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ASSET PURCHASE AGREEMENT
DATED AS OF
JUNE 2, 2000
BY AND BETWEEN
WAREFORCE INCORPORATED
AND
PACIFIC ONLINE COMPUTERS, INC.
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), dated as of June 2, 2000, is by
and between Pacific Online Computers, Inc. a California corporation ("Seller"),
and Wareforce Incorporated ("Buyer"), a California corporation.
Whereas, Seller conducts a business which operates as a supplier of
computer hardware and software and technical services. This business is
defined as that business of Seller from the existing customers of Seller
and all future customers obtained from the existing and subsequent
employees and all business generated out of the existing, or subsequent
offices of the Seller (the "Business") and
Whereas, Buyer desires to purchase a portion of the assets of the
Business from Seller, and Seller desires to sell such assets of the
Business to Buyer, upon the terms and subject to the conditions
hereinafter set forth;
Now, therefore, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained,
the parties hereto agree as follows:
1) PURCHASE AND SALE
a) Purchase and Sale. Upon the terms and subject to the conditions of this
Agreement, Buyer agrees to purchase from Seller and Seller agrees to
sell, transfer, assign and deliver, or cause to be sold, transferred,
assigned and delivered, to Buyer at Closing (as defined herein) on the
Closing Date, the following assets, as found on Seller's balance sheet as
of the Closing Date:
i) Intangible Assets. Seller's customer lists, phone numbers,
marketing materials, outstanding purchase orders, rights to use
the trade names "Online Connecting Point", "CoreTeks" and "Ops
Track" and any associated trademarks, service marks, logos and the
like, accounting records, service records, and customer records
and other intangible assets as defined herein and any and all
other intangible assets necessary for the continuation of the
business after Closing. Specifically excluded from the assets
purchased is the name "Pacific Online Computers, Inc."
ii) Fixed Assets. All fixed assets including furniture, fixtures,
leasehold improvements, desktop computers, servers, laptops,
printers, copiers, faxes, office supplies, telephone equipment,
firewalls, LAN/WAN, accessories, peripherals, communication gear,
and demo lab equipment (including any and all existing Cisco lab
equipment) and all software currently used by Seller, whether
Seller's licenses for such software are current or not. Buyer
agrees that its use of the "Trend" software and its subsidiary
programs, hardware and connections will be for
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a period of no more than sixty (60) days after Closing.
Specifically excluded from the assets purchased is the cabin owned
by Seller and located in Cleveland National Park.
iii) Ops Track System. The Ops Track system, including all of the
computer code, database schemas, linked code to backend database
systems (such as "Trend"), computer listings and all other related
assets required for the operation of Ops Track. These assets
specifically include any and all intellectual property and
licensing rights.
(1) Wareforce grants Seller the right to license the Ops Track
source code to up to ten (10) additional entities for a
ninety (90) day period following Closing. Seller shall
ensure that the licenses granted to the licensees of this
code is for their use only, and shall state that they may
not sublicense the code or grant use of their Ops Track
system to others.
(2) Buyer will make no warranties or have any liability to
support this code for any such licensee, unless Buyer
agrees otherwise.
(3) Notwithstanding anything else to the contrary contained in
this agreement, Seller will not license the Ops Track code
to any other computer reseller in California.
(4) Notwithstanding anything else to the contrary contained in
this agreement, Seller agrees to grant to Buyer a right of
first refusal prior to the license of the Ops Track code to
any other party so long as Buyer agrees to meet the terms
and conditions of license as did the potential licensee.
iv) Other Assets. Any inventory in the warehouse or configuration
center will be purchased as needed for customer shipment by Buyer
at Seller's landed cost or current distribution price, whichever
is lower. Seller agrees that prior to Closing it will obtain the
written agreement of Deutsche Financial Services ("Deutsche") that
Deutsche will grant Buyer thirty (30) days to pay for any of
Seller's inventory that Buyer purchases at Closing.
Collectively, all of the assets described in this Section 1 as being purchased
by Buyer are referred to herein as the "Purchased Assets".
2) ASSUMPTION OF LIABILITIES
a) Upon the terms and subject to the conditions of this Agreement, Buyer
agrees, effective at the Closing Date, to assume the following
liabilities of Seller, as the same existed on Closing:
i) Deferred Revenue and Customer Deposits. Buyer will assume up to
$100,000 in total in liabilities for customer pre-paid expenses in
relation to maintenance and other service
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contracts for one hundred twenty (120) days post-Closing. For
claims that exceed this amount, Seller will reimburse Buyer 1.3
times Buyer's for its actual salary costs for Buyer's personnel
needed to service these accounts.
