EXHIBIT 10.18
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement"), dated as of
October 8, 1996, is by and between Xxxxxx X. Xxxxxxx and Xxxxx X.
Xxxxxx ("Sellers"), and Bit 3 Computer Corporation, a Minnesota
corporation, the address of which is 0000 Xxxx Xxxxxx Xxxxx,
Xxxxxxxxxxx, XX 00000-0000, ("Bit 3"), and SBS Technologies,
Inc., a New Mexico corporation, the address of which is 0000
Xxxxxxxxx Xxxxxxxxx, NE, AFC Xxxxxxxx 0, Xxxxx 000, Xxxxxxxxxxx,
XX 00000, ("SBS" or "Buyer").
I. RECITALS.
A. Sellers together own all of the outstanding capital
stock of Bit 3 and wish to sell that stock to Buyer
under the terms and conditions of this Agreement.
B. Buyer wishes to acquire Bit 3 by the purchase of all of
the issued and outstanding shares of capital stock of
Bit 3 under the terms and conditions of this Agreement.
X. Xxxxxxx and Buyer desire to make a Section 338(h)(10)
election under the Internal Revenue Code of 1986, as
amended from time to time, as further provided in this
Agreement.
D. The parties hereto wish to make certain
representations, warranties, covenants and agreements
in connection with that acquisition of stock.
The parties, intending to be legally bound, agree as
follows:
II. DEFINITIONS.
For purposes of this Agreement, the following terms, when used
with an initial capital letter, shall have the meanings specified
or referred to in this Section II:
A. "Accredited Investor" has the meaning set forth in Rule
501 of Regulation D promulgated under the Securities
Act.
B. "Additional Tax Liability" means the additional
liability for all income taxes, federal, state and
local, which may be due from or assessed to the Sellers
solely as a result of the election to be made under
Section 338(h)(10) of the Code as provided in Section
VI.H below.
C. "Affiliate" has the meaning set forth in Rule 12b-2 of
the regulations promulgated under the Securities
Exchange Act.
D. "Bit 3 Shares" means any and all shares of the Common
Stock, no par value, of Bit 3.
E. "Blue Sky Laws" means the applicable state securities
laws and regulations promulgated thereunder.
F. "Buyer" has the meaning set forth in the preface above.
G. "Change in Control" means any of the following: (i)
the sale, lease, exchange or other transfer, directly
or indirectly, of all or substantially all of the
assets of the Buyer or Bit 3, in one transaction or in
a series of related transactions, to any corporation,
person or other entity that is not controlled by the
Buyer or Bit 3; (ii) the approval by the shareholders
of the Buyer or Bit 3 of any plan or proposal for the
liquidation or dissolution of the Buyer or Bit 3, as
the case may be; (iii) any person is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934 (the "Exchange Act")),
directly or indirectly, of more than 50% of the
combined voting power of the outstanding securities of
the Buyer or Bit 3 ordinarily having the right to vote
at elections of directors; (iv) a merger or
consolidation to which the Buyer is a party if the
shareholders of the Buyer immediately prior to the
effective date of such merger or consolidation have,
solely on account of ownership of securities of the
Buyer at such time, "beneficial ownership" (as defined
in Rule 13d-3 under the Exchange Act) immediately
following the effective date of such merger or
consolidation of securities of the surviving company
representing less than 50% of the combined voting power
of the surviving corporation's then outstanding
securities ordinarily having the right to vote at
elections of directors (regardless of any approval by
the Board of Directors); (v) a merger or consolidation
to which Bit 3 is a party with any person (other than
for the purposes of reincorporation in a different
state); or (vi) a change in control of a nature that
would be required to be reported (assuming such event
has not been "previously reported") pursuant to section
13 or 15(d) of the Exchange Act, whether or not the
Buyer is then subject to such reporting requirement, as
of the effective date of such change in control.
H. "Closing Consideration Balance Sheet" means the balance
sheet of Bit 3 prepared as of the Closing Consideration
Adjustment Date pursuant to Section III.B.3 below.
I. "Closing Date" means the date on which the Transactions
are closed, as provided in Section III.C below.
J. "Code" means the Internal Revenue Code of 1986, as
amended.
K. "Confidential Information" means any information
concerning the business and affairs of Bit 3, except
for information concerning Bit 3 that the Party alleged
to have impermissibly disclosed such information (the
"Disclosing Party") can show: (i) to have been in its
possession before its receipt from another Party
hereto; (ii) to be now or at the time of the disclosure
by the recipient generally available to the public
through no fault of the Disclosing Party; (iii) to have
been available to the public at the time of its receipt
by the Disclosing Party; (iv) to have been received
separately by the Disclosing Party in an unrestricted
manner from a person entitled to disclose such
information; or (v) to have been developed
independently by the Disclosing Party without regard to
any information received in connection with the
Transactions.
L. "Damages" means all damages, dues, penalties, fines,
costs, amounts paid in settlement, obligations, Taxes,
liens, losses, expenses, and fees, including court
costs and reasonable attorneys' fees, incurred by any
Party as a result of any action.
M. "Disclosure Schedule" means the schedules of exceptions
to the representations and warranties set forth in
Sections IV.A, IV.B, and IV.C, each of which is divided
into sections which correspond to the subsections of
Sections IV.A, IV.B, and IV.C of this Agreement.
N. "Employee Benefit Plan" means an employee benefit plan
within the meaning of Section 3(3) of ERISA.
O. "Employee Pension Benefit Plan" means an employee
pension benefit plan within the meaning of Section 3(2)
of ERISA.
P. "Employee Welfare Benefit Plan" means an employee
welfare benefit plan within the meaning of Section 3(1)
of ERISA.
Q. "Environmental, Health and Safety Laws" means the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safely and
Health Act of 1970, each as amended, together with all
other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local and
foreign governments (and all agencies thereof)
concerning pollution or protection of the environment,
public health and safety, or employee health and
safety, including laws relating to emissions,
discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient
air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes in
effect on the Closing Date.
R. "Extremely Hazardous Substance" has the meaning set
forth in Section 302 of the Emergency Planning and
Community Right-to-Know Act of 1986, as amended.
S. "Fairness Opinion" means the opinion as provided in
Section VIII.A.8 below.
T. "Financial Statements" means the financial statements,
including balance sheets, income statements and all
notes thereto, of Bit 3 for the period or periods
specified in Section IV.C.7 below.
U. "GAAP" means United States generally accepted
accounting principles applied consistently with the
principles, practices and procedures used in the
preparation of the most recent audited financial
statement of the entity as to which such term is being
used.
V. "GE" means GE Medical Systems.
W. "Indemnified Party" means the Party seeking
indemnification pursuant to the provisions of this
Agreement.
X. "Indemnifying Party" means the Party from whom
indemnification is being sought pursuant to the
provisions of this Agreement.
Y. "Intellectual Property" means (i) all patents, patent
applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations, thereof,
(ii) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all
translations, adaptations, derivations, and combination
thereof and including all goodwill associated
therewith, and all applications, registrations, and
renewals in connection therewith, (iii) all copyrights,
and all applications, registrations, and renewals in
connection therewith, (iv) all mask works and all
applications, registrations, and renewals in connection
therewith, (v) all trade secrets and confidential
business information (including research and
development, know-how, formulas, compositions,
manufacturing and production processes and techniques,
technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost
information, and business and marketing plans and
proposals), (vi) all computer software (including data
and related documentation), (vii) all other proprietary
rights, and (viii) all copies and tangible embodiments
thereof (in whatever form or medium).
Z. "Knowledge" means actual knowledge of the Party of the
relevant subject matter to which it relates, and such
knowledge as would have come to the attention of any
such Party in the course of due inquiry in the course
of discharging such Party's duties as an officer or
director of the relevant entity in a reasonable and
prudent manner consistent with sound business
practices.
AA. "Liability" means, as of any date, any liability
(whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
BB. "Material" means as to any financial matter, a matter
involving $10,000 per occurrence, or two or more
matters aggregating $25,000 or more, and for any
financial matter or otherwise, a matter which impedes
the ability to conduct Bit 3's business as then
conducted.
CC. "Material Adverse Effect" in the case of Bit 3 or the
Sellers, means any event, change or occurrence which
has or could reasonably be expected (in light of known
circumstances) to have a Material negative impact on
the condition (financial or otherwise), business,
results of operations, prospects or going concern value
of Bit 3, or the ability of Bit 3 to consummate the
transactions contemplated hereby. In the case of SBS,
Material Adverse Effect means any event, change or
occurrence which has or could reasonably be expected
(in light of known circumstances) to have a Material
adverse impact on the ability of SBS to consummate the
transactions contemplated hereby.
DD. "Most Recent Audited Financial Statements" means the
audited balance sheet of Bit 3 of June 30, 1996 and the
audited statements of income, changes in stockholders'
equity, and cash flow of Bit 3 for the six months ended
June 30, 1996, audited by Peat Marwick.
EE. "Most Recent Audited Balance Sheet" means the balance
sheet included within the Most Recent Audited Financial
Statements.
FF. "Net Worth" means the difference between the net
tangible assets and the liabilities of Bit 3,
determined in accordance with GAAP consistently applied
or otherwise as provided pursuant to Section III.B.3 of
this Agreement.
GG. "Ordinary Course of Business" means the ordinary course
of business consistent with past custom and practice
(including with respect to quantity and frequency) of
the Party to whom such term is applied.
HH. "Party" or "Parties" means, either individually or
collectively, Sellers and/or either of them, Bit 3,
and/or SBS.
II. "Peat Marwick" means the accounting firm of KPMG Peat
Marwick LLP.
JJ. "Person" means an individual, a partnership, a
corporation, an association, a joint stock company, a
trust, a joint venture, a limited liability company or
limited liability partnership, an unincorporated
organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
KK. "Public Offering" means the offering of a certain
number of the shares of the Common Stock of the Buyer
which will be registered pursuant to the provisions of
the Securities Act, and the net proceeds of which will
be used to fund all or part of the Transactions.
LL. "Purchase Price" means the amount of consideration to
be paid by the Buyer to the Sellers in exchange for the
Bit 3 Shares purchased pursuant to this Agreement, as
provided in Section III.B below.
MM. "Securities Act" means the Securities Act of 1933, as
amended.
NN. "Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended.
OO. "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other
than (i) mechanic's, materialmen's, and similar liens,
(ii) liens for Taxes or special assessments not yet due
and payable or for Taxes or special assessments that
the taxpayer is contesting in good faith through
appropriate proceedings and for which an adequate
reserve has been set aside, (iii) purchase money liens
and liens securing rental payments under capital lease
arrangements, (iv) other liens arising in the Ordinary
Course of Business and not incurred in connection with
the borrowing of money, (v) security interests
reflected in the Most Recent Audited Financial
Statement, and (vi) statutory security interests
arising or incurred in the Ordinary Course of Business
with respect to which the underlying obligations are
not delinquent.
PP. "Subsidiary" means any corporation with respect to
which a specified Person (or a Subsidiary thereof) owns
a majority of the common stock or has the power to vote
or direct the voting of sufficient securities to elect
a majority of the directors.
QQ. "Tax" means any federal, state, local or foreign
income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar),
unemployment, disability, real property, personal
property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether
disputed or not.
RR. "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
SS. "Transactions" means the transactions contemplated to
take place pursuant to this Agreement.
Other capitalized terms used in this Agreement shall have the
meanings ascribed to them as set forth in other provisions of
this Agreement.
III. PURCHASE AND SALE OF BIT 3 SHARES.
A. BASIC TRANSACTION. Subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from
each of the Sellers at the Closing, and each of the
Sellers agrees to sell to the Buyer at the Closing, all
of the Sellers' Bit 3 Shares.
