STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT is made as of this _____ day of February, 2003,
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by, between and among XXXXX XXXXXXXXX, Trustee of the Xxxxx Xxxxxxxxx Revocable
Living Trust dated May 12, 1997 ("X. Xxxxxxxxx, Trustee"), XXXXXXX XXXX, Trustee
of the Xxxxxxx Xxxx Revocable Living Trust dated June 30, 1997 ("X. Xxxx,
Trustee"), XXXXX XXXX, Trustee of the Xxxxx Xxxx Revocable Living Trust dated
May 16, 1997 ("X. Xxxx, Trustee") and XXXXXXX XXXXXXX ("X. Xxxxxxx") (X.
Xxxxxxxxx, Trustee, X. Xxxx, Trustee, X. Xxxx, Trustee and X. Xxxxxxx
hereinafter referred to collectively as the "Sellers" and individually as
"Seller") and XXXXXXX COMPUTER RESOURCES, INC., a Delaware corporation
("Purchaser").
W I T N E S S E T H :
WHEREAS, Sellers own all of the issued and outstanding shares of Micrologic
Business Systems of K.C., Inc., a Missouri corporation, which is a full service
provider of a variety of computer service and support solutions to large and
medium size commercial, governmental and other professional customers throughout
the Kansas City, Missouri metropolitan area, as follows:
X. Xxxxxxxxx, Trustee - 94,495.50 shares
X. Xxxx, Trustee - 94,494.50 shares
X. Xxxx, Trustee - 94,494.50 shares
X. Xxxxxxx - 30,000.00 shares
Total - 313,484.50 shares
WHEREAS, Sellers desire to sell and Purchaser desires to purchase all the
Company Shares owned by Sellers, and Sellers and Purchaser desire to engage in
the other transactions provided for herein.
NOW, THEREFORE, in and for the consideration of the mutual promises and
undertakings herein contained, and subject to the terms and conditions
hereinafter set forth, the Parties agree as follows:
ARTICLE I
1. Definitions. As used herein the following terms shall have the
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following meanings, respectively:
1.01 Accounts Receivable: All notes and accounts receivable held by Company
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or of which Company is the beneficial holder and all notes, bonds and
other evidences of indebtedness of and rights to receive payments from
any Person held by Company.
Page 1 of 54 Pages
1.02 Acquisition: The purchase and sale of all the Company Shares upon the
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terms and provisions, and subject to the conditions, set forth in this
Agreement.
1.03 Affiliate: Shall have the meaning ascribed to such term in Rule 405
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promulgated under the Securities Act of 1933, as amended.
1.04 Affiliate Receivables: Any account or note receivable or other payment
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obligation owing to Company by any officer, director, employee or
Affiliate of Company.
1.05 Agreement: This Stock Purchase Agreement.
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1.06 Applicable Law. All applicable provisions of all (i) constitutions,
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treaties, statues, laws (including common law), rules, regulations,
ordinances, codes or order of any Governmental Authority and (ii)
orders, decisions, injunctions, judgments, awards and decrees of or
agreements with any Governmental Authority.
1.07 Balance Sheet. The "Balance Sheet" is the unaudited Balance Sheet of
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Company as of March 31, 2002 and for the eight month period commencing
April 1, 2002 and ending November 30, 2002, included as part of the
Year End financial Statements.
1.08 Book Value: The shareholders' equity of Company as of the Closing Date
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as reported in Company's Closing Balance Sheet, determined in
accordance with Section 3.01.
1.09 Book Value Report: Shall have the meaning defined in Section 3.01.
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1.10 Business. The operations of Company involving generally the sale of
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goods relating to personal computers, client services, computer
networks, communication equipment, other equipment related thereto,
such as computer monitors, peripherals and all other individual
components, operating systems and application software and other off
the shelf software.
1.11 Business Day. "Business Day" shall mean a day other than a Saturday,
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Sunday or other day on which commercial banks in Cincinnati, Ohio are
authorized or required to close.
1.12 Closing: The consummation of the Acquisition on the Closing Date at
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the place of Closing hereinafter specified in accordance with the terms
and conditions hereof.
1.13 Closing Balance Sheet: The balance sheet of Company at the date of
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the Closing.
Page 2 of 54 Pages
1.14 Closing Date: The date on which the Closing shall take place,
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determined in accordance with Article XIV.
1.15 Code: The Internal Revenue Code of 1986, as amended.
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1.16 Company: Micrologic Business Systems of K.C., Inc., a Missouri
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corporation.
1.17 Company's Accountant: Company's accountant shall mean Xxxxxxx Xxxxx
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Park & Xxxxxxxxx, PC 0000 Xxxxx Xxxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xx.
Xxxxx, Xxxxxxxx, 00000.
1.18 Company Personnel: Shall mean current or former employees, officers,
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directors or consultants of Company.
1.19 Company Shares: All the issued and outstanding common shares, without
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par value, of Company.
1.20 Contracts. Shall have the meaning defined in Section 4.09(a).
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1.21 Consent. Any consent, approval, authorization, waiver, permit, grant,
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franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or
notice to, any Person.
1.22 Court: A Court is any federal, state, municipal, domestic, foreign or
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any other governmental tribunal or an arbitrator or person with similar
power or authority.
1.23 Disclosure Schedule: The schedule dated as of the date hereof,
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prepared pursuant to Article IV, copies of which have been signed by
Sellers and delivered to Purchaser.
1.24 Employee Benefit Plans: Shall mean all pension, annuity, retirement,
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stock option, stock purchase, savings, profit sharing or deferred
compensation plans or agreements, any bonus, group insurance, welfare,
health and disability plan, fringe benefit or other incentive or
benefit contract, plan, or commitment or arrangement applicable to
Company Personnel.
1.25 Employees: With respect to Company, shall mean all full-time and
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part-time employees of Company.
1.26 Employee Contracts: All employment contracts, consulting agreements,
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and collective bargaining agreements or related agreements with respect
to Employees of Company.
Page 3 of 54 Pages
1.27 Environmental Laws: Shall mean all federal, state or local judgments,
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decrees, orders, laws, licenses, ordinances, rules or regulations
pertaining to environmental matters, including, without limitation,
those arising under the Resource Conservation and Recovery Act (42
U.S.C. Sec.1801, et seq.) ("RCRA"), the Comprehensive Environmental
-- ---
Response, Compensation and Liability Act of 1980, as amended, (42
U.S.C. Sec.9601, et seq.) ("CERCLA"), the Superfund Amendment and
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Reauthorization Act of 1986 ("XXXX"), the Federal Clean Water Act (33
U.S.C. Sec.1251, et seq.), the Federal Clean Air Act (33 U.S.C.
-- ---
Sec.7401, et seq.), the Toxic Substances Control Act (15 U.S.C.
-- ---
Sec.7401, et seq.) the Federal Insecticide, Fungicide and Rodenticide
Act (7 U.S.C. Sec.136, et seq.) and the Occupational Safety and Health
-- ---
Act (29 U.S.C. Sec.651, et seq.).
-- ---
1.28 Environmental Liabilities and Costs: All Losses, whether direct or
--------------------------------------
indirect, known or unknown, current or potential, past, present or
future, imposed by, under or pursuant to Environmental Laws, including,
without limitation, all Losses related to Remedial Actions, and all
fees, disbursements and expenses of counsel, experts, personnel and
consultants based on, arising out of or otherwise in respect of: (i)
the ownership or operation of the Business, the Leased Real Property or
any other real properties, assets, equipment or facilities, by Company,
or any of its predecessors or Affiliates; (ii) the environmental
conditions existing on the Closing Date on, under, above, or about any
Leased Real Property or any other real properties, assets, equipment or
facilities currently or previously owned, leased or operated by
Company, or any of its predecessors or Affiliates; and (iii)
expenditures necessary to cause any Leased Real Property or any aspect
of the Business to be in compliance with any and all requirements of
Environmental Laws as of the Closing Date, including, without
limitation, all Environmental Permits issued under or pursuant to such
Environmental Laws, and reasonably necessary to make full economic use
of any Leased Real Property.
1.29 Environmental Permits: Any federal, state and local permit, license,
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registration, consent, order, administrative consent order,
certificate, approval or other authorization with respect to Company
necessary for the conduct of the Business as currently conducted or
previously conducted under any Environmental Law.
1.30 ERISA: The Employee Retirement Income Security Act of 1974, as
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amended.
1.31 Floor Planning Indebtedness: Includes any indebtedness incurred,
incurrable, or accrued pursuant to any of Company's financial
arrangements, or floor plan agreements, with GE Commercial Distribution
Finance Corporation, formerly known as Deutsche Financial Services
Company and the IBM Corporation, respectively and any of their
respective successors and/or assigns, all as set forth on Disclosure
Schedule 1.31. Disclosure Schedule 1.31 shall set forth the
Page 4 of 54 Pages
respective principal balances and all accrued interest of such items on
the date hereof.
1.32 GAAP: Generally accepted accounting principles in effect in the United
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States consistently applied throughout the periods involved.
1.33 Governmental Approval: Any Consent of, with or from any Governmental
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Authority.
1.34 Governmental Authority: Any nation or government, any state or other
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political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any government
authority, agency, department, board, commission or instrumentality of
the United States, any State of the United States or any political
subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
1.35 Hazardous Materials: Shall mean any hazardous waste, as defined by 42
--------------------
U.S.C. Sec.6903(5), any hazardous substances or wastes as defined by 42
U.S.C. Sec.9601(14), any pollutant or contaminant as defined by 42
U.S.C. Sec.9601(33) or any toxic substances or wastes, oil or hazardous
material or other chemicals or substances regulated by any public or
Governmental Authority.
1.36 Indemnifying Party: Shall have the meaning defined in Section
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11.06(a).
1.37 Intellectual Property: Any and all United States and foreign: (a)
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patents (including reexaminations, design patents, industrial designs
and utility models) and patent applications (including docketed patent
disclosures awaiting filing, provisional applications, reissues,
divisions, continuations, continuations-in-part and extensions), patent
disclosures awaiting filing determination, inventions and improvements
thereto; (b) trademarks, service marks, trade names, trade dress,
logos, business and product names, slogans, and registrations and
applications for registration thereof; (c) copyrights (including
software) and registrations thereof including Company's name; (d)
inventions, processes, designs, formulae, trade secrets, know-how,
industrial models, confidential and technical information,
manufacturing, engineering and technical drawings, product
specifications and confidential business information; (e) mask work and
other semiconductor chip rights and registrations thereof; (f)
intellectual property rights similar to any of the foregoing; (g)
copies and tangible embodiments thereof (in whatever form or medium,
including electronic media); and (h) the Internet address and website
of Company.
1.38 Inventories: All inventories of raw materials, work in process,
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finished products, goods, spare parts, office and other supplies,
including any of such inventories held at any location controlled by
Company or at any other location (pursuant to
Page 5 of 54 Pages
conditional sales agreements, consignment arrangements or in any
bailment or otherwise) and any such items previously purchased and in
transit to Company at any such locations.
1.39 Leased Real Property: Shall mean all interests leased pursuant to the
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Leases.
1.40 Leases: Shall mean all real property leases, subleases, licenses and
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occupancy agreements pursuant to which Company is the lessee,
sublessee, licensee or occupant which relate to or are being used in
the Business and which are described on Disclosure Schedule 4.09.
1.41 Lien: With the exception of Permitted Liens, a mortgage, pledge,
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hypothecation, right of others, claim, security interest, encumbrance,
lease, sublease, license, occupancy agreement, adverse claim or
interest, easement, covenant, encroachment, burden, title defect, title
retention agreement, voting trust agreement, interest, equity, option,
lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever, including, without limitation,
such that may arise under any Contracts.
1.42 Line of Credit Indebtedness. Includes any indebtedness incurred,
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incurable, or accrued pursuant to any of Company's financing
arrangements, agreements, letters of credit and line of credit with
Blue Ridge Bank and Trust Company, 0000 Xxxx Xxxxx Xxxxxxxxx, Xxxxx
000, Xxxxxx Xxxx, Xxxxxxxx 00000 and any of its successors and/or
assigns, all as set forth on Disclosure Schedule 1.42. Disclosure
Schedule 1.42 shall set forth the principal balance and all accrued
interest of such items on the date hereof.
1.43 Losses. Any and all losses, liabilities, damages, obligations and
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expenses arising as a result of the designated action or inaction, and
all actions, suits, proceedings, demands, assessments, judgments, costs
and expenses (including, without limitation, attorney's fees and other
expenses incurred in investigating or defending any claim, action, suit
or proceeding [which claim, action, suit or proceeding has become final
and non-appealable, or which matter has otherwise been settled between
the parties hereto] and any and all amounts paid in settlement thereof)
with respect to the designated action or inaction.
1.44 2002 NPBT. The net profit before taxes and distributions to
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shareholders of Company for the period commencing April 1, 2002 and
ending April 5, 2003 without incorporating any gains or losses realized
on the disposition of assets other than in the ordinary course of
business. The determination of 2002 NPBT shall be determined according
to the provisions set forth in Section 3.02.
1.45 NPBT of Company. The net profit before taxes of Company, without
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incorporating any gains or losses realized on the disposition of assets
other than in the ordinary course of business. The NPBT of Company for
applicable
Page 6 of 54 Pages
periods set forth in Section 2.03 will be determined in accordance with
the GAAP.
1.46 NPBT Threshold. Shall have the meaning set forth in Section 2.03.
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1.47 Notes: The two year subordinated promissory notes payable to Sellers
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as more fully described in Section 2.04(b).
1.48 Other Sellers Documents: The agreements and other documents and
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instruments described in Sections 2.04, 6.01, 7.01 and 8.01.
1.49 Party or Parties: Purchaser or Sellers or any of them.
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1.50 Party to Be Indemnified: as defined in Section 11.06(a).
