EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
AMONG
DELTA COMPUTEC INC.,
NQL INC.
AND
XXXXXXXX.XXX, INC.
DATED AS OF
MAY 31, 2002
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of May
31, 2002, by and among Delta Computec Inc., a New York corporation ("SELLER"),
NQL, Inc., a Delaware Corporation and sole shareholder of Seller
("SHAREHOLDER"), and XxxxXxxx.xxx, Inc., dba ViewCast Corporation, a Delaware
corporation ("BUYER").
RECITALS
WHEREAS, Seller is engaged in the Business (as defined in EXHIBIT A);
WHEREAS, Buyer wishes to purchase and acquire from Seller, and Seller
wishes to sell, assign and transfer to Buyer, the Acquired Assets, and Buyer has
agreed to assume the Assumed Liabilities, all for the consideration, and upon
the terms and subject to the conditions, herein set forth (the "ACQUISITION");
and
WHEREAS, Shareholder is presently a debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the District of New Jersey, case no. 02-31661 (the "SHAREHOLDER BANKRUPTCY
COURT").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties and covenants hereinafter set forth, and intending
to be legally bound hereby, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. The definitions set forth in EXHIBIT A are incorporated
herein by reference.
ARTICLE 2
BASIC TRANSACTION
2.1 PURCHASE AND SALE OF ACQUIRED ASSETS AND LIABILITIES. In consideration
for the payment of the Purchase Price, as set forth in Article 3 (the "PURCHASE
PRICE"), on the Closing Date, and subject to the terms of this Agreement (A) the
Seller will sell and transfer to Buyer or a wholly-owned subsidiary of Buyer
designated by Buyer substantially all of its operating assets, property, rights,
and good-will associated with, among other items, the name of the Seller and the
Seller's intellectual property used in connection with the Business, including
(i) the "ACQUIRED CURRENT ASSETS" and the "ACQUIRED LONG TERM ASSETS" each as
identified on SCHEDULE 2.1, and (ii) the "ASSUMED CUSTOMER CONTRACTS" described
on a list dated as of the date hereof and delivered by Seller and acknowledged
to have been received by Buyer, which list is not attached to this Agreement for
confidentiality reasons, which list will be updated at Closing to include the
customer and remaining contract value of each Assumed Customer Contract that is
used to calculate the aggregate Contract Value as set forth in Section 3.3(A)
(The Acquired Current Assets, the Acquired Long Term Assets and the Assumed
Customer Contracts transferred at Closing are collectively referred to herein as
the "ACQUIRED ASSETS") and (B) Buyer will assume and be obligated for the
Assumed Liabilities as described in Section 2.3, but only to the extent
specified therein. (Subject to Sections 2.2 and 2.4, the Acquired Assets and
Assumed Liabilities transferred at Closing are collectively referred to herein
as the "ACQUIRED ASSETS AND LIABILITIES.") Except as expressly stated herein,
the Acquired Assets and Liabilities will otherwise be transferred and sold to,
and acquired by, the Buyer "as is," "where is," without any representation or
warranty.
2.2 EXCLUDED ASSETS. Notwithstanding anything herein to the contrary, the
Acquired Assets and Liabilities will not include (A) any Acquired Assets and
Liabilities for which a third party consent is required by this Agreement at
Closing, where such third party consent is not obtained by the Closing, (B) any
of the assets set forth in SCHEDULE 2.2 or (C) any assets relating to any Plan
(collectively the "EXCLUDED ASSETS").
2.3 ASSUMPTION OF LIABILITIES. Subject to the terms and conditions set
forth herein, as of the close of business on the Closing Date and thereafter,
Buyer shall assume and agree to pay, honor, perform and discharge when due, and
shall indemnify and hold Seller and Shareholder harmless with respect thereto
all of the following liabilities, which, collectively shall be deemed the
"ASSUMED LIABILITIES":
(A) all liabilities of Seller to be performed from and after the Closing
Date and listed on SCHEDULE 2.3 that are assigned to Buyer at the Closing;
(B) all liabilities and obligations of Seller under the Assumed Customer
Contracts and other Contracts assumed by Buyer to be performed from and after
the Closing Date (but excluding any performance obligations or monetary
liabilities and obligations of Seller or Shareholder that were to be performed
or paid by Seller or Shareholder prior to the Closing, with respect to which
Seller shall indemnify and hold Buyer harmless) all of which will be assumed by
Buyer at the Closing; and
(C) except as set forth above, and except for the Excluded Assets and
Excluded Liabilities, all liabilities and obligations on or after the Closing
Date that relate to or arise out of the conduct of the Business after the close
of business on the Closing Date;
2.4 EXCLUDED LIABILITIES. Except as specifically set forth in Section 2.3,
Buyer shall not assume or in any way be responsible for, and Seller shall remain
responsible for, any liabilities or obligations of Seller and shall indemnify
and hold Buyer harmless with respect to such liabilities and obligations. Buyer
shall only be responsible for the Assumed Liabilities and except for the Assumed
Liabilities, Buyer does not and will not assume or become liable on any contract
of Seller or for any actual or potential indebtedness, obligation or liability
of Seller, including:
(A) any successor liability in tort or otherwise, including any such
liability that may be incurred in connection with pending or threatened
litigation, whether or not such liability is known, unknown or contingent, and
Seller will continue to be solely responsible for and shall pay the same
directly to the persons to whom the same are payable;
(B) any liability for Excluded Assets;
(C) any liability for Taxes relating to the Business, including the
Acquired Assets and Liabilities, attributable to a period prior to the Closing
Date, regardless of when such Taxes first became or become due;
(D) any liability for customer claims relating to actions taken by the
Seller prior to the close of business on the Closing Date, including customer
claims regarding the products and services delivered by Seller prior to the
close of business on the Closing Date;
(E) any Taxes imposed on Seller in connection with this Agreement and the
transactions proposed hereby; and
(F) any liabilities, claims, damages, and obligations of Seller or
Shareholder to any of its current or former employees arising out of their
employment with Seller or Shareholder, including any
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liabilities of Seller or Shareholder with respect to any retention, incentive or
similar payments from Seller relating to the sale of the Acquired Assets, and
all liabilities, claims, damages, and obligations associated with the Plans.
Without limiting the generality of the foregoing provisions of this
Section 2.4, except for the Assumed Liabilities, Buyer is not assuming and Buyer
is not responsible for any obligations or liabilities of Seller, however
arising, including those liabilities or obligations for Seller's prior actions,
product liability claims or customer claims attributable to a period prior to
the Closing Date, and whether such liabilities or obligations are currently
existing or hereafter arising or now known, foreseeable, unknown or
unforeseeable. The liabilities that are excluded under this Section 2.4 are
deemed "EXCLUDED LIABILITIES."
ARTICLE 3
CLOSING AND PURCHASE PRICE
3.1 CLOSING. The closing (the "CLOSING") of the purchase and sale of the
Acquired Assets and Liabilities pursuant to this Agreement will take place as
soon as possible after all conditions precedent set forth in Articles 10 and 11
have been satisfied, at the offices of Seller, on or before June 30, 2002 or at
such other time or date as agreed among the parties (the "CLOSING DATE"). Except
as otherwise agreed to in writing by the parties, in no event shall the Closing
occur subsequent to the later of (i) thirty (30) days from the entry of the
Shareholder Bankruptcy Court Order if such order is entered on or prior to
August 31, 2002, or (ii) August 31, 2002 (the "OUTSIDE DATE"), except that if
the Shareholder Bankruptcy COURT ORDER referenced in Section 10.5 and Section
11.10 is not obtained on or prior to August 31, 2002, Buyer shall have the right
and option to extend the Outside Date beyond August 31, 2002, with five days
prior written notice to Shareholder and Seller. Notwithstanding the time of the
Closing, the Closing shall be deemed to have occurred as of 5:00 p.m. local time
on the Closing Date.
3.2. PURCHASE PRICE. Subject to Section 3.3, the Purchase Price will
consist of the assumption of the Assumed Liabilities by Buyer and the payment by
Buyer to Seller of an amount equal to Two Million Five Hundred Thousand dollars
($2,500,000.00) (subject to the adjustments and offsets described below), which
includes (i) a cash payment and (ii) the issuance of stock of the Buyer, which
cash will be paid and stock will be issued in the following manner:
(A) at the Closing, Buyer will pay the Seller the sum of Two Hundred Fifty
Thousand dollars ($250,000.00);
(B) at the Closing, Buyer and Seller will enter into a mutually agreeable
escrow agreement (the "ESCROW AGREEMENT") and Buyer will deposit with the escrow
agent (the "ESCROW AGENT") the sum of Two Hundred Fifty Thousand dollars
($250,000.00) (the "ESCROWED FUNDS"), which will be held in escrow in an
interest bearing account for a period of at least one hundred twenty (120) days
in order to secure the payment by Seller of any of the Escrowed Liabilities;
(C) within fifteen days of the sixth month Contract Valuation Date (the
"SIX MONTH PAYMENT DATE"), Buyer will pay the Seller the sum of Two Hundred
Fifty Thousand dollars ($250,000.00), pursuant to and subject to adjustment as
set forth in Section 3.3;
(D) within fifteen days of the twelfth month Contract Valuation Date, (the
"TWELVE MONTH PAYMENT DATE"), Buyer will pay the Seller the sum of Two Hundred
Fifty Thousand dollars ($250,000.00), pursuant to and subject to adjustment as
set forth in Section 3.3; and
(E) at Closing, Buyer will issue to the Seller ninety-five thousand five
hundred (95,500) shares of the Buyer's Stock and, within twenty days of the
Closing, Buyer will issue to the Seller fifty-four
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thousand five hundred (54,500) shares of the Buyer's redeemable, convertible
preferred stock, par value $.0001, having an aggregate value of One Million Five
Hundred dollars ($1,500,000) (the "BUYER'S STOCK"), with each share of Buyer's
Stock having a stated value of $10.00 ("STATED VALUE"). The Buyer's Stock will
be convertible into one million (1,000,000) shares of the Buyer's Common Stock,
par value $.0001 ("CONVERSION SHARES"), at an initial conversion price of $1.50
per share of Common Stock, subject to adjustment for stock splits, stock
dividends and similar events. Buyer's Stock will be mandatorily redeemable at
its Stated Value at the holders' option upon written notice to the Buyer at any
time after the second anniversary of the Closing. Buyer's Stock will be
mandatorily redeemable at its Stated Value at Buyer's option upon thirty (30)
days' written notice to the holders (i) at any time on or after the third
anniversary of the Closing or (ii) prior to the third anniversary if at any time
Buyer's Common Stock has a market value of $3.75 per share for a period of the
ten consecutive trading days ending one trading day prior to the beginning of a
thirty day written notice period. In determining the market value of the Buyer's
Common Stock, the price per share of the Buyer's Stock will equal the weighted
average closing price of a share of the Buyer's Common Stock during the period
of ten consecutive trading days. The terms of the Buyer's Stock will be as set
forth in the Certificate of Designations (the "CERTIFICATE OF DESIGNATIONS"),
the form of which is attached hereto as EXHIBIT 3.2(E).
The number of shares of Buyer's Stock to be issued within twenty days of
Closing will be subject to adjustment pursuant to Section 3.3 (A)(ii) and (iii)
and will be issued the earlier of (a) the day that Buyer accepts or is deemed
not to have objected to the Closing Date Value Statement and any Purchase Price
adjustment at Closing, or (b) the twentieth day after the Closing. If any issues
are in dispute with respect to the Closing Date Value Statement that could
effect the number of Buyer's Shares to be issued pursuant to Section 3.3 (A)(ii)
and (iii), then only the number of shares of Buyer's Stock equivalent to the
dollar amount in dispute will be delayed until the day when the issues in
dispute and the final number of Buyer's Shares are conclusively resolved in
accordance with Section 3.3(B). If any fractional shares of Buyer's Stock are
due to be issued, such fractional share of Buyer's Stock shall be disregarded
and, in the Buyer's sole discretion, either the number of shares of Buyer's
Stock issuable shall be the next higher number of shares of Buyer's Stock or
Buyer shall pay cash in an amount calculated by multiplying the amount of the
fractional share by the Stated Value.
3.3 ADJUSTMENT TO PURCHASE PRICE AND RIGHT TO OFFSET.
(A) Purchase Price Determination.
(i) The Purchase Price as set forth in Section 3.2 is based upon and
assumes the following:
(a) the book value, as shown on the Closing Date Value
Statement at Closing, of the Seller's Acquired Current Assets minus its
Assumed Current Liabilities IS equal to a negative Three Hundred Eight
Thousand Five Hundred Thirty-Two Dollars ($-308,532) (the "CURRENT ASSET
VALUE"), as such Acquired Current Assets are detailed on SCHEDULE 2.1 and
the Assumed Current Liabilities are detailed on SCHEDULE 2.3;
(b) the book value, as shown on the Closing Date Value
Statement, calculated at Closing in the same manner as Long Term Asset
Value is calculated on SCHEDULE 2.1, of the Seller's Acquired Long Term
Assets is equal to Two Million One Hundred Sixty Thousand Five Hundred
Seventy-Five Dollars ($2,160,575) (the "LONG-TERM ASSET VALUE"), as such
Long Term Acquired Assets are detailed on SCHEDULE 2.1; and
(c) the Assumed Customer Contracts assigned to Buyer (x) have
an aggregate contract value (the "CONTRACT VALUE") of $6,058,906.51, and
(y) are continued,
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renewed, extended or otherwise entered into subsequent to Closing (as set
forth in Section 3.3(A)(iv)) at a minimum of 85% of $6.058,906.51 with
such Contract Value being calculated on a consistent basis.
(ii) If the value of the Seller's Acquired Current Assets minus its
Assumed Current Liabilities, as shown on the Closing Date Value Statement, at
the Closing is:
(a) less than $-354,812 but equal to or greater than
$-408,532, then the number of shares of Buyer's Stock to be issued within
twenty days of Closing pursuant to Section 3.2(E) will be decreased on a
dollar-for-dollar basis based on the aggregate Stated Value of Buyer's
Stock to be issued at Closing for each dollar that the Seller's Acquired
Current Assets minus its Assumed Current Liabilities at the Closing is
less than $-354,812 up to and including $-408,532.
(b) less than $-408,532, then in addition to the reduction of
the number of shares of Buyer's Stock to be issued within twenty days of
Closing as described in Section 3.3(A)(ii)(a), the cash to be paid on the
Six Month Payment Date pursuant to Section 3.2(C) and then, if necessary,
the cash to be paid on the Twelve Month Payment Date pursuant to Section
3.2(D), will be decreased on a dollar-for-dollar basis for each dollar
that the Seller's Acquired Current Assets minus its Assumed Current
Liabilities is less than $-408,532 (collectively, the "DEFERRED PAYMENT
ADJUSTMENTS"). If any Deferred Payment Adjustments are made, then the
number of shares of Buyer's Stock to be issued within twenty days of
Closing pursuant to Section 3.2(E) will be further decreased on a
dollar-for-dollar basis based on the aggregate Stated Value of Buyer's
Stock for each dollar of the Deferred Payment Adjustments. The number of
Buyer's Shares reduced due to the Deferred Payment Adjustments will become
the "DEFERRED PAYMENT BUYER'S STOCK" issuable at the Six Month Payment
Date and then, if necessary, at the Twelve Month Payment Date in
accordance with Section 3.3(A)(iv) and is part of the same series of
Buyer's Stock with the same terms as the Buyer's Stock pursuant to Section
3.2(E).
