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EXHIBIT 2
MERGER AGREEMENT
BY AND AMONG
ALPHA MICROSYSTEMS,
A CALIFORNIA CORPORATION,
ALPHA MICRO MERGER CORP.,
A DELAWARE CORPORATION,
DELTA COMPUTEC INC.,
A NEW YORK CORPORATION,
AND
XXXXXX XXXXXXX XX AND XXXXXX XXXXXXX
JULY 2, 1998
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TABLE OF CONTENTS
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ARTICLE I THE MERGER.............................................................. 1
1.1 The Merger.............................................................. 1
1.2 The Closing............................................................. 2
1.3 Filing of Articles of Merger............................................ 2
1.4 Surviving Corporation's Certificate of Incorporation,
Bylaws, Directors and Officers.......................................... 2
1.5 Conversion of Securities................................................ 2
1.6 Delivery of Purchase Price.............................................. 5
1.7 Dissenting Shares....................................................... 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ALPHA MICRO........................... 6
2.1 Corporate Status........................................................ 6
2.2 Corporate Power and Authority........................................... 6
2.3 Enforceability.......................................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 6
3.1 Corporate Status........................................................ 6
3.2 Subsidiaries............................................................ 7
3.3 Power and Authority..................................................... 7
3.4 Enforceability.......................................................... 7
3.5 Capitalization.......................................................... 7
3.6 Commission Reports...................................................... 8
3.7 Loss Contingencies Other Non-Accrued Liabilities........................ 8
3.8 No Violation............................................................ 8
3.9 Representations and Covenants Regarding Corporate Records of
the DCI and its Subsidiaries............................................ 9
3.10 Interim Financial Statements............................................ 9
3.11 Changes Since May 31, 1998 (the "Current Balance Sheet
Date"), and for the Period Between May 28, 1998 and May 31, 1998........ 9
3.12 Liabilities of the Company.............................................. 10
3.13 Litigation.............................................................. 10
3.14 Environmental Matters................................................... 11
3.15 Real Estate............................................................. 15
3.16 Good Title to and Condition of Assets................................... 15
3.17 Compliance with Laws.................................................... 16
3.18 Labor and Employment Matters............................................ 16
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TABLE OF CONTENTS (CONTINUED)
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3.19 Employee Benefit Plans.................................................. 17
3.20 Insurance............................................................... 20
3.21 Receivables............................................................. 20
3.22 Licenses and Permits.................................................... 20
3.23 Adequacy of the Assets; Relationships with Customers and
Suppliers; Affiliated Transactions...................................... 21
3.24 Intellectual Property................................................... 21
3.25 Contracts............................................................... 21
3.26 Customers............................................................... 22
3.27 Accuracy of Information Furnished by the Company........................ 22
3.28 Bank Accounts; Business Locations....................................... 23
3.29 Names; Prior Acquisitions............................................... 23
3.30 No Commissions.......................................................... 23
3.31 National Canada Finance Finance......................................... 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF XXXXXXX............................... 23
4.1 Xxxxxxx Shares.......................................................... 23
4.2 Enforceability.......................................................... 23
4.3 No Violation............................................................ 24
4.4 Outstanding Loans....................................................... 24
4.5 Management.............................................................. 24
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER.................................. 24
5.1 Conduct of Business by the Company Pending the Merger................... 24
ARTICLE VI ADDITIONAL AGREEMENTS................................................... 26
6.1 Further Assurances...................................................... 26
6.2 Cooperation............................................................. 26
6.3 Access to Information................................................... 26
6.4 Notification of Certain Matters......................................... 26
6.5 Confidentiality; Publicity.............................................. 27
6.6 No Other Discussions.................................................... 27
6.7 Restrictive Covenants................................................... 27
6.8 Trading in Alpha Micro Common Stock..................................... 28
6.9 Xxxxxxx Vote............................................................ 28
6.10 Xxxxxxx Loans........................................................... 28
6.11 Surviving Corporation................................................... 29
6.12 Operation of Business................................................... 29
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE ALPHA MICRO COMPANIES.............. 29
7.1 Accuracy of Representations and Warranties and Compliance
with Obligations........................................................ 29
7.2 No Material Adverse Change or Destruction of Property................... 29
7.3 Corporate Certificate................................................... 30
7.4 Opinion of Counsel...................................................... 30
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TABLE OF CONTENTS (CONTINUED)
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7.5 Consents................................................................ 30
7.6 No Adverse Litigation................................................... 30
7.7 Financing............................................................... 30
7.8 Shareholder Approval; Dissenters' Rights................................ 30
7.9 Shareholder Loans....................................................... 30
7.10 Changes in Balance Sheet................................................ 30
7.11 Lien Releases........................................................... 31
7.12 Minority Shareholder Claims............................................. 31
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS....... 31
8.1 Accuracy of Representations and Warranties and Compliance
with Obligations........................................................ 31
8.2 No Order or Injunction.................................................. 31
8.3 Shareholder Approval.................................................... 31
ARTICLE IX ESCROW.................................................................. 32
9.1 Escrow.................................................................. 32
9.2 Reductions to the Escrowed Funds........................................ 32
ARTICLE X INDEMNIFICATION......................................................... 33
10.1 Survival of Representations and Warranties.............................. 33
10.2 Indemnification......................................................... 33
10.3 Adjustment to Merger Consideration...................................... 34
ARTICLE XI DEFINITIONS............................................................. 35
11.1 Affiliate............................................................... 35
11.2 Agreement............................................................... 35
11.3 Agreement of Merger..................................................... 35
11.4 Alpha Micro Companies................................................... 35
11.5 Assets.................................................................. 35
11.6 CERCLA.................................................................. 35
11.7 Closing................................................................. 35
11.8 Closing Date............................................................ 35
11.9 Code.................................................................... 35
11.10 Company................................................................. 35
11.11 Company Common Stock.................................................... 35
11.12 Contracts............................................................... 35
11.13 Current Balance Sheet................................................... 35
11.14 Current Balance Sheet Date.............................................. 35
11.15 DCI..................................................................... 35
11.16 DCI Stock............................................................... 35
11.17 Dissenting Shares....................................................... 35
11.18 Effective Date or Effective Time........................................ 36
11.19 Electing Shareholders................................................... 36
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TABLE OF CONTENTS (CONTINUED)
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11.20 Employee Plans.......................................................... 36
11.21 EPCRA................................................................... 36
11.22 ERISA................................................................... 36
11.23 ERISA Affiliate......................................................... 36
11.24 Escrow Agent............................................................ 36
11.25 Escrow Agreement........................................................ 36
11.26 Escrow Amount........................................................... 36
11.27 Escrowed Funds.......................................................... 36
11.28 Facility................................................................ 36
11.29 FIFRA................................................................... 36
11.30 Fixed Assets............................................................ 36
11.31 GAAP.................................................................... 36
11.32 Governmental Authority.................................................. 36
11.33 Immigration Act......................................................... 36
11.34 Indemnified Party....................................................... 37
11.35 Indemnifying Party...................................................... 37
11.36 Insurance Policies...................................................... 37
11.37 Intellectual Property................................................... 37
11.38 Interim Financial Statements............................................ 37
11.39 IRS..................................................................... 37
11.40 Leased Premises......................................................... 37
11.41 Leases.................................................................. 37
11.42 Lien.................................................................... 37
11.43 Xxxxxxx................................................................. 37
11.44 Xxxxxxx Per Share Merger Price.......................................... 37
11.45 Losses.................................................................. 37
11.46 Material Adverse Change (or Effect)..................................... 37
11.47 Merger.................................................................. 37
11.48 Multi-employer Plan..................................................... 37
11.49 Net Shareholders' Deficit............................................... 37
11.50 New York Statute........................................................ 38
11.51 Notices................................................................. 38
11.52 OSHA.................................................................... 38
11.53 Option.................................................................. 38
11.54 Paying Agent............................................................ 38
11.55 PBGC.................................................................... 38
11.56 Pension Plan............................................................ 38
11.57 Per Share Merger Price.................................................. 38
11.58 Permits................................................................. 38
11.59 Person.................................................................. 38
11.60 Pre-Closing Certificate................................................. 38
11.61 Proceedings............................................................. 38
11.62 Purchase Price.......................................................... 38
11.63 RCRA.................................................................... 38
11.64 Receivables............................................................. 38
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TABLE OF CONTENTS (CONTINUED)
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11.65 XXXX.................................................................... 38
11.66 Shareholders' Representative............................................ 38
11.67 Shareholders............................................................ 39
11.68 Stock Option Plan....................................................... 39
11.69 Subsidiary.............................................................. 39
11.70 Surviving Corporation................................................... 39
11.71 System.................................................................. 39
11.72 Tax Return.............................................................. 39
11.73 Taxes................................................................... 39
11.74 Welfare Plan............................................................ 39
11.75 Other Definitional Provisions........................................... 39
ARTICLE XII TERMINATION............................................................. 40
12.1 Termination............................................................. 40
12.2 Effect of Termination................................................... 40
ARTICLE XIII GENERAL PROVISIONS...................................................... 40
13.1 Notices................................................................. 40
13.2 Entire Agreement........................................................ 42
13.3 Expenses................................................................ 42
13.4 Amendment; Waiver....................................................... 42
13.5 Binding Effect; Assignment.............................................. 42
13.6 Counterparts............................................................ 42
13.7 Interpretation.......................................................... 42
13.8 Governing Law; Severability............................................. 42
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EXHIBIT 2
MERGER AGREEMENT
This Merger Agreement (this "Agreement") is entered into as of July 2,
1998, by and among ALPHA MICROSYSTEMS, a California corporation ("Alpha Micro"),
a party to this Agreement but not to the Merger (as hereinafter defined); ALPHA
MICRO MERGER CORP., a Delaware corporation and wholly-owned subsidiary of Alpha
Micro (sometimes hereinafter referred to as the "Alpha Micro Merger Sub," and
together with Alpha Micro, the "Alpha Micro Companies"); DELTA COMPUTEC INC., a
New York corporation ("DCI", and together with its subsidiaries the "Company");
and XXXXXX XXXXXXX XX AND XXXXXX XXXXXXX (collectively "Xxxxxxx" and
collectively with the other shareholders of the Company, the "Shareholders").
Certain other capitalized terms used herein are defined in Article XI and
throughout this Agreement. Xxxxxxx is executing this Agreement solely for the
purposes of making the representations contained in Article IV, making the
covenants contained in Section 6.7 and granting the proxy contained in Section
6.9, and agreeing to the provisions of Articles IX and X.
R E C I T A L S :
The Boards of Directors of Alpha Micro and DCI have determined that it
is in the best interests of their respective shareholders for Alpha Micro to
acquire the Company upon the terms and subject to the conditions set forth in
this Agreement. In order to effectuate the transaction, Alpha Micro has
organized Alpha Micro Merger Sub as a wholly-owned subsidiary, and the parties
have agreed, subject to the terms and conditions set forth in this Agreement, to
merge Alpha Micro Merger Sub with and into DCI so that DCI continues as the
surviving corporation. As a result, DCI will become a wholly-owned subsidiary of
Alpha Micro, and the Shareholders will have the right to receive the Purchase
Price (as hereinafter defined).
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement
and in accordance with the Business Corporation Law of the State of New York
(the "New York Statute"), at the Effective Time (as defined below) Alpha Micro
Merger Sub shall be merged with and into DCI (the "Merger") pursuant to the
terms and
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conditions set forth in the Agreement of Merger annexed hereto as Exhibit "A"
(the "Agreement of Merger"). The terms and conditions of the Agreement of Merger
are incorporated herein by reference as if fully set forth herein. As a result
of the Merger, the separate corporate existence of Alpha Micro Merger Sub shall
cease and DCI shall continue as the surviving corporation (the "Surviving
Corporation").
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the consummation of the Merger (the "Closing") shall take place as promptly as
practicable (and in any event within five (5) business days) after satisfaction
or waiver of the conditions set forth in Articles VII and VIII, by delivery of
documents through the parties' respective attorneys and the filing of the
Agreement of Merger, or such other time and place as the parties may otherwise
agree.
1.3 Filing of Articles of Merger. At the time of the Closing, the
parties shall cause the Merger to be consummated by filing a duly executed
Certificate of Merger with the Secretary of State of the State of New York, in
such form as Alpha Micro determines is required by and is in accordance with the
relevant provisions of the New York Statute (the date and time of such filing is
referred to herein as the "Effective Date" or "Effective Time").
1.4 Surviving Corporation's Certificate of Incorporation, Bylaws,
Directors and Officers.
(a) Certificate of Incorporation. The Certificate of Incorporation
of DCI shall be amended to be the Certificate of Incorporation of Alpha
Micro Merger Sub as in effect immediately prior to the Effective Time,
and as so amended shall be the Certificate of Incorporation of the
Surviving Corporation.
(b) Bylaws. The Bylaws of Alpha Micro Merger Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by the New
York Statute and the Certificate of Incorporation of the Surviving
Corporation.
(c) Directors and Officers. The directors of Alpha Micro Merger Sub
immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation,
and the officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed, as the
case may be, and qualified.
1.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of DCI, Alpha Micro, Alpha Micro
Merger Sub, or the Shareholders:
(a) Per Share Merger Consideration.
Each share of common stock, par value $.01 per share, of DCI
("Company Common Stock" or "Xxxxxxx Common Stock") issued and
outstanding immediately prior
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to the Effective Time, (other than any Dissenting Shares) shall be
converted into the right to receive a portion of the Purchase Price
calculated as follows:
(i) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time held by a Shareholder other
than Xxxxxxx or any other Electing Shareholder (as defined herein)
shall be converted into the right to receive Thirty Two Cents
($.32) (the "Per Share Merger Price"), provided that there shall be
withheld from the Per Share Merger Price the pro rata portion
(based upon the total number of shares of Company Stock Outstanding
and Options and Warrants described in Paragraph (b) of this Section
1.5) of the Escrow Funds as calculated pursuant to this Section
1.5, which amount shall be deposited into the escrow provided by
Article IX to fund the Shareholder's indemnification obligations
pursuant to Article X and any adjustment pursuant to Section 9.2
and be subject to the terms of the Escrow Agreement attached hereto
as Exhibit "B".
