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EXHIBIT 2.3
AGREEMENT AND PLAN OF REORGANIZATION
Among
ENTEX INFORMATION SERVICES, INC.
EIS ACQUISITION CORPORATION
And
FCP TECHNOLOGIES, INC.
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS 1
1.1 Certain Definitions 1
1.2 Other Definitions 2
ARTICLE II
THE MERGER 2
2.1 Merger; Effective Time of the Merger 2
2.2 Closing 2
2.3 Effects of the Merger 3
2.4 Taxable Transaction, Not Pooling of Interests 3
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES 3
3.1 Effect on Capital Stock 3
3.2 Exchange of Certificates 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES 6
4.1 Representations and Warranties of FCP 6
4.2 Representations and Warranties of Entex and Sub 18
ARTICLE V
EMPLOYMENT AGREEMENTS; STOCK OPTIONS; RETENTION PROGRAM 21
5.1 Employment 21
5.2 FCP Retention Bonus Program 21
5.3 Grant of Stock Options to Xxxxxxx and Xxx Xxxxxxxxx 21
5.4 Grant of Stock Options to FCP Key Employees 21
ARTICLE VI
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE
TIME; ADDITIONAL AGREEMENTS 22
6.1 Conduct of Business of FCP 22
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TABLE OF CONTENTS
(continued)
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6.2 Access to Information 24
6.3 Exclusivity; Acquisition Proposals 24
6.4 Breach of Representations and Warranties 24
6.5 Consents 24
6.6 Best Efforts 25
6.7 FIRPTA 25
6.8 FCP Shareholders' Approval 25
6.9 Conversion of FCP Preferred 25
6.10 FCP Dissenting Shares 25
6.11 Communications 25
6.12 Legal Conditions to the Merger 25
6.13 Employee Benefits 26
6.14 Expenses 26
6.15 Brokers or Finders 26
6.16 Confidentiality 27
6.17 Officers and Directors 27
ARTICLE VII
CONDITIONS PRECEDENT 27
7.1 Conditions to Each Party's Obligation to Effect the Merger 27
7.2 Conditions of Obligations of Entex and Sub 28
7.3 Conditions of Obligation of FCP 29
ARTICLE VIII
INDEMNIFICATION 30
8.1 FCP Indemnity 30
8.2 Entex's and Sub's Indemnity 30
8.3 Conditions of Indemnification for Third Party Claims 30
8.4 Offsets 31
8.5 Arbitration 31
ARTICLE IX
TERMINATION 32
9.1 Termination 32
9.2 Effect of Termination 33
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TABLE OF CONTENTS
(continued)
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ARTICLE X
GENERAL PROVISIONS 33
10.1 Nonsurvival of Representations, Warranties and Agreements 33
10.2 Amendment 33
10.3 Extension; Waiver 34
10.4 Notices 34
10.5 Interpretation 35
10.6 Counterparts 35
10.7 Entire Agreement 35
10.8 No Transfer 35
10.9 Severability 35
10.10 Other Remedies 36
10.11 Further Assurances 36
10.12 Absence of Third Party Beneficiary Rights 36
10.13 Mutual Drafting 36
10.14 Governing Law 36
EXHIBITS
Exhibit 2.1 Merger Agreement
Exhibit 5.2 FCP Retention Bonus Program
Exhibit 4.1(x) FCP Customers Aggregating 80% of Revenue for the 12 Months
Ended June 30, 1996
Exhibit 5.4 Lit of FCP Key Employees to Receive Options
Exhibit 7.2(d) Form of Legal Opinion of X'Xxxxxx and Xxxxxx
Exhibit 7.3(c) Form of Legal Opinion of Wilson, Sonsini, Xxxxxxxx &
Xxxxxx
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is entered into effective as
of July__, 1996, by and among ENTEX INFORMATION SERVICES, INC., a Delaware
corporation ("Entex"), EIS ACQUISITION CORPORATION, a Delaware corporation and a
wholly owned subsidiary of Entex ("Sub"), and FCP TECHNOLOGIES, INC., a Delaware
corporation ("FCP")
RECITALS
A. In connection with the transactions contemplated by this Agreement,
Sub and FCP will execute an Agreement and Plan of Merger in substantially the
form attached hereto as Exhibit 2.1 (the "Merger Agreement"), which provides for
the merger of Sub into FCP (the "Merger") Under the Merger Agreement, the shares
of Common Stock, $.001 par value, of FCP ("FCP Common") issued and outstanding
immediately prior to the Effective Time of the Merger (as such term is
hereinafter defined), other than FCP Dissenting Shares, will be converted into
cash in accordance with Section 3.1(c)(i) of this Agreement.
