principles to another Tax period not subject to examination
that is not closed by the statute of limitations, would result in a
deficiency of Corporation Tax for such other Tax period. The
Tax Returns of the Corporation disclose (in accordance with Section
6662(d)(2)(B)(ii) of the Code) all positions taken therein that
could give rise to a substantial understatement of federal income
tax within the meaning of Section 6662(d) of the Code. During
the past seven (7) years, no claim has been made by any Taxing
Authority in a jurisdiction in which the Corporation does not file
Tax Returns that it is or may be subject to taxation by that
jurisdiction. No Tax Return of the Corporation for any
period has been or is currently under audit by the Internal Revenue
Service or any state, local or other tax authorities. No
claim has been made by any Taxing Authority relating to any such
Tax Returns or any audit. There are no liens for Taxes upon
the assets and properties of the Corporation. No Management
Stockholder expects any Taxing Authority to assess any additional
Taxes for any period for which Tax Returns have been filed, nor are
they aware of any facts which would constitute the basis for the
proposal of any Tax deficiencies against the Corporation for any
year. The Corporation has never received from any foreign,
federal, state, or local Taxing Authority (including jurisdictions
where the Corporation has not filed Tax Returns) any (i) notice
indicating an intent to open an audit or other review, (ii) request
for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed,
asserted, or assessed by any taxing authority against the
Corporation. The Stockholders have delivered to Buyer correct
and complete copies of all Tax Returns, examination reports, and
notices of deficiencies assessed against or agreed to by the
Corporation filed in respect of, or received in respect of, the
2002 through 2005 Tax years.
16
(e)
The Corporation 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 person for all periods for which the statutory period of
limitations for the assessment of such tax has not yet expired and
all Internal Revenue Service (“IRS”) Forms W-2 and 1099
(and any similar forms of a state, local or foreign Taxing
Authority) required with respect thereto have been properly
completed and timely filed.
(f)
There is no contract covering any employee or former employee of
the Corporation that could give rise to the payment of any amount
that would not be deductible pursuant to Section 280G of the Code
or any corresponding provisions of state, local or foreign income
tax law.
(g)
The Corporation (i) has never been a party to any Tax allocation or
sharing agreement; and (ii) has never been a member of an
Affiliated Group (as defined in Section 1504(a) of the Code or any
corresponding provision of state, local or foreign income tax law)
filing a consolidated Tax Return; or (iii) has any liability for
Taxes of any person under Treasury Regulation Section 1.1502 6 (or
any corresponding provision of state, local or foreign income tax
law).
(h)
The Corporation has not been the “distributing
corporation” (within the meaning of Section 355(a)(1) of the
Code or any corresponding provision of state, local or foreign
income tax law) or the “controlled corporation” (within
the meaning of Section 355(a)(1) of the Code or any corresponding
provision of state, local or foreign income tax law) within the
two-year period ending as of the date of this
Agreement.
(i)
The Corporation is not required to include any item of income in,
or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date
as a result of any: (i) change in accounting method for a taxable
period ending on or prior to the Closing Date under Section 481(a)
of the Code (or any corresponding provision of state, local or
foreign income tax law); (ii) “closing agreement” as
described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign income tax law); (iii)
installment sale or open transaction disposition made on or prior
to the Closing Date; or (iv) prepaid amount received on or prior to
the Closing Date.
(j)
Each Stockholder represents, for himself or itself only, that he or
it is not a “foreign person” as such term is described
in Section 1445 of the Code. The Corporation has not been a
United States real property holding corporation within the meaning
of Code Section 897(c)(2) at any time during the applicable period
specified in Code Section 897(c)(1)(A)(ii).
(k)
None of the assets of the Corporation is “tax-exempt use
property” within the meaning of Section 168(h) of the Code or
“tax-exempted bond financed property” within the
meaning of Section 168(g)(5) of the Code.
17
(l)
The Corporation is not a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal
income tax purposes.
(m)
The Corporation has disclosed to the IRS (and to any other Taxing
Authority that so requires) on the appropriate Tax Returns any
Reportable Transaction in which it has participated. The
Corporation has retained all documents and other records pertaining
to any Reportable Transaction in which it has participated,
including documents and other records listed in Treasury Regulation
Section 1.6011-4(g) and any other documents or other records which
are related to any Reportable Transaction in which the Corporation
has participated but not listed in Treasury Regulation Section
1.6011-4(g).
(n)
Neither the Corporation nor the Stockholders are relying on any
legal or tax advice from the Buyer or Guarantor in connection with
the transactions contemplated by this Agreement or the other
agreements.
(x)
Financial Statements .
(A)
Accounts Receivable . The accounts receivable of the
Corporation to be reflected in the Unaudited Stub Financial
Statements as of February 28, 2007 (which are currently estimated
to be in the amount of approximately $900,000), and the accounts
receivable acquired by the Corporation since such date, represent
or will represent (as applicable) valid subsisting claims for the
aggregate amounts thereof net of the reserves or allowances for
doubtful receivables to be reflected either in the Unaudited Stub
Financial Statements or in the Corporation’s books and
records for the period following the date of such Unaudited Stub
Financial Statements (which books and records have been uniformly
maintained in a manner consistent with the Available Financial
Statements). The Management Stockholders know of no reason
that would make such accounts receivable, net of such amounts as
will be reserved in the Unaudited Stub Financial Statements or on
the Corporation’s books and records, taken as a whole, not
collectible.
(B)
Inventory and Fixed Assets . The inventory and fixed
assets of the Corporation to be reflected in the Unaudited Stub
Financial Statements as of February 28, 2007 (which are currently
estimated to be in the amount of approximately $200,000) and the
inventory and fixed assets acquired by the Corporation since such
date (a) have been fully paid for unless otherwise reflected in the
Available Financial Statements, the Additional Financial Statement,
in the Corporation’s books and records, or disclosed in a
Schedule to this Agreement, and (b) are marketable or adequate
provision for obsolescence has been provided.
(C)
Net Revenues . The net revenues of the Corporation to
be reflected in the 2006 Income Statement shall be at least
$3,000,000.
(D)
Net Income . The net income of the Corporation to be
reflected in the 2006 Income Statement shall be at least
$70,000.
18
(xi)
Title of Properties .
(A)
The Corporation does not own any real property. Except as
disclosed on Schedule
4(b)(xi) , the Corporation has good,
marketable and insurable title to all properties and assets, real
and personal, tangible and intangible, having a market value which
is currently estimated to exceed $25,000, as will be reflected in
the Unaudited Stub Financial Statements or as acquired subsequent
to February 28, 2007 (other than those which have been disposed of
in the ordinary course of business prior to the Closing
Date).
(B)
Schedule 4(b)(xi)
contains an
accurate list of all leases and other agreements requiring
aggregate annual payments by the Corporation in excess of $50,000
under which the Corporation is lessee of any personal
property. Each such lease and other agreement is in full
force and effect and constitutes the legal, valid and binding
obligation of the Corporation and, to the best knowledge of the
Management Stockholders, of the other parties thereto.
(C)
Except as disclosed in Schedule 4(b)(xi) , the Management Stockholders
are not aware of, nor have they received notice of, the violation
of any applicable zoning regulation, ordinance or other law, order,
regulation or requirement in force on the date hereof relating to
the Corporation’s business or its owned or leased real or
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