Exhibit 10.7
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is entered into this
11th day of October, 1996, by, between and among XXXXXXX COMPUTER RESOURCES,
INC., a Delaware corporation, (the "Purchaser"), COMMUNICATIONS TECHNOLOGY,
INC., d/b/a DILAN, a North Carolina corporation (the "Seller"), and XXXXXX
XXXXXX (the "Shareholder").
W I T N E S S E T H :
WHEREAS, Seller is a full service provider of micro computer products and
computer integration and networking services to large and medium size
commercial, health care, governmental and educational customers (the
"Business"); and
WHEREAS, Shareholder owns all the issued and outstanding stock, and is the sole
director of, Seller; and
WHEREAS, Purchaser desires to purchase substantially all the assets of the
Seller used in the Business and assume certain of the liabilities of Seller in
connection with the Business, and Seller desires to sell substantially all of
such assets, subject to such liabilities, but only (i) upon the terms and
subject to the conditions set forth in this Agreement, (ii) the representations,
warranties, covenants, indemnifications, assurances and undertakings of Seller
and Shareholder and of Purchaser contained in this Agreement and (iii) the
agreements of Seller and Shareholder to refrain from competition with Purchaser
for five (5) years from the closing of this transaction.
NOW, THEREFORE, in consideration of the above premises and the mutual promises,
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
1.
DEFINITIONS
1.1 AFFILIATE. "Affiliate" shall mean (i) in the case of an entity, any
person (the term "person" for these purposes means an individual,
partnership, firm, corporation or other entity) who or which, directly or
indirectly, through one or more intermediaries, controls or is controlled
by, or is under common control with, any specified person (the term
"control" for these purposes means the ability, whether by ownership of
shares or other equity interests, by contract or otherwise, to elect a
majority of the directors of a corporation, to select the managing or
general partner of a partnership, or otherwise to select, or have the
power to remove and then select, a majority of those persons exercising
governing authority over an entity) or (ii) in
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the case of an individual, such individual's spouse, descendants or
parents or a trust primarily for the benefit of such individual or any of
the foregoing.
1.2 ASSUMED LIABILITIES. The "Assumed Liabilities" are the liabilities of
the Seller assumed or paid at Closing by the Purchaser pursuant to this
Agreement.
1.3 BALANCE SHEET. The "Balance Sheet" is the audited balance sheet of the
Seller as of March 31, 1996, included as part of the Financial
Statements.
1.4 CLOSING. The "Closing" shall be the consummation of the transactions
contemplated under this Asset Purchase Agreement.
1.5 CLOSING DATE. The "Closing Date" shall be as of 2:00 PM, E.S.T., October
11, 1996.
1.6 CODE. The "Code" is the Internal Revenue Code of 1986, as amended, 26
U.S.C. Section 1 ET SEQ.
1.7 COURT. A "Court" is any federal, state, municipal, domestic, foreign or
other governmental tribunal or an arbitrator or person with similar power
or authority.
1.8 DISCLOSURE SCHEDULE. The "Disclosure Schedule" is the Disclosure
Schedule dated the date of this Agreement and delivered by Seller to
Purchaser.
1.9 ENCUMBRANCE. An "Encumbrance" is any security interest, lien, charge,
encumbrance or restriction, whether imposed by agreement, understanding,
law or otherwise, on any Purchased Asset (as defined herein).
1.10 EXCLUDED ASSETS. An "Excluded Asset" is any asset set forth on Exhibit C
attached hereto.
1.11 FINANCIAL STATEMENTS. The "Financial Statements" are the audited
financial statements of the Seller for the year ended March 31, 1995 and
March 31, 1996 and the unaudited interim balance sheets as of July 31,
1996 and September 30, 1996, including any and all notes thereto.
1.12 GOVERNMENTAL ENTITY. A "Governmental Entity" is any Court or any
federal, state, municipal, domestic, foreign or other administrative
agency, department, commission, board, bureau or other governmental
authority or instrumentality.
1.13 PRO FORMA BALANCE SHEET. The "Pro Forma Balance Sheet" is the unaudited
balance sheet adjusted for Excluded Assets per Section 2.3 and Exhibit C
and Excluded Liabilities of the Seller per Section 3.3 as of September
30, 1996, included as part of the Financial Statements.
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1.14 PURCHASE PRICE. The "Purchase Price" is the total consideration paid by
Purchaser to Seller for the Purchased Assets as set forth in Section 4.1.
1.15 PURCHASED ASSETS. The "Purchased Assets" are the assets of the Seller,
used in the Business, acquired by the Purchaser pursuant to the terms of
this Agreement. Any asset of Seller which is not an Excluded Asset shall
be a Purchased Asset.
1.16 TAXES. "Taxes" means all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts,
excise, property, sales, use, license, payroll and franchise taxes,
imposed by any Governmental Entity and includes any estimated tax,
interest and penalties or additions to tax.
1.17 TAX RETURN. A "Tax Return" is a report, return or other information
required to be supplied to a Governmental Entity in connection with Taxes
including, where permitted or required, combined or consolidated returns
for any group of entities that includes the Seller.
2.
TERMS
2.1 AGREEMENT.
Seller agrees to sell and convey to Purchaser the Purchased Assets as
hereinafter set forth in Section 2.2. Purchaser agrees to purchase said
assets. The agreements of Purchaser and Seller are expressly conditioned
upon the terms, conditions, covenants, representations and warranties as
hereinafter set forth.
2.2 ASSETS TO BE SOLD AND PURCHASED.
At the Closing of this Agreement, Purchaser shall purchase and Seller
shall sell all the Assets of the Seller, used in the Business, except for
the Excluded Assets. The Purchased Assets shall include, but not be
limited to:
(a) The tangible personal property and assets of the Seller of every
kind and description, real, personal or mixed, wherever located,
used in the Business of Seller, including without limitation, all of
such assets as reflected on the Pro Forma Balance Sheet (excepting
those assets disposed of, and including those assets acquired, in
the ordinary course of business since the date of the Pro Forma
Balance Sheet);
(b) All intangible assets of the Seller which are used in the Business
of Seller, including without limitation, all purchase orders,
contract rights and agreements, work in process, customer lists,
supplier arrangements, patents, trademarks and service marks
(including the goodwill associated with the marks), office supplies,
computer programs, claims of the Seller, the right to
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use the corporate and trade name of or used by the Seller, or any
derivative thereof, as all or part of a corporate or trade name;
(c) All investment securities, cash and cash equivalents (except
investment securities, cash and cash equivalents that are Excluded
Assets as defined in Section 2.3) and customer notes receivable
relating to the Business;
(d) All inventory of the Business which shall be valued on a moving
average basis at the lower of cost of acquisition, less trade and
cash discounts, or market;
(e) All accounts receivable and vendor receivables relating to the
Business;
(f) All prepaid expenses applicable to the Business;
(g) All of Seller's service, routing, installation and networking
contracts;
(h) All vendor rebates, spiff money, retainage amounts under any
contracts, and any other customer deposits;
(i) The distribution agreements and authorizations of Seller;
(j) All base artwork, photo materials, plates (if owned by Seller),
separations and other materials that are used by Seller for printing
brochures and promotional materials;
(k) The entire right, title, benefit and interest of Seller, now
existing or hereafter arising, in or to all indemnities, guarantees,
warranties, claims and choses of action of Seller against other
parties with respect to the Purchased Assets, including by way of
example and not limitation, any rights under insurance policies and
other rights thereunder;
(l) The assignment of any telephone numbers used in the Business;
(m) The covenant not to compete agreements with Seller and Shareholder
set forth on Exhibits "B" and "B-1" attached hereto and made a part
hereof;
(n) All rights of Seller in the JacqCad Master Computer Program, all
updates thereto and all rights of Seller under all license and
distributor agreements entered into by Seller regarding such
software; and
(o) All other fees, assets, property, business and going concern value,
and rights of Seller (including the rights under covenants or
agreements not to disclose confidential information or not to
compete, if any), and all other assets of Seller not specifically
excluded pursuant to the terms of this Agreement.
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2.3 EXCLUDED ASSETS.
The Excluded Assets are set forth on Exhibit "C" hereto.
2.4 LEASE AGREEMENTS.
(a) Seller is the lessee under certain lease agreements providing for
payments of more than $5,000.00 per year covering the following real
and personal properties:
(i) Lease by and between Damler Associates, as Landlord, and
Seller, as Tenant, dated July 21, 1994, as amended on
December 8, 1994, covering the real property located at Xxx
Xx. 0, Xxxxxxxxxxxx Xxxxxxxx Xxxxxx, Xxxx-Xxx Xxxxxxxx,
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000, as amended by a First
Amendment to Lease which provides for an additional 1,750
square feet adjacent to the Lot No. 2 space;
(ii) Lease by and between Century Center, Inc. and Seller dated
May 3, 1994 for approximately 3,564 square feet known as
Spaces F and G (556-F/G Arborhill Road) Century Center,
Xxxxxxxxxxxx, Xxxxx Xxxxxxxx 00000;
(iii) Lease by and between BCI Property Company No. 44, a North
Carolina general partnership, and Seller dated April 27,
1994 for approximately 3,310 square feet of space in the
Bissell Business Park located at 4321 - E. Xxxxxx Xxxxxx
Blvd., Charlotte, North Carolina, which Lease was assigned
by BCI Property Company No. 44 to Highwoods/Xxxxxxxx Limited
Partnership as of July 13, 1995;
(iv) Sublease Agreement by and between Wordsmith Executive
Suites, Inc., as Sublessor and Seller, as Sublessee, dated
February 14, 1996, covering the real property located at
Wordsmith Offices and Secretarial Services, Inc., Xxxxx 000,
00 Xxxxx Xxxx, Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx
00000;
(v) Sublease Agreement by and between Seller, as Sublessor, and
Allstates Air Cargo, Inc., as Sublessee, dated March 15,
1995, as amended by a First Amendment to Sublease for a
portion of the premises located in the Xxxx-Xxx Xxxxxxxx,
Xxxxx 00-X, Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
(vi) Lease agreement dated April 4, 1995 for an initial term of
two (2) years with Advanta Business Services for one (1)
Netframe 8540 cluster server, two (2) 4.2 gb fast/wide live
drives and one (1) 64 mb
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memory kit. Monthly rent under such lease is $2,626.00 with
an option to purchase at the end of the lease for $1.00;
(vii) Lease Agreement with Colonial Pacific Leasing as assignee of
U.S. Commercial Leasing, Inc. regarding three (3) Xylogics
Remote Annex 6100 T-1 Access Servers and one (1) Xylogics
Remote Annex 6100 T-1 Server;
(viii) Lease agreement with General Electric Capital for one (1)
Mita DC-5690 copier and one (1) AS7-10 finisher;
(ix) Lease Agreement with Chrysler Credit Corporation relating to
a 1994 Chrysler LHS;
(x) Lease agreement with First Citizens Bank relating to a 1994
Ford Explorer; and
(xi) Lease Agreement with First Citizens Bank relating to a 1993
Ford Explorer.
(b) Seller is the lessor under certain master lease agreements for
equipment providing for payments of more than $5,000.00 per year as
follows:
(i) Loomcraft;
(ii) W. Xxxxx Xxxxxxx;
(iii) We Love Country;
(iv) Xxxxxx Xxxx Wylde, Inc.;
(v) Nosara Design Corporation;
(vi) Xxxxxx, Inc.;
(vii) Mastercraft;
(viii) EBGB;
(ix) Xxxxx of Maine;
(x) Ty-MAWR;
(xi) Masterweave;
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(xii) Perfect Home;
(xiii) R & D Weaving;
(xiv) Prime Vision;
(xv) Sales Vision; and
(xvi) Mastercraft/Doblin.