B. The parties hereto desire to enter into this Agreement for the
purpose of setting forth certain representations, warranties and covenants made
by each to the other as an inducement to the execution and delivery of the
Merger Agreement and the conditions precedent to the consummation of the Merger.
C. The Boards of Directors of Entex, Sub and FCP, respectively, have
approved and adopted this Agreement and the Merger Agreement.
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and mutual
covenants and agreements contained herein, Entex, Sub, FCP, and Computers Plus,
L.P. hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Definitions. The terms defined in this Section 11 shall, for
all purposes of this Agreement, have the meanings herein specified, unless the
context expressly or by necessary implication otherwise requires:
(a) "Delaware General Corporation Law" means the General Corporation
Law of Delaware, as amended.
(b) "FCP Common" means the shares of Class A Common Stock and Class
B Common Stock of FCP issued and outstanding immediately prior to the Effective
Time of the Merger.
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(c) "FCP Dissenting Shares" means shares of FCP Common which shall
be owned by FCP Shareholders who are entitled to appraisal rights with respect
to such shares in accordance with Section 262 et seq. of the Delaware General
Corporation Law.
(d) "FCP Dissenting Shareholders" means those FCP Shareholders who
are holders of and are entitled to FCP Dissenting Shares.
(e) "FCP Preferred" means the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock of FCP issued and outstanding immediately prior to the
Effective Time of the Merger.
(f) "FCP Shareholders" shall mean holders of FCP Common and FCP
Preferred
1.2 Other Definitions. In addition to the terms defined in Section 1.1,
certain other terms are defined elsewhere in this Agreement, and, whenever such
terms are used in this Agreement, they shall have their respective defined
meanings, unless the context expressly or by necessary implication otherwise
requires.
ARTICLE II
THE MERGER
2.1 Merger: Effective Time of the Merger. Subject to the terms and
conditions of this Agreement and of the Agreement and Plan of Merger in
substantially the form attached hereto as Exhibit 2.1 (the "Merger Agreement"),
Sub will be merged with and into FCP (the "Merger") in accordance with Section
251 of the Delaware General Corporation Law. The Merger Agreement provides,
among other things, the mode of effecting the Merger and the manner and basis of
converting each issued and outstanding share of FCP Common into the right to
receive one or more cash payments. Unless the parties agree otherwise, the
Merger Agreement shall be executed by FCP and Sub as soon as practicable
following the approval of the Merger by the FCP Shareholders at the FCP
Shareholders' Meeting.
Subject to the provisions of this Agreement and the Merger Agreement,
the Merger Agreement shall be filed in accordance with the Delaware General
Corporation Law on the Closing Date (as defined in Section 2.2). Except as
otherwise agreed by the parties, the Merger shall become effective upon
confirmation of such filing of the Merger Agreement (the date of confirmation of
such filing being hereinafter referred to as the "Effective Date of the Merger"
and the time of confirmation of such filing being hereinafter referred to as the
"Effective Time of the Merger").
2.2 Closing. The Closing under this Agreement (the "Closing") shall be
held as soon as practicable following the later to occur of (a) the approval of
the Merger by the FCP Shareholders, and (b) satisfaction of all other conditions
precedent to the Merger specified in this Agreement; unless duly waived by the
party entitled to satisfaction thereof. In any event, if the Closing has not
occurred
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on or before July 30, 1996, this Agreement may be terminated as provided in
Article VIII. Such date on which the Closing is to be held is herein referred to
as the "Closing Date". The Closing shall be held at the offices of Entex, 0
Xxxxxxxxxxxxx Xxxxx, Xxx Xxxxx, Xxx Xxxx at 10:00 a.m. on such date, or at such
other time and place as the parties may agree upon in writing.
2.3 Effects of the Merger. At the Effective Time of the Merger, (i) the
separate existence of Sub shall cease and Sub shall be merged with and into FCP
(Sub and FCP are sometimes referred to herein as the "Constituent Corporations"
and FCP after the Merger is sometimes referred to herein as the "Surviving
Corporation"), (ii) the Certificate of Incorporation of FCP shall be the
Certificate of Incorporation of the Surviving Corporation, except that such
Certificate of Incorporation shall be amended to provide that the authorized
capital stock of the Surviving Corporation shall be 1,000 shares of Common
Stock, (iii) the Bylaws of Sub shall be the Bylaws of the Surviving Corporation,
(iv) the directors of Sub shall be the directors of the Surviving Corporation,
(v) the officers of Sub shall be the officers of the Surviving Corporation, and
(vi) the Merger shall, from and after the Effective Time of the Merger, have all
the effects provided by applicable law.