ii) Lease Obligations. Subject to landlord approval and negotiations
between Buyer and landlords, Buyer shall lease the facilities
currently being leased by Buyer in Bakersfield, Irvine and San
Diego on a month-to month basis for up to six (6) months after
Closing. Buyer will not assume any obligations for Seller's lease
of its Xxxxxx City facility. However, Seller specifically agrees
to provide Buyer, at no cost to Buyer, with a reasonable period to
remove any assets or other employee materials from the Xxxxxx City
facility as part of the transition post-Closing.
iii) Information Systems. Buyer intends to convert Seller's systems to
Buyer's own systems. Seller will work with Buyer to complete this
as quickly as possible. As may be required, Seller will work with
Buyer and Seller's ERP system vendor ("Trend") to ensure that
Seller's systems are converted to those of the Buyer with no
disruption to Seller's business information.
iv) Sales Returns. In order to reimburse Buyer for any returns in the
first ninety (90) days after Closing for sales made by Seller
prior to Closing, Seller agrees that Buyer may deduct such costs
(or lost profits), both net of inventory costs, incurred by Buyer
from the principal balance owing under the Note as defined in
Section 4(b) below. Such reimbursements will be paid to the Buyer
by the Seller in cash or shall be taken by the Buyer as a credit
against the outstanding balance of the Note.
All of the liabilities described in this Section 2 as being assumed by
Buyer are referred to herein collectively as the "Assumed Liabilities".
3) EXCLUDED LIABILITIES
a) Notwithstanding any provision in this Agreement or any other writing to
the contrary, Buyer is assuming only the Assumed Liabilities and is not
assuming any other liability or obligation of Seller (or any predecessor
owner of all or part of its business and assets) of whatever nature,
whether presently in existence or arising hereafter. All such other
liabilities and obligations shall be retained by and remain obligations
and liabilities of Seller. Specifically, Buyer shall not assume or be
liable for any liability of Seller in respect of:
i) Any profit derived from the sale provided for by this Agreement;
ii) The preparation of filing in any tax returns in the payment of any
taxes, license fees, or
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any other charges levied, assessed, or imposed upon the Seller's
business or property before the Closing Date, except that Buyer
shall pay Seller at closing the amount shown to be accrued and
owing for taxes on the schedule of accounts payable;
iii) Any state, local or federal taxes resulting from the sale of the
assets contemplated by this transaction.
4) PURCHASE PRICE
The maximum purchase price to be paid by Buyer to Seller is $2.5 million,
structured as follows:
a) $1.3 million in cash at closing. Seller agrees to use such cash in part
to pay the following when due:
i) Bi-weekly payroll for week ending June 2, 2000;
ii) One week of in arrears payroll;
iii) Business expenses (such as mileage, education reimbursement, etc.)
incurred by Seller's employees prior to the Closing;
iv) Vacation pay for employees not hired by Wareforce;
v) Normal sales tax payment.
vi) Additionally, Seller agrees that Buyer may retain $130,000 of the
$1.3 million referred to above to use for the payment of
commissions owed by Seller for sales made by Seller's commissioned
employees in the month of May 2000. Buyer agrees to pay these
commissions on June 15, 2000.
(1) Should this retained $130,000 be inadequate to cover the
amount of commissions owed, Buyer will nonetheless pay the
full amount owed and Seller will, by June 22, 2000,
reimburse Buyer for the additional amount paid.
(2) Should the $130,000 be more than the amount of commissions
owed, Buyer will refund the difference to Seller by June
22, 2000.
b) $1.2 million in a note (the "Note) payable in monthly installments
beginning October 1, 2000, subject to the performance measures. Note
shall bear interest at prime (as published in Investors Business Daily)
minus 1% per annum. The interest rate shall be adjusted on the first day
of the month following a change in the prime rate. Monthly payment shall
be principal plus interest
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amortized over a period of two (2) years beginning October 1, 2000, with
the first payment including interest from the date of closing. However,
notwithstanding anything else to the contrary contained in this
Agreement, payment of the Note is subject to the following:
A. Payment of the Note will be based on the Business as acquired by Buyer
achieving at least the average quarterly gross profit of $2,250,000
achieved by Seller during each quarterly period beginning October 1,
2000, and each subsequent quarter thereafter ("Target Gross Profit").
