ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is
entered into this ____ day of March, 1998, by, between and among
XXXXXXX COMPUTER RESOURCES, INC., a Delaware corporation, (the
"Purchaser"), COMMERCIAL BUSINESS SYSTEMS, INC., a Virginia
corporation (_Seller"), XXXXXX X. XXXXXXX (_T. Clayton_) and
XXXXXX XXXXXXX (_S. Shapiro_) (X. Xxxxxxx and X. Xxxxxxx
hereinafter referred to collectively as the _Shareholders_ and
individually as _Shareholder_).
W I T N E S S E T H :
WHEREAS, Seller is a full service provider of a variety of
computer service and support solutions to large and medium size
commercial, governmental and other professional customers
throughout the States of Virginia and West Virginia (the
_Business_); and
WHEREAS, Seller also operates a depot repair and refurbishing of
products business for the telephone industry which is not being
sold pursuant to this Agreement;
WHEREAS, X. Xxxxxxx is the owner of forty-five (45) shares of the
outstanding stock of Seller and X. Xxxxxxx is the owner of five
(5) shares of the outstanding stock of Seller, which stock, in
the aggregate, constitute 100% of the outstanding stock of
Seller; and
WHEREAS, Purchaser desires to purchase certain of the assets of
Seller used in its Business and assume certain of the liabilities
of Seller in connection with the Business, and Seller desires to
sell certain of such assets, subject to such liabilities, but
only (i) upon the terms and subject to the conditions set forth
in this Agreement, (ii) the representations, warranties,
covenants, indemnifications, assurances and undertakings of
Seller, Shareholders and of Purchaser contained in this
Agreement, (iii) the agreements of Seller to refrain from
competition with Purchaser for five (5) years from the closing of
this transaction and (iv) the agreement of each Shareholder to
refrain from competition for the later of five (5) years from the
Closing date or one (1) year after the termination of the
Shareholders' employment with Purchaser pursuant to and in
accordance with, the terms of their respective Employment
Agreements to be executed upon Closing.
NOW, THEREFORE, in consideration of the above premises and the
mutual promises, covenants, agreements, representations and
warranties herein contained, the parties hereto agree as follows:
1.
DEFINITIONS
1.1
Affiliate. "Affiliate" shall have the meaning ascribed to
such term in Rule 405 promulgated under the Securities Act
of 1933, as amended.
1.2
Assumed Liabilities. The "Assumed Liabilities" are the
liabilities of Seller assumed or paid at Closing by the
Purchaser pursuant to Sections 3.1 and 3.2 of this
Agreement.
1.3
Balance Sheet. The "Balance Sheet" is the audited balance
sheet of Seller as of October 31,1997, included as part of
the Financial Statements.
1.4
Closing. The "Closing" shall be the consummation of the
transactions contemplated under this Asset Purchase
Agreement.
1.5
Closing Date. The "Closing Date" shall be as of 10:00 a.m.,
E.D.T., March 6, 1998.
1.6
Code. The "Code" is the Internal Revenue Code of 1986, as
amended, 26 U.S.C. S1
et seq.
1.7
Court. A "Court" is any federal, state, municipal,
domestic, foreign or other governmental tribunal or an
arbitrator or person with similar power or authority.
1.8
Disclosure Schedule. The "Disclosure Schedule" is the
Disclosure Schedule dated the date of this Agreement and
delivered by Seller to Purchaser.
1.9
Encumbrance. An "Encumbrance" is any security interest,
lien, or encumbrance whether imposed by agreement,
understanding, law or otherwise, on any Purchased Assets (as
defined herein).
1.10
Excluded Assets. An "Excluded Asset" is any asset set forth
in Section 2.3.
1.11
Financial Statements. The "Financial Statements" are the
audited financial statements of Seller for the year ended
October 31, 1997 and the unaudited financial statements for
the years ended October 31, 1996 and October 31, 1995,
including any and all notes thereto.
1.12
Governmental Entity. A "Governmental Entity" is any Court
or any federal, state, municipal, domestic, foreign or other
administrative agency, department, commission, board, bureau
or other governmental authority or instrumentality.
1.13
Knowledge. _Knowledge of Seller and Shareholder_ shall mean
the actual knowledge of any of the Shareholders.
1.14
Net Asset Amount. _Net Asset Amount_ shall have the meaning
set forth in Section 5.2.
1.15
October 31, 1997 Pro Forma Balance Sheet. The _October 31,
1997 Pro Forma Balance Sheet is the audited balance sheet of
Seller relating to the Business adjusted for Excluded Assets
of Seller and Excluded Liabilities of Seller as of such
date.
1.16
Person. Any natural person, firm, partnership, association,
corporation, company, limited liability company, limited
partnership, trust, business trust, governmental authority
or other entity.
1.17
Pro Forma Balance Sheet. The "Pro Forma Balance Sheet" is
the unaudited balance sheet of Seller prepared as described
in Section 5.2(c) and adjusted for Excluded Assets of Seller
and Excluded Liabilities of Seller as of the Closing Date.
1.18 Pro Forma EBIT
. The earnings of Seller's Business before
interest and taxes, and without incorporating gains or
losses realized on the disposition of assets other than in
the ordinary course of business for Seller's fiscal year
ending October 31, 1997. EBIT from Seller's Business for
such period shall be determined in accordance with GAAP and
in the manner set forth in Section 5.1.
1.19 Purchase Price
. The "Purchase Price" is the total
consideration paid by Purchaser to Seller for the Purchased
Assets as set forth in Section 4.1.
1.20 Purchased Assets
. The "Purchased Assets" are the assets of
Seller used in the Business, acquired by the Purchaser
pursuant to the terms of this Agreement.
1.21 Tax or Taxes
: Any federal, state, provincial, local,
foreign or other income, alternative, minimum, any taxes
under Section 1374 of the Code, any taxes under Section 1375
of the Code, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, sales, use,
goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary,
recording, premium, severance, environmental, including
taxes under Section 59A of the Code), real property,
personal property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment insurance,
social security, disability, workers' compensation, payroll,
health care, withholding, estimated or other similar tax,
duty or other governmental charge or assessment or
deficiencies thereof (including all interest and penalties
thereon and additions thereto whether disputed or not).
1.22
Tax Return. A "Tax Return" is a report, return or other
information required to be supplied to a Governmental Entity
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in connection with Taxes including, where permitted or
required, combined or consolidated returns for any group of
entities that includes Seller.
2.
TERMS
2.1 Agreement
.
Seller agrees to sell and convey to Purchaser the Purchased
Assets as hereinafter set forth in Section 2.2. The
agreements of Purchaser and Seller are expressly conditioned
upon the terms, conditions, covenants, representations and
warranties as hereinafter set forth.
2.2 Assets to be Sold by Seller and Purchased by Purchaser
.
At the Closing of this Agreement, Purchaser shall purchase
and Seller shall sell the following assets of Seller used in
the Business:
(a) All investment securities, cash and cash equivalents
(except investment securities, cash and cash
equivalents that are Excluded Assets, as defined in
Section 2.3) and customers notes receivable relating to
the Business;
(b) Certain inventory of computers, related equipment and
service parts held by Seller as set forth on Exhibit A
attached hereto;
(c) Accounts Receivable held by Seller as set forth on
Exhibit B attached hereto;
(d) Certain vehicles of Seller set forth on attached
Exhibit C;
(e) The tangible personal property and assets of Seller of
every kind and description, real, personal or mixed,
wherever located, used in the Business including
without limitation, all such assets as reflected on the
October 31, 1997 Pro Forma Balance Sheet (excepting
those assets disposed of, and including those assets
acquired, in the ordinary course of business since the
date of the October 31, 1997 Pro Forma Balance Sheet).
Such fixed assets and equipment of Seller are set
forth on attached Exhibit D;
(f) All of Seller fixed rate contracts and time and
material contracts with the organizations set forth on
attached Exhibit E;
(g) All of Seller service contracts which are set forth on
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attached Exhibit F;
(h) All intangible assets of Seller which are used in the
Business, including, without limitation, all purchase
orders, contracts, rights and agreements, work in
process, customers lists, supplier agreements, patents,
trademarks and service marks (including the goodwill
associated with the marks), computer programs, the
right to the use of the corporate and trade names of or
used by Seller in the manner set forth in Section 9.19,
or derivative thereof, as all or a part of a corporate
or trade name (excepting the intangible assets to be
retained by Seller as set forth in Section 2.3);
(i) All distribution contracts and authorizations of Seller
related to the Business;
(j) All base artwork, photo materials, plates (if owned by
Seller), separations and other materials that are used
by Seller for printing brochures and promotional
materials including all intellectual property rights
therein;
(k) The assignment of any telephone numbers used in the
Business of Seller;
(l) The covenant not to compete agreements with Seller, X.
Xxxxxxx and X. Xxxxxxx as set forth on Exhibits L,L-1
and L-2 attached hereto and made a part hereof; and
(m) All other fees, assets, property, business and going
concern value, and rights of Seller (including the
rights under covenants or agreements not to disclose
confidential information or not to compete, if any) and
all other assets of Seller not specifically excluded
pursuant to the terms of this Agreement.
2.3 Excluded Assets
.
The Excluded Assets are set forth on Exhibit _G_ hereto.
2.4
Lease Agreements.
Seller is the lessee under certain lease agreements calling
for payments of more than $5,000.00 per year covering the
following real and personal properties:
(i) 2,600 square feet located in Mountaineer Mall,
Morgantown, West Virginia, pursuant to a Lease
Agreement with First Union Management, Inc., as Lessor,
dated April 17, 1995, as amended by a First Amendment
Subsequent to Lease dated June 2, 1997;
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(ii) Office/warehouse space located at 000 Xxxxxxxx Xxxxxxxx
Xxxx, Xxxxxx, Xxxx Xxxxxxxx 00000 pursuant to a Lease
Agreement with Carmal, Inc., as Lessor, dated December
10, 1996;
(iii) Tangible personal property lease agreements for
the Xxxxxx and Morgantown, West Virginia offices and
Justice Road, Virginia offices dated July 22, 1997 with
Golden Eagle Credit Corporation as Lessor; and
(iv) Lease Agreements with GTE Corporation for tangible
personal property dated August 22, 1997 and July 7,
1998, respectively.
At the Closing, Seller and Purchaser shall execute necessary
documentation for the assignment of these leases and all of
Seller's right and interest thereunder to Purchaser and, at
the Closing, Seller shall assign all its rights and interest
in said leases to Purchaser. Purchaser agrees to indemnify
and hold Seller harmless from any liability with respect to
the aforementioned leases occurring after the Closing Date.
To the extent that the assignment of any lease shall
require the consent of other parties thereto, this Agreement
shall not constitute an assignment thereof and Seller shall
obtain any such necessary consents or assignments by the
Closing.
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2.5 Instruments
of Transfer.
Except as otherwise provided herein, at Closing, Seller will
deliver to Purchaser such bills of sale, endorsements,
assignments and other good and sufficient instruments of
transfer and assignment as shall be effective to vest in
Purchaser good and marketable title and interest in and to
the Purchased Assets. At or after the Closing, and without
further consideration, Seller will execute and deliver to
Purchaser such further instruments of conveyance and
transfer and take such other action as Purchaser may
reasonably request in order to more effectively convey and
transfer to Purchaser any of the Purchased Assets or for
aiding and assisting and collecting and reducing to
possession and exercising rights with respect thereto.