2.4 Taxable Transaction; Not Pooling of Interests. The Merger is not
intended to be a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and is not to be
accounted for as a pooling of interests pursuant to Opinion No. 16 of the
Accounting Principles Board.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holder of any
shares of FCP Common:
(a) Capital Stock of Sub. All issued and outstanding shares of
capital stock of Sub shall continue to be issued and shall be converted into
1,000 shares of common stock of the Surviving Corporation. Each stock
certificate of Sub evidencing ownership of any such shares shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Capital Stock of FCP. All shares of FCP
Common that are owned directly or indirectly by FCP or any Subsidiary of FCP and
any shares of FCP Common owned by Entex, Sub or any other Subsidiary of Entex
shall be canceled and no consideration shall be delivered in exchange therefor.
In this Agreement, a "Subsidiary" means a corporation or other entity whose
voting securities are owned or are otherwise controlled directly or indirectly
by a parent corporation or other intermediary entity in an amount sufficient to
elect at least a majority of the Board of Directors or other managers of such
corporation or other entity
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(c) Conversion of FCP Preferred. Immediately prior to the Effective
Time, all issued and outstanding shares of FCP Preferred shall be converted into
shares of issued and outstanding FCP Common.
(d) Conversion of FCP Common. Subject to adjustment for FCP
Dissenting Shares, if any, as provided in Sections 3.1(f), each share of FCP
Common issued and or issuable immediately prior to the Effective Time of the
Merger shall be converted into the right to receive the following amounts:
(i) $1,000,000 payable in accordance with Section 3.2(c) below
to the holder of all of the outstanding Series E Preferred and Series F
Preferred (the "Preferred Payment") in consideration for the sale by such holder
of all such shares or shares of Class A Common issuable upon conversion thereof
(the "Preferred Payment Shares")
(ii) $3,000,000 payable upon the Closing divided by the total
number of shares of FCP Common (other than the Preferred Payment Shares) issued
or issuable at the Closing Date (the "Closing Payment"), and
(iii) $1,000,000 less the KPMG Sales Tax Estimated Amount
(determined in accordance with Section 4.1(o) hereof), and subject to the offset
provisions of Article VIII hereof, such sum payable six (6) months after the
Closing, divided by the total number of shares of FCP Common issued or issuable
at the Closing Date; provided, however that the Preferred Payment Shares shall
not be included in such calculation nor shall the holders of the Preferred
Payment Shares be entitled to receive any part of the Closing Payment or the
Deferred Payments as hereinafter defined (the "Deferred Payment, and together
with the Preferred Payment and the Closing Payments, the "Merger Payments").
At the option of Xxxxxxx Xxxxxxxxx, exercised once during
the six (6) month period following the Closing, acting on behalf of the former
shareholders of FCP, payment of the Deferred Payment may be further delayed for
the portion of the KPMG Sales Tax Estimated Amount which relates to specific
states in order to determine the actual sales tax liability of FCP in such
states. In such case, the portion of the Deferred Payment that is delayed (the
"Sales Tax Deferral") shall not be due until the amount of actual sales tax
liability, interest and penalties represented by the Sales Tax Deferral is
finally determined by the appropriate state taxing authorities and paid by
Entex.
Following payment of the Deferred Payment, FCP shall have
no further liability for sales taxes and Entex shall be solely responsible for
FCP sales tax liability in excess of the KPMG Sales Tax Estimated Amount.
If the Sales Tax Deferral is greater than the actual sales
tax liability, interest and penalties required to be paid by Entex, Entex will
promptly pay to Xxxxxxx Xxxxxxxxx as the designated fiduciary of the former
shareholders of FCP the excess of the Sales Tax Deferral over the actual amount
paid.
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The amount of Sales Tax Deferral shall be 200% of the KPMG
Sales Tax Estimated Amount for each state selected by Xxxxxxxxx.
(e) Adjustment of Exchange Ratio. If, between the date of this
Agreement and the Effective Time of the Merger, the outstanding shares of FCP
Common or FCP Preferred shall have been changed into a different number of
shares or a different class, or the rate at which FCP Preferred converts into
FCP Common shall be adjusted, by reason of any reclassication, recapitalization,
split-up, stock dividend, stock combination, exchange of shares or readjustment,
the Closing Payment and Deferred Payment shall be correspondingly adjusted.