(c) Seller is the Lessor under certain operating lease agreements for
equipment providing for payments of more than $5,000.00 per year as
follows:
(i) Access, Inc.;
(ii) Sales Vision;
(iii) American Emergencies Vehicle, Inc.; and
(iv) Xxxxxx Xxxxxx, Inc.
(d) Seller is the Lessor under certain lease agreements for equipment
with Henredon, Inc. and Blueridge Community Action, Inc., which
leases have been pledged as security to Xxxx Commercial Credit
Corporation by Seller, including all the equipment and other
property which is the subject matter of such lease and including all
returned and repossessed equipment with all additions and
attachments together with any and all proceeds of whatever nature
arising therefrom.
At the Closing, Seller and Purchaser shall execute necessary
documentation for the assignment of these leases and all of Seller's
right and interest thereunder to Purchaser and, at the Closing, Seller
shall assign all its rights and interests in said leases to Purchaser.
Purchaser agrees to indemnify and hold Seller harmless from any liability
with respect to the aforementioned leases occurring after the Closing
Date. To the extent that the assignment of any lease shall require the
consent of other parties thereto, this Agreement shall not constitute an
assignment thereof and Seller shall obtain any such necessary consents or
assignments by the Closing.
2.5 INSTRUMENTS OF TRANSFER.
At Closing, the Seller will deliver to the Purchaser such bills of sale,
endorsements, assignments and other good and sufficient instruments of
transfer and assignment as shall be effective to vest in Purchaser good
and marketable title and interest in
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and to the Purchased Assets. At or after the Closing, and without
further consideration, the Seller will execute and deliver to Purchaser
such further instruments of conveyance and transfer and take such other
action as Purchaser may reasonably request in order to more effectively
convey and transfer to Purchaser any of the Purchased Assets or for
aiding and assisting and collecting and reducing to possession and
exercising rights with respect thereto. Seller and the Shareholder agree
to use their best efforts to obtain and deliver to Purchaser such
consents, approvals, assurances and statements from third parties as
Purchaser may reasonably require in a form satisfactory to Purchaser. In
addition to the foregoing, Seller will deliver to Purchaser the originals
or copies of all of the Seller's books, records and other data relating
to the Purchased Assets; and simultaneously with such delivery, the
Seller shall take all such acts as may be necessary to put Purchaser in
actual possession, and operating control of the Purchased Assets. Seller
shall cooperate with Purchaser to permit Purchaser, if possible, to enjoy
Seller's ratings and benefits under workmen's compensation laws and
unemployment compensation laws to the extent permitted by such laws.
2.6 INSTRUMENTS GIVING CERTAIN ADDITIONAL POWERS AND RIGHTS.
At the Closing, Seller shall, by appropriate instrument, constitute and
appoint Purchaser, its successors and assigns, the true and lawful
attorney of Seller with full power of substitution, in the name of
Purchaser, or the name of Seller, on behalf of and for the benefit of
Purchaser, to collect all receivables and other items being transferred
and assigned to Purchaser as provided herein, to endorse, without
recourse, any and all checks in the name of Seller the proceeds of which
Purchaser is entitled to hereunder, to institute and prosecute, in the
name of Seller or otherwise, all proceedings which Purchaser may deem
proper in order to collect, assert or enforce any claim, right or title
of any kind in or to the Purchased Assets, to defend and compromise any
and all actions, suits and proceedings in respect of any of the Purchased
Assets, and to do all such acts and things in relation thereto as
Purchaser may deem advisable. Seller agrees that the foregoing powers
are coupled with an interest and shall be irrevocable by Seller, directly
or indirectly, by the dissolution of Seller or in any manner or for any
reason. Seller further agrees that Purchaser shall retain for its own
account any amounts collected pursuant to the foregoing powers, and
Seller shall pay or transfer to Purchaser, if and when received, any
amounts which shall be received by Seller after the Closing in respect of
any receivables or other assets, properties, rights or business to be
transferred and assigned to Purchaser as provided herein. Seller further
agrees that, at any time or from time to time after the Closing, it will,
upon the request of Purchaser and at Seller's expense, do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged
or delivered, all such further reasonable acts, assignments, transfers,
powers of attorney or assurances as may be required in order to further
transfer, assign, grant, assure and confirm to Purchaser, or to aid and
assist in the collection or granting of possession by Purchaser of, any
of the
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Purchased Assets, or to vest in Purchaser good and marketable title to
the Purchased Assets.
3.
ASSIGNMENT OF LIABILITIES
3.1 LIABILITIES TO BE PAID OFF AT CLOSING OR ASSUMED.
A. At the Closing, Purchaser shall pay off (and secure the release of
Seller and Shareholder from any personal guaranty or liability with
respect to such obligations), the following:
(i) Seller's obligation to Bank of Granite under a certain
Installment Fixed Asset Note in the original principal amount of
Five Hundred Thousand Dollars ($500,000.00) dated January 24,
1996, the outstanding amount of which is $435,402.85 Dollars on
the Closing Date, which is collateralized by a security interest
in the Seller's fixed assets;
(ii) Seller's obligation to Branch Banking and Trust Company under a
certain Commercial Note in the original principal amount of
$360,000 Dollars, the outstanding amount of which is One Hundred
Fifty-Seven Thousand Two Hundred Eight and 49/100 Dollars
($157,208.49) on the Closing Date which is collateralized by a
security interest in certain of the Seller's property.
The Assumed Liabilities to be paid off as set forth in Sections 3.1
A (i) through (ii), as may have been incurred, increased or
decreased since the Balance Sheet to the Pro Forma Balance Sheet for
operations in the ordinary course of business or any other
transaction permitted by this Agreement, and subject to the
satisfaction of the minimum net worth requirements set forth in
Section 4.1(c) as of September 30, 1996. Any incurrence of or
increase or decrease in the amount of the Assumed Liabilities set
forth above for the period October 1, 1996 through October 11, 1996
shall be subject to the provisions of Section 10.1.
B. At the Closing, Purchaser shall assume and pay or discharge when due
(and secure the release of Seller and all Shareholders from any and
all personal liability or guarantee with respect to such
obligations), the following:
(i) All of the trade accounts payable, accrued expenses, capital
lease and unearned service contracts of the Seller relating to
the Business incurred in the ordinary course of business
consistent with Seller's prior practices and of the same or
similar nature as such items as set forth on the Disclosure
Schedule, the Pro Forma Balance Sheet, the Financial Statements,
or any notes thereto; and
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*$998,183.47 assumed
trade payables
$2,292,474.60 paid off
(ii) Seller's obligation to Deutsche Financial Services Corporation,
the outstanding amount of which is_______ * Dollars
($__________) on the Closing Date and which is secured by a
security interest in the Seller's receivables and inventory.
The Assumed Liabilities to be assumed as set forth in Sections
3.1.B.(i) through (iv) as may be incurred, increased or decreased
since the Balance Sheet to the Pro Forma Balance Sheet for
operations in the ordinary course of business or any other
transaction permitted by this Agreement, and subject to the
satisfaction of the minimum net worth requirements set forth in
Section 4.1(c) as of September 30, 1996. Any incurrence of or
increase or decrease in the amount of the liabilities set forth
above to be assumed at Closing for the period October 1, 1996
through October 11, 1996 shall be subject to the provisions of
Section 10.1.
C. It is the parties' intent that Purchaser shall pay off at Closing,
or assume and pay off or discharge when due, all obligations of
Seller set forth in Sections 3.1 A and B above for which the
Shareholder has personal liability and Purchaser agrees to use its
best efforts to secure the release of the Shareholder from such
personal guaranty after Closing if such releases are not secured
prior to Closing.
D. Purchaser shall indemnify and hold harmless Seller from any
liability emanating from a guarantee of any liability owed to Xxxx
Commercial Credit Corporation emanating out of leases with Henredon,
Inc. and Blue Ridge Community Action, Inc., which were assigned to
Xxxx Commercial Credit Corporation by Seller, to the extent and in
the amount not to exceed the value of said leases and the underlying
equipment as reflected on the Pro Forma Balance Sheet.
3.2 EXECUTORY CONTRACTS.
At the Closing, Purchaser shall assume Seller's obligations and pay or
discharge when due the following:
(i) All obligations, to the extent they are assumable, under
contracts, leases or agreements of the Seller as set forth on the
Disclosure Schedule under Section 7.8; and
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(ii) All future Assumed Liabilities for merchandise in transit F.O.B.
shipping point which has not been received by Seller as of the
Closing and for which no xxxx has been issued by the supplier at
such time.
3.3 EXCLUDED LIABILITIES.
Notwithstanding anything in this Agreement to the contrary, Purchaser
shall not assume or become responsible for any claim, liability or
obligation of any nature whatsoever, whether known or unknown, accrued,
absolute, contingent or otherwise (a "Liability") of Seller except the
Assumed Liabilities. Without limiting the generality of the foregoing,
the following are included among the Liabilities of Seller which
Purchaser shall not assume or become responsible for (unless specifically
included on the list of Assumed Liabilities):
(i) all Liabilities for local, state, federal, sales, franchise, and
income and other taxes whether deferred or which have accrued or
may accrue or become due and payable by Seller either prior to,
on or after the Closing Date, including, without limitation, all
taxes and fees of a similar nature arising from the sale and
transfer of the Purchased Assets to Purchaser;
(ii) all Liabilities and obligations to directors, officers, employees
or agents of Seller, including, without limitation, all
Liabilities and obligations for wages, salary, bonuses,
commissions, vacation (except to the extent Purchaser agrees to
assume such item) or severance pay, profit sharing or pension
benefits, and all Liabilities and obligations arising under any
bonus, commission, salary or compensation plans or arrangements,
whether accruing prior to, or on or after the Closing Date;
(iii) all Liabilities and obligations with respect to unemployment
compensation claims and workmen's compensation claims and claims
for race, age and sex discrimination or sexual harassment or for
unfair labor practice which occurred prior to the Closing Date
and for which any claim may be asserted by any of the Seller's
employees, prior to, on or after the Closing Date;
(iv) all Liabilities of Seller to third parties for personal injury or
damage to property based on or arising from occurrences,
circumstances or events, or exposure to conditions, existing or
occurring prior to the Closing Date and for which any claim may
be asserted by any third party prior to, on or after the Closing
Date;
(v) all Liabilities and obligations of Seller arising under or by
virtue of environmental laws whether accruing prior to, on or
after the Closing Date;
(vi) all Liabilities of Seller, including any costs of attorneys' fees
incurred in connection therewith, for litigation, claims, demands
or governmental
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proceedings arising from occurrences, circumstances or events,
or exposure to conditions occurring or existing prior to, on or
after the Closing Date;
(vii) all Liabilities based on any theory of liability or product
warranty with respect to any product manufactured or sold prior
to the Closing Date and for which any claim may be asserted by
any third party, prior to, on or after the Closing Date;
(viii) all attorneys' fees, accountants or auditors' fees, and other
costs and expenses incurred by Seller and/or the Shareholders in
connection with the negotiation, preparation and performance of
this Agreement or any of the transactions contemplated hereby;
(ix) All Liabilities of the Seller in connection with the Excluded
Assets, including but not limited to the mortgage loan for the
real estate being retained by Seller as set forth on Exhibit C;
(x) Any Liabilities of Seller with respect to any options, warrants,
agreements or convertible or other rights to acquire shares of
its capital stock of any class;
(xi) Any Liabilities of Seller incurred incident to the redemption of
all the issued and outstanding shares of common stock of Seller
owned by Xxxx Xxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxxxxx Xxxxx,
Xxxxxxx Xxxxx, Xxxxxx Xxxx, Xx. and Xxxxxx Xxxxxxxx;
(xii) Any Liability to Bay Networks, Inc. under the Settlement
Agreement dated February 15, 1996;
(xiii) all other debts, Liabilities, obligations, contracts and
commitments (whether direct or indirect, known or unknown,
contingent or fixed, liquidated or unliquidated, and whether now
or hereinafter arising) arising out of or relating to the
ownership, operation or use of any of the Purchased Assets on or
prior to the Closing Date or the conduct of the Business of
Seller whether prior to, on or after the Closing Date, except
only for the liabilities and obligations to be performed by
Purchaser constituting the Assumed Liabilities; and
(xiv) Any Liability relating to the Merisel Datago/Vantage Agreement,
which agreement is not being assigned.
