EXHIBIT 2
ASSET PURCHASE AND SALE AGREEMENT
Agreement made this 28th day of May, 2004 by and between ePlus Technology,
Inc., a Virginia corporation, with a principal place of business at 000 Xxxxxxx
Xxxxxxx, Xxxxxxx, XX 00000 ("Buyer") and Manchester Technologies, Inc., a New
York corporation, with a principal place of business at 000 Xxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxx 00000 ("Seller"), on behalf of itself and all of its
subsidiaries.
RECITALS
A. Seller is a reseller of computer information technology products and
services.
B. Seller desires to sell to Buyer and the Buyer desires to purchase from
the Seller the Assets and the Business.
C. For a period of three years from the Closing, the Seller shall cease to
act directly or indirectly as a reseller of computer information technology
products and services to domestic (USA) end users, as provided herein.
D. Seller and Buyer are publicly traded companies and Seller and Buyer are
in compliance with all applicable SEC and NASD rules and regulations.
E. Capitalized terms used in this Agreement are defined in Section 1
hereof.
1. Definitions.
1.1. "Ancillary Documents": The Services Agreement, the Escrow Agreement,
the Sublease Agreements and/or Assignments and the Non-Solicitation Agreement.
1.2. "Assets"(all of which are owned by Seller): all assets exclusively
used in the Business, unless excluded herein, including but not limited to the
customer lists, computer data files, personnel records regarding employees hired
by Buyer, sales records, customer records, marketing materials, and web content
including the domain name and address for Manchester Software
(xxxxxxxxxxxxxxxxxx.xxx), , and the "superstore" but not including
x-xxxxxxxxxx.xxx or xxxxxx.xxx, and the Contracts including but not limited to
those set forth on Schedules 1.2 and 3.7, the rights to income from Qwest
agreements scheduled on 1.2.2 ($210,527), the rights to income from the Cisco
agreements scheduled on 1.2.2 ($268,979), provided Buyer uses best efforts to
comply with the contractual requirements of Cisco to obtain payment, and
equipment set forth on Schedule 1.2 excluding items on Schedule 1.2.1; provided
for the avoidance of doubt that the following are expressly excluded from such
definition: all assets used in the Reserved Business Activities, cash,
trademarks and other Proprietary Information not expressly included, securities
held in any
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entity, accounts receivable invoiced as of the Closing or on open orders as
scheduled provided the products shipped pursuant to such open orders are shipped
on or before June 11, 2004, as such term is defined in Section 7.1 hereof, and
corporate minute books and stock transfer records.
1.3. "Business": the information technology hardware and software reseller
and services operations, including e. Track Solutions (d.b.a. Manchester
Software), carried on by the Seller to its information technology hardware
products and services end user customers to the date of Closing. The Business
includes information technology, product sale and services to domestic (USA) end
users, which shall be defined to mean end users taking delivery of the product
and/or services in the United States (including Territories) including any
international organizations. The Business excludes sales of paper custom forms
sold to end-users, product sales and services to resellers and product sales and
services to non-domestic end users who accept delivery outside the United
States, including non-domestic end users who accept delivery by a domestic
export agent or freight forwarder. The Business includes the Doctor Notes and
Quest and UNICEF Contracts.
1.3.1. "Committed Inventory: The inventory scheduled on Schedule 1.3.1
shall be the Committed Inventory.
1.4. "Contracts": The Agreements including all revenue-producing contracts
in the Business and such other agreements related exclusively to the Business,
excluding the Agreements relating to the Reserved Business Activities provided,
however, that any Agreement (other than Doctor Notes, UNICEF and Quest) relating
to both the Business and the Reserved Business Activity shall be shared, subject
to the terms of any such Agreement
1.5. "Excluded Liabilities": Except for Liabilities, all liabilities,
obligations or commitments of Sellers for (i) any state, federal, sales, use,
goods and services, excise or custom taxes, (ii) any claim with respect to any
"employee benefit plan", as such term is used in section 3(3) of ERISA, and any
bonus, incentive, or deferred compensation, severance, retention, change of
control, or stock option plan, (iii) the termination of any employee benefits or
employee benefit plan on or prior to the Closing and any liabilities arising
from the termination of Seller's employees not hired by Purchaser subsequent to
Closing, (iv) the termination of employment of any employee of the Seller on or
prior to the Closing and any liabilities arising from the termination of
Seller's employees not hired by Purchaser subsequent to Closing, (v) any legal,
accounting, transactional, consultant, brokerage or other expense relating to
the negotiation and consummation of the transactions contemplated by this
Agreement by or on behalf of the Seller, (vi) any liability, obligation or
commitment of any kind caused by or arising from the conduct or operation of the
Business prior to the Closing.
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1.6. "Inventory": Means all goods identified on Schedule 1.6. Schedule
8.15(a) to be completed after Closing shall list all Inventory to be transferred
to Buyer. Schedule 8.15(b) to be completed after the Closing shall list all
Inventory to be retained by Seller. Such Schedules and total consideration shall
be agreed upon after closing in accordance with Section 8.15.
1.7. "Liabilities": all liabilities of Seller which are listed on Schedule
1.7, liabilities to third parties under any other Contracts pursuant to Section
8.4 or to indemnify Seller pursuant to Section 8.4, the Seller's liabilities
with respect to Hired Active Employees as provided in Section 8.1, the
liabilities for such other Employees to the extent allocated to Buyer as
provided for in Section 3.25, and, the Buyers' obligations pursuant to the
Ancillary Documents and no others. Buyer assumes no liability of Seller not set
forth herein.
1.8. "Services Agreement": the Agreement in substantially the form
attached hereto as Schedule 1.8.
1.9. "Purchase Price": Five million two hundred six thousand, eight
hundred fourteen dollars and eighteen cents ($5,206,814.18). , plus the value of
Inventory to be Scheduled in 8.15(a), plus Purchase Price Adjustments as
provided for in Section 2.5 below.. The net purchase price to be paid at closing
is five million dollars ($5,000,000), (which is $5,206,814.18, adjusted pursuant
to Paragraph 2.5), to be paid by wire transfer at closing.
1.10. The "Sublease and Assignment Agreements" are the Agreements in
substantially the form attached as Schedule 1.10.
1.11. "Seller Financial Statements": the financial statements provided
pursuant to Sections 7.1.5 and 8.9 hereof.
1.12. The "Non Solicitation Agreements" are the Agreements in
substantially the forms attached as Schedule 1.12.
1.13 "Reserved Business Activities" shall mean the remaining post-closing
business of the Seller, such as Electrograph Systems, and any business activity
which is not expressly prohibited by this Agreement or the Ancillary Documents.
2. Transaction.
2.1. Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Seller shall sell, transfer, convey, assign and
deliver to the Buyer, and the Buyer shall purchase or acquire from the Seller,
all of the right, title and interest in and to the Assets, other than the Assets
set forth in Schedule 1.2.1, free and clear of all liens and encumbrances.
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2.2. The Buyer shall assume and agree to pay, honor and discharge through
performance when due the Liabilities.