B. PURCHASE PRICE AND METHOD OF PAYMENT.
1. TOTAL PURCHASE PRICE. The total consideration to
be paid by the Buyer to the Sellers for the Bit 3
Shares (the "Purchase Price") will be an amount
equal to the sum of the following (allocated in
the percentages set forth on Exhibit III.B.1
hereto):
a. Twenty-Four Million Dollars ($24,000,000) in
cash less, on a dollar-for-dollar basis, the
amount, if any, by which the Net Worth of Bit
3 as of the Closing Consideration Adjustment
Date (as defined in Section III.C below), as
shown on the Closing Consideration Balance
Sheet (determined as set forth in Section
III.B.3 below), is less than $3,250,000,
plus, on a dollar-for-dollar basis, the
amount, if any, by which the Net Worth of Bit
3 as of the Closing Consideration Adjustment
Date, as shown on the Closing Consideration
Balance Sheet, is greater than $3,250,000
(the "Basic Purchase Price"); plus
b. up to $250,000 pursuant to Section VI.H
hereto; plus
c. an amount equal to the out of pocket fees and
expenses incurred by or on behalf of the
Sellers or Bit 3 to Peat Marwick in
connection with the audit of the Financial
Statements, and not previously reimbursed by
the Buyer.
2. METHOD OF PAYMENT. At the Closing the Buyer will:
a. Pay the Sellers, by wire transfer,
immediately available funds aggregating
Twenty Million Dollars ($20,000,000)
(allocated in the percentages set forth on
Exhibit III.B.1 hereto) to a bank account of
each of the Sellers pursuant to written
instructions of the Sellers given to the
Buyer at least 48 hours prior to the Closing;
and
b. Execute and deliver to the Sellers the
Buyer's promissory notes in the aggregate
amount of One Million Five Hundred Thousand
Dollars ($1,500,000) (allocated in the
percentages set forth on Exhibit III.B.1
hereto), pursuant to which One Million
Dollars ($1,000,000) will be due on July 1,
1997, and Five Hundred Thousand Dollars
($500,000) will be due on July 1, 1998. Such
promissory notes shall be senior to all other
indebtedness of the Buyer other than the debt
of the Buyer to NationsBank existing on the
Closing Date and shall be secured by the
assets of the Buyer (and senior to all other
security interests other than the security
interest of NationsBank on such debt).
c. Execute and deliver to the Sellers the
Buyer's promissory notes in the aggregate
amount of Two Million Five Hundred Thousand
Dollars ($2,500,000) allocated in the
percentages set forth on Exhibit III.B.1
hereto), which will be due on July 1, 1998.
Such promissory notes shall be senior to all
other indebtedness of the Buyer other than
the debt of the Buyer to NationsBank or any
successor lender (regardless of the amount of
such debt) and shall be secured by the assets
of the Buyer (and senior to all other
security interests other than the security
interest of NationsBank or any such successor
lender). Payments pursuant to the Promissory
Notes shall be deemed to include imputed
interest compounded semiannually at the
applicable federal short-term interest rate,
as determined in accordance with the
provisions of section 1274(d) of the Code.
d. The promissory notes provided for in the
preceding paragraphs shall be in the forms
mutually agreed to by the parties and are
herein referred to as the "Promissory Notes".
The Promissory Notes shall be due and
payable in full at their face amount upon the
occurrence of any Change in Control.
3. PURCHASE PRICE ADJUSTMENT. The Basic Purchase
Price set forth in Section III.B.1 hereof will be
subject to adjustment as follows:
a. The Buyer will prepare and deliver to the
Sellers within 45 days following the Closing
Date a balance sheet for Bit 3 as of the
close of business on the Closing
Consideration Adjustment Date (the "Closing
Consideration Balance Sheet"). The Closing
Consideration Balance Sheet shall be used to
determine the amount of the adjustments to
the Basic Purchase Price set forth in Section
III.B.1.a above.
b. The Closing Consideration Balance Sheet shall
be prepared from the books and records of Bit
3 in accordance with GAAP and applied
consistently with the principles, practices
and procedures used in preparation of the
Most Recent Audited Balance Sheet. All
inventory and supplies reflected on the
Closing Consideration Balance Sheet shall be
so reflected on the basis of a complete
physical count taken on the Closing Date,
adjusted for receipts and shipments through
the Closing Consideration Date, and shall be
valued in accordance with Bit 3's prior
practices as reflected in the Most Recent
Audited Balance Sheet. Representatives of
both the Buyer and the Sellers shall have the
right to participate in the taking of such
physical inventory and the valuation thereof.
Peat Marwick will apply certain procedures
agreed upon by the Parties to specific
accounts and/or items on the Closing
Consideration Balance Sheet. Bit 3, the
Buyer and the Sellers will provide each other
with full cooperation in connection with the
preparation of the Closing Consideration
Balance Sheet, and each shall have the right
to review Peat Marwick's work papers in
connection with the agreed upon procedures
performed on the Closing Consideration
Balance Sheet.
c. The Closing Consideration Balance Sheet will
not include (i) the costs associated with the
audit of Bit 3's financial statements as of
December 31, 1993, 1994 and 1995 and for the
years ended December 31, 1994 and 1995, and
as of and for the six months ended June 30,
1996, or (ii) attorneys' fees incurred by Bit
3 in connection with corporate "clean up"
matters necessary in connection with the
Transactions. Bit 3 shall pay all of its
attorneys' fees relating to the Transactions
at or prior to the Closing Date, or in the
case of Bit 3 shall accrue any such
attorneys' fees as shall not have been so
paid. It is contemplated by the Parties that
the Buyer shall not be responsible for the
payment of the Sellers' and Bit 3's
attorneys' fees incurred in connection with
this Agreement and the Transactions.
d. Within 30 days after receipt of the Closing
Consideration Balance Sheet, the Sellers will
notify the Buyer if they disagree with any of
the amounts included in the Closing
Consideration Balance Sheet. If such notice
is not given, the Closing Consideration
Balance Sheet will be final and conclusive
for all purposes. If the parties are unable
to resolve the differences within 60 days of
the receipt of the Closing Consideration
Balance Sheet, the Buyer and the Sellers
agree to retain the accounting firm of
Coopers & Xxxxxxx, through its Minneapolis
office, to arbitrate the dispute and render a
decision within 30 days of such retention,
which decision shall be final and binding for
all purposes. Any award pursuant to this
Subsection III.B.3.d may be entered in and
enforced by any court having jurisdiction
over the matter and the parties hereby
consent and commit themselves to the
jurisdiction of the courts of New Mexico for
the purposes of the enforcement of any such
award. The Buyer and the Sellers will each
pay one-half of the costs of services
rendered by said accounting firm.
e. Within five days after the expiration of the
30-day period for giving notice of
disagreement with Peat Marwick's finding, if
no such notice is given, or within five days
after the resolution of disputes, if any,
pursuant to Section III.B.3.d above, the
Basic Purchase Price shall be adjusted (using
the formula set forth in Section III.B.1.a
based on the amounts shown in the Closing
Consideration Balance Sheet) (the "Adjusted
Purchase Price"). The Buyer or the Sellers,
as appropriate, will by wire transfer in
immediately available funds, make payment to
the other of any adjustment of the Purchase
Price pursuant to Section III.B.1.a.
4. The amount of the Purchase Price will be reduced
on a dollar-for-dollar basis by the amount of any
uncollected accounts receivable of Bit 3 as
provided in Section VI.J below.
C. CLOSING. Unless this Agreement has been terminated and
the Transactions have been abandoned pursuant to the
terms of this Agreement, the closing of the
Transactions (the "Closing") will take place at such
location as the Parties may mutually agree, on the date
of, and simultaneously with, the execution of the firm
commitment underwriting agreement between the Buyer and
the underwriters (the "Underwriters") of the Public
Offering (the "Closing Date"). At such time, the
documents prepared in connection with such Closing,
including the stock certificates and assignment
documents for the Bit 3 Shares, will be fully executed
by the Parties and placed in escrow with an escrow
agent mutually acceptable to the Buyer and the Sellers
(the "Escrow Agent"), all conditions to the obligations
of the Parties to consummate the Transactions shall
thereafter be deemed to be satisfied without exception,
and this Agreement shall be a binding and unconditional
agreement between the Parties subject only to delivery
by the Buyer of the portion of the Purchase Price to be
paid at Closing pursuant to Section III.B.2.a (the
"Closing Consideration"). The Buyer will deliver to
the Sellers the Closing Consideration simultaneously
with the receipt by the Buyer from the Underwriters of
the proceeds of the Public Offering. The date on which
the Closing Consideration is delivered by the Buyer to
the Sellers hereunder is herein referred to as the
"Closing Consideration Adjustment Date." In the event
that the Sellers do not receive the Closing
Consideration within eight (8) business days of the
Closing, this Agreement shall terminate effective as of
the Closing Date; provided, however, that the Closing
Date shall be no later than December 6, 1996, unless
extended as provided in this Agreement. The Escrow
Agent shall deliver the documents prepared for the
Closing to the respective Parties upon receipt of
confirmation from the Sellers that the Closing
Consideration has been delivered to the Sellers, and
such delivery of the Closing Proceeds to the Sellers
shall be the only condition to release of such
documents to the appropriate Parties.
D. DELIVERIES AT THE CLOSING. At the Closing the
Parties shall deliver the following:
1. The Sellers will deliver to the Buyer:
a. the various certificates, instruments, and
documents referred to in this Agreement, and
b. stock certificates representing all of the
Sellers' Bit 3 Shares, endorsed in blank or
accompanied by duly executed assignment
documents.
2. The Buyer shall deliver to each of the Sellers:
a. the various certificates, instruments, and
documents referred to in this Agreement, and
b. the Closing Consideration specified in
Section II.B.2.a above.
IV. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTIONS.
A. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of
the Sellers, jointly and severally, represents and
warrants to the Buyer, as of the date hereof, except as
set forth in the Disclosure Schedule, as follows:
1. AUTHORIZATION OF TRANSACTIONS. Each of the
Sellers has all requisite power and authority to
execute and deliver this Agreement and to perform
Sellers' obligations under this Agreement. This
Agreement constitutes the valid and legally
binding obligation of the Sellers, enforceable
against the Sellers in accordance with its terms
and conditions (subject as to enforcement of
remedies, to the discretion of courts in awarding
equitable relief to applicable bankruptcy,
reorganization, insolvency, moratorium and similar
laws relating to or affecting the rights of
creditors generally and to general principles of
equity).
2. REQUIRED NOTICES, FILINGS AND APPROVALS. Except
for notices, filings or approvals required under
the Blue Sky Laws, to Sellers' Knowledge the
Sellers need not give any notice to, make any
filing with, or obtain any authorization, consent
or approval of any government or governmental
agency or any other Person, in order for the
Sellers to consummate the Transactions.
3. NONCONTRAVENTION. Except as set forth in the
Disclosure Schedule, neither the execution and
delivery of this Agreement, nor the consummation
of the Transactions will (i) to Sellers' Knowledge
violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government,
governmental agency, or court to which the Sellers
are or either is subject or (ii) conflict with,
result in a breach of, constitute a default under,
result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other
arrangement to which the Sellers are or either is
a party or by which the Sellers are or either is
bound or to which any of the Sellers' assets are
subject.
4. BROKERS' FEES. The Sellers have no Liability or
obligation to pay any brokerage fees, commissions,
finders' fees or financial advisory fees to any
Person with respect to the Transactions, except
those owed to Broadview Associates, LLP.
5. BIT 3 SHARES. Each of the Sellers holds of record
and owns beneficially the number of Bit 3 Shares
as set forth in the Disclosure Schedule, free and
clear of any restrictions on transfer (other than
any restrictions under the Securities Act and Blue
Sky Laws), Taxes (other than income or other Taxes
as may be owed by the Sellers as a result of the
Transactions), Security Interests, options,
warrants, rights, contracts, commitments,
equities, claims, and demands. The Sellers are
not and neither of them is a party to any option,
warrant, right, or other contract or commitment
that could require the Sellers or either of them
to sell, transfer, or otherwise dispose of any
capital stock of Bit 3 (other than pursuant to
this Agreement). The Sellers and each of them are
not parties to any voting trust, proxy, or other
written agreement or understanding with respect to
the voting of any capital stock of Bit 3.
B. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Sellers, as of the date
hereof, and except as set forth in the Disclosure
Schedule, as follows:
1. ORGANIZATION OF BUYER. Buyer is a corporation
duly organized, validly existing, and in good
standing under the laws of the State of New
Mexico, with requisite corporate power and
authority to carry on its business as it is now
being conducted, and to own, operate and lease its
properties and assets. Buyer has only three
subsidiaries, GreenSpring Computers, Inc., Xxxx
Systems International, Inc. and Logical Design
Group, Inc. Buyer, and each of its subsidiaries,
is duly licensed or qualified to transact business
as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the
business transacted by it or the character or
location of the properties owned, leased or
operated by it requires that licensing or
qualification, except where the failure to be so
licensed or qualified would not have a Material
Adverse Effect on the business, operations or
financial condition of Buyer and its subsidiaries,
taken as a whole.
2. AUTHORIZATION OF TRANSACTIONS. Subject to
stockholder approval and completion of the Public
Offering, Buyer has full power and authority
(including full corporate power and authority) to
execute and deliver this Agreement and to perform
its obligations under it. The Board of Directors
of the Buyer has taken all action required by law,
the Buyer's Articles of Incorporation and Bylaws
to authorize the execution, delivery and
performance of this Agreement and consummation of
the Transactions. This Agreement has been duly
and validly executed and delivered by the Buyer
and no other action is necessary, other than
shareholder approval as set forth below. This
Agreement constitutes the valid and legally
binding obligation of Buyer, enforceable in
accordance with its terms and conditions (subject
as to enforcement of remedies, to the discretion
of courts in awarding equitable relief and to
applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the rights
of creditors generally, and general principles of
equity).
3. REQUIRED NOTICES, FILINGS AND APPROVALS. Except
for notices, filings or approvals under the
Securities Act, the Securities Exchange Act, the
Rules of the NASD, and the Blue Sky Laws required
to effect the Public Offering, and notification to
NationsBank, Buyer need not give any notice to,
make any filing with, or obtain any authorization,
consent, or approval of any government or
governmental agency or any other Person in order
for the Buyer to consummate the Transactions.
4. NONCONTRAVENTION. Except as set forth in Exhibit
IV.B, neither the execution and delivery of this
Agreement, nor the consummation of the
Transactions will (i) violate any constitution,
statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other
restriction of any government, governmental
agency, or court to which the Buyer is subject or
(ii) conflict with, result in a breach of,
constitute a default under, result in the
acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract,
lease, license, instrument, or other arrangement
to which the Buyer is a party or by which the
Buyer is bound or to which any of the Buyer's
assets are subject.
5. BROKERS' FEES. The Buyer has no Liability or
obligation to pay any brokerage fees, commissions,
finders' fees or financial advisory fees to any
Person with respect to the Transactions, except
those owed to its investment bankers and
underwriters pursuant to the Public Offering
(which fees and commissions will be solely the
responsibility of the Buyer).
6. FILINGS WITH SEC. Buyer has made all filings with
the SEC that it has been required to make within
the past 12 months under the Securities Act and
the Securities Exchange Act (collectively the
"Public Reports"). Each of the Public Reports has
materially complied with the Securities Act and
the Securities Exchange Act. None of the Public
Reports, as of their respective dates, contained
any untrue statement of a material fact or
omitted to state a material fact necessary in
order to make the statements made in it, in light
of the circumstances under which they were made,
not misleading. Buyer has delivered to Sellers
and Bit 3 a correct and complete copy of each
Public Report, together with all exhibits and
schedules thereto and as amended to date.
7. INVESTMENT. The Buyer is an Accredited Investor
and acknowledges that the Bit 3 Shares purchased
by the Buyer pursuant to this Agreement are being
acquired for investment only and not with a view
to any public distribution thereof, within the
meaning of the Securities Act. Buyer will not
offer to sell or otherwise dispose of the Bit 3
Shares so acquired by it in violation of any of
the registration requirements of the Securities
Act or of any applicable Blue Sky Laws.
8. ABILITY TO COMPLETE THE PUBLIC OFFERING. Subject
to the price of the Buyer's Common Stock in the
Public Offering being acceptable to the Buyer's
Board of Directors, the Buyer does not know of any
fact or circumstance that would cause it to
believe that it will not be able to complete, on
or before December 6, 1996, a Public Offering
with net proceeds sufficient to complete the
Transactions, as determined in Buyer's sole
discretion.
9. EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END.
Except as set forth in Exhibit IV.B, since the
most recent fiscal year end audit of the Buyer,
there have not been any changes in the business,
financial condition, operations, results of
operations, or future prospects of the Buyer and
its subsidiaries, taken as a whole, which have had
a Material Adverse Effect on the Buyer and its
subsidiaries, taken as a whole.
C. REPRESENTATIONS CONCERNING BIT 3. Sellers and each of
them, jointly and severally, represent and warrant to
Buyer, as of the date hereof, except as set forth in
the Disclosure Schedule, as follows:
1. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER.
Bit 3 is a corporation duly organized, validly
existing, and in good standing under the laws of
the State of Minnesota, with requisite corporate
power and authority to carry on its business as it
is now being conducted, and to own, operate and
lease its properties and assets. Bit 3 has no
subsidiaries. Bit 3 is duly licensed or qualified
to transact business as a foreign corporation and
is in good standing in each jurisdiction in which
the nature of the business transacted by it or the
character or location of the properties owned,
leased or operated by it requires that licensing
or qualification, except where the failure to be
so licensed or qualified would not have a Material
Adverse Effect on the business, operations or
financial condition of Bit 3. The Disclosure
Schedule lists the directors and officers of Bit
3. The Sellers have delivered to Buyer correct
and complete copies of the charter and bylaws of
Bit 3 (as amended to date). The minute books
(containing records of meetings of the
shareholders, the board of directors, and any
committee of the board of directors), the stock
certificate books, and the stock record book of
Bit 3 are correct and complete. Bit 3 is not in
default under or in violation of any provision of
its Articles of Incorporation and Bylaws.
2. CAPITALIZATION. The entire authorized capital
stock of Bit 3 consists of 2,500 Bit 3 Shares, of
which 500 Bit 3 Shares are issued and outstanding
and -0- Bit 3 Shares are held in treasury. All of
the issued and outstanding Bit 3 shares have been
duly authorized, are validly issued, fully paid,
and nonassessable, and are held of record by the
respective Sellers as set forth in the Disclosure
Schedule. There are no outstanding or authorized
options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or
other contracts or commitments that could require
Bit 3 to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are
no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar
rights with respect to Bit 3, other than normal
dividends paid to its shareholders from time-to-
time. There are no voting trusts, proxies, or
other agreements or understandings with respect to
the voting of the capital stock of Bit 3.
3. NONCONTRAVENTION. Except as set forth in the
Disclosure Schedule, neither the execution and
delivery of this Agreement, nor the consummation
of the Transactions will (i) to Sellers' Knowledge
violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government,
governmental agency, or court to which Bit 3 is
subject or (ii) conflict with, result in a breach
of, constitute a default under, result in the
acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract,
lease, license, instrument, or other arrangement
to which Bit 3 is a party or by which Bit 3 is
bound or to which any of Bit 3's assets are
subject.
4. REQUIRED NOTICES, FILINGS AND APPROVALS. Except
for notices, filings and approvals required under
the Blue Sky Laws, to Sellers' Knowledge Bit 3
does not need to give any notice to, make any
filing with, or obtain any authorization, consent,
or approval of any government or governmental
agency in order for Bit 3 to consummate the
Transactions.
5. BROKERS' FEES. Bit 3 has no Liability or
obligation to pay any brokerage fees, commissions,
finders' fees or financial advisory fees to any
Person with respect to the Transactions, except
those owed to Broadview Associates, LLP, as to
which Bit 3 will have no Liability after the
Closing Date (and as to which Sellers will hold
Buyer and Bit 3 harmless for any such liability
after Closing).
6. TITLE TO ASSETS. Bit 3 has good and marketable
title to, or a valid leasehold interest in, the
properties and assets used by it, located on its
premises, or shown on the Most Recent Audited
Balance Sheet or acquired after the date of the
Most Recent Audited Balance Sheet, free and clear
of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of
Business since the date of the Most Recent Audited
Balance Sheet.
7. FINANCIAL STATEMENTS. The Disclosure Schedule
contains the following financial statements of Bit
3 (collectively the "Financial Statements"): (i)
audited balance sheets as of December 31, 1994 and
1995 and audited statements of income, changes in
stockholders' equity, and cash flow for the fiscal
years ended December 31, 1993, 1994 and 1995; (ii)
the Most Recent Audited Financial Statements; and
(iii) unaudited balance sheets and statements of
income as of and for each of the three months
ended September 30, 1996. The audited financial
statements referred to above (including the notes
thereto), have been prepared in accordance with
GAAP applied on a consistent basis throughout the
periods covered thereby, and present fairly the
financial condition of Bit 3 as of such dates and
the results of operations of Bit 3 for such
periods.
8. EVENTS SUBSEQUENT TO MOST RECENT AUDITED FINANCIAL
STATEMENT. Except as set forth in the Disclosure
Schedule, since June 30, 1996, there have not been
any changes in the business, financial condition,
operations, or results of operations, of Bit 3
which have had a Material Adverse Effect on Bit 3.
Without limiting the generality of the foregoing,
since June 30, 1996, other than as contemplated by
this Agreement:
a. Bit 3 has not sold, leased, transferred, or
assigned any of its assets, tangible or
intangible, other than in the Ordinary Course
of Business;
b. Bit 3 has not entered into any agreement,
contract, lease, or license (or series of
related agreements, contracts, leases, and
licenses) either involving more than $10,000
or not used in Bit 3's business;
c. To Sellers' Knowledge no party (including Bit
3) has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or
license (or series of related agreements,
contracts, leases, and licenses) involving
more than $10,000 to which Bit 3 is a party
or by which it is bound, other than such
terminations, modifications or cancellations
pursuant to and consistent with the terms of
such agreements, contracts, leases or
licenses which are effected for reasons other
than cause or convenience;
d. Bit 3 has not imposed any Security Interest
upon any of its assets, tangible or
intangible;
e. Bit 3 has not made any capital expenditure
(or series of related capital expenditures)
either involving more than $10,000 or not
used in Bit 3's business;
f. Bit 3 has not made any capital investment in,
any loan to, or any acquisition of the
securities or assets of, any other Person (or
series of related capital investments, loans,
and acquisitions);
g. Bit 3 has not issued any note, bond, or other
debt security or created, incurred, assumed,
or guaranteed any indebtedness for borrowed
money or capitalized lease obligations;
h. Bit 3 has not delayed or postponed the
payment of accounts payable and other
Liabilities outside the Ordinary Course of
Business;
i. Bit 3 has not accelerated the shipment of
products in advance of the customer's
requested delivery schedule;
j. Bit 3 has not canceled, compromised, waived,
or released any right or claim (or series of
related rights and claims) either involving
more than $10,000 or outside the Ordinary
Course of Business;
k. Bit 3 has not granted any license or
sublicense of any rights under or with
respect to any Intellectual Property to
manufacture or produce any of Bit 3's
products;
1. There has been no change made or authorized
in the Articles of Incorporation or Bylaws of
Bit 3;
m. Bit 3 has not experienced any damage,
destruction, or loss (whether or not covered
by insurance) to its property;
n. Bit 3 has not made any loan to any of its
directors, officers, and employees outside
the Ordinary Course of Business;
o. Bit 3 has not entered into any employment
contract or collective bargaining agreement,
written or oral, or modified the terms of any
existing such contract or agreement;
p. Bit 3 has not granted any increase in the
base compensation of any of its directors,
officers, and employees outside the Ordinary
Course of Business;
q. Bit 3 has not adopted, amended, modified, or
terminated any bonus, profit-sharing,
incentive, severance, or other plan,
contract, or commitment for the benefit of
any of its directors, officer, and employees
(or taken any such action with respect to any
other Employee Benefit Plan);
r. Bit 3 has not made any other change in
employment terms for any of its directors,
officers, and employees outside the Ordinary
Course of Business;
s. Bit 3 has not made or pledged to make any
charitable or other capital contribution
outside the Ordinary Course of Business;
t. to Sellers' actual knowledge there has not
been any other material occurrence, event,
incident, action, failure to act, or
transaction outside the Ordinary Course of
Business involving Bit 3; and
u. Bit 3 has not committed to any of the
foregoing.