It is the intent of the parties that upon Closing, all employees of
Seller will be terminated by it and Purchaser will extend offers of
employment to such individuals at such time.
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4.
CONSIDERATION FOR PURCHASED ASSETS
4.1 PURCHASE PRICE.
Subject to the other terms of this Agreement, the Purchase Price for the
Purchased Assets shall be the sum of:
(a) Three Million Seven Hundred Forty-Two Thousand Four Hundred
Eighty-Three Dollars ($3,742,483.00); and
(b) The Assumed Liabilities assumed or paid off under Sections 3.1 A.
and/or 3.1 B.
The sum of the items contained in Sections 4.1(a) and (b) above shall be
either adjusted upward or downward by the amount determined under Section
4.1(c) and as further may be adjusted by the provisions of Section 4.1(d)
(c) Prior to the Closing, Seller shall prepare and deliver to Purchaser
the Pro Forma Balance Sheet which shall set forth the Purchased
Assets (including, for this purpose only, any Excess Cash) and the
Assumed Liabilities as of September 30, 1996. The Pro Forma
Balance Sheet shall be prepared using the same accounting methods,
policies, practices and procedures, with consistent
classifications, judgments and estimation methodologies as used in
the preparation of the March 31, 1996 balance sheet.
If the Net Assets Amount (as defined below) shown on the Pro Forma
Balance Sheet is less than $1,325,000.00, the Purchase Price shall
be decreased on a dollar for dollar basis for the difference. Any
such reduction shall be offset against the cash portion of the
Purchase Price as set forth in Section 4.2(a) below.
If the Net Assets Amount shown on the Pro Forma Balance Sheet
equals or exceeds $1,325,000.00, Seller shall be entitled to retain
cash, cash equivalents and investment securities, if any, up to the
amount of such excess (the "Excess Cash") and such Excess Cash
shall be an Excluded Asset.
The Net Assets Amount shall mean the total of the Purchased Assets
(including, for this purpose only, any Excess Cash) less the total
of the Assumed Liabilities, in each case as shown on the Pro Forma
Balance Sheet.
Purchaser shall review the Pro Forma Balance Sheet prior to Closing
and shall initially make any adjustments to the Purchase Price
based on such Pro
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Forma Balance Sheet. Not later than the date occurring forty-five
(45) days after Closing, Seller and Purchaser agree to determine
any adjustment to the Pro Forma Balance Sheet resulting from a test
of accounts to be performed by such date. Such test of accounts
shall include confirmation of Seller's inventory acquired hereunder
but not its value.
In the event that there is Excess Cash as of September 30, 1996,
Seller shall be entitled to distribute such Excess Cash prior to
Closing, and such distribution shall be deemed as having been
undertaken in the ordinary course of business.
In addition, Seller shall be entitled to be reimbursed by Purchaser
for all income or franchise taxes payable by Seller arising from
operation of the Business in the ordinary course during the period
from October 1, 1996 to the Closing Date, based on taxable income
for such period and utilizing an effective income tax rate of 40%.
Purchaser shall agree to reimburse Seller for such taxes, if any,
as determined by Seller, not later than 30 days after Closing. The
determination of the taxable income for such period shall be made
in accordance with Seller's internally-generated financial
statements consistent with prior periods. Such taxable income
shall not include any income attributable to the sale of the
Purchased Assets being effectuated hereunder.
(d) To the extent that the earnings before interest and taxes ("EBIT")
of Seller's business for the period April 1, 1996 through the
Closing Date and from the Closing Date to March 31, 1997, when such
business is operated as a division of Purchaser, exceeds One
Million One Hundred Twenty-Five Thousand ($1,125,000.00) Dollars,
the Purchase Price shall be increased by an amount equal to the
aggregate amount of EBIT in excess of $1,125,000.00 times 2. To
the extent that the EBIT of Seller's business for the period April
1, 1996 through the Closing Date and from the Closing Date to March
31, 1997, when such business is operated as Purchaser's DILAN
Division, is less than Nine Hundred Twenty-Five Thousand
($925,000.00) Dollars. The Purchase Price shall be decreased by an
amount equal to the difference between 925,000 and the total of
such EBIT times 2. In the event that the EBIT for the
computational period is greater than One Million Twenty-Five
Thousand ($1,025,000.00) Dollars but less than One Million One
Hundred Twenty-Five Thousand ($1,125,000.00) Dollars or in the
event such EBIT is less than $1,025,000.00 but greater than
$925,000.00, no increase or decrease to the Purchase Price shall be
made.
(i) For purposes of this Section, the term "earnings before
interest and taxes" ("EBIT") shall mean the EBIT of Seller
from April 1, 1996 to the Closing Date plus the EBIT of
Purchaser's DILAN division from the Closing Date to March
31, 1997. In making said determination, all
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gains or losses realized by Seller or Purchaser's DILAN
division on the sale or other disposition of its assets
(other than in the ordinary course of business) shall be
excluded; all refunds, returns or rebates which are made
during such period shall be subtracted along with all
accounts receivable that are written off during such period
in accordance with Purchaser's accounting system. For
purposes of determining Purchaser's DILAN division's EBIT
for the period form the Closing Date to March 31, 1997, no
overhead allocation of Purchaser's other operations will be
charged by Purchaser to such DILAN division. In addition,
no deduction shall be taken for any inventory purchased from
Seller that is subsequently written down by Purchaser. No
sale shall be made by Purchaser's DILAN division for below
cost of any inventory purchased hereunder without the
express written consent of Purchaser's home office. The
Purchaser's DILAN division's EBIT will be calculated on a
basis consistent with Seller's financial statements
determining EBIT for the period April 1, 1996 to the Closing
Date, using the same methodologies, judgments and estimates
employed by Seller in preparing such financial statements,
all in accordance with generally accepted accounting
principles.
Within forty-five (45) days of March 31, 1997, Purchaser
will deliver to Seller a copy of the report of EBIT prepared
by the Company's Certified Public Accountants for the
subject period along with any supporting documentation
reasonably requested by Seller. Within thirty (30) days
following delivery to Seller of such report, Seller shall
have the right to object in writing to the results contained
in such determination. If timely objection is not made by
the Seller to such determination, such determination shall
become final and binding for purposes of this Agreement. If
timely objection is made by Seller to Purchaser and Seller
and Purchaser are able to resolve their differences in
writing within thirty (30) days following the expiration of
the thirty (30) day period, then such determination shall
become final and binding as it regards to this Agreement.
If timely objection is made by Seller to Purchaser and
Seller and Purchaser are unable to resolve their differences
in writing within thirty (30) days following the expiration
of the thirty (30) 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
Seller. If Purchaser and Seller are unable to agree
promptly on an accounting firm to serve as the Arbitrator,
each shall select by no later than the thirtieth (30th) day
following the expiration of the sixty (60) day period, an
accounting firm, and the selected accounting firm shall be
instructed to select promptly another accounting firm, the
firm to serve as the Arbitrator. The Arbitrator shall
consider only the disputed matters pertaining to
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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 the Seller
and Purchaser. Expenses of the arbitration (including
reasonable attorney and accounting fees) shall be borne by
Seller, unless the arbitration panel determines that the
determination of EBIT is greater by Fifty Thousand
($50,000.00) Dollars or more than the determination made by
Company's accounting firm, in which case the expense of the
arbitration (including reasonable attorney and accounting
fees) shall be borne by Purchaser.
(ii) Any increase or decrease to the Purchase Price resulting
from any adjustments made under this Section 4.1(d) shall be
made by increasing or decreasing the promissory note
referenced in Section 4.2(b). If, prior to such adjustment,
Purchaser has made any interest payment to Seller under such
promissory note, the parties agree to adjust any prior
payments to equitably reflect either the increase or
decrease made to the Purchase Price as a result of any
adjustments contained in Section 4.1(d).
4.2 PAYMENT OF THE PURCHASE PRICE.
Subject to the conditions, covenants, representations and warranties
hereof, at Closing, Purchaser shall deliver:
(a) By wire transfer to Seller in the amount of Two Million Seven
Hundred Thousand Dollars ($2,700,000.00) less any deficiency in the
Net Asset Amount on the Pro Forma Balance Sheet as described in
Section 4.1(c) ($53,517.00). One Hundred Twenty-Five Thousand
($125,000.00) Dollars of such amount shall be held in an escrow
account with Seller's and Purchaser's counsel as escrow agents
pending the conclusion of the test of accounts to be performed
within forty-five (45) days of the closing as set forth in Section
4.1(c).
(b) The Purchaser's Subordinated Promissory Note in the principal
amount of One Million Ninety-Six Thousand Dollars ($1,096,000.00)
in the form attached hereto as Exhibit "D" (the "Note") as may be
adjusted by the provisions of Section 4.1(d). Such Note shall be
subordinate to Purchaser's lender pursuant to the terms of a
Subordination Agreement in the form attached hereto as Exhibit "E";
(c) The assumption or payment of the Assumed Liabilities assumed by
Purchaser pursuant to Sections 3.1 A. or B.
4.3 ALLOCATION OF PURCHASE PRICE.
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The Purchase Price to be paid to Seller hereunder, including Assumed
Liabilities assumed or paid by Seller pursuant to Section 3.1 A. or
Section 3.1 B., shall be allocated as set forth on Exhibit "F" attached
hereto. Seller, Shareholders and Purchaser agree that each shall act in
a manner consistent with such allocation in (a) filing Internal Revenue
Form 8594; and (b) in paying sales and other transfer taxes in connection
with the purchase and sale of assets pursuant to this Agreement. The
parties agree to enter into an amendment to Exhibit "F" upon the
finalization of the balance sheet of Seller as of the Closing Date and
the determination to be made under Section 4.1(d), as approved by
Purchaser, within thirty (30) days of the final determination of any
adjustments required by Section 4.1(d). The Purchase Price for the
Purchased Assets shall be allocated in the manner set forth on Exhibit
"F" attached hereto.
4.4 CERTAIN CLOSING EXPENSES.
Seller shall be liable for and shall pay all federal, state and local
sales taxes (if any), documentary stamp taxes, and all other duties, or
other like charges properly payable upon and in connection with the
conveyance and transfer of the Purchased Assets by Seller to Purchaser.