Gross Profit is defined as Net Revenue minus all Cost of Goods Sold and
Cost of Services provided, as defined by Generally Accepted Accounting
Principles ("GAAP") applied on a consistent basis with the Seller's
computation of Gross Profit for the month of April 2000 and concurred
upon by Buyer's independent auditors, with Seller having the right to
audit such computation.
i) If the Business acquired by Buyer from Seller generates less than
$2,250,000 but at least $2,137,500 of Gross Profit in a given
quarter, then Buyer will be given a credit of $75,000 effective on
the first day of the second month of the subsequent quarter.
ii) If the Business acquired by Buyer from Seller generates less than
$2,137,500 but at least $2,025,000 Gross Profit in a given quarter
then the Buyer will be given a credit of $112,500 effective on the
first day of the second month of the subsequent quarter.
iii) If the Business acquired by Buyer from Seller generates less than
$2,025,000 of Gross Profit in a given quarter then the Buyer will
be given a credit of $150,000 effective on the first day of the
second month of the subsequent quarter.
c) Any credits or adjustments in the note based on the Asset Purchase
Agreement can be applied, when received or earned to the outstanding
principal balance of the note or applied to subsequent principal payments
required under the note at the sole discretion of the Buyer.
5) CLOSING
The closing (the "Closing") of the purchase and sale of the Purchased
Assets and the assumption of the Assumed Liabilities hereunder shall take
place at the offices of Buyer in El Segundo, California, at 10 a.m. on or
before June 5, 2000, or at such other time or place as Buyer and Seller
may agree. At the Closing:
a) Buyer shall deliver to Seller a certified check or wire transfer payable
to the order of Seller in the amount of ONE MILLION THREE HUNDRED
THOUSAND DOLLARS AND NO CENTS ($1,300,000.00); and
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b) Buyer shall deliver to Seller a promissory note in the principal amount
of ONE MILLION TWO HUNDRED THOUSAND DOLLARS AND NO CENTS ($1,200,000.00)
payable to Seller, payable in monthly installments beginning October 1,
2000, subject to the performance measures described in Section 4(a)
above. Such note shall bear interest at prime (as published in Investors
Business Daily) minus 1% per annum. Monthly payment shall be principal
plus interest amortized over a period of two (2) years beginning October
1, 2000, however, the first payment will include interest from the date
of closing.
c) Seller and Buyer shall enter into an Assignment and Assumption Agreement
substantially in the form attached hereto as Exhibit A, and Seller shall
deliver to Buyer such general warranty deeds, bills of sale,
endorsements, consents, assignments and other good and sufficient
instruments of conveyance and assignment (the "Conveyance Documents") as
the parties and their respective counsel shall deem reasonably necessary
or appropriate to vest in Buyer all right, title and interest in, to and
under the Purchased Assets.
d) Seller shall deliver to Buyer a certified copy of the resolution by the
Seller's board of directors certifying that Seller has authorized the
execution, delivery of performance and the transaction contemplated
herein and authorizing the officers of Seller to execute this Agreement.
e) Seller's Counsel's Closing Opinion. As soon as reasonably possible after
Closing, Seller shall provide to Buyer an opinion of counsel stating:
i) The Seller's corporate existence and good standing are as stated
herein;
ii) Except as may be expressed by counsel, counsel does not know or
have any reasonable grounds to know of any litigation, proceeding,
or government investigation pending against or related to the
Seller, its properties or business; and
iii) All proceedings required by law or by the provisions of this
Agreement to be taken by Seller and its shareholders in connection
with the transactions provided for in this Agreement have been
duly and valuably taken;
iv) Neither the execution and delivery of the Purchase Agreement nor
the consummation of the transaction contemplated thereby (1)
violates any provision of the Certificate of Incorporation or
Bylaws (or other governing instrument) of the Seller; (2) breaches
or constitutes a default (or an event) that, with notice or lapse
of time or both, would constitute a default under any agreement of
the Seller with any other person to the extent that any such
default would constitute a material adverse effect upon the
Company, or (3) violates any statute, law, regulation, or rule or
order applicable to the Seller; and
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v) No consent, approval or authorization of, or declaration, filing,
or registration with, any state or federal authorities is required
in connection with the execution, delivery and performance of the
Purchase Agreement or the consummation of the transaction
contemplated thereby.
f) Buyer's Counsel's Closing Opinion. At closing Buyer shall provide to
Seller and opinion of counsel stating:
i) That the Buyer is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority to own its properties
and to engage in its business as presently conducted or
contemplated, and is duly qualified and in good standing as a
foreign corporation under the laws of each jurisdiction in which
it is authorized to do business except where such failure to
qualify does not have a material adverse effect on the business or
assets of the Buyer. All of the outstanding shares of capital
stock of the Buyer have been duly authorized and validly issued
and are fully paid and non-assessable and were not issued in
violation of the preemptive rights of any person;
ii) Except as set forth herein or in any schedule or exhibit attached
to the Purchase Agreement, counsel does not know or have any
reasonable grounds to know of any material litigation, proceeding,
or government investigation pending against or related to the
Buyer, its properties or business;
iii) All proceedings required by law or by the provisions of this
Agreement to be taken by Buyer and its shareholders in connection
with the transactions provided for in this Agreement have been
duly and valuably taken;
iv) Neither the execution and delivery of the Purchase Agreement nor
the consummation of the transaction contemplated thereby (1)
violates any provision of the Certificate of Incorporation or
Bylaws (or other governing instrument) of the Buyer; (2) breaches
or constitutes a default (or an event) that, with notice or lapse
of time or both, would constitute a default under any agreement of
the Buyer with any other person to the extent that any such
default would constitute a material adverse effect upon the
Company, or (3) violates any statute, law, regulation, or rule or
order applicable to the Buyer; and
v) No consent, approval or authorization of, or declaration, filing,
or registration with, any state or federal authorities is required
in connection with the execution, delivery and performance of the
Purchase Agreement or the consummation of the transaction
contemplated thereby.