Seller and the Shareholders agree to use their best efforts
to obtain and deliver to Purchaser such consents, approvals,
assurances and statements from third parties as Purchaser
may reasonably require in a form reasonably satisfactory to
Purchaser. In addition to the foregoing, Seller will
deliver to Purchaser the originals or copies of all of
Seller's books, records and other data relating to the
Purchased Assets; and simultaneously with such delivery,
Seller shall take all such acts as may be necessary to put
Purchaser in actual possession, and operating control of the
Purchased Assets. Seller shall cooperate with Purchaser to
permit Purchaser, if possible, to enjoy Seller's ratings and
benefits under workmen's compensation laws and unemployment
compensation laws to the extent permitted by such laws.
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2.6
Instruments Giving Certain Powers and Rights.
At the Closing, Seller shall, by appropriate instrument,
constitute and appoint Purchaser, its successors and
assigns, the true and lawful attorney of Seller with full
power of substitution, in the name of Purchaser, or the name
of Seller, on behalf of and for the benefit of Purchaser, to
collect all receivables and other items being transferred
and assigned to Purchaser as provided herein, to endorse,
without recourse, any and all checks in the name of Seller
the proceeds of which Purchaser is entitled to hereunder, to
institute and prosecute, in the name of Seller or otherwise,
all proceedings which Purchaser may deem proper in order to
collect, assert or enforce any claim, right or title of any
kind in or to the Purchased Assets, to defend and compromise
any and all actions, suits and proceedings in respect of any
of the Purchased Assets, and to do all such acts and things
in relation thereto as Purchaser may deem advisable. Seller
agrees that the foregoing powers are coupled with an
interest and shall be irrevocable by Seller, directly or
indirectly, by the dissolution of Seller or in any manner or
for any reason. Seller further agrees that Purchaser shall
retain for its own account any amounts collected pursuant to
the foregoing powers, and Seller shall pay or transfer to
Purchaser, if and when received, any amounts which shall be
received by Seller after the Closing in respect of any
receivables or other assets, properties, rights or business
to be transferred and assigned to Purchaser as provided
herein. Seller further agrees that, at any time or from
time to time after the Closing, it will, upon the request of
Purchaser and at Seller's expense, do, execute, acknowledge
and deliver, or will cause to be done, executed,
acknowledged or delivered, all such further reasonable acts,
assignments, transfers, powers of attorney or assurances as
may be required in order to further transfer, assign, grant,
assure and confirm to Purchaser, or to aid and assist in the
collection or granting of possession by Purchaser of, any of
the Purchased Assets, or to vest in Purchaser good and
marketable title to the Purchased Assets.
To the extent that any assignment does not result in a
complete transfer of the contracts to Purchaser because of a
provision in any contract against Seller's assignment of any
its right thereunder, Seller shall cooperate with Purchaser
in any reasonable manner proposed by Purchaser to complete
the acquisition of the contracts and Seller's rights,
benefits and privileges thereunder in order to fulfill and
carry out Seller's obligations under this Agreement. Such
additional action may include, but is not limited to: (i)
entering into a subcontract between Seller and Purchaser
which allows Purchaser to perform Seller's duties under such
contracts and to enforce Seller's rights thereunder; (ii)
the sale of Seller's stock owned by Shareholders to
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Purchaser on terms to which the parties may mutually agree
to allow Purchaser to operate Seller as a wholly-owned
subsidiary to enforce the contracts; or (iii) entering into
a new multi-party agreement with such customers which allows
Purchaser to perform Seller's obligations and enforce
Seller's rights under the contracts.
3.
ASSUMPTION OF LIABILITIES
3.1 Liabilities
to be Paid Off at Closing or Assumed.
(a) At the Closing, Purchaser shall assume and pay off or
discharge when due (and secure the release of Seller
and all Shareholders from any and all personal
liability or guaranty with respect to such obligations)
the following:
(i) Accounts payable incurred in the ordinary course
of the Business, which accounts payable totaled
$196,919.07 on January 31, 1998;
(ii) A sales tax payable in the amount of
$9,272.26 as of January 31, 1998; and
(iii) Long term notes payable to Jefferson Bank in
the approximate amount of $35,103.00 relating to
various vehicle loans as of January 31, 1998; and
(iv) Accrued vacation pay which totalled approximately
$20,000.00 on January 31, 1998.
The Assumed Liabilities to be assumed as set forth in
Section 3.1(i) through (iv) as may be incurred,
increased or decreased since January 31, 1998 to the
Pro Forma Balance Sheet for operations in the ordinary
course of business or any other transaction permitted
by this Agreement, and subject to the satisfaction of
the Net Asset Amount requirement set forth in Section
4.1(d) as of the Closing Date.
(b) It is the parties' intent that Purchaser shall pay off
at Closing, or assume and pay off or discharge when
due, all obligations of Seller set forth in Section
3.1(a) above for which any Shareholder has personal
liability and Purchaser agrees to use its best efforts
to secure the release of any Shareholder from such
personal guaranty after the Closing if such releases
are not secured prior to Closing.
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3.2
Executory Contracts.
At the Closing, Purchaser shall assume and pay, perform and
discharge when due the following:
(a) All the obligations and liabilities of Seller arising
after the Closing under the contracts described in
Section 2.4; and
(b) All future liabilities for merchandise in transit
F.O.B. shipping point which has not been received
and/or entered into inventory by Seller as of the
Closing and for which no xxxx has been posted by Seller
as of the Closing.
3.3 Excluded Liabilities
.
Notwithstanding anything in this Agreement to the contrary,
Purchaser shall not assume or become responsible for any
claim, liability or obligation of any nature whatsoever,
whether known or unknown, accrued, absolute, contingent or
otherwise (a "Liability") of Seller except the Assumed
Liabilities. Without limiting the generality of the
foregoing, the following are included among the Liabilities
of Seller which Purchaser shall not assume or become
responsible for (unless specifically included as Assumed
Liabilities):
(a) any indebtedness or Liabilities relating to the depot
repair and refurbishing business of Seller being
retained by it;
(b) all Liabilities for any Taxes whether deferred or which
have accrued or may accrue or become due and payable by
Seller either prior to, on or after the Closing Date,
including, without limitation, all Taxes and fees of a
similar nature arising from the sale and transfer of
the Purchased Assets to Purchaser;
(c) all Liabilities and obligations to directors, officers,
employees or agents of Seller, including, without
limitation, all Liabilities and obligations for wages,
salary, bonuses, commissions, vacation (except as set
forth in Section 3.1(a)(iv)) or severance pay, profit
sharing or pension benefits, and all Liabilities and
obligations arising under any bonus, commission, salary
or compensation plans or arrangements, whether accruing
prior to, on or after the Closing Date;
(d) all Liabilities and obligations with respect to
unemployment compensation claims and workmen's
compensation claims and claims for race, age and sex
discrimination or sexual harassment or for unfair labor
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practice based on or arising from occurrences,
circumstances or events, or exposure to conditions,
existing or occurring prior to the Closing Date and for
which any claim may be asserted by any of Seller's
employees, prior to, on or after the Closing Date;
(e) all Liabilities of Seller to third parties for personal
injury or damage to property based on or arising from
occurrences, circumstances or events, or exposure to
conditions, existing or occurring prior to the Closing
Date and for which any claim may be asserted by any
third party prior to, on or after the Closing Date;
(f) all Liabilities and obligations of Seller arising under
or by virtue of federal or state environmental laws
based on or arising from occurrences, circumstances or
events, or exposure to conditions, existing or
occurring prior to the Closing Date and for which any
claim may be asserted prior to, on or after the Closing
Date;
(g) all Liabilities of Seller including any costs of
attorneys' fees incurred in connection therewith, for
litigation, claims, demands or governmental proceedings
arising from occurrences, circumstances or events, or
exposure to conditions occurring or existing prior to
the Closing Date;
(h) all Liabilities based on any theory of liability or
product warranty with respect to any product
manufactured or sold prior to the Closing Date and for
which any claim may be asserted by any third party,
prior to, on or after the Closing Date;
(i) all attorneys' fees, accountants or auditors' fees, and
other costs and expenses incurred by Seller and/or
Shareholders in connection with the negotiation,
preparation and performance of this Agreement or any of
the transactions contemplated hereby;
(j) all Liabilities of Seller in connection with the
Excluded Assets;
(k) any Liabilities of Seller with respect to any options,
warrants, agreements or convertible or other rights to
acquire shares of its capital stock of any class; and
(l) all other debts, Liabilities, obligations, contracts
and commitments (whether direct or indirect, known or
unknown, contingent or fixed, liquidated or
unliquidated, and whether now or hereinafter arising)
arising out of or relating to the ownership, operation
or use of any of the Purchased Assets on or prior to
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the Closing Date or the conduct of the Business of
Seller prior to the Closing Date, except only for the
liabilities and obligations to be assumed or paid,
performed or discharged by Purchaser constituting the
Assumed Liabilities.
Seller shall pay all of its respective liabilities not being
assumed hereunder by Purchaser within the customary time for
payment of such liabilities.
It is the intent of the parties that upon Closing, all
employees of Seller involved in the Business will be
terminated by Seller and Purchaser will extend offers of
employment to such individuals.
4.
CONSIDERATION FOR
THE PURCHASED ASSETS
4.1 Purchase
Price for the Purchased Assets.
Subject to the other terms of this Agreement, the Purchase
Price for the Purchased Assets shall be the sum of:
(a) Two Million Five Hundred Thousand Dollars
($2,500,000.00); and
(b) The liabilities assumed or paid off at Closing under
Section 3.1.
The sum of the items contained in Sections 4.1(a) and (b)
above shall be adjusted by the amounts determined under
Sections 4.1(c), (d) and (e).
(c) If Seller's Pro Forma EBIT for the period November 1,
1996 through October 31, 1997 relating to the Business
is less than $500,000.00, the Purchase Price shall be
decreased on a dollar-for-dollar basis to the extent of
such deficit. The determination of Sellers' Pro Forma
EBIT for the applicable period shall be made in the
manner provided for in Section 5.1.
(d) If the Net Asset Amount of Seller as of the Closing
Date as shown on the Pro Forma Balance Sheet is less
than $600,000.00, the Purchase Price shall be decreased
on a dollar-for-dollar basis to the extent of such
deficit. The determination of the Net Asset Amount
shall be made in the manner provided for in Section 5.2
hereof.
(e) If the earnings before interest and taxes (_EBIT_) of
Purchaser's Virginia/West Virginia Service Division in
fiscal years one and two following the closing is less
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than $500,000.00 (prorated to $417,000.00 for the
period commencing with the Closing and ending January
5, 1999, $500,000.00 for the period commencing January
6, 1999 and ending January 5, 2000 and prorated to
$83,000.00 for the period commencing January 6, 2000
and ending March 5, 2000) in any applicable period, the
Purchase Price will be reduced on a dollar-for-dollar
basis to the extent of such deficit in EBIT for such
applicable period(s). The determination of such EBIT
for the applicable period shall be made in the manner
provided for in Section 5.3.
4.2 Payment of the Purchase Price for The Purchased Assets
.
