(jj)(1)
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is entered into this
3rd day of July, 2000, effective 12:01 a.m., by, between and among XXXXXXX
COMPUTER RESOURCES, INC., a Delaware corporation, ("Purchaser No. 1"), XXXXXXX
SELECT INTEGRATION SOLUTIONS, INC. ("Purchaser No. 2"), DATASOURCE SYSTEMS
CORPORATION, dba DATASOURCE XXXXX and DATASOURCE SYSTEMS MARKETING CORPORATION,
a Delaware corporation ("Seller"), and ROAR XXXX ("X. Xxxx") (also hereinafter
referred to as the "Shareholder").
W I T N E S S E T H :
WHEREAS, Seller is a full service provider of a variety of computer service and
support solutions to large and medium size commercial, governmental and other
professional customers throughout the Minneapolis, St. Xxxx, Minnesota
Metropolitan area; and
WHEREAS, Shareholder is the owner of three (3) shares of the outstanding stock
of Seller, which stock constitutes one hundred percent (100%) of the outstanding
stock of Seller; and
WHEREAS, Purchaser No. 1 is in the business of marketing and selling a broad
range of microcomputers and related products including equipment selection,
procurement and configuration; and
WHEREAS, Purchaser No. 2, a wholly-owned subsidiary of Purchaser No. 1, is a
single source provider of integrated desktop management and network services
including life cycle services, internetworking services, and end user support
services; and
WHEREAS, Purchaser No. 1 desires to purchase certain of the assets of Seller
used in its business of marketing and selling a broad range of microcomputers
and related products including equipment selection, procurement and
configuration ("Business No. 1") and assume certain of the liabilities of Seller
in connection with Business No. 1 and Purchaser No. 2 desires to purchase
certain of the assets of Seller used in its integrated desktop management and
network services business ("Business No. 2") and assume certain of the
liabilities of Seller in connection with Business No. 2; and Seller desires to
sell certain 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, Shareholder and of Purchaser No. 1 and Purchaser No. 2
contained in this Agreement, (iii) the agreement of Seller to refrain from
competition with Purchaser No. 1 and Purchaser No. 2 for five (5) years from the
Closing of this transaction, and (iv) the agreement of Shareholder to refrain
from competition for the later of five (5) years from the Closing Date or one
(1) year after the termination of Shareholder's employment with Purchaser No. 1
pursuant to and in accordance with, the terms of his Employment Agreement to be
executed upon Closing.
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 have the meaning ascribed to such term in
---------
Rule 405 promulgated under the Securities Act of 1933, as amended.
1.2 Assumed Liabilities No 1. The "Assumed Liabilities No. 1" are the
---------------------------
liabilities of Seller assumed or paid at Closing by Purchaser No. 1
pursuant to Section 3.1 of this Agreement.
1.3 Assumed Liabilities No 2. The "Assumed Liabilities No. 2" are the
---------------------------
liabilities of Seller assumed or paid at Closing by Purchaser No. 2
pursuant to Section 3.2 of this Agreement.
1.4 Balance Sheet. The "Balance Sheet" is the unaudited balance sheet of
--------------
Seller as of May 31, 2000, included as part of the Financial Statements.
1.5 Closing. The "Closing" shall be the consummation of the transactions
-------
contemplated under this Asset Purchase Agreement.
1.6 Closing Date. The "Closing Date" shall be as of 12:01 a.m., E.D.T.,
-------------
July 3, 2000.
2
1.7 Code. The "Code" is the Internal Revenue Code of 1986, as amended, 26
----
U.S.C. 1 et seq.
------
1.8 Court. A "Court" is any federal, state, municipal, domestic, foreign or
-----
other governmental tribunal or an arbitrator or person with similar power
or authority.
1.9 Disclosure Schedule. The "Disclosure Schedule" is the Disclosure
--------------------
Schedule dated the date of this Agreement and delivered by Seller to
Purchaser No. 1 and Purchaser No. 2, respectively.
1.10 Encumbrance. An "Encumbrance" is any security interest, lien, or
-----------
encumbrance whether imposed by agreement, understanding, law or otherwise,
on any of Purchased Assets No. 1 and/or Purchased Assets No. 2 (as defined
herein).
1.11 Excluded Assets. An "Excluded Asset" is any asset set forth in Section
---------------
2.4.
1.12 Financial Statements. The "Financial Statements" are the audited
---------------------
financial statements of Seller for the year ended October 31, 1999,
including any and all notes thereto and the unaudited financial statements
of Seller for the period ending October 31, 1998 and October 31, 1997, and
for the period commencing November 1, 1999 and ending May 31, 2000.
1.13 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.
1.14 Knowledge of Seller and Shareholder or Seller's Knowledge. "Knowledge
----------------------------------------------------------
of Seller and Shareholder and/or Seller's Knowledge" shall mean actual
knowledge of the Shareholder.
1.15 Net Asset Amount No. 1. "Net Asset Amount No. 1" shall have the
--------------------------
meaning set forth in Section 5.1.
1.16 Net Asset Amount No. 2. "Net Asset Amount No. 2" shall have the
--------------------------
meaning set forth in Section 5.1.
1.17 NPBT. The net profit before taxes of Purchaser No. 1's Minneapolis/St.
----
Xxxx, Minnesota Division and Purchaser No. 2's Minneapolis/St. Xxxx,
Minnesota Division for the applicable period as set forth in Section 4.6.
The determination of NPBT shall be determined in accordance with the
provisions set forth in Section 4.6.
3
1.18 Person. Any natural person, firm, partnership, association,
------
corporation, company, limited liability company, limited partnership,
trust, business trust, governmental authority or other entity.
1.19 Pro Forma Balance Sheet No. 1. The "Pro Forma Balance Sheet No. 1" is
------------------------------
the balance sheet of Seller prepared as described in Section 5.1 and
adjusted for Excluded Assets of Seller and Excluded Liabilities relating to
Business No. 1 of Seller as of the Closing Date.
1.20 Pro Forma Balance Sheet No. 2. The "Pro Forma Balance Sheet No. 2" is
------------------------------
the balance sheet of Seller prepared as described in Section 5.1 and
adjusted for Excluded Assets of Seller and Excluded Liabilities relating to
Business No. 2 of Seller as of the Closing Date.
1.21 Purchase Price No. 1. The "Purchase Price No. 1" is the total
-----------------------
consideration paid by Purchaser No. 1 to Seller for Purchased Assets No. 1
as set forth in Sections 4.1 and 4.6.
1.22 Purchase Price No. 2. The "Purchase Price No. 2" is the total
-----------------------
consideration paid by Purchaser No. 2 to Seller for Purchased Assets No. 2
as set forth in Sections 4.2 and 4.6
1.23 Purchased Assets No. 1. The "Purchased Assets No. 1" are the assets of
----------------------
Seller, used in Business No. 1, acquired by Purchaser No. 1 pursuant to the
terms of this Agreement.
1.24 Purchased Assets No. 2. The "Purchased Assets No. 2" are the assets of
----------------------
Seller, used in Business No. 2, acquired by Purchaser No. 2 pursuant to the
terms of this Agreement.
1.25 Seller's Accountant. "Seller's Accountant" shall mean Xxxxxx,
--------------------
Xxxxxxxxx, Xxxxxx and Co., P.L.L.P.
1.26 May 31st Pro-Forma Balance Sheet No. 1. The "May 31st Pro-Forma
--------------------------------------------
Balance Sheet No. 1" is the unaudited balance sheet of Seller adjusted for
Excluded Assets of Seller and Excluded Liabilities relating to Business No.
1 of Seller as of May 31, 2000.
1.27 May 31st Pro-Forma Balance Sheet No. 2. The "May 31st Pro-Forma
--------------------------------------------
Balance Sheet No. 2" is the unaudited balance sheet of Seller adjusted For
Excluded Assets of Seller and Excluded Liabilities relating to Business No.
2 of Seller as of May 31, 2000.
4
1.28 Tax or Taxes. Any federal, state, provincial, local, foreign or other
-------------
income, alternative, minimum, any taxes under Section 1374 of the Code, any
taxes under Section 1375 of the Code, accumulated earnings, personal
holding company, franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, sales, use, goods and
services, excise, customs duties, transfer, conveyance, mortgage,
registration, stamp, documentary, recording, premium, severance,
environmental, including taxes under Section 59A of the Code), real
property, personal property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care, withholding,
estimated or other similar tax, duty or other governmental charge or
assessment or deficiencies thereof (including all interest and penalties
thereon and additions thereto whether disputed or not).
1.29 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 Seller.
2.
TERMS
-----
2.1 Agreement.
---------
Seller agrees to sell and convey to Purchaser No. 1 the Purchased Assets
No. 1 as hereinafter set forth in Section 2.2. Seller agrees to sell and
convey to Purchaser No. 2 the Purchased Assets No. 2 as hereinafter set
forth in Section 2.3. Purchaser No. 1 agrees to purchase the Purchased
Assets No. 1 and Purchaser No. 2 agrees to purchase the Purchased Assets
No. 2. The agreements of Purchaser No. 1 and Purchaser No. 2 and Seller are
expressly conditioned upon the terms, conditions, covenants,
representations and warranties as hereinafter set forth.
2.2 Assets to be Sold by Seller and Purchased by Purchaser No. 1.
-----------------------------------------------------------------------
At the Closing of this Agreement, Purchaser No. 1 shall purchase and Seller
shall sell all the assets of Seller used in Business No. 1, except for the
Excluded Assets relating to Business No. 1. The Purchased Assets No. 1
shall include, but not be limited to:
(a) The tangible personal property and assets of Seller of every kind and
description, real, personal or mixed, wherever located, used in
Business No. 1, including without limitation, all such assets as
5
reflected on the May 31, 2000 Pro Forma Balance Sheet No. 1 (excepting
those assets disposed of, and including those assets acquired, in the
ordinary course of business since the date of the May 31, 2000 Pro
Forma Balance Sheet No. 1).
(b) All intangible assets of Seller which are used in Business No. 1 of
Seller, including without limitation, all purchase orders, contract
rights and agreements, work in process, customer lists, supplier
agreements, patents, trademarks and service marks (including the
goodwill associated with the marks), office supplies, computer
programs, claims of the Seller, the right to use of the corporate and
trade names 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 and customer
notes receivable relating to Business No. 1;
(d) All inventory of Business No. 1 which shall be valued on a moving
average basis at the lower of cost of acquisition, less any trade or
cash discounts, or market;
(e) All accounts receivable and vendor receivables relating to Business
No. 1;
(f) All prepaid expenses applicable to Business No. 1, including but not
limited to all prepaid software licenses;
(g) All vendor rebates, spiff money, retainage amounts under any contracts
and any customer deposits relating to Business No. 1;
(h) All distribution contracts and authorizations of Seller relating to
Business No. 1;
(i) 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 including all intellectual
property rights therein relating to Business No. 1;
(j) The assignment of any telephone numbers used in Business No. 1 of
Seller;
(k) The entire right, title, benefit and interest of Seller now existing
or hereafter arising, in or to all indemnities, guaranties,
warranties, claims and choses of action of Seller against other
parties with respect to Purchased Assets No. 1, including by way of
example and not limitation, any rights under insurance policies and
any other rights thereunder, but only with respect to Purchased Assets
No. 1;
6
(l) Seller's rights under the agreements set forth in Schedule 2.2(l) with
respect to the parties set forth therein, pursuant to which such
parties agreed not to disclose, use or communicate information
regarding such parties' business (which is part of Business No. 1) and
not to engage in certain activities competitive with Business No. 1.
(m) 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 rights under the respective asset purchase agreements,
stock purchase agreements or other documents set forth on Disclosure
Schedule 2.2(m) (and related documents) pursuant to which Seller
acquired certain of the assets of the parties set forth in such
Disclosure Schedule.
2.3 Assets to be Sold by Seller and Purchased by Purchaser No. 2.
-----------------------------------------------------------------------
At the Closing of this Agreement, Purchaser No. 2 shall purchase and Seller
shall sell all the assets of Seller used in Business No. 2, except for the
Excluded Assets relating to Business No. 2. The Purchased Assets No. 2
shall include, but not be limited to:
(a) The tangible personal property and assets of Seller of every kind and
description, real, personal or mixed, wherever located, used in
Business No. 2, including without limitation, all such assets as
reflected on the May 31, 2000 Pro Forma Balance Sheet No. 2 (excepting
those assets disposed of, and including those assets acquired, in the
ordinary course of business since the date of the May 31, 2000 Pro
Forma Balance Sheet No. 2).
(b) All intangible assets of Seller which are used in Business No. 2 of
Seller, including without limitation, all purchase orders, contract
rights and agreements, work in process, customer lists, supplier
agreements, patents, trademarks and service marks (including the
goodwill associated with the marks), office supplies, computer
programs, claims of the Seller, the right to use of the corporate and
trade names 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 and customer
notes receivable relating to Business No. 2;
7
(d) All inventory of Business No. 2 which shall be valued on a moving
average basis at the lower of cost of acquisition, less any trade or
cash discounts, or market;
(e) All accounts receivable and vendor receivables relating to Business
No. 2;
(f) All prepaid expenses applicable to Business No. 2, including but not
limited to all prepaid software licenses;
(g) All of Seller's fixed rate contracts and time and material contracts
relating to Business No. 2;
(h) All vendor rebates, spiff money, retainage amounts under any contracts
and any customer deposits relating to Business No. 2;
(i) All of Seller's service contracts relating to Business No. 2;
(j) All distribution contracts and authorizations of Seller relating to
Business No. 2;
(k) 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 including all intellectual
property rights therein relating to Business No. 2;
(l) The assignment of any telephone numbers used in Business No. 2 of
Seller;
(m) The entire right, title, benefit and interest of Seller now existing
or hereafter arising, in or to all indemnities, guaranties,
warranties, claims and choses of action of Seller against other
parties with respect to Purchased Assets No. 2, including by way of
example and not limitation, any rights under insurance policies and
any other rights thereunder, but only with respect to Purchased Assets
No. 2;
(n) Seller's rights under the agreements set forth in Schedule 2.3(n) with
respect to the parties set forth therein, pursuant to which such
parties agreed not to disclose, use or communicate information
regarding such parties' business (which is part of Business No. 2) and
not to engage in certain activities competitive with Business No. 2;
and
8
(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 rights under the respective asset purchase agreements,
stock purchase agreements or other documents set forth on Disclosure
Schedule 2.3(o) (and related documents) pursuant to which Seller
acquired certain of the assets of the parties set forth in such
Disclosure Schedule.