(ii) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time held by Xxxxxxx or any
other Electing Shareholder shall be converted into the right to
receive a portion of the Purchase Price equal to an amount (the
"Xxxxxxx Per Share Merger Price") calculated as follows:
(A) the sum of the Purchase Price plus the aggregate
exercise price of all Options included in Paragraph (b) of this
Section 1.5; less
(B) the aggregate of the amount payable to Shareholders
other than Xxxxxxx and Electing Shareholders pursuant to
Subparagraph (i) of this Section 1.5(a) plus the amount due
holders of Options and Warrants pursuant to Paragraph (b) of
this Section 1.5; divided by
(C) the number of outstanding shares of the Company as of
the Effective Time held by Xxxxxxx and Electing Shareholders;
provided that a portion (the "Escrowed Funds") of the amount that
would otherwise be payable as Xxxxxxx Per Share Merger Price shall
be deducted from the amount to be paid to Xxxxxxx and each Electing
Shareholder in accordance with each holder's pro rata interest
(based upon the total number of shares of Company Common Stock
outstanding and Options and Warrants described in Paragraph (b) of
this Section 1.5) which amount shall be deposited into the escrow
provided by Article IX to fund the Shareholders' indemnification
obligations pursuant to Article X and any adjustment pursuant to
Section 9.2 and be subject to the terms of the Escrow Agreement
attached hereto as Exhibit "B".
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For the purposes hereof, the "Purchase Price" shall equal Three
Million Four Hundred Thirty Two Thousand Nine Hundred Ninety Nine
Dollars ($3,432,999) less the amount of any increase in the Net
Shareholders' Deficit (excluding adjustments for the provision for
income taxes as they relate to net operating losses and any from
reduction in the Company's accounts payable attributable to the
compromise or other write-off by the payee, but including in the
calculation of the Net Shareholders' Deficit on the Closing Date all
direct transaction costs (including attorneys' fees and fees due Xxxxxxx
& Co.) between May 28, 1998, and the Closing Date (as hereinafter
defined) (which increase in the Net Shareholders' Deficit shall be
considered in the calculation of the threshold recovery amount as
described in Section 10.2(d) and to the extent, when considered with
other Losses, it does not exceed such threshold recovery amount shall
not be subtracted). "Net Shareholders' Deficit" shall mean the net
shareholders deficit as determined in accordance with GAAP. Not later
than two (2) business days prior to the Closing, the Company shall
deliver to Alpha Micro a certificate (the "Pre-Closing Certificate")
executed by the Chief Financial Officer of the Company, and reasonably
acceptable to Alpha Micro, which Pre-Closing Certificate shall set forth
a good faith estimate of the amount of the Net Shareholders' Deficit. In
connection with the preparation of the Pre-Closing Certificate, the
Company shall make available to Alpha Micro and its advisors the Chief
Financial Officer of the Company and all work papers, schedules,
memoranda and other documents and information prepared or reviewed by
the Company in the preparation of the Pre-Closing Certificate as may be
necessary for the verification of the calculations set forth in the
Pre-Closing Certificate.
For the purposes hereof, an "Electing Shareholder" shall mean a
shareholder who has executed prior to the Merger an agreement in a form
reasonably acceptable to Alpha Micro whereby such Electing Shareholder
agrees to receive as full consideration for such Electing Shareholder's
shares of Company Common Stock the Xxxxxxx Per Share Merger
Consideration.
The Escrowed Funds shall equal Two Hundred Fifty Thousand Dollars
($250,000) plus an additional amount equal to the following: One Hundred
Fifty Thousand Dollars ($150,000) less any reduction in the Company's
accounts payable subsequent to May 31, 1998 and prior to the Closing
Date attributable to the compromise or other write-off by the Payee
which (i) relates to an account payable more than sixty (60) days
outstanding, (ii) is acknowledged and agreed to in writing by the payee,
and (iii) is approved by Alpha Micro as not having an adverse impact on
the Company's relationship with a continuing vendor.
(b) Options and Warrants. Each Option and Warrant issued and
outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder thereof be
canceled at the Effective Time and shall (subject to Section 1.7)
entitle the holder thereof to receive an amount, if greater than zero,
equal to the Per Share Merger Price multiplied by the number of shares
of Company Common Stock acquirable immediately prior to the Effective
Time through the exercise of such Option or Warrant, less the aggregate
exercise price for all shares of
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Company Common Stock issuable upon the exercise of such Option or
Warrant, provided that there shall be withheld from the Per Share Merger
Price payable with respect to such Option and Warrant the pro rata
portion (based upon the total number of shares of Company Stock
Outstanding and Options and Warrants described in this Paragraph (b)) of
the Escrow Funds as calculated pursuant to this Section 1.5, which
amount shall be deposited into the escrow provided by Article IX to fund
the Shareholder's indemnification obligations pursuant to Article X and
any adjustment pursuant to Section 9.2 and be subject to the terms of
the Escrow Agreement attached hereto as Exhibit "B"..
(c) Treasury Stock. Each share of Company Common Stock held in the
treasury of the Company or by any direct or indirect Subsidiary of the
Company immediately prior to the Effective Time, if any, shall be
canceled.
(d) Alpha Micro Merger Corp Stock. Each share of common stock of
Alpha Micro Merger Corp issued and outstanding at the Effective Time
shall be converted into one share of the common stock of the Surviving
Corporation.
(e) Rights as Shareholders. The Shareholders of DCI's Common Stock
will cease to have any rights as shareholders of DCI, except such
rights, if any, as they may have pursuant to the New York Statute.
1.6 Delivery of Purchase Price. At the Effective Time, the Shareholders
shall deliver the certificates representing all issued and outstanding shares of
Company Common Stock to Alpha Micro for cancellation, and Alpha Micro shall
deliver the Purchase Price in the following manner: (i) Alpha Micro shall
deliver to the Escrow Agent the Escrowed Funds, to be held as a source of funds
for the indemnification obligations of the Shareholders pursuant to Article X;
and (ii) Alpha Micro shall deliver the remainder of the Purchase Price to an
entity designated by DCI (which shall be subject to Alpha Micro's reasonable
approval) (the "Paying Agent"), in cash, to be distributed to the Shareholders
(each Shareholder having the right to receive a portion of the Purchase Price
based on the number of shares of DCI Common Stock owned by the respective
Shareholder on the Effective Date and as calculated and set forth in Section 1.5
above).
1.7 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, each share of DCI Common Stock issued and outstanding immediately
prior to the Effective Time and which is held by any holder of such shares who
has not voted for approval of this Agreement and the transactions contemplated
hereby or consented thereto in writing, and who has properly demanded appraisal
rights with respect thereto in accordance with Section 623 of the New York
Statute (the "Dissenting Shares"), shall not be converted into, or be
exchangeable for the right to receive, the applicable Per Share Merger Price,
but holders of such shares shall be entitled to receive payment of the appraised
value of such Dissenting Shares in accordance with the provisions of Section 623
of the New York Statute, unless and until the holder of any such shares
withdraws his or her demand for such appraisal in accordance with the New York
Statute or otherwise loses his or her
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right to such appraisal. If a holder of Dissenting Shares shall properly
withdraw his or her demand for appraisal or shall otherwise lose his or her
right to such appraisal, then, as of the Effective Time or the occurrence of
such event, whichever last occurs, each of such holder's Dissenting Shares shall
cease to be Dissenting Shares and shall be deemed to have been converted into
and to have become exchangeable for the right to receive the applicable Per
Share Merger Price, without any interest thereon but subject to the obligation
of such holder to participate in the escrow under the Escrow Agreement based on
such holder's Pro Rata Interest pursuant to Section 1.5(a). The Company shall
give Alpha Micro prompt notice of any written demands for appraisal of any
shares of Company Common Stock, attempted withdrawals of such demands, and any
other instruments served pursuant to the New York Statute received by the
Company relating to Shareholders' rights of appraisal.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ALPHA MICRO
As a material inducement to the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, Alpha Micro
represents and warrants to the Company and the Shareholders, as of the date of
execution of this Agreement and as of the Effective Time:
2.1 Corporate Status. Alpha Micro is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
Alpha Micro Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Alpha Micro Merger Sub is
a wholly-owned subsidiary of Alpha Micro.
2.2 Corporate Power and Authority. Each of the Alpha Micro Companies has
the corporate power and authority to execute and deliver this Agreement, to
perform its respective obligations hereunder and to consummate the transactions
contemplated hereby. Each of the Alpha Micro Companies has taken all action
necessary to authorize its execution and the delivery of this Agreement, the
performance of its respective obligations hereunder and the consummation of the
transactions contemplated hereby.
2.3 Enforceability. This Agreement has been duly executed and delivered
by each of the Alpha Micro Companies and constitutes a legal, valid and binding
obligation of each of the Alpha Micro Companies, enforceable against each of the
Alpha Micro Companies in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to each of the Alpha Micro Companies to enter
into this Agreement and to consummate the transactions contemplated hereby, the
Company represents
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and warrants to the Alpha Micro Companies, as of the date of execution of this
Agreement and as of the Closing Date:
3.1 Corporate Status. DCI is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, and has
the requisite power and authority to own or lease its properties and to carry on
its business as now being conducted. DCI is qualified to transact business as a
foreign corporation in California, Connecticut, Georgia, Illinois, Louisiana,
Maryland, Massachusetts, Ohio, Pennsylvania, Texas and New Jersey, and the
nature of its properties or the conduct of its business does not require
qualification in any other state. DCI has fully complied with all of the
requirements of any statute governing the use and registration of fictitious
names, and has the legal right to use the names under which it operates its
business. There is no pending or threatened proceeding for the dissolution,
liquidation, insolvency or rehabilitation of DCI.
3.2 Subsidiaries. Schedule 3.2 lists each subsidiary ("Subsidiary") of
DCI and each other corporation, partnership, joint venture or other business
entity in which DCI, directly or indirectly, own any outstanding voting
securities of or other interests in, or controls, together a description of the
interest therein, the state of incorporation, and each state in which such
Subsidiary is qualified to transact business. Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its formation, and has the requisite power and authority to own or
lease its properties and to carry on its business as now being conducted or
proposed to be conducted. Each Subsidiary is qualified to transact business as a
foreign corporation in those states where the nature of its properties and the
conduct of its business requires qualification. Each Subsidiary has fully
complied with all of the requirements of any statute governing the use and
registration of fictitious names, and has the legal right to use the names under
which it operates its business. There is no pending or threatened proceeding for
the dissolution, liquidation, insolvency or rehabilitation of any Subsidiary or
other entity described on Schedule 3.2 except as set forth on Schedule 3.2.
3.3 Power and Authority. DCI has the power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. DCI has taken all action necessary to
authorize the execution and delivery of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated
hereby, excepting the approval of the Shareholders which will be obtained prior
to Closing.
3.4 Enforceability. This Agreement has been duly executed and delivered
by DCI, and constitutes the legal, valid and binding obligation of DCI,
enforceable against it in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
3.5 Capitalization. DCI has authorized an aggregate of 20,000,000 shares
of Company common stock $.01 par value and 5,000,000 shares of preferred stock,
and
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18,200,050 shares of Common Stock and no shares of preferred stock are issued
and outstanding. All of the issued and outstanding shares of each of the
Subsidiaries listed on Schedule 3.2 are owned by DCI. All of the issued and
outstanding shares of capital stock of DCI and its Subsidiaries and the
securities of any other entity in which the Company has an interest (i) have
been duly authorized and validly issued, and once exchanged for the Per Share
Merger Price or Xxxxxxx Per Share Merger Price, as the case may be, no person or
entity shall be entitled to require that payment be made with respect to such
shares except as contemplated by Section 1.5(a) hereof, (ii) were issued in
compliance with all applicable state and federal securities laws, and (iii) were
not issued in violation of any preemptive rights or rights of first refusal. No
preemptive rights or rights of first refusal exist with respect to the shares of
capital stock of DCI or its Subsidiaries and no such rights arise by virtue of
or in connection with the transactions contemplated hereby. There are no
outstanding or authorized rights, options, warrants, convertible securities,
subscription rights, conversion rights, exchange rights or other agreements or
commitments of any kind that could require DCI or its Subsidiaries to issue or
sell any shares of their respective capital stock (or securities convertible
into or exchangeable for shares of its capital stock) except as listed on
Schedule 3.5. There are no outstanding stock appreciation, phantom stock profit
participation or other similar rights with respect to DCI or its Subsidiaries
except as listed on Schedule 3.5. There are no proxies, voting rights or other
agreements or understandings with respect to the voting or transfer of the
capital stock of DCI or its Subsidiaries. DCI is not obligated to redeem or
otherwise acquire any of its outstanding shares of capital stock.
3.6 Commission Reports. Except for delinquent filings prior to fiscal
1997, DCI has duly and timely made all required filings with the Securities and
Exchange Commission under the Securities Act of 1933 and the Securities Exchange
Act of 1934, each as amended, and all of the reports, forms and documents so
filed complied in all material respects with all applicable requirements. DCI
has heretofore delivered to Alpha Micro accurate and complete copies of the
reports, proxy statements and registration statements which have been filed with
the Securities and Exchange Commission since January 1, 1993, all of which are
listed on Schedule 3.6. None of such reports, proxy statements or registration
statements contained any untrue statements of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements and schedules of DCI
contained in such public reports (or incorporated therein by reference) were
prepared in accordance with GAAP applied on a consistent basis, except as noted
therein, and fairly present the consolidated financial condition and results of
operations of DCI and its subsidiaries as at the respective dates thereof and
for the periods indicated therein, subject (in the case of interim unaudited
financial statements) to normal year-end audit adjustments, none of which are
material.