(f) Dissenters' Rights of FCP Shareholders. If holders of FCP Common
or FCP Preferred are entitled to appraisal rights in connection with the Merger
under Section 262 of the Delaware General Corporation Law, any FCP Dissenting
Shares shall not be converted into the Merger Payments in accordance with
Section 3.2 hereof but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such FCP Dissenting
Shares pursuant to the Delaware General Corporation Law. FCP shall give Entex
prompt notice of any demand received by FCP to require FCP to purchase shares of
FCP Common, and Entex shall have the right to participate in all negotiations
and proceedings with respect to such demand. FCP agrees that, except with the
prior written consent of Entex, or as required under the provisions of the
Delaware General Corporation Law, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such purchase demand. Each FCP
Dissenting Shareholder who, pursuant to the provisions of the Delaware General
Corporation Law, becomes entitled to payment of the value of shares of FCP
Common or FCP Preferred shall receive payment therefor pursuant to such
provisions. In the event of any legal obligation, after the Effective Time of
the Merger, to deliver the Merger Payments to any FCP Dissenting Shareholder who
shall have failed to make an effective demand for appraisal or shall have lost
his status as a FCP Dissenting Shareholder, Entex shall issue and deliver, upon
surrender by such FCP Dissenting Shareholder of his certificate or certificates
representing shares of FCP Common, the Closing Payments to which such FCP
Dissenting Shareholder is then entitled under this Section 3.1, the Merger
Agreement and the Delaware General Corporation Law.
3.2 Exchange of Certificates
(a) Exchange Agent. Entex shall act as exchange agent (the "Exchange
Agent") in the Merger.
(b) Entex to Provide Closing Payment. As promptly as practicable
after the Effective Time of the Merger, Entex shall make available for exchange
in accordance with this Article III and the Merger Agreement, through such
reasonable procedures as Entex may adopt, the Closing Payment payable pursuant
to Section 3.1 and the Merger Agreement in exchange for shares of FCP Common.
(c) Exchange Procedures. As promptly as practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of a certificate or certificates
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which immediately prior to the Effective Time of the Merger represented
outstanding shares of FCP Common or FCP Preferred (the "Certificates") whose
shares are being converted into Merger Payments pursuant to Section 3.1 hereof
and the Merger Agreement, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Entex may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Payments. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Entex, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Payments to which the holder of FCP Common and FCP Preferred is entitled
pursuant to Section 3.1 hereof and the Merger Agreement. The Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of FCP Common or FCP Preferred which is not registered on the transfer records
of FCP, the appropriate Merger Payments may be delivered to a transferee if the
Certificate representing such FCP Common or FCP Preferred is presented to the
Exchange Agent and accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 3.2, each Certificate
shall be deemed at any time after the Effective Time of the Merger to represent
the right to receive upon such surrender the Merger Payments as provided by this
Article III and the provisions of the Delaware General Corporation Law.
(d) No Further Ownership Rights in FCP Common or FCP Preferred. The
Merger Payments delivered in exchange for shares of FCP Common and FCP Preferred
in accordance with the terms hereof shall be deemed to have been delivered in
full satisfaction of all rights pertaining to such shares of FCP Common and FCP
Preferred, as the case may be. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of FCP Common or FCP Preferred which were outstanding immediately prior to the
Effective Time of the Merger. If, after the Effective Time of the Merger,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of FCP. Except as disclosed in a
document referring specifically to the representations and warranties in this
Agreement which is delivered by FCP to Entex prior to the execution of this
Agreement (as may be supplemented in a nonmaterial manner prior to the Closing)
(the "FCP Disclosure Schedule"), FCP represents and warrant to Entex and Sub as
set forth below, which representations and warranties are true and correct as of
the date of this Agreement and will be true and correct as of the Closing Date.
As used in this Agreement, "Business Condition" with respect to any corporate
entity or group of corporate entities shall mean the business,
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Financial condition, results of operations and assets of such corporate entity
or group of corporate entities.
(a) Organization, Standing and Power. FCP is a corporation which is
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to own, operate and
lease its properties (subject to the ownership of FCP's principal executive
offices as described in Section 4.1(s)(ii) hereof) and to carry on its business
as now being conducted. FCP is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which the failure to so qualify would have
a material adverse effect on the corporation's Business Condition. FCP has no
Subsidiaries nor any direct or indirect equity interest in or loans to any
partnership, corporation, joint venture, business association or other entity.