2.3. The Buyer shall not assume any of the Excluded Liabilities.
2.4. Purchase Price. The purchase price shall equal (i) the Purchase Price
by delivery of cash payable by wire transfer or, and (ii) assumption of the
Liabilities. A portion of the purchase price shall be escrowed pursuant to the
Escrow Agreement.
2.5. Purchase Price Adjustments. The Purchase Price shall be subject to
adjustment ("Purchase Price Adjustment") in accordance with this Section 2.5.
Any and all Purchase Price Adjustments required to be made shall be payable by
cash payments by Buyer to Seller or Seller to Buyer and otherwise in accordance
with this Section 2.5. All Purchase Price Adjustments shall be subject to the
agreement of the Parties and shall be evidenced by Schedule 2.5.
2.6. The Purchase Price shall be apportioned as in Schedule 2.6, to be
agreed post-closing.
3. Warranties and Representations of the Seller. The Seller warrants and
represents to Buyer:
3.1. Corporate. Seller is a duly organized and a validly existing New York
corporation in good standing as to corporate status and tax requirements in
every jurisdiction where its business so requires. Seller has obtained all
necessary corporate, regulatory, and governmental approvals for the execution
and performance of each of this Agreement and the Ancillary Documents, as
applicable, and has full legal right and power so to do. Each of this Agreement
and the Ancillary Documents has been duly executed and delivered by Seller and
is valid and binding obligation, duly approved as necessary by law, enforceable
in accordance with its terms. The execution and performance of each of this
Agreement and the Ancillary Documents will not violate or constitute a default
under any agreement, charter, by-law, court order, law, rule, regulation,
judgment or injunction by which Seller is bound.
3.2. Approval. No governmental approval or other consent or Seller
shareholder approval is required to be obtained or made by Seller in connection
with the execution and delivery of this Agreement or the Ancillary Documents to
which it is a party, or the consummation of the transactions contemplated hereby
or thereby.
3.3. Title. All the Assets are owned by Seller with good and marketable
title, and are not subject to security interests, liens, encumbrances or claims
by third parties.
3.4. Litigation. Seller is not subject to or threatened by any defensive
litigation, investigation, administrative procedure, arbitration or similar
proceeding that (i) are not
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generally in the ordinary course of business, or if outside the ordinary course
of business would not have or result in a material adverse effect to the
Business or Assets (ii) questions the validity of, or the obligations of Seller
under, this Agreement or any Ancillary Document, (iii) seeks to impede, enjoin
or invalidate the transactions contemplated by this Agreement or any Ancillary
Document, or (iv) would have or result, in any case or in the aggregate, in a
material adverse effect to the Business or the Assets.
3.5. Brokers. Seller has no agreement, written or oral, with any broker or
finder requiring any payment in connection with this Agreement, except as
disclosed on Schedule 3.5.
3.6. Real Property. Schedule 3.6 includes a complete list of the real
property leased by Seller ("Leased Real Property"). Seller has a valid leasehold
interest in the Leased Real Property and such interest shall be in full force
and effect at Closing. It is understood and agreed that Buyer has no obligations
with respect to the Leased Real Property except as set forth in the Sublease and
Assignment Agreements.
3.7. Contracts: Each of the Contracts described in Schedule 3.7 which
schedule is a non exclusive schedule of Contracts, is, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies, (a) a valid and binding obligation of Seller and other party
thereto, (b) is in full force and effect and enforceable against Seller and the
other party to the Contract, and (c) there does not exist any violation, breach
or default, or any event or condition that would constitute a violation or
breach or a default under any such Contract by the Seller. Seller has performed
all material obligations required to be performed by it to date under the
Contracts. All Contracts are in the name of Seller. Schedule 3.7 lists the names
of all parties, and with respect to each Contract attached, and to the extent
evidenced by the attached, , the subject matter, the duration, whether the
Contract is assignable or not, whether there are any notices that are required
and whether they have or have not been given and any other information material
to Buyer with respect to the Contracts. With respect to each Contract attached
to Schedule 3.7, Seller is providing Buyer an original, or if after diligent
search an original is not located, a certified copy, of the Contract and any and
all necessary attachments and related documents. Seller warrants that the
Contract is a true and complete copy and there are no side letters or other
documents or oral agreements which modify the terms of the written documents
provided and that no person is authorized to modify any contract up to the date
of Closing. Contracts for which consent is required but not obtained shall be
addressed in the Service Agreement. There shall be no adjustment of the Purchase
Price by reason of the failure of any third party to withhold or condition
consent to the assignment of any contract, including without limitation any
lease to Leased Real Property. Seller covenants that Buyer will receive the
amount set forth in Schedules 1.2.2, provided Buyer fulfills its obligations
thereunder.
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3.8. Benefits. There are no plans of Seller in effect for pension, profit
sharing, deferred compensation, severance pay, bonuses, stock options, stock
purchases, or any other form of retirement or deferred benefit, or for any
health, accident or other welfare plan, collectively herein "the Benefits."
Subject to Sectons 3.25 and 8.1, Buyer shall have no liability as to any of the
Benefits, as limited in this Section 3.8, for the individuals listed on Schedule
3.21(c) unless specifically assumed on Schedule 3.8.
3.9. Claims. There have been no private or governmental claims, citations,
complaints, notices of violation or letters made, issued to or threatened
against Seller by any governmental entity or private or other party for the
impairment or diminution of, or damage, injury or other adverse effects to, the
environment or public health resulting, in whole or in part, from the use or
operation of the Leased Real Property. Seller has duly complied with and the
Leased Real Property is in compliance with, the provisions of all federal, state
and local environmental, health and safety laws, codes and ordinances and all
rules and regulations promulgated thereunder.
3.10. No Violation. Seller is not in violation with respect to the Assets
of any law, order, ordinance, rule or regulation of any governmental authority.
3.11. Compliance. The transaction contemplated herein complies with all
applicable SEC, governmental, and NASD statutes, rules and regulations. Seller
specifically represents that the approval of a majority of its shareholders is
not required.
3.12. Financial Statements. The Seller Financial Statements comprising
Schedule 3.12, defined in section 7.1.5 and those to be provided pursuant to
Section 8.9, present fairly in all respects the financial position of Seller as
of the dates indicated and the results of its operations and its cash flows for
the periods then ended in accordance with GAAP, consistently applied. The Seller
Financial Statements contain all adjustments necessary to present fairly the
financial condition of Seller as of the respective dates indicated and the
results of operations of Seller for the respective periods indicated, except for
normal audit adjustments.
3.13. Absence of Changes. Since the date of the last Balance Sheet
provided by Seller to Buyer, (i) Seller has carried on its business only in the
ordinary course consistent with past practice, (ii) there has been no material
adverse change, and there has been no event or circumstance which is reasonably
anticipated to result in a material adverse change, with respect to Seller, and
(iii) Seller has not made any change in any method of accounting or accounting
practice.
3.14. Tax Matters.
(a) Seller has filed all tax returns that it was required to file
prior to the Closing Date. All such tax returns were correct and complete
in all respects. All taxes owed by Seller (whether or not shown on any tax
return) have been paid.