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g) Seller shall provide to Buyer at closing a Certificate of Good Standing
dated within a reasonable number of days prior to the Closing Date.
h) Seller will deliver to Buyer on the Closing Date an officer's certificate
certifying that Seller has taken all corporate action necessary to
authorize the transactions contemplated by this Agreement.
i) Buyer shall deliver to Seller a certified copy of the resolution by the
Buyer's board of directors certifying that Buyer has authorized the
execution, delivery of performance and the transaction contemplated
herein and authorizing the officers of Buyer to execute this Agreement.
j) Buyer will deliver to Seller on the Closing Date an officer's certificate
certifying that Buyer has taken all corporate action necessary to
authorize the transactions contemplated by this Agreement.
k) Buyer shall provide to Seller at closing a Certificate of Good Standing
dated within a reasonable number of days prior to the Closing Date.
6) REPRESENTATIONS AND WARRANTIES OF THE SELLER
a) Seller hereby represents and warrants to Buyer that:
i) Organization and Good Standing. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has all corporate powers
and all material governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted.
ii) Corporate Authorization. The execution, delivery and performance
by Seller of this Agreement and the consummation by Seller of the
transactions contemplated hereby and thereby are within Seller's
corporate powers and have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement constitutes
a valid and binding agreement of Seller.
iii) Sufficiency of and Title to the Purchased Assets. Upon
consummation of the transactions contemplated hereby, Buyer will
have acquired good and marketable title, free of all liens and the
like, in and to, or a valid leasehold interest in, each of the
Purchased Assets.
iv) Reimbursement for Liquidation Expenses. Post-Closing, Seller shall
reimburse Buyer at a rate of salary X 1.3 for the costs of any
personnel being paid by Buyer that relates to activities required
by Buyer to complete the liquidation of Seller. However, Wareforce
will absorb the first $5,000.00 of these expenses each month for
the first three (3) months. Such reimbursements will be paid to
the Buyer by the Seller in cash or shall be taken by the Buyer
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as a credit against the outstanding balance of the Note.
v) Leases. Seller knows of no issue, which would cause Buyer to loose
the right to lease any of the facilities Seller currently
occupies.
b) Warranties.
i) Seller warrants that the "Trend" system will remain available for
Buyer's use for sixty (60) days after Closing.
ii) Seller warrants that at the time of Closing it is current on any
payroll tax obligations it may have.
iii) Seller has made no warranties to customers of the Business other
than customary implied warranties and those warranties set forth
on printed materials provided with the products sold to such
customers.
7) REPRESENTATIONS AND WARRANTIES OF BUYER
a) Buyer hereby represents and warrants to Seller that:
i) Organization and Good Standing. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws
of California and is qualified in each jurisdiction where the
nature of its business or the ownership of property requires such
qualification except where such failure to qualify shall not have
a material adverse effect on the business or financial ability of
the Buyer and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted;
ii) Corporate Authorization. The execution, delivery and performance
by Buyer of this Agreement and the consummation by Buyer of the
transactions contemplated hereby are within the corporate powers
of Buyer and have been duly authorized by all necessary corporate
action on the part of Buyer and constitutes a valid and binding
agreement of Buyer enforceable in accordance with its terms
subject to the laws of bankruptcy and those laws affecting
creditors rights generally;
iii) Hiring of Employees. Buyer warrants that it will, upon Closing,
employ specific employees of Seller based on offers which will be
extended prior to Closing to those employees Buyer intends to
hire.
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(1) Specifically, Buyer will develop prior to Closing a list of "Key
Employees" from Seller's employee base that Buyer wishes to hire
upon Closing. Prior to Closing Buyer and Seller's senior
management will jointly review this list and will work together to
recruit these individuals to accept employment with Wareforce.
While this list will be specifically defined as soon as possible,
certain employees in the Sales, Technical Services and Information
Systems areas will be considered Key Employees.
(2) Tenure & Benefits: Buyer will hire Seller's associates and bring
them onto the Buyer's payroll with the same level of tenure such
employees had with Seller. For example, an employee of Seller's
with 5 years of tenure (and any benefits associated with that
tenure) will be hired by Buyer at that same tenure. Such employees
shall be eligible to participate in Buyer's employee benefit plan
per Buyer's Employee Policy Handbook.
