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AGREEMENT OF SALE
This Agreement is entered into this 27th day of March, 1997 by and between
Applied Cellular Technology, Inc. ("ACT"), a Missouri corporation, acting by
and through its subsidiary, Universal Commodities Corporation, a New Jersey
corporation ("Buyer"), Xxxxxxx X. Xxxxxxxx and Xxxx X. Xxxxx (hereinafter
referred to as "Sellers") and Norcom Resources, Incorporated, a Minnesota
corporation ("Acquiree").
WHEREAS, Xxxxxxx X. Xxxxxxxx owns nine hundred (900) shares, $.01 par value
and Xxxx X. Xxxxx owns one hundred (100) shares, $.01 par value (the
"Acquiree Shares"), of the issued and outstanding common stock of Acquiree
(representing one hundred percent (100%) of the currently issued and
outstanding common stock of Acquiree);
WHEREAS, Sellers desire to sell and Buyer desires to acquire eighty percent
(80%) of the Acquiree's shares (the "Sales Shares"), such that said
acquisition qualifies as a tax-free reorganization under Section 368 of the
Internal Revenue Code. Buyer shall receive seven hundred twenty (720) shares
from Xxxxxxx X. Xxxxxxxx and eighty (80) shares from Xxxx X. Xxxxx.
NOW, THEREFORE, for the mutual consideration set out herein, the parties
agree as follows:
1. PURCHASE AND SALE OF ACQUIREE SHARES
1.1 Sellers shall sell to Buyer and Buyer shall purchase from Sellers
the Sale Shares at a closing of such sale (the "Closing") to be held at the
place and on the date hereinafter provided (the "Closing Date").
1.2 The purchase price (the "Price") for the Sale Shares shall be the
amount of shares of restricted common stock of ACT, Buyer's parent
corporation, with demand registration rights, such shares having a value of
one million six hundred thousand dollars ($1,600,000.00) (for eighty percent
(80%) of the Acquiree's shares) based upon a value of ACT shares (the
"Valuation Price") which is equal to the lesser of: (i) four and 75/100ths
dollars ($4.75) per share; or (ii) the market value of ACT shares as
reflected on the NASDAQ bid price published in "The Wall Street Journal" for
the day which is two (2) business days prior to the Closing Date, whichever
is lower.
a. At the Closing, Sellers shall receive two hundred
eighty-four thousand four hundred forty-four (284,444) shares of restricted
common stock of ACT with demand registration rights which has a value of one
million two hundred eighty thousand dollars ($1,280,000.00) as determined
above. The Sellers shall receive the above shares in the proportion of their
current shareholder's portions. Xxxxxxx X. Xxxxxxxx shall receive two hundred
fifty-six thousand (256,000) shares, ninety percent (90%). Xxxx X. Xxxxx
shall receive twenty-eight thousand four hundred forty-four (28,444) shares,
ten percent (10%).
b. Upon the first anniversary of the date of this Agreement,
Sellers shall receive such amount of shares of restricted common stock with
demand registration rights of ACT (which are subject to the registration
rights pursuant to Section 10 hereof) which have a value of three hundred
twenty thousand dollars ($320,000.00) as determined above, plus five percent
(5%) interest on such amount accruing from the Closing Date until the first
anniversary of this Agreement, only if Acquiree's financial statements
reflect that Acquiree has earnings before income tax ("EBIT") equal to at
least four hundred thousand dollars ($400,000.00) for such period. If, upon
such first anniversary of the date of this Agreement, EBIT of Acquiree is
less than four hundred thousand dollars ($400,000.00), Buyer shall not be
obligated to pay Sellers pursuant to this Section 1.2(b). The compilation of
the financial statements referenced herein shall be consistent with
Acquiree's current practices, if such practices are in accordance with
standard
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accounting practices. Any earnings attributable to entities obtained through
acquisitions made by Acquiree or by Buyer on behalf of or for the benefit of
Acquiree between the date of this Agreement and the first anniversary of such
date shall be used to calculate the EBIT of Acquiree for purposes of this
Section 1.2(b). Intercompany charges or management fees (except reasonable
charges for working capital infusions) shall not be factored into the
calculation of EBIT of Acquiree for purposes of this Section 1.2(b). The
distribution of the shares shall be apportioned between the Sellers to reflect
their ownership percentages.
c. Buyer, in conjunction with ACT, agrees that it will prepare
and file with the Securities and Exchange Commission (the "Commission") a
registration statement with respect to the three hundred thousand seven
hundred fifty-three (300,753) shares of ACT's common stock issuable to
Sellers pursuant to Sections 1.2(a), 1.4 and 1.5 hereof (the "Registration
Statement"), such Registration Statement shall be filed within thirty (30)
days of the Closing Date. Buyer shall use its reasonable efforts to cause
the Registration Statement to become effective within nine (9) months after
the date of this Agreement. Buyer, in conjunction with ACT, shall prepare
and file with the Commission such amendments and supplements to the
Registration Statement, including post-effective amendments and the
prospectus used in connection therewith that may be necessary to keep such
Registration Statement effective for a period of not less than nine (9)
months and to comply with the provisions of the Securities Act of 1933, as
amended, and the regulations promulgated pursuant thereto (the "Act").