2.4 Excluded Assets.
----------------
The Excluded Assets are set forth on Exhibit A hereto.
2.5 Lease Agreements.
-----------------
Seller is the lessee under certain lease agreements calling for payments of
more than $5,000.00 per year covering the following real and personal
properties:
(i) See attached Disclosure Schedule 2.5.
At the Closing, Seller and Purchaser No. 1 or Purchaser No. 2 shall execute
necessary documentation for the assignment of these leases and all of
Seller's right and interest thereunder to Purchaser No. 1 and/or Purchaser
No. 2, as agreed upon by the parties and, at the Closing, Seller shall
assign all its rights and interest in said leases to Purchaser No. 1 and/or
Purchaser No. 2, as applicable. Purchaser No. 1 and Purchaser No. 2 agree
to indemnify and hold Seller harmless from any liability with respect to
the aforementioned leases occurring after the Closing Date which is assumed
by such party. 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, or as reasonably possible after the Closing.
9
2.6 Instruments of Transfer.
-------------------------
Except as otherwise provided herein, at Closing, Seller will deliver to
Purchaser No. 1 and Purchaser No. 2, respectively, such bills of sale,
endorsements, assignments and other good and sufficient instruments of
transfer and assignment as shall be effective to vest in Purchaser No. 1
and Purchaser No. 2, as applicable, good title and interest in and to
Purchased Assets No. 1 and Purchased Assets No. 2, respectively. At or
after the Closing, and without further consideration, Seller will execute
and deliver to Purchaser No. 1 and Purchaser No. 2, as applicable, such
further instruments of conveyance and transfer and take such other action
as Purchaser No. 1 and/or Purchaser No. 2 may reasonably request in order
to more effectively convey and transfer to Purchaser No. 1 and/or Purchaser
No. 2, as applicable, any of the Purchased Assets No. 1 and/or Purchased
Assets No. 2 or for aiding and assisting and collecting and reducing to
possession and exercising rights with respect thereto. Seller and
Shareholder agree to use their best efforts to obtain and deliver to
Purchaser No. 1 and Purchaser No. 2, as applicable, such consents,
approvals, assurances and statements from third parties as Purchaser No. 1
and Purchaser No. 2, as applicable, may reasonably require in a form
reasonably satisfactory to Purchaser No. 1 and Purchaser No. 2. In addition
to the foregoing, Seller will deliver to Purchaser No. 1 and Purchase No.
2, as applicable, the originals or copies of all of Seller's books, records
and other data relating to Purchased Assets No. 1 and Purchased Assets No.
2, respectively; and simultaneously with such delivery, Seller shall take
all such acts as may be necessary to put Purchaser No. 1 in actual
possession, and operating control of Purchased Assets No. 1 and put
Purchaser No. 2 in actual possession, and operating control of Purchased
Assets No. 2. Seller shall cooperate with Purchaser No. 1 and Purchaser No.
2 to permit such parties, 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.
2.7 Instruments Giving Certain Powers and Rights.
-------------------------------------------------
At the Closing, Seller shall, by appropriate instrument, constitute and
appoint Purchaser No. 1 and Purchaser No. 2, their respective successors
and assigns, the true and lawful attorney of Seller with full power of
substitution, in the name of Purchaser No. 1 and/or Purchaser No. 2, as
applicable, or the name of Seller, on behalf of and for the benefit of
Purchaser No. 1 and Purchaser No. 2, as applicable, to collect all accounts
receivable and/or vendor receivables and other items being transferred and
assigned to Purchaser No. 1 and/or Purchaser No. 2, as applicable, as
provided herein, to endorse, without recourse, any and all checks in the
name of Seller the proceeds of which Purchaser No. 1 and/or Purchaser No.
2, as applicable, is entitled to hereunder, to institute and prosecute, in
the name of Seller or otherwise, all proceedings which Purchaser No. 1
and/or Purchaser No. 2, as applicable, may deem proper in order to collect,
10
assert or enforce any claim, right or title of any kind in or to Purchased
Assets No. 1 and/or Purchased Assets No. 2, as applicable, to defend and
compromise any and all actions, suits and proceedings in respect of any of
Purchased Assets No. 1 and/or Purchased Assets No. 2, as applicable, and to
do all such acts and things in relation thereto as such party may deem
advisable. Purchaser No. 1 and/or Purchaser No. 2, as applicable, shall
provide Seller with notice of any collection action(s) instituted by it
under this provision. 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 No. 1 and/or Purchaser No. 2,
as applicable, shall retain for its own respective account any amounts
collected pursuant to the foregoing powers, and Seller shall pay or
transfer to Purchaser No.1 and/or Purchaser No. 2, as applicable, if and
when received, any amounts which shall be received by Seller after the
Closing in respect of any such receivables or other assets, properties,
rights or business to be transferred and assigned to Purchaser No. 1 and/or
Purchaser No. 2, 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 Xx. 0 xxx/xx Xxxxxxxxx Xx. 0 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 No. 1
and/or Purchaser No. 2, as applicable, or to aid and assist in the
collection or granting of possession by Purchaser No. 1 and/or Purchaser
No. 2, as applicable, of any of the Purchased Assets No. 1 and/or the
Purchased Assets No. 2, or to vest in Purchaser No. 1 good and marketable
title to Purchased Assets No. 1 and to vest in Purchaser No. 2 good and
marketable title to Purchased Assets No. 2.
To the extent that any assignment does not result in a complete transfer of
the contracts to Purchaser No. 1 and/or Purchaser No. 2, as applicable,
because of a provision in any contract against Seller's assignment of any
its right thereunder, Seller shall cooperate with Purchaser No. 1 and
Purchaser No. 2 in any reasonable manner proposed by Purchaser No. 1 and/or
Purchaser No. 2, as applicable, to complete the acquisition of the
contracts and Seller's rights, benefits and privileges thereunder in order
to fulfill and carry out Seller's obligations under this Agreement. Such
additional action may include, but is not limited to: (i) entering into a
subcontract between Seller and Purchaser No. 1 and/or Purchaser No. 2, as
applicable, which allows such party to perform Seller's duties under such
contracts and to enforce Seller's rights thereunder; or (ii) entering into
a new multi-party agreement with such customers which allows Purchaser No.
1 and/or Purchaser No. 2, as applicable, to perform Seller's obligations
and enforce Seller's rights under the contracts.
11
3.
ASSIGNMENT OF LIABILITIES
-------------------------
12
3.1 Liabilities to be Paid Off at Closing or Assumed by Purchaser No. 1.
-----------------------------------------------------------------------
13
A. At the Closing, Purchaser No. 1 shall assume and pay off or discharge
when due (and secure the release of Seller and Shareholder from any
and all personal liability or guaranty with respect to such
obligation), the following:
(i) Seller's obligation to Deutsche Financial Services Company under
a floor plan credit facility, the outstanding amount of which on
June 22, 2000 is $637,525.53, plus accrued interest, and as of
the Closing Date is $1,085,264.49, which is collateralized by a
security interest in Seller's assets;
(ii) Seller's obligation to Deutsche Financial Services Company under
a line of credit facility, the outstanding amount of which on
June 22, 2000 is $970,225.15, plus accrued interest, and as of
the Closing Date is $703,887.98, which is collateralized by a
security interest in Seller's assets; and
Seller's obligation to Deutsche Financial Services Company for
both open and pending approvals for purchases of inventory of
approximately $180,826.39 as of the Closing Date, which are not
reflected in the above outstanding line of credit balance;
14
(iii)Seller's obligation to IBM Credit Corporation under a floor plan
credit facility, the outstanding amount of which on May 31, 2000
is $13,058.43, plus accrued interest, and as of the Closing Date
is $20,271.86, which is collateralized by a security interest in
Seller's assets;
(iv) Seller's obligation to Western State Bank of St. Xxxx under a
loan agreement, the outstanding amount of which on June 22, 2000
is $200,000.00, plus accrued interest, and as of the Closing Date
is $205,333.34;
(v) Seller's obligation to X.X. Xxxxxx under a loan arrangement, the
outstanding amount of which on June 22, 2000 is $255,454.76, plus
accrued interest, and as of the Closing Date is $259,393.91; and
15
(vi) Seller's obligation to Ford Communications in the amount of
$34,687.09.
The Assumed Liabilities to be paid off as set forth in Sections 3.1 A. (i),
(ii), (iii), (iv), (v) and (vi), as may be incurred, increased or decreased
since the May 31, 2000 Pro Forma Balance Sheet No. 1 to the Pro Forma
Balance Sheet No. 1 for operations in the ordinary course of business or
any other transaction permitted by this Agreement, and subject to the
satisfaction of the Net Asset Amount No. 1 requirement set forth in Section
4.1(d) as of the Closing Date.
It is intent of the parties that Purchaser No. 1 shall pay off at Closing,
or assume and pay off or discharge when due, all obligations of Seller set
forth in Section 3.1 A above (subparagraphs (iv) and (v) shall be paid off)
for which the Shareholder has personal liability and Purchaser No. 1 agrees
to use its best efforts to secure
the release of Shareholder from such liability after the Closing if such
releases are not secured prior to Closing.
B. All of the trade accounts payable of the Seller relating to Business
No. 1 incurred in the ordinary course of business consistent with
Seller's prior practices, the outstanding amount of which is
$287,550.33 on June 23, 2000, and as may be incurred, increased or
decreased since June 23, 2000 to the Pro Forma Balance Sheet No. 1 for
operations in the ordinary course of business or any other transaction
provided by this Agreement, and subject to the satisfaction of the Net
Asset Amount No. 1 requirement set forth in Section 4.1(d) as of the
Closing Date.
3.2 Liabilities to be Paid Off at Closing or Assumed by Purchaser No. 2.
-----------------------------------------------------------------------
At the Closing, Purchaser No. 2 shall assume and pay off or discharge when
due (and secure the release of Seller and Shareholder from any and all
personal liability or guaranty with respect to such obligation), the
following:
A. All of the trade accounts payable of the Seller relating to Business
No. 2 incurred in the ordinary course of business consistent with
Seller's prior practices, the outstanding amount of which is
$81,103.94 on June 23, 2000, and as may be incurred, increased or
decreased since June 23, 2000 for operations in the ordinary course of
business or any other transaction provided by this Agreement, and
subject to the satisfaction of the Net Asset Amount No. 2 requirement
set forth in Section 4.2(d) as of the Closing Date.
16
3.3 Executory Contracts to be Assumed by Purchaser No. 1.
------------------------------------------------------------
At the Closing, Purchaser No. 1 shall assume and pay, perform and discharge
when due the following:
(i) All of the obligations and liabilities of Seller arising after the
Closing under the contracts described in Section 2.2.
(ii) All future liabilities for merchandise in transit FOB shipping point
relating to Business No. 1 which has not been received and/or entered
into inventory by Seller and for which no xxxx has been posted by
Seller as of the Closing.
3.4 Executory Contracts to be Assumed by Purchaser No. 2.
------------------------------------------------------------
At the Closing, Purchaser No. 2 shall assume and pay, perform and discharge
when due the following:
(i) All of the obligations and liabilities of Seller arising after the
Closing under the contracts described in Section 2.3.
(ii) All future liabilities for merchandise in transit FOB shipping point
relating to Business No. 2 which has not been received and/or entered
into inventory by Seller and for which no xxxx has been posted by
Seller as of the Closing.
3.5 Excluded Liabilities.
---------------------
Notwithstanding anything in this Agreement to the contrary, Purchaser No. 1
and Purchaser No. 2 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
Assumed Liabilities No. 1 and Assumed Liabilities No. 2 that are
specifically assumed by such party. Without limiting the generality of the
foregoing, the following are included among the Liabilities of Seller which
Purchaser No. 1 and Purchase No. 2 shall not assume or become responsible
for (unless specifically included as Assumed Liabilities No. 1 or Assumed
Liabilities No. 2):
(a) all Liabilities for any 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
Purchased Assets No. 1 and Purchased Assets No. 2 to Purchaser No. 1
and Purchaser No. 2, respectively;
17
(b) 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
(provided that Seller's employees that become employees of Purchaser
Xx. 0 xxx/xx Xxxxxxxxx Xx. 0 xxxxx xx able to take any unused vacation
days for the current year during the remaining portion of the year as
part of Purchaser's No. 1 and/or Purchaser's No. 2 own vacation
program for its employees) 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, on or after the Closing Date;
(c) 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 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 of
Seller's employees, prior to, on or after the Closing Date;
(d) 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;
(e) all Liabilities and obligations of Seller arising under or by virtue
of federal or state environmental laws 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 prior to, on or after the Closing Date;
(f) all Liabilities of Seller including any costs of attorneys' fees
incurred in connection therewith, for litigation, claims, demands or
governmental proceedings arising from occurrences, circumstances or
events, or exposure to conditions occurring or existing prior to the
Closing Date;
(g) 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;
18
(h) all attorneys' fees, accountants' or auditors' fees, and other costs
and expenses incurred by Seller and/or Shareholder in connection with
the negotiation, preparation and performance of this Agreement or any
of the transactions contemplated hereby;
(i) all Liabilities of Seller in connection with the Excluded Assets;
(j) 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; and
(k) any Liabilities of Seller incurred incident to any indemnification for
breach of any representations, warranties, covenants, or other
agreements made by Seller under any of the asset purchase, stock,
reorganization, or other legal transaction(s) set forth in Disclosure
Schedule 2.2(m) and/or 2.3(o).
(l) any Liabilities of Seller with respect to any loans or advances made
by Shareholder or any Affiliate to Seller;
(m) 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 Purchased Assets No. 1 and/or Purchased Assets No. 2 on or prior to
the Closing Date or the conduct of the Business No. 1 of Seller and/or
Business No. 2 of Seller prior to the Closing Date, except only for
the liabilities and obligations to be assumed or paid, performed or
discharged by Purchaser No. 1 and/or Purchaser No. 2 constituting
Assumed Liabilities No. 1 or Assumed Liabilities No. 2.
Seller shall pay all liabilities not being assumed hereunder by Purchaser No. 1
or Purchaser No. 2 within the customary time for payment of such liabilities.
It is the intent of the parties that upon Closing, all employees of Seller will
be terminated by such parties and Purchaser No. 1 or Purchaser No. 2 will extend
offers of employment to such individuals.
19
4.
CONSIDERATION FOR
-----------------
PURCHASED ASSETS NO. 1 AND PURCHASED ASSETS NO. 2
-------------------------------------------------
4.1 Purchase Price No. 1 for Purchased Assets No. 1.
-------------------------------------------------------
Subject to the other terms of this Agreement, Purchase Price No. 1 for
Purchased Assets No. 1 shall be the sum of:
(a) Zero Dollars ($0.00);
(b) The liabilities assumed or paid off at Closing under Section 3.1; and
(c) Any amount that may be paid pursuant to Section 4.6 that is allocated
to Purchase Price No. 1.
The sum of the items contained in Sections 4.1(a), (b) and (c) above shall
be adjusted by the amount determined under Sections 4.1(d) and 4.1(e) as
follows:
(d) If Net Asset Amount No. 1 of Seller as of the Closing Date as shown on
the Pro Forma Balance Sheet No. 1 is less than $(29,071.00), Purchase
Price No. 1 shall be decreased on a dollar-for-dollar basis to the
extent of such deficit. If Net Asset Amount No. 1 of Seller as of the
Closing Date as shown on Pro Forma Balance Sheet No. 1 is greater than
$(29,071.00), Purchase Price No. 1 shall be increased on a
dollar-for-dollar basis to the extent of such excess. The
determination of Net Asset Amount No. 1 shall be made in the manner
provided for in Section 5.1 hereof.
(e) The Purchase Price No. 1 shall be reduced by the sum of $5,000.00 for
each employee of Seller who fails to commence employment with
Purchaser No. 1 and/or Purchaser No. 2 upon the Closing Date and for
each employee who would leave the employment of Purchaser No. 1 and/or
Purchaser No. 2 before the expiration of ninety (90) days from the
Closing Date other than due to such employee's death, disability or
the agreement of Purchaser Xx. 0, Xxxxxxxxx Xx. 0, and Seller and
Shareholder to terminate employee. Purchaser No. 1 acknowledges that
X. Xxxxxxx and X. Xxxxx have provided Seller with termination notices,
which terminations shall not be subject to this provision.
4.2 Purchase Price No. 2 for Purchased Assets No. 2.
-------------------------------------------------------
Subject to the other terms of this Agreement, the Purchase Price for
Purchased Assets No. 2 shall be the sum of:
(a) One Hundred Fifty Thousand Dollars ($150,000.00);
(b) The liabilities assumed or paid off at Closing under Section 3.2; and
(c) Any amount that may be paid pursuant to Section 4.6 that is allocated
to Purchase Price No. 2.
The sum of the items contained in Sections 4.2(a), (b), (c), above
shall be adjusted by the amount determined under Section 4.2(d), as
follows:
(d) If Net Asset Amount No. 2 of Seller as of the Closing Date as shown on
the Pro Forma Balance Sheet No. 2 is less than $570,253.00, Purchase
Price No. 2 shall be decreased on a dollar-for-dollar basis to the
extent of such deficit. If Net Asset Amount No. 2 of Seller as of the
Closing Date as shown on Pro Forma Balance Sheet No. 2 is greater than
$570,253.00, Purchase Price No. 2 shall be increased on a
dollar-for-dollar basis to the extent of such excess. The
determination of Net Asset Amount No. 2 shall be made in the manner
provided for in Section 5.1 hereof.
4.3 Payment of the Purchase Price for Purchased Assets No. 1.
-----------------------------------------------------------------
Subject to the conditions, covenants, representations and warranties
hereof, at Closing, Purchaser No. 1 shall deliver:
(a) A promissory note in the amount of $0.00, as may be adjusted as set
forth in Section 4.1(d) and/or Section 4.1(e). Such promissory note
shall bear interest at the prime rate of Chase Manhattan Bank as of
the date of Closing. The principal of the promissory note and all
accrued interest shall be payable in full ninety (90) days from the
Closing Date. A copy of said promissory note is attached hereto as
Exhibit "B".
(b) The Assumed Liabilities No. 1 assumed or paid off under Section 3.1.
20
4.4 Payment of the Purchase Price for Purchased Assets No. 2.
-----------------------------------------------------------------
Subject to the conditions, covenants, representations and warranties
hereof, at Closing, Purchaser No. 2 shall deliver:
(a) A promissory note in the amount of $150,000.00, as may be adjusted as
set forth in Section 4.2(d). Such promissory note shall bear interest
at the prime rate of Chase Manhattan Bank as of the date of Closing.
The principal of the promissory note and all accrued interest shall be
payable in full ninety (90) days from the Closing Date. A copy of said
promissory note is attached hereto as Exhibit "B-1".
(b) The Assumed Liabilities No. 2 assumed or paid off under Section 3.2.
4.5 Allocation of Purchase Price.
-------------------------------
Purchase Price No. 1 to be paid to Seller hereunder, including the
liabilities assumed or paid by Purchaser No. 1 pursuant to Section 3.1,
shall be allocated as set forth on Exhibit C attached hereto. Purchase
Price No. 2 to be paid to Seller hereunder, including the liabilities
assumed or paid by Purchaser No. 2 pursuant to Section 3.2, shall be
allocated as set forth in Exhibit C-1 attached hereto. Seller, Purchaser
Xx. 0, Xxxxxxxxx Xx. 0 and Shareholder 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.
4.6 Potential Adjustment to Purchase Price.
------------------------------------------
If the net profits before taxes ("NPBT") of the Purchaser No. 1's and
Purchaser No. 2's Minneapolis/St. Xxxx Divisions in the aggregate during
any of fiscal years 2000 (July 3, 2000 to January 5, 2001), 2001, 2002,
2003, 2004 and (January 6, 2005 to July 2, 2005) exceed the applicable NPBT
threshold for such year set forth below:
Fiscal Year 2000 - (Closing Date to January 5, 2001-pro rate
$650,000.00)
Fiscal Year 2001 - $650,000
Fiscal Year 2002 - $650,000
Fiscal Year 2003 - $650,000
Fiscal Year 2004 - $650,000
(January 6, 2005
to July 2, 2005) - Pro rate $650,000
21
Purchaser No. 1 and Purchaser No. 2 (according to the percentages set forth
below) shall pay Seller, by bank check or wiring within ninety (90) days
following the end of the fiscal year, an amount equal to fifty percent (50%) of
the aggregate NPBT of Purchaser No. 1's and Purchaser No. 2's Minneapolis/St.
Xxxx Divisions in excess of the NPBT Threshold for the applicable year or
portion thereof, subject to a cumulative limitation of Seven Million Three
Hundred Thousand Dollars ($7,300,000.00) during such aggregate period. Any NPBT
shortfall in any year shall not be offset against any excess NPBT in any
subsequent year(s) hereunder, it being the intent of the parties that the NPBT
Threshold set forth herein shall apply to each applicable year separately,
subject, however, to the cumulative limitation of Seven Million Three Hundred
Thousand Dollars ($7,300,000.00) during such aggregate period. Such cash
payment by Purchaser Xx. 0 xxx Xxxxxxxxx Xx. 0 xxxxx xx additional Purchase
Price which will be added to the good will allocation of the Purchase Price.
Commencing on the installation of the Astea (MIS and Accounting) System at the
Purchaser's No. 1 and Purchaser's No. 2 Minneapolis/St. Xxxx Divisions, a 1.5%
MAS royalty fee on gross sales by Purchaser No. 1's and Purchaser No. 2's
respective Minneapolis/St. Xxxx Divisions shall be made incident to said
determination. For each subsequent year described above in this paragraph for
which Purchaser No. 1 and Purchaser No. 2 may be required to pay additional
Purchase Price, the parties shall, in good faith, agree upon the MAS royalty fee
to be charged hereunder based on the level of services and support being
provided by Purchaser No. 1 and Purchaser No. 2 to its respective
Minneapolis/St. Xxxx Division. Provided, however, such MAS royalty fee shall be
1.5% if the parties are unable to come to an agreement for each subsequent year.
For purposes of this Section, the term "Minneapolis/St. Xxxx Division" shall be
defined as Business No. 1 and Business No. 2 acquired from Seller, by Purchaser
Xx. 0 xxx Xxxxxxxxx Xx. 0, xxxxxxxxxxxx. Xxxxxxxxx Xx. 0 and Purchaser No. 2
shall pay their respective percentage of any amounts due hereunder, which
percentage shall be predicated on the respective NPBT contribution made by each
of their Minneapolis/St. Xxxx Divisions to the computation set forth above.
For purposes of this Section, the term "NPBT" shall mean the net profit
before taxes of Purchaser No. 1's and Purchaser No. 2's Minneapolis/St.
Xxxx Divisions during the applicable period. The NPBT shall be determined
by the internally-generated financial statements of Purchaser No. 1 and
Purchaser No. 2 determined in the manner set forth above in accordance with
generally accepted accounting principles, consistently applied, provided
that no effect shall be given to any gain or loss attributable to sale of
assets by said Divisions not in the ordinary course of business. Said
determination of NPBT shall be subject to verification as described below.
In addition, for purposes of determining NPBT for any particular year,
except as noted above, no item of income or expense will be allocated by
Purchaser No. 1 or Purchaser No. 2 to Purchaser No. 1's and/or Purchaser
No. 2's Minneapolis/St. Xxxx Division unless such items are reasonably
calculated to contribute to the increase in profits of such Minneapolis/St.
Xxxx Divisions, it being the intent of the parties that the Purchaser No. 1
and Purchaser No. 2 shall exercise the utmost good faith with respect to
allocations of income and expense to Purchaser No. 1's and Purchaser No.
2's Minneapolis/St. Xxxx Division. Incident to the determination of NPBT of
Purchaser No. 1's and Purchase No. 2's Minneapolis/St. Xxxx Division, no
compensation of any executive or other employee of Purchaser No. 1 and/or
Purchaser No. 2 or their respective affiliates who do not work directly for
Purchaser No. 1's and/or Purchaser No. 2's Minneapolis/St. Xxxx Division
shall be allocated to such division. Any payment made to Seller pursuant to
this Section 4.6 shall not be charged against the NPBT for any year.
22
Within ninety (90) days after the end of each fiscal year or period
described herein, Purchaser No. 1 and Purchaser No. 2 will deliver to
Seller a copy of the report of NPBT prepared by Purchaser No. 1 and
Purchaser No. 2 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 No. 1 and
Purchase No. 2 and Seller and Purchaser No. 1 and Purchaser No. 2 are able
to resolve their differences in writing within thirty (30) days following
the expiration of the thirty-day (30-day) period, then such determination
shall become final and binding as it regards to this Agreement. If timely
objection is made by Seller to Purchaser No. 1 and Purchaser No. 2 and
Seller and Purchaser No. 1 and Purchaser No. 2 are unable to resolve their
differences in writing within thirty (30) days following the expiration of
the thirty-day (30-day) period, then all disputed 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 No. 1 and Purchaser No. 2 and Seller. If Purchaser No. 1 and
Purchaser No. 2 and Seller are unable to agree promptly on an accounting
firm to serve as the Arbitrator, each shall select by no later than the
30th day following the expiration of the sixty-day (60-day) period, an
accounting firm, and the two selected accounting firms shall be instructed
to select promptly another independent accounting firm, such newly selected
firm to serve as the Arbitrator. The Arbitrator shall consider only the
disputed matters pertaining to the determination and shall act promptly to
resolve all disputed matters, and its decision with respect to all disputed
matters shall be final and binding upon Seller and Purchaser. Expenses of
the Arbitration shall be borne one-half (1/2) by Purchaser No. 1 and
Purchaser No. 2 and one-half (1/2) by Seller. Each party shall be
responsible for its own attorney and accounting fees.
4.7 Certain Closing Expenses.
--------------------------
Except as set forth below, Seller shall be responsible for and shall pay
all federal, state and local sales tax (if any), documentary stamp tax and
all other duties, or other like charges properly payable upon and in
connection with the conveyance and transfer of the Purchased Assets No. 1
by Seller to Purchaser No. 1 and the conveyance and transfer of the
Purchased Assets No. 2 by Seller to Purchaser No. 2.
23
5.
POST-CLOSING ADJUSTMENTS
------------------------
5.1Within sixty (60) days after the Closing Date (the "Post Closing Date"),
Seller's Accountant will deliver to Purchaser No.1 and to Purchaser No. 2 copies
of Pro Forma Balance Sheet No. 1 and Pro Forma Balance Sheet No. 2,
respectively, prepared by Seller's Accountant along with any supporting
documentation reasonably requested by Purchaser No. 1 or Purchaser No. 2
reflecting Net Asset Amount No. 1 and Net Asset Amount No. 2 as of the Closing
which shall be defined as the total of the Purchased Assets No. 1 less the total
of the Assumed Liabilities No. 1 relating to Business No. 1, as reflected on Pro
Forma Balance Sheet No. 1 (the "Net Asset Report No. 1") and the total of the
Purchased Assets No. 2 less the total of the Assumed Liabilities No. 2 relating
to Business No. 2, as reflected on Pro Forma Balance Sheet No. 2 (the "Net Asset
Report No. 2"). The Pro Forma Balance Sheet No. 1 and the Pro Forma Balance
Sheet No. 2 shall be prepared using the same accounting methods, policies,
practices and procedures, with consistent classifications, judgments,
estimations and methodologies as used in the preparation of the May 31, 2000 Pro
Forma Balance Sheet No. 1 and the May 31, 2000 Pro Forma Balance Sheet No. 2.
Within thirty (30) days following delivery to Purchaser No. 1 of Net Asset
Report No. 1 and to Purchaser No. 2 of Net Asset Report Xx. 0, Xxxxxxxxx Xx. 0
and Purchaser No. 2 shall have the right to object in writing to the results
contained therein. If timely objection is not made by Purchaser No. 1 and/or
Purchaser No. 2 to Net Asset Report No. 1 and/or Net Asset Report No. 2, as
applicable, Net Asset Report No. 1 and Net Asset Report No. 2 shall become final
and binding for purposes of this Agreement. If timely objection is made by
Purchaser No. 1 and/or Purchaser No. 2 to Net Asset Report No. 1 and/or Net
Asset Report No. 2, and Seller and Purchaser No. 1 and/or Purchaser No. 2, as
applicable, are able to resolve their differences in writing within fifteen (15)
days following the expiration of such thirty (30) day period, then Net Asset
Report No. 1 and/or Net Asset Report No. 2, as resolved, shall become final and
binding as it relates to this Agreement. If timely objection is made by
Purchaser No. 1 and/or Purchaser No. 2, as applicable, to Net Asset Report No. 1
and/or Net Asset Report No. 2 and Seller and Purchaser No. 1 and/or Purchaser
No. 2, as applicable, are unable to resolve their differences in writing within
such fifteen (15) day period, then all disputed matters pertaining to Net Asset
Report No. 1 and/or Net Asset Report No. 2 shall be submitted to and reviewed by
an arbitrator (the "Arbitrator") which shall be an independent accounting firm
selected by Seller and Purchaser No. 1 and/or Purchaser No. 2, as applicable.
If Purchaser No. 1 and/or Purchaser No. 2, as applicable, and Seller are unable
to agree promptly on the accounting firm to serve as the Arbitrator, each shall
select by not later than the seventh (7th) day following the expiration of the
Net Asset Report objection period, a nationally recognized accounting firm, and
each selected accounting firm shall be instructed to jointly select promptly
another nationally recognized accounting firm, such third accounting firm shall
serve as the Arbitrator. The Arbitrator shall consider only the disputed
matters pertaining to the determination and shall act promptly and fairly to
resolve all disputed matters and its decision with respect to all disputed
matters shall be final and binding upon Seller, Purchaser No. 1 and Purchaser
No. 2, as applicable. The expenses of the arbitration shall be borne one-half
(1/2) by Purchaser No. 1 and/or Purchaser No. 2, as applicable, and one-half
(1/2) by Seller. Each party shall be responsible for its own attorney and
accounting fees. If the Net Asset Amount No. 1 (as shown on the Net Asset
Report No. 1) is less than $(29,071.00), the Purchase Price No. 1 to be paid to
Seller shall be decreased on a dollar-for-dollar basis for such difference and
shall be off-set against the promissory note set forth in Section 4.3(a) or
(Section 4.4(a), if necessary), then from any payments to be made to Seller
24
under Section 4.6, if necessary, and then from Seller and/or Shareholder for any
deficiency, if any. If the Net Asset Amount No. 1 is greater than $(29,071.00),
the Purchase Price No. 1 to be paid to Seller shall be increased on a
dollar-for-dollar basis for excess by Purchaser paying to Seller by certified or
cashier's check or wire transfer such excess. If the Net Asset Amount No. 2 (as
shown on the Net Asset Report No. 2) is less than $570,253.00, the Purchase
Price No. 2 to be paid to Seller shall be decreased on a dollar-for-dollar basis
for such difference by Seller and shall be off-set against the promissory note
set forth in Section 4.4(a) (or Section 4.3(a), if necessary), then against, any
payments to be made to Seller, if any, under Section 4.6, if necessary, and then
from Seller and/or Shareholder for any deficiency, if any. If the Net Asset
Amount No. 2 is greater than $570,253.00, the Purchase Price No. 2 to be paid to
Seller shall be increased on a dollar-for-dollar basis by Purchaser No. 2 paying
to Seller by certified or cashier's check or wire transfer such excess.
6.
EMPLOYMENT AGREEMENT
--------------------
6.1 Employment Agreement of X. Xxxx.
-----------------------------------
At Closing, Purchaser No. 1 shall enter into an Employment Agreement with
X. Xxxx. A copy of said Employment Agreement is attached hereto and made a
part hereof as Exhibit D.
7.
COVENANT NOT TO COMPETE AGREEMENTS
----------------------------------
7.1 Covenant Not to Compete Agreements of Seller and Shareholder.
--------------------------------------------------------------------
At Closing, Seller and Shareholder shall enter into Covenant Not to Compete
Agreements with Purchaser No. 1 and Purchaser No. 2. Copies of said
Covenant Not to Compete Agreements are attached hereto and made a part
hereof as Exhibits E, E-1, E-2 and E-3.
25
8.
SUBLEASE AGREEMENT
------------------
8.1 Sublease Agreement.
-------------------
Shareholder is the owner of the real estate located at 0000 Xxxxxxx 0, Xx.
Xxxxx Xxxx, Xxxxxxxxx 00000. As a condition of the Closing of this
Agreement, Shareholder shall have caused Seller to enter into a Sublease
Agreement with Purchaser in the form attached hereto as Exhibit F. Such
lease shall be a triple net lease for no more than twelve thousand (12,000)
square feet for a period of three (3) years, at a base rental rate of $9.50
a square foot. Said Sublease shall be subject to cancellation by Purchaser
No. 1 at any time after one (1) year has lapsed from the commencement of
such Sublease, subject to a ninety (90) day written notice requirement by
Purchaser No.1 to Seller. Shareholder agrees not to terminate the
underlying lease between it and Seller during the term of the Sublease
Agreement, as long as Purchaser No. 1 is not in default under the terms of
the Sublease.
9.
REPRESENTATIONS AND WARRANTIES
------------------------------
OF SELLER AND SHAREHOLDER
-------------------------
Except as set forth in the Disclosure Schedule attached hereto, Seller and
Shareholder, jointly and severally, represent and warrant to Purchaser No.
1 and Purchaser No. 2 that the following statements are true and correct as
of the date hereof:
9.1 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 Delaware and has the corporate
power and authority to own, lease and operate the Purchased Assets No. 1
and the Purchased Assets No. 2 and to conduct Business No. 1 and Business
No. 2 currently being conducted by it. The Seller is duly qualified and
validly existing in Delaware 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.
26
9.2 Capitalization.
--------------
The authorized capitalization of the Seller consists solely of one thousand
(1,000) shares of common stock, without par value, of which three (3)
shares representing one hundred percent (100%) of the issued stock are
currently owned by the Shareholder, are fully paid and nonassessable and
have not been issued in violation of the preemptive rights of any person.
Except as set forth in Disclosure Schedule, 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.
9.3 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 its 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.
9.4 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 No. 1 to Purchaser No.
1 and of the Purchased Assets No. 2 to Purchaser No. 2 as contemplated
in this 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 Purchased Assets Xx. 0 xxx/xx Xxxxxxxxx Xxxxxx Xx. 0, (xx) (except
for Seller's secured creditors set forth in Sections 3.1 and/or 3.2,
whose consent shall be obtained prior to Closing and except as set
forth in Disclosure Schedule), 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
27
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 No.1 and/or
Purchased Assets No. 2), and (iii) will not result in the creation of
any encumbrance upon any of the properties, assets, or Business No. 1
or Business No. 2 of Seller or of Shareholder. Neither Seller, nor
Shareholder, nor any of their assets or properties (including, without
limitation, the Purchased Assets No. 1 and/or Purchased Assets No. 2)
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 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 No. 1 of Purchased Assets No. 1 or by Purchaser No. 2 of
Purchased Assets No. 2 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
No. 1 to Purchaser No. 1 or of Purchased Assets No. 2 to Purchaser No.
2, or the consummation of the other transactions contemplated thereby,
or to continue the use and operation of Purchased Assets No. 1 by
Purchaser No. 1 or Purchased Assets No. 2 by Purchaser No. 2 after the
Closing Date.
28
9.5 Financial Statements.
---------------------
(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 that the May 31, 2000 Pro Forma
Balance Sheet No. 1 and the May 31, 2000 Pro Forma Balance Sheet No. 2
do not contain any footnotes and are subject to normal year-end audit
adjustments as shall be reflected on the Pro Forma Balance Sheet No. 1
and Pro Forma Balance Sheet No. 2 of Seller which will be prepared as
set forth in Section 5.1) applied on a consistent basis throughout the
periods indicated 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 Pro
Forma Balance Sheet No. 1 and/or Pro Forma Balance Sheet No. 2, or 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 of Pro Forma Balance Sheet No. 1 and/or Pro Forma Balance Sheet No.
2, of any material liability of any nature or in any amount not fully
reflected, reserved against, or disclosed in the Financial Statements
or in Pro Forma Balance Sheet No. 1 and/or Pro Forma Balance Sheet No.
2.
9.6 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 1999 and
January through May of 2000 and the amount of business done by the Seller
with each such customer for such periods. Assuming that Purchaser No. 1
continues to conduct Business No. 1 and that Purchaser No. 2 continues to
conduct Business No. 2 in the ordinary course consistent with Seller's
prior practices generally and specifically with respect to Seller's current
customers, Seller has no 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 No. 1 and/or Purchaser
No. 2, as applicable, after the Closing.
29
9.7 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 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 No. 1 and/or Seller's Business No. 2 are the sole
property of the Seller and 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.
9.8 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 Business No. 1 and/or Business No. 2, 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 Dollars ($5,000.00)
per year, other than purchase orders incurred in the ordinary course
of business;
(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 No. 1 or
its Business No. 2 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, including but
not limited to any indemnification provided under any asset purchase
agreement, stock purchase agreement, or other transaction that Seller
is a party to;
30
(e) With any Affiliate of Seller;
(f) With any labor union or employees' association connected with Seller's
Business No. 1 and/or Seller's Business No. 2;
(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 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 (if written) have been provided or made available to Purchaser Xx.
0 xxx/xx Xxxxxxxxx Xx. 0. 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 any Shareholder, material
to Purchased Assets No. 1 or Purchased Assets No. 2, except such as have
been disclosed in the Disclosure Schedule and for which an accurate summary
description has been provided.
31
9.9 Inventory.
---------
Except as specifically described on the Disclosure Schedule, all inventory
is reflected on the May 31, 2000 Pro Forma Balance Sheet, and at the
Closing Date will consist of items of quality and quantity which are usable
or saleable in the ordinary course of business of Seller in the conduct of
its Business No. 1 and/or its Business No. 2, and items of below standard
quality and items not usable or saleable in the ordinary course of Seller's
business have been written down in value in accordance with good business
practices to estimated net realizable market value or adequate reserves
have been provided therefor. The values at which the inventory are carried
on the list attached to the Disclosure Schedule reflect the normal
valuation policy of Seller in setting inventory at the lower of cost or net
realizable market values, all in accordance with generally accepted
accounting principles. Except as set forth on the Disclosure Schedule,
since May 31, 2000, the inventory of Seller has been maintained at normal
and adequate levels for the continuation of the Business No. 1 and/or
Business No. 2 in its normal course. No change has occurred in such
inventory which affects or will affect the usability or salability thereof,
no write-downs or write-offs of the value of such inventory has occurred
and no additional amounts have been reserved with respect to such
inventories except in each case those adjustments made in the ordinary
course of business. The Disclosure Schedule lists the location of all
inventory together with a brief description of the type and amount at each
location.
9.10 Accounts Receivable and Vendor Receivables.
----------------------------------------------
All accounts receivable and vendor receivables of Seller which have arisen
in connection with Business No. 1 and/or Business No. 2 or otherwise and
which are reflected on the Financial Statements and all receivables which
have arisen since May 31, 2000 through the Closing shall have arisen only
from bonafide transactions in the ordinary course of business and represent
valid, collectible and existing claims, net of any reserve as reflected on
the Pro Forma Balance Sheet No. 1 and/or the Pro Forma Balance Sheet No. 2.
Subject to customer credit, the payment of each account and vendor
receivable will not be subject to any known defense, counterclaim condition
(other than Seller's performance in the ordinary course of business)
whatsoever. The Disclosure Schedule hereto accurately lists, as of the
Closing Date, all receivables arising out of or relating to Business Xx. 0
xxx/xx Xxxxxxxx Xx. 0, the amount owing and aging of such accounts
receivable, the name of the party from whom such account receivable is
owing, any security in favor of Seller for the repayment of such account
receivable which Seller purports to have. Seller has made available to
Purchaser No. 1 and Purchaser No. 2 complete and correct copies of all
instruments, documents and agreements evidencing such accounts receivable
and of all instruments, documents or agreements (if any) creating security
therefor.
32
9.11 Taxes.
-----
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, and except as set
forth in the Disclosure Schedule, 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. Seller and Shareholder shall pay, without
right of reimbursement from Purchaser No. 1 and/or Purchaser No. 2, all of
Seller and Shareholder's income Taxes including but not limited to any
Taxes attributable to any gain under Section 1374 of the Code, including
any interest and penalties thereon, that relate to the activities of Seller
through the Closing including this transaction, as due.
33
9.12 Title to Purchased Assets; Encumbrances.
-------------------------------------------
(a) With respect to Purchased Assets No. 1 and Purchased Assets No. 2
sold, at the Closing Seller shall have good title to Purchased Assets
No. 1 and/or Purchased Assets No. 2 being acquired by Purchaser No. 1
and/or Purchaser No. 2, respectively, and except for matters expressly
set forth in Section 3.1, Section 3.2 Section 3.3 or Section 3.4,
which Encumbrances, if any, upon Purchased Assets No. 1 and/or
Purchased Assets No. 2 shall be removed at Closing, free and clear of
all Encumbrances whatsoever; immediately after the transfer of
Purchased Assets No. 1 being acquired by Purchaser No. 1 from Seller
and Purchased Assets No. 2 being acquired by Purchaser No. 2 from
Seller, Purchaser No. 1 will own all of said Purchased Assets No. 1
and Purchaser No. 2 will own all of said Purchased Assets No. 2, free
and clear of all Encumbrances 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 Xx. 0, Xxxxxxxxx Xx. 0, or Purchased Assets No. 1 or
Purchased Assets No. 2. To the best of knowledge of Seller, all of
Seller's tangible and other operating assets used in Business No. 1
and/or Business No. 2 which are being sold hereunder to Purchaser No.
1 and/or Purchaser No. 2, respectively, are, in all material respects,
in good operating condition and repair, free of all structural,
material or mechanical defects and conform with all applicable laws
and regulations.
