STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT is made as of this 20th day of August, 1999, by,
between and among XXXXXX X. XXXXXXXXX ("X. Xxxxxxxxx") and XXXXXX XXXX ("X.
Xxxx") (X. Xxxxxxxxx and X. Xxxx hereinafter referred to collectively as the
"Sellers" and individually as "Seller") and XXXXXXX COMPUTER RESOURCES, INC., a
Delaware corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, Sellers own all of the issued and outstanding shares of Acme Data
Systems, Inc., an Ohio corporation, which is a full-service provider of a
variety of computer service and support solutions to large and medium-sized
commercial, governmental and other professional customers throughout the
Columbus, Ohio Metropolitan area, as follows:
X. Xxxxxxxxx - 25 shares
R, Leas - 25 shares
Total - 50 shares
WHEREAS, Sellers desire to sell and Purchaser desires to purchase all the
Company Shares owned by Sellers, and Sellers and Purchaser desire to engage in
the other transactions provided for herein.
NOW, THEREFORE, in and for the consideration of the mutual promises and
undertakings herein contained, and subject to the terms and conditions
hereinafter set forth, the Parties agree as follows:
ARTICLE I
1. Definitions. As used herein the following terms shall have the following
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meanings, respectively:
1.01 Accounts Receivable: All notes and accounts receivable held by Company
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or of which Company is the beneficial holder and all notes, bonds and other
evidences of indebtedness of and rights to receive payments from any Person held
by Company.
1.02 Acquisition: The purchase and sale of all the Company Shares upon the
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terms and provisions, and subject to the conditions, set forth in this
Agreement.
1.03 Affiliate: Shall have the meaning ascribed to such term in Rule 405
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promulgated under the Securities Act of 1933, as amended.
1.04 Affiliate Receivables: Any account or note receivable or other payment
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obligation owing to Company by any officer, director, employee or Affiliate of
Company.
1.05 Agreement: This Stock Purchase Agreement.
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1.06 Applicable Law. All applicable provisions of all (i) constitutions,
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treaties, statues, laws (including common law), rules, regulations, ordinances,
codes or order of any Governmental Authority and (ii) orders, decisions,
injunctions, judgments, awards and decrees of or agreements with any
Governmental Authority.
1.07 Book Value: The shareholders' equity of Company as of the Closing Date
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as reported in Company's Closing Balance Sheet, determined in accordance with
Section 3.01.
1.08 Book Value Report: Shall have the meaning defined in Section 3.01.
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1.09 Business. The operations of Company involving generally the sale of
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goods, or the provision of services (including repair and maintenance services),
relating to personal computers, client services, computer networks,
communication equipment, other equipment related thereto, such as computer
monitors, peripherals and all other individual components, operating systems and
application software and other software (including software created for use on
the Internet) created for use in tie-in arrangements, customer service and
internal management systems for sales, delivery and support and any other
business operations of Company.
1.10 Business Day. "Business Day" shall mean a day other than a Saturday,
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Sunday or other day on which commercial banks in Cincinnati, Ohio are authorized
or required to close.
1.11 Closing: The consummation of the Acquisition on the Closing Date at
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the place of Closing hereinafter specified in accordance with the terms and
conditions hereof.
1.12 Closing Balance Sheet: The balance sheet of Company at the date of
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the Closing.
1.13 Closing Date: The date on which the Closing shall take place,
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determined in accordance with Article XIV.
1.14 Code: The Internal Revenue Code of 1986, as amended.
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1.15 Company: Acme Data Systems, Inc., an Ohio corporation.
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1.16 Company's Accountant: Company's accountant shall mean Xxxxx Xxxxx, LLC.
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1.17 Company Personnel: Shall mean current or former employees, officers,
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directors or consultants of Company.
1.18 Company Shares: All the issued and outstanding common shares, without
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par value, of Company.
1.19 Contracts. Shall have the meaning defined in Section 4.09(a).
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1.20 Consent. Any consent, approval, authorization, waiver, permit, grant,
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franchise, concession, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any Person.
1.21 Court: A Court is any federal, state, municipal, domestic, foreign or
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any other governmental tribunal or an arbitrator or person with similar power or
authority.
1.22 Disclosure Schedule: The schedule dated as of the date hereof,
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prepared pursuant to Article IV, copies of which have been signed by Sellers and
delivered to Purchaser.
1.23 EBIT. The earnings of Company before interest and taxes, and without
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incorporating any gains or losses realized on the disposition of assets other
than in the ordinary course of business. Company's EBIT for all applicable
periods will be determined in accordance with GAAP.
1.24 EBIT of Purchaser's Columbus Division. The earnings of Purchaser's
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Columbus Division (that existed prior to the closing of this Agreement and any
part of the business that is operated by Purchaser's wholly-owned subsidiary,
Xxxxxxx Select Integration Solutions, Inc.) before interest and taxes, and
without incorporating any gains or losses realized on the disposition of assets
other than in the ordinary course of business. The EBIT of Purchaser's Columbus
Division for all applicable periods will be determined in accordance with GAAP.
Provided, however, for the period commencing the day after the Closing Date
until January 5, 2000, the EBIT of Purchaser's Columbus Division shall be
determined without any moving or other integration expenses incurred by
Purchaser incident to its Columbus Division moving into the facility currently
leased by Company from Advanced Marketing Group and which facility shall be
leased to Purchaser pursuant to a Lease Agreement of even date. The parties
shall determine in good faith the amount of any moving or other integration
expenses incurred by Purchaser that shall not be included in the EBIT
determination hereunder.
1.25 EBIT Threshold. Shall have the meaning set forth in Section 2.03.
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1.26 Employee Benefit Plans: Shall mean all pension, annuity, retirement,
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stock option, stock purchase, savings, profit sharing or deferred compensation
plans or agreements, any retainer, consultant, bonus, group insurance, welfare,
health and disability plan, fringe benefit or other incentive or benefit
contract, plan, or commitment or arrangement applicable to Company Personnel.
1.27 Employees: With respect to Company, shall mean all full-time and
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part-time employees of Company.
1.28 Employee Contracts: All employment contracts, consulting agreements,
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and collective bargaining agreements or related agreements with respect to
Employees of Company.
1.29 Environmental Laws: Shall mean all federal, state or local judgments,
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decrees, orders, laws, licenses, ordinances, rules or regulations pertaining to
environmental matters, including, without limitation, those arising under the
Resource Conservation and Recovery Act (42 U.S.C. -1801, et seq.) ("RCRA"), the
-- ---
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (42 U.S.C. -9601, et seq.) ("CERCLA"), the Superfund Amendment and
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Reauthorization Act of 1986 ("XXXX"), the Federal Clean Water Act (33 U.S.C.
-1251, et seq.), the Federal Clean Air Act (33 U.S.C. -7401, et seq.), the Toxic
-- --- -- ---
Substances Control Act (15 U.S.C. -7401, et seq.) the Federal Insecticide,
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Fungicide and Rodenticide Act (7 U.S.C. -136, et seq.) and the Occupational
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Safety and Health Act (29 U.S.C. -651, et seq.).
-- ---
1.30 Environmental Liabilities and Costs: All Losses, whether direct or
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indirect, known or unknown, current or potential, past, present or future,
imposed by, under or pursuant to Environmental Laws, including, without
limitation, all Losses related to Remedial Actions, and all fees, disbursements
and expenses of counsel, experts, personnel and consultants based on, arising
out of or otherwise in respect of: (i) the ownership or operation of the
Business, the Leased Real Property or any other real properties, assets,
equipment or facilities, by Company, or any of its predecessors or Affiliates;
(ii) the environmental conditions existing on the Closing Date on, under, above,
or about any Leased Real Property or any other real properties, assets,
equipment or facilities currently or previously owned, leased or operated by
Company, or any of its predecessors or Affiliates; and (iii) expenditures
necessary to cause any Leased Real Property or any aspect of the Business to be
in compliance with any and all requirements of Environmental Laws as of the
Closing Date, including, without limitation, all Environmental Permits issued
under or pursuant to such Environmental Laws, and reasonably necessary to make
full economic use of any Leased Real Property.
1.31 Environmental Permits: Any federal, state and local permit, license,
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registration, consent, order, administrative consent order, certificate,
approval or other authorization with respect to Company necessary for the
conduct of the Business as currently conducted or previously conducted under any
Environmental Law.
1.32 ERISA: The Employee Retirement Income Security Act of 1974, as
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amended.
1.33 GAAP: Generally accepted accounting principles in effect in the United
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States consistently applied throughout the periods involved.
1.34 Governmental Approval: Any Consent of, with or from any Governmental
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Authority.
1.35 Governmental Authority: Any nation or government, any state or other
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political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, commission or instrumentality of the United States, any State of the
United States or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.
1.36 Hazardous Materials: Shall mean any hazardous waste, as defined by 42
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U.S.C. -6903(5), any hazardous substances or wastes as defined by 42 U.S.C.
-9601(14), any pollutant or contaminant as defined by 42 U.S.C. -9601(33) or any
toxic substances or wastes, oil or hazardous material or other chemicals or
substances regulated by any public or Governmental Authority.
1.37 Indemnifying Party: Shall have the meaning defined in Section
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11.06(a).
1.38 Intellectual Property: Any and all United States and foreign: (a)
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patents (including reexaminations, design patents, industrial designs and
utility models) and patent applications (including docketed patent disclosures
awaiting filing, provisional applications, reissues, divisions, continuations,
continuations-in-part and extensions), patent disclosures awaiting filing
determination, inventions and improvements thereto; (b) trademarks, service
marks, trade names, trade dress, logos, business and product names, slogans, and
registrations and applications for registration thereof; (c) copyrights
(including software) and registrations thereof including Company's name; (d)
inventions, processes, designs, formulae, trade secrets, know-how, industrial
models, confidential and technical information, manufacturing, engineering and
technical drawings, product specifications and confidential business
information; (e) mask work and other semiconductor chip rights and registrations
thereof; (f) intellectual property rights similar to any of the foregoing; (g)
copies and tangible embodiments thereof (in whatever form or medium, including
electronic media); and (h) the Internet address and website of Company.
1.39 Inventories: All inventories of raw materials, work in process,
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finished products, goods, spare parts, office and other supplies, including any
of such inventories held at any location controlled by Company or at any other
location (pursuant to conditional sales agreements, consignment arrangements or
in any bailment or otherwise) and any such items previously purchased and in
transit to Company at any such locations.
1.40 Leased Real Property: Shall mean all interests leased pursuant to the
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Leases.
1.41 Leases: Shall mean all real property leases, subleases, licenses and
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occupancy agreements pursuant to which Company is the lessee, sublessee,
licensee or occupant which relate to or are being used in the Business and which
are described on Disclosure Schedule 4.09.
1.42 Lien: With the exception of Permitted Liens, a mortgage, pledge,
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hypothecation, right of others, claim, security interest, encumbrance, lease,
sublease, license, occupancy agreement, adverse claim or interest, easement,
covenant, encroachment, burden, title defect, title retention agreement, voting
trust agreement, interest, equity, option, lien, right of first refusal, charge
or other restrictions or limitations of any nature whatsoever, including,
without limitation, such that may arise under any Contracts.
1.43 Line of Credit Indebtedness: Includes any indebtedness incurred,
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incurable, or accrued pursuant to any of Company's financing arrangements,
agreements, letters of credit and a line of credit with Deutsche Financial
Services Corp. and any of its successors and assigns, all as set forth on
Disclosure Schedule 1.42. Disclosure Schedule 1.42 shall set forth the
principal balance and all accrued interest of such items on the date hereof.
1.44 Losses. Any and all losses, liabilities, damages, obligations and
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expenses arising as a result of the designated action or inaction, and all
actions, suits, proceedings, demands, assessments, judgments, costs and expenses
(including, without limitation, attorney's fees and other expenses incurred in
investigating or defending any claim, action, suit or proceeding and any and all
amounts paid in settlement thereof) with respect to the designated action or
inaction.
1.45 Notes: The two-year subordinated promissory notes payable to Sellers
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as more fully described in Section 2.04(b).
1.46 Other Sellers Documents: The agreements and other documents and
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instruments described in Sections 2.04, 6.01, 7.01 and 8.01.
1.47 Party or Parties: Purchaser or Sellers or any of them.
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1.48 Party to Be Indemnified: as defined in Section 11.06(a).
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1.49 Permitted Liens. Shall mean and include any (i) matters described in
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detail and by item in Disclosure Schedule 1.48(i) to this Agreement and (ii)
liens arising by operation of Applicable Law for taxes, assessments, labor,
materials, and obligations not yet due or which are being contested in good
faith, which contested items are set forth in detail in Disclosure Schedule
1.48(ii). The phrase "Permitted Liens" shall also include (a) liens imposed by
mandatory provisions of Applicable Law such as carriers, materialmens,
mechanics, warehousemens, landlords and other like liens arising in the ordinary
course of business, securing obligations not yet due or which are being
contested in good faith, which contested items are set forth in Disclosure
Schedule 1.48, (b) liens arising in the ordinary course of business from pledges
or deposits to secure public or statutory obligations, deposits to secure (or in
lieu of) surety, stay, appeal or customs bonds and deposits to secure the
payment of Taxes, and (c) good faith deposits in connection with bids, tenders,
contracts or leases.