d. Buyer and ACT shall use their reasonable efforts to cause
all securities registered pursuant to the Registration Statement and Section
10 hereof to be listed on the NASDAQ National Market System.
e. In the event of the issuance of any stop order suspending
the effectiveness of the Registration Statement, or any order suspending or
preventing the use of any related prospectus or suspending the qualification
of any common stock included in the Registration Statement, the Buyer will
use its reasonable best efforts to require ACT to promptly obtain the
withdrawal of such order.
f. Buyer shall bear all costs, fees and expenses involved in
the preparation and filing of Registration Statement by ACT, including,
without limitation, accounting and auditing fees and expenses, expenses in
connection with the state qualifications specified above, filing fees, legal
counsel fees and expenses and printing expenses. Sellers, however, shall pay
all applicable transfer taxes and brokerage commissions as a result of any
sale by Sellers.
g. In the event that any of the shares of common stock of ACT
delivered hereunder are issued by means of the Registration Statement, Buyer
agrees to indemnify and hold harmless Sellers and their heirs, executors,
representatives and assigns (an "Indemnified Person") from and against any
and all claims, demands, actions, causes of action, losses, costs, damages,
liabilities and expenses, including, without limitation, reasonable legal
fees (hereinafter referred to in the singular as a "claim" and in the plural
as "claims") based upon, arising out of or resulting from any untrue
statement of a material fact contained in the Registration Statement or any
failure to state therein a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except insofar as such claim is based upon, arises out
of or results from information furnished to Buyer in writing by Sellers for
use in connection with the Registration Statement. Also, in that connection,
Sellers agree to indemnify and hold harmless Buyer and ACT, jointly and
severally, each of their officers and directors (Buyer and ACT, their
officers and directors and any such other persons being referred to
collectively as "Indemnified Person") from and against any and all claims
based upon, arising out of or resulting from any untrue statement of a
material fact contained in the Registration Statement or any failure to state
therein a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading to the extent that such
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claim is based upon, arises out of or results from information furnished to
Buyer in writing by Sellers for use in connection with the Registration
Statement. The indemnification set forth herein shall be in addition to any
liability which Buyer or Sellers, respectively, may otherwise have to the
Indemnified Person.
h. Within five (5) days after receiving written notice of any
claim in respect of which an Indemnified Person may seek indemnification
under subsection 1.2(g) above, such Indemnified Person shall submit notice
thereof to Buyer or Seller, as the case may be (sometimes referred to as an
"Indemnifying Person"). The omission of the Indemnified Person so to notify
the Indemnifying Person of any such claim shall not relieve the Indemnifying
Person from any liability it may have hereunder except to the extent that (i)
such liability was caused or increased by such omission, or (ii) the ability
of the Indemnifying Person to reduce such liability was adversely affected by
such omission. The Indemnified Person and the Indemnifying Person shall
cooperate with, and assist, one another in the defense of any claim and any
action, suit or proceeding arising in connection therewith; provided,
however, that the Indemnifying Person shall have the right to investigate and
defend any claim and the Indemnified Person shall have the right to employ
separate counsel and to participate in the defense of any claim, but the fees
and expenses of such counsel shall not be at the expense of the Indemnifying
Person. No settlement of any claim for indemnification under this Section
shall be made without the consent of the Indemnifying Person.
i. In the event that ACT is unable to complete the
Registration Statement and list the stock on NASDAQ within ninety (90) days
or any mutually negotiated extension thereof, Sellers may, at their sole
option, require Buyer to immediately convey back to Sellers their respective
shares in Norcom Resources, Incorporated in exchange for their shares in ACT.
j. Restrictions on Buyer. From and after the date hereof, and
continuing through the period of time necessary to complete the Registration
Statement for the shares conveyed in paragraphs 1.2(a) and 1.2(b), Buyer
shall comply with the following covenants and restrictions:
i. Buyer shall not sell, transfer, mortgage, pledge or
otherwise dispose of the Acquiree stock or otherwise subject the Acquiree
stock to any lien or other encumbrance.
ii. Buyer shall not cause or permit Acquiree to sell,
transfer, mortgage, pledge or otherwise dispose of any assets of Acquiree or
otherwise subject any of Acquiree's assets to any lien or other encumbrance
other than in the ordinary course of business.
iii. Buyer shall cause or permit Acquiree to operate its
business in the ordinary course in accordance with past business practices
and in accordance with all applicable laws, rules and regulations.
iv. Buyer shall not cause or permit Acquiree to issue any
additional shares of its capital stock.
v. Buyer shall not cause or permit Acquiree to incur any
indebtedness other than in the ordinary course of business or as reasonably
necessary.
vi. Buyer shall not cause or permit Acquiree to issue any
dividends, profit distributions, salary bonuses or other compensation to
Buyer or any principal, officer, director, employee or agent of Buyer.
vii. Buyer shall not cause or permit Acquiree to expend,
utilize or dissipate any of its cash assets other than in the ordinary course
of business.
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viii. Buyer shall not cause or permit Acquiree to terminate
the employment of any facility manager other than for good cause.
ix. Buyer shall not terminate or replace any member of
the Board of Directors other than for good cause.
k. The above-referenced Purchase Price shall include all
furnishings and equipment currently located at Acquiree except as
specifically excluded.