Notwithstanding the above, if Buyer consents to Seller's purchase of
a material capital asset in the ordinary course of business, and such purchase
would cause a negative effect on the value of the Acquired Current Assets, then
the value of such purchased asset will be discounted both for purposes of
determining the value of the Seller's Acquired Current Assets and the Acquired
Long Term Assets, as shown on the Closing Date Value Statement, calculated in
the same manner as is calculated on Schedule 2.1.
(iii) If the book value, as shown on the Closing Date Value
Statement, at Closing of the Seller's Acquired Long Term Assets is less than the
Long Term Asset Value (excluding normal depreciation), then the number of shares
of Buyer's Stock to be issued within twenty days of Closing pursuant to Section
3.2(E) will be decreased by the amount the Long Term Asset Value (excluding
normal depreciation) exceeds the Acquired Long Term Assets, as shown on the
Closing Date Value Statement, on a dollar-for-dollar basis based on the
aggregate Stated Value of Buyer's Stock.
(iv) (a) The Purchase Price to be paid after the Closing in cash
pursuant to Section 3.2(C) and (D), and/or paid by issuing Deferred Payment
Buyer's Stock pursuant to Section 3.3(A)(ii)(b), shall be paid at the Six Month
Payment Date and/or the Twelve Month Payment Date after all Deferred Payment
Adjustments are made pursuant to Section 3.3(A)(ii)(b), with such cash payment
amounts, and issuable Deferred Payment Buyer's Stock if applicable, decreased
based on the amount by which the aggregate Contract Value of the Assumed
Customer Contracts on the six month Contract Valuation Date and the twelve month
Contract Valuation
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Date is less than $2,575,035.25 and $5,150,070.53, respectively, as
described in 3.3(A)(iv)(c) and (d).
(b) As of the last day of the sixth month after the Closing
Date occurs and as of the last day of the twelfth month after the Closing
Date occurs (each a "CONTRACT VALUATION DATE"), Buyer will determine the
aggregate Contract Value on each Contract Valuation Date with such
Contract Value being calculated on a consistent basis for determining the
amount of the Purchase Price to be paid pursuant to Section 3.2(C) and
(D). Within fifteen (15) days of each Contract Valuation Date, Buyer will
provide Seller with a statistical report showing the aggregate Contract
Value on each Contract Valuation Date. The aggregate Contract Value so
determined at each Contract Valuation Date will include the revenue
recognized from and after Closing through the Contract Valuation Date from
(I) the Assumed Customer Contracts, (II) any extension or renewal of, or
addenda to, any such Assumed Customer Contracts, (III) any new contracts
executed between Buyer and any of the counterparts to the Assumed Customer
Contracts as set forth on the list of Assumed Customer Contracts provided
by Seller to Buyer as of the Closing Date, and (IV) any customer contracts
entered into with the recipients of bids or written quotes set forth on
SCHEDULE 3.3(A)(IV), the respective bids of which or the written quotes,
as appropriate, are provided to Buyer by the Closing Date, to the extent
that such bids or written quotes are still valid at the Closing Date. The
revenue recognized from any new customer contracts entered into between
Buyer and any customer not falling within one of the categories set forth
above will be excluded from any determination of the value of the Assumed
Customer Contracts for purposes of this calculation.
(c) If as of the six month Contract Valuation Date the
aggregate Contract Value is greater than $2,325,035.25 ($4,650,070.53
divided by 2), the amount of aggregate Contract Value in excess of
$2,325,035.25, not to exceed $250,000, will be paid first in cash to the
extent any such cash payment remains owing after all Deferred Payment
Adjustments are made pursuant to Section 3.3(A)(ii)(b) and then paid by
issuing Deferred Payment Buyer's Stock on a dollar-for-dollar basis based
on the aggregate Stated Value of Buyer's Stock on the Six Month Payment
Date as the payment made pursuant to Section 3.2(C).
(d) If as of the twelve month Contract Valuation Date the
aggregate Contract Value is greater than $4,650,070.53, the amount of
aggregate Contract Value in excess of $4,650,070.53, not to exceed
$500,000, less the amount, if any, previously paid in cash and/or Deferred
Payment Buyer's Stock pursuant to Section 3.3(A)(iv)(c), will be paid
first in cash to the extent any such cash payment remains owing after all
Deferred Payment Adjustments are made pursuant to Section 3.3(A)(ii)(b)
and then paid by issuing Deferred Payment Buyer's Stock on a
dollar-for-dollar basis based on the aggregate Stated Value of Buyer's
Stock on the Twelve Month Payment Date as the payments made pursuant to
Section 3.2(C) and/or (D).
(B) Closing Date Value Statement.
(i) Seller will provide to Buyer no less than five (5) days prior to
the Closing Date a balance sheet containing a representation by Seller's
independent accountants as of the date that is no less than five (5) days prior
to the Closing Date that includes Seller's reasonable estimate of Seller's
computation in accordance with GAAP of the Current Asset Value and Long-Term
Asset Value as of the Closing Date (collectively the "CLOSING DATE VALUE
STATEMENT.") Seller may, in its sole discretion, pay or escrow its employees'
payroll and related employment taxes and withholding amounts through the Closing
Date, and may include all such amounts in the Closing Date Value Statement.
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(ii) Upon the delivery by Seller of the Closing Date Value
Statement, Seller shall, and shall cause its accountants to, give Buyer (and
Buyer's accountants, if Buyer so chooses) (a) access to its accountants and
their work papers in order for Buyer to evaluate the Closing Date Value
Statement, and (b) access to additional books and records of Seller necessary
for Buyer to evaluate the activities that have taken place between the date of
the Closing Date Value Statement and the Closing Date that might have materially
affected the information contained in the Closing Date Value Statement. The
parties will use the Closing Date Value Statement, as adjusted if necessary
pursuant to 3.3(B)(iii), to determine whether any adjustment is required by the
terms of Section 3.3 to the amounts to be paid pursuant to Section 3.2(C) and
(D) or Buyer's Stock to be issued by Buyer to Seller within twenty days of
Closing pursuant to Section 3.2(E). Buyer will have twenty (20) days from the
Closing Date to give Seller notice of Buyer's objection to the Closing Date
Value Statement or the amount of any Purchase Price adjustment made at Closing,
as provided in Section 3.3(A)(ii) or (iii) and if Buyer provides no such notice,
then no post-Closing Purchase Price adjustment will be made.
(iii) If Buyer gives to Seller notice of Buyer's objection within
such twenty (20) day period, then the issues in dispute will be submitted to
Seller's and Buyer's respective accountants for resolution of the amount of any
post-Closing Purchase Price adjustment, and such resolution will be conclusive
and binding on the parties. If the issues are not resolved by the accountants
within twenty (20) days of the submission of the dispute, then the accountants
shall jointly appoint a third party firm of certified public accountants to
resolve within sixty (60) days the issues in dispute and the determination as to
any post-Closing Purchase Price adjustment by such third party accounting firm
will be conclusive and binding on the parties. Each of Seller and Buyer will
bear the costs and expenses of their respective accountants, and Buyer and
Seller will share equally the costs of any third party accounting firm that is
retained hereunder.
(C) Right to Offset As set forth in Section 14.2, after the Closing, Buyer
will also have the right to offset against any Purchase Price payments to be
paid or Buyer's Stock to be issued, if any, the amount of any Damages suffered
by Buyer in accordance with Section 14.2, but in any event, such offset and/or
reduction shall not exceed $500,000 in the aggregate.
3.4 USE OF PURCHASE PRICE PROCEEDS. Seller and Shareholder agree that the
Escrowed Funds may be released from escrow during the one hundred twenty (120)
days after the Closing Date with such released amount being used to pay any
unpaid payroll, income and sales Taxes of the Seller and any specific claims
asserted in writing prior to the one hundred twentieth day to the effect that
the claimant has title to, or asserts an interest in, any of the Acquired Assets
for which Buyer has no responsibility (the "ESCROWED LIABILITIES"), that exists
during the one hundred twenty (120) days after the Closing Date. Seller and
Shareholder agree that the remaining surplus Escrowed Funds shall be released
from escrow to Seller, for use as the Seller determines in its sole discretion,
on the day that is one hundred twenty (120) days after the Closing Date with
such released amount being equal to the amount Buyer reasonably estimates the
remaining Escrowed Funds to exceed the aggregate amount of any remaining
Escrowed Liabilities that exists on the day that is one hundred twenty (120)
days after the Closing Date. The amount of the Escrowed Funds equal to the
aggregate amount of Escrowed Liabilities on the day that is one hundred twenty
(120) days after the Closing Date shall remain in escrow after such date
pursuant to the terms of the Escrow Agreement. Seller and Shareholder further
agree to reserve and use the cash payment made pursuant to Section 3.2(A), to
pay any amounts set forth on the SCHEDULE 3.4 (the "SELLER'S DIRECTED PAYMENTS")
and, if needed, in addition to the Escrowed Funds described in Section 3.2(B),
to pay any Escrowed Liabilities, with the order of any such payments being
unpaid payroll, income and sales Taxes of the Seller and any specific claims
asserted in writing to the effect that the claimant has title to, or asserts an
interest in, any of the Acquired Assets for which Buyer has no responsibility,
prior to the payment of any intercompany payables.
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3.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Acquired Assets in a manner determined by Buyer, and Buyer shall
provide this allocation to Seller and Shareholder. Buyer, on the one hand, and
Seller and Shareholder, on the other hand, agree that they shall not take any
position or action inconsistent with such allocation in the filing of any income
Tax Returns.
3.6 DELIVERIES. At the Closing:
(A) Buyer shall deliver to Seller the cash to be delivered at Closing, the
Buyer's Stock to be delivered at Closing pursuant to Section 3.2(E) (excluding
the Buyer's Stock to be issued within 20 days of Closing (subject to adjustment
pursuant to Section 3.2(E) and 3.3(A)) and the other agreements, instruments,
certificates and other documents required to be delivered by Buyer pursuant to
Article 11;
(B) Seller and Shareholder shall deliver to Buyer (i) the agreements,
instruments of transfer, certificates and other documents required to be
delivered by Seller and Shareholder pursuant to Article 10 and (ii) possession
of the Acquired Assets and Liabilities;
(C) Buyer and Mr. Xxxx XxXxxx will have executed and delivered to each
other an employment agreement (the "EMPLOYMENT AGREEMENT") for a minimum term of
one-year (1 year) and containing such other terms as may be mutually agreed upon
by Buyer and Mr. Xxxx XxXxxx;
(D) Shareholder and Seller will execute and deliver to Buyer a three-year
(3 year) non-competition agreement in favor of Buyer;
(E) The Buyer and Seller will execute and deliver a registration rights
agreement (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which Buyer will
agree to commence the process of registration of the resale of the Conversion
Shares, and to use commercially reasonable efforts to cause that registration to
become effective as soon as reasonably practicable, with such process being
commenced within 30 days following a written request to do so from the holders
of at least twenty-five percent (25%) of the outstanding Buyer's Stock. Under
the Registration Rights Agreement, Buyer will bear the costs of the registration
under the Registration Rights Agreement, except for the costs of underwriting
discounts and commissions (if any) applicable to the Buyer's Stock and fees and
disbursements of counsel for the Seller and/or Shareholder; and
(F) Buyer, Seller and the Escrow Agent will execute and deliver to each
other the Escrow Agreement.
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ARTICLE 4
BANKRUPTCY COURT APPROVAL
In accordance with the Shareholder's filing for bankruptcy, with regard to
Seller, this Agreement will be subject to the approval of the United States
Bankruptcy Court having jurisdiction over the Shareholder's case (the
"SHAREHOLDER BANKRUPTCY COURT"). Shareholder acknowledges and agrees that (A)
time is of the essence in order to preserve the value of the Business, and (B)
it will use its reasonable best efforts to seek the entry of an appropriate
order by the Shareholder Bankruptcy Court prior to August 31, 2002 (i)
authorizing Shareholder to cause the Seller to enter into and consummate the
Contemplated Transactions, including the transfer by the Seller of its assets
and liabilities, as contemplated hereunder, free and clear of any rights,
claims, or encumbrances of Shareholder as set forth in Section 7.6, and (ii)
with regard to Seller, approving the terms and conditions of this Agreement
including the enforcement of the exclusive dealing provision and any Break Up
Fee payment required by Article 13 (collectively the "SHAREHOLDER BANKRUPTCY
COURT ORDER"). Buyer acknowledges and agrees that in connection with
Shareholder's motion to obtain the Shareholder Bankruptcy Court Order the Buyer
shall represent to the Shareholder Bankruptcy Court that it is prepared to
proceed to close the Contemplated Transactions pursuant to the terms of this
Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDER
Except as set forth in the disclosure schedules delivered to Buyer
contemporaneously herewith , each of Seller and Shareholder represent to Buyer,
with respect to itself, the following:
5.1 ORGANIZATION, STANDING, ETC. OF SELLER AND SHAREHOLDER. Each of Seller
and Shareholder represent that it (A) is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of its
incorporation and has all requisite corporate power and authority to carry on
its business as currently conducted by it and to own or lease and to operate the
properties used by it; and (B) Seller is qualified to do business in each state
of the United States in which the Business is conducted that requires such
qualification, except where the failure to so qualify would have a Material
Adverse Effect on the Business. SCHEDULE 5.1 lists the states in which Seller is
qualified to do business. For the purposes of this Agreement, a "MATERIAL
ADVERSE EFFECT ON THE BUSINESS" means any and all material adverse change(s) in,
or material adverse effect(s) on, the assets, liabilities, financial condition,
business or operations of the Acquired Assets and Liabilities or the Business.
5.2 CORPORATE AUTHORIZATION. The execution, delivery and performance of
this Agreement and all other documents executed or to be executed pursuant to
this Agreement by Seller and Shareholder, and the consummation of the
Contemplated Transactions, have been duly authorized by all necessary corporate
action on the part of Seller and Shareholder and do not conflict in any material
respect with either of their charters or bylaws. This Agreement has been duly
executed and delivered by a duly authorized officer of Seller and an authorized
representative of Shareholder. As Shareholder has filed for protection under
bankruptcy law, this representation will be subject to, and, with regard to
Shareholder, satisfied by, the entry of the Shareholder Bankruptcy Court Order.
5.3 ENFORCEABILITY. This Agreement constitutes the valid and legally
binding obligation of Seller and Shareholder, enforceable in accordance with its
terms, in all events subject to the entry of the Shareholder Bankruptcy Court
Order.
5.4 GOVERNMENTAL AUTHORIZATIONS AND THIRD PARTY CONSENTS. Except as set
forth on SCHEDULE 5.9(B), or as included on SCHEDULE 10.6(A) OR SCHEDULE
10.6(B), no consents, licenses,
9
approvals or authorizations of, or registrations or declarations with, any
Governmental Authority or third party are required to be obtained or made by
Seller or Shareholder in connection with the execution, delivery, performance,
validity and enforceability of this Agreement, other than consents, licenses,
approvals, authorizations, registrations or declarations, where the failure to
obtain such would not have a Material Adverse Effect on the Business.