1.50 Person: Any natural person, firm, partnership, association,
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corporation, company, limited liability company, limited partnership, trust,
business trust, Governmental Authority or other entity.
1.51 Post Closing Date: Shall have the meaning defined in Section 3.01.
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1.52 Purchase Price: The total consideration paid by Purchaser to Sellers
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for the Company Shares as provided in Section 2.02.
1.53 Pro Forma EBIT: The aggregate of the EBIT of Company for the period
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commencing January 1, 1999 and ending January 5, 2000 and the EBIT of
Purchaser's Columbus Division for the period commencing with the day following
the Closing Date and ending January 5, 2000. The determination of Pro Forma
EBIT shall be determined in accordance with the procedures set forth in Section
3.02.
1.54 Remedial Action: All actions required to (i) clean up, remove, treat
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or in any way remediate any Hazardous Materials; (ii) prevent the release of
Hazardous Materials so that they do not migrate or endanger or threaten to
endanger public health or welfare or the environment; or (iii) perform studies,
investigations and care related to (i) and (ii) above.
1.55 Spare Parts: All replacements, components, devices, equipment and
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other similar items owned or held by Company for use in connection with the
repair, replacement, modification, customization or installation of goods and
products applicable to the Business.
1.56 Subsidiary: Each corporation or other Person in which a Person owns or
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controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interest or conferring the power to name the majority of the members to the
board of directors or other governing body of the corporation or other Person or
otherwise direct the management or policies thereof.
1.57 Tax or Taxes: Any federal, state, provincial, local, foreign or other
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income, alternative, minimum, any taxes under Section 1374 of the Code, any
taxes under Section 1375 of the Code, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits, windfall
profits, gross receipts, value added, sales, use, goods and services, excise,
customs duties, transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance, environmental, including taxes under
Section 59A of the Code), real property, personal property, ad valorem,
intangibles, rent, occupancy, license, occupational, employment, unemployment
insurance, social security, disability, workers' compensation, payroll, health
care, withholding, estimated or other similar tax, duty or other governmental
charge or assessment or deficiencies thereof (including all interest and
penalties thereon and additions thereto whether disputed or not).
1.58 Tax Return: Any return, report, declaration, form, claim for refund or
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information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
1.59 Vendor Receivables: Any amounts owing to Company from vendors of goods
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and products used in the Business resulting from discounts for prompt payment,
volume discounts, promotional programs or similar vendor special pricing and
term arrangements.
1.60 Year-End Financials: The unaudited financial statements of Company for
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the twelve-month periods ending December 31, 1998 and December 31, 1997.
ARTICLE II
2. Purchase of Company Shares and Purchase Price.
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2.01 Purchase of Company Shares. Sellers agree to sell and transfer the
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Company Shares to Purchaser, and Purchaser agrees to purchase the Company Shares
from Sellers, on the Closing Date.
2.02 Purchase Price. The Purchase Price for the Company Shares shall be
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Five Million Five Hundred Sixty-Two Thousand Two Hundred Dollars ($5,562,200.00)
plus any amount that may be paid pursuant to Section 2.03, adjusted as follows:
(a) To the extent that the Book Value as reported on the Closing
Balance Sheet is less than $1,018,407.00 plus the net profit of Company from
June 30, 1999 to the Closing Date, the Purchase Price shall be decreased on a
dollar-for-dollar basis to the extent of such deficit. The determination of the
Book Value shall be made in the manner provided in Section 3.01.
(b) In the event that the Company's Pro Forma EBIT for the period
commencing January 1, 1999 and ending January 5, 2000 and the EBIT of
Purchaser's Columbus Division for the period commencing the day following the
Closing Date and ending January 5, 2000 is less than One Million Five Hundred
Thirty-Nine Thousand Dollars ($1,539,000.00) in the aggregate, the Purchase
Price shall be decreased on a dollar-for-dollar basis equal to the difference
between One Million Five Hundred Thirty-Nine Thousand Dollars ($1,539,000.00)
and the total of such Pro Forma EBIT. The determination of Pro Forma EBIT shall
be made in the manner provided for in Section 3.02 hereof. Any adjustment to
the Purchase Price under this Section shall be made to the Notes issued under
Section 2.04(b).
2.03 Potential Adjustment to Purchase Price.
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If the EBIT of Company (as hereinafter defined as Purchaser's Columbus
Division) during the fiscal years 2000, 2001, 2002 and 2003 exceed the
applicable EBIT Threshold for such year set forth below:
Fiscal 2000 - $1,589,000.00
Fiscal 2001 - $1,689,000.00
Fiscal 2002 - $1,789,000.00
Fiscal 2003 - $1,889,000.00
Purchaser shall pay to Sellers according to the percentages set forth in
Section 2.04(a) below, by bank check or wiring within ninety (90) days following
the end of the fiscal year, an amount equal to fifty percent (50%) of the EBIT
of Company in excess of the EBIT Threshold for the applicable year or portion
thereof, subject to a cumulative limitation of Five Million Dollars
($5,000,000.00) during such aggregate period. Any EBIT shortfall in any year
shall not be offset against any excess EBIT in any subsequent year(s) hereunder,
it being the intent of the parties that the EBIT Threshold set forth herein
shall apply to each applicable year separately, subject, however, to the
cumulative limitation of Five Million Dollars ($5,000,000.00) during such
aggregate period. Such cash payment by Purchaser shall be additional Purchase
Price for the Company Shares. Commencing on the later of the closing date or
the installation of the ASTEA Accounting System at Company, 1.5% MAS royalty fee
and a .3% Adfund fee on gross sales by Company shall be made incident to said
determination. For each subsequent year described above in this paragraph for
which Purchaser may be required to pay additional Purchase Price, the parties
shall, in good faith, agree upon the MAS and Adfund royalty fee to be charged
hereunder based on the level of services and support being provided by Purchaser
to Company. Provided, however, such MAS royalty fee shall be 1.5% and the
Adfund royalty fee shall be .3% if the parties are unable to come to an
agreement for each subsequent year.
For purposes of this Section 2.03, the term "Purchaser's Columbus Division"
shall be the business acquired by Purchaser from Sellers under this Agreement
including any part of the business that is operated by Purchaser's wholly-owned
subsidiary, Xxxxxxx Select Integration Solutions, Inc., and shall include
Purchaser's operations in Columbus, Ohio that existed prior to the closing of
this Agreement. In the event that during the term of this Section 2.03,
Purchaser would cause Company to merge into Purchaser or any Affiliate of
Purchaser, the term "Purchaser's Columbus Division" shall also include such
entity into which Company is merged to the extent of such entity's Columbus
Division. It being the intent of the parties to exercise good faith in the
implementation of this provision in the event of the merger of Company into
Purchaser or any of its Affiliates during the term of this Agreement.
The EBIT of Company shall be determined by the internally-generated
financial statements of Company determined in the manner set forth above in
accordance with generally accepted accounting principles, consistently applied.
Said determination of EBIT shall be subject to verification as described below.
In addition, for purposes of determining EBIT for any particular year, except as
noted above, no item of income or expense will be allocated by Purchaser to
Company unless such items are reasonably calculated to contribute to the
increase in profits of Company, it being the intent of the parties that
Purchaser shall exercise the utmost good faith with respect to allocations of
income and expense to Company. Incident to the determination of EBIT of
Company, no compensation of any executive or other employee of Purchaser or its
respective affiliates who do not work directly for Company shall be allocated to
such division.
Within ninety (90) days after the end of each fiscal year or period
described herein, Purchaser will deliver to Sellers a copy of the report of EBIT
prepared by Purchaser for the subject period along with any supporting
documentation reasonably requested by Sellers. Within ninety (90) days
following delivery to Sellers of such report, Sellers shall have the right to
object in writing to the results contained in such determination. If timely
objection is not made by the Sellers to such determination, such determination
shall become final and binding for purposes of this Agreement. If timely
objection is made by Sellers to Purchaser and Sellers and Purchaser are able to
resolve their differences in writing within thirty (30) days following the
expiration of the ninety-day (90-day) period, then such determination shall
become final and binding as it regards to this Agreement. If timely objection
is made by Sellers to Purchaser and Sellers and Purchaser are unable to resolve
their differences in writing within thirty (30) days following the expiration
of the ninety-day (90-day) period, then all disputed matters pertaining to the
report shall be submitted to and reviewed by an arbitrator (the "Arbitrator")
which shall be an independent accounting firm selected by Purchaser and
Sellers. If Purchaser and Sellers are unable to agree promptly on an accounting
firm to serve as the Arbitrator, each shall select by no later than the 30th day
following the expiration of the one hundred twenty-day (120-day) period, an
accounting firm, and the two selected accounting firms shall be instructed to
select promptly another independent accounting firm, such newly selected firm to
serve as the Arbitrator. The Arbitrator shall consider only the disputed
matters pertaining to the determination and shall act promptly to resolve all
disputed matters, and its decision with respect to all disputed matters shall be
final and binding upon Sellers and Purchaser. Expenses of the Arbitration shall
be borne one-half (1/2) by Purchaser and one-half (1/2) by Sellers. Each party
shall be responsible for its own attorney and accounting fees.
2.04 Payment of Purchase Price.
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(a) Three Million Dollars ($3,000,000.00) shall be payable at Closing
in cash or by bank or certified checks or wire transfer of Purchaser which
amount shall be prorated among the Sellers according to the following
percentages:
X. Xxxxxxxxx - 50%
X. Xxxx - 50%
(b) Two Million Six Thousand Two Hundred Dollars ($2,006,200.00) in the
aggregate, as may be adjusted upward or downward as set forth in Sections 3.01
and 3.02 shall be payable in the form of the Notes of Purchaser, attached hereto
as Exhibit A (the "Notes") which Notes shall be prorated among the Sellers
according to the percentages set forth in Section 2.04(a) above. Such Notes
shall bear interest at the prime rate of Chase Manhattan Bank, as of the Closing
Date. Interest under said Notes shall be payable quarterly in arrears with the
first interest payment being due and payable ninety (90) days from the Closing.
One-half (1/2) of the outstanding principal balance of said Notes shall be
payable in full on the first annual anniversary date of the Closing of the
transaction and the remaining principal balance of such Notes shall be payable
in full on the second annual anniversary of the Closing of the transaction. All
obligations of Purchaser thereunder will be subordinated and made junior in
right of payment to the extent and the manner provided in a Subordination
Agreement to be executed by Deutsche Financial Services Company, Purchaser and
each Seller. A copy of the Subordination Agreement to be executed by the
Sellers is attached hereto as Exhibit B.
(c) The sum of Five Hundred Fifty-Six Thousand Dollars ($556,000.00)
shall be payable in the form of the common stock of Purchaser. The number of
shares of Purchaser's stock to be issued to the Sellers in accordance with the
percentages set forth in Section 2.04(a) above shall be determined by dividing
556,000 by the average of the closing price for Purchaser's stock on the
over-the-counter market for the twenty (20) previous business days preceding the
Closing Date. Incident to the issuance of such shares, Sellers shall execute
such documentation containing such representations concerning the holding of
Purchaser's shares, including that Sellers are able to bear the economic risk of
holding the shares to be delivered hereunder for the period required by
applicable Federal Securities Laws because such shares will not have been
registered under the Securities Act of 1933 and therefore cannot be sold unless
they are subsequently registered under the Act or an exemption from registration
is available. The form of the documentation to be executed by each Seller
incident to the issuance of these shares is attached hereto as Exhibit C. In
the event the base price of Purchaser's common stock is greater than $22.00 per
share or is less than $11.00 per share, the parties agree to engage in good
faith negotiations to renegotiate the economics of this aspect of the
transaction on the Closing Date.
ARTICLE III
3. Post-Closing Adjustments.
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3.01 Within ninety (90) days after the Closing (the "Post Closing Date"),
the Sellers will deliver to Purchaser a copy of the audited Closing Balance
Sheet prepared by Seller's accountant along with any supporting documentation
reasonably requested by Purchaser reflecting Company's calculation of Book Value
and the determination of any deficit in Book Value in accordance with Section
2.02(a) (the "Book Value Report"). The cost of the preparation of such audited
Closing Balance Sheet shall be borne one-half (1/2) by Sellers and one-half
(1/2) by Purchaser. Provided, however, Purchaser's obligation hereunder shall
not exceed the sum of Ten Thousand Dollars ($10,000.00). Within fifteen (15)
days following delivery to Purchaser of the Book Value Report, Purchaser shall
have the right to object in writing to the results contained therein. If
timely objection is not made by Purchaser to the Book Value Report, the Book
Value Report shall become final and binding for purposes of this Agreement. If
timely objection is made by Purchaser to the Book Value Report, and Sellers and
Purchaser are able to resolve their differences in writing within five (5) days
following the expiration of such fifteen (15) day period, then the Book Value
Report as resolved shall become final and binding as it relates to this
Agreement. If timely objection is made by Purchaser to the Book Value Report,
and Sellers and Purchasers are unable to resolve their differences in writing
within such period, then all disputed matters pertaining to the Book Value
Report shall be submitted to and reviewed by an Arbitrator according to the
process and procedure set forth in Section 2.03 above. Expenses of the
Arbitration shall be borne one-half (1/2) by Purchaser and one-half (1/2) by
Sellers. Each party shall be responsible for its own attorneys and accounting
fees. Any net reduction in the Purchase Price as a result of said adjustment
shall be made in the manner set forth in Section 2.02(b) and shall be reflected
by decreasing the face amount of the Notes set forth in Section 2.04(c) in
proportion to Sellers' ownership of the Company Shares. The parties agree to
implement any adjustments to any interest payment that may have been made prior
to the date of such determination to reflect the adjustments set forth above.