1.3 At the Closing Date, Sellers will deliver a certificate
representing the Sale Shares duly endorsed so as to make Buyer the sole
holder thereof, free and clear of all claims and encumbrances. The Sale
Shares are not registered under the Securities Act of 1933 as amended (the
"Act"). The Sale Shares will be subject to a usual and appropriate stop
transfer order on the books and records of Acquiree's transfer agent
pertaining to securities not registered under the Act. The certificate for
the Sale Shares delivered shall bear on its face the following restrictive
legend:
"No sale, offer to sell or transfer of the shares represented by this
certificate shall be made unless a registration statement under the
Securities Act of 1993, as amended, with respect to such shares is then in
effect or an exemption from the registration requirements of such Act is
then, in fact, applicable to such shares".
Concurrent with the above, Acquiree shall issue new certificates as
follows: eight hundred (800) shares in the name of Buyer; one hundred eighty
(180) shares in the name of Xxxxxxx X. Xxxxxxxx; and twenty (20) shares in
the name of Xxxx X. Xxxxx.
1.4 Buyer acknowledges the existence of a promissory note from
Acquiree to Xxxxxxx X. Xxxxxxxx in the amount of one hundred seventy thousand
dollars ($170,000.00). The parties agree that this amount shall be reduced
by the amount assigned by Acquiree to Xxxxxxx X. Xxxxxxxx in accordance with
paragraph 4.20 of this Agreement, or one hundred twenty-seven thousand eight
hundred sixty-eight and seventy one-hundredths dollars ($127,868.70). The
net amount, in shares, due Xxxxxxx X. Xxxxxxxx, as a result of the set-off of
the amount due Xxxxxxxx hereunder and the amount excluded under paragraph
4.2, is equal to forty-two thousand one hundred thirty-four and thirty
one-hundredths dollars ($42,134.30) or nine thousand three hundred
sixty-three (9,363) shares. The ACT shares transferred to Xxxxxxx X. Xxxxxxxx
as described in this Section 1.4 are in addition to the Purchase Price for the
Sale Shares and shall be registered by Buyer and ACT as a part of the
registration of the Sale Shares described in Section 1.2c.
1.5 In addition to the above, Sellers shall receive, as additional
compensation at Closing, the amount of shares of restricted common stock of
ACT, with demand registration rights, having a value of thirty-one thousand
two hundred fifty-nine dollars ($31,259.00) determined in accordance with
paragraph 1.2. Such shares shall be apportioned equally between the Sellers,
each Seller receiving three thousand four hundred seventy-three (3,473)
shares.
1.6 The parties further agree that Xxxxxxx X. Xxxxxxxx shall
personally assume liability for a payable in the amount of seventy thousand
dollars ($70,000.00) to Maintech.
2. PUT OPTION
a. The Buyer hereby grants to Sellers a put option (the "Put") for
the consideration of ten dollars ($10.00) to require the Buyer to purchase
the remaining issued and outstanding Acquiree Shares (representing twenty
percent (20%) of the currently outstanding common shares). The Sellers may
Put back to Buyer, at any time after the fifth anniversary of this Agreement,
by providing notice to Buyer of such exercise of the Put. Each Seller may
exercise their Put independently from the other Seller. The Buyer shall hold
an anti-dilutive position. Anti-dilutive
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shall mean in any future capitalization by the holder of eighty percent (80%)
of the outstanding shares, the holder of the remaining twenty percent (20%)
shall not suffer dilution in any form.
Within forty-five (45) days after Seller exercises the Put, Buyer
shall purchase the remaining twenty percent (20%) of the Acquired Shares for
a purchase price equal to four (4) times twenty percent (20%) of the average
EBIT of the Acquiree based upon the blended average. The EBIT in the year of
the Put and the EBIT in prior year combined shall equal the blended average
(the "Put Price"). Notwithstanding the preceding sentence to the contrary,
minimum value of the Put shall be four hundred thousand dollars
($400,000.00). The Put Price shall be payable to Sellers, at the election of
Buyer, in its sole discretion, in cash and/or shares of restricted common
stock of ACT which shall be subject to the registration rights set forth in
Section 10 hereof. Buyer shall use its best efforts to register such shares
within a reasonable period of time after the exercise of the Put.
In the event that an individual Seller decides to exercise their
Put independent of the other Seller, the value of such Put shall be equal to
the prorated amount of the Put Value apportioned in accordance with that
Seller's ownership position at the time of the exercise.
b. In addition to the above, Buyer agrees that Xxxxxxx X. Xxxxxxxx
may retain a right of first refusal with regard to the Put Option currently
held by Xxxx X. Xxxxx. Xxxxxxx X. Xxxxxxxx may exercise such right at any
time within thirty (30) days of the receipt of notice by Xxxxxxx X. Xxxxxxxx
from Xxxx X. Xxxxx. The terms and conditions, as well as purchase price,
shall be negotiated by and between Xxxxxxx X. Xxxxxxxx and Xxxx X. Xxxxx.
c. After the Closing Date, Buyer shall operate Acquiree as a
wholly-owned subsidiary and any earnings attributable to entities obtained
through acquisitions made by Acquiree or by Buyer on behalf of or for the
benefit of Acquiree after the Closing Date shall be used to calculate the EBIT
of Acquiree for purposes of calculating the Put Price. Intercompany charges
or management fees (except reasonable charges for working capital infusions)
shall not be factored into the calculation of EBIT of Acquiree for purposes
of calculating the Put Price.