9. UNDISCLOSED LIABILITIES. To Sellers' actual
knowledge, Bit 3 has no Material Liability, and
there are no occurrences or circumstances of which
Sellers have actual knowledge which would give
Sellers reasonable grounds to believe that Bit 3
would likely have such Material Liability in the
foreseeable future, except for (i) Liabilities
reflected on the face of the Most Recent Audited
Balance Sheet, including any notes, (ii)
Liabilities that are set forth on the Disclosure
Schedule, (iii) Liabilities which have arisen
after June 30, 1996 in the Ordinary Course of
Business (none of which results from, arises out
of, relates to, is in the nature of, or was caused
by any breach of contract, breach of warranty,
tort, infringement, or violation of law), (iv)
Liabilities for executory obligations to be
performed under the contracts described in Section
IV.C.17 below, and (v) Liabilities in connection
with or as a result of the Transactions.
10. LEGAL COMPLIANCE. To Sellers' Knowledge Bit 3 is
in compliance in all material respects with all
applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments
(and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed
or commenced against any of them alleging any
failure so to comply.
11. TAX MATTERS.
a. Bit 3 is an "S Corporation" as defined under
1361 of the Code, and has been an S
Corporation since its election as of June 1,
1990. All Tax Returns required to be filed
with respect to Bit 3 or its operations by
Bit 3 with any taxing authority as of the
Closing Date have been filed, or if after the
Closing Date will be filed promptly when due,
and all Taxes required to be paid with
respect to the periods covered by those Tax
Returns have been paid or accrued or adequate
reserves for the payment thereof have been
established, except where such failure to
file such Tax Returns or pay such Taxes would
not have a Material Adverse Effect on Bit 3.
Bit 3 is not delinquent in the payment of
any Tax, assessment or governmental charge.
x. Xxxxxxx shall be responsible for the payment
of all personal Taxes imposed on them with
respect to the S Corporation earnings of Bit
3 or distributions and dividends paid to them
by Bit 3 before Closing, as well as any other
personal Taxes resulting from the
Transactions. Sellers and Bit 3,
individually and jointly, shall be
responsible for the preparation and timely
filing of all Tax Returns and related reports
which are required for the short period up to
the Closing Date. Any additional Tax caused
by reason of 1363(d), 1374, or 1375 of the
Code have been paid or will be paid by Bit 3,
and Sellers agree that such Tax Liability is
a liability existing before the Closing Date
and is not an Additional Tax Liability.
c. Bit 3 has withheld and paid all Taxes legally
required to have been withheld and paid in
connection with amounts paid to any employee,
independent contractor, creditor,
stockholder, or other third party.
d. The Sellers are not aware that any authority
intends to assess any additional Taxes for
any period for which Tax Returns have been
filed. Except as set forth on the Disclosure
Schedule, there is no dispute or claim
concerning any Tax Liability of or relating
to Bit 3 either (i) claimed or raised by any
authority in writing or (ii) as to which any
of the Sellers has actual knowledge based
upon personal contact with any agent of that
authority. The Disclosure Schedule lists all
federal, state, local, and foreign income Tax
Returns filed with respect to Bit 3 for
taxable periods ended on or after December
31, 1989 through the present, indicates those
Tax Returns that have been audited and those
Tax Returns that currently are the subject of
audit.
12. REAL PROPERTY LEASED OR SUBLEASED. The Disclosure
Schedule lists all real property leased or
subleased to Bit 3. The Sellers have delivered to
the Buyer correct and complete copies of the
leases and subleases listed in the Disclosure
Schedule. With respect to each lease and sublease
listed in the Disclosure Schedule:
a. to Sellers' Knowledge the lease or sublease
is legal, valid, binding and enforceable;
b. to Sellers' Knowledge Bit 3 is not in
material breach or default, and no event has
occurred which, with notice or lapse of time,
would constitute a breach or default or
permit termination, modification, or
acceleration, of any lease or sublease;
c. Bit 3 has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold;
d. all facilities leased or subleased thereunder
by Bit 3 are supplied with utilities and
other services necessary for the operation of
said facilities as currently operated by Bit
3; and
x. Xxxxxxx have received written notice from all
lessors or sublessors of such leased or
subleased real property, to the effect that
the terms and conditions of the leases and
subleases will be continued uninterrupted and
without modification from the current terms
and conditions as a result of the
Transactions, for a period ending October 31,
1997.
13. COMPLIANCE WITH BUILDING AND ZONING CODES. To
Sellers' Knowledge, all of Bit 3's operations and
activities as conducted as of the date hereof,
comply in all Material respects with all
applicable building and zoning codes.
14. INTELLECTUAL PROPERTY.
a. Bit 3 owns or has the right to use pursuant
to license, sublicense, agreement, or
permission all Intellectual Property
necessary or desirable to design, manufacture
and sell its current products and for office
administration, the failure to possess which
would have a Material Adverse Effect on Bit
3. Each Material item of Intellectual
Property owned or used by Bit 3 immediately
before the Closing will be owned or available
for use by Bit 3 on identical terms and
conditions immediately after the Closing.
Bit 3 has taken appropriate action to
maintain and protect as a trade secret each
Material item of Intellectual Property that
it owns or uses.
b. To Sellers' Knowledge, none of the products
manufactured by Bit 3 infringes upon any
Intellectual Property rights of third
parties, and none of the Sellers has since
July 1, 1993, received any written charge,
complaint, claim, demand, or notice alleging
any such infringement (including any claim
that Bit 3 must license or refrain from using
any Intellectual Property rights of any third
party).
c. No patents are owned by Bit 3 and Bit 3 has
made no patent applications. Bit 3 has not
granted to any third party any license with
respect to any of its Intellectual Property
to manufacture or produce any product.
d. The Disclosure Schedule identifies each item
of Intellectual Property that any third party
owns and that Bit 3 embodies or incorporates
in Bit 3's products, pursuant to license,
sublicense, agreement, or permission. The
Sellers have delivered to the Buyer correct
and complete copies of all such licenses,
sublicenses, agreements, and permissions (as
amended to date). With respect to each item
of Intellectual Property required to be
identified in the Disclosure Schedule, the
license, sublicense, agreement, or permission
covering the item is, to the Sellers' actual
knowledge, the legal, valid and binding
obligation of Bit 3, enforceable in
accordance with its terms, and in full force
and effect, and Sellers have no reason to
believe that such will not stay in effect
following the Closing Date.
15. TANGIBLE ASSETS. Bit 3 owns or leases all
buildings, machinery, equipment, and other
tangible assets necessary for the conduct of its
businesses as currently conducted. To the
Sellers' Knowledge, each of those tangible assets
is free from defects (patent and latent), has been
maintained in accordance with normal industry
practice, is in good operating condition and
repair (subject to normal wear and tear), and is
suitable for the purposes for which it currently
is used.
16. INVENTORY. Inventories reflected on Bit 3's Most
Recent Audited Balance Sheet are properly stated
in accordance with GAAP.
17. CONTRACTS. The Disclosure Schedule lists the
following written contracts and other agreements
to which Bit 3 is a party:
a. any agreement (or group of related
agreements) for the lease of personal
property to or from any Person providing for
lease payments;
b. any agreement for the sale of Bit 3 products
or the purchase of raw materials by Bit 3
which involve currently open sales or
purchase orders;
c. any agreement concerning a partnership or
joint venture;
d. any agreement (or group of related
agreements) under which it has created,
incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any
capitalized lease obligation;
e. any profit sharing, stock option, stock
purchase, stock appreciation, deferred
compensation, severance, or other material
plan or arrangement for the benefit of its
current or former directors, officers, and
employees;
f. any collective bargaining agreement;
g. any written agreement for the employment of
any individual on a full or part-time basis
in which the consideration to be paid is more
than $75,000 per year, or for the performance
of consulting services in which Bit 3's
future obligation exceeds $25,000;
h. any agreement under which it has been
advanced or loaned any amount to any of its
directors, officers, and employees outside
the Ordinary Course of Business; or
i. any agreement which is currently in default,
the consequences of which could have a
Material Adverse Effect on the business,
financial condition, operations, results of
operations, or future prospects of Bit 3.
The Sellers have delivered to the Buyer a correct and
complete copy of each written agreement listed in the
Disclosure Schedule. With respect to each such
agreement, to Sellers' Knowledge : (i) the agreement
is the legal, valid and binding obligation of Bit 3,
enforceable in accordance with its terms, and in full
force and effect; (ii) the agreement will continue to
be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the
consummation of the transactions; (iii) Bit 3 is not,
to Sellers' Knowledge, in breach or default, and no
event has occurred which with notice or lapse of time
would constitute a breach or default, or permit
termination, modification, or acceleration, under the
agreement; and (iv) to Sellers' actual knowledge no
party to any such agreement has notified Sellers or Bit
3 that they do not intend to perform under the
agreement, for any reason.
18. NOTES AND ACCOUNTS RECEIVABLE. All notes and
accounts receivable of Bit 3 as shown on the Most
Recent Audited Balance Sheet are reflected
properly on such balance sheet as of the date of
such balance sheet, are valid receivables subject
to no setoffs or counterclaims, subject only to a
reasonable reserve for bad debts set forth on the
face of the Most Recent Audited Balance Sheet,
including the notes thereto.
19. POWERS OF ATTORNEY. There are no outstanding
powers of attorney executed on behalf of Bit 3.
20. INSURANCE. The Disclosure Schedule contains an
accurate and complete list of all policies of fire
and other casualty, general liability, theft,
life, workers' compensation, health, directors and
officers, business interruption and other forms of
insurance owned or held by Bit 3, specifying the
insurer, the policy number, the term of the
coverage, and in the case of any "claims made"
coverage, the same information as to predecessor
policies for the previous three years. To
Sellers' Knowledge, all present policies are in
full force and effect, and will not terminate or
be violated as a result of the Transactions. To
Sellers's Knowledge, neither Sellers or Bit 3
have done anything which will cause such policies
to be cancelled.
21. LITIGATION. The Disclosure Schedule sets forth
each instance in which Bit 3 (i) is subject to any
outstanding injunction, judgment, order, decree or
ruling, or (ii) is a party or, to the Knowledge of
the Sellers, has been threatened in writing to be
made a party to any action, suit, proceeding,
hearing, or investigation, of, in, or before any
court or quasi-judicial or administrative agency
of any federal, state, local, or foreign
jurisdiction, or before any arbitrator, which
would cause a Material Adverse Effect on Bit 3.
There are no occurrences or circumstances of which
Sellers have actual knowledge, which would give
Sellers reasonable grounds to believe that there
would be a high likelihood that any such action,
suit, proceeding, hearing, or investigation may be
brought or threatened against Bit 3 in the
foreseeable future.
22. CUSTOMERS. As of the date of this Agreement, GE
has designed certain of Bit 3's products into
certain of GE's products. The Sellers have no
actual knowledge that GE intends to discontinue to
use such Bit 3 products in those GE products in
the immediately foreseeable future, or that the
change in ownership of Bit 3 effected by the
Transactions will itself cause a substantial
diminution or termination of Bit 3's business
relationship with GE.