FCP has delivered to Entex complete and correct copies of the Certificate of
Incorporation and Bylaws of FCP as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of FCP consists
of 20,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of
preferred stock, $.001 par value. At the close of business on May 31, 1996,
there were 2,831,143.40 shares of FCP Class A Common and 3,729,570 shares of FCP
Class B Common outstanding. As of May 31, 1996, there were outstanding
1,445,689.4 shares of Series A Preferred Stock, 385,453 shares of Series B
Preferred Stock, 372,957 shares of Series C Preferred Stock, 1,000,000 shares of
Series D Preferred Stock, 87,299 shares of Series E Preferred Stock and 292,700
shares of Series F Preferred Stock. The outstanding shares of FCP Preferred are
convertible into an aggregate of 700,399 shares of FCP Common. All outstanding
shares of FCP Common and FCP Preferred are validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, FCP's
Certificate of Incorporation or Bylaws or any agreement to which FCP is a party
or may be bound. Except for the FCP Preferred which is convertible into an
aggregate of 700,399 shares of FCP Common, there are no options, warrants,
calls, conversion rights, commitments or agreements of any character to which
FCP is a party or by which it is bound that do or may obligate FCP to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
FCP Common or FCP Preferred or that do or may obligate FCP to grant, extend or
enter into any such option, warrant, call, conversion right, commitment or
agreement.
(c) Authority. FCP has all requisite corporate power and authority
to enter into this Agreement and the Merger Agreement and, subject to approval
of this Agreement and the Merger Agreement by the shareholders of FCP, to
perform its obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the Merger
Agreement, the performance by FCP of its obligations hereunder and thereunder
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the part
of FCP, and have been unanimously approved by the Board of Directors of FCP. No
other corporate proceeding on the part of FCP is necessary to authorize this
Agreement or the Merger Agreement or the performance of FCP's obligations
hereunder or thereunder or the consummation of the transactions contemplated
hereby or thereby, other than the approval of the Merger by FCP's shareholders.
This Agreement and the Merger Agreement have been duly executed and delivered by
FCP and constitute legal, valid and binding
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obligations of FCP enforceable against FCP in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency, or other
similar laws affecting the enforcement of creditors' rights generally and except
that the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefor may be brought. Subject to
satisfaction of the conditions set forth in Article VII, the execution and
delivery of this Agreement and the Merger Agreement do not, and the consummation
of the transactions contemplated hereby and thereby will not conflict with or
result in any violation of any material statute, law, rule, regulation,
judgment, order, decree, or ordinance applicable to FCP or its properties or
assets, or conflict with or result in any breach or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of a material lien or encumbrance on any of the
properties or assets of FCP pursuant to (i) any provision of the Certificate of
Incorporation or Bylaws of FCP or (ii) any material agreement, contract, note,
mortgage, indenture, lease, instrument, permit, concession, franchise or license
to which FCP is a party or by which FCP or any of its properties or assets may
be bound or affected. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency,
commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to FCP in connection with the execution and delivery of this
Agreement or the Merger Agreement by FCP or the consummation by FCP of the
transactions contemplated hereby or thereby, except for (i) the obtaining of the
approval of the Merger by the FCP Shareholders, and (ii) the filing of the
Merger Agreement and officers' certificates with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which FCP is qualified to do business.
(d) Financial Statements
(i) FCP has furnished Entex with (a) its audited financial
statements for each of the fiscal years ended January 28, 1995 and February 3,
1996, including a balance sheet of FCP as at January 28, 1995 and February 3,
1996 and the related statements of income and cash flow, (b) unaudited financial
statements as of May 4, 1996, including a balance sheet as of May 4, 1996 (the
"FCP Fiscal April Balance Sheet) and the related statement of income and cash
flow for the quarter then ended (the foregoing financial statements are referred
to collectively as the "FCP Financial Statements").
(ii) The FCP Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated in the notes thereto, and except that the FCP Fiscal
April Balance Sheet and the financial statements do not contain notes) and
fairly present the financial position of FCP as at the dates thereof and the
results of its operations and changes in financial position for the periods then
ended. There are no capitalized software development costs recorded in the FCP
Financial Statements. There has been no change in FCP's accounting policies,
except as described in the notes to the FCP Financial Statements.
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(iii) As reflected on the FCP Fiscal April Balance Sheet, as
adjusted by Entex which adjustments have been agreed to by FCP, FCP had a
negative net worth of not greater than $3,956,000.
(iv) As reflected on the FCP Financial Statements, FCP realized
(a) net income before interest and provision for taxes of not less than negative
$10,000 (-$10,000) for the three (3) month period ended May 4, 1996 and (b) net
income before interest and provision for taxes of not less than $1,397,000 for
the nine (9) month period ended May 4, 1996.