5.
EMPLOYMENT AGREEMENTS
5.1 EMPLOYMENT AGREEMENT OF SHAREHOLDERS.
At Closing, Purchaser shall enter into Employment Agreements with X.
Xxxxxx and Xxxxxxx Xxxxx. Copies of said Employment Agreements are
attached hereto and made a part hereof as Exhibits "G-1" and "G-2."
6.
LEASE AGREEMENT
6.1 LEASE AGREEMENT - 0000 00XX XXXXXX XX, XX, XXXXXXX, XXXXX XXXXXXXX REAL
ESTATE.
Seller is the owner of the real estate located at 0000 00xx Xxxxxx XX,
XX,. Xxxxxxx, Xxxxx Xxxxxxxx 00000, which real estate is an Excluded
Asset. As a condition to the Closing of this Agreement, Seller shall
have entered into a Lease Agreement with Purchaser in the form attached
hereto as Exhibit "H."
7.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE SHAREHOLDER
Except as set forth in the Disclosure Schedule attached hereto, Seller
and Shareholder, jointly and severally, represent and warrant to
Purchaser that the
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following statements are true and correct as of the date hereof and shall
remain true and correct as of the Closing as if made again at and as of
that time:
7.1 ORGANIZATION, GOOD STANDING, QUALIFICATION AND POWER OF SELLER.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina and has the
corporate power and authority to own, lease and operate the Purchased
Assets and to conduct the Business currently being conducted by it. The
Seller is duly qualified and validly existing in North Carolina and in
good standing in each of the other jurisdictions in which it is required
by the nature of its business or the ownership of its properties to so
qualify. Seller has no subsidiaries. The Disclosure Schedule correctly
lists, with respect to the Seller, each jurisdiction in which it is
qualified to do business as a foreign corporation.
7.2 CAPITALIZATION.
The authorized capitalization of the Seller consists solely of 400,000
shares of no par common stock, of which 136,000 shares representing one
hundred percent (100%) of the issued stock are currently owned in the
manner set forth in the second recital on page 1 of this Agreement, are
fully paid and nonassessable and have not been issued in violation of the
preemptive rights of any person. Seller is not obligated to issue or
acquire any of its securities, nor has it granted options or any similar
rights with respect to any of its securities, except for the options set
forth on Exhibit I, which options shall be cancelled prior to the Closing
of this transaction.
7.3 AUTHORITY TO MAKE AGREEMENT.
Seller and Shareholder have the full legal power and authority to enter
into, execute, deliver and perform their respective obligations under
this Agreement and each of the other agreements, instruments and other
instruments to be delivered incident hereto ("Other Seller Documents").
This Agreement and the Other Seller Documents have been duly and validly
executed and delivered by Seller and Shareholder, and are the legal and
binding obligation of each of them, enforceable in accordance with their
respective terms, subject to principles of equity, bankruptcy laws, and
laws affecting creditors' rights generally. Seller has taken all
necessary action (including action of its Board of Directors and
Shareholder) to authorize and approve the execution and delivery of this
Agreement and the Other Seller Documents, the performance of its
obligations thereunder and the consummation of the transactions
contemplated thereby.
7.4 EXISTING AGREEMENTS, GOVERNMENTAL APPROVALS AND PERMITS.
(a) The execution, delivery and performance of this Agreement and the
Other Seller Documents by Seller, the sale, transfer, conveyance,
assignment and delivery of the Purchased Assets to Purchaser as
contemplated in this
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Agreement, and the consummation of the other transactions
contemplated thereby: (i) do not violate any provisions of law,
statute, ordinance or regulation applicable to Seller, the
Shareholder or the Purchased Assets, (ii) (except for Seller's
secured creditors set forth in Section 3.1, whose consent shall be
obtained prior to Closing) will not conflict with, or result in the
breach or termination of any provision of, or constitute a default
under (in each case whether with or without the giving of notice or
the lapse of time or both) the Articles of Incorporation or Bylaws
of Seller or any indenture, mortgage, lease, deed of trust, or
other instrument, contract or agreement or any license, permit,
approval, authority, or any order, judgment, arbitration award, or
decree to which Seller or the Shareholder is a party or by which
Seller or the Shareholder or any of their assets and properties are
bound (including, without limitation, the Purchased Assets), and
(iii) will not result in the creation of any encumbrance upon any
of the properties, assets, or Business of Seller or of the
Shareholder. Neither Seller, nor the Shareholder, nor any of
their assets or properties (including, without limitation, the
Purchased Assets) is subject to any provision of any mortgage,
lease, contract, agreement, instrument, license, permit, approval,
authority, order, judgment, arbitration award or decree, or to any
law, rule, ordinance, or regulation, or any other restriction of
any kind or character, which would prevent Seller or the
Shareholder from entering into this Agreement or any of the Other
Seller Documents or from consummating the transactions contemplated
thereby.
(b) Neither Seller nor the Shareholder is a party to, subject to or
bound by any agreement, judgment, award, order, writ, injunction or
decree of any court, governmental body or arbitrator which would
prevent the use by Purchaser of the Purchased Assets in accordance
with present practices of Seller after the Closing Date or which,
by operation of law, or pursuant to its terms, would be breached,
terminate, lapse or be subject to termination or default under (in
each case whether with or without notice, the passage of time or
both) upon the consummation of the transactions contemplated in
this Agreement.
(c) No approval, authority or consent of, or filing by Seller with, or
notification to, any foreign, federal, state or local court,
authority or governmental or regulatory body or agency or any
person is necessary to authorize the execution and delivery of this
Agreement or the Other Seller Documents by Seller or the
Shareholder, the sale, transfer, conveyance, assignment and
delivery of the Purchased Assets to Purchaser, or the consummation
of the other transactions contemplated thereby, or to continue the
use and operation of the Purchased Assets by Purchaser after the
Closing Date.
7.5 FINANCIAL STATEMENTS.
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A. Copies of the Financial Statements are attached to the Disclosure
Schedule. Each of the Financial Statements are true and complete
in all material respects and were prepared in accordance with
generally accepted accounting principles (except for the unaudited
Balance Sheet and Pro Forma Balance Sheet of Seller which were
prepared as set forth in Section 1.11) applied on a consistent
basis throughout the periods indicated (except as noted on such
Financial Statements) and fairly present in all material respects
the financial position and condition of the Seller as of the
respective dates thereof and the results of its operation and
changes in financial position for the respective periods then
ended.
B. Except to the extent reflected, reserved against, or disclosed on
the Pro Forma Balance Sheet, the Financial Statements, or the
Disclosure Schedule, the Seller had, as of such date, no material
liabilities or obligations of any nature, whether accrued,
absolute, contingent, or otherwise, including without limitation,
unfunded pension or other retirement plan liabilities and tax
liabilities whether or not incurred in respect of or measured by
the Seller's income, for any period prior to the date of said
Financial Statements, or arising out of transactions entered into
or any set of facts existing prior thereto. Except to the extent
disclosed on the Disclosure Schedule, there exists no basis for the
assertion against Seller, as of the date of the Financial
Statements or the Pro Forma Balance Sheet, of any material
liability of any nature or in any amount not fully reflected,
reserved against, or disclosed in said Financial Statements or Pro
Forma Balance Sheet.
7.6 CUSTOMERS.
The Disclosure Schedule includes a correct list of the twenty-five (25)
largest customers of the Seller by sales in dollars for each of the past
two (2) years and the amount of business done by the Seller with each
such customer for each year. Assuming that Purchaser continues to
conduct the Business in the ordinary course consistent with Seller's
prior practices generally and specifically with respect to Seller's
current customers, Seller has no actual knowledge that any of the current
customers of Seller will or intend to (a) cease doing business with the
Seller; or (b) materially alter the amount of business they are presently
doing with the Seller; or (c) not do business with the Purchaser after
the Closing. For purposes of this Section 7.6, actual knowledge of
Seller shall be limited to the actual knowledge of the officers of
Seller.
7.7 INTANGIBLE PROPERTY.
The Disclosure Schedule includes an accurate list and summary description
of all patents, franchises, distributorships, registered and unregistered
trademarks, trade names and service marks, licenses, brand names and
company lists and all applications for the foregoing, presently owned
and/or held (as a licensee or
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otherwise) by the Seller. The Seller is not a licensor in respect to any
patents, trade secrets, inventions, shop rights, know-how, trademarks,
trade names, copyrights, or applications therefor. The Disclosure
Schedule contains an accurate and complete description of such intangible
property and the items of all licenses and other agreements relating
thereto. All of the above-mentioned intangibles used in the Seller's
Business are the sole property of the Seller, do not require the consent
of or consent to any other person as a condition to their use or the
transaction provided for herein and do not infringe upon the rights of
others.
7.8 SIGNIFICANT AGREEMENTS.
The Disclosure Schedule contains an accurate and complete list of all
contracts, agreements, licenses, instruments and understandings (whether
or not in writing) to which the Seller is a party or is bound and that
are material to the Business, assets, financial condition or results of
operations of the Seller. Without limiting the generality of the
foregoing, such list includes all such contracts, agreements, licenses
and instruments:
(a) Providing for payments of more than Five Thousand ($5,000.00) per
year;
(b) Providing for the extension of credit other than consistent with
normal credit terms described in the Disclosure Schedule;
(c) Limiting the ability of the Seller to conduct its Business or any
other business or to otherwise compete in its or any other
business, including as to manner or place;
(d) Providing for a guarantee or indemnity by the Seller;
(e) With any Affiliate of Seller;
(f) With any labor union or employees' association connected with
Seller's Business;
(g) For the employment or retention of any director, officer, employee,
agent, shareholder, consultant, broker or advisor of Seller or any
other contract between Seller and any director, officer, employee,
agent, shareholder, consultant or advisor which does not provide
for termination at will by the Seller without further cost or other
liability to the Seller as of or at any time after the Closing.
(h) In the nature of a profit sharing, bonus stock option, stock
purchase, pension, deferred compensation, retirement, severance,
hospitalization, insurance or other plan or contract providing
benefit to any person or former
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director, officer, employee, agent, shareholder, consultant, broker
or advisor of Seller, or such person's dependents, beneficiaries or
heirs;
(i) In the nature of an indenture, mortgage, promissory note, loan or
credit agreement or other contract relating to the borrowing of
money or a line of credit by the Seller or relating to the direct
or indirect guarantee or assumption by the Seller of obligations of
others;
(j) Leases or subleases with respect to any property, real, personal or
mixed, in which the Seller is involved, as lessor or lessee; and
(k) Distributorship Agreement(s) or License Agreement(s) with respect
to any property which Seller has entered into as licensor.
True and correct copies of all items so disclosed in the Disclosure
Schedule have been provided or made available to Purchaser. Each of such
items listed, or required to be listed, is a valid and binding obligation
of the parties thereto enforceable in accordance with its terms, subject
to principles of equity, bankruptcy laws, and laws affecting creditors'
rights generally, and there have been no material defaults or claims of
material default by the Seller and there are no facts or conditions that
have occurred or that are anticipated to occur which, through the passage
of time or the giving of notice, or both, would constitute a default by
the Seller, or would cause the acceleration of any obligation of any
party thereto or the creation of an Encumbrance upon any asset of the
Seller. There are no material oral contracts, agreements or
understandings made by the Shareholder, whether or not binding, material
to the Seller, except such as have been disclosed in the Disclosure
Schedule and for which an accurate summary description has been provided.