(3) Vacation: Specifically, Buyer will not assume the vacation pay
liability of the employees it hires from Seller. As described
above, Wareforce will `grandfather' these people into the
Wareforce payroll system with the same level of vacation they had
at closing. For example, an employee of Seller with three (3)
weeks of accrued vacation will be granted three (3) weeks of
accrued vacation by Buyer upon hire. However, should the employee
hired by Buyer leave Buyer's employ for any reason within ninety
(90) days, the dollar amount of any vacation pay owed to that
employee by Buyer shall be deducted by Buyer from the principal
balance due on the Note.
(4) Transition Employees. The parties further understand and agree
that there may be select employees of Seller that Buyer chooses
not to hire, but who nonetheless may be important in a transition
period after Closing. Seller will cooperate with Buyer by
negotiating to retain these individuals on a independent
contractor basis at reasonable rates for a mutually agreeable
period of time. Buyer shall reimburse Xxxxxx for any associated
independent contractor expenses including health insurance, times
1.3.
b) No Violation of Other Agreements. Neither the execution and delivery of
the Purchase Agreement nor the consummation of the transaction
contemplated thereby (1) violates any provision of the Certificate of
Incorporation or Bylaws (or other governing instrument) of the Buyer; (2)
breaches or constitutes a default (or an event) that, with notice or
lapse of time or both, would constitute a default under any agreement of
the Buyer with any other person to the extent that any such default would
constitute a material adverse effect upon the Company, or (3) violates
any statute, law, regulation, or rule or order applicable to the Buyer.
c) No Consents Required. No consent, approval or authorization of, or
declaration, filing, or registration with, any state or federal
authorities is required in connection with the execution,
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delivery and performance of the Purchase Agreement or the consummation of
the transaction contemplated thereby.
d) Office Space for Xxx Xxxxxx. So long as Buyer has such office space under
lease, Buyer shall provide space in its Irvine offices for Xxx Xxxxxx and
members of his staff working on the liquidation of Seller for up to one
hundred eighty (180) days. Wareforce shall provide them with access to
the facilities, records and information systems during regular business
hours.
e) Access to Records. Buyer warrants that it will make available during
normal business hours to Seller and Seller's agents the books and records
of Seller that are acquired by Buyer.
8) TAX MATTERS
a) Tax Definitions. The following terms, as used herein, have the following
meanings:
i) "Code" means the Internal Revenue Code of 1986, as amended.
ii) "Post-Closing Tax Period" means any Tax period (or portion
thereof) ending after the Closing Date.
iii) "Pre-Closing Tax Period' means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
iv) "Proration Date" means the Closing Date.
v) "Tax" means any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, franchise,
capital, paid-up capital, profits, greenmail, license,
withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit
tax, custom, duty or other tax, governmental fee or other like
assessment or charge or any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount
imposed by any governmental authority (domestic or foreign)
responsible for the imposition of any such tax.
b) Tax Cooperation: Allocation of Taxes.
i) Buyer and Seller agree to furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information
and assistance relating to the Purchased Assets as is reasonably
necessary for the filing of all Tax returns, and making of any
election related to Taxes, the preparation for any audit by any
taxing authority, and the prosecution or defense of
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any claim, suit or proceeding relating to any Tax return. Seller
and Buyer shall cooperate with each other in the conduct of any
audit or other proceeding related to Taxes involving the Purchased
Assets and each shall execute and deliver such powers of attorney
and other documents as are necessary to carry out the intent of
this Section.
ii) All real property taxes, personal property taxes and similar ad
valorem obligations levied with respect to the Purchased Assets
for a taxable period which includes (but does not end on) the
Proration Date (collectively, the "Apportioned Obligations") shall
be apportioned between Seller and Buyer as of the Proration Date
based on the number of days of such taxable period included in the
Pre-Closing Tax Period and the number of days of such taxable
period included in the Post-Closing Period. Seller shall be liable
for the proportionate amount of such taxes that is attributable to
the Pre-Closing Tax Period, and Buyer shall be liable for the
proportionate amount of such taxes that is attributable to the
Post-Closing Tax Period. Within ninety (90) days after the
Closing, Seller and Buyer shall present a statement to the other
setting forth the amount of the tax liability so accrued under
this Section (8)(b)(ii) together with such supporting evidence as
is reasonably necessary to calculate the proration amount. The
proration amount shall to the extent such adjustment would have
resulted in an adjustment to the purchase price, be used to
calculate an adjustment to the purchase price under Section (4).