23. EMPLOYEES. To the Sellers' actual knowledge, no
executive, key employee, or group of employees has
any plans to terminate employment with Bit 3. Bit
3 is not a party to or bound by any collective
bargaining agreement, nor, to Sellers' Knowledge,
has it experienced any strikes, grievances, claims
of unfair labor practices, or other collective
bargaining disputes. To Sellers' Knowledge, Bit 3
has not committed any unfair labor practice. The
Sellers' have no actual knowledge of any
organizational effort currently being made or
threatened by or on behalf of any labor union with
respect to employees of Bit 3.
24. EMPLOYEE BENEFITS.
a. Except as set forth in the Disclosure
Schedule, Bit 3 has complied in all material
respects with all applicable laws relating to
the providing of employee benefits to its
employees, including, but not limited to, the
granting of leave time, the providing of
health, disability and workers compensation
insurance, and the providing of pension
benefits.
b. The Disclosure Schedule lists each Employee
Benefit Plan that Bit 3 maintains or to which
Bit 3 contributes. Except as set forth in
the Disclosure Schedule:
(1) Each such Employee Benefit Plan (and
each related trust, insurance contract,
or fund) complies in form and in
operation in all material respects with
the applicable requirements of ERISA,
the Code, the laws of the State of
Minnesota, and any other applicable
laws.
(2) All required Form 5500 Annual Reports
have been filed with respect to each
such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Section
4980B have been met in all material
respects with respect to each such
Employee Benefit Plan subject thereto.
(3) All contributions (including all
employer contributions and employee
salary reduction contributions) which
are due on or before the Closing Date
have been paid to each such Employee
Benefit Plan which is an Employee
Pension Benefit Plan and all
contributions for any period ending on
or before the Closing Date which are not
yet due have been paid to each such
Employee Pension Benefit Plan or
accrued. All premiums or other payments
which are due on or before the Closing
Date for all periods ending on or before
the Closing Date, have been paid or
accrued with respect to each such
Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(4) Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan
complies in all material respects with
the requirements of a "qualified plan"
under Code Section 401(a).
(5) The Sellers have delivered to the Buyer
correct and complete copies of the plan
documents and summary plan descriptions,
the most recent determination letter
received from the Internal Revenue
Service, the most recent Form 5500
Annual Report, and all related trust
agreements, insurance contracts, and
other funding agreements which implement
each such Employee Benefit Plan.
c. With respect to each Employee Benefit Plan
that Bit 3 maintains or ever has maintained
or to which it contributes, ever has
contributed, or ever has been required to
contribute:
(1) No such Employee Benefit Plan is subject
to Title IV of ERISA.
(2) There have been no Prohibited
Transactions (as defined in Section 406
of ERISA) with respect to any such
Employee Benefit Plan which could
reasonably be expected to have a
Material Adverse Effect on Bit 3. To
Sellers' Knowledge no fiduciary has any
Liability for breach of fiduciary duty
or any other failure to act or comply in
connection with the administration or
investment of the assets of any such
Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation
with respect to the administration or
the investment of the assets of any such
Employee Benefit Plan (other than
routine claims for benefits) is pending,
or, to the Knowledge of the Sellers, is
threatened. None of the Sellers has
actual knowledge of any basis for any
such action, suit, proceeding, hearing,
or investigation.
d. No Employee Welfare Benefit Plan with respect
to which Bit 3 could reasonably be expected
to have any liability, provides medical,
health, or life insurance or other welfare-
type benefits for current or future retired
or terminated employees, their spouses, or
their dependents (other than in accordance
with Code section 4980B and comparable
provisions of state law).
e. Liabilities associated with any Employee
Benefit Plan, Employee Pension Benefit Plan
or Employee Welfare Plan to which Bit 3 is
subject, have been properly reflected and
represented on the Most Recent Audited
Financial Statement for Bit 3, to the extent
required by and in accordance with GAAP.
25. GUARANTIES. Bit 3 is not a guarantor or otherwise
is liable for any Liability or obligation
(including indebtedness) of any other Person.
26. ENVIRONMENT, HEALTH, AND SAFETY.
a. Bit 3 has complied in all material respects
with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or
commenced against any of them alleging any
failure so to comply. Without limiting the
generality of the preceding sentence, Bit 3
has obtained and been in material compliance
with all of the terms and conditions of all
permits, licenses, and other authorizations
which are required under, and has complied
with all other limitations, restrictions,
conditions, standards, prohibitions,
requirements, obligations, schedules, and
timetables which are contained in, all
Environmental, Health, and Safety Laws.
b. Bit 3 has no Material Liability (and Bit 3
has not handled or disposed of any substance,
arranged for the disposal of any substance,
exposed any employee or other individual to
any substance or condition, or owned or
operated any property or facility in any
manner that would give the Sellers reasonable
grounds to believe that Bit 3 would likely
have such Material Liability) for damage to
any site, location, or body of water (surface
or subsurface), for any illness of or
personal injury to any employee or other
individual, or for any reason under any
Environmental, Health, and Safety Law.
c. All properties and equipment used in the
business of Bit 3 have been free of asbestos,
PCB's, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous
Substances.
27. CERTAIN BUSINESS RELATIONSHIPS WITH BIT 3. None
of the Sellers or their Affiliates has any written
agreement with Bit 3 within the past twelve (12)
months or which are currently in effect, and none
of the Sellers and their Affiliates owns any
assets, tangible or intangible, which are used in
the business of Bit 3.
28. DISCLOSURE. To the Sellers' Knowledge, the
representations and warranties contained in this
Subsection C do not contain any untrue statement
of a material fact or omit to state any material
fact necessary in order to make the statements and
information not misleading, as of the date of such
representation or warranty.
V. PRE-CLOSING COVENANTS. The Parties agree as follows with
respect to the period between the execution of this
Agreement and the Closing.
A. GENERAL. Each of the Parties will use his or its
commercially reasonable efforts to take all action and
to do all things necessary, proper, or advisable in
order to consummate and make effective the Transactions
(including satisfaction, but not waiver, of the closing
conditions set forth in Section VII below). However,
the taking of any such action, or the failure to take
such action, by any Party shall not affect the
representations and warranties of the Parties contained
in this Agreement.
B. NOTICES AND CONSENTS. The Sellers will cause Bit 3 to
give any notices to third parties, and will cause Bit 3
to use commercially reasonable efforts to obtain any
third-party consents, that the Buyer reasonably may
request in connection with the matters referred to in
Section IV.C.4 above. Each of the Parties will (and
the Sellers will cause Bit 3 to) give any notices to,
make any filings with, and use its commercially
reasonable efforts to obtain any authorizations,
consents, and approvals of governments and governmental
agencies in connection with the matters referred to in
Sections IV.A.2, IV.B.3 and IV.C.4 above. However, the
giving of any such notices, the making of any such
filings, or the obtaining of any such approvals, or the
failure to give such notices, to make any such filings,
or to obtain any such approvals, by any Party shall not
affect the representations and warranties of the
Parties contained in this Agreement.
C. OPERATION OF BUSINESS. The Sellers will not cause or
permit Bit 3 to engage in any practice, take any
action, or enter into any transaction outside the
Ordinary Course of Business.
D. PRESERVATION OF BUSINESS. The Sellers will cause Bit 3
to use its commercially reasonable efforts to keep its
business and properties substantially intact, including
its present operations, physical facilities, working
conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
E. FULL ACCESS. Each of the Sellers will permit, and the
Sellers will cause Bit 3 to permit, representatives of
the Buyer to have full access at all reasonable times,
and in a manner so as not to interfere with the normal
business operations of Bit 3, to all premises,
properties, books, records (including Tax records of
Bit 3, but not including the personal tax records of
Sellers), contracts, and documents of or pertaining to
Bit 3. Buyer shall not contact, approach, confer with
or otherwise engage in any discussions or
communications with any employee, independent
contractor, agent, vendor or customer of Bit 3 without
the prior written consent of the Sellers. The Buyer
will provide to the Sellers copies of the results of
any searches authorized or conducted by or on behalf of
the Buyer with respect to the Intellectual Property of
Bit 3, or possible infringement by the products of Bit
3 on the Intellectual Property of any third party.
Upon termination of this Agreement, the Buyer will
return any and all information provided by the Sellers
or Bit 3 pursuant to this Section.
F. EXCLUSIVITY. From the date of this Agreement through
either the Closing Date or the date of termination of
this Agreement as provided in Article IX below, none of
the Sellers will (and the Sellers will not cause or
permit Bit 3 to) (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or
other voting securities, or any substantial portion of
the assets, of Bit 3 (including any acquisition
structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in
any other manner any effort or attempt by any Person to
do or seek any of the foregoing. None of the Sellers
will vote their Bit 3 Shares in favor of any such
acquisition structured as a merger, consolidation, or
share exchange. The Sellers will notify the Buyer
immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the
foregoing.
G. PUBLIC OFFERING. The Buyer agrees to use commercially
reasonable efforts to prepare and file a registration
statement under the Securities Act for a Public
Offering covering sufficient shares of Common Stock of
the Buyer to raise proceeds, net of underwriting
discounts and commissions, and offering expenses, which
are sufficient to enable the Buyer to close the
Transactions (the "Registration Statement"), and shall
use its commercially reasonable efforts to cause such
Registration Statement to become effective as soon as
possible and to effect and close the Public Offering as
soon as possible. The Sellers shall provide to the
Buyer such information concerning Bit 3 as the Buyer
may reasonably request for the inclusion by the Buyer
in the Registration Statement (subject to Sellers'
concerns concerning the confidentiality of such
information); provided, however, that the Buyer agrees
and acknowledges that the Sellers and Bit 3 are not and
will not be participants in the preparation of the
Registration Statement or otherwise involved in
connection with the Public Offering process.
H. SHAREHOLDER APPROVAL. The Buyer shall promptly, after
the execution of this Agreement, take all actions
necessary in accordance with the laws of the State of
New Mexico, its Articles of Incorporation and Bylaws,
federal law, the rules of the NASD and any securities
exchange in which Buyer's securities are or may be
listed, to convene a meeting of the shareholders to
consider and vote on an authorization to increase in
the number of shares of Common Stock issued and the
Public Offering in order to effect the Transactions.
The Board of Directors will recommend that the Buyer's
shareholders vote to approve the increase in the number
of shares of Common Stock issued and the Public
Offering in order to effect the Transactions, and shall
use all reasonable efforts to solicit from the
shareholders of the Buyer proxies in favor of such
action, and shall take all other actions in its
judgment reasonably necessary and appropriate to secure
the approval of the shareholders required to approve
the increase in the number of shares of Common Stock
authorized for issuance and the Public Offering in
order to effect the Transactions.
I. NOTICE OF DEVELOPMENTS; SUPPLEMENTS TO AND AMENDMENT OF
THE DISCLOSURE SCHEDULE. Prior to the Closing, and
from time-to-time at the request of the Buyer (and,
upon receiving notice from the Buyer of the Buyer's
intent to accelerate the effectiveness of the
Registration Statement, within 24 hours after receiving
such notice), the Sellers, Bit 3 and the Buyer will
each supplement or amend its respective Disclosure
Schedule, with respect to any event or development (the
"Events") which, if existing or occurring at or before
the date of this Agreement, would have been required to
be set forth on such Disclosure Schedule, or which is
necessary to correct any information set forth on such
Disclosure Schedule or in any representation or
warranty of the Sellers, Bit 3 or the Buyers which has
been rendered inaccurate by reason of such Event (the
Party giving any such notice is herein referred to as
the "Notice Giving Party"). If any such Event as
supplemented or amended shall be of such nature to
cause a Material Adverse Effect on the Party to whom it
applies, or on the ability of the Party receiving
notice of such Event to close the Transactions (the
"Notice Receiving Party"), then the Notice Receiving
Party shall have a right to terminate this Agreement
within the shorter of two (2) weeks of receipt of such
notice or a period ending on the Closing Date. The
Notice Giving Party shall provide additional detail or
information as reasonably requested by the Notice
Receiving Party, as to any Events disclosed to the
Notice Receiving Party as a supplement or amendment to
the Disclosure Schedule. If the Notice Receiving Party
does not object to the disclosing of the Events within
the shorter of two (2) weeks of the disclosure of such
Events to the Notice Receiving Party or a period ending
on the Closing Date, then the Notice Receiving Party
will be deemed to have waived any rights (including
without limitation any claim for indemnification, any
right to terminate the Agreement or any rights not to
Close the Transactions) arising as a result of the
failure of the Buyer to fulfill any condition contained
in Article VII of this Agreement or for materially
breaching a representation or warranty of the Notice
Giving Party.