(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 No. 1 and/or Purchaser No. 2 or Purchased Assets No.
1 or Purchased Assets Xx. 0, xxx Xxxxxxxxx Xx. 0 xxx Xxxxxxxxx Xx. 0
are not obligated to assume the obligations under any contract,
agreement, lease or commitment of Seller, except as specifically set
forth herein.
9.13 Pending Actions.
----------------
Seller has not been served with or received notice of any actions, suits,
arbitrations, OSHA, 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
34
property or assets, nor are there any facts or conditions which exist which
would give rise to any such Actions or Disputes which, if determined
adversely to Seller, would have a material adverse effect upon Seller's
Business No. 1 and/or Seller's Business No. 2.
9.14 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.
9.15 Status of Business.
--------------------
(a) Since October 31, 1999, Business No. 1 and Business No. 2 of the
Seller have been operated only in the ordinary course, and, except as
set forth in the Disclosure Schedule or permitted under Section 2.4
dealing with Excluded Assets, there has not been with respect to
Business Xx. 0 xxx/xx Xxxxxxxx Xx. 0:
(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 Business No. 1 and/or Business No. 2, whether written or oral,
except in the ordinary course of business;
35
(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;
(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 Business
No. 1 and/or Business No. 2 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 Shareholder, or any
family member or any associate or Affiliate of the Seller or of
the Shareholder;
(xi) Any material contract canceled 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;
36
(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 Business No. 1 and/or Business No. 2 or assets; or
(xiv)Any dividend or other distribution on or in respect of shares of
its capital stock, except for any distributions made pursuant to
the provisions of Section 2.4 relating to Excluded Assets.
(b) Seller is not
(i) in violation of any outstanding judgment, order, injunction,
award or decree specifically relating to Business Xx. 0 xxx/xx
Xxxxxxxx Xx. 0, xx
(xx) in violation of any federal, state or local law, ordinance or
regulation which is applicable to Business No. 1 and/or Business
No. 2, except where such violation does not have a materially
adverse effect on Business No. 1 and/or Business No. 2.
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
Business No. 1 and/or Business No. 2, except where failure to have
such permit, license, order, approval, authorization, concession or
franchise does not have a materially adverse effect on Business Xx. 0
xxx/xx Xxxxxxxx Xx. 0. 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 Business No. 1 and/or
Business No. 2 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 Xx. 0
xxx/xx Xxxxxxxx Xx. 0.
00
(x) Xx the Closing, Seller shall have accrued or paid in full, to all
employees of Business No. 1 and/or Business No. 2, 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 Business No. 1 and/or Business No. 2, and all
employee benefit plans and tax laws relating to employment at Business
No. 1 and/or Business No. 2. There is no unfair labor practice
complaint against Seller relating to Business No. 1 and/or Business
No. 2 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 Business No. 1 and/or Business No. 2. Seller has no labor
contracts or collective bargaining agreements with respect to any of
its employees.
9.16 Environmental Laws.
-------------------
(a) To the best of Seller's Knowledge, the real estate located at 0000
Xxxxxxx 0, Xx. Xxxxx Xxxx, Xxxxxxxxx 00000, which is leased by Seller,
("Real Estate") has 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. 651, et seq.; Federal
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901, et
seq.; Federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. 9601, et seq.; the Federal Clean
Air Act, 42 U.S.C. 2401, et seq.; the Federal Clean Water Act, 33
U.S.C. 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.
38
(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 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.
9.17 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.
39
(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.
9.18 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.
9.19 Change of Corporate Name.
---------------------------
At the Closing, Seller, if requested by either Purchaser No. 1 and/or
Purchaser No. 2, will adopt and file with the Secretary of State of
Minnesota an Amendment to the Charter of Seller changing the name of Seller
to a name substantially dissimilar to DATASOURCE SYSTEMS CORPORATION, dba
DATASOURCE XXXXX and DATASOURCE SYSTEMS MARKETING CORPORATION and Seller
shall also execute a Consent for Use of Similar Name form, as set forth in
the Disclosure Schedule, granting to Purchaser No. 1 and/or Purchaser No. 2
(as may be agreed by such parties) the use of the name DATASOURCE SYSTEMS
CORPORATION, dba DATASOURCE XXXXX and/or DATASOURCE SYSTEMS MARKETING
CORPORATION.
40
9.20 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.
9.21 Preservation of Organization.
------------------------------
Except as set forth on the Disclosure Schedule, since October 31, 1999, the
Seller has kept intact Business No. 1 and/or Business No. 2 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 Xx. 0 xxx/xx Xxxxxxxx Xx. 0.
9.22 Absence of Certain Business Practices.
-----------------------------------------
Neither Seller, nor, to Seller's Knowledge, any officer, employee or agent
of the Seller, nor any other Person acting on its behalf, has, directly or
indirectly, within the past five years given or agreed to give any gift,
bribe, rebate or kickback or otherwise provide any similar benefit to any
customer, supplier, governmental employee or any other Person who is or may
be in a position to or hinder Seller or Business No. 1 and/or Business No.
2 (or assist Seller in connection with any actual or proposed transaction
relating to Business No. 1 and/or Business No. 2 or any other business
previously operated by Seller) (i) which subjected or might have subjected
Seller to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) which if not given in the past, might have
had a material adverse effect on Business Xx. 0 xxx/xx Xxxxxxxx Xx. 0,
(xxx) which if not continued in the future, might have a material adverse
effect on Business No. 1 and/or Business No. 2 or subject Seller to suit or
penalty in any private or governmental litigation or proceeding, (iv) for
any of the purposes described in Section 162(c) of the Code or (v) for the
purpose of establishing or maintaining any concealed fund or concealed bank
account.
41
9.23 Suppliers.
---------
The Disclosure Statement sets forth the names of and description of
contractual arrangements (whether or not binding or in writing) with the
ten (10) largest suppliers of the Seller by sales or services in dollars.
Assuming that Purchaser No.1 and/or Purchaser No. 2, as applicable,
continues to conduct Business No. 1 and/or Business No. 2 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 Purchaser Xx. 0 xxx/xx Xxxxxxxxx Xx. 0 after the Closing.
9.24 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 Xx. 0 xxx/xx Xxxxxxxx Xx. 0.
9.25 Employee Benefit Plans.
-----------------------
For the purposes of this Section 9.25, "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:
(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;
42
(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,
substantially 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) Except as described on the Disclosure Schedule, 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, and a pro rata portion of the
contributions (including matching contributions) for the plan
year on which the closing date occurs shall have been made on or
prior to the Closing Date for the period ending on the Closing
Date.
(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.
43
(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
retirement plans under the Code. The IRS has issued, and the
Seller has made available for inspection, one or more
determination letters with respect to the qualification of all
Employee Pension Benefit Plans stating that the IRS has made a
favorable determination as to the qualification of such Plan
under Section 401(a) of the Code, and that continued
qualification of the Plan in its present form will depend upon
its effect in operation. 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. Except as described in the
Disclosure Schedule, such Plans are now and always have been,
established in writing and maintained and operated substantially
in accordance with the plan documents, ERISA, the Code and all
other applicable laws, in all material respects.
44
(x) There is no liability arising from the termination or partial
termination of any Employee Benefit Plan, except for liabilities
as to which 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.
9.26 Assets Necessary to the Business.
------------------------------------
The Seller owns, leases or holds under license all assets and properties
(tangible and intangible) necessary to carry on its Business No. 1 and
Business No. 2 and operations as presently conducted and as shown on the
Financial Statements. Such assets and properties are all of the assets and
properties necessary to carry on Seller's Business No. 1 and Business No. 2
as presently conducted and Shareholder (other than through his ownership of
stock in the Seller and/or as set forth on the Disclosure Schedule) nor any
member of his family owns or leases or has any interest in any assets or
properties presently being used to carry on Business No. 1 or Business No.
2 of Seller.
9.27 Transactions with Affiliates.
------------------------------
Except as disclosed on the Disclosure Schedule, there is no lease,
sublease, contract, agreement or other arrangement of any kind whatsoever
entered into by Seller and its Shareholder or Affiliate.
9.28 Territorial Restrictions.
-------------------------
Except as described in the Disclosure Schedule, Seller is not restricted by
any written agreement or understanding with any other Person from carrying
on the Business No. 1 and/or Business No. 2 anywhere in the world. Neither
Purchaser nor any of its Affiliates will, as a result of its acquisition of
Purchased Assets No. 1 and/or Purchased Assets No. 2 become restricted in
carrying on Business No. 1 and/or Business No. 2 anywhere in the world as a
result of any contract or other agreement to which Seller is a party or by
which it is bound.
45
9.29 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.
10.
REPRESENTATIONS AND WARRANTIES
------------------------------
OF PURCHASER XX. 0 XXX XXXXXXXXX XX. 0
--------------------------------------
Purchaser No. 1 hereby represents and warrants to Seller that the following
statements are true and correct as of the date hereof.
10.1 Organization, Good Standing and Power of Purchaser No. 1.
----------------------------------------------------------------
(a) Purchaser No. 1 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 Business No. 1 of Seller currently
conducted by Seller in each of the jurisdictions in which Seller
currently conducts its Business No. 1, which are the only
jurisdictions where the failure to be so qualified by Purchaser No. 1
will have a material adverse effect on the business prospects or
financial condition of Purchaser No. 1.
10.2 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 No. 1 ("Other Purchaser No. 1
Documents") in connection herewith has been taken by Purchaser No. 1.
This Agreement has been duly and validly executed and delivered by
Purchaser No. 1 and constitutes the valid and binding obligation of
Purchaser No. 1 enforceable in accordance with its terms. All Other
Purchaser No. 1 Documents in connection herewith will, when executed
and delivered, constitute the valid and binding obligation of
Purchaser No. 1 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 No. 1's primary lender, Deutsche Financial Services Company,
whose consent shall be obtained prior to Closing) in connection with
the execution, delivery or performance of this Agreement or any Other
Purchaser No. 1 Documents in connection herewith.
(c) Neither the execution, delivery nor performance of this Agreement or
any of the Other Purchaser No. 1 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 No. 1;
(ii) conflict with, violate or result in any breach of any agreement
or instrument to which Purchaser is a party or by which Purchaser
No. 1 or any of Purchaser's assets or properties is bound, or
constitute a default thereunder or give rise to a right of
acceleration of an obligation of Purchaser No. 1; or
(iii)conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Purchaser No. 1.
10.3 Brokers and Finders.
---------------------
No broker, finder or other person or entity acting in a similar capacity
has participated on behalf of Purchaser No. 1 in bringing about the
transaction herein contemplated, or rendered any service with respect
thereto or been in any way involved therewith.
Purchaser No. 2 hereby represents and warrants to Seller that the following
statements are true and correct as of the date hereof.
10.4 Organization, Good Standing and Power of Purchaser No. 2.
----------------------------------------------------------------
(a) Purchaser No. 2 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 Business No. 2 of Seller currently
conducted by Seller in each of the jurisdictions in which Seller
currently conducts its Business No. 2, which are the only
jurisdictions where the failure to be so qualified by Purchaser No. 2
will have a material adverse effect on the business prospects or
financial condition of Purchaser No. 2.
46
10.5 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 No. 2 ("Other Purchaser No. 2
Documents") in connection herewith has been taken by Purchaser No. 2.
This Agreement has been duly and validly executed and delivered by
Purchaser No. 2and constitutes the valid and binding obligation of
Purchaser No. 2 enforceable in accordance with its terms. All Other
Purchaser No. 2 Documents in connection herewith will, when executed
and delivered, constitute the valid and binding obligation of
Purchaser No. 2 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 No. 2's primary lender, Deutsche Financial Services Company,
whose consent shall be obtained prior to Closing) in connection with
the execution, delivery or performance of this Agreement or any Other
Purchaser No. 2 Documents in connection herewith.
(c) Neither the execution, delivery nor performance of this Agreement or
any of the Other Purchaser No. 2 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 No. 2;
(ii) conflict with, violate or result in any breach of any agreement
or instrument to which Purchaser No. 2 is a party or by which
Purchaser No. 2 or any of Purchaser's assets or properties is
bound, or constitute a default thereunder or give rise to a right
of acceleration of an obligation of Purchaser No. 2; or
(iii)conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Purchaser No. 2.
10.6 Brokers and Finders.
---------------------
No broker, finder or other person or entity acting in a similar capacity
has participated on behalf of Purchaser No. 2 in bringing about the
transaction herein contemplated, or rendered any service with respect
thereto or been in any way involved therewith.
47
10.7 Full Disclosure
----------------
None of the representations and warranties made by Purchaser No. 1 herein
contains or will contain, to the best of Purchaser No. 1's knowledge, any
untrue statement of material fact or omits or will omit any material fact.
None of the representations and warranties made by Purchaser No. 2 herein
contains or will contain, to the best of Purchaser No. 2's knowledge, any
untrue statement of material fact or omits or will omit any material fact.
11.
SURVIVAL OF AND RELIANCE UPON REPRESENTATIONS,
WARRANTIES AND AGREEMENTS; INDEMNIFICATION
------------------------------------------
11.1 Survival of Representations and Warranties.
----------------------------------------------
The parties acknowledge and agree that all representat-ions, 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 11.3 and 11.4 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 3.1, 3.2,
3.3, 3.4, 4.2, 9.3, 9.11, 9.12, 9.13, 9.16, 10.2 and 10.4 which shall
survive the Closing and shall terminate in accordance with the statute of
limitations governing written contracts in the State of Minnesota and
Exhibit D, Exhibits E, E-1, E-2 and E-3 and Exhibit F, which shall
terminate as provided therein.
11.2 Reliance Upon and Enforcement of Representations, Warran-ties and
-----------------------------------------------------------------------
Agreements.
----------
(a) Seller hereby agrees that, notwithstanding any right of Purchaser No.
1 and/or Purchaser No. 2 to fully investigate the affairs of Seller,
and notwithstanding knowledge of facts determined or determinable by
Purchaser No. 1 and/or Purchaser No. 2 pursuant to such investigation
or right of investigation, Purchaser No. and/or Purchaser No. 2 have
the right to rely fully upon the representations, warranties and
agreements of Seller contained in this Agreement and upon the accuracy
of any document, certificate or exhibit given or delivered to
Purchaser No. 1 and/or Purchaser No. 2 pursuant to the provisions of
this Agreement.
48
(b) Purchaser No. 1 and/or Purchaser No. 2 hereby agree that,
notwithstanding any right of Seller to fully investigate the affairs
of Purchaser No. 1 and/or Purchaser No. 2, and notwithstanding
knowledge of facts determined or determinable by Seller pursuant to
such investigation or right of investigation, Seller have the right to
rely fully upon the representations, warranties and agreements of
Purchaser No. 1 and/or Purchaser No. 2 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.
11.3 Indemnification by Seller and Shareholder.
---------------------------------------------
Provided Purchaser No. 1 and/or Purchaser No. 2 make a written claim for
indemnification against Seller and/or Shareholder within any applicable
survival period specified in Section 11.1, and subject to the limitations
set forth in Section 11.6, Seller and Shareholder (jointly and severally),
shall indemnify Purchaser Xx. 0 xxx/xx Xxxxxxxxx Xx. 0 against and hold
them 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 pursuant to the provisions of the Agreement;
(ii) any imposition (including by operation of law) or attempted imposition
by a third party upon Purchaser Xx. 0 xxx/xx Xxxxxxxxx Xx. 0 of any
liability of Seller which Purchaser No. 1 has not specifically agreed
to assume pursuant to Section 3.1 of this Agreement and/or which
Purchaser No. 2 has not specifically agreed to assume pursuant to
Section 3.2 of this Agreement;
(iii)any liability (except for any Assumed Liabilities No. 1 or Assumed
Liabilities No. 2 described in Sections 3.1 and 3.2, respectively) or
other obligation incurred by or imposed upon Purchaser Xx. 0 xxx/xx
Xxxxxxxxx Xx. 0 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;
(iv) any and all costs and expenses (including reasonable legal and
accounting fees) related to any of the foregoing;
(v) any deficiency in the Net Asset Amount No. 1 and/or Net Asset Amount
No. 2 set forth in Section 5.
49
Except as otherwise provided in this Agreement, nothing in this Section
11.3 shall be construed to limit the amount to which, or the time by which,
by reason of offset or otherwise, that Purchaser No. 1 and/or Purchaser No.
2 may recover from Seller or Shareholder pursuant to this Agreement
resulting from Seller's or Shareholder's breach or violation of any
representation, warranty, covenant or agreement contained herein.
Any amounts to which Purchaser No. 1 and/or Purchaser No. 2, their
successors or assigns, is entitled to indemnification pursuant to the
provisions of this Section, shall first be offset against the amount
payable to Seller under the promissory notes set forth in Sections 4.3(a)
and/or 4.4(a), then against any payments due under Section 4.6. Provided,
however, the offset in any one year may not exceed the aggregate amount
payable under Section 4.6, if any.
11.4 Indemnification by Purchaser Xx. 0 xxx/xx Xxxxxxxxx Xx. 0.
-----------------------------------------------------------------
Provided Shareholder and Seller make a written claim for indemnification
against Purchaser No. 1 and/or Purchaser No. 2, as applicable, within any
applicable survival period specified in Xxxxxxx 00, Xxxxxxxxx Xx. 0 and/or
Purchaser No. 2, as applicable, shall indemnify Seller and Shareholder
against and hold it harmless from any and all loss, damage, liability or
deficiency resulting from or arising out of: (i) any Assumed Liabilities of
Purchaser No. 1 or any Assumed Liabilities of Purchaser No. 2 , as
applicable; (ii) any liability of Purchaser No. 1 and/or Purchaser No. 2
arising out of Purchaser No. 1's and/or Purchaser No. 2'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); (iii)
any inaccuracy in or breach of any representation, warranty, covenant or
obligation made or incurred by Purchaser No. 1 and/or Purchaser No. 2, as
applicable herein or in any other agreement, instrument, or document
delivered by or on behalf of Purchaser No. 1 and/or Purchaser No. 2
pursuant to the provisions of this Agreement; and (iv) any and all related
costs and expenses (including reasonable legal and accounting fees). Except
as otherwise provided herein, nothing in this Section 11.4 shall be
construed to limit the amount to which, or the time by which, by reason of
offset or otherwise, that Seller may recover from Purchaser No. 1 and/or
Purchaser No. 2 pursuant to this Agreement resulting from its breach or
violation of any representation, warranty, covenant or agreement contained
herein.
50
11.5 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/Shareholder on the one hand, or Purchaser Xx. 0 xxx/xx
Xxxxxxxxx Xx. 0, as applicable, 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 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 11.3 and 11.4 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, negotia-tion or settlement thereof, at
that Indemnifying Party's expense. Thereafter, the Party to be
Indemnified shall be indemnified in the entirety for any liability
arising out of the ultimate defenses, negotiation or settlement of
such matter.
51
(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. If the Party to be Indemnified
agrees to accept such proposal, the Indemnifying Party shall proceed
to conclude the settlement of the matter and immediately indemnify the
Party to be Indemnified pursuant to the terms of Sections 11.3 or 11.4
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 resolve the claim is less than
the amount of the original proposed settlement made by the
Indemnifying Party, then the Party to be Indemnified shall receive
such indemnification pursuant to Sections 11.3 or 11.4 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 up to the maximum of the original proposed settlement. If
the amount finally paid to resolve the claim is equal to or greater
than the amount of the original proposed settlement proposed by the
Indemnifying Party, then the Indemnifying Party shall provide
indemnification pursuant to Sections 11.3 and 11.4 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.
11.6 Limitation on Liability.
-------------------------
(a) Notwithstanding anything contained herein to the contrary, no claims
for indemnification shall be made by Purchaser Xx. 0 xxx/xx Xxxxxxxxx
Xx. 0 against the Seller and Shareholder until such time as all claims
hereunder by Purchaser Xx. 0 xxx/xx Xxxxxxxxx Xx. 0 exceed $10,000.00
in the aggregate and then indemnification shall be made only to the
extent that such claim or claims exceed $10,000.00 in the aggregate.
(b) Notwithstanding anything herein to the contrary, no claims for
indemnification shall be made by Seller and Shareholder against
Purchaser No. 1 and/or Purchaser No. 2 until such time as all claims
hereunder by Seller and Shareholder exceed Ten Thousand Dollars
($10,000.00) in the aggregate, and then indemnification shall be made
only to the extent that such claim or claims exceed $10,000.00 in the
aggregate.
11.7 Excluded Liabilities.
---------------------
(a) Notwithstanding anything contained herein to the contrary, in the
event any Excluded Liability would attach to Purchased Assets No. 1
and/or Purchased Assets No. 2 under any successor liability statute or
otherwise, notwithstanding the fact that such liability was an
52
Excluded Liability, Seller and Shareholder shall be jointly and
severally responsible for the payment of such Excluded Liability and
the lien on Purchased Assets No. 1 and/or Purchased Assets No. 2
(which would represent a breach of certain representations under the
Agreement) related to such liability.
12.
THE CLOSING
------------
12.1 Date, Time and Place of Closing.
------------------------------------
Consummation of the transactions contemplated hereby (the "Closing") shall
take place on July 3, 2000 (the "Closing Date"), effective at 12:01 a.m.
EDT 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.
12.2 Conditions Precedent to Purchaser No. 1's and Purchaser No. 2's
-----------------------------------------------------------------------
obligations.
-----------
The obligation of Purchaser No. 1 and/or Purchaser No. 2 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) 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;
53
(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
Seller since October 31, 1999;
(d) Seller shall have delivered to Purchaser No. 1 and/or Purchaser No. 2,
as applicable, at or before the Closing, the following documents, all
of which shall be in form and substance reasonably acceptable to
Purchaser No. 1 and Purchaser No. 2 and its counsel:
(i) The instruments of transfer required by Sections 2.6 and 2.7;
(ii) Releases (or copies thereof) of all liens, claims, charges,
encumbrances, security interests and restrictions on Purchased
Assets No. 1 and Purchased Assets No. 2 necessary to provide
Purchaser No. 1 with good title to each of the Purchased Assets
No. 1 at the Closing and to provide Purchaser No. 2 with good
title to each of the Purchased Assets no. 2 at the Closing;
(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) Certificates of Existence for Seller from the Secretary of State
of Minnesota dated no earlier than fifteen (15) days prior to
Closing;
(v) Opinion Letter of Siegel, Brill, Greupner, Xxxxx & Xxxxxx, P.A.,
containing the opinions set forth in Exhibit G;
(vi) Seller and Shareholder shall have entered into the
non-competition agreements as set forth in Exhibits E, E-1, E-2
and E-3;
(vii)X. Xxxx shall have entered into the Employment Agreement set
forth in Exhibit D;
(viii)Seller shall have entered into the Sublease Agreement set forth
in Exhibit F; and
(e) Seller will adopt and file with the Secretary of States of Delaware
and Minnesota an Amendment to the Charter of Seller changing the name
of Seller to a name substantially dissimilar to DATASOURCE SYSTEMS
CORPORATION, dba DATASOURCE XXXXX and/or DATASOURCE SYSTEMS MARKETING
CORPORATION and Seller shall execute a Consent for Use of Similar Name
form as set forth in Section 9.19.
54
(f) Purchaser No. 1 and Purchaser No. 2 shall have received assurances in
form and substance satisfactory to it (that may include insurance
certificates) that Seller has made all provisions necessary under
applicable law, with regard to an employer's obligation to provide for
a continuation of health insurance and other benefits of any employee,
who is not employed by Seller following termination of employment.
12.3 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:
(a) Performance by Purchaser No. 1 and Purchaser No. 2 of all of the
representa-tions, 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 No. 1 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 Promissory Note in the amount set forth in Section 4.3(a)
hereof, if any;
(ii) An assumption of liability agreement under which Purchaser No. 1
assumes the liabilities set forth in Section 3.1;
(iii)Certified copies of the corporate actions taken by Purchaser No.
1 authorizing the execution, delivery and performance of this
Agreement;
(iv) Certificate of Good Standing for Purchaser No. 1 from the
Secretary of State of Delaware dated no earlier than fifteen (15)
days prior to the date of Closing; and
55
(v) Opinion Letter of Xxxxxxxxx & Dreidame, counsel for Purchaser No.
1, addressed to Seller and dated the Closing Date, containing the
opinions set forth in Exhibit H.
(d) Purchaser No. 2 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 Promissory Note payable to Seller at closing in the amount set
forth in Section 4.4(a);
(ii) An assumption of liability agreement under which Purchaser No. 2
assumes the liabilities set forth in Section 3.2;
(iii)Certified copies of the corporate actions taken by Purchaser No.
2 authorizing the execution, delivery and performance of this
Agreement;
(iv) Certificate of Good Standing for Purchaser No. 2 from the
Secretary of State of Delaware dated no earlier than fifteen (15)
days prior to the date of Closing; and
(v) Opinion Letter of Xxxxxxxxx & Dreidame Co., LPA, counsel for
Purchaser No. 2, addressed to Seller and dated the Closing Date,
containing the opinions set forth in Exhibit I.
(e) Purchaser No. 1 shall have entered into the Employment Agreement set
forth in Exhibit D with X. Xxxx.
(f) Purchaser No. 1 shall have entered into a Sublease Agreement set forth
in Exhibit F with Seller.
13.
GENERAL PROVISIONS
------------------
13.1 Publicity.
---------
All public announcements relating to this Agreement or the transactions
contemplated hereby will be made by Purchaser No. 1 and Purchaser No. 2
with the consent of Seller, which consent will not be unreasonably
withheld, except for any disclosure which may be required because of
Purchaser No. 1's being a publicly-traded corporation on the
over-the-counter market.
56
13.2 Expenses.
--------
Purchaser No. 1 will bear and pay all of its expenses incident to the
transactions contemplated by this Agreement which are incurred by Purchaser
No. 1 or its representatives, Purchaser No. 2 will bear and pay all of its
expenses incident to the transactions contemplated by this Agreement which
are incurred by Purchaser No. 2 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 their respective
representatives.
57
13.3 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 No. 1, to:
Pomeroy Computer Resources, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
(b) If to Purchaser No. 2, to
Pomeroy Select Integration Solutions, 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
(b) If to Seller, to:
Datasource Systems Corporation,
dba Datasource Xxxxx and
Datasource Systems Marketing Corporation
0000 Xxxxxx Xxxxx, X.
Xxxxx, Xxxxxxxxx 00000
With a copy to:
Xxxx Xxxxxx, Esq.
Siegel, Brill, Greupner, Xxxxx & Xxxxxx, P.A.
0000 Xxxxxxxxxx Xxxxxx
000 Xxxxxxxxxx Xxx. Xx.
Xxxxxxxxxxx, Xxxxxxxxx 00000
58
(c) If to Shareholder, to:
Roar Xxxx
0000 Xxxxxx Xx. X.
Xxxxx, Xxxxxxxxx 00000
13.4 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.
13.5 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.
13.6 Exhibits.
--------
The Exhibit and Disclosure Schedule referred to in this Agreement
constitute an integral part of this Agreement as if fully rewritten herein.
13.7 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.
13.8 Governing Law.
--------------
This Agreement shall be construed in accordance with and governed by the
laws of the State of Minnesota, without regard to its laws regarding
conflict of laws.
13.9 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.
59
13.10 Waivers; Remedies Exclusive.
-----------------------------
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. 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.
Except as otherwise provided in the Escrow Agreement, the Employment
Agreement, the Lease Agreement and the Covenant Not to Compete Agreements,
the indemnification provided for by Section 12 herein shall constitute the
exclusive remedy of any party with respect to (i) the matters for which
such indemnification is provided and (ii) any other matters arising out of,
relating to or connected with this Agreement or the transactions
contemplated hereby, and whether any claims or causes of action asserted
with respect to any such matters are brought in contract, tort or other
legal theory whatsoever.
13.11 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.
13.12 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.
60
13.13 Business Records.
-----------------
Seller and Shareholder shall be permitted to retain copies of such books
and records relating to Purchased Assets No. 1 and/or Purchased Assets No.
2 and relating to the accounting and tax matters of Business No. 1 and/or
Business No. 2 and to have access to all original copies of records so
delivered to Purchaser No. 1 and/or Purchaser No. 2 at reasonable times,
for any reasonable business purpose, for a period of six (6) years after
the Closing.