3.02 Within ninety (90) days after January 5, 2000, Sellers will deliver to
Purchaser a determination of Company's EBIT prepared by Company's Accountant for
the period commencing January 1, 1999 and ending on the Closing Date along with
any supporting documentation reasonably requested by Purchaser. Company's EBIT
shall be prepared using the same accounting methods, policies, practices and
procedures with consistent classifications, judgments, estimations and
methodologies as used in the preparation of the December 31, 1998 unaudited
Balance Sheet. Within ninety (90) days after January 5, 2000, Purchaser will
deliver to Sellers a determination of the Company's EBIT for the period
commencing on the Closing Date and ending January 5, 2000 and a determination of
the EBIT of Purchaser's Columbus Division along with any supporting
documentation reasonably requested by Sellers. Incident to said EBIT
determination, a 1.8% royalty fee (MAS 1.5% and Adfund .3%) on gross sales by
Company during said period shall be made incident to said determination
commencing with the time that the ASTEA conversion has been implemented at
Company and a 1.8% royalty fee (MAS 1.5% and Adfund .3%) on gross sales by
Purchaser's Columbus Division shall be made incident to said determination for
the period commencing the day after the Closing Date and ending January 5, 2000.
Within thirty (30) days following delivery of such reports, the parties shall
have the right to object in writing to the results contained in such
determination. If timely objection is not made by any party of such
determination, such determination shall become final and binding. If timely
objection is made by any party, and Purchaser and Sellers are able to resolve
their differences in writing within ten (10) days following the expiration of
the EBIT objection period, then such determination as resolved shall become
final and binding as it relates to this Agreement. If timely objection is made
by either party, and Sellers and Purchaser are unable to resolve their
differences in writing within ten (10) days following the expiration of the EBIT
objection period, then all disputed matters relating to the report shall be
submitted to and reviewed by an Arbitrator according to the process and
procedure set forth in Section 3.01above. The expenses of the arbitration shall
be borne one-half (1/2) by Purchaser and one-half by Sellers Each party shall
be responsible for its own attorney and accounting fees. Any net reduction in
the Purchase Price as a result of said adjustment shall be made in the manner
set forth in Section 2.02(b) and shall be reflected by decreasing the face
amount of the Notes set forth in Section 2.04(c) in proportion to Sellers'
ownership of the Company Shares. The parties agree to implement any adjustments
to any interest payments that may have been made prior to the date of such
determination to reflect the adjustment set forth above.
ARTICLE IV
4. Representations of Sellers. Except as set forth in the Disclosure
----------------------------
Schedule attached hereto, which identifies the specific sections to which each
such disclosure relates, Sellers, jointly and severally (except for
representations and warranties made by an individual Seller which only relate to
that specific Seller (i.e. such as ownership of the Company Shares), which are
made severally only), represent, warrant and covenant to Purchaser that the
following statements are true as of the date hereof and shall be true and
correct as of the Closing Date as if made again at and as of that time:
4.01 Organization and Good Standing. Except as disclosed in Disclosure
---------------------------------
Schedule 4.01, Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, and is duly licensed,
authorized and qualified to do business and in good standing in all
jurisdictions in which the conduct of its business or the ownership or leasing
of its properties require it to be so licensed, author-ized or qualified.
Copies of Company's Articles of Incorporation and By-Laws and any amendments
thereto (certified to be correct by the Secretary of Company) have been
delivered to Purchaser and are complete and correct as of the date hereof.
Disclosure Schedule 4.01 correctly lists, with respect to Company, each
jurisdiction, if any, in which it is qualified to do business as a foreign
corporation.
4.02 Capitalization. The authorized capital stock of Company consists
--------------
solely of 500 common shares, without par value, of which 50 shares are issued
and outstanding. Company has 77 treasury shares. The issued and out-standing
common shares of Company are held by the following persons in the following
numbers:
Name of Shareholder Number of Shares Held
--------------------- ------------------------
X. Xxxxxxxxx - 25 shares
X. Xxxx - 25 shares
Company has no authorized or outstanding preferred stock or any other class
of stock. The Company Shares have been duly authorized and validly issued and
are fully paid and nonassessable. The Company Shares have been issued in
compliance with all applicable federal and state securities laws and no past or
present holder thereof is entitled to any right of rescission in respect thereof
and no documentary taxes or other taxes were required with respect to the
issuance or transfer of such Company Shares. There are no existing
subscriptions, options warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale or
transfer of any capital stock of Company or any securities convertible into or
exchangeable for any such capital stock.
4.03 Title to Shares. Sellers own, respectively, the number of Company
-----------------
Shares set forth opposite each of their names in Section 4.02 hereof, free and
clear of all Liens. The transfer of the Company Shares to Purchaser will convey
good and marketable title to the Company Shares, free and clear of all Liens.
4.04 Subsidiaries. Company has no subsidiaries.
------------
4.05 Authority. This Agreement is a valid and binding obligation of each
---------
Seller, enforceable in accordance with its terms except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally, or by the availability
of equitable remedies or the application of general equitable principles.
Except as set forth in Disclosure Schedule 4.05, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will:
(i) violate, or conflict with, or require any Consent under, or result
in a breach of any provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the properties or assets of
Company under any of the terms, conditions or provisions of the Articles of
Incorporation or Bylaws of Company or of any note, bond, mortgage, indenture,
deed of trust, license, agreement or other instrument or obligation to which
Company, or any Seller is a party, or by which Company or any Seller or any of
their properties or assets may be bound or affected; or
(ii) violate any order, writ, injunction or decree applicable to
Sellers or Company or any of their properties or assets or, to the knowledge of
Sellers, violate any statute, rule or regulation applicable to Sellers or
Company or any of their properties or assets; or
(iii) constitute a default or event that, with notice or lapse of time,
or both, would be a default, breach, or violation of any lease, license,
promissory note, conditional sales contract, commitment, indenture, mortgage,
deed of trust or other agreement, instrument or arrangement to which Company is
a party or by which it is bound; or
(iv) constitute an event that would permit any party to terminate any
agreement or to accelerate the maturity of any indebtedness or other obligation
of Company; or
(v) no Consent by, notice to or registration with any Governmental
Authority is required on the part of Sellers or Company prior or subsequent to
the Closing Date in connection with the execution, delivery and performance by
Sellers of this Agreement or the consummation of any of the transactions
contemplated hereby.
4.06 Closing Balance Sheet. The Closing Balance Sheet, which shall be
-----------------------
attached hereto as Exhibit "D" on the Post-Closing Date, will reflect only the
assets and liabilities of Company as of the Closing Date and will not include
any assets or liabilities of any corporation or entity except Company. As of
the Closing Date, Company will not have any liabilities (whether absolute,
accrued, contingent or otherwise and whether due or to become due), including
without limitation, any tax liabilities of the nature required by GAAP to be
reflected or reserved against in the Closing Balance Sheet, which are not
accurately and fully reflected or reserved against in the Closing Balance Sheet;
provided, however, that the Closing Balance Sheet shall not be accompanied by
notes and shall not include normal year-end adjustments (if any) other than
depreciation or any other accrual of the nature set forth on Disclosure Schedule
4.06, attached hereto, which are not material in the aggregate.
4.07 Year End Financials.
---------------------
(a) The Year End Financials have been provided to Purchaser, are in
accordance with the books and records of Company, and have been prepared in
accordance with GAAP as applied by Company on a consistent basis throughout the
periods covered by such statements and fairly represent the financial condition
of Company as of the respective dates and the results of operations of Company
for the period then ended. Except as stated in the Year End Financials or as
otherwise set forth in Disclosure Schedule 4.07(a), there have been no unusual
accounting practices engaged in which have affected the amount or trend of net
income of Company, or any unusual or nonrecurring transactions, during the
periods reflected in the Year End Financials.
(b) Absence of Undisclosed Liability. Except as to the extent
-----------------------------------
specifically reflected in the Year End Financials or otherwise set forth in
Disclosure Schedule 4.07(b), and except for trade payables, liabilities and
contractual obligations arising in the ordinary course of business since the
date of Company's 1998 unaudited financial statements, Company does not have any
other liabilities of any nature, whether accrued, absolute or contingent, or
otherwise, and whether due, or to become due of the nature required by GAAP to
have been reflected or reserved against in financial statements.
(c) No Liabilities as Guarantor. Except as set forth in Disclosure
------------------------------
Schedule 4.07(c), Company is not directly or indirectly obligated to guaranty or
assume any debt, dividend, or other obligation of any person, corporation,
association, partnership, or other entity, except endorsements made in the
ordinary course of business in connection with the deposit of items for
collection.
(d) Absence of Material Change. Except as set forth in Disclosure
-----------------------------
Schedule 4.07(d) or as otherwise set forth in this Agreement or the Exhibits
hereto, since December 31, 1998, there has not been:
(i) any change in the condition (financial or otherwise),
properties, business, operations or prospects of Company which is materially
adverse, singly or in the aggregate;
(ii) any material loss, damage or destruction in the nature of a
casualty loss or otherwise, whether covered by insurance or not, adversely
affecting any property or asset of Company;
(iii) an actual or any threatened strike or other material labor
trouble or material dispute;
(iv) any loss or any threatened loss of any governmental permit,
license, qualification, special charter or certificate of authority held or
enjoyed or formerly held or enjoyed by Company which loss has had or upon
occurrence would have a material effect, singly or in the aggregate, on the
condition (financial or otherwise), properties, business, operations or
prospects of Company;
(v) to the knowledge of the Sellers, any statute, regulation,
order, ordinance or other law the adoption, amendment or rescission of which
have a material effect, singly or in the aggregate, on the condition (financial
or otherwise), properties, business, operations or prospects of Company;
(vi) any indebtedness, liability or obligation (whether absolute,
accrued, contingent or otherwise) incurred by Company, or other transaction
entered into by Company, other than in the ordinary course of business and
consistent with past practice, or any guarantee of any indebtedness, liability
or obligation made by Company;
(vii) any declaration, setting aside or payment of any dividend or
other distributions in respect of any capital stock of Company;
(viii) any issuance, sale, combination or reclassification of any
capital stock or other securities of Company;
(ix) any issuance or grant of any option, warrant or other right
in respect of any capital stock or other securities of Company;
(x) any direct or indirect redemption, purchase or other
acquisition of any capital stock or other securities of Company;
(xi) any obligation, liability, Lien or encumbrance paid,
discharged or satisfied by Company other than in the ordinary course of
business;
(xii) any mortgage, Lien, pledge, charge or encumbrance (except
for liens for current taxes not yet due and payable), created, incurred or
assumed by Company other than in the ordinary course of business;
(xiii) except in the ordinary course of business, any sale,
transfer or other disposition of any tangible asset of Company, any cancellation
of any debt or claim of Company or any disposition of any intangible properties,
assets or rights of Company;
(xiv) any salary or wage increase granted or committed to be made,
other than normal merit or cost-of-living increases pursuant to Company's
general prevailing practices, with respect to any officer, director, employee or
agent of Company, or any bonus, incentive or deferred compensation, profit
sharing, retirement, pension, group insurance, death benefit or other fringe
benefit plan or trust agreement entered into or amended or any employment or
consulting agreement entered into or amended or altered;
(xv) any termination (whether by discharge, retirement or
otherwise) of any officer, director, employee or agent of Company or any notice
to so terminate given or received by any of the foregoing;
(xvi) any loan made, increased or forgiven to any officer,
director, employee or agent of Company or to any member of any of their
families;
(xvii) any capital expenditure, addition or improvement made or
committed to be made by Company in excess of $10,000.00 with respect to any
single expenditure, addition or improvement or in excess of $20,000.00 with
respect to all such expenditures, additions and improvements;
(xviii) any failure on the part of Company to operate its business
in the ordinary course or to use its best efforts to preserve its business
organization intact, to retain the services of its employees and to preserve its
goodwill and relationships with suppliers, creditors and others having business
relationships with it;
(xix) any known material loss of business, termination or
discontinuance of any relationship or dispute between Company and any customer
or supplier;
(xx) any loss, amendment, termination or waiver of any material
right of Company other than in the ordinary course of business;
(xxi) any known write-off as uncollectible of any notes or
accounts receivable, or any portions thereof, in excess of $10,000.00 with
respect to any single note or account or in excess of $20,000.00 with respect to
all such write-offs;
Purchaser acknowledges that on or before Closing, Company shall have paid
off all outstanding liabilities due to its current or past shareholders, in the
respective amounts as set forth on Disclosure Schedule 4.07(d).