Subject to the conditions, covenants, representations and
warranties hereof, at Closing, Purchaser shall deliver:
(a) By certified or bank cashier's checks or by wire
transfer to Seller, the amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00); and
(b) The Assumed Liabilities assumed or paid off under
Section 3.1; and
(c) The remaining sum of One Million Dollars
($1,000,000.00) as may be adjusted as set forth in
Sections 5.1, 5.2 or 5.3, shall be payable pursuant to
the terms of Purchaser's promissory note. The note
shall bear interest at the prime rate of Purchaser's
primary lender, Star Bank, National Association as of
the date of Closing. The principal of the note shall
be payable in two (2) equal annual installments with
the first principal payment commencing on the first
annual anniversary of the Closing and the remaining
principal payment being due on the second annual
anniversary date of the Closing. Interest on the
unpaid principal balance of the note shall be paid
quarterly with the first interest payment being due and
payable ninety (90) days from Closing. Such note and
all obligations of Purchaser thereunder will be
subordinated and made junior in right of payment to the
extent and in the manner provided in a Subordination
Agreement to be executed between Star Bank, National
Association and Purchaser and Seller. A copy of said
note is attached hereto as Exhibit H. Such note shall
be subordinate to Purchaser's lender pursuant to the
terms of a Subordination Agreement in the form attached
hereto as Exhibit I.
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4.3
Allocation of Purchase Price.
The Purchase Price to be paid to Seller hereunder, including
the liabilities assumed or paid by Purchaser pursuant to
Section 3.1, shall be allocated as set forth on Exhibit J
attached hereto. Seller, Shareholders and Purchaser agree
that each shall act in a manner consistent with such
allocation in (a) filing Internal Revenue Form 8594; and (b)
in paying sales and other transfer taxes in connection with
the purchase and sale of assets pursuant to this Agreement.
4.4 Certain Closing Expenses
.
Seller shall be responsible for and shall pay all federal,
state and local sales tax (if any), documentary stamp tax
and all other duties, or other like charges properly payable
upon and in connection with the conveyance and transfer of
the Purchased Assets by Seller to Purchaser.
5.
PRE-CLOSING AND POST-CLOSING ADJUSTMENTS
5.1 Upon the issuance of the audited financial statements by
Seller's accountant, Xxxxxx & Xxxxxx, P.C., Seller will
deliver to Purchaser a determination of Company's Pro Forma
EBIT prepared by Company's accountant for the subject period
along with any supporting documentation reasonably requested
by Purchaser. Within ten days following delivery to
Purchaser of such report and prior to Closing, Purchaser
shall have the right to object in writing to the results
contained in such determination. If timely objection is not
made by Purchaser of such determination, such determination
shall become final and binding. If timely objection is made
by Purchaser to Seller, and Purchaser and Seller are able to
resolve their differences in writing within five (5) days
following the expiration of the Pro Forma EBIT objection
period, then such determination as resolved shall become
final and binding as it relates to this Agreement. If
timely objection is made by Purchaser to Seller, and Seller
and Purchaser are unable to resolve their differences in
writing within five (5) days following the expiration of the
Pro Forma EBIT objection period, then all disputed matters
relating to the report shall be submitted to and reviewed by
an arbitrator (the _Arbitrator_) which shall be an
independent accounting firm selected by Seller and
Purchaser. If Purchaser and Seller are unable to agree
promptly on the accounting firm to serve as the Arbitrator,
each shall select, by not later than the seventh day
following the Pro Forma EBIT objection period, an accounting
firm, and each selected accounting firm shall be instructed
to jointly select promptly another accounting firm, such
third accounting firm shall serve as the Arbitrator. The
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Arbitrator shall consider only the disputed matters
pertaining to the determination and shall act promptly and
fairly to resolve all disputed matters and their decision
with respect to all disputed matters shall be final and
binding upon Seller and Purchaser. The expenses of the
arbitration (including reasonable attorney and accounting
fees) shall be borne one-half by Purchaser and one-half by
Seller. Any net reduction in the Purchase Price as a result
of said adjustments shall be made in the manner set forth in
Section 4.1(c) and shall be reflected by decreasing the face
amount of the note set forth in Section 4.2(c).
5.2 Within fifteen (15) days after the Closing, Seller shall
prepare and deliver to Purchaser a Pro Forma Balance Sheet
which shall set forth the Purchased Assets, and the Assumed
Liabilities as of such date. The Pro Forma Balance Sheet
shall be prepared using the same accounting methods,
policies, practices and procedures, with consistent
classifications, judgments, estimations and methodologies as
used in the preparation of the October 31, 1997 Pro Forma
Balance Sheet. If the Net Asset Amount (as defined below)
shown on the Pro Forma Balance Sheet is less than
$600,000.00, the Purchase Price to be paid to Seller shall
be decreased on a dollar-for-dollar basis for such
difference by decreasing the face amount of the note as set
forth in Section 4.2(c) and if the decrease is in excess of
the face amount of the note, such amount equal to the excess
shall be paid immediately by Seller to Purchaser by
certified or cashier's check on the date of the resolution
of this determination. If the Net Asset Amount shown on the
Pro Forma Balance Sheet equals or exceeds $600,000,00,
Purchaser shall be entitled to such excess. The Net Asset
Amount shall mean the total of the Purchased Assets less the
total of the Assumed Liabilities, in each case as shown on
the Pro Forma Balance Sheet.
5.3 Within forty-five (45) days after the end of the applicable
periods set forth in Section 4.1(e), i.e. January 6, 1999,
January 6, 2000 and March 5, 2000, Purchaser will deliver to
Seller a copy of the report of EBIT prepared by Purchaser
for the subject period along with any supporting
documentation reasonably requested by Seller. Within thirty
(30) days of delivery to Seller of such report, Seller shall
have the right to object in writing to the results contained
in such determination. If timely objection is not made by
Seller to such determination, such determination shall
become final and binding for purposes of this Agreement. If
timely objection is made by Seller to Purchaser and
Purchaser and Seller are able to resolve their differences
in writing within thirty (30) days following the expiration
of the thirty-day period, then such determination shall
become final and binding as it relates to this Agreement.
If timely objection is made by Seller to Purchaser and
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Seller and Purchaser are unable to resolve their differences
in writing within thirty (30) days following the expiration
of the thirty-day period, then all disputed matters
pertaining to the report shall be submitted to and reviewed
by an Arbitrator (the _Arbitrator_) which shall be an
independent accounting firm selected by Purchaser and
Seller. If Purchaser and Seller are unable to agree
promptly upon an accounting firm to serve as the Arbitrator,
each shall select by no later than the thirtieth day
following the expiration of the sixty (60) day period, an
accounting firm and the two selected accounting firms shall
be instructed to select promptly another accounting firm,
such newly selected firm to serve as the Arbitrator. The
Arbitrator shall consider only the disputed matters
pertaining to the determination and shall act promptly to
resolve all disputed matters, and its decision with respect
to all disputed matters shall be final and binding upon
Seller and Purchaser. The expenses of the arbitration
(including reasonable attorney and accounting fees) shall be
borne one-half by Seller and one-half by Purchaser.
For purposes of this Section, the term _EBIT_ shall mean the
net income before taxes and interest expense of Purchaser's
Virginia and West Virginia Service Division. The EBIT shall
be determined by the independent accountant regularly
retained by the Purchaser in the manner set forth above in
accordance with generally accepted accounting principles,
subject to verification as described below. For purposes of
determining the EBIT for any particular year, except as
noted above, no item of income or expense will be allocated
by Purchaser to Purchaser's Virginia/West Virginia Service
Division unless such items are reasonably calculated to
contribute to the increased profits of such Division, it
being the intent of the parties that Purchaser shall
exercise the utmost good faith with respect to allocations
of income and expense to Purchaser's Virginia/West Virginia
Service Division. Incident to the determination of EBIT of
Purchaser's Virginia/West Virginia Service Division, no
compensation of any executive or other employee of Purchaser
or its affiliates who does not work directly for Purchaser's
Virginia/West Virginia Service Division shall be allocated
to such Division. In making the determination of EBIT for
the Purchaser's Virginia/West Virginia Service Division for
calendar year 1 following the Closing, a one and one-half
percent (1.5%) MAS royalty fee on gross sales by the
Purchaser's Virginia/West Virginia Service Division shall be
made incident to said determination. A MAS royalty fee is a
fee charged to each branch of the Purchaser for the
following services performed by Purchaser's corporate
headquarters: marketing, advertising, professional,
accounting and other related expenses. For each subsequent
year described above in this paragraph, the parties shall,
in good faith, agree upon an MAS royalty fee to be charged
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hereunder based on the level of services and support being
provided by the Purchaser to its Virginia/West Virginia
Service Division. Provided, however, such MAS royalty fee
shall be 1.5% if the parties are unable to come to an
agreement for each subsequent year. For purposes of this
Section, the term _Virginia/West Virginia Service Division_
shall be the Business acquired from Seller. Purchaser's
contract with the State of West Virginia relating to
computer hardware and software and services for educational
purposes for K through 12 shall not be included as part of
the Virginia/West Virginia Service Division.
6.
EMPLOYMENT AGREEMENTS
6.1 Employment Agreements of Shareholders
.
At Closing, Purchaser shall enter into an Employment
Agreements with X. Xxxxxxx and X. Xxxxxxx. Copies of said
Employment Agreements are attached hereto and made a part
hereof as Exhibits K and K-1.
7.
COVENANT NOT TO COMPETE AGREEMENTS
7.1
Covenant Not to Compete Agreements of Seller and
Shareholders
.
At Closing, Seller and each Shareholder shall enter into
Covenant Not to Compete Agreements with Purchaser. Copies
of said Covenant Not to Compete Agreements are attached
hereto and made a part hereof as Exhibits L, L-1 and L-2.
8.
LEASE AGREEMENT
8.1
Lease Agreement - 00000 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx
00000.
CCS&W, a Virginia general partnership, is the owner of the
real estate located at 00000 Xxxxxxx Xxxx, Xxxxxxxxxx,
Xxxxxxxx 00000. As a condition of the Closing of this
Agreement, CCS&W, a Virginia general partnership, shall
have entered into a lease agreement with Purchaser in the
form attached hereto as Exhibit M. Such lease shall be for
a period of five (5) years, the rental rate shall be subject
to verification by an independent appraiser and such lease
shall include a thirty (30) month cancellation (bust-up)
provision.
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9.
REPRESENTATIONS AND WARRANTIES OF SELLER
AND SHAREHOLDERS
Except as set forth in the Disclosure Schedule attached
hereto, Seller and Shareholders, jointly and severally,
represent and warrant to Purchaser that the following
statements are true and correct as of the date hereof and
shall remain true and correct as of the Closing as if made
again at and as of that time:
9.1
Organization, Good Standing, Qualification and Power of
Seller.
Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Virginia and
has the corporate power and authority to own, lease and
operate the Purchased Assets and to conduct the Business
currently being conducted by it. The Seller is duly
qualified and validly existing in West Virginia and in good
standing in each of the other jurisdictions in which it is
required by the nature of its business or the ownership of
its properties to so qualify. Seller has no subsidiaries.
The Disclosure Schedule correctly lists, with respect to the
Seller, each jurisdiction in which it is qualified to do
business as a foreign corporation.
9.2 Capitalization
.
The authorized capitalization of the Seller consists solely
of ten thousand (10,000) shares of no par common stock, of
which fifty (50) shares representing one hundred percent
(100%) of the issued stock are currently owned in the manner
set forth in the third recital on page 1 of this Agreement,
are fully paid and nonassessable and have not been issued in
violation of the preemptive rights of any person. Seller is
not obligated to issue or acquire any of its securities, nor
has it granted options or any similar rights with respect to
any of its securities.