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1.51 Permitted Liens. Shall mean and include any (i) matters described in
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detail and by item in Disclosure Schedule 1.51(i) to this Agreement and
which Purchaser has agreed to and (ii) liens arising by operation of
Applicable Law for taxes, assessments, labor, materials, and
obligations not yet due or which are being contested in good faith,
which contested items are set forth in detail in Disclosure Schedule
1.51(ii). The phrase "Permitted Liens" shall also include (a) liens
imposed by mandatory provisions of Applicable Law such as carriers,
materialmens, mechanics, warehousemens, landlords and other like liens
arising in the ordinary course of business, securing obligations not
yet due or which are being contested in good faith, which contested
items are set forth in Disclosure Schedule 1.51, (b) liens arising in
the ordinary course of business from pledges or deposits to secure
public or statutory obligations, deposits to secure (or in lieu of)
surety, stay, appeal or customs bonds and deposits to secure the
payment of Taxes, and (c) good faith deposits in connection with bids,
tenders, contracts or leases.
1.52 Person: Any natural person, firm, partnership, association,
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corporation, company, limited liability company, limited partnership,
trust, business trust, Governmental Authority or other entity.
1.53 Post Closing Date: Shall have the meaning defined in Section 3.01.
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1.54 Purchase Price: The total consideration paid by Purchaser to Sellers
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for the Company Shares as provided in Section 2.02.
1.55 Remedial Action: All actions required to (i) clean up, remove, treat
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or in any way remediate any Hazardous Materials; (ii) prevent the
release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the environment; or
(iii) perform studies, investigations and care related to (i) and (ii)
above.
Page 7 of 54 Pages
1.56 Spare Parts: All replacements, components, devices, equipment and
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other similar items owned or held by Company for use in connection with
the repair, replacement, modification, customization or installation of
goods and products applicable to the Business.
1.57 Subsidiary: Each corporation or other Person in which a Person owns or
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controls, directly or indirectly, capital stock or other equity
interests representing at least 50% of the outstanding voting stock or
other equity interest or conferring the power to name the majority of
the members to the board of directors or other governing body of the
corporation or other Person or otherwise direct the management or
policies thereof.
1.58 Tax or Taxes: Any federal, state, provincial, local, foreign or other
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income, alternative, minimum, any taxes under Section 1374 of the Code,
any taxes under Section 1375 of the Code, accumulated earnings,
personal holding company, franchise, capital stock, net worth, capital,
profits, windfall profits, gross receipts, value added, sales, use,
goods and services, excise, customs duties, transfer, conveyance,
mortgage, registration, stamp, documentary, recording, premium,
severance, environmental, including taxes under Section 59A of the
Code), real property, personal property, ad valorem, intangibles, rent,
occupancy, license, occupational, employment, unemployment insurance,
social security, disability, workers' compensation, payroll, health
care, withholding, estimated or other similar tax, duty or other
governmental charge or assessment or deficiencies thereof (including
all interest and penalties thereon and additions thereto whether
disputed or not).
1.59 Tax Return: Any return, report, declaration, form, claim for refund or
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information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.60 Vendor Receivables: Any amounts owing to Company from vendors of goods
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and products used in the Business resulting from discounts for prompt
payment, volume discounts, promotional programs or similar vendor
special pricing and term arrangements.
1.61 Year-End Financials: The audited financial statements of Company for
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the year ending March 31, 2001 and the unaudited financial statements
of Company for the period ending March 31, 2002 and for the period
commencing April 1, 2002 and ending November 30, 2002, including any
and all notes thereto.
Page 8 of 54 Pages
ARTICLE II
2. Purchase of Company Shares and Purchase Price.
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2.01 Purchase of Company Shares. Sellers agree to sell and transfer the
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Company Shares to Purchaser, and Purchaser agrees to purchase the
Company Shares from Sellers, on the Closing Date.
2.02 Purchase Price. The Purchase Price for the Company Shares shall be
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Five Million Two Hundred Fifty Thousand Dollars ($5,250,000.00) plus
any amount that may be paid pursuant to Section 2.03, adjusted as
follows:
(a) To the extent that the Book Value as reported on the Closing
Balance Sheet is less than $1,778,916.00, the Purchase Price
shall be decreased on a dollar-for-dollar basis to the extent
of such deficit. To the extent that the Book Value as reported
on the Closing Balance Sheet is greater than $1,778,916.00,
the Purchase Price shall be increased on a dollar-for-dollar
basis to the extent of such excess. The determination of Book
Value shall be made in the manner provided for in Section
3.01.
(b) In the event that the Company's 2002 NPBT is more than
$25,000.00, below the amount of $1,750,000.00, or
$1,725,000.00, the Purchase Price shall be decreased on a
dollar-for-dollar basis equal to the difference between
$1,725,000.00 and such 2002 NPBT. In the event that Company's
2002 NPBT is more than $25,000.00 above the amount of
$1,750,000.00, or $1,775,000.00, the Purchase Price shall be
increased on a dollar-for-dollar basis equal to the difference
between the 2002 NPBT and $1,775,000.00. The determination of
the Company's 2002 NPBT shall be made in the manner provided
for in Section 3.02 hereof.
2.03 Potential Adjustment to Purchase Price.
------------------------------------------
If the NPBT of Company during fiscal years 2003, 2004 and 2005 exceed
the applicable NPBT Threshold for such year set forth below:
NPBT Threshold
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Fiscal Year 2003
Closing Date through
January 5, 2004) - 1,750,000.00 (Pro Rate)
Fiscal Year 2004 - $ 1,750,000.00
Fiscal Year 2005 - $ 1,750,000.00
Fiscal Year 2006 (January
6, 2006 through third
annual anniversary of
Page 9 of 54 Pages
Closing Date) - 1,750,000.00 (Pro Rate)
Purchaser shall pay to Sellers according to the percentages below, by
bank check or wire transfer within one hundred twenty (120) days
following the end of the fiscal year, an amount equal to fifty percent
(50%) of the NPBT of Company in excess of the NPBT Threshold for the
applicable year or portion thereof, subject to a cumulative limitation
of Three Million Five Hundred Thousand Dollars ($3,500,000.00) during
such aggregate period. Any NPBT shortfall in any year shall not be
offset against any excess NPBT in any subsequent year(s) hereunder, it
being the intent of the parties that the NPBT Threshold set forth
herein shall apply to each applicable year separately, subject,
however, to the cumulative limitation of Three Million Five Hundred
Thousand Dollars ($3,500,000.00) during such aggregate period. Such
cash payment by Purchaser shall be additional Purchase Price for
Company Shares. Commencing upon the earlier of the conversion of the
Astea accounting system at Company or April 5, 2003, a 2.0%
infrastructure fee and a .3% MDF fee on gross sales by Company shall be
made incident to said determination. For each subsequent year described
above in this paragraph for which Purchaser may be required to pay
additional Purchase Price, the parties shall, in good faith, agree upon
the infrastructure and MDF fees to be charged hereunder based on the
level of services and support being provided by Purchaser to Company.
Provided, however, such infrastructure fee shall be 2.0% and the MDF
fee shall be .3% if the parties are unable to come to an agreement for
each subsequent year. Attached hereto as Exhibit A is a list of the
type of administrative services and marketing and development services
that are provided by Purchaser to Company as a result of the
infrastructure fee and MDF fee paid by Company on gross sales. In
addition, Exhibit B attached hereto sets forth a list of clients that
Company is currently receiving favorable pricing on products from
certain original equipment manufacturers. Purchaser and Company shall
in good faith determine on a case-by-case basis whether any gross sales
by the Company will be subject to a reduced infrastructure fee and MDF
fee because of the special circumstances surrounding the sale of
certain equipment to customers of clients for which favorable pricing
may be available. The granting of a reduction in the infrastructure fee
and/or the MDF fee on any transaction shall not be an agreement to
reduce such fees on any subsequent sales by Company to the same
customer or any other customer based on a prior transaction, and each
transaction shall be evaluated in good faith on its own merits by
Company and Purchaser, taking into account all facts and circumstances
relating to that particular transaction.
The NPBT of Company shall be determined by the internally-generated
financial statements of Company determined in the manner set forth
above in accordance with generally accepted accounting principles,
consistently applied. Said determination of NPBT of Company shall be
subject to verification as described below. In addition, for purposes
of determining NPBT of Company for any
Page 10 of 54 Pages
particular year, except as noted above, no item of income or expense
will be allocated by Purchaser to Company unless such items are
reasonably calculated to contribute to the increase in profits of
Company, it being the intent of the parties that Purchaser shall
exercise the utmost good faith with respect to allocations of income
and expense to Company. Incident to the determination of NPBT of
Company, no compensation of any executive or other employee of
Purchaser or its respective affiliates who do not work directly for
Company shall be allocated to Company.
Within ninety (90) days after the end of each fiscal year or period
described herein, Purchaser will deliver to Sellers a copy of the
report of NPBT prepared by Purchaser for the subject period along with
any supporting documentation reasonably requested by Sellers. Within
thirty (30) days following delivery to Sellers of such report, Sellers
shall have the right to object in writing to the results contained in
such determination. If timely objection is not made by Sellers to such
determination, such determination shall become final and binding for
purposes of this Agreement. If timely objection is made by Sellers to
Purchaser and Sellers and Purchaser are able to resolve their
differences in writing within thirty (30) days following the expiration
of the thirty-day (30-day) period, then such determination shall become
final and binding as it regards to this Agreement. If timely objection
is made by Sellers to Purchaser and Sellers and Purchaser are unable to
resolve their differences in writing within thirty (30) days following
the expiration of the thirty-day (30-day) period, then all disputed
accounting matters pertaining to the report shall be submitted to and
reviewed by an arbitrator (the "Arbitrator") which shall be an
independent accounting firm selected by Purchaser and Sellers. If
Purchaser and Sellers are unable to agree promptly on an accounting
firm to serve as the Arbitrator, each shall select by no later than the
30th day following the expiration of the sixty-day (60-day) period, an
accounting firm, and the two selected accounting firms shall be
instructed to select promptly another independent accounting firm, such
newly selected firm to serve as the Arbitrator. The Arbitrator shall
consider only the disputed accounting matters pertaining to the
determination and shall act promptly to resolve all disputed matters,
and its decision with respect to all disputed matters shall be final
and binding upon Sellers and Purchaser. Expenses of the Arbitration
shall be borne one-half (1/2) by Purchaser and one-half (1/2) by
Sellers. Each party shall be responsible for its own attorney and
accounting fees. The resolution of any disputed legal matters
pertaining to the report shall be subject to judicial review.
Two-thirds (2/3) of any earnout to be paid hereunder shall be payable
to the Sellers actively employed by Purchaser in accordance with the
following percentages:
X. Xxxx, Trustee - 33.33%
X. Xxxx, Trustee - 33.33%
Page 11 of 54 Pages
X. Xxxxxxx - 33.34%
If X. Xxxx, X. Xxxx or X. Xxxxxxx would voluntarily terminate his
employment with Purchaser before the expiration of the earnout period,
or in the event X. Xxxx, X. Xxxx or X. Xxxxxxx'x employment would be
terminated by Purchaser for cause, said individual shall forfeit his
right to receive any future earnout payments hereunder and any
forfeited earnout payments shall be reallocated in equal proportions to
any of the other individuals set forth above who continue their
employment with Purchaser.
One-third () of any earnout to be paid hereunder will be payable to the
Sellers based on their share ownership set forth in Section 2.04(a). In
the event of the death or disability of any Seller, any amount owing to
said Seller hereunder shall be paid to said individual or his personal
representative or guardian, as due.
In the event that X. Xxxx, X. Xxxx and X. Xxxxxxx would all voluntarily
terminate their employment with Purchaser or would have their
employment terminated by Purchaser for cause before the expiration of
the earnout period, all Sellers shall forfeit their right to any
earnout payments hereunder.
2.04 Payment of Purchase Price.
----------------------------
(a) Three Million Nine Hundred Twenty-Five Thousand Dollars
($3,925,000.00) by bank cashier check or wire transfer of
Purchaser, which amount shall be prorated among the Sellers
according to the following percentages:
X. Xxxx, Trustee - 30.14%
X. Xxxxxxxxx, Trustee - 30.15%
X. Xxxx, Trustee - 30.14%
X. Xxxxxxx - 9.57%
(b) One Million Three Hundred Twenty-Five Thousand Dollars
($1,325,000.00) in the aggregate shall be payable in the form
of the Notes of Purchaser, attached hereto as Exhibit C (the
"Notes") which Notes shall be prorated among the Sellers
according to the percentages set forth in Section 2.04(a)
above. Such Notes shall bear interest at the prime rate of
Chase Manhattan Bank, in effect as of the Closing Date.
Interest under said Notes shall be payable quarterly in
arrears with the first interest payment being due and payable
ninety (90) days from the Closing. One-half (1/2) of the
outstanding principal balance of said Notes shall be payable
in full on the first annual anniversary date of the Closing
of the transaction, and the remaining principal balance of
such Notes shall be payable in full on the second annual
anniversary of the Closing of the transaction. All obligations
of Purchaser thereunder will be
Page 12 of 54 Pages
subordinated and made junior in right of payment to the extent
and in the manner provided in a Subordination Agreement to be
executed by GE Commercial Distribution Finance Corporation,
formerly known as Deutsche Financial Services Company,
Purchaser and each Seller. A copy of the Subordination
Agreement to be executed by the Sellers is attached hereto as
Exhibit D.
-
ARTICLE III
3. Post-Closing Adjustments.
-------------------------
3.01 Within sixty (60) days after the Closing (the "Post Closing Date"), the
Sellers will deliver to Purchaser a copy of the Closing Balance Sheet
prepared by the Sellers, along with any supporting documentation
reasonably requested by Purchaser reflecting the calculation of Book
Value in accordance with Section 2.02(a) (the "Book Value Report"). The
Book Value Report shall be prepared using the same accounting methods,
policies, practices and procedures, with consistent classifications,
judgments, estimations and methodologies as used in the preparation of
the Balance Sheet. Within sixty (60) days following delivery to
Purchaser of the Book Value Report, Purchaser shall have the right to
object in writing to the results contained therein. If timely objection
is not made by Purchaser to the Book Value Report, the Book Value
Report shall become final and binding for purposes of this Agreement.