VI. POST-CLOSING COVENANTS. The Parties agree as follows with
respect to the period following the Closing.
A. GENERAL. In case at any time after the Closing any
further action is necessary or desirable to carry out
the purposes of this Agreement, each of the Parties
will take such further action (including the execution
and delivery of such further instruments and documents)
as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless
the requesting Party is entitled to indemnification
therefor under Section VIII below). The Sellers
acknowledge and agree that from and after the Closing
the Buyer will be entitled to possession of all
documents, books, records (including Tax records of Bit
3, but not the personal Tax records of the Sellers),
agreements, and financial data of any sort relating to
Bit 3.
B. EMPLOYEE BENEFITS. The Buyer will offer to the
employees of Bit 3 (other than the Sellers), effective
as of the first calendar day of the month immediately
following Closing, employment in capacities and at base
rates of pay identical to those in effect as of the
Closing Date. The Buyer will provide to such employees
(the "Bit 3 Employees"), the same benefit plans,
policies and practices, whether or not subject to
ERISA, provided by the Buyer to similarly situated
employees of the Buyer, at the same cost borne by such
employees of the Buyer, except that the Bit 3 Employees
will not become eligible for the Buyer's medical
flexible spending account pursuant to Code Section 125
until January 1, 1997. The Buyer shall cause each
benefit plan, policy and practice in which Bit 3
Employees are eligible to participate to be amended to
take into account all service with Bit 3 before the
Closing Date for all purposes other than (i) accrual of
benefits under any defined benefit pension plan
intended to be qualified under Code Section 401(a), or
(ii) the Buyer's Employee Stock Purchase Plan. During
the 1996 plan year, neither Buyer nor Bit 3 shall
terminate any Bit 3 plan providing for a medical
flexible spending account pursuant to Code Section 125
or amend the provisions of the plan dealing with such
accounts in a manner that adversely affects any
participant. No group health plan maintained by the
Buyer or any Affiliate of the Buyer shall impose on any
Bit 3 Employee as of the Closing Date (or any spouse or
dependent of any such employee) any preexisting
condition limitation or restriction other than (x) such
a limitation or restriction which is generally
applicable under the plan and which applies in the case
of an employee (or any spouse or dependent of any such
employee) who fails to enroll in the plan when he or
she first becomes eligible, or (y) to the extent that
such preexisting limitation or restriction is not
covered under Bit 3's group health plan as of the
Closing Date.
C. LITIGATION SUPPORT. If and for as long as any Party
actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand in connection with (i) any
Transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or before the
Closing Date involving Bit 3, each of the other Parties
will cooperate with him or it and his or its counsel in
the contest of defense, make available their personnel,
and provide such testimony and access to their books
and records as shall be necessary in connection with
the contest or defense, all at the sole cost and
expense of the contesting or defending Party,
including, without limitation, the reasonable costs and
expenses related to airfare, lodging and meals of such
cooperating Party (unless the contesting or defending
Party is entitled to indemnification therefor under
Section VIII below); provided, however, that the
obligations of the Sellers pursuant to this Section for
any matter will terminate ten (10) years after the
Closing Date.
D. TRANSITION. Neither of the Sellers will take any
action that is designed or intended to have the effect
of discouraging any lessor, licensor, customer,
supplier, or other business associate of Bit 3 from
maintaining the same business relationships with Bit 3
after the Closing as it maintained with Bit 3 before
the Closing. Each of the Sellers will refer all
customer inquiries relating to the businesses of Bit 3
to the Buyer from and after the Closing.
E. CONFIDENTIALITY. Each of the Sellers shall treat and
hold as confidential, and the Buyer shall treat and
hold as confidential prior to Closing, (and in the
event this Agreement shall be terminated and the
Transactions shall not Close, thereafter), all of the
Confidential Information, and in such event shall
refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver
promptly to the Buyer or Sellers, as the case may be,
or destroy, at the request and option of the Buyer or
the Sellers, as the case may be, all tangible
embodiments (and all copies) of the Confidential
Information which are in his, their or its possession.
If any of the Sellers or the Buyer is requested or
required (by oral question or request for information
or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that
Party will notify the others promptly of the request or
requirement so that the Buyer or the Sellers, as the
case may be, may seek an appropriate protective order
or waive compliance with the provisions of this
section. If, in the absence of a protective order or
the receipt of a waiver hereunder, any of the Sellers
or the Buyer is/are, on the advice of counsel,
compelled to disclose any Confidential Information to
any tribunal or else stand liable for contempt, that
Seller or the Buyer may disclose the Confidential
Information to the tribunal; provided, however, that
the disclosing Seller or the Buyer, as the case may be,
shall use his, their or its reasonable best efforts to
obtain, at the reasonable request of the Buyer or the
Sellers, as the case may be, an order or other
assurance that confidential treatment will be accorded
to that portion of the Confidential Information
required to be disclosed as the Buyer or the Sellers,
as the case may be, shall designate. The foregoing
provisions shall not apply to any Confidential
Information included in the Registration Statement as
to which the Sellers have consented to disclosure.
F. EMPLOYMENT AGREEMENT. At Closing, each of the Sellers
will enter into an Employment Agreement, substantially
in the form attached as Exhibit VI.F, by which each of
the Sellers will be employed by Buyer under the terms
and conditions set forth in that Employment Agreement.
G. COVENANT NOT TO COMPETE. At Closing, each of the
Sellers will enter into a Covenant Not to Compete
substantially in the form attached as Exhibit VI.G.
H. SECTION 338(h)(10) ELECTION.
1. With respect to the purchase by Buyer of the Bit 3
Shares from the Seller, (1) Buyer and Sellers
shall jointly make an election pursuant to Section
338(h)(10) of the Code and any comparable election
made under applicable state and local tax law
(together the "Election"), (2) Buyer and Sellers
shall, as promptly as reasonably practicable
following the Closing Date, cooperate with each
other to take all actions necessary and
appropriate (including filing such forms, Tax
Returns, schedules and other documents as may be
required) to effect and preserve a timely Election
in accordance with the provisions of Treasury
Regulation 1.338(h)(10)-1 (or any comparable
provision of state or local tax law) or any
successor provisions, and (3) Buyer and Sellers
shall report the purchase of the Bit 3 Shares by
Buyer consistent with the Election (and any
comparable elections under state or local tax law)
and shall take no position to the contrary thereto
in any Tax Return, any proceeding before any
taxing authority or otherwise.
2. In connection with the Election, Buyer and Sellers
shall act together in good faith to agree on the
"aggregate deemed sales price" (as defined under
applicable Treasury Regulations) and the
allocation of such aggregate deemed sales price
among Bit 3's assets. Such allocation of the
aggregate deemed sales price shall be made in
accordance with Section 338(b) of the Code and any
applicable Treasury Regulations. Buyer and
Sellers (1) shall be bound by such allocation for
purposes of determining any Taxes, (2) shall
prepare and file all Tax Returns to be filed with
any taxing authority in a manner consistent with
such allocation, and (3) shall take no position
inconsistent with such allocation in any Tax
Return, any proceeding before any taxing authority
or otherwise. If that allocation is disputed by
any taxing authority, the Party receiving notice
of such dispute shall promptly notify and consult
with the other Party concerning resolution of such
dispute.
3. Buyer shall reimburse Sellers up to $250,000 for
any Additional Tax Liability that may be due from
the Sellers as a result of the Election. The
calculation of the Additional Tax Liability shall
be prepared by the Sellers' accountant and
provided to the Buyer for review and audit by the
Buyer's accountant, as soon as the calculation can
be made. The reimbursement shall be made to
Sellers within ten (10) days after proof of
payment by the Sellers of the Additional Tax
Liability has been delivered to Buyer. The
Sellers shall provide Buyer with copies of the Tax
Returns which resulted in the payment by them of
any Additional Tax Liability.
I. FILING OF TAX RETURNS AND PAYMENT OF TAX LIABILITY.
Sellers shall file, or shall cause Bit 3 to file, all
Bit 3 federal and state income Tax Returns as required
by Section IV.C.11 above, for the period of Bit 3's
operation up to and including the Closing Date, to the
extent not previously filed, and the Buyer shall
provide full cooperation to the Sellers with respect to
such filings. Sellers shall provide to Buyer copies of
all such Bit 3 Tax Returns and evidence of payment of
such Taxes. All Bit 3 Taxes due as a result of Bit 3's
operation up to and including the Closing Date shall be
paid or accrued as of the Closing Date.
J. ADJUSTMENT FOR UNCOLLECTED RECEIVABLES. The Buyer will
use its commercially reasonable efforts in accordance
with Bit 3's prior collection practices within one-
hundred twenty (120) days of the Closing Date to
collect all accounts receivable of Bit 3 which are
reflected on the balance sheet prepared as of the close
of business on the Closing Date, which will be prepared
using procedures substantially identical to those set
forth in Section III.B.3 above used for the Closing
Consideration Balance Sheet (the "Closing Balance
Sheet") (the Guaranteed Receivables"). The Buyer may
in its discretion, reasonably exercised, resort to
litigation or the use of collection agencies or similar
efforts to collect the Guaranteed Receivables;
provided, however, that all costs and expenses
(including without limitation legal fees and fees
charged by collection agencies) incurred by the Buyer
in connection with such efforts will not be deemed for
purposes of this Section VI.K to reduce the amount of
any Guaranteed Receivable collected pursuant to such
efforts. Any payment made to the Buyer or any
Affiliate of the Buyer by an account debtor will be
applied by the Buyer to the receivable to which such
payment relates. The Purchase Price will be reduced by
the amount, if any, by which the amount of the
Guaranteed Receivables not collected on or before the
120th day after the Closing Date (the "Uncollected
Receivables") exceeds the bad debt reserve reflected on
the Closing Balance Sheet (such excess is hereinafter
referred to as the "Guaranteed Receivables Shortfall").
The amount of the Guaranteed Receivables Shortfall may
be applied against the amounts owed to the Sellers
pursuant to the Promissory Notes under Section
III.B.2.a above, or if the amount of the unpaid amounts
under the Promissory Notes is insufficient, shall be
promptly paid by Sellers to Buyer in immediately
available funds, within five (5) business days of
receipt by Sellers of notice and demand for such
payment by Buyer. The Buyer agrees that upon
application by the Buyer of the Guaranteed Receivables
Shortfall to the Promissory Notes or collection of any
such Guaranteed Receivables Shortfall from the Sellers
it will immediately thereafter, transfer all rights,
title and interest in and to the Uncollected
Receivables to the Sellers for collection. Seller will
thereafter be entitled to utilize any means to collect
such Uncollected Receivables and will further be
entitled to retain any proceeds from such collection.
K. PAYMENT OF AUDIT EXPENSES. Buyer shall reimburse
Sellers and Bit 3 for any out-of-pocket amounts paid by
Sellers or Bit 3 to Peat Marwick in connection with the
audit by Peat Marwick of Bit 3's financial statements
as of and for the years ended December 31, 1993, 1994,
1995 and the six months ended June 30, 1996. Buyer
shall promptly pay such amounts upon submission of
invoices received from Peat Marwick.