Thereafter, Seller shall notify Buyer upon receipt of any xxxx for
real or personal property taxes relating to the Purchased Assets,
part or all of which are attributable to the Post-Closing Tax
Period, and shall promptly deliver such xxxx to Buyer who shall
pay the same to the appropriate taxing authority, provided that if
such xxxx covers a Pre-Closing Tax Period, Seller shall also remit
prior to the due date of assessment to Buyer payment for the
proportionate amount of such xxxx that is attributable to the
Pre-Closing Tax Period shall constitute another adjustment under
Section (4).
iii) Allocation of Purchase Price. Buyer reserves the right to
determine the allocation of the purchase price to be paid
hereunder.
9) COVENANTS OF SELLER
a) No Solicitations. Seller and each of the principal shareholders of Seller
(excluding Xxxxxx Micro Inc., all subsidiaries and successors), shall
not, for a period of three (3) years following the Closing Date, employ
or solicit, either directly or indirectly, the performance of services by
any employee of Seller employed by the Seller at the time of Closing.
Xxxxxx Micro Inc., all subsidiaries and successors, shall not, for a
period of three (3) years following the Closing Date directly solicit the
performance of services by any employee of Seller employed by the Seller
at the time of Closing.
b) Telephone Numbers. Seller will make commercially reasonable efforts to
assist Buyer in
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transferring Seller's current telephone and facsimile numbers to Buyer as
of the Closing Date.
c) Name and Logo. Seller shall allow Buyer to use the name and logo for
"Online Connecting Point", CoreTeks, and Ops Track at no cost to Buyer,
for such time, as Buyer deems necessary.
d) Utilities. Seller will make commercially reasonable efforts to assist
Buyer in transferring Seller's current water, sewage and electrical
services (collectively "Utilities") to Buyer as of the Closing Date.
Seller shall accrue on its financial statements all charges for Utilities
incurred prior to and on the Closing Date. Buyer agrees that it shall be
obligated for charges for Utilities incurred subsequent to the Closing
Date.
e) Release of Liens. Seller will take all action necessary prior to the
Closing Date to release any and all liens or other encumbrances on the
Purchased Assets including, without limitation, causing any necessary
UCC-2 Termination Statements to be filed.
f) Non-Competition. Seller, all subsidiary corporations of each and any
business in which the principal shareholders of Seller (excluding Xxxxxx
Micro Inc., its subsidiaries and successors) is an officer, director or
in which any of them has a one-third or greater equity interest
(collectively, the "Non-Competing Entities"), will not engage in sales
activities competing with the Business. If any Customer requests sales of
Business products or services from Seller for three (3) years from the
Closing Date, Seller will refer such Customer to Buyer. As used herein,
"sales activities" shall mean selling, leasing, taking orders, soliciting
orders or contacting Customers of Seller, as such Customers exist on the
books and records of the Seller as of the Closing Date. This covenant not
to compete shall automatically terminate and be of no further force and
effect upon the occurrence of an Event of Default by Buyer under (i) the
Note or (ii) under this Agreement or under any instrument evidencing or
securing indebtedness which arose as part of the transaction contemplated
hereby.
10) INDEMNIFICATION
a) Indemnification of Seller. Effective on the Closing Date and thereafter,
Buyer shall indemnify and hold harmless Seller and its directors,
officers, employees and agents, and shareholders from and against any and
all liabilities, damages, losses, penalties, deficiencies, expenses and
costs incurred by any of them, including without limitation reasonable
attorneys' and accountants' fees (hereafter individually a "Loss" and
collectively `losses"), arising from or in connection with:
i) Any claim made or litigation instituted by a third party relating
to Buyer's ownership rights in and to the Purchased Assets;
ii) Any liability or obligation of Buyer which relates to the
ownership or use of any of the
15
Purchased Assets or the conduct of the Business subsequent to the
Closing Date including liabilities arising out of the Assumed
Liabilities, including but not limited to liabilities arising from
or relating thereto;
iii) Any claim first made or litigation instituted by a third party
relating to Buyer's conduct of the Business subsequent to the
Closing Date.
iv) Any taxes imposed on Buyer, the Business or any of the Purchased
Assets for any period subsequent to the Closing;
v) Any and all actions, suits, proceedings, demands, assessments or
judgments, costs and expenses reasonably arising out of any of the
foregoing matters set forth in this Section (10)(a); and
vi) The breach by Buyer of any representations or warranties made by
Buyer herein or in any document given by Buyer in connection with
the consummation of the transaction contemplated hereby.
b) Indemnification of Buyer. Effective on the Closing Date and thereafter,
the Seller shall, jointly and severally, indemnify and hold harmless
Buyer and its directors, officers, employees and agents, from and against
any and all Losses arising from or in connection with:
i) Any claim made or litigation instituted by a third party relating
to Seller's conduct of the Business, whether such litigation is
instituted before or after the Closing Date; or
ii) Any and all actions, suits, proceedings, demands, assessments or
judgments, costs and expenses reasonably arising out of any of the
foregoing matters set forth in this Section (10)(b)(ii) except to
the extent such losses shall arise in connection with or
constitute Assumed Liabilities hereunder.