3. LOAN GUARANTEES
Xxxxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxxxx have personally guaranteed
certain loans the terms of which have been previously disclosed to Buyer (see
Disclosure Schedule). Buyer hereby agrees to use reasonable efforts to have
said guarantees released. If the appropriate lending institutions do not
agree to release any or all of the personal guarantees, Buyer hereby agrees
to indemnify Xxxxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxxxx in the event of a
default on any of the obligations created by the loans.
3.1 Buyer agrees to indemnify and hold harmless Xxxxxxx X. Xxxxxxxx
and Xxxxxxx X. Xxxxxxxx, their heirs, executors, representatives and assigns
(an "Indemnified Person") from and against any and all claims, demands,
actions, causes of action, losses, costs, damages, liabilities and expenses,
including, without limitation, reasonable legal fees (hereinafter referred to
in the singular as a "claim" and in the plural as "claims") based upon,
arising out of or resulting from any default of the certain loans. The
indemnification set forth herein shall be in addition to any liability which
Buyer may otherwise have to the Indemnified Person.
3.2 Within five (5) days after receiving written notice of any claim
in respect of which an Indemnified Person may seek indemnification under
Subsection 3.1 above, such Indemnified Person shall submit notice thereof to
Buyer or Sellers, as the case may be (sometimes referred to as an
"Indemnifying Person"). The failure of the Indemnified Person so to notify
the Indemnifying Person of any such claim shall not relieve the Indemnifying
Person from any liability it may have hereunder except to the extent that (i)
such liability was caused or increased by such omission, or
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(ii) the ability of the Indemnifying Person to reduce such liability was
adversely affected by such omission. The Indemnified Person and the
Indemnifying Person shall cooperate with, and assist, one another in the
defense of any claim and any action, suit or proceeding arising in connection
therewith; provided, however, that the Indemnifying Person shall have the
right to investigate and defend any claim as the Indemnified Person shall have
the right to employ separate counsel and to participate in the defense of any
claim, but the fees and expenses of such counsel shall not be at the expense
of the Indemnifying Person. No settlement of any claim for indemnification
under this Section 3 shall be made without the consent of the Indemnifying
Person.
4. REPRESENTATIONS OF SELLERS AND ACQUIREE
Sellers hereby represent and warrant, to the extent of the facts known
to Sellers and Acquiree, that, effective this date and the Closing Date, the
representations listed below are true and correct.
4.1 Sellers are the sole owners of one thousand (1,000) of the common
shares issued and outstanding Shares of Acquiree; such Acquiree Shares are
free from claims, liens or other encumbrances; and Sellers have the
unqualified right to transfer and dispose of such shares.
4.2 The Sale Shares constitute validly issued shares of Acquiree
fully-paid and nonassessable.
4.3 Acquiree has previously furnished unaudited financial statements
for the year ending December 31, 1996 (see Disclosure Schedule). These
financial statements are substantially correct and complete and have been
prepared in conformity with generally accepted accounting principles applied
on a consistent basis. The financial statements present fairly the financial
condition of Acquiree of the respective dates of said balance sheets and the
results of operations for the respective periods indicated in said statements
of income and retained earnings and, in the case of each such interim
statement, is subject to year-end adjustments consistent with past practice.
Notwithstanding the foregoing, Sellers make no representation or warranty
with respect to the future performance (financial or otherwise) of Acquiree
following the Closing Date.
4.4 To the best of Sellers' knowledge, there are no actions, suits,
proceedings or investigations (whether or not purportedly on behalf of
Acquiree) pending or threatened against or affecting Acquiree, at law, or in
equity or admiralty, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau agency or instrumentality,
domestic or foreign, which involve the likelihood of any adverse judgment of
liability, not fully covered by insurance, in excess of $5,000.00 in any one
case or $10,000.00 in the aggregate, or which may result in any material
adverse change aside from the monetary adverse judgment or liability) in the
business, operations, properties or assets or in the condition, financial or
otherwise, of Acquiree. To the best of Sellers' knowledge, Acquiree is not
in default with respect to any order, writ, injunction or decree of any court
or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
4.5 Acquiree has, to its best knowledge, complied in all material
respects with all laws, regulations and judicial or administrative tribunal
orders applicable to its business of which it is aware except as previously
disclosed to Buyer (see Disclosure Schedule).
4.6 All federal, state and local tax returns required to be filed by
Acquiree have been duly filed. Federal income tax returns of Acquiree have
been submitted to the Internal Revenue Service ("IRS") for all past fiscal
years through the calendar year ended in 1995. All deficiencies by any
taxing authority have either been paid or settled or are included in the
amounts for accrued taxes shown on the respective balance sheet.
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4.7 Acquiree and Sellers agree that any and all tax deficiencies
disclosed on the balance sheet will be paid or settled prior to Closing.