9.3 Authority to Make Agreement
.
Seller and each Shareholder have the full legal power and
authority to enter into, execute, deliver and perform their
respective obligations under this Agreement and each of the
other agreements, instruments and other instruments to be
delivered incident hereto ("Other Seller Documents"). This
Agreement and the Other Seller Documents have been duly and
validly executed and delivered by Seller and each
Shareholder, and are the legal and binding obligation of
each of them, enforceable in accordance with their
respective terms, subject to principles of equity,
- 18 -
bankruptcy laws, and laws affecting creditors' rights
generally. Seller has taken all necessary action (including
action of its Board of Directors and Shareholders) to
authorize and approve the execution and delivery of this
Agreement and the Other Seller Documents, the performance of
its obligations thereunder and the consummation of the
transactions contemplated thereby.
9.4
Existing Agreements, Governmental Approvals and Permits.
(a) The execution, delivery and performance of this
Agreement and the Other Seller Documents by Seller, the
sale, transfer, conveyance, assignment and delivery of
the Purchased Assets to Purchaser as contemplated in
this Agreement, and the consummation of the other
transactions contemplated thereby: (i) do not violate
any provisions of law, statute, ordinance or regulation
applicable to Seller, any Shareholder or the Purchased
Assets, (ii) (except for Seller's secured creditors set
forth in Section 3.1, whose consent shall be obtained
prior to Closing) will not conflict with, or result in
the breach or termination of any provision of, or
constitute a default under (in each case whether with
or without the giving of notice or the lapse of time or
both) the Articles of Incorporation or Bylaws of Seller
or any indenture, mortgage, lease, deed of trust, or
other instrument, contract or agreement or any license,
permit, approval, authority, or any order, judgment,
arbitration award, or decree to which Seller or any
Shareholder is a party or by which Seller or any
Shareholder or any of their assets and properties are
bound (including, without limitation, the Purchased
Assets), and (iii) will not result in the creation of
any encumbrance upon any of the properties, assets, or
Business of Seller or of any Shareholder. Neither
Seller, nor any Shareholder, nor any of their assets or
properties (including, without limitation, the
Purchased Assets) is subject to any provision of any
mortgage, lease, contract, agreement, instrument,
license, permit, approval, authority, order, judgment,
arbitration award or decree, or to any law, rule,
ordinance, or regulation, or any other restriction of
any kind or character, which would prevent Seller or
any Shareholder from entering into this Agreement or
any of the Other Seller Documents or from consummating
the transactions contemplated thereby.
(b) Neither Seller nor any Shareholder is a party to,
subject to or bound by any agreement, judgment, award,
order, writ, injunction or decree of any court,
governmental body or arbitrator which would prevent the
use by Purchaser of the Purchased Assets in accordance
with present practices of Seller after the Closing Date
- 19 -
or which, by operation of law, or pursuant to its
terms, would be breached, terminate, lapse or be
subject to termination or default under (in each case
whether with or without notice, the passage of time or
both) upon the consummation of the transactions
contemplated in this Agreement.
(c) No approval, authority or consent of, or filing by
Seller with, or notification to, any foreign, federal,
state or local court, authority or governmental or
regulatory body or agency or any person is necessary to
authorize the execution and delivery of this Agreement
or the Other Seller Documents by Seller or any
Shareholder, the sale, transfer, conveyance, assignment
and delivery of the Purchased Assets to Purchaser, or
the consummation of the other transactions contemplated
thereby, or to continue the use and operation of the
Purchased Assets by Purchaser after the Closing Date.
9.5 Financial Statements
.
A. Copies of the Financial Statements are attached to the
Disclosure Schedule. Each of the Financial Statements
are true and complete in all material respects and were
prepared in accordance with generally accepted
accounting principles (except for the Pro Forma Balance
Sheet of Seller which will be prepared as set forth in
Section 5.2) applied on a consistent basis throughout
the periods indicated (except as noted on such
Financial Statements) and fairly present in all
material respects the financial position and condition
of the Seller as of the respective dates thereof and
the results of its operation and changes in financial
position for the respective periods then ended.
B. Except to the extent reflected, reserved against, or
disclosed on the Pro Forma Balance Sheet, the Financial
Statements, or the Disclosure Schedule, the Seller had,
as of such date, no material liabilities or obligations
of any nature, whether accrued, absolute, contingent,
or otherwise, including without limitation, unfunded
pension or other retirement plan liabilities and tax
liabilities whether or not incurred in respect of or
measured by the Seller's income, for any period prior
to the date of said Financial Statements, or arising
out of transactions entered into or any set of facts
existing prior thereto. Except to the extent disclosed
on the Disclosure Schedule, there exists no basis for
the assertion against Seller, as of the date of the
Financial Statements or the Pro Forma Balance Sheet, of
any material liability of any nature or in any amount
not fully reflected, reserved against, or disclosed in
said Financial Statements or Pro Forma Balance Sheet.
- 20 -
9.6
Customers.
The Disclosure Schedule includes a correct list of the
twenty-five (25) largest customers of the Seller by sales in
dollars for each of the past two (2) years and the amount of
business done by the Seller with each such customer for each
year. Assuming that Purchaser continues to conduct the
Business in the ordinary course consistent with Seller's
prior practices generally and specifically with respect to
Seller's current customers, except for Via Systems, Inc.,
Seller has no knowledge that any of the current customers of
Seller will or intend to (a) cease doing business with the
Seller; or (b) materially alter the amount of business they
are presently doing with the Seller; or (c) not do business
with the Purchaser after the Closing.
9.7 Intangible Property
.
The Disclosure Schedule includes an accurate list and
summary description of all patents, franchises,
distributorships, registered and unregistered trademarks,
trade names and service marks, licenses, brand names and
company lists and all applications for the foregoing,
presently owned and/or held (as a licensee or otherwise) by
the Seller. The Seller is not a licensor in respect to any
patents, trade secrets, inventions, shop rights, know-how,
trademarks, trade names, copyrights, or applications
therefor. The Disclosure Schedule contains an accurate and
complete description of such intangible property and the
items of all licenses and other agreements relating thereto.
All of the above-mentioned intangibles used in the Seller's
Business are the sole property of the Seller, do not require
the consent of or consent to any other person as a condition
to their use or the transaction provided for herein and do
not infringe upon the rights of others.
9.8
Significant Agreements.
The Disclosure Schedule contains an accurate and complete
list of all contracts, agreements, licenses, instruments and
understandings (whether or not in writing) to which the
Seller is a party or is bound and that are material to the
Business, assets, financial condition or results of
operations of the Seller. Without limiting the generality
of the foregoing, such list includes all such contracts,
agreements, licenses and instruments:
(a) Providing for payments of more than Five Thousand
($5,000.00) per year;
(b) Providing for the extension of credit other than
consistent with normal credit terms described in the
- 21 -
Disclosure Schedule;
(c) Limiting the ability of the Seller to conduct its
Business or any other business or to otherwise compete
in its or any other business, including as to manner or
place;
(d) Providing for a guarantee or indemnity by the Seller;
(e) With any Affiliate of Seller;
(f) With any labor union or employees' association
connected with Seller's Business;
(g) For the employment or retention of any director,
officer, employee, agent, shareholder, consultant,
broker or advisor (except for Seller's contract with
Xxxxxx Xxxxxx) of Seller or any other contract between
Seller and any director, officer, employee, agent,
shareholder, consultant or advisor which does not
provide for termination at will by the Seller without
further cost or other liability to the Seller as of or
at any time after the Closing.
(h) In the nature of a profit sharing, bonus stock option,
stock purchase, pension, deferred compensation,
retirement, severance, hospitalization, insurance or
other plan or contract providing benefit to any person
or former director, officer, employee, agent,
shareholder, consultant, broker or advisor of Seller,
or such person's dependents, beneficiaries or heirs;
(i) In the nature of an indenture, mortgage, promissory
note, loan or credit agreement or other contract
relating to the borrowing of money or a line of credit
by the Seller or relating to the direct or indirect
guarantee or assumption by the Seller of obligations of
others;
(j) Leases or subleases with respect to any property, real,
personal or mixed, in which the Seller is involved, as
lessor or lessee; and
(k) Distributorship Agreement(s) or License Agreement(s)
with respect to any property which Seller has entered
into as licensor.
True and correct copies of all items so disclosed in the
Disclosure Schedule have been provided or made available to
Purchaser. Each of such items listed, or required to be
listed, is a valid and binding obligation of the parties
thereto enforceable in accordance with its terms, subject to
principles of equity, bankruptcy laws, and laws affecting
- 22 -
creditors' rights generally, and there have been no material
defaults or claims of material default by the Seller and
there are no facts or conditions that have occurred or that
are anticipated to occur which, through the passage of time
or the giving of notice, or both, would constitute a default
by the Seller, or would cause the acceleration of any
obligation of any party thereto or the creation of an
Encumbrance upon any asset of the Seller. There are no
material oral contracts, agreements or understandings made
by any Shareholder, whether or not binding, material to the
Seller, except such as have been disclosed in the Disclosure
Schedule and for which an accurate summary description has
been provided.
9.9 Inventory
.
Except as specifically described on the Disclosure Schedule,
all inventory is reflected on the October 31, 1997 Balance
Sheet and at the Closing Date will consist of items of
quality and quantity which are usable or saleable in the
ordinary course of business of Seller in the conduct of its
Business, and items of below standard quality and items not
usable or saleable in the ordinary course of Seller's
business have been written down in value in accordance with
good business practices to estimated net realizable market
value or adequate reserves have been provided therefor. The
values at which the inventory are carried on the October 31,
1997 Balance Sheet reflect the normal valuation policy of
Seller in setting inventory at the lower of cost or net
realizable market values, all in accordance with generally
accepted accounting principles. Except as set forth on the
Disclosure Schedule, since October 31, 1997, the inventory
of Seller has been maintained at normal and adequate levels
for the continuation of the Business in its normal course.
No change has occurred in such inventory which affects or
will affect the usability or salability thereof, no write-
downs or write-offs of the value of such inventory has
occurred and no additional amounts have been reserved with
respect to such inventories. The Disclosure Schedule lists
the location of all inventory together with a brief
description of the type and amount at each location.
- 23 -
9.10
Accounts Receivable.
All accounts receivable of Seller which have arisen in
connection with the Business or otherwise and which are
reflected on the Financial Statements and all receivables
which have arisen since October 31, 1997 through the Closing
shall have arisen only from bonafide transactions in the
ordinary course of business and represent valid, collectible
and existing claims. Subject to customer credit, the
payment of each account receivable will not be subject to
any known defense, counterclaim condition (other than
Seller's performance in the ordinary course of business)
whatsoever. The Disclosure Schedule hereto accurately
lists, as of the Closing Date, all receivables arising out
of or relating to the Business, the amount owing and aging
of such accounts receivable, the name and last known address
of the party from whom such account receivable is owing, any
security in favor of Seller for the repayment of such
account receivable which Seller purports to have. Seller
has delivered to Purchaser complete and correct copies of
all instruments, documents and agreements evidencing such
accounts receivable and of all instruments, documents or
agreements (if any) creating security therefor.
9.11 Taxes
.
Except as to Taxes not yet due and payable, and except for
Taxes the payment of which is being diligently contested in
good faith and by proper proceedings and for which adequate
reserves have been established in accordance with generally
accepted accounting principles, Seller has filed all returns
and reports that are now required to be filed by it in
connection with any federal, state or local tax, duty or
charge levied, assessed or imposed upon it, or its property,
including unemployment, social security and similar taxes;
and all of such taxes have been either paid or adequate
reserves or other provision has been made therefor.