5.5 FINANCIAL STATEMENTS AND UNDISCLOSED LIABILITIES. Seller has delivered
to Buyer the following unaudited financial statements and balance sheets, each
as of and for the year-ended December 31, 2001 (the "FINANCIAL STATEMENTS
DATE"): (a) income statement of the Business and (b) balance sheet for the
Business (such statements hereinafter being referred to as the "FINANCIAL
STATEMENTS"). The Financial Statements have been prepared in accordance with
GAAP consistently applied and fairly present in all material respects the
financial condition, the Acquired Assets and Liabilities and the results of
operation of the Business at the dates thereof and for the periods covered
thereby, except as set forth on SCHEDULE 5.5. Except as set forth on SCHEDULE
5.5, and normal year-end adjustments (which in the aggregate will not be
material to the Financial Statements), to the Seller's Knowledge, Seller has no
liability (and there is no basis for any present or future action, suit,
investigation, claim or other similar action that would reasonably give rise to
any liability) that (i) is not disclosed on the face of the balance sheet or on
the notes thereto or (ii) did not arise in the ordinary course of business.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Financial Statements
Date, Seller has conducted its operations related to the Business in the
ordinary course of business except as set forth on SCHEDULE 5.6.
5.7 TITLE TO ACQUIRED ASSETS.
(A) Except as set forth on SCHEDULE 5.7(A), and except for equipment that
is subject to leases, or conditional sales agreements, finance leases and
similar agreements (collectively the "EQUIPMENT LEASES"), Seller is the sole
owner of or has other valid ownership rights in the Acquired Assets (other than
real property which is addressed in Section 5.7(B)). Seller's right, title and
interest in equipment that is subject to an Equipment Lease is included in the
Acquired Assets, subject to assignment to Buyer and assumption by Buyer of the
obligations thereunder.
(B) Seller owns no real property. SCHEDULE 5.7(B) includes a list of all
of Seller's leased real property. With respect to real property listed on
SCHEDULE 5.7(B), the Seller's right, title and interest in the applicable real
property leases is included in the Acquired Assets, subject to assignment to
Buyer and assumption by Buyer of the obligations thereunder.
5.8 TRANSFERRED INTELLECTUAL PROPERTY.
(A) Seller owns, or is licensed or otherwise possesses the right to use,
all Seller's intellectual property, and the Seller's intellectual property
acquired by Buyer is all the intellectual property necessary to conduct the
Business substantially as currently conducted by Seller in all material
respects.
(B) SCHEDULE 5.8(B) includes a list of all of Seller's (A) patents,
registered copyrights, registered trademarks, registered trade names and
registered service marks, and any pending applications therefor, included in the
intellectual property, and (B) any software and hardware licenses to which
Seller is a party (the "TRANSFERRED INTELLECTUAL PROPERTY").
(C) To Seller's Knowledge, except as set forth on SCHEDULE 5.8(C), no
claims with respect to the Transferred Intellectual Property have been asserted
and are pending as of the date of this Agreement (i) to the effect that the
sale, licensing or use of any of the products of the Business infringes any
other
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party's valid copyright, trademark, service xxxx, trade secret or other
intellectual property right, (ii) against the use by Seller of any trademarks,
service marks, trade names, trade secrets, copyrights, patents, technology, or
know-how used in the Business as currently conducted, or (iii) challenging the
ownership or use by Seller of any of the Transferred Intellectual Property that
Seller purports to own or use, nor, to Seller's Knowledge, is there a valid
basis for such a claim described in this Section 5.8(C).
5.9 CONTRACTS.
(A) SCHEDULE 5.9(A) lists all Business Agreements and Reseller/Vendor
Agreements constituting a portion of the Contracts relating to the Business
between Seller or Shareholder and any other person or entity. SCHEDULE 5.9(B)
lists all Contracts relating to the Business between Seller or Shareholder and
any other person or entity that place any material limitation on the method of
conducting or the scope of the Business or that purport to restrict the business
activities of Seller in any manner relating to the Business, or use of
information in the Business.
(B) Seller has made available to Buyer a copy or description of each of
the Assumed Customer Contracts and other Seller Contracts that are used in the
Business. All of Seller's right, title and interest in these Assumed Customer
Contracts and other Contracts will be assigned to Buyer at Closing to the extent
such Assumed Customer Contracts and other Contracts can be assigned . Except for
the Assumed Customer Contracts or as set forth on SCHEDULE 10.6(A) OR 10.6(B),
no consent or approval of the other contracting party to any Contract that is
material to the Business is required to be obtained for the consummation of the
transactions contemplated herein.
5.10 LITIGATION AND PRODUCT LIABILITY. Except as set forth on SCHEDULE
5.10, to Seller's Knowledge, no actions, suits, proceedings or governmental
investigations are pending against Seller or, to Seller's Knowledge, overtly
threatened, involving the Business or the Acquired Assets and Liabilities at law
or in equity or before any Governmental Authority, or have been settled,
dismissed or resolved since January 1, 2001, that would have a Material Adverse
Effect on the Business following the Closing Date. As of the date of this
Agreement, Seller is not subject to any judgment, stipulation, order or decree
arising from any action, suit, proceeding or investigation that individually or
in the aggregate would have a Material Adverse Effect on the Business following
the Closing Date. Except as set forth on SCHEDULE 5.10, to Seller's Knowledge,
Seller has no liability or basis for any liability arising out of any injury to
individuals or property as the result of the ownership, use or possession of any
product or service, sold, leased or delivered by Seller.
5.11 LICENSES AND PERMITS. Seller has all licenses, permits and other
authorizations from Governmental Authorities necessary for the conduct of the
Business as conducted by Seller prior to the date hereof, all of which are
identified on SCHEDULE 5.11 (collectively "PERMITS"), except where the failure
to have such Permits would not have a Material Adverse Effect on the Business.
Except as set forth on SCHEDULE 5.11(A), (A) each of the Permits is in full
force and effect, (B) the Business is in compliance with the terms, provisions
and conditions thereof, except where the failure to be so in compliance would
not have a Material Adverse Effect on the Business, (C) to Seller's Knowledge,
there are no outstanding violations, notices of noncompliance, judgments,
consent decrees, orders or judicial or administrative actions, investigations or
proceedings with respect to such Permits that would have a Material Adverse
Effect on the Business, and (D) to Seller's Knowledge, no condition exists and
no event has occurred which (whether with or without notice, lapse of time or
the occurrence of any other event) would permit the suspension or revocation of
any material Permits other than by expiration of the term set forth therein.
Seller makes no representation or warranty with respect to the transferability
of the Permits to Buyer.
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5.12 ENVIRONMENTAL COMPLIANCE. Except as set forth in SCHEDULE 5.12, to
Seller's Knowledge (A) the conduct of the Business complies with all
Environmental Laws, except where the failure to so comply would not have a
Material Adverse Effect on the Business and (B) there are no outstanding
violations, notices of noncompliance, judgments, consent decrees, orders or
judicial or administrative actions, investigation or proceedings arising under
or pursuant to Environmental Laws, with respect to or affecting any of the
leased facilities, which would have a Material Adverse Effect on the Business.
To Seller's Knowledge, SCHEDULE 5.12 describes all known conditions of the
leased facilities and equipment of the Seller as of the date hereof which relate
to compliance with, or liabilities under, Environmental Laws.
5.13 ADEQUACY OF ASSETS. Except as set forth on SCHEDULE 5.13, Seller is
of the opinion that the Acquired Assets are sufficient for the conduct of the
Business on the Closing Date and immediately thereafter in substantially the
same manner in which it has been conducted by Seller since May 1, 2001.
5.14 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The execution, delivery
and performance of this Agreement and the consummation of the Contemplated
Transactions will not conflict with or result in any violation of or default
under any provision of any mortgage, indenture, trust, lease, partnership or
other agreement or other instrument, permit, concession, grant, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Seller or any of its properties or assets, the result of which
would (either individually or in the aggregate) have a Material Adverse Effect
on the Business or would materially impair Seller's and/or Shareholder's ability
to consummate the Contemplated Transactions. Except as set for on SCHEDULE
5.14(A), Seller has complied, and is in compliance, with all other Applicable
Laws applicable to Seller or any of the Acquired Assets and Liabilities or the
Business, the failure with which to so comply would have a Material Adverse
Effect on the Business, and no basis exists for any claim of default under or
violation of any such statute, law, ordinance, regulation, rule, permit,
judgment, order, or decree except such defaults or violations, if any, the
resulting claims for default or violation of which would not have a Material
Adverse Effect on the Business. Except as set for on SCHEDULE 5.14(B), to
Seller's Knowledge, Seller has paid all sales and use Taxes that are due and
payable with respect to the Business.
5.15 ACCOUNTS RECEIVABLE. The accounts receivable constituting a portion
of the Acquired Assets will be good and valid receivables arising from the sale
of goods and services in the ordinary course of business and, to the Knowledge
of Seller, should be collected in the ordinary course of business as actually
conducted by Seller at the aggregate amount recorded therefor on the books and
records of Seller as of the Closing (subject to no counterclaims or offset), net
of the applicable bad debt reserve, if any, currently recorded on such books and
records.
5.16 INVENTORY. Subject to reserves for obsolete, damaged and slow moving
items reflected on the balance sheet as of the Closing Date, the inventories of
finished goods, work-in-process, and raw materials reflected on the balance
sheet as of the Closing Date, to the Seller's Knowledge, are of a quality and
quantity which could be sold, used or consumed in the normal course of Business.
5.17 BROKERS. Except as set forth on SCHEDULE 5.17, no agent, broker,
Person or firm acting on behalf of Seller or Shareholder or their stockholders
is, or will be, entitled to any commission or broker's or finder's fees from
Seller or Shareholder, or from any Person controlling, controlled by or under
common control with Seller or Shareholder, in connection with any of the
Contemplated Transactions. Buyer shall have no obligation or liability to any
entity or Person set forth on SCHEDULE 5.17 or otherwise with respect to any
such commissions, brokers or finders fee.
5.18 INVESTMENT. On the date hereof and the dates that Buyer's Stock is
delivered to Seller, Seller represents and warrants to Buyer that it (A)
understands that the Buyer's Stock has not been
12
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT")
or under any state securities laws, and is being offered and sold by Buyer in
reliance upon federal and state exemptions for transactions not involving any
public offering, (B) has no present intent to distribute or otherwise transfer
the Buyer's Stock to Shareholder or its shareholders, unless such distribution
is authorized by the Shareholder Bankruptcy Court, (C) is a sophisticated
investor with knowledge and experience in business and financial matters, (D)
has received certain information concerning the Buyer and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and risks inherent in holding the Buyer's Stock, (E) is able to bear the
economic risk inherent in holding the Buyer's Stock, and (F) is an Accredited
Investor, as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
5.19 SHAREHOLDER BANKRUPTCY. Shareholder represents and warrants that
it has sought bankruptcy law protection and has filed for bankruptcy prior to
the execution of this Agreement.
5.20 EMPLOYEES AND BENEFITS.
(A) SCHEDULE 5.20(A) sets forth a true and correct list of all "employee
benefit plans" as defined by Section 3(3) of ERISA, all specified fringe benefit
plans as defined in Section 6039D of the Code, and all other bonus, incentive
compensation, deferred compensation, profit sharing, stock option, stock
appreciation right, stock bonus, stock purchase, employee stock ownership,
savings, severance, disability, accident, group insurance, vacation, holiday,
sick leave, fringe benefit or welfare plan, and any other employee compensation
or benefit plan, agreement, policy, practice, commitment, contract or
understanding (whether qualified or nonqualified, currently effective or
terminated, written or unwritten), and any trust, escrow or other agreement
related thereto which currently is sponsored, established, maintained or
contributed to or required to be contributed to by the Seller or for which the
Seller has any liability, contingent or otherwise (the "PLANS"). Seller has
maintained and operated each Plan that is a group health plan in compliance with
Section 4980B and 9801 of the Code and Sections 601 et seq. and 701 et seq. of
ERISA , including providing all required notices to its current and former
employees. Seller shall indemnify Buyer for any loss or claim Buyer may incur in
connection with Seller's obligations relating to any current or former employee
of Seller arising from the failure of Seller to comply with Section 4980B or
9801 of the Code or Section 601 et seq. or 701 et seq. of ERISA, including any
loss or claim resulting from the failure of Seller to provide any notices to any
of Seller's current or former employees. This indemnity is exclusive of any
other indemnity provided by Seller in this Agreement with respect to the subject
matter of this Section 5.20.
(B) To Seller's Knowledge, there are no pending, threatened or anticipated
disputes, lawsuits, investigations, audits, complaints or claims (other than
routine claims for benefits) by, on behalf of, or against any of the Plans or
any trust related thereto, except as individually or in the aggregate would not
result in any loss to Buyer or the imposition of any encumbrance or lien on the
Acquired Assets.
(C) Neither Seller nor any trade or business (whether or not incorporated)
which is or at any time within the six (6) year period preceding the date of
this Agreement would have been treated as a "single employer" with Seller under
Section 414(b), (c), (m), or (o) of the Code (an "ERISA AFFILIATE") has at any
time within the six (6) year period preceding the date of this Agreement,
sponsored, contributed to, had an obligation to contribute to or otherwise
participated in any Plan that is subject to Title IV of ERISA or Section 412 of
the Code, including any "multiemployer plan" (as defined in Section 3(37) of
ERISA) with respect to which Buyer would have any loss or that could result in
an encumbrance or lien attaching to any Acquired Assets.
(D) SCHEDULE 5.20(D) sets forth a true and complete list of all current
and former employees of Seller and all former employees of Shareholder,
including each person employed by Seller or
13
Shareholder within the 36 month period immediately preceding the Closing Date,
who: (i) as of the Closing Date is receiving health care continuation coverage
under Section 4980B of the Code; (ii) is eligible, as of the Closing Date, to
receive health care continuation coverage under Section 4980B of the Code but
elected not to receive such coverage; or (iii) will be eligible to elect health
care continuation coverage under Section 4980B of the Code in connection with
the sale (as such phrase is described in Section 54.4980B-9, Q&A-8 of the Income
Tax Regulations) contemplated by this Agreement.
(E) As of the date hereof, Seller has 116 employees, all of whom are
listed on SCHEDULE 5.20(E).
(F) Seller has not been required to provide any notification under the
Workers Adjustment and Retraining Notification Act (the "WARN ACT").
5.21 TAXES.
(A) Seller has timely filed or caused to be timely filed, or is on
extension with, all federal, state and local Tax Returns for all federal, state
and local Taxes; all such Tax Returns are proper, complete and accurate in all
material respects; and all amounts showing thereon have been paid. (Seller has
delivered to Buyer copies of its federal income tax returns for the last three
(3) fiscal years.)
(B) Seller has paid, caused to be paid or has reserved for all Taxes that
have become due.
(C) The amounts set up as provisions for Taxes on Seller's Financial
Statements are, to Seller's Knowledge, sufficient for the payment of all accrued
and unpaid Taxes of any kind.
(D) Except as set forth on SCHEDULE 5.21, Seller has not received and/or
has no Knowledge of any notice of deficiency or assessment with respect to
Seller, or any of the Acquired Assets, or any basis for any of the foregoing,
from any taxing authorities. Seller has not been notified by the Internal
Revenue Service that it intends to audit the federal income Tax Returns of
Seller.
(E) Except as set forth on SCHEDULE 5.21, there is no litigation,
governmental or other proceeding (formal or informal), or investigation pending,
or to Seller's Knowledge, threatened, with respect to any such federal, state or
local Tax Return. There are no Tax liens upon, pending against or, to Seller's
Knowledge, threatened against any Acquired Assets.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the disclosure schedules delivered to Seller
contemporaneously herewith, Buyer hereby represents and warrants to Seller and
Shareholder the following:
6.1 ORGANIZATION AND STANDING OF BUYER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of its incorporation and has all requisite corporate power and authority to
carry on its business as currently conducted by it.