(e) Inventory. The inventories (the "FCP Inventories") of FCP shown
on the FCP Fiscal April Balance Sheet, as adjusted by Entex which adjustments
have been agreed to by FCP, including finished goods (including in-transit goods
and office supplies) of at least $5,859,199 and parts of at least $1,162,669,
are in each case valued at cost (determined on a first-in first-out basis or
market, whichever is lower), with proper allowance for obsolescence, in
accordance with generally accepted accounting principles (the "Inventory
Reserve"). The FCP Inventories consist of items which FCP in good faith believes
are of quality and quantity readily usable or saleable in the normal course of
business of FCP, except the Inventory Reserve.
(f) Receivables. The receivables shown on the FCP May Balance Sheet
arose in the ordinary course of business and have been collected or are
collectible in the book amounts thereof, less an amount not in excess of the
allowance for doubtful accounts provided for in such balance sheet. The
receivables of FCP acquired after the date of the FCP May Balance Sheet and
prior to the Effective Time of the Merger arose or will arise in the ordinary
course of business and have been collected or are or will be collectible in the
book amounts thereof, consistent with the past practice of FCP, less an
allowance for doubtful accounts which shall not be lower as a proportion of such
receivables than the aggregate amount of the allowance for doubtful accounts
provided for in the FCP Fiscal April Balance Sheet is to the aggregate amount of
receivables provided for therein.
(g) Compliance with Law. FCP is in compliance and has conducted its
business so as to comply with all laws, rules and regulations, judgments,
decrees or orders of any Governmental Entity applicable to its operations or
with respect to which compliance is a condition of engaging in the business
thereof, except to the extent that failure to comply would, individually or in
the aggregate, not have had and is expected not to have a material adverse
effect on the Business Condition of FCP. There are no material judgments or
orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration) against FCP or against any of
its respective properties or businesses.
(h) No Defaults. FCP is not, nor has received notice that it would
be with the passage of time, (i) in violation of any provision of the
Certificate of Incorporation or Bylaws of FCP or (ii) in default or violation of
any material term, condition or provision of (A) any material judgment, decree,
order, injunction or stipulation applicable to FCP or (B) any material
agreement, note, mortgage, indenture, contract, lease or instrument, permit,
concession, franchise or license to which FCP is a party or by which FCP or its
properties or assets may be bound.
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(i) Litigation. There are no actions, suits, proceedings, claims or
investigations pending or, to the best knowledge of FCP, threatened, against FCP
which could, individually or in the aggregate, have a material adverse effect on
the Business Condition of FCP or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
hereby. The FCP Disclosure Schedule sets forth with respect to each pending
action, suit, proceeding, claim or investigation to which FCP is a party, the
forum, the parties thereto, a brief description of the subject matter thereof
and the amount of damages claimed. FCP has delivered to Entex correct and
complete copies of all correspondence prepared by its counsel for FCP's
independent public accountants in connection with the last two completed audits
of FCP's financial statements and any such correspondence since the date of the
last such audit.
(j) No Material Adverse Change. Since May 4, 1996, FCP has conducted
its business in the ordinary course and there has not occurred:
(i) Any material adverse change in the Business Condition of
FCP;
(ii) Any amendments or changes in the Certificate of
Incorporation or Bylaws of FCP;
(iii) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting any of the properties or
businesses of FCP;
(iv) Any redemption, repurchase or other acquisition of shares
of FCP Common or FCP Preferred by FCP (other than pursuant to arrangements with
terminated employees or consultants), or any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to FCP Common or FCP Preferred;
(v) Any increase in or modification of the compensation or
benefits payable or to become payable by FCP to any of its directors or
employees, except in the ordinary course of business consistent with past
practice;
(vi) Any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement (including, but
not limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of its employees, except in the
ordinary course of business consistent with FCP's past practice;
(vii) Any acquisition or sale of a material amount of property
or assets of FCP;
(viii) Any alteration in any term of any outstanding security of
FCP, other than the conversion of the FCP Preferred into FCP Common, which will
occur prior to the Effective time of the Merger;
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(ix) Any (A) incurrence, assumption or guarantee by FCP of any
debt for borrowed money; (B) issuance or sale of any securities convertible into
or exchangeable for debt, securities of FCP, or (C) issuance or sale of options
or other rights to acquire from FCP, directly or indirectly, debt securities of
FCP or any securities convertible into or exchangeable for any such debt
securities;
(x) Any creation or assumption by FCP of any mortgage, pledge,
security interest or lien or other encumbrance on any asset;
(xi) Any making of any loan, advance or capital contribution to
or investment in any person other than (A) travel loans or advances made in the
ordinary course of business of FCP and (B) other loans and advances in an
aggregate amount which does not exceed $25,000 outstanding at any time;
(xii) Any entry into, amendment of, relinquishment, termination
or nonrenewal by FCP of any contract, lease transaction, commitment or other
right or obligation other than in the ordinary course of business;
(xiii) Any transfer or grant of a right under the FCP
Intellectual Property Rights (as defined in Section 4.1(r) hereof), other than
those transferred or granted in the ordinary course of business consistent with
past practice;
(xiv) Any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of FCP; or
(xv) Any termination of any key FCP employee; or
(xvi) Any agreement or arrangement made by FCP to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement untrue or incorrect as of
the date when made.