If timely objection is made by Purchaser to the Book Value Report, and
Sellers and Purchaser are able to resolve their differences in writing
within fifteen (15) days following the expiration of such sixty (60)
day period, then the Book Value Report as resolved shall become final
and binding as it relates to this Agreement. If timely objection is
made by Purchaser to the Book Value Report and Sellers and Purchaser
are unable to resolve their differences in writing within such fifteen
(15) day period, then all disputed matters pertaining to the Book Value
Report shall be submitted to and reviewed by an arbitrator (the
"Arbitrator") which shall be an independent accounting firm selected by
Sellers and Purchaser. If Purchaser and Sellers are unable to agree
promptly on the accounting firm to serve as the Arbitrator, each shall
select by not later than the seventh (7th) day following the expiration
of the Book Value Report objection period, an independent accounting
firm, and each selected accounting firm shall be instructed to jointly
select promptly another independent accounting firm, such third
accounting firm shall serve as the Arbitrator. The Arbitrator shall
consider only the disputed accounting matters pertaining to the
determination and shall act promptly and fairly to resolve all disputed
accounting matters and its decision with respect to all disputed
accounting matters shall be final and binding upon Sellers and
Purchaser. The resolution of any disputed legal matters pertaining to
the report shall be subject to judicial review. The expenses of the
arbitration shall be borne one-half (1/2) by Purchaser and one-half
(1/2) by Sellers. Each party shall be responsible for its
Page 13 of 54 Pages
own attorney and accounting fees. If the Book Value (as shown on the
Book Value Report) is less than $1,778,916.00, the Purchase Price to be
paid to Sellers shall be decreased on a dollar-for-dollar basis for
such difference by Sellers repaying to Purchaser by a bank cashier's
check or wire transfer the applicable amount from the cash paid to
Sellers at Closing under Section 2.04(a) and in the event Sellers would
fail to pay Purchaser hereunder, Purchaser shall have the right to
offset said amount against any payments due Sellers under the Notes,
set forth in Section 2.04(b). If the Book Value Amount (as shown on the
Book Value Report) is greater than $1,778,916.00, such excess shall be
paid immediately by Purchaser to Sellers in proportion to Sellers'
ownership of the Company Shares as set forth in Section 2.04(a) by bank
cashier's check or wire transfer on the date of the resolution of this
determination.
3.02 Within sixty (60) days of the fiscal year ending April 5, 2003, Sellers
will deliver to Purchaser the determination of the 2002 NPBT for the
period commencing April 1, 2002 to Closing, prepared by Company's
Accountant, along with any supporting documentation reasonably
requested by Purchaser, and Purchaser will deliver to Sellers the
determination of the 2002 NPBT for the period commencing with the
Closing and ending April 5, 2003, prepared by Purchaser's internally
generated accounting statements, along with any supporting
documentation reasonably requested by Sellers. The 2002 NPBT shall be
prepared in accordance with GAAP using the same principles set forth in
the Year End Financials. Within thirty (30) days following delivery of
such report, both parties shall have the right to object in writing to
the results contained in such determination. If timely objection is not
made by either party to such determination, such determination shall
become final and binding. If timely objection is made by any party and
the parties are able to resolve their differences in writing within
fifteen (15) days following the expiration of the 2002 NPBT objection
period, then such determination as resolved shall become final and
binding as relates to this Agreement. If timely objection is made by
any party and Sellers and Purchaser are unable to resolve their
differences, in writing within ten (10) days following the expiration
of the 2002 NPBT objection period, then all disputed accounting matters
shall relating to the reports shall be submitted to and reviewed by an
Arbitrator according to the process and procedure set forth in Section
3.01 above. The expenses of the arbitration shall be borne one-half by
Purchaser and one-half by Sellers. Each party shall be responsible for
its own accounting and attorneys' fees. Any disputed legal issues
pertaining to those reports shall be subject to judicial review. If the
2002 NPBT is below $1,725,000, the Purchase Price to be paid to Sellers
shall be decreased on a dollar-for-dollar basis for such difference by
Sellers repaying to Purchaser by bank cashier's check or wire transfer
the applicable amount from the cash paid to Sellers at Closing under
Section 2.04(a) and in the event Sellers would fail to pay Purchaser
hereunder, Purchaser shall have the right to offset said amount against
any payments due Sellers under the Notes, set forth in Section 2.04(b).
If the 2002 NPBT is greater than $1,775,000, such excess
Page 14 of 54 Pages
shall be paid immediately by Purchaser to Sellers in proportion to
Sellers' ownership of the Company Shares as set forth in Section
2.04(a) by bank cashier's check or wire transfer on the date of the
resolution of this determination.
ARTICLE IV
4. Representations of Sellers. Except as set forth in the Disclosure
--------------------------
Schedule attached hereto, which identifies the specific sections to
which each such disclosure relates, Sellers, jointly and severally
(except for representations and warranties made by an individual Seller
which only relate to that specific Seller (i.e. such as ownership of
the Company Shares), which are made severally only), represent, warrant
and covenant to Purchaser that the following statements are true as of
the date hereof.
4.01 Organization and Good Standing. Except as disclosed in Disclosure
---------------------------------
Schedule 4.01, Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Missouri
and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted, and is duly licensed, authorized and qualified to do
business and in good standing in all jurisdictions in which the conduct
of its business or the ownership or leasing of its properties require
it to be so licensed, authorized or qualified. Copies of Company's
Articles of Incorporation and By-Laws and any amendments thereto
(certified to be correct by the Secretary of Company) have been
delivered to Purchaser and are complete and correct as of the date
hereof. Disclosure Schedule 4.01 correctly lists, with respect to
Company, each jurisdiction, if any, in which it is qualified to do
business as a foreign corporation.
4.02 Capitalization. The authorized capital stock of Company consists
--------------
solely of Five Hundred Thousand (500,000) common shares, par value of
$1.00 each, of which 313,484.50 shares are issued and outstanding.
Company has treasury shares as set forth in Disclosure Schedule 4.02.
The issued and outstanding common shares of Company are held by the
following persons in the following numbers:
Name of Shareholder Number of Shares Held
--------------------- ---------------------
X. Xxxx, Trustee - 94,494.50
X. Xxxxxxxxx, Trustee - 94,495.50
X. Xxxx, Trustee - 94,494.50
X. Xxxxxxx - 30,000.00
Page 15 of 54 Pages
Company has no authorized or outstanding preferred stock or any other
class of stock. The Company Shares have been duly authorized and
validly issued and are fully paid and nonassessable. The Company Shares
have been issued in compliance with all applicable federal and state
securities laws and no past or present holder thereof is entitled to
any right of rescission in respect thereof and no documentary taxes or
other taxes were required with respect to the issuance or transfer of
such Company Shares. There are no existing subscriptions, options
warrants, calls, rights, contracts, commitments, understandings,
restrictions or arrangements relating to the issuance, sale or transfer
of any capital stock of Company or any securities convertible into or
exchangeable for any such capital stock.
4.03 Title to Shares. Sellers own, respectively, the number of Company
--------------------------
Shares set forth opposite each of their names in Section 4.02 hereof,
free and clear of all Liens. The transfer of the Company Shares to
Purchaser will convey good and marketable title to the Company Shares,
free and clear of all Liens.
4.04 Subsidiaries. Company has no subsidiaries.
------------
4.05 Authority. This Agreement is a valid and binding obligation of each
---------
Seller, enforceable in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally, or by the availability of equitable
remedies or the application of general equitable principles. Except as
set forth in Disclosure Schedule 4.05, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will:
(i) violate, or conflict with, or require any Consent under, or
result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the properties
or assets of Company under any of the terms, conditions or
provisions of the Articles of Incorporation or Bylaws of
Company or of any note, bond, mortgage, indenture, deed of
trust, license, agreement or other instrument or obligation to
which Company, or any Seller is a party, or by which Company
or any Seller or any of their properties or assets may be
bound or affected; or
(ii) violate any order, writ, injunction or decree applicable to
Sellers or Company or any of their properties or assets or, to
the knowledge of Sellers, violate any statute, rule or
regulation applicable to Sellers or Company or any of their
properties or assets; or
Page 16 of 54 Pages
(iii) constitute a default or event that, with notice or lapse of
time, or both, would be a default, breach, or violation of any
lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust or other
agreement, instrument or arrangement to which Company is a
party or by which it is bound; or
(iv) constitute an event that would permit any party to terminate
any agreement or to accelerate the maturity of any
indebtedness or other obligation of Company; or
(v) no Consent by, notice to or registration with any Governmental
Authority is required on the part of Sellers or Company prior
or subsequent to the Closing Date in connection with the
execution, delivery and performance by Sellers of this
Agreement or the consummation of any of the transactions
contemplated hereby.
4.06 Closing Balance Sheet. The Closing Balance Sheet, which shall be
-----------------------
attached hereto as Exhibit E on the Post-Closing Date, will reflect
only the assets and liabilities of Company as of the Closing Date and
will not include any assets or liabilities of any corporation or entity
except Company. As of the Closing Date, Company will not have any
liabilities (whether absolute, accrued, contingent or otherwise and
whether due or to become due), including without limitation, any tax
liabilities of the nature required by GAAP to be reflected or reserved
against in the Closing Balance Sheet, which are not accurately and
fully reflected or reserved against in the Closing Balance Sheet;
provided, however, that the Closing Balance Sheet shall not be
accompanied by notes and shall not include normal year-end adjustments
(if any) other than depreciation or any other accrual of the nature set
forth on Disclosure Schedule 4.06, attached hereto, which are not
material in the aggregate.
4.07 Year End Financials.
---------------------
(a) The Year End Financials have been provided to Purchaser, are
in accordance with the books and records of Company, and have
been prepared in accordance with GAAP as applied by Company on
a consistent basis throughout the periods covered by such
statements and fairly represent the financial condition of
Company as of the respective dates and the results of
operations of Company for the period then ended. Except as
stated in the Year End Financials or as otherwise set forth in
Disclosure Schedule 4.07(a), there have been no unusual
accounting practices engaged in which have affected the amount
or trend of net income of Company, or any unusual or
nonrecurring transactions, during the periods reflected in the
Year End Financials.
Page 17 of 54 Pages
(b) Absence of Undisclosed Liability. Except as to the extent
----------------------------------
specifically reflected in the Year End Financials or otherwise
set forth in Disclosure Schedule 4.07(b), and except for trade
payables, liabilities and contractual obligations arising in
the ordinary course of business since the date of Company's
1999 audited financial statements, Company does not have any
other liabilities of any nature, whether accrued, absolute or
contingent, or otherwise, and whether due, or to become due of
the nature required by GAAP to have been reflected or reserved
against in financial statements.
(c) No Liabilities as Guarantor. Except as set forth in Disclosure
---------------------------
Schedule 4.07(c), Company is not directly or indirectly
obligated to guaranty or assume any debt, dividend, or other
obligation of any person, corporation, association,
partnership, or other entity, except endorsements made in the
ordinary course of business in connection with the deposit of
items for collection.
(d) Absence of Material Change. Except as set forth in Disclosure
---------------------------
Schedule 4.07(d) or as otherwise set forth in this Agreement
or the Exhibits hereto, since April 1, 2002, there has not
been:
(i) any change in the condition (financial or otherwise),
properties, business, operations or prospects of Company
which is materially adverse, singly or in the aggregate;
(ii) any material loss, damage or destruction in the nature
of a casualty loss or otherwise, whether covered by
insurance or not, adversely affecting any property or
asset of Company;
(iii) an actual or any threatened strike or other material
labor trouble or material dispute;
(iv) any loss or any threatened loss of any governmental
permit, license, qualification, special charter or
certificate of authority held or enjoyed or formerly
held or enjoyed by Company which loss has had or upon
occurrence could be reasonably expected to have a
material adverse effect, singly or in the aggregate, on
the condition (financial or otherwise), properties,
business, operations or prospects of Company;
(v) to the knowledge of the Sellers, any statute,
regulation, order, ordinance or other law the adoption,
amendment or rescission of which could be reasonably
expected to have a material adverse effect, singly or in
the aggregate, on the condition (financial or
Page 18 of 54 Pages
otherwise), properties, business, operations or
prospects of Company;
(vi) any indebtedness, liability or obligation (whether
absolute, accrued, contingent or otherwise) incurred by
Company, or other transaction entered into by Company,
except in the ordinary course of business, or any
guarantee of any indebtedness, liability or obligation
made by Company;
(vii) any declaration, setting aside or payment of any
dividend or other distributions in respect of any
capital stock of Company;
(viii) any issuance, sale, combination or reclassification of
any capital stock or other securities of Company;
(ix) any issuance or grant of any option, warrant or other
right in respect of any capital stock or other
securities of Company;
(x) any direct or indirect redemption, purchase or other
acquisition of any capital stock or other securities of
Company;
(xi) any obligation, liability, Lien or encumbrance paid,
discharged or satisfied by Company, except in the
ordinary course of business;
(xii) any mortgage, Lien, pledge, charge or encumbrance
(except for liens for current taxes not yet due and
payable), created, incurred or assumed by Company;
(xiii) any sale, transfer or other disposition of any tangible
asset of Company, except in the ordinary course of
business, any cancellation of any debt or claim of
Company or any disposition of any intangible properties,
assets or rights of Company;
(xiv) any salary or wage increase granted or committed to be
made, other than normal merit or cost-of-living
increases (3.5% for the current year) pursuant to
Company's general prevailing practices, with respect to
any officer, director, employee or agent of Company, or
any bonus, incentive or deferred compensation, profit
sharing, retirement, pension, group insurance, death
benefit or other fringe benefit plan or trust agreement
entered into or amended or any employment or consulting
agreement entered into or amended or altered;
Page 19 of 54 Pages
(xv) any termination (whether by discharge, retirement or
otherwise) of any officer, director, employee or agent
of Company or any notice to so terminate given or
received by any of the foregoing;
(xvi) any loan made, increased or forgiven to any officer,
director, employee or agent of Company or to any member
of any of their families;
(xvii) any capital expenditure, addition or improvement made
or committed to be made by Company in excess of
$10,000.00 with respect to any single expenditure,
addition or improvement or in excess of $20,000.00 with
respect to all such expenditures, additions and
improvements;
(xviii) any failure on the part of Company to operate its
business in the ordinary course or to use its best
efforts to preserve its business organization intact, to
use its best efforts to retain the services of its
employees and to use its best efforts to preserve its
goodwill and relationships with suppliers, creditors and
others having business relationships with it;
(xix) any known material loss of business, termination or
discontinuance of any relationship or dispute between
Company and any customer or supplier;
(xx) any loss, amendment, termination or waiver of any
material right of Company;
(xxi) any known write-off as uncollectible of any notes or
accounts receivable, or any portions thereof, in excess
of $10,000.00 with respect to any single note or account
or in excess of $20,000.00 with respect to all such
write-offs;
Purchaser acknowledges that on or before Closing, Company shall have
paid off all outstanding liabilities due to its current or past
shareholders, in the respective amounts as set forth on Disclosure
Schedule 4.07(d).
4.08 Assets. Except as provided in Disclosure Schedule 4.08, Company has
------
good and marketable title to all of its assets and properties, real,
personal or otherwise, including, but not limited to, those assets and
properties reflected in Company's March 31, 2002 financial statements,
except only for assets subsequently disposed of in the ordinary course
of business, free and clear of all Liens, except (a) as specifically
reflected thereon, (b) the Line of Credit Indebtedness, or (c) for
Permitted Liens. To the best knowledge of Sellers, all Company's
tangible and other operating assets, property and equipment are in
Page 20 of 54 Pages
good operating condition and repair, free of structural or material
mechanical defects and conform with all applicable laws and
regulations. Without limiting the generality of the foregoing, specific
representations are set forth in the following subparagraphs of this
Section 4.08.
4.08.1 Accounts Receivable. All Accounts Receivable of Company which have
--------------------
arisen in connection with the Business or otherwise and which are
reflected on Company's April 1, 2002 financial statements, and all such
receivables which will have arisen since April 1, 2002 have arisen only
from bona fide transactions in the ordinary course of business and
represent valid, collectible and existing claims. Except as set forth
on Disclosure Schedule 4.08.1, and subject to customer credits, the
payment of each Account Receivable will not, as of the Closing Date, to
the best of Sellers' knowledge, be subject to any known defense,
counterclaim or condition (other than Company's performance in the
ordinary course of business) whatsoever. Disclosure Schedule 4.08.1
hereto accurately lists, as of a date within five (5) days of execution
of this Agreement, and will list, as of a date within five (5) days of
the Closing Date, all receivables arising out of or relating to the
Business, the amount owing and the aging of such Accounts Receivable.
Sellers have provided Purchaser the opportunity to review complete and
correct copies of all instruments, documents and agreements evidencing
such Accounts Receivable and of all instruments, documents or
agreements, if any, creating security therefor.
4.08.2 Vendor Receivables. All Vendor Receivables of Company which have
-------------------
arisen in connection with the Business or otherwise and which are
reflected on Company's April 1, 2002 financial statements and all such
Vendor Receivables which have arisen since April 1, 2002 have arisen
only from bona fide transactions in the ordinary course of business and
represent valid, collectible and existing claims. Except as set forth
in Disclosure Schedule 4.08.2, the payment of each Vendor Receivable
will not, as of the Closing Date, to the best of Sellers' knowledge, be
subject to any known defense, counterclaim or condition whatsoever.
Disclosure Schedule 4.08.2 hereto accurately lists, as of a date within
five (5) days of the execution of this Agreement, and will list, as of
a date within five (5) days of the Closing Date, all Vendor Receivables
arising out of or relating to the Business, the amount owing and the
aging of such Vendor Receivables. Sellers have provided Purchaser the
opportunity to review complete and correct copies of all instruments,
documents and agreements evidencing such Vendor Receivables and of all
instruments, documents and agreements, if any, creating security
therefor.
4.08.3 Inventory. Except as specifically described on Disclosure Schedule
---------
4.08.3, all inventory reflected on the April 1, 2002 financial
statements consists of items of quality and quantity which are usable
or saleable in the ordinary course of Business of Company in the
conduct of its Business, and items of below standard quality and items
not usable or saleable in the ordinary course of
Page 21 of 54 Pages
Company's business have been written-down in value in accordance with
normal, customary and historical business practices to estimated net
realizable market value or adequate reserves have been provided
therefor. The values at which the Inventories are carried on the April
1, 2002 financial statements reflect the normal valuation policy of
Company in setting inventory at the lower of cost or market, all in
accordance with GAAP. Except as set forth on Disclosure Schedule
4.08.3, since April 1, 2002, Inventories have been maintained at normal
and adequate levels for the continuation of the Business in its normal
course. Since April 1, 2002, no change has occurred in such Inventories
which affect or will affect the usability or salability thereof, no
write-downs or write-ups of the value of such Inventories has occurred
and no additional amounts have been reserved with respect to such
Inventories, except for in the ordinary course of business. Disclosure
Schedule 4.08.3 lists the location of all Inventories together with a
brief description of the type and amount at each location.
4.08.4 Real Property. Company owns no real property.
--------------
4.08.5 Dealer Agreements. A list of Company's dealer agreements is set
------------------
forth in Disclosure Schedule 4.08.
4.08.6 Intellectual Property.
----------------------
(a) Title. Disclosure Schedule 4.08.6(a) contains a complete and
-----
correct list and a brief description of all Intellectual
Property described in Section 1.40(a), 1.40(b) and 1.40(c)
that is owned by Company and primarily related to, used in,
held for use in connection with, or necessary for the conduct
of, or otherwise material to the Business (the "Owned
Intellectual Property"). Company owns or has the exclusive
right to use pursuant to license, sublicense, agreement or
permission all of its Intellectual Property, free from any
Liens (other than Permitted Lines). No Affiliate of Seller
owns or has any interest in or with respect to any Company
Intellectual Property and Company Intellectual Property
comprises all of the Intellectual Property necessary for
Company to conduct and operate the Business following the
Closing as now being conducted by Company.
(b) No Infringement. To the knowledge of Sellers, the conduct of
----------------
the Business does not infringe or otherwise conflict with any
rights of any Person in respect of any Intellectual Property.
To the knowledge of Sellers, none of Company Intellectual
Property is being infringed or otherwise used or available for
use, by any other Person.
(c) Licensing Arrangements. Disclosure Schedule 4.08.6(c) sets
-----------------------
forth all agreements or arrangements (i) pursuant to which
Company has leased or licensed Intellectual Property, or the
use of Intellectual Property as otherwise permitted (through
non-assertion, settlement or similar
Page 22 of 54 Pages
agreements or otherwise) to, any other Person and (ii)
pursuant to which Company has had Intellectual Property
licensed to it, or has otherwise been permitted to use
Intellectual Property (through non-assertion, settlement or
similar agreements or otherwise), excluding software licensed
by Company for internal purposes, together with a brief
description of the Intellectual Property covered thereby. All
of the agreements or arrangements set forth in Disclosure
Schedule 4.08.6(c), (x) are in full force and effect in
accordance with their terms and no default exists thereunder
by Company, or to the knowledge of Sellers, or other parties
thereto (y) are free and clear of all Liens other than
Permitted Liens, and (z) except as set forth on Disclosure
Schedule 4.08.6(c), do not contain any change in control or
other terms or conditions that will become applicable or
inapplicable as a result of the consummation of the
transactions contemplated by this Agreement. Sellers have
delivered to Purchaser true and complete copies of all
licenses and arrangements (including amendments) set forth on
Disclosure Schedule 4.08.6(c).
(d) No Intellectual Property Litigation. To Sellers' knowledge, no
-----------------------------------
claim or demand of any Person has been made nor is there any
proceeding that is pending, or to the knowledge of Sellers,
threatened, nor is there to Sellers' knowledge, a reasonable
basis therefor, which (i) challenges the rights of Company in
respect of any of the Intellectual Property, (ii) asserts that
Company is infringing or otherwise in conflict with, or is,
except as set forth in Disclosure Schedule 4.08.6(d), required
to pay any royalty, license fee, charge or other amount with
regard to, any Intellectual Property, or (iii) claims that any
default exists under any agreement or arrangement regarding
Intellectual Property. None of Company's Intellectual Property
is subject to any outstanding order, ruling, decree, judgment
or stipulation by or with any court, arbitrator, or
administrative agency, or has been the subject of any
litigation within the last five years, whether or not resolved
in favor of Company.
(e) Due Registration, etc. Company has no Intellectual Property
------------------------
that has been registered with, filed and/or issued by, as the
case may be, the United States Patent and Trademark Office,
United States Copyright Office or such other filing offices,
domestic or foreign.
(f) Use of Name and Xxxx. Except as set forth in Disclosure
-------------------------
Schedule 4.08.6(f), there are no restrictions or limitations
pursuant to any order, decisions, injunctions, judgements,
awards or decrees of any Governmental Authority on Purchaser's
right to use the names and marks set forth on Disclosure
Schedule 4.08.6(a) in the conduct of the Business as presently
carried on by Company.
Page 23 of 54 Pages
4.08.7 Motor Vehicles. Disclosure Schedule 4.08.7 sets forth a complete
---------------
list of all motor vehicles owned by Company.
4.09 Contracts.
---------
(a) Disclosure Schedule 4.09 contains a complete and correct list
of all agreements, contracts, commitments and other
instruments and arrangements (whether written or oral) of the
types described below (x) by which Company or under which
Company or any of its assets, businesses or operations receive
benefits, or (y) to which Company is a party or by which
Company is bound in connection with the Business (the
"Contracts").
(i) leases, licenses, permits, franchises, insurance
policies, Governmental Approvals and other contracts
concerning or relating to the Leased Real Property in
Sellers' or Company's possession;
(ii) employment, bonuses, vacations, pensions, profit
sharing, retirement, stock options, stock purchases,
employee discounts or other employee benefits,
consulting, agency, collective bargaining or other
similar contracts, agreements, and other instruments and
arrangements relating to or for the benefit of current,
future or former employees, officers, directors, sales
representatives, distributors, dealers, agents,
independent contractors or consultants which involves
aggregate annual payments in excess of $15,000;
(iii) loan agreements, indentures, letters of credit,
mortgages, security agreements, pledge agreements, deeds
of trust, bonds, notes, guarantees, and other agreements
and instruments relating to the borrowing of money or
obtaining of or extension of credit;
(iv) brokerage or finder's agreements;
(v) joint venture, partnership and similar contracts
involving a sharing of profits or expenses, including,
but not limited to, joint research and development and
joint marketing contracts;
(vi) asset purchase agreements and other acquisition or
divestiture agreements, including, but not limited to,
any agreements relating to the sale, lease or disposal
of any assets owned by Company (other than sales of
Inventory in the ordinary course of business) or
involving continuing indemnity or other obligations;
Page 24 of 54 Pages
(vii) orders and other contracts for the purchase or sale of
Inventories, materials, supplies, products or services
open or as to which any liability exists as of the date
hereof, each of which involves aggregate payments in
excess of $15,000;
(viii) contracts with respect to which the aggregate amount
that could reasonably expected to be paid or received
thereunder in the future exceeds $15,000;
(ix) sales agency, manufacturer's representative, marketing
or distributorship agreements;
(x) contracts, agreements or arrangements with respect to
the representation of the Business in foreign countries;
(xi) master lease agreements providing for the leasing of
either (a) personal property primarily used in, or held
for use primarily in connection with, the Business and
(b) other personal property;
(xii) contracts, agreements or commitments with any director,
officer, employee, or Affiliate of Company or any of the
Sellers, or with any holder of more than five percent
(5%) of any class of capital stock of Company
outstanding other than employment contracts; and
(xiii)any other contracts, agreements or commitments that are
material to the Business.
(b) Sellers have delivered to Purchaser complete and correct
copies of all written Contracts, together with all amendments
thereto, and accurate descriptions of all material terms of
all oral Contracts, set forth or required to be set forth in
Disclosure Schedule 4.09.
(c) Company has not received notice of any plan or intention of
any party to any Contract to exercise any right to cancel or
terminate any Contract. To the best knowledge of Sellers,
there does not exist under any Contract any event of default
or event or condition that, after notice or lapse of time or
both, would constitute a violation, breach or event of default
thereunder on the part of Company or, to the best knowledge of
Sellers, any other party thereto, except as set forth in
Disclosure Schedule 4.09 and except for such events or
conditions that, individually and in the aggregate, (i) has
not had or resulted in, and will not have or result in a
material effect on Company or its assets, and (ii) has not and
will not materially impair the ability of Company to perform
its obligations under this Agreement and under the Other
Sellers Documents. Except as set
Page 25 of 54 Pages
forth in Disclosure Schedule 4.09, no consent of any third
party is required under any Contract as a result of or in
connection with, and the enforceability of any Contract will
not be affected in any manner by the execution, delivery and
performance of this Agreement or any of the Other Sellers
Documents or the consummation of the transactions contemplated
thereby.
(d) Company has no outstanding power of attorney relating to the
Business.
4.10 Labor Disagreements. In connection with the operation of the Business
--------------------
of Company or any other business previously operated by Company, (i) to
the best of Sellers' knowledge, Company is not engaged in any unfair
labor practice; (ii) Company has not been notified of any unfair labor
practice charge or complaint against Company pending and, to the
knowledge of Sellers, no such charge or complaint is threatened before
the National Labor Relations Board, any state labor relations board or
any court or tribunal; (iii) except as set forth on Disclosure Schedule
4.10, Company has not been notified of any charge or claim filed at or
with the Equal Employment Opportunity Commission, any state agency
having similar jurisdiction or any court or tribunal, actually pending
and, to the knowledge of Sellers, no such charge or claim is threatened
against Company in connection with the operation of the Business of
Company; (iv) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending against or
affecting Company and, to the knowledge of Sellers, none is or has been
threatened; (v) Company has not been notified of any grievance which
might have a material effect on the conduct of the operations of the
Business of Company; (vi) Company has no labor contracts or collective
bargaining agreements with respect to any Company Personnel; (vii) no
labor organization or group of employees of Company has made a demand
for recognition or certification, and, to the Sellers' knowledge, there
are no representation or certification proceedings or petitions seeking
a representation proceeding presently pending or threatened in writing
to be brought or filed with the National Labor Relations Board or any
other labor relations tribunal or authority, and (viii) Company has not
been notified of any organizing activities involving Company pending
with any labor organization or group of employees of Company.
4.11 Employee Benefit Information.
------------------------------
(i) Except as set forth on Disclosure Schedule 4.11(i), Company
(or any entity that is or was at any time treated as a single
employer with Company under Sections 414(b), (c), (m) or (o)
of the Code) does not maintain, is not required to contribute
to and has no liabilities with respect to any Employee Benefit
Plans and no Company Personnel or dependent of such Company
Personnel is entitled to any benefits except as provided
Page 26 of 54 Pages
for by the provisions of such Employee Benefit Plans or by
applicable law.
(ii) Sellers have provided Purchaser with (a) copies of all
Employee Benefit Plans or in the case of any unwritten plan, a
written description thereof, (b) copies of any annual,
financial or actuarial reports and Internal Revenue Service
determination letters relating to such Employee Benefit Plans
and (c) copies of the most recent summary plan descriptions
(whether or not required to be furnished under ERISA) and all
material employee communications relating to such Employee
Benefit Plans and distributed to Company Personnel, and (d)
copies of all material communications with any governmental
entity or agency (including without limitation, the Department
of Labor, the Internal Revenue Service, or the Pension Benefit
Guarantee Corporation).
(iii) Except as set forth on Disclosure Schedule 4.11(iii), the
events contemplated by this Agreement (either alone or
together with any other event) will not (a) entitle any
Company Personnel to severance pay, unemployment compensation,
or other similar payments under any Employee Benefit Plan or
law, (b) accelerate the time of payment or vesting or increase
the amount of benefits due under any Employee Benefit Plan or
compensation to any Company Personnel, (c) result in any
payments (including parachute payments) under any Employee
Benefit Plan or law, becoming due to any Company Personnel, or
(d) terminate or modify or give a third party a right to
terminate or modify the provisions or terms of any Employee
Benefit Plan.
(iv) The Micrologic Business Systems of K.C., Inc. 401(k) Plan (the
"Plan") is qualified under Sections 401(a) of the Code and the
related trust is exempt from Tax under Section 501(a) of the
Code and Company has no other Employee Benefit Plan qualified
under Section 401(a) or any other Section of the Code. The
Internal Revenue Service has issued a determination letter
that the prototype plans to which the Plan relates are so
qualified and nothing, to Seller's knowledge, has occurred
since the date of such letter to cause the letter to be no
longer valid or effective assuming the Plan is amended on a
timely basis to comply with changes to the Code, or other
legislative, regulatory or administrative requirements subject
to the remedial amendment period applicable to such Act. All
contributions due with respect to the periods ending on or
before the Closing Date to the Plan has been timely made, and
a pro rata portion of the contributions (including matching
contributions) for the plan year in which the Closing Date
occurs shall have been made on or prior to the Closing Date
for the period ending on the Closing Date. With respect to the
Plan and any other Employee Benefit Plan sponsored or
contributed to by the Company or any entity that is or was at
any time treated as a
Page 27 of 54 Pages
single employer with Company under Section 414(b), (c), (m) or
(o) of the Code, no event has occurred, and there exists no
condition or set of circumstances in connection with which the
Company could, directly, or indirectly (through a commonly
controlled entity or otherwise), be subject to any liability
under ERISA, the Code or any other applicable law, and all
such Employee Benefit Plans conform to, and their
administration is in compliance with, all applicable laws and
regulations. No prohibited transaction within the meaning of
ERISA section 406 or Code section 4975, or breach of fiduciary
duty under Title I of ERISA has occurred with respect to such
Employee Benefit Plans.
(v) Neither Company nor any entity that is or was at any time
treated as a single employer with Company under Section
414(b), (c), (m) or (o) of the Code has at any time (a)
maintained, contributed to or been required to contribute to
any plan under which more than one employer makes
contributions (within the meaning of Section 4064(a) of ERISA)
or any plan that is a multi-employer plan as defined in
Section 3(37) of ERISA, (b) incurred or expects to incur any
liability to the Pension Benefit Guaranty Corporation or
otherwise under Title IV or ERISA (other than the payment of
premiums none of which are overdue) or (c) incurred or expects
to incur liability in connection with an "accumulated funding
deficiency" within the meaning of Section 412 of the Code
whether or not waived.
(vi) Company has, in the conduct of the affairs of the Business of
Company, complied in all material respects with all applicable
laws, rules and regulations relating to the employment of
labor, including those relating to wages, hours, terms and
conditions of employment, collective bargaining and the
payment of social security and similar Taxes.
(vii) Company has not and prior to the Closing Date will not have
suffered a "plant closing" or "mass layoff" within the meaning
of the Worker Adjustment and Retraining Notification Act
("WARN").
(viii) To Seller's knowledge, the Company has complied in all
material respects with the Consolidated Omnibus Budget
Reconciliation Act of 1984.
(ix) The Sellers agree to remain Trustees of the Plan.
4.12 Burdensome Obligations. Except for agreements described in the
-----------------------
Disclosure Schedule 4.12, Company is not a party to any so-called
requirements or similar type of contract limiting its freedom or
latitude in the purchase of its inventory, equipment or other items.
Company is not subject to or bound by any contract
Page 28 of 54 Pages
or other obligation whatsoever which materially adversely affects its
business, properties or prospects, except as expressly disclosed in
this Agreement.
4.13 Lawful Operations. To the best of Sellers' knowledge, the businesses
------------------
conducted and properties owned or leased by Company conform with all
Applicable Laws and all permits and licenses, if any, that are required
to enable Company to operate its Business have been obtained.
4.14 Legal Proceedings; Claims. Except as set forth in the Disclosure
---------------------------
Schedule 4.14, there are no decrees or order of any regulatory agency,
court or public authority materially affecting the operations of
Company, and Company is not a party to any litigation or other judicial
or administrative proceedings. Except as set forth in Disclosure
Schedule 4.14, to Sellers' knowledge, neither Company nor any Seller is
a party to any litigation or other judicial, administrative or other
proceeding pending or known by Sellers to be threatened which would
affect Company's or Sellers' ability to perform this Agreement or would
materially affect the assets or operations of Company; and, to the best
of Sellers' knowledge there are no claims in existence or threatened
against Company or any of its properties which may result in
litigation. Sellers have not received any notice of any violations of
any Federal, State, local or foreign laws or regulations which might
materially affect the properties, assets, business, financial condition
or corporate status of Company; and Company is not in default with
respect to any order or decree of any court or administrative
regulatory agency.
4.15 Taxes.
-----
A. Company has:
(i) Except as set forth in Disclosure Schedule 4.15,
prepared in accordance with reasonable interpretations
of all Applicable Laws, and timely filed all Tax Returns
required to be filed or sent by it with respect to any
Taxes; copies of all Company federal and state income
Tax Returns since March 31, 2002 have been provided to
Purchaser;
(ii) timely paid all Taxes that are shown as due and payable
on said Tax Returns;
(iii) established on its books and records reserves that are
adequate for the payment of all Taxes not yet due and
payable;
(iv) complied with all Applicable Laws, rules and regulations
relating to the payment and withholding of Taxes and
have timely and properly withheld from employee wages
and paid over to the proper Governmental Authorities all
amounts required to be so
Page 29 of 54 Pages
withheld and paid over under all Applicable Laws. There
are no liens for Taxes upon the assets of Company except
for Liens for Taxes not yet due. Company is not a party
to any agreement providing for the allocation, sharing
or indemnification of Taxes;
(v) that, except as reflected or reserved against in the
Balance Sheet of Company as of March 31, 2002, Company
as of such date had no deferred tax liabilities of any
nature and Sellers represent and warrant that they do
not know nor do they have any reasonable grounds to know
of any basis for any deferred tax liability in any
amount not fully reflected or reserved against in the
Balance Sheet as of March 31, 2002;
(vi) that all deductions taken on all the Company's tax
returns have been properly deducted by Company pursuant
to pertinent provisions of the Code.
(vii) complied with the provisions of Section 263A of the Code
relating to the capitalization and inclusion in
inventory costs of certain expenses.
To Sellers' knowledge, Company is not currently under audit by
any Governmental Authority for any Taxes and has not extended
the statute of limitations relating to the filing of a Tax
Return or the payment of any Taxes.
X. Xxxxxxx represent that:
(i) there has been no consent filed with the Internal
Revenue Service under Section 341(f) of the Code; and
(ii) Sellers shall be responsible for their federal, state
and local income taxes relating to or arising from their
ownership of Company Shares.
4.16 Environmental Compliance.
-------------------------
(i) To Seller's knowledge and belief, and without any independent
investigation, Company is not in violation, or alleged to be
in violation, of any Environmental Laws which would have a
material effect on the Business,
(ii) Company has not received a notice, complaint, order,
directive, claim or citation from any third party, including
without limitation any federal, state or local governmental
authority, (A) that Company has been identified by
Page 30 of 54 Pages
the Unites States Environmental Protection Agency ("EPA") as a
potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 CFR Part 000
Xxxxxxxx X, or the CERCLA Information System; (B) that any
Hazardous Materials which Company has generated, stored,
transported or disposed of has been released at any site at
which a federal, state or local agency has conducted or has
ordered that any person conduct a remedial investigation,
removal or other response action pursuant to any Environmental
Law or has named Company as a potentially responsible party;
or (C) that Company is or shall be named party to any claim,
action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out
of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release
of Hazardous Materials.
(iii) To the knowledge of Sellers, and without any independent
investigation, (A) no portion of the property of Company has
been used for the handling, processing, storage or disposal of
Hazardous Materials except in compliance in all material
respects with applicable Environmental Laws; and no
underground tank or other underground storage receptacle
containing or formerly containing any Hazardous Materials is
located on any portion of any of the properties currently or
formerly owned, operated or leased by Company or any of its
Affiliates during Company's or any of its Affiliate's
ownership, operation or lease of the properties; (B) in the
course of any activities conducted by Company or operators of
Company's properties, no Hazardous Materials have been
generated or are being used on the property except in
compliance in all material respects with applicable
Environmental Laws; (C) there have been no releases (i.e., any
past or present releasing, spilling, leaking, leaching,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened releases of
Hazardous Materials on, upon, into or from the property
currently or formerly owned, operated or leased by Company or
any of its Affiliates during or prior to Company's or any of
its Affiliate's ownership, operation or lease, which releases
would have a material effect on the value of any of the
property or adjacent properties or the environment; and (D) in
addition any Hazardous Materials, that have been generated or
stored by Company or any of its Affiliates on any of the
currently or formerly owned, operated or leased property of
Company have been transported off site only by carriers having
an identification number issued by the EPA and treated or
disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable
Environmental Laws, which transporters and facilities have
been and are operating in material compliance with such
permits and applicable Environmental Laws or, if any
transporter or facility has not been or is not in material
compliance,
Page 31 of 54 Pages
such failure would not have a material effect on Company or
any of its Affiliates.
(iv) Sellers have provided to Purchaser all environmentally related
audits, studies, reports, analyses (including soil and
groundwater analysis), and results of investigations that have
been performed with respect to the currently or previously
owned, leased, or operated properties of Company or any of its
Affiliates, and that are in the possession of Company, any of
its Affiliates or Sellers.
(v) There is not now nor, to the knowledge of Sellers, have there
been located at any of the properties of Company, whether
owned or leased asbestos containing material or equipment
containing polychlorinated biphenyls in violation of any
applicable Environmental Law.
(vi) Company currently holds, and at all times has held, all
required federal, state, and local permits, licenses,
certificates and approvals necessary to Company's Business
("Environmental Permits"). Company has not been notified by
any relevant Governmental Authority that any Environmental
Permit will be modified, suspended, canceled or revoked, or
cannot be renewed in the ordinary course of business, which
modification, suspense, cancellation, revocation or
non-renewal could affect in any material way the manner in
which Company operates Company's Business.
4.17 Insurance. Company maintains policies of fire, extended coverage,
---------
liability and other forms of insurance covering its Business,
properties and assets in amounts and against such losses and risks as
are generally maintained for comparable businesses and properties, and
valid policies for such insurance will be outstanding and duly in force
through and on the Closing Date. Attached hereto as Disclosure Schedule
4.17 is a complete list of all insurance policies owned by Company,
indicating risks insured against, carrier, policy number, amount of
coverage, premiums and expiration dates.
4.18 Books and Records. The books of account of Company substantially
-------------------
reflect all its known material items of income and expense and all its
known material assets, liabilities and accruals. The corporate minute
books of Company are substantially complete as to the records of
substantially all substantial proceedings of incorporators,
shareholders and directors, and there are no substantial and material
minutes or records of the proceedings of any of said person not
included therein. The share ledgers and share certificate books contain
a complete and accurate record of all issuances and transfers of shares
in Company.
Page 32 of 54 Pages
4.19 Certain Interests. Except as set forth in Disclosure Schedule 4.19,
------------------
Sellers do not directly or indirectly own any interest in any
corporation, firm or enterprise engaged in a business competitive with
Company, except (i) Company Shares or (ii) any passive investment by
Sellers in the stock of any publicly held corporation which is not in
excess of five percent of the issued and outstanding capital stock of
such corporation.
4.20 Officers and Directors; Certain Payments. Disclosure Schedule 4.20 is
-----------------------------------------
a true and complete list showing (a) the names of all officers and
directors of Company and the directorships and officerships in Company
held by each; (b) the names and address of each financial institution
in which Company has an account, safe deposit box or investment
account, the names of all persons authorized to draw thereon or to have
access thereto, and the nature of such authorization; and (c) the names
of all persons holding tax or other powers of attorney from Company and
a summary statement of the terms thereof.
4.21 Commissions or Brokers Fees. Neither Company nor any Seller has
------------------------------
incurred any liability to any person for financial advice, finder's
fees or brokerage commission with respect to the transactions
contemplated by this Agreement, which liability may be asserted against
Company, Purchaser or any affiliate of Purchaser, except for Sellers'
engagement of Xxxxxx Marketing Consulting, Inc., whose fee shall be
paid by Sellers.
4.22 Assets Necessary to the Business. Company owns, leases, licenses, or
----------------------------------
has the right to use all assets and properties (tangible and
intangible) necessary to carry on its Business and operations as
presently conducted. Such assets and properties are all of the assets
and properties necessary to carry on the Business of Company as
presently conducted and, except as set forth in Disclosure Schedule
4.22, none of the Sellers (other than through their ownership of stock
in Company) nor any member of their respective families owns or leases
or has any interest in any assets or properties presently being used to
carry on the Business of Company.