4.8 Since the date of the balance sheet, there has not occurred:
a. any material and adverse change in the financial condition
or operations of Acquiree;
b. any damage, destruction or loss to or of any of the
material assets or properties owned or leased by Acquiree;
c. the creation or attachment of any lien against any of the
currently issued and distributed common stock of Acquiree;
d. any waiver, release, discharge, transfer or cancellation by
Acquiree of any rights or claims of material value;
e. any issuance by Acquiree of any securities (must include
all debt or equity securities) or any merger or consolidation of Acquiree
with any other person or any acquisition by Acquiree of the business of any
other person;
f. any incurrence, assumption or guarantee by Acquiree of any
indebtedness or liability other than in the ordinary course of business;
g. any declaration, setting aside or payment by Acquiree of
any dividends on, or any other distribution with respect to, any capital
stock of Acquiree or any repurchase, redemption or other acquisition of any
capital stock of Acquiree;
h. (i) any payment of any bonus, profit sharing, pension or
similar payment or arrangement or special compensation to any employee of
Acquiree, except in the ordinary course of the business of Acquiree, (ii) any
increase in the compensation payable or to become payable to any employee of
Acquiree; or
4.9 Except as set forth in the documents listed or referred to in
Exhibits hereto, the execution and carrying out of this Agreement will not
conflict with, or result in any breach of any of the terms, or create a
charge or encumbrance upon any of the properties or assets, or outstanding
stock of Acquiree pursuant to any corporate charter, bylaw, indenture,
mortgage or lease to which Acquiree or any of its stockholders is a party or
by which it is bound. The execution and carrying out of this Agreement will
not violate any provision of law.
4.10 To the best knowledge of the Sellers and Acquiree, none of the
written information and documents which have been or will be furnished by
Acquiree or by any representatives of Acquiree to Buyer or any of the
representatives of Buyer in connection with the transaction contemplated by
this Agreement contains or will contain, as the case may be, any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary in order to make the statements therein not misleading in light of
the circumstances in which made. To the knowledge of Acquiree, Acquiree has
disclosed to Buyer as the purchaser of the Sale Shares all material
information relating to Acquiree and its activities as currently conducted.
4.11 The representations and warranties made hereinabove in this
Section 4 will be correct in all material respects on and as of the Closing
Date with the same force and effect as though such representations and
warranties had been made on the Closing Date.
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4.12 The Acquiree is authorized to issue one thousand (1,000) shares
of common stock, $.01 par value, of which one thousand (1,000) shares are
issued and outstanding. Acquiree has only one class of capital stock and all
outstanding shares have been duly authorized, validly issued and are fully
paid and nonassessable with no personal liability attaching to the ownership
thereof. There are not outstanding convertible securities, warrants, options
or commitments of any nature which may cause authorized but unissued shares
to be issued to any person.
4.13 Organization of Acquiree. Acquiree is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Minnesota, with all requisite power and authority to own its properties
and to carry on its business as now conducted.
4.14 Officers and Directors. The present officers and directors of
Acquiree are as follows:
Officers: President Xxxxxxx X. Xxxxxxxx
Vice President Xxxx X. Xxxxx
Secretary Xxxx X. Xxxxx
Treasurer Xxxxxxx X. Xxxxxxxx
Directors: Xxxxxxx X. Xxxxxxxx
Xxxx X. Xxxxx
4.15 Other Agreements. Acquiree is a party to no material agreement
(written or verbal) except (1) as disclosed in this Agreement, (2) orders of
merchandise in normal quantities for use in Acquiree's business, and (3) as
set forth in the separate Disclosure Schedule.
4.16 Insurance Policies. Acquiree has delivered to Buyer true,
correct and complete copies of all policies of fire, liability and other
forms of insurance now in force with respect to Acquiree and its assets, as
listed in the separate Disclosure Schedule. All premiums have been paid and
all such policies are in effect and will remain in effect through the Closing
Date. Acquiree shall amend such policies to add Buyer as an additional
insured.
4.17 Relationship with Competitors. Seller does not own or have a
material beneficial interest and has not owned or had a beneficial interest
within the past three (3) years, directly or indirectly, in any corporation,
firm, association, partnership or proprietorship that (1) is similar to or a
competitor of Acquiree, (2) is a customer or supplier of Acquiree, or (3) has
any existing contractual relationship with Acquiree, as listed in the
separate Disclosure Schedule.
4.18 Employees. All employees of Acquiree and their current rate of
compensation are listed in the separate Disclosure Schedule. Acquiree is not
a party to any union contract, pension or profit-sharing plan or any other
agreement providing employee benefits except a health insurance plan.
4.19 Acquiree currently maintains a profit-sharing plan for the
benefit of certain key employees. Such plan shall be terminated prior to the
Closing Date and proceeds distributed to individual members.
4.20 Acquiree currently holds a receivable from Worldwide System
Marketing and Data Hardware. This receivable is secured by a promissory note
and mortgage from Xxxxxx X. Xxxxxx, individually. The note and mortgage have
a current balance owing of one hundred twenty-seven thousand eight hundred
sixty-eight and seventy one-hundredths dollars ($127,868.70). At the
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Closing, Acquiree will assign its entire interest in this receivable note and
mortgage to Xxxxxxx X. Xxxxxxxx.