4.08 Assets. Except as provided in Disclosure Schedule 4.08, Company has
------
good and marketable title to all of its assets and properties, real, personal or
otherwise, including, but not limited to, those assets and properties reflected
in Company's December 31, 1998 financial statements, except only for assets
subsequently disposed of in the ordinary course of business, free and clear of
all Liens, except (a) as specifically reflected thereon, (b) the Line of Credit
Indebtedness, or (c) for Permitted Liens. To the best knowledge of Sellers, all
Company's tangible and other operating assets, property and equipment are in
good operating condition and repair, free of structural or material mechanical
defects and conform with all applicable laws and regulations. Without limiting
the generality of the foregoing, specific representations are set forth in the
following subparagraphs of this Section 4.08.
4.08.1 Accounts Receivable. All Accounts Receivable of Company which have
--------------------
arisen in connection with the Business or otherwise and which are reflected on
Company's December 31, 1998 financial statements, and all such receivables which
will have arisen since December 31, 1998 have arisen only from bona fide
transactions in the ordinary course of business and represent valid, collectible
and existing claims. Except as set forth on Disclosure Schedule 4.08.1, and
subject to customer credits, the payment of each Account Receivable will not, as
of the Closing Date, be subject to any known defense, counterclaim or condition
(other than Company's performance in the ordinary course of business)
whatsoever. Disclosure Schedule 4.08.1 hereto accurately lists, as of a date
within five (5) days of execution of this Agreement, and will list, as of a date
within five (5) days of the Closing Date, all receivables arising out of or
relating to the Business, the amount owing and the aging of such Accounts
Receivable. Sellers have provided Purchaser the opportunity to review complete
and correct copies of all instruments, documents and agreements evidencing such
Accounts Receivable and of all instruments, documents or agreements, if any,
creating security therefor.
4.08.2 Vendor Receivables. All Vendor Receivables of Company which have
-------------------
arisen in connection with the Business or otherwise and which are reflected on
Company's December 31, 1998 financial statements and all such Vendor Receivables
which have arisen since December 31, 1998 have arisen only from bona fide
transactions in the ordinary course of business and represent valid, collectible
and existing claims. Except as set forth in Disclosure Schedule 4.08.2, the
payment of each Vendor Receivable will not, as of the Closing Date, be subject
to any known defense, counterclaim or condition whatsoever. Disclosure Schedule
4.08.2 hereto accurately lists, as of a date within five (5) days of the
execution of this Agreement, and will list, as of a date within five (5) days of
the Closing Date, all Vendor Receivables arising out of or relating to the
Business, the amount owing and the aging of such Vendor Receivables. Sellers
have provided Purchaser the opportunity to review complete and correct copies of
all instruments, documents and agreements evidencing such Vendor Receivables and
of all instruments, documents and agreements, if any, creating security
therefor.
4.08.3 Inventory. Except as specifically described on Disclosure Schedule
---------
4.08.3, all inventory reflected on the December 31, 1998 financial statements
consists of items of quality and quantity which are usable or saleable in the
ordinary course of Business of Company in the conduct of its Business, and items
of below standard quality and items not usable or saleable in the ordinary
course of Company's business have been written-down in value in accordance with
good business practices to estimated net realizable market value or adequate
reserves have been provided therefor. The values at which the Inventories are
carried on the December 31, 1998 financial statement reflect the normal
valuation policy of Company in setting inventory at the lower of cost or market,
all in accordance with GAAP. Except as set forth on Disclosure Schedule 4.08.3,
since December 31, 1998, Inventories have been maintained at normal and adequate
levels for the continuation of the Business in its normal course. Since
December 31, 1998, no change has occurred in such Inventories which affect or
will affect the usability or salability thereof, no write-downs or write-ups of
the value of such Inventories has occurred and no additional amounts have been
reserved with respect to such Inventories. Disclosure Schedule 4.08.3 lists the
location of all Inventories together with a brief description of the type and
amount at each location.
4.08.4 Real Property. Company owns no real property.
--------------
4.08.5 Dealer Agreements. A list of Company's dealer agreements is set
------------------
forth in Disclosure Schedule 4,08.
4.08.6 Intellectual Property.
----------------------
(a) Title. Disclosure Schedule 4.08.6(a) contains a complete and
-----
correct list and a brief description of all Intellectual Property described in
Section 1.37(a), 1.37(b) and 1.37(c) that is owned by Company and primarily
related to, used in, held for use in connection with, or necessary for the
conduct of, or otherwise material to the Business (the "Owned Intellectual
Property"). Company owns or has the exclusive right to use pursuant to license,
sublicense, agreement or permission all of its Intellectual Property, free from
any Liens (other than Permitted Lines). No Affiliate of Seller owns or has any
interest in or with respect to any Company Intellectual Property and Company
Intellectual Property comprises all of the Intellectual Property necessary for
Company to conduct and operate the Business following the Closing as now being
conducted by Company.
(b) No Infringement. To the knowledge of Sellers, the conduct of the
----------------
Business does not infringe or otherwise conflict with any rights of any Person
in respect of any Intellectual Property. To the knowledge of Sellers, none of
Company Intellectual Property is being infringed or otherwise used or available
for use, by any other Person.
(c) Licensing Arrangements. Disclosure Schedule 4.08.6(c) sets forth
-----------------------
all agreements, arrangements or laws (i) pursuant to which Company has leased or
licensed Intellectual Property, or the use of Intellectual Property as otherwise
permitted (through non-assertion, settlement or similar agreements or otherwise)
to, any other Person and (ii) pursuant to which Company has had Intellectual
Property licensed to it, or has otherwise been permitted to use Intellectual
Property (through non-assertion, settlement or similar agreements or otherwise),
excluding software licensed by Company for internal purposes, together with a
brief description of the Intellectual Property covered thereby. All of the
agreements or arrangements set forth in Disclosure Schedule 4.08.6(c), (x) are
in full force and effect in accordance with their terms and no default exists
thereunder by Company, or to the knowledge of Sellers, or other parties thereto
(y) are free and clear of all Liens other than Permitted Liens, and (z) except
as set forth on Disclosure Schedule 4.08.6(c), do not contain any change in
control or other terms or conditions that will become applicable or inapplicable
as a result of the consummation of the transactions contemplated by this
Agreement. Sellers have delivered to Purchaser true and complete copies of all
licenses and arrangements (including amendments) set forth on Disclosure
Schedule 4.08.6(c).
(d) No Intellectual Property Litigation. To Sellers' knowledge, no
--------------------------------------
claim or demand of any Person has been made nor is there any proceeding that is
pending, or to the knowledge of Sellers, threatened, nor is there to Sellers'
knowledge, a reasonable basis therefor, which (i) challenges the rights of
Company in respect of any of the Intellectual Property, (ii) asserts that
Company is infringing or otherwise in conflict with, or is, except as set forth
in Disclosure Schedule 4.08.6(d), required to pay any royalty, license fee,
charge or other amount with regard to, any Intellectual Property, or (iii)
claims that any default exists under any agreement or arrangement regarding
Intellectual Property. None of Company's Intellectual Property is subject to
any outstanding order, ruling, decree, judgment or stipulation by or with any
court, arbitrator, or administrative agency, or has been the subject of any
litigation within the last five years, whether or not resolved in favor of
Company.
(e) Due Registration, etc. Company has no Intellectual Property that
------------------------
has been registered with, filed and/or issued by, as the case may be, the United
States Patent and Trademark Office, United States Copyright Office or such other
filing offices, domestic or foreign.
(f) Use of Name and Xxxx. Except as set forth in Disclosure Schedule
-----------------------
4.08.6(f), there are no restrictions or limitations pursuant to any order,
decisions, injunctions, judgements, awards or decrees of any Governmental
Authority on Purchaser's right to use the names and marks set forth on
Disclosure Schedule 4.08.6(a) in the conduct of the Business as presently
carried on by Company.
4.08.7 Motor Vehicles. Disclosure Schedule 4.08.7 sets forth a complete
---------------
list of all motor vehicles owned by Company.
4.09 Contracts.
---------
(a) Disclosure Schedule 4.09 contains a complete and correct list of
all agreements, contracts, commitments and other instruments and arrangements
(whether written or oral) of the types described below (x) by which Company or
under which Company or any of its assets, businesses or operations receive
benefits, or (y) to which Company is a party or by which Company is bound in
connection with the Business (the "Contracts").
(i) leases, licenses, permits, franchises, insurance policies,
Governmental Approvals and other contracts concerning or relating to the Leased
Real Property in Sellers' or Company's possession;
(ii) employment, bonuses, vacations, pensions, profit sharing,
retirement, stock options, stock purchases, employee discounts or other employee
benefits, consulting, agency, collective bargaining or other similar contracts,
agreements, and other instruments and arrangements relating to or for the
benefit of current, future or former employees, officers, directors, sales
representatives, distributors, dealers, agents, independent contractors or
consultants which involves aggregate annual payments in excess of $15,000;
(iii) loan agreements, indentures, letters of credit, mortgages,
security agreements, pledge agreements, deeds of trust, bonds, notes,
guarantees, and other agreements and instruments relating to the borrowing of
money or obtaining of or extension of credit;
(iv) brokerage or finder's agreements;
(v) joint venture, partnership and similar contracts involving a
sharing of profits or expenses, including, but not limited to, joint research
and development and joint marketing contracts;
(vi) asset purchase agreements and other acquisition or
divestiture agreements, including, but not limited to, any agreements relating
to the sale, lease or disposal of any assets owned by Company (other than sales
of Inventory in the ordinary course of business) or involving continuing
indemnity or other obligations;
(vii) orders and other contracts for the purchase or sale of
Inventories, materials, supplies, products or services open or as to which any
liability exists as of the date hereof, each of which involves aggregate
payments in excess of $15,000;
(viii) contracts with respect to which the aggregate amount that
could reasonably expected to be paid or received thereunder in the future
exceeds $15,000;
(ix) sales agency, manufacturer's representative, marketing or
distributorship agreements;
(x) contracts, agreements or arrangements with respect to the
representation of the Business in foreign countries;
(xi) master lease agreements providing for the leasing of either
(a) personal property primarily used in, or held for use primarily in connection
with, the Business and (b) other personal property;
(xii) contracts, agreements or commitments with any director,
officer, employee, or Affiliate of Company or any of the Sellers, or with any
holder of more than five percent (5%) of any class of capital stock of Company
outstanding other than employment contracts; and
(xiii) any other contracts, agreements or commitments that are
material to the Business.
(b) Sellers have delivered to Purchaser complete and correct copies of
all written Contracts, together with all amendments thereto, and accurate
descriptions of all material terms of all oral Contracts, set forth or required
to be set forth in Disclosure Schedule 4.09.
(c) Company has not received notice of any plan or intention of any
party to any Contract to exercise any right to cancel or terminate any Contract.
To the best knowledge of Sellers, there does not exist under any Contract any
event of default or event or condition that, after notice or lapse of time or
both, would constitute a violation, breach or event of default thereunder on the
part of Company or, to the best knowledge of Sellers, any other party thereto,
except as set forth in Disclosure Schedule 4.09 and except for such events or
conditions that, individually and in the aggregate, (i) has not had or resulted
in, and will not have or result in a material effect on Company or its assets,
and (ii) has not and will not materially impair the ability of Company to
perform its obligations under this Agreement and under the Other Sellers
Documents. Except as set forth in Disclosure Schedule 4.09, no consent of any
third party is required under any Contract as a result of or in connection with,
and the enforceability of any Contract will not be affected in any manner by the
execution, delivery and performance of this Agreement or any of the Other
Sellers Documents or the consummation of the transactions contemplated thereby.
(d) Company has no outstanding power of attorney relating to the
Business.
4.10 Labor Disagreements. In connection with the operation of the Business
--------------------
of Company or any other business previously operated by Company, (i) Company is
not engaged in any unfair labor practice; (ii) Company has not been notified of
any unfair labor practice charge or complaint against Company pending and, to
the knowledge of Sellers, no such charge or complaint is threatened before the
National Labor Relations Board, any state labor relations board or any court or
tribunal; (iii) except as set forth on Disclosure Schedule 4.10, Company has not
been notified of any charge or claim filed at or with the Equal Employment
Opportunity Commission, any state agency having similar jurisdiction or any
court or tribunal, actually pending and, to the knowledge of Sellers, no such
charge or claim is threatened against Company in connection with the operation
of the Business of Company; (iv) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending against or affecting
Company and, to the knowledge of Sellers, none is or has been threatened; (v)
Company has not been notified of any grievance which might have a material
effect on the conduct of the operations of the Business of Company; (vi)
Company has no labor contracts or collective bargaining agreements with respect
to any Company Personnel; (vii) no labor organization or group of employees of
Company has made a demand for recognition or certification, and, to the Sellers'
knowledge, there are no representation or certification proceedings or petitions
seeking a representation proceeding presently pending or threatened in writing
to be brought or filed with the National Labor Relations Board or any other
labor relations tribunal or authority, and (viii) Company has not been notified
of any organizing activities involving Company pending with any labor
organization or group of employees of Company.