4.23 Absence of Certain Business Practices. To the best of Seller's
-----------------------------------------
knowledge, neither Company, nor any officer, employee or agent of
Company, nor any other Person acting on its behalf, has, directly or
indirectly, within the past five years given or agreed to give any
gift, bribe, rebate or kickback or otherwise provide any similar
benefit to any customer, supplier, governmental employee or any other
Person who is or may be in a position to help or hinder Company or the
Business (or assist Company in connection with any actual or proposed
transaction relating to the Business or any other business previously
operated by Company) (i) which subjected or might have subjected
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) which if not given in the past, might
have had a material effect on Company or its assets, (iii) which if not
continued in the future, might have a material effect on
Page 33 of 54 Pages
Company or its assets or subject Company to suit or penalty in any
private or governmental litigation or proceeding, (iv) for any of the
purposes described in Section 162(c) of the Code or (v) for the purpose
of establishing or maintaining any concealed fund or concealed bank
account.
4.24 Transactions with Affiliates. Except as disclosed on Disclosure
------------------------------
Schedule 4.24, there is no lease, sublease, contract, agreement or
other arrangement of any kind whatsoever entered into by Company with
any Seller or with any Affiliate of any Seller, except such of the
foregoing which may be terminated at Closing by Purchaser without
further liability. Prior to Closing, all indebtedness owed by any
Seller to Company shall be repaid.
4.25 Territorial Restrictions. Except as described in Disclosure Schedule
-------------------------
4.25, Company is not restricted by any written agreement or
understanding with any other Person (excluding Applicable Laws of
Governmental Authorities) from carrying on the Business anywhere in the
world. Neither Purchaser nor any of its affiliates will, as a result of
its acquisition of Company Shares, become restricted in carrying on the
Business anywhere in the world as a result of any Contract or other
agreement to which Company is a party or by which it is bound.
4.26 Customers. Disclosure Schedule 4.26 includes a correct list of the
---------
twenty (20) largest customers for Company for each of the past two (2)
fiscal years and the amount of business done by Company with each such
customer for each year. None of the Sellers have any knowledge or
information, and are aware of any facts indicating that any of the
customers will or intend to (a) cease doing business with Company; (b)
materially alter the amount of business they are presently doing with
Company; or (c) not do business with Company after the Closing Date.
4.27 Suppliers. Disclosure Schedule 4.27 sets forth the names of and
---------
description of contractual arrangements (whether or not binding or in
writing) with the ten (10) largest suppliers of Company and any sole
suppliers of significant goods or services (other than electricity,
gas, telephone or water) to Company. None of the Sellers have any
knowledge or information, or are aware of any facts indicating that any
of the suppliers of Company will or intend to (a) cease doing business
with Company; (b) materially alter the amount of business they are
presently doing with Company; or (c) not do business with Company after
the Closing Date.
4.28 Product Liability. To the best of Sellers' knowledge, there are no
------------------
material product liability claims against Company, either potential or
existing, which are not fully covered by product liability insurance
coverage or which are not covered by any manufacturer's warranty
provided to Company, which, if determined
Page 34 of 54 Pages
adversely to Company, could reasonably be expected to have a material
adverse effect upon the Company.
4.29 Immigration Compliance.
-----------------------
(a) Company is in compliance with all applicable federal, state
and local laws, rules, directives and regulations relating to
the employment authorization of their respective employees
(including, without limitation, the Immigration Reform and
Control Act of 1986, as amended and supplemented, and Section
212(n) and 274A of the Immigration and Nationality Act, as
amended and supplemented, and all implementing regulations
relating thereto), and Company has not employed nor is any
such entity currently employing any unauthorized aliens (as
such term is defined under 8 CFR 274a.1(a)).
(b) Company has not received any notice from the Immigration and
Naturalization Service (the "INS") or the United States
Department of Labor (the "DOL") of the disapproval or denial
of any visa petition or entry permit pending before the INS or
labor certification pending before the DOL on behalf of any
employee or prospective employee of Company.
(c) Since the approval of each of their respective visa petitions,
there has been no material change in the terms and conditions
of employment of any employees of Company.
(d) Sellers shall cause Company to have delivered to Purchaser by
the Closing Date true, accurate and complete copies of all
visa petitions, entry permits and visa applications (and all
supporting documents) submitted to the INS for all foreign
employees and prospective foreign employees of Company.
4.30 Preference Payments. Company has not received any payments from any
--------------------
third party creditor that could be set aside as a preference item
within the meaning of Section 547 of the Bankruptcy Code, as such
section may hereafter be amended.
4.31 Full Disclosure. None of the representations and warranties made by
----------------
Sellers named herein, or made on their behalf, including any
disclosures made in the Disclosure Schedule, contains or will contain,
to the best of Sellers' knowledge, any untrue statement of material
fact or omits or will omit any material fact.
4.32 Disclosure Schedule. Any disclosure that is made by Sellers in the
--------------------
Disclosure Schedule under the terms of this Agreement that are
designated as pertaining to a particular Section of the Disclosure
Schedule shall constitute a disclosure for any other Section of the
Disclosure Schedule to the extent applicable.
Page 35 of 54 Pages
ARTICLE V
5. Representations of Purchaser. Purchaser represents, warrants and
-----------------------------
covenants to Sellers that the following statements are true as of the
date hereof.
5.01 Organization. Purchaser is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware
and has all the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now
being conducted.
5.02 Authority. This Agreement is a valid and binding obligation of
---------
Purchaser, enforceable in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, moratorium or
similar laws relating to or limiting creditors' rights generally, or by
the availability of equitable remedies or the application of general
equitable principles. Except as set forth in Disclosure Schedule 5.02,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will:
(i) violate, or conflict with, or require any Consent under, or
result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the properties
or assets of Purchaser under any of the terms, conditions or
provisions of the Articles of Incorporation or Bylaws of
Purchaser or of any note, bond, mortgage, indenture, deed of
trust, license, agreement or other instrument or obligation to
which Purchaser is a party, or by which Purchaser or any of
its properties or assets may be bound or affected, or
(ii) violate any order, writ, injunction or decree applicable to
Purchaser or any of its properties or assets or, to the
knowledge of Purchaser, violate any statute, rule or
regulation applicable to Purchaser or any of its properties or
assets; or
(iii) constitute a default or event that, with notice or lapse of
time, or both, would be a default, breach, or violation of any
lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust or other
agreement, instrument or arrangement to which Purchaser is a
party or by which it is bound; or
(iv) constitute an event that would permit any party to terminate
any agreement or to accelerate the maturity of any
indebtedness or other obligation of Purchaser.
Page 36 of 54 Pages
(v) no Consent by, notice to or registration with any Governmental
Authority is required on the part of Purchaser prior or
subsequent to the Closing Date in connection with the
execution, delivery and performance by Purchaser of this
Agreement or the consummation of any of the transactions
contemplated hereby.
5.03 Commissions or Brokers' Fees. Purchaser has not incurred any liability
----------------------------
to any person for financial advice, finder's fees or brokerage
commission with respect to the transactions contemplated by this
Agreement, which liability may be asserted against any Seller or
Company.
ARTICLE VI
6.01 Release by Sellers. Each Seller, as of the Closing Date, shall release
------------------
and discharge Company from all actions, claims or demands of every kind
and nature which any of the Sellers have or may have against Company
whether based upon contract or otherwise, arising before the execution
of this Agreement. Nothing contained herein shall constitute a release
of any rights of the Sellers arising under this Agreement, of any
claims under any Employee Benefit Plans currently maintained by
Company, or with respect to anything which may occur after the Closing
Date.
ARTICLE VII
7.01 Covenants Not to Compete. As inducement for and in consideration of
---------------------------
Purchaser entering into this Agreement, the Sellers, in their capacity
as Trustee as to X. Xxxxxxxxx, X. Xxxx and X. Xxxx, and individually
shall each enter into a non-competition agreement. Such non-competition
agreements are set forth in Exhibits F, F-1, F-2 and F-3 attached
hereto and made a part hereof.
ARTICLE VIII
8.01 Employment Agreements/Consulting Agreement. Upon the Closing Date,
--------------------------------------------
Company shall enter into Employment Agreements with X. Xxxx, X. Xxxx
and X. Xxxxxxx. Copies of said Employment Agreements are attached
hereto and made a part hereof as Exhibits G, G-1 and G-2. Upon the
--------------
Closing Date, Company shall enter into a Consulting Agreement with X.
Xxxxxxxxx. A copy of said Consulting Agreement is attached hereto and
made a part hereof as Exhibit G-3.
8.02 Termination of Employment Agreements. Upon the Closing Date, Company
---------------------------------------
shall terminate any current Employment Agreements it may have with X.
Xxxx,
Page 37 of 54 Pages
X. Xxxxxxxxx, X. Xxxx and X. Xxxxxxx. In addition, Company shall
terminate its Consulting Agreement with MBSKC, L.L.C., a Missouri
limited liability company.
8.03 Termination of Stock Purchase and Stockholder Agreement. Upon the
------------------------------------------------------------
Closing Date, Company and Sellers shall terminate the Stock Purchase
and Stockholder Agreement dated June 1, 1994, as amended.
8.04 Termination of Stock Purchase Agreement. Upon the Closing Date, MBSKC
----------------------------------------
Limited Partnership, a Missouri Limited Partnership and Sellers shall
terminate the Stock Purchase Agreement dated June 1, 1994, as amended.
8.05 Termination of Stock Agreement. Upon the Closing Date, Company and
---------------------------------
MBSKC Limited Partnership shall terminate the Stock Agreement dated
June 1, 1994, as amended.
ARTICLE IX
9.01 Termination of Lease Agreement and Entering Into New Lease Agreement.
----------------------------------------------------------------------
At Closing, Company shall terminate its current Lease Agreement with
MBSKC, L.L.C., a Missouri limited liability company. Upon the Closing
Date, Company shall enter into a new Lease Agreement with MBSKC,
L.L.C., a Missouri limited liability company at the current fair market
rate, which shall be subject to verification by an appraiser. Base
Annual Rent shall not exceed the lower of the current rental rate or
$7,717.00 per month for 8,000 square feet. Copies of such Termination
of Lease and the New Lease Agreement are attached hereto as Exhibits H
-
and H-1.
-
ARTICLE X
10.01 Covenants of Sellers.
----------------------
10.01.1 Further Actions.
----------------
Sellers will, as promptly as practicable, file or supply, or cause to
be filed or supplied, all applications, notifications and information
required to be filed or supplied by them or Company pursuant to
Applicable Law in connection with this Agreement, the Other Sellers
Documents and the consummation of the other transactions contemplated
hereby.
10.01.2 Further Assurances. Following the Closing, Sellers shall, and shall
------------------
cause each of their Affiliates and Company to, from time to time,
execute and deliver such additional instruments, documents, conveyances
or assurances and take such other actions as shall be necessary, or
otherwise reasonably requested by
Page 38 of 54 Pages
Purchaser, to confirm and assure the rights and obligations provided
for in this Agreement and in the Other Sellers Documents and render
effective the consummation of the transactions contemplated thereby.
Without limiting the generality of the foregoing, the Parties
specifically contemplate closing the transaction contemplated herein
prior to the time that full compliance by Sellers regarding certain
consents will be practical. As a result, notwithstanding the Closing,
and subject to the provisions of Article XVI, each Seller shall use
such reasonable efforts, without incurring any material cost incident
thereto, to assist Purchaser and Company in procuring any of the
consents, instruments or agreements called for herein.
10.01.3 Liability for Transfer Taxes. Sellers shall be responsible for the
------------------------------
timely payment of, and shall indemnify and hold harmless Purchaser and
their Affiliates against, all sales, income, use, value added,
documentary, stamp, and any other taxes and fees attributable or
arising out of the sale of the Company Shares by Sellers to Purchaser.
Sellers represent to Purchaser there will be no tax liability to
Company arising out of the sale of the Company Shares.
ARTICLE XI
11.01 Covenants of Purchaser.
------------------------
11.01.1 Further Actions.
----------------
Purchaser will, as promptly as practicable, file or supply, or cause to
be filed or supplied, all applications, notifications and information
required to be filed or supplied by it pursuant to applicable law in
connection with this Agreement, the Other Sellers Documents and the
consummation of the other transactions contemplated hereby.
11.01.2 Further Assurances. Following the Closing, Purchaser shall, and
-------------------
shall cause each of its Affiliates and Company to, from time to time,
execute and deliver such additional instruments, documents, conveyances
or assurances and take such other actions as shall be necessary, or
otherwise reasonably requested by Sellers, to confirm and assure the
rights and obligations provided for in this Agreement and in the Other
Sellers Documents and render effective the consummation of the
transactions contemplated thereby. Without limiting the generality of
the foregoing, the parties specifically contemplate closing the
transactions contemplated herein prior to the time that compliance by
Purchaser with the conditions precedent set forth in Section 13.02(7)
relating to the releases of any of the Sellers of their guaranties of
any Line of Credit Indebtedness will be practicable. As a result,
notwithstanding the Closing, this Section 11.01.2 shall require prompt
delivery thereafter by Purchaser of the
Page 39 of 54 Pages
instruments and agreements called for herein, including that contained
in Section 13.02(7).
11.01.3 Tax Election. Purchaser will not file any election under Section
-------------
338 of the Code with respect to this Agreement or the transaction
contemplated herein.
ARTICLE XII
12.01 Survival of Representations and Warranties. The Parties acknowledge
--------------------------------------------
and agree that all the representations, covenants, warranties and
agreements contained in this Agreement or in any agreement, instrument,
exhibit, certificate, schedule or other document delivered in
connection herewith, shall survive the Closing and shall be binding
upon the party giving such representation, covenant, warranty or
agreement and shall be fully enforceable to the extent provided for in
Sections 12.04 and 12.05 hereof, at law or in equity, for the period
beginning on the date of Closing and ending three (3) years thereafter,
except for the representations, warranties and agreements designated
and identified in Section 4.01, 4.02, 4.03, 4.05, 4.08 through 4.08.7,
4.11, 4.15, 4.16, 5.01 and 5.02, which shall survive the Closing and
shall terminate in accordance with the statutes of limitation governing
written contracts and Exhibits F, F-1, F-2 and F-3 and G, G-1, G-2 and
------------------ -----------
G-3, which shall terminate as provided therein.