6.2 CORPORATE AUTHORIZATION. The execution, delivery and performance of
this Agreement and all other documents executed or to be executed pursuant to
this Agreement by Buyer, and the consummation of the Contemplated Transactions
by Buyer, have been duly authorized by all necessary corporate action on the
part of Buyer and do not conflict in any material respect with its charter or
bylaws. This Agreement has been duly executed and delivered by a duly authorized
officer of Buyer.
14
6.3 ENFORCEABILITY. This Agreement constitutes the valid and legally
binding obligation of Buyer, enforceable in accordance with its terms.
6.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The execution, delivery
and performance of this Agreement and the consummation of the Contemplated
Transactions will not conflict with or result in any violation of or default
under any provision of any mortgage, indenture, trust, lease, partnership or
other agreement or other instrument, permit, concession, grant, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Buyer or any of its properties or assets, the result of which
would (either individually or in the aggregate) have a material adverse effect
on the operations or financial condition of Buyer and its subsidiaries, taken as
a whole (a "MATERIAL ADVERSE EFFECT ON BUYER"), or would materially impair
Buyer's ability to consummate the Contemplated Transactions.
6.5 GOVERNMENTAL AUTHORIZATIONS AND THIRD-PARTY CONSENTS. Except as set
forth on SCHEDULE 6.5, no consents, licenses, approvals or authorizations of, or
registrations or declarations with, any Governmental Authority or any third
party, are required to be obtained or made by Buyer in connection with the
execution, delivery, performance, validity and enforceability of this Agreement
other than the consents, licenses, approvals, authorizations, registrations or
declarations, where the failure to obtain such would not have a Material Adverse
Effect on Buyer. Buyer is not currently engaged in, or contemplating, any
business transaction that would be reasonably expected to hinder or delay the
authorizations and consents referred to in this Section 6.5.
6.6 LITIGATION. To Buyer's Knowledge, no action, suit, proceeding or
governmental investigation is pending or, to Buyer's Knowledge, overtly
threatened, against Buyer or its properties, at law or in equity or before any
Governmental Authority that seeks to question, delay or prevent the consummation
of the Contemplated Transactions.
6.7 BROKERS. Except as set forth on SCHEDULE 6.7, no agent, broker, Person
or firm acting on behalf of Buyer or its stockholders is, or will be, entitled
to any commission or broker's or finder's fees from Buyer, or from any Person
controlling, controlled by or under common control with Buyer, in connection
with any of the Contemplated Transactions. Seller and Shareholder shall have no
obligation or liability to any entity or Person set forth on SCHEDULE 6.7 or
otherwise with respect to any such commissions, brokers or finders fee.
6.8 FILINGS WITH SEC; FINANCIAL STATEMENTS
(A) SEC Filings. Buyer has filed with the SEC each form, registration
statement, report, schedule, proxy, information statement and other documents
required to be filed with the SEC since January 1, 2000 (such documents,
together with any documents filed during such period by Buyer with the SEC on a
voluntary basis, the "BUYER SEC DOCUMENTS"). As of their respective dates, the
Buyer SEC Documents (i) complied in all material respects with the applicable
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Buyer SEC Documents and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(B) Financial Statements. The financial statements of Buyer included in
the Buyer's Annual Report on Form 10-K for the fiscal year ended December 31,
2001 and its Quarterly Report on
15
Form 10-Q for the first fiscal quarter for year 2002 (the "Buyer Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited statements as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of Buyer
as of the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments that do not reflect a Material Adverse
Effect on Buyer).
(C) No Undisclosed Liabilities. Except as included in the Buyer SEC
Documents filed prior to the date hereof, and normal year-end adjustments (which
in the aggregate will not be material to the Buyer Financial Statements), to the
Buyer's Knowledge, Buyer has no liability (and there is no basis for any present
or future action, suit, investigation, claim or other similar action that would
reasonably give rise to any liability) that did not arise in the ordinary course
of business.
(D) Absence of Changes. Except as and to the extent disclosed in the Buyer
SEC Documents filed prior to the date hereof, or as set forth in SCHEDULE
6.8(D), since December 31, 2001, Buyer has conducted its business in the
ordinary and usual course consistent with past practice and there has not been
any event, occurrence or development which has had, or would have, a Material
Adverse Effect on Buyer.
ARTICLE 7
COVENANTS OF SELLER AND SHAREHOLDER
Each of Seller and Shareholder, as indicated below agree to the following
covenants with respect to itself:
7.1 CONDUCT OF BUSINESS.
(A) Except as set forth on SCHEDULE 7.1 or as may be otherwise expressly
permitted by this Agreement, or with the prior consent of Buyer, until the
earlier of the Termination Date or the Closing Date, Seller will: (i) operate
the Business only in the ordinary course; (ii) use commercially reasonable
efforts to preserve intact the organization of the Business; (iii) continue in
full force and effect all existing insurance and similar policies of or relating
to the Business; and (iv) use commercially reasonable efforts to preserve each
of Seller's relationships with its suppliers, customers, licensors and licensees
and others having business dealings with Seller relating to the Business.
(B) Without limiting the generality of Section 7.1(A), until the earlier
to occur of the Termination Date or the Closing, and except as may be otherwise
expressly permitted by this Agreement or with the prior written consent of
Buyer, which shall not be unreasonably withheld, delayed or conditioned, Seller
shall not, with respect to the Business:
(i) enter into any transaction in excess of Ten Thousand dollars
($10,000) in connection with the Business outside the ordinary course of
business;
(ii) conduct the Business in a manner that departs materially from
the manner in which the Business was being conducted prior to the date of
this Agreement;
(iii) sell, lease, transfer, mortgage or assign any of the Acquired
Assets or Liabilities, tangible or intangible, other than in the ordinary
course of business;
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(iv) cancel, compromise, knowingly waive or release any material
right or claim (or series of related rights and claims) under any
contracts that form a part of the Acquired Assets, outside the ordinary
course of business;
(v) make any material change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or
agree to pay, conditionally or otherwise, any material bonus, incentive,
retention or other compensation, retirement, welfare, fringe or severance
benefit or vacation pay, to or in respect of any employee of the Business,
other than the increases and payments in the ordinary course of business
consistent with past practice in the compensation payable to employees of
the Business;
(vi) hire any employees such that the total number of employees of
the Seller is greater than 116, with the notable exception of temporary or
full-time personnel required to fulfill new billable contracts only; and
(vii) agree to do any of the foregoing.
If Seller wishes to engage in any act that falls within the provisions of
Section 7.1(B), Seller shall provide prior written notice thereof to Buyer who
shall advise Seller within five (5) business days of any objection Buyer has
with such action. If Buyer fails to object within such period, Buyer shall be
deemed to have waived any objection to such act.
7.2 ACCESS. Subject to reasonable notice and as permitted by law, and
subject to the Non-Disclosure Agreement, Seller shall afford to Buyer and its
accountants, counsel and other agents and representatives access during normal
business hours throughout the period from the date hereof until the earlier of
(i) the Closing Date, (ii) the Termination Date, or (iii) the date that the
Break-Up Fee is paid to Buyer in accordance with Section 13.2, to all of the
properties, books, contracts, commitments and records of the Business and,
during such period, Seller shall furnish promptly to Buyer and its
representatives in relation to the Business access to all other information
concerning the business, properties and personnel of the Business as Buyer may
reasonably request. Seller shall promptly upon request provide Buyer access to a
true, complete and correct copy of each written agreement or other instrument,
together with all amendments or clarifications thereto, and a true, complete and
correct summary of the terms and conditions of each oral agreement, identified
in Seller's Disclosure Schedule. If access is restricted due to a term in the
agreement or by Applicable Law, Seller shall use its commercially reasonable
efforts to secure consent from the other party(ies) to the agreement to provide
such access prior to the Closing with sufficient time for Buyer review. Buyer
will treat the documents and other material and information referred to in this
Section 7.2 as confidential in compliance with Section 9.5.
7.3 RELEASE OF LIENS, SECURITY INTERESTS AND FINANCING LEASES. Except as
set forth in SCHEDULE 7.3, Seller shall transfer the Acquired Assets to Buyer at
the Closing free and clear of all liens, interests, claims, security interests
and encumbrances, including acquired financing/capital leases (and any liens and
interests associated therewith) and other contracts acquired by Buyer. Seller
shall transfer the Acquired Assets listed on SCHEDULE 7.3 at the Closing subject
to all liens, interests, claims, security interests and encumbrances, including
acquired financing/capital leases (and any liens and interests associated
therewith) and other contracts acquired by Buyer.
7.4 PLANS, BENEFITS AND POLICIES. Seller acknowledges that Buyer has
no obligation to hire any of Seller's employees and Seller shall retain all
liabilities related to its Plans.
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7.5 USE OF CORPORATE NAME. After the Closing Date, Seller will cease and
discontinue the use the corporate name "DCI," "Delta Computec Inc." or any other
name confusingly similar to such names, except that for a reasonable period of
time from the Closing Date, Seller may refer to those names in connection with
identifying itself as "formerly known as" one or more of those names where such
identification is required by law, rule or regulation.
7.6 NO ASSERTION OF CLAIMS. As of the date hereof and thereafter,
Shareholder agrees that it will not assert any claims, encumbrances or rights
against (i) the Acquired Assets and Liabilities or (ii) Buyer in connection with
the Acquired Assets or Liabilities (other than with respect to Buyer's
obligations under this Agreement), which, in either case, Shareholder has or in
the future may have against Seller or the Seller's assets or liabilities, and
represents and warrants to Buyer that at the Closing, the Acquired Assets and
Liabilities will be transferred to Buyer free and clear of any such claims,
encumbrances or rights.
7.7 TAX CERTIFICATES. As soon as possible after the Closing, Seller will
provide to Buyer certificates dated as of a date after the Closing Date (A) as
to the good standing and payment of all applicable Taxes by Seller for the
jurisdictions set forth in SCHEDULE 5.14(B) and (B) from the appropriate taxing
authorities for the jurisdictions set forth in SCHEDULE 5.14(B) stating that no
Taxes are due to such state or other taxing authority for which Buyer could have
liability to withhold or pay Taxes with respect to the transfer of the Acquired
Assets. The amount necessary to pay the Taxes set forth on SCHEDULE 5.14(B)
shall be included in the Escrowed Liabilities as set forth in Section 3.4.
ARTICLE 8
COVENANTS OF BUYER
8.1 INVESTIGATION. In conducting its review of the Business, Buyer shall
conduct itself so as to not unreasonably interfere with the Business or with the
performance of Seller's employees.
8.2 ACCESS. Subject to reasonable notice and as permitted by law, and
subject to the Non-Disclosure Agreement, Buyer shall afford to Seller and
Shareholder and their accountants, counsel and other agents and representatives
access during normal business hours throughout the period from the date hereof
until the earlier of (i) the Closing Date, (ii) the Termination Date, or (iii)
the date that the Break-Up Fee is paid to Buyer in accordance with Section 13.2,
to all of the properties, books, contracts, commitments and records of Buyer's
business and, during such period, Buyer shall furnish promptly to Seller and
Shareholder and their representatives in relation to its business access to all
other information concerning its business, properties and personnel as Seller
and Shareholder may reasonably request. Buyer shall promptly upon request
provide Seller and Shareholder access to a true, complete and correct copy of
each written agreement or other instrument, together with all amendments or
clarifications thereto, and a true, complete and correct summary of the terms
and conditions of each oral agreement, identified in Buyer's Disclosure
Schedule. If access is restricted due to a term in the agreement or by
Applicable Law, Buyer shall use its commercially reasonable efforts to secure
consent from the other party(ies) to the agreement to provide such access prior
to the Closing with sufficient time for Seller and Shareholder review. Seller
and Shareholder will treat the documents and other material and information
referred to in this Section 8.2 as confidential in compliance with Section 9.5.
8.3 NON-SOLICITATION. In the event that the Closing does not occur for any
reason, for a period of one (1) year from the execution of this Agreement, Buyer
agrees not to solicit any employee of Seller or Shareholder as of the date
hereof, or, to Buyer's Knowledge enter into discussions for, or engage for any
purpose or in any capacity, the services of any employee of Seller or
Shareholder as of the date hereof or solicit, enter into discussions for, or
engage any customer that is a party to an Assumed
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Customer Contract for business that is substantially similar to the business
described in such Assumed Customer Contract.
8.4 WARN ACT. Buyer shall be responsible for the timely dissemination of
any and all notices required under the WARN Act that result from the Closing of
the Contemplated Transactions.
8.5 QUARTERLY FINANCIAL STATEMENTS. The financial statements of Buyer
included in its Quarterly Reports on Form 10-Q for the fiscal quarters during
the year 2002 filed subsequent to the date of this Agreement will comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, will be
prepared in accordance with GAAP (except, in the case of unaudited statements as
permitted by Form 10-Q) applied on a consistent basis (except as may be
indicated in the notes thereto) and will fairly present the consolidated
financial position of Buyer as of the dates thereof and the consolidated results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments that would
not have a Material Adverse Effect on Buyer).
8.6 COBRA. For the purposes of obligations Buyer shall have to former
employees of Seller under Section 54-4980B-9 of the Income Tax Regulations,
Buyer agrees to treat former employees of Shareholder listed on SCHEDULE 5.20(D)
as if they were former employees of Seller whose employment was associated with
the Business.
8.7 ISSUANCE OF BUYER'S STOCK. Upon Buyer's issuance to Seller of the
Buyer's Stock pursuant to any provision of this Agreement in consideration for
the transfer of the Acquired Assets and Liabilities, subject to Sections 3.2(E)
and 3.3(A) and (B), the Buyer's Stock (i) will be duly authorized, (ii) will be
validly issued, fully paid and nonassessable, free and clear of any and all
Taxes, liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Buyer and (iii) will be entitled to all of the rights, preferences
and privileges set forth in the Certificate of Designations for the Buyer's
Stock. Upon Buyer's issuance to Seller of the Buyer's Stock, the Conversion
Shares will be duly authorized and reserved for issuance and, when issued upon
conversion of the Buyer's Stock in accordance with the terms of the Certificate
of Designations, will be duly and validly issued, fully paid and nonassessable,
free and clear of all Taxes, liens, claims, preemptive or similar rights or
encumbrances imposed by or through the Buyer. At Closing, Buyer will provide to
Seller an Officer's Certificate, in form reasonably satisfactory to Seller,
acknowledging compliance with the provisions of this Section 8.7.
ARTICLE 9
COVENANTS OF ALL PARTIES
9.1 COOPERATION AMONG PARTIES. Subject to the terms and conditions
of this Agreement, each party will use its commercially reasonable efforts to
cooperate with each other in order to consummate the Contemplated
Transactions in a timely manner, including doing the following;
(A) to execute and deliver any further instruments or documents that are
reasonably requested by a party or counsel to any party signatory hereto to
evidence or facilitate the consummation of the Contemplated Transactions;
(B) to enter into mutually acceptable arrangements pursuant to which any
payments recovered by Seller following the Closing Date in respect of
receivables arising under the Assumed Customer Contracts and other contracts
acquired by Buyer following the Closing Date are promptly remitted to Buyer,
while recognizing that Seller shall have no employees and no operations after
the Closing; and
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(C) to assign to Buyer with respect to its assumption of all capital and
operating leases of Seller used in the operation of the Business that are
included in the Acquired Assets.