5. REPRESENTATIONS BY BUYER AND ACT
Buyer warrants and represents, to the extent of the facts known to
Buyer, that, effective this date and the Closing Date, the representations
listed below are true and correct.
5.1 Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey.
5.2 The Board of Directors of Buyer have duly approved this
Agreement.
5.3 ACT's restricted common shares deliverable pursuant to this
Agreement shall be validly issued and outstanding, fully paid and
nonassessable.
5.4 The authorized capital stock of ACT consists of twenty million
(20,000,000) shares of Common Stock, $.001 par value, six million nine
hundred sixty thousand fifty-three (6,960,053) of which have been validly
issued and are outstanding and four million two hundred sixteen thousand four
hundred fifty (4,216,450) of those are freely tradable without restriction or
further registration under the Securities Act of 1933.
5.5 Annexed hereto as Exhibit 5.5 is the unaudited financial
statements of Buyer dated September 30, 1996. The financial statements in
Exhibit 5.5 are substantially correct and complete and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis. The financial statements present fairly the financial
condition of Buyer as of the respective dates of said balance sheets and the
results of operations for the respective periods indicated in said statements
of income and retained earnings and, in the case of each such interim
statement, is subject to year-end adjustments consistent with past practice.
5.6 To the best of Buyer's knowledge, there are no actions, suits,
proceedings or investigations (whether or not purportedly on behalf of Buyer)
pending or threatened against or affecting Buyer at law or in equity or
admiralty or before or by any federal, state, municipal or other governmental
department, commission, board, bureau agency or instrumentality, domestic or
foreign, which involve the likelihood of any adverse judgment of liability,
not fully covered by insurance, in excess of $5,000.00 in any one care of
$10,000.00 in the aggregate, or which may result in any material adverse
change aside from the monetary adverse judgment or liability, in the
business, operations, properties or assets or in the condition, financial or
otherwise, of Buyer. To the best of Buyer's knowledge, Buyer is not in
default with respect to any order, writ, injunction or decree of any court or
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
5.7 Buyer has complied in all material respects with all laws,
regulations and judicial or administrative tribunal orders applicable to its
business of which it is aware.
5.8 All federal, state and local tax returns required to be filed by
Buyer have been duly filed. Federal income tax returns of Buyer have been
submitted to the IRS for all past fiscal years through the fiscal year ended
in 1995. All deficiencies proposed by any taxing authority have either been
paid or settled or are included in the amounts for accrued taxes shown on the
respective balance.
5.9 Since the date of the balance sheet, there has not occurred:
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a. any material and adverse change in the financial condition
or operations of Buyer;
b. any damage, destruction or loss to or of any of the
material assets or properties owned or leased by Buyer;
c. the creation or attachment of any lien against any of the
currently issued and distributed common stock of Buyer;
d. any waiver, release, discharge, transfer or cancellation by
Buyer of any rights or claims of material value;
e. any issuance by Buyer of any securities or any merger or
consolidation of Buyer with any other person or any acquisition by Buyer of
the business of any other person;
f. any incurrence, assumption or guarantee by Buyer of any
indebtedness or liability other than in the ordinary course of business;
g. any declaration, setting aside or payment by Buyer of any
dividends on, or any other distribution with respect to, any capital stock of
Buyer or any repurchase, redemption or other acquisition of any capital stock
of Buyer;
h. (i) any payment of any bonus, profit sharing, pension or
similar payment or arrangement or special compensation to any employee of
Buyer, except in the ordinary course of the administration of Buyer, (ii) any
increase in the compensation payable or to become payable to any employee of
Buyer; or
5.10 Except as set forth in the documents listed or referred to in
Exhibits hereto, the execution and carrying out of this Agreement will not
conflict with, or result in any breach of any of the terms, or create a
charge or encumbrance upon any of the properties or assets, or outstanding
stock of Buyer pursuant to any corporate charter, bylaw, indenture, mortgage
or lease to which Buyer or any of its stockholders is a party or by which it
is bound. The execution and carrying out of this Agreement will not violate
any provision of law.
5.11 None of the written information and documents which have been or
will be furnished by Buyer or any representatives of Buyer to Sellers or any
of the representatives of Sellers in connection with the transactions
contemplated by this Agreement contains or will contain, as the case may be,
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary in order to make the statements therein not
misleading in light of the circumstances in which made. To the knowledge of
Buyer, Buyer has disclosed to Sellers as the purchaser of the common stock of
Buyer all material information relating to Buyer and its activities as
currently conducted.
5.12 The representations and warranties made hereinabove in this
Section 5 will be correct in all material respects on and as of the Closing
Date with the same force and effect as though such representations and
warranties had been made on the Closing Date.
5.13 Buyer is fully aware of the condition and prospects, financial
and otherwise, of the Acquiree, having been supplied with such financial and
other data relating to the Acquiree as Buyer considered necessary and
advisable to enable it to form a decision concerning the purchase herein
provided.
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5.14 Buyer is fully aware that the Sale Shares, when delivered, will
not have been registered under the Act; that accordingly no sale, offer to
sell or transfer of the Sale Shares shall be made unless a registration
statement under the Act with respect to the Sale Shares is then in effect or
an exemption from the registration requirements of the Act is then, in fact,
applicable to the Sale Shares or, in the opinion of Acquiree's counsel,
registration is not required.