7.9 INVENTORY.
The Disclosure Schedule contains a copy of Seller's inventory as of
September 30, 1996. No item included in the Inventory of Seller is held
by the Seller on consignment from others.
7.10 ACCOUNTS RECEIVABLE.
All accounts and notes receivable of the Seller, as reflected on the Pro
Forma Balance Sheet, represent sales actually made in the ordinary
course of business, are valid obligations of the respective debtors
without any known claims or defenses and are fully collectible net of any
reserve as reflected on the September 30, 1996 pro forma balance sheet.
7.11 TAXES.
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Except as to taxes not yet due and payable, and except for taxes the
payment of which is being diligently contested in good faith and by
proper proceedings and for which adequate reserves have been established
in accordance with generally accepted accounting principles, Seller has
filed all returns and reports that are now required to be filed by it in
connection with any federal, state or local tax, duty or charge levied,
assessed or imposed upon it, or its property, including unemployment,
social security and similar taxes; and all of such taxes have been either
paid or adequate reserves or other provision has been made therefor.
7.12 TITLE TO PURCHASED ASSETS.
(a) With respect to all Purchased Assets sold, at the Closing Seller
shall have good and marketable title to the Purchased Assets being
acquired by Purchaser, free and clear of all liens, security
interests, encumbrances, leases and charges whatsoever; immediately
after the transfer of all the Purchased Assets being acquired by
Purchaser from Seller, Purchaser will own all of said Purchased
Assets free and clear of all leases, liens, claims, encumbrances
and charges whatsoever, whether perfected or unperfected; and, by
way of illustration but not limitation, there are not any unpaid
taxes, assessments or charges due or payable by Seller to any
federal, state or local agency, or any obligations or liabilities
or any unsatisfied judgments against, or, to the best of Seller's
knowledge, any litigation or proceedings pending or threatened
against Seller by Seller's employees, clients, customers,
creditors, suppliers, or any other party (nor state of facts for
any such obligation, liability, litigation or proceeding), that
could become a claim, obligation, liability, lien or other charge
of or against Purchaser or the Purchased Assets.
(b) Except as otherwise specifically set forth herein, Seller is not a
party to any contract, agreement, lease or commitment that would
result in any claim, obligation, liability, lien or other charge
against Purchaser or the Purchased Assets, and Purchaser is not
obligated to assume the obligations under any contract, agreement,
lease or commitment of Seller, except as specifically set forth
herein.
7.13 PENDING ACTIONS.
Seller has not been served with or received notice of any actions, suits,
arbitrations, NCOSHA, EPA or other governmental violations, or any other
proceedings or investigations, either administrative or judicial,
strikes, lockouts or NLRB charges or complaints ("Actions and Disputes").
To the best of Seller's knowledge, there are no Actions or Disputes
pending or threatened against or affecting (directly or indirectly) the
Seller or its property or assets, nor are there any facts or conditions
which exist which would give rise to any such Actions or Disputes which,
if
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determined adversely to Seller, would have a material adverse effect upon
Seller's Business.
7.14 INSURANCE.
The Disclosure Schedule contains an accurate and complete listing
(showing type of insurance, amount, insurance company, annual premium and
special exclusions) of all policies of fire, liability, worker's
compensation and other forms of insurance owned or held by the Seller.
All such policies are in full force and effect; are sufficient for
compliance with all requirements of law and of all agreements to which
the Seller is a party; are valid, outstanding and enforceable policies;
provide adequate insurance coverage for the assets and operations of the
Seller and will remain in full force and effect through the Closing.
There are no outstanding requirements or recommendations by any insurance
company that issued a policy with respect to any of the properties and
assets of the Seller by any Board of Fire Underwriters or other body
exercising similar functions or by any Governmental Entity requiring or
recommending any repairs or other work to be done on or with respect to
any of the properties and assets of the Seller or requiring or
recommending any equipment or facilities to be installed on or in
connection with any of the properties or assets of the Seller.
7.15 STATUS OF BUSINESS.
(a) Since March 31, 1996, the Business of the Seller has been operated
only in the ordinary course, and, except as set forth in the
Disclosure Schedule or permitted under Exhibit C dealing with
Excluded Assets, there has not been with respect to the Business:
(i) Any material change in its condition (financial or other),
assets, liabilities, obligations, business or earnings,
except changes in the ordinary course of business, none of
which in the aggregate has been materially adverse;
(ii) Any material liability or obligation incurred or assumed, or
any material contract, agreement, arrangement, lease (as
lessor or lessee), or other commitment entered into or
assumed, on behalf of the Business, whether written or oral,
except in the ordinary course of business;
(iii) Any purchase or sale of material assets in anticipation of
this Agreement, or any purchase, lease, sale, abandonment or
other disposition of material assets, except in the ordinary
course of business;
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(iv) Any waiver or release of any material rights, except for
rights of nominal value;
(v) Any cancellation or compromise of any material debts owed to
Seller or material claims known by Seller against another
person or entity, except in the ordinary course of business;
(vi) Any damage or destruction to or loss of any physical assets
or property of Seller which materially adversely affects the
Business or any of the properties of the Seller (whether or
not covered by insurance);
(vii) Any material changes in the accounting practices,
depreciation or amortization policy or rates theretofore
adopted by the Seller, or any material revaluation or
write-up or write-down of any of its assets;
(viii) Any direct or indirect redemption, purchase or other
acquisition for value by the Seller of its shares, or any
agreement to do so;
(ix) Any material increase in the compensation levels or in the
method of determining the compensation of any of the
Seller's officers, directors, agents or employees, or any
bonus payment or similar arrangement with or for the benefit
of any such person, any increase in benefits expense to the
Seller, any payments made or declared into any
profit-sharing, pension, or other retirement plan for the
benefit of employees of the Seller, except in the ordinary
course of business;
(x) Any loans or advances between the Seller and any
Shareholder, or any family member or any associate or
Affiliate of the Seller or of any Shareholder;
(xi) Any material contract cancelled or the terms thereof amended
or any notice received with respect to any such contract
terminating or threatening termination or amendment of any
such contract;
(xii) Any transfer or grant of any material rights under any
leases, licenses, agreements, or with respect to any trade
secrets or know-how;
(xiii) Any labor trouble or employee controversy materially
adversely affecting its Business or assets; or
(xiv) Any dividend or other distribution on or in respect of
shares of its capital stock.
(b) Seller is not
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(i) in violation of any outstanding judgment, order, injunction,
award or decree specifically relating to the Business, or
(ii) in violation of any federal, state or local law, ordinance
or regulation which is applicable to the Business, except
where such violation does not have a materially adverse
effect on the Business.
Seller has all permits, licenses, orders, approvals,
authorizations, concessions and franchises of any federal, state or
local governmental or regulatory body that are material to or
necessary in the conduct of the Business, except where failure to
have such permit, license, order, approval, authorization,
concession or franchise does not have a materially adverse effect
on the Business. All such permits, licenses, orders, approvals,
concessions and franchises are set forth on the Disclosure Schedule
and are in full force and effect and there is no proceeding, or to
the knowledge of Seller, threatened to revoke or limit any of them.
(c) No claim, litigation, action, investigation or proceeding is
pending or, to the knowledge of Seller, threatened, and no order,
injunction or decree is outstanding, against or relating to the
Business or its assets, and Seller does not know of any information
which could result in such a claim, litigation, action,
investigation or proceeding, which, if determined adversely to
Seller, would have a material adverse effect upon Seller's
Business.
(d) Seller has accrued or paid in full, to all employees of the
Business, in the normal course of its operations, all wages,
salaries, commissions, bonuses, vacations and other direct
compensation for all services performed by them. To the best of
Seller's knowledge, Seller is in compliance with all federal, state
and local laws, ordinances and regulations relating to employment
and employment practices at the Business, and all employee benefit
plans and tax laws relating to employment at the Business, except
where such non-compliance would not have a materially adverse
effect on the Business. There is no unfair labor practice
complaint against Seller relating to the Business pending before
the National Labor Relations Board or similar agency or body and,
to the best of Seller's knowledge, no condition exists that could
give rise to any unfair labor practice complaint. There is no
labor strike, dispute, slowdown or stoppage actually pending or, to
the knowledge of Seller, threatened against or involving the
Business.
7.16 ENVIRONMENTAL LAWS.
(a) To the best of Seller's knowledge, the real estate located at (i)
0000 00xx Xxxxxx, XX, XX, Xxxxxxx, Xxxxx Xxxxxxxx 00000, (ii) Xxx
Xx. 0, Xxxxxxxxxxxx Xxxxxxxx Xxxxxx, Xxxx-Xxx Xxxxxxxx,
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000 (iii) Spaces F and G (556-F/G
Arborhill Road) Century
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Center, Xxxxxxxxxxxx, Xxxxx Xxxxxxxx 00000; (iv) 0000-X Xxxxxx
Xxxxxx Xxxx., Xxxxxxxxx, Xxxxx Xxxxxxxx; (v) the real estate leased
under Sublease Agreement by and between Seller as tenant and
Allstates Air Cargo, Inc. as sublessee dated March 15, 1995, as
amended by a First Amendment to Sublease; and (vi) Xxxxx 000, 00
Xxxxx Xxxx, Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 ("Real
Estate") have not been used or operated in any fashion involving
producing, handling and disposing of chemicals, toxic substances,
wastes and effluent materials, x-rays or other materials or devices
in material violation of any laws, rules, regulations or orders,
and to the best of Seller's knowledge, the Real Estate is in
material compliance with applicable laws, regulations, ordinances,
decrees and orders arising under or relating to health, safety, and
environmental laws and regulations, including without limitation
the Federal Occupation and Safety Health Act, 29 U.S.C. Section
651, et seq.; Federal Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. Section 6901, et seq.; Federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. Section 9601, et seq.; the Federal Clean Air Act, 42
U.S.C. Section 2401, et seq.; the Federal Clean Water Act, 33
U.S.C. Section 1251, et seq.; and all state and local laws that
correspond therewith or supplement such laws.
(b) To the best of Seller's knowledge, the Real Estate has not been
operated, in violation of any laws, rules, regulations or orders,
so as to involve or create any surface impoundments, incinerators,
land fills, waste storage tanks, waste piles, or deep well
injection systems or for the purpose of storage, treatment or
disposal of a hazardous waste as defined by RCRA or hazardous
substance, pollutant or contaminate as defined by CERCLA and, to
the best of Seller's knowledge, no acts have been committed that
would make the Real Estate or any part thereof subject to remedial
action under RCRA or CERCLA or corresponding state or local laws.
(c) To the best of Seller's knowledge, there have not been, are not now
and as of the Closing Date, there will be no solid waste, hazardous
waste, hazardous substance, toxic substance, toxic chemicals,
pollutants or contaminants, underground storage tanks, purposeful
dumps, or accidental spills in, on or about the Real Estate or any
of the assets of the Seller, whether real or personal, owned or
leased, or stored on any real property owned or leased by the
Seller or by the Seller's lessees, licensees, invites, or
predecessors.
(d) Seller is not engaged in, and to the best of Seller's knowledge and
belief, is not threatened with any litigation, or governmental or
other proceeding which may give rise to any claim against the Real
Estate. Specifically, there are no pending suits, charges,
actions, governmental investigations, or other proceedings,
involving, directly or indirectly without limitation, the laws,
statutes and regulations set forth in subsection (a), above,
whether initiated
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by a third party or by Seller and there are none, to the best of
Seller's knowledge, threatened against or relating to or involving
the Real Estate or the transactions contemplated by this Agreement.