VII. CONDITIONS TO OBLIGATION TO CLOSE.
A. CONDITIONS TO OBLIGATION OF THE BUYER. The obligation
of the Buyer to consummate the Transactions to be
performed by it in connection with the Closing is
subject to satisfaction of the following conditions:
1. the representations and warranties set forth in
Sections IV.A and IV.C above shall be true and
correct in all material respects at and as of the
Closing Date;
2. the Sellers shall have performed and complied with
all of the covenants hereunder in all material
respects through the Closing;
3. the Sellers shall have procured all of the third
party consents specified in Section V.B above;
4. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state,
local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the
Transactions, (ii) cause any of the Transactions
to be rescinded following consummation, (iii)
affect adversely the right of the Buyer to own Bit
3 Shares and to control Bit 3, or (iv) materially
adversely affect the right of Bit 3 to own its
assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or
charge shall be in effect);
5. the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the
conditions specified above in Sections VII.A.1-4
is satisfied in all material respects;
6. the Parties shall have received all
authorizations, consents, and approvals of
governments and governmental agencies referred to
in Sections IV.A.2, IV.B.3, and IV.C.4 above;
7. the Buyer shall have received from counsel to the
Sellers an opinion in form and substance mutually
agreed to by the parties, addressed to the Buyer,
and dated as of the Closing Date;
8. the Buyer shall have received from Xxxxx and
Company or its other advisers, a Fairness Opinion
in form and substance satisfactory to the Buyer in
its sole discretion, to the effect that the
Transactions will be fair and reasonable to the
Buyer, and that the consideration to be granted
and received by the Buyer in the Transactions is
fair and reasonable to the Buyer under the
circumstances of the Transactions;
9. the Buyer shall have obtained on terms and
conditions commercially satisfactory to it, all of
the financing it needs in order to consummate the
Transactions and fund the working capital
requirements of Bit 3 after the Closing. Buyer
intends to acquire some or all of that financing
through the Public Offering;
10. all actions to be taken by the Sellers in
connection with consummation of the Transactions
and all certificates, opinions, instruments, and
other documents required to effect the
Transactions will be reasonably satisfactory in
form and substance to the Buyer;
11. the Buyer has received any legally required
approvals of its shareholders for the necessary
increase in the number of shares of the Common
Stock to be issued in the Public Offering, to
finance, in whole or in part, the Transactions;
and
12. the Buyer has received written notice from the
lessors and sublessors of all real property leased
or subleased by Bit 3 as provided in Section
IV.C.12.e above, in form and substance reasonably
satisfactory to Buyer.
B. CONDITIONS TO OBLIGATION OF THE SELLERS. The
obligation of the Sellers to consummate the
Transactions to be performed by them in connection with
the Closing is subject to satisfaction of the following
conditions:
1. the representations and warranties set forth in
Section IV.B above shall be true and correct in
all material respects at and as of the Closing
Date;
2. the Buyer shall have performed and complied with
all of its covenants hereunder in all material
respects through the Closing;
3. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state,
local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the
Transactions, (ii) cause any of the Transactions
to be rescinded following consummation, (iii)
affect adversely the right of the Buyer to own Bit
3 Shares and to control Bit 3, or (iv) materially
adversely affect the right of Bit 3 to own its
assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or
charge shall be in effect);
4. the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the
conditions specified above in Sections VII.B.1-3
is satisfied in all respects;
5. the Parties shall have received all other
authorizations, consents, and approvals of
governments and governmental agencies referred to
in Sections IV.A.2, IV.B.3, and IV.C.4 above;
6. the Sellers shall have received from counsel to
the Buyer an opinion in form and substance
mutaully agreed to by the parties, addressed to
the Sellers, and dated as of the Closing Date; and
7. all actions to be taken by the Buyer in connection
with consummation of the Transactions and all
certificates, opinions, instruments, and other
documents required to effect the Transactions will
be reasonably satisfactory in form and substance
to the Sellers.
VIII. REMEDIES FOR BREACHES OF THIS AGREEMENT.
A. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Buyer and the
Sellers contained in Sections IV.A, IV.B and IV.C, and
as may be otherwise contained in this Agreement, shall
survive the Closing (even if the damaged party knew or
had reason to know of any misrepresentation or breach
of warranty at the time of Closing) and continue in
full force and effect for a period after the Closing
Date (the "Survival Period") as follows: (i) in the
case of the Sellers' representations and warranties
pertaining to Intellectual Property as contained in
Section IV.C.14, for a period of three (3) years
following the Closing Date, and (ii) in the case of all
other representations and warranties of the Buyer and
the Sellers for a period of eighteen (18) months
following the Closing Date.
B. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
1. If any of the Sellers breaches any of the Sellers'
representations, warranties, and covenants
contained in this Agreement, and if the Buyer
makes a written claim for indemnification against
the Sellers as provided in this Agreement within
the relevant Survival Period, then the Sellers
agree, jointly and severally, to indemnify the
Buyer from and against any Damages the Buyer may
suffer, whether such Damages occured during or
after the Survival Period, resulting from, arising
out of, relating to, in the nature of, or caused
by the breach.
2. The aggregate amount payable by the Sellers to the
Buyer hereunder shall not exceed four million
dollars ($4,000,000); provided, however, that in
the case of any breach of a representation or
warranty contained in this Agreement as to which,
notwithstanding the language of such
representation or warranty (or subpart thereof),
the Sellers had actual knowledge that such
representation or warranty was breached as of the
date such representation or warranty was made, or
in the case of an intentional breach of any
covenant contained in this Agreement, the
aggregate amount payable by the Sellers hereunder
shall not exceed an amount equal to the lesser of
(a) one-half (1/2) of the total consideration paid
to the Sellers under this Agreement, or (b) the
aggregate amount realized by the Sellers from the
consideration paid to them under this Agreement,
net of personal taxes (federal, state and local)
paid by the Sellers on the consideration and
expenses directly related to the Transactions paid
by the Sellers.
3. The Sellers, jointly and severally, hereby
indemnify and hold harmless the Buyers and Bit 3
from any and all Liability for Taxes imposed or
assessed on the Buyer or on Bit 3 after the
Closing Date, resulting from the operation of Bit
3 prior to the Closing Date, that have not been
paid or accrued as of the Closing Date or from
Taxes imposed or assessed on Bit 3 as a result of
the Transactions and the Election (except to the
extent provided in Section VI.H above), without
regard to the limits set forth in the preceding
paragraph and for the period of the applicable
statute of limitation.
4. Notwithstanding anything in Section VIII.B.1 to
the contrary, the Buyer will not be entitled to
any indemnification under Section VIII.B.1 if the
aggregate amount of all claims thereunder is less
than one hundred thousand dollars ($100,000);
provided, however, that if the aggregate amount of
all claims equals or exceeds such amount, then the
Buyer will be entitled to full indemnification of
all claims under Section VIII.B.1 in excess of
such amount. The Parties do not intend that such
exception amount shall be deemed to be a
definition or limitation of what is "material" for
any purpose under this Agreement.
C. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS.
1. If the Buyer breaches any of the Buyer's
representations, warranties, and covenants
contained in this Agreement, and if the Sellers
make a written claim for indemnification against
the Buyer as provided in this Agreement within the
Survival Period, then the Buyer agrees to
indemnify the Sellers from and against any Damages
the Sellers may suffer, whether such Damages
occured during or after the Survival Period,
resulting from, arising out of, relating to, in
the nature of, or caused by the breach.
2. The Buyer agrees to indemnify the Sellers from and
against any Damages (resulting from any claim from
any other Person) the Sellers may suffer resulting
from, arising out of, related to, in the nature
of, or caused in any way from the Public Offering,
except to the extent that such Damages directly
result from the inclusion in the Registration
Statement of written material supplied by the
Sellers for inclusion in the Registration
Statement.
3. Notwithstanding anything in Section VIII.C.1 to
the contrary, the Sellers will not be entitled to
any indemnification under Section VIII.C.1 if the
aggregate amount of all claims thereunder is less
than one hundred thousand dollars ($100,000);
provided, however, that if the aggregate amount of
all claims equals or exceeds such amount, then the
Sellers will be entitled to full indemnification
of all claims under Section VIII.C.1 in excess of
such amount. The Parties do not intend that such
exception amount shall be deemed to be a
definition or limitation of what is "material" for
any purpose under this Agreement.
D. MATTER INVOLVING THIRD PARTIES.
1. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a
"Third Party Claim") which may give rise to a
claim for indemnification against any other Party
(the "Indemnifying Party") under this Section,
then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of
the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party
thereby is prejudiced.
2. Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third
Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as
(i) the Indemnifying Party notifies the
Indemnified Party in writing within 15 days after
the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against
the entirety of any Damages the Indemnified Party
may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the
Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the
financial resources to defend against the Third
Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an
injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice
materially adverse to the continuing business
interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
3. As long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance
with Section VIII.D.2 above, (i) the Indemnified
Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of
the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or
enter into any settlement with respect to the
Third Party Claim without the prior written
consent of the Indemnifying Party (not to be
withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any
judgment or enter into any settlement with respect
to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be
withheld unreasonably).
4. In the event any of the conditions in Section
VIII.D.2 above is or becomes unsatisfied, however
(i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into
any settlement with respect to the Third Party
Claim, with the prior written consent of the
Indemnifying Party, which consent shall not be
unreasonably withheld, in any manner it reasonably
may deem appropriate, (ii) the Indemnifying
Parties will reimburse the Indemnified Party
promptly and periodically for the costs of
defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and
(iii) provided that consent of the Indemnifying
Party is received, the Indemnifying Party will
remain responsible for any Damages the Indemnified
Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided
in this Section VIII.
E. TREATMENT OF INDEMNIFICATION PAYMENTS. All
indemnification payments under this Section VIII shall
be deemed adjustments to the Purchase Price, and must
first be used to offset future payments due or to
become due under the Promissory Notes.
F. OTHER INDEMNIFICATION PROVISION. Each of the Sellers
hereby agrees that he will not make any claim for
indemnification against Bit 3 by reason of the fact
that he was a director, officer, employee, or agent of
such entity or was serving at the request of that
entity as a partner, trustee, director, officer,
employee, or agent of another entity (whether that
claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or
otherwise and whether that claim is pursuant to any
statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit,
proceeding, complaint, claim, or demand brought by the
Buyer against such Seller for indemnification under
this Agreement based on a breach of a representation or
warranty contained herein.
G. NO OTHER REMEDIES. Notwithstanding anything in this
Agreement to the contrary, the Parties' rights to bring
a claim for Damages against any other Party to this
Agreement shall be limited to Section III, Section
IX.B.2 or an indemnification claim pursuant to this
Article VIII, except for claims for Damages based on a
willful and material breach of any covenant or
agreement set forth in this Agreement performed or to
be performed at or prior to Closing. For purposes of
this provision, a party will be deemed to have
willfully breached any of its covenants or agreement
set forth in this Agreement if such party has
intentionally and knowingly taken, or intentionally
and knowingly failed to take, any action which causes a
breach of any of its covenants or agreements set forth
in this Agreement. Except as set forth in Section
III.C. above, no party hereto will be able to rescind
this Agreement after Closing.
