EXHIBIT 7(2)
AGREEMENT AND PLAN OF MERGER
AMONG
COMPUCOM SYSTEMS, INC.,
CIC ACQUISITION CORP.
AND
COMPUTER INTEGRATION CORP.
DATED AS OF APRIL 7, 1998
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.................................................... 2
1.1 Definitions.................................................... 2
ARTICLE II THE MERGER..................................................... 2
2.1 Merger......................................................... 2
2.2 Closing........................................................ 2
2.3 Certificate of Incorporation and Bylaws of
Surviving Corporation.......................................... 2
2.4 Directors and Officers......................................... 3
2.5 Disclosure Schedule............................................ 3
ARTICLE III CONVERSION OR CANCELLATION OF THE
COMPANY'S CAPITAL STOCK........................................ 3
3.1 Conversion or Cancellation of the Company's Capital Stock...... 3
3.2 Dissenting Shares.............................................. 4
3.3 Payment........................................................ 5
3.4 No Further Rights.............................................. 6
3.5 Closing of the Company's Transfer Books........................ 6
3.6 Stock Options and Warrants..................................... 6
ARTICLE IV REPRESENTATIONS ANDWARRANTIES OF THE COMPANY................... 7
4.1 Organization, Standing, etc. of the Company.................... 7
4.2 Authorization and Execution.................................... 7
4.3 No Consents.................................................... 8
4.4 Absence of Conflicts; Governmental Authorizations.............. 8
4.5 Capitalization................................................. 8
4.6 SEC Reports and Financial Statements........................... 9
4.7 Absence of Certain Changes or Events........................... 9
4.8 Absence of Undisclosed Liabilities............................. 10
4.9 Accounts Receivable............................................ 10
4.10 Tax Returns.................................................... 10
4.11 Agreements, Contracts and Commitments.......................... 11
4.12 Intellectual Property.......................................... 14
4.13 Litigation..................................................... 16
4.14 Compliance with Legal Requirements............................. 16
4.15 Employee Benefit Plans......................................... 17
4.16 Absence of Labor Difficulties.................................. 19
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4.17 Customers...................................................... 19
4.18 Assets Necessary to Business................................... 19
4.19 Licenses and Permits........................................... 20
4.20 Title to Properties............................................ 20
4.21 Insurance...................................................... 20
4.22 Books and Records.............................................. 21
4.23 Absence of Certain Business Practices.......................... 21
4.24 Bank Accounts.................................................. 21
4.25 Default........................................................ 21
4.26 No Subsidiaries................................................ 21
4.27 No Broker's or Finder's Fees................................... 22
4.28 Opinion of Financial Advisor................................... 22
4.29 Information Supplied........................................... 22
ARTICLE V REPRESENTATIONS AND WARRANTIESOF COMPUCOM AND THE
COMPUCOM SUBSIDIARY............................................ 22
5.1 Organization, Standing, etc., of CompuCom...................... 22
5.2 Organization, Standing, etc., of CompuCom Subsidiary........... 22
5.3 Authorization and Execution.................................... 23
5.4 Absence of Conflicts; Governmental Authorizations.............. 23
5.5 Financing...................................................... 24
5.6 Information Supplied........................................... 24
ARTICLE VI COVENANTS OF THE COMPANY....................................... 24
6.1 Investigations................................................. 24
6.2 Operation of the Company....................................... 25
6.3 No Solicitation................................................ 27
6.4 Board Approval, Fairness Opinion, Shareholder Approval
and Information Statement...................................... 29
6.5 Consents....................................................... 30
6.6 Financial Statements and Reports............................... 30
6.7 Notice and Cure................................................ 31
6.8 Best Efforts and Consents...................................... 31
6.9 Agreements and Covenants....................................... 31
ARTICLE VII COVENANTS OF COMPUCOM AND THE
COMPUCOM SUBSIDIARY............................................ 31
7.1 Conduct of Business of the CompuCom Subsidiary................. 31
7.2 Obligation of CompuCom to Make Merger Effective and the
CompuCom Subsidiary's Shareholder Consent...................... 31
7.3 Notice and Cure................................................ 32
7.4 Best Efforts and Consents...................................... 32
7.5 Information for Information Statement for the
Company's Shareholders......................................... 32
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ARTICLE VIII CONDITIONS..................................................... 32
8.1 General Conditions............................................. 32
8.2 Conditions to the Obligation of CompuCom and
the CompuCom Subsidiary........................................ 33
8.3 Conditions to Obligations of the Company....................... 34
ARTICLE IX TERMINATION; PAYMENT OF EXPENSES............................... 35
9.1 Termination of Agreement and Abandonment of Merger............. 35
9.2 Effect of Termination.......................................... 36
9.3 Amendment...................................................... 36
9.4 Extension; Waiver.............................................. 36
9.5 Fees and Expenses.............................................. 36
ARTICLE X ESCROW......................................................... 37
10.1 Escrow Agreement............................................... 37
10.2 Non Transferability of the Escrowed Funds...................... 37
10.3 Escrowed Funds................................................. 37
10.4 Adjustments to Purchase Price.................................. 38
10.5 Escrow Committee............................................... 40
ARTICLE XI FURTHER COVENANTS.............................................. 41
11.1 Account Receivable Collections................................. 41
11.2 CompuCom to Cause CompuCom Subsidiary and
Surviving Corporation to Perform............................... 41
11.3 Directors' and Officers' Liability Insurance................... 41
ARTICLE XII GENERAL........................................................ 41
12.1 Release of Information......................................... 41
12.2 Notices........................................................ 42
12.3 Successors and Assigns......................................... 43
12.4 Further Assurances............................................. 43
12.5 Specific Performance........................................... 43
12.6 Severability................................................... 44
12.7 Entire Agreement............................................... 44
12.8 Governing Law.................................................. 44
12.9 Certain Construction Rules..................................... 44
12.10 Survival of Covenants, Representations and Warranties.......... 44
12.11 Counterparts................................................... 45
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SCHEDULE 1.1 DEFINITIONS
EXHIBITS
--------
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of April 7, 1998,
among CompuCom Systems, Inc., a Delaware corporation ("CompuCom"), CIC
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
CompuCom (the "CompuCom Subsidiary"), and Computer Integration Corp., a Delaware
corporation ("CIC" and together with its wholly owned subsidiary CIC Systems,
Inc., a Delaware corporation, collectively, the "Company").
RECITALS:
---------
A. The respective Boards of Directors of CompuCom, the CompuCom
Subsidiary and the Company have each approved the merger of the CompuCom
Subsidiary into the Company (the "Merger"), whereby (other than shares of
Company Capital Stock (as hereinafter defined) owned directly or indirectly by
the Company or by CompuCom, CompuCom Subsidiary or any wholly owned subsidiary
of the Company or the CompuCom Subsidiary and Dissenting Shares (as defined in
Section 3.2)), (i) each outstanding share of the Common Stock, par value $.001
per share, of the Company (the "Company Common Stock"), will be converted into
the right to receive the Merger Consideration (as hereinafter defined), (ii)
each outstanding share of the Series D, 9% Cumulative Convertible Redeemable
Preferred Stock (the "Series D Preferred Stock") will be converted into the
right to receive the Series D Merger Consideration (as hereinafter defined), and
(iii) each share of the Company's Series E, 9% Cumulative Convertible Redeemable
Preferred Stock (the "Series E Preferred Stock") will be converted into the
right to receive the Series E Merger Consideration (as hereinafter defined) (the
Merger Consideration, the Series D Merger Consideration and the Series E Merger
Consideration collectively, the "Consideration"), all upon the terms and subject
to the conditions set forth in this Agreement. The Company Common Stock, the
Series D Preferred Stock and the Series E Preferred Stock are hereinafter
collectively referred to as the "Company Capital Stock." The Board of Directors
of the Company has adopted resolutions recommending that the Company's
shareholders approve the acquisition of all of the outstanding Company Capital
Stock by the CompuCom Subsidiary pursuant to the Merger.
B. CompuCom, the CompuCom Subsidiary and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
C. Simultaneously herewith, CompuCom, CompuCom Subsidiary and certain
shareholders of the Company named therein (the "Selling Shareholders") are
entering into a Stock Purchase Agreement (the "Stock Purchase Agreement")
providing for the purchase by the CompuCom Subsidiary on the terms and subject
to the conditions set forth in the Stock Purchase Agreement of each issued and
outstanding share of Company Capital Stock held by the Selling Shareholders.
NOW, THEREFORE, in consideration of the mutual agreements, representations
and warranties contained herein, and subject to the conditions contained herein,
the parties hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the terms set forth in
Schedule 1.1 shall have the respective meanings set forth therein.
ARTICLE II
THE MERGER
2.1 Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereinafter defined), in accordance with this Agreement
and the Delaware General Corporation Law (the "DGCL"), the CompuCom Subsidiary
shall merge with and into the Company and the separate existence and corporate
organization of the CompuCom Subsidiary (except as may be continued by operation
of law) shall cease and the Company shall survive the Merger as the surviving
corporation (the "Surviving Corporation"). The Surviving Corporation shall
succeed to and possess all the estates, properties (real, personal and mixed)
rights, privileges, powers, franchises, immunities, purposes, and all and every
other interest of, or belonging to, the Company or the CompuCom Subsidiary, all
without further act or deed; and the Surviving Corporation shall be subject to
all the debts, liabilities, obligations, restrictions, disabilities, penalties
and duties of the Company and the CompuCom Subsidiary, all without further act
or deed. CompuCom shall not assume any debts, liabilities, obligations,
restrictions, disabilities, penalties or duties of the Company, the CompuCom
Subsidiary or the Surviving Corporation.
2.2 Closing. The Closing of the Merger (the "Closing") shall take place
at the offices of Xxxxxxxxxxx & Price, L.L.P., 000 Xxxx Xxxxxx, Xxxxxx, Xxxxx at
10:00 a.m., Dallas, Texas time, on a date to be specified by CompuCom or the
CompuCom Subsidiary, which shall be no later than the third business day after
satisfaction of the last to occur of the conditions set forth in Section 8.1, or
at such other time and place or on such other date as CompuCom and the Company
may agree. On the Closing Date, a Certificate of Merger substantially in the
form of Exhibit A (which shall be completed as appropriate to reflect the terms
of this Agreement) shall be executed, delivered, filed and recorded in
accordance with the DGCL, unless otherwise agreed by the parties in writing.
The Merger shall become effective when such Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such other time as
the CompuCom Subsidiary and the Company shall agree should be specified in the
Certificate of Merger (the time the Merger becomes effective being hereinafter
referred to as the "Effective Time").
2.3 Certificate of Incorporation and Bylaws of Surviving Corporation.
From and after the Effective Time, the Certificate of Incorporation, as amended,
of the CompuCom Subsidiary immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, until further amended
in accordance with the DGCL. From and after the Effective Time, the Bylaws, as
amended, of the CompuCom Subsidiary immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation, until further amended in
accordance with the DGCL.
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2.4 Directors and Officers. The directors and officers of the CompuCom
Subsidiary immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation, with each to serve as such until his or
her respective successor is duly elected and qualified in the manner provided in
the Certificate of Incorporation and Bylaws of the Surviving Corporation, or his
or her earlier death, resignation or removal.
2.5 Disclosure Schedule. The Company has prepared, executed and
delivered to CompuCom as of the date of this Agreement, a partially completed
disclosure schedule (the "Disclosure Schedule"), setting forth, among other
things, certain information that, to the extent and as provided in this
Agreement, qualifies certain representations and warranties of the Company made
in this Agreement. The Disclosure Schedule will be arranged in sections
corresponding to sections of this Agreement to be modified by the disclosures
set forth in the Disclosure Schedule. Information contained in a Section or
subsection of the Disclosure Schedule (or expressly incorporated therein) shall
qualify only those representations and warranties of the Company made in the
identically numbered Section or subsection of this Agreement, and shall not be
deemed to qualify the representations or warranties made in any other Section or
subsection. The Company shall complete the Disclosure Schedule and deliver the
completed Disclosure Schedule to CompuCom on or before April 15, 1998. In
addition to the termination provisions contained in Section 9.1, CompuCom shall
have the right to terminate this Agreement within seven (7) business days
following receipt of the completed Disclosure Schedule if the completed
Disclosure Schedule reveals any fact, matter, claim or circumstance not
disclosed by the Company to CompuCom prior to the execution of this Agreement
which, in CompuCom's judgment could materially and adversely affect the Company.
ARTICLE III
CONVERSION OR CANCELLATION OF THE COMPANY'S CAPITAL STOCK
3.1 Conversion or Cancellation of the Company's Capital Stock. Subject
to the terms and conditions of this Agreement, on the Effective Time, by virtue
of the Merger and without any action on the part of the CompuCom Subsidiary, the
Company or the holder of any of the following securities:
(a) Each share of the Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than Dissenting Shares and shares
canceled in accordance with Section 3.1(c), shall be converted into and
represent the right to receive, without interest, the Merger Consideration Due
at Closing plus the Merger Contingent Consideration to be deposited by CompuCom
or CompuCom Subsidiary and held by the Escrow Agent in escrow as contingent
consideration for distribution in full or in part to either the holders of the
Company Common Stock or CompuCom based upon resolution of certain matters
subject to adjustment pursuant to the Escrow Agreement described in Article X.
The Merger Contingent Consideration, together with the Option and Warrant Merger
Contingent Consideration as defined in Section 3.6(c), is hereinafter referred
to as the "Contingent Consideration," and the Merger Consideration Due at
Closing and the Merger Contingent Consideration are hereinafter collectively
referred to as the "Merger Consideration."
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(i) Each share of the Series D Preferred Stock issued and
outstanding immediately prior to the Effective Time, other than Dissenting
Shares and shares canceled in accordance with Section 3.1(c), shall be converted
into and represent the right to receive $100 in cash without interest thereon
(such amount of cash referred to herein as the "Series D Merger Consideration").
(b) Each share of the Series E Preferred Stock issued and
outstanding immediately prior to the Effective Time, other than Dissenting
Shares and shares canceled in accordance with Section 3.1(c), shall be converted
into and represent the right to receive $4,000 in cash without interest thereon
(such amount of cash referred to herein as the "Series E Merger Consideration").
(c) At the Effective Time, each share of the Company Capital
Stock, if any, held in the Company's treasury and each share of the Company
Capital Stock owned by the CompuCom Subsidiary, CompuCom or any direct or
indirect wholly owned subsidiary of either of them at the Effective Time
(including any owned by them as a result of a Closing under the terms of the
Stock Purchase Agreement) shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(d) Each share of common stock of the CompuCom Subsidiary issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one fully paid and nonassessable share of Common Stock, par value
$.001 per share, of the Surviving Corporation.
3.2 Dissenting Shares.
(a) Shares of the Company Common Stock held by each shareholder
who has not voted such shares in favor of the Merger, and shares of Series D
Preferred Stock and Series E Preferred Stock, in each case, as to which
appraisal shall have been duly demanded and perfected in accordance with Section
262 of the DGCL where the holder thereof has not effectively withdrawn or
forfeited such right to such appraisal ("Dissenting Shares") shall not be
converted into, represent the right to receive, or be exchangeable for the
Consideration due with respect to such class of Capital Stock, unless such
holder shall have forfeited such holder's right to appraisal under the DGCL or
withdrawn, with the consent of the Company, such holder's demand for appraisal.
If such holder has forfeited or withdrawn such holder's right to appraisal of
Dissenting Shares, then, as of the Effective Time, or the occurrence of such
event, whichever last occurs, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to
receive, and be exchangeable for, the Consideration due with respect to such
class of Capital Stock.
(b) The Company shall give CompuCom (i) prompt written notice of
any written demands for appraisal of any shares of Capital Stock of the Company,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL and received by the Company and (ii) the opportunity to direct and control
all negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of CompuCom,
make any payment with respect to any demands for appraisal of Capital Stock of
the Company or settle or offer to settle any such demands.
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3.3 Payment.
(a) Prior to the Effective Time, CompuCom shall designate a bank,
trust company or other entity reasonably satisfactory to the Company to act as
the disbursing agent (the "Disbursing Agent") in effecting the exchange of the
Consideration for certificates of shares of the Capital Stock to be converted in
the Merger ("Certificates"). On or before the Effective Time, CompuCom or the
CompuCom Subsidiary shall deposit with the Disbursing Agent cash sufficient to
make the payments contemplated by Section 2.1 to be made to the holders of the
Capital Stock whose shares are to be converted in the Merger, other than shares
of Capital Stock canceled pursuant to Section 3.1(c) and other than the
Contingent Consideration. In addition, at or prior to the Effective Time, the
CompuCom Subsidiary shall deposit the Merger Contingent Consideration with the
Escrow Agent as provided in Article X. As soon as practicable after the
Effective Time, CompuCom shall cause the Disbursing Agent to send a notice and a
transmittal form to each holder of record of shares of the Company Capital Stock
whose shares are to be converted in the Merger, advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Disbursing
Agent such holder's Certificates for exchange into the Consideration due with
respect to the class of Capital Stock held by such holder. Each such holder,
upon proper surrender of such Certificates to the Disbursing Agent together with
and in accordance with such transmittal form, shall be entitled to receive in
exchange therefor the Consideration deliverable in respect of the Capital Stock
theretofore evidenced by the Certificates so surrendered, subject to any Taxes
required to be withheld. Upon surrender of such Certificates to the Disbursing
Agent, CompuCom shall cause the Disbursing Agent promptly to deliver the
Consideration due with respect to the Capital Stock evidenced by such
Certificates to the Person entitled thereto. Until properly surrendered, each
such Certificate (other than Certificates representing Dissenting Shares) shall
be deemed for all purposes to evidence only the right to receive the
Consideration payable with respect to any class of Capital Stock multiplied by
the number of shares of that class of Capital Stock represented by such
Certificate. Until properly surrendered, holders of Certificates will not be
entitled to payment of the Consideration to which they would otherwise be
entitled. No interest will be paid or accrued on the cash payable upon the
surrender of a Certificate. All costs and expenses of the Disbursing Agent
shall be borne by CompuCom.
(b) If the Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of such Consideration that the Certificates so surrendered shall be
properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to the Disbursing Agent any transfer or
other Taxes payable by reason of the foregoing or establish to the satisfaction
of the Disbursing Agent that such Taxes have been paid or are not required to be
paid. Notwithstanding the foregoing, neither the Disbursing Agent nor any party
hereto shall be liable to a holder of shares of Company Capital Stock for any
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Surviving Corporation will
issue, in exchange for such lost, stolen or destroyed Certificate, the
Consideration due with respect to the class of Capital Stock represented by such
Certificate deliverable in respect thereof as determined in accordance with this
Article III. When
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authorizing such issue of the Consideration in exchange therefor, the Board of
Directors of the Surviving Corporation may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to give the Surviving Corporation a bond in such sum as it
may direct, or such other secured or unsecured indemnity agreement as such Board
of Directors may require, as indemnity against any claim that may be made
against the Surviving Corporation with respect to the Certificate alleged to
have been lost, stolen or destroyed.
(d) Promptly following the six-month anniversary of the Effective
Time, the Disbursing Agent shall return to the Surviving Corporation all
Consideration in its possession relating to the transactions described in this
Agreement, and the Disbursing Agent's duty shall thereupon terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
Surviving Corporation, in accordance with the procedures above, and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Consideration due with respect to the class of Capital Stock
represented by such Certificate, without any interest thereon and subject to any
Taxes required to be withheld.
3.4 No Further Rights. From and after the Effective Time, holders of
Certificates shall cease to have any rights as shareholders of the Company,
except as provided herein or by law.
3.5 Closing of the Company's Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of the
Company Capital Stock shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Disbursing Agent,
they shall be canceled and exchanged for the Consideration, as provided in this
Article III, subject to applicable law in the case of Dissenting Shares.
3.6 Stock Options and Warrants.
(a) The Company will (i) terminate, to the extent permitted by
the terms thereof, the Company's 1994 Stock Option Plan, as amended (the
"Company Option Plan"), immediately before the Effective Time, without prejudice
to the rights of the holders of outstanding Options issued pursuant to the
Company Option Plan, (ii) grant no additional Options after the date of this
Agreement under the Company Option Plan and (iii) grant no other options,
warrants, rights, convertible securities or other agreements or commitments
pursuant to which the Company is required to issue any shares of its Capital
Stock or any securities convertible into or exchangeable for its Capital Stock.
(b) Promptly after Closing, each holder of a then outstanding
vested Option or Warrant to purchase Company Common Stock heretofore granted,
all as more particularly described in the Disclosure Schedule, will, upon
consent of each such holder thereof, receive in settlement thereof, (a) a cash
payment from the Company, if any, in an amount (the "Option and Warrant Merger
Consideration") equal to the product of (i) the per share Merger Consideration
Due at Closing, minus the per share exercise price of such Options or Warrants,
multiplied by (ii) the total number of shares of Company Common Stock which the
holder of each such Option or Warrant is entitled to purchase under such Option
or Warrant, as provided above (the "Option and Warrant Shares") and a deposit by
CompuCom or the CompuCom Subsidiary of the Merger Contingent Consideration for
each Option and Warrant Share (the "Option and Warrant Merger Contingent
Consideration") to be held in escrow as contingent consideration for
distribution to the holders of
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Options and Warrants of the Company or to be disbursed in whole or in part to
the Surviving Corporation in accordance with the provisions of the Escrow
Agreement; provided, however, that the amounts payable pursuant to Options and
Warrants shall be reduced by any applicable federal and state withholding Taxes.
Options and Warrants shall be surrendered and canceled at the Closing and, upon
such surrender and cancellation, will be paid for by the Surviving Corporation
on the business day next following the Closing. On or prior to Closing, the
Company shall obtain from each holder of the Options and Warrants the written
consent to the surrender and cancellation of all of such holder's Options and
Warrants pursuant to this Section 3.6(b) and shall take all steps necessary to
effect the surrender, cancellation and settlement of Options and Warrants
pursuant to this Section 3.6(b).
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to CompuCom and the CompuCom
Subsidiary as follows:
4.1 Organization, Standing, etc. of the Company. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own its assets and to carry on its business as presently conducted and,
except where the failure to qualify would not have a Material Adverse Effect, is
duly qualified as a foreign corporation to do business in and is in good
standing in each jurisdiction in which the character of the assets owned or held
under lease by it or the nature of the business transacted by it makes such
qualification necessary. Section 4.1 of the Disclosure Schedule sets forth a
true and complete list of (a) all jurisdictions where the Company is qualified
to do business and (b) each business name which has been used by the Company
since January 1, 1993 and the city and state in which the principal office of
each such business was conducted since January 1, 1993. The Company has
heretofore furnished to CompuCom true and complete copies of its Certificate of
Incorporation and all amendments thereto to the date hereof and its Bylaws as
presently in effect. The Company has all requisite corporate power and authority
to execute and deliver, and perform its obligations under, this Agreement and to
consummate the transactions contemplated hereby.
4.2 Authorization and Execution. The execution and delivery of this
Agreement and, subject to obtaining the requisite approval of the holders of the
Company Common Stock, the performance by the Company of this Agreement, the
Merger and the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company. The
Board of Directors of the Company, at meetings duly called and held, has (a)
determined that the transactions contemplated by this Agreement, including the
Merger, are fair to and in the best interests of the shareholders of the
Company, (b) approved this Agreement and the transactions contemplated hereby,
including, without limitation, the Merger, and (c) resolved to recommend that
the Company's shareholders approve and adopt this Agreement, the Merger and the
transactions contemplated hereby. Neither the holders of the Series D Preferred
Stock nor the holders of the Series E Preferred Stock have the right to vote
with respect to this Agreement, the Merger or the transactions contemplated
hereby. This Agreement has been duly and validly
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executed and delivered by the Company and constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, assuming this Agreement is enforceable against CompuCom and the CompuCom
Subsidiary.
4.3 No Consents. Except as set forth in Section 4.4(b) and as set forth
in Section 4.11(v) of the Disclosure Schedule, the execution and delivery by the
Company of this Agreement and the consummation of the transactions contemplated
hereby will not require any Consent or other action by or in respect of, or
declaration or filing with, any other Person.
4.4 Absence of Conflicts; Governmental Authorizations.
(a) The execution and delivery by the Company of this Agreement,
the performance by the Company of its obligations hereunder and the consummation
by the Company of the transactions contemplated hereby will not (i) conflict
with or result in any violation of any provision of the Company's Certificate of
Incorporation or Bylaws, each as amended to date; (ii) except as set forth in
Section 4.4(a)(ii) of the Disclosure Schedule, conflict with, result in any
violation or breach of, constitute a default under, give rise to any right of
termination or acceleration (with or without notice or the lapse of time or
both) pursuant to, or result in being declared void or voidable, any term or
provision of any note, bond, mortgage, indenture, lease, license, Contract or
other instrument to which the Company is a party or by which any of its or his
properties or assets are or may be bound; (iii) violate any term of any Legal
Requirement applicable to the Company or its or his properties or assets; or
(iv) result in the creation of, or impose on the Company the obligation to
create, any Lien upon any properties or assets of the Company.
(b) Except for applicable requirements, if any, of the Exchange
Act (including the filing with the SEC of an information statement (the
"Information Statement") relating to approval by the Selling Shareholders of the
Merger by written consent), the premerger notification requirements of the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
Nasdaq SmallCap Market, the filing and recordation of appropriate merger
documents as required by the DGCL, filings required pursuant to any state
securities or "blue sky" laws and such other notices, reports or other filings
the failure of which to be made would not, individually or in the aggregate,
have a Material Adverse Effect on the Company or prevent or materially impair
the consummation of the transactions contemplated hereby, the Company is not
required to submit any notice, report or other filing to any Tribunal, domestic
or foreign, in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.
4.5 Capitalization. The authorized capital stock of the Company
consists of (a) 20,000,000 shares of Company Common Stock of which 14,046,010
shares are issued and outstanding, (b) 4,000,000 shares of Company Common Stock
have been reserved for issuance upon the exercise of outstanding Options, (c)
355,000 shares of Company Common Stock have been reserved for issuance upon
exercise of outstanding Warrants, (d) 40,000 shares of Series D Preferred Stock
of which 19,036 shares are issued and outstanding, (e) 250 shares of Series E
Preferred Stock of which 125 shares are issued and outstanding, and (f) no
shares of Company Capital Stock are held in treasury. All of the outstanding
shares of Company Capital Stock have been duly authorized and are validly
issued, fully paid and nonassessable and free of preemptive rights. All of the
issued shares of Company Capital Stock were issued, and to the extent purchased
by the Company or
8
transferred, have been so purchased or transferred, in compliance with all
applicable Legal Requirements, including federal and state securities laws, and
any preemptive rights and any other statutory or contractual rights of any
shareholders of the Company. Except for the Options and the Warrants, there are
no subscriptions, options, warrants, rights (including "phantom" stock rights),
convertible securities or other agreements or commitments (contingent or
otherwise) of any character (written or oral) pursuant to which the Company is
required to issue any shares of its Capital Stock or any securities convertible
into or exchangeable for its Capital Stock, or is otherwise required to give any
Person the right to receive any benefits or rights similar to any rights enjoyed
by or accruing to the holders of shares of Company Capital Stock or any rights
to participate in the equity or net income of the Company. Section 4.5 of the
Disclosure Schedule sets forth the number and exercise price of all outstanding
Options and Warrants. As of the Closing Date, there will be no outstanding
subscriptions, options (other than the Options), warrants (other than the
Warrants), rights or any other agreements or commitments of any kind or any
convertible or exchangeable securities of the sort described in the immediately
preceding sentence. Except as set forth on Section 4.5 of the Disclosure
Schedule, there are not any shareholders' agreements, voting trusts or other
agreements or understandings between or among shareholders or to which the
Company is a party or by which it is bound with respect to the transfer or
voting of any Capital Stock of the Company.
4.6 SEC Reports and Financial Statements. The Company has filed with the
SEC, and has heretofore made available to CompuCom true and complete copies of,
all forms, reports, schedules, statements and other documents required to be
filed by it since June 30, 1995, under the Exchange Act or the 33 Act (such
forms, reports, schedules, statements and other documents, including any
financial statements or schedules included therein, are referred to as the
"Company SEC Documents"). The Company SEC Documents, at the time filed, (a) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the 33 Act, as the case may be, and the
applicable rules and regulations of the SEC thereunder. The financial statements
of the Company included in the Company SEC Documents comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Forms 10-Q and 8-K of the SEC)
and fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the financial position of the Company as at the
dates thereof and the results of operations and cash flows for the periods then
ended.
4.7 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed and publicly available to the date of this Agreement
(the "Company Filed SEC Documents"), and except as disclosed in the Company's
financial statements dated as of June 30, 1997 audited by Ernst & Young LLP (the
"Company 1997 Financial Statements"), a copy of which has been delivered to
CompuCom by the Company, since June 30, 1997, the Company has conducted its
business only in the ordinary course, and there has not then, occurred or arisen
any change in, or any event (including, without limitation, any damage,
destruction or loss whether or not covered by insurance), condition or state of
facts of any character that individually or in the aggregate has or may be
expected to have a Material Adverse Effect.
9
4.8 Absence of Undisclosed Liabilities. Except as specifically
reflected in the Company 1997 Financial Statements, there were as of the date of
the Company 1997 Financial Statements no liabilities, Indebtedness or
obligations (whether absolute or contingent, asserted or unasserted, due or to
become due) against, relating to or affecting the Company that could,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in Section 4.8 of the Disclosure Schedule, since the date of the Company
1997 Financial Statements, the Company has not incurred any liabilities,
Indebtedness or obligations (whether absolute or contingent, asserted or
unasserted, due or to become due) other than liabilities, Indebtedness and
obligations incurred after such date in the ordinary course of business
consistent with past practice and which would not, individually or in the
aggregate, have a Material Adverse Effect.
4.9 Accounts Receivable. All Accounts Receivable existing as of the
date hereof arose out of bona fide business transactions in the ordinary course
of business consistent with past practices (including regular credit practices).
To the best knowledge of the Company, adequate reserves have been accrued and
maintained in the Company 1997 Financial Statements and in the financial
statements of the Company included in the Form 10-Q of the Company filed with
the SEC for the quarterly period ended December 31, 1997, to provide for all
doubtful accounts of, valid counterclaims or setoffs by, rebates, discounts and
allowances to, and returns from, any customers of the Company, and such reserves
were established in a manner consistent with the Company's collection experience
in prior years. Each Account Receivable constitutes a legal, valid and binding
account receivable. To the best knowledge of the Company, the Accounts
Receivable in the aggregate, net of reserves, are collectible in accordance with
the Company's regular collection practices and without recourse to legal
proceedings. The Company has furnished CompuCom with a true and complete copy of
its Accounts Receivable Aging Report, dated March 31, 1998.
4.10 Tax Returns. Except as set forth in Section 4.10 of the Disclosure
Schedule, with respect to all reporting periods applicable to the Company ended
on or before the date hereof, the Company has accurately prepared and timely
filed all returns and reports required by law, and has paid (or made adequate
provision on its books for the payment of) all Taxes, fees and assessments
determined to be owed in accordance therewith, when due or within prior
extensions of time. Except as set forth in Section 4.10 of the Disclosure
Schedule, none of the Company's federal or state tax returns or reports for tax
periods ending after 1991 has been or is currently being audited by any taxing
authority. Except as set forth in Section 4.10 of the Disclosure Schedule, to
the best knowledge of the Company, there is no audit threatened or proposed by
any taxing authority. There are no outstanding agreements, waivers or other
arrangements extending the period of limitation applicable to any claim for, or
the period for the collection or assessment of, any Tax due from the Company.
Except as set forth in Section 4.10 of the Disclosure Schedule, to the best
knowledge of the Company, there are no actual or proposed Tax adjustments or
assessments against the Company or any basis for any such assessment, and all
Tax liabilities have either been paid or are adequately provided for on the
books of the Company. No closing agreement pursuant to Section 7121 of the Code
or any similar provision of any state, local or foreign law has been entered
into by or with respect to the Company. The Company is not a party to, is not
bound by and does not have any obligation under any Tax sharing agreement or
similar arrangement. The Company has paid or is withholding and will pay when
due to the proper taxing authorities all withholding amounts required to be
withheld through the date hereof with respect to all Taxes on income,
unemployment, social security or other similar programs or benefits with respect
to salary and other compensation of directors, officers and employees of the
Company.
10
4.11 Agreements, Contracts and Commitments. Sections 4.11(a) through
4.11(v) of the Disclosure Schedule, respectively, contain a true and complete
list as of the date hereof of all material Contracts and other documents of the
following types (for purposes of this Section 4.11, a Contract or other document
described in subparagraphs (a) through (v) shall be deemed to be material if it
meets the dollar threshold specified in the applicable subparagraph), written or
oral, to which the Company is a party or by which the business or any of the
assets of the Company are bound as of the date hereof (true and complete copies
or, if none, written descriptions, of which have been provided or made available
to CompuCom, together with all exhibits, amendments or modifications thereto):
(a) all notes, loans, credit agreements, letters of credit,
mortgages, guarantees, surety or indemnification agreements, indentures,
security agreements and other Contracts and instruments (i) relating to the
borrowing of money by or on behalf of, or the extension of credit to, the
Company, (ii) evidencing any Indebtedness or other liabilities of the Company or
the guarantee by the Company of the Indebtedness or other liabilities of any
other Person, or (iii) evidencing any keep-well or similar obligations of the
Company with respect to any other Person;
(b) all Contracts or other instruments evidencing, creating or
suffering to exist any Liens of any kind on the properties and assets of the
Company;
(c) all licenses or permits from any Tribunal required to conduct
the business of the Company as presently conducted;
(d) all employment, agency, consultation, severance and
collective bargaining Contracts, including, without limitation, Contracts to
employ, and other Contracts with, (i) any present officer, director, employee,
agent, consultant or other similar representative of the Company or (ii) any
former officer, director, employee, agent, consultant or similar representative
of the Company that left the employ or engagement of the Company within the
preceding 12 months and to whom the Company has any continuing payment
obligations;
(e) all sales, agency, representatives, broker, finders,
franchise, dealers or distributorship Contracts;
(f) all Contracts, orders or commitments for the purchase by the
Company of raw materials, supplies, finished products or any other properties
and assets (excluding inventory for resale) in an amount exceeding $50,000;
(g) all Contracts, orders or commitments for the disposition of
or license, sale or lease to customers or any other Persons of products or
services (including, without limitation, any item of Software and any related
maintenance or support services) or any other properties or assets of the
Company in an amount exceeding $100,000 individually or $500,000 in the
aggregate, with specific designation of those Contracts, orders or commitments
that are not evidenced by form Contracts previously provided to CompuCom;
(h) all noncompetition, nondisclosure, confidentiality and
similar Contracts, other than those that were entered into in the ordinary
course of business consistent with past practice which contain any covenant,
provision or obligation limiting in any manner whatsoever (whether
11
during any particular period of time from and after the Closing Date, in certain
geographic areas or otherwise) the ability of (i) the Company, or any of the
employees of the Company, to engage in any line of business, to compete with any
Person or to obtain from, or provide to, any Person any products or services or
(ii) any Person to compete with or provide products or services to the Company;
(i) all Contracts or commitments that provide for the provision
of any goods, or the rendition of any services, to the Company and that are not
terminable on notice of 30 days or less without penalty or premium other than
customary maintenance agreements relating to computer equipment or Software used
by the Company, the terms of which contain no liabilities (other than to pay for
the maintenance services) or material obligations;
(j) all Contracts or commitments for capital expenditures
relating to the business of the Company in an amount in excess of $25,000 for
any single item;
(k) all partnership, joint venture, profit sharing or similar
Contracts;
(l) all leases or subleases of real property used in the
Company's business, operations and affairs, and all other leases, subleases or
rental or use Contracts that involve a consideration or expenditure of more than
$50,000 for the entire term thereof;
(m) all Contracts or arrangements (including, without limitation,
those relating to allocations of expenses, personnel, services, equipment or
facilities) between or among the Company on the one hand and any Affiliates of
the Company on the other;
(n) all Contracts or commitments that involve a consideration or
expenditure of more than $50,000 for the entire term thereof;
(o) all Contracts pursuant to which the Company may have granted,
or agreed to grant, to another Person exclusive rights with respect to any goods
or services, items of Software or territory;
(p) all outstanding proxies, powers of attorney or similar
delegations of authority of the Company;
(q) all Contracts pursuant to which the Company may have granted,
or agreed to grant (whether or not any requirement such as the giving of notice,
the lapse of time or the happening of any further condition, event or act has
been satisfied), to another Person the right to sublicense or transfer any
Software;
(r) all Contracts pursuant to which the Company or any of its
Affiliates may have delivered to another Person, or granted or agreed to grant
(whether or not any requirement such as the giving of notice, the lapse of time
or the happening of any further condition, event or act has been satisfied) to
another Person the rights to obtain, any source code to any Software (including,
without limitation, any source code escrow Contract);
12
(s) all Contracts pursuant to which the Company or any of its
Affiliates may have delivered to another Person, or granted or agreed to grant
(whether or not any requirement such as the giving of notice, the lapse of time
or the happening of any further condition, event or act has been satisfied) to
another Person the rights to obtain, any Software "keys" allowing access to
additional modules or programs of any Software;
(t) all performance bonds posted by the Company or any of its
Affiliates;
(u) to the extent not required to be disclosed elsewhere in this
Section 4.11, all Contracts not entered into in the ordinary course of business
consistent with past practice;
(v) all Contracts and commitments requiring the Consent of, or
the waiver by, any suppliers, distributors, customers, licensees, licensors,
insurers or other Persons in connection with the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby on the part of the Company.
Each Contract disclosed or required to be disclosed pursuant to any clause
of Section 4.11 is in full force and effect, constitutes a legal, valid and
binding obligation of the Company and, to the best knowledge of the Company, the
other parties thereto, and is enforceable against each of them in accordance
with its terms. Except for obtaining the Consents required under any of the
Contracts set forth in Section 4.11(v) of the Disclosure Schedule, the terms of
each such Contract allow the succession of the Company by the Surviving
Corporation as party thereto (and on the Effective Time, the Surviving
Corporation will so succeed the Company) pursuant to the transactions
contemplated hereby without requiring any payment to any Person or any waiting
period, payment of any charge, fee or expense or any notice to any Person,
including, without limitation, any transfer fee, relicensing fee or other fee
with respect to Software. Except in the case of any Contracts as to which
Consent is required as disclosed in Section 4.11(v) of the Disclosure Schedule
or as otherwise disclosed in Section 4.11 of the Disclosure Schedule, the
enforceability of each Contract disclosed or required to be disclosed pursuant
to any clause of Section 4.11, and the enjoyment of all the rights and benefits
thereunder, will not be affected in any manner by the execution and delivery of
this Agreement, the performance by the parties of their obligations hereunder
and the consummation of the transactions contemplated hereby. Except as set
forth in Section 4.11 of the Disclosure Schedule, neither the Company nor, to
the best knowledge of the Company, any other party to any such Contract is in
breach or default thereunder, no notice of default, defense, offset,
counterclaim, termination, cancellation or acceleration has been received by any
party thereto in connection therewith and, to the best knowledge of the Company,
no event has occurred that would constitute a breach, violation or default or
give rise to any right of offset, counterclaim, termination, cancellation or
acceleration thereunder (with or without notice or lapse of time or both). The
Company does not have any present expectation or intention of not fully
performing any such Contract substantially in accordance with its terms. The
Company does not know or have reason to know of any threat to cancel, or not to
renew or extend, any such Contract by any party thereto. There are no material
disputes with respect to any such Contract. The Company has furnished CompuCom
with a true and complete list of all outstanding bids involving amounts
exceeding $500,000 for new business or prospects submitted by the Company or any
of its Affiliates.
13
4.12 Intellectual Property.
(a) General. (i) Section 4.12(a)(i) and Section 4.12(b)(i) of the
Disclosure Schedule set forth a true and complete list of all items of
Intellectual Property (A) which are owned by the Company and (B) which also are
used or held for use in the business and operations of the Company
(collectively, the "Owned IP"), except for Trade Secrets and Miscellaneous
Software Components. To the best knowledge of the Company, all trademark
registrations and copyright registrations which are part of the Owned IP are in
good standing, are valid and subsisting, and are in full force and effect in
accordance with their terms; (ii) Section 4.12(a)(ii) and Section 4.12(b)(ii) of
the Disclosure Schedule set forth a true and complete list of all items of
Intellectual Property (A) which the Company does not own, but in which the
Company has a right or rights (by license or otherwise), and (B) which also are
used or held for use in the business and operations of the Company
(collectively, the "Not-Owned IP"), except for Trade Secrets and Miscellaneous
Software Components. The right of the Company to use the Not-Owned IP in the
business and operations of the Company is solely evidenced by the written
license agreements or other Contracts set forth in Section 4.12(a)(ii) and
Section 4.12(b)(ii) of the Disclosure Schedule; (iii) the development, license,
use, sale, distribution and modification of the Owned IP by the Company in
connection with the business and operations of the Company, and, to the best
knowledge of the Company, the license, use, sale, distribution and modification
of the Not-Owned IP by the Company in connection with the business and
operations of the Company, has not infringed on or otherwise violated the rights
of any other Person or constituted an unlawful disclosure, use or
misappropriation of the right or rights of any other Person. The continued and
future license, use, sale, distribution or modification of the Owned IP and the
Not-Owned IP by the Surviving Corporation, shall not constitute an infringement
or other violation of the rights of any other Person or constitute an unlawful
disclosure, use or misappropriation of the right or rights of any other Person
(other than to the extent resulting from material changes to the Owned IP or the
Not-Owned IP, as the case may be, made by the Surviving Corporation or other
Persons after the Closing Date). The Company is not in violation of, or in
default (with or without notice or lapse of time or both) under, any Contract or
other Legal Requirement relating to the Company IP; (iv) (A) There is no action,
suit, inquiry, formal or informal complaint, investigation or other proceeding
that is pending, or to the best knowledge of the Company, threatened, with
respect to, (B) to the best knowledge of the Company, there is no presently
existing factual basis that is reasonably likely to result in any action, suit,
inquiry, formal or informal complaint, investigation or proceeding contesting,
and (C) there is no outstanding Order concerning, (X) any right of the Company
to develop, license, use, sell, distribute or modify the Owned IP or (Y) any
right under a Contract or any other right of the Company to license, use, sell,
distribute or modify the Not-Owned IP; (v) The Company has the right, which
(subject to the expiration of copyrights and patents by operation of law or the
loss of Trade Secrets as a result of actions taken by other Persons) is non-
terminable and not subject to expiration or revocation, to develop, license,
control or regulate the use of, sell, distribute and modify the Owned IP without
any valid legal or equitable claim by, or payment or other obligation owing to,
or Consent from, any Person. The Surviving Corporation will retain at the
Effective Time all of such rights on the same basis and geographic scope as that
enjoyed by the Company immediately prior to the Effective Time, without any
diminution or alteration as a result of the Merger; (vi) except as set forth in
Section 4.12(a)(vi) of the Disclosure Schedule (and subject only to the express
terms of those Contracts that are referred to in Section 4.12(a)(ii) and Section
4.12(b)(ii) of the Disclosure Schedule to the extent that true and complete
copies have been provided to CompuCom), the Company has the right, which is non-
terminable and not subject to expiration or revocation, to license, use, sell,
14
distribute or modify the Not-Owned IP without any valid legal or equitable claim
by, or payment or other obligation owing to, any other Person. The Surviving
Corporation will retain at the Effective Time all of such rights on the same
basis or geographic scope as that enjoyed by the Company immediately prior to
the Effective Time, without any diminution or alteration as a result of the
Merger. Section 4.12(a)(vi) of the Disclosure Schedule sets forth a true,
complete and correct list of all Consents required to permit the Surviving
Corporation to license, use, sell, distribute and modify the Not-Owned IP on the
same basis and geographic scope as that enjoyed by the Company immediately prior
to the Effective Time, without any diminution or alteration as a result of the
Merger; (vii) Except as set forth in Section 4.11(g) of the Disclosure Schedule,
the Company has not granted or obligated itself to grant to any Person any
outstanding license, option or other right to develop, license, sell, distribute
or modify (including, without limitation, any rights under any source code
escrow Contract) in any manner, in whole or in part, any of the Owned IP or Not-
Owned IP. No Person has either asserted any right to develop, license, use,
sell, distribute or modify the Owned IP except in accordance with a license or
other Contract set forth in Section 4.11(g) of the Disclosure Schedule, or
offered to grant the Company a license or any other right of use with respect to
the Owned IP. The Company is under no obligation to compensate any Person for
any development, license, use, sale, distribution or modification of any of the
Owned IP. To the best knowledge of the Company, no Person, other than the
Company, has either applied for any patent or registered any claim to copyright
with respect to any part of the Owned Software; and (viii) to the best knowledge
of the Company, (A) none of the Owned IP has been infringed by any Person, and
(B) none of the Owned IP is being used by any Person except pursuant to a
Contract set forth in Section 4.11(g) of the Disclosure Schedule.
(b) Software. (i) Section 4.12(b)(i) of the Disclosure Schedule sets
forth a true and complete list of all items of Software other than Miscellaneous
Software Components (A) which are owned by the Company and (B) which are also
used or held for use or under development in the business and operations of the
Company (the "Owned Software"). The Owned Software shall include without
limitation all earlier or predecessor versions of any of such Software; (ii)
Section 4.12(b)(ii) of the Disclosure Schedule sets forth a true and complete
list of all items of Software other than Miscellaneous Software Components (A)
which the Company does not own but in which the Company has a right or rights
(by license or otherwise), and (B) which also are used or held for use in the
business and operations of the Company, other than licenses for generally
available commercial Software used on personal computers having an individual
acquisition cost of $1,000 or less (the "Not-Owned Software"); (iii) all Owned
Software licensed to third parties (excluding, however, any Owned Software
currently being tested at any beta site, defined as such in the applicable
license Contract to the third parties) substantially conforms to all published
specifications therefor and to all technical and other written materials
provided by the Company to a licensee in connection with such Owned Software;
(iv) to the best knowledge of the Company, the Owned Software contains no
material operating defects and provides services and generates documentation
that complies in all material respects with applicable Legal Requirements.
(c) Development and Protection of the Owned IP. (i) The Owned
Software consists exclusively of (A) "works made for hire" as that term is used
in Title 17 of the United States Code, and the Company is considered the author
of each of such works, and (B) works developed by independent contractors or
consultants engaged by the Company or a predecessor in interest to the Company
which have assigned to the Company their entire right, title and interest in and
to the work or works produced, including, without limitation, all copyright and
other intellectual property
15
rights therein pursuant to a valid and enforceable written Contract; (ii) the
Company has taken all reasonable measures to protect in all material respects
the confidential and proprietary nature of the Trade Secrets and the source
code, object code and access codes for the Owned Software and the Not-Owned
Software (the "Confidential Software"). All employees, agents, consultants,
distributors and licensees of the Company who have had access to any of the
Trade Secrets or Confidential Software (including, without limitation, any of
the source code for the Owned Software) have been put on written notice of the
confidential and proprietary nature of the Trade Secrets and the Confidential
Software and have been required to enter into a written agreement
("Confidentiality Contract") with the Company acknowledging the confidential
nature of and agreeing not to disclose the Trade Secrets or Confidential
Software other than as permitted by such Confidentiality Contract. Each
Confidentiality Contract is in full force and effect, constitutes a legal, valid
and binding obligation of each such Person that is a party thereto, and is
enforceable in accordance with its terms. The Trade Secrets and Confidential
Software are not and have not been a part of the public knowledge or literature.
The Company has not disclosed, divulged or otherwise provided access to any part
of the source code for the Owned Software other than to Persons that have
entered into written Confidentiality Contracts with the Company. To the best of
knowledge of the Company, no Person that is a party to a Confidentiality
Contract or a Contract relating to Intellectual Property with the Company is in
breach or default thereunder; (iii) To the best knowledge of the Company, all
Know-How material to the Software of the Company has been reduced to writing.
Such descriptions explain such Know-How and enable its intended use by the
Surviving Corporation. To the best knowledge of the Company, the Company has
taken all reasonable measures to protect in all material respects the
confidential and proprietary nature of the information related to the business
strategy, finances, marketing plans or employees of the Company which has not
been published and is not generally known to the public; (iv) to the best
knowledge of the Company, no employee is in violation of any confidentiality
Contract with any former employer or business associate. Section 4.12(c)(iv) of
the Disclosure Schedule sets forth a list of all key employees who have signed
Confidentiality Contracts with former employers or business associates.
4.13 Litigation. Except as set forth in Section 4.13 of the Disclosure
Schedule, there is no action, suit, inquiry, formal or informal complaint,
investigation or other proceeding that is pending or, to the best knowledge of
the Company, threatened, involving the Company, its properties or assets, or any
of its directors, officers or agents (in their capacities as such), at law or in
equity, in or before any Tribunal. To the best knowledge of the Company, there
is no presently existing factual basis that is reasonably likely to result in
any such action, suit, inquiry, formal or informal complaint, investigation or
other proceeding.
4.14 Compliance with Legal Requirements.
(a) The Company is not in material violation of, or default under (or
with or without notice or lapse of time or both, would be in violation of, or
default under), and has not received any notice alleging any such violation or
default under, any provision of its Certificate of Incorporation or Bylaws or
any term or provision of any note, bond, mortgage, indenture, lease, license,
Contract or other instrument to which it is a party or by which any of its
properties or assets are or may be bound. Except as set forth in Section
4.14(a) of the Disclosure Schedule, to the best knowledge of the Company, the
Company is not, and has not been, in violation of, or default under (or with or
without notice or lapse of time or both, would be in violation of, or default
under), and
16
has not received any notice alleging any such violation or default
under, any provision of any Legal Requirement applicable to it or its properties
or assets that could have a Material Adverse Effect.
(b) Without limiting the generality of Section 4.14(a), the Company
has not received, and does not have any knowledge of any information which would
indicate that the Company will or may receive, written notice from any Tribunal
that the Company (i) does not possess all permits, licenses and other
authorizations, or has not filed all environmental notices, which are required
under applicable Environmental Laws, (ii) is in conflict with or in default or
violation of any terms and conditions of the required permits, licenses and
authorizations or of any notice filing requirements or (iii) is in conflict with
or in default or violation of any Environmental Laws. There is not, and as of
the Effective Time there will not be, any condition, event, fact, circumstance
or other matter existing or occurring which does or reasonably may be expected
to (x) interfere with, or prevent compliance or continued compliance with any
Environmental Laws in connection with, the ownership, use or operation by the
Company of any of its properties or assets, (y) require any reporting,
assessment or remedial action of any kind under Environmental Laws in connection
with the ownership, use or operation by the Company of any of its properties or
assets or (z) give rise to any common law or legal liability under Environmental
Laws, including, without limitation, CERCLA, or any similar Legal Requirements
in connection with the ownership, use or operation by the Company of any of its
properties or assets.
(c) The Company is in material compliance with and has complied with,
in all material respects, the requirements of the Americans with Disabilities
Act.
(d) The Company is not presently subject to any outstanding Order from
any Tribunal under any Legal Requirement, nor is the Company subject to any
outstanding claims, Liens, judicial or administrative proceedings or
investigations arising under any Legal Requirement.
(e) To the best knowledge of the Company, there is no proposed Legal
Requirement that could have a Material Adverse Effect.
4.15 Employee Benefit Plans.
(a) Schedule 4.15(a)(i) of the Disclosure Schedule hereto sets forth a
true and complete list of: (i) all "Employee Benefit Plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and any other employee benefit arrangements or payroll practices
(including, without limitation, severance pay, vacation pay, company awards,
salary continuation for disability, sick leave, deferred compensation, bonus or
other incentive compensation and stock purchase arrangements or policies)
maintained by the Company or to which the Company contributes or is obligated to
contribute with respect to employees of the Company (collectively, the "Employee
Benefit Plans"), and, in a separate category, all Employee Benefit Plans which
are "pension plans" (as defined in Section 3(2) of ERISA ("Pension Plans")).
Section 4.15(a)(ii) of the Disclosure Schedule sets forth the name, title,
current salary rate (including bonus and commissions), and current base salary
rate of the 10 most highly compensated present employees of the Company. There
is no trade or business (whether or not incorporated) which is under common
control, or treated as a single employer, with the Company under Section 414 of
the Code. No Employee Benefit Plans cover persons employed outside of the
United States. No Pension Plans are subject to Section 4063 or 4064 of ERISA
(collectively, the
17
"Multiemployer Plans"). No Employee Benefit Plans that are welfare plans as
defined in Section 3(1) of ERISA provide benefits after termination of
employment (other than as required by Section 4980B of the Code and at the
former employee's own expense). No Employee Benefit Plan is a "defined benefit
plan" as defined in Section 3(35) of ERISA.
(b) Each of the Employee Benefit Plans intended to qualify under
Section 401 of the Code (collectively, the "Qualified Plans") so qualifies, and
nothing has occurred with respect to the operation of any such plan which could
cause the loss of such qualification or the imposition of any material
liability, penalty or tax under ERISA or the Code. Any entity maintained or
contributed to by the Company and which is intended to be an association
described in Section 501(c)(9) of the Code is exempt from federal income Tax
under Section 501(a) of the Code.
(c) To the best knowledge of the Company, all contributions and
premiums required by law or by the terms of each Employee Benefit Plan or any
agreement relating thereto have been timely made (without regard to any waivers
granted with respect thereto).
(d) There has been no "reportable event," as that term is defined in
Section 4043 of ERISA and the regulations thereunder, with respect to any of the
Qualified Plans which would require the giving of notice, or any event requiring
notice to be provided, under Section 4063(a) of ERISA.
(e) There has been no violation of ERISA that could result in a
material liability with respect to the filing of applicable returns, reports,
documents or notices regarding any of the Employee Benefit Plans with the
Secretary of Labor or the Secretary of the Treasury or the furnishing of such
notices or documents to the participants or beneficiaries of the Employee
Benefit Plans.
(f) Except as set forth in Section 4.15(f) of the Disclosure Schedule,
true and complete copies of the following documents, with respect to each of the
Employee Benefit Plans (as applicable) have been delivered by the Company to
CompuCom: (i) any plans and related trust documents, and all amendments thereto,
(ii) the most recent Forms 5500 and schedules thereto, (iii) the most recent
summary plan description, and (iv) written descriptions of all non-written
agreements relating to the Employee Benefit Plans.
(g) There are no pending Legal Proceedings which have been asserted or
instituted against any Employee Benefit Plan, the assets of any such plan or the
Company, or the plan administrator or fiduciary of any Employee Benefit Plan
with respect to the operation of any such plan (other than routine, uncontested
benefit claims), and there are no facts or circumstances which could form the
basis for any such Legal Proceeding. Neither the Company nor to the best
knowledge of the Company any fiduciary of any plan which is not a Multiemployer
Plan has engaged in a nonexempt prohibited transaction described in Sections 406
of ERISA or 4975 of the Code.
(h) To the best knowledge of the Company, each of the Employee Benefit
Plans has been maintained and administered, in all material respects, in
accordance with its terms and all provisions of applicable Legal Requirements.
To the best knowledge of the Company, all amendments and actions required to
bring each of the Employee Benefit Plans into conformity with
18
all of the applicable provisions of ERISA and other applicable Legal
Requirements have been made or taken except to the extent that such amendments
or actions are not required by law to be made or taken until a date after the
Closing Date and are disclosed in Schedule 4.15(h) of the Disclosure Schedule.
(i) Each Employee Benefit Plan complies in all material respects with
all applicable requirements of (i) the Age Discrimination in Employment Act of
1967, as amended, and the regulations thereunder; (ii) Title VII of the Civil
Rights Act of 1964, as amended, and the regulations thereunder; (iii) the health
care continuation provisions of COBRA; and (iv) the Medicare Secondary Payor
Provisions of Section 1862(b) of the Social Security Act.
(j) Except as set forth in Section 4.15(j) of the Disclosure Schedule,
the Company is not a party to any agreement, contract or arrangement that would
result in the payment of any "excess parachute payments" within the meaning of
Section 280G of the Code.
(k) Except as set forth in Section 4.15(k) of the Disclosure Schedule,
the Company will not have, by reason of the transaction contemplated by this
Agreement, any obligation to make any payment to any employee pursuant to any
Employee Benefit Plan.
4.16 Absence of Labor Difficulties. The Company is not a party to any
labor union or collective bargaining agreement. There is no labor union or
organizing activity pending or, to the best knowledge of the Company, threatened
with respect to the Company or its business. To the best knowledge of the
Company, the Company is not engaged in any unfair labor practice. There is no
unfair labor practice complaint against the Company pending before the National
Labor Relations Board or any other agency. There is no labor strike, dispute,
slowdown or stoppage pending or, to the best knowledge of the Company,
threatened against or involving the Company. No grievance or other labor
dispute or proceeding or any arbitration proceeding arising out of or under any
collective bargaining or other employee agreement is pending or, to the best
knowledge of the Company, threatened against the Company. The Company is not
aware of any other actual or potential labor problem which could have a Material
Adverse Effect.
4.17 Customers. Section 4.17 of the Disclosure Schedule sets forth each
customer or group of affiliated customers accounting for 5% or more of the
revenue of the Company during the twelve-month period ended February 28, 1998.
Except as disclosed in Section 4.17 of the Disclosure Schedule, no customer or
group of affiliated customers listed in Section 4.17 of the Disclosure Schedule
has terminated or, to the best knowledge of the Company, has, in writing or by
an express oral statement, threatened to terminate or advised it will terminate
its relationship with the Company.
4.18 Assets Necessary to Business. The properties and assets owned or
leased by the Company (all of which, after the Effective Time, will be owned or
leased by the Surviving Corporation) are sufficient to carry on the business and
operations currently conducted by the Company. Except as set forth in Section
4.18 of the Disclosure Schedule, all such properties and assets are fit for the
purposes for which they are presently being used in the business and operations
of the Company and are in good operating condition and repair. Except as set
forth in Section 4.18 of the Disclosure Schedule, the transactions contemplated
hereby will not deprive the Company (or, after the Effective Time, the Surviving
Corporation) of the benefits of any properties or assets used, or available for
use, in its business or operations or of the benefits of any rights relating
thereto
19
(whether by reason of a violation of the terms of any Contract or commitment or
a failure to obtain any Consent from any Tribunal or any other Person or for any
other cause) or the imposition of any liabilities on the Company or any other
Person.
4.19 Licenses and Permits.
(a) Except as set forth in Section 4.19(a) of the Disclosure Schedule,
the Company owns or validly holds all material licenses, franchises, privileges,
Consents, exemptions, certificates, registrations, orders and similar documents
and instruments that are required by any Legal Requirement in connection with
the conduct of the business and operations of the Company as currently
conducted.
(b) All such licenses, franchises, privileges, Consents, exemptions,
certificates, registrations, orders and similar documents and instruments are
valid, binding and in full force and effect, and to the best knowledge of the
Company, no proceeding is pending or, to the best knowledge of the Company,
threatened for the revocation of any such license, franchise, privilege, permit,
Consent, exemption, certificate, registration, order or similar document or
instrument, and to the best knowledge of the Company, there are no presently
existing factual bases therefor that are reasonably likely to result in any such
revocation.