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Seller currently is not the beneficiary of any extension of time within
which to file any tax return. No claim has ever been made by an authority
in a jurisdiction where Seller does not file tax returns that it is or may
be subject to taxation by that jurisdiction. There are no security
interests or liens on any of the Assets of Seller that arose in connection
with any failure (or alleged failure) to pay any tax.
(b) Seller has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(c) Seller does not expect any authority to assess any additional
taxes with respect to Seller for any period for which tax returns have
been filed. There is no dispute or claim concerning any tax liability of
Seller either (A) claimed or raised by any authority in writing or (B) as
to which any directors and officers (and employees responsible for tax
matters) of Seller have knowledge.
(d) Seller has not waived any statute of limitations in respect of
taxes or agreed to any extension of time with respect to a tax assessment
or deficiency.
(e) Seller has not filed a consent under Code Sec. 341 (f)
concerning collapsible corporations. Seller has not been a United States
real property holding corporation within the meaning of Code Sec. 897 (c)
(2) during the applicable period specified in Code Sec. 897 (c) (1) (A)
(ii). (A) Seller has not been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common
parent of which is the Seller or (B) nor has Seller any liability for the
taxes of any person (other than any of Seller and its Subsidiaries) under
Treas. Reg. ss. 1.150206 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
3.15. Intellectual Property.
(a) Schedule 3.15(a) contains a list of all of Seller's Intellectual
Property which is part of the Assets. All licenses included in Seller's
Intellectual Property are in full force and effect and constitute legal,
valid, and binding obligations of the respective parties thereto and there
have not been and there currently are not any defaults thereunder by any
party. Neither Seller nor any of its predecessors or affiliates (or any
goods or services sold by any of them) has violated, infringed upon, or
unlawfully or wrongfully used the intellectual property of others and, to
the knowledge of Seller, none of Seller's Intellectual Property or any
related rights or any customer lists, supplier lists, or mailing lists, as
used in Seller's business now or heretofore conducted by Seller, infringes
upon or otherwise violates the rights of others, nor has any person
asserted a claim of such infringement or misuse. Except as set forth on
Schedule 3.15.b, Seller has taken all reasonable measures to enforce,
maintain, and protect its interests and, to the extent applicable, the
rights of
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third parties, in and to Sellers Intellectual Property. Seller has all
right, title, and interest in the Intellectual Property identified on
Schedule 3.15(a). The consummation of the transactions contemplated by
this Agreement will not alter or impair any Intellectual Property rights
of Seller or result in a Default under any Contract of Seller. Seller is
not obligated nor has Seller incurred any liability to make any payments
for royalties, fees, or otherwise to any person in connection with any of
Seller's Intellectual Property.
(b) No present or former officer, director, partner, or employee of
Seller owns or has any proprietary, financial, or other interest, direct
or indirect, in any of Seller's Intellectual Property. To Seller's
reasonable knowledge, no officer or employee of Seller has entered into
any Contract with a non-party to this Agreement that requires such officer
or employee to assign any interest to inventions or other Intellectual
Property or keep confidential any trade secrets, proprietary data,
customer lists, or other business information or which restricts or
prohibits such officer or employee from engaging in competitive activities
with or the solicitation of customers from any competitor of Seller except
as set forth in Schedule 3.15(b).
(c) Seller grants Buyer an unconditional, fully-paid, non-exclusive
perpetual, royalty-free, transferable license to use all software owned by
Seller to maintain the Business on or prior to Closing. Seller agrees to
use its best efforts to transfer any third-party licenses used by it in
the Business to Buyer. Best efforts shall not be construed to require
Seller to incur any costs.
3.16 Inventory. The Inventory and Committed Inventory of Seller consists
of new manufactured and purchased parts, goods in process, and finished goods,
all of which is merchantable and fit for the purpose for which it was procured,
and none of which is damaged, or defective.
3.17. Computer Software and Databases. Schedule 3.17(a) identifies all
Computer Software and Databases owned, licensed, leased, internally developed,
or otherwise used in connection with the Business ("Seller's Computer Software
and Databases") which are to be purchased by Buyer. Seller has all Computer
Software and Databases that are necessary to conduct Seller's business as
presently conducted by Seller and all documentation relating to all such
Computer Software and Databases. Schedule 3.17(b) identifies each Person to whom
Seller, in the last two (2) years, has sold, licensed, leased, or otherwise
transferred or granted any interest or rights to any of Seller's Computer
Software and Databases and the date of each such sale, license, lease, or other
transfer or grant.
3.18 Insurance. All of the Assets and the operations of Seller of an
insurable nature and of a character usually insured by companies of similar size
and in similar businesses are insured by Seller in such amounts and against such
losses, casualties or risks as is (i) usual in such companies and for such
assets, operations, and businesses, (ii)
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required by any Law applicable to Seller, or (iii) required by any Contract of
Seller relating to Seller's business. Schedule 3.18 (to be provided
post-closing) contains a complete and accurate list of all insurance policies
held or owned by Seller and now in force and such Schedule indicates the name of
the insurer, the type of policy, the risks covered thereby, the amount of the
premiums, the term of each policy, the policy number and the amounts of coverage
and deductible in each case and all outstanding claims thereunder as of the date
hereof. All such policies are in full force and effect and enforceable in
accordance with their terms. Seller is not now in Default regarding the
provisions of any such policy, including, without limitation, failure to make
timely payment of all premiums due thereon, and has not failed to give any
notice or present any claim thereunder in due and timely fashion. Seller has not
been refused, or denied renewal of, any insurance coverage in connection with
the ownership or use of the Assets or the operation of Seller's business. In
addition to the deductibles set forth on Schedule 3.18, such Schedule discloses
all risks that are self-insured by Seller that in the ordinary course of
business would reasonably be insured by companies of similar size.
3.19. Employees.
(a) As of the Schedule date, Schedule 3.19(a) contains a complete
and accurate list of the following information for each active full-time
employee, independent contractor, consultant and agent of Seller,
including each full-time employee on leave of absence or layoff status:
employer; name; job title; date of hiring or engagement; current
compensation paid by type (i.e. salary, bonus, commission, overtime or
other). Upon Buyer's request from and after the Closing, Seller will
promptly supplement Schedule 3.19(a) by providing all information
requested by Buyer within the possession and control of Seller pertaining
to any such employee, subject only to legal limitations restricting
disclosure;
(b) As of the Schedule date, Schedule 3.19(b) states the number of
full-time employees terminated by Seller and contains a complete and
accurate list of the following information for each employee of Seller who
has been terminated or laid off, or whose hours of work have been reduced
by more than fifty percent (50%) by Seller, in the six (6) months prior to
the date of this Agreement: (i) the date of such termination, layoff or
reduction in hours; (ii) the reason for such termination, layoff or
reduction in hours; and (iii) the location to which the employee was
assigned.