4.11 Employee Benefit Information.
------------------------------
(i) Except as set forth on Disclosure Schedule 4.11(i), Company does
not maintain, is not required to contribute to and has no liabilities with
respect to any Employee Benefit Plans and no Company Personnel or dependent of
such Company Personnel is entitled to any benefits except as provided for by the
provisions of such Employee Benefit Plans or by applicable law.
(ii) Sellers have provided Purchaser with (a) copies of all Employee
Benefit Plans or in the case of any unwritten plan, a written description
thereof, (b) copies of any annual, financial or actuarial reports and Internal
Revenue Service determination letters relating to such Employee Benefit Plans
and (c) copies of the most recent summary plan descriptions (whether or not
required to be furnished under ERISA) and all material employee communications
relating to such Employee Benefit Plans and distributed to Company Personnel.
(iii) Except as set forth on Disclosure Schedule 4.11(iii), the events
contemplated by this Agreement (either alone or together with any other event)
will not (a) entitle any Company Personnel to severance pay, unemployment
compensation, or other similar payments under any Employee Benefit Plan or law,
(b) accelerate the time of payment or vesting or increase the amount of benefits
due under any Employee Benefit Plan or compensation to any Company Personnel,
(c) result in any payments (including parachute payments) under any Employee
Benefit Plan or law, becoming due to any Company Personnel, or (d) terminate or
modify or give a third party a right to terminate or modify the provisions or
terms of any Employee Benefit Plan.
(iv) The Acme Data Systems, Inc. Employee Savings Plan (the "401(k)
Plan") is qualified under Sections 401(a) and 401(k) of the Code and the related
trust is exempt from Tax under Section 501(a) of the Code and Company has no
other employees' savings plans qualified under Section 401(a) or any other
Section of the Code. The Internal Revenue Service has issued a determination
letter that the prototype plan to which the 401(k) Plan relates is so qualified
and nothing, to Seller's knowledge, has occurred since the date of such letter
to cause the letter to be no longer valid or effective assuming the plan is
amended on a timely basis to comply with changes to the Code, or other
legislative, regulatory or administrative requirements subject to the remedial
amendment period applicable to such Act. All contributions due with respect to
the periods ending on or before the Closing Date to the 401(k) Plan have been
timely made, and a pro rata portion of the contributions (including matching
contributions) for the plan year in which the Closing Date occurs shall have
been made on or prior to the Closing Date for the period ending on the Closing
Date. The Acme Data Systems, Inc. Cafeteria Plan (the "Cafeteria Plan")
satisfies all the applicable provisions of Section 125 of the Code.
(v) Neither Company nor any entity that is or was at any time treated
as a single employer with Company under Section 414(b), (c), (m) or (o) of the
Code has at any time (a) maintained, contributed to or been required to
contribute to any plan under which more than one employer makes contributions
(within the meaning of Section 4064(a) of ERISA) or any plan that is a
multi-employer plan as defined in Section 3(37) of ERISA, (b) incurred or
expects to incur any liability to the Pension Benefit Guaranty Corporation or
otherwise under Title IV or ERISA (other than the payment of premiums none of
which are overdue) or (c) incurred or expects to incur liability in connection
with an "accumulated funding deficiency" within the meaning of Section 412 of
the Code whether or not waived.
(vi) Company has, in the conduct of the affairs of the Business of
Company, complied in all material respects with all applicable laws, rules and
regulations relating to the employment of labor, including those relating to
wages, hours, terms and conditions of employment, collective bargaining and the
payment of social security and similar Taxes.
(vii) Company has not and prior to the Closing Date will not have
suffered a "plant closing" or "mass layoff" within the meaning of the Worker
Adjustment and Retraining Notification Act ("WARN").
(viii) To Seller's knowledge, the Company has complied in all material
respects with the Consolidated Omnibus Budget Reconciliation Act of 1984.
4.12 Burdensome Obligations. Except for agreements described in the
-----------------------
Disclosure Statement Exhibit 4.12, Company is not a party to any so-called
requirements or similar type of contract limiting its freedom or latitude in the
purchase of its inventory, equipment or other items. Company is not subject to
or bound by any contract or other obligation whatsoever which materially
adversely affects its business, properties or prospects, except as expressly
disclosed in this Agreement.
4.13 Lawful Operations. To the best of Sellers' knowledge, the businesses
------------------
conducted and properties owned or leased by Company conform with all Applicable
Laws and all permits and licenses, if any, that are required to enable Company
to operate its Business have been obtained.
4.14 Legal Proceedings; Claims. Except as set forth in the Disclosure
---------------------------
Schedule 4.14, there are no decrees or order of any regulatory agency, court or
public authority materially affecting the operations of Company, and Company is
not a party to any litigation or other judicial or administrative proceedings.
Except as set forth in Disclosure Schedule 4.14, to Sellers' knowledge, neither
Company nor any Seller is a party to any litigation or other judicial,
administrative or other proceeding pending or known by Sellers to be threatened
which would affect Company's or Sellers' ability to perform this Agreement or
would materially affect the assets or operations of Company; and, to the best
of Sellers' knowledge there are no claims in existence or threatened against
Company or any of its properties which may result in litigation. There are no
known existing violations of any Federal, State, local or foreign laws or
regulations which might materially affect the properties, assets, business,
financial condition or corporate status of Company; and Company is not in
default with respect to any order or decree of any court or administrative
regulatory agency.
4.15 Taxes.
-----
A. Company has:
(i) Except as set forth in Disclosure Schedule 4.16, prepared in
accordance with reasonable interpretations of all Applicable Laws, and timely
filed all Tax Returns required to be filed or sent by it with respect to any
Taxes; copies of all Company federal and state income Tax Returns since January
1, 1994 have been provided to Purchaser;
(ii) timely paid all Taxes that are shown as due and payable on
said Tax Returns;
(iii) established on its books and records reserves that are
adequate for the payment of all Taxes not yet due and payable;
(iv) complied with all Applicable Laws, rules and regulations
relating to the payment and withholding of Taxes and have timely and properly
withheld from employee wages and paid over to the proper Governmental
Authorities all amounts required to be so withheld and paid over under all
Applicable Laws. There are no liens for Taxes upon the assets of Company except
for Liens for Taxes not yet due. Company is not a party to any agreement
providing for the allocation, sharing or indemnification of Taxes;
(v) that, except as reflected or reserved against in the Balance
Sheet of Company as of June 30, 1999, Company as of such date had no deferred
tax liabilities of any nature and Sellers represent and warrant that they do not
know nor do they have any reasonable grounds to know of any basis for any
deferred tax liability in any amount not fully reflected or reserved against in
the Balance Sheet as of June 30, 1999;
(vi) that all deductions taken on all the Company's tax returns
have been properly deducted by Company pursuant to pertinent provisions of the
Internal Revenue Code.
To Sellers' knowledge, Company is not currently under audit by any
Governmental Authority for any Taxes and has not extended the statute of
limitations relating to the filing of a Tax Return or the payment of any Taxes.
X. Xxxxxxx represent that:
(i) there has been no consent filed with the Internal Revenue
Service under Section 341(f) of the Code; and
(ii) Each Seller shall be responsible for his or its federal,
state and local income taxes relating to or arising from his or its ownership of
Company Shares.
4.16 Environmental Compliance.
-------------------------
(i) To Seller's knowledge, Company is not in violation, or alleged to
be in violation, of any Environmental Laws which would have a material effect on
the Business,
(ii) Company has not received a notice, complaint, order, directive,
claim or citation from any third party, including without limitation any
federal, state or local governmental authority, (A) that Company has been
identified by the Unites States Environmental Protection Agency ("EPA") as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 CFR Part 000 Xxxxxxxx X, or the CERCLA Information
System; (B) that any Hazardous Materials which Company has generated, stored,
transported or disposed of has been released at any site at which a federal,
state or local agency has conducted or has ordered that any person conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law or has named Company as a potentially responsible party; or
(C) that Company is or shall be named party to any claim, action, cause of
action, complaint, or legal or administrative proceeding (in each case,
contingent or otherwise) arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Materials.
(iii) To the knowledge of Sellers, (A) no portion of the property of
Company has been used for the handling, processing, storage or disposal of
Hazardous Materials except in compliance in all material respects with
applicable Environmental Laws; and no underground tank or other underground
storage receptacle containing or formerly containing any Hazardous Materials is
located on any portion of any of the properties currently or formerly owned,
operated or leased by Company or any of its Affiliates during Company's or any
of its Affiliate's ownership, operation or lease of the properties; (B) in the
course of any activities conducted by Company or operators of Company's
properties, no Hazardous Materials have been generated or are being used on the
property except in compliance in all material respects with applicable
Environmental Laws; (C) there have been no releases (i.e., any past or present
releasing, spilling, leaking, leaching, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping) or threatened releases
of Hazardous Materials on, upon, into or from the property currently or formerly
owned, operated or leased by Company or any of its Affiliates during or prior to
Company's or any of its Affiliate's ownership, operation or lease, which
releases would have a material effect on the value of any of the property or
adjacent properties or the environment; and (D) in addition any Hazardous
Materials, that have been generated or stored by Company or any of its
Affiliates on any of the currently or formerly owned, operated or leased
property of Company have been transported off site only by carriers having an
identification number issued by the EPA and treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required under
applicable Environmental Laws, which transporters and facilities have been and
are operating in material compliance with such permits and applicable
Environmental Laws or, if any transporter or facility has not been or is not in
material compliance, such failure would not have a material effect on Company or
any of its Affiliates.
(iv) Sellers have provided to Purchaser all environmentally related
audits, studies, reports, analyses (including soil and groundwater analysis),
and results of investigations that have been performed with respect to the
currently or previously owned, leased, or operated properties of Company or any
of its Affiliates, and that are in the possession of Company, any of its
Affiliates or Sellers.
(v) There is not now nor, to the knowledge of Sellers, have there been
located at any of the properties of Company, whether owned or leased asbestos
containing material or equipment containing polychlorinated biphenyls in
violation of any applicable Environmental Law.
(vi) Company currently holds, and at all times has held, all required
federal, state, and local permits, licenses, certificates and approvals
necessary to Company's Business ("Environmental Permits"). Company has not been
notified by any relevant Governmental Authority that any Environmental Permit
will be modified, suspended, canceled or revoked, or cannot be renewed in the
ordinary course of business, which modification, suspense, cancellation,
revocation or non-renewal could affect in any material way the manner in which
Company operates Company's Business.
4.17 Insurance. Company maintains policies of fire, extended coverage,
---------
liability and other forms of insurance covering its Business, properties and
assets in amounts and against such losses and risks as are generally maintained
for comparable businesses and properties, and valid policies for such insurance
will be outstanding and duly in force through and on the Closing Date. Attached
hereto as Disclosure Schedule 4.17 is a complete list of all insurance policies
owned by Company, indicating risks insured against, carrier, policy number,
amount of coverage, premiums and expiration dates.
4.18 Books and Records. The books of account of Company substantially
-------------------
reflect all its known material items of income and expense and all its known
material assets, liabilities and accruals. The corporate minute books of
Company are substantially complete as to the records of substantially all
substantial proceedings of incorporators, shareholders and directors, and there
are no substantial and material minutes or records of the proceedings of any of
said person not included therein. The share ledgers and share certificate books
contain a complete and accurate record of all issuances and transfers of shares
in Company.
4.19 Certain Interests. Except as set forth in Disclosure Schedule 4.19,
------------------
Sellers do not directly or indirectly own any interest in any corporation, firm
or enterprise engaged in a business competitive with Company, except (i) Company
Shares or (ii) any passive investment by Sellers in the stock of any publicly
held corporation which is not in excess of five percent of the issued and
outstanding capital stock of such corporation.
4.20 Officers and Directors; Certain Payments. Disclosure Schedule 4.20 is
-----------------------------------------
a true and complete list showing (a) the names of all officers and directors of
Company and the directorships and officerships in Company held by each; (b) the
names and address of each financial institution in which Company has an account,
safe deposit box or investment account, the names of all persons authorized to
draw thereon or to have access thereto, and the nature of such authorization;
and (c) the names of all persons holding tax or other powers of attorney from
Company and a summary statement of the terms thereof.
4.21 Commissions or Brokers Fees. Neither Company nor any Seller has
------------------------------
incurred any liability to any person for financial advice, finder's fees or
brokerage commission with respect to the transactions contemplated by this
Agreement, which liability may be asserted against Company, Purchaser or any
affiliate of Purchaser, except for Sellers' engagement of Growth Managers
Advisors, Inc., whose fee shall be paid by Sellers.
4.22 Assets Necessary to the Business. Company owns, leases, licenses, or
----------------------------------
has the right to use all assets and properties (tangible and intangible)
necessary to carry on its Business and operations as presently conducted. Such
assets and properties are all of the assets and properties necessary to carry on
the Business of Company as presently conducted and, except as set forth in
Disclosure Schedule 4.22, none of the Sellers (other than through their
ownership of stock in Company) nor any member of their respective families owns
or leases or has any interest in any assets or properties presently being used
to carry on the Business of Company.