(k) Absence of Undisclosed Liabilities. FCP has no liabilities or
obligations (whether absolute, accrued or contingent, and whether or not
determined or determinable) of a character which, under generally accepted
accounting principles, should be accrued, shown, disclosed or indicated in a
balance sheet and are not reflected on the FCP May Balance Sheet.
(l) Certain Agreements. Except for the representations and covenants
made by Entex management in joint presentations with FCP management to FCP
employees regarding (i) severance, (ii) sales commissions, or (iii)
participation in Entex stock benefit plans, neither the execution and delivery
of this Agreement or the Merger Agreement nor the consummation of the
transactions contemplated hereby or thereby will (i) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director or employee of FCP
from FCP, under any Plan (as defined in Section 41(m)
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hereof) or otherwise, (ii) materially increase any benefits otherwise payable
under any Plan, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
(m) ERISA. All material employee benefit plans, programs, policies
or arrangements covering any active, former or retired employee of FCP are
listed in the FCP Disclosure Schedule (the "Plans") To the extent applicable,
the Plans comply with the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Code, and any Plan intended
to be qualified under Section 401(a) of the Code has either obtained a
favorable determination letter as to its qualified status from the Internal
Revenue Service or still has a remaining period of time under applicable
Treasury Regulations or Internal Revenue Service pronouncements in which to
apply for such determination letter and to make any amendments necessary to
obtain a favorable determination. To the extent any Plan with an existing
determination letter from the Internal Revenue Service must be amended to comply
with the applicable requirements of the Tax Reform Act of 1986 and subsequent
legislation, the time period for effecting such amendments will not expire prior
to the Merger. FCP has furnished Entex with copies of the most recent Internal
Revenue Service letters and Forms 5500 with respect to any such Plan. No Plan is
covered by Title IV of ERISA or Section 412 of the Code. Neither FCP nor any
officer or director of FCP has incurred any liability or penalty under Sections
4975 through 4980 of the Code or Title I of ERISA. Each Plan has been maintained
and administered in all material respects in compliance with its terms and with
the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such Plans. No suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of Plan activities) has been
brought, or to the best knowledge of FCP is threatened, against or with respect
to any such Plan. All material contributions, reserves or premium payments
required to be made or accrued as of the date hereof to the Plans have been made
or accrued.
(n) Major Contracts. FCP is not a party to or subject to:
(i) Any union contract or any employment contract or arrangement
providing for future compensation, written or oral, with any officer,
consultant, director or employee which is not terminable by it on 30 day's
notice or less without penalty or obligation to make payments related to such
termination, other than (A) (in the case of employees other than executive
officers) such agreements as are not materially different from standard
arrangements offered to employees generally in the ordinary course of business
consistent with FCP's past practices and (B) such agreements as may be imposed
or implied by law;
(ii) Any plan, contract or arrangement exceeding $25,000,
written or oral, providing for bonuses, pensions, deferred compensation,
severance pay or benefits, retirement payments, profit-sharing, or the like;
(iii) Any joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of profits with
other persons;
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(iv) Any existing OEM agreement, distribution agreement, volume
purchase agreement or other similar agreement which (i) is not in the ordinary
course of business or (ii) in which the annual amount involved in 1995 exceeded
or is expected to exceed in 1996 $200,000 in aggregate amount or (iii) pursuant
to which FCP has granted or received most favored nation pricing provisions or
exclusive marketing rights related to any service, group of services or
territory;
(v) Any lease for real or personal property in which the amount
of payments which FCP is required to make on an annual basis exceeds $200,000;
(vi) Any material agreement, contract, mortgage, indenture,
lease, instrument, license, franchise, permit, concession, arrangement,
commitment or authorization which may be, by its terms, terminated or breached
by reason of the execution of this Agreement, the Merger Agreement, the closing
of the Merger, or the transactions contemplated hereby or thereby;
(vii) Except for trade indebtedness incurred in the ordinary
course of business, any instrument evidencing or related in any way to
indebtedness incurred in the acquisition of companies or other entities or
indebtedness for borrowed money by way of direct loan, sale of debt securities,
purchase money obligation, conditional sale, guarantee, or otherwise;
(viii) Any material license agreement, either as licensor or
licensee (excluding nonexclusive software licenses granted to customers or
end-users in the ordinary course of business);
(ix) Any contract containing covenants purporting to limit FCP's
freedom to compete in any line of business in any geographic area; or
(x) Any other agreement, contract or commitment which is
material to FCP.