(c) No officer is bound by any contract with any third party that
purports to limit the ability of such officer (i) to engage in or continue
or perform any conduct, activity, duties or practice relating to the
business of Seller or (ii) to assign to Seller or to any other Person any
rights to any invention, improvement, or discovery. To Seller's reasonable
knowledge no former or current employee of Seller is a party to, or is
otherwise bound by, any contract that in any way adversely affected,
affects, or will affect the ability of Seller or Buyer to conduct the
business as heretofore carried on by Seller except to the extent Scheduled
in Schedule 3.15(b).
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3.20 Labor Disputes; Compliance
(a) Seller has complied in all respects with all legal requirements
relating to employment practices, terms and conditions of employment,
equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining and other requirements under
federal, state and local law, the payment of social security and similar
taxes and occupational safety and health. Buyer is not liable for the
payment of any taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing legal
requirements.
(b) Except as disclosed on Schedule 3.20(b), (i) Seller has not
been, and is not now, a party to any collective bargaining agreement or
other labor contract; (ii) since May 26, 2004, there has not been, there
is not presently pending or existing, and to Seller's Knowledge there is
not threatened any strike, slowdown, picketing, work stoppage or employee
grievance process involving Seller; (iii) no event has occurred or
circumstance exists that could provide the basis for any work stoppage or
other labor dispute; (iv) there is not pending or, to Seller's knowledge,
threatened against or affecting Seller any proceeding relating to the
alleged violation of any legal requirement pertaining to labor relations
or employment matters, including any charge or complaint filed with the
National Labor Relations Board or any comparable Governmental Body, and
there is no organizational activity or other labor dispute against or
affecting Seller; (v) no application or petition for an election of or for
certification of a collective bargaining agent is pending; (vi) no
grievance or arbitration Proceeding exists that might have an adverse
effect upon Seller or the conduct of its business; (vii) there is no
lockout of any employees by Seller, and no such action is contemplated by
Seller; and (viii) there is no charge of discrimination pending against or
threatened against Seller with the Equal Employment Opportunity Commission
or similar governmental body.
3.21. Employees and Employee Benefits.
(a) For the purpose of this Agreement, the term "Active Employees"
shall mean all employees employed on the Closing Date by Seller for its
business.
(b) For the purpose of this Agreement the term "Independent
Contractors" shall mean all individuals or business entities who are not
employees and are performing services as sales representatives of Seller
in connection with the Business on the Closing Date.
(c) Employment of Active Employees and Engagement of Independent
Contractors by Buyer. (i) Buyer is not obligated to hire any Active
Employee or to enter into an agreement with any Independent Contractor but
may interview all Active Employees and Independent Contractors, except
that, for the persons or
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entities on Schedules 3.21(c) and 3.21(c.2), Buyer will offer employment
or engagement on the same or similar terms, provided, however, Buyer shall
not offer employment or solicit the services of any person identified by
Seller on Schedule 3.21(c.1).The employees or independent contractors to
whom Buyer has offered employment or engagement and who have accepted such
employment or engagement will be referred to as the Hired Active Employees
and the Hired Independent Contractors respectively.. Subject to legal
requirements, Buyer will have reasonable access to the personnel records
(including performance appraisals, disciplinary actions and grievances of
Seller for the purpose of preparing for and conducting employment
interviews with all Active Employees and will conduct the interviews as
expeditiously as possible following the Closing Date. Access to Active
Employees will be provided by Seller upon reasonable prior notice during
normal business hours. Seller will terminate its employment of all of its
Hired Active Employees and Hired Independent Contractors upon the
effective date of such Hired Active Employee's or Hired Independent
Contractor's employment or engagement by Buyer. (ii) Except insofar as
Seller determines, in its sole discretion, that their employment is
necessary under the Services Agreement, Seller shall not solicit the
continued employment of any Active Employee whom Buyer indicates, pursuant
to Schedules 3.21(c) and 3.21(c.2), as being the intended recipient of an
offer of Employment, unless and until Buyer has previously informed Seller
in writing that the particular Active Employee or Independent Contractor
will not receive any employment offer from Buyer nor shall Seller solicit
the employment or engagement of any Hired Active Employee or Hired
Independent Contractors after the Closing unless and until such Hired
Active Employee or Hired Independent Contractor has been discharged by
Buyer. Buyer shall inform Seller promptly of the identities of those
Active Employees to whom it will not make employment or engagement offers.
(iii) It is understood and agreed that (A) Buyer's expressed intention to
extend offers of employment as set forth in this section shall not
constitute any commitment, contract or understanding (expressed or
implied) of any obligation on the part of Buyer to a post-Closing
employment relationship of any fixed term or duration or, except as set
forth in Section 8.1, upon any terms or conditions other than those that
Buyer may establish pursuant to individual offers of employment, and (B)
employment offered by Buyer to Active Employees or Independent Contractors
is "at will" and may be terminated by Buyer or by an employee or
independent contractor at any time for any reason (subject to any
applicable legal requirements). Nothing in this Agreement shall be deemed
to prevent or restrict in any way the right of Buyer to terminate,
reassign, promote or demote any of the Hired Active Employees or Hired
Independent Contractors after the Closing or to change adversely or
favorably the title, powers, duties, responsibilities, functions,
locations, salaries, other compensation or terms or conditions of
employment of such individuals. Schedule 3.21(c.2) consists of employees
to whom Buyer is making employment/engagement offers, effective upon
landlord consents and who will be retained by Seller until the time of
such consents.
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(d) Salaries and Benefits. Except as set forth in Section 8.1 (i)
Seller shall be responsible for (A) the payment of all wages and other
remuneration due to Active Employees with respect to their services as
employees of Seller through the close of business on the Closing Date,
including pro rata bonus payments and all vacation and sick pay ("PAL
leave") earned prior to the Closing Date; (B) the payment to any Active
Employees, of any termination or severance payments and the provision of
health plan continuation coverage in accordance with the requirements of
COBRA and Sections 601 through 608 of ERISA; and (C) subject to the
provisions of Section 3.25 any and all payments to employees required
under the Worker Adjustment and Retraining Notification Act (the "WARN
Act.") in respect of any "plant closing" or "mass layoff" affecting
Seller's employees and occurring prior to the Closing Date. (ii) Seller
shall be liable for any claims made or incurred by Active Employees and
their beneficiaries through the Closing Date. For purposes of the
immediately preceding sentence, a claim will be deemed incurred, in the
case of hospital, medical or dental benefits, when the services that are
the subject of the charge are performed and, in the case of other benefits
(such as disability or life insurance), when an event has occurred or when
a condition has been diagnosed that entitles the employee to the benefit.
(e) Seller's Deferred Compensation, Retirement and/or Savings Plans.
(i) All Hired Active Employees who are participants in Seller's deferred
compensation and/or retirement plans sponsored and/or provided by Seller,
hereinafter Seller's "Retirement Plans" shall retain their benefits to the
extent theretofore vested under Seller's Retirement Plans as of the
Closing Date, and Seller (or Seller's Retirement Plans) shall retain sole
ability for the payment or transfer of such vested benefits as and when
such Hired Active Employees become eligible therefor under such plans.
(f) Collective Bargaining Matters. Buyer will set its own initial
terms and conditions of employment for the Hired Active Employees and
others it may hire, including work rules, benefits and salary and wage
structure, all as permitted by law. Buyer is not obligated to assume any
collective bargaining agreements under this Agreement. Subject to Section
3.25 and Section 8.1. Seller shall be solely liable for any severance
payment required to be made to its employees. Any bargaining obligations
of Buyer with any union with respect to bargaining unit employees
subsequent to the Closing, whether such obligations arise before or after
the Closing, shall be the sole responsibility of Buyer.
(g) General Employee Provisions. (i) Seller and Buyer shall give any
notices required by legal requirements and take whatever other actions
with respect to the plans, programs and policies described in this Section
3.21 as maybe necessary to carry out the arrangements described in this
Section 3.21. (ii) Seller and Buyer shall provide each other with such
plan documents and summary plan descriptions, employee data or other
information as may be reasonably required to carry out the
12
arrangements described in this Section 3.21. (iii) If any of the
arrangements described in this Section 3.21 are determined by the IRS or
other Governmental Body of competent jurisdiction to be prohibited bylaw,
Seller and Buyer shall modify such arrangements to reflect as closely as
possible their expressed intent and retain the allocation of economic
benefits and burdens to the parties contemplated herein in a manner that
is not prohibited by law. (iv) Seller shall provide Buyer with completed
I-9 forms and attachments with respect to all Hired Active Employees,
except for such employees as Seller certifies in writing to Buyer are
exempt from such requirement. (v) Buyer shall not have any responsibility,
liability or obligation, whether to Active Employees, former employees,
their beneficiaries or to any other Person, with respect to any employee
benefit plans, practices, programs or arrangements (including the
establishment, operation or termination thereof and the notification and
provision of COBRA coverage extension) maintained by Seller.
(h) Seller will provide Buyer with duplicate copies of all personnel
records with respect to Hired Active Employees and Hired Independent
Contractors.
(i) Subsequent to Closing, Seller shall pay its employees,
independent contractors, and former employees commissions due to them,
subject to the same terms and conditions as the existing commission
policies and/or agreements.
3.22. Assistance in Proceedings. Seller will cooperate with Buyer and its
counsel in the contest or defense of, and make available its personnel and
provide any testimony and access to its Books and Records in connection with,
any Proceeding involving or relating to (a) any contemplated transaction or (b)
any action, activity, circumstance, condition, conduct, event, fact, failure to
act, incident, occurrence, plan, practice, situation, status or transaction on
or before the Closing Date involving Seller or its business.
3.23. Nonsolicitation and Nondisparagement.
(a) Restriction. For a period of three (3) years after the Closing
Date, Seller shall not, anywhere in the United States, directly or
indirectly invest in, own, manage, operate, finance, control, advise,
render services to or guarantee the obligations of any Person engaged in
or planning to become engaged in the computer IT services business as a
domestic reseller to end users ("Competing Business"), provided, however,
that Seller may engage in distribution of such products to other
"resellers" (excepting any Independent Contractors) or non-domestic end
users and may continue to engage in distribution and sales of display
technology and such other products and services related to such business
currently engaged in by Electrograph Systems, Inc., a wholly owned
subsidiary of Seller, and any other business not expressly restricted
hereby, and purchase or otherwise acquire up to (but not more than) five
percent (5 %) of any class of the securities of any Person (but may not
otherwise participate in the activities of such Person) if such securities
are listed on any national or regional securities exchange or have
13
been registered under Section 12(g) of the Exchange Act. For purposes
hereof "non-domestic end-users" shall include end-users to whom Seller
sells by delivery through domestic freight forwarders or domestic export
agents.
(b) Nonsolicitation. For a period of three (3) years after the
Closing Date, Seller shall not, directly or indirectly: (i) cause, induce
or attempt to cause or induce any customer, supplier, licensee, licensor,
franchisee, employee, consultant or other business relation of Buyer to
cease doing business with Buyer, to deal with any competitor of Buyer or
in any way interfere with its relationship with Buyer; (ii) cause, induce
or attempt to cause or induce any customer, supplier, licensee, licensor,
franchisee, employee, consultant or other business relation of Seller on
the Closing Date or within the year preceding the Closing Date to cease
doing business with Buyer, to deal with any competitor of Buyer or in any
way interfere with its relationship with Buyer; or (iii) knowingly hire,
retain or attempt to hire or retain any employee or independent contractor
of Buyer or in any way interfere with the relationship between Buyer and
any of its employees or independent contractors.
(c) Nondisparagement. After the Closing Date, Seller will not
disparage Buyer or any of Buyer's shareholders, directors, officers,
employees or agents.
(d) Modification of Covenant. If a final judgment of a court or
tribunal of competent jurisdiction determines that any term or provision
contained in Section 3.24(a) through (c) is invalid or unenforceable, then
the parties agree that the court or tribunal will have the power to reduce
the scope, duration or geographic area of the term or provision, to delete
specific words or phrases or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision. This Section 3.24 will be enforceable as
so modified after the expiration of the time within which the judgment may
be appealed. This Section 3.24 is reasonable and necessary to protect and
preserve Buyer's legitimate business interests and the value of the Assets
and to prevent any unfair advantage conferred on Seller.
(e) No restriction on Seller under this Section3.23 shall be
operative with respect to Seller's disposition of inventory scheduled on
Schedule 8.15(b).
3.24. Customer and Other Business Relationships. After the Closing, Seller
will cooperate with Buyer in its efforts to continue and maintain for the
benefit of Buyer those business relationships of Seller existing prior to the
Closing and relating to the Business to be operated by Buyer after the Closing,
including relationships with lessors, landlords, vendors, employees, regulatory
authorities, licensors, customers, suppliers and others, and Seller will satisfy
the Excluded Liabilities in a manner that is not detrimental to any of such
relationships. Seller will refer to Buyer all inquiries relating to such
Business and no other Person or entity. Neither Seller nor during the course of
continued employment by Seller,
14
any of its officers, shall take any action that would tend to diminish the value
of the Assets after the Closing or that would interfere with the Business to be
engaged in after the Closing by Buyer, including disparaging the name or
business of Buyer.
3.25. WARN Act. Pursuant to Section 3.21 Buyer will notify Seller of the
names of all Active Employees of Seller to whom Buyer intends to make an offer
of employment. From and after the closing Buyer shall continue to notify Seller
of the names of all Active Employees who continue to be employed by Seller after
the Closing Date to whom Buyer has made an offer of employment. Seller agrees to
bear all the responsibilities under the WARN Act, if any, including all
notifications for any Active Employees subject to any pre-Closing "plant
closing" or "mass layoff" within the meaning of the WARN Act. The parties agree
to cooperate to minimize WARN Act liability and to share equally in any such
liability as to Seller's Active employees, post-Closing, excepting therefrom
liability as to Hired Active Employees, as to whom any WARN Act obligations
shall be the sole responsibility of Buyer. For purposes hereof "WARN Act
liability" shall include without limitation each of the following: (a) liability
for continued compensation after notice of termination is given to any employee
or the cost of a mutually agreeable negotiated severance payment which such
employee agrees to accept in return for a release of claims pursuant to the WARN
Act; and (b) the actual cost of retaining such employee through and including
any such notice period required by the WARN Act. Seller's agreement to share the
liability equally will not diminish the Buyer's liability to reimburse Seller
for the cost of any such employee pursuant to the Services Agreement
4. Warranties and Representations of Buyer. Buyer warrants and represents
to Seller:
4.1. Buyer is a duly organized and a validly existing Virginia corporation
in good standing as to corporate status and tax requirements in every
jurisdiction where its business so requires. Buyer has obtained all necessary
corporate approvals for the execution and performance of each of this Agreement
and the Ancillary Documents and has full legal right and power so to do. Each of
this Agreement and the Ancillary Documents has been duly executed and delivered
by Buyer and is its valid and binding obligation, enforceable in accordance with
its terms. The execution and performance of each of this Agreement and the
Ancillary Documents does not and will not violate or constitute a default under
any agreement, charter, bylaw, court order, judgment or injunction to which
Buyer is a party or by which it is bound.
4.2. Each of this Agreement and the Ancillary Documents is the legal,
valid and binding obligation of Buyer, enforceable in accordance with its terms.
4.3. Buyer has no written or oral agreement with any broker or finder
requiring any payment in connection with this Agreement.
4.4. No governmental approval or other consent or Buyer shareholder
approval or other corporate action is required to be obtained or made by the
Buyer in connection with
15
the execution and delivery of this Agreement or the Ancillary Documents to which
it is a party, or the consummation of the transactions contemplated hereby or
thereby.
4.5 Buyer will satisfy the Liabilities in accordance with the assumption
of same hereunder.
4.6 Nondisparagement. After the Closing Date, Buyer will not disparage
Seller or any of Seller's shareholders, directors, officers, employees or
agents.
5. Intentionally Deleted.
6. Buyer Confidentiality Obligation., Buyer and Seller agree to be bound
by the terms and conditions of the Non-Disclosure Agreement dated February 27,
2004, with the following modification: for information conveyed from the Seller
(Discloser) to the Buyer (Recipient), only information which satisfies both the
requirements of being Confidential Information in the Non-Disclosure Agreement
and is related to the Reserved Business Activities, shall be considered to be
Confidential Information. Buyer may not publicly disclose the Seller's Financial
Statements prior to Seller's own public disclosure except, and to the extent
necessary, for regulatory filings.
7. Closing.
7.1. Buyer shall purchase and Seller shall sell all of Seller's right,
title and interest in and to the Assets, subject to the Liabilities, at the
offices of Kressel, Rothlein, Xxxxx & Xxxx, LLC, 000 Xxxxxxxx, Xxxxxxxxxx, Xxx
Xxxx 00000 on May 28, 2004 (the "Closing"); provided, however, in no event shall
Buyer assume any of the Excluded Liabilities. At the Closing, all transactions
set forth below shall be effected. No transaction shall be deemed consummated
unless all such transactions are consummated. It is a condition of the
obligation of Buyer and Seller to consummate the Closing that the obligations of
the other at Closing shall have been performed, unless waived. At Closing:
7.1.1. Buyer shall deliver to the Seller, and Seller shall deliver
to Buyer, certificates that all warranties and representations herein are
true and correct in all material respects at Closing.
7.1.2. Seller and Buyer shall each deliver to the other certified
copies of resolutions of its Board of Directors authorizing the execution
and performance of this Agreement.
7.1.3. The Purchase Price as per Closing adjustments shall be paid
by Buyer to Seller by wire transfer in accordance with Seller's
instructions.
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7.1.4. Seller shall have delivered to Buyer all other instruments
and documents of transfer reasonably requested by Buyer to pass title and
possession of the Assets.
7.1.5. Financial Statements. Seller shall have provided financial
statements ("Seller Financial Statements") which include 1) full carve-out
financial statements (including balance sheets, statements of earnings,
changes in shareholders' equity, cash flow, footnotes, and auditor's
opinion) of the entity representing the Seller's assets, liabilities and
business being sold or transferred herein, audited by Seller's independent
accountants in accordance with GAAP and Regulation S-X as of July 31,
2003, 2002 and 2001 ("Audit Years"), and 2) quarterly unaudited financial
statements (including balance sheets, statement of earnings, and cash
flow) for each quarterly period through January 31, 2004.
7.1.6. The Ancillary Documents shall be executed.
7.1.7. A Xxxx of Sale and an Assignment executed and delivered by
Seller to Buyer.
7.1.8. The Buyer and Seller shall each have received an opinion of
the other's respective counsel, substantially in the form of Schedule
7.1.8 or with such changes thereto as are reasonably satisfactory to the
other.
8. Post-Closing Matters.
8.1. Effective June 1, 2004 at 12:01 AM, (and except for employees or
independent contractors whose services Seller continues under the Services
Agreement), Seller shall terminate the employment of each of the employees named
on Schedules 3.21(c) and 3.21(c.2), and effective as of June 1, 2004 at 12:01
AM, the Buyer shall offer employment to each employee named on Schedules 3.21(c)
and 3.21(c.2) (i) at a position comparable to such employee's position with
Seller immediately prior to the Closing, (iii) in the same general vicinity of
the facility at which such employee was employed by Seller, (iii) at wage or
salary levels and bonus or other incentive compensation amount, as applicable,
in compliance with Buyer's compensation Schedule with respect to similarly
situated employees, and (iv) with its standard employee benefits at Closing,
with length of service with Seller, up to the Closing, to be recognized by Buyer
for purposes of Buyer's 401-K benefit plan (other than accrual of benefits) as
service with Buyer. After the closing Buyer may supplement (without diminution)
Schedule 3.21c. The employees named on Schedules 3.21(c) and 3.21(c.2)
(including those on Schedules 3.21(c) and 3.21(c.2)as may be supplemented) who
accept such offers of employment by the Buyer shall be referred to in this
Agreement as the Hired Active Employees. The Buyer shall assume and be solely
responsible for the liability, if any, under the WARN Act and continued health
care coverage as described in Section 4980B of the Code (COBRA), incurred by the
Seller in connection with the actual or constructive termination of employment
with the Seller
17
(including in connection with the consummation of the transactions contemplated
by this Agreement and the Ancillary Documents) of any employee named on Schedule
3.21(c), and Schedule 3.21(c) as may be supplemented, and Schedule 3.21(c.2),
inclusive. Subject to Section 3.25 the Seller shall remain solely responsible
for any and all liabilities in respect of any Active Employees who do not become
Hired Active Employees. Subject to the terms of the Services Agreement, Seller
agrees to retain those employees set forth in Exhibit F of the Services
Agreement and Schedule 1.10, for the benefit of Buyer. Buyer may, from time to
time, add one or more employees to Schedules 3.21(c) and 3.21(c.2) or give
notice that it does not intend to add employees to Schedules 3.21(c) and
3.21(c.2).