4.23 Absence of Certain Business Practices. Neither Company, nor any
-----------------------------------------
officer, employee or agent of Company, nor any other Person acting on its
behalf, has, directly or indirectly, within the past five years given or agreed
to give any gift, bribe, rebate or kickback or otherwise provide any similar
benefit to any customer, supplier, governmental employee or any other Person who
is or may be in a position to help or hinder Company or the Business (or assist
Company in connection with any actual or proposed transaction relating to the
Business or any other business previously operated by Company) (i) which
subjected or might have subjected Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) which if not given in
the past, might have had a material effect on Company or its assets, (iii) which
if not continued in the future, might have a material effect on Company or its
assets or subject Company to suit or penalty in any private or governmental
litigation or proceeding, (iv) for any of the purposes described in Section
162(c) of the Code or (v) for the purpose of establishing or maintaining any
concealed fund or concealed bank account.
4.24 Transactions with Affiliates. Except as disclosed on Disclosure
------------------------------
Schedule 4.24, there is no lease, sublease, contract, agreement or other
arrangement of any kind whatsoever entered into by Company with any Seller or
with any Affiliate of any Seller, except such of the foregoing which may be
terminated at Closing by Purchaser without further liability. Prior to Closing,
all indebtedness owed by any Seller to Company shall be repaid.
4.25 Territorial Restrictions. Except as described in Disclosure Schedule
-------------------------
4.25, Company is not restricted by any written agreement or understanding with
any other Person (excluding Applicable Laws of Governmental Authorities) from
carrying on the Business anywhere in the world. Neither Purchaser nor any of
its affiliates will, as a result of its acquisition of Company Shares, become
restricted in carrying on the Business anywhere in the world as a result of any
Contract or other agreement to which Company is a party or by which it is bound.
4.26 Customers. Disclosure Schedule 4.26 includes a correct list of the
---------
twenty-five (25) largest customers for Company for each of the past two (2)
fiscal years and the amount of business done by Company with each such customer
for each year. None of the Sellers have any knowledge or information, and are
aware of any facts indicating that any of the customers will or intend to (a)
cease doing business with Company; (b) materially alter the amount of business
they are presently doing with Company; or (c) not do business with Company after
the Closing Date.
4.27 Suppliers. Disclosure Schedule 4.27 sets forth the names of and
---------
description of contractual arrangements (whether or not binding or in writing)
with the fifteen (15) largest suppliers of Company and any sole suppliers of
significant goods or services (other than electricity, gas, telephone or water)
to Company with respect to which practical alternative sources of supply are not
readily available on comparable terms and conditions. None of the Sellers have
any knowledge or information, or are aware of any facts indicating that any of
the suppliers of Company will or intend to (a) cease doing business with
Company; (b) materially alter the amount of business they are presently doing
with Company; or (c) not do business with Company after the Closing Date.
4.28 Product Liability. Except as set forth in Disclosure Schedule 4.28
------------------
and for warranties under Applicable Law,
(a) there are no warranties, express or implied, written or oral, with
respect to the products of the Business;
(b) to Seller's knowledge, there are no pending or threatened claims
with respect to any warranty; and
(c) Company does not have, and to the best knowledge of Sellers, will
not have, any liability, after the Closing, with respect to any such warranty,
whether known or unknown, absolute, accrued, contingent, or otherwise and
whether due or to become due.
4.29 Disclosure. No representation or warranty made by any Seller in this
----------
Agreement and no exhibit, certificate or documents furnished or to be furnished
by any Seller pursuant hereto contains or will contain any known untrue
statement of a material fact or omits or will omit any known material fact
necessary in order to make the statements contained therein not misleading. The
Sellers have no knowledge of any factors materially affecting the future
prospects of Company's Business which have not been disclosed in this Agreement
and the Disclosure Schedule.
4.30 On October 15, 1998, Company redeemed all the issued and outstanding
shares of common stock of Company owned by Xxxxxxx Xxxxxx pursuant to the terms
and conditions contained in the Stock Redemption Agreement dated the 15th day of
October 15, 1998. In connection with the redemption of shares of common stock
from Xxxxxxx Xxxxxx, the Sellers represent and warrant that Company disclosed
all materials terms, conditions and considerations regarding Company that
occurred prior to the redemption. In making such disclosures to Xxxxxxx Xxxxxx
and in redeeming shares of common stock of Xxxxxxx Xxxxxx, the Sellers represent
and warrant that the Company did not make any untrue statement of a material
fact or omit to state a material fact necessary to make all such statements and
disclosures not misleading. Sellers shall indemnify and hold harmless
Purchaser, its successors and assigns, against all loss, liability, damage or
expenses (including, without limitation, interest, penalties and reasonable
attorneys' fees) arising from or in connection with any misrepresentation or
material omission or breach of the representations and warranties set forth in
this paragraph to the extent set forth in Article XI of this Agreement.
4.31 Any disclosure that is made by Sellers in the Disclosure Schedule under
the terms of this Agreement that are designated as pertaining to a particular
Section of the Disclosure Schedule shall constitute a disclosure for any other
Section of the Disclosure Schedule to the extent applicable.
ARTICLE V
5. Representations of Purchaser. Purchaser represents, warrants and
------------------------------
covenants to Sellers that the following statements are true as of the date
hereof and shall be true and correct as of the Closing Date as if made again at
and as of that time.
5.01 Organization. Purchaser is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware and has
all the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted.
5.02 Authority. This Agreement is a valid and binding obligation of
---------
Purchaser, enforceable in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally,
or by the availability of equitable remedies or the application of general
equitable principles. Except as set forth in Disclosure Schedule 5.02, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will:
(i) violate, or conflict with, or require any Consent under, or result
in a breach of any provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the properties or assets of
Purchaser under any of the terms, conditions or provisions of the Articles of
Incorporation or Bylaws of Purchaser or of any note, bond, mortgage, indenture,
deed of trust, license, agreement or other instrument or obligation to which
Purchaser is a party, or by which Purchaser or any of its properties or assets
may be bound or affected, or
(ii) violate any order, writ, injunction or decree applicable to
Purchaser or any of its properties or assets or, to the knowledge of Purchaser,
violate any statute, rule or regulation applicable to Purchaser or any of its
properties or assets; or
(iii) constitute a default or event that, with notice or lapse of time,
or both, would be a default, breach, or violation of any lease, license,
promissory note, conditional sales contract, commitment, indenture, mortgage,
deed of trust or other agreement, instrument or arrangement to which Purchaser
is a party or by which it is bound; or
(iv) constitute an event that would permit any party to terminate any
agreement or to accelerate the maturity of any indebtedness or other obligation
of Purchaser.
(v) no Consent by, notice to or registration with any Governmental
Authority is required on the part of Purchaser prior or subsequent to the
Closing Date in connection with the execution, delivery and performance by
Purchaser of this Agreement or the consummation of any of the transactions
contemplated hereby.
5.03 Commissions or Brokers' Fees. Purchaser has not incurred any liability
----------------------------
to any person for financial advice, finder's fees or brokerage commission with
respect to the transactions contemplated by this Agreement, which liability may
be asserted against any Seller or Company.
5.04 MD& A Update
--------------
Since April 5, 1999, there has been no material adverse change in the
results of operations or financial condition of Purchaser, nor are there any
demands, commitments, events or uncertainties known to Purchaser which could
affect Purchaser's liquidity, capital resources, or results or operations as of
the date hereof (other than those previously disclosed by Purchaser in its
periodic reports filed with the Securities and Exchange Commission) that would
require discussion in Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") prepared in accordance with Item
303 of Regulation S-K promulgated by the Securities and Exchange Commission if
such MD&A were required to be updated through the date hereof.
5.05 Shares.
------
The shares of Common Stock of Purchaser which are to be issued to Sellers
have been duly authorized and, when issued in accordance with the terms of this
Agreement, will be validly issued and outstanding, fully paid and nonassessable.
Purchaser common stock is properly listed and authorized for quotation on the
NASDAQ National Market System.
5.06 Accredited Investor.
--------------------
Purchaser hereby certifies the following:
(a) Purchaser has such knowledge and experience in financial and
business matters and has retained competent legal and accounting representation
to enable it to evaluate the merits and risks of its purchase of the Company
Shares and has determined to bear and afford the economic risks of such an
investment;
(b) Purchaser has had access to all material information concerning the
Company, its business and financial condition and all information necessary to
verify the accuracy of such information; and
(c) Purchaser has had the opportunity to ask questions of and receive
answers from the Company's directors and officers regarding the Company's
business and financial condition.
ARTICLE VI
6.01 Release by Sellers. Each Seller, as of the Closing Date, shall release
------------------
and discharge Company from all actions, claims or demands of every kind and
nature which any of the Sellers have or may have against Company whether based
upon contract or otherwise, arising before the execution of this Agreement.
Nothing contained herein shall constitute a release of any rights of the Sellers
arising under this Agreement, of any claims under any Employee Benefit Plans
currently maintained by Company, or with respect to anything which may occur
after the Closing Date.
ARTICLE VII
7.01 Covenants Not to Compete. As inducement for and in consideration of
---------------------------
Purchaser entering into this Agreement, the Sellers shall each enter into a
non-competition agreement. Such non-competition agreements are set forth in
Exhibits E and E-1 attached hereto and made a part hereof.
ARTICLE VIII
8.01 Employment Agreement. Upon the Closing Date, Company shall enter into
---------------------
an Employment Agreements with X. Xxxxxxxxx. A copy of said Employment Agreement
is attached hereto and made a part hereof as Exhibit F.
ARTICLE IX
9.1 Covenants of Sellers.
----------------------
9.01.1 Further Actions.
----------------
Sellers will, as promptly as practicable, file or supply, or cause to be
filed or supplied, all applications, notifications and information required to
be filed or supplied by them or Company pursuant to Applicable Law in connection
with this Agreement, the Other Sellers Documents and the consummation of the
other transactions contemplated hereby.
9.01.2 Further Assurances. Following the Closing, Sellers shall, and shall
-------------------
cause each of their Affiliates and Company to, from time to time, execute and
deliver such additional instruments, documents, conveyances or assurances and
take such other actions as shall be necessary, or otherwise reasonably requested
by Purchaser, to confirm and assure the rights and obligations provided for in
this Agreement and in the Other Sellers Documents and render effective the
consummation of the transactions contemplated thereby. Without limiting the
generality of the foregoing, the parties specifically contemplate closing the
transactions contemplated herein prior to the time that full compliance by
Sellers with the conditions precedent set forth in Section 12.01(2) will be
practicable. As a result, notwithstanding the Closing, this Section 9.01.4
shall require prompt delivery thereafter by Sellers of the consents, instruments
and agreements called for herein, including in Section 12.01(2).
9.01.3 Liability for Transfer Taxes. Sellers shall be responsible for the
-------------------------------
timely payment of, and shall indemnify and hold harmless Purchaser and their
Affiliates against, all sales, income, use, value added, documentary, stamp, and
any other taxes and fees attributable or arising out of the sale of the Company
Shares by Sellers to Purchaser. Sellers represent to Purchaser that there will
be no tax liability to Company arising out of the sale of the Company Shares.
ARTICLE X
10.01 Covenants of Purchaser.
------------------------
10.01.1 Further Actions.
----------------
Purchaser will, as promptly as practicable, file or supply, or cause to be
filed or supplied, all applications, notifications and information required to
be filed or supplied by it pursuant to applicable law in connection with this
Agreement, the Other Sellers Documents and the consummation of the other
transactions contemplated hereby.
10.01.2 Tax Elections. Purchaser will not file any election under Section
--------------
338 of the Code with respect to this Agreement or the transactions contemplated
herein.
10.01.3 Further Assurances. Following the Closing, Purchaser shall, and
-------------------
shall cause each of its Affiliates and Company to, from time to time, execute
and deliver such additional instruments, documents, conveyances or assurances
and take such other actions as shall be necessary, or otherwise reasonably
requested by Sellers, to confirm and assure the rights and obligations provided
for in this Agreement and in the Other Sellers Documents and render effective
the consummation of the transactions contemplated thereby. Without limiting the
generality of the foregoing, the parties specifically contemplate closing the
transactions contemplated herein prior to the time that compliance by Purchaser
with the conditions precedent set forth in Section 13.02(7) relating to the
releases of any of the Sellers of their guaranties of any of the Line of Credit
Indebtedness will be practicable. As a result, notwithstanding the Closing,
this Section 10.01.4 shall require prompt delivery thereafter by Purchaser of
the instruments and agreements called for herein, including that contained in
Section 13.02(7).
ARTICLE XI
11.01 Survival of Representations and Warranties. The Parties acknowledge
--------------------------------------------
and agree that all the representations, covenants, warranties and agreements
contained in this Agreement or in any agreement, instrument, exhibit,
certificate, schedule or other document delivered in connection herewith, shall
survive the Closing and shall be binding upon the party giving such
representation, covenant, warranty or agreement and shall be fully enforceable
to the extent provided for in Sections 11.04 and 11.05 hereof, at law or in
equity, for the period beginning on the date of Closing and ending three (3)
years there-after, except for the representations, warranties and agreements
designated and identified in Section 4.01, 4.02, 4.03, 4.05, 4.08 through
4.08.7, 4.15, 4.16, 5.01 and 5.02, which shall survive the Closing and shall
terminate in accordance with the statutes of limitation governing written
contracts and Exhibits E and E-1 and F, which shall terminate as provided
therein.