The parties acknowledge and agree that time is of the essence, and they will
work together in an attempt to (i) finalize forms of ancillary agreements to be
delivered at the Closing, including the Escrow Agreement within thirty (30) days
of the execution of this Agreement, and (b) close the Contemplated Transactions
as soon as feasible after the execution of this Agreement.
9.2 CONSENTS.
Seller and Buyer will use their commercially reasonable efforts to obtain
prior to the earlier of the date required (if so required) or the Closing Date,
the consents set forth on Schedule 10.6(B) and all authorizations, consents,
orders, permits or approvals of, or notices to, or filings, registrations or
qualifications with, all Governmental Authorities, for the consummation of the
Contemplated Transactions.
9.3 LIABILITY FOR TRANSFER TAXES.
(A) Seller shall be responsible for and pay in a timely manner all sales,
use, value added, documentary, stamp, registration, transfer, conveyance,
excise, recording, license and other similar Taxes and fees (including without
limitation any goods and services Tax, but for the avoidance of doubt, excluding
any income Taxes) ("TRANSFER TAXES") arising out of or in connection with or
attributable to the Contemplated Transactions. Seller shall prepare and timely
file all Tax Returns required to be filed in respect of Transfer Taxes that are
required under Applicable Law, provided, however, that Seller's preparation of
such Tax Returns shall be subject to Buyer's approval, which approval shall not
be unreasonably withheld, conditioned or delayed.
(B) Nothing herein shall prevent Seller or Shareholder from seeking
exemption from the payment of any such Transfer Taxes, or seeking payment of
Transfer Taxes at a favorable tax rate, under applicable law, including, but not
limited to, Section 1146 of the Bankruptcy Code.
9.4 PRORATIONS. Real and personal property Taxes that are paid or payable
with respect to the Acquired Assets for the year 2002 shall be prorated between
Seller and Buyer based on their respective period of ownership in year 2002. The
pro rata portion of such Taxes shall be adjusted between Seller and Buyer at the
Closing. If the year 2002 Tax bills are unavailable on the Closing Date, the
actual Taxes for the year 2001 will be used for proration purposes. In the event
that Taxes for year 2002 are increased over actual Taxes for year 2001, Seller
will remain liable for the increase over the pro-rated portion through the
Closing Date and shall pay to Buyer the amount of such increase within thirty
days following Buyer's delivery to Seller of reasonable evidence of such tax
increase, if applicable. Payments for any leases that are paid or payable with
respect to the Acquired Assets for the year 2002 shall also be prorated between
Seller and Buyer based on their respective period of ownership in year 2002.
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9.5 CONFIDENTIALITY.
(A) Except as expressly modified by this Agreement, the mutual
Non-Disclosure and Confidentiality Agreement effective as of December 19, 2001,
and executed among the parties on January 9, 2002 (the "CONFIDENTIALITY
AGREEMENT" or "NON-DISCLOSURE AGREEMENT") will remain in full and force and
effect. If the Contemplated Transactions are not consummated, each party will
immediately return or destroy all confidential information of the other parties
and any and all copies thereof, however stored, and, if requested by the other
parties, shall certify conformity with this Section 9.5(A) in writing.
(B) Subject to the terms of Article 13 with respect to notices that may be
provided in connection with Shareholder Bankruptcy Court Order approving this
Agreement, and except to the extent a party is required by law, rule or
regulation, no party shall, and will direct its Representatives not to make,
without the prior written consent of the other parties, directly or indirectly,
any public comment, statement or communication with respect to, or otherwise
disclose or to permit the disclosure of the existence of, the terms of this
Agreement. If a party is required by law to make such a disclosure, or if a
party must make such disclosure to satisfy a legal demand of a court of
competent jurisdiction or regulatory body, it must first provide to the other
parties the content of the proposed disclosure, and the time and place that the
disclosure will be made.
(C) The parties agree that, if the list of Assumed Customer Contracts,
which is referenced in Section 2.1(A)(ii), the list of former employees, which
is referenced in Section 5.20(D) and the list of current employees, which is
referenced in Section 5.20(E), must be disclosed in connection with, the
Shareholder's bankruptcy proceeding, the Shareholder and Seller agree that they
will request that such lists be filed under seal and the Shareholder Bankruptcy
Court's clerk be ordered not to disclose such lists or their contents to anyone
not authorized by the Shareholder Bankruptcy Court to obtain such information.
9.6 EMPLOYMENT AGREEMENT. Buyer and Mr. Xxxx XxXxxx shall negotiate
the Employment Agreement, which shall be for a minimum term of one-year (1
year) and contain such other terms as may be mutually agreed by Buyer and Mr.
Xxxx XxXxxx, and Seller, Shareholder and Mr. Xxxx XxXxxx shall take all
reasonable actions necessary to permit Mr. Xxxx XxXxxx to enter into the
Employment Agreement.
9.7 UPDATING OF INFORMATION. The parties acknowledge and agree that due to
the potential length of the time period between the date of this Agreement and
the Closing Date, the parties will work together in an attempt to update for the
Closing the following: (i) the list of Assumed Customer Contracts, which is
referenced in Section 2.1(A)(ii), such that on the Closing Date Seller shall
provide to Buyer an updated list reflecting the Assumed Customer Contracts as of
the Closing Date; and (ii) SCHEDULES 2.1, 2.2, 2.3, 5.7(B), 5.9(A), 5.20(D),
5.20(E) AND 7.3. Seller and Shareholder acknowledge and agree that if an update
to the list of Assumed Customer Contracts or SCHEDULES 2.1, 2.3, 2.4, 5.7(B),
5.9(A), 5.20(D), 5.20(E) OR 7.3 reflects an event or circumstance or series of
related events or circumstances that have caused or could reasonably be expected
to cause a Material Adverse Effect on the Business, then Buyer will not be
required to close the Contemplated Transactions pursuant to Section 10.12.
ARTICLE 10
CONDITIONS TO OBLIGATIONS OF BUYER TO CLOSE
The obligations of Buyer to purchase the Acquired Assets and Liabilities
and otherwise consummate the Contemplated Transactions that are to be
consummated at the Closing are subject to the satisfaction, as of the Closing
Date, of the following conditions (any of which may (to the extent permitted by
Applicable Law) be waived by Buyer, in its sole discretion, in whole or in
part):
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10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth in Article 5 shall be accurate in all material
respects as of the Closing, as though made on and as of the Closing Date, except
to the extent that (A) any of such representations and warranties refers
specifically to a date other than the Closing Date, in which case such
representation or warranty shall have been accurate in all material respects as
of such other date, and (B) the accuracy of any of such representations and
warranties is affected by any of the Contemplated Transactions.
10.2 PERFORMANCE. Seller and Shareholder shall have performed in all
material respects all obligations required by this Agreement to be performed by
Seller and Shareholder on or before the Closing Date.
10.3 NO CONFLICT. The Contemplated Transactions and the consummation of
the Closing shall not be illegal or prohibited under any Applicable Law. No
temporary restraining order, preliminary or permanent injunction, cease and
desist order or other order issued by any court of competent jurisdiction or any
competent Governmental Authority or any other legal restraint or prohibition
preventing the Contemplated Transactions or the consummation of the Closing or
imposing damages in respect thereto, shall be in effect, and there shall be no
pending or threatened actions or proceedings by any Governmental Authority (or
determinations made by any Governmental Authority) that would reasonably be
expected to have a material adverse effect on the Contemplated Transactions.
10.4 CERTIFICATE. Buyer shall have received from duly authorized
Representatives of Seller and Shareholder certificates dated as of the Closing
Date, confirming, to such person's Knowledge, that the conditions applicable to
it in Sections 10.1, and 10.2 have been met, and including copies of the
necessary corporate resolutions of Seller and Shareholder that authorize the
transaction; provided that this Section 10.4 shall be deemed satisfied with
regard to Shareholder by the entry of the Shareholder Bankruptcy Court Order.
10.5 SHAREHOLDER BANKRUPTCY COURT APPROVAL. Shareholder shall have
obtained the Shareholder Bankruptcy Court Order set forth in Section 4.1 in form
and substance reasonably acceptable to Buyer, and the implementation, operation
or effect of such order shall not be stayed or any stay entered shall have been
dissolved.
10.6 CONSENTS. All approvals, consents, waivers and authorizations
required to be obtained by Seller and Shareholder in connection with the
Contemplated Transactions, consisting of those consents listed on SCHEDULE
10.6(B) shall have been obtained and shall be in full force and effect. Seller
shall not be required to obtain any consents (i) relating to the Assumed
Customer Contracts or (ii) listed on SCHEDULE 10.6(A), which obligation not to
obtain such consents is not waivable by Buyer.
10.7 TRANSFER DOCUMENTS. Seller shall have delivered to Buyer at the
Closing all documents, certificates and agreements necessary to transfer to
Buyer all of Seller's right and title to and interests in the Acquired Assets
and Liabilities, in form and substance reasonably satisfactory to Buyer,
including, without limitation:
(A) bills of sale, assignments, leases and general conveyances with
respect to the Acquired Assets and Liabilities, dated as of the Closing Date;
(B) assignments of all Assumed Customer Contracts and any other agreements
and instruments constituting Acquired Assets and Liabilities assigning to Buyer
all of Seller's right, title and interest therein and thereto, dated as of the
Closing Date;
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(C) certificates of title to all Acquired Assets identified on Schedule
2.1(A) that are evidenced by titles, duly endorsed for transfer to Buyer as of
the Closing Date; and
(D) any UCC termination filings that are necessary for Seller to be able
to transfer and convey to Buyer the Acquired Assets and Liabilities free and
clear of any and all liens, interests, claims, security interests and
encumbrances, other than liens, interests, claims, and security interests that
Buyer agrees to assume.
10.8 OTHER DELIVERIES. Buyer shall have received the deliveries set
forth in Sections 3.6 (B), (C), (D), (E) and (F).
10.9 TAX CERTIFICATES. Except as set forth on SCHEDULE 5.14(B), Seller
shall have provided to Buyer certificates dated as of a date not earlier than
the fifth business day prior to the Closing Date (A) as to the good standing and
payment of all applicable Taxes by Seller, executed by the appropriate official
of the state of its incorporation and each jurisdiction in which Seller is
licensed or qualified to do business as a foreign corporation as set forth on
SCHEDULE 5.1 and (B) from the appropriate taxing authorities (including, but not
limited to, those authorities in the states listed on SCHEDULE 5.1 other than
the states listed on SCHEDULE 5.14(B)) stating that no Taxes are due from any
state or other taxing authority for which Buyer could have liability to withhold
or pay Taxes with respect to the transfer of the Acquired Assets.
10.10 CHANGE OF CORPORATE NAME. On or prior to the Closing Date, and in
any event within five (5) business days after the Closing Date, Seller will have
provided to Buyer with evidence that Buyer has legally changed its corporate
name to some other name that does not include the initials "DCI," "Delta
Computec Inc." or any other name confusingly similar to such names.
10.11 NO BANKRUPTCY BY SELLER. Seller shall not be the subject of a
bankruptcy proceeding as a debtor or an alleged debtor.
10.12 NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, there
shall have been no event or circumstance or series of related events or
circumstances that have caused or could reasonably be expected to cause a
Material Adverse Effect on the Business.
ARTICLE 11
CONDITIONS TO OBLIGATIONS OF SELLER TO CLOSE
The obligation of Seller to sell, transfer and convey the Acquired Assets
and Liabilities to Buyer and otherwise consummate the Contemplated Transactions
that are to be consummated at the Closing is subject to the satisfaction, as of
the day of Closing, of the following conditions (any of which may (to the extent
permitted by Applicable Law) be waived by Seller, in its sole discretion in
whole or in part):
11.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth in Article 6 shall be accurate in all material
respects as of the Closing, as though made on and as of the Closing Date, except
to the extent that (A) any of such representations and warranties refers
specifically to a date other than the Closing Date, in which case such
representation or warranty shall have been accurate in all material respects as
of such other date, or (B) the accuracy of any of such representations and
warranties is affected by any of the Contemplated Transactions.
11.2 PERFORMANCE. Buyer shall have performed in all material respects all
obligations required by this Agreement to be performed by Buyer on or before the
Closing Date.
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11.3 NO CONFLICT. The Contemplated Transactions and the consummation of
the Closing shall not be illegal or prohibited under any Applicable Law. No
temporary restraining order, preliminary or permanent injunction, cease and
desist order or other order issued by any court of competent jurisdiction or any
competent Governmental Authority or any other legal restraint or prohibition
preventing the Contemplated Transactions or the consummation of the Closing, or
imposing damages in respect thereto, shall be in effect, and there shall be no
pending or threatened actions or proceedings by any Governmental Authority (or
determinations by any Governmental Authority) that would reasonably be expected
to have a material adverse effect on the Contemplated Transactions.
11.4 CERTIFICATE. Seller and Shareholder shall have received from a duly
authorized Representative of Buyer a certificate dated the Closing Date
confirming, to such person's Knowledge, that the conditions in Sections 8.7,
11.1 and 11.2 have been met, and including copies of the necessary corporate
resolutions of Buyer that authorize the transaction.
11.5 NO BANKRUPTCY OF BUYER. Buyer shall not on the Closing Date be a
debtor, a debtor-in-possession or an alleged debtor in a proceeding under the
Bankruptcy Code.
11.6 CONSENTS. All corporate approvals, consents, waivers and
authorizations required to be obtained by Buyer in connection with the
Contemplated Transactions, including those consents that are identified on
Schedule 11.6, shall have been obtained and shall be in full force and effect.
11.7 OTHER DELIVERIES. Seller and Shareholder shall have received the
deliveries required to be made to them as set forth in Section 3.6 (A), (E)
and (F).
11.8 LANDLORD CONSENT. The landlord (the "LANDLORD") of the premises
located at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx, leased by the Seller from
the Landlord pursuant to a lease agreement dated July 23, 1991 as thereafter
amended from time to time (the "TETERBORO LEASE"), shall have executed a consent
to the assignment of the Teterboro Lease from Seller to Buyer, and shall have
released Seller from any and all obligations under the Teterboro Lease on and
from and after the Closing Date.
11.9 KELTIC CONSENT. Buyer and Keltic Financial Partners, LLC ("Keltic")
shall have entered into an agreement pursuant to which upon occurrence of the
Closing Seller and Shareholder are to be released from any and all obligations
under the Senior Secured Credit Facility between Keltic Financial Partners, LP
and Delta Computec Inc. dated May 31, 2001 (the "KELTIC AGREEMENT") on and from
and after the Closing Date.
11.10 SHAREHOLDER BANKRUPTCY COURT APPROVAL. Shareholder shall have
obtained the Shareholder Bankruptcy Court Order set forth in Section 4.1 and the
implementation, operation or effect of such order shall not be stayed or any
stay entered shall have been dissolved.
11.11 NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, there
shall have been no event or circumstances or series of related events or
circumstances that have caused or could reasonably be expected to cause a
Material Adverse Effect on Buyer.