(c) All such licenses, franchises, privileges, Consents, exemptions,
certificates, registrations, orders and similar documents and instruments will,
upon consummation of the transactions contemplated by this Agreement, be valid,
binding and in full force and effect on identical terms and conditions, which
terms and conditions will, upon consummation of the transactions contemplated by
this Agreement, permit the conduct of the business and operations of the
Company, in substantially the same manner as prior to the date hereof.
4.20 Title to Properties. Except as provided pursuant to the express
provisions of the Contracts set forth in Section 4.11(b) of the Disclosure
Schedule, the Company has good, valid and indefeasible title to all properties
and assets owned by it and valid leasehold or license interests in all
properties and assets leased by it (whether real, personal or mixed), in each
case free and clear of all Liens of any kind. As of the date hereof, the
Company does not own in fee simple any real property used, or available for use,
in its business or operations. All leases of properties or assets (whether
real, personal or mixed) used by the Company in its business and operations are
valid, subsisting and effective in accordance with their terms and the Company
enjoys peaceful possession of all such properties and assets. All improvements
and fixtures constituting a part of any real property leased by the Company are
in good operating condition and repair and are suitable for their current uses.
To the best knowledge of the Company, no improvement constituting a part of such
real property encroaches upon any real property of any other Person.
4.21 Insurance. The properties and assets of the Company that are of an
insurable character are insured against loss or damage by fire or other risks.
Schedule 4.21 of the Disclosure Schedule sets forth a true and complete
description of the policies of insurance presently in force, specifying with
respect to each such policy the name of the insurer, type of coverage, term of
policy, deductible amount, limits of liability and annual premium. All such
insurance is in full force and effect and is maintained with reputable insurance
companies and associations. To the best knowledge of the Company, there are no
circumstances existing that would enable such insurers to
20
avoid liability under the policies issued by them. There are no Persons other
than the Company having an interest under such policies. All such policies are
in full force and effect, and the Company has received no notice of cancellation
or termination with respect to any such policy. Premiums in respect of each such
insurance policy are fully paid to the date hereof. The insurance coverage
provided by such policies of insurance will not in any respect be affected by,
and will not terminate or lapse by reason of, the transactions contemplated by
this Agreement. At no time since January 1, 1995 has any insurance company or
association canceled or reduced any insurance coverage covering any of the
properties or assets of the Company or given any notice or other indication of
its intention to cancel or reduce any such coverage. The loss of any properties
or assets of the Company not covered by insurance would not have a Material
Adverse Effect.
4.22 Books and Records. The minute books and records of the Company
contain a true, complete and correct record of all actions taken at all meetings
and by all written consents in lieu of meetings of the Board of Directors, or
any committees thereof, and shareholders of the Company. To the best knowledge
of the Company, the stock ledger and related stock transfer records of the
Company contain a true, complete and correct record of the original issuance,
transfer and other capitalization matters of the capital stock of the Company.
The accounting, financial reporting, tax and business books and records of the
Company (a) accurately and fairly reflect in all material respects the business
and condition of the Company and the transactions and the assets and liabilities
of the Company with respect thereto, and (b) have been maintained in all
material aspects in accordance with good business and bookkeeping practices.
Without limiting the generality of the foregoing, the Company has not engaged in
any transaction with respect to its business or operations, maintained any bank
account therefor or used any funds of the Company in the conduct thereof except
for transactions, bank accounts and funds that have been and are reflected in
the normally maintained books and records of the business.
4.23 Absence of Certain Business Practices. To the best knowledge of the
Company, neither the Company nor any of its Affiliates, directors, officers,
employees or agents has, directly or indirectly, given or agreed to give any
gift or similar benefit to any customer, supplier, competitor or governmental
employee or official (domestic or foreign) that (i) could subject the Company to
any material damage or penalty in any civil, criminal or governmental litigation
or proceeding, or (ii) if not given in the past, could have had a Material
Adverse Effect.
4.24 Bank Accounts. Section 4.24 of the Disclosure Schedule sets forth a
true and complete list of the names and locations of all banks, trust companies,
securities brokers and other financial institutions at which the Company has an
account or safe deposit box or maintains a banking, custodial, trading or other
similar relationship, and a true and complete list and description of each such
account, box and relationship, indicating in each case the account number and
the names of the respective officers, employees, agents or other similar
representatives of the Company authorized to transact business with respect
thereto.
4.25 Default. Since January 1, 1995, no Indebtedness of the Company has
been the subject of a notice of acceleration of the maturity of such
Indebtedness. The Company is not in default under Indebtedness such as would
permit the acceleration thereof.
4.26 No Subsidiaries. Except as set forth in Section 4.26 of the
Disclosure Schedule, the Company has no subsidiaries and does not control
(directly or indirectly, through the ownership of
21
securities, by Contract, by proxy, alone or in combination with others, or
otherwise) any corporation, partnership, business organization or other Person.
The Company does not have any equity interest in any Person.
4.27 No Broker's or Finder's Fees. No broker, investment banker, financial
advisor or other person, other than X.X. Xxxxxxxx & Co., the fees and expenses
of which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement, based upon arrangements made by or
on behalf of the Company.
4.28 Opinion of Financial Advisor. The Company has received the opinion of
X.X. Xxxxxxxx & Co. to the effect that, as of that date, the consideration to be
received in the Merger or pursuant to the Stock Purchase Agreement by the
holders of Company Common Stock is fair from a financial point of view, and a
complete and correct signed copy of such opinion has been, or promptly upon
receipt thereof will be, delivered to CompuCom.
4.29 Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in the Information Statement, will, at the time the Information Statement is
first mailed to the Company's shareholders, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Information
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
CompuCom or the CompuCom Subsidiary specifically for inclusion or incorporation
by reference therein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF COMPUCOM AND THE COMPUCOM SUBSIDIARY
CompuCom and the CompuCom Subsidiary, jointly and severally, hereby
represent and warrant to the Company as follows:
5.1 Organization, Standing, etc., of CompuCom. CompuCom is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own its
assets and to carry on its business as presently conducted. CompuCom has all
requisite corporate power and authority to execute and deliver, and perform its
obligations under, this Agreement and to consummate the transactions
contemplated hereby.
5.2 Organization, Standing, etc., of CompuCom Subsidiary.
(a) The CompuCom Subsidiary is a newly formed corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has all requisite
22
corporate power and authority to own its assets and to carry on its business as
presently conducted. The CompuCom Subsidiary has all requisite corporate power
and authority to execute and deliver, and perform its obligations under, this
Agreement and to consummate the transactions contemplated hereby.
(b) At the Effective Time, the duly authorized capital stock of the
CompuCom Subsidiary will consist of 1,000 shares of common stock, $.001 value,
1,000 shares of which will be validly issued, fully paid and nonassessable and
owned of record and beneficially by CompuCom. There are no outstanding options,
warrants or other rights to subscribe for or purchase capital stock (or
securities convertible into or exchangeable for capital stock) of the CompuCom
Subsidiary. The CompuCom Subsidiary has not engaged in any activities other
than as contemplated by the terms of this Agreement.
5.3 Authorization and Execution. The execution and delivery of this
Agreement and the performance of each of CompuCom and the CompuCom Subsidiary of
this Agreement and the consummation by each of them of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of CompuCom and the CompuCom Subsidiary. This
Agreement has been duly and validly executed and delivered by each of CompuCom
and the CompuCom Subsidiary and constitutes a legal, valid and binding agreement
of each of CompuCom and the CompuCom Subsidiary enforceable against CompuCom and
the CompuCom Subsidiary, as applicable, in accordance with its terms, assuming
this Agreement is enforceable against the Company.
5.4 Absence of Conflicts; Governmental Authorizations.
(a) The execution and delivery by each of CompuCom and the CompuCom
Subsidiary of this Agreement, the performance by each of them of their
respective obligations hereunder and the consummation by each of them of the
transactions contemplated hereby will not (i) conflict with or result in any
violation of any provision of the Certificate of Incorporation or Articles of
Incorporation of CompuCom or the CompuCom Subsidiary, as applicable, or the
Bylaws of CompuCom or the CompuCom Subsidiary, each as amended to date; (ii)
conflict with, result in any violation or breach of, constitute a default under,
give rise to any right of termination or acceleration (with or without notice or
the lapse of time or both) pursuant to, or result in being declared void or
voidable, any term or provision of any note, bond, mortgage, indenture, lease,
license, Contract or other instrument to which CompuCom or the CompuCom
Subsidiary is a party or by which any of their respective properties or assets
are or may be bound; (iii) violate any term of any Legal Requirement applicable
to CompuCom or the CompuCom Subsidiary or their respective properties or assets;
or (iv) result in the creation of, or impose on CompuCom or the CompuCom
Subsidiary the obligation to create, any Lien upon any properties or assets of
CompuCom or the CompuCom Subsidiary.
(b) Except for applicable requirements, if any, of the 33 Act, the
Exchange Act, the premerger notification requirements of the HSR Act, the Nasdaq
SmallCap Market, the filing and recordation of appropriate merger documents as
required by the DGCL, filings required pursuant to any state securities or
"blue sky" laws, and such other notices, reports or other filings the failure of
which to be made would not, individually or in the aggregate, have a Material
Adverse Effect on CompuCom or prevent or materially impair the consummation of
the transactions contemplated
23
hereby, CompuCom is not required to submit any notice, report or other filing to
any Tribunal, domestic or foreign, in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
5.5 Financing. CompuCom possesses, or has access to, all funds necessary
to pay the Consideration and related fees and expenses, and has the financial
capacity to perform its other obligations under this Agreement. Upon the terms
and subject to the conditions of this Agreement, CompuCom will pay, or cause the
CompuCom Subsidiary to pay, the Consideration.
5.6 Information Supplied. None of the information supplied or to be
supplied by CompuCom or the CompuCom Subsidiary specifically for inclusion or
incorporation by reference in the Information Statement will, at the time the
Information Statement is first mailed to the Company's shareholders, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company covenants and agrees with CompuCom or the CompuCom Subsidiary
that, at all times before the Closing, the Company at its expense will comply
with all covenants and provisions of this Article VI, except to the extent
otherwise expressly required or permitted by this Agreement.
6.1 Investigations. The Company will provide CompuCom and CompuCom's
counsel, accountants and other representatives and agents with reasonable
access, upon prior notice and during normal business hours, to all facilities,
officers, directors, employees, agents, accountants, actuaries, assets,
properties, books and records of the Company and will furnish CompuCom with such
financial and operating data and other information with respect to the business
and properties of the Company or the transactions contemplated hereby as
CompuCom shall from time to time request; provided, however, that such
investigation (a) shall be conducted in such manner as not to interfere
unreasonably with the operation of the business of the Company, and (b) shall
not affect any of the representations and warranties hereunder. The Company
will also provide CompuCom with timely notice of and access to minutes of all
meetings (and all actions by written consent in lieu thereof) of the board of
directors, or any committee thereof, and shareholders of the Company. In the
event of termination of this Agreement, CompuCom will return or cause to be
returned to the Company all documents and other material obtained from the
Company in connection with the transactions contemplated hereby and will keep
confidential any such information unless such information is ascertainable from
public or published information or is required to be disclosed by applicable
Legal Requirements.
24
6.2 Operation of the Company. The Company will carry on its business
solely in the usual and ordinary course consistent with past practice. Without
limiting the generality of the foregoing:
(a) The Company will not, without the prior written consent of
CompuCom: (i) authorize, issue or commit to issue any shares of its capital
stock of any class (whether or not from treasury stock) or other equity
interests in the Company, except for the issuance of shares of Company Common
Stock upon the exercise of, and in accordance with, the Options and Warrants;
(ii) split up, combine or reclassify any of its capital stock or other equity
interests in the Company; (iii) grant, commit to grant, issue or commit to issue
any options, warrants or other rights (including Options or Warrants) to
subscribe for or purchase any shares of its Capital Stock, other equity
interests in the Company or any security directly or indirectly convertible into
or exchangeable for, or which in any manner confers upon the holder thereof the
right to acquire, any shares of any class of its Capital Stock or other equity
securities; (iv) purchase, redeem or otherwise acquire any shares of its Capital
Stock of any class or any equity interests in the Company, or any interest in or
right to acquire any such shares or other equity interests in the Company; (v)
declare, set aside for payment or pay any dividend on, or make any other
distribution or payment with respect to, any share of its Capital Stock of any
class or any other equity interests; (vi) grant or pay any increase in the
salaries or other compensation (including, without limitation, perquisites) of
any of its officers or directors, grant or pay any bonus to any of its officers
or directors, enter into any employment agreement or make any loan to or enter
into any transaction of any other nature with any of its officers or directors,
take any action to institute any new severance or termination pay practices with
respect to any of its officers or directors, or increase the benefits payable
under its severance or termination pay practices applicable to officers or
directors; (vii) grant or pay any increase in the salaries or other compensation
(including, without limitation, perquisites) of any of its employees, agents or
consultants other than in the ordinary course of business consistent with past
practice, grant or pay any bonus to any of its employees, agents or consultants
other than in the ordinary course of business consistent with past practice,
enter into any employment agreement or make any loan to or enter into any
material transaction of any other nature with any of its employees, agents or
consultants, take any action to institute any new severance or termination pay
practices with respect to any of its employees, agents or consultants, or
increase the benefits payable under its severance or termination pay practices
applicable to its employees; (viii) enter into any stay pay packages with any of
its officers or employees providing for the expenditure of $10,000 individually
or $100,000 in the aggregate; (ix) grant any increase in the pension, retirement
or other employment benefits of any character of, or grant any new benefits to,
any of its officers, directors, or employees other than benefits to new
employees no greater than those provided to existing employees, or, other than
as contemplated by Section 4.6 or Section 8.2(i), amend or terminate, partially
or completely, any Plan described in Section 4.15; (x) create, incur, assume,
guarantee, endorse, refinance, modify, extend, renew or otherwise become liable
for (a) any debt, obligation or other liability for money borrowed except
pursuant to existing or planned lines of credit disclosed in Section 4.11(a) of
the Disclosure Schedule or (b) any other debt, obligation or other liability,
except in the ordinary course of business consistent with past practice or
cancel, pay, agree to cancel or pay, or otherwise provide for a complete or
partial discharge in advance of a scheduled payment date with respect to, any
debt, obligation or other liability, or waive, cancel or compromise any right to
25
receive any direct or indirect payment or other benefit under any debt,
obligation or other liability owing to the Company, except as otherwise
contemplated hereby or in the ordinary course of business consistent with past
practice; (xi) dispose of or assign any of its material fixed or internal use
assets or properties or permit any of its assets and properties to be subjected
to any Liens or sell any part of its operations or business to any other Person;
(xii) enter into any lease or contract for the purchase or sale of any real
property, or enter into any material lease or contract for the purchase or sale
of any personal property, except in the ordinary course of business consistent
with past practice, or terminate, modify, assign, release, relinquish or waive
any right of the Company under any existing real property lease, or increase its
obligations under real property leases, except in accordance with the express
terms of existing real property leases listed in Section 4.11(l) of the
Disclosure Schedule; (xiii) fail to maintain all equipment and other assets and
properties in good working condition and repair according to the standards it
has maintained to the date of this Agreement, subject only to ordinary wear and
tear; (xiv) change or remove (x) the independent certified public accountants
for the Company, (y) any material operational, financial reporting accounting
practice or policy or any assumption underlying such a practice or policy, or
(z) any method of calculating any bad debt, contingency or other reserve for
financial reporting purposes or for other accounting purposes; (xv) except as
set forth in Section 6.2(a)(xiii) of the Disclosure Schedule pursuant to
documentation to which CompuCom consents in writing in advance, amend, modify or
repeal, or propose to do, or permit or consent to any amendment, modification or
repeal of its Certificate of Incorporation or Bylaws or take any action with
respect to such action; (xvi) license any of its technology, Intellectual
Property or Software except in the ordinary course of business consistent with
past practice; (xvii) (A) merge, consolidate or otherwise combine or agree to
merge, consolidate or otherwise combine with any other Person, (B) acquire all
or substantially all, or a portion of all, the assets, capital stock or other
equity securities of any other Person, or any business division of any other
Person or (C) otherwise organize or acquire control or ownership of any other
Person; (xviii) except as set forth in Section 6.2(a)(xvi) of the Disclosure
Schedule, violate, breach or default, or take or fail to take any action that
(with or without notice or lapse of time or both) would constitute a violation,
breach or default under, any term or provision of any Contract to which the
Company is a party or by which any of its properties or assets is or may be
bound and as to which such violation, breach or default could affect the
validity or enforceability of this Agreement or any of the transactions
contemplated hereby or, individually or in the aggregate, has or could have a
Material Adverse Effect; (xix) delay or postpone beyond normal past practice the
payment of any material account payable or other debt, obligation or other
liability; (xx) permit any increase in its aggregate obligations under operating
leases involving personal property having a fair market value in excess of
$25,000; (xxi) permit any increase in its aggregate obligations under capital
leases involving assets having a fair market value in excess of $25,000; (xxii)
except as disclosed in Section 4.11(j) of the Disclosure Schedule, make any
capital expenditure in excess of $5,000 or make capital expenditures in excess
of $25,000 in the aggregate; (xxiii) enter into, or become obligated under, any
Contract, or change, amend, terminate or otherwise modify any Contract, except
for customer Contracts and other normal purchase, sale and license agreements
and commitments that are entered into in the ordinary course of business
consistent with past practice; (xxiv) enter into, directly or indirectly, any
transaction or permit to exist any transaction, with any Affiliate of the
Company; or (xxv) buy additional inventory pursuant to any vendor inventory buy-
in program.
26
(b) The Company will promptly advise CompuCom in writing of the
commencement or threat of any claim, litigation, action, suit, inquiry or
proceeding involving the Company, its properties or assets, or any of its
directors, officers or agents (in their capacities as such).
(c) The Company shall furnish CompuCom with a copy of all amendments
to the Company's Annual Report on Form 10-K, filed with the SEC for the year
ended June 30, 1997 (the "Company 10-K") and of any other form filed with the
SEC under the Exchange Act from the date of filing of the Company 10-K to the
Effective Time of the Merger.
(d) The Company will use its best efforts to (i) preserve intact its
present business organization, reputation and customer relations, (ii) keep
available the services of its present officers, directors, employees, agents,
consultants and other similar representatives, (iii) maintain all its licenses,
qualifications and authorizations to do business in each jurisdiction in which
it is so licensed, qualified or authorized, (iv) maintain in full force and
effect all contracts, documents and arrangements referred to in Section 4.11,
and (v) continue all current marketing and selling activities relating to the
business, operations or affairs of the Company.
(e) The Company will comply, in all material respects, with all Legal
Requirements applicable to its business, operations or affairs.
6.3 No Solicitation.
(a) The Company and its officers, directors, employees,
representatives and agents shall immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a Takeover
Proposal (as hereinafter defined). The Company shall not authorize or permit
any of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it to,
directly or indirectly (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate, any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; provided, however, that if, at any
time prior to the acceptance for payment of shares of the Company Capital Stock
pursuant to the Merger, the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to the Company's shareholders under
applicable law, the Company may, in response to an unsolicited Takeover
Proposal, and subject to compliance with Section 6.3(c), (A) furnish information
with respect to the Company to any Person pursuant to a confidentiality
agreement in a form approved by the Company and CompuCom (such approval not to
be unreasonably withheld) and (B) participate in negotiations regarding such
Takeover Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
director or executive officer of the Company or any investment banker, financial
advisor, attorney, accountant or other representative of the Company, whether or
not such Person is purporting to act on behalf of the Company or otherwise,
shall be deemed to be a breach of this Section 6.3(a) by the Company. For
purposes of this Agreement, "Takeover Proposal" means any inquiry, proposal or
offer from
27
any Person relating to any direct or indirect acquisition or purchase
of twenty percent or more of the assets of the Company or twenty percent or more
of any class of equity securities of the Company, any tender offer or exchange
offer that if consummated would result in any Person beneficially owning twenty
percent or more of any class of equity securities of the Company, any merger,
consolidation, business combination, sale of substantially all of the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company, other than the transactions contemplated by this Agreement, or any
other transaction the consummation of which could reasonably be expected to
impede, interfere with, prevent or materially delay the Merger or which would
reasonably be expected to dilute materially the benefits to CompuCom of the
transactions contemplated hereby.
(b) Except as set forth in this Section 6.3, neither the Board of the
Directors of the Company nor any committee thereof shall (i) withdraw or modify
or propose to withdraw or modify, in a manner adverse to CompuCom, the approval
or recommendation by such Board of Directors or such committee of this Agreement
or the Merger, (ii) approve or recommend, or propose to approve or recommend,
any Takeover Proposal or (iii) cause the Company to enter into any agreement
with respect to any Takeover Proposal. Notwithstanding the foregoing, in the
event that prior to the Merger, the Board of Directors of the Company determines
in good faith, after consultation with outside counsel, that it is necessary to
do so in order to comply with its fiduciary duties to the Company's shareholder
under applicable law, the Board of Directors of the Company may (subject to the
other provisions of this Section 6.3) withdraw or modify its approval or
recommendation of this Agreement and the Merger, approve or recommend a Superior
Proposal (as defined below), cause the Company to enter into an agreement with
respect to a Superior Proposal or terminate this Agreement, but in each case
only at a time that is after the second business day following CompuCom's
receipt of written notice (a "Notice of Superior Proposal") advising CompuCom
that the Board of Directors of the Company has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the Person making such Superior Proposal. In the event that a
Notice of Superior Proposal is delivered and any material term or condition of
the Superior Proposal described therein is subsequently changed, the Company
shall deliver a supplemental Notice of Superior Proposal describing such change
and may withdraw or modify its approval or recommendation of this Agreement and
the Merger, approve or recommend the modified Superior Proposal or cause the
Company to enter into an agreement with respect to the modified Superior
Proposal only at a time that is after the second business day following
CompuCom's receipt of the supplemental Notice of Superior Proposal. In
addition, if the Company proposes to enter into an Agreement with respect to any
Takeover Proposal, it shall concurrently with entering into such agreement pay,
or cause to be paid to CompuCom (x) the Termination Fee (as defined in Section
9.5) and (y) any Indebtedness owed to CompuCom with respect to product sold or
services provided by CompuCom to the Company or supplied or provided by CompuCom
to any of the Company's customers at the request of the Company. For purposes
of this Agreement, a "Superior Proposal" means any bonafide proposal made by a
third party to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than fifty percent of the shares of the Company
Common Stock then outstanding or all or substantially all the assets of the
Company and otherwise on terms which the Board of Directors of the Company
determines in its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation including,
28
without limitation, X.X. Xxxxxxxx & Co.) to be more favorable to the Company's
shareholders than the Merger.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.3, the Company shall immediately advise
CompuCom orally and in writing of any request for information or of any Takeover
Proposal, the material terms and conditions of such request or Takeover Proposal
and the identity of the Person making such request or Takeover Proposal. The
Company will keep CompuCom fully informed of the status and details (including
amendments or proposed amendments) of any such request or Takeover Proposal.
(d) Nothing contained in this Section 6.3 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if, in the good faith judgment of the Board of Directors
of the Company, after consultation with outside counsel, failure so to disclose
would be inconsistent with its fiduciary duties to the Company's shareholders
under applicable law; provided, however, neither the Company nor its Board of
Directors nor any committee thereof shall, except as permitted by Section
6.3(b), withdraw or modify, or propose to withdraw or modify, its position with
respect to this Agreement or the Merger or approve or recommend, or propose to
approve or recommend, a Takeover Proposal.
6.4 Board Approval, Fairness Opinion, Shareholder Approval and Information
Statement.
(a) The Company hereby approves of and consents to the Merger and
represents that the Board of Directors of the Company, at a meeting duly called
and held, duly adopted resolutions approving this Agreement and the Merger,
determining that the terms of the Merger are fair to, and in the best interest
of, the Company's shareholders and recommending that the Company's shareholders
approve and adopt this Agreement. The Company represents that its Board of
Directors has received the opinion of X.X. Xxxxxxxx & Co. that the proposed
consideration to be received by the holders of the Company Common Stock pursuant
to the Merger or the Stock Purchase Agreement is fair to such holders from a
financial point of view, and a complete and correct signed copy of such opinion
has been delivered by the Company to CompuCom.
(b) The Company will, through its Board of Directors, recommend to its
shareholders that the shareholders vote in favor of, or otherwise consent to,
the approval of this Agreement, the Merger and the transactions contemplated
hereby. Without limiting the generality of the foregoing, the Company agrees
that its obligations pursuant to the first sentence of this Section 6.4(b) shall
not be affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Takeover Proposal or (ii) the withdraw or
modification by the Board of Directors of the Company of its approval or
recommendation of this Agreement or the Merger. The Company will use its best
efforts to obtain a written consent in lieu of a meeting of the Selling
Shareholders approving the Merger under the terms of the Stock Purchase
Agreement (the "Shareholders' Written Consent") on terms that comply with
Section 228 of the DGCL.
29
(c) The Company will, at CompuCom's request, as soon as practicable,
prepare and file a preliminary Information Statement with the SEC and will use
its best efforts to respond to any comments of the SEC or its staff and to cause
the Information Statement to be mailed to the Company's shareholders as promptly
as practicable after responding to all such comments to the satisfaction of the
staff. CompuCom and its counsel shall be given reasonable opportunity to review
and comment upon the Information Statement prior to its filing with the SEC or
dissemination to shareholders of the Company. The Company will notify CompuCom
promptly of the receipt of any comments from the SEC or its staff and of any
requests by the SEC or its staff for amendments or supplements to the
Information Statement or for additional information and will supply CompuCom
with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Information Statement or the Merger. Each of the Company,
CompuCom and the CompuCom Subsidiary agrees promptly to correct any information
provided by it for use in the Information Statement if and to the extent that
such information shall have become false or misleading in any material respect,
and the Company further agrees to take all steps necessary to amend or
supplement the Information Statement and to cause the Information Statement as
so amended or supplemented to be filed with the SEC and disseminated to the
Company's shareholders, in each case as and to the extent required by applicable
Federal securities laws. If at any time prior to the effective date of the
Shareholders' Written Consent there shall occur any event that should be set
forth in an amendment or supplement to the Information Statement, the Company
will promptly prepare and mail to its shareholders such an amendment or
supplement. The Company will not mail any Information Statement, or any
amendment or supplement thereto, to which CompuCom reasonably objects.
6.5 Consents. The Company shall use its best efforts to obtain the
Consent of each Person listed in Section 4.11(v) of the Disclosure Schedule,
each of whose Consent is required in connection with the execution, delivery or
performance of this Agreement.
6.6 Financial Statements and Reports.
(a) As promptly as practicable after each calendar month ending
between the date hereof and the Closing Date, but in no event later than 30 days
after the end of each such month, the Company will deliver to CompuCom true and
correct copies of the unaudited financial statements (including a balance sheet,
a statement of operations and changes in shareholders' equity and cash flows) of
the Company as of and for the month then ended, prepared in accordance with GAAP
and which shall present fairly the financial condition and assets and
liabilities (whether accrued, absolute, contingent or otherwise) of the Company
as of the end of such month and the results of operations of the Company for and
during the period then ended, subject to normal and recurring year-end audit and
quarter-end adjustments.
(b) As promptly as practicable, the Company will deliver to CompuCom
true and complete copies of such other material financial statements, reports or
analyses as may be prepared or received by the Company and as relate to the
Company's business and operations, and such other information with respect to
the foregoing as CompuCom reasonably may request,
30
including, without limitation, normal internal reports and special reports (such
as those of consultants).
6.7 Notice and Cure. The Company will notify CompuCom promptly in writing
of, and contemporaneously will provide CompuCom with true and complete copies of
any and all information or documents relating to, and will use its best efforts
to cure before the Effective Time, any event, transaction or circumstance that
results in or will result in any covenant or agreement of the Company under this
Agreement being breached, or that renders or will render untrue any
representation or warranty of the Company contained in this Agreement as if the
same were made on or as of the date of such event, transaction or circumstance.
The Company will use its best efforts to cure, at the earliest practicable date
and prior to the Effective Time, any violation or breach of any representation,
warranty, covenant or agreement made by the Company in this Agreement, whether
occurring or arising before or after the date of this Agreement.
6.8 Best Efforts and Consents. Subject to the terms and conditions herein
provided, the Company shall use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable Legal Requirements and otherwise to consummate and
make effective the transactions contemplated by this Agreement, and to satisfy
the conditions to Closing and shall use its best efforts to obtain all necessary
actions or non-actions, extensions, waivers, Consents, licenses and clearances
and to effect all registrations, filings and notices with, to or from other
Persons or Tribunals required of the Company that are necessary or desirable to
effect the Merger and the transactions contemplated hereby. Such best efforts
shall include efforts to cooperate with CompuCom to, as promptly as practicable,
make any filings required pursuant to the HSR Act and to promptly and diligently
provide any additional information required or reasonably requested in order to
comply with the requirements of the HSR Act.
6.9 Agreements and Covenants. The Company shall not make any commitment,
either in writing or orally, which would violate any of the provisions set forth
in this Article VI.
ARTICLE VII
COVENANTS OF COMPUCOM AND THE COMPUCOM SUBSIDIARY
CompuCom covenants and agrees with the Company that, at all times before
the Closing, CompuCom at its expense will comply with all covenants and
provisions of this Article VII, except to the extent otherwise expressly
required or permitted by this Agreement.
7.1 Conduct of Business of the CompuCom Subsidiary. During the period from
the date of this Agreement to the Effective Time, the CompuCom Subsidiary shall
not engage in any activities of any nature except as provided in or contemplated
by this Agreement.
7.2 Obligation of CompuCom to Make Merger Effective and the CompuCom
Subsidiary's Shareholder Consent. CompuCom shall cause the CompuCom Subsidiary
to take all
31
actions necessary on its part to carry out the transactions contemplated hereby.
CompuCom, as the sole shareholder of the CompuCom Subsidiary, will consent in
writing to the approval of this Agreement and the Merger in accordance with the
DGCL.
7.3 Notice and Cure. CompuCom will notify the Company promptly in writing
of, and contemporaneously will provide the Company with true and complete copies
of any and all information or documents relating to, and will use its best
efforts to cure before the Effective Time, any event, transaction or
circumstance occurring after the date of this Agreement that results in or will
result in any covenant or agreement of CompuCom under this Agreement to be
breached, or that renders or will render untrue any representation or warranty
of CompuCom contained in this Agreement as if the same were made on or as of the
date of such event, transaction or circumstance. CompuCom also will use its
best efforts to cure, at the earliest practicable date and before the Effective
Time, any violation or breach of any representation, warranty, covenant or
agreement made by it in this Agreement, whether occurring or arising before or
after the date of this Agreement.
7.4 Best Efforts and Consents. Subject to the terms and conditions herein
provided, CompuCom shall use its best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable Legal Requirements and otherwise to consummate and
make effective the transactions contemplated by this Agreement and shall use its
best efforts to obtain all necessary actions or non-actions, extensions,
waivers, Consents, Licenses and clearances and to effect all registrations,
filings and notices with, to or from other Persons or Tribunals required of
CompuCom or the CompuCom Subsidiary that are necessary or desirable to effect
the Merger and the transactions contemplated hereby. Such best efforts shall
include efforts to cooperate with the Company to, as promptly as practicable,
make any filings required pursuant to the HSR Act and to promptly and diligently
provide any additional information required or reasonably requested in order to
comply with the requirements of the HSR Act.
7.5 Information for Information Statement for the Company's Shareholders.
CompuCom will furnish to the Company such data and information relating to it as
the Company may reasonably request for the purpose of including such data and
information in the Information Statement.
ARTICLE VII
CONDITIONS
8.1 General Conditions. Notwithstanding any other provisions of this
Agreement, the obligations of all of the parties hereto to effect the Merger
shall be subject to satisfaction prior to the Closing Date of the following
conditions:
(a) Selling Shareholder Approval. The Selling Shareholders shall have
executed a consent pursuant to the provisions of Section 228 of the DGCL in lieu
of a meeting of the holders of the Company Common Stock.
32
(b) HSR Act Waiting Period Expired. All applicable waiting periods
specified under the HSR Act with respect to the transactions provided for in
this Agreement shall have expired or been terminated.
(c) No Violations or Proceedings. Consummation of the Merger shall
not violate any Order of any Tribunal having competent jurisdiction, and no
any Tribunal which, in either such case, in the good faith judgment of either
CompuCom or the Company has a reasonable probability of resulting in an Order,
restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by this Agreement or the ownership and operation by
CompuCom after the Effective Time of the Surviving Corporation or all of the
material assets and business of the Company.
(d) Fairness Opinion. The Company shall have received the opinion of
X.X. Xxxxxxxx & Co. to the effect that the consideration to be paid to the
holders of Company Common Stock pursuant to the Stock Purchase Agreement and the
Merger is fair from a financial point of view.
(e) Information Statement. The Information Statement shall have been
sent to the shareholders of the Company other than the Selling Shareholders as
required pursuant to Rule 14c-2 of under the Exchange Act and twenty days shall
have expired since the Information Statement was sent to such shareholders.
8.2 Conditions to the Obligation of CompuCom and the CompuCom Subsidiary.
Notwithstanding any other provisions of this Agreement (including, without
limitation Section 2.2), the obligations of CompuCom and the CompuCom Subsidiary
to effect the Merger shall be subject to satisfaction prior to the Closing Date
of the following conditions:
(a) Purchase of Shares under Stock Purchase Agreement. CompuCom shall
have determined, to its reasonable satisfaction, that all of the conditions to
the closing set forth in the Stock Purchase Agreement, including but not limited
to those established in Section 5.2 of the Stock Purchase Agreement, have been
satisfied and the parties to the Stock Purchase Agreement are ready, willing and
able to close the transactions contemplated by the Stock Purchase Agreement
simultaneous with the Closing of the Merger.
(b) Representatives and Warranties True and Correct. The
representations and warranties of the Company that are qualified as to
materiality shall have been true and correct and such representations and
warranties that are not so qualified shall have been true and correct in all
material respects, in each case as of the date of this Agreement and the date of
the Merger, except in the case of any representation and warranty that speaks as
of a particular date, which shall be true and correct or true and correct in all
material respects, as applicable, as of such date.
(c) Satisfaction of Obligations. The Company shall have performed in
all material respects its material obligations, and shall have complied in all
material respects with its material covenants and agreements, under this
Agreement.
33
(d) No Material Adverse Change. CompuCom shall have completed its
examination of the financial condition, properties and business of the Company
and such examination shall not have revealed the existence of any fact, matter,
claim (whether existing prior to the date of this Agreement or arising after the
date hereof) or circumstance not previously disclosed by the Company to CompuCom
which, in CompuCom's judgment materially and adversely affects the Company
including, without limitation, (i) that the Company's business has been
conducted other than in the ordinary course from July 1, 1997 to the Closing,
(ii) that since such date, the Company has not increased the compensation of its
employees except in the ordinary course of business consistent with past
practices, (iii) that since such date, the Company has not paid dividends in
excess of $110,000 to its shareholders or (iv) that since such date, the Company
has not increased its indebtedness for borrowed money except in the ordinary
course of business consistent with past practices or (v) that since such date,
the Company has not paid bonuses to its employees except in the ordinary course
of business consistent with past practices.
(e) Severance Obligations. At least five days prior to the Closing,
the Company shall have entered into agreements with each of Xxxx Xxxxx, Xxxxx
Xxxxxx, Xxxx Xxxxxxx, Xx Xxxxxxx, Xxxx Patch, Xxxx Xxxxxxx and Xxx XxXxxxxxx to
whom it has severance payment obligations if such individual's employment with
the Company is terminated after Closing to accept an aggregate of not more than
$550,000 in full satisfaction of all severance obligations owing to such
individuals.
(f) Termination of Credit Facility. At least five days prior to the
Closing, the Company shall have received confirmation that any prepayment or
other fees owing to Congress as a result of the termination of the Company's
credit facility with Congress shall not exceed $700,000.
(g) Agreement with X.X. Xxxxxxxx & Co. At least five days prior to the
Closing, the Company shall have received the written agreement of X. X. Xxxxxxxx
& Co. that its fee in connection with the consummation of the Merger and the
transactions provided for in the Stock Purchase Agreement shall not exceed
$195,000.
(h) Agreement with Current Exchange. At least five days prior to the
Closing, the Company shall have entered into an agreement with Current Exchange,
Inc. (f/k/a Cedar Computer Center, Inc.) ("Current Exchange") providing for the
Company to pay an amount not to exceed $500,000 to Current Exchange in full and
complete satisfaction of a contractual price guarantee pursuant to which the
Company is obligated to pay to Current Exchange on July 2, 1998, with respect to
515,000 shares of Company Common Stock held by Current Exchange, the difference
between the closing market price of Company Common Stock on that date and
$10.00.
(i) Company Profit Sharing Plan. The Company shall take all actions
necessary to terminate the Company's Section 401(k) Plan effective immediately
prior to the Closing.
8.3 Conditions to Obligations of the Company. Notwithstanding any other
provisions of this Agreement (including, without limitation, Section 2.2), the
obligations of the Company to
34
effect the Merger shall be subject to satisfaction prior to the Closing Date of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of CompuCom and CompuCom Subsidiary in this Agreement that are
qualified as to materiality shall have been true and correct and such
representations and warranties that are not so qualified shall have been true
and correct in all material respects, in each case as of the date of this
Agreement and the date of the Merger, except in the case of any representation
and warranty that speaks as of a particular date, which shall be true and
correct or true and correct in all material respects, as applicable, as of such
date.
(b) Satisfaction of Obligations. CompuCom and CompuCom Subsidiary
shall have performed in all material respects their material obligations, and
shall have complied in all material respects with their material covenants and
agreements, under this Agreement.
ARTICLE IX
TERMINATION; PAYMENT OF EXPENSES
9.1 Termination of Agreement and Abandonment of Merger. Anything herein
to the contrary notwithstanding, this Agreement and the Merger contemplated
hereby may be terminated at any time before the Effective Time, whether before
or after approval of this Agreement by the shareholders of the Company, as
follows:
(a) Mutual Consent. By mutual written consent of CompuCom and the
Company.
(b) CompuCom or the Company. By either CompuCom or the Company (i) if
the Merger shall not have occurred prior to June 30, 1998; provided, however,
that the right to terminate the Agreement pursuant to this Section 9.1(b)(i)
shall not be available to any party whose failure to perform any of its
obligations under the Agreement results in the failure of any such condition or
if the failure of such condition results from facts or circumstances that
constitute a breach of a representation or warranty under the Agreement by such
party; or (ii) if any Tribunal shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, shares of the Company
Capital Stock pursuant to the Merger and such order, decree or ruling or other
action shall have become final and nonappealable.
(c) CompuCom or the CompuCom Subsidiary. By CompuCom if (i) any of the
representations and warranties of the Company contained in this Agreement shall
not have been, or shall cease to be, true and correct in all material respects
(whether because of circumstances or events occurring in whole or in part prior
to, on or after the date of this Agreement), (ii) the Company shall have
breached or failed to perform in any material respect any covenant or agreement
to be performed by it pursuant to this Agreement or (iii) the Stock Purchase
Agreement
35
shall have terminated; provided, that CompuCom or CompuCom Subsidiary may not
terminate the Agreement pursuant to this Section 9.1(c) if CompuCom or CompuCom
Subsidiary is at such time in breach of its obligations under this Agreement.
(d) Company. By the Company (i) in connection with entering into a
definitive agreement in accordance with Section 6.3(b), provided it has complied
with all provisions thereof, including the notice provisions therein, and that
it makes simultaneous payment of the Termination Fee; or (ii) if (A) any of the
representations and warranties of CompuCom or the CompuCom Subsidiary contained
in this Agreement shall not have been, or shall cease to be, true and correct in
all material respects (whether because of circumstances or events occurring in
whole or in part prior to, on or after the date of this Agreement) or (B)
CompuCom or the CompuCom Subsidiary shall have breached or failed to perform in
any material respect any covenant or agreement to be performed by them pursuant
to this Agreement, provided, that the Company may not terminate the Agreement
pursuant to this Section 9.1(d) if the Company is at such time in breach of its
obligations under this Agreement.
9.2 Effect of Termination. In the event of a termination of this
Agreement by either the Company or CompuCom as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the party of CompuCom, CompuCom Subsidiary or the Company or their
respective officers or directors, except with respect to Section 4.27, this
Section 9.2 and Article XII; provided, however, that nothing herein shall
relieve any party for liability for any breach hereof.
9.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after obtaining the approval of the Company's shareholders (if
required by law), but, after any such approval, no amendment shall be made which
by law requires further approval by such shareholders without obtaining such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) subject to the
proviso of Section 9.3, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under the Agreement or otherwise shall not
constitute a waiver of those rights.
9.5 Fees and Expenses.
(a) Except as provided below in this Section 9.5, all fees and
expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated by this
36
Agreement shall be paid by the party incurring such fees or expenses, whether or
not the Merger is consummated.
(b) If the Company breaches the provisions of Section 6.3 on or before
June 30, 1998, the Company shall pay to CompuCom an amount equal to $1,000,000
(the "Termination Fee"), which shall be payable in same day funds on the fifth
business day following the breach of the provisions of Section 6.3.
ARTICLE X
ESCROW
10.1 Escrow Agreement. CompuCom, CompuCom Subsidiary, the Company, members
of a committee designated by the Selling Shareholders (the "Escrow Committee")
and a bank, trust company or other entity designated by CompuCom and reasonably
satisfactory to the Company to act as escrow agent (the "Escrow Agent") will as
soon as reasonably practicable after the execution of this Agreement enter into
an Escrow Agreement (the "Escrow Agreement") substantially in the form of
Exhibit B. The members of the Escrow Committee shall be designated in writing
by the Selling Shareholders to CompuCom Subsidiary at or prior to the Closing.
References in this Agreement to this Article or the escrow obligations created
hereby, shall be references to the Escrow Agreement. The provisions of the
Escrow Agreement are incorporated as if fully stated herein. A portion of the
Consideration, consisting of the Merger Contingent Consideration including a
portion of the Option and Warrant Merger Consideration consisting of the Option
and Warrant Merger Contingent Consideration, shall be deposited by CompuCom or
the CompuCom Subsidiary and held in escrow, together with all amounts so held
under the terms of the Stock Purchase Agreement, as Contingent Consideration for
the shareholders, optionholders and warrantholders of the Company by the Escrow
Agent in compliance with the terms and conditions of the Escrow Agreement. The
funds held in escrow pursuant to this Article X will be invested by the Escrow
Agent provided the funds may only be invested in short-term government
securities.
10.2 Non Transferability of the Escrowed Funds. The funds held in escrow
shall be held for the benefit of the shareholders, optionholders or
warrantholders of the Company and the Surviving Corporation only and shall not
be transferrable by any potential recipient thereof, except by will, intestate
succession or operation of law.
10.3 Escrowed Funds.
The moneys deposited under the Escrow Agreement and all interest
earnings thereon (collectively, the "Escrowed Funds") shall be applied as
provided in the Escrow Agreement, the Stock Purchase Agreement and this
Agreement. Subject to the following sentence, the Escrowed Funds shall be held
for a period not to exceed twelve months from the Closing Date (the "Escrow
Period"). At the end of the Escrow Period, any Escrowed Funds which have not
previously been distributed and which are not the subject of any objection with
respect to the
37
distribution thereof as provided in the Escrow Agreement, shall
be distributed as provided in the Escrow Agreement to the former holders of
Company Common Stock and to the former holders of any Option and Warrant Shares
who received payment for such Option and Warrant Shares in the Merger pursuant
to this Agreement.
10.4 Adjustments to Purchase Price.
(a) The Merger Consideration per Share shall be adjusted as provided
in this Section 10.4.
(b) Following the Merger, the Surviving Corporation at its expense
shall cause to be prepared a balance sheet of the Company as of the close of
business on the Closing Date. Such balance sheet, as finally agreed upon or
determined as provided in Section 10.4(d) below, is referred to herein as the
"Closing Balance Sheet." The Closing Balance Sheet shall include the assets and
liabilities of the Company as of the Closing Date and shall be prepared in
accordance with generally accepted accounting principles consistently applied
and consistent with the Company's past practices, and shall not reflect any
income tax benefit for operating losses of the Company subsequent to December
31, 1997. The Closing Balance Sheet shall not reflect any reduction in any
deferred tax assets that were listed on the balance sheet of the Company
included in the Form 10-Q of the Company filed with the SEC for the quarterly
period ended December 31, 1997. The Closing Balance Sheet shall not reflect any
accrual for payments to be made by the Company with respect to the matters
described in Sections 8.2(e), (f), (g) and (h). The inventory to be shown on the
Closing Balance Sheet shall be based on a physical count of all product and
parts inventory of the Company as of the close of business on the day preceding
the Closing Date using appropriate cut-off procedures and using a valuation
method consistent with generally accepted accounting principles consistently
applied and consistent with the Company's past practices, which is mutually
agreeable to the Surviving Corporation and the Escrow Committee.
(c) The Closing Balance Sheet shall be prepared and delivered by the
Surviving Corporation to the Escrow Committee no later than one hundred twenty
days after the Closing Date. If practicable, the Surviving Corporation shall
prepare and deliver a preliminary Closing Balance Sheet to the Escrow Committee
within ninety days after the Closing Date. The Escrow Committee may review and
examine the Closing Balance Sheet and shall have complete access to the work
papers used by the Surviving Corporation in preparing the Closing Balance Sheet
and relevant records of the Company. The Escrow Committee shall have the right
to employ an independent accounting firm to assist it in reviewing the Closing
Balance Sheet and any of the matters described in Section 10.4(f) below for
which the Surviving Corporation seeks distribution from the Escrowed Funds. The
reasonable cost and expenses of any such independent accounting firm shall be
paid from the Escrowed Funds.
(d) If the Escrow Committee agrees with the Closing Balance Sheet, it
shall so notify the Surviving Corporation in writing not more than 30 days after
receipt of the Closing Balance Sheet from the Surviving Corporation. The Escrow
Committee shall also have the right to object, by written notice to the
Surviving Corporation delivered within 30 days of receipt of the Closing Balance
Sheet from the Surviving Corporation, to the Closing Balance Sheet; and if the
38
Surviving Corporation and the Escrow Committee are unable to resolve such
objections within 20 days, all such objections shall be referred for resolution
to the Dallas office of an independent accounting firm of national reputation
mutually acceptable to CompuCom Subsidiary and the Escrow Committee (the
"Neutral Arbitrator").
(e) If the stockholders' equity of the Company set forth on the
Closing Balance Sheet is less than $2,300,000, then the Surviving Corporation
shall be entitled to receive a distribution from the Escrowed Funds of an amount
equal to the difference between $2,300,000 and the stockholders' equity of the
Company as set forth on the Closing Balance Sheet.
(f) The Surviving Corporation shall also be entitled to distributions
from the Escrowed Funds with respect to each of the following matters: (i) for
the amount of any payments made by the Surviving Corporation within the twelve-
month period following Closing with respect to any claims, suits, actions or
proceedings asserted against the Surviving Corporation relating to actions,
occurrences or omissions of the Company occurring prior to Closing which are not
reserved for on the Closing Balance Sheet, plus the amount of any reserves which
the Surviving Corporation may establish in the exercise of its reasonable
judgment with respect to any such matters within the twelve-month period
following Closing, (ii) for any accounts payable or any other liabilities of the
Company relating to the period prior to Closing which may be asserted against
the Surviving Corporation after Closing which have not been reflected or accrued
for on the Closing Balance Sheet, plus the amount of any accruals which the
Surviving Corporation may establish in the exercise of its reasonable judgment
with respect to any such matters within the twelve-month period following
Closing, and (iii) for the amount of any sales or income tax liability which may
be asserted against the Surviving Corporation after Closing with respect to the
operations of the Company prior to Closing which have not been reflected or
accrued for on the Closing Balance Sheet, plus the amount of any accruals which
the Surviving Corporation may establish in the exercise of its reasonable
judgment with respect to any such matters within the twelve-month period
following Closing.
(g) The Surviving Corporation shall give written notice to the Escrow
Agent and the Escrow Committee if the Surviving Corporation believes it is
entitled to distributions from the Escrow Fund with respect to any of the
matters set forth in Sections 10.4(e) or (f). The Surviving Corporation shall
use commercially reasonable efforts to give such notice with respect to any
matters for which it believes it is entitled to distributions from the Escrowed
Funds not later than ten months after the Closing Date; provided, however that
the Surviving Corporation shall give such notice with respect to the matters
referred to in Section 10.4(e) at the time the Closing Balance Sheet is
delivered to the Escrow Committee and the Surviving Corporation shall give
notice with respect to the matters set forth in Section 10.4(f) on no more than
two occasions during the Escrow Period. If the Escrow Committee has not
objected to the Closing Balance Sheet within the time period specified for
raising objections or if the Neutral Arbitrator has rendered its decision with
respect to any objections to the Closing Balance Sheet which may have been
referred to it for resolution, the Escrow Committee shall not have the right to
object to distributions requested by the Surviving Corporation pursuant to
Section 10.4(e). The Escrow Committee shall have the right to object, by
written notice delivered within 30 days after the Surviving Corporation's notice
is received, to the Surviving Corporation and the Escrow Agent to any such
39
proposed distributions under Section 10.4(f); and if the Surviving Corporation
and the Escrow Committee are unable to resolve such objections within 20 days,
such objections shall be referred to the Neutral Arbitrator for decision.
(h) If the Escrow Committee does not consent or object within the time
periods and in the manner provided herein, the Escrow Committee shall be deemed
to have consented to the Closing Balance Sheet or the proposed distribution of
the Escrowed Funds, as the case may be. The decisions and agreements of the
Escrow Committee and the Surviving Corporation shall be binding on the holders
of Company Common Stock and on the holders of Option and Warrant Shares, in each
case for which such holder is receiving payment pursuant to Section 3.1 or
Section 3.6, as applicable, and the decisions of the Neutral Arbitrator with
respect to any matters referred to it for resolution shall be binding on the
Escrow Committee, the holders of Company Common Stock, the holders of Option and
Warrant Shares and the CompuCom Subsidiary. The fees and expenses of the
Neutral Arbitrator shall be paid by CompuCom if the Escrow Committee is the
substantially prevailing party and shall be paid from the Escrowed Funds if the
Surviving Corporation is the substantially prevailing party. If the Neutral
Arbitrator determines that neither party is the substantially prevailing party,
such fees and expenses shall be paid from the Escrowed Funds.
(i) Each member of the Escrow Committee shall be entitled to a fee of
$750 for reviewing each notice given by the Surviving Corporation requesting a
distribution from the Escrowed Funds and to reimbursement for any reasonable
out-of-pocket expenses incurred by such member in performing his services as a
member of the Escrow Committee. Such fees and reimbursements shall be paid out
of the Escrowed Funds. The members of the Escrow Committee may also purchase a
policy of liability insurance in an amount not to exceed $3,000,000 insuring
them against any claims by former shareholders, optionholders and warrantholders
of the Company which may be asserted against the members of the Escrow Committee
in performing their duties as set forth in this Article X provided that the
premium for such policy is reasonable. The costs and expenses of such insurance
policy and any deductible applicable to such insurance policy shall be paid from
the Escrowed Funds to the extent these are funds available and otherwise by
CompuCom.
(j) The consent of the Escrow Committee, the lack of objection by the
Escrow Committee within the time periods and in the manner provided herein, and
the decision of the Neutral Arbitrator shall be sufficient and full authority
for the Escrow Agent to distribute Escrowed Funds to the Surviving Corporation.
The Escrowed Funds shall be distributed by the Escrow Agent as provided in this
Agreement and the Escrow Agreement. If there is a conflict between this
Agreement and the Escrow Agreement, the Escrow Agreement shall control.
10.5 Escrow Committee. In all matters respecting the Escrow Agreement the
Escrow Committee shall represent the former shareholders, optionholders and
warrantholders of the Company. CompuCom, the Surviving Corporation and the
Escrow Agent shall be entitled to rely upon any statements or other
communications by or purported to be on behalf of the Escrow Committee without
the necessity of determining the validity of the actions taken. Actions taken
40
by the Escrow Committee (or failures to act) shall be deemed binding and
conclusive on all former shareholders, optionholders or warrantholders of the
Company.
ARTICLE XI
FURTHER COVENANTS
11.1 Account Receivable Collections. The Surviving Corporation shall
use commercially reasonable efforts to collect the accounts receivable of the
Company reflected on the Closing Balance Sheet which shall include at a minimum,
those efforts employed by the Company in collecting its accounts receivable
prior to the Closing.
11.2 CompuCom to Cause CompuCom Subsidiary and Surviving Corporation
to Perform. CompuCom shall cause CompuCom Subsidiary prior to the Merger and
the Surviving Corporation after the Merger to perform their obligations and
comply with their covenants and agreements under this Agreement.
11.3 Directors' and Officers' Liability Insurance. For a period of six
years after the Closing Date, CompuCom shall cause the Surviving Corporation to
maintain in effect, at no expense to the insureds thereunder, the current policy
(or policies) of director's and officer's liability insurance maintained by the
Company; provided, however, that such policy (or policies) need cover only
wrongful acts of the insureds that occurred prior to the Closing Date and if the
premium therefor exceeds 150% of the premium that the Company spent in the last
fiscal year to maintain or procure its current policy (or policies) of
director's and officer's liability insurance, then the Surviving Corporation
shall only be obligated to maintain a policy of director's and officer's
liability insurance providing the amount of coverage that can be purchased for
150% of such premium.
ARTICLE XII
GENERAL
12.1 Release of Information. The Company and CompuCom shall, subject to
their respective legal obligations (including requirements of the Nasdaq
SmallCap Market and other similar regulatory bodies), cooperate with each other
in releasing information concerning this Agreement and the transactions
contemplated hereby. Each of the Company and CompuCom shall furnish to the
other drafts of all releases prior to publication and agree to promptly consult
with each other prior to issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and in making
any filings with any federal or state governmental or regulatory agency or with
the Nasdaq SmallCap Market with respect thereto; provided, however, that each
party shall have the right, in the event of any disagreement between CompuCom
and the Company about the timing or content of any such releases or other public
statements or filings, to issue such releases or other public statements or to
file such filings as it
41
is advised by counsel that it is required to make to assure continued compliance
with federal and state securities laws.
12.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed), sent by overnight courier (provided proof of delivery) or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by light notice):
(a) If to CompuCom or the CompuCom Subsidiary, to:
CompuCom Systems, Inc.
0000 Xxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attention: Lazane Xxxxx, Sr. Vice President, Finance and
Chief Financial Officer
Telecopy No.: (000) 000-0000
With a copy (which shall not constitute effective notice) to:
Xxxxxxxxxxx & Price, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) If to the Company prior to the Closing Date, to:
Computer Integration Corp.
15720 Xxxx X. Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx, President and Chief Executive Officer
Telecopy No.: (000) 000-0000
With a copy (which shall not constitute effective notice) to:
Holland & Knight LLP
Xxx Xxxx Xxxxxxx Xxxxxxxxx
X.X. Xxx 00000
Ft. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
42
(c) If to the Company after the Closing Date to the Escrow Committee,
to:
Xx. Xxxxxx Xxxxxxxx
Cossutta & Associates
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
With a copy (which shall not constitute effective notice) to:
Holland & Knight LLP
Xxx Xxxx Xxxxxxx Xxxxxxxxx
X.X. Xxx 00000
Ft. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
12.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors,
heirs, executors, administrators, legal representatives and permitted assigns,
provided that neither this Agreement nor any rights or obligations hereunder may
be assigned without the written consent of the other parties except that (i)
CompuCom may assign any or all of its rights hereunder to any Affiliate of
CompuCom, and (ii) the CompuCom Subsidiary may assign any or all of its rights
hereunder to any other newly organized corporation under the laws of the State
of Delaware, all of the capital stock of which is owned directly or indirectly
by CompuCom or an Affiliate of CompuCom. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person (other than the parties
hereto, any permitted assignee, holders of shares of Company Capital Stock,
holders of Options and Indemnities) any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement, and no Person (other
than as so specified) shall be deemed a third party beneficiary under or by
reason of this Agreement.
12.4 Further Assurances. Each party hereto agrees to use its best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things that may be necessary or appropriate to consummate and to make effective
the transactions contemplated by this Agreement, including, without limitation,
the execution and delivery of such other certificates, agreements, instruments
and documents and the provision of all such information as may be necessary or
appropriate as aforesaid.
12.5 Specific Performance. All remedies, either under this Agreement or by
law or otherwise afforded to any party hereto, shall be cumulative and not
alternative. Each party hereto acknowledges and agrees to any breach of the
agreements and covenants contained in this Agreement would cause irreparable
injury to the other parties hereto for which such parties would have no adequate
remedy at law. In addition to any other remedy to which any party hereto may be
entitled, each party hereto agrees that temporary and permanent injunctive and
other equitable relief and specific performance may be granted without proof of
actual damages or inadequacy of
43
legal remedy in any proceeding that may be brought to enforce any of the
provisions of this Agreement.
12.6 Severability. If any provision of this Agreement or the application
of any such provision to any Person or circumstance, shall be declared
judicially to be invalid, unenforceable or void, such decision shall not have
the effect of invalidating or voiding the remainder of this Agreement, it being
the intent and agreement of the parties that this Agreement shall be deemed
amended by modifying such provision to the extent necessary to render it valid,
legal and enforceable while preserving its intent or, if such modification is
not possible, by substituting therefor another provision that is valid, legal
and enforceable and that achieves the same objective.
12.7 Entire Agreement. This Agreement (including the exhibits and
schedules including, without limitation, the Disclosure Schedule hereto) and the
documents and instruments executed and delivered in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous agreements and
understandings, whether written or oral, among the parties or any of them with
respect to the subject matter hereof, and there are no representations,
understandings or agreements relating to the subject matter hereof that are not
fully expressed in this Agreement and the documents and instruments executed and
delivered in connection herewith. All exhibits and schedules attached to this
Agreement are expressly made a part of, and incorporated by reference into, this
Agreement.
12.8 Governing Law. This Agreement shall be construed in accordance with,
and the rights of the parties shall be governed by, the substantive laws of the
State of Delaware, without giving effect to any choice-of-law rules that may
require the application of the laws of another jurisdiction.
12.9 Certain Construction Rules. The article and section headings and the
table of contents contained in this Agreement are for convenience of reference
only and shall in no way define, limit, extend or describe the scope or intent
of any provisions of this Agreement. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. In addition, as used in this
Agreement, unless otherwise provided to the contrary, (a) all references to
days, months or years shall be deemed references to calendar days, months or
years and (b) any reference to a "Section," "Article," "Exhibit" or "Schedule"
shall be deemed to refer to a section or article of this Agreement or an exhibit
or schedule attached to this Agreement. The words "hereof," "herein," and
"hereunder" and words of similar import referring to this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement.
Unless otherwise specifically provided for herein, the term "or" shall not be
deemed to be exclusive.
12.10 Survival of Covenants, Representations and Warranties. The respective
covenants, representations and warranties of CompuCom, the Company and the
CompuCom Subsidiary contained herein shall expire and be terminated on the
Effective Time, unless otherwise specifically herein provided.
44
12.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one instrument binding on all the parties,
notwithstanding that all the parties are not signatories to the original or the
same counterpart.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first above written.
THE COMPANY:
COMPUTER INTEGRATION CORP.
By: /s/ Xxxx Xxxxx
-----------------------------------
Chief Executive Officer
COMPUCOM:
COMPUCOM SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxx Xxxxxxxx
Chief Executive Officer
THE COMPUCOM SUBSIDIARY:
CIC ACQUISITION CORP.
By: /s/ X. Xxxxxx Xxxxx
-------------------------------------
Name: X. Xxxxxx Xxxxx
-----------------------------------
Title: President
----------------------------------
45
SCHEDULE 1.1
DEFINITIONS
"33 Act" means the Securities Act of 1933, as amended.
"Accounts Receivable" as of any specified date means the accounts
receivable (including, without limitation, any "accounts" as defined under the
Uniform Commercial Code of the State of Delaware) and notes receivable of the
Company as of that date, including any Indebtedness arising from the sale or
license of goods or the performance of services by the Company and the right to
payment of any interest or finance charges or similar fees or charges relating
thereto.
"Affiliate" means, with respect to any specified Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by Contract or otherwise.
"Agreement" has the meaning specified in the preamble hereof.
"Capital Stock" means the Company Capital Stock, Series D Preferred Stock
and Series E Preferred Stock.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and as in effect on the date hereof.
"Certificates" has the meaning specified in Section 3.3(a).
"Closing" has the meaning specified in Section 2.2.
"Closing Balance Sheet" has the meaning specified in Section 10.4(b).
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and the rulings issued thereunder.
"Company" has the meaning specified in the preamble hereof.
"Company 10-K" has the meaning specified in Section 6.2(c).
"Company 1997 Financial Statements" has the meaning specified in Section
4.7.
Schedule 1 - Page 1
"Company Capital Stock" has the meaning specified in the recitals hereof.
"Company Common Stock" has the meaning specified in the recitals hereof.
"Company Filed SEC Documents" has the meaning specified in Section 4.7.
"Company IP" means, collectively, the Owned IP and the Not-Owned IP.
"Company Option Plan" has the meaning specified in Section 3.6(a).
"Company SEC Documents" has the meaning specified in Section 4.6.
"CompuCom" has the meaning specified in the preamble hereof.
"CompuCom Subsidiary" has the meaning specified in the preamble hereof.
"Confidential Software" has the meaning specified in Section 4.12(c)(ii).
"Confidentiality Contract" has the meaning specified in Section
4.12(c)(ii).
"Consent" means any consent, approval, permit, notice, action,
authorization or giving of notice to any Person not a party to this Agreement.
"Consideration" means the Merger Consideration, the Series D Merger
Consideration and the Series E Merger Consideration.
"Contingent Consideration" has the meaning specified in Section 3.1(a).
"Contract" means, with respect to any Person, any contract, agreement,
understanding or other instrument or obligation (whether oral or written,
pending or executory) to which such Person is a party or by which such Person or
such Person's properties or assets are or may be bound.
"Current Exchange" has the meaning specified in Section 8.2(h).
"DGCL" has the meaning specified in Section 2.1.
"Disbursing Agent" has the meaning specified in Section 3.3(a).
"Disclosure Schedule" has the meaning specified in Section 2.5.
"Dissenting Shares" has the meaning specified in Section 3.2(a).
"Effective Time" means the date and time at which the Merger becomes
effective as provided in Section 2.2.
Schedule 1 - Page 2
"Employee Benefit Plans" has the meaning specified in Section 4.15(a).
"Environmental Laws" mean any Legal Requirement relating to (i) emissions,
discharges, releases, threatened releases, or the presence of pollutants,
contaminants, toxic materials, waste, Hazardous Substances or other substances
into or in the environment, including, but not limited to, ambient air, surface
water, groundwater, publicly owned treatment works, septic systems or land; (ii)
the use, treatment, storage, disposal, handling, manufacturing, sale,
transportation or shipment of any Hazardous Substance, toxic materials, waste,
material, substances, products or by-products as defined in CERCLA; or (iii)
otherwise relating to the pollution or protection of health, safety or
environment.
"ERISA" has the meaning specified in Section 4.15(a).
"Escrow Agent" has the meaning specified in Section 10.1.
"Escrow Agreement" has the meaning specified in Section 10.1.
"Escrow Committee" has the meaning specified in Section 10.1.
"Escrowed Funds" has the meaning specified in Section 10.3.
"Escrow Period" has the meaning specified in Section 10.3.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles and practices which
are recognized as such by the American Institute of Certified Public Accountants
acting through its Accounting Principles Board or other appropriate board or
committee (other than the Emerging Standards Committee), and which are
consistently applied for all periods so as to present fairly the financial
condition, the results of operations and the cash flows of the relevant Person
or Persons.
"Hazardous Substance" means hazardous substance as defined in CERCLA, any
petroleum or petroleum based substance, natural gas or any other hazardous,
toxic or noxious pollutant, material or substance.
"HSR Act" has the meaning specified in Section 4.4(b).
"Indebtedness" means, with respect to any Person, all obligations,
contingent or otherwise, which in accordance with GAAP would be required to be
presented upon the such Person's balance sheet as liabilities, but in any event
including liabilities secured by any Lien existing on property owned or acquired
by such Person or a subsidiary thereof, whether or not the liability secured
thereby shall have been assumed by or shall otherwise be the Person's legal
liability, capitalized lease obligations and all guarantees, endorsements and
other contingent obligations in respect of Indebtedness of other Persons.
Schedule 1 - Page 3
"Information Statement" has the meaning specified in Section 4.4(b).
"Intellectual Property" or "IP" shall mean and include (a) all domestic and
foreign patents (including, without limitation, certificates of invention and
other patent equivalents), patent applications and patents issuing therefrom as
well as any division, continuation or continuation in part thereof, and any
reissue, extension, revival or renewal of any patent; (b) all domestic and
foreign trademarks (whether registered or at common law), trade names, service
marks, assumed names, trade dress, logos and registrations for and applications
to register any of the same; (c) copyrights and registration of claim to
copyright, (d) novel devices, processes, compositions of matter, methods,
techniques, observations, discoveries, apparatuses, designs, expressions,
theories and ideas, whether or not patentable; (e) Software; and (f) Trade
Secrets.
"Know-How" means scientific, engineering, mechanical, electrical,
financial, marketing or practical knowledge or experience useful in the business
and operations of the Company.
"Legal Requirement" means any domestic, foreign or international law,
treaty, ordinance, statute, rule or regulation of any Tribunal or any Order.
"Lien" means, with respect to any properties or assets, any mortgage,
pledge, hypothecation, assignment, security interest, lien, tax lien,
assessment, lease, sublease, adverse claim, levy, charge, liability or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or character whatsoever (including, without limitation,
any conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction) in respect of such
properties or assets.
"Material Adverse Effect" means a material adverse effect (which shall be
deemed to include, without limitation, any adverse effect aggregating $100,000
or more) on the business, operations, affairs, condition (financial or
otherwise), results of operations, properties, assets, liabilities or prospects
of the Company or, after the Effective Time, the Surviving Corporation.
"Merger" has the meaning specified in Section 2.1.
"Merger Consideration" has the meaning specified in Section 3.1(a).
"Merger Consideration Due at Closing," expressed as an amount per share of
Company Common Stock, means $17,250,000.00 (i) minus (a) $1,903,600.00, the
amount to be paid to the holders of the Series D Preferred Stock; minus (b)
$500,000.00, the amount to be paid to the holders of the Series E Preferred
Stock; minus (c) an amount not to exceed $195,000.00 to be paid to X.X. Xxxxxxxx
& Co., the Company's financial advisor, in connection with the transactions
contemplated by this Agreement and the Stock Purchase Agreement; minus (d) an
amount not to exceed $500,000.00 to be paid to Current Exchange in full and
complete satisfaction of a contractual price guarantee pursuant to which the
Company is obligated to pay to Current Exchange on July 2, 1998, with respect to
515,000 shares of Company Common Stock held by
Schedule 1 - Page 4
Current Exchange, the difference between the closing market price of Company
Common Stock on that date and $10.00; minus (e) an amount not to exceed
$550,000.00 in the aggregate necessary for the Company to satisfy certain
severance payment obligations of the Company to each of Xxxx Xxxxx, Xxxxx
Xxxxxx, Xxxx Xxxxxxx, Xx Xxxxxxx, Xxxx Patch, Xxxx Xxxxxxx and Xxx XxXxxxxxx if
their employment with the Company is terminated after Closing; minus (f) an
amount not to exceed $700,000.00 necessary for the Company to pay any prepayment
or other fees owing to Congress Financial Corporation ("Congress") for
termination of the Company's credit facility with Congress; and minus (g)
$2,750,000, the aggregate amount to be deposited with the Escrow Agent; and (ii)
divided by the sum of (a) 14,046,010, representing the total number of issued
and outstanding shares of Company Common Stock plus (b) the number of Option and
Warrant Shares for which payment is to be made to optionholders or
warrantholders pursuant to this Agreement.
"Merger Contingent Consideration" expressed as an amount per share of
Company Common Stock, means $2,750,000 divided by the sum of (a) 14,046,010,
representing the total number of issued and outstanding shares of Company Common
Stock plus (b) the number of Option and Warrant Shares for which payment is to
be made to optionholders or warrantholders pursuant to this Agreement.
"Miscellaneous Software Components" has the meaning specified in the
definition of "Software."
"Multiemployer Plans" has the meaning specified in Section 4.15(a).
"Neutral Arbitrator" has the meaning specified in Section 10.4(d).
"Notice of Superior Proposal" has the meaning specified in Section 6.3(b).
"Not-Owned IP" has the meaning specified in Section 4.12(a)(ii).
"Not-Owned Software" has the meaning specified in Section 4.12(b)(ii).
"Options" means options of the Company to purchase shares of Company
Capital Stock, as granted pursuant to the Company's 1994 Stock Option Plan, as
amended, that are described in the Disclosure Schedule.
"Option and Warrant Contingent Merger Consideration" has the meaning
specified in Section 3.6(b).
"Option and Warrant Merger Consideration" has the meaning specified in
Section 3.6(b).
"Option and Warrant Shares" has the meaning specified in Section 3.6(b).
"Order" means any decision, judgment, order, writ, injunction, decree,
award or determination of any Tribunal.
Schedule 1 - Page 5
"Owned IP" has the meaning specified in Section 4.12(a)(i).
"Owned Software" has the meaning specified in Section 4.12(b)(i).
"Pension Plans" has the meaning specified in Section 4.15(a).
"Person" means any corporation, association, partnership, joint venture,
organization, individual, business, trust or any other entity or organization of
any kind or character, including a Tribunal.
"Qualified Plans" has the meaning specified in Section 4.15(b).
"SEC" means the Securities and Exchange Commission.
"Selling Shareholders" has the meaning specified in Recital C.
"Series D Merger Consideration" has the meaning specified in Section
3.1(b).
"Series D Preferred Stock" has the meaning specified in Recital A.
"Series E Merger Consideration" has the meaning specified in Section
3.1(c).
"Series E Preferred Stock" has the meaning specified in Recital A.
"Shareholders' Written Consent" has the meaning specified in Section
6.4(b).
"Software" means the expression of an organized set of instructions in a
natural or coded language which is contained on a physical media of any nature
(e.g., written, electronic, magnetic, optical or otherwise) and which may be
used with a computer or other automated data processing equipment device of any
nature which is based on digital technology, to make such computer or other
device operate in a particular manner and for a certain purpose, as well as any
related documentation for such set of instructions. The term shall include
computer programs in source and object code, test or other significant data
libraries, user documentation for computer programs, and any of the following
which is contained on a physical media of any nature and which is used in the
design, development, modification, enhancement, testing, installation,
maintenance, diagnosis or assurance of the performance of a computer program
(collectively, "Miscellaneous Software Components"): flow diagrams, masks, input
and output formats, file layouts, database formats, test programs, installation
and operating instructions, diagnostic and maintenance instructions, and other
similar materials and information.
"Stock Purchase Agreement" has the meaning specified in Recital C.
"Superior Proposal" has the meaning specified in Section 6.3(b).
"Surviving Corporation" has the meaning specified in Section 2.1.
Schedule 1 - Page 6
"Takeover Proposal" has the meaning specified in Section 6.3(a).
"Taxes" means all taxes, charges, fees, levies or other similar assessments
or liabilities (including, without limitation, income, receipts, ad valorem,
value added, excise, property (whether real property or personal property),
windfall profit, sales, occupation, service, stamp, use, licensing, withholding,
employment, payroll, share, capital, surplus, franchise, occupational or other
taxes imposed by any Tribunal, whether computed on a separate, consolidated,
unitary or combined basis or in any other manner, and includes any interest,
fines, penalties, assessments, deficiencies, or additions to tax.
"Termination Fee" has the meaning specified in Section 9.5.
"Trade Secrets" means any formula, design, device or compilation of
information which is used or held for use in the business and operations of the
Company, which gives the holder thereof an advantage or opportunity for
advantage over competitors which do not have or use the same, and which is not
generally known by the public. Trade Secrets can include, by way of example,
information contained on drawings and other documents, and information relating
to research, development or testing; provided, however, that for purposes of
this Agreement, Trade Secrets shall not include Software.
"Tribunal" means any government, any arbitration panel, any court or any
governmental department, commission, board, bureau, agency or instrumentality of
the United States or any foreign or domestic state, province, commonwealth,
nation, territory, possession, country, parish, town, township, village or
municipality.
"Warrants" means warrants of the Company to purchase shares of Company
Common Stock that are described in the Disclosure Schedule.
Schedule 1 - Page 7
EXHIBIT A
CERTIFICATE OF MERGER
MERGING
CIC ACQUISITION CORP.
INTO
COMPUTER INTEGRATION CORP.
Computer Integration Corp., a Delaware corporation ("CIC"), pursuant to
Section 251 of the General Corporation Law of the State of Delaware (the "GCL"),
with respect to the merger of CIC Acquisition Corp. ("Acquisition") with and
into CIC pursuant to the terms of that certain Agreement and Plan of Merger
dated as of April ___, 1998, between CompuCom Systems, Inc., a Delaware
corporation ("CompuCom"), Acquisition, a Delaware corporation and a wholly-owned
subsidiary of CompuCom, and CIC (the "Merger Agreement").
DOES HEREBY CERTIFY:
FIRST. That the name and state of incorporation of each of the constituent
corporations to the merger is as follows:
Name of Corporation Jurisdiction of Incorporation
------------------- -----------------------------
Computer Integration Corp. Delaware
CIC Acquisition Corp. Delaware
SECOND. That the Merger Agreement has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with the provisions of Section 251 of the GCL.
THIRD. That the name of the surviving corporation of the merger is Computer
Integration Corp., a Delaware corporation.
FOURTH. That the amendments or changes in the Certificate of Incorporation
of Computer Integration Corp., which is the surviving corporation, that are to
be effected by the merger are as follows:
Paragraph FOURTH shall be amended to read in its entirety as follows:
"FOURTH: The Corporation is authorized to issue one class of capital
stock to be designated "Common Stock." The number of shares of Common
Stock which the Corporation shall have authority to issue is 1,000 shares,
$.01 par value per share. Each
CERTIFICATE OF MERGER - Page 1
share of Common Stock of the Corporation shall have identical rights and
privileges in every respect."
FIFTH. That the executed Merger Agreement is on file at an office of the
surviving corporation at 15720 Xxxx X. Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxx Xxxxxxxx 00000.
SIXTH. That a copy of the Merger Agreement will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any of
the constituent corporations to the merger.
SEVENTH. That the merger shall be effective upon filing of this Certificate
of Merger with the Secretary of State of the State of Delaware in accordance
with Section 103(d) of the GCL.
IN WITNESS WHEREOF, Computer Integration Corp. has caused this Certificate
of Merger to be executed by its President this ___ day of __________, 1998.
COMPUTER INTEGRATION CORP.
By:
------------------------------------
, President
-----------------
CERTIFICATE OF MERGER - Page 2
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is entered into as of this
______ day of ___________, 1998, by and among CompuCom Systems, Inc., a Delaware
corporation ("CompuCom"), CIC Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of CompuCom ("Purchaser"), Computer Integration Corp., a
Delaware corporation ("CIC" and together with its wholly owned subsidiary CIC
Systems, Inc., a Delaware corporation, collectively, the "Company"), Xxxxxx
Xxxxxxxx and Xxxxx Xxxxxxx (such individuals, collectively, the "Escrow
Committee") and _______________________, a ___________________________ the
("Escrow Agent").
R E C I T A L S:
I CompuCom, Purchaser, and certain shareholders (the "Selling
Shareholders") of the Company entered into a Stock Purchase Agreement dated as
of April _________, 1998 (the "Purchase Agreement").
II Pursuant to the Purchase Agreement, Purchaser agreed to purchase at
the purchase price stated therein (the "Purchase Price") all of the shares of
Common Stock, par value $.001 per share of the Company (the "Company Common
Stock") owned by the Selling Shareholders.
III CompuCom, Purchaser and the Company entered into an Agreement and Plan
of Merger ("Merger Agreement") providing, among other things, for (i) the merger
of Purchaser with and into the Company (the "Merger") and conversion of each
issued and outstanding share of Company Common Stock, other than shares of
Company Common Stock owned by the Company or by CompuCom or Purchaser (and
shares of Company Common Stock held by shareholders who perfected any appraisal
rights that they may have had under Delaware law), into the right to receive an
amount in cash equal to the Merger Consideration (as defined in the Merger
Agreement) and (ii) certain payments to be made to the holders of Option and
Warrant Shares (as defined in the Merger Agreement).
IV Pursuant to the Purchase Agreement and the Merger Agreement,
$2,750,000 (the "Escrow Amount") of the consideration to be paid to the Selling
Shareholders, to the holders of Company Common Stock whose shares of Company
Common Stock are to be converted into the right to receive the Merger
Consideration pursuant to the Merger and to the holders of Option and Warrant
Shares (collectively, the "Shareholders") is to be deposited by Purchaser in an
interest bearing account and held in escrow by the Escrow Agent as contingent
consideration for the Shareholders or disbursed in whole or in part to the
Surviving Corporation (as defined in the Merger Agreement) as set forth in the
Purchase Agreement and the Merger Agreement.
ESCROW AGREEMENT - Page 1
V The parties hereto are entering into this Escrow Agreement as provided
in the Purchase Agreement and the Merger Agreement to set forth, among other
things, the terms pursuant to which the Escrowed Funds (as defined in Section
1(a)) will be held and disbursed.
NOW, THEREFORE, in consideration of the recitals and the mutual promises
and covenants set forth in this Escrow Agreement, the Purchase Agreement and the
Merger Agreement, the parties agree as follows:
5.1 APPOINTMENT OF ESCROW AGENT.
(a) The Escrow Committee, CompuCom and Purchaser appoint Escrow Agent
as their agent and custodian to hold and disburse the Escrow Amount, and all
earnings thereon ("Escrow Earnings"), in accordance with the terms of this
Escrow Agreement. The Escrow Amount and the Escrow Earnings are sometimes
referred to herein collectively as the "Escrowed Funds."
(b) The Escrow Committee and Purchaser acknowledge and agree that this
Escrow Agreement shall be subject to the terms of the Purchase Agreement and
Merger Agreement. Notwithstanding the foregoing, the obligations of Escrow Agent
are to be determined solely by this Escrow Agreement and any subsequent
amendments or supplemental instructions agreed to in writing by all of the
parties hereto.
(c) The Escrow Agent hereby accepts its appointment and agrees to act
as Escrow Agent in accordance with the terms and conditions of this Escrow
Agreement.
5.2 DEPOSIT OF ESCROW AMOUNT.
Simultaneously with payment of the portion of the Purchase Price being
paid to the Selling Shareholders at Closing (as defined in the Purchase
Agreement) and the deposit of sufficient funds with the Disbursing Agent (as
defined in the Merger Agreement) as required to consummate the Merger, Purchaser
is delivering directly to the Escrow Agent, the Escrow Amount. The Disbursing
Agent will keep a list of (a) all Selling Shareholders, (b) the shareholders of
the Company whose shares are converted into Merger Consideration in the Merger
and (c) the holders of Option and Warrant Shares as to which the Purchaser has
deposited the Option and Warrant Contingent Consideration (as defined in the
Merger Agreement) with the Escrow Agent.
5.3 ESCROW COMMITTEE.
The Escrow Committee shall represent the Shareholders in all matters
pertaining to this Escrow Agreement. CompuCom, Purchaser, the Surviving
Corporation and the Escrow Agent shall be entitled to rely upon any statements
or other communications by or purported to be on behalf of the Escrow Committee
without the necessity of determining the validity of the actions taken. Actions
taken by the Escrow Committee (or failures to act) shall be deemed binding and
conclusive on all Shareholders.
ESCROW AGREEMENT - Page 2
5.4 INVESTMENT.
(a) Escrow Agent shall invest and reinvest the Escrowed Funds,
provided the Escrowed Funds may only be invested in bonds or other obligations
issued or guaranteed by the government of the United States of America (or an
instrumentality or agency thereof) and not having maturities of greater than
thirty (30) days.
(b) All investments of the Escrowed Funds shall be held by, or
registered in the name of, Escrow Agent or its nominee.
(c) Any Escrow Earnings that are not distributed to either the
Shareholders or the Surviving Corporation at the end of any taxable period will
be deemed interest income of the escrow pursuant to Section 468B of the Internal
Revenue Code of 1986, as amended, and will not be treated as interest income to
the Shareholders or Purchaser prior to distribution.
5.5 NO TITLE TO ESCROWED FUNDS UNTIL DISTRIBUTED. Neither Shareholders
nor the Surviving Corporation shall have any right, title or interest in or to
the Escrowed Funds until (and then only to the extent that) the Escrowed Funds
are distributed to such party. The parties hereto intend that, in the event of
the filing of any petition in bankruptcy by or against a Shareholder or the
Surviving Corporation, the bankruptcy estate of the Shareholder or the Surviving
Corporation, as the case may be, shall have no right, title or interest in or to
the Escrowed Funds until (and then only to extent that) the same is actually
received by the Shareholder or the Surviving Corporation.
5.6 ESCROW CLAIMS; DISTRIBUTIONS; TERMINATION.
(a) ESCROW CLAIMS BY SURVIVING CORPORATION. In the event that the
Surviving Corporation believes it is entitled pursuant to the provisions of the
Purchase Agreement and the Merger Agreement to a payment from the Escrowed
Funds, the Surviving Corporation shall deliver to the Escrow Agent, with a copy
to the Escrow Committee, a written notice (a "Distribution Notice") which shall
be signed on behalf of the Surviving Corporation and shall set forth a demand
for payment to the Surviving Corporation of all or a specified dollar amount of
the Escrowed Funds together with a summary description of the basis therefor.
(b) PAYMENT FROM ESCROWED FUNDS TO THE SURVIVING CORPORATION UPON
REQUEST WITHOUT OBJECTION.
(i) PAYMENT TO SURVIVING CORPORATION. If the Surviving
Corporation delivers a Distribution Notice to the Escrow Agent and the
Escrow Committee, and if no Committee Response Notice (as defined below) is
delivered to the Escrow Agent by the Escrow Committee within thirty (30)
days of the delivery of such Distribution Notice to the Escrow Committee,
then the Escrow Agent shall promptly pay to the Surviving Corporation out
of the Escrowed Funds the amount specified in the Distribution Notice.
(ii) CALCULATION OF DUE DATE FOR NOTICES. Upon receipt of any
Distribution Notice, the Escrow Agent shall promptly deliver a copy of the
Distribution Notice to the Escrow Committee. For purposes of calculating
the due date of any Committee
ESCROW AGREEMENT - Page 3
Response Notice, the Escrow Agent may conclusively assume and rely that the
date it receives a Distribution Notice is the same date such notice was
received by the Escrow Committee.
(c) PAYMENT FROM ESCROWED FUNDS AFTER NOTICE OF OBJECTION.
(i) ESCROW COMMITTEE RESPONSE TO DISTRIBUTION NOTICE. If the
Surviving Corporation delivers a Distribution Notice to the Escrow Agent,
with a copy to the Escrow Committee, and if the Escrow Committee believes
that the Surviving Corporation is not entitled to payment from the Escrowed
Funds in the full amount specified in the Distribution Notice, the Escrow
Committee shall, within thirty (30) days of the delivery to the Escrow
Committee of the Distribution Notice, deliver to the Escrow Agent, with a
copy to the Surviving Corporation, a written notice (a "Committee Response
Notice"), which shall be signed by the Escrow Committee. The Committee
Response Notice shall set forth (A) a demand that the Escrow Agent not make
payment to the Surviving Corporation from the Escrowed Funds as to the
portion of the proposed payment from the Escrowed Funds disputed by the
Escrow Committee in such Committee Response Notice, and (B) the basis for
such demand by the Escrow Committee.
(ii) ESCROW DISTRIBUTION. Provided that timely delivery is made
in accordance with the provisions of this Section 6(c), the Escrow Agent
shall make no payment from the Escrowed Funds of any portion of the
Escrowed Funds disputed in a Committee Response Notice until it shall have
received one of the following:
(1) written instructions to make payment from the Escrowed
Funds, signed by the Surviving Corporation and the Escrow Committee;
or
(2) a copy of the decision of the Neutral Arbitrator (as
defined below) adjudicating the dispute pursuant to the terms of the
Purchase Agreement and the Merger Agreement. The Surviving Corporation
shall deliver a copy of the decision of the Neutral Arbitrator to the
Escrow Agent.
(iii) NEUTRAL ARBITRATOR. In the event that the Surviving
Corporation and the Escrow Committee are unable to resolve any objections
to a distribution to the Surviving Corporation contained in a Committee
Response Notice within twenty (20) days of the delivery of the Committee
Response Notice to the Escrow Agent and the Surviving Corporation, all such
objections shall be referred by the Surviving Corporation and the Escrow
Committee for resolution to the Dallas office of an independent accounting
firm of national reputation mutually acceptable to the Surviving
Corporation and the Escrow Committee (the "Neutral Arbitrator"). The
Surviving Corporation shall deliver to Escrow Agent, with a copy to the
Escrow Committee, a written notice identifying the Neutral Arbitrator and
any decisions made by the Neutral Arbitrator with respect to matters
submitted to it. If the Neutral Arbitrator determines that the Surviving
Corporation is the substantially prevailing party in connection with any
matter submitted to it or that neither the Surviving Corporation nor the
Escrow Committee is the substantially prevailing party in
ESCROW AGREEMENT - Page 5
connection with any such matter, the fees and expenses of the Neutral
Arbitrator shall be paid out of the Escrowed Funds.
Upon receipt of the decision of the Neutral Arbitrator, if a payment is to
be made from the Escrowed Funds as a result of such decision, the Escrow Agent
shall make such payment in accordance with such decision.
(d) PAYMENT FROM ESCROWED FUNDS AT REQUEST OF THE ESCROW COMMITTEE.
(i) PAYMENTS AT REQUEST OF ESCROW COMMITTEE. In the event that
the Escrow Committee is entitled pursuant to the provisions of the Purchase
Agreement and the Merger Agreement to a payment from the Escrowed Funds,
the Escrow Committee shall deliver to the Escrow Agent, with a copy to the
Surviving Corporation, a written notice (an "Escrow Committee Distribution
Notice") which shall be signed by the Escrow Committee and shall set forth
a demand for payment of a specified dollar amount of the Escrowed Funds
together with a summary description of the basis therefor.
(ii) PAYMENT AS DIRECTED BY ESCROW COMMITTEE. If the Escrow
Committee delivers an Escrow Committee Distribution Notice to the Escrow
Agent and the Surviving Corporation, and if no Surviving Corporation
Response Notice (as defined below) is delivered to the Escrow Agent by the
Surviving Corporation within thirty (30) days of the delivery of such
Escrow Committee Distribution Notice to the Surviving Corporation, then the
Escrow Agent shall promptly pay to the Escrow Committee or as directed by
the Escrow Committee out of the Escrowed Funds the amount specified in the
Escrow Committee Distribution Notice.
(iii) CALCULATION OF DUE DATE FOR NOTICES. Upon receipt of any
Escrow Committee Distribution Notice, the Escrow Agent shall promptly
deliver a copy of the Escrow Committee Distribution Notice to the Surviving
Corporation. For purposes of calculating the due date of any Surviving
Corporation Response Notice, the Escrow Agent may conclusively assume and
rely that the date it receives a Escrow Committee Distribution Notice is
the same date such notice was received by the Surviving Corporation.
(iv) SURVIVING CORPORATION RESPONSE TO ESCROW COMMITTEE
DISTRIBUTION NOTICE. If the Escrow Committee delivers an Escrow Committee
Distribution Notice to the Escrow Agent, with a copy to the Surviving
Corporation, and if the Surviving Corporation believes that the Escrow
Committee is not entitled to payment from the Escrowed Funds in the full
amount specified in the Escrow Committee Distribution Notice, the Surviving
Corporation shall, within thirty (30) days of the delivery to the Surviving
Corporation of the Escrow Committee Distribution Notice, deliver to the
Escrow Agent, with a copy to the Escrow Committee, a written notice (a
"Surviving Corporation Response Notice"), which shall be signed by the
Surviving Corporation. The Surviving Corporation Response Notice shall set
forth (A) a demand that the Escrow Agent not make payment to the Escrow
Committee or as directed by the Escrow Committee from the Escrowed Funds as
to the portion of the proposed payment from the Escrowed Funds disputed by
the
ESCROW AGREEMENT - Page 5
Surviving Corporation in such Surviving Corporation Response Notice, and
(B) the basis for such demand by the Surviving Corporation.
(v) ESCROW DISTRIBUTION. Provided that timely delivery is made
in accordance with the provisions of this Section 6(d), the Escrow Agent
shall make no payment from the Escrowed Funds of any portion of the
Escrowed Funds disputed in a Surviving Corporation Response Notice until it
shall have received written instructions to make payment from the Escrowed
Funds, signed by the Surviving Corporation and the Escrow Committee.
In the case of a distribution of less than all of the Escrowed Funds
pursuant to the preceding provisions of this Section 6, the remaining Escrowed
Funds shall continue to be held by the Escrow Agent until disbursed pursuant to
this Section 6.
(e) TERMINATION. This Escrow Agreement shall automatically terminate
upon the earlier to occur of: (i) ______________, 1999, or (ii) the date on
which the entire Escrowed Funds held by Escrow Agent are distributed or
otherwise disposed of by Escrow Agent in accordance with the provisions of
Section 6(b), Section 6(c) and Section 6(d). If the Escrow Agreement terminates
pursuant to (i) above then on such date the Escrow Agent shall release and
deliver to the Disbursing Agent for payment to the Shareholders all of the
remaining Escrowed Funds other than an amount equal to the aggregate amount
described in all Distribution Notices previously received by the Escrow Agent
and not previously paid to the Surviving Corporation pursuant to Section 6(c).
Such amount, if any, shall continue to be held by the Escrow Agent and disbursed
pursuant to Section 6(c)(ii); provided, however, if any portion of the Escrowed
Funds remains on deposit following termination of this Escrow Agreement, all
rights and benefits of the Escrow Agent shall remain in place notwithstanding
such termination. Any amounts received by the Disbursing Agent from the Escrow
Agent for distribution to the Shareholders shall be distributed to each
Shareholder in an amount equal to the product of (x) the amount of the Escrowed
Funds received by the Disbursing Agent from the Escrow Agent divided by
14,046,010, representing the total number of issued and outstanding shares of
Company Common Stock immediately prior to the Merger plus the number of Option
and Warrant Shares, multiplied by (y) the total number of shares of Company
Common Stock and Option and Warrant Shares for which such Shareholder received
payment pursuant to the Purchase Agreement or the Merger Agreement, as
applicable.
5.7 DUTIES OF ESCROW AGENT. Escrow Agent hereby accepts its duties and
obligations under this Escrow Agreement and represents that it has the legal
power and authority to enter into this Escrow Agreement and perform its duties
and obligations hereunder. Escrow Agent further agrees that all property held
by Escrow Agent hereunder shall be segregated from all other property held by
the Escrow Agent and shall be identified as being held in connection with this
Escrow Agreement. Such segregation may be accomplished by appropriate
identification on the books and records of the Escrow Agent. Escrow Agent
agrees that its documents and records with respect to the transactions
contemplated hereby will be available for examination by authorized
representatives of the Surviving Corporation and the Escrow Committee. Escrow
Agent shall provide a monthly report to the Surviving Corporation and the Escrow
Committee with respect to the Escrowed Funds.
ESCROW AGREEMENT - Page 6
5.8 COMPENSATION OF ESCROW AGENT. Escrow Agent shall be entitled to
receive fees, payable in accordance with the fee schedule attached as Exhibit A
hereto, for its services under this Escrow Agreement, and to reimbursement for
any expenses incurred by it hereunder, which shall be paid by
___________________________. The provisions of this Section shall survive the
termination of this Agreement.
5.9 LIABILITIES OF ESCROW AGENT. Unless otherwise expressly provided in
this Escrow Agreement, Escrow Agent shall:
(a) not be held liable for any action or failure to act under or in
connection with this Escrow Agreement, except for its own gross negligence or
willful misconduct;
(b) have no responsibility to inquire into or determine the
genuineness, authenticity or sufficiency of any securities, checks, notices or
other documents or instruments submitted to it in connection with its duties
pursuant to this Escrow Agreement or to confirm the identity, authority or
rights of any person or legal entity executing or delivering or purporting to
execute or deliver this Escrow Agreement;
(c) be entitled to deem (unless it has actual knowledge to the
contrary) the signatories of any documents or instruments submitted to it
pursuant to this Escrow Agreement as being those of persons authorized to sign
such documents or instruments on behalf of the other parties to this Escrow
Agreement and shall be entitled to rely (unless it has actual knowledge to the
contrary) upon the genuineness of the signatures of such signatories without
inquiry and without requiring substantiating evidence of any kind;
(d) be entitled to refrain from taking any action contemplated by
this Escrow Agreement in the event that it becomes aware of any disagreement
between the other parties hereto as to any material facts or as to the happening
of any contemplated event precedent to such action;
(e) have no responsibility or liability for any diminution which may
result from any investments or reinvestment made in accordance with any
provisions contained in this Escrow Agreement;
(f) have no duties or responsibilities except those expressly set
forth herein; and
(g) be entitled, if a dispute between the parties arises or if the
Escrow Agent shall be uncertain as to its rights or duties under this Escrow
Agreement, to pay the Escrowed Funds into a court of competent jurisdiction, in
which event the Escrow Agent shall have no further obligations under this Escrow
Agreement.
5.10 INDEMNIFICATION OF ESCROW AGENT. CompuCom and Purchaser hereby agree
to indemnify the Escrow Agent, and hold the Escrow Agent harmless, from and
against any and all claims, costs, expenses, demands, judgments, losses, damages
and liabilities (including, without limitation, reasonable attorneys' fees and
disbursements of the Escrow Agent's outside counsel incurred in defending the
Escrow Agent against any claims) arising out of or in connection with
ESCROW AGREEMENT - Page 7
this Escrow Agreement or any action or failure to act by the Escrow Agent under
or in connection with this Escrow Agreement, except such as may be caused by the
gross negligence or willful misconduct of the Escrow Agent. The provisions of
this Section 10 shall survive the termination of this Agreement.
5.11 RESIGNATION OF ESCROW AGENT.
(a) Escrow Agent may resign as escrow agent hereunder effective thirty
(30) days following the giving of written notice thereof to the Surviving
Corporation and the Escrow Committee. Similarly, the Escrow Agent may be
removed and replaced following the giving of thirty (30) days' written notice to
the Escrow Agent by the Surviving Corporation and the Escrow Committee.
Notwithstanding the foregoing, no such resignation or removal shall be effective
until a successor Escrow Agent has acknowledged its appointment as such as
provided in Section 11(b) hereof. In either event, upon the effective date of
such resignation or removal, the Escrow Agent shall deliver the Escrowed Funds
to a successor Escrow Agent appointed by the Surviving Corporation and the
Escrow Committee in writing; provided, however, that if the Surviving
Corporation and the Escrow Committee are unable to agree upon a successor Escrow
Agent, or shall have failed to appoint a successor Escrow Agent prior to the
expiration of thirty (30) days following the date of the notice of such
resignation or removal, the then-acting Escrow Agent may petition any court of
competent jurisdiction for the appointment of a successor Escrow Agent, or other
appropriate relief, and tender the Escrowed Funds into the registry of the
court. Any such resulting appointment shall be binding upon all of the parties
to this Escrow Agreement.
(b) Upon acknowledgment by any successor Escrow Agent appointed in
accordance with Section 11(a) hereof of the receipt of the Escrowed Funds and
its written acceptance to serve as Escrow Agent in accordance with this Escrow
Agreement, the then-acting Escrow Agent shall be fully released from and
relieved of all duties, responsibilities and obligations under this Escrow
Agreement.
5.12 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed), sent by overnight courier (provided proof of delivery) or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by written notice):
If to the Escrow Committee:
Xx. Xxxxxx Xxxxxxxx
Cossutta & Associates
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
ESCROW AGREEMENT - Page 8
With a copy (which shall not constitute effective notice) to:
Holland & Knight LLP
Xxx Xxxx Xxxxxxx Xxxxxxxxx
X.X. Xxx 00000
Ft. Xxxxxxxxxx, Xxxxxxx 00000
Attn.: Xxxx Xxxxxx, Esq.
Fax No.: (000) 000-0000
If to CompuCom, Purchaser or the Surviving Corporation:
CompuCom Systems, Inc.
0000 Xxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attn.: Lazane Xxxxx, Sr. Vice President, Finance and Chief Financial
Officer
Fax No.: (000) 000-0000
With a copy (which shall not constitute effective notice) to:
Xxxxxxxxxxx & Price, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn.: Xxxxxxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
If to Escrow Agent:
Xx. Xxxxxx Xxxxxxxx
Cossutta & Associates
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
5.13 ASSIGNMENT. This Escrow Agreement shall not be assigned by any party
without the written consent of the other parties and any attempted assignment
without such written consent shall be null and void and without legal effect.
This Escrow Agreement shall be binding upon and inure to the benefit of the
respective parties hereto and, provided any consent required by this Section 13
is duly obtained, the successors and assigns of such party. Nothing herein is
intended or shall be construed to give any other person any right, remedy or
claim under, in or with respect this Escrow Agreement or any property held
hereunder.
5.14 GOVERNING LAW. This Escrow Agreement shall be construed in accordance
with, and the rights of the parties shall be governed by, the substantive laws
of the State of ________, without giving effect to any choice-of-law rules that
may require the application of the laws of another jurisdiction. All actions
and proceedings arising out of or relating to this Escrow Agreement shall
ESCROW AGREEMENT - Page 9
be heard and determined in any _________ state court or in any federal court
sitting in ___________.
5.15 COUNTERPARTS. This Escrow Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one instrument binding on all the parties,
notwithstanding that all the parties are not signatories to the original or the
same counterpart.
5.16 AMENDMENT. This Escrow Agreement may only be amended by a writing
signed by CompuCom, the Surviving Corporation and the Escrow Committee. The
Escrow Agent's duties and obligations under this Agreement shall not be altered,
changed, or modified without its prior written consent.
[Remainder of this page intentionally left blank]
ESCROW AGREEMENT - Page 10
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of
the date first written above.
COMPUCOM SYSTEMS, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
CIC ACQUISITION CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
COMPUTER INTEGRATION CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
----------------------------------------
Xxxxxx Xxxxxxxx, Escrow Committee Member
----------------------------------------
Xxxxx Xxxxxxx, Escrow Committee Member
ESCROW AGENT
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
ESCROW AGREEMENT - Page 11
EXHIBIT A
FEE SCHEDULE
--see attached--
EXHIBIT A