c) Indemnification Procedure.
i) Claims for Indemnification. Except for Third Party Claims
described below, if an event giving rise to indemnification
hereunder shall have occurred or is threatened, the indemnified
party promptly shall deliver to the indemnifying party written
notice thereof, stating that such event has occurred or is
threatened, describing such event in reasonable detail and
specifying or reasonably estimating the amount of the prospective
Loss and the method of computation thereof (a `Claim"), all with
reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such right of
indemnification is claimed or has arisen (the "Notice of Claim").
For purposes hereof, any Claim for indemnification shall
16
be deemed to have been made as of the date on which the Notice of
Claim is delivered in accordance with the terms of this Section.
ii) In the event the indemnifying party shall in good faith dispute
the validity of all or any amount of a Claim for indemnification
as set forth in the Notice of Claim, the indemnifying party shall,
within thirty (30) days after delivery of the Notice of Claim,
execute and deliver to the indemnified party a notice setting
forth with reasonable particularity the grounds, amount of, and
basis upon which the Claim is disputed (the "Dispute Statement").
iii) In the event the Indemnifying party shall within thirty (30) days
deliver to the indemnified party a Dispute Statement, then the
portion of the claim described in the Notice of Claim disputed by
the indemnifying party (the "Disputed Liability") shall not be due
and payable except in accordance with a final and unappealable
judgment or decision of a court or arbitration tribunal of
competent jurisdiction, or a written agreement between the
indemnifying party and the indemnified party stipulating the
amount of the Admitted Liability (as defined below).
iv) In the event the indemnifying party shall not within thirty (30)
days after receipt of the Notice of Claim deliver to the
indemnified party a Dispute Statement identifying a Disputed
liability, then the amount of the claim described in the Notice of
Claim, or if a Dispute Statement is delivered, the portion thereof
not disputed as a Disputed Liability, shall be deemed to be
admitted (the "Admitted Liability") and shall, upon the incurring
of an actual Loss arising therefrom, immediately be due and
payable.
d) Settlement of Third Party Claims. If the indemnified party shall receive
notice of any Claim by a third party which is or may be subject to
indemnification (a "Third Party Claim"), the indemnified party shall give
the indemnifying party prompt written notice of such Third Party Claim
and shall permit the indemnifying party, at its option, to participate in
the defense of such Third Party Claim by counsel of its own choice and at
its expense. If, however, the indemnifying party acknowledges in writing
to the indemnified party the indemnifying party's obligation to indemnify
the indemnified party hereunder against all Losses that may result from
such Third Party Claim (subject to the limitations set forth herein),
then the indemnifying party shall be entitled, at its option, to assume
and control the defense of such Third Party Claim at its expense and
through counsel of its choice after delivery of written notification.
i) In the event the indemnifying party exercises its right to
undertake the defense of any such Third Party Claim, the
indemnified party shall cooperate with the indemnifying party in
such defense and make available to the indemnifying party, at the
indemnifying party's expense, all witnesses, pertinent records,
materials and information in its possession or under its control
17
relating thereto as is reasonably required by the indemnifying
party. However, the indemnifying party without the written consent
of the indemnified party may settle no such Third Party Claim,
unless the settlement involves only the payment of money by the
indemnifying party. Similarly, the indemnified party without the
written consent of the indemnifying party shall settle no Third
Party Claim.
ii) In the event the indemnified party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the
indemnifying party shall cooperate with the indemnified party in
such defense and make available to it all such witnesses, records,
materials and information in its possession or under its control
relating thereto as is reasonably required by the indemnified
party.
e) Limitations on Sellers Indemnification Notwithstanding anything contained
herein to the contrary, the Seller's indemnification hereunder shall be
subject to the following:
i) The Buyer shall be entitled to indemnification only if and to the
extent that the aggregate indemnifiable damages exceed an amount
greater than an amount which would, if known on the Closing Date
would have resulted in an adjustment to the Purchase Price as
determined pursuant to Section (4).