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license and commitment listed in the
FCP Disclosure Schedule pursuant to this Section 4.1(o) is valid and binding on
FCP, and is in full force and effect, and neither FCP nor to the knowledge of
FCP any other party thereto, has breached any provision of, or is in default
under the terms of, any such agreement, contract, mortgage, indenture, plan,
lease, instrument, permit, concession, franchise, arrangement, license or
commitment.
(o) Taxes
(i) Except for state sales taxes incurred during any Taxable
period prior to the Effective Time of the Merger, which amounts have been
properly accrued, all Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports) required
to be filed with any Taxing Authority with respect to any Taxable period ending
on or before the Effective Time of the Merger, by or on behalf of FCP
(collectively, the "FCP Returns"), have been or will be filed when due
(including any extensions of such due date), and all amounts shown due thereon
on or before the Effective Time of the Merger have been or will be paid
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on or before such date. Except as provided on or before subparagraph (v) below,
the FCP Fiscal April Balance sheet fully accrues all actual and contingent
liabilties for Taxes with respect to all periods through May 4, 1996 and FCP has
not and will not incur any Tax liability with respect to all periods through May
4, 1996 in excess of the amount reflected on the FCP Fiscal April Balance Sheet.
(ii) No material Tax liability since May 4, 1996 has been
incurred other than in the ordinary course of business. Except for those certain
state sales taxes which amounts have been properly accrued, FCP has withheld and
paid to the applicable financial institution or Taxing Authority all amounts
required to be withheld, All FCP Returns filed with respect to U.S. Federal
income taxes for which FCP has received notice of audit from any Taxing
Authority, have been examined and closed or are with respect to a taxable year
for which the period for assessment, after giving effect to extensions or
waivers, has expired. FCP (or any member of any affiliated or combined group of
which FCP has been a member) has not granted any extension or waiver of the
limitation period applicable to any FCP Returns.
(A) Except as provided in subparagraph (v) below, there is no
material claim, audit, action, suit, proceeding, or investigation now pending or
(to the best knowledge of FCP) threatened against or with respect to FCP in
respect of any Tax or assessment. No notice of deficiency or similar document of
any Tax Authority has been received by FCP. Except as may be required as a
result of the Merger, FCP has not been or will not be required to include any
material adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code as a result of transactions, events
or accounting methods employed prior to the Closing.
(B) Other than pursuant to this Agreement, FCP is not a party to
or bound by (or will prior to the Effective Time of the Merger become a party to
or bound by) any tax indemnity, tax sharing or tax allocation agreement (whether
written, unwritten or arising under operation of federal law as a result of
being a member of a group filing consolidated tax returns, under operation of
certain state laws as a result of being a member of a unitary group, or under
comparable laws of other states or foreign jurisdictions) which includes a party
other than FCP. FCP has not participated in (or will not prior to the Effective
Date participate in) an international boycott within the meaning of Section 999
of the Code.
(iii) FCP has heretofore provided or made available to Entex true
and correct copies of all material Tax Returns, and, as reasonably requested by
Entex prior to or following the date hereof, information statements, reports,
work papers, Tax opinions and memoranda and other Tax data and documents
(iv) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means (i) any and all federal, state, local and foreign taxes and similar
governmental obligations, charges, imposts and assessments, including without
limitation any income (gross or net), alternative or add-on minimum tax, gross
income, gross receipts, sales, use, environmental, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property,
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net worth, environmental or windfall profit tax, custom, duty or other tax,
assessment or similar governmental charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount imposed by any
governmental entity (a "Taxing Authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period and
(iii) any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of any express or implied obligation to indemnify or
reimburse any other person.
(v) FCP is currently contesting sales taxes and franchise taxes
for the period January 1, 1989 to date allegedly owed to the State of New York.
FCP has not reserved for such sales taxes and believes that none are due. To the
extent that it is subsequently determined that such sales taxes are due, any
amounts paid (including all interest and penalties thereon) shall be deemed to
be "Damages" for such purposes.
(vi) Following the (closing Date, KPMG Peat Marwick will prepare
an analysis of sales taxes owed by FCP through the Closing. Within six(6) months
of the Closing Date, KPMG Peat Marwick will issue a written report of such
analysis, including an amount which KPMG determines to be the amount which
should be reserved for such FCP sales taxes (the "KPMG Sