ASSET PURCHASE AGREEMENT
________________________
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is
entered into this 30th day of May, 1997, by, between and among
XXXXXXX COMPUTER RESOURCES, INC., a Delaware corporation, (the
"Purchaser"), MAGIC BOX, INC., a Florida corporation (the
"Seller'') and XXXXXX XXXXX ( "X. Xxxxx" ), M. XXXXXX XXXXXXXX
( "X. Xxxxxxxx"'), XXXXXX XXXXX ("X. Xxxxx") and XXXXXXX XXXXX
("X. Xxxxx") (X. Xxxxx, X. Xxxxxxxx, X. Xxxxx and X. Xxxxx
hereinafter referred to collectively as "Shareholders" and
individually as "Shareholder").
W I T N E S S E T H :
WHEREAS, Seller is a provider of micro computer products and
computer integration and networking services to customers in
Southern Florida (the "Business").
WHEREAS, all the issued and outstanding stock of Seller is owned
in the following proportions:
X. Xxxxx - 40%
X. Xxxxxxxx - 25%
X. Xxxxx - 25%
X. Xxxxx - 10%
WHEREAS, Purchaser desires to purchase substantially all of the
assets of the Seller used in the Business and assume certain of
the liabilities of Seller in connection with the Business, and
Seller desires to sell substantially all of such assets, subject
to such liabilities, but only (i) upon the terms and subject to
the conditions set forth in this Agreement, (ii) the
representations, warranties, covenants, indemnifications,
assurances and undertakings of Seller, Shareholders and Purchaser
contained in this Agreement and (iii) the agreements of Seller,
X. Xxxxxxxx and X. Xxxxx to refrain from competition with
Purchaser for three (3) years from the closing of this
transaction and (iv) the agreements of X. Xxxxx and X. Xxxxx to
refrain from competition with Purchaser for the later of three
(3) years from the Closing Date, or one (1) year after the
termination of X. Xxxxx and/or X. Xxxxx'x employment with
Purchaser pursuant to, and in accordance with, the terms of their
respective Employment Agreements to be executed upon the Closing.
WHEREAS, Purchaser shall have the right, at its sole option, to
elect to effectuate the transactions contemplated hereby, through
a first tier subsidiary of Purchaser ("Acquisition Sub"), and
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have all ancillary documents described herein (e.g. employment
agreements, promissory notes, etc.) executed by such Acquisition
Sub, provided Purchaser shall guarantee all of the obligations of
Acquisition Sub contained in this Agreement and in such ancillary
documents.
NOW, THEREFORE, in consideration of the above premises and the
mutual promises, covenants, agreements, representations and
warranties herein contained, the parties hereto agree as follows:
1
DEFINITIONS
___________
1Affiliate. "Affiliate" shall mean (i) in the case of an
entity, any person (the term "person" for these purposes
means an individual, partnership, firm, corporation or other
entity) who or which, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is
under common control with, any specified person (the term
"control" for these purposes means the ability, whether by
ownership of shares or other equity interests, by contract
or otherwise, to elect a majority of the directors of a
corporation, to select the managing or general partner of a
partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons
exercising governing authority over an entity) or (ii) in
the case of an individual, such individual's spouse,
descendants or parents or a trust primarily for the benefit
of such individual or any of the foregoing.
2Assumed Liabilities.
The "Assumed Liabilities" are the
liabilities of the Seller assumed or paid at Closing by the
Purchaser pursuant to this Agreement.
3Balance Sheet
The "Balance Sheet" is the unaudited
balance sheet of the Seller as of April 30, 1997, included
as part of the Financial Statements.
4Closing. The "Closing" shall be the consummation of the
transactions contemplated under this Asset Purchase
Agreement.
5Closing Date. The "Closing Date" shall be July 1, 1997,
and shall commence at 9:00 a.m. E.D.T.
6Code. The "Code" is the Internal Revenue Code of 1986, as
amended, 26 U.S.C. S1 et seq.
7Court. A "Court" is any federal, state, municipal,
domestic, foreign or other governmental tribunal or an
arbitrator or person with similar power or authority.
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8Disclosure Schedule. The "Disclosure Schedule" is the
Disclosure Schedule effective May 31, 1997 and supplemented
as necessary to reflect the operations of the Business, as
provided herein, through the Closing Date, and delivered by
Seller to Purchaser by June 16, 1997.
9Encumbrance. An "Encumbrance" is any security interest,
lien, charge, encumbrance or restriction, whether imposed by
agreement, understanding, law or otherwise, on any Purchased
Asset (as defined herein).
10Excluded Assets. "Excluded Assets" are any assets set
forth on Exhibit A attached hereto.
11Financial Statements. The "Financial Statements" are the
unaudited financial statements of the Seller for the years
ended December 31, 1996 and December 31, 1995 (original and
restated) and the unaudited interim balance sheets as of
April 30, 1997, including any and all notes thereto.
12Governmental Entity. A "Governmental Entity" is any Court
or any federal, state, municipal, domestic, foreign or other
administrative agency, department, commission, board, bureau
or other governmental authority or instrumentality having
jurisdiction over the applicable matter.
13Knowledge. "knowledge" of Seller and Shareholders shall
mean the actual knowledge of any of the Shareholders, and
for all purposes "knowledge" shall mean actual knowledge of
the applicable party without any duty of inquiry.
14Pro Forma Balance Sheet. The "Pro Forma Balance Sheet" is
the unaudited balance sheet adjusted for Excluded Assets per
Section 2.3 and Exhibit A and Excluded Liabilities of the
Seller per Section 3.3 as of April 30, 1997, included as
part of the Financial Statements. The Pro Forma Balance
Sheet shall be updated by Seller dated as of June 15, 1997,
as more particularly described at Section 4.1(c) below.
15Purchase Price. The "Purchase Price" is the total
consideration paid by Purchaser to Seller for the Purchased
Assets as set forth in Section 4.1.
16Purchased Assets. The "Purchased Assets" are the assets
of the Seller, used in the Business, acquired by the
Purchaser pursuant to the terms of this Agreement set forth
on Exhibit E. Any asset of Seller which is not an Excluded
Asset shall be a Purchased Asset.
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17Taxes. "Taxes" means all taxes, charges, fees, levies or
other assessments, including, without limitation, income,
gross receipts, excise, property, sales, use, license,
payroll and franchise taxes, imposed by any Governmental
Entity and includes any estimated tax, interest and
penalties or additions to tax.
18Tax Return. A "Tax Return" is a report, return or other
information required to be supplied to a Governmental Entity
in connection with Taxes including, where permitted or
required, combined or consolidated returns for any group of
entities that includes the Seller.
2.
TERMS
_____
1 Agreement.
_________
Seller agrees to sell and convey to Purchaser the Purchased
Assets as hereinafter set forth in Paragraph 2.2. Purchaser
agrees to purchase said Purchased Assets. The agreements of
Purchaser and Seller are expressly conditioned upon the
terms, conditions, covenants, representations and warranties
as hereinafter set forth.
2 Assets to be Sold and Purchased.
________________________________
At the Closing of this Agreement, Purchaser shall purchase
and Seller shall sell all the Purchased Assets owned by the
Seller, used in the Business, except for the Excluded
Assets. The Purchased Assets shall include, but not be
limited to:
(a) The tangible personal property and assets owned by the
Seller of every kind and description, real, personal or
mixed, wherever located, used in the Business of
Seller, including without limitation, all of such
assets as reflected on the Pro Forma Balance Sheet
(excepting those assets disposed of, and including
those assets acquired, in the ordinary course of
business since the date of the Pro Forma Balance
Sheet);
(b) All intangible assets owned by the Seller which are
used in the Business of Seller, including without
limitation, all purchase orders, contract rights and
agreements, work in process, customer lists, supplier
arrangements, patents, trademarks and service marks
(including the goodwill associated with the marks),
office supplies, computer programs, claims of Seller
known by Seller as of the Closing Date, the right to
use the corporate and trade name of or used by the
Seller, or any derivative thereof, as all or part of a
corporate or trade name;
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(c) All investment securities, cash and cash equivalents
(except investment securities, cash and cash
equivalents that are Excluded Assets as defined in
Section 2.3) and customer notes receivable relating to
the Business;
(d) All inventory of the Business which shall be valued on
a moving average basis at the cost of acquisition;
(e) All accounts receivable and vendor receivables relating
to the Business;
(f) All prepaid expenses applicable to the Business;
(g) All of Seller's service, installation and networking
contracts;
(h) All vendor rebates, spiff money, retainage amounts
under any contracts, and any other customer deposits;
(i) Distribution agreements and authorizations of Seller;
(j) All base artwork, photo materials, plates (if owned by
Seller), separations and other materials that are used
by Seller for printing brochures and promotional
materials;
(k) The assignment of any telephone numbers used in the
Business;
(l) The covenant not to compete agreements with Seller, X.
Xxxxx, X. Xxxxx, X. Xxxxxxxx and X. Xxxxx; set forth on
Xxxxxxxx "X", "X-0", "X-0", "B-3" and "B-4" attached
hereto and made a part hereof; and
(m) All other fees, assets, property, and business of
Seller (including the rights under covenants or
agreements not to disclose confidential information or
not to compete, if any), and all other assets of Seller
not specifically excluded pursuant to the terms of this
Agreement.
3Excluded Assets. _______________
The Excluded Assets are set forth on Exhibit "A" hereto.
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4Lease Agreements ________________
(a) Seller is the lessee under certain lease agreements
providing for payments of more than $5,000.00 per year
covering the following real and personal properties and
leased personal:
(i) 00000 XX 00xx Xxxxxx, Xxxxx, Xxxxxxx 00000
(the other leases of Seller shall be set forth in
(ii)
the Disclosure Schedule)
(iii)
(iv)
(v)
(b) Seller is the lessor under certain master lease
agreements for equipment providing for payments of more
than $5,000.00 per year as follows:
(i) (the other leases of Seller shall be set forth in
the Disclosure Schedule)
(ii)
(iii)
(iv)
(v)
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(c) Seller is the lessor under certain operating lease
agreements for equipment providing for payments of more
than $5,000.00 per year as follows:
(i)(the other leases of Seller shall be set forth in
the Disclosure Schedule)
(ii)
(iii)
(iv)
(v)
At the Closing, Seller and Purchaser shall execute necessary
documentation for the assignment of these leases and all of
Seller's right and interest thereunder to Purchaser and, at
the Closing, Seller shall assign all its rights and
interests in said leases to Purchaser. Purchaser agrees to
indemnify and hold Seller harmless from any liability with
respect to the aforementioned leases occurring after the
Closing Date. To the extent that the assignment of any
lease shall require the consent of other parties hereto,
this Agreement shall not constitute an assignment thereof
and Seller shall obtain any such necessary consents or
assignments by the Closing. Purchaser shall cooperate with
Seller in the obtaining of such consents.
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5Instruments of Transfer
_______________________
At Closing, the Seller will deliver to the Purchaser such
bills of sale, endorsements, assignments and other good and
sufficient instruments of transfer and assignment customary
for transfers in Dade County, Florida as shall be effective
to vest in Purchaser good and marketable title and interest
in and to the Purchased Assets subject to any liens that may
exist with respect to the IBM loan, the Deutsch loan, and
any other disclosed recorded liens which obligation secured
by such liens shall be assumed or paid by Purchaser at the
Closing. Seller shall cooperate with Purchaser in obtaining
termination of such liens upon payment by Purchaser. At or
after the Closing, and without further consideration, the
Seller will execute and deliver to Purchaser such further
reasonable and appropriate instruments of conveyance and
transfer and take such other action as Purchaser may
reasonably request in order to more effectively convey and
transfer to Purchaser any of the Purchased Assets or for
aiding and assisting and collecting and reducing to
possession and exercising rights with respect thereto.
Seller, agrees to use its best efforts to obtain and deliver
to Purchaser such consents, approvals, assurances and
statements from third parties as Purchaser may reasonably
require in a form reasonably satisfactory to Purchaser,
provided Seller's best efforts shall not require Seller to
bring any legal action or expend any of its funds. In
addition to the foregoing, Seller will deliver to Purchaser
or otherwise put Purchaser in possession of the originals or
copies of all of the Seller's books, records and other data
relating to the Purchased Assets; and simultaneously with
such delivery, the Seller shall take all such acts as may be
reasonably necessary to put Purchaser in actual possession,
and operating control of the Purchased Assets. To the
extent Seller delivers to Purchaser originals of its books
and records, Purchaser shall allow Seller and the
Shareholders access, upon prior notice, to such books and
records, as they relate to the period prior to the Closing
Date, if Seller or the Shareholders have a need to access
such books and records. Seller shall cooperate with
Purchaser to permit Purchaser, if reasonably possible, to
enjoy Seller's ratings and benefits under workmen's
compensation laws and unemployment compensation laws to the
extent permitted by such laws.
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6Instruments Giving Certain Additional Powers and Rights.
_______________________________________________________
At the Closing, Seller shall, by appropriate instrument,
constitute and appoint Purchaser, its successors and
permitted assigns, the true and lawful limited attorney of
Seller with full power of substitution, in the name of
Purchaser, or the name of Seller, on behalf of and for the
benefit of Purchaser, for the limited purpose of collecting
all receivables and other items being transferred and
assigned to Purchaser as provided herein, to endorse,
without recourse, any and all checks in the name of Seller
the proceeds of which Purchaser is entitled to hereunder, to
collect, assert or enforce any claim, right or title of any
kind in or to the Purchased Assets. Seller agrees that the
foregoing powers are coupled with an interest and shall be
irrevocable by Seller, directly or indirectly, by the
dissolution of Seller or in any manner or for any reason.
Seller further agrees that Purchaser shall retain for its
own account any amounts collected pursuant to the foregoing
powers, and Seller shall pay or transfer to Purchaser, if
and when received, any amounts which shall be received by
Seller after the Closing in respect of any receivables or
other assets, properties, rights or business to be
transferred and assigned to Purchaser as provided herein.
Seller further agrees that, for up to 180 days after the
Closing Date, it will, upon the reasonable request of
Purchaser and at Seller's reasonable expense, do, execute,
acknowledge and deliver, or will cause to be done, executed,
acknowledged or delivered, all such further reasonable acts,
assignments, transfers, powers of attorney or assurances as
may be reasonably required in order to further transfer,
assign, grant, assure and confirm to Purchaser, or to aid
and assist in the collection or granting of possession by
Purchaser of, any of the Purchased Assets, or to vest in
Purchaser good and marketable title to the Purchased Assets.
Notwithstanding the preceding sentence or any other
provision herein to the contrary, Seller shall only have an
obligation to use its best efforts with respect to the
actions described in the preceding sentence, which will not
include any obligation to engage counsel, or bring any form
of action, at law or at equity, to enforce Purchaser's
rights to the Purchased Assets or to collect the accounts
receivable transferred hereunder.
3.
ASSIGNMENT OF LIABILITIES
_________________________
1Liabilities to be Paid Off at Closing or Assumed.
________________________________________________
A. At the Closing, Purchaser shall pay off (and secure the
release of Seller and all Shareholders from any
personal guaranty or liability with respect to such
obligations), the following:
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(i) Seller's obligation to (i) IBM Credit Corporation
("IBM") under a certain working capital credit line
which provides for a maximum principal amount of
One Million, Fifty Thousand Dollars ($1,050,000)
dated ________________, the outstanding amount of
which is approximately Three Hundred Ten Thousand
Dollars ($310,000.00) as of the execution of this
Agreement and the outstanding amount of which on
the Closing Date will be subject to satisfaction of
the expected Net Assets Amount, which line is
collateralized by a security interest in the
Seller's receivables and certain inventory, and
(ii) Deutsch Financial Services, Inc. under a
certain inventory credit account which allows for
up to a maximum of Three Hundred Fifty Thousand
Dollars ($350,000), the outstanding balance of
which is approximately One Hundred Fifty Thousand
Dollars ($150,000.00) as of the execution of this
Agreement, and the outstanding amount of which on
the Closing Date will be subject to satisfaction of
the expected Net Assets Amount, which is
collateralized by a security interest in the
Seller's receivables and certain inventory; and
(ii) The Assumed Liabilities to be paid off as set forth
in Section 3.1 A (i), as may have been incurred,
increased or decreased since the Pro Forma Balance
Sheet for operations in the ordinary course of
business or any other transaction permitted by this
Agreement are subject to the satisfaction of the
minimum worth requirements set forth in Section
4.1(c) as of June 15, 1997. Any incurrence of, or
increase or decrease in the amount of, the Assumed
Liabilities set forth above for the period
commencing on June 15, 1997, through the Closing
Date, shall be subject to the provisions of Section
9.
B. Notwithstanding anything to the contrary in this
Agreement, at the Closing, Purchaser shall assume and
pay or discharge when due (and secure the release of
Seller and all Shareholders from any and all personal
liability or guarantee with respect to such assumed
obligations), all non-contingent liabilities of the
Seller existing as of the Closing Date, incurred by
Seller in the operation of the Business and excluding
the Excluded Liabilities. These Assumed Liabilities
shall include, but not be limited to, the following:
(i) All of the trade accounts payable, accrued expenses,
accrued payroll, accrued payroll taxes, accrued sales
taxes, accrued pension contributions (if any), and
accrued vacation to non stockholders and non officers
of Seller, capital lease and unearned service and other
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contracts of the Seller relating to the Business, of
the same or similar nature as such items as set forth
on the Disclosure Schedule, the Pro Forma Balance
Sheet, the Financial Statements, or any notes thereto;
and
(ii) All other liabilities of Seller set forth as an Assumed
Liability on the Disclosure Schedule.
It is the parties' mutual intent to include as Assumed
Liabilities on the Disclosure Schedule all known liabilities of
Seller incurred in the operation of the Business. The Assumed
Liabilities to be assumed as set forth in Sections 3.1.B.(i) and
(ii) as may have been incurred, increased or decreased since the
Balance Sheet to the Pro Forma Balance Sheet for operations in
the ordinary course of business or any other transaction
permitted by this Agreement are subject to the satisfaction of
the minimum net worth requirements set forth in Section 4.1(c) as
of June 15, 1997. Any incurrence of or increase or decrease in
the amount of, the liabilities set forth above to be assumed at
Closing for the period commencing on the date first written
above, and continuing through the Closing Date, shall be subject
to the provisions of Section 9.
C. It is the parties' intent that Purchaser shall pay off
at Closing, or assume and pay off or discharge when
due, all obligations of Seller set forth in Sections
3.1 A and B above, respectively, for which any of the
Shareholders have personal liability, and Purchaser
agrees to use its best efforts to secure the release of
Shareholders from such personal guaranty within 60 days
after Closing if such releases are not secured prior to
Closing. The obligations of Seller that are personally
guaranteed by any Shareholder are set forth on
Exhibit L. If Shareholders are not so released within
60 days after Closing Date, Purchaser shall (i) place
in escrow with the Escrow Agents the full amount of
such liabilities, (ii) agree not to allow such
liabilities to be increased, and (iii) indemnify Seller
and the Shareholders from any amount any of them may
have to pay as a result of such liabilities (including
reasonable attorneys' fees, if any). If Shareholders
are not so released within six (6) months after the
Closing, then notwithstanding anything in this
Agreement to the contrary, Purchaser shall not have the
right to make any claims against Shareholders or Seller
hereunder, including claims, for breach of any
representations or warranties, failure to comply with
covenants, for indemnification, or otherwise. Prior to
the expiration of the initial 60 day period, Seller
shall provide to Purchaser letters from all creditors
to whom such personal guaranties apply, which letters
will provide that such personal guaranties will be
released upon payment by Purchaser of such underlying
obligations.
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2 Executory Contracts.
___________________
At the Closing, Purchaser shall assume Seller's obligations
and pay or discharge when due the following:
(i) All obligations, to the extent they are assumable,
under contracts, leases or agreements of the Seller as
set forth on the Disclosure Schedule under Section 6.8;
and
(ii) All future liabilities for merchandise in transit
F.O.B. shipping point which has not been received by
Seller as of the Closing and for which no xxxx has been
issued by the supplier at such time.
3 Excluded Liabilities.
____________________
Notwithstanding anything contained in this Agreement to the
contrary, Purchaser shall not assume or become responsible
for any claim, liability or obligation whatsoever, whether
known or unknown, accrued, absolute, contingent or otherwise
( "Liability" ) except the Assumed Liabilities (the
"Excluded Liabilities"). Without limiting the generality of
foregoing, the following are included among the Excluded
Liabilities of Seller which Purchaser shall not assume or
become responsible for (unless specifically included on the
list of Assumed Liabilities):
(i) Without in any way effecting the obligations of
Purchaser to reimburse Seller pursuant to
Section 4.1(d) below, all Liabilities for local, state,
federal, franchise, and income and other taxes
(including but not limited to, any taxes attributable
to any gain under Section 1377 of the Code) whether
deferred or which have accrued or may accrue or become
due and payable by Seller and/or Shareholders either
prior to, on or after the Closing Date, including,
without limitation, all taxes and fees of a similar
nature arising from the sale and transfer of the
Purchased Assets to Purchaser;
(ii) All Liabilities and obligations to directors and
officers of Seller, including, without limitation, all
Liabilities and obligations for wages, salary, bonuses,
commissions, vacation (except to the extent Purchaser
agrees to assume such item) or severance pay, profit
sharing or pension benefits, and all Liabilities and
obligations arising under any bonus, commission, salary
or compensation plans or arrangements, whether accruing
prior to, or on or after the Closing Date;
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(iii) All Liabilities and obligations with respect to
unemployment compensation claims and workmen's
compensation claims and claims for race, age and sex
discrimination or sexual harassment or for unfair labor
practice which occurred prior to the Closing Date and
for which any claim may be asserted by any of the
Seller's employees, prior to, on or after the Closing
Date;
(iv) All Liabilities of Seller to third parties for
personal injury or damage to property based on or
arising from occurrences, circumstances or events, or
exposure to conditions, existing or occurring prior to
the Closing Date and for which any claim may be
asserted by any third party prior to, on or after the
Closing Date;
(v) All Liabilities and obligations of Seller arising
under or by virtue of environmental laws accruing prior
to, or on the Closing Date;
(vi) All Liabilities of Seller, including any costs of
attorneys' fees incurred in connection therewith, for
litigation, claims, demands or governmental proceedings
arising from occurrences, circumstances or events, or
exposure to conditions occurring or existing prior to,
or on the Closing Date;
(vii) All Liabilities of Seller based on any theory of
liability or product warranty with respect to any
product manufactured or sold prior to the Closing Date
and for which any claim may be asserted by any third
party, prior to, on or after the Closing Date;
(viii) All attorneys' fees, accountants or auditors' fees,
and other costs and expenses incurred by Seller and/or
the Shareholders in connection with the negotiation,
preparation and performance of this Agreement;
(ix) All Liabilities of the Seller in connection with the
Excluded Assets, unless such Liabilities are
specifically designated as Assumed Liabilities in the
Agreement or in the Disclosure Schedule;
(x) Any Liabilities of Seller with respect to any options,
warrants, agreements or convertible or other rights to
acquire shares of its capital stock of any class;
(xi) Any Liabilities of Seller relating to the shareholder
loans reflected on the Financial Statements; and
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(xii) All other debts, Liabilities, obligations, contracts
and commitments (whether direct or indirect, known or
unknown, contingent or fixed, liquidated or
unliquidated, and whether now or hereinafter arising)
arising out of or relating to the ownership, operation
or use of any of the Purchased Assets on or prior to
the Closing Date or the conduct of the Business of
Seller whether prior to, on or after the Closing Date,
except only for the liabilities and obligations to be
performed by Purchaser constituting the Assumed
Liabilities, provided, it is the parties' intent to
include as Assumed Liabilities on the Disclosure
Schedule, all known liabilities (that are not an
Excluded Liability) that arose from the operations of
the Business by Seller prior to the Closing Date. It
shall be Seller's responsibility to disclose such
liabilities on the Disclosure Schedule.
It is the intent of the parties that upon Closing, all
employees and leased employees of Seller will be terminated
by it and Purchaser will extend offers of employment to such
individuals at such time or assume the existing lease
agreement for personnel with Paychex Business Solutions,
Inc. dated October, 1992, as Purchaser in its sole
discretion shall determine.
4. CONSIDERATION FOR PURCHASED ASSETS
__________________________________
1Purchase Price ______________
Subject to the other terms of this Agreement, the Purchase
Price for the Purchased Assets shall be the sum of:
(a) Two Million Five Hundred Thousand Dollars
($2,500,000.00); and
(b) The Assumed Liabilities assumed or paid off under
Sections 3.1 A. and 3.1 B.
(c) The amount in Section 4.1(a) above shall be either
adjusted upward or downward by the amount determined
under this Section 4.1(c). Prior to the Closing,
Seller shall prepare and deliver to Purchaser the
updated Pro Forma Balance Sheet which shall set forth
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the Purchased Assets (including, for this purpose only,
any Excess Cash) and the Assumed Liabilities as of June
15, 1997. The June 15, 1997 Pro Forma Balance Sheet
shall be prepared using the same accounting methods,
assumptions, policies, practices and procedures, with
consistent classifications, judgments, and estimation
methodologies as used in the preparation of the April
30, 1997 Pro Forma Balance Sheet, adjusted only for
operations of Seller commencing May 1, 1997 through and
including June 15, 1997, based solely on information
known on June 15, 1997, and without taking into account
any changes in circumstances or events occurring after
June 15, 1997.
If the Net Assets Amount (as defined below) shown on
the June 15, 1997 Pro Forma Balance Sheet is less than
$876,999.00, the Purchase Price shall be decreased on a
dollar for dollar basis for the difference. Any such
reduction shall reduce the principal amount of the
Note(s) and shall be first applied against the final
payment under promissory note portion of the Purchase
Price as set forth in Section 4.2(c) below.
If the Net Assets Amount shown on the Pro Forma Balance
Sheet exceeds $876,999.00, Seller shall be entitled to
retain cash, cash equivalents and investment
securities, if any, up to the amount of such excess
(the "Excess Cash") and such Excess Cash shall be an
Excluded Asset. If cash, cash equivalents and
investment securities do not exist in an amount that is
equal to the Excess Cash, then any difference in the
increase in the Purchase Price shall be reflected, at
Seller's option, either (i) in additional cash
consideration paid by Purchaser to Seller within 10
days after the Closing Date or (ii) by Seller
increasing the outstanding principal amount of the
Assumed Liability IBM credit line.
The Net Assets Amount shall mean the total of the
Purchased Assets (including, for this purpose only, any
Excess Cash) less the total of the Assumed Liabilities,
in each case as shown on the June 15, 1997 Pro Forma
Balance Sheet.
Seller shall provide the June 15, 1997 Pro Forma
Balance Sheet at least seven (7) days prior to the
Closing Date. Purchaser shall review the Pro Forma
Balance Sheet prior to Closing and shall contact Seller
prior to the Closing with any of Purchaser's requested
adjustments to the Purchase Price based on such Pro
Forma Balance Sheet. If Seller delivers the Pro Forma
Balance Sheet within seven (7) days of the Closing
Date, the Purchaser's time period within which to
provide its requested adjustments shall be extended by
E-17
the number of days by which Seller is delinquent in
such delivery. The preceding sentence shall not in any
way affect the Closing Date.
In the event that there is Excess Cash as of June 15,
1997, Seller shall be entitled to distribute such
Excess Cash prior to Closing, and such distribution
shall be deemed as having been undertaken in the
ordinary course of business.
(d) In addition, Seller shall be entitled to be reimbursed
by Purchaser for all corporate and individual income or
corporate franchise taxes which will become payable by
Seller or Shareholders as a result of the operation of
the Business in the ordinary course during the period
from the date of the June 15, 1997 Pro Forma Balance
Sheet to the Closing Date. This reimbursement will be
based on taxable income for such period and utilizing
an effective income tax rate of 40%. Purchaser shall
agree to reimburse Seller for such taxes, if any, as
determined by Seller, not later than 30 days after
Closing. The determination of the taxable income for
such period shall be made in accordance with Seller's
internally-generated financial statements consistent
with prior periods. Such taxable income shall not
include any income attributable to the sale of the
Purchased Assets being effectuated hereunder or any
gain from the sale of certain marketable securities,
the gain from which is an Excluded Asset as set forth
in Exhibit A.
The Purchase Price has been determined based upon Purchaser's
understanding of the net assets acquired hereunder and the
operations of the Business prior to the date hereof. Commencing
on the date first written above and ending on June 16, 1997 (the
"Inspection Period"), Purchaser shall perform due diligence upon
Seller, as more particularly described at Section 12 below, to
confirm, at its sole discretion, the adequacy of Seller's net
assets and operating results. The purchase price is subject to
potential adjustments as set forth in Sections 4.1(c), 4.4 and
6.12 below.
2Payment of the Purchase Price.
_____________________________
Subject to the conditions, covenants, representations and
warranties hereof, (except for 4.2(a) below) at Closing,
Purchaser shall deliver:
(a) Upon the execution of this Agreement, Purchaser shall
deposit with XxXxxxxxx, Will & Xxxxx and Xxxxx X.
Xxxxx, III as co-escrow agents (the "Escrow Agents"),
an xxxxxxx money deposit of Fifty Thousand Dollars
($50,000) (the "Deposit"). In the event that this
transaction does not close because of failure to
E-18
satisfy any of the conditions precedent set forth in
Section 12 or 13.2 or Seller's failure to close, other
than as a result of Purchaser's breach of this
Agreement, such amount shall be returned to Purchaser.
In the event that this transaction closes, or fails to
close because of Purchaser's breach or refusal to close
(other than a refusal to close because of Seller's
breach), such amount shall be applied against the
Purchase Price at Closing, or be payable to Seller, all
as more specifically described at Section 12 below.
(b) By wire transfer to Seller in the amount of One Million
Nine Hundred and Eight Thousand Dollars
($1,908,000.00), such amount subject to a dollar for
dollar reduction to the extent the Deposit exceeds
Fifty Thousand Dollars ($50,000), as provided herein.
(c) The Purchaser's four Subordinated Promissory Notes in
the aggregate principal amount of Five Hundred Forty-
Two Thousand Dollars ($542,000.00) in the form attached
hereto as Exhibit "C" (the "Notes"). Each of the four
(4) Notes shall be issued in amounts equal to the pro
rata proportion of the aggregate principal (i.e.,
$542,000) that each of the respective Shareholders owns
of the stock of Seller (i.e., $216,800 [40%], $135,500
[25%], $135,500 [25%], and $54,200 [10%]) and each Note
shall be transferrable to the Shareholder whose
percentage ownership interest in Seller corresponds to
the amount of the principal on the applicable Note.
Such Notes shall be subordinate to Purchaser's lender,
pursuant to the terms of a Subordination Agreement in
the form attached hereto as Exhibit "D". The
Subordination Agreement shall not serve to reduce the
remaining principal balance under the Notes.
(d) The assumption or payment of the Assumed Liabilities
assumed by Purchaser pursuant to Section 3.1 A. and
Section 3.1 B.
3Allocation of Purchase Price
____________________________
The Purchase Price to be paid to Seller hereunder, including
Assumed Liabilities assumed or paid by Seller pursuant to
Section 3.1 A. and Section 3.1 B., shall be allocated as set
forth on Exhibit "F" attached hereto. Seller, Shareholders
and Purchaser agree that each shall act in a manner
consistent with such allocation in (a) filing Internal
Revenue Form 8594 which shall be completed as soon as
possible after the Closing; and (b) in paying sales and
other transfer taxes in connection with the purchase and
sale of assets pursuant to this Agreement. The Purchase
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Price for the Purchased Assets shall be allocated in the
manner set forth on Exhibit "F" attached hereto.
4Potential Adjustment to Purchase Price.
______________________________________
If, during the Calendar year 1997, the sum of (i) Seller's
Pro forma EBIT from January 1, 1997 to July 1, 1997
(adjusted as mutually agreed upon for non-recurring costs
and excluding gains from marketable securities), and (ii)
Purchaser's EBIT from the operation's of the Business, as
its "Magic Box Division", from July 1, 1997 to December 31,
1997 (adjusted as mutually agreed upon for non-recurring
costs) (a) exceeds $420,000, then 50% of such excess, not to
exceed a $250,000 adjustment, shall be paid in one lump sum
by Purchaser to Seller, by bank check or by wiring within 45
days after the end of such 12 month period (unless extended
as provided below due to a dispute by Seller) in the form of
additional Purchase Price which will be added to the
goodwill allocation of the Purchase Price, or (b) is less
than $420,000, then 50% of such deficiency, not to exceed a
$125,000 adjustment, shall serve as a reduction to the
Purchase Price, which will reduce the principal amount of
the Notes and offset against the final payment under the
Notes, and will be reduced from the goodwill allocation of
the Purchase Price. For purposes of this Section 4.4,
"EBIT" shall mean the earnings of Purchaser from the
operations of the Business, before interest and taxes, and
without incorporating any gains or losses realized or the
disposition of assets, other than in the ordinary course of
business. For purposes of determining Purchaser's EBIT for
the period from the Closing Date to December 31, 1997, no
overhead allocation of Purchaser's other operations will be
charged by Purchaser to such EBIT. In addition, no
deduction shall be taken for any inventory purchased from
Seller that is subsequently written down by Purchaser. No
sale shall be made by Purchaser's "Magic Box" division for
below cost of any inventory purchased hereunder without the
express written consent of Purchaser's home office.
Purchaser's "Magic Box" division's EBIT will be calculated
on a basis consistent with Seller's financial statements
determining EBIT for the period January 1, 1997 to the
Closing Date, using the same methodologies, judgments,
variances, assumptions, adjustments and estimates employed
by Seller in preparing such financial statements.
Within forty-five (45) days after December 31, 1997,
Purchaser will deliver to Seller a copy of the report of
EBIT prepared by the Purchaser's Certified Public
Accountants for the subject period along with any supporting
documentation reasonably requested by Seller. Within thirty
(30) days following delivery to Seller of such report,
Seller shall have the right to object in writing to the
results contained in such determination. If timely
objection is not made by the Seller to such determination,
such determination shall become final and binding for
E-20
purposes of this Agreement. If timely objection is made by
Seller to Purchaser and Seller and Purchaser are able to
resolve their differences in writing within thirty (30) days
following the expiration of the thirty (30) day period, then
such determination shall become final and binding as it
regards to this Agreement. If timely objection is made by
Seller to Purchaser and Seller and Purchaser are unable to
resolve their differences in writing within thirty (30) days
following the expiration of the thirty (30) day period, then
all disputed matters pertaining to the report shall be
submitted to and reviewed by an arbitrator (the
"Arbitrator") which shall be an independent accounting firm
selected by Purchaser and Seller. If Purchaser and Seller
are unable to agree promptly on an accounting firm to serve
as the Arbitrator, each shall select by no later than the
thirtieth (30th) day following the expiration of the sixty
(60) day period, an accounting firm, and the selected
accounting firm shall be instructed to select promptly
another accounting firm, such newly selected firm to serve
as the Arbitrator. The Arbitrator shall consider only the
disputed matters pertaining to the determination and shall
act promptly to resolve all disputed matters and its
decision with respect to all disputed matters shall be final
and binding upon the Seller and Purchaser. Expenses of the
arbitration (including reasonable attorney and accounting
fees) shall be borne equally by Seller and Purchaser, unless
the arbitration panel determines that the determination of
EBIT is greater by Fifty Thousand ($50,000.00) Dollars or
more than the determination made by Purchaser's accounting
firm, in which case the expense of the arbitration
(including reasonable attorney and accounting fees) shall be
borne by Purchaser.
5Certain Closing Expenses
________________________
Seller shall be liable and shall pay all federal, state and
local income taxes (if any), and all other duties, or other
like charges properly payable upon and in connection with
the conveyance and transfer of the Purchased Assets by
Seller to Purchaser. Purchaser shall be responsible for
required documentary stamp taxes on the Notes.
5.
EMPLOYMENT AGREEMENTS
_____________________
1Employment Agreement of Shareholders
____________________________________
At the Closing, Purchaser shall enter into Employment
Agreements with X. Xxxxx, and X. Xxxxx. Copies of said
Employment Agreements are attached hereto and made a part
hereof as Exhibits "G-1" and "G-2".
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6.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
____________________________________________
AND THE SHAREHOLDERS
____________________
Except as set forth in the Disclosure Schedule attached
hereto, Seller and Shareholders jointly and severally,
represent and warrant to Purchaser that the following
statements are materially true and correct as of the date
hereof and shall remain materially true and correct as of
the Closing as if made again at and as of that time:
1Organization, Good Standing, Qualification and Power of
_______________________________________________________
Seller.
______
Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Florida
and has the corporate power and authority to own, lease and
operate the Purchased Assets and to conduct the Business
currently being conducted by it. The Seller is duly
qualified and in good standing in each of the jurisdictions
in which it is required by the nature of its business or the
ownership of its properties to so qualify. Seller has no
subsidiaries, other than its 50% interest in Ace Education,
Inc. as disclosed on the Disclosure Schedule. The
Disclosure Schedule correctly lists, with respect to the
Seller, each jurisdiction in which it is qualified to do
business as a foreign corporation.
2Capitalization.
______________
The authorized capitalization of the Seller consists solely
of 1000 shares of $1.00 par common stock, of which 200
shares representing one hundred percent (100%) of the issued
stock are currently owned in the manner set forth in the
second recital on page 1 of this Agreement, are fully paid
and nonassessable and have not been issued in violation of
the preemptive rights of any person. Seller is not
obligated to issue or acquire any of its securities, nor has
it granted options or any similar rights with respect to any
of its securities.
3Authority to Make Agreement
___________________________
Seller and each Shareholder have the full legal power and
authority to enter into, execute, deliver and perform their
respective material obligations under this Agreement and
each of the other agreements, instruments and other
instruments to be delivered incident hereto ("Other Seller
Documents"). This Agreement and the Other Seller Documents
have been (or will be at the Closing) duly and validly
E-22
executed and delivered by Seller and each Shareholder, and
are the legal and binding obligation of each of them,
enforceable in accordance with their respective terms,
subject to principles of equity, bankruptcy laws, and laws
affecting creditors' rights generally. Seller has taken all
necessary action (including action of its Board of Directors
and Shareholders) to authorize and approve the execution and
delivery of this Agreement and the Other Seller Documents,
the performance of its obligations thereunder and the
consummation of the transactions contemplated thereby.
4Existing Agreements, Governmental Approvals and Permits.
_______________________________________________________
(a) The execution, delivery and performance of this
Agreement and the Other Seller Documents by Seller, the
sale, transfer, conveyance, assignment and delivery of
the Purchased Assets to Purchaser as contemplated in
this Agreement, to the best of Seller's and
Shareholders' knowledge: (i) do not materially violate
any provisions of law, statute, ordinance or regulation
applicable to Seller, the Shareholders or the Purchased
Assets which would result in a material adverse affect
on Purchaser or the Purchased Assets, (ii) (except for
Seller's secured creditors set forth in Section 3.1,
whose consent shall be obtained prior to Closing) will
not materially conflict with, or result in the material
breach or termination of any provision of, or
constitute a material default under (in each case
whether with or without the giving of notice or the
lapse of time or both) the Articles of Incorporation or
Bylaws of Seller or any security agreement relating to
the Purchased Assets, lease, contract or agreement or
any license, permit, approval, authority, or any order,
judgment, arbitration award, or decree to which Seller
or any Shareholder is a party or by which Seller or any
Shareholder or any of its assets and properties are
bound (including, without limitation, the Purchased
Assets), and (iii) will not result in the creation of
any material encumbrance upon any of the properties,
assets, or Business of Seller or any Shareholder. To
the best of Seller's and Shareholders' knowledge,
neither Seller, nor any Shareholder, nor any of its
assets or properties (including, without limitation,
the Purchased Assets) is subject to any mortgage,
lease, contract, agreement, instrument, license,
permit, approval, authority, order, judgment,
arbitration award or decree, or to any law, rule,
ordinance, or regulation, or any other restriction of
any kind or character, which would prevent Seller or
any Shareholder from entering into this Agreement or
any of the Other Seller Documents or from consummating
the transactions contemplated thereby.
E-23
(b) To the best of Seller's and Shareholders' knowledge,
neither Seller nor any Shareholder is a party to,
subject to or bound by any agreement, judgment, award,
order, writ, injunction or decree of any court,
governmental body or arbitrator which would prevent the
use by Purchaser of the Purchased Assets in accordance
with the present practices of Seller after the Closing
Date or which, by operation of law, or pursuant to its
terms, would be materially breached, terminated, lapse
or be subject to termination or default under (in each
case whether with or without notice, the passage of
time or both) upon the consummation of the transactions
contemplated in this Agreement.
(c) To the best of Seller's and Shareholders' knowledge, no
approval, authority or consent of, or filing by Seller
with, or notification to, any foreign, federal, state
or local court, authority or governmental or regulatory
body or agency or any person is necessary to authorize
the execution and delivery of this Agreement or the
Other Seller Documents by Seller or any Shareholder,
the sale, transfer, conveyance, assignment and delivery
of the Purchased Assets to Purchaser, or the
consummation of the other transactions contemplated
thereby, or to continue the use and operation of the
Purchased Assets by Purchaser after the Closing Date in
materially the same way as utilized prior to the
Closing Date.
5 Financial Statements.
____________________
A. Copies of the Financial Statements are attached to the
Disclosure Schedule. Each of the Financial Statements
are true and complete in all material respects and were
prepared in accordance with methods applied on a
consistent basis throughout the periods indicated
(except as noted on such Financial Statements) and
fairly present in all material respects the financial
position and condition of the Seller as of the
respective dates thereof and the results of its
operation and changes in financial position for the
respective periods then ended.
B. Except to the extent reflected, reserved against, or
disclosed on the Pro Forma Balance Sheet, the Financial
Statements, or the Disclosure Schedule, the Seller had,
as of such date, no material liabilities or obligations
of any nature, whether accrued, absolute, contingent,
or otherwise, including without limitation, unfunded
pension or other retirement plan liabilities and tax
liabilities whether or not incurred in respect of or
measured by the Seller's income, for any period prior
to the date of said Financial Statements, or arising
out of transactions entered into or any set of facts
existing prior thereto. Except to the extent disclosed
E-24
on the Disclosure Schedule, there exists no basis for
the assertion against Seller, as of the date of the
Financial Statements or the Pro Forma Balance Sheet, of
any material liability of any nature or in any amount
not fully reflected, reserved against, or disclosed in
said Financial Statements or Pro Forma Balance Sheet.
6 [Intentionally Omitted].
7 Intangible Property.
___________________
To the best of Seller's and Shareholders' knowledge, the
Disclosure Schedule includes a materially accurate list and
summary description of all patents, franchises,
distributorship, registered and unregistered trademarks,
trade names and service marks, licenses, brand names and
company lists and all applications for the foregoing,
presently owned and/or held (as a licensee or otherwise) by
the Seller. The Seller is not a licensor in respect to any
patents, trade secrets, inventions, shop rights, know-how,
trademarks, trade names, copyrights, or applications
therefor. Seller acknowledges that Purchaser shall have all
of Seller's right to utilize the name "Magic Box", but
Seller makes no representations nor warranties regarding its
entitlement to the name "Magic Box", and Purchaser agrees
that if at any time in the future Purchaser is no longer
using the name "Magic Box", Seller shall have the right to
utilize the name "Magic Box"; subject to applicable non-
competition agreements. The Disclosure Schedule contains a
materially accurate and complete description of such
intangible property and the items of all licenses and other
agreements relating thereto. All of the above-mentioned
intangibles used in the Seller's Business are the sole
property of the Seller, do not require the consent of or
consent to any other person as a condition to their use or
the transaction provided for herein and do not infringe upon
the rights of others.
8 Significant Agreements
______________________
The Disclosure Schedule contains a materially accurate and
complete list of all written contracts, agreements,
licenses, instruments and understandings (whether or not in
writing) to which the Seller is a party or is bound and that
are material to the Business, assets, financial condition or
results of operations of the Seller. Without limiting the
generality of the foregoing, such list includes all such
contracts, agreements, licenses and instruments:
(a) Providing for payments of more than Five Thousand
($5,000.00) per year;
E-25
(b) Providing for the extension of credit other than
consistent with normal credit terms described in the
Disclosure Schedule;
(c) Limiting the ability of the Seller to conduct its
Business or any other business or to otherwise compete
in its or any other business, including as to manner or
place;
(d) Providing for a guarantee or indemnity by the Seller;
(e) With any Affiliate of Seller;
(f) With any labor union or employees' association
connected with Seller's Business;
(g) For the employment or retention of any director,
officer, employee, shareholder, consultant, broker or
advisor of Seller or any other contract between Seller
and any director, officer, employee, shareholder,
consultant or advisor which does not provide for
termination at will by the Seller without further cost
or other liability to the Seller as of or at any time
after the Closing.
(h) In the nature of a profit sharing, bonus stock option,
stock purchase, pension, deferred compensation,
retirement, severance, hospitalization, insurance or
other plan or contract providing benefit to any person
or former director, officer, employee, shareholder,
consultant, broker or advisor of Seller, or such
person's dependents, beneficiaries or heirs;
(i) In the nature of an indenture, mortgage, promissory
note, loan or credit agreement or other contract
relating to the borrowing of money or a line of credit
by the Seller or relating to the direct or indirect
guarantee or assumption by the Seller of obligations of
others; and
(j) Leases or subleases with respect to any property, real,
personal or mixed, in which the Seller is involved, as
lessor or lessee.
True and correct copies of all items so disclosed in the
Disclosure Schedule shall be provided or made available to
Purchaser within the time period required by Section 9.5.
To the best of Seller's and Shareholders' knowledge, each of
such items listed, or required to be listed, is a valid and
binding obligation of the parties thereto enforceable in
accordance with its terms, subject to principles of equity,
bankruptcy laws, and laws affecting creditors' rights
generally, and there have been no known material defaults or
E-26
material claims of material default by the Seller, which
would have a material adverse effect on Purchaser, and there
are no material facts or conditions that have occurred or
that are anticipated to occur which, through the passage of
time or the giving of notice, or both, would constitute a
material default by the Seller, or would cause the
acceleration of any a material obligation of any party
thereto or the creation of a material Encumbrance upon any
asset of the Seller, which would have a material adverse
effect on Purchaser. To the best of Seller's and
Shareholders' knowledge, there are no material oral
contracts, agreements or understandings made by any
Shareholder, whether or not binding, material to the Seller,
except such as have been disclosed in the Disclosure
Schedule and for which a materially accurate summary
description has been provided. At the Closing, Purchaser
will assume all of such contracts, oral or written,
including all rights and obligations therein, that were
disclosed on the Disclosure Schedule.
9Taxes.
_____
Except as to taxes not yet due and payable, and except for
taxes the payment of which is being diligently contested in
good faith and for which adequate reserves have been
established in accordance with generally accepted accounting
principles, to the best of Seller's and Shareholders'
knowledge, Seller has filed all returns and reports that are
now required to be filed by it in connection with any
federal, state or local tax, duty or charge levied, assessed
or imposed upon it, or its property, including unemployment,
social security and similar taxes; and to the best of
Seller's and Shareholders' knowledge, all of such taxes have
been either paid or materially adequate reserves or other
provision has been made therefor. To the best of Seller's
and Shareholders' knowledge, Seller and Shareholders shall
pay, without right of reimbursement from Purchaser, except
as set forth herein including at Section 4.1(d), all of
Seller and Shareholders' income Taxes, including but not
limited to any taxes attributable to any gain under Section
1374 of the Code, including any interest and penalties
thereon, that relate to the activities of Seller through the
Closing, including this transaction, as due.
E-27
10 Title to Properties; Encumbrances.
_________________________________
(a) With respect to all Purchased Assets sold at the
Closing Seller shall have good and marketable title to
the Purchased Assets being acquired by Purchaser, free
and clear of all liens, security interests,
encumbrances, leases and charges whatsoever other than
as set forth herein and, immediately after the transfer
of all the Purchased Assets being acquired by Purchaser
from Seller, Purchaser will own all of said Purchased
Assets free and clear of all liens, claims,
encumbrances and charges whatsoever, whether perfected
or unperfected; and, by way of illustration but not
limitation, there are not any material known
undisclosed unpaid taxes, assessments or charges due or
payable by Seller to any federal, state or local
agency, or any material obligations or liabilities or
any unsatisfied judgments against, or, to the best of
Seller's knowledge, any litigation or proceedings
pending or threatened against Seller by Seller's
employees, clients, customers, creditors, suppliers, or
any other party (nor known state of facts for any such
obligation, liability, litigation or proceeding), that
could become a claim, obligation, liability, lien or
other charge of or against Purchaser or the Purchased
Assets and which would have a material adverse effect
on the Business.
(b) Except as otherwise specifically set forth herein, to
the best of Seller's and Shareholders' knowledge,
Seller is not a party to any material contract,
agreement, lease or commitment that would result in any
claim, obligation, liability, lien or other material
charge against Purchaser or the Purchased Assets, and
which would have a material adverse effect on the
Business, and to the best of Seller's and Shareholders'
knowledge, Purchaser is not obligated to assume the
obligations under any contract, agreement, lease or
commitment of Seller, except as specifically set forth
herein.
11Pending Actions.
_______________
To the best of Seller's and Shareholders' knowledge, Seller
has not been served with or received notice of any actions,
suits, arbitrations, OSHA, EPA or other governmental
violations, or any other proceedings or investigations,
either administrative or judicial, strikes, lockouts or NLRB
charges or complaints ("Actions and Disputes"), which could
have a materially adverse impact on Purchaser, the Purchased
Assets or the Business. To the best of Seller's and
Shareholders' knowledge, there are no Actions or Disputes
pending or threatened against or materially affecting
(directly or indirectly) the Seller or its property or
assets, nor are there any known facts or conditions which
exist which would give rise to any such Actions or Disputes
E-28
which, if determined adversely to Seller, would have a
material adverse effect upon Seller's Business.
12 Insurance.
_________
To the best of Seller's and Shareholders' knowledge, the
Disclosure Schedule contains a materially accurate and
complete listing (showing type of insurance, amount,
insurance company, annual premium and special exclusions) of
all policies of fire, liability, worker's compensation and
other forms of insurance owned or held by the Seller. To
the best of Seller's and Shareholders' knowledge, all such
policies are in full force and effect; are materially
sufficient for compliance with all requirements of law and
of all agreements to which the Seller is a party; are valid,
outstanding and enforceable policies; provide materially
adequate insurance coverage for the assets and operations of
the Seller and will remain in full force and effect through
the Closing. To the best of Seller's and Shareholders'
knowledge, there are no outstanding requirements or
recommendations by any insurance company that issued a
policy with respect to any of the properties and assets of
the Seller by any Board of Fire Underwriters or other body
exercising similar functions or by any Governmental Entity
requiring or recommending any repairs or other work to be
done on or with respect to any of the properties and assets
of the Seller or requiring or recommending any equipment or
facilities to be installed on or in connection with any of
the properties or assets of the Seller.
Seller and Purchaser agree that Seller shall procure, at
Purchaser's cost by a payment made by Purchaser (which shall
be made at the Closing or Purchaser shall deliver a check to
Seller made payable to the insurance company), "Tail"
insurance insuring Seller (and Purchaser, if Purchaser
desires) for a period of two (2) years after the Closing
from liabilities arising from the operation of the Business
by Seller prior to the Closing Date. The Purchase Price
shall be reduced by 50% of the cost to Purchaser of such
tail insurance, which shall reduce the principal amount of
the Notes and be deducted from the final payments under the
Notes.
E-29
13Inventory.
The Disclosure Schedule contains a copy of Seller's
inventory as of April 30, 1997. To the best of Seller's and
Shareholders' knowledge, no item included in the Inventory
of Seller is held by Seller on consignment from others. To
the best of Seller's and Shareholders' knowledge and without
investigation, obsolete or discontinued items do not
constitute a material part of such inventory. The value at
which items of inventory are carried on the books of Seller
reflect the cost of such item. Solely for purposes of
Purchaser's information, Seller will provide copies of its
certified inventory dated December 31, 1996, which was
performed by an independent outside inventory service.
14Accounts Receivable.
All accounts receivable and notes receivable of the Seller,
as reflected on the Balance Sheet, to the best of Seller's
and Shareholders' knowledge, represent sales actually made
in the ordinary course of business and are valid obligations
of the respective debtors without any known material claims
or defenses, other than as set forth on the Disclosure
Schedule or the Balance Sheet. Purchaser acknowledges that
for any accounts receivable that are over 90 days old, the
applicable debtor on such accounts will likely make a claim
for offset or other claim of reduction.
15Status of Business
(a) Since December 31, 1996, the Business of the Seller has
in all material respects been operated only in the
ordinary course, and, except as set forth in the
Disclosure Schedule, elsewhere in this Agreement, or
permitted under Exhibit A dealing with Excluded Assets,
there has not been with respect to the Business, except
as same may occur in the ordinary course of Seller's
Business:
(i) Any material change in its condition (financial or
other), assets, liabilities, obligations, business
or earnings, except changes in the ordinary course
of business, none of which in the aggregate has
been materially adverse;
(ii) Any material liability or obligation incurred or
assumed, or any material contract, agreement,
arrangement, lease (as lessor or lessee), or other
commitment entered into or assumed, on behalf of
the Business, whether written or oral, except in
the ordinary course of business;
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(iii) Any purchase or sale of material assets in
anticipation of this Agreement, or any purchase,
lease, sale, abandonment or other disposition of
material assets, except in the ordinary course of
business;
(iv) Any waiver or release of any material rights,
except for rights of nominal value;
(v) Any material damage or destruction to or loss of
any physical assets or property of Seller which
materially adversely affects the Business or any of
the properties of the Seller (whether or not
covered by insurance);
(vi) Any material changes in the accounting practices,
depreciation or amortization policy or rates
theretofore adopted by the Seller, or any material
revaluation or write-up or write-down of any of its
assets;
(vii) Any material increase in the compensation levels or
in the method of determining the compensation of
any of the Seller's officers, directors, agents or
employees, or any bonus payment or similar
arrangement with or for the benefit of any such
person, any material increase in benefits expense
to the Seller, any payments made or declared into
any profit-sharing, pension, or other retirement
plan for the benefit of employees of the Seller,
except in the ordinary course of business;
(viii) Any material contract cancelled or the terms
thereof materially amended or any notice received
with respect to any such contract terminating or
threatening termination or material amendment of
any such contract;
(ix) Any transfer or grant of any material rights under
any leases, licenses, agreements, or with respect
to any trade secrets or know-how; or
(x) Any labor trouble or employee controversy
materially adversely affecting its Business or
assets.
(b) To the best of Seller's and Shareholders' knowledge,
Seller is not
E-31
(i)in violation of any outstanding judgment, order,
injunction, award or decree specifically relating
to the Business, or
(ii) in violation of any federal, state or local
law, ordinance or regulation which is applicable to
the Business, except where such violation does not
have a materially adverse effect on the Business.
To the best of Seller's and Shareholders' knowledge,
Seller has all required permits, licenses, orders,
approvals, authorizations, concessions and franchises
of any federal, state or local governmental or
regulatory body that are material to or necessary in
the conduct of the Business, except where failure to
have such required permit, license, order, approval,
authorization, concession or franchise does not have a
materially adverse effect on the Business. All such
permits, licenses, orders, approvals, concessions and
franchises are, to the best of Seller's and
Shareholders' knowledge, set forth on the Disclosure
Schedule and to the best of Seller's and Shareholders'
knowledge, are in full force and effect and there is no
proceeding, or to the knowledge of Seller, threatened
to revoke or limit any of them.
(c) To the best of Seller's and Shareholders' knowledge, no
claim, litigation, action, investigation or proceeding
is pending or, to the knowledge of Seller, threatened
which could have a material adverse impact on the
Business, and to the best of Seller's and Shareholders'
knowledge, no order, injunction or decree is
outstanding, against or relating to the Business or its
assets which could have a material adverse impact on
the Business, and Seller does not know of any
information which could result in such a material
claim, litigation, action, investigation or proceeding,
which, if determined adversely to Seller, would have a
material adverse effect upon Seller's Business.
(d) To the best of Seller's and Shareholders' knowledge,
Seller has accrued or paid in full, to all employees of
the Business, in the normal course of its operations,
all wages, salaries, commissions, bonuses, vacations
and other direct compensation for all services
performed by them, subject to Purchaser's agreement
herein to assume such items which are set forth on the
Disclosure Schedule and which are incurred in the
ordinary course of business. To the best of Seller's
knowledge, Seller is in compliance with all applicable
federal, state and local laws, ordinances and
regulations relating to employment and employment
practices at the Business, and all applicable employee
benefit plans and tax laws relating to employment at
the Business, except where such non-compliance would
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not have a materially adverse effect on the Business.
To the best of Seller's and Shareholders' knowledge,
there is no unfair labor practice complaint against
Seller relating to the Business pending before the
National Labor Relations Board or similar agency or
body and, to Seller's Knowledge, no condition exists
that could give rise to any unfair labor practice
complaint. There is no labor strike, dispute, slowdown
or stoppage actually pending or, to the knowledge of
Seller, threatened against or involving the Business.
16 Environmental
(a) To the best of Seller's knowledge, the real estate
located at 00000 X.X. 00xx Xxxxxx, Xxxxx, Xxxxxxx 00000
("Real Estate") has not been used or operated in any
fashion involving producing, handling and disposing of
chemicals, toxic substances, wastes and effluent
materials, x-rays or other materials or devices in
material violation of any laws, rules, regulations or
orders, and to the best of Seller's knowledge, the Real
Estate is in material compliance with applicable laws,
regulations, ordinances, decrees and orders arising
under or relating to health, safety, and environmental
laws and regulations, including without limitation the
Federal Occupation and Safety Health Act, 29 U.S.C.
S651, et seq.; Federal Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. S6901, et seq.;
Federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C.
S9601, et seq.; the Federal Clean Air Act, 42 U.S.C.
S2401, et seq.; the Federal Clean Xxxxx Xxx, 00 X.X.X.
X0000, et seq.; and all state and local laws that
correspond therewith or supplement such laws.
(b) To the best of Seller's knowledge, the Real Estate has
not been operated, in violation of any laws, rules,
regulations or orders, so as to involve or create any
surface impoundments, incinerators, land fills, waste
storage tanks, waste piles, or deep well injection
systems or for the purpose of storage, treatment or
disposal of a hazardous waste as defined by RCRA or
hazardous substance, pollutant or contaminate as
defined by CERCLA and, to the best of Seller's
knowledge, no acts have been committed that would make
the Real Estate or any part thereof subject to remedial
action under RCRA or CERCLA or corresponding state or
local laws.
(c) To the best of Seller's knowledge, there have not been,
are not now and as of the Closing Date, there will be
no solid waste, hazardous waste, hazardous substance,
toxic substance, toxic chemicals, pollutants or
contaminants, underground storage tanks, purposeful
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dumps, or accidental spills in, on or about the Real
Estate or any of the assets of the Seller, whether real
or personal, owned or leased, or stored on any real
property owned or leased by the Seller or by the
Seller's lessees, licensees, invites, or predecessors.
(d) To the best of Seller's knowledge, Seller is not
engaged in, and to the best of Seller's knowledge and
belief, is not threatened with any litigation, or
governmental or other proceeding which may give rise to
any claim against the Real Estate. Specifically, there
are no pending suits, charges, actions, governmental
investigations, or other proceedings, involving,
directly or indirectly without limitation, the laws,
statutes and regulations set forth in subsection (a),
above, whether initiated by a third party or by Seller
and there are none, to the best of Seller's knowledge,
threatened against or relating to or involving the Real
Estate or the transactions contemplated by this
Agreement. Seller is not in default with respect to any
order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or
instrumentality.
(e) To the best of Seller's knowledge, Seller has obtained
all permits, and licenses and other authorizations
required by all environmental laws; and all of such
permits, licenses and other authorizations are in full
force and effect as of the date hereof. To the best of
Seller's knowledge, a true and correct list of all such
permits, licenses and other authorizations is set forth
in the Disclosure Schedule.
17Certain Employees
(a) Each of the following is included in the list of
agreements set forth in the Disclosure Schedule: all
collective bargaining agreements, employment and
consulting agreements, bonus plans, deferred
compensation plans, employee pension plans or
retirement plans, employee profit-sharing plans,
employee stock purchase and stock option plans,
hospitalization insurance, and other plans and
arrangements providing for employee benefits of
employees of the Seller.
(b) Essentially all of the employees of Seller are leased
employees who are leased from Paychecks, Inc. To the
best of Seller's and Shareholders' knowledge, the
Disclosures Schedule contains a materially true,
complete and accurate list of the following: the
names, positions, and compensation of the present
employees and leased employees of the Seller, together
with a statement of the current annual salary payable
to such salaried employees and leased employees and a
summary of the bonuses and description of agreements
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for additional compensation and other like benefits, if
any, paid or payable to such persons for the period set
forth in the Disclosure Schedule. Except as listed in
the Disclosure Schedule, to the best of Seller's
knowledge, all employees and leased employees of Seller
are employees-at-will, may be terminated at any time
for any lawful reason or for no reason and have no
known entitlement to employment by virtue of any oral
or written contract or employer policy.
(c) to the best of Seller's and Shareholders' knowledge,
Seller has no retired employees who are receiving or
are entitled to receive any payments, health or other
benefits from Seller.
18Payments to Employees.
All accrued obligations of Seller relating to employees,
leased employees, and agents of Seller, whether arising by
operation of law, by contract, or by past service, for
payments to trusts or other funds or to any governmental
agency, or to any individual employee or agent (or his
heirs, legatees, or legal representatives) with respect to
unemployment compensation benefits, profit sharing or
retirement benefits, or social security benefits to the best
of Seller's and Shareholders' knowledge, have been paid or
accrued by Seller. To the best of Seller's and
Shareholders' knowledge, all material obligations of Seller
as an employer or principal relating to employees or agents,
whether arising by operation of law, by contract, or by past
practice, for vacation and holiday pay, bonuses, and other
forms of compensation which are or may become payable to
such employees or agents, have been paid, will be paid, or
are set forth on the Disclosure Schedule. Purchaser has
agreed herein to assume all such accrued and unpaid
salaries, bonuses, vacations, and other compensation which
are set forth on the June 15, 1997 Pro Forma Balance Sheet
or as incurred in the ordinary course of business thereafter
as set forth on Disclosure Schedule, and Seller shall not be
responsible for such Assumed Liabilities.
19Change of Corporate Name
Within five (5) business days after the Closing, Seller, if
requested by Purchaser, will adopt and file with the
Secretary of State of Florida an amendment to the Articles
of Incorporation of Seller changing the name of Seller to a
name substantially dissimilar to "Magic Box, Inc.''
and
Seller shall also execute a Consent for Use of Similar Name
form, as set forth in the Disclosure Schedule granting to
Purchaser the use of the name "Magic Box, Inc."
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20Brokers and Finders.
Except as set forth in the Disclosure Schedule, no broker,
finder or other person or entity acting in a similar
capacity has participated on behalf of Seller in bringing
about the transaction herein contemplated, or rendered any
service with respect thereto or been in any way involved
therewith.
21 [Intentionally Omitted].
22 Absence of Certain Payments.
To the best of Seller's knowledge, neither Seller, nor any
director, officer, agent, Affiliate, employee or other
person associated with or acting on behalf of any of them,
have used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to
political activity, or made any direct or indirect unlawful
payments to foreign or domestic government officials or
employees from corporate funds, or made or received any
payment, whether direct or indirect, to or from any supplier
or customer of the Seller, for purposes other than the
satisfaction of lawful obligations, or established or
maintained any unlawful or unrecorded funds.
23 [Intentionally Omitted].
24 Product Liability Claims
To the best of Seller's knowledge, there are no material
product liability claims pending against the Seller, which
are not covered by product liability insurance coverage,
which, if determined adversely to Seller, would have a
material adverse effect upon Seller's Business.
25Employee Benefit Plans.
For the purposes of this Section 6.25, "Seller" shall
include all persons who are members of a controlled group, a
group of trades or businesses under common control, or an
affiliated service group (within the meanings of Sections
414(b), (c) or (m) of the Code), of which the Seller is a
member.
(a) To the best of Seller's and Shareholders' knowledge,
the Employee Benefit Plans presently maintained by the
Seller or to which the Seller has contributed within
the past six (6) years, including any terminated or
frozen plans which have not yet distributed all plan
assets, are fully set forth in the Disclosure
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Schedule. For purposes of this provision, the term
"Employee Benefit Plan" shall mean:
A Welfare Benefit Plan as defined in Section 3(1)
(i)
of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") established for the
purpose of providing for its participants or their
beneficiaries, through the purchase of insurance or
otherwise, medical, surgical, or hospital care or
benefits, or benefits in the event of sickness,
accident, disability, death or unemployment
(including any plan or program of severance pay),
or vacation benefits, apprenticeship or other
training programs, or day care centers, scholarship
funds, or prepaid legal services, or any benefit
described in Section 302(c) of the Labor Management
Relations Act of 1947;
(ii) An Employee Pension Benefit Plan as defined
in Section 3(2) of ERISA established or maintained
by the Seller for the purpose of providing
retirement income to employees or for the purpose
of providing deferral of income by employees for
periods extending to the termination of covered
employment or beyond; and
(iii) Any other plan or arrangement not covered by
ERISA but which provides benefits to employees or
former employees and results in an accrued
liability on the part of the Seller either by
contract or by operation of law.
(b) With respect to any such Employee Benefit Plans, the
Seller represents and warrants that, to the best of
Seller's knowledge:
The Seller has not, with respect to any Employee
(i)
Benefit Plans, engaged in any prohibited
transaction, as such term is defined in Section
4975 of the Code or Section 406 of ERISA, the
performance of which would have a material adverse
effect on Purchaser.
(ii) The Seller has, with respect to any Employee
Benefit Plans, materially complied with all
reporting and disclosure requirements required by
Title I, Subtitle B, Part 1 of ERISA.
(iii) There was no accumulated funding deficiency
(as defined in section 302 of ERISA and Section 412
of the Code) with respect to any Employee Pension
Benefit Plan which is a defined benefit pension
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plan, whether or not waived, as of the last day of
the most recent fiscal year of the plans ending
prior to the date of this Agreement.
(iv) There are no material contributions due to
any Employee Pension Benefit Plan for the most
recent fiscal year of the plans ending prior to the
date of this Agreement and the Seller's Financial
Statements reflect any liability of the Seller to
make contributions to the Employee Pension Benefit
Plans.
(v)No material liability to the Pension Benefit
Guaranty Corporation ("PBGC") has been asserted
with respect to any Employee Pension Benefit Plan
which is a defined benefit pension plan, which
would have a material adverse effect on Purchaser.
(vi) There has been no reportable event as
described in Section 4043(b) of ERISA since the
effective date of Section 4043 of ERISA with
respect to any Employee Pension Benefit Plan which
is a defined benefit plan, which would have a
material adverse effect on Purchaser.
(vii) Except for claims for benefits by
participants and beneficiaries in the normal course
of events, to the best of Seller's knowledge, there
are no claims, pending or threatened, by any
individual or Governmental Entity, which, if
decided adversely, would have a material adverse
effect upon the financial condition of any Employee
Benefit Plan, the plan administrator of any
Employee Benefit Plan, or the Seller.
(viii) The Seller has made available for inspection
all annual reports for the Seller filed on Internal
Revenue Service ("IRS") Form 5500 or 5500C, all
reports for the Seller prepared by an actuary for
the last three plan years, the plan and trust
documents and the Summary Plan Description, as
amended, for each Employee Benefit Plan and the
last filed PBGC1 Form (if applicable) for each
Employee Benefit Plan, with respect to any Employee
Benefit Plans other than multi-employer plans
(within the meaning of Section 3(37) of ERISA), and
other reports filed with the PBGC during the last
three plan years.
(ix) All Employee Pension Benefit Plans are
intended to be qualified retirements plans under
the Code. The IRS has issued, and the Seller has
made available for inspection, one or more
favorable determination letters with respect to the
qualification of all Employee Pension Benefit Plans
stating that from the inception of each such plan,
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such plan has been qualified under Section 401(a)
of the Code and each trust maintained in connection
with such plan has been and is exempt under Section
501(a) if the Code. The time for adoption of any
amendments required by changes in the Code since
such determination letters were issued, or changes
required by the IRS as a condition for continued
qualification of such plans has not expired, or did
not expire without such amendments being made.
Such plans are now, and always have been,
established in writing and maintained and operated
in accordance with the plan documents, ERISA, the
Code, and all other applicable laws.
(x)There is no material liability arising from the
termination or partial termination of any Employee
Benefit Plan, except for liabilities as to which
adequate reserves are reflected on the Financial
Statements, and there exists no condition
presenting a material risk of such liability.
(xi) The Seller has timely made any contributions
it is obligated to make to any multi-employer plan
within the meaning of Section 3(37) of ERISA. The
Seller has no material liability arising as a
result of withdrawal from any multi-employer plan,
no such material withdrawal liability has been
asserted and no such material withdrawal liability
will be asserted with regard to any withdrawal or
partial withdrawal on or before the date of this
Agreement.
26Full Disclosure.
None of the representations and warranties made by the
Seller and Shareholders herein, or made on its behalf,
including any disclosures made in the Disclosure Schedule,
contains or will contain, to Shareholders' and Seller's
knowledge, any untrue statement of material fact or omits or
will omit any material fact.
7.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
___________________________________________
Purchaser hereby represents and warrants to Seller and
Shareholders that the following statements are true and correct
as of the date hereof and shall remain true and correct as of the
Closing as if made again at and as of that time.
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1Organization, Good Standing and Power of Purchaser.
(a) Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the
State of Delaware and has full corporate power and
lawful authority to execute, deliver and perform this
Agreement and conduct the business of Seller currently
conducted by Seller in each of the jurisdictions in
which Seller currently conducts its Business, which are
the only jurisdictions where the failure to be so
qualified by Purchaser will have a material adverse
effect on the business prospects or financial condition
of Purchaser.
2Status of Agreements
(a) All requisite corporate action (including action of its
Board of Directors) to approve, execute, deliver and
perform this Agreement and each of the other
agreements, instruments and other documents to be
delivered by and on behalf of Purchaser ("Other
Purchaser Documents") in connection herewith has been
taken by Purchaser and Purchaser has full legal power
and authority to execute, deliver and perform as
required under this Agreement and the other Purchaser
Documents. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes the
valid and binding obligation of Purchaser enforceable
in accordance with its terms. All Other Purchaser
Documents in connection herewith will, when executed
and delivered, constitute the valid and binding
obligation of Purchaser enforceable in accordance with
their respective terms.
(b) No authorization, approval, consent or order of, or
registration, declaration or filing with, any court,
governmental body or agency or other public or private
body, entity or person is required (except for
Purchaser's primary lender, Star Bank, N.A., whose
consent shall be obtained prior to June 16, 1997) in
connection with the execution, delivery or performance
of this Agreement or any Other Purchaser Documents in
connection herewith.
(c) Neither the execution, delivery nor performance of this
Agreement or any of the Other Purchaser Documents in
connection herewith does or will, to the best of
Purchaser's knowledge:
(i) conflict with, violate or result in any
breach of any judgment, decree, order, statute,
ordinance, rule or regulation applicable to
Purchaser;
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(ii) conflict with, violate or result in any
breach, termination, or default (in each case
whether with or without notice or the lapse of time
or both) of any agreement or instrument to which
Purchaser is a party or by which Purchaser or any
of Purchaser's assets or properties is bound, or
constitute a default thereunder or give rise to a
right of acceleration of an obligation of
Purchaser; or
(iii) conflict with or violate any provision of the
Articles of Incorporation or By-Laws of Purchaser.
3Brokers and Finders.
No broker, finder or other person or entity acting in a
similar capacity has participated on behalf of Purchaser in
bringing about the transaction herein contemplated, or
rendered any service with respect thereto or been in any way
involved therewith.
4Financial Statements. True and complete copies of the
Purchaser's financial statements for Purchaser's fiscal
years ended 1995 and 1996 and as of April 5, 1997 have been
delivered to the Seller. Such financial statements have
been prepared in accordance with generally accepted
accounting principles consistently applied and accurately
reflect the Purchaser's business, operations, financial
results, financial position, expenses, incomes, assets and
liabilities and are complete in all material respects as of
their respective dates. There has been no material change
to Purchaser's financial position since the financial
statements dated December 31, 1996.
5Compliance. To the best of Purchaser's knowledge, Purchaser has
not failed to comply with any applicable law, statute, rule,
regulation, ordinance, requirement, announcement, decree,
judgment, award, order, injunction, consent or other binding
action of any Governmental Authority or Court which could
result in a material adverse effect to its business,
operations or financial position.
6Litigation. Other than as described in Schedule 7.6, there
is no action, claim, lawsuit, demand, suit, inquiry,
hearing, investigation, notice of violation, litigation,
proceeding, arbitration, or other dispute, whether civil,
criminal, administrative, or otherwise, pending or, to the
best knowledge of the Purchaser, threatened against the
Purchaser which, if adversely determined, would have a
material adverse effect on Purchaser. Nor is there any
decree, judgment, award, order, injunction, consent or other
binding action outstanding against the Purchaser having, or
which, insofar as can reasonably be foreseen, in the future
may have, a material adverse effect on Purchaser.
7No Additional Seller Representations. Purchaser has been
offered, and up to the Closing Date and the time(s) of
transfer of the Purchased Assets shall be offered, the
opportunity to ask questions of, and receive answers from,
Seller and Shareholders, and the Purchaser has been given
full and complete access to all available information and
data relating to the business and assets of Seller, has
obtained such additional information about Seller and the
Purchased Assets which the Purchaser has deemed necessary in
order to evaluate the opportunities, both financial and
otherwise, with respect to Seller and, except as expressly
set forth in this Agreement, Purchaser has not relied on any
representation, warranty or other statement of Seller or
Shareholders concerning Seller or the Purchased Assets, in
its evaluation of the decision to consummate the
transactions contemplated herein. As of the Closing Date,
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Purchaser will have had an opportunity to review and be
familiar with all of the contracts of Seller which have been
provided to Purchaser prior to the Closing Date.
8Tax Matters. Except as to taxes not yet due and payable,
and except for taxes the payment of which is being
diligently contested in good faith and for which adequate
reserves have been established in accordance with generally
accepted accounting principles, to the best of Purchaser's
knowledge, Purchaser has filed all returns and reports that
are now required to be filed by it in connection with any
federal, state or local tax, duty or charge levied, assessed
or imposed upon it, or its property, including unemployment,
social security and similar taxes; and to the best of
Purchaser's knowledge, all of such taxes have been either
paid or materially adequate reserves or other provision has
been made therefor.
9 [Intentionally Omitted].
10No Change in Management Services. To the best of
Purchaser's knowledge, none of the members of Purchaser's
senior management including, but not limited to, its
officers and directors, have expressed a desire to terminate
his or her relationship or affiliation with Purchaser.
11Changes to Purchaser's Business. To the best of
Purchaser's knowledge, there have been no adverse recent
trends in Purchaser's sales, revenues, or earnings and
Purchaser is not aware of any changes to the industry or
Purchaser's business, which could be expected to result in
such decreased sales, revenues, or earnings.
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12Delivery of Purchaser Statements. Purchaser covenants
that, commencing on the Closing Date through and including
the date of the final payments under the Notes, Purchaser
shall deliver to Seller (without the need for Seller to
request such delivery) copies of Purchaser's quarterly and
annual financial statements and all amendments thereto, the
annual financial statement to be audited by independent
public accountants, at such times as such financial
statements are finalized. Purchaser covenants that such
financial statements shall be prepared in accordance with
general accepted accounting principles and will fully and
fairly reflect the Purchaser's financial position and
financial results as of their dates. Purchaser further
covenants to provide to Seller from time to time, after the
Closing Date and until July 15, 1999, such other information
about the Purchaser's business, operations, financial
position and capitalization as Seller shall reasonably
request.
13Full Disclosure. None of the representations and
warranties made by Purchaser herein, or made on its behalf,
including any disclosures made in Schedules and Exhibits
attached hereto, contains or will contain, to Seller's
knowledge, any untrue statement of material fact or omits or
will omit any material fact.
8.
COMPETITION
___________
1 As an inducement for and in consideration of Purchaser
entering into this Agreement, Seller and X. Xxxxx, X. Xxxxx,
X. Xxxxxxxx and X. Xxxxx agree to enter into a Covenant Not
to Compete Agreement, in the form of Xxxxxxxx "X" , "X-0",
"X-0", "B-3" and "B-4", respectively, attached hereto and
made a part hereof.
9.
INTERIM OPERATIONS
__________________
1Seller's Covenants.
From June 15, 1997 the date of the updated Pro Forma Balance
Sheet through and including the Closing Date, except as set
forth on the Disclosure Schedule, or in the ordinary course
of business, Seller shall not:
(i) change its Articles of Incorporation or bylaws or merge
or consolidate with or into any entity, or acquire
control of any entity, or obligate itself to do so;
E-43
(ii) declare, set aside or pay any dividend or other
distribution on or in respect of shares of its capital
stock;
(iii) authorize, guarantee or incur indebtedness for
borrowed money, including but not limited to, borrowing
for the payment of any taxes;
(iv) sell or agree to sell any of the Purchased Assets,
except in the ordinary course of business;
(v) mortgage, pledge or subject to any security interest
any of the Purchased Assets;
(vi) make any capital expenditures or capital additions or
betterments, or commitments therefor, aggregating in
excess of $5,000.00, except in the ordinary course of
business;
(vii) seek other officers to purchase the stock or assets
of Seller and shall refrain and cause its officers,
employees and agents to refrain from seeking other
offers to purchase the stock or assets of Seller;
(viii) enter into any long-term contractual arrangements
or blanket purchase orders which extend past the
Closing Date without the express written consent of
Purchaser except in the ordinary course of business;
(ix) increase the salaries of any existing employees, hire
new managers or employees, pay or award bonuses, make
loans, or permit draws by any individuals without
Purchaser's express written consent except in the
ordinary course of business.
If the Closing Date is extended for any reason by Purchaser
(and Seller consents to such extension), and Purchaser
desires for Seller to continue to comply with the provisions
of this Section 9, Purchaser shall place an additional
$250,000 with the Escrow Agents to hold as additional
Deposit, pursuant to the terms of this Agreement.
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2 Conduct of Business.
From the date hereof until Closing, Seller will operate the
Business substantially as presently operated and only in the
ordinary course of business and, consistent with such
operation, will use its best efforts to preserve intact for
the benefit of Purchaser, the present business organization
of the Business and the relationships and good will of
suppliers, customers, clients and others having business
relations with the Business. Without limiting the
generality of the foregoing, Seller will not, other than in
the ordinary course of business, take any of the actions
contemplated by, or which would give rise to, a result
contemplated by Section 6.15(a) hereof as set forth in such
section.
3Access to Information.
From the date hereof until Closing, Seller and Purchaser
shall make available or cause to be made available to the
accountants, attorneys or other representatives of the other
of such parties for examination during normal business
hours, upon reasonable prior requests, all properties,
assets, books of accounts, title papers, insurance policies,
contracts, leases, commitments, records and other documents
of every character relating to the Business, all of which
are subject to the terms of the Confidentiality Agreement
executed by and between Seller and Purchaser (the
"Confidentiality Agreement") and provided such access does
not interfere with the ordinary course of Seller's and
Purchaser's respective businesses. Notwithstanding anything
in this Agreement that may imply otherwise, Purchaser shall
not contact employees of Seller, other than Shareholders,
officers and directors, until after the expiration of the
Inspection Period.
4Other Actions.
From the date hereof until Closing, Seller and Purchaser
shall not take any action which shall prevent the
representations, warranties and covenants of Seller or
Purchaser, respectively, set forth herein from being
materially true and correct at the Closing. Seller and
Purchaser shall each use its respective best efforts to
fulfill all conditions precedent set forth herein in order
to consummate the transactions contemplated hereby in a
timely manner.
5Completion of Schedules, Exhibits, and Ancillary Documents
Purchaser and Seller shall endeavor to complete and agree
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upon all of the terms of the ancillary documents including, but
not limited to, the Notes, the Employment Agreements, the Non-
Competition Agreements, and the Subordination Agreements within 7
days after the date first written above, and to finalize the
Disclosure Schedule and other Exhibits prior to June 9, 1997,
other than those Schedules which cannot by their nature be
completed until a date close to the Closing date.
10.
[INTENTIONALLY OMITTED]
11.
SURVIVAL OF AND RELIANCE UPON
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION
___________________________________________________________
1Survival of Representations and Warranties
The parties acknowledge and agree that all representations,
warranties and agreements contained in this Agreement or in
any agreement, instrument, exhibit, certificate, schedule or
other document delivered in connection herewith and
referenced herein, shall survive the Closing and continue to
be binding upon the party giving such representation,
warranty or agreement and shall be fully enforceable to the
extent provided for in Sections 11.3 and 11.4 hereof, at law
or in equity, for the period beginning on the Closing Date
and ending one (1) year thereafter, except for (i)
representations in Sections 6.3, 7.2 and 6.10 which shall
survive until the expiration of the statute of limitations
applicable to such representations and (ii) Xxxxxxxx "X",
"X-0" " B-2", "B-3" and "B-4", which shall terminate as
provided therein.
2Reliance Upon and Enforcement of Representations, Warran-
ties and Agreements.
(a) Seller hereby agrees that, notwithstanding any right of
Purchaser to fully investigate the affairs of Seller,
and notwithstanding knowledge of facts determined or
determinable by Purchaser pursuant to such
investigation or right of investigation, Purchaser has
the right to rely fully upon the representations,
warranties and agreements of Seller contained in this
Agreement and upon the accuracy of any document,
certificate or exhibit given or delivered to Purchaser
pursuant to the provisions of this Agreement.
(b) Purchaser hereby agrees that, notwithstanding any right
of Seller to fully investigate the affairs of
Purchaser, and notwithstanding knowledge of facts
determined or determinable by Seller pursuant to such
investigation or right of investigation, Seller has the
right to rely fully upon the representations,
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warranties and agreements of Purchaser contained in
this Agreement and upon the accuracy of any document,
certificate or exhibit given or delivered to Seller
pursuant to the provisions of this Agreement.
3 Indemnification by Seller and Shareholders.
Subject to the limitations in Section 11.5(d) below, Seller
and each Shareholder shall indemnify Purchaser against and
hold it harmless from:
(i) any and all material loss, damage, liability or
deficiency resulting from or arising out of any
material inaccuracy in or material breach of any
representation, warranty, covenant, or obligation made
or incurred by Seller herein or in any other agreement,
instrument or document delivered by or on behalf of
Seller in connection herewith and incorporated herein;
(ii) any imposition (including by operation of law) or
attempted imposition by a third party upon Purchaser of
any liability of Seller which Purchaser has not
specifically agreed to assume pursuant to Sections 3.1
and 3.2 of this Agreement; and
(iii) any and all reasonable costs and expenses incurred by
Purchaser (including reasonable legal and accounting
fees) related to any of the foregoing, subject to the
provisions of Section 11.5.
Nothing in this Section 11.3 shall be construed to further
limit the amount to which, or the time by which (except as
described in Sections 11.1 and 11.5(d)), by reason of offset
or otherwise, the Purchaser may recover from Seller or any
Shareholder pursuant to this Agreement resulting from
Seller's and any Shareholder's breach or violation of any
representation, warranty, covenant or agreement contained
herein.
Any amounts to which Purchaser, its successors or assigns,
is entitled to indemnification pursuant to the provisions of
this Section, subject to the provisions of Section 11.5,
shall be offset against the final amounts payable to Seller
under the Notes. Provided, however, the offset in any one
year may not exceed the aggregate amount of principal and
interest due on said promissory note for said year.
Notwithstanding anything in this Agreement to the contrary,
if Purchaser directly causes Seller or Shareholders to
materially breach, default or perform other acts or events
that would give rise to claim by Purchaser for loss, damage,
or liability hereunder, then Purchaser shall have no right
to make a claim for such loss, damage, or liability.
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4 Indemnification by Purchaser.
Purchaser shall indemnify Seller and the Shareholders
against and hold it and them harmless from any and all loss,
damage, liability or deficiency resulting from or arising
out of: (i) any Assumed Liabilities; (ii) any liability of
Purchaser arising out of Purchaser's operations subsequent
to the Closing (except to the extent such liability is the
result of a material breach of a covenant or warranty of
Seller hereunder); or (iii) any inaccuracy in or breach of
any representation, warranty, covenant or obligation made or
incurred by Purchaser herein; and (iv) any and all related
costs and expenses (including reasonable legal and
accounting fees), subject to the provisions of 11.5. Except
as specifically provided herein, nothing in this Section
11.4 shall be construed to limit the amount to which, or the
time (except as described in Section 11.1) by which, by
reason of offset or otherwise, that Seller may recover from
Purchaser pursuant to this Agreement resulting from its
breach or violation of any representation, warranty,
covenant or agreement contained herein.
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5Notification of and Participation in Claims.
(a) No claim for indemnification shall arise until written
notice thereof is given to the party from whom
indemnity is sought. Such notice shall be sent within
ten (10) days after the party to be indemnified has
received notification of such claim, but failure to
notify the indemnifying party shall in no event
prejudice the right of the party to be indemnified
under this Agreement, unless the indemnifying party
shall be prejudiced by such failure and then only to
the extent of such prejudice. In the event that any
legal proceeding shall be instituted or any claim or
demand is asserted by any third party in respect of
which Seller/Shareholders on the one hand, or Purchaser
on the other hand, may have an obligation to indemnify
the other, the party asserting such right to indemnity
(the "Party to be Indemnified") shall give or cause to
be given to the party from whom indemnity is sought
(the "Indemnifying Party") written notice thereof and
the Indemnifying Party shall have the right, at its
option and expense, to participate in the defense of
such proceeding, claim or demand, but not to control
the defense, negotiation or settlement thereof, which
control shall at all times rest with the Party to be
Indemnified, unless the Indemnifying Party (i) agrees
to assume the defense, and (ii) does so with reputable
counsel in Dade County, Florida, in which case such
Indemnifying Party may assume such control through
counsel of its choice and at its expense. In the event
the Indemnifying Party assumes control of the defense,
the Indemnifying Party shall not be responsible for the
legal costs and expenses of the Party to be Indemnified
in the event the Party to be Indemnified decides to
join in such defense. The parties hereto agree to
cooperate fully with each other in connection with the
defense, negotiation or settlement of any such third
party legal proceeding, claim or demand. If the
Indemnifying Party assumes the defense, the Party to be
Indemnified shall make available to the Indemnifying
Party all relevant records and take such other actions
as are necessary to defend against the claim. Upon an
Indemnifying Party making any payment hereunder, the
Indemnifying Party shall be subrogated to the rights,
if any, of the Party to be Indemnified.
(b) If the Party to be Indemnified is also the party
controlling the defense, negotiation or settlement of
any matter, and if the Party to be Indemnified
determines to compromise the matter, the Party to be
Indemnified shall immediately advise the Indemnifying
Party of the terms and conditions of the proposed
settlement. If the Indemnifying Party agrees to accept
such proposal, the Party to be Indemnified shall
proceed to conclude the settlement of the matter, and
the Indemnifying Party shall immediately indemnify the
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Party to be Indemnified pursuant to the terms of
Sections 11.3 and 11.4 hereunder. If the Indemnifying
Party does not agree within fourteen (14) days to
accept the settlement (said 14-day period to begin on
the first business day following the date such party
receives a complete copy of the settlement proposal),
the Indemnifying Party shall immediately assume control
of the defense, negotiation or settlement thereof, at
that Indemnifying Party's expense. Thereafter, if the
claim validly requires indemnification hereunder, the
Party to be Indemnified shall be indemnified in the
entirety for any liability arising out of the ultimate
defenses, negotiation or settlement of such matter.
(c) If the Indemnifying Party is the party controlling the
defense, negotiation or settlement of any matter, and
the Indemnifying Party determines to compromise the
matter, the Indemnifying Party shall immediately advise
the Party to be Indemnified of the terms and conditions
of the proposed settlement. If the Party to be
Indemnified agrees to accept such proposal, the
Indemnifying Party shall proceed to conclude the
settlement of the matter and immediately indemnify the
Party to be Indemnified pursuant to the terms of
Sections 11.3 or 11.4 hereunder. If the Party to be
Indemnified does not agree within fourteen (14) days to
accept the settlement (said 14-day period to begin on
the first business day following the date such party
receives a complete copy of the settlement proposal),
the Party to be Indemnified shall immediately assume
control of the defense, negotiation or settlement
thereof, at the Party to be Indemnified's expense. If
the final amount paid to resolve the claim is less than
the amount of the original proposed settlement made by
the Indemnifying Party, then the Party to be
Indemnified shall receive such indemnification pursuant
to Sections 11.3 or 11.4 hereof, including any and all
reasonable expenses incurred by the Party to be
Indemnified incurred in connection with the defense,
negotiation or settlement of such matter. If the
amount finally paid to resolve the claim (including
legal fees incurred by the Party to be Indemnified) is
equal to or greater than the amount of the original
proposed settlement proposed by the Indemnifying Party,
then the Indemnifying Party shall provide
indemnification pursuant to Sections 11.3 and 11.4 for
the amount of the original settlement proposal
submitted by the Indemnifying Party, and the Party to
be Indemnified shall be responsible for all amounts in
excess of the original settlement proposal submitted by
the Indemnifying Party and all costs and expenses
incurred by the Party to be Indemnified in connection
with such defense, negotiation or settlement.
Notwithstanding anything to the contrary herein, if the
Indemnifying Party desires to settle a claim hereunder
and the terms of the settlement provide for a complete
release of the Party to be Indemnified, the Party to be
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Indemnified must consent to such settlement provided
such release does not contain any provision,
requirement or waiver of rights that are materially
detrimental to such Party to be Indemnified.
(d) Notwithstanding anything to the contrary in this
Agreement, including, but not limited to this Section
11.5, the maximum aggregate amount that Seller and
Shareholders may collectively be required to pay
Purchaser hereunder, or as a result of any other
provision of this Agreement as a result of any and all
breaches, if any, of representations or warranties
hereunder, or as a result of any and all defaults in
any covenants hereunder, or as a result of any and all
unassumed liabilities, whether claimed pursuant to this
indemnification section or otherwise, shall be
$542,000, subject to reduction to, and based upon, the
aggregate then outstanding balance under the Notes,
provided if Purchaser provides Seller with written
notice during the final 60 days of the first year after
the Closing Date that Purchaser is concerned about the
ability of the remaining balance of the Notes to
satisfy potential claims by Purchaser hereunder, then,
even though Purchaser has made a payment under the
Notes, the amount that Purchaser may collectively claim
against Seller and Shareholders shall continue to be
$542,000, provided such claims shall only be made pro-
rata against Shareholders based upon the ownership of
each Shareholder in Seller as set forth in the recitals
first set forth above, (i.e., $216,800 for X. Xxxxx;
$135,500 for X. Xxxxxxxx and X. Xxxxx'x and $54,200 for
X. Xxxxx). In no event shall any Shareholder be liable
to Purchaser for any liabilities described in the first
sentence of this Section 11.5(d), or elsewhere in this
Agreement, for an amount in excess of the applicable
amount set forth in the preceding sentence. The sole
source of recourse for such claims shall be the right
of Purchaser to offset any amounts under the Notes to
the extent such final payment is sufficient to cover
such claim and thereafter if necessary from the next
preceding payment(s) under the Note(s) or from the cash
delivered to the Shareholders if the notice referred to
above has been provided. Any offset against the Notes
shall be made pro-rata against all four (4) Notes,
based upon the initial principal amount of the Notes as
of the date of the Closing and shall be deducted from
the final payments under the Notes. Prior to any off-
set, Purchaser shall send written notice to the holder
of the Notes stating with reasonable specificity the
basis for Purchaser's right to such indemnification
payment. If within 10 days after receipt of such
notice of set-off, the holder contests in writing (sent
to Purchaser) Purchaser's claim of indemnification
under this Section 11, then the amount which Purchaser
would otherwise have paid to the holder but for the
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exercise of such right of set-off shall be paid into an
interest bearing escrow account maintained by a bank
selected by Purchaser, to be held in such account until
Purchaser and the holder have reached agreement as to
the amount, if any, of such indemnification payment and
set-off, or until there has been a judicial resolution
of such matter, at which time the amount held in such
segregated account, together with any interest accrued
thereon, shall be released to the prevailing party, as
appropriate and/or instructed. Purchaser and the
holder agree that they will use their best efforts to
resolve any such dispute within 30 days of receipt of
notice by Purchaser of the holder's objection to the
set-off.
(e) Indemnification Basket. Notwithstanding anything to
the contrary in this Agreement, Seller and Shareholders
shall not have any liability to Purchaser, pursuant to
this indemnification section or elsewhere in this
Agreement, unless and until the aggregate of all
claims, losses, and liabilities that Seller and
Shareholders would be liable to Purchaser hereunder,
exceeds $150,000 (net of any tax benefit Purchaser
obtains as a result of such expenses, losses, and
liabilities) and then such liability shall exist only
to the extent that the aggregate of all losses,
liabilities, and damages exceed $150,000 (net of the
income tax benefit derived by Purchaser).
12.
EXPRESS CONDITIONS
__________________
1Notwithstanding anything herein to the contrary, and
subject to Section 12.2 below, Purchaser's and Seller's
obligations hereunder are subject to the following
conditions:
(a) Purchaser shall have obtained from its primary lender,
Star Bank, N.A., consent to the transaction.
(b) Purchaser shall have acquired all necessary permits
from federal, state and local agencies that are
necessary to conduct cabling operations in the State of
Florida.
(c) Approval of the Board of Directors of Purchaser.
(d) Approval of the Board of Directors of Seller and Seller
completing its due diligence review of Purchaser
satisfactory to Seller at its sole discretion.
(e) The Closing contemplated by this Agreement shall be
expressly contingent upon a due diligence review of
Seller's Business satisfactory to Purchaser in its sole
E-52
discretion. During such period, the Seller will allow
Purchaser and its representatives full and complete
access to the books, records and facilities of the
business and will use its best efforts to keep
Purchaser fully apprised of its business activities,
financial condition and prospects. In addition, the
Seller will make available its officers, counsel and
independent accountants to discuss these matters with
Purchaser's representatives and other financial
employee(s) of Seller designated by Seller, subject to
the time limitations contained in Section 9.3. The
Closing is contingent upon Purchaser being satisfied in
every respect with the results of the Purchaser's due
diligence investigation. If the results of the
investigation are not to the satisfaction of Purchaser,
Purchaser shall notify Seller in writing that this
condition precedent has not been satisfied, and
immediately thereafter, the Escrow Agents shall be
authorized by the Purchaser and Seller to release the
escrow funds to Purchaser. Purchaser will conduct its
due diligence in a manner that will minimize any
interference with the business of Seller and will enter
into the Confidentiality Agreement which will be
customary to transactions of this nature.
Subject to Section 12.2 below, in the event any of the
foregoing contingencies have not been met or waived, by
Purchaser or Seller, where applicable, by June 16, 1997, the
$50,000.00 xxxxxxx money shall be returned promptly to
Purchaser. If the conditions set forth in this Section 12.1
that relate to Purchaser have been met or waived, as
described herein or in Section 12.2 below, then Purchaser
shall deposit an additional $100,000 with the Escrow Agents
as an additional Deposit, and, thereafter, if Purchaser does
not close the transactions contemplated hereby on the
Closing Date as may be extended by Seller under
Section 13.4, other than as a result of Seller's or
Shareholders' material breach or the failure of Seller to
materially satisfy the conditions precedent set forth in
Section 13.2 below, then the entire Deposit then held by the
Escrow Agents shall be promptly delivered to Seller as
agreed upon liquidated damages (and not as a penalty)) for
its cost, inconvenience, expense, and damages resulting from
Purchaser's due diligence investigation of its Business and
Seller's time expended. If the transaction does not close
on the Closing Date as a result of Seller's or Shareholders'
material breach or the failure of Seller to materially
satisfy the conditions precedent set forth in Section 13.2
below, then the entire Deposit shall be returned to
Purchaser.
2 The contingencies set forth in Section 12.1 must have all
been met or waived, by Purchaser and Seller, where
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applicable, no later than June 16, 1997. Failure of either
Purchaser or Seller to inform the other in writing on or
before June 16, 1997, that any one or more of the express
conditions set forth in Section 12.1 have not been met,
shall serve conclusively as such non-sending party's notice
and acknowledgment that all of the express conditions
applicable to such party have been met and fully satisfied
or irrevocably waived, and such non-sending party shall have
waived any and all rights to make any claims that any
express condition set forth in Section 12.1 has not been
met, regardless of whether such condition has actually been
met, and the non-sending party shall be obligated to proceed
with the transactions contemplated herein, in accordance
with the terms of this Agreement.
13.
THE CLOSING
___________
1Date, Time and Place of Closing
Consummation of the transactions contemplated hereby (the
"Closing") shall take place on July 1, 1997 (the "Closing
Date"), commencing at 9:00 a.m. EDT at
_________________________________________, or on such other
Closing Date, or at such other time and/or place as the
parties may mutually agree upon.
2Conditions Precedent to Purchaser's Obligations
The obligation of Purchaser to perform in accordance with
this Agreement and to consummate the transactions herein
contemplated is subject to the satisfaction of the following
conditions at or before the Closing:
(a) The Seller shall have complied with and materially
performed all of the representations, warranties,
agreements and covenants hereunder required to be
performed by it prior to or at the Closing;
(b) There shall be no pending or threatened legal action
which, if successful, would prohibit consummation or
require substantial rescission of the transactions
contemplated by this Agreement;
(c) The business, aggregate properties and operations of
Seller shall not have been materially adversely
affected as a result of any fire, accident or other
casualty or any labor disturbance or act of God or the
public enemy, and there shall otherwise have been no
material adverse change to the business, aggregate
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properties, or operations of the Seller since the date
of execution of this Agreement;
(d) Seller shall have delivered to Purchaser, at or before
the Closing, the following documents, all of which
shall be in form and substance reasonably acceptable to
the Purchaser and its counsel:
(i) The instruments of transfer and limited powers of
attorney required by Sections 2.5 and 2.6;
(ii) Releases or estoppel letters (or copies thereof) of
all liens, claims, charges, encumbrances, security
interests and restrictions on the Purchased Assets
necessary to provide Purchaser with good,
marketable and indefeasible title to each of the
Purchased Assets at the Closing;
(iii) Certified copies of the corporate actions taken by
the Board of Directors and Shareholders of Seller,
authorizing the execution, delivery and performance
of this Agreement;
(iv) Certificate of Good Standing for Seller from the
Secretary of State of Florida dated no earlier than
fifteen (15) days prior to Closing;
(v) Opinion letter of XxXxxxxxx, Will & Xxxxx, counsel
for Seller, addressed to Purchaser and dated the
Closing Date, containing the opinion set forth on
Exhibit "J".
(vi) Seller shall have entered into the Subordination
Agreement in the form attached hereto as Exhibit
"D".
(vii) Seller X. Xxxxx, X. Xxxxx, X. Xxxxxxxx and X. Xxxxx
shall have entered into the non-competition
agreements set forth in Xxxxxxxx "X" "X-0", "X-0",
"B-3" and "B-4".
(viii) The express conditions set forth in Section 12 have
been satisfied or waived, as provided in such
Section 12.
(e) Seller will adopt and file with the Secretary of State
of Florida within five (5) business days after the
Closing Date an amendment to the Articles of
Incorporation of Seller changing the name of Seller to
a name substantially dissimilar to Magic Box, Inc.
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Seller shall execute a Consent for Use of Similar Name
form, as set forth on Exhibit "M", granting to
Purchaser the use of the name Magic Box, Inc.
3Conditions Precedent to Seller's Obligations.
The obligation of Seller to perform in accordance with this
Agreement and to consummate the transactions herein
contemplated is subject to the satisfaction of the following
conditions at or before the Closing:
(a) Performance by Purchaser of all of the representations,
warranties, agreements and covenants to be performed by
it at or before the Closing;
(b) There shall be no pending or threatened legal action
which, if successful, would prohibit consummation or
require substantial rescission of the transactions
contemplated by this Agreement;
(c) The business, aggregate properties and operations of
Purchaser shall not have been materially adversely
affected as a result of any fire, accident or other
casualty or any labor disturbance or act of God or the
public enemy, and there shall otherwise have been no
material adverse change to the business, aggregate
properties, or operations of the Purchaser since the
date of execution of this Agreement;
(d) Purchaser shall deliver to Seller at or before the
Closing the following documents, all of which shall be
in form and substance acceptable to Seller and its
counsel:
(i) A wire transfer or bank or cashiers check for the
aggregate amount to be paid to Seller at the
Closing pursuant to Section 4.2(b) hereof;
(ii) A wire transfer or bank or cashiers check from the
Escrow Agents for the amount set forth in Section
4.2(a) hereof;
(iii) Assumption of Liabilities Agreement under which
Purchaser assumes the Liabilities set forth in
Sections 3.1 and 3.2;
(iv) Subordinated promissory notes as set forth in
Section 4.2(c);
(v) Certified copies of the corporate actions taken by
Purchaser authorizing the execution, delivery and
performance of this Agreement;
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(vi) Certificate of Good Standing for Purchaser from the
Secretary of State of Delaware dated no earlier
than fifteen (15) days prior to the date of
Closing;
(vii) Opinion letter of Xxxxxxxxx & Dreidame Co., L.P.A.,
counsel for Purchaser, addressed to Seller and
dated the Closing Date, containing the opinions set
forth on Exhibit "N"; and
(viii) All of the express conditions set forth in Section
12 have been satisfied or waived.
(e) Purchaser shall have entered into the Employment
Agreements set forth in Exhibits "G" and "G-1" .
4 Potential Extension of Closing Date. Notwithstanding the
definition of the Closing Date contained herein, if Seller
provides Purchaser with written notice of its knowledge of a
potential decrease in the federal capital gains tax rate, then as
part of such notice Seller may extend the Closing Date for up to
30 days after the date set forth herein.
14.
GENERAL PROVISIONS
__________________
1Publicity. All public announcements relating
to this Agreement or the
transactions contemplated hereby will be made by mutual
agreement of by Purchaser and Seller, which mutual agreement
will not be reasonably withheld by either party. For any
disclosure which may be required because of Purchaser's
being a publicly-traded corporation on the over-the-counter
market, Seller's consent will not be required, but Purchaser
will first inform Seller of such disclosure.
2Expenses. Purchaser will bear and pay all of its expenses
incident to
the transactions contemplated by this Agreement which are
incurred by Purchaser or its representatives, and Seller
shall bear and pay all of the expenses incident to the
transactions contemplated by this Agreement which are
incurred by Seller or its representatives.
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3Notices.
All notices and other communications required by this
Agreement shall be in writing and shall be deemed given (i)
upon delivery if delivered by hand, (ii) the next business
day if sent by nationally reputable overnight carrier, or
(iii) three days after mailing if mailed by registered mail
or certified mail, return receipt requested; to the
appropriate party at the following address (or at such other
address for a party as shall be specified by notice pursuant
hereto):
(a) If to Purchaser, to:
Pomeroy Computer Resources, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx
With a copy to:
Xxxxx X. Xxxxx III, Esq.
Xxxxxxxxx & Dreidame
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
(b) If to Seller, to:
Magic Box, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: President
With a copy to:
XxXxxxxxx, Will & Xxxxx
000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
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(c) If to Shareholders, to:
Xxxxxx Xxxxx
000 XX 000 Xxxxxxx
Xxxxx, Xxxxxxx 00000
M. Xxxxxx Xxxxxxxx, Esq.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxx 00000
Xxxxxx Xxxxx, Esq.
Xxxxxxxxx Xxxxxxx et al.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
X. Xxxxx
000 XX 00 Xxxxxx
#0000
Xxxxx, Xxxxxxx 00000
With a copy to:
XxXxxxxxx, Will & Xxxxx
000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
4Binding Effect.
Except as may be otherwise provided herein, this Agreement
and all the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and
permitted assigns.
5Headings.
The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in
the construction or interpretation of this Agreement.
E-59
6Exhibits.
The Exhibits referred to in this Agreement constitute an
integral part of this Agreement as if fully rewritten
herein.
7Counterparts.
This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which
constitute together one and the same document.
8 Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Florida, without regard
to its laws or the laws of any other jurisdiction regarding
conflict of laws.
9Severability
If any provision of this Agreement shall be held
unenforceable, invalid, or void to any extent for any
reason, such provision shall remain in force and effect to
the maximum extent allowable, if any, and the enforceability
or validity of the remaining provisions of this Agreement
shall not be affected thereby.
10 Waivers; Remedies Accumulated.
No waiver of any right or option hereunder by any party
shall operate as a waiver of any other right or option, or
the same right or option with respect to any subsequent
occasion for its exercise, or of any right to damages. No
waiver by any party of any breach of this Agreement or of
any representation or warranty contained herein shall be
held to constitute a waiver of any other breach or a
continuation of the same breach. All remedies provided in
this Agreement are in addition to all of the remedies
provided by law. No waiver of any of the provisions of this
Agreement shall be valid and enforceable unless such waiver
is in writing and signed by the party granting the same.
11 Assignments.
Except as otherwise provided in this Agreement, including
Purchaser's specific right to assign the Agreement to
Acquisition Sub as set forth in the recitals, no party shall
assign its rights or obligations hereunder prior to Closing
and thereafter without the prior written consent of the
other party.
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12 Entire Agreement.
This Agreement and the agreements, instruments and other
documents to be delivered hereunder constitute the entire
understanding and agreement concerning the subject matter
hereof. All negotiations between the parties hereto are
merged into this Agreement, and there are no
representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation thereto between
the parties other than those incorporated herein and to be
delivered hereunder. Except as otherwise expressly
contemplated by this Agreement, nothing expressed or implied
in this Agreement is intended or shall be construed so as to
grant or confer on any person, firm or corporation other
than the parties hereto any rights or privilege hereunder.
No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by the parties
hereto.
13 Business Records.
Seller and Shareholder shall be permitted to retain copies
of such books and records relating to the Purchased Assets
and relating to the accounting and tax matters of the
Business and to have access to all original copies of
records so delivered to Purchaser at reasonable times, for
any reasonable business purpose, for a period of six (6)
years after the Closing.
14 Attorneys' Fees.
In the event any dispute arises between Purchaser, on the
one hand, and Seller or Shareholders, on the other hand,
whether pursuant to this Agreement or otherwise, the
prevailing party shall be entitled to recover from the non-
prevailing party, the prevailing party's attorneys' fees and
costs, including all costs of appeal. In addition, such
prevailing party shall also be entitled to recover
attorneys' fees and costs incurred in enforcing any judgment
from a suit arising under this Agreement or otherwise. This
post-judgment attorneys' fees and costs provision shall be
severable from the other provisions, shall survive any
judgment on such suit, and shall not be deemed to be merged
into the judgment.
The parties hereto have executed this Agreement as of the
date first above written.
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MAGIC BOX, INC.
________________________________
By:
Xxxxxx Xxxxx, President
XXXXXXX COMPUTER RESOURCES, INC.
________________________________
By:
Xxxxxxx Xxxxxxx, Chief Financial
Officer
XXXXXX XXXXX
M. XXXXXX XXXXXXXX
XXXXXX XXXXX
XXXXXXX XXXXX
________________________________
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EXHIBIT A
EXCLUDED ASSETS
1. Excess cash as defined in Section 4.1(c)
2. The Purchase Price or any part thereof received by Seller
for the sale of the Purchased Assets
Seller's minute book and stock records
3. Marketable Securities of Seller
4. (This will be supplemented prior to May 31, 1997)
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