3.7 Loss Contingencies and Other Non-Accrued Liabilities. Except as
described on the Schedule 3.7, the Company does not have (i) any loss
contingencies which are not required by GAAP to be accrued; (ii) any loss
contingencies involving an unasserted claim or assessment which are not required
by GAAP to be disclosed because the potential claimants have not manifested to
the Company an awareness of a possible claim or assessment; or (iii) any
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categories of known liabilities or obligations which are not required by GAAP to
be accrued. For purposes of this Agreement, "loss contingency" shall have the
meaning accorded to it by GAAP.
3.8 No Violation. The execution and delivery of this Agreement by DCI,
the performance by DCI of its obligations hereunder and the consummation by DCI
of the transactions contemplated by this Agreement will not (i) contravene any
provision of the articles of incorporation or bylaws of DCI, (ii) violate or
conflict with any law, statute, ordinance, rule, regulation, decree, writ,
injunction, judgment or order of any Governmental Authority or of any
arbitration award which is either applicable to, binding upon or enforceable
against the Company, (iii) conflict with, result in any breach of, or constitute
a default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any contract which is
applicable to, binding upon or enforceable against the Company, (iv) result in
or require the creation or imposition of any Lien upon or with respect to any of
the property or assets of the Company, or (v) excepting with respect to the
filing and recordation of appropriate merger documents as required by the New
York Statute, and except as to the approval of a majority of DCI's shareholders,
require the consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, any court or tribunal or any other
Person.
3.9 Representations and Covenants Regarding Corporate Records of DCI and
its Subsidiaries. The copies of the articles of incorporation and bylaws of DCI
and its Subsidiaries which were provided to Alpha Micro are true, accurate and
complete and reflect all amendments thereto, and DCI and its Subsidiaries shall
not amend the [articles of incorporation or] bylaws prior to the Closing Date.
The minute books for DCI and its Subsidiaries have been or shall be delivered to
Alpha Micro for review within four (4) days from the date of this Agreement, and
shall be true and correct in all material respects as of the date of such
review. The Company shall promptly provide to Alpha Micro copies of all
subsequent entries therein prior to the Closing Date. Upon delivery to Alpha
Micro, the minute books of DCI and its Subsidiaries shall be true and correct
and will contain the true signatures of the Persons purporting to have signed
them. All material corporate actions taken by DCI and its Subsidiaries have been
or will be as of the date of delivery of the minute books duly authorized or
ratified. All accounts, books, ledgers and official and other records of DCI and
its Subsidiaries have been fully, properly and accurately kept and completed in
all material respects, and there are no material inaccuracies or discrepancies
of any kind contained therein.
3.10 Interim Financial Statements. DCI has delivered to Alpha Micro
financial statements for the periods ending April 30, 1998 and May 31, 1998 (the
"Interim Financial Statements"). The Interim Financial Statements fairly present
the financial position of the Company at each of the balance sheet dates and the
results of operations for the periods covered thereby, and have been prepared in
accordance with GAAP consistently applied throughout the periods indicated. The
Interim Financial Statements of the Company fully and fairly reflect all of its
transactions, properties, assets and liabilities. There are no extraordinary or
material non-recurring items of income or expense during the periods covered by
the Interim Financial Statements (except as may be expressly stated in the notes
thereto) and the balance sheets included in the Interim Financial Statements do
not reflect any write-up or revaluation increasing
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the book value of any assets, except as specifically disclosed in the notes
thereto. The Interim Financial Statements reflect all adjustments necessary for
a fair presentation of the financial information contained therein.
3.11 Changes Since May 31, 1998 (the "Current Balance Sheet Date"), and
for the Period Between May 28, 1998 and May 31, 1998. Except as set forth on
Schedule 3.11, since the Current Balance Sheet Date, and as separately stated,
for the period May 28, 1998 through May 31, 1998, the Company has not (i) issued
any capital stock or other securities; (ii) made any distribution of or with
respect to its capital stock or other securities or purchased or redeemed any of
its securities; (iii) paid any bonus to or increased the rate of compensation of
any of its officers or salaried employees or amended any other terms of
employment of such Persons; (iv) sold, leased or transferred any of its
properties or assets other than in the ordinary course of business consistent
with past practice; (v) made or obligated itself to make capital expenditures
out of the ordinary course of business consistent with past practice; (vi) made
any payment in respect of its liabilities other than in the ordinary course of
business consistent with past practice; (vii) incurred any obligations or
liabilities (including any indebtedness) or entered into any transaction or
series of transactions involving in excess of $20,000 in the aggregate outside
of the ordinary course of business, except for this Agreement and the
transactions contemplated hereby; (viii) suffered any theft, damage, destruction
or casualty loss, not covered by insurance and for which a timely claim was
filed, in excess of $10,000 in the aggregate; (ix) suffered any extraordinary
losses (whether or not covered by insurance); (x) waived, canceled, compromised
or released any rights having a value in excess of $10,000 in the aggregate
except as approved in writing by Alpha Micro; (xi) made or adopted any change in
its accounting practice or policies; (xii) made any adjustment to its books and
records other than in respect of the conduct of its business activities in the
ordinary course consistent with past practice; (xiii) entered into any
transaction with any Affiliate other than intercompany transactions in the
ordinary course of business consistent with past practice; (xiv) entered into
any employment agreement; (xv) terminated, amended or modified any agreement
involving an amount in excess of $10,000; (xvi) imposed any security interest or
other Lien on any of its assets other than in the ordinary course of business
consistent with past practice; (xvii) except consistent with past practices,
delayed paying any accounts payable which are due and payable except to the
extent being contested in good faith; (xviii) made or pledged any charitable
contribution in excess of $5,000; (xix) entered into any other transaction or
been subject to any event which has or may have a Material Adverse Effect on the
Company; or (xx) agreed to do or authorized any of the foregoing, except as
expressly contemplated herein.
3.12 Liabilities of the Company. The Company does not have any
liabilities or obligations, whether accrued, absolute, contingent or otherwise,
except (i) to the extent reflected or taken into account in the Current Balance
Sheet and not heretofore paid or discharged, (ii) liabilities described on
Schedule 3.7, (iii) liabilities incurred in the ordinary course of business
consistent with past practice since the Current Balance Sheet Date (none of
which relates to breach of contract, breach of warranty, tort, infringement or
violation of law, or which arose out of any action, suit, claim, governmental
investigation or arbitration proceeding), (iv) normal accruals,
reclassifications, and audit adjustments which would be reflected on an audited
financial statement and which do not exceed in the aggregate $25,000, and
(v) liabilities
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incurred in the ordinary course of business prior to the Current Balance Sheet
Date which, in accordance with GAAP consistently applied, were not recorded
thereon. Other than set forth on Schedule 3.12, the Company will have no
outstanding indebtedness for borrowed money at the Effective Time, including
principal and accrued but unpaid interest, and including payments on capitalized
equipment leases. The amount of the Company's outstanding indebtedness to
Xxxxxxx (whether pursuant to outstanding debentures, the existing credit
agreement or otherwise), will be no more than Three Million Nine Hundred Ninety
Two Thousand and One Dollars ($3,992,001), as of the Effective Time, except as
permitted pursuant to Section 6.10.
3.13 Litigation. Except as set forth on Schedule 3.13, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation pending, threatened, anticipated or contemplated before any court,
administrative agency, arbitration panel, mediator or other body which matter is
against, by or affecting the Company, or any of its properties or assets, or
which questions the validity or enforceability of this Agreement or the
transactions contemplated hereby, and there is no basis for any of the
foregoing. The Company has not been charged with, nor is the Company under
investigation with respect to any charge concerning or in violation of, any
provisions of federal, state or local law or administrative regulations in
respect of its business and operations. There are no outstanding judgments,
orders, writs, injunctions, decrees or stipulations issued by any court or
federal ,state or local Governmental Authority in any proceeding to which the
Company is or was a party which have not been complied with in full or which
continue to impose any material obligations on the Company.
3.14 Environmental Matters.
(a) The Company and its former subsidiaries and predecessors are
and have at all times been in full compliance with all Environmental
Laws (as defined in clause (h) below) governing their business,
operations, properties and assets, including, without limitation: (i)
all requirements relating to the Discharge (as defined in clause (h)
below) and/or Handling (as defined in clause (h) below) of Hazardous
Substances (as defined in clause (h) below) or other Waste (as defined
in clause (h) below); (ii) all requirements relating to notice, record
keeping and reporting; (iii) all requirements relating to obtaining and
maintaining Licenses (as defined in clause (h) below) for the ownership
of their properties and assets and the operation of their businesses as
presently and previously conducted, including Licenses relating to the
Handling and Discharge of Hazardous Substances and other Waste; and (iv)
all applicable writs, orders, judgments, injunctions, governmental
communications, directives, decrees, informational requests or demands
issued pursuant to, or arising under, any Environmental Laws.
(b) There are no non-compliance orders, warning letters, notices of
violation or the like (collectively "Notices"), claims, suits, actions,
judgments, penalties, fines, or investigations or proceedings
(administrative, judicial or otherwise) (collectively "Proceedings")
pending or threatened against or involving the Company or any of its
former subsidiaries, or the business, operations, properties, or assets
of any or all of the foregoing, initiated by any Governmental Authority
or third party with respect to any Environmental Laws or Licenses issued
to the Company or any of its former subsidiaries
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in connection with, related to or arising out of (i) the ownership by
the Company or such subsidiaries of their properties or assets or (ii)
the operation of their businesses, which have not been resolved to the
satisfaction of the initiating Governmental Authority or third party in
a manner that would impose any obligation, burden or liability on Alpha
Micro or the Surviving Corporation in the event that the transactions
contemplated by this Agreement are consummated, or which could have a
Material Adverse Effect on Alpha Micro or the Surviving Corporation,
including, without limitation: (i) Notices or Proceedings related to the
Company and/or any of its former subsidiaries being a potentially
responsible party under any applicable Environmental Laws; (ii) Notices
or Proceedings in connection with any federal or state environmental
cleanup site, or in connection with any real property or premises where
the Company and/or any of its former subsidiaries has conducted its
business or operations or has transported, transferred or disposed of
other Waste; (iii) Notices or Proceedings relating to the Company and/or
any of its former subsidiaries being responsible to undertake any
removal, response or remedial actions or clean-up actions of any kind;
or (iv) Notices or Proceedings related to the Company and/or any of its
former subsidiaries being liable under any Environmental Laws for
personal injury, property damage, natural resource damage, or clean up
obligations.
(c) Except as set forth on Schedule 3.14, neither the Company nor
any of its former subsidiaries has Handled or Discharged, nor has it
allowed or arranged for any third party to Handle or Discharge,
Hazardous Substances or other Waste to, at or upon: (i) any location
other than a site lawfully permitted to receive such Hazardous
Substances or other Waste; (ii) any real property currently or
previously owned or leased by the Company and/or any of its former
subsidiaries; or (iii) any site which, pursuant to any Environmental
Laws, (A) has been placed on the National Priorities List or its state
equivalent, or (B) the Environmental Protection Agency or the relevant
state agency or other Governmental Authority has notified the Company
and/or any of its former subsidiaries that such Governmental Authority
has proposed or is proposing to place on the National Priorities List or
its state equivalent. There has not occurred, nor is there presently
occurring, a Discharge, or threatened Discharge, of any Hazardous
Substance on, into or beneath the surface of or, to the knowledge of the
Company, adjacent to, any real property currently or previously owned or
leased by the Company and/or any of its former subsidiaries in an amount
requiring a notice or report to be made to a Governmental Authority or
in violation of any applicable Environmental Laws. The Company and/or
any of its former subsidiaries did not Discharge any Hazardous Substance
on, into or beneath the surface of any real property adjacent to any
real property currently or previously owned or leased by the Company or
on which the Company and/or any of its former subsidiaries performed any
of its business operations.
(d) Schedule 3.14 identifies the operations and activities, and
locations thereof, which have been conducted or are being conducted by
the Company or any of its former subsidiaries on any real property
currently or previously owned or leased by the Company or any of its
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19
former subsidiaries or on which the Company and/or any of its former
subsidiaries performed any of its business operations which have
involved the Handling or Discharge of Hazardous Substances.
(e) Neither the Company nor any of its former subsidiaries owns,
operates or uses, nor have any of them owned, operated, or used, any
Aboveground Storage Tanks (as defined in clause (h) below) or
Underground Storage Tanks (as defined in clause (h) below), and there
are not now nor have there ever been any Aboveground Storage Tanks or
Underground Storage Tanks on or beneath any real property currently or
previously owned or leased by the Company nor any of its former
subsidiaries that are or were required to be registered under applicable
Environmental Laws.
(f) Schedule 3.14 identifies (i) all environmental audits,
assessments, investigations or occupational health studies undertaken by
the Company or its agents or, to the knowledge of the Company,
undertaken by any Governmental Authority, or any third party, relating
to or affecting the Company and/or any of its former subsidiaries or any
real property currently or previously owned or leased by the Company or
any of its former subsidiaries or on which the Company and/or any of its
former subsidiaries performed any of its business operations; (ii) the
results of any ground water, soil, air and/or asbestos testing and/or
monitoring undertaken by the Company and/or any of its former
subsidiaries or its agents or, to the knowledge of the Company,
undertaken by any Governmental Authority or any third party, relating to
or affecting the Company and/or any of its former subsidiaries or any
real property currently or previously owned or leased by the Company or
any of its former subsidiaries or on which the Company and/or any of its
former subsidiaries performed any of its business operations which
indicate the presence of Hazardous Substances; (iii) all material
written communications between the Company and/or any of its former
subsidiaries and any Governmental Authority and/or third party arising
under or related to Environmental Laws; and (iv) all outstanding
citations issued under OSHA, or similar state or local statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or decrees,
relating to or affecting either the Company and/or any of its former
subsidiaries or any real property currently or previously owned or
leased by the Company and/or any of its former subsidiaries.