IX. TERMINATION.
A. TERMINATION OF AGREEMENT. Certain Parties may
terminate this Agreement as provided below:
1. the Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time
before the Closing;
2. the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time before
the Closing if (i) any of the Sellers or Bit 3 has
breached any material representation, warranty, or
covenant contained in this Agreement in any
material respect, the Buyer has notified the
Sellers of the Breach, and the breach has
continued without cure for a period of the shorter
of 30 days after the notice of breach or the
period ending on the Closing Date, (ii) the
Closing shall not have occurred on or before
December 6, 1996, unless extended pursuant to
Section IX.C below, by reason of the failure of
any condition precedent under Section VII.A hereof
(unless the failure results primarily from the
Buyer itself breaching any representation,
warranty, or covenant contained in this
Agreement), or (iii) any of the supplements or
amendments to the Disclosure Schedule submitted by
the Sellers prior to the Closing are not accepted
by the Buyer, as provided in Section V.I above;
3. the Sellers may terminate this Agreement by giving
written notice to the Buyer at any time before the
Closing if (i) the Buyer has breached any material
representation, warranty, or covenant contained in
this Agreement in any material respect, any of the
Sellers has notified the Buyer of the breach, and
the breach has continued without cure for a period
the shorter of 30 days after the notice of breach
or the period ending on the Closing Date, (ii) the
Closing shall not have occurred on or before
December 6, 1996, unless extended pursuant to
Section IX.C below, or (iii) any of the
supplements or amendments to the Disclosure
Schedule submitted by the Buyer prior to the
Closing are not accepted by the Sellers, as
provided in Section V.I above;
4. the Sellers may terminate this Agreement if (i)
the Buyer has not filed a Registration Statement
for the Public Offering covering sufficient shares
of Common Stock of the Buyer to raise proceeds,
net of underwriting discounts and commissions, and
estimated offering expenses, sufficient for the
Transactions, within forty-five (45) days of
receipt of the audited financial statements of Bit
3, or (ii) such Registration Statement has not
become effective under the Securities Act by
December 6, 1996, unless extended pursuant to
Section IX.C below.
5. the Sellers may terminate this Agreement if the
portion of the Purchase Price to be delivered to
them at Closing is not delivered to them within
eight (8) business days of the Closing Date,
pursuant to Section III.C above.
B. EFFECT OF TERMINATION.
1. In the event of a termination of this Agreement
pursuant to Section IX.A above, written notice
will be given to the other Party and the
provisions of this Agreement (except to the extent
provided in Section VI.E, VI.L, IX.B.3 and IX.B.4)
will terminate and the Transactions will be
abandoned, without further action by any Party.
2. In the event of a termination of this Agreement by
the Buyer other than pursuant to Section IX.A.2
above, or if the Closing does not occur on or
before December 6, 1996 (unless extended pursuant
to Section IX.C below), unless the failure to
Close is due to market conditions adversely
affecting the Public Offering, regulatory delays
caused by the Securities and Exchange Commission
or the administrators under any applicable Blue
Sky Laws, delays in obtaining any other necessary
approvals or consents required in order to
consummate the Transactions, or other causes
beyond the control of the Buyer, the Buyer shall
promptly pay the Sellers, in immediately available
funds within five (5) business days after
termination, (i) an amount equal to all of the
reasonable out-of-pocket fees and expenses
incurred by or on behalf of the Sellers or Bit 3
in connection with the audit of the Financial
Statements by Peat Marwick, and (ii) a termination
fee of five hundred thousand dollars ($500,000).
3. If this Agreement is terminated for any reason,
each Party will, upon request of the others,
redeliver all documents, work papers and other
material of any other Party (including all copies
thereof) relating to the Transactions, whether so
obtained before or after the execution of this
Agreement, to the Party furnishing the same, and
the confidentiality obligations of Section VI.E
will continue to be applicable to and enforceable
against the Parties.
4. If this Agreement terminates for any reason, the
Parties and their directors, officers, employees
or agents, and any Affiliate of the Parties, their
Affiliates, directors, officers, employees or
agents, shall not directly or indirectly, either
for its own benefit or for the benefit of any
other person, firm or corporation whatsoever, for
a three (3) year period thereafter, employ or
attempt to employ any of the then employees of the
other Parties. The Parties acknowledge that if
any of them breaches this covenant, the non-
breaching Parties will be irreparably and
immeasurably injured. Therefore, the Parties
agree that in addition to any other remedies
available to the non-breaching Parties, the non-
breaching Parties may apply to a court of
competent jurisdiction for a temporary and/or
permanent injunction and that such court may grant
such injunction to restrain and prohibit such
breach by any of the Parties or their Affiliates.
C. EXTENSIONS. This Agreement, and the various deadlines
for performance of obligations and for consummation of
the Transactions as provided herein, may be extended
with the mutual consent of the Parties, in which event
the obligations of the Parties shall be modified
accordingly, and all deadlines for performance shall be
modified in accordance with any such extension. In the
event that the Parties agree to any such extension, the
Sellers shall not be entitled to the payment of a
termination fee, as provided above, solely as a
consequence of such extension. The Sellers shall agree
to an extension in the Closing Date to a date no later
than December 20, 1996, in the event that the
Registration Statement has not been declared effective
as of December 6, 1996, and the Buyer is then awaiting
receipt of, or has submitted responses to, comments
from the Securities and Exchange Commission on the
Registration Statement. In no event will the Closing
Date be extended beyond December 20, 1996.
X. MISCELLANEOUS.
A. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party
shall issue any press release or make any public
announcement relating to the subject matter of this
Agreement before the Closing without first notifying
the other Parties of the notifying Party's intent to
issue such a press release or make such a public
announcement, and receiving prior approval of the other
Parties, which approval shall not be unreasonably
withheld and which approval, in the case of the Sellers
and Bit 3, shall be deemed to have been given if
Sellers and Bit 3 do not otherwise notify Buyer within
twenty-four (24) hours of such notice; provided,
however, that any Party may make any public disclosure
that is required by applicable law or any listing or
trading agreement concerning its publicly-traded
securities, so long as the Party so required to make an
announcement promptly upon learning of such requirement
notifies the other Parties of such requirement and
discusses with the other Parties, in good faith, the
exact proposed wording of any such announcement.
B. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other
than the Parties and their respective successors and
permitted assigns.
C. ENTIRE AGREEMENT. This Agreement (including the
documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
D. SUCCESSION AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Parties
named herein and their respective successors and
permitted assigns. No Party may assign either this
Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written
approval of the Buyer and the Sellers; provided,
however, that the Buyer may (i) assign any or all of
its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any
or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its
obligations hereunder).
E. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an
original but all of which together will constitute one
and the same instrument.
F. HEADINGS. The Section headings contained in this
Agreement are inserted for convenience only and shall
not affect in any way the meaning or interpretation of
this Agreement.
G. NOTICES. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any
notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or
certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set
forth below:
If to the Sellers or Bit 3 Copy to:
prior to Closing:
Xx. Xxxxxx X. Xxxxxxx Xxxxx X. Xxxxxxxxx, Esq.
Xx. Xxxxx X. Xxxxxx Xxxxxxxxxxx Xxxxx
0000 Xxxx Xxxxxx Xxxxx & Xxxxxxxx
Xxxxx 000 Xxxxx XXX
Xxxxxxxxxxx, XX 00000-0000 00 Xxxxx Xxxxxxx Xx.
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
If to the Buyer or Bit 3
after Closing:
SBS Technologies, Inc. Xxxxxx X. Xxxxxxx, Esq.
Attn: Xxxxxxxxxxx X. Xxxxxxx, President Xxxxxxx, Xxxxxxxxxxx
0000 Xxxxxxxxx Xxxx., XX & XxXxxxx
AFC Xxxxxxxx 0, Xxxxx 000 5700 Xxxxxx Dr., NE
Albuquerque, New Mexico 87110 Xxxxx 000
Xxxxxxxxxxx, XX 00000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address
set forth above using any other means (including personal
delivery, expedited courier, messenger service, facsimile,
telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the
address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
H. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of
New Mexico without giving effect to any choice or
conflict of law provision or rule (whether of the State
of New Mexico or any other jurisdiction) that would
cause the application of the laws of any jurisdiction
other than the State of New Mexico.
I. AMENDMENTS AND WAIVERS. No amendment of any provision
of this Agreement shall be valid unless the same shall
be in writing and signed by the Buyer and the Sellers.
No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
J. SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the
offending term or provision in any other situation or
in any other jurisdiction.
K. EXPENSES. Each of the Parties and Bit 3 will bear his
or its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement
and the Transactions. The Sellers agree that Bit 3
will fully discharge and not have any undischarged
Liabilities as of the Closing Date for any costs and
expenses in connection with this Agreement and the
Transactions (including for any legal fees and expenses
in connection with this Agreement or any of the
Transactions).
L. INCORPORATION OF EXHIBITS AND DISCLOSURE SCHEDULE. The
Exhibits and Disclosure Schedule identified in this
Agreement are incorporated herein by reference and made
a part hereof.
M. SPECIFIC PERFORMANCE. Each of the Parties acknowledges
and agrees that the other Parties would be damaged
irreparably if any of the provisions of Sections V.E,
V.F, VI.B, VI.E and IX.B.4 of this Agreement are not
performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the
Parties agrees that the other Parties shall be entitled
to an injunction or injunctions to prevent breaches of
such provisions of this Agreement and to enforce
specifically such provisions of this Agreement in any
action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties
and the matter (subject to the provisions set forth in
Section X.N below).
N. DISPUTES.
1. Except for matters which are subject to mediation
and arbitration as provided below, each of the
Parties submits to the jurisdiction of any state
or federal court sitting in Albuquerque, New
Mexico, in any action or proceeding arising out of
or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may
be heard and determined in any such court. Each
Party also agrees not to bring any action or
proceeding arising out of or relating to this
Agreement in any other court. Each of the Parties
waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought
and waives any bond, surety, or other security
that might be required of any other Party with
respect thereto. Any Party may make service on
any other Party by sending or delivering a copy of
the process to the Party to be served at the
address and in the manner provided for the giving
of notices in Section X.G above. Nothing in this
Section X.N, however, shall affect the right of
any Party to bring any action or proceeding
arising out of or relating to this Agreement in
any other court or to serve legal process in any
other manner permitted by law or at equity. Each
Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and
may be enforced by suit on the judgment or in any
other manner provided by law or at equity.
2. The Parties agree that any claim or dispute
arising out of or relating to this Agreement or
the formation, breach, termination or validity
thereof, which involves in the aggregate an amount
not exceeding one hundred thousand dollars
($100,000), and except for injunctive relief as
contemplated by Section X.M above ("Dispute"),
will be resolved in the manner provided below. If
the Dispute cannot be settled by direct
discussions, the Parties will first try to settle
the Dispute in an amicable manner by mediation
under the Commercial Mediation Rules of the
American Arbitration Association, before resorting
to arbitration. Any Dispute which has not been
resolved within sixty (60) days of the initiation
of the mediation procedure (the "Mediation
Deadline") will be settled by binding arbitration
by a panel of three (3) arbitrators, selected in
the manner provided below, in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association (the "Rules"). In the
event that a Party seeks mediation or arbitration
of a Dispute, the proceeding will be held in
Albuquerque, New Mexico. Judgment upon any
arbitration award may be entered in any court
having jurisdiction thereof, and the Parties
consent to the jurisdiction of the courts in the
state in which the arbitration occurred for this
purpose. The Parties agree that service of
process and of any notices required in connection
with any arbitration hereunder or any related
court proceedings may be given in the manner
provided for the giving of notices under this
Agreement as set forth in Section X.G. Within
twenty (20) days of the Mediation Deadline, the
Sellers will collectively nominate one arbitrator
and the Buyer will nominate one arbitrator.
Within thirty (30) days of the nomination and
appointment of the two arbitrators, the two
arbitrators shall select a third arbitrator, and
if they fail to do so, a neutral arbitrator shall
be chosen in accordance with the Rules.
The Parties have executed this Agreement as of the date set
forth above.
SBS TECHNOLOGIES, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxxxxxx X. Xxxxxxx
Title: President and
Chief Operating Officer
SELLERS:
/s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxx
BIT 3 COMPUTER CORPORATION
By: /s/ Xxxxxx X. Vukavic
------------------------------------
Xxxxxx X. Vukavic
Title: President and
Co-Chief Executive Officer