5.15 Buyer has been fully advised by the Sellers that the Sellers will
sell the Sale Shares to Buyer without registration under the Act on the basis
of the statutory exemption in Section 4(2) of the Act relating to
transactions not involving a public offering and that Sellers' reliance upon
the statutory exemption is based in large part upon Buyer's representations
made in this Agreement.
5.16 Buyer is acquiring the Sale Shares for investment for its own
account and not with a view to resell or otherwise distribute the Sale
Shares. In making the foregoing representations, Buyer understand that, in
the view of the Securities and Exchange Commission, the statutory exemption
under Section 4(2) would not be available if, notwithstanding Buyer's
representations, it had in mind merely acquiring the Sale Shares for resale
upon the occurrence or nonoccurrence of some predetermined event.
5.17 Buyer has the full right, power and authority to purchase the
Sale Shares in accordance with the terms of this Agreement and otherwise to
consummate and close the transaction provided for in this Agreement in the
manner and upon the terms herein specified.
5.18 Buyer is acquiring the Sale Shares for the purpose of controlling
Acquiree.
5.19 Buyer represents that copies of all documents which have been
filed by ACT with the Securities and Exchange Commission for the past one (1)
year period will be provided to Sellers, and that all representations
contained therein remain true and complete.
6. CLOSING DATE
The Closing Date herein referred to shall be upon such date as the
parties hereto may mutually agree upon but is expected to be during March of
1997. At the Closing, Buyer will be provided with and accept delivery of the
Sale Shares, and in connection therewith, and will make payment of all sums
due to Seller. Certain closing documents may be delivered subsequent to the
Closing Date upon the mutual agreement of the parties hereto.
Notwithstanding the foregoing, for purposes of allocating the profits and/or
losses of Acquiree, the effective date shall be deemed the first day of
January, 1997.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
All obligations of the Sellers under this Agreement are subject to the
fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
7.1 The negotiation and execution of an employment agreements with
Xxxxxxx X. Xxxxxxxx and Xxxx X. Xxxxx on terms and conditions agreeable to
the parties thereto providing for a base salary, benefits and mutually agreed
incentive compensation based on performance measures. Said employment
agreements are attached as Exhibit 12.1.
7.2 The representations and warranties by Buyer contained in this
Agreement or in any certificate or document delivered to Seller pursuant to
the provisions hereof shall be true in all
12
material respects at and as of the time of Closing as though such
representations and warranties were made at and as of such time.
7.3 Buyer shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing including the payment of the
Price in accordance with the terms hereof.
7.4 Sellers shall have obtained the resignations of all present
officers and directors of, and shall appoint such new officers and directors,
of Acquiree as Buyer shall direct, subject, however, to the requirement that
the resignations of such present officers and directors shall take effect,
and such new officers and directors shall take office, only at such time
following the Closing, as such taking of office shall be lawful and proper
following compliance by Acquiree of all requirements therefor under the
Securities Exchange Act of 1934.
7.5 All instruments and documents delivered to Sellers pursuant to
the provisions hereof shall be reasonably satisfactory to legal counsel for
Sellers.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
All obligations of Buyer under this Agreement are subject to the
fulfillment, prior to the, or at the Closing on, the Closing Date, of each of
the following conditions:
8.1 A financial review of Acquiree's books and records to confirm
that two (2) years of unaudited financials can be obtained.
8.2 The representations and warranties by Sellers contained in this
Agreement or in any certificate or document delivered to Buyer pursuant to
the provisions hereof shall be true at and as of the time of Closing as
though such representations and warranties were made at and as of such time.
8.3 Acquiree and Sellers shall have performed and complied with all
other covenants, agreement and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing.
9. DOCUMENTS AT CLOSING
At the Closing, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
9.1 Sellers and Acquiree, as the case may be, will deliver, or cause
to be delivered, to Buyer the following:
a. stock certificates for the Sale Shares, duly endorsed in
blank with appropriate signature guarantees;
b. all records of Acquiree, including, without limitation,
such books and records, charter documents and Minnesota certificate of good
standing, as may reasonably be available to Sellers and requested by Buyer;
c. certified copies of resolutions by Sellers' and Acquiree's
boards of directors of executive committees thereof, thereunto duly
authorized, authorizing this transaction;
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d. resignations of the present officers and directors of
Acquiree to take effect;
e. a copy of a reasonably current shareholder list of Acquiree
certifying the number of shares outstanding;
f. current financial statements as of December 31, 1996, in
addition to those provided by Exhibit 4.3 of Acquiree showing no assets or
debts of any substance not otherwise disclosed, except for such sums as may
be owed to Acquiree's transfer agent and certain nominal state taxes;
g. such other instruments, documents and certificates, if any,
as are required to be delivered pursuant to the provisions of this Agreement
or which may be reasonably requested in furtherance of the provisions of this
Agreement.
9.2 Buyer will deliver or cause to be delivered to Seller such other
instruments and documents as are required to be delivered pursuant to the
provisions of this Agreement or which may be reasonably requested in
furtherance of the provisions of this Agreement.