ARTICLE 12
TERMINATION
12.1 RIGHT TO TERMINATE AGREEMENT. This Agreement may be terminated and
the Contemplated Transactions may be abandoned at any time prior to the Closing
(the actual date on which
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this Agreement is terminated being referred to herein as the ("TERMINATION
DATE")) by written notice from one party to the other under the following
circumstances:
(A) by Buyer or Seller, if the Closing has not occurred on or before the
Outside Date (or such other date as the Outside Date may be extended beyond
August 31, 2002 by Buyer pursuant to Section 3.1), unless such failure to close
is due to the failure of the party seeking to terminate this Agreement to comply
in all material respects with its obligations under this Agreement;
(B) by mutual written consent of Buyer and Seller;
(C) by Buyer, if any of the conditions in Article 10 have not been
satisfied in each case as of the Outside Date (or such other date as the Outside
Date may be extended beyond August 31, 2002 by Buyer pursuant to Section 3.1)
(other than through the failure of Buyer to comply with Buyer's obligations
under this Agreement), and Buyer has not waived such conditions on or before the
Outside Date (or such other date as the Outside Date may be extended beyond
August 31, 2002 by Buyer pursuant to Section 3.1);
(D) by Seller or Shareholder, if any of the conditions in Article 11 have
not been satisfied or if satisfaction of any such condition is or becomes
impossible, in each case as of the Outside Date (or such other date as the
Outside Date may be extended beyond August 31, 2002 by Buyer pursuant to Section
3.1) (other than through the failure of Seller or Shareholder to comply with
either of their obligations under this Agreement), and Seller and/or Shareholder
have not waived such conditions on or before the Outside Date (or such other
date as the Outside Date may be extended beyond August 31, 2002 by Buyer
pursuant to Section 3.1);
(E) by Buyer if the Shareholder Bankruptcy Court (i) rejects or does not
enter the Shareholder Bankruptcy Court Order prior to the Outside Date (or such
other date as the Outside Date may be extended beyond August 31, 2002 by Buyer
pursuant to Section 3.1), and the Contemplated Transactions do not close, or
(ii) enters a modified Shareholder Bankruptcy Court Order that is not reasonably
acceptable to Buyer; and
(F) by Buyer, Seller, or Shareholder if the Shareholder Bankruptcy Court
enters an order that authorizes an Alternative Transaction.
12.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 12.1:
(A) Each party shall promptly cause to be returned to any other party all
documents and information obtained from such other party in connection with this
Agreement and the Contemplated Transactions and all confidential information of
such other party, including any copies of such documents and information.
(B) All rights and obligations of the parties hereunder shall terminate
without any liability of any party to the other party except for (i) the
obligations of Buyer under Section 8.3, (ii) the confidentiality provisions
contained in Section 9.5 and the Confidentiality Agreement entered into prior to
this Agreement among the parties, (iii) the rights and obligations of the
parties under Sections 12.2 through 12.4, (iv) the rights of Buyer under Article
13, and (v) Article 15. The parties agree that the remedies of the parties set
forth in paragraphs (i) - (v) of this Section 12.2(B) are the sole and exclusive
remedies of the parties upon the termination of this Agreement prior to the
Closing.
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(C) If Buyer terminates this Agreement under Section 12.1(A), Section
12.1(C) (other than a failure to meet the condition set forth in Section 10.3)
or Section 12.1(E), then Seller agrees to reimburse Buyer and pay to Buyer the
Buyer Reimbursed Costs, as liquidated damages, as set forth in Section 12.4
below.
(D) If Seller or Shareholder terminates this Agreement under Section 12.1
(A) or Section 12.1(D) (other than a failure to meet a condition set forth in
Sections 11.3, 11.8, or 11.9), then Buyer agrees to pay to Seller the Seller and
Shareholder Damages, as liquidated damages, as set forth in Section 12.3 below.
(E) If this Agreement is terminated under Section 12.1(B), Section 12.1
(C) (because of a failure to meet a condition set forth in Section 10.3), or
Section 12.1 (D) (because of a failure to meet a condition set forth in Sections
11.3, 11.8, or 11.9), no party will be liable to pay any damages or expenses to
the other parties.
(F) If this Agreement is terminated under Section 12.1(F), then, Seller
agrees to reimburse Buyer and pay to Buyer the Buyer Reimbursed Costs, as
liquidated damages, as set forth in Section 12.4 below, subject to the Break Up
Fee as liquidated damages pursuant to Article 13.
12.3 LIQUIDATED DAMAGES; LIMITATION OF LIABILITY. IN THE EVENT THAT SELLER
TERMINATES THE AGREEMENT AS SET FORTH IN SECTION 12.2(D), THE PARTIES
ACKNOWLEDGE AND AGREE THAT ANY RESULTING HARM TO THE SHAREHOLDER AND THE SELLER
IS DIFFICULT TO ESTIMATE. THE PARTIES AGREE, THEREFORE, THAT UPON ANY SUCH
EVENT, ANY LIABILITY OF BUYER FOR DAMAGES WILL NOT EXCEED AN AGGREGATE OF THIRTY
THOUSAND DOLLARS ($30,000.00), AS LIQUIDATED DAMAGES, WHICH AMOUNT THE PARTIES
ACKNOWLEDGE REPRESENTS A REASONABLE ESTIMATE OF SELLER'S AND SHAREHOLDER'S
AGGREGATE COSTS ASSOCIATED WITH THE TRANSACTIONS CONTEMPLATED HEREUNDER. UNDER
NO CIRCUMSTANCE WILL BUYER BE LIABLE TO SHAREHOLDER OR SELLER FOR ANY INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR EXEMPLARY DAMAGES ARISING FROM THIS
AGREEMENT OR THE CONTEMPLATED TRANSACTIONS.
12.4 LIQUIDATED DAMAGES; LIMITATION OF LIABILITY. EXCEPT FOR BUYER'S
RIGHTS TO RECEIVE THE BREAK UP FEE AS SET FORTH IN THIS AGREEMENT, IN THE EVENT
THAT BUYER TERMINATES THE AGREEMENT AS SET FORTH IN SECTION 12.2(C) or BUYER,
SELLER OR SHAREHOLDER TERMINATES THE AGREEMENT AS SET FORTH IN SECTION 12.2(F),
THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY RESULTING HARM TO BUYER IS DIFFICULT
TO ESTIMATE. THE PARTIES AGREE, THEREFORE, THAT UPON ANY SUCH EVENT, SUBJECT TO
BUYER'S RIGHTS TO RECEIVE THE BREAK UP FEE AS SET FORTH IN THIS AGREEMENT, ANY
LIABILITY OF SELLER AND SHAREHOLDER WILL NOT EXCEED AN AGGREGATE OF SIXTY
THOUSAND DOLLARS ($60,000), AS LIQUIDATED DAMAGES, WHICH AMOUNT THE PARTIES
ACKNOWLEDGE REPRESENTS A REASONABLE ESTIMATE OF BUYER'S AGGREGATE COSTS
ASSOCIATED WITH THE TRANSACTIONS CONTEMPLATED HEREUNDER. EXCEPT FOR BUYER'S
RIGHTS TO RECEIVE THE BREAK UP FEE AS SET FORTH IN THIS AGREEMENT, UNDER NO
CIRCUMSTANCES WILL SELLER OR SHAREHOLDER BE LIABLE TO BUYER FOR ANY INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING FROM THIS
AGREEMENT OR THE CONTEMPLATED TRANSACTIONS.
26
ARTICLE 13
EXCLUSIVE DEALING AND BREAK UP FEE
13.1 EXCLUSIVITY. Until the earlier of (i) the Closing Date, (ii) the
Outside Date (or such other date as the Outside Date may be extended beyond
August 31, 2002 by Buyer pursuant to Section 3.1), (iii) the Termination Date,
and (iv) the date that the Break Up Fee is paid to Buyer:
(A) Neither the Seller nor the Shareholder will, directly or indirectly,
through any of their representatives, agents, employees, contractors, directors,
shareholders, principals or otherwise (collectively the "REPRESENTATIVES")
solicit or entertain offers from, negotiate with or in any manner encourage,
discuss, accept or consider any proposal of any other person relating to the
acquisition of the Seller, its assets or business, in whole or in part, whether
directly or indirectly, through purchase, merger, consolidation or otherwise
(other than sales of inventory in the ordinary course). Notwithstanding the
above, the parties understand and acknowledge that this Agreement will be
submitted by Shareholder to the Shareholder Bankruptcy Court for approval, and
in connection with that approval, Shareholder may be required by contract or
Applicable Law to notify third parties of the proposed Acquisition, in which
case such notification shall be provided only to the parties set forth on
SCHEDULE 13.1 or as otherwise directed by the Shareholder Bankruptcy Court.
Subject to approval from the Shareholder Bankruptcy Court, Shareholder shall set
forth the manner in which notice is delivered, the content of the notices, and
the procedures to follow in connection with any responses from any of the
notified parties as described in SCHEDULE 13.1. Seller and Shareholder shall be
permitted to respond to requests for information in accordance with the
procedures as shall be approved by the Shareholder Bankruptcy Court; and
(B) Until the earlier of the (i) Closing Date, or (ii) the Termination
Date, either the Seller or the Shareholder will, as the case may be, immediately
notify Buyer regarding any contact between any Representative and any other
person regarding any such offer or proposal or any related inquiry.
13.2 BREAK UP FEE. If any of the following events occur, then the
Break Up Fee shall be paid to Buyer, as set forth herein:
(A) If (i) either the Seller or the Shareholder breaches Section 13.1 and,
the Seller or the Shareholder signs a letter of intent or other agreement within
such period that relates to the acquisition of a material portion of the Seller
or its capital stock, assets or business, in whole or in substantial part,
whether directly or indirectly, through purchase, merger, consolidation or
otherwise (other than sales of inventory or immaterial portions of the Seller's
assets in the ordinary course), and such transaction is ultimately consummated;
or (ii) the Shareholder Bankruptcy Court authorizes a sale of the Acquired
Assets and Liabilities to a third party that is not owned by, controlled by or
under common control with Buyer or its officers, directors or shareholders,
which sale may be due to such third party making a higher or better offer than
Buyer's offer (a sale to an entity other than Buyer is referred to as an
"ALTERNATIVE TRANSACTION"); then, immediately upon the closing of an Alternative
Transaction, the Seller will pay to Buyer the sum of two hundred thousand
dollars ($200,000.00), which amount is inclusive of any (a) fees and expenses
incurred by Buyer in connection with the Acquisition, (b) the preparation and
negotiation of this Agreement and related documents, and (c) legal costs and
fees incurred by Buyer in connection with the collection of these amounts (the
"BREAK UP Fee."). This Break Up Fee will be due and payable within fifteen (15)
days of the closing of the Alternative Transaction.
(B) This Break Up Fee will serve as the exclusive remedy to Buyer under
this Agreement for the occurrence of any of the events set forth in this Section
13.2. If a Break Up Fee in the amount of $200,000 is required to be paid to
Buyer hereunder, and in accordance with other provisions of this Agreement,
Seller or Shareholder have paid to Buyer Buyer's Reimbursed Costs, then the
amount of the Break Up Fee to be paid to Buyer shall be decreased by the amount
of the Buyer's Reimbursed Costs
27
already paid. Shareholder and Seller agree to be jointly and severally liable
for the payment of any Break Up Fee required to be paid to Buyer under this
Section 13.2, it being understood that if the Break Up Fee is not approved by
the Shareholder Bankruptcy Court, Seller shall be solely liable for the Break Up
Fee.
13.3 EXEMPTION. Seller will not be required to pay the Break-Up Fee if all
of the conditions precedent to Buyer's obligation to close as set forth in
Article 10 are satisfied at the Outside Date (or such other date as the Outside
Date may be extended beyond August 31, 2002 by Buyer pursuant to Section 3.1),
and all of the conditions precedent to Seller's and Shareholder's obligation to
close as set forth in Article 11 are not satisfied at the Outside Date (or such
other date as the Outside Date may be extended beyond August 31, 2002 by Buyer
pursuant to Section 3.1).
ARTICLE 14
SURVIVAL AND LIMITATION OF LIABILITY
14.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as set
forth below, the representations, warranties and covenants set forth in this
Agreement shall terminate and expire, and shall cease to be of any force or
effect on the Closing Date, and all liability of the parties hereto with respect
to such representations, warranties and covenants shall thereupon be
extinguished. Notwithstanding the above, the following provisions shall survive
the Closing of the Agreement: (A) Sections 2.1, 2.2, 2.3, 2.4, 3.2, 3.3, 3.4,
3.5, 3.6, 5.17, 5.18, 6.7, 7.5, 7.6 and 8.7 and Articles 14, and 15 shall
continue without expiration or limit, (B) the confidentiality obligations of the
parties as set forth in Section 9.5 shall survive for the period of time set
forth in the Confidentiality Agreement, (C) Sections 5.5, 5.20, 5.21, 6.8, 8.4,
8.6, 9.3 and 9.4 shall continue for the applicable statute of limitations
(including extensions thereof), and (D) Sections 5.1, 5.2, 5.3, 5.4, 5.9, 6.1,
6.2, 6.3, 6.5, 7.1, 7.3, 7.4, 7.7, and 9.1, shall continue for a period of one
year from the Closing Date.
14.2 BUYER'S DAMAGES, BUYER'S RIGHT OF OFFSET. After the Closing, Buyer
may pursue any remedies available to it, including injunctive relief or specific
performance, with respect to any Damages suffered by Buyer in connection with
any breach by Seller or Shareholder of any representations, warranties or
covenants of Seller or Shareholder that survive the Closing as set forth in
Section 14.1(C) and (D), provided, however, that Seller and/or Shareholder will
only be liable to Buyer for an aggregate amount up to and not in excess of Five
Hundred Thousand dollars ($500,000), which amount shall be satisfied (i) first
by an offset by Buyer against the cash component of the Purchase Price to be
paid pursuant to Section 3.2(C) and (D), if any, (ii), second, if necessary, by
a reduction in the number of shares of Buyer's Stock to be issued to Seller
pursuant to Section 3.3(A)(iv)(c) and (d), if any, on a dollar-for-dollar basis
based on the aggregate Stated Value of Buyer's Stock, and (iii) third, by a
claim against Seller for any remaining Damages which are not satisfied by the
offset and/or reduction set forth in subsections (i) and (ii) above. "DAMAGES"
consist of any loss, liability, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' fees and expenses) or
diminution of value, whether or not involving a third-party claim). OTHER THAN
BUYER'S RIGHTS TO RECEIVE THE BREAK UP FEE AS SET FORTH IN THIS AGREEMENT, UNDER
NO CIRCUMSTANCES SHALL BUYER'S DAMAGES INCLUDE ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING FROM THIS AGREEMENT OR THE
CONTEMPLATED TRANSACTIONS.
14.3 SELLER'S DAMAGES. After the Closing, Seller and Shareholder may
pursue any remedies available to them, including injunctive relief or specific
performance, with respect to any Damages suffered by Seller or Shareholder in
connection with any breach by Buyer of any representations, warranties or
covenants of Buyer that survive the Closing as set forth in Section 14.1(C) and
(D), provided, however, that Buyer will only be liable to Seller and Shareholder
for an aggregate amount up to and not in excess of Five Hundred Thousand dollars
($500,000.00). Any Damages suffered by Seller or
28
Shareholder pursuant to this Section 14.3 may be offset against any Damages
suffered by Buyer pursuant to Section 14.2. UNDER NO CIRCUMSTANCES SHALL
SELLER'S OR SHAREHOLDER'S DAMAGES INCLUDE ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING FROM THIS AGREEMENT OR THE
CONTEMPLATED TRANSACTIONS.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (A) delivered
personally, (B) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or (C) sent by reputable next-day or
overnight mail or courier. All such notices, requests, demands, waivers and
other communication shall be deemed to have been received (i) if by personal
delivery, upon delivery, (ii) if by certified or registered mail, on the fifth
business day after the mailing thereof, (iii) if by next-day or overnight mail
or courier, on the business day after such mailing, (iv) if by facsimile, after
telephone confirmation that the facsimile has been received in total. Any
communications to a party shall be sent to the party at the following addresses:
BUYER: XxxxXxxx.xxx, Inc.