(g) To the best of the Company's knowledge, there are not, and have
not been, any asbestos containing materials in, on, under, about or as
part of any of the properties (including, without limitation, the
improvements thereto and the personal property thereon and/or thereat)
which the Company and/or its former subsidiaries or predecessors, or any
of them, owned and/or at which they, or any of them, operated; nor do
any of the assets of the Company and/or its former subsidiaries or
predecessors contain, nor have they ever contained, asbestos containing
materials; nor are asbestos containing materials used or otherwise been
part of the business or operations of the Company or its former
subsidiaries or predecessors, nor have they ever been.
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(h) For purposes of this Section 3.14, the following terms shall
have the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA (defined below), or
any applicable state or local statute, law, ordinance, code, rule,
regulation, order, ruling, or decree governing Aboveground Storage
Tanks.
"Discharge" or "Discharged" means any manner of spilling, leaking,
dumping, discharging, releasing or emitting, as any of such terms may
further be defined in any Environmental Law, into any medium including,
without limitation, ground water, surface water, soil or air.
"Environmental Laws" means all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings, and changes or ordinances or judicial or
administrative interpretations thereof, or similar laws of foreign
jurisdictions where the Company conducts business, whether currently in
existence or hereafter enacted or promulgated, any of which govern (or
purport to govern) or relate to pollution, protection of the
environment, public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste or occupational
health and safety, as any of these terms are or may be defined in such
statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or
administrative interpretations thereof, including, without limitation:
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended by the Superfund Amendment and Reauthorization Act
of 1986, 42 U.S.C. ss.9601, et seq. (collectively "CERCLA"); the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984,
42 U.S.C. ss.6901 et seq. (collectively "RCRA"); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. ss.1801, et seq.; the Clean
Water Act, as amended, 33 U.S.C. ss.1311, et seq.; the Clean Air Act, as
amended (42 U.S.C. ss.7401-7642); the Toxic Substances Control Act, as
amended, 15 U.S.C. ss.2601 et seq.; the Federal Insecticide, Fungicide,
and Rodenticide Act as amended, 7 U.S.C. ss. 136-136y ("FIFRA"); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended,
42 U.S.C. ss. 11001, et seq. (Title III of XXXX) ("EPCRA"); and the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
ss.651, et seq. ("OSHA").
"Handle," "Handling" or "Handled" means any manner of generating,
accumulating, storing, treating, disposing of, transporting,
transferring, labeling, handling, manufacturing or using, as any of such
terms may further be defined in any Environmental Law, of any Hazardous
Substances or Waste.
"Hazardous Substances" shall be construed broadly to include any
toxic or hazardous substance, material, or waste, and any other
contaminant, pollutant or constituent thereof whether liquid, solid,
semi-solid, sludge and/or gaseous, including without limitation
chemicals, compounds, by-products, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated
biphenyls, the presence of which requires investigation, remediation
and/or monitoring under any Environmental
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Laws or which are or become defined, designated, identified,
regulated, listed or controlled by, under or pursuant to any
Environmental Laws, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control
Act, the Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA, or
any similar state statute, or any future amendments to, or regulations
implementing such Environmental Laws, statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, or which has been or
shall be determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under any other
statute, law, regulation, order, code, rule, order, or decree.
"Licenses" means all licenses, certificates, permits, approvals and
registrations.
"Underground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA, or any applicable
state or local statute, law, ordinance, code, rule, regulation, order,
ruling, or decree governing Underground Storage Tanks.
"Waste" shall be construed broadly to include agricultural wastes,
biomedical wastes, biological wastes, bulky wastes, construction and
demolition debris, garbage, household wastes, industrial solid wastes,
liquid wastes, recyclable materials, sludge, solid wastes, special
wastes, used oils, white goods, and yard trash as those terms are
defined under any applicable Environmental Laws.
3.15 Real Estate.
(a) The Company does not own any real property.
(b) Schedule 3.15 sets forth a list of all leases, licenses or
similar agreements (the "Leases") to which the Company is a party
(copies of which have previously been furnished to Alpha Micro), in each
case, setting forth (i) the lessor and lessee thereof and the date and
term of each of the Leases, (ii) the legal description, including street
address, of each property covered thereby, and (iii) a brief description
of the principal improvements and buildings thereon (the "Leased
Premises"). The Leases are in full force and effect and have not been
amended, and as of the Effective Time the Company is not, in default or
breach under any such Lease, and to the knowledge of the Company, no
other party to any such Lease is in default or breach under any such
Lease. No event has occurred which, with the passage of time or the
giving of notice or both, would cause a material breach of or default
under any of such Leases by the Company, or, to the knowledge of the
Company, by any other party thereunder, or which would entitle the
lessor under any of the Leases to damages.
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3.16 Good Title to and Condition of Assets.
(a) The Company has good and marketable title to all of its Assets
(as hereinafter defined), free and clear of any Liens or restrictions on
use, except as set forth on Schedule 3.16. For purposes of this
Agreement, the term "Assets" means all of the properties and assets of
the Company, other than the Leased Premises, whether personal or mixed,
tangible or intangible, wherever located.
(b) The Fixed Assets (as hereinafter defined) currently in use or
necessary for the business and operations of the Company are in good
operating condition, normal wear and tear excepted. For purposes of this
Agreement, the term "Fixed Assets" means all vehicles, machinery,
equipment, tools, supplies, leasehold improvements, furniture and
fixtures used by or located on the premises of the Company or set forth
on the Current Balance Sheet or acquired by the Company since the
Current Balance Sheet Date. Schedule 3.16 lists the vehicles owned,
leased or used by the Company, setting forth the make, model, vehicle
identification number, and year of manufacture, and for each vehicle,
whether it is owned or leased, and if owned, the name of any lienholder
and the amount of the Lien, and if leased, the name of the lessor and
the general terms of the lease.
3.17 Compliance with Laws.
(a) The Company is and has been in compliance with all laws,
regulations and orders applicable to it, its business and operations (as
conducted by it now and in the past), the Assets and the Leased Premises
and any other properties and assets (in each case owned or used by it
now or in the past). Except for certain delinquent SEC filings described
in Section 3.6 above, the Company has not been cited, fined or otherwise
notified since June 1, 1996 of any asserted past or present failure to
comply with any laws, regulations or orders and no proceeding with
respect to any such violation is pending or threatened.
(b) Neither the Company, nor any of its employees or agents, has
made any payment of funds in connection with the business of the Company
which is prohibited by law, and no funds have been set aside to be used
in connection with the business of the Company for any payment
prohibited by law.
(c) The Company is and at all times has been in full compliance
with the terms and provisions of the Immigration Reform and Control Act
of 1986, as amended (the "Immigration Act"). With respect to each
Employee (as defined in 8 C.F.R. 274a.1(f)) of the Company for whom
compliance with the Immigration Act is required, the Company has on file
a true, accurate and complete copy of (i) each Employee's Form I-9
(Employment Eligibility Verification Form) and (ii) all other records,
documents or other papers prepared, procured and/or retained by the
Company pursuant to the Immigration Act. The Company has not been cited,
fined, served with a Notice of Intent to Fine or with a Cease and Desist
Order, nor has any action or administrative proceeding been initiated or
threatened against the Company, by the
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Immigration and Naturalization Service by reason of any actual or
alleged failure to comply with the Immigration Act.
(d) The Company is not subject to any Contract, decree or
injunction which restricts the continued operation of any business of
the Company or the expansion thereof to other geographical areas,
customers and suppliers or lines of business.
3.18 Labor and Employment Matters. Schedule 3.18 sets forth the name,
current rate of compensation of the employees of the Company. Except as set
forth on Schedule 3.18, the Company is not a party to or bound by any collective
bargaining agreement or any other agreement with a labor union, and there has
been no effort by any labor union during the twenty-four (24) months prior to
the date hereof to organize any employees of the Company into one or more
collective bargaining units. There is no pending or threatened labor dispute,
strike or work stoppage which affects or which may affect the business of the
Company or which may interfere with its continued operations. Neither the
Company nor any agent, representative or employee thereof has within the last
twenty-four (24) months committed any unfair labor practice as defined in the
National Labor Relations Act, as amended, and there is no pending or threatened
charge or complaint against the Company by or with the National Labor Relations
Board or any representative thereof. There has been no strike, walkout or work
stoppage involving any of the employees of the Company during the twenty-four
(24) months prior to the date hereof. The Company is not aware that any
executive or key employee or group of employees has any plans to terminate his,
her or their employment with the Company as a result of the Merger or otherwise.
The Company has complied with applicable laws, rules and regulations relating to
employment, civil rights and equal employment opportunities, including but not
limited to, the Civil Rights Act of 1964, the Fair Labor Standards Act, and the
Americans with Disabilities Act, as amended.
3.19 Employee Benefit Plans.
(a) Schedule 3.19 attached hereto contains a complete and accurate
list of all Employee Plans. Complete and accurate copies of (i) all
Employee Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Plans, (iii) all related trust
agreements, insurance contracts and summary plan descriptions, (iv) all
annual reports filed on IRS Form 5500, 5500C or 5500R for the last three
(3) plan years for each Employee Plan, (v) all reports by independent
auditors for the last three (3) plan years, (vi) the most recent
determination letters and all rulings, exemptions and waivers issued by
the Internal Revenue Service ("IRS"), Department of Labor, or Pension
Benefit Guaranty Corporation ("PBGC"), (vii) a description setting forth
the amount of any liability of the Company as of the Closing Date for
payments more than thirty (30) days past due with respect to each
Welfare Plan or Pension Plan which covers or has covered employees or
former employees of the Company, (viii) union contracts pursuant to
which the Company has established or maintains an Employee Plan, (ix)
minutes or other records of meetings of Employee Plan fiduciaries held
in the past three (3) years, and (x) all amendments to any of the
foregoing, and all written interpretations or descriptions of any of the
foregoing which have been distributed to the Company's
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employees have been delivered to Alpha Micro. Each Employee Plan
has been administered in accordance with its terms and the Company has
met its obligations with respect to such Employee Plan and has timely
made all required contributions thereto. The Company and all Employee
Plans are in compliance with the currently applicable provisions of
ERISA, the Code, the regulations thereunder, and other applicable law.
(b) Except as set forth on Schedule 3.19, the Company has no
knowledge of investigations by any governmental entity, termination
proceedings or other claims (other than routine claims for benefits),
suits or proceedings against or involving any Employee Plan or asserting
any rights or claims to benefits under any Employee Plan that could give
rise to any material liability.
(c) Schedule 3.19 sets forth each Pension Plan which is intended to
be qualified under Section 401(a) of the Code. Each Pension Plan listed
on Schedule 3.19 and each related trust agreement, annuity contract or
other funding instrument which covers or has covered employees or former
employees of the Company or any ERISA Affiliate is qualified and tax
exempt under the provisions of Code Sections 401(a) (or 403(a), as
appropriate) and 501(a), and has been so qualified during the period
from its adoption to date.
(d) Neither the Company nor any ERISA Affiliate currently
maintains, or has ever maintained, an Employee Plan subject to Section
412 of the Code or Title IV of ERISA.
(e) Except as set forth on Schedule 3.19, neither the Company nor
any ERISA Affiliate currently contributes, or has ever contributed, to a
Multi-employer Plan.
(1) Except as set forth on Schedule 3.19, neither the Company
nor any ERISA Affiliate has, at any time, withdrawn from a
Multi-employer Plan in a "complete withdrawal" or a "partial
withdrawal" as defined in Sections 4203 and 4205 of ERISA,
respectively, so as to result in a liability, contingent or
otherwise (including, but not limited to, the obligations pursuant
to an agreement entered into in accordance with Section 4204 of
ERISA), of the Company or any ERISA Affiliate.
(2) All contributions required to be made by the Company or any
ERISA Affiliate to each Multi-employer Plan have been made when
due.
(3) If, as of the Closing Date, the Company (and all ERISA
Affiliates) were to withdraw from all Multi-employer Plans to which
it (or any of them) has contributed or been obligated to
contribute, it (and they) would incur no liabilities to such plans
under Title IV of ERISA, except to the extent specified on Schedule
3.19.
(4) To the best of the Company's knowledge, with respect to
each Multi-employer Plan: (i) no such Multi-employer Plan has been
terminated
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or has been in reorganization under ERISA so as to result,
directly or indirectly, in any liability, contingent or otherwise,
of the Company or any ERISA Affiliate under Title IV of ERISA; (ii)
no proceeding has been initiated by any Person (including the PBGC)
to terminate any Multi-employer Plan; (iii) the Company and the
ERISA Affiliates have no reason to believe that any Multi-employer
Plan will be terminated or will be reorganized under ERISA; and
(iv) the Company and the ERISA Affiliates do not expect to withdraw
from any Multi-employer Plan.
(f) Except as set forth on Schedule 3.19, there are no unfunded
obligations under any Employee Plan providing benefits after termination
of employment to any employee of the Company (or to any beneficiary of
any such employee), including but not limited to retiree health
coverage, pensions and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the
Code and insurance conversion privileges under state law.
(g) Except as set forth on Schedule 3.19, no act or omission has
occurred and no condition exists with respect to an Employee Plan
maintained by the Company that could subject the Company to any material
fine, penalty, tax liability or Lien of any kind imposed under (i)
Sections 404, 406, 502(c), 502(i) or 502(l) of ERISA, (ii) Sections 412,
511, 4971, 4972, 4975, 4976, 4977, 4978, 4978B, 4979, 4979A or 4980B of
the Code, or (iii) Title IV of ERISA.
(h) Except as set forth on Schedule 3.19, no Employee Plan is
funded by, associated with, or related to a "voluntary employee's
beneficiary association" within the meaning of Section 501(c)(9) of the
Code.
(i) Except as set forth on Schedule 3.19, no Employee Plan, plan
documentation or agreement, summary plan description or other written
communication distributed generally to employees by its terms prohibits
the Company from amending or terminating any such Employee Plan.
(j) No complete or partial termination of any Employee Plan has
occurred for which affected participants were not fully vested in their
accrued benefits.
(k) Any bonding required by ERISA has been obtained and is in full
force and effect.
(l) With respect to each trust established by the Company which
intended to qualify as a voluntary employee benefit association under
Section 501(c)(9) of the Code, the Company does not have and does not
expect to have any liability (whether absolute or contingent, whether in
the nature of penalties, excise tax, additional contributions, or
otherwise) with respect to the funding or operation thereof, and the
Company does not expect the trust to have any unrelated business income
tax (whether absolute or contingent). The Company has either received a
ruling or determination from the IRS that such trust is exempt from
taxation under Section 501(c)(9) of the Code or has applied to the IRS
for such a ruling or determination.
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(m) The consummation of this transaction will not entitle any
employee of the Company to severance pay, unemployment compensation or
any similar payment.
(n) All required filings, including all filings required to be made
with the United States Department of Labor, IRS and the PBGC have been
timely filed.
(o) Each Welfare Plan which covers or has covered employees or
former employees of the Company and which is a "group health plan," as
defined in Section 607(1) of ERISA, has been operated in material
compliance with provisions of Part 6 of Title I of ERISA and Section
4980B of the Code at all times.
(p) There is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company (with respect to their
relationship with such entities) that, individually or collectively,
provides for the payment by the Company of any amount (i) that is not
deductible under Section l62(a)(l) or 404 of the Code or (ii) that is an
"excess parachute payment" pursuant to Section 280G of the Code.
(q) Each Employee Plan, related trust agreement, annuity contract
or other funding instrument which covers or has covered employees or
former employees of the Company is legally valid and binding and in full
force and effect.
(r) Neither the Company nor any ERISA Affiliate has any announced
plan or legally binding commitment to create any additional Employee
Plans which are intended to cover employees or former employees of the
Company or to amend or modify any existing Employee Plan which covers or
has covered employees or former employees of the Company.
(s) No event has occurred in connection with which the Company or
any ERISA Affiliate or any Employee Plan, directly or indirectly, could
be subject to any material liability (i) under any statute, regulation
or governmental order relating to any Employee Plans, or (ii) pursuant
to any obligation of the Company or any ERISA Affiliate to indemnify any
Person against liability incurred under, any such statute, regulation or
order as they relate to the Employee Plans.
3.20 Insurance. The Company is covered by valid, outstanding and
enforceable policies of insurance covering its respective properties, assets and
businesses against risks of the nature normally insured against by corporations
in the same or similar lines of business and in coverage amounts typically and
reasonably carried by such corporations (the "Insurance Policies"). Such
Insurance Policies are in full force and effect, and all premiums due thereon
have been paid. As of the Effective Time, each of the Insurance Policies will be
in full force and effect. None of the Insurance Policies will lapse or terminate
as a result of the transactions contemplated by this Agreement. The Company has
complied with the provisions of such Insurance Policies. Schedule 3.20 contains
(i) a complete and correct list of all Insurance Policies and all amendments and
riders thereto (copies of which have been provided to Alpha Micro) and (ii) a
detailed description of each pending claim under any of the Insurance Policies
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for an amount in excess of $10,000 that relates to loss or damage to the
properties, assets or businesses of the Company. The Company has not failed to
give, in a timely manner, any notice required under any of the Insurance
Policies to preserve its rights thereunder and has no knowledge of facts which
would give rise to retroactive premium adjustments.
3.21 Receivables. All of the Receivables (as hereinafter defined) are
valid and legally binding, represent bona fide transactions and arose in the
ordinary course of business of the Company. All of the Receivables are good and
collectible receivables, and will be collected in full in accordance with the
terms of such receivables (and in any event within six months following the
Closing), without setoff or counterclaims, subject to the allowance for doubtful
accounts, if any, set forth on the Current Balance Sheet as reasonably adjusted
since the date of the Current Balance Sheet in the ordinary course of business
consistent with past experience. For purposes of this Agreement, the term
"Receivables" means all receivables of the Company, including all trade account
receivables arising from the provision of services, sale of inventory, notes
receivable, and insurance proceeds receivable.
3.22 Licenses and Permits. The Company possesses all licenses and
required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for its businesses and operations, including with
respect to the operation of each of the Owned Properties and Leased Premises.
All such Permits are valid and in full force and effect, the Company is in full
compliance with the respective requirements thereof, and no proceeding is
pending or threatened to revoke or amend any of them. None of such Permits is or
will be impaired or in any way affected by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
3.23 Adequacy of the Assets; Relationships with Suppliers; Affiliated
Transactions. The Assets, Leased Premises and Intellectual Property constitute,
in the aggregate, all of the assets and properties necessary for the conduct of
the business of the Company in the manner in which and to the extent to which
such business is currently being conducted and proposed to be conducted. No
current supplier to the Company of items essential to the conduct of its
business has threatened to terminate its business relationship with it for any
reason. The Company does not have any direct or indirect interest in any
customer, supplier or competitor of the Company, or in any Person from whom or
to whom the Company leases real or personal property.
3.24 Intellectual Property. The Company has full legal right, title and
interest in and to all trademarks, service marks, copyrights, know-how, patents,
trade secrets, proprietary computer software, data bases and compilations,
licenses (including licenses for the use of computer software programs), and
other intellectual property used in the conduct of its business (the
"Intellectual Property"). The business of the Company as presently conducted,
and the unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property, does not infringe or misappropriate any rights held or
asserted by any Person, and no Person is infringing on the Intellectual
Property. No payments are required for the continued use of the Intellectual
Property, excepting to the extent reflected in contracts listed on Schedule
3.25. None of the Intellectual Property has ever been declared invalid or
unenforceable, or is the subject of any pending or threatened action for
opposition, cancellation, declaration, infringement, or invalidity,
unenforceability or misappropriation or like claim, action or proceeding.
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3.25 Contracts. Schedule 3.25 contains a list of all executory
contracts, plans, undertakings and commitments (whether oral or written) to
which the Company is a party or by which it is bound (collectively, the
"Contracts"), and any proposals or bids, including but not limited to the
following (including with respect to each oral agreement, a summary of all
material terms of such oral agreement):
(a) employment contracts;
(b) labor or union contracts;
(c) distribution, franchise, license, sales, agency or advertising
contracts;
(d) contracts or commitments relating to commission arrangements
with others;
(e) contracts with suppliers;
(f) leases for personal property;
(g) service and consulting contracts, showing names and addresses
of such customers and the equipment subject to service under the service
contracts, and amounts and periods prepaid; and
(h) reseller agreements and certifications.
True copies of all of the Contracts, including all amendments and
supplements thereto, as well as all proposed but not yet executed contracts,
have been or will be prior to the Effective Time made available to Alpha Micro.
The Company will deliver to Alpha Micro at the Closing the original or a full,
true and correct copy of each of the written Contracts, and all modifications
and amendments to the foregoing, in existence on the Closing Date.
All of the Contracts are valid and in full force and effect. Except as
set forth on Schedule 3.25, all of the Contracts are fully assignable without
the consent of the other party thereto. The Company has duly performed all of
its obligations under the Contracts to the extent those obligations to perform
have accrued, and no default or breach under any Contracts by the Company or any
other party has occurred which remains uncured, nor is the Company aware of any
event which has occurred which, with notice or passage of time, could give rise
to any such default. To the best of the Company's knowledge, there is no reason
to believe that any customer who is a party to any Contract is unable or
unwilling to perform its obligations under such contract. The Company is not
aware of any request for or need for service under any service contract which
has not been performed prior to the Closing, except as set forth on Schedule
3.25.
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With respect to equipment leases, the Company has caused no damages to
the leased equipment which would entitle the lessor under any such Lease to
damages.
3.26 Customers. The customer list delivered to Alpha Micro contains a
complete and accurate list of the names and addresses of all customers who have
purchased products or services from the Company within the last three (3) years.
Schedule 3.26 sets forth (i) the twenty (20) largest customers of the Company in
terms of revenues during the Company's last fiscal year, showing the approximate
total sales in dollars by the Company to each of these customers during such
fiscal year. No single customer (including affiliates of the Company) represents
more than ten percent (10%) of the Company's revenues. Except as listed on
Schedule 3.26, since the Current Balance Sheet Date, there has been no adverse
change in the business relationship of the Company with any customer or supplier
which would have a Material Adverse Effect on the business taken as a whole.
Except as disclosed on Schedule 3.26, neither Xxxxxxx nor Xxxx Xxxxxx has
received any direct or indirect communication that any material customer with
whom the Company presently has a contract intends to terminate, not renew or
materially reduce the present level of services obtained from the Company.
3.27 Accuracy of Information Furnished by the Company. No
representation, statement or information made or furnished by the Company to
Alpha Micro or any of Alpha Micro's representatives, including those contained
in this Agreement and the various Schedules attached hereto and the other
information and statements referred to herein and previously furnished by the
Company, contains or shall contain any untrue statement of a material fact or
omits or shall omit any material fact necessary to make the information
contained therein not misleading. The Company has provided Alpha Micro with
access to true, accurate and complete copies of all documents listed or
described in the various Schedules attached hereto.
3.28 Bank Accounts; Business Locations. Schedule 3.28 sets forth all
accounts of the Company with any bank, broker or other depository institution,
and the names of all Persons authorized to withdraw funds from each such
account.
3.29 Names; Prior Acquisitions. All names under which the Company does
business as of the date hereof are specified on Schedule 3.29. Except as set
forth on Schedule 3.29, the Company has not changed its name or used any assumed
or fictitious name, or been the surviving entity in a merger, acquired any
business or changed its principal place of business or chief executive office,
within the past three (3) years.
3.30 No Commissions. Except for that contract by and between DCI and
Xxxxxxx & Co. described on Schedule 3.25, the Company has not incurred any
obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
3.31 National Canada Finance Corp. The Company has obtained the written
agreement that the quarterly premium payments associated with the Company's debt
to National Canada Finance Corp. shall not exceed Twenty Five Thousand Dollars
($25,000) in the aggregate, and that no other amounts shall be due National
Canada Finance Corp. excepting outstanding principal and accrued interest under
the Amended and Restated Promissory Note dated October 10, 1996.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXXXXX
As a material inducement to each of the Alpha Micro Companies to enter
into this Agreement and to consummate the transactions contemplated hereby,
Xxxxxxx represents and warrants to the Alpha Micro Companies, as of the date of
execution of this Agreement and as of the Effective Time:
4.1 Xxxxxxx Shares. Xxxxxx Xxxxxxx XX and Xxxxxx Xxxxxxx own those
shares represented by share certificates as set forth on Schedule 4.1. Xxxxxxx
owns in the aggregate 14,300,000 shares of Company Common Stock of DCI. Except
as described on Schedule 4.1, neither Xxxxxx Xxxxxxx XX nor Xxxxxx Xxxxxxx has
any rights to acquire any other shares of DCI.
4.2 Enforceability. This Agreement has been duly executed and delivered
by Xxxxxx Xxxxxxx XX and Xxxxxx Xxxxxxx, and constitutes the legal, valid and
binding obligation of Xxxxxx Xxxxxxx XX and Xxxxxx Xxxxxxx, enforceable it in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
4.3 No Violation. The execution and delivery of this Agreement by Xxxxxx
Xxxxxxx XX and Xxxxxx Xxxxxxx, the performance by Xxxxxx Xxxxxxx XX and Xxxxxx
Xxxxxxx of each of his or her obligations hereunder and the consummation by them
of the transactions contemplated by this Agreement will not (i) violate or
conflict with any law, statute, ordinance, rule, regulation, decree, writ,
injunction, judgment or order of any Governmental Authority or of any
arbitration award which is either applicable to, binding upon or enforceable
against either Xxxxxx Xxxxxxx XX or Xxxxxx Xxxxxxx, (ii) conflict with, result
in any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under any
Contract which is applicable to, binding upon or enforceable against either
Xxxxxx Xxxxxxx XX or Xxxxxx Xxxxxxx.
4.4 Outstanding Loans. The amounts shown on Schedule 4.4 as owed to
Xxxxxxx accurately reflect all amounts owed Xxxxxx Xxxxxxx XX and/or Xxxxxx
Xxxxxxx as of the date of this Agreement, and as supplemented, as of the
Effective Date.
4.5 Management. Xxxxxxx is not aware that any executive or key employee
or group of employees has any plans to terminate his, her or their employment
with the Company as a result of the Merger or otherwise.
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business by the Company Pending the Merger. The Company
covenants and agrees that, between the date of this Agreement and the Effective
Time, the business of the Company shall be conducted only in, and the Company
shall not take any action except in, the ordinary course of business, consistent
with past practice. The Company shall use commercially reasonable efforts to
preserve intact its business organization, to keep available the services of its
current officers, employees and consultants, and to preserve its present
relationships with customers, suppliers and other Persons with which it has
significant business relations. By way of amplification and not limitation, the
Company shall not, between the date of this Agreement and the Effective Time,
directly or indirectly, do or propose or agree to do any of the following
without the prior written consent of Alpha Micro:
(a) amend or otherwise change its articles of incorporation or
bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber, or, authorize the
issuance, sale, pledge, disposition, grant or encumbrance of any shares
of its capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest in the Company, except
with respect to options already granted under the Company's Stock Option
Plan, and provided hereunder that nothing herein shall preclude the
Company from effecting on its books transfers by its shareholders other
than Xxxxxxx, and further provided that Xxxxxxx shall be permitted to
transfer up to 292,000 shares of the Company Common Stock held by
Xxxxxxx to Xxxx XxXxxx and certain other employees of the Company
designated by Xxxxxxx;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) acquire (including, without limitation, for cash or shares of
stock, by merger, consolidation, or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization
or division thereof or any assets, or make any investment either by
purchase of stock or securities, contributions of capital or property
transfer, or, except in the ordinary course of business, consistent with
past practice, purchase any property or assets, (ii) incur any
indebtedness for borrowed money (other than to Xxxxxxx, provided that
the amount owed Xxxxxxx as of the Effective Date, whether pursuant to
outstanding debentures, the existing credit agreement or otherwise,
shall not exceed Three Million Nine Hundred Ninety Two Thousand One
Dollars ($3,992,001), other than as permitted by Section 6.10; issue any
debt securities or assume, guarantee or otherwise as an accommodation
become responsible for, the
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obligations of any Person or entity, or make any loans or advances, (iv)
sell, dispose of or encumber any of its assets, tangible or intangible,
except in the ordinary course of business consistent with past practice,
or (v) enter into any Contract other than in the ordinary course of
business, consistent with past practice;
(f) increase the compensation payable or to become payable to its
officers or employees, or, except as presently bound to do, grant any
severance or termination pay to, or enter into any employment or
severance agreement with, any of its directors, officers or other
employees, or establish, adopt, enter into or amend or take any action
to accelerate any rights or benefits which any collective bargaining,
bonus, profit sharing, trust, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees
except as disclosed on Schedule 5.1(f);
(g) take any action other than in the ordinary course of business
and in a manner consistent with past practice with respect to accounting
policies or procedures;
(h) pay, discharge or satisfy any existing claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) due persons or entities other than Xxxxxxx, other than the
payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice of due and payable liabilities
reflected or reserved against in its financial statements, as
appropriate, or liabilities incurred after the date hereof in the
ordinary course of business and consistent with past practice, or pay,
discharge or satisfy any existing claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) due
persons or entities other than Xxxxxxx other than as permitted by
Section 6.10;
(i) increase or decrease prices charged to its customers, except
for previously announced price changes, or take any other action which
might reasonably result in any material increase in the loss of
customers through non-renewal or termination of service contracts or
other causes; or
(j) agree, in writing or otherwise, to take or authorize any of the
foregoing actions or any action which would make any representation or
warranty in Article III untrue or incorrect.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
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33
6.2 Cooperation. Each of the parties agrees to cooperate with the other
in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation or the rules of Nasdaq in connection with the
transactions contemplated by this Agreement and to use their respective best
efforts to agree jointly on a method to overcome any objections by any
Governmental Authority to any such transactions.
6.3 Access to Information. From the date hereof to the Effective Time,
the Company shall (and shall cause its directors, officers, employees, auditors,
counsel and agents) to afford Alpha Micro and Alpha Micro's officers, employees,
auditors, counsel and agents reasonable access at all reasonable times to its
properties, offices, other facilities, to its officers and employees and to all
books and records, and shall furnish such Persons with all financial, operating
and other data and information as may be requested, provided that all
information afforded Alpha Micro in connection with such access shall continue
to be subject to the provisions of the Letter Agreement between the Company and
Alpha Micro dated May 29, 1998 relating to confidential information. No
information provided to or obtained by Alpha Micro shall affect any
representation or warranty in this Agreement.
6.4 Notification of Certain Matters. The Shareholders shall give prompt
notice to Alpha Micro of the occurrence or non-occurrence of any event which
would likely cause any representation or warranty contained herein to be untrue
or inaccurate, or any covenant, condition, or agreement contained herein not to
be complied with or satisfied.
6.5 Confidentiality; Publicity. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement or the subject matter or terms hereof without the
prior consent of the other parties hereto. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior approval of the other
parties, except that either party may make such public disclosure which it
believes in good faith to be required by law or by the terms of any listing
agreement with or requirements of a securities exchange (in which case such
party shall consult with an officer of the other prior to making such
disclosure).
6.6 No Other Discussions. Neither the Company or Xxxxxxx or their
respective employees, agents and representatives will (i) initiate, encourage
the initiation by others of discussions or negotiations with third parties or
respond to solicitations by third persons relating to any merger, sale or other
disposition of any substantial part of the assets, business or properties of the
Company (whether by merger, consolidation, sale of stock or otherwise) or (ii)
enter into any agreement or commitment (whether or not binding) with respect to
any of the foregoing transactions. The Company and/or Xxxxxxx will immediately
notify Alpha Micro if any third party attempts to initiate any solicitation,
discussion or negotiation with respect to any of the foregoing transactions.
Neither Alpha Micro nor its employees, agents and representatives will, prior to
the Merger, (i) initiate, encourage the initiation by others of discussions or
negotiations with third parties or respond to solicitations by third persons
relating to any merger,
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sale or other disposition of any substantial part of the assets, business or
properties of the Company (whether by merger, consolidation, sale of stock or
otherwise) or (ii) prior to the Merger, enter into any agreement or commitment
(whether or not binding) with respect to any of the foregoing transactions. In
the event this Agreement is terminated pursuant to the provisions of Section
12.1(a), (c) or (d), Alpha Micro shall disclose to Xxxxxxx if any other person
or entity has attempted to initiate any solicitation, discussion or negotiation
with respect to any of the foregoing transactions
6.7 Restrictive Covenants. In order to assure that Alpha Micro will
realize the benefits of the Merger, Xxxxxx Xxxxxxx XX and Xxxxxx Xxxxxxx hereby
each agree with Alpha Micro that they execute and deliver at the Closing a
Covenant Not To Compete in the form of Exhibit "C" hereto pursuant to which they
will agree that neither Xxxxxx Xxxxxxx XX nor Xxxxxx Xxxxxxx will, for a period
of four years from the Effective Time:
(a) directly or indirectly, alone or as a partner, joint venturer,
officer, director, employee, consultant, agent, independent contractor
or shareholder of any company or business, engage in any business
activity in any county in which the Company presently conducts business
which is directly or indirectly in competition with the business
conducted by the Company at the Effective Time; provided, however, that,
the beneficial ownership of less than five percent (5%) of the shares of
stock of any corporation having a class of equity securities actively
traded on a national securities exchange or over-the-counter market
shall not be deemed, in and of itself, to violate the prohibitions of
this Section;
(b) directly or indirectly (i) induce any Person which is a
customer of the Company at the Effective Time to patronize any business
directly or indirectly in competition with the business conducted by the
Company; (ii) canvass, solicit or accept from any Person which is a
customer of the Company, any such competitive business; or (iii) request
or advise any Person which is a customer of the Company at the Effective
Time to withdraw, curtail or cancel any such customer's business with
the Company or its successors;
(c) directly or indirectly employ, or knowingly permit any company
or business directly or indirectly controlled by him, to employ, any
Person who was employed by the Company at or within the prior six
months, or in any manner seek to induce any such Person to leave his or
her employment; and
(d) directly or indirectly, at any time following the Effective
Time, in any way utilize, disclose, copy, reproduce or retain in his
possession the Company's proprietary rights or records, including, but
not limited to, any of its customer lists.
Xxxxxx Xxxxxxx XX and Xxxxxx Xxxxxxx agree and acknowledge that the
restrictions contained in this Section are reasonable in scope and duration and
are necessary to protect Alpha Micro after the Effective Time. The parties agree
and acknowledge that the breach of this Section will cause irreparable damage to
Alpha Micro and upon breach of any provision of this Section, Alpha Micro shall
be entitled to injunctive relief, specific performance or other
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35
equitable relief; provided, however, that, this shall in no way limit any other
remedies which Alpha Micro may have (including, without limitation, the right to
seek monetary damages).
6.8 Trading in Alpha Micro Common Stock. Except as otherwise expressly
consented to in writing by Alpha Micro, from the date of this Agreement until
the Effective Time, neither the Company nor Xxxxxxx will directly or indirectly
purchase or sell (including short sales) any shares of Alpha Micro Common Stock
in any transactions effected on Nasdaq or otherwise.
6.9 Xxxxxxx Vote. Xxxxxx Xxxxxxx XX and Xxxxxx Xxxxxxx, in executing
this Agreement, as shareholders of the Company approve the Merger and the
transactions contemplated hereby, and agree (i) not to sell, transfer or
otherwise assign or encumber the shares of Company Stock owned by either of them
except as permitted by Section 5.1(b) hereof and (ii) to vote in favor of the
Merger and the transactions contemplated hereby at a special shareholders'
meeting called for such purpose. Concurrently with the execution of this
Agreement, Xxxxxx Xxxxxxx XX and Xxxxxx Xxxxxxx shall deliver to Alpha Micro an
irrevocable proxy to vote each of their shares of Company Common Stock in favor
of the Merger.
6.10 Xxxxxxx Loans. Neither the Company nor Xxxxxxx shall permit any
increase in the amount of the Company's outstanding indebtedness to Xxxxxxx
(whether pursuant to outstanding debentures, the existing credit agreement or
otherwise) to increase to more than Three Million Nine Hundred Ninety Two
Thousand and One Dollars ($3,992,001), provided that such amount may increase to
up to Four Million One Hundred Ninety Two Thousand and One Dollars ($4,192,001)
with Xxxx XxXxxx'x written approval, and in excess of Four Million One Hundred
Ninety Two Thousand and One Dollars ($4,192,001) with Alpha Micro's prior
written approval. Subsequent to the execution of this Agreement, neither the
Company nor Xxxxxxx shall permit any repayment of any amount owed Xxxxxxx unless
the amount due Xxxxxxx by the Company exceeds Three Million Nine Hundred Ninety
Two Thousand and One Dollars ($3,992,001). Alpha Micro agrees that it will cause
the Surviving Corporation to pay, immediately after (but on the same day as) the
Closing, all amounts owed by the Company to Xxxxxxx, which shall not exceed at
the Effective Time the amounts permitted as set forth herein.
6.11 Surviving Corporation. Alpha Micro shall not permit the Surviving
Corporation to be dissolved prior to the first anniversary of the Merger.
6.12 Operation of Business. The Company shall not incur any debt or
subdebt not recorded on the Company's May 31, 1998 balance sheet in excess of
the approximately Twenty Thousand Dollars ($20,000) incurred in connection with
the acquisition of certain equipment in June 1998 except as permitted pursuant
to Section 6.10.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE ALPHA MICRO COMPANIES
The obligations of the Alpha Micro Companies to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the following
conditions, any or all of which may be waived in whole or in part by the Alpha
Micro Companies:
7.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Company and Xxxxxxx
contained in this Agreement shall be true and correct at and as of the Effective
Time with the same force and effect as though made at and as of that time except
(i) for changes specifically permitted by or disclosed on any schedule to this
Agreement, and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date. The Company and Xxxxxxx shall have performed and complied with all of
their respective obligations required by this Agreement to be performed or
complied with at or prior to the Effective Time. The Company and Xxxxxxx shall
have delivered to the Alpha Micro Companies a certificate, dated as of the
Effective Date, duly signed (in the case of the Company, by its President),
certifying that such representations and warranties of the certifying party are
true and correct and that all such obligations have been complied with and
performed.
7.2 No Material Adverse Change or Destruction of Property. Between the
date hereof and the Effective Time, (i) there shall have been no Material
Adverse Change to the Company, and (ii) none of the properties and assets of the
Company shall have been damaged by fire, flood, casualty, act of God or the
public enemy or other cause (regardless of insurance coverage for such damage)
which damages may have a Material Adverse Effect thereon, and there shall have
been delivered to the Alpha Micro Companies a certificate to that effect, dated
the Effective Date and signed by or on behalf of the Company.
7.3 Corporate Certificate. The Company shall have delivered to the Alpha
Micro Companies (i) copies of the articles of incorporation and bylaws of DCI
and each of its Subsidiaries as in effect immediately prior to the Effective
Time, (ii) copies of resolutions adopted by the Board of Directors of the
Company authorizing the transactions contemplated by this Agreement, and (iii) a
certificate of good standing of the Company issued by the Secretary of State of
the State of New York as of a date not more than two days prior to the Effective
Date, certified in the case of subsections (i) and (ii) of this Section as of
the Effective Date by the Secretary of the Company as being true, correct and
complete.
7.4 Opinion of Counsel. The Alpha Micro Companies shall have received an
opinion dated as of the Effective Date from counsel for the Company in the form
of Exhibit "D".
7.5 Consents. The Company shall have received consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any material rights or obligations of the Company from any Person from whom such
consent or waiver is required under any Contract or instrument, or who, as a
result of the transactions contemplated hereby, would have such rights to
terminate or modify such Contracts or instruments, either by the terms thereof
or as a matter of law, other than those listed on Schedule 7.5.
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7.6 No Adverse Litigation. Other than the election of appraisal rights
by fewer than ten (10%) of the Shareholders, there shall not be pending or
threatened any action or proceeding by or before any court or other governmental
body which shall seek to restrain, prohibit, invalidate or collect damages
arising out of the Merger or any other transaction contemplated hereby, and
which, in the judgment of Alpha Micro, makes it inadvisable to proceed with the
Merger and other transactions contemplated hereby.
7.7 Financing. Alpha Micro shall have obtained financing from ING
pursuant to that commitment letter dated June __, 1998.
7.8 Shareholder Approval; Dissenters' Rights. The shareholders of DCI
shall have approved the transactions contemplated herein and holders of no more
than ten percent (10%) of the Company Common Stock shall have elected
dissenter's rights.
7.9 Shareholder Loans. The amount owed by the Company to Xxxxxxx
(whether by loan, debenture or otherwise) shall not exceed $3,992,000 except as
permitted pursuant to Section 6.10.
7.10 Changes in Balance Sheet. As of the Closing Date:
(i) the Company's unearned prepaid revenue shall not have increased
since May 31, 1998,
(ii) the outstanding balance of the Company's accounts payable
shall not exceed the amount of its accounts payable on May 31, 1998, and
(iii) the Company shall not have incurred any debt or subdebt not
recorded on the Company's May 31, 1998 balance sheet in excess of the
approximately Twenty Thousand Dollars ($20,000) incurred in connection
with the acquisition of certain equipment in June 1998.
7.11 Lien Releases. Xxxxxxx and National Canada Finance Corp. shall have
delivered into an escrow acceptable to Alpha Micro UCC lien releases to be
delivered to Alpha Micro upon payment of the outstanding debt to them, and no
other UCC Financing Statements shall be effective other than with respect to
equipment purchases as contemplated by Article III.
7.12 Minority Shareholder Claims. The Company shall have provided to
Alpha Micro releases from each minority shareholder who has previously asserted
claims against the Company.
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ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY AND THE SHAREHOLDERS
The obligations of DCI and its shareholders to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the following
conditions, any or all of which may be waived in whole or in part by the
Company:
8.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Alpha Micro contained in this
Agreement shall be true and correct at and as of the Effective Time with the
same force and effect as though made at and as of that time except (i) for
changes specifically permitted by or disclosed pursuant to this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date. The Alpha Micro
Companies shall have performed and complied with all of their obligations
required by this Agreement to be performed or complied with at or prior to the
Effective Time. The Alpha Micro Companies shall have delivered to the Company
and the Shareholders a certificate, dated as of the Effective Date, and signed
by an executive officer, certifying that such representations and warranties are
true and correct and that all such obligations have been complied with and
performed.
8.2 No Order or Injunction. No court of competent jurisdiction or other
governmental body shall have issued or entered any order or injunction
restraining or prohibiting the transactions contemplated hereby, which remains
in effect at the time of Closing.
8.3 Shareholder Approval. The shareholders of DCI shall have approved
the transactions contemplated herein.
ARTICLE IX
ESCROW
9.1 Escrow. The Escrowed Funds shall be placed in escrow with a bank
acceptable to both parties(the "Escrow Agent") and invested by the Escrow Agent
in direct obligations of the United States Government with maturities of
ninety-one (91) days or less (such funds together with interest thereon the
"Escrow Amount"). The Escrow Amount is subject to adjustment pursuant to Section
9.2 and to indemnification claims pursuant to Article X. The Escrow Amount shall
be held by the Escrow Agent until December 31, 1999 in accordance with the terms
of an Escrow Agreement to be executed among Xxxxxxx, the Alpha Micro Companies
and the Escrow Agent at Closing in the form of Exhibit "B" (the "Escrow
Agreement").
9.2 Reductions to the Escrowed Funds.
(a) Net Shareholders' Deficit. To the extent the actual Net
Shareholders' Deficit shall subsequently be determined to be greater
than the Net Shareholders' Deficit as set forth in the Pre-Closing
Certificate (in each case calculated in
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accordance with Section 1.5(a)), Alpha Micro shall be entitled to
reimbursement of the difference on a dollar for dollar basis from the
Escrowed Funds and Xxxxxx Xxxxxxx XX, as the representative of the
Shareholders (the "Shareholders' Representative), shall give written
instructions to the Escrow Agent to distribute to Alpha Micro the amount
of such difference.
(b) Obligations to Indemnify Pursuant to Article X. Alpha Micro
shall be entitled to reimbursement from the Escrowed Funds for any
amounts which the Alpha Micro Companies are entitled to indemnification
pursuant to Article X, and Alpha Micro's right to reimbursement pursuant
to Article X shall be limited solely to the Escrowed Funds.
(c) Procedure for Reimbursement. To the extent Alpha Micro believes
it is entitled to any amount from the Escrowed Funds, it shall give
notice together with supporting documentation for its claim to the
Shareholders' Representative and the Escrow Agent. If no objection is
received from the Shareholders Representative within thirty (30) days
the Escrow Agent shall reimburse Alpha Micro the amount claimed from the
Escrowed Funds. If Alpha Micro and the Shareholders' Representative are
unable to resolve any disagreement with respect to a claim of Alpha
Micro for reimbursement from the Escrowed Funds, they shall submit to
binding arbitration in Paramus, New Jersey (or such other location as
the parties may mutually agree), in the case of a claim pursuant to
Section 9.1(a) using a nationally recognized accounting firm selected in
accordance with the terms of the Escrow Agreement, or using the American
Arbitration Association in the case of any other claim. The cost of such
arbitration proceeding shall be shared equally by Alpha Micro and the
Shareholders and the Shareholders' share of such amount shall be paid
solely from the Escrowed Funds. The proceedings shall be conducted in
accordance with the rules of the American Arbitration Association. Alpha
Micro agrees to cause the Company to afford the Shareholders'
Representative access to all books and records of the Company reasonably
necessary to evaluate any claim of Alpha Micro for reimbursement.
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations and Warranties. The respective
representations and warranties contained in this Agreement or in any Schedule
hereto shall survive the Closing Date and continue through December 31, 1999.
10.2 Indemnification.
(a) The Shareholders agree to indemnify, defend and hold harmless
the Alpha Micro Companies and their respective officers, directors,
employees, agents, advisors, representatives, lenders and its and their
respective "affiliates" (as such term is defined in Rule 405 of the
Securities Act of 1933, as amended) from and against any claim,
liability, obligation, loss, damage, assessment, judgment, cost and
expense
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(including, without limitation, reasonable attorney's and accountant's
fees and costs and expenses reasonably incurred in investigating,
preparing, defending against or prosecuting any litigation or claim,
action, suit, proceeding or demand) of any kind or character ("Losses")
arising out of or in any manner incident, relating or attributable to
(i) any inaccuracy in any representation or breach of any warranty of
the Company or Xxxxxxx contained in this Agreement or in any schedule,
exhibit, certificate, instrument or other document or agreement executed
and delivered by the Company in accordance with this Agreement; (ii) any
failure by the Company or Xxxxxxx to perform or observe any covenant,
agreement or condition to be performed or observed by it under this
Agreement or under any schedule, exhibit, certificate, instrument or
other document or agreement executed by it in accordance with this
Agreement; and (iii) any Losses incurred in connection with a matter
disclosed on Schedule 3.07 or Schedule 3.13 in excess of the amount
recorded with respect to such matter on the Current Balance Sheet. The
obligation of the Shareholders to indemnify Alpha Micro as herein stated
shall survive the consummation of the transactions herein described for
the period set forth in Section 10.1, as extended for periods of dispute
about whether a claim is justified.
(b) Alpha Micro agrees to indemnify, defend and hold harmless the
Shareholders and the officers, directors and advisors of DCI from and
against any Losses arising out of or in any manner incident relating or
attributable to (i) any inaccuracy in any representation or breach of
any warranty of the Alpha Micro Companies contained in this Agreement or
in any Schedule, Exhibit, certificate, instrument or other document or
agreement executed and delivered by the Alpha Micro Companies in
accordance with this Agreement; (ii) any failure by the Alpha Micro
Companies to perform or observe any covenant, agreement or condition to
be performed or observed by them under this Agreement or under any
Schedule, Exhibit, certificate, instrument or other document or
agreement executed by it in accordance with this Agreement; or (iii) the
failure of the Surviving Corporation to fully pay and discharge any duty
of the Company in accordance with its terms to the extent due after the
Closing Date. The obligation of Alpha Micro to indemnify the
Shareholders as herein stated shall survive the consummation of the
transactions herein described for the applicable period set forth in
Section 10.1, as extended for periods of dispute about whether a claim
is justified.
(c) If Alpha Micro believes that a matter has occurred that
entitles it to indemnification under this Article X or the Shareholders
believe that a matter has occurred that entitles them to indemnification
under this Article X, Alpha Micro or the Xxxxxx Xxxxxxx XX as the
Shareholders' Representative, as the case may be (the "Indemnified
Party"), shall give prompt written notice to the party or parties
against whom indemnification is sought (each of whom is referred to
herein as an "Indemnifying Party") describing such matter in reasonable
detail. The Indemnified Party shall be entitled to give such notice
prior to the establishment of the amount of its Losses and to supplement
its claim from time to time thereafter by further notices as they are
established. The Indemnifying Party shall send a written response to
such claim for indemnification within thirty (30) days after receipt of
the claim stating its acceptance or objection to the indemnification
claim, and explaining its position with respect thereto in
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reasonable detail. If such Indemnifying Party does not respond within
such thirty (30) day period, it will be deemed to have accepted the
Indemnified Party's indemnification claim as specified in the notice
given by the Indemnified Party. If the Indemnifying Party gives a timely
objection notice, then the parties will negotiate in good faith to
attempt to resolve the dispute. Upon the expiration of an additional
thirty (30) day period from the date of the objection notice or such
longer period to which the Indemnified and Indemnifying Parties may
agree, such dispute shall be submitted to arbitration in Paramus, New
Jersey (or such other location as the parties may mutually agree) to a
member of the American Arbitration Association mutually appointed by the
Indemnified and Indemnifying Parties (or, in the event the Indemnified
and Indemnifying Parties cannot agree on a single such member, to a
panel of three (3) members. The decision rendered in any arbitration
shall be final, binding and conclusive on the parties. Judgment upon the
award by the arbitrator(s) may be entered in any court having
jurisdiction.
(d) Amounts recoverable by Alpha Micro hereunder from the Escrowed
Funds shall be paid in accordance with the Escrow Agreement. Alpha Micro
may not recover from the Shareholders under this Section 10.2 any
increase in Negative Net Worth or Losses until the aggregate amount
thereof exceeds Fifty Thousand Dollars ($50,000.00), but in such event
shall be entitled to recover the amount of its Losses in excess of
$50,000 to a maximum of the amount of the Escrowed Funds remaining in
the Escrow. For example, if the aggregate of all Losses equals $500,000
and there is $400,000 in Escrowed Funds, Alpha Micro shall be entitled
to all $400,000 of the Escrowed Funds.
10.3 Adjustment to Merger Consideration. All payments for Indemnifiable
Damages made pursuant to this Article shall be treated as adjustments to the
consideration granted in the Merger under Section 1.5 hereof.
ARTICLE XI
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings specified below:
11.1 "Affiliate". shall have the meaning ascribed in Rule 405 of the
Securities Act of 1933, as Amended.
11.2 "Agreement" shall have the meaning given in the Preamble.
11.3 "Agreement of Merger" shall have the meaning given in Section 1.1
hereof.
11.4 "Alpha Micro Companies" shall have the meaning given in the
Preamble.
11.5 "Assets" shall have the meaning given in Section 3.16(a) hereof.
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11.6 "CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. ss. 9601 et seq.), as amended
by the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. ss.9601,
et seq.
11.7 "Closing" shall have the meaning given in Section 1.2 hereof.
11.8 "Closing Date" shall mean the date on which the Closing occurs.
11.9 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
11.10 "Company" shall have the meaning given in the Preamble.
11.11 "Company Common Stock" shall have the meaning given in Section
1.5(a) hereof.
11.12 "Contracts" Shall have the meaning given in Section 3.25 hereof.
11.13 "Current Balance Sheet" shall mean the Balance Sheet of the
Company as of May 31, 1998.
11.14 "Current Balance Sheet Date" shall have the meaning given in
Section 3.11 hereof.
11.15 "DCI" shall have the meaning given in the Preamble.
11.16 "DCI Stock" shall mean "Company Common Stock."
11.17 "Dissenting Shares" shall have the meaning given in Section 1.7
hereof.
11.18 "Effective Date" or "Effective Time" shall have the meaning given
in Section 1.3 hereof.
11.19 "Electing Shareholders" shall have the meaning given in Section
1.5.
11.20 "Employee Plans" shall mean all Benefit Arrangements,
Multi-employer Plans, Pension Plans and Welfare Plans.
11.21 "EPCRA" shall mean the Emergency Planning and Community Right to
Know Act.
11.22 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
11.23 ERISA Affiliate" shall mean any entity which is (or at any
relevant time was) a member of a "controlled group of corporations" or
"affiliated service group" with or under "common control" with the Company
(prior to the Closing Date) or Alpha Micro Companies as defined in Section
414(b), (c), (m) or (o) of the Code.
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11.24 "Escrow Agent" shall have the meaning given in Section 9.1 hereof.
11.25 "Escrow Agreement" shall have the meaning given in Section 9.1
hereof.
11.26 "Escrow Amount" shall have the meaning given in Section 9.1
hereof.
11.27 "Escrowed Funds" shall have the meaning given in Section
1.5(a)(ii) hereof.
11.28 "Facility" shall mean each parcel of real property, each building,
structure, installation, equipment, pipe or pipeline, well, pit, pond, lagoon,
impoundment, ditch, landfill, storage container, motor vehicle, rolling stock
and any and every part thereof, currently owned, leased or operated by the
Company.
11.29 "FIFRA" shall mean the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended, 7 U.S.C. ss. 136-136y ("FIFRA").
11.30 "Fixed Assets" shall have the meaning given in Section 3.16(b)
hereof.
11.31 "GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
11.32 "Governmental Authority" means any nation or government, any
state, regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including but not
limited to any self regulatory authority such as NASD.
11.33 "Immigration Act" shall mean the Immigration Reform and Control
Act of 1986.
11.34 "Indemnified Party" shall have the meaning given in Section
10.2(c) hereof.
11.35 "Indemnifying Party" shall have the meaning given in Section
10.2(c) hereof.
11.36 "Insurance Policies" shall have the meaning given in Section 3.20
hereof.
11.37 "Intellectual Property" shall have the meaning given in Section
3.24 hereof.