12.02 Reliance Upon and Enforcement of Warranties and Agreements of Sellers.
---------------------------------------------------------------------
Each Seller hereby agrees that, notwithstanding any right of Purchaser
to fully investigate the affairs of Company, and notwithstanding
knowledge of facts determined or determinable by Purchaser pursuant to
such investigation or right of investigation, Purchaser has the right
to rely fully upon the representations, covenants, warranties and
agreements of each Seller contained in this Agreement and upon the
accuracy of any document, schedule, certificate or exhibit given or
delivered to Purchaser pursuant to the provisions of this Agreement.
12.03 Reliance Upon and Enforcement of Representations, Warranties and
----------------------------------------------------------------------
Agreements of Purchaser. Purchaser hereby agrees that, notwithstanding
--------------------
any right of Sellers to fully investigate the affairs of Purchaser and
notwithstanding knowledge of facts determined or determinable by
Sellers pursuant to such investigation or right of investigation,
Sellers have the right to rely fully upon the representations,
covenants, warranties and agreements of Purchaser contained in this
Agreement and upon the accuracy of any document, certificate or exhibit
given or delivered to Sellers pursuant to the provisions of this
Agreement.
12.04 Indemnification by Sellers. Each Seller, jointly and severally, shall
--------------------------
indemnify Purchaser against and hold it harmless from any Losses
resulting from or arising out of any inaccuracy in or breach of any
representation, warranty, covenant or
Page 40 of 54 Pages
obligation made or incurred by any Seller herein or in any other
agreement, instrument or document delivered by any Seller pursuant to
the terms of this Agreement. Subject to the limitation in Section 12.10
hereof, any amounts to which Purchaser, its successors or assigns, is
entitled to indemnification pursuant to the provisions of this Section
shall be first offset against the amounts payable to Sellers under the
Notes (including proceeding against Sellers for any amounts that may
have been previously paid to Sellers under the Notes). Provided,
however, the offset in any one year may not exceed the aggregate amount
of principal and interest due on said applicable Notes for said year.
12.05 Indemnification by Purchaser. Subject to the limitation set forth in
-----------------------------
Section 12.10, Purchaser agrees to defend, indemnify and hold harmless
the Sellers from, against and in respect of any and all Losses
resulting from or arising out of an inaccuracy in or other breach of
any representation, warranty, covenant, or obligation made or incurred
by Purchaser herein or in any other agreement, instrument or document
delivered by Purchaser pursuant to the terms of this Agreement.
12.06 Notification of and Participation in Claims.
------------------------------------------------
(a) No claim for indemnification shall arise until notice thereof
is given to the party from whom indemnity is sought (the
"Indemnifying Party"). Such notice shall be sent to the
Indemnifying Party within ten (10) days after the party
asserting such right to indemnity (the "Party to be
Indemnified") has received notification of such claim, but
failure to notify the Indemnifying Party shall in no event
prejudice the rights of the Party to be Indemnified under this
Agreement, unless the Indemnifying Party shall be prejudiced
by such failure and then only to the extent of such prejudice.
In the event that any legal proceeding shall be instituted or
any claim or demand is asserted by any third party in respect
of which Sellers on the one hand, or Purchaser on the other
hand, may have an obligation to indemnify the other, the Party
to be Indemnified shall give or cause to be given to the
Indemnifying Party written notice thereof and the Indemnifying
Party shall have the right, at its option and expense, to
participate in the defense of such proceeding, claim or
demand, but not to control the defense, negotiation or
settlement thereof, which control shall at all times rest with
the Party to be Indemnified, unless the Indemnifying Party
irrevocably acknowledges in writing full and complete
responsibility for and agrees to provide indemnification of
the Party to be Indemnified, in which case such Indemnifying
Party may assume such control through counsel of its choice
and at its expense. In the event the Indemnifying Party
assumes control of the defense, the Indemnifying Party shall
not be responsible for the legal costs and expenses of the
Party to be Indemnified in the event the Party to be
Indemnified decides to join in such defense. The Parties agree
to cooperate fully with each
Page 41 of 54 Pages
other in connection with the mitigation, defense, negotiation
or settlement of any such third party legal proceeding, claim
or demand.
(b) If the Party to be Indemnified is also the party controlling
the defense, negotiation or settlement of any matter, and if
the Party to be Indemnified determines to compromise the
matter, the Party to be Indemnified shall immediately advise
the Indemnifying Party of the terms and conditions of the
proposed settlement. If the Indemnifying Party agrees to
accept such proposal, the Party to be indemnified shall
proceed to conclude the settlement of the matter, and the
Indemnifying Party shall immediately indemnify the Party to be
indemnified pursuant to the terms of Sections 12.04 and 12.05
hereunder, subject to the limitations set forth elsewhere in
this Section 11. If the Indemnifying Party does not agree
within fourteen (14) days to accept the settlement (said
14-day period to begin on the first business day following the
date such party receives a complete copy of the settlement
proposal), the Indemnifying Party shall immediately assume
control of the defense, negotiation or settlement thereof, at
that Indemnifying Party's expense. Thereafter, the Party to be
Indemnified shall be indemnified in the entirety for any
liability arising out of the ultimate defenses, negotiation or
settlement of such matter.
(c) If the Indemnifying Party is the party controlling the
defense, negotiation or settlement of any matter, and the
Indemnifying Party determines to compromise the matter, the
Indemnifying Party shall immediately advise the Party to be
Indemnified of the terms and conditions of the proposed
settlement and irrevocably acknowledge in writing full and
complete responsibility for, and agree to provide,
indemnification of the Party to be Indemnified. If the Party
to be indemnified agrees to accept such proposal, the
Indemnifying Party shall proceed to conclude the settlement of
the matter and immediately indemnify the Party to be
indemnified pursuant to the terms of Sections 12.04 or 12.05
hereunder. If the Party to be Indemnified does not agree
within fourteen (14) days to accept the settlement (said
14-day period to begin on the first business day following the
date such Party receives a complete copy of the settlement
proposal), the Party to be Indemnified shall immediately
assume control of the defense, negotiation or settlement
thereof, at the Party to be Indemnified's expense. If the
final amount paid to resolve the claim is less than the amount
of the original proposed settlement made by the Indemnifying
Party, then the Party to be Indemnified shall receive such
indemnification pursuant to Sections 12.04 or 12.05 hereof,
including any and all expenses incurred by the Party to be
Indemnified incurred in connection with the defense,
negotiation or settlement of such matter. If the amount
finally paid to resolve the claim is equal to or greater than
the amount of the original proposed settlement proposed by the
Indemnifying Party, then the Indemnifying Party shall provide
indemnification pursuant
Page 42 of 54 Pages
to Sections 12.04 and 12.05 for the amount of the original
settlement proposal submitted by the Indemnifying Party, and
the Party to be Indemnified shall be responsible for all
amounts in excess of the original settlement proposal
submitted by the Indemnifying Party and all costs and expenses
incurred by the Party to be Indemnified in connection with
such defense, negotiation or settlement.
12.07 Provisions of General Application. With respect to any right of
------------------------------------
indemnification arising under this Agreement, the following provisions
shall apply:
(a) Procedures. The Party to be Indemnified and the Indemnifying
----------
Party agree to cooperate in the defense of any third party
claim or action subject to this Section 12, to permit the
cooperation and participation of the other parties in any such
claim or action, and to promptly notify the other parties of
the occurrence of any indemnified event or any material
developments or amounts due respecting any indemnification
event.
(b) No Implications. Neither the rights of any Party to
----------------
indemnification from another Party nor the obligations of any
Party to indemnify another Party, under this Agreement, shall
in any way imply or create, and each Party specifically
disclaims, any responsibility whatsoever by such Party for any
other Party's liabilities to any other person or entity or
Governmental Authority.
(c) Mitigation. The Party to be Indemnified shall use its good
----------
faith efforts to mitigate any claim or loss by any third party
hereunder and the Indemnifying Party shall be entitled to
participate in and coordinate such mitigation with the Party
to be Indemnified.
12.08 Assignment and Accounting for Benefits. To the extent that the
------------------------------------------
Indemnifying Party shall have actually paid indemnity damages to or on
behalf of the Party to be Indemnified, the Party to be Indemnified
shall make a non-exclusive assignment (to the extent permitted under
applicable law) to the Indemnifying Party (as their interest may
appear) of the remedies, rights and claims, if any, of the Party to be
Indemnified against any and all third parties for the same liability,
including, but not limited to, remedies, rights and claims against (i)
liability insurers and other insurance companies, and (ii) any other
person which has indemnified the Party to be Indemnified for such
liability. The parties shall cooperate reasonably in the pursuit of any
such remedies, rights and claims.
12.09 Exclusive Remedy. Anything contained in this Agreement or the Other
-----------------
Seller Documents to the contrary notwithstanding, the indemnification
rights set forth in this Section 12, all of which are subject to the
terms, limitations, and restrictions of this Section 12, shall be the
exclusive remedy after Closing against the Sellers and/or Purchaser for
monetary damages sustained as a result of a
Page 43 of 54 Pages
breach of a material representation, warranty, covenant, or agreement
under this Agreement. Such limitations set forth in this Section 12
shall not impair the rights of any of the parties: (a) to seek
non-monetary equitable relief, including (without limitation) specific
performance or injunctive relief to redress any default or breach of
this Agreement; or (b) to seek enforcement, collection, damages, or
such non-monetary equitable relief to redress any subsequent default or
breach of any employment agreement, non-competition agreement, transfer
document, assumption, consent, or agreement to be delivered at Closing
hereunder. In connection with the seeking of any non-monetary equitable
relief, each of the Parties acknowledges and agrees that the other
Parties hereto would be damaged irreparably in the event that any of
the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of
the Parties hereto agrees that the other Party hereto shall be entitled
to an injunction or injunctions to prevent breaches of the provisions
of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any competent court having jurisdiction
over the Parties.
12.10 Limitation on Liability.
-------------------------
(a) Notwithstanding anything contained herein to the contrary, no
claims for indemnification shall be made by Purchaser against
Sellers relating to Company until such time as all claims
hereunder exceed Twenty Thousand Dollars ($20,000.00) and then
indemnification shall be made only to the extend such claim or
claims exceed Twenty Thousand Dollars ($20,000.00) in the
aggregate.
(b) Notwithstanding anything contained herein to the contrary, the
maximum liability that any Seller may be required to pay to
Purchaser as a result of any and all breaches shall be limited
to the total consideration paid under this Agreement by
Purchaser to all Sellers multiplied by the following
respective percentages: X. Xxxxxxxxx, Trustee - 30.15%; X.
Xxxx, Trustee - 30.14%; X. Xxxx, Trustee - 30.14%; X. Xxxxxxx
- 9.57%.
(c) Notwithstanding anything contained in this Agreement to the
contrary, the maximum liability that Purchaser may be required
to pay to Sellers as a result of any and all breaches shall be
limited to the total consideration paid under this Agreement
by Purchaser to Sellers.
(d) Insurance. Prior to enforcing any claim for indemnification
---------
against the Indemnifying Party under this Agreement, the Party
to be Indemnified shall administratively file in good faith
with any insurers all forms and submissions required by
applicable policies for the proceeds or other benefits of
insurance coverage, if any, applicable to the claim or event
from which such indemnification right arose. In the event that
insurance
Page 44 of 54 Pages
proceeds are paid to the Party to be Indemnified respecting an
event to which an indemnification right applies hereunder,
such indemnification right shall apply only to the extent that
the amount of damages indemnified against exceeds such
insurance proceeds actually paid to the Party to be
Indemnified; provided however, that collection by judicial or
legal process of such insurance proceeds shall not be a
condition precedent to asserting or collecting such
indemnification claims under this Agreement. If the
Indemnifying Party incurs indemnity costs or pays indemnity
damages under this Agreement, and the Party to be Indemnified
subsequently receives insurance proceeds for the same claim or
event, then the Party to be Indemnified shall refund such
indemnity costs or damage payments to the Indemnifying Party
from such insurance proceeds to the extent that the Party to
be Indemnified has received benefits from both sources (i.e.,
payments of indemnity damages from the Indemnifying Party and
such insurance proceeds) in excess of the amount of
indemnifiable damages incurred by or asserted against the
Party to be Indemnified.
ARTICLE XIII
13. Conditions Precedent to the Obligations of Each Party. The obligations
------------------------------------------------------
of the Parties to consummate the transactions contemplated hereby shall
be subject to the fulfillment, on or prior to the Closing Date, of the
following conditions:
1. No Injunction, Etc. The consummation of the transaction
---------------------
contemplated hereby shall not have been restrained, enjoined
or otherwise prohibited by any Applicable Law, including any
order, injunction, decree or judgment of any Court or other
Governmental Authority. No Court or other Governmental
Authority shall have determined any Applicable Law to make
illegal the consummation of the transactions contemplated
hereby or by the other Sellers Documents, and no proceeding
with respect to the application of any such Applicable Law to
such effect shall be pending.
13.01 Conditions Precedent to Purchaser's Obligations.
---------------------------------------------------
1. Representations, Performance. Sellers shall have duly
-----------------------------
performed and complied in all material respects with all
agreements and conditions required by this Agreement and each
of the Other Sellers Documents to be performed or complied
with by them prior to or on the Closing Date. Sellers shall
have delivered to Purchaser a duly authorized, properly
executed certificate, dated the Closing Date to the foregoing
effect.
Page 45 of 54 Pages
2. Consents. Sellers have obtained all Consents necessary to
--------
consummate the transactions contemplated hereby, unless the
failure to obtain any such Consent would not materially
adversely affect the Company or its assets.
3. No Material Adverse Effect. No event, occurrence, fact,
-----------------------------
condition, change, development or effect shall have occurred,
exist or come to exist since April 1, 2002 that, individually
or in the aggregate, would have a material adverse effect on
the Company or its assets.