00000 Xxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Tel: 000-000-0000
Fax: 000-000-0000
WITH A COPY TO: Xxxxxx and Xxxxx, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
SHAREHOLDER: NQL Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Tel: 000-000-0000
Fax: 000-000-0000
29
WITH A COPY TO: Angel and Xxxxxxx, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
Xxxxxxx Xxxxxxxxxx & Mugel, LLP
00 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
SELLER: Delta Computec Inc..
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: President
Tel: 000-000-0000
Fax: 000-000-0000
WITH A COPY TO: Xxxxxxx Fleishmann & Mugel, LLP
00 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
or, in each case, to such other address of a party as may be specified in
writing by such party to the other parties in the manner set forth in this
Section 15.1. Any reports, notices or other writings required under this
Agreement to be delivered to Seller, shall simultaneously be delivered to
Shareholder.
15.2 SEVERABILITY. Any term or provision of the Agreement that is invalid
or unenforceable in any jurisdiction, as to such jurisdiction, shall be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the remaining terms and provisions of the
Agreement or affecting the validity or enforceability of any of the terms or
provisions of the Agreement in any other jurisdiction.
15.3 RELIANCE ON COUNSEL AND OTHER ADVISORS. Each party has consulted such
legal, financial, technical or other experts as it deems necessary or desirable
before entering into the Agreement. Each party represents and warrants that it
has read, knows, understands and agrees with the terms and conditions of the
Agreement.
15.4 EXHIBITS AND SCHEDULES. Each of the Exhibits and Schedules referred
to in the Agreement and attached hereto, and all signed documents to be
delivered in connection with this Agreement are an integral part of the
Agreement and are incorporated herein by this reference.
30
15.5 RULES OF CONSTRUCTION. Unless the context otherwise requires: (A) a
term has the meaning assigned to it; (B) an accounting term not otherwise
defined has the meaning assigned to it in accordance with GAAP; (C) references
in the singular or to `him," "her," "it," "itself," or other like references,
and references in the plural or the feminine or masculine reference, as the case
may be, shall also, when the context so requires, be deemed to include the
plural or singular, or the masculine or feminine reference, as the case may be;
(D) the use of the word "including" shall mean including, without limitation,
with regard to the items listed thereafter; (E) the headings in the Agreement
are for convenience and identification only and are not intended to describe,
interpret, define or limit the scope, extent, or intent of the Agreement or any
provision thereof; (F) the Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party that drafted
and caused the Agreement to be drafted; (G) the use of the term "specific" in
relation to a subject means relating exclusively to that subject; (H) references
to "commercially reasonable efforts" in the Agreement shall require the efforts
that a prudent person desirous of achieving a commercially reasonable result
would use in similar circumstances to achieve a result within a commercially
reasonable time; and (I) whenever a payment is to be made under the Agreement,
such payment shall be by bank check or wire transfer.
15.6 WAIVER; REMEDIES CUMULATIVE. Except as expressly set forth in this
Agreement, the rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither any failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or any of the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (A) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (B) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (C) no notice to or demand on one party will be deemed to
be a waiver of any obligation of that party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement. Any
waiver must be in writing and signed by the party or parties against whom it is
sought to be enforced.
15.7 COSTS. Except as expressly set forth in this Agreement, each of
Buyer, Shareholder and the Seller will be responsible for and bear all of its
respective costs and expenses (including the expenses of its representatives)
incurred at any time in connection with this Agreement and the Contemplated
Transactions.
15.8 ENTIRE AGREEMENT. Except with respect to the Confidentiality
Agreement, this Agreement constitutes the entire agreement among the parties and
supersedes all prior oral or written agreements, understandings, representations
and warranties and courses of conduct and dealing between the parties on the
subject matter thereof. Except as otherwise provided herein, this Agreement may
be amended or modified only by a writing executed by all of the parties.
15.9 ASSIGNMENTS; SUCCESSORS; AND NO THIRD PARTY RIGHTS. No party may
assign any of its rights or delegate any of its rights or obligations under this
Agreement without the prior written consent of the other parties, except that
Buyer may assign any of its rights and delegate any of its obligations under
this Agreement to any wholly-owned subsidiary of Buyer by providing notice of
such assignment to the other parties provided that Buyer and such subsidiary
shall remain jointly and severally liable for the performance of its obligations
hereunder for the period of time such obligations are enforceable under this
Agreement. Subject to the foregoing, this Agreement will apply to, be binding in
all respects upon and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or
31
referred to in this Agreement will be construed to give any Person other than
the parties to this Agreement any legal or equitable right, remedy or claim
under or with respect to this Agreement or any provision of this Agreement,
except to such wholly-owned subsidiary of Buyer to whom the Acquired Assets and
Liabilities may be sold, and except for such rights as shall inure to a
successor or permitted assignee pursuant to this Section 15.9.
15.10 GOVERNING LAW; JURISDICTION AND SERVICE OF PROCESS. This Agreement
will be governed by and construed under the laws of the State of Texas without
regard to conflicts-of-laws principles. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
or any of the other Agreements to which reference is made herein, may be brought
(i) against Buyer or Seller in the courts of the State of Texas, County of
Dallas, or, if it has or can acquire jurisdiction, in the United States District
Court for the Northern District of Texas or in the courts of the State of New
Jersey, County of Bergen, or if it has or can acquire jurisdiction, in the
United States District Court for the District of New Jersey, and, (ii) against
Shareholder in the Shareholder Bankruptcy Court. Each of the parties consents to
the jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
15.11 COUNTERPARTS. This Agreement and any amendments hereto may be
executed in one or more counterparts, each of which will be deemed to be an
original of this Agreement and all of which, when taken together, will be deemed
to constitute one and the same Agreement.
[signatures on next page]
32
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the date first above written.
BUYER:
XxxxXxxx.xxx, Inc. dba ViewCast Corporation
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------
Title: President, CEO
------------------------------
SELLER:
Delta Computec Inc.
By: /s/ Xxxx XxXxxx
--------------------------------
Name: Xxxx XxXxxx
------------------------------
Title: President
------------------------------
SHAREHOLDER:
NQL Inc.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
------------------------------
Title: Authorized Representative
------------------------------
Acknowledged with respect to Sections 3.6(C) and 9.6 by:
XXXX XXXXXX:
By: /s/ Xxxx XxXxxx
-------------------------------
Xxxx XxXxxx
EXHIBIT "A"
DEFINITIONS
The following terms, as used in this Agreement, shall have the following
meanings unless otherwise specifically defined therein:
"ACQUIRED ASSETS" has the meaning set forth in Section 2.1.
"ACQUIRED CURRENT ASSETS" has the meaning set forth in Section 2.1.
"ACQUIRED LONG TERM ASSETS" has the meaning set forth in Section 2.1.
"ACQUIRED ASSETS AND LIABILITIES" has the meaning set forth in Section
2.1.
"ACQUISITION" has the meaning set forth in the Recitals.
"AGREEMENT" has the meaning set forth in the introductory paragraph.
"ALTERNATIVE TRANSACTION" has the meaning set forth in Section 13.2.
"APPLICABLE LAW" means all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, and (b) orders,
decisions, injunctions, judgments, awards and decrees of, or agreements with,
any Governmental Authority.
"ASSUMED CUSTOMER CONTRACTS" has the meaning set forth in Section 2.1.
"ASSUMED LIABILITIES" has the meaning set forth in Section 2.3.
"BANKRUPTCY CODE" means 11 U.S.C.
"BREAK UP FEE" has the meaning set forth in Section 13.2.
"BUSINESS" means providing professional information technology services
including Internet and intranet consulting, network design, and onsite support
for customers located primarily in the northeastern U.S.
"BUYER" has the meaning set forth in the introductory paragraph.
"BUYER'S DISCLOSURE SCHEDULE" has the meaning set forth in Article 6.
"BUYER FINANCIAL STATEMENTS" has the meaning set forth in Section 6.8.
"BUYER SEC DOCUMENTS" has the meaning set forth in Section 6.8.
"BUYER'S KNOWLEDGE" (or other words to that effect) means the actual
knowledge of the following individuals: Xx. Xxxxxx Xxxxx and Xx. Xxxxxx
Xxxxxx.
"BUYER'S REIMBURSED COSTS" has the meaning set forth in Section 12.4.
A-1
"BUYER'S STOCK" has the meaning set forth in Section 3.2.
"CERTIFICATE OF DESIGNATIONS" has the meaning set forth in Section 3.2.
"CLOSING" has the meaning set forth in Section 3.1.
"CLOSING DATE" has the meaning set forth in Section 3.1.
"CLOSING DATE VALUE STATEMENT" has the meaning set forth in Section 3.3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 9.5.
"CONTEMPLATED TRANSACTIONS" means the transactions contemplated by the
Agreement.
"CONTRACTS" means all legally binding agreements, contracts, commitments,
orders, licenses, leases and other instruments and arrangements, express or
implied, oral or written, whether or not enforceable.
"CONTRACT VALUE" has the meaning set forth in Section 3.3.
"CONTRACT VALUATION DATE" has the meaning set forth in Section 3.3.
"CONVERSION SHARES" has the meaning set forth in Section 3.2.
"CURRENT ASSET VALUE" has the meaning set forth in Section 3.3.
"DAMAGES" has the meaning set forth in Section 14.2.
"DEFERRED PAYMENTS ADJUSTMENT" has the meaning set forth in Section 3.3.
"DEFERRED PAYMENT BUYER'S STOCK" has the meaning set forth in Section 3.3.
"ENVIRONMENTAL LAWS" means all applicable federal, state and local laws,
ordinances and regulations pertaining to protection of public health, welfare or
the environment, protection of air and water quality, storage, handling and use
of Hazardous Materials, and generation, storage, disposal or other management of
waste materials, the Clean Air Act, the Federal Water Pollution Control Act, as
amended by the Clean Water Act, the Solid Waste Disposal Act as amended by the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation, and Liability Act, and the rules, regulations and
ordinances of the cities and other jurisdictions in which the Business is
located, the United States Environmental Protection Agency and all other
applicable Governmental Authorities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" has the meaning set forth in Section 5.20.
"ESCROW AGENT" has the meaning set forth in Section 3.2.
"ESCROW AGREEMENT" has the meaning set forth in Section 3.2.
A-2
"ESCROWED FUNDS" has the meaning set forth in Section 3.2.
"ESCROWED LIABILITIES" has the meaning set forth in Section 3.4.
"EQUIPMENT LEASES" has the meaning set forth in Section 5.7.
"EXCHANGE ACT" has the meaning set forth in Section 6.8.
"EXCLUDED ASSETS" has the meaning set forth in Section 2.2.
"EXCLUDED LIABILITIES" has the meaning set forth in Section 2.4.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 5.5.
"FINANCIAL STATEMENTS DATE" has the meaning set forth in Section 5.5.
"GAAP" means generally accepted United States accounting principles,
applied on a consistent basis.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any governmental authority,
quasi-governmental, agency, department, board, commission or instrumentality of
the United States, any state of the United States or any political subdivision
thereof, any tribunal or arbitrator(s) of competent jurisdiction and any
self-regulatory organization.
"KELTIC" has the meaning set forth in Section 11.9.
"KELTIC AGREEMENT" has the meaning set forth in Section 11.9.
"LANDLORD" has the meaning set forth in Section 11.8.
"LONG-TERM ASSET VALUE" has the meaning set forth in Section 3.3.
"MATERIAL ADVERSE EFFECT ON BUYER" has the meaning set forth in Section
6.4.
"MATERIAL ADVERSE EFFECT ON THE BUSINESS" has the meaning set forth in
Section 5.1.
"NON-DISCLOSURE AGREEMENT" see Confidentiality Agreement.
"OUTSIDE DATE" has the meaning set forth in Section 3.1.
"PERMITS" has the meaning set forth in Section 5.11.
"PLANS" has the meaning set forth in Section 5.20.
"PURCHASE PRICE" has the meaning set forth in Section 2.1.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section 3.6.
A-3
"REPRESENTATIVES" has the meaning set forth in Section 13.1.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" has the meaning set forth in Section 5.18.
"SELLER" has the meaning set forth in the introductory paragraph.
"SELLER'S DIRECTED PAYMENTS" has the meaning set forth in Section 3.4.
"SELLER'S DISCLOSURE SCHEDULE" has the meaning set forth in Article 5.
"SELLER'S KNOWLEDGE" (or other words to that effect) means the actual
=
knowledge of the following individuals: Xx. Xxxx Xxxxx and Mr. Xxxx XxXxxx
"SHAREHOLDER" has the meaning set forth in the introductory paragraph.
"SHAREHOLDER'S KNOWLEDGE" (or other words to that effect) means the
actual knowledge of Mr. Xxxx Xxxxxxxx.
"SHAREHOLDER BANKRUPTCY COURT" has the meaning set forth in the Recitals.
"SHAREHOLDER BANKRUPTCY COURT ORDER" has the meaning set forth in Article
4.
"STATED VALUE" has the meaning set forth in Section 3.2.
"SIX MONTH PAYMENT DATE" has the meaning set forth in Section 3.2.
"TAXES" in the plural and "TAX" in the singular means all federal, state,
local and foreign Taxes, including income, employment (including Social
Security, withholding and state disability), excise, property, franchise, gross
income, real or personal property, ad valorem, sales, use, customs, duties, and
other Taxes, fees, assessments or charges of any kind, together with all
interest, additions to Tax and penalties relating thereto.
"TAX RETURN" means any return, report, declaration, form, claim for refund
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TERMINATION DATE" has the meaning set forth in Section 12.1.
"TETERBORO LEASE" has the meaning set forth in Section 11.8.
"TRANSFER TAXES" has the meaning set forth in Section 9.3.
"TRANSFERRED INTELLECTUAL PROPERTY" has the meaning set forth in Section
5.8.
"TWELVE MONTH PAYMENT DATE" has the meaning set forth in Section 3.2.
"WARN ACT" has the meaning set forth in Section 5.20.