- 24 -
9.12
Title to Purchased Assets.
(a) With respect to all Purchased Assets sold, at the
Closing Seller shall have good and marketable title to
the Purchased Assets being acquired by Purchaser, free
and clear of all Encumbrances whatsoever; immediately
after the transfer of all the Purchased Assets being
acquired by Purchaser from Seller, Purchaser will own
all of said Purchased Assets free and clear of all
Encumbrances whatsoever, whether perfected or
unperfected; and, by way of illustration but not
limitation, there are not any unpaid taxes, assessments
or charges due or payable by Seller to any federal,
state or local agency, or any obligations or
liabilities or any unsatisfied judgments against, or,
to the best of Seller's knowledge, any litigation or
proceedings pending or threatened against Seller by
Seller's employees, clients, customers, creditors,
suppliers, or any other party (nor state of facts for
any such obligation, liability, litigation or
proceeding), that could become a claim, obligation,
liability, lien or other charge of or against Purchaser
or the Purchased Assets. To the best of knowledge of
Seller, all of Seller's tangible and other operating
assets used in the Business which are being sold
hereunder to Purchaser are in good operating condition
and repair, free of all structural, material or
mechanical defects and conform with all applicable laws
and regulations.
(b) Except as otherwise specifically set forth herein,
Seller is not a party to any contract, agreement, lease
or commitment that would result in any claim,
obligation, liability, lien or other charge against
Purchaser or the Purchased Assets, and Purchaser is not
obligated to assume the obligations under any contract,
agreement, lease or commitment of Seller, except as
specifically set forth herein.
9.13 Pending Actions
.
Seller has not been served with or received notice of any
actions, suits, arbitrations, OSHA, EPA or other
governmental violations, or any other proceedings or
investigations, either administrative or judicial, strikes,
lockouts or NLRB charges or complaints ("Actions and
Disputes"). To the best of Seller's knowledge, there are no
Actions or Disputes pending or threatened against or
affecting (directly or indirectly) the Seller or its
property or assets, nor are there any facts or conditions
which exist which would give rise to any such Actions or
Disputes which, if determined adversely to Seller, would
have a material adverse effect upon Seller's Business.
- 25 -
9.14
Insurance.
The Disclosure Schedule contains an accurate and complete
listing (showing type of insurance, amount, insurance
company, annual premium and special exclusions) of all
policies of fire, liability, worker's compensation and other
forms of insurance owned or held by the Seller. All such
policies are in full force and effect; are sufficient for
compliance with all requirements of law and of all
agreements to which the Seller is a party; are valid,
outstanding and enforceable policies; provide adequate
insurance coverage for the assets and operations of the
Seller and will remain in full force and effect through the
Closing. There are no outstanding requirements or
recommendations by any insurance company that issued a
policy with respect to any of the properties and assets of
the Seller by any Board of Fire Underwriters or other body
exercising similar functions or by any Governmental Entity
requiring or recommending any repairs or other work to be
done on or with respect to any of the properties and assets
of the Seller or requiring or recommending any equipment or
facilities to be installed on or in connection with any of
the properties or assets of the Seller.
9.15
Status of Business.
(a) Since October 31, 1997, the Business of the Seller has
been operated only in the ordinary course, and, except
as set forth in the Disclosure Schedule or permitted
under Section 2.3 dealing with Excluded Assets, there
has not been with respect to the Business:
(i) Any material change in its condition (financial or
other), assets, liabilities, obligations, business
or earnings, except changes in the ordinary course
of business, none of which in the aggregate has
been materially adverse;
(ii) Any material liability or obligation incurred or
assumed, or any material contract, agreement,
arrangement, lease (as lessor or lessee), or other
commitment entered into or assumed, on behalf of
the Business, whether written or oral, except in
the ordinary course of business;
(iii) Any purchase or sale of material assets in
anticipation of this Agreement, or any purchase,
lease, sale, abandonment or other disposition of
material assets, except in the ordinary course of
business;
(iv) Any waiver or release of any material rights,
- 26 -
except for rights of nominal value;
(v) Any cancellation or compromise of any material
debts owed to Seller or material claims known by
Seller against another person or entity, except in
the ordinary course of business;
(vi) Any damage or destruction to or loss of any
physical assets or property of Seller which
materially adversely affects the Business or any
of the properties of the Seller (whether or not
covered by insurance);
(vii) Any material changes in the accounting practices,
depreciation or amortization policy or rates
theretofore adopted by the Seller, or any material
revaluation or write-up or write-down of any of
its assets;
(viii) Any direct or indirect redemption, purchase or
other acquisition for value by the Seller of its
shares, or any agreement to do so;
(ix) Any material increase in the compensation levels
or in the method of determining the compensation
of any of the Seller's officers, directors, agents
or employees, or any bonus payment or similar
arrangement with or for the benefit of any such
person, any increase in benefits expense to the
Seller, any payments made or declared into any
profit-sharing, pension, or other retirement plan
for the benefit of employees of the Seller, except
in the ordinary course of business;
(x) Any loans or advances between the Seller and any
Shareholder, or any family member or any associate
or Affiliate of the Seller or of any Shareholder;
(xi) Any material contract cancelled or the terms
thereof amended or any notice received with
respect to any such contract terminating or
threatening termination or amendment of any such
contract;
(xii) Any transfer or grant of any material rights under
any leases, licenses, agreements, or with respect
to any trade secrets or know-how;
(xiii) Any labor trouble or employee controversy
materially adversely affecting its Business or
assets; or
(xiv) Any dividend or other distribution on or in
- 27 -
respect of shares of its capital stock.
(b) Seller is not
(i) in violation of any outstanding judgment, order,
injunction, award or decree specifically relating
to the Business, or
(ii) in violation of any federal, state or local law,
ordinance or regulation which is applicable to the
Business, except where such violation does not
have a materially adverse effect on the Business.
Seller has all permits, licenses, orders, approvals,
authorizations, concessions and franchises of any
federal, state or local governmental or regulatory body
that are material to or necessary in the conduct of the
Business, except where failure to have such permit,
license, order, approval, authorization, concession or
franchise does not have a materially adverse effect on
the Business. All such permits, licenses, orders,
approvals, concessions and franchises are set forth on
the Disclosure Schedule and are in full force and
effect and there is no proceeding, or to the knowledge
of Seller, threatened to revoke or limit any of them.
(c) No claim, litigation, action, investigation or
proceeding is pending or, to the knowledge of Seller,
threatened, and no order, injunction or decree is
outstanding, against or relating to the Business or its
assets, and Seller does not know of any information
which could result in such a claim, litigation, action,
investigation or proceeding, which, if determined
adversely to Seller, would have a material adverse
effect upon Seller's Business.
(d) Seller has accrued or paid in full, to all employees of
the Business, in the normal course of its operations,
all wages, salaries, commissions, bonuses, vacations
and other direct compensation for all services
performed by them. To the best of Seller's knowledge,
Seller is in compliance with all federal, state and
local laws, ordinances and regulations relating to
employment and employment practices at the Business,
and all employee benefit plans and tax laws relating to
employment at the Business, except where such non-
compliance would not have a materially adverse effect
on the Business. There is no unfair labor practice
complaint against Seller relating to the Business
pending before the National Labor Relations Board or
similar agency or body and, to the best of Seller's
knowledge, no condition exists that could give rise to
any unfair labor practice complaint. There is no labor
- 28 -
strike, dispute, slowdown or stoppage actually pending
or, to the knowledge of Seller, threatened against or
involving the Business. Seller has no labor contracts
or collective bargaining agreements with respect to any
of its employees.
9.16 Environmental Laws
.
(a) To the best of Seller's knowledge, the real estate
located at (i) Mountaineer Mall, Morgantown, WV; (ii)
000 Xxxxxxxx Xxxxxxxx Xxxx, Xxxxxx, XX 00000; and
(iii) 00000 Xxxxxxx Xxxx, Xxxxxxxxxx, XX 00000 (_Real
Estate_) have not been used or operated in any fashion
involving producing, handling and disposing of
chemicals, toxic substances, wastes and effluent
materials, x-rays or other materials or devices in
material violation of any laws, rules, regulations or
orders, and to the best of Seller's knowledge, the Real
Estate is in material compliance with applicable laws,
regulations, ordinances, decrees and orders arising
under or relating to health, safety, and environmental
laws and regulations, including without limitation the
Federal Occupation and Safety Health Act, 29 U.S.C.
S651, et seq.; Federal Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. S6901, et seq.;
Federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C.
S9601, et seq.; the Federal Clean Air Act, 42 U.S.C.
S2401, et seq.; the Federal Clean Xxxxx Xxx, 00 X.X.X.
X0000, et seq.; and all state and local laws that
correspond therewith or supplement such laws.
(b) To the best of Seller's knowledge, the Real Estate has
not been operated, in violation of any laws, rules,
regulations or orders, so as to involve or create any
surface impoundments, incinerators, land fills, waste
storage tanks, waste piles, or deep well injection
systems or for the purpose of storage, treatment or
disposal of a hazardous waste as defined by RCRA or
hazardous substance, pollutant or contaminate as
defined by CERCLA and, to the best of Seller's
knowledge, no acts have been committed that would make
the Real Estate or any part thereof subject to remedial
action under RCRA or CERCLA or corresponding state or
local laws.
(c) To the best of Seller's knowledge, there have not been,
are not now and as of the Closing Date, there will be
no solid waste, hazardous waste, hazardous substance,
toxic substance, toxic chemicals, pollutants or
contaminants, underground storage tanks, purposeful
dumps, or accidental spills in, on or about the Real
Estate or any of the assets of the Seller, whether real
- 29 -
or personal, owned or leased, or stored on any real
property owned or leased by the Seller or by the
Seller's lessees, licensees, invites, or predecessors.
(d) Seller is not engaged in, and to the best of Seller's
knowledge and belief, is not threatened with any
litigation, or governmental or other proceeding which
may give rise to any claim against the Real Estate.
Specifically, there are no pending suits, charges,
actions, governmental investigations, or other
proceedings, involving, directly or indirectly without
limitation, the laws, statutes and regulations set
forth in subsection (a), above, whether initiated by a
third party or by Seller and there are none, to the
best of Seller's knowledge, threatened against or
relating to or involving the Real Estate or the
transactions contemplated by this Agreement. Seller is
not in default with respect to any order, writ,
injunction or decree of any federal, state, local or
foreign court, department, agency or instrumentality.
(e) The Disclosure Schedule will list all waste disposal
sites, dump sites and other areas either on the Real
Estate or offsite at which hazardous or toxic waste
generated by the Seller has been disposed (in each case
identifying such waste) and it will specifically
identify each such site or area which is or has been
included in any published federal, state or local
(domestic or foreign) superfund or other list of
hazardous or toxic waste sites or areas.
(f) To the best of Seller's knowledge, Seller has obtained
all permits, and licenses and other authorizations
required by all environmental laws; and all of such
permits, licenses and other authorizations are in full
force and effect as of the date hereof. A true and
correct list of all such permits, licenses and other
authorizations is set forth in the Disclosure Schedule.