8.2. The Buyer shall provide Hired Active Employees with coverage under
any welfare and benefit plans, programs, policies or arrangements established by
the Buyer provided that Seller shall remain solely responsible for any and all
benefit liabilities to or in respect of Hired Active Employees or their
beneficiaries or dependents relating to or in connection with any claims based
upon an occurrence prior to the effective date of employment by Buyer for life,
disability, accidental death or dismemberment, medical, dental, hospitalization,
other health or other welfare or benefit plans or expense reimbursements. The
Buyer shall waive any preexisting condition restrictions, as permitted by its
insurance provider(s) and to the extent permitted by law for any Hired Active
Employees and his or her dependents under the applicable benefit plan. From and
after the Closing, the Seller shall remain solely responsible for any and all
liabilities relating to or in connection with the requirements of COBRA to
provide continuation of health care coverage under any plan in respect of (i)
Active Employees who do not become Hired Active Employees and their covered
dependents, and (ii) to the extent related to a qualifying event occurring
before the effective date of employment by Buyer for Hired Active Employees and
their covered dependents.
8.3. To assure to Buyer the full benefit of conducting the Business from
and after the Closing Date, Seller undertakes that they shall not disclose to
another person or itself use for any purpose, and shall use all reasonable
endeavors to prevent the publication or disclosure of, information concerning
the Business or affairs of the clients or customers of the Business, of which it
has knowledge except for disclosure (i) required by law or applicable regulation
or (ii) on a confidential basis to its professional advisers or (iii) of
information that has come into the public domain through no breach of this
Agreement.
8.4. Notwithstanding anything to the contrary in this Agreement: This
Agreement shall not constitute an agreement to transfer, convey or assign any
Contracts if a transfer, conveyance or assignment, or an attempt to make a
transfer, conveyance or assignment, without the consent of a third party
(including any governmental authority) would constitute a breach or violation
thereof or in any way materially affect the rights of the transferee, conveyee
or assignee thereof until such consent is obtained; and if any such required
consent is not obtained on or prior to the Closing and Buyer shall so request,
the Seller shall use commercially reasonable efforts to obtain such consent
thereafter, and the Seller and the Buyer shall cooperate with each other to
effect any reasonable arrangement
18
designed to provide to the Buyer the benefit of, and to permit it to assume the
liabilities and. obligations under, any such Contracts. To the extent any
Contract is assigned, Buyer assumes the obligations of its performance from and
after the effective date of its assignment. In the event any Contract cannot be
assigned to Buyer, Seller shall allow Buyer to obtain the benefit of the
Contract in Seller's name and each shall serve as the others' agents for such
purpose; provided that Buyer shall indemnify, defend and hold Seller harmless
from and against any and all claim, demand, action, damage, loss, cost,
interest, liability, fee or expense, including without limitation attorney's
fees, which the Seller may suffer or incur in connection therewith.
8.5. From the date of Closing until the third annual anniversary thereof,
neither Seller nor its subsidiaries or affiliates shall directly or indirectly
resell information technology hardware or software products or provide
associated services relating thereto to domestic end users or the Independent
Contractors, nor shall Seller receive an agent fee from a reseller of
information technology hardware or software products for the sale by such agent
of any information technology hardware or software products or services, unless
said referral was made prior to closing and payment as a result of said referral
occurs within 120 days of Closing, nor shall they enter into any agreement
designed to subvert the spirit of this paragraph. Nothing herein shall limit or
prohibit the right of Seller, an affiliate or subsidiary to engage in sale or
distribution of such products and/or services to non-domestic end users (as
defined in Section 3.23) or resellers (domestic and non-domestic) or to continue
to engage in sale and distribution of display technology or related products and
services or to engage in any other business activity not expressly prohibited
hereby.
8.6. On and after the date of Closing, the Seller shall afford promptly to
the Buyer and its representatives access to its books and records, employees and
auditors to the extent necessary or useful for the Buyer in connection with any
third party audit, investigation, dispute or litigation or any other reasonable
business purpose relating to the Business and the Assets. Any such access by the
Buyer shall (i) be upon reasonable notice and at reasonable times during the
normal business hours of Seller, (ii) shall not unreasonably interfere with the
conduct of the business of the Seller, (iii) be at the Buyer's expense and (iv)
shall be subject to appropriate restrictions for classified or privileged
information.
8.7. Following the Closing, the parties shall at their own expense,
execute and deliver, or cause to be executed and delivered, such additional
reasonable instruments, documents, conveyances or assurances and take such other
actions as may be reasonably necessary, or otherwise reasonably requested by the
other party, to render effective the consummation of the transactions
contemplated by this Agreement and the Ancillary Documents or otherwise carry
out the intent and purposes of this Agreement and the Ancillary Documents.
8.8. Seller and Buyer shall each promptly remit to the other any payments
received from any Person which belongs to the other party. In the event both
parties have
19
an interest in the check, the payee may endorse and cash it, provided it
promptly remits the amount due to the other party within 5 business days of
clearance or availability of funds.
8.9. Seller will provide Buyer with unaudited financial statements,
prepared in accordance with GAAP, for the quarter ending April 30, 2004 and from
May 1, 2004 to Closing.
8.10. Subsequent to closing:
All rights, title and interest in pre-Closing purchase orders that
have not been filled and invoiced by Seller on or before June 11, 2004,
shall be assigned to Buyer on June 12, 2004, and Buyer shall assume
Seller's obligation to perform and/or fill such purchase order.
8.11. The parties shall simultaneously announce this transaction. Each
shall have the right to approve the other's text prior to issuance; the right to
approval shall not be unreasonably withheld and in no event may either party
restrict the other from complying with any applicable law or regulation.
8.12. Seller will sign such documents as are needed to title all tangible
and intangible assets in Buyer.
8.13 Buyer and Seller each will forthwith use best efforts and submit
necessary materials to obtain Landlord consent for the Subleases and
Assignments. In no event shall Seller be obligated to pay any consideration to
secure the Landlord consent. unless such consideration is provided for in and by
the existing Lease. Upon obtaining such consents, respectively, Seller shall
assign to Buyer all right, title and interest in and to the Assets scheduled on
Schedule 1.2 regarding the locations to which those consents correspond. Until
such time, Buyer shall have free use of the such Assets. Upon landlord consent,
Buyer will pay Seller the security deposits for Boca Raton ($8,239.73) and
Pittsford ($4,196.00).
8.14 Seller shall afford full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of Seller, to
Buyer and its duly appointed representatives to all information concerning the
Assets and personnel of Seller.