10. REGISTRATION RIGHTS
10.1 Whenever ACT proposes to register any of its securities under the
Act and the registration form to be used may be used for the registration of
the securities issued to Sellers pursuant to Section 1.2(b) and 2(a) (the
"Registerable Securities"), the Buyer will give prompt written notice (in any
event within three (3) business days after receipt of notice of any exercise
of demand registration rights from any other person) to the Sellers of its
intention to effect such a registration and will include in such registration
all Registerable Securities with respect to which ACT received written
request for inclusion within fifteen (15) days after the receipt of ACT's
notice.
10.2 All costs and expenses associated with the registration of the
Registerable Securities by ACT will be paid by the Buyer.
10.3 If the registration described in this Section 10 is an
underwritten primary registration on behalf of ACT, and the managing
underwriters advise ACT in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
that is acceptable to ACT, ACT will include in such registration (a) first,
on a prorata basis, the securities ACT proposes to sell and the Registerable
Securities requested to be included in such registration, and (b) secondly,
other securities requested to be included in such registration.
10.4 If the registration described in this Section 10 is an
underwritten secondary registration on behalf of holders of ACT's securities,
and the managing underwriters advise the company in writing that in their
opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in
such offering within a price range acceptable to the holders initially
requesting such registration, the company will include in such registration
(a) first, the securities requested to be included therein by the holders
requesting such registration and the Registerable Securities requested to be
included in such registration, and (b) second, other securities requested to
be included in such registration.
10.5 Notwithstanding the provisions of Sections 10.3 and 10.4, ACT and
Buyer agree that they will commence a registration for the Registerable
Securities within ninety (90) days of
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written request by Sellers and will undertake all good faith efforts to
complete such registration within ninety (90) days of its commencement.
11. INDEMNIFICATION
Sellers shall indemnify and hold harmless Buyer and ACT from and
against, and in respect of, damages, if any (including, without limitation,
attorney's fees, interest and penalties), sustained by Buyer and ACT based
upon, arising out of or resulting from, the filing by Acquiree of any tax
return or amendment thereto for any year up to, and including, the year of
1996, without limitation as to time. The rights available hereunder shall be
in addition to any other rights or remedies which may be available to the
Buyer or ACT.
12. MISCELLANEOUS
12.1 Prior to Closing, Xxxxxxx X. Xxxxxxxx and Xxxx X. Xxxxx shall
enter into an employment agreements with Acquiree under the terms outlined in
Exhibit 12.1.
12.2 The respective representations of Sellers and Buyer contained
herein or in any certificates delivered prior to or at Closing shall survive
for a period of eighteen (18) months from the Closing Date, except as
otherwise provided herein.
12.3 Broker's Fee. The payment of the broker accomplishment fee shall
be the sole responsibility of Buyer.
12.4 Further Assurances. At any time, and from time to time, after
the effective date, each party will execute such additional instruments and
take such action as may be reasonably requested by the other party to confirm
or perfect title to any property transferred hereunder or otherwise to carry
out the intent and purposes of this Agreement.
12.5 Waiver. Any failure on the part of any party hereto to comply
with any of its obligations, agreements or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
12.6 Arbitration. Any and all disputes and differences between or
among the parties with respect to the construction or performance of the
terms of this Agreement which cannot be resolved amicably shall be resolved
by arbitration before the American Arbitration Association in accordance with
its rule then obtaining sitting in New Jersey.
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12.7 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or
if sent by prepaid first class registered or certified mail, return receipt
requested, fax or recognized courier then upon receipt thereof to the
following addresses:
To Sellers: Xxxxxxx X. Xxxxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Xxxx X. Xxxxx
0000 000xx Xxxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
To Acquiree: Norcom Resources, Incorporated
000 Xxxx Xxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
with copies to: Xxxxxx X. Xxxxxx, Esquire
Xxxxxxx & Xxxxxx
0000 Xxxxxxxxxxx Xxx, Xxxxx 000
Xxxxx, XX 00000
To Buyer: Universal Commodities Corporation
0000 Xxxxx 000 Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
with copies to: Merra, Kanakis, Creme & Xxxxxx, P.C.
00 Xxxx Xxxxxx
Xxxxxx, XX 00000
12.8 Headings. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
12.9 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
12.10 Governing Law. This Agreement shall be governed by the laws of
the State of New Jersey.
12.11 Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
12.12 Entire Agreement. This Agreement is the entire agreement of the
parties covering everything agreed upon or understood in the transaction.
There are no oral promises, conditions, representations, understandings,
interpretations or terms of any kind as conditions or inducements to the
execution hereof.
12.13 Severability. If any part of this Agreement is deemed to be
unenforceable the balance of this Agreement shall remain in full force and
effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
SELLERS:
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxx X. Xxxxx
-----------------------------
Xxxx X. Xxxxx
ACQUIREE:
Norcom Resources, Incorporated
By: Xxxxxxx X. Xxxxxxxx
-----------------------------
Title: President
Its duly authorized
BUYER:
Universal Commodities Corporation
By: /s/ Xxxx Xxxxxxx
------------------------------
Title: President
Its duly authorized 10,485/98598
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EXHIBIT 5.5
Applied Cellular Technology, Inc. Audited Financial Statements
for the years ended December 31, 1996 and 1995.
"Filed on Form 10-K filed March 31, 1997
is incorporated herein by this reference"