9.17 Certain Employees
(a) Each of the following is included in the list of
agreements set forth in the Disclosure Schedule: all
collective bargaining agreements, employment and
consulting agreements, bonus plans, deferred
compensation plans, employee pension plans or
retirement plans, employee profit-sharing plans,
employee stock purchase and stock option plans,
hospitalization insurance, and other plans and
arrangements providing for employee benefits of
employees of the Seller.
(b) The Disclosures Schedule contains a true, complete and
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accurate list of the following: the names, positions,
and compensation of the present employees of the
Seller, together with a statement of the annual salary
payable to salaried employees and a summary of the
bonuses and description of agreements for additional
compensation and other like benefits, if any, paid or
payable to such persons for the period set forth in the
Disclosure Schedule. Except as listed in the
Disclosure Schedule, to the best of Seller's knowledge,
all employees of Seller are employees-at-will.
(c) Seller has no retired employees who are receiving or
are entitled to receive any payments, health or other
benefits from Seller.
9.18 Payments to Employees
.
All accrued obligations of Seller relating to employees and
agents of Seller, whether arising by operation of law, by
contract, or by past service, for payments to trusts or
other funds or to any governmental agency, or to any
individual employee or agent (or his heirs, legatees, or
legal representatives) with respect to unemployment
compensation benefits, profit sharing or retirement
benefits, or social security benefits have been paid or
accrued by Seller. All obligations of Seller as an employer
or principal relating to employees or agents, whether
arising by operation of law, by contract, or by past
practice, for vacation and holiday pay, bonuses, and other
forms of compensation which are or may become payable to
such employees or agents, have been paid or will be paid or
accrued by Seller.
9.19
Change of Corporate Name.
At the Closing, Seller, if requested by Purchaser shall
execute a Consent for Use of Similar Name, as set forth in
the Disclosure Schedule, granting to Purchaser the use of
the letters CBS.
9.20 Brokers and Finders
.
Except as set forth in the Disclosure Schedule, no broker,
finder or other person or entity acting in a similar
capacity has participated on behalf of Seller in bringing
about the transaction herein contemplated, or rendered any
service with respect thereto or been in any way involved
therewith.
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9.21
Preservation of Organization.
Except as set forth on the Disclosure Schedule, since
October 31, 1997, the Seller has kept intact the Business
and organization of the Seller; retained the services of all
the Seller's material employees and agents, retained the
Seller's arrangements with the manufacturers of the products
distributed by Seller in the same manner as conducted prior
to such date, and engaged in no transaction other than in
the ordinary course of Seller's Business.
9.22 Absence of Certain Business Practices
.
Neither Seller, nor any officer, employee or agent of the
Seller, nor any other Person acting on its behalf, has,
directly or indirectly, within the past five years given or
agreed to give any gift, bribe, rebate or kickback or
otherwise provide any similar benefit to any customer,
supplier, governmental employee or any other Person who is
or may be in a position to help or hinder Seller or the
Business (or assist Seller in connection with any actual or
proposed transaction relating to the Business or any other
business previously operated by Company) (i) which subjected
or might have subjected Seller to any damage or penalty in
any civil, criminal or governmental litigation or
proceeding, (ii) which if not given in the past, might have
had a material adverse effect on the Business, (iii) which
if not continued in the future, might have a material
adverse effect on the Business or subject Seller to suit or
penalty in any private or governmental litigation or
proceeding, (iv) for any of the purposes described in
Section 162(c) of the Code or (v) for the purpose of
establishing or maintaining any concealed fund or concealed
bank account.
9.23 Suppliers
.
The Disclosure Statement sets forth the names of and
description of contractual arrangements (whether or not
binding or in writing) with the twenty-five (25) largest
suppliers of the Seller by sales or services in dollars.
Assuming that Purchaser continues to conduct the Business in
the ordinary course consistent with Seller's prior practices
generally and specifically with respect to Seller's current
suppliers, Seller has no direct knowledge that any of the
current suppliers of the Seller will, or intend to, (a)
cease doing business with the Seller; or (b) materially
alter the amount of business they are currently doing with
the Seller; or (c) not do business with the Purchaser after
the Closing.
9.24
Product Liability Claims.
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To the best of Seller's knowledge, there are no material
product liability claims against the Seller, either
potential or existing, which are not fully covered by
product liability insurance coverage with a responsible
company which, if determined adversely to Seller, would have
a material adverse effect upon Seller's Business.
9.25
Employee Benefit Plans.
For the purposes of this Section 9.25, "Seller" shall
include all persons who are members of a controlled group, a
group of trades or businesses under common control, or an
affiliated service group (within the meanings of Sections
414(b), (c) or (m) of the Code), of which the Seller is a
member.
(a) The Employee Benefit Plans presently maintained by the
Seller or to which the Seller has contributed within
the past six (6) years, including any terminated or
frozen plans which have not yet distributed all plan
assets, are fully set forth in the Disclosure
Schedule. For purposes of this provision, the term
"Employee Benefit Plan" shall mean:
(i) A Welfare Benefit Plan as defined in Section 3(1)
of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") established for the
purpose of providing for its participants or their
beneficiaries, through the purchase of insurance
or otherwise, medical, surgical, or hospital care
or benefits, or benefits in the event of sickness,
accident, disability, death or unemployment
(including any plan or program of severance pay),
or vacation benefits, apprenticeship or other
training programs, or day care centers,
scholarship funds, or prepaid legal services, or
any benefit described in Section 302(c) of the
Labor Management Relations Act of 1947;
(ii) An Employee Pension Benefit Plan as defined in
Section 3(2) of ERISA established or maintained by
the Seller for the purpose of providing retirement
income to employees or for the purpose of
providing deferral of income by employees for
periods extending to the termination of covered
employment or beyond; and
(iii) Any other plan or arrangement not covered by
ERISA but which provides benefits to employees or
former employees and results in an accrued
liability on the part of the Seller either by
contract or by operation of law.
(b) With respect to any such Employee Benefit Plans, the
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Seller represents and warrants that, to the best of
Seller's knowledge;
(i) The Seller has not, with respect to any Employee
Benefit Plans, engaged in any prohibited
transaction, as such term is defined in Section
4975 of the Code or Section 406 of ERISA.
(ii) The Seller has, with respect to any Employee
Benefit Plans, complied with all reporting and
disclosure requirements required by Title I,
Subtitle B, Part 1 of ERISA.
(iii) There was no accumulated funding deficiency
(as defined in section 302 of ERISA and Section
412 of the Code) with respect to any Employee
Pension Benefit Plan which is a defined benefit
pension plan, whether or not waived, as of the
last day of the most recent fiscal year of the
plans ending prior to the date of this Agreement.
(iv) There are no contributions due to any Employee
Pension Benefit Plan for the most recent fiscal
year of the plans ending prior to the date of this
Agreement and the Seller's Financial Statements
reflect any liability of the Seller to make
contributions to the Employee Pension Benefit
Plans.
(v) No material liability to the Pension Benefit
Guaranty Corporation ("PBGC") has been asserted
with respect to any Employee Pension Benefit Plan
which is a defined benefit pension plan.
(vi) There has been no reportable event as described in
Section 4043(b) of ERISA since the effective date
of Section 4043 of ERISA with respect to any
Employee Pension Benefit Plan which is a defined
benefit plan.
(vii) Except for claims for benefits by
participants and beneficiaries in the normal
course of events, to the best of Seller's
knowledge, there are no claims, pending or
threatened, by any individual or Governmental
Entity, which, if decided adversely, would have a
material adverse effect upon the financial
condition of any Employee Benefit Plan, the plan
administrator of any Employee Benefit Plan, or the
Seller.
(viii) The Seller has made available for inspection
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all annual reports for the Seller filed on
Internal Revenue Service ("IRS") Form 5500 or
5500C, all reports for the Seller prepared by an
actuary for the last three plan years, the plan
and trust documents and the Summary Plan
Description, as amended, for each Employee Benefit
Plan and the last filed PBGC1 Form (if applicable)
for each Employee Benefit Plan, with respect to
any Employee Benefit Plans other than multi-
employer plans (within the meaning of Section
3(37) of ERISA), and other reports filed with the
PBGC during the last three plan years.
(ix) All Employee Pension Benefit Plans are intended to
be qualified retirements plans under the Code.
The IRS has issued, and the Seller has made
available for inspection, one or more favorable
determination letters with respect to the
qualification of all Employee Pension Benefit
Plans stating that from the inception of each such
plan, such plan has been qualified under Section
401(a) of the Code and each trust maintained in
connection with such plan has been and is exempt
under Section 501(a) if the Code. The time for
adoption of any amendments required by changes in
the Code since such determination letters were
issued, or changes required by the IRS as a
condition for continued qualification of such
plans has not expired, or did not expire without
such amendments being made. Such plans are now,
and always have been, established in writing and
maintained and operated in accordance with the
plan documents, ERISA, the Code, and all other
applicable laws.
(x) There is no liability arising from the termination
or partial termination of any Employee Benefit
Plan, except for liabilities as to which adequate
reserves are reflected on the Financial
Statements, and there exists no condition
presenting a material risk of such liability.
(xi) The Seller has timely made any contributions it is
obligated to make to any multi-employer plan
within the meaning of Section 3(37) of ERISA. The
Seller has no liability arising as a result of
withdrawal from any multi-employer plan, no such
withdrawal liability has been asserted and no such
withdrawal liability will be asserted with regard
to any withdrawal or partial withdrawal on or
before the date of this Agreement.
9.26
Assets Necessary to the Business.
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The Seller owns all assets and properties (tangible and
intangible) necessary to carry on its Business and
operations as presently conducted and as shown on the
Financial Statements. Such assets and properties are all of
the assets and properties necessary to carry on Seller's
Business as presently conducted and none of the Shareholders
(other than through their ownership of stock in the Seller
and/or as set forth on the Disclosure Schedule) nor any
member of their respective families owns or leases or has
any interest in any assets or properties presently being
used to carry on the Business of Seller.
9.27 Transactions with Affiliates
.
Except as disclosed on the Disclosure Schedule, there is no
lease, sublease, contract, agreement or other arrangement of
any kind whatsoever entered into by Seller and any
Shareholder or affiliate.
9.28 Territorial Restrictions
.
Except as described in the Disclosure Schedule, Seller is
not restricted by any written agreement or understanding
with any other Person from carrying on the Business anywhere
in the world. Neither Purchaser nor any of its affiliates
will, as a result of its acquisition of the Purchased
Assets, become restricted in carrying on the Business
anywhere in the world as a result of any contract or other
agreement to which Seller is a party or by which it is
bound.
9.30 Full Disclosure
.
None of the representations and warranties made by the
Seller herein, or made on its behalf, including any
disclosures made in the Disclosure Schedule, contains or
will contain, to the best of Seller's knowledge, any untrue
statement of material fact or omits or will omit any
material fact.
10.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that the
following statements are true and correct as of the date hereof
and shall remain true and correct as of the Closing as if made
again at and as of that time.
- 36 -
10.1
Organization, Good Standing and Power of Purchaser.
(a) Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the
State of Delaware and has full corporate power and
lawful authority to execute, deliver and perform this
Agreement and conduct the Business of Seller currently
conducted by Seller in each of the jurisdictions in
which Seller currently conducts its Business, which are
the only jurisdictions where the failure to be so
qualified by Purchaser will have a material adverse
effect on the business prospects or financial condition
of Purchaser.
10.2 Status of Agreements
.