Seller is not in default with respect to any order, writ,
injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality.
(e) The Disclosure Schedule will list all waste disposal sites, dump
sites and other areas either on the Real Estate or offsite at which
hazardous or toxic waste generated by the Seller has been disposed
(in each case identifying such waste) and it will specifically
identify each such site or area which is or has been included in
any published federal, state or local (domestic or foreign)
superfund or other list of hazardous or toxic waste sites or areas.
(f) To the best of Seller's knowledge, Seller has obtained all permits,
and licenses and other authorizations required by all environmental
laws; and all of such permits, licenses and other authorizations
are in full force and effect as of the date hereof. A true and
correct list of all such permits, licenses and other authorizations
is set forth in the Disclosure Schedule.
7.17 CERTAIN EMPLOYEES
(a) Each of the following is included in the list of agreements set
forth in the Disclosure Schedule: all collective bargaining
agreements, employment and consulting agreements, bonus plans,
deferred compensation plans, employee pension plans or retirement
plans, employee profit-sharing plans, employee stock purchase and
stock option plans, hospitalization insurance, and other plans and
arrangements providing for employee benefits of employees of the
Seller.
(b) The Disclosures Schedule contains a true, complete and accurate
list of the following: the names, positions, and compensation of
the present employees of the Seller, together with a statement of
the annual salary payable to salaried employees and a summary of
the bonuses and description of agreements for additional
compensation and other like benefits, if any, paid or payable to
such persons for the period set forth in the Disclosure Schedule.
Except as listed in the Disclosure Schedule, to the best of
Seller's knowledge, all employees of Seller are employees-at-will.
(c) Seller has no retired employees who are receiving or are entitled
to receive any payments, health or other benefits from Seller.
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7.18 PAYMENTS TO EMPLOYEES.
All accrued obligations of Seller relating to employees and agents of
Seller, whether arising by operation of law, by contract, or by past
service, for payments to trusts or other funds or to any governmental
agency, or to any individual employee or agent (or his heirs, legatees,
or legal representatives) with respect to unemployment compensation
benefits, profit sharing or retirement benefits, or social security
benefits have been paid or accrued by Seller. All obligations of Seller
as an employer or principal relating to employees or agents, whether
arising by operation of law, by contract, or by past practice, for
vacation and holiday pay, bonuses, and other forms of compensation which
are or may become payable to such employees or agents, have been paid or
will be paid or accrued by Seller.
7.19 CHANGE OF CORPORATE NAME.
At the Closing, Seller, if requested by Purchaser will adopt and file
with the Secretary of State of North Carolina an amendment to the
Articles of Incorporation of Seller changing the name of Seller to a name
substantially dissimilar to "Communications Technology, Inc., d/b/a
DILAN" and Seller shall also execute a Consent for Use of Similar Name
form, as set forth in the Disclosure Schedule granting to Purchaser the
use of the name "Communications Technology, Inc., d/b/a DILAN." In
addition, Shareholder, if requested by Purchaser, will require DILAN,
Inc. a North Carolina corporation owned solely by Shareholder to adopt
and file with the Secretary of State of North Carolina an Amendment to
the Articles of Incorporation of DILAN, Inc. changing the name of such
corporation to a name substantially dissimilar to DILAN and Seller shall
also execute a consent for use of similar name form, as set forth in the
Disclosure Schedule granting to Purchaser the use of the name DILAN.
7.20 BROKERS AND FINDERS.
Except as set forth in the Disclosure Schedule, no broker, finder or
other person or entity acting in a similar capacity has participated on
behalf of Seller in bringing about the transaction herein contemplated,
or rendered any service with respect thereto or been in any way involved
therewith.
7.21 PRESERVATION OF ORGANIZATION.
Except as set forth on the Disclosure Schedule, since March 31, 1996, the
Seller has kept intact the Business and organization of the Seller;
retained the services of all the Seller's material employees and agents,
retained the Seller's arrangements with the manufacturers of the products
distributed by Seller in the same manner as conducted prior to such date,
and engaged in no transaction other than in the ordinary course of
Seller's Business.
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7.22 ABSENCE OF CERTAIN PAYMENTS.
To the best of Seller's knowledge, neither Seller, nor any director,
officer, agent, Affiliate, employee or other person associated with or
acting on behalf of any of them, have used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, or made any direct or indirect unlawful
payments to foreign or domestic government officials or employees from
corporate funds, or made or received any payment, whether direct or
indirect, to or from any supplier or customer of the Seller, for purposes
other than the satisfaction of lawful obligations, or established or
maintained any unlawful or unrecorded funds.
7.23 SUPPLIERS.
The Disclosure Statement sets forth the names of and description of
contractual arrangements (whether or not binding or in writing) with the
twenty-five (25) largest suppliers of the Seller by sales or services in
dollars. Assuming that Purchaser continues to conduct the Business in
the ordinary course consistent with Seller's prior practices generally
and specifically with respect to Seller's current suppliers, Seller has
no direct knowledge that any of the current suppliers of the Seller will,
or intend to, (a) cease doing business with the Seller; or (b) materially
alter the amount of business they are currently doing with the Seller; or
(c) not do business with the Purchaser after the Closing. For purposes
of this Section 7.23, direct knowledge of Seller shall be limited to the
direct knowledge of the officers of Seller.
7.24 PRODUCT LIABILITY CLAIMS.
To the best of Seller's knowledge, there are no material product
liability claims against the Seller, either potential or existing, which
are not fully covered by product liability insurance coverage with a
responsible company which, if determined adversely to Seller, would have
a material adverse effect upon Seller's Business.
7.25 EMPLOYEE BENEFIT PLANS.
For the purposes of this Section 7.25, "Seller" shall include all persons
who are members of a controlled group, a group of trades or businesses
under common control, or an affiliated service group (within the meanings
of Sections 414(b), (c) or (m) of the Code), of which the Seller is a
member.
(a) The Employee Benefit Plans presently maintained by the Seller or to
which the Seller has contributed within the past six (6) years,
including any terminated or frozen plans which have not yet
distributed all plan assets, are fully set forth in the Disclosure
Schedule. For purposes of this provision, the term "Employee
Benefit Plan" shall mean:
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(i) A Welfare Benefit Plan as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") established for the purpose of providing for its
participants or their beneficiaries, through the purchase of
insurance or otherwise, medical, surgical, or hospital care
or benefits, or benefits in the event of sickness, accident,
disability, death or unemployment (including any plan or
program of severance pay), or vacation benefits,
apprenticeship or other training programs, or day care
centers, scholarship funds, or prepaid legal services, or
any benefit described in Section 302(c) of the Labor
Management Relations Act of 1947;
(ii) An Employee Pension Benefit Plan as defined in Section 3(2)
of ERISA established or maintained by the Seller for the
purpose of providing retirement income to employees or for
the purpose of providing deferral of income by employees for
periods extending to the termination of covered employment
or beyond; and
(iii) Any other plan or arrangement not covered by ERISA but which
provides benefits to employees or former employees and
results in an accrued liability on the part of the Seller
either by contract or by operation of law.
(b) With respect to any such Employee Benefit Plans, the Seller
represents and warrants that, to the best of Seller's knowledge;
(i) The Seller has not, with respect to any Employee Benefit
Plans, engaged in any prohibited transaction, as such term
is defined in Section 4975 of the Code or Section 406 of
ERISA.
(ii) The Seller has, with respect to any Employee Benefit Plans,
complied with all reporting and disclosure requirements
required by Title I, Subtitle B, Part 1 of ERISA.
(iii) There was no accumulated funding deficiency (as defined in
section 302 of ERISA and Section 412 of the Code) with
respect to any Employee Pension Benefit Plan which is a
defined benefit pension plan, whether or not waived, as of
the last day of the most recent fiscal year of the plans
ending prior to the date of this Agreement.
(iv) There are no contributions due to any Employee Pension
Benefit Plan for the most recent fiscal year of the plans
ending prior to the date of this Agreement and the Seller's
Financial Statements reflect any liability of the Seller to
make contributions to the Employee Pension Benefit Plans.
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(v) No material liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been asserted with respect to any
Employee Pension Benefit Plan which is a defined benefit
pension plan.
(vi) There has been no reportable event as described in Section
4043(b) of ERISA since the effective date of Section 4043 of
ERISA with respect to any Employee Pension Benefit Plan
which is a defined benefit plan.
(vii) Except for claims for benefits by participants and
beneficiaries in the normal course of events, to the best of
Seller's knowledge, there are no claims, pending or
threatened, by any individual or Governmental Entity, which,
if decided adversely, would have a material adverse effect
upon the financial condition of any Employee Benefit Plan,
the plan administrator of any Employee Benefit Plan, or the
Seller.
(viii) The Seller has made available for inspection all annual
reports for the Seller filed on Internal Revenue Service
("IRS") Form 5500 or 5500C, all reports for the Seller
prepared by an actuary for the last three plan years, the
plan and trust documents and the Summary Plan Description,
as amended, for each Employee Benefit Plan and the last
filed PBGC1 Form (if applicable) for each Employee Benefit
Plan, with respect to any Employee Benefit Plans other than
multi-employer plans (within the meaning of Section 3(37) of
ERISA), and other reports filed with the PBGC during the
last three plan years.
(ix) All Employee Pension Benefit Plans are intended to be
qualified retirements plans under the Code. The IRS has
issued, and the Seller has made available for inspection,
one or more favorable determination letters with respect to
the qualification of all Employee Pension Benefit Plans
stating that from the inception of each such plan, such plan
has been qualified under Section 401(a) of the Code and each
trust maintained in connection with such plan has been and
is exempt under Section 501(a) if the Code. The time for
adoption of any amendments required by changes in the Code
since such determination letters were issued, or changes
required by the IRS as a condition for continued
qualification of such plans has not expired, or did not
expire without such amendments being made. Such plans are
now, and always have been, established in writing and
maintained and operated in accordance with the plan
documents, ERISA, the Code, and all other applicable laws.
(x) There is no liability arising from the termination or
partial termination of any Employee Benefit Plan, except for
liabilities as to which
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adequate reserves are reflected on the Financial Statements,
and there exists no condition presenting a material risk of
such liability.
(xi) The Seller has timely made any contributions it is obligated
to make to any multi-employer plan within the meaning of
Section 3(37) of ERISA. The Seller has no liability arising
as a result of withdrawal from any multi-employer plan, no
such withdrawal liability has been asserted and no such
withdrawal liability will be asserted with regard to any
withdrawal or partial withdrawal on or before the date of
this Agreement.
7.26 REDEMPTION OF CERTAIN SHAREHOLDERS.
Seller and Shareholder represent and warrant that as of the Closing Date,
Shareholder will own one hundred percent (100%) of the issued and
outstanding common stock of the Company; and that the Company will have
no other equity securities or rights to acquire equity securities issued
and outstanding on the Closing Date. Furthermore, Seller and Shareholder
represent and warrant that on October 1 thru October 10, 1996 Seller
redeemed all of the issued and outstanding shares of common stock of
Seller owned by Xxxx Xxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxxxxx Xxxxx,
Xxxxxxx Xxxxx, Xxxxxx Xxxx, Xx. and Xxxxxx Xxxxxxxx (the "Redeemed
Shareholders"). In connection with the redemption of shares of common
stock from the Redeemed Shareholders, Seller and Shareholder disclosed
all material facts concerning this Agreement and Seller's and
Shareholder's transactions with Purchaser, including all material terms,
conditions and considerations that occurred prior to the redemption. In
making such disclosures to the Redeemed Shareholders and in redeeming the
Redeemed Shareholders' shares of common stock, Seller and Shareholder 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. Seller and Shareholder shall indemnify and hold harmless
Purchaser, its successors and assigns, against all loss, liability,
damage or expense (including, without limitation, interest, penalties and
reasonable attorneys' fees) arising from and in connection with any
misrepresentation or material omission or breach of the representations
and warranties set forth in this paragraph.
7.27 FULL DISCLOSURE.
None of the representations and warranties made by the Seller herein, or
made on its behalf, including any disclosures made in the Disclosure
Schedule, contains or will contain, to the best of Seller's knowledge,
any untrue statement of material fact or omits or will omit any material
fact.
8.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
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Purchaser hereby represents and warrants to Seller that the following statements
are true and correct as of the date hereof and shall remain true and correct as
of the Closing as if made again at and as of that time.
8.1 ORGANIZATION, GOOD STANDING AND POWER OF PURCHASER.
(a) Purchaser is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has
full corporate power and lawful authority to execute, deliver and
perform this Agreement and conduct the Business of Seller currently
conducted by Seller in each of the jurisdictions in which Seller
currently conducts its Business, which are the only jurisdictions
where the failure to be so qualified by Purchaser will have a
material adverse effect on the business prospects or financial
condition of Purchaser.
8.2 STATUS OF AGREEMENTS.
(a) All requisite corporate action (including action of its Board of
Directors) to approve, execute, deliver and perform this Agreement
and each of the other agreements, instruments and other documents
to be delivered by and on behalf of Purchaser ("Other Purchaser
Documents") in connection herewith has been taken by Purchaser.
This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes the valid and binding obligation of
Purchaser enforceable in accordance with its terms. All Other
Purchaser Documents in connection herewith will, when executed and
delivered, constitute the valid and binding obligation of Purchaser
enforceable in accordance with their respective terms.
(b) No authorization, approval, consent or order of, or registration,
declaration or filing with, any court, governmental body or agency
or other public or private body, entity or person is required
(except for Purchaser's primary lender, Star Bank, N.A., whose
consent shall be obtained prior to Closing) in connection with the
execution, delivery or performance of this Agreement or any Other
Purchaser Documents in connection herewith.
(c) Neither the execution, delivery nor performance of this Agreement
or any of the Other Purchaser Documents in connection herewith does
or will:
(i) conflict with, violate or result in any breach of any
judgment, decree, order, statute, ordinance, rule or
regulation applicable to Purchaser;
(ii) conflict with, violate or result in any breach of any
agreement or instrument to which Purchaser is a party or by
which Purchaser or any of Purchaser's assets or properties
is bound, or constitute a default
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thereunder or give rise to a right of acceleration of an
obligation of Purchaser; or
(iii) conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Purchaser.
8.3 BROKERS AND FINDERS.
No broker, finder or other person or entity acting in a similar capacity
has participated on behalf of Purchaser in bringing about the transaction
herein contemplated, or rendered any service with respect thereto or been
in any way involved therewith.
9.
COMPETITION
9.1 As an inducement for and in consideration of Purchaser entering into this
Agreement, Seller and Shareholder agree to enter into a Covenant Not to
Compete Agreement, in the form of Exhibits "B" and "B-1", respectively,
attached hereto and made a part hereof.
9.2 As an express condition of this Agreement, certain key employees of
Seller and/or former shareholders that were redeemed as set forth in
Section 7.26, specifically, Xxxx Xxxxxx, Xxxxxx Xxxx, Xx., Xxxxxxx Xxxxx,
Xxxx Xxxxxxx, Xxxxxxx Xxxxx and Xxxxxx Xxxxxxxx shall enter into covenant
not to compete agreements in the form of Xxxxxxxx "X-0", "X-0",
"X-0","X-0", "B-6" and "B-7", respectively, attached hereto and made a
part hereof.
10.
INTERIM OPERATIONS
10.1 SELLER'S COVENANTS.
From the date of the Pro Forma Balance Sheet to the Closing Date and
except as set forth on the Disclosure Schedule, Seller shall not:
(i) change its articles of incorporation or bylaws or merge or
consolidate with or into any entity, or acquire control of any
entity, or obligate itself to do so;
(ii) issue or agree to issue any shares of the capital stock of the
Seller or any stock options, warrants, rights, calls or commitments
of any character calling for or permitting the issue, transfer,
sale or delivery of any such capital stock;
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(iii) declare, set aside or pay any dividend or other distribution on or
in respect of shares of its capital stock, or purchase, redeem or
otherwise acquire, or agree to purchase, redeem or otherwise
acquire, any of its capital stock;
(iv) authorize, guarantee or incur indebtedness for borrowed money,
including but not limited to, borrowing for the payment of any
taxes;
(v) sell or agree to sell any of the Purchased Assets, except in the
ordinary course of business;
(vi) mortgage, pledge or subject to any security interest any of the
Purchased Assets;
(vii) make any capital expenditures or capital additions or betterments,
or commitments therefor, aggregating in excess of $5,000.00;
(viii) refrain and cause its officers, employees and agents to refrain
from seeking other offers to purchase the stock or assets of
Seller;
(ix) enter into any long-term contractual arrangements or blanket
purchase orders which extend past the closing date without the
express written consent of Purchaser;
(x) increase the salaries of any existing employees, hire new managers
or employees, pay or award bonuses, make loans, or permit draws by
any individuals without Purchaser's express written consent.
10.2 CONDUCT OF BUSINESS.
Seller will operate the Business substantially as presently operated and
only in the ordinary course of business and, consistent with such
operation, will use its best efforts to preserve intact for the benefit
of Purchaser, the present business organization of the Business and the
relationships and good will of suppliers, customers, clients and others
having business relations with the Business. Without limiting the
generality of the foregoing, Seller will not take any of the actions
contemplated by, or which would give rise to, a result contemplated by
Section 7.15(a) hereof.
10.3 ACCESS TO INFORMATION.
From the date hereof until Closing, Seller shall make available or cause
to be made available to the accountants, attorneys or other
representatives of Purchaser for examination during normal business
hours, upon reasonable requests, all properties, assets, books of
accounts, title papers, insurance policies, contracts,
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leases, commitments, records and other documents of every character
relating to the Business.
10.4 OTHER ACTIONS.
From the date hereof until Closing, Seller shall not take any action
which shall prevent the representations, warranties and covenants of
Seller set forth herein from being true and correct at the Closing.
11.
BULK SALES ACT
11.1 COMPLIANCE WITH BULK SALES ACT.
Purchaser waives compliance with the provisions of any applicable bulk
sales law and Seller and Shareholder, jointly and severally, agree to
indemnify and hold harmless Purchaser from any liability incurred as a
result of the failure to so comply, except to liabilities explicitly
assumed hereunder by Purchaser.
12.
SURVIVAL OF AND RELIANCE UPON
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The parties acknowledge and agree that all representations, 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 continue to be binding
upon the party giving such representation, warranty or agreement and
shall be fully enforceable to the extent provided for in Sections 12.3
and 12.4 hereof, at law or in equity, for the period beginning on the
date of Closing and ending three (3) years thereafter, except for the
representations, warranties and agreements designated and identified in
Sections 3.3, 7.3, 7.12(a), 7.12(b), 7.15 (c), 7.16, 7.26 and 8.2 which
shall survive the Closing and shall terminate in accordance with the
statute of limitations governing written contracts in the State of North
Carolina and Xxxxxxxx "X", "X-0", "X-0", "B-3", "B-4", "B-5", "B-6" and
"B-7", which shall terminate as provided therein.
12.2 RELIANCE UPON AND ENFORCEMENT OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.
(a) Seller hereby agrees that, notwithstanding any right of Purchaser
to fully investigate the affairs of Seller, 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, warranties and
agreements of Seller contained in this
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Agreement and upon the accuracy of any document, certificate or
exhibit given or delivered to Purchaser pursuant to the provisions
of this Agreement.
(b) Purchaser hereby agrees that, notwithstanding any right of Seller
to fully investigate the affairs of Purchaser, and notwithstanding
knowledge of facts determined or determinable by Seller pursuant to
such investigation or right of investigation, Seller has the right
to rely fully upon the representations, warranties and agreements
of Purchaser contained in this Agreement and upon the accuracy of
any document, certificate or exhibit given or delivered to Seller
pursuant to the provisions of this Agreement.
12.3 INDEMNIFICATION BY SELLER AND SHAREHOLDER.
Seller and Shareholder (jointly and severally, shall indemnify Purchaser
against and hold it harmless from:
(i) any and all loss, damage, liability or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation,
warranty, covenant, or obligation made or incurred by Seller herein
or in any other agreement, instrument or document delivered by or
on behalf of Seller in connection herewith;
(ii) any imposition (including by operation of law) or attempted
imposition by a third party upon Purchaser of any liability of
Seller which Purchaser has not specifically agreed to assume
pursuant to Section 3.2 of this Agreement;
(iii) any liability (except for any Assumed Liabilities described in
Section 3.1) or other obligation incurred by or imposed upon
Purchaser resulting from the failure of the parties to comply with
the provisions of any law relating to bulk transfers which may be
applicable to the transaction herein contemplated; and
(iv) any and all costs and expenses (including reasonable legal and
accounting fees) related to any of the foregoing, subject to the
provisions of Section 12.5.
Nothing in this Section 12.3 shall be construed to limit the amount to
which, or the time by which (except as described in Sections 12.1 or
12.6), by reason of offset or otherwise, the Purchaser may recover from
Seller or the Shareholder pursuant to this Agreement resulting from
Seller's and the Shareholder's breach or violation of any representation,
warranty, covenant or agreement contained herein.
Notwithstanding the above, no claims for indemnification shall be made by
Purchaser against the Seller and/or the Shareholder until such time as
all claims hereunder net of income tax benefit realized and/or realizable
by Purchaser total
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more than Fifty Thousand Dollars ($50,000.00) in the aggregate, and then
indemnification shall be made only to the extent such claim or claims
exceed such threshold amount in the aggregate. Any amounts to which
Purchaser, its successors or assigns, is entitled to indemnification
pursuant to the provisions of this Section, subject to the provisions of
Section 12.5, shall first be offset against the amount payable to Seller
under the promissory note. Provided, however, the offset in any one year
may not exceed the aggregate amount of principal and interest due on said
promissory note for said year. Moreover, nothing in this Section 12
(except as set forth in Section 12.1) shall be construed to limit the
amount to which, or the time in which, by reason of offset, or otherwise,
that Purchaser may recover from Seller and the Shareholder pursuant to
this Agreement resulting from the breach of any representation, warranty,
covenant or agreement contained herein.
12.4 INDEMNIFICATION BY PURCHASER.
Purchaser shall indemnify Seller against and hold it harmless from any
and all loss, damage, liability or deficiency resulting from or arising
out of: (i) any Assumed Liabilities; (ii) any liability of Purchaser
arising out of Purchaser's operations subsequent to the Closing (except
to the extent such liability is the result of a breach of a covenant or
warranty of Seller hereunder); or (iii) any inaccuracy in or breach of
any representation, warranty, covenant or obligation made or incurred by
Purchaser herein; and (iv) any and all related costs and expenses
(including reasonable legal and accounting fees), subject to the
provisions of 12.5. Except as specifically provided herein, nothing in
this Section 12.4 shall be construed to limit the amount to which (except
as described in Section 12.1), or the time by which, by reason of offset
or otherwise, that Seller may recover from Purchaser pursuant to this
Agreement resulting from its breach or violation of any representation,
warranty, covenant or agreement contained herein.
12.5 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. Such notice
shall be sent within ten (10) days after the party to be
indemnified has received notification of such claim, but failure to
notify the indemnifying party shall in no event prejudice the right
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 Seller/Shareholders on the
one hand, or Purchaser on the other hand, may have an obligation to
indemnify the other, the party asserting such right to indemnity
(the "Party to be Indemnified") shall give or cause to be given to
the party from whom indemnity is sought (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
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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 hereto
agree to cooperate fully with each other in connection with the
defense, negotiation or settlement of any such third party legal
proceeding, claim or demand.
(b) If the Party to be Indemnified is also the party controlling the
defense, negotiation or settlement of any matter, and if the Party
to be Indemnified determines to compromise the matter, the Party to
be Indemnified shall immediately advise the Indemnifying Party of
the terms and conditions of the proposed settlement. If the
Indemnifying Party agrees to accept such proposal, the Party to be
Indemnified shall proceed to conclude the settlement of the matter,
and the Indemnifying Party shall immediately indemnify the Party to
be Indemnified pursuant to the terms of Sections 12.3 and 12.4
hereunder. If the Indemnifying Party does not agree within
fourteen (14) days to accept the settlement (said 14-day period to
begin on the first business day following the date such party
receives a complete copy of the settlement proposal), the
Indemnifying Party shall immediately assume control of the defense,
negotiation or settlement thereof, at that Indemnifying Party's
expense. Thereafter, the Party to be Indemnified shall be
indemnified in the entirety for any liability arising out of the
ultimate defenses, negotiation or settlement of such matter.
(c) If the Indemnifying Party is the party controlling the defense,
negotiation or settlement of any matter, and the Indemnifying Party
determines to compromise the matter, the Indemnifying Party shall
immediately advise the Party to be Indemnified of the terms and
conditions of the proposed settlement and irrevocably acknowledge
in writing full and complete responsibility for, and agree to
provide, indemnification of the Party to be Indemnified. If the
Party to be Indemnified agrees to accept such proposal, the
Indemnifying Party shall proceed to conclude the settlement of the
matter and immediately indemnify the Party to be Indemnified
pursuant to the terms of Sections 12.3 or 12.4 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
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resolve the claim is less than the amount of the original proposed
settlement made by the Indemnifying Party, then the Party to be
Indemnified shall receive such indemnification pursuant to Sections
12.3 or 12.4 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 12.3 and 12.4 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.
13.
EXPRESS CONDITIONS
13.1 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, Star Bank,
N.A., consent to the transaction.
(b) Purchaser shall have acquired all necessary permits from federal,
state and local agencies that are necessary to conduct cabling
operations in the State of North Carolina.
(c) Approval of the Board of Directors of Purchaser.
(d) Purchaser has completed its due diligence investigation of the
books and records and business prospects of Seller to its
satisfaction.
(e) Certain of Seller's employees or its former shareholders have
entered into the Covenant Not to Compete Agreements set forth in
Section 9.2.
The contingencies set forth in this Section shall have all been met, or
rejected in writing, by Purchaser and Seller, where applicable, no later
than October 11, 1996.
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14.
THE CLOSING
14.1 DATE, TIME AND PLACE OF CLOSING.
Consummation of the transactions contemplated hereby (the "Closing")
shall take place on October 11, 1996 (the "Closing Date"), at ____ p.m.
EST at the offices of Xxxxxxxxx & Dreidame, 000 Xxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxxxxx, Xxxx 00000, or on such other Closing Date, or at such
other time and/or place as the parties may mutually agree upon.
14.2 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS.
The obligation of Purchaser to perform in accordance with this Agreement
and to consummate the transactions herein contemplated is subject to the
satisfaction of the following conditions at or before the Closing:
(a) The Seller shall have complied with and performed all of the
representations, warranties, agreements and covenants hereunder
required to be performed by it prior to or at the Closing;
(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) The business, aggregate properties and operations of Seller shall
not have been materially adversely affected as a result of any
fire, accident or other casualty or any labor disturbance or act of
God or the public enemy, and there shall otherwise have been no
material adverse change to the business, aggregate properties, or
operations of the Seller since March 31, 1996;
(d) Seller shall have delivered to Purchaser, at or before the Closing,
the following documents, all of which shall be in form and
substance reasonably acceptable to the Purchaser and its counsel:
(i) The instruments of transfer and powers of attorney required
by Sections 2.5 and 2.6;
(ii) Releases (or copies thereof) of all liens, claims, charges,
encumbrances, security interests and restrictions on the
Purchased Assets necessary to provide Purchaser with good,
marketable and indefeasible title to each of the Purchased
Assets at the Closing;
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(iii) Certified copies of the corporate actions taken by the Board
of Directors and Shareholder of Seller, authorizing the
execution, delivery and performance of this Agreement;
(iv) Certificate of Existence for Seller from the Secretary of
State of North Carolina dated no earlier than fifteen (15)
days prior to Closing;
(v) Opinion letter of Xxxxxxx, Xxxxxx & Xxxxx, LLP, counsel for
Seller, addressed to Purchaser and dated the Closing Date,
containing the opinion set forth on Exhibit "J".
(vi) Seller shall have entered into the Lease Agreement set forth
in Exhibit "H."
(vii) Seller shall have entered into the Subordination Agreement
in the form attached hereto as Exhibit "E".
(viii) Seller and the Shareholder shall have entered into the
non-competition agreements set forth in Exhibits "B" and
"B-1".
(ix) Certain employees and former shareholders of Seller shall
have entered into the non-competition agreements set forth
in Exhibits "B-2", "B-3", "B-4", "B-5", "B-6" and "B-7".
(x) The express conditions set forth in Section 13 have been
satisfied or waived.
(e) Seller will adopt and file with the Secretary of State of North
Carolina an amendment to the Articles of Incorporation of Seller
changing the name of Seller to a name substantially dissimilar to
Communications Technology, Inc., d/b/a DILAN and Seller shall
execute a Consent for Use of Similar Name form, as set forth on
Exhibit "K", granting to Purchaser the use of the name
"Communications Technology, Inc., d/b/a DILAN". Shareholder will
cause DILAN, Inc. to file with the Secretary of State of North
Carolina an amendment to the Articles of Incorporation of DILAN,
Inc. changing the name of DILAN, Inc. to a name substantially
dissimilar to DILAN, Inc. and Shareholder shall cause DILAN, Inc.
to execute a Consent for Use of Similar Name for, as set forth on
Exhibit "L" granting Purchaser the use of the name DILAN.
14.3 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
The obligation of Seller to perform in accordance with this Agreement and
to consummate the transactions herein contemplated is subject to the
satisfaction of the following conditions at or before the Closing:
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(a) Performance by Purchaser of all of the representations, warranties,
agreements and covenants to be performed by it at or before the
Closing;
(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) Purchaser shall deliver to Seller at or before the Closing the
following documents, all of which shall be in form and substance
acceptable to Seller and its counsel:
(i) A wire transfer for the aggregate amount to be paid to
Seller at the Closing pursuant to Section 4.2(a) hereof;
(ii) A wire transfer to the Escrow Agents for the amount set
forth in Section 4.2(a) hereof;
(iii) Assumption of Liabilities Agreement under which Purchaser
assumes the Liabilities set forth in Section 3.1;
(iv) A subordinated promissory note as set forth in Section
4.2(b);
(v) Lease Agreement set forth in Section 6;
(vi) Certified copies of the corporate actions taken by Purchaser
authorizing the execution, delivery and performance of this
Agreement;
(vii) Certificate of Good Standing for Purchaser from the
Secretary of State of Delaware dated no earlier than fifteen
(15) days prior to the date of Closing;
(viii) Opinion letter of Xxxxxxxxx & Dreidame Co., L.P.A., counsel
for Purchaser, addressed to Seller and dated the Closing
Date, containing the opinions set forth on Exhibit "M";
(ix) All of the express conditions set forth in Section 13 have
been satisfied or waived.
(d) Purchaser shall have entered into the Employment Agreements set
forth in Exhibits "G" and "G-1".
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15.
GENERAL PROVISIONS
15.1 PUBLICITY.
All public announcements relating to this Agreement or the transactions
contemplated hereby will be made by Purchaser with the consent of Seller,
which consent will not be unreasonably withheld, except for any
disclosure which may be required because of Purchaser's being a
publicly-traded corporation on the over-the-counter market.
15.2 EXPENSES.
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 Seller shall bear and pay all of the
expenses incident to the transactions contemplated by this Agreement
which are incurred by Seller or its representatives.
15.3 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
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
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(b) If to Seller, to:
Communications Technology, Inc.
X.X. Xxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
With a copy to:
Xxxxxx Xxxxxxxx, Esq.
Xxxxxxx, Xxxxxx and Xxxxx, LLP
X X & X Xxxxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
(c) If to Shareholder, to:
Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
15.4 BINDING EFFECT.
Except as may be otherwise provided herein, this Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives,
successors and assigns.
15.5 HEADINGS.
The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or
interpretation of this Agreement.
15.6 EXHIBITS.
The Exhibits referred to in this Agreement constitute an integral part of
this Agreement as if fully rewritten herein.
15.7 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.
15.8 GOVERNING LAW.
This Agreement shall be construed in accordance with and governed by the
laws of the State of North Carolina, without regard to its laws regarding
conflict of laws.
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15.9 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.
15.10 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, or 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 of 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.
15.11 ASSIGNMENTS.
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.
15.12 ENTIRE AGREEMENT.
This Agreement and the agreements, instruments and other documents to be
delivered hereunder constitute the entire understanding 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, understandings, or agreements,
oral or otherwise, in relation thereto between the parties other than
those incorporated herein and to be delivered hereunder. Except as
otherwise expressly contemplated by this Agreement, nothing expressed or
implied in this Agreement is intended or shall be construed so as to
grant or confer on any person, firm or corporation other than the parties
hereto any rights or privilege hereunder. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing
by the parties hereto.
15.13 BUSINESS RECORDS.
Seller and Shareholder shall be permitted to retain copies of such books
and records relating to the Purchased Assets and relate to the accounting
and tax matters of the Business and to have access to all original copies
of records so
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delivered to Purchaser at reasonable times, for any reasonable business
purpose, for a period of six (6) years after the Closing.
The parties hereto have executed this Agreement as of the date first
above written.
WITNESSES: COMMUNICATIONS TECHNOLOGY, INC.
\s\ Xxxxxx X. Xxxxxx
------------------------------
\s\ Xxxxx X. Xxxxx By: \s\ Xxxxxx Xxxxxx
------------------------------ ------------------------------
\s\ Xxxxxx X. Xxxxxx XXXXXXX COMPUTER RESOURCES, INC.
------------------------------
\s\ Xxxxx X. Xxxxx By: \s\ Xxxxx X. Xxxxxxxxx CFO
------------------------------ ------------------------------
\s\ Xxxxxx X. Xxxxxx
------------------------------
\s\ Xxxxx X. Xxxxx \s\ Xxxxxx Xxxxxx
------------------------------ ------------------------------
XXXXXX XXXXXX
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