A-4
EXHIBIT 3.2(E)
FORM OF CERTIFICATE OF DESIGNATIONS
SCHEDULE 2.1
ACQUIRED CURRENT ASSETS AND ACQUIRED LONG TERM ASSETS
ACQUIRED CURRENT ASSETS:
ORIGINALLY
REPORTED REPORTED
11/30/01 AS 3/31/02
Cash $ 54,928) $ 46,876
Accts Receivable - net of allowance 2,074,486 2,032,566
Inventory 162,818 76,036
Prepaid Insurance 0 0
Prepaid Property Tax 0 0
Prepaid Misc. 64,361 0
Prepaid Commissions 52,609 47,332
Prepaid Income Tax 0 0
TOTAL ACQUIRED CURRENT ASSETS $2,299,346 $2,202,810
ACQUIRED LONG TERM ASSETS:
ORIGINALLY
REPORTED REPORTED
11/30/01 AS 3/31/02
Machinery & Equip, Gross $ 1,375,147 $ 1,377,738
Service Spares, Gross 2,711,564 2,786,746
Software Licenses, Gross 102,967 102,967
Subtotal 4,189,678 4,267,451
Total Accumulated Depreciation and (2,095,606) (2,407,799)
Amortization
Net Value 2,094,072 1,859,652
Security Deposits 66,503 66,503
TOTAL ACQUIRED LONG TERM ASSET VALUE $ 2,160,575 $ 1,926,155
SCHEDULE 2.2
EXCLUDED ASSETS
EXCLUDED ASSETS:
ORIGINALLY
REPORTED REPORTED
11/30/01 AS 3/31/02
Prepaid Insurance 327,857 179,601
Prepaid Misc. 65,004 54,153
Prepaid Property Tax 3,741 1,884
Prepaid Income Tax 5,274 5,274
Goodwill, net of amortization 7,152,793 7,117,311
TOTAL EXCLUDED ASSETS $7,554,669 $7,358,223
EXCLUDED RECORDS AND DOCUMENTS:
Included within the definition of Excluded Assets are the corporate
records of Seller including: corporate minute books and related documents; stock
records and related documents; financial statements and data upon which the
financial statements have been based, or may be required to be based for
financial statements to be produced in the future; tax returns and data upon
which tax returns have been based, or may be required to be based for tax
returns to be filed in the future; employee records (collectively: "EXCLUDED
RECORDS AND DOCUMENTS"). The Excluded Records and Documents are currently
located at Seller's premises at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx. Buyer
agrees to provide, without cost to Seller, a place of storage for the Excluded
Records and Documents at 000 Xxxxxx Xxxxxx (or such other location as Buyer
deems appropriate) for a period of at least three years from the Closing Date.
Seller or Seller's representatives shall have reasonable access to the location
where the Excluded Records and Documents are maintained during normal business
hours and Seller shall provide reasonable advance notification to Buyer if
Seller desires to have access to the Excluded Records and Documents or if Seller
desires to remove the Excluded Records and Documents from the place of storage
provided by Buyer. The risk of loss relating to the Excluded Records and
Documents so long as they shall remain at a place of storage provided by Buyer
shall be borne solely by Seller.
SCHEDULE 2.3
ASSUMED LIABILITIES
ASSUMED CURRENT LIABILITIES
ORIGINALLY
REPORTED REPORTED
11/30/01 AS 3/31/02
Accts Payable (1,031,335) (749,809)
InterCompany Payable 0 0
Short Term Loans Pay (754,998) (666,349)
Accrued Payroll/Taxes 0 0
Income Tax Pay 0 0
Deferred Revenue (821,545) (830,238)
Sales Tax Payable 0 0
Other Accruals- Insurance Financing 0 0
Other Accruals- Miscellaneous 0 (146,984)
Other Accruals- Accounting Fees 0 0
TOTAL ASSUMED CURRENT LIABILITIES $(2,607,878) $(2,393,380)
OTHER LIABILITIES:
TOTAL OTHER LIABILITIES NONE NONE
OTHER COMMITMENTS:
LEASES:
FACILITIES: EQUIPMENT: VEHICLES:
-NJ and DE Leases -Ricoh, Pitney Xxxxx -GMAC
-Ford Motor Credit
SCHEDULE 3.3(A)(IV)
EXISTING VALID BIDS AND WRITTEN QUOTES
AS OF THE CLOSING DATE
SCHEDULE 3.4
SELLER'S DIRECTED PAYMENTS
SCHEDULE 5.1
STATES IN WHICH SELLER IS QUALIFIED TO DO BUSINESS
JURISDICTIONS:
Main locations:
New York - (incorporated 11/15/79)
New Jersey - Office located in Teterboro, NJ
Delaware - Office located in Claymont, DE
(Physical locations closed but still qualified to do business):
Louisiana
California
Maryland
Georgia
Texas
Ohio
Connecticut
Pennsylvania
Massachusetts
SCHEDULE 5.5
EXCEPTIONS TO FINANCIAL STATEMENTS AND UNDISCLOSED LIABILITIES REPRESENTATION
The only year end audit adjustment for Fiscal Year 2001 now that is not included
in the Fiscal Year 2001 Financial Statements is the impairment charge for
Goodwill.
SCHEDULE 5.6
SELLER'S EXCEPTIONS TO ABSENCE OF CERTAIN CHANGES OR EVENTS REPRESENTATION
1. Seller has contemplated and is pursuing an asset purchase transaction.
SCHEDULE 5.7(A)
EXCEPTIONS TO TITLE TO ACQUIRED ASSETS REPRESENTATION
EQUIPMENT SUBJECT TO LEASES AND/OR FINANCE AGREEMENTS:
AUTOMOBILES:
PHH - 1994 Chevy Astro Van, 1998 Chevy G20 Van
(Leases have expired, but company has been charged monthly administration
costs -$25/vehicle each month. Vehicles can be returned at no charge.)
GMAC - 2000 Chevy Astro Van
Ford Motor Credit - - 2001 Lincoln
OFFICE EQUIPMENT:
Ricoh- 2 Copiers / 1 Fax
Xerox Fax machine
Pitney Xxxxx postage machine
SCHEDULE 5.7(B)
SELLER'S LEASED REAL PROPERTY
Teterboro, NJ - - -38,000 sq. ft. office/warehouse facility. Lease terminates
July 31, 2006.
Claymont, DE - - -900 sq. ft. office facility. Lease terminates August 1, 2002.
SUBLEASE:
Teterboro, NJ - - Ameriban
SCHEDULE 5.8(B)
TRANSFERRED INTELLECTUAL PROPERTY OF SELLER
No Patents, copyrights or trademarks.
(A) Registered Trade names : Delta Computec Inc.
DCi
DCi Professional Services
(B) See the attachment to this schedule for the software licenses currently
being used or a party to.
(C) Registered Service xxxx: PC RESERVE
SCHEDULE 5.8(C)
CLAIMS AGAINST TRANSFERRED INTELLECTUAL PROPERTY OF SELLER
None.
SCHEDULE 5.9(A)
BUSINESS AGREEMENTS AND RESELLER/VENDOR AGREEMENTS
RESELLER/VENDOR AGREEMENTS:
- 3COM Authorized Service Partner and Network Systems Integrator
- ATI Authorized Service Provider
- Cervalis Business Partner
- Cisco Systems Premier Partner
- Citrix Authorized Solutions Provider
- Compaq Computer Corporation Authorized Reseller and Service Provider
- DELL Customer Authorized Service Provider
- Extreme Authorized Reseller and Service Provider
- Fujitsu America Authorized Reseller
- Hewlett Packard Site Authorized Service Partner
- IBM Authorized Reseller and Service Center
- Lexmark Authorized Reseller and Service Provider
- Lotus Business Partner
- Microsoft Solutions Provider
- Netilla Authorized Business Partner
- Novell Gold Dealer and Authorized Service Center
- NQL Authorized Reseller
- Okidata Authorized Service Center
- Sonic Firewall Partner
- Sony Authorized Partner
- Toshiba Authorized Service Provider
- VideoLabs Business Partner
- Xerox/Tektronix Authorized Service Center
OTHER BUSINESS AGREEMENTS:
LINE OF CREDIT:
Keltic Financial Partners LLC
LEASES:
FACILITIES: EQUIPMENT: VEHICLES:
-NJ and DE Leases -Ricoh, Pitney Xxxxx -GMAC
-Ford Motor Credit
SUBLEASE:
Teterboro, NJ -- Ameriban
SCHEDULE 5.9(B)
LIMITING CONTRACTS
None.
SCHEDULE 5.10
PROCEEDINGS AND LIABILITY
None.
SCHEDULE 5.11
PERMITS
SALES TAX PERMITS:
New York
New Jersey
Delaware
Louisiana
California
Maryland
Georgia
Texas
Ohio
Connecticut
Pennsylvania
Massachusetts
Connecticut
SCHEDULE 5.11(A)
EXCEPTIONS TO PERMITS
None except Sales Tax in Schedule 5.14 (B)
SCHEDULE 5.12
EXCEPTIONS TO ENVIRONMENTAL COMPLIANCE
None.
SCHEDULE 5.13
EXCEPTIONS TO ADEQUACY OF ASSETS
None.
SCHEDULE 5.14(A)
EXCEPTIONS TO COMPLIANCE WITH APPLICABLE LAWS
Sales Taxes - see SCHEDULE 5.14 (B)
SCHEDULE 5.14(B)
EXCEPTIONS TO PAYMENT OF SALES AND USE TAXES
Company Jurisdiction Tax Period Amount
------- ------------ ---------- ---------
Delta Data Net New York State 5/31/96 135,000
Delta Computec State Board of 3/31/99 2,520
Equalization (CA)
Delta Computec Commonwealth 12/31/97 11,431
of PA
Delta Computec Massachusetts 10/31/96 18,016
Dept of Revenue
---------
SALES TAX RESERVE ACCOUNT BALANCE AS OF 12/31/02 166,967
Delta Computec New York Month of March 2,325.00
Delta Computec Georgia Month of March 13.30
Delta Computec New Jersey Qtr Ending 3/31/02 14,666.07
Delta Computec Connecticut Qtr Ending 3/31/02 1,375.00
Delta Computec Texas Month of March 406.91
Delta Computec Pennsylvania Month of March 194.80
Delta Computec Calif. Bd of Equal. Qtr Ending 3/31/02 133.00
Delta Computec Other Month of March 390.94
---------
TOTAL SALES TAX LIABILITY AS OF 3/31/02
186,472
=========
SCHEDULE 5.17
BROKERS
Xxxxxx Xxxxxxxx Corporate Finance LLC
SCHEDULE 5.20(A)
EMPLOYEE BENEFIT PLANS
Type Carrier
---- -------
Medical Benefits United Healthcare
Dental Benefits Guardian Insurance
Life Insurance Reliance Standard Life Insurance Company
Disability Insurance Reliance Standard Life Insurance Company
Accidental Death and Reliance Standard Life Insurance Company
Dismemberment Insurance
Employee Assistance Program Cigna Behavioral Health
Flexible Spending Plan Flex Pro
401k Plan Xxxxxx Investments
Vacation Policy Ten Days for less than five
years of service Fifteen Days for
more than five years of service
Sick Policy Four sick days per year
Personal Days One day per year
Paid Holidays An average of ten days per year
EMPLOYEE INCENTIVE/BONUS PLANS
Sales Commission Plan A
Sales Commission Plan B (Technical Personnel)
Technician Bonus Plan
Other - Certain members of management contain bonus options in their employment
offers. These bonus options are a normally a percentage of base salary and are
determined or available by the financial performance of the company.
SCHEDULE 5.20(D)
HEALTH CARE COVERAGE EMPLOYEES
EMPLOYEE SCHEDULES ALREADY RECEIVED AND WILL BE UPDATED AT TIME OF CLOSING.
SCHEDULE 5.20(E)
CURRENT EMPLOYEES
EMPLOYEE SCHEDULES ALREADY RECEIVED AND WILL BE UPDATED AT TIME OF CLOSING.
SCHEDULE 5.21
TAXES
INCOME TAXES
State of NJ - - Tax Year 1998 notice for corp. tax due of $ 9,618.20, but return
shows credit of $13,000.00 Currently being investigated.
SALES TAX
See Sales Tax - - Schedule 5.14 (B)
SCHEDULE 6.5
GOVERNMENTAL AUTHORIZATIONS AND THIRD PARTY CONSENTS
TO BE OBTAINED BY BUYER
None.
SCHEDULE 6.7
BUYER'S BROKERS
NETWORK 1 FINANCIAL SECURITIES, INC.
SCHEDULE 6.8(D)
EXCEPTIONS TO ABSENCE OF CHANGES REPRESENTATION
None.
SCHEDULE 7.1
EXCEPTIONS TO CONDUCT OF BUSINESS
None.
SCHEDULE 7.3
EXCEPTIONS TO RELEASE OF LIENS AND ENCUMBRANCES
UCC FINANCING STATEMENT - Keltic has a UCC Lien on assets in connection with
Loan Agreement.
SALES TAX LIEN - State Board of Equalization (CA) has a sales tax lien in
California. DCi does not have any assets in California so American Express
charges processed for services are being withheld by California Sales Tax
Authority to satisfy this lien.
AUTOMOBILES:
PHH - 1994 Chevy Astro Van, 1998 Chevy G20 Van
(Leases have expired, but company has been charged monthly administration
costs -$25/vehicle each month. Vehicles can be returned at no charge.)
GMAC - 2000 Chevy Astro Van
Ford Motor Credit - - 2001 Lincoln
OFFICE EQUIPMENT:
Ricoh - 2 Copiers / 1 Fax
Xerox Fax machine
Pitney Xxxxx postage machine
SCHEDULE 10.6(A)
SELLER CONSENTS NOT REQUIRED
1. Claymont, DE lease of 900 sq. ft. office facility with lease termination
of August 1, 2002
2. Compaq Computer Corporation Authorized Reseller and Service Provider
3. DELL Customer Authorized Service Provider
4. Hewlett Packard Site Authorized Service Partner
5. IBM Authorized Reseller and Service Center
6. Lexmark Authorized Reseller and Service Provider
7. Sony Authorized Partner
8. Xerox/Tektronix Authorized Service Center
9. Ricoh equipment lease
10. Pitney Xxxxx equipment lease
11. GMAC vehicle lease
12. Ford Motor Credit vehicle lease
SCHEDULE 10.6(B)
SELLER CONSENTS
FACILITY LEASE:
Teterboro, NJ - - Forsgate Industrial
SUBLEASE:
Teterboro, NJ - - Ameriban
LINE OF CREDIT
Keltic Financial Partners LP
SCHEDULE 11.6
BUYER CONSENTS
1. FINAL BOARD APPROVAL, INCLUDING AUTHORIZATION FOR ISSUANCE OF BUYER'S
STOCK.
SCHEDULE 13.1
NOTICES
Shareholder and Seller will request that the Shareholder Bankruptcy Court limit
notice regarding the proposed Acquisition to the following persons or entities,
or as otherwise ordered by the Shareholder Bankruptcy Court:
I. All creditors of Shareholder.
II. Shareholder's Official Committee of Unsecured Creditors, including
the Committee's attorneys and financial advisors, if any exist.
III. The Office of the United States Trustee.
IV. Shareholder's preferred shareholders of record.
V. Holders of Excluded Liabilities.
VI. All entities who file notices of appearances in Shareholder's
chapter 11 case.
VII. The following entities who previously expressed an interest in
purchasing any of the Acquired Assets or Liabilities or the Seller's
stock:
EPlus Technologies of PA Inc.
Everest Broadband Networks
Micros to Mainframe Inc.
Delta Corporate Services
Vytek Wireless Inc.
R.E.M. Associates LLC
Xxxxx Pacific LLC
Infinity Information Inc.
Rockwood Inc.
AmTech Associates
VIII. The following entities who Seller and/or Shareholder believe may
have an interest in purchasing the Acquired Assets or Seller's
stock:
Discus Data Solutions, Inc.
Xxxxxx Systems International, Inc.
Information Systems Support Inc.
Lante Corp.
Plural
Sytex Inc.
York Telecom
IX. Any entity who subsequent to the filing of a motion with the
Shareholder Bankruptcy Court seeking approval of the Agreement,
requests, or expresses an interest, in writing, regarding the
Acquisition or in the purchase of the Acquired Assets or the
Seller's stock.
Notice shall only be published as ordered by the Shareholder Bankruptcy Court.