(a) All requisite corporate action (including action of its
Board of Directors) to approve, execute, deliver and
perform this Agreement and each of the other
agreements, instruments and other documents to be
delivered by and on behalf of Purchaser ("Other
Purchaser Documents") in connection herewith has been
taken by Purchaser. This Agreement has been duly and
validly executed and delivered by Purchaser and
constitutes the valid and binding obligation of
Purchaser enforceable in accordance with its terms.
All Other Purchaser Documents in connection herewith
will, when executed and delivered, constitute the valid
and binding obligation of Purchaser enforceable in
accordance with their respective terms.
(b) No authorization, approval, consent or order of, or
registration, declaration or filing with, any court,
governmental body or agency or other public or private
body, entity or person is required (except for
Purchaser's primary lender, Star Bank, N.A., whose
consent shall be obtained prior to Closing) in
connection with the execution, delivery or performance
of this Agreement or any Other Purchaser Documents in
connection herewith.
(c) Neither the execution, delivery nor performance of this
Agreement or any of the Other Purchaser Documents in
connection herewith does or will:
(i) conflict with, violate or result in any
breach of any judgment, decree, order, statute,
ordinance, rule or regulation applicable to
Purchaser;
(ii) conflict with, violate or result in any
breach of any agreement or instrument to which
Purchaser is a party or by which Purchaser or any
- 37 -
of Purchaser's assets or properties is bound, or
constitute a default thereunder or give rise to a
right of acceleration of an obligation of
Purchaser; or
(iii) conflict with or violate any provision of the
Articles of Incorporation or By-Laws of
Purchaser.
10.3
Brokers and Finders.
No broker, finder or other person or entity acting in a
similar capacity has participated on behalf of Purchaser in
bringing about the transaction herein contemplated, or
rendered any service with respect thereto or been in any way
involved therewith.
11.
BULK SALES ACT
11.1 Compliance
with Bulk Sales Act.
Purchaser waives compliance with the provisions of any
applicable bulk sales law and Seller and Shareholders,
jointly and severally, agree to indemnify and hold harmless
Purchaser from any liability incurred as a result of the
failure to so comply, except to liabilities explicitly
assumed hereunder by Purchaser.
12.
SURVIVAL OF AND RELIANCE UPON
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION
12.1 Survival of Representations and Warranties
.
The parties acknowledge and agree that all representations,
warranties and agreements contained in this Agreement or in
any agreement, instrument, exhibit, certificate, schedule or
other document delivered in connection herewith, shall
survive the Closing and continue to be binding upon the
party giving such representation, warranty or agreement and
shall be fully enforceable to the extent provided for in
Sections 12.3 and 12.4 hereof, at law or in equity, for the
period beginning on the date of Closing and ending three (3)
years thereafter, except for the representations, warranties
and agreements designated and identified in Sections 3.1,
3.2, 3.3, 4.2, 9.3, 9.11, 9.12, 9.16 and 10.2 which shall
survive the Closing and shall terminate in accordance with
the statute of limitations governing written contracts in
the State of Virginia and Exhibits X, X-1, L, L-1, L-2 and
M, which shall terminate as provided therein.
- 38 -
12.2
Reliance Upon and Enforcement of Representations, Warranties
and Agreements
.
(a) Seller hereby agree that, notwithstanding any right of
Purchaser to fully investigate the affairs of Seller,
and notwithstanding knowledge of facts determined or
determinable by Purchaser pursuant to such
investigation or right of investigation, Purchaser has
the right to rely fully upon the representations,
warranties and agreements of Seller contained in this
Agreement and upon the accuracy of any document,
certificate or exhibit given or delivered to Purchaser
pursuant to the provisions of this Agreement.
(b) Purchaser hereby agrees that, notwithstanding any right
of Seller to fully investigate the affairs of
Purchaser, and notwithstanding knowledge of facts
determined or determinable by Seller pursuant to such
investigation or right of investigation, Seller have
the right to rely fully upon the representations,
warranties and agreements of Purchaser contained in
this Agreement and upon the accuracy of any document,
certificate or exhibit given or delivered to Seller
pursuant to the provisions of this Agreement.
12.3 Indemnification by Seller and Shareholders
.
Provided Purchaser makes a written claim for indemnification
against Seller and/or Shareholders within any applicable
survival period specified in Section 12.1, Seller and
Shareholders (jointly and severally, shall indemnify
Purchaser against and hold it harmless from:
(i) any and all loss, damage, liability or deficiency
resulting from or arising out of any inaccuracy in or
breach of any representation, warranty, covenant, or
obligation made or incurred by Seller herein or in any
other agreement, instrument or document delivered by or
on behalf of Seller pursuant to the provisions of the
Agreement;
(ii) any imposition (including by operation of law) or
attempted imposition by a third party upon Purchaser of
any liability of Seller which Purchaser has not
specifically agreed to assume pursuant to Sections 3.1
and 3.2 of this Agreement;
(iii) any liability (except for any Assumed Liabilities
described in Section 3.1 and 3.2) or other obligation
incurred by or imposed upon Purchaser resulting from
the failure of the parties to comply with the
provisions of any law relating to bulk transfers which
may be applicable to the transaction herein
- 39 -
contemplated;
(iv) any and all costs and expenses (including reasonable
legal and accounting fees) related to any of the
foregoing, subject to the provisions of Section 12.5.
Except as otherwise provided in this Agreement, nothing in
this Section 12.3 shall be construed to limit the amount to
which, or the time by which, by reason of offset or
otherwise, the Purchaser may recover from Seller or the
Shareholders pursuant to this Agreement resulting from
Seller's or the Shareholders' breach or violation of any
representation, warranty, covenant or agreement contained
herein.
Any amounts to which Purchaser, its successors or assigns,
is entitled to indemnification pursuant to the provisions of
this Section, subject to the provisions of Section 12.5,
shall first be offset against the amount payable to Seller
under the promissory note. Provided, however, the offset in
any one year may not exceed the aggregate amount of
principal and interest due on said promissory note for said
year. Prior to any setoff, Purchaser shall send written
notice to the holder of the Promissory Note (the _Holder_)
stating with reasonable specificity the basis for
Purchaser's right to such indemnification payment. If
within fifteen (15) days after receipt of such notice of
setoff, the Holder contests in writing sent to Purchaser,
Purchaser's claim of indemnification under this Section 12,
then the amount which Purchaser could otherwise have paid to
the holder but for the exercise of such right of setoff
shall be paid into an interest bearing escrow account
maintained by a bank selected by Purchaser pursuant to a
written escrow agreement signed by the parties to this
Agreement or a bank account under the joint control of the
parties to this Agreement, to be held in such account until
Purchaser and the Holder have reached Agreement as to the
amount, if any, of such indemnification payment and setoff,
or until there has been a judicial resolution of such
matter, at which time the amount held in such segregated
account, together with any interest accrued thereon, shall
be released to the prevailing party, as appropriate and/or
instructed. Purchaser and the Holder agree that they will
use their best efforts to resolve any such dispute within
thirty (30) days of receipt of notice by Purchaser of the
Holder's objections to the setoff.
- 40 -
12.4
Indemnification by Purchaser.
Provided Shareholders and Seller make a written claim for
indemnification against Purchaser within any applicable
survival period specified in Section 12.1, Purchaser shall
indemnify Seller and Shareholders against and hold it
harmless from any and all loss, damage, liability or
deficiency resulting from or arising out of: (i) any Assumed
Liabilities; (ii) any liability of Purchaser arising out of
Purchaser's operations subsequent to the Closing (except to
the extent such liability is the result of a breach of a
covenant or warranty of Seller hereunder); (iii) any
inaccuracy in or breach of any representation, warranty,
covenant or obligation made or incurred by Purchaser herein
or in any other agreement, instrument, or document delivered
by or on behalf of Purchaser pursuant to the provisions of
this Agreement; and (iv) any and all related costs and
expenses (including reasonable legal and accounting fees),
subject to the provisions of 12.5. Except as otherwise
provided herein, nothing in this Section 12.4 shall be
construed to limit the amount to which, or the time by
which, by reason of offset or otherwise, that Seller may
recover from Purchaser pursuant to this Agreement resulting
from its breach or violation of any representation,
warranty, covenant or agreement contained herein.
- 41 -
12.5
Notification of and Participation in Claims.
(a) No claim for indemnification shall arise until notice
thereof is given to the party from whom indemnity is
sought. Such notice shall be sent within ten (10) days
after the party to be indemnified has received
notification of such claim, but failure to notify the
indemnifying party shall in no event prejudice the
right of the party to be indemnified under this
Agreement, unless the indemnifying party shall be
prejudiced by such failure and then only to the extent
of such prejudice. In the event that any legal
proceeding shall be instituted or any claim or demand
is asserted by any third party in respect of which
Seller and Shareholders on the one hand, or Purchaser
on the other hand, may have an obligation to indemnify
the other, the party asserting such right to indemnity
(the "Party to be Indemnified") shall give or cause to
be given to the party from whom indemnity is sought
(the "Indemnifying Party") written notice thereof. The
Indemnifying Party may elect, within thirty (30) days
after receipt of such notice, or five (5) days before
the return date required by any citation, claim or
other statute, whichever occurs earlier, to contest or
defend against such claim at the Indemnifying Party's
expense, and shall give written notice to the Party to
be Indemnified of the commencement of such defense with
reasonable promptness after giving of the written
notice of the claim by the Party to be Indemnified.
The Party to be Indemnified shall be entitled to
participate with the Indemnifying Party in such event
(at the cost and expense of the Party to be
Indemnified) but shall not be entitled in any way to
release, waive, settle, modify, or pay such claim
without the consent of the Indemnifying Party if the
Indemnifying Party has assumed such defense. In the
event that the Party to be Indemnified determines to
settle any such claim without such prior consent of the
Indemnifying Party, the Indemnifying Party shall have
no further indemnification obligations under this
Section 12 with respect to such claim. In the event
that the Indemnifying Party does not elect to contest,
defend, settle or pay the claim as provided above, the
Party to be Indemnified shall have the exclusive right
to prosecute, defend, compromise, settle or pay the
claim in its sole discretion and pursue its rights
under this Agreement. In the event the Indemnifying
Party shall assume the defense, the Indemnifying Party
and the Party to be Indemnified shall cooperate in the
defense of such action and the records of each shall be
available to the other with respect to such defense.
12.6
Limitation on Liability
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Notwithstanding anything expressed or implied to the
contrary in this Agreement:
Each Shareholder and Seller shall have no liability under
Section 12.3 until the aggregate amount of all claims under
Section 12.3 exceed a deductible of Ten Thousand Dollars
($10,000); provided, however, that if such claims exceed Ten
Thousand Dollars ($10,000), then the indemnification
provided for in Section 12.3 shall apply to claims in excess
of the Ten Thousand Dollars ($10,000) deductible provided
for above.
13.
EXPRESS CONDITIONS
13.1 Notwithstanding anything herein to the contrary, Purchaser's
obligations hereunder are subject to the following
conditions:
(a) Purchaser shall have obtained from its primary lender,
Star Bank, N.A., consent to the transaction.
(b) Purchaser shall have acquired all necessary permits
from federal, state and local agencies that are
necessary to conduct business in the States of Virginia
and West Virginia.
(c) Approval of the Board of Directors of Purchaser.
(d) Purchaser has completed its due diligence investigation
of the books and records and business prospects of
Seller to its satisfaction.
The contingencies set forth in this Section shall have all
been met, or rejected in writing, by Purchaser and Seller,
where applicable, no later than March 6, 1998.
14.