8.15 On or before June 12, 2004 Buyer shall inspect all Seller's Inventory
as scheduled on Schedule 1.6 and identify those items of Inventory to be
purchased from Seller. The items to be purchased by Buyer shall be sold to Buyer
at Seller's cost. The items and costs of such items to be sold to Buyer shall be
scheduled on Schedule 8.15(a). The items to be retained by Seller shall be
scheduled on Schedule 8.15(b)
20
8.16 Without charge to Buyer, Seller will permit Buyer to use such
personal property as existing in Seller's premises leased to Seller situated at
the Columbia office from and after the closing until purchased by Buyer from
Seller or removed by Seller. Until Seller's removal or Buyer's Purchase or such
use by Buyer terminates, whichever is later, Buyer shall maintain such personal
property in the same condition as presently existing, reasonable wear and tear
excepted. Prior to December 1, 2004, Seller agrees not to remove such property
unless and until Buyer has been offered an opportunity to purchase such items at
the same price and on the same terms as offered to Seller by a third party.
Buyer shall grant access to Seller on reasonable notice during usual business
hours to permit inspection by Seller and/or third parties to whom Seller
identifies as prospective purchasers of such property.
8.17 Buyer shall purchase all the Committed Inventory remaining after June
11, 2004 in accordance with Schedule 2.5 (Item 3), and such other inventory as
Buyer may elect to purchase pursuant to Schedule 2.5 (Item 2).
9. Remedies for Breaches of This Agreement
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Parties contained
in this Agreement shall survive the Closing and continue in full force and
effect for a period of one (1) year.
(b) Indemnification Provisions for Benefit of Buyer.
(i) In the event Seller breaches (or in the event any third party
alleges facts that, if true, would mean Seller has breached) any of its
respective representations, warranties, and covenants contained in this
Agreement, and, if there is an applicable survival period pursuant to
Section 9(a) above, provided that Buyer makes a written claim for
indemnification against Seller within one year of expiration of such
survival period, then Seller agrees, jointly and severally, to indemnify
Buyer from and against the entirety of any Adverse Consequences Buyer may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences Buyer may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to,
in the nature of, or caused by the breach (or the alleged breach)
provided, however, that Seller shall not have any obligation to indemnify
Buyer from and against any Adverse Consequences resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or alleged
breach) of any representation or warranty of Seller until Buyer has
suffered Adverse Consequences by reason of all such breaches (or alleged
breaches) in excess of a $50,000 aggregate threshold at which point Seller
will be obligated thereafter to indemnify Buyer from and against all such
Adverse Consequences. The $50,000 aggregate threshold provided for herein
shall not be
21
applicable to the Purchase Price Adjustments, Post Closing Adjustments,
Seller's obligations under Section 3.25, or under the Services Agreement.
(ii) Seller agrees to indemnify Buyer from and against the entirety
of any Adverse Consequences Buyer may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any liability of Seller
which is not an assumed Liability including any liability of Seller that
becomes a liability of Buyer under any bulk transfer law (other than bulk
transfer sales taxes) of any jurisdiction, under any common law doctrine
of de facto merger or successor liability, or otherwise by operation of
law.
(c) Indemnification Provisions for Benefit of Seller.
(i) In the event Buyer breaches (or in the event any third party
alleges facts that, if true, would mean Buyer has breached) any of its
representations, warranties, and covenants contained in this Agreement,
and, if there is an applicable survival period pursuant to Section 9(a)
above, provided that Seller makes a written claim for indemnification
against Buyer within such survival period, then Buyer agrees to indemnify
Seller from and against the entirety of any Adverse Consequences Seller
may suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach). Buyer shall not have any obligation to
indemnify Seller from and against any Adverse Consequences resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
alleged breach) of any representation or warranty of Buyer until Seller
has suffered Adverse Consequences by reason of all such breaches (or
alleged breaches) in excess of a $50,000 aggregate threshold at which
point Buyer will be obligated thereafter to indemnify Seller and against
all such Adverse Consequences. The $50,000 aggregate threshold shall not
be applicable to a breach of Sections 4.5, 3.25, or 8.1, the Purchase
Price Adjustments, the Post Closing Adjustments, or under the Services
Agreement.
(ii) Buyer agrees to indemnify Seller from and against the entirety
of any Adverse Consequences Seller may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any liability of Seller
that becomes a liability of Buyer for any bulk transfer sales taxes of any
jurisdiction, and any claim by the Landlord under any lease assigned to
Buyer or by any Lessor under any sublease granted by Seller to Buyer,
under any of the Ancillary Agreements and any claim by any Lessor under
any lease agreement through which Buyer is granted a sublease in
accordance with any of the Ancillary Agreements.
(d) Matters Involving Third Parties.
22
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against the other Party (the
"Indemnifying Party") under this Section 9, then the Indemnified Party
shall promptly notify the Indemnifying party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying
the Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15
days after the Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim actively
and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8 (d) (ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 8 (d) (ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, the Indemnifying Party in
connection therewith), (B) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending
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against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (C) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Section 8.
(e) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant.
(f) For purposes of this Section "Adverse Consequences" shall mean
all actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
10. Intentionally Deleted.
11. General Provisions.
11.1. Each party shall pay its own legal, accounting and other transaction
related expenses.
11.2. No waiver, amendment or termination shall be effective unless in
writing signed by the party to be charged. No waiver in one instance shall
constitute a waiver in any other. All notices shall be in writing and delivered
in hand or sent by registered or certified mail, return receipt requested, or by
overnight Federal Express at the addresses set forth above to the attention of
the persons signing this Agreement below.
11.3. This Agreement shall be governed under the laws of New York without
regard to application of conflict of laws principles and any disputes arising
hereunder shall exclusively be adjudicated in state or federal courts of New
York or Virginia. Each party hereto consents to the jurisdiction of such courts.
11.4. This Agreement constitutes the entire agreement of the parties with
respect to its subject matter and supersedes all prior oral and written
communications, proposals and agreements in such regard. Except as expressly set
forth herein, there are no representations or warranties given by either party
to the other. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.5. Headings are for convenience and are not admissible as to
construction.
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11.6. This Agreement shall bind upon and inure to the benefit of the
parties and their respective successors, assigns, heirs and legal
representatives; provided no party may assign this Agreement or delegate any
obligations hereunder without the prior written consent of the other party
except that Buyer may assign its rights and obligations to any affiliated entity
established by Buyer in order to effect the within transactions.
11.7. Each of the parties hereto acknowledges that there may be no
adequate remedy at law for the failure by such party to comply with the
provisions of this Agreement and that such failure would cause immediate harm
that would not be adequately compensable in damages. Accordingly, each of the
parties hereto agrees that its agreement contained herein may be specifically
enforced without the requirement of posting a bond or other security, in
addition to all other remedies available to the parties hereto under this
Agreement.
11.8. If any provision of this Agreement is held to be unenforceable for
any reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to this Agreement to the extent possible. In
any event, the invalidity or unenforceability of any provision of this Agreement
in any jurisdiction shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction.
11.9. This Agreement, including the Schedules hereto, and the Ancillary
Documents constitute the full and entire understanding and agreement of the
parties with respect to the subject matter hereof and thereof and supersede any
and all prior agreements or understandings relating to the subject matter
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective on the date first set forth above.
MANCHESTER TECHNOLOGIES
By:
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Name:
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Title:
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ePLUS TECHNOLOGY, INC.
By:
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Name:
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Title:
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