4. Transfer Documents and Other Miscellaneous Matters. Sellers
-------------------------------------------------------
have delivered to Purchaser, at or before the Closing, the
following documents, all of which shall be in form and
substance reasonably acceptable to Purchaser and its counsel:
(i) A certificate or certificates for all of the Company
Shares. Such certificate(s) shall be in form for
transfer, duly endorsed in blank by Sellers, or with
appropriate duly executed stock transfer powers
attached;
(ii) Opinion letter of The Xxxxxx Law Firm, P.C., counsel for
Sellers, addressed to Purchaser and dated the Closing
Date;
(iii) All minute books, stock certificates and transfer books,
contracts, policies of insurance, tax returns, records
of every kind and nature and all other documents and
writings belonging or relating to the Company and its
corporate organization, business and assets;
(iv) A Good Standing Certificate, dated within thirty (30)
days of the Closing, of the Secretary of State of
Missouri as to the good standing of Company;
(v) The Disclosure Schedule;
(vi) Copies of the Certificate of Incorporation and By-Laws
of Company, certified as true and correct by an officer
of Company;
(vii) Such resignations of officers and directors of Company
as Purchaser may request; and
(viii) Such other documents which Purchaser reasonably deems
necessary to effectuate this Agreement.
Page 46 of 54 Pages
5. Certain Employment Agreements. X. Xxxx, X. Xxxx and X. Xxxxxxx
-------------------------------
shall have entered into an Employment Agreement described in
Section 8.01. X. Xxxxxxxxx shall have entered into the
Consulting Agreement.
6. Covenant Not to Compete Agreements. Sellers shall have entered
-----------------------------------
into the Covenant Not to Compete Agreements in the form set
forth in Exhibits F, F-1, F-2 and F-3.
------------- ---
7. Subordination Agreements. Each Seller shall have entered into
-------------------------
his respective Subordination Agreement set forth in Exhibit
"D".
8. Cancellation and Termination of Employment Agreements. Company
-----------------------------------------------------
and X. Xxxxxxxxx, X. Xxxx, X. Xxxx and X. Xxxxxxx shall enter
into an agreement in form and content satisfactory to
Purchaser's counsel canceling and terminating certain
Employment Agreements between such Parties and the Company.
9. Parties shall have entered into a Termination of Stock
----------------------
Purchase and Stockholder Agreement, Termination of Stock
--------------------------------------------------------------
Purchase Agreement, and Termination of Stock Agreement as set
------------------------ ----------------
forth in Article VIII.
-------------------------
10. Company shall have entered into a Termination of Lease
Agreement with MBSKC, L.L.C., a Missouri limited liability
company, and Company shall have entered into a new Lease
Agreement with MBSKC, L.L.C., a Missouri limited liability
company, as set forth in Article IX.
11. Sellers shall have executed any and all documentation
necessary to cancel any existing buy-sell agreements between
the Sellers.
13.02 Conditions and Obligations of Sellers. The obligation of Sellers to
---------------------------------------
consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by the Sellers in their sole discretion), on or
prior to the Closing Date, of the following additional conditions,
which Purchaser agrees to use reasonable good faith efforts to cause to
be fulfilled:
1. Representations, Performance. Purchaser has duly performed and
-----------------------------
complied in all material respects with all agreements and
conditions required by this Agreement and each of the Other
Sellers Documents to be performed or complied with by it prior
to or on the Closing Date. Purchaser shall have delivered to
Sellers a certificate dated the Closing Date and signed by its
duly authorized officer, to the foregoing effect.
2. Consents and Approvals. Purchaser have obtained all Consents
------------------------
necessary to consummate the transactions contemplated hereby.
Page 47 of 54 Pages
3. Consideration and Other Miscellaneous Deliveries. Purchaser
--------------------------------------------------
shall have delivered to Sellers at or before the Closing, the
following documents, all of which shall be in form and
substance acceptable to Sellers and its counsel:
(i) A certified or cashiers check or wire transfer for the
aggregate amount to be paid to each Seller at the
Closing pursuant to Section 2.04(a) hereof;
(ii) The Notes as set forth in Section 2.04(b);
(iii) Certified copies of the corporation actions taken by
Purchaser authorizing the execution, delivery and
performance of this Agreement;
(iv) A Certificate of Good Standing for Purchaser from the
Secretary of State of Delaware dated no earlier than
thirty (30) days prior to the Closing Date;
(v) Opinion letter of Xxxxxxxxx & Dreidame Co., L.P.A.,
counsel for Purchaser, addressed to Sellers and dated
the Closing Date.
4. Certain Employment Agreements. X. Xxxx, X. Xxxx and X. Xxxxxxx
-----------------------------
shall have entered into an Employment Agreement described in
Section 8.01. X. Xxxxxxxxx shall have entered into the
Consulting Agreement.
5. Covenant Not to Compete Agreements. Sellers have entered into
-----------------------------------
the Covenant Not to Compete Agreements set forth in Exhibits
F, F-1, F-2 and F-3.
-----------------------
6. Subordination Agreement. Each Seller shall have entered into
------------------------
his respective Subordination Agreement set forth in Exhibit D.
7. Pay-off Line of Line of Credit Indebtedness. Simultaneous with
-------------------------------------------
the Closing, Purchaser shall cause Company to pay off the Line
of Credit Indebtedness and incident thereto procure the
releases of any of the Sellers of their guarantees of any of
the Line of Credit Indebtedness.
8. Payoff of Floor Planning. Simultaneous with the Closing,
---------------------------
Purchaser shall cause Company to pay off the Floor Planning
Indebtedness and incident thereto procure the releases of any
of the Sellers of their guarantees of any of the Floor
Planning Indebtedness.
9. Other Seller Documents. Purchaser shall have entered into each
----------------------
of the Other Seller Documents to which it is a party.
Page 48 of 54 Pages
ARTICLE XIV
14.01 Closing. The Closing of the sale and purchase of the Company Shares
-------
(the "Closing") shall take place on February _____, 2003 at the offices
of Xxxxxxxxx & Dreidame, Cincinnati, Ohio, or at such other time and/or
place as the parties may mutually agree upon. The Closing shall be
deemed effective as of the day of Closing. The day on which the Closing
actually occurs is herein sometimes referred to as the Closing Date.
ARTICLE XV
15. General Provisions.
-------------------
15.01 Further Documents. The Parties will, upon request at any time before
------------------
or after Closing, execute, deliver and/or furnish all such documents
and instruments, and do or cause to be done all such acts and things,
as may be reasonably necessary to carry out the purpose and intent of
this Agreement.
15.02 Publicity. Neither the Sellers, nor Company, nor Purchaser shall make
---------
any public announcements concerning this transaction without the prior
written consent of the other Parties hereto. Nothing herein contained
shall restrict Company or Purchaser from communicating with its
employees concerning this transaction. Each Party shall keep such
communication confidential, and shall use its best efforts to prevent
its respective employees from disseminating such information to the
public. Nothing herein contained shall prohibit any disclosure that is
required by law or a court of competent jurisdiction.
15.03 Expenses. Except to the extent otherwise specifically provided
--------
herein, Purchaser will bear and pay all of its expenses incident to the
transactions contemplated by this Agreement which are incurred by
Purchaser or its representatives and Sellers shall bear and pay all of
the expenses incident to the transactions contemplated by this
Agreement which were incurred by Sellers or their representatives.
15.04 Notices. All notices and other communications required by this
-------
Agreement shall be in writing and shall be deemed given if delivered by
hand or mailed by registered mail or certified mail, return receipt
requested, to the appropriate party at the following address (or at
such other address for a party as shall be specified by notice pursuant
hereto):
(a) If to Purchaser, to:
Page 49 of 54 Pages
Pomeroy Computer Resources, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxx X. Xxxxx III, Esq.
Xxxxxxxxx & Dreidame Co., L.P.A.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000-0000
(b) If to Sellers, to:
X. Xxxxxxxxx, Trustee
00 Xx. Xxxxxxx Xxxxx
Xx. Xxxxxxx, XX 00000
X. Xxxx, Trustee
Xxxxx 0, Xxx 000 X
Xxxxxx, XX 00000
X. Xxxx, Trustee
000 Xxxxx Xxxxxxxx
Xxxxxxxxxxxx, XX 00000
X. Xxxxxxx
00000 Xxxx 000xx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
With a copy to:
Xxxxxx X. Xxxxxx
The Xxxxxx Law Firm, P.C.
00000 Xxxxxxxxxx Xxxx
Xx. Xxxxx, XX 00000
15.05 Binding Effect. Except as may be otherwise provided herein, this
---------------
Agreement and all provisions hereof shall be binding upon and shall
inure to the benefit of the Parties hereto and their respective heirs,
legal representatives, successors and assigns. Except as otherwise
provided in this Agreement, no Party shall assign its rights or
obligations hereunder prior to Closing without the prior written
consent of the other Party.
15.06 Headings. The headings in this Agreement are intended solely for the
--------
convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
Page 50 of 54 Pages
15.07 Schedules and Exhibits. Schedules and exhibits referred to in this
------------------------
Agreement constitute and integral part of this Agreement as if fully
rewritten herein. Any disclosure made on any Schedule or Exhibit
delivered pursuant hereto shall be deemed to have been disclosed for
purposes of any other Schedule or Exhibit required hereby.
15.08 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of
which constitute together one and the same document.
15.09 Governing Law. This Agreement shall be construed in accordance with
--------------
and governed by the laws of the State of Missouri.
15.10 Severability. If any provision of this Agreement shall be held
------------
unenforceable, invalid or void to any extent for any reason, such
provision shall remain in force and effect to the maximum extent
allowable, if any, and the enforceability or validity of the remaining
provisions of this Agreement shall not be affected thereby.
15.11 Waivers, Remedies Accumulated. No waiver of any right or option
-------------------------------
hereunder by any Party shall operate as a waiver of any other right or
option, for the same right or option with respect to any subsequent
occasion for its exercise, or of any right to damages. No waiver by any
Party or any breach of this Agreement or of any representation or
warranty contained herein shall be held to constitute a waiver of any
other breach or a continuation of the same breach. All remedies
provided in this Agreement are in addition to all of the remedies
provided by law. No waiver of any of the provisions of this Agreement
shall be valid and enforceable unless such waiver is in writing and
signed by the party granting the same.
15.12 Entire Agreement. This Agreement and the agreements, instruments and
-----------------
other documents to be delivered hereunder constitute the entire
understand and agreement concerning the subject matter hereof. All
negotiations between the Parties hereto are merged into this Agreement,
and there are no representations, warranties, covenants, understanding
or agreements, oral or otherwise, in relation thereto between the
Parties other than those incorporated herein and to be delivered
hereunder. Except as otherwise expressed or contemplated by this
Agreement, nothing expressed or implied in this Agreement is intended
or shall be construed so as to grant or refer on any person, firm or
corporation other than the Parties hereto any rights or privileges
hereunder. No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by the Parties hereto.
15.13 Business Records. Sellers shall be permitted to retain copies of such
----------------
books and records relating to the business of Company as related to the
accounting and tax
Page 51 of 54 Pages
matters of the business, and have access to all original copies of
records so delivered to Purchaser at reasonable times, for any
reasonable business purpose, for a period of six years after the
Closing Date.
15.14 Construction of Agreement. In the event this Agreement is interpreted
-------------------------
by any court of competent jurisdiction, no Party shall be deemed the
drafter of this Agreement and such court of law shall not construe this
Agreement or any provision thereof against any Party as the drafter
thereof.
15.15 Knowledge. Whenever in this Agreement the terms "knowledge" or "best
---------
knowledge" are used with respect to any Party, it shall mean the actual
knowledge of the Party, or the officers and directors of the Party or
Company, as applicable.
ARTICLE XVI
CONSENT TO GRANTING OF A SECURITY
---------------------------------
INTEREST IN ACQUISITION DOCUMENTS
---------------------------------
16. Sellers consent and agree that upon the Closing of this transaction,
Purchaser shall have the right to grant to GE Commercial Distribution
Finance Corporation, formerly known as Deutsche Financial Services
Corporation, as Administrative Agent for the benefit of various lenders
under a Credit Facilities Agreement, and Purchaser and various
Affiliates of such parties, a first priority security interest and lien
on all of Purchaser's rights, remedies, claims and interests under all
the acquisition documents for this transaction.
Seller agrees to execute at Closing an assignment of rights agreement,
a copy of which is attached hereto as Exhibit I.
ARTICLE XVII
INFORMATION SECURITY PROGRAM
----------------------------
MANUAL AND CD
-------------
17. Upon the Closing Date, MBSKC, L.L.C. shall transfer to Company all its
right, title and interest in the Information Security Program Manual
and CD, free and clear of all Encumbrances. Incident to such transfer,
Company shall enter into a Royalty Agreement incident to which Company
shall pay MBSKC, L.L.C. a ten percent (10%) royalty on all sales of
security products relating to the Information Security Program Manual
and CD for the earlier of (i) two years from the Closing Date, or (ii)
the payment of Two Hundred Fifty Thousand Dollars ($250,000.00) in
royalties in the aggregate by Company to MBSKC, L.L.C. A copy of said
Royalty Agreement is attached hereto as Exhibit J. At the Closing, the
current License and Royalty Agreement between MBSKC, L.L.C. and Company
dated
Page 52 of 54 Pages
December 31, 2002 shall be terminated. Company shall continue to
explore the HP opportunity. In the event HP should demonstrate an
interest to include protecting Company's position in their respective
markets, and would purchase the copyright during the period set forth
above, Company and MBSKC, L.L.C. would split the net profit from said
sale on a 50%/50% basis. Any net profit from such sale to be retained
by Company shall be excluded from the earnout computation set forth in
Section 2.03. Company acknowledges that Midcon Data in Oklahoma has
been developing disaster recovery and imaging in parallel with
Company's Security Program. It has a signed agreement with zero (0)
royalties with the agreement that hardware opportunities are referred
to Company.
Page 53 of 54 Pages
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PURCHASER:
XXXXXXX COMPUTER RESOURCES, INC.
By: _______________________________
SELLERS:
___________________________________
XXXXX XXXXXXXXX, Trustee of the
Xxxxx Xxxxxxxxx Revocable Living Trust
Dated May 12, 1997
___________________________________
XXXXXXX XXXX, Trustee of the
Xxxxxxx Xxxx Revocable Living Trust
Dated June 30, 1997
___________________________________
XXXXX XXXX, Trustee of the
Xxxxx Xxxx Revocable Living Trust
Dated May 16, 1997
___________________________________
XXXXXXX XXXXXXX
Page 54 of 54 Pages