THE CLOSING
14.1 Date, Time and Place of Closing
.
Consummation of the transactions contemplated hereby (the
"Closing") shall take place on March 6, 1998 (the "Closing
Date"), at 10:00 a.m. EST at the offices of Xxxxxxxxx &
Dreidame, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxx
00000, or on such other Closing Date, or at such other time
and/or place as the parties may mutually agree upon.
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14.2
Conditions Precedent to Purchaser's Obligations.
The obligation of Purchaser to perform in accordance with
this Agreement and to consummate the transactions herein
contemplated is subject to the satisfaction of the following
conditions at or before the Closing:
(a) Seller shall have complied with and performed all of
the representations, warranties, agreements and
covenants hereunder required to be performed by it
prior to or at the Closing;
(b) There shall be no pending or threatened legal action
which, if successful, would prohibit consummation or
require substantial rescission of the transactions
contemplated by this Agreement;
(c) The business, aggregate properties and operations of
Seller shall not have been materially adversely
affected as a result of any fire, accident or other
casualty or any labor disturbance or act of God or the
public enemy, and there shall otherwise have been no
material adverse change to the business, aggregate
properties, or operations of Seller since December 31,
1997;
(d) Seller shall have delivered to Purchaser, at or before
the Closing, the following documents, all of which
shall be in form and substance reasonably acceptable to
the Purchaser and its counsel:
(i) The instruments of transfer required by Sections
2.5 and 2.6;
(ii) Releases (or copies thereof) of all liens, claims,
charges, encumbrances, security interests and
restrictions on Purchased Assets necessary to
provide Purchaser with good, marketable and
indefeasible title to each of the Purchased Assets
at the Closing;
(iii) Certified copies of the corporate actions taken by
the Board of Directors and Shareholders of Seller
authorizing the execution, delivery and
performance of this Agreement;
(iv) Certificates of Existence for Seller from the
Secretary of State of Virginia dated no earlier
than fifteen (15) days prior to Closing;
(v) Opinion letter of Xxxxxxxx, Xxxx and Xxxxxxxxx,
Richmond, VA for Seller containing the opinion set
forth in Exhibit _N_;
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(vi) Seller shall have entered into the Subordination
Agreement in the form attached hereto as Exhibit
"I";
(vii) Seller and the Shareholders shall have entered
into the non-competition agreements set forth in
Exhibits _L_, _L-1" and _L-2";
(viii) Shareholders shall have entered into the
Employment Agreements set forth in Exhibits _K_
and _K-1";
(ix) The express conditions set forth in Section 13
have been satisfied or waived.
(e) Seller will execute the Consent for Use of Similar Name
as set forth in Section 9.19.
(f) CCS&W, a Virginia general partnership, shall enter into
a lease agreement with Purchaser for the Richmond,
Virginia location as set forth in Exhibit _M_.
(g) Purchaser shall have received assurances in form and
substance satisfactory to it (that may include
insurance certificates) that Seller has made all
provisions necessary under applicable law, with regard
to an employer's obligation to provide for a
continuation of health insurance and other benefits of
any employee, who is not employed by Seller following
termination of employment.
(h) On or before the Closing Date, if reasonably
obtainable, or promptly thereafter, Seller shall
provide to Purchaser copies of certificates from the
appropriate taxing authority stating that no Taxes are
due to any state or other taxing authority with respect
to the Business of Seller.
14.3 Conditions Precedent to Seller's Obligations
.
The obligation of Seller to perform in accordance with this
Agreement and to consummate the transactions herein
contemplated is subject to the satisfaction of the following
conditions at or before the Closing:
(a) Performance by Purchaser of all of the representations,
warranties, agreements and covenants to be performed by
it at or before the Closing;
(b) There shall be no pending or threatened legal action
which, if successful, would prohibit consummation or
require substantial rescission of the transactions
- 45 -
contemplated by this Agreement;
(c) Purchaser shall deliver to Seller at or before the
Closing the following documents, all of which shall be
in form and substance acceptable to Seller and its
counsel:
(i) A certified or bank cashier's check or wire
transfer for the aggregate amount to be paid to
Seller at the Closing pursuant to Section 4.2(a)
hereof;
(ii) Assumption of Liabilities Agreement under which
Purchaser assumes the Liabilities set forth in
Sections 3.1 and 3.2;
(iii) A subordinated promissory note as set forth in
Section 4.2(c);
(iv) Certified copies of the corporate actions taken by
Purchaser authorizing the execution, delivery and
performance of this Agreement;
(v) Certificate of Good Standing for Purchaser from
the Secretary of State of Delaware dated no
earlier than fifteen (15) days prior to the date
of Closing;
(vi) Opinion letter of Xxxxxxxxx & Dreidame Co.,
L.P.A., counsel for Purchaser, addressed to Seller
and dated the Closing Date, containing the
opinions set forth on Exhibit "O";
(vii) All of the express conditions set forth in Section
14 have been satisfied or waived.
(d) Purchaser shall have entered into the Employment
Agreements set forth in Exhibit _K_ and _K-1".
15.
GENERAL PROVISIONS
15.1
Publicity.
All public announcements relating to this Agreement or the
transactions contemplated hereby will be made by Purchaser
with the consent of Seller, which consent will not be
unreasonably withheld, except for any disclosure which may
be required because of Purchaser's being a publicly-traded
corporation on the over-the-counter market.
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15.2
Expenses.
Purchaser will bear and pay all of its expenses incident to
the transactions contemplated by this Agreement which are
incurred by Purchaser or its representatives and Seller
shall bear and pay all of the expenses incident to the
transactions contemplated by this Agreement which are
incurred by Seller or their respective representatives.
15.3 Notices
.
All notices and other communications required by this
Agreement shall be in writing and shall be deemed given if
delivered by hand or mailed by registered mail or certified
mail, return receipt requested, to the appropriate party at
the following address (or at such other address for a party
as shall be specified by notice pursuant hereto):
(a) If to Purchaser, to:
Pomeroy Computer Resources, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxx X. Xxxxx III, Esq.
Xxxxxxxxx & Dreidame
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
(b) If to Seller, to:
Commercial Business Systems, Inc.
00000 Xxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
With a copy to:
Xxxxxxxx, Xxxx & Xxxxxxxxx
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, III
(c) If to Shareholders, to:
Xxxxxx X. Xxxxxxx
00000 Xxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
15.4
Binding Effect.
Except as may be otherwise provided herein, this Agreement
and all the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and
assigns.
- 47 -
15.5
Headings.
The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in
the construction or interpretation of this Agreement.
15.6
Exhibits.
The Exhibits referred to in this Agreement constitute an
integral part of this Agreement as if fully rewritten
herein.
15.7 Counterparts
.
This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which
constitute together one and the same document.
15.8 Governing Law
.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Virginia, without
regard to its laws regarding conflict of laws.
15.9
Severability.
If any provision of this Agreement shall be held
unenforceable, invalid, or void to any extent for any
reason, such provision shall remain in force and effect to
the maximum extent allowable, if any, and the enforceability
or validity of the remaining provisions of this Agreement
shall not be affected thereby.
- 48 -
15.10
Waivers; Remedies Exclusive.
No waiver of any right or option hereunder by any party
shall operate as a waiver of any other right or option, or
the same right or option with respect to any subsequent
occasion for its exercise, or of any right to damages. No
waiver by any party of any breach of this Agreement or of
any representation or warranty contained herein shall be
held to constitute a waiver of any other breach or a
continuation of the same breach. No waiver of any of the
provisions of this Agreement shall be valid and enforceable
unless such waiver is in writing and signed by the party
granting the same. Except as otherwise provided in the note
issued pursuant to Section 4.2(c), the Employment Agreements
and the Covenant Not to Compete Agreements, the
indemnification provided for by Section 12 herein shall
constitute the exclusive remedy of any party with respect to
(i) the matters for which such indemnification is provided
and (ii) any other matters arising out of, relating to or
connected with this Agreement or the transactions
contemplated hereby, and whether any claims or causes of
action asserted with respect to any such matters are brought
in contract, tort or other legal theory whatsoever.
15.11
Assignments.
Except as otherwise provided in this Agreement, no party
shall assign its rights or obligations hereunder prior to
Closing without the prior written consent of the other
party.
15.12 Entire Agreement
.
This Agreement and the agreements, instruments and other
documents to be delivered hereunder constitute the entire
understanding and agreement concerning the subject matter
hereof. All negotiations between the parties hereto are
merged into this Agreement, and there are no
representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation thereto between
the parties other than those incorporated herein and to be
delivered hereunder. Except as otherwise expressly
contemplated by this Agreement, nothing expressed or implied
in this Agreement is intended or shall be construed so as to
grant or confer on any person, firm or corporation other
than the parties hereto any rights or privilege hereunder.
No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by the parties
hereto.
- 49 -
15.13
Business Records.
Seller and Shareholders shall be permitted to retain copies
of such books and records relating to the Purchased Assets
and relating to the accounting and tax matters of the
Business and to have access to all original copies of
records so delivered to Purchaser at reasonable times, for
any reasonable business purpose, for a period of six (6)
years after the Closing.
The parties hereto have executed this Agreement as of the
date first above written.
WITNESSES: COMMERCIAL BUSINESS SYSTEMS,
INC.
___________________________
___________________________
By:________________________________
___________________________ XXXXXXX COMPUTER RESOURCES, INC.
___________________________
By:________________________________
___________________________
___________________________
__________________________________
XXXXXX X. XXXXXXX
___________________________
___________________________
__________________________________
XXXXXX XXXXXXX
- 50 -
EXHIBIT _G_
EXCLUDED ASSETS
1. Any income tax refunds
2. The Purchase Price or any part thereof received by Seller
for the sale of the Purchased Assets
3. Any tangible or intangible assets related to the depot
repair and refurbishing business of Seller
4. Seller's minute book and stock records
EXHIBIT J
ALLOCATION OF PURCHASE PRICE
Asset
Purchase Price Allocation
Cash or Cash Equivalent Book Value at Time of Sale
Accounts Receivable Book Value at Time of Sale
Inventory Book Value at Time of Sale
Prepaid Expenses Book Value at Time of Sale
Equipment, Furniture & Fixtures Book Value at Time of Sale
Leasehold Improvements Book Value at Time of Sale
Other Assets Book Value at Time of Sale
Goodwill Book Value at Time of Sale
EXHIBIT _1"
LIABILITIES BEING ASSUMED
(i) Accounts payable incurred in the ordinary course of the
Business, which accounts payable totaled $196,919.07 on
January 31, 1998;
(ii) A sales tax payable in the amount of $9,272.26 as
of January 31, 1998; and
(iii) Long term notes payable to Jefferson Bank in the
approximate amount of $35,103.00 relating to various
vehicle loans as of January 31, 1998; and
(iv) Accrued vacation pay which totalled approximately
$20,000.00 on January 31, 1998.
The Assumed Liabilities to be assumed as set forth
in Section 3.1(i) through (iv) as may be incurred,
increased or decreased since January 31, 1998 to
the Pro Forma Balance Sheet for operations in the
ordinary course of business or any other
transaction permitted by this Agreement, and
subject to the satisfaction of the Net Asset
Amount requirement set forth in Section 4.1(d) as
of the Closing Date.
EXHIBIT A
Permitted Increase - $50,000,000
$40,000,000.00 - Senior Debt
+ $50,000,000.00
- Permitted Increase
$90,000,000.00 - Total Subordinated Debt