13.14 Dissolution of Seller.
-----------------------
Purchaser No. 1 and Purchaser No. 2 acknowledge that following the Closing,
Seller may adopt a plan of liquidation with the intent to dissolve the
corporation. Provided, however, Seller and Shareholder agree that the plan
of liquidation will not be effectuated and implemented by Seller until all
the conditions set forth in Section 2 of this Agreement regarding the
transfer of all the respective purchased assets have been effectuated by
Seller. Seller acknowledges that Purchaser No. 1 and Purchaser No. 2 will
suffer irreparable harm in the event that Seller would liquidate prior to
satisfying all of its obligations under the terms of this Agreement and the
exhibits hereto.
13.15 Compliance with Bulk Sales Act.
----------------------------------
Purchaser No. 1 and Purchaser No. 2 waive compliance with the provisions of
any applicable bulk sales law and Seller and Shareholder, jointly and
severally, agree to indemnify and hold harmless Purchaser No. 1 and
Purchaser No. 2 from any liability incurred as a result of the failure to
so comply, except to liabilities explicitly assumed hereunder by Purchaser
No. 1 and/or Purchaser No. 2.
14.
SALE OF EQUIPMENT BY SHAREHOLDER
--------------------------------
DBA GEILO LEASING COMPANY
--------------------------
61
14.1 At Closing, Shareholder shall sell to Purchaser No. 1 the equipment set
forth on Exhibit J attached hereto, along with any and all leases relating
thereto, for the sum of Thirty Thousand Dollars ($30,000.00). Such transfer
shall be by xxxx of sale and assignment and incident thereto, Shareholder
shall represent good title to such assets, free and clear of all
encumbrances whatsoever, whether perfected or unperfected, and by way of
illustration, that there are not any unpaid taxes, assessments or charges
due or payable by Shareholder to any federal, state or local agency, or any
obligations or liabilities or any unsatisfied judgment(s) against, or to
the best of Shareholder's knowledge, any litigation or proceeding pending
or threatened against Shareholder by any party that could become a claim,
obligation, liability, lien or other charge of or against Purchaser No. 1
or such assets.
15.
PLEDGE AGREEMENT
----------------
15.1 To secure Shareholder's obligations under this Agreement, Shareholder shall
pledge to Purchaser No. 1 and Purchaser No. 2 all of his membership
interest in Xxxx Real Properties, LLC, a Minnesota limited liability
company. A copy of said pledge agreement is attached hereto and
incorporated herein by reference as Exhibit K.
The parties hereto have executed this Agreement as of the date first above
written.
WITNESSES: DATASOURCE SYSTEMS CORPORATION dba DATASOURCE
XXXXX and
DATASOURCE SYSTEMS
MARKETING CORPORATION
___________________________
___________________________ By:________________________________
Roar Xxxx, President
XXXXXXX COMPUTER RESOURCES,
___________________________ INC.
___________________________ By:________________________________
Xxxxxxx X. Xxxxxxx
Chief Financial Officer
62
XXXXXXX SELECT INTEGRATION
___________________________ SOLUTIONS, INC.
___________________________ By:________________________________
Xxxxxxx X. Xxxxxxx
CEO and President
___________________________ __________________________________
ROAR XXXX
___________________________
63
(jj)(2)
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 3rd day of July, 2000, by and between XXXXXXX
COMPUTER RESOURCES, INC., a Delaware corporation ("Company"), and ROAR XXXX
("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement ("Purchase
Agreement") of even date pursuant to which it purchased substantially all the
assets of DataSource Systems Corporation, dba DataSource Xxxxx ("DataSource")
used in its business of marketing and selling a broad range of microcomputers
and related products including equipment selection procurement and
configuration; and
WHEREAS, Employee, as an inducement for and in consideration of Company entering
into the Purchase Agreement, has agreed to enter into and execute this
Employment Agreement pursuant to Section 6 thereof; and
WHEREAS, Company desires to engage the services of Employee, pursuant to the
terms, conditions and provisions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
---------
agrees to be employed by the Company, upon the following terms and
conditions.
2. Term. The initial term of Employee's employment pursuant to this Agreement
----
shall begin on the 3rd day of July, 2000, and shall continue for a period
of five (5) years, ending June 30, 2005 unless terminated earlier pursuant
to the provisions of Section 10, provided that Sections 8, 9, 10(b) and 11,
if applicable, shall survive the termination of such employ-ment and shall
expire in accordance with the terms set forth therein.
3. Renewal Term. The term of Employee's employment shall automatically renew
------------
for additional consecutive renewal terms of one (1) year unless either
party gives written notice of his/its intent not to renew the terms of this
Agreement sixty (60) days prior to expiration of the then expiring term.
4. Duties. Employee shall serve as Manager of the Company's Minneapolis/St.
------
Xxxx Division. Employee shall be responsible to and report directly to the
officers of Company. Employee shall at all time have such powers and
authorities as shall be reasonably required to discharge such duties in an
efficient manner together with such facilities and services as are
appropriate to his position. Employee shall devote his best efforts and
substantially all his time during normal business hours to the diligent,
faithful and loyal discharge of the duties of his employment and towards
the proper, efficient and successful conduct of the Company's affairs.
Employee further agrees to refrain during the term of this Agreement from
making any sales of competing services or products or from profiting from
any transaction involving computer services or products for his account
without the express written consent of Company.
5. Compensation. For all services rendered by the Employee under this
------------
Agreement (in addition to other monetary or other benefits referred to
herein), compensation shall be paid to Employee as follows:
(a) Base Salary: During each fiscal year of the initial term of this
Agreement, Employee shall be paid an annual base salary of One Hundred
Thirty-Two Thousand Dollars ($132,000.00). Said base salary shall be
payable in accordance with the historical payroll practices of the
Company.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
----------------
entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with the standard family
medical health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent (50%) of
the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a vacation of three
(3) weeks during which time his compensa-tion will be paid in full.
Provided, however, such weeks may not be taken consecutively without
the written consent of Company.
(c) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or
welfare plans maintained by the Company during the term of this
Agreement.
(d) Automobile - Company shall provide Employee with an automobile
allowance of $500.00 per month. Employee shall be responsible for all
insurance, maintenance and repairs to such vehicle.
(e) Other Company Programs - Employee shall be eligible to participate in
any other plans or programs implemented by the Company for all of its
employees with duties and responsibilities similar to Employee.
2
(f) Employee shall be responsible for any and all taxes owed, if any, on
the fringe benefits provided to him pursuant to this Section 6.
7. Expenses. During the term of this Agreement, Employee shall be entitled to
---------
receive prompt reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses incurred by
Employee in fulfilling the Employee's duties and responsibilities
hereunder, including, all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the
Company, provided that such expenses are incurred and accounted for in
accordance with the reasonable policies and procedures established by the
Company.
8. Non-Competition. Employee expressly acknowledges the provisions of Section
---------------
7 of the Purchase Agreement relating to Employee's Covenant Not to Compete
with Company and also Employee's Covenant Not to Compete with Company's
wholly-owned subsidiary, Xxxxxxx Select Integration Solutions, Inc.
Accordingly, such provisions of Section 7 are incorporated herein by
reference to the extent as if restated in full herein. In addition to the
consideration received under this Agreement, Employee acknowledges that as
the sole shareholder of the common stock of DataSource, he has received
substantial consideration pursuant to such Purchase Agreement and that as
an inducement for, and in consideration of, Company entering into the
Purchase Agreement and Company entering into this Agreement, Employee has
agreed to be bound by such provisions of Section 7 of the Pur-chase
Agreement. Accordingly, such provisions of Section 7 and Exhibits I-2 and
I-3 and the restrictions on Employee thereby imposed shall apply as stated
therein.
9. Non-Disclosure and Assignment of Confidential Information. The Employee
------------------------------------------------------------
acknowledges that the Company's trade secrets and confidential and
proprietary information, including without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including unpublished
information concerning revenues, profits and profit margins;
3
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for
purposes of the Securities Exchange Act of 1934, as
amended;
all constitute valuable, special and unique proprietary and trade secret
information of the Company. In recognition of this fact, the Employee agrees
that the Employee will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly available
without violation of this Agreement, (ii) information of which the Employee did
not know and should not have known was disclosed to the Employee in violation of
any other person's confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make use of any such
information for the benefit of any person, firm, operation or other entity
except the Company and its subsidiaries or affiliates. The Employee's
obligation to keep all of such information confidential shall be in effect
during and for a period of five (5) years after the termination of his
employment; provided, however, that the Employee will keep confidential and will
not disclose any trade secret or similar information protected under law as
intangible property (subject to the same exceptions set forth in the
parenthetical clause above) for so long as such protection under law is
extended.
10. Termination.
------------
(a) The Employee's employment with the Company may be terminated at any time as
follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability which renders
Employee unable to perform his duties hereunder;
(iii)By the Company, for cause upon three (3) day's written notice to
Employee. For purposes of this Agreement, the term "cause" shall
mean termination upon: (i) the engaging by Employee in conduct
which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including but not limited to any
material misrepresentation related to the performance of his
duties; (ii) the conviction of Employee of a felony or other
crime involving theft or fraud, (iii) Employee's gross neglect,
gross misconduct or gross insubordination in carrying out his
duties hereunder resulting, in either case, in material harm to
the Company; or (iv) any material breach by Employee of this
Agreement; or (v) by either the Employee or Company upon ninety
(90) days' written notice at any time after thirty-six (36)
months of employment. Company's right to terminate shall only be
applicable if it has closed its Minneapolis/St. Xxxx Division.
4
(b) Compensation upon Termination: In the event of termination of
employment, the Employee or his estate, in the event of death, shall
be entitled to his annual base salary and other benefits provided
hereunder to the date of his termination.
11. Disability. In the event that Employee becomes temporarily disabled and/or
-----------
totally and permanently disabled, physically or mentally, which renders him
unable to perform his duties hereunder, Employee shall receive one hundred
percent (100%) of his base annual salary (in effect at the time of such
disability) for a period of one (1) year following the initial date of such
disability (offset by any payments to the Employee received pursuant to
disability benefit plans, if any, maintained by the Company.) Such payments
shall be payable in twelve consecutive equal monthly installments and shall
commence thirty (30) days after the determination by the physicians of such
disability as set forth below.
For purposes of this Agreement, Employee shall be deemed to be temporarily
disabled and/or totally and permanently disabled if attested to by two
qualified physicians, (one to be selected by Company and the other by
Employee) competent to give opinions in the area of the disabled Employee's
physical and/or mental condition. If the two physicians disagree, they
shall select a third physician, whose opinion shall control. Employee shall
be deemed to be temporarily disabled and/or totally and permanently
disabled if he shall become disabled as a result of any medically
determinable impairment of mind or body which renders it impossible for
such Employee to perform satisfactorily his duties hereunder, and the
qualified physician(s) referred to above certify that such disability does,
in fact, exist. The opinion of the qualified physician(s) shall be given by
such physician(s), in writing directed to the Company and to Employee. The
physician(s) decision shall include the date that disability began, if
possible, and the 12th month of such disability, if possible. The decision
of such physician(s) shall be final and conclusive and the cost of such
examination shall be paid by Company.
12. Severability. In case any one (1) or more of the provisions or part of a
------------
provision contained in this Agreement shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of this Agreement. In such a situation, this Agreement shall be
reformed and construed as if such invalid, illegal or unenforceable
provision, or part of a provision, had never been contained herein, and
such provision or part shall be reformed so that it will be valid, legal
and enforceable to the maximum extent possible.
5
13. Governing Law. This Agreement shall be governed and construed under the
--------------
laws of the State of Minnesota and shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the parties.
14. Notices. All notices, requests, demands and other communications relating
-------
to this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed by certified or registered mail,
return receipt re-quested, postage prepaid to the following addresses (or
to such other address for a party as shall be specified by notice pursuant
hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxx X. Xxxxx III, Esq.
Xxxxxxxxx & Dreidame Co., L.P.A.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
With a copy to: Xxxx Xxxxxx, Esq.
Siegel, Brill, Greupner, Xxxxx & Xxxxxx, P.A.
0000 Xxxxxxxxxx Xxxxxx
000 Xxxxxxxxxx Xxx. Xx.
Xxxxxxxxxxx, Xxxxxxxxx 00000
15. Enforcement of Rights. The parties expressly recognize that any breach of
---------------------
this Agreement by either party is likely to result in irrevocable injury to
the other party and agree that such other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction in Hennepin County, Minnesota, either at law or in equity, to
obtain damages for any breach of this Agreement, or to enforce the specific
performance of this Agreement by each party or to enjoin any party from
activities in violation of this Agreement. Should either party engage in
any activities prohibited by this Agreement, such party agrees to pay over
to the other party all compensation, remuneration, monies or property of
any sort received in connection with such activities. Such payment shall
not impair any rights or remedies of any non-breaching party or obligations
or liabilities of any breaching party pursuant to this Agreement or any
applicable law.
6
16. Entire Agreement. This Agreement and the Purchase Agreement referred to
-----------------
herein contain the entire understanding of the parties with respect to the
subject matter contained herein and may be altered, amended or superseded
only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
17. Parties in Interest.
--------------------
(a) This Agreement is personal to each of the parties hereto. No party may
assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided,
however, that nothing in this Section 17 shall preclude (i) Employee
from designating a beneficiary to receive any benefit payable
hereunder upon his death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any rights
hereunder to person or persons entitled thereto. Notwithstanding the
foregoing, this Agreement shall be binding upon and inure to the
benefit of any successor corporation of Company
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the assets of the Company or the business with respect to which
the duties and responsibilities of Employee are principally related,
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Company would have been required to
perform it if no such succession had taken place. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which
executes and delivers the assumption agreement provided for in this
Section 17 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
18. Representations of Employee. Employee represents and warrants that he is
-----------------------------
not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in
connection with previous employment which prevents Employee from entering
into and performing his obligations under this Agreement.
19. Counterparts. This Agreement may be executed simulta-neously in several
------------
counterparts, each of which shall be deemed an original part, which
together shall constitute one and the same instrument.