11) MISCELLANEOUS
a) Conditions Precedent. This Agreement can be terminated by either party
upon written notice to the other party, in the event that any of the
following shall not have occurred on or before the Closing Date:
i) At least 90% of the Key Employees accept employment and sign
employment agreements or employment offer letters with Buyer.
ii) Buyer shall have obtained financing to replace Seller's current
inventory and/or receivables financing.
iii) Buyer shall have had an opportunity to conduct on-site due
diligence at Seller's facilities and from such due diligence Buyer
and Buyer's accountants, lenders and the like are satisfied as to
the financial condition of Seller as stated as of June 2, 2000.
b) Dispute Resolution.
i) Any and all disputes or differences pertaining to or arising out
of this Agreement or the breach, termination or invalidity
thereof, shall be finally and exclusively settled by binding
18
arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. The arbitration shall be
held in Los Angeles, California before one arbitrator appointed in
accordance with said rules. Judgment upon an award rendered may be
entered in any court having jurisdiction or application may be
made to such court for a judicial acceptance of the award and an
order of enforcement, as the case may be. The prevailing party in
any such proceeding shall be entitled to its actual attorneys'
fees and all other costs in connection with the arbitration and
enforcement of the arbiter's award.
ii) Either party may, without inconsistency with this Agreement, seek
from a court any interim or provisional relief that may be
necessary to protect the rights or property of that party, pending
the establishment of the arbitral tribunal or pending the arbitral
tribunal's determination of the merits of the controversy.
c) Expenses. Except as otherwise provided herein, all costs in connection
with this Agreement shall be paid by the party incurring such cost or
expense.
d) Notices. Any notices required or permitted to be given hereunder shall be
in writing and shall be deemed delivered (i) two (2) days after being
deposited in the mails, (ii) one day after being, deposited with an
express overnight courier service or (iii) the same day notice is sent by
electronic facsimile transmission if such transmission is made by 5:00
p.m. local time or one day after being sent by facsimile transmission if
such transmission is made after 5:00 p.m., addressed:
i) if to Seller, to:
Xx. Xxxxxxx Xxxxxx
President
Xxxxxx Business Solutions, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000.
ii) if to Buyer, to:
Xxx Xxxxxxxx
General Counsel
Wareforce Incorporated
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxxxx, XX 00000
Phone: 000.000.0000
Fax: 000.000.0000.
e) Successors and Assigns. The provisions of this Agreement shall be binding
upon and inure to the
19
benefit of the parties hereto and their respective successors and
assigns; provided that neither party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without
the consent of the other party hereto.
f) Governing Law. This Agreement shall be construed in accordance with and
governed by the law of the State of California.
g) Counterparts: Effectiveness. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
h) Captions. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
i) Entire Agreement. This Agreement, constitutes the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both
written and oral, between the parties with respect to the subject matter
of this Agreement No representation, inducement, promise, understanding,
condition or warranty not set forth herein has been made or relied upon
by either party hereto. Neither this Agreement nor any provision hereof
is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
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In witness whereof, the parties hereto here caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
SELLER: BUYER:
PACIFIC ONLINE COMPUTERS, INC. WAREFORCE INCORPORATED
By: By:
-------------------------- ---------------------------
Name: Name: Xxx Xxxxxxxx
------------------------
Title: Title: Vice President, General
------------------------ Counsel and Secretary
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EXHIBIT A
ASSIGNMENT AND ASSUMPTION AGREEMENT
Assignment and Assumption Agreement, dated as of June 2, 2000, between Pacific
Online Computers, Inc., a California corporation ("Seller"), and Wareforce
Incorporated ("Buyer"), a California corporation.
WITNESSETH
Whereas, Buyer and Seller have concurrently herewith consummated the purchase by
Buyer of the Purchased Assets pursuant to the terms and conditions of the Asset
Purchase Agreement dated June 2, 2000, between Buyer and Seller, (the "Asset
Purchase Agreement"); capitalized terms not otherwise defined herein shall have
the meaning given them in the Asset Purchase Agreement;
Whereas, pursuant to the Asset Purchase Agreement, Buyer has agreed to purchase
the Purchased Assets and to assume certain liabilities and obligations of Seller
with respect to the Purchased Assets;
Now, therefore, in consideration of the sale and purchase of the Purchased
Assets and in accordance with the terms of the Asset Purchase Agreement, Buyer
and Seller agree as follows:
i) Seller does hereby sell, transfer, assign and deliver to Buyer all of the
right, title and interest of Seller in, to and under the Purchased
Assets.
ii) Buyer does hereby accept and assume all the right, title and interest of
Seller in, to and under all of the Purchased Assets and the Lease and
Buyer assumes and agrees to pay, perform and discharge promptly and fully
when due all of the Assumed Liabilities.
iii) This Agreement shall be construed in accordance with and governed by the
laws of the State of California, without regard to the conflicts of law
rules of such state.
iv) This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
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In witness whereof, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
SELLER: BUYER:
PACIFIC ONLINE COMPUTERS, INC. WAREFORCE INCORPORATED
By: By:
---------------------------- ------------------------------
Name: Name: Xxx Xxxxxxxx
------------------------
Title: Title: Vice President, General
------------------------- Counsel and Secretary