11.02 Reliance Upon and Enforcement of Warranties and Agreements of Sellers.
---------------------------------------------------------------------
Each Seller hereby agrees that, notwithstanding any right of Purchaser to fully
investigate the affairs of Company, and notwithstanding knowledge of facts
determined or determinable by Purchaser pursuant to such investigation or right
of investigation, Purchaser has the right to rely fully upon the
representations, covenants, warranties and agreements of each Seller contained
in this Agreement and upon the accuracy of any document, schedule, certificate
or exhibit given or delivered to Purchaser pursuant to the provisions of this
Agreement.
11.03 Reliance Upon and Enforcement of Representations, Warranties and
----------------------------------------------------------------------
Agreements of Purchaser. Purchaser hereby agrees that, notwithstanding any
--------------------
right of Sellers to fully investigate the affairs of Purchaser and
notwithstanding knowledge of facts determined or determinable by Sellers
pursuant to such investigation or right of investigation, Sellers have the right
to rely fully upon the representations, covenants, warranties and agreements of
Purchaser contained in this Agreement and upon the accuracy of any document,
certificate or exhibit given or delivered to Sellers pursuant to the provisions
of this Agreement.
11.04 Indemnification by Sellers. Each Seller, jointly and severally, shall
--------------------------
indemnify Purchaser against and hold it harmless from any Losses resulting from
or arising out of any inaccuracy in or breach of any representation, warranty,
covenant or obligation made or incurred by any Seller herein or in any other
agreement, instrument or document delivered by any Seller pursuant to the terms
of this Agreement. Subject to the limitations in Section 11.10 hereof, any
amounts to which Purchaser, its successors or assigns, is entitled to
indemnification pursuant to the provisions of this Section shall be offset
against the amounts payable to Sellers under the Notes (including proceeding
against Sellers for any amounts that may have been previously paid to Sellers
under the Notes). Provided, however, the offset in any one year may not exceed
the aggregate amount of principal and interest due on said applicable
subordinated promissory notes for said year and then against any amounts payable
to Sellers under Section 2.03.
11.05 Indemnification by Purchaser. Purchaser agrees to defend, indemnify
------------------------------
and hold harmless the Sellers from, against and in respect of any and all Losses
resulting from or arising out of an inaccuracy in or other breach of any
representation, warranty, covenant, or obligation made or incurred by Purchaser
herein or in any other agreement, instrument or document delivered by Purchaser
pursuant to the terms of this Agreement.
11.06 Notification of and Participation in Claims.
------------------------------------------------
(a) No claim for indemnification shall arise until notice thereof is
given to the party from whom indemnity is sought (the "Indemnifying Party").
Such notice shall be sent to the Indemnifying Party within ten (10) days after
the party asserting such right to indemnity (the "Party to be Indemnified") has
received notification of such claim, but failure to notify the Indemnifying
Party shall in no event prejudice the rights of the Party to be Indemnified
under this Agreement, unless the Indemnifying Party shall be prejudiced by such
failure and then only to the extent of such prejudice. In the event that any
legal proceeding shall be instituted or any claim or demand is asserted by any
third party in respect of which Sellers on the one hand, or Purchaser on the
other hand, may have an obligation to indemnify the other, the Party to be
Indemnified shall give or cause to be given to the Indemnifying Party written
notice thereof and the Indemnifying Party shall have the right, at its option
and expense, to participate in the defense of such proceeding, claim or demand,
but not to control the defense, negotiation or settlement thereof, which control
shall at all times rest with the Party to be Indemnified, unless the
Indemnifying Party irrevocably acknowledges in writing full and complete
responsibility for and agrees to provide indemnification of the Party to be
Indemnified, in which case such Indemnifying Party may assume such control
through counsel of its choice and at its expense. In the event the Indemnifying
Party assumes control of the defense, the Indemnifying Party shall not be
responsible for the legal costs and expenses of the Party to be Indemnified in
the event the Party to be Indemnified decides to join in such defense. The
Parties agree to cooperate fully with each other in connection with the
mitigation, defense, negotiation or settlement of any such third party legal
proceeding, claim or demand.
(b) If the Party to be Indemnified is also the party controlling the
defense, negotiation or settlement of any matter, and if the Party to be
Indemnified determines to compromise the matter, the Party to be Indemnified
shall immediately advise the Indemnifying Party of the terms and conditions of
the proposed settlement. If the Indemnifying Party agrees to accept such
proposal, the Party to be Indemnified shall proceed to conclude the settlement
of the matter, and the Indemnifying Party shall immediately indemnify the Party
to be Indemnified pursuant to the terms of Sections 11.04 and 11.05 hereunder,
subject to the limitations set forth elsewhere in this Section 11. If the
Indemnifying Party does not agree within fourteen (14) days to accept the
settlement (said 14-day period to begin on the first business day following the
date such party receives a complete copy of the settlement proposal), the
Indemnifying Party shall immediately assume control of the defense, negotia-tion
or settlement thereof, at that Indemnifying Party's expense. Thereafter, the
Party to be Indemnified shall be indemnified in the entirety for any liability
arising out of the ultimate defenses, negotiation or settlement of such matter.
(c) If the Indemnifying Party is the party controlling the defense,
negotiation or settlement of any matter, and the Indemnifying Party determines
to compromise the matter, the Indemnifying Party shall immediately advise the
Party to be Indemnified of the terms and conditions of the proposed settlement
and irrevocably acknowledge in writing full and complete responsi-bility for,
and agree to provide, indemnification of the Party to be Indemnified. If the
Party to be Indemnified agrees to accept such proposal, the Indemnifying Party
shall proceed to conclude the settlement of the matter and immediately indemnify
the Party to be Indemnified pursuant to the terms of Sections 11.04 or 11.05
hereunder. If the Party to be Indemnified does not agree within fourteen (14)
days to accept the settlement (said 14-day period to begin on the first business
day following the date such Party receives a complete copy of the settlement
proposal), the Party to be Indemnified shall immediately assume control of the
defense, negotiation or settlement thereof, at the Party to be Indemnified's
expense. If the final amount paid to resolve the claim is less than the amount
of the original proposed settlement made by the Indemnifying Party, then the
Party to be Indemnified shall receive such indemnification pursuant to Sections
11.04 or 11.05 hereof, including any and all expenses incurred by the Party to
be Indemnified incurred in connection with the defense, negotiation or
settlement of such matter. If the amount finally paid to resolve the claim is
equal to or greater than the amount of the original proposed settlement proposed
by the Indemnifying Party, then the Indemnifying Party shall provide
indemnification pursuant to Sections 11.04 and 11.05 for the amount of the
original settlement proposal submitted by the Indemnifying Party, and the Party
to be Indemnified shall be responsible for all amounts in excess of the original
settlement proposal submitted by the Indemnifying Party and all costs and
expenses incurred by the Party to be Indemnified in connection with such
defense, negotiation or settlement.
11.07 Provisions of General Application. With respect to any right of
------------------------------------
indemnification arising under this Agreement, the following provisions shall
apply:
(a) Procedures. The Party to be Indemnified and the Indemnifying Party
----------
agree to cooperate in the defense of any third party claim or action subject to
this Section 11, to permit the cooperation and participation of the other
parties in any such claim or action, and to promptly notify the other parties of
the occurrence of any indemnified event or any material developments or amounts
due respecting any indemnification event.
(b) No Implications. Neither the rights of any Party to
----------------
indemnification from another Party nor the obligations of any Party to indemnify
another Party, under this Agreement, shall in any way imply or create, and each
Party specifically disclaims, any responsibility whatsoever by such Party for
any other Party's liabilities to any other person or entity or Governmental
Authority.
(c) Insurance. Prior to enforcing any claim for indemnification
---------
against the Indemnifying Party under this Agreement, the Party to be Indemnified
shall administratively file in good faith with any insurers all forms and
submissions required by applicable policies for the proceeds or other benefits
of insurance coverage, if any, applicable to the claim or event from which such
indemnification right arose. In the event that insurance proceeds are paid to
the Party to be Indemnified respecting an event to which an indemnification
right applies hereunder, such indemnification right shall apply only to the
extent that the amount of damages indemnified against exceeds such insurance
proceeds actually paid to the Party to be Indemnified; provided however, that
collection by judicial or legal process of such insurance proceeds shall not be
a condition precedent to asserting or collecting such indemnification claims
under this Agreement. If the Indemnifying Party incurs indemnity costs or pays
indemnity damages under this Agreement, and the Party to be Indemnified
subsequently receives insurance proceeds for the same claim or event, then the
Party to be Indemnified shall refund such indemnity costs or damage payments to
the Indemnifying Party from such insurance proceeds to the extent that the Party
to be Indemnified has received benefits from both sources (i.e., payments of
indemnity damages from the Indemnifying Party and such insurance proceeds) in
excess of the amount of indemnifiable damages incurred by or asserted against
the Party to be Indemnified.
(d) Mitigation. The Party to be Indemnified shall use its good faith
----------
efforts to mitigate any claim or loss by any third party hereunder and the
Indemnifying Party shall be entitled to participate in and coordinate such
mitigation with the Party to be Indemnified.
11.08 Assignment and Accounting for Benefits. To the extent that the
------------------------------------------
Indemnifying Party shall have actually paid indemnity damages to or on behalf of
the Party to be Indemnified, the Party to be Indemnified shall make a
non-exclusive assignment (to the extent permitted under applicable law) to the
Indemnifying Party (as their interest may appear) of the remedies, rights and
claims, if any, of the Party to be Indemnified against any and all third parties
for the same liability, including, but not limited to, remedies, rights and
claims against (i) liability insurers and other insurance companies, and (ii)
any other person which has indemnified the Party to be Indemnified for such
liability. The parties shall cooperate reasonably in the pursuit of any such
remedies, rights and claims.
11.09 Exclusive Remedy. Anything contained in this Agreement or the Other
-----------------
Seller Documents to the contrary notwithstanding, the indemnification rights set
forth in this Section 11, all of which are subject to the terms, limitations,
and restrictions of this Section 11, shall be the exclusive remedy after Closing
against the Sellers and/or Purchaser for monetary damages sustained as a result
of a breach of a representation, warranty, covenant, or agreement under this
Agreement. Such limitations set forth in this Section 11 shall not impair the
rights of any of the parties: (a) to seek non-monetary equitable relief,
including (without limitation) specific performance or injunctive relief to
redress any default or breach of this Agreement; or (b) to seek enforcement,
collection, damages, or such non-monetary equitable relief to redress any
subsequent default or breach of any employment agreement, non-competition
agreement, transfer document, assumption, consent, or agreement to be delivered
at Closing hereunder. In connection with the seeking of any non-monetary
equitable relief, each of the Parties acknowledges and agrees that the other
Parties hereto would be damaged irreparably in the event that any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties hereto agrees
that the other Party hereto shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any competent court having
jurisdiction over the Parties.
11.10 Limitation on Liability.
-------------------------
(a) Notwithstanding anything contained herein to the contrary, no
claims for indemnification shall be made by Purchaser against the Sellers until
such time as all claims hereunder exceed Seven Thousand Five Hundred Dollars
($7,500.00) and then indemnification shall be made only to the extent such claim
or claims exceed Seven Thousand Five Hundred Dollars ($7,500.00) in the
aggregate. In addition, notwithstanding anything contained herein to the
contrary, the maximum aggregate liability that the Sellers may be required to
pay to Purchaser under this Agreement shall be limited to an amount equal to Two
Million Six Thousand Two Hundred Dollars ($2,006,200) plus the total of all
amounts paid to Sellers by Purchaser pursuant to Section 2.03 of this Agreement.
(b) Notwithstanding anything contained herein to the contrary, in the
event that Company would discover any assets that are currently not reflected on
its financial statements and of which any of the Sellers have no knowledge of
such assets' existence, Purchaser shall not have any right to make any claim
against Sellers for any tax liability that may arise out of the recordation of
said item(s) into the financial statements of Company, provided, that the fair
market value of such unrecorded items is in excess of the tax liability. It
being the intent of the parties that Seller shall not incur an obligation
hereunder to the extent that Company and/or Purchaser receives a current
economic benefit that is in excess of the tax liability or other liability that
arises as a result of the recognition of said item(s) for financial and tax
reporting purposes.
ARTICLE XII
/EXPRESS CONDITIONS
-------------------
12.01 Notwithstanding anything herein to the contrary, Purchaser's
obligations hereunder are subject to the following conditions:
(a) Purchaser shall have obtained from its primary lender, Deutsche
Financial Services Company, consent to the transaction.
(b) Approval of the Board of Directors of Purchaser;
(c) Purchaser has completed its due diligence investiga-tion of the
books and records and business prospects of Company to its satisfaction.
The contingencies set forth in this Section shall have all been met, or
rejected in writing, by Purchaser and Sellers where applicable, no later than
August ___, 1999.
ARTICLE XIII
13. Conditions Precedent to the Obligations of Each Party. The obligations
------------------------------------------------------
of the Parties to consummate the transactions contemplated hereby shall be
subject to the fulfillment, on or prior to the Closing Date, of the following
conditions:
1. No Injunction, Etc. The consummation of the transaction
---------------------
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction, decree or
judgment of any Court or other Governmental Authority. No Court or other
Governmental Authority shall have determined any Applicable Law to make illegal
the consummation of the transactions contemplated hereby or by the other Sellers
Documents, and no proceeding with respect to the application of any such
Applicable Law to such effect shall be pending.
13.01 Conditions Precedent to Purchaser's Obligations. The obligations of
-------------------------------------------------
Purchaser to consummate the transactions contemplated hereby shall be subject to
the fulfillment (or waiver by Purchaser, in its sole discretion) on or prior to
the Closing Date of the following additional conditions, which Sellers agree to
use reasonable good faith efforts to cause to be fulfilled:
1. Representations, Performance. The representations and warranties of
----------------------------
Sellers contained in this Agreement and in the Other Sellers Documents (i) shall
be true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material respects
(in the case of any representation or warranty without any materiality
qualification) at and as of the date hereof, and (ii) shall be repeated and
shall be true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material respects
(in the case of any representation or warranty without any materiality
qualification) on and as of the Closing Date with the same effect as though made
on and as of the Closing Date. Sellers shall have duly performed and complied
in all material respects with all agreements and conditions required by this
Agreement and each of the Other Sellers Documents to be performed or complied
with by them prior to or on the Closing Date. Sellers shall have delivered to
Purchaser a duly authorized, properly executed certificate, dated the Closing
Date to the foregoing effect.
2. Consents. Sellers have obtained all Consents necessary to
--------
consummate the transactions contemplated hereby, unless the failure to obtain
any such Consent would not materially adversely affect the Company or its
assets.
3. No Material Adverse Effect. No event, occurrence, fact, condition,
---------------------------
change, development or effect shall have occurred, exist or come to exist since
December 31, 1998 that, individually or in the aggregate, would have a material
adverse effect on the Company or its assets.
4. Transfer Documents and Other Miscellaneous Matters. Sellers have
-----------------------------------------------------
delivered to Purchaser, at or before the Closing, the following documents, all
of which shall be in form and substance reasonably acceptable to Purchaser and
its counsel:
(i) A certificate or certificates for all of the Company Shares.
Such certificate(s) shall be in form for transfer, duly endorsed in blank by
Sellers, or with appropriate duly executed stock transfer powers attached;
(ii) Opinion letter of Harris, McClellan, Xxxxx & Xxx, PPL,
counsel for Sellers, addressed to Purchaser and dated the Closing Date;
iii) All minute books, stock certificates and transfer books,
contracts, policies of insurance, tax returns, records of every kind and nature
and all other documents and writings belonging or relating to the Company and
its corporate organization, business and assets;
(iv) Certificates, dated as of the most recent practicable date,
of the Secretary of State of Ohio as to the good standing of Company;
(v) The Disclosure Schedule;
(vi) Copies of the Certificate of Incorporation and By-Laws of
Company, certified as true and correct by an officer of Company;
(vii) Such resignations of officers and directors of Company as
Purchaser may request; and
(viii) Such other documents which Purchaser reasonably deems
necessary to effectuate this Agreement.
5. Certain Employment Agreement. X. Xxxxxxxxx shall have entered into
-----------------------------
the Employment Agreement described in Section 8.01.
6. Covenant Not to Compete Agreements. Sellers shall have entered into
----------------------------------
the Covenant Not to Compete Agreements in the form set forth in Exhibits E and
E-1.
7. Subordination Agreement. Sellers shall have entered into the
------------------------
Subordination Agreement set forth in Exhibit "B".
8. Seller shall have executed the Investor's Representation Agreement
set forth in Exhibit C.
9. Cancellation and Termination of Employment Agreements. Company and
------------------------------------------------------
Xxxxxx X. Xxxxxxxxx, Xxxxxx Xxxx and Xxxxxxx Xxxxxx shall enter into an
agreement in form and content satisfactory to Purchaser's counsel canceling and
terminating certain Employment Agreements between such Parties and the Company.
10. Current Lease Agreement. The current Lease Agreement between
-------------------------
Company and Advanced Marketing Group shall be terminated at Closing and
Purchaser and Advanced Marketing Group shall enter into a new Lease Agreement at
a fair market rental rate to be determined by an appraisal to be obtained by the
parties.
11. Sellers shall have executed any and all documentation necessary to
cancel any existing buy-sell agreements between the shareholders along with any
and all obligations of Company under an insurance trust agreement dated the 16th
day of May, 1994.
13.02 Conditions and Obligations of Sellers. The obligation of Sellers to
---------------------------------------
consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by the Sellers in their sole discretion), on or prior to
the Closing Date, of the following additional conditions, which Purchaser agrees
to use reasonable good faith efforts to cause to be fulfilled:
1. Representations, Performance. The representations and warranties of
----------------------------
Purchaser contained in the Agreement or in the Other Sellers Documents (i) shall
be true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material respects
(in the case of any representation or warranty without any materiality
qualification) at and as of the date hereof, and (ii) shall be repeated and
shall be true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material respects
(in the case of any representation or warranty without any materiality
qualification) on and as of the Closing Date with the same effect as though made
at and as of such date. Purchaser has duly performed and complied in all
material respects with all agreements and conditions required by this Agreement
and each of the Other Sellers Documents to be performed or complied with by it
prior to or on the Closing Date. Purchaser shall have delivered to Sellers a
certificate dated the Closing Date and signed by its duly authorized officer, to
the foregoing effect.
2. Consents and Approvals. Purchaser have obtained all Consents
------------------------
necessary to consummate the transactions contemplated hereby.
3. Consideration and Other Miscellaneous Deliveries. Purchaser shall
--------------------------------------------------
have delivered to Sellers at or before the Closing, the following documents, all
of which shall be in form and substance acceptable to Sellers and its counsel:
(i) A certified or cashiers checks or wire transfer for the
aggregate amount to be paid to each Seller at the Closing pursuant to Section
2.04(a) hereof;
(ii) The Notes as set forth in Section 2.04(b);
(iii) The common stock of Purchaser is delivered to each Seller
pursuant to Section 2.04(c) hereof;
(iv) Certified copies of the corporation actions taken by
Purchaser authorizing the execution, delivery and performance of this Agreement;
(v) A Certificate of Good Standing for Purchaser from the
Secretary of State of Delaware dated no earlier than forty-five (45) days prior
to the Closing Date;
(vi) Opinion letter of Xxxxxxxxx & Dreidame Co., L.P.A., counsel
for Purchaser, addressed to Sellers and dated the Closing Date.
4. Certain Employment Agreements. X. Xxxxxxxxx shall have entered into
-----------------------------
the employment agreement described in Section 8.01.
5. Covenant Not to Compete Agreements. Sellers have entered into the
------------------------------------
Covenant Not to Compete Agreements set forth in Exhibits D and D-1.
6. Subordination Agreement. Sellers shall have entered into the
------------------------
Subordination Agreement set forth in Exhibit B.
7. Pay-off Line of Credit Indebtedness. Simultaneous with the closing,
-----------------------------------
Company pays off, or Purchaser assumes, the Line of Credit Indebtedness and
incident thereto procure the releases of any of the Sellers of their guarantees
of any of the Line of Credit Indebtedness.
8. Other Seller Documents. Purchaser shall have entered into each of
------------------------
the Other Seller Documents to which it is a party.
ARTICLE XIV
14.01 Closing. The Closing of the sale and purchase of the Company Shares
-------
(the "Closing") shall take place on August 20, 1999 at the offices of Xxxxxxxxx
& Dreidame, Cincinnati, Ohio, or at such other time and/or place as the parties
may mutually agree upon. The Closing shall be deemed effective as of the day of
Closing. The day on which the Closing actually occurs is herein sometimes
referred to as the Closing Date.
ARTICLE XV
15. General Provisions.
-------------------
15.01 Further Documents. The Parties will, upon request at any time before
------------------
or after Closing, execute, deliver and/or furnish all such documents and
instruments, and do or cause to be done all such acts and things, as may be
reasonably necessary to carry out the purpose and intent of this Agreement.
15.02 Publicity. Neither the Sellers, nor Company, nor Purchaser shall make
---------
any public announcements concerning this transaction without the prior written
consent of the other Parties hereto. Nothing herein contained shall restrict
Company or Purchaser from communicating with its employees concerning this
transaction. Each Party shall keep such communication confidential, and shall
use its best efforts to prevent its respective employees from disseminating such
information to the public. Nothing herein contained shall prohibit any
disclosure that is required by law or a court of competent jurisdiction.
15.03 Expenses. Except to the extent otherwise specifically provided
--------
herein, Purchaser will bear and pay all of its expenses incident to the
transactions contemplated by this Agreement which are incurred by Purchaser or
its representatives and Sellers shall bear and pay all of the expenses incident
to the transactions contemplated by this Agreement which were incurred by
Sellers or their representatives.
15.04 Notices. All notices and other communications required by this
-------
Agreement shall be in writing and shall be deemed given if delivered by hand or
mailed by registered mail or certified mail, return receipt requested, to the
appropriate party at the following address (or at such other address for a party
as shall be specified by notice pursuant hereto):
(a) If to Purchaser, to:
Pomeroy Computer Resources, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxx X. Xxxxx III, Esq.
Xxxxxxxxx & Dreidame Co., L.P.A.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000-0000
(b) If to Sellers, to:
Xxxxxx X. Xxxxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxx 00000
With a copy to:
Xxxxx X. Xxxxxx, Esq.
Harris, McClellan, Xxxxx & Xxx
00 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxx 00000-0000
15.05 Binding Effect. Except as may be otherwise provided herein, this
---------------
Agreement and all provisions hereof shall be binding upon and shall inure to the
benefit of the Parties hereto and their respective heirs, legal representatives,
successors and assigns. Except as otherwise provided in this Agreement, no
Party shall assign its rights or obligations hereunder prior to Closing without
the prior written consent of the other Party.
15.06 Headings. The headings in this Agreement are intended solely for the
--------
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
15.07 Schedules and Exhibits. Schedules and exhibits referred to in this
------------------------
Agreement constitute and integral part of this Agreement as if fully rewritten
herein. Any disclosure made on any Schedule or Exhibit delivered pursuant
hereto shall be deemed to have been disclosed for purposes of any other Schedule
or Exhibit required hereby.
15.08 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which
--
constitute together one and the same document.
15.09 Governing Law. This Agreement shall be construed in accordance with
--------------
and governed by the laws of the State of Ohio.
15.10 Severability. If any provision of this Agreement shall be held
------------
unenforceable, invalid or void to any extent for any reason, such provision
shall remain in force and effect to the maximum extent allowable, if any, and
the enforceability or validity of the remaining provisions of this Agreement
shall not be affected thereby.
15.11 Waivers, Remedies Accumulated. No waiver of any right or option
-------------------------------
hereunder by any Party shall operate as a waiver of any other right or option,
for the same right or option with respect to any subsequent occasion for its
exercise, or of any right to damages. No waiver by any Party or any breach of
this Agreement or of any representation or warranty contained herein shall be
held to constitute a waiver of any other breach or a continuation of the same
breach. All remedies provided in this Agreement are in addition to all of the
remedies provided by law. No waiver of any of the provisions of this Agreement
shall be valid and enforceable unless such waiver is in writing and signed by
the party granting the same.
15.12 Entire Agreement. This Agreement and the agreements, instruments and
-----------------
other documents to be delivered hereunder constitute the entire understand and
agreement concerning the subject matter hereof. All negotiations between the
Parties hereto are merged into this Agreement, and there are no representations,
warranties, covenants, understanding or agreements, oral or otherwise, in
relation thereto between the Parties other than those incorporated herein and to
be delivered hereunder. Except as otherwise expressed or contemplated by this
Agreement, nothing expressed or implied in this Agreement is intended or shall
be construed so as to grant or refer on any person, firm or corporation other
than the Parties hereto any rights or privileges hereunder. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by the Parties hereto.
15.13 Business Records. Sellers shall be permitted to retain copies of such
----------------
books and records relating to the business of Company as related to the
accounting and tax matters of the business, and have access to all original
copies of records so delivered to Purchaser at reasonable times, for any
reasonable business purpose, for a period of six years after the Closing Date.
15.14 Construction of Agreement. In the event this Agreement is interpreted
-------------------------
by any court of competent jurisdiction, no Party shall be deemed the drafter of
this Agreement and such court of law shall not construe this Agreement or any
provision thereof against any Party as the drafter thereof.
15.15 Knowledge. Whenever in this Agreement the terms "knowledge" or "best
---------
knowledge" are used with respect to any Party, it shall mean the actual
knowledge of the Party, or the officers and directors of the Party or Company,
as applicable.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PURCHASER:
XXXXXXX COMPUTER RESOURCES, INC.
By: _______________________________
SELLERS:
___________________________________
XXXXXX X. XXXXXXXXX
___________________________________
XXXXXX XXXX