7
IN WITNESS WHEREOF, this Agreement has been executed effec-tive as of the day
and year first above written.
WITNESSES: COMPANY:
XXXXXXX COMPUTER RESOURCES, INC.
__________________________
__________________________ By:_________________________________
Xxxxxxx X. Xxxxxxx
Chief Financial Officer
EMPLOYEE:
__________________________
__________________________ _________________________________
Roar Xxxx
8
(jj)(3)
AGREEMENT
--------------
This Agreement made and entered into this _____ day of ______________, 2000, by
and between DATASOURCE SYSTEMS CORPORATION, dba DATASOURCE XXXXX and dba
DATASOURCE SYSTEMS MARKETING CORPORATION, a Delaware corporation (hereinafter
referred to as "Seller"), and XXXXXXX COMPUTER RESOURCES, INC., a Delaware
corporation (hereinafter referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is a full-service provider of a variety of computer service and
support solutions, including installation, training, setup and consultation, to
large and medium size commercial, governmental and other professional customers
throughout the Minneapolis/St. Xxxx, Minnesota Metropolitan area; and
WHEREAS, simultaneously with the execution of this Agreement, Seller and
Purchaser have entered into an Asset Purchase Agreement ("Asset Purchase
Agreement") whereby Seller has sold to Purchaser substantially all of the assets
of Seller relating to Seller's Business of marketing and selling a broad range
of microcomputers and related products including equipment selection,
procurement and configuration; and
WHEREAS, the Purchaser would not have entered into the Asset Purchase Agreement
with Seller without the consent of Seller to enter into this Covenant Not to
Compete Agreement; and
WHEREAS, pursuant to Section 7.1 and Exhibit E of said Asset Purchase Agreement,
Seller agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. In consideration of the payments to be made by Purchaser to Seller for its
assets, Seller covenants and agrees that for a period equal to five (5)
years from the closing of the Asset Purchase Agreement of even date, Seller
will not, or with any other person, corporation or entity, directly or
indi-rectly, by stock or other ownership, investment, management,
employment or otherwise, or in any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office and conducts Business during the term
of this Agreement. A list of the states in which Purchaser and its
subsidiaries currently transact business is attached hereto as Exhibit
A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Seller from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board.
(f) Nothing in this Agreement shall prohibit Seller from being affiliated
with DS Capital, LLC, a company engaged in the leasing business which
is owned by Seller's Shareholder, solely for the purposes of servicing
any existing leases of such company as of the date hereof, or any
renewal or extensions thereof for such equipment. Seller acknowledges
that any new leasing business that may be generated from the date
hereof shall be originated through Purchaser's wholly owned
subsidiary, Technology Integration Financial Services, Inc.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly
or indirectly, through subsidiaries or affiliates, in the following
line of business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing, or supporting of microcomputer products,
microcomputer support solutions and computer integration products,
peripheral devices and related products and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
2
Notwithstanding anything herein to the contrary, the "Business of
Purchaser" shall only include business activity that is reasonably related to,
and is directly competitive with, the business engaged in by Purchaser during
the term of this Agreement.
Seller has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Seller herein, and agrees that the same are necessary for the
reasonable and proper protection of Seller's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Seller
that it will abide by and be bound by each of the covenants and
restrictions herein; and Seller agrees that Purchaser is entitled to
injunctive relief in the event of any breach of any covenant or restriction
contained herein in addition to all other remedies provided by law or
equity. Seller hereby acknowledges that each and every one of said
covenants and restrictions is reasonable with respect to the subject
matter, the length of time and geographic area embraced therein, and agrees
that irrespec-tive of when or in what manner this agreement may be
terminated, said covenants and restrictions shall be operative during the
full period or periods hereinbefore mentioned and throughout the area
hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service xxxx, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Seller's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Seller pursuant to an Asset Purchase Agreement to which
Seller and Purchaser are parties of even date herewith.
3
3. The terms and conditions of this Agreement shall be binding upon the Seller
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
SELLER:
---------
DATASOURCE SYSTEMS CORPORATION,
dba DATASOURCE XXXXX and dba
DATASOURCE SYSTEMS MARKETING
CORPORATION
By: __________________________________
Roar Xxxx, President
PURCHASER:
----------
XXXXXXX COMPUTER RESOURCES, INC.
By: ___________________________________
Xxxxxxx X. Xxxxxxx, Chief Financial Officer
4
EXHIBIT A
----------------
STATES IN WHICH PURCHASER AND/OR
ITS SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. California
4. Florida
5. Georgia
6. Indiana
7. Illinois
8. Iowa
9. Kentucky
10. Maryland
11. Massachusetts
12. Michigan
13. Minnesota
14. Mississippi
15. North Carolina
16. Ohio
17. Oklahoma
18. Pennsylvania
19. South Carolina
20. Tennessee
21. Texas
22. Virginia
23. West Virginia
5
(jj)(4)
AGREEMENT
--------------
This Agreement made and entered into this _____ day of ______________, 2000, by
and between DATASOURCE SYSTEMS CORPORATION, dba DATASOURCE XXXXX and dba
DATASOURCE SYSTEMS MARKETING CORPORATION, a Delaware corporation (hereinafter
referred to as "Seller"), and XXXXXXX SELECT INTEGRATION SOLUTIONS, INC., a
Delaware corporation (hereinafter referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is a full-service provider of a variety of computer service and
support solutions, including installation, training, setup and consultation, to
large and medium size commercial, governmental and other professional customers
throughout the Minneapolis/St. Xxxx, Minnesota Metropolitan area; and
WHEREAS, simultaneously with the execution of this Agreement, Seller and
Purchaser have entered into an Asset Purchase Agreement ("Asset Purchase
Agreement") whereby Seller has sold to Purchaser substantially all of the assets
of Seller relating to Seller's Business of marketing and selling a broad range
of microcomputers and related products including equipment selection,
procurement and configuration; and
WHEREAS, the Purchaser would not have entered into the Asset Purchase Agreement
with Seller without the consent of Seller to enter into this Covenant Not to
Compete Agreement; and
WHEREAS, pursuant to Section 7.1 and Exhibit E-1 of said Asset Purchase
Agreement, Seller agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. In consideration of the payments to be made by Purchaser to Seller for its
assets, Seller covenants and agrees that for a period equal to five (5)
years from the closing of the Asset Purchase Agreement of even date, Seller
will not, or with any other person, corporation or entity, directly or
indi-rectly, by stock or other ownership, investment, management,
employment or otherwise, or in any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office and conducts Business during the term
of this Agreement. A list of the states in which Purchaser and its
subsidiaries currently transact business is attached hereto as Exhibit
A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Seller from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board.
(f) Nothing in this Agreement shall prohibit Seller from being affiliated
with DS Capital, LLC, a company engaged in the leasing business which
is owned by Seller's Shareholder, solely for the purposes of servicing
any existing leases of such company as of the date hereof, or any
renewals or extensions thereof for such equipment. Owner acknowledges
that any new leasing business that may be generated from the date
hereof shall be originated through Purchaser's affiliate, Technology
Integration Financial Services, Inc.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing, or supporting of microcomputer products,
microcomputer support solutions and computer integration products,
peripheral devices and related products and the sale of networking
services; and
2
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Notwithstanding anything herein to the contrary, the "Business of
Purchaser" shall only include business activity that is reasonably related to,
and is directly competitive with, the business engaged in by Purchaser during
the term of this Agreement.
Seller has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Seller herein, and agrees that the same are necessary for the
reasonable and proper protection of Seller's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Seller
that it will abide by and be bound by each of the covenants and
restrictions herein; and Seller agrees that Purchaser is entitled to
injunctive relief in the event of any breach of any covenant or restriction
contained herein in addition to all other remedies provided by law or
equity. Seller hereby acknowledges that each and every one of said
covenants and restrictions is reasonable with respect to the subject
matter, the length of time and geographic area embraced therein, and agrees
that irrespec-tive of when or in what manner this agreement may be
terminated, said covenants and restrictions shall be operative during the
full period or periods hereinbefore mentioned and throughout the area
hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service xxxx, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
3
2. The consideration for Seller's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Seller pursuant to an Asset Purchase Agreement to which
Seller and Purchaser are parties of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Seller
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
SELLER:
--------
DATASOURCE SYSTEMS CORPORATION,
dba DATASOURCE XXXXX and dba
DATASOURCE SYSTEMS MARKETING
CORPORATION
By: __________________________________
Roar Xxxx, President
PURCHASER:
------------
XXXXXXX SELECT INTEGRATION
SOLUTIONS, INC.
By: ___________________________________
Xxxxxxx X. Xxxxxxx, President
4
EXHIBIT A
----------------
STATES IN WHICH PURCHASER
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES OR OTHER
AFFILIATES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. California
4. Florida
5. Georgia
6. Indiana
7. Illinois
8. Iowa
9. Kentucky
10. Maryland
11. Massachusetts
12. Michigan
13. Minnesota
14. Mississippi
15. North Carolina
16. Ohio
17. Oklahoma
18. Pennsylvania
19. South Carolina
20. Tennessee
21. Texas
22. Virginia
23. West Virginia
5
(jj)(5)
AGREEMENT
--------------
This Agreement made and entered into this _____ day of ___________, 2000, by and
between ROAR XXXX (hereinafter referred to as "Owner") and XXXXXXX COMPUTER
RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with DATASOURCE
SYSTEMS CORPORATION, dba DATASOURCE XXXXX and dba DATASOURCE SYSTEMS MARKETING
CORPORATION, a Delaware corporation ("Company"), for the acquisition of certain
of its assets (the "Business"); and
WHEREAS, Owner owns One Hundred Percent (100%) of the outstanding stock of
Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Section 7.1 and Exhibit E-2 of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (100% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to the later of five (5) years
from the closing of the Asset Purchase Agreement of even date or one (1)
year after the termination of Owner's employment with Purchaser pursuant to
the terms of an Employment Agreement of even date, Owner will not, or with
any other person, corporation or entity, directly or indi-rectly, by stock
or other ownership, investment, management, employment or otherwise, or in
any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
2
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office and conducts Business during the term
of this Agreement. A list of the states in which Purchaser and its
subsidiaries currently transact business is attached hereto as Exhibit
A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an officer, director or employee
of DS Capital, LLC, a corporation engaged in the leasing business
solely for the purposes of servicing any existing leases of such
company as of the date hereof, or any renewals or extensions thereof
for such equipment. Owner acknowledges that any new leasing business
that may be generated from the date hereof shall be originated through
Purchaser's wholly owned subsidiary, Technology Integration Financial
Services, Inc. Nothing in this Agreement shall prohibit Owner from
owning 25% of the outstanding stock of Electronic Media Group, Inc., a
web development company.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
3
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Notwithstanding anything herein to the contrary, the "Business of
Purchaser" shall only include business activity that is reasonably related to,
and is directly competitive with, the business engaged in by Purchaser during
the term of this Agreement.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespec-tive of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service xxxx, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
4
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
__________________________________
ROAR XXXX
XXXXXXX COMPUTER RESOURCES , INC.
By:________________________________
XXXXXXX X. XXXXXXX
Chief Financial Officer
5
EXHIBIT A
----------------
STATES IN WHICH PURCHASER AND/OR
ITS SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. California
4. Florida
5. Georgia
6. Indiana
7. Illinois
8. Iowa
9. Kentucky
10. Maryland
11. Massachusetts
12. Michigan
13. Minnesota
14. Mississippi
15. North Carolina
16. Ohio
17. Oklahoma
18. Pennsylvania
19. South Carolina
20. Tennessee
21. Texas
22. Virginia
23. West Virginia
6
(jj)(6)
AGREEMENT
--------------
This Agreement made and entered into this _____ day of ___________, 2000, by and
between ROAR XXXX (hereinafter referred to as "Owner") and XXXXXXX SELECT
INTEGRATION SOLUTIONS, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with DATASOURCE
SYSTEMS CORPORATION, dba DATASOURCE XXXXX and dba DATASOURCE SYSTEMS MARKETING
CORPORATION, a Delaware corporation ("Company"), for the acquisition of certain
of its assets (the "Business"); and
WHEREAS, Owner owns One Hundred Percent (100%) of the outstanding stock of
Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Section 7.1 and Exhibit E-3 of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (100% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to the later of five (5) years
from the closing of the Asset Purchase Agreement of even date or one (1)
year after the termination of Owner's employment with Purchaser pursuant to
the terms of an Employment Agreement of even date, Owner will not, or with
any other person, corporation or entity, directly or indi-rectly, by stock
or other ownership, investment, management, employment or otherwise, or in
any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
2
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office and conducts Business during the term
of this Agreement. A list of the states in which Purchaser and its
subsidiaries currently transact business is attached hereto as Exhibit
A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an officer, director or employee
of DS Capital, LLC, a corporation engaged in the leasing business
solely for the purposes of servicing any existing leases of such
company as of the date hereof, or any renewals or extensions thereof
for such equipment. Owner acknowledges that any new leasing business
that may be generated from the date hereof shall be originated through
Purchaser's affiliate, Technology Integration Financial Services, Inc.
Nothing in this Agreement shall prohibit Owner from owning 25% of the
outstanding stock of Electronic Media Group, Inc., a web development
company.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
3
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Notwithstanding anything herein to the contrary, the "Business of
Purchaser" shall only include business activity that is reasonably related to,
and is directly competitive with, the business engaged in by Purchaser during
the term of this Agreement.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespec-tive of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service xxxx, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
4
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
__________________________________
ROAR XXXX
XXXXXXX SELECT INTEGRATION
SOLUTIONS, INC.
By:________________________________
XXXXXXX X. XXXXXXX
President
5
EXHIBIT A
---------------
STATES IN WHICH PURCHASER
AND/OR ITS PARENT COMPANIES
AND/OR SUBSIDIARIES OR OTHER
AFFILIATES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. California
4. Florida
5. Georgia
6. Indiana
7. Illinois
8. Iowa
9. Kentucky
10. Maryland
11. Massachusetts
12. Michigan
13. Minnesota
14. Mississippi
15. North Carolina
16. Ohio
17. Oklahoma
18. Pennsylvania
19. South Carolina
20. Tennessee
21. Texas
22. Virginia
23. West Virginia
6