11.38 "Interim Financial Statements" shall have the meaning given in
Section 3.10.
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11.39 "IRS" shall mean the Internal Revenue Service.
11.40 "Leased Premises" shall have the meaning given in Section 3.15(b)
hereof.
11.41 "Leases" shall have the meaning given in Section 3.15(a) hereof.
11.42 "Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, but not limited to, any conditional sale
or other title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code or comparable law or any jurisdiction in connection with such
mortgage, pledge, security interest, encumbrance, lien or charge).
11.43 "Xxxxxxx" shall have the meaning given in the Preamble.
11.44 "Xxxxxxx Per Share Merger Price" shall have the have the meaning
given in Section 1.5(a) hereof.
11.45 "Losses" shall have the meaning given in Section 10.2(a) hereof.
11.46 "Material Adverse Change (or Effect)" means a change (or effect),
in the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects which change (or effect)
individually or in the aggregate, is materially adverse to such condition,
properties, assets, liabilities, rights, obligations, operations, business or
prospects.
11.47 "Merger" shall have the meaning given in Section 1.1 hereof.
11.48 "Multi-employer Plan" shall mean any "multi-employer plan" as
defined in Section 4001(a)(3) of ERISA (i) which Company maintains, administers,
contributes to or is required to contribute to, or, within the past six (6)
years, maintained, administered, contributed to or was required to contribute to
and (ii) which covers any employee or former employee of Company (with respect
to their relationship with Company).
11.49 "Net Shareholders' Deficit" shall have the meaning as given in
Section 1.5(a) hereof.
11.50 "New York Statute" shall mean the Business Corporation Law of the
State of New York.
11.51 "Notices" shall have the meaning given in Section 3.14(b) hereof.
11.52 "OSHA" shall mean the Occupational Safety and Health Act.
11.53 "Option" shall mean each option, warrant or other right to
acquire, directly or indirectly through conversion of convertible securities
purchasable through exercise of such option, warrant or other right, shares of
Company Common Stock.
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11.54 "Paying Agent" shall have the meaning given in Section 1.6 hereof.
11.55 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
11.56 "Pension Plan" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multi-employer Plan or a defined
benefit plan subject to Title IV of ERISA or Section 412 of the Code) (i) which
the Company maintains, administers, contributes to or is required to contribute
to, or, within the five (5) years prior to the Closing Date, maintained,
administered, contributed to or was required to contribute to and (ii) which
covers any employee or former employee of the Company Pension Plan.
11.57 "Per Share Merger Price" shall have the meaning given in Section
1.5(a) hereof.
11.58 "Permits" shall have the meaning given in Section 3.22 hereof,
11.59 "Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
11.60 "Pre-Closing Certificate" shall have the meaning given in Section
1.5(a) hereof.
11.61 "Proceedings" shall have the meaning given in Section 3.14(b)
hereof.
11.62 "Purchase Price" shall have the meaning given in Section 1.5(a)
hereof.
11.63 "RCRA" shall mean the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. ss.6901 et seq.
11.64 "Receivables" shall have the meaning in Section 3.21 hereof.
11.65 "XXXX" shall mean the Superfund Amendment and Reauthorization Act.
11.66 "Shareholders' Representative" shall mean Xxxxxx Xxxxxxx XX.
11.67 "Shareholders" shall have the meaning given in the Preamble.
11.68 "Stock Option Plan" shall mean The Delta CompuTec Inc. Incentive
Stock Option Plan and the Delta CompuTec 1985 Stock Option Plan.
11.69 "Subsidiary" shall have the meaning given in Section 3.2 hereof.
11.70 "Surviving Corporation" shall have the meaning given in Section
1.1 hereof.
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11.71 "System" shall have the meaning given in Section 3.25 hereof.
11.72 "Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes; and
11.73 "Taxes" means all taxes, fees or other assessments, including, but
not limited to, income, excise, property, sales, franchise, intangible,
withholding, social security and unemployment taxes imposed by any federal,
state, local or foreign governmental agency, and any interest or penalties
related thereto.
11.74 "Welfare Plan" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA (i) which the Company maintains, administers,
contributes to or is required to contribute to, and (ii) which covers any
employee or former employee of the Company.
11.75 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made
or delivered pursuant hereto or thereto, unless the context otherwise
requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with this
Agreement and the transactions contemplated hereby shall be determined
in accordance with GAAP applied on a basis consistent with prior
periods, where applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the
neuter and feminine, where the context so permits.
ARTICLE XII
TERMINATION
12.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of all of the parties hereto at any
time prior to the Closing; or
(b) by Alpha Micro in the event of a material breach by the Company
or Xxxxxxx of any provision of this Agreement; or
(c) by DCI in the event of a material breach by Alpha Micro of any
provision of this Agreement; or
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(d) by either Alpha Micro or DCI if the Closing shall not have
occurred by August 31, 1998, unless DCI has not held its shareholders
meeting by August 26, 1998 to seek the approval of the transactions
contemplated herein, in which case either Alpha Micro or DCI shall have
the right to terminate this Agreement if the Closing does not occur
within five (5) business days of such meeting, providing in either case
that the party electing to terminate the Agreement is not in default of
any of its obligations hereunder.
12.2 Effect of Termination. Except for the provisions of Article X
hereof, which shall survive any termination of this Agreement, in the event of
termination of this Agreement pursuant to Section 12.1, this Agreement shall
forthwith become void and of no further force and effect and the parties shall
be released from any and all obligations hereunder; provided, however, that
nothing herein shall relieve any party from liability for the willful breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Notices. Except as otherwise expressly provided herein, any notice
herein required or permitted to be given shall be in writing and shall be
personally served or sent by overnight courier, by registered mail or certified
mail, postage prepaid, or by prepaid telex (if such transmission is confirmed by
delivery by certified or registered mail (first-class postage prepaid) or
guaranteed overnight delivery), telecopy or telegram and shall be deemed to have
been given when such writing is received by the intended recipient thereof. For
the purposes hereof, the addresses of the parties hereto (until notice of a
change thereof served as provided in this Paragraph 13.1) shall be as follows:
If to Alpha Micro: Alpha Microsystems
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Fax No.: (000) 000-0000
With a copy to: Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxx Xxxx, Esq.
Fax No.: (000) 000-0000
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If to Alpha Micro Merger Sub: Alpha Microsystems
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Fax No.: (000) 000-0000
With a copy to: Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxx Xxxx, Esq.
Fax No.: (000) 000-0000
If to the Company: Delta CompuTec Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx
Attn: Xxxxxx Xxxxxxx XX
With a copy to: Xxxxxx Beach & Xxxxxx
The Granite Building
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxx
Fax No.: (000) 000-0000
If to Xxxxxxx: Xxxxxx Xxxxxxx XX
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Fax No.: _____________________________
Notice shall be deemed given on the date sent if sent by overnight delivery or
facsimile transmission and on the date delivered (or the date of refusal of
delivery) if sent by certified or registered mail.
13.2 Entire Agreement. This Agreement (including the Exhibits and
Schedules attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matter and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter. The
Exhibits and Schedules constitute a part hereof as though set forth in full
above.
13.3 Expenses. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby.
13.4 Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement
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49
shall operate as a waiver, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude the exercise of any other right,
power or privilege. No waiver of any breach of any provision shall be deemed to
be a waiver of any preceding or succeeding breach of the same or any other
provision, nor shall any waiver be implied from any course of dealing between
the parties. No extension of time for performance of any obligations or other
acts hereunder or under any other agreement shall be deemed to be an extension
of the time for performance of any other obligations or any other acts. The
rights and remedies of the parties under this Agreement are in addition to all
other rights and remedies, at law or equity, that they may have against each
other.
13.5 Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other Person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by the Company or Xxxxxxx without the prior
written consent of Alpha Micro, nor may it be assigned by Alpha Micro without
the prior written consent of the Company and Xxxxxxx.
13.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
13.7 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
13.8 Governing Law; Severability. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
California applicable to contracts executed and to be wholly performed within
such State. If any word, phrase, sentence, clause, section, subsection or
provision of this Agreement as applied to any party or to any circumstance is
adjudged by a court to be invalid or unenforceable, the same will in no way
affect any other circumstance or the validity or enforceability of any other
word, phrase, sentence, clause, section, subsection or provision of this
Agreement. If any provision of this Agreement, or any part thereof, is held to
be unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination shall have
the power to reduce the duration and/or area of such provision, and/or to delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
ALPHA MICROSYSTEMS,
a California corporation
By: /s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx, President
ALPHA MICRO MERGER CORP.,
a Delaware corporation
By: /s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx, President
DELTA COMPUTEC INC.,
a New York corporation
By: /s/ XXXXXX X. XXXXXXX XX
-------------------------------------
Its: Chairman, Chief Executive Officer
------------------------------------
/s/ XXXXXX X. XXXXXXX XX
-----------------------------------------
XXXXXX XXXXXXX XX, INDIVIDUALLY
/s/ XXXXXX XXXXXXX
-----------------------------------------
XXXXXX XXXXXXX, INDIVIDUALLY
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LIST OF EXHIBITS AND SCHEDULES
Exhibits to Merger Agreement
----------------------------
Exhibit A - Agreement of Merger
Exhibit B - Escrow Agreement
Exhibit C - Covenant Not to Compete
Exhibit D - Opinion
Disclosure Schedules
--------------------
Schedule 3.2 - List of Subsidiaries
Schedule 3.5 - Exceptions Related to Capitalization
Schedule 3.6 - Securities & Exchange Commission List
Schedule 3.7 - Loss Contingencies
Schedule 3.11 - Changes Since May 31, 1998 and for the Period Between
May 28, 1998 and May 31, 1998
Schedule 3.12 - Liabilities
Schedule 3.13 - Litigation
Schedule 3.14 - Environmental Matters
Schedule 3.15 - Leases
Schedule 3.16 - Vehicles and Assets
Schedule 3.18 - Employee Compensation
Schedule 3.19 - Employee Plans
Schedule 3.20 - Insurance
Schedule 3.25 - Contracts
Schedule 3.26 - Customers
Schedule 3.28 - Accounts
Schedule 3.29 - Names
Schedule 4.1 - Xxxxxxx Shares
Schedule 4.4 - Xxxxxxx Loans
Schedule 5.1(f) - Salary Increases
Schedule 7.5 Consents
52
EXHIBIT "A"
AGREEMENT OF MERGER
To be in form necessary to reflect the terms of the Merger
Agreement and in compliance with Applicable Law.
A-1
53
EXHIBIT "B"
ESCROW AGREEMENT
To be in form necessary to reflect the terms of the Merger Agreement.
X-0
00
XXXXXXX "X"
XXXXXXXX NOT TO COMPETE
To be in form necessary to reflect the terms of the Merger Agreement.
C-1
55
EXHIBIT "D"
1. Each of DCI and its subsidiaries is duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to conduct business and is in good standing
as a foreign corporation in each jurisdiction listed in Schedules 3.1 and 3.2
respectively of the Merger Agreement. Each of DCI and its subsidiaries has the
necessary power and authority to own, lease and operate their properties and to
conduct their business as presently conducted.
2. DCI has the requisite power and authority to enter into the Merger
Agreement and the other documents contemplated thereby and to perform its
obligations thereunder, and to consummate the transactions contemplated thereby.
The Merger Agreement and each document contemplated thereby have been duly
executed and delivered by DCI and constitute the legal, valid and binding
obligation of DCI, enforceable against DCI in accordance with their terms. The
execution and delivery of the Merger Agreement and the documents contemplated
thereby and the consummation by DCI of the transactions contemplated thereby
have been duly approved by the board of directors and the shareholders of DCI,
and all corporate action by DCI required in order to authorize the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby has been duly and validly taken.
3. No authorization, consent, order, permit or approval of, or filing
with, any governmental authority, or, to our actual knowledge upon reasonable
investigation, any other person, is required for the execution and delivery of
the Merger Agreement by DCI or the consummation by DCI of the transactions
contemplated thereby, except those set forth in the Agreement and the Schedules
thereto.
4. Neither the execution and delivery of the Merger Agreement or any of
the documents contemplated thereby by DCI nor the compliance by DCI with any of
the provisions thereof will (a) violate or conflict with the Articles of
Incorporation or Bylaws of DCI, or (b) violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to DCI or any
of its properties or assets.
5. The authorized capital stock of DCI consists of ___________ shares of
voting common stock of which _________ are issued and outstanding on the date
hereof, and _________ shares of preferred stock, of which _________ are issued
and outstanding on the date hereof. All such outstanding shares have been dully
authorized and validly issued and, excepting to the extent the consideration
paid was less than par value, are fully paid and nonassessable. Except as set
forth in Schedule __ to the Merger Agreement, there are no outstanding warrants,
options or rights (including conversion or preemptive rights) to subscribe for
or purchase any capital stock or other securities of DCI or any of its
subsidiaries.
6. To our actual knowledge, except as set forth on Schedule 3.13 to the
Merger Agreement, there is no action, suit, proceeding at law or in equity or
D-1
56
investigation by any person or entity, or any arbitration or any administrative
or other proceeding by or before any governmental or other instrumentality or
agency, pending or to our actual knowledge threatened against or affecting DCI
or any of its properties or rights which could reasonably be expected to (i)
materially and adversely affect the right or ability of DCI to carry on its
business as now conducted; (ii) materially and adversely affect the financial
condition or properties of DCI; or (iii) question the validity of the Merger
Agreement or any of the transactions contemplated thereby.
7. The payment of a lower price per share for each share owned by the
Lobozzos than the price per share payable to the other shareholders of DCI in
the Merger as provided in the Merger Agreement does not violate any New York
statute, law, regulation, rule or order.
8. The Termination Agreements executed by [name employees] terminating
their Employment Contracts have been duly executed and delivered by each party
thereto and are enforceable in accordance with their terms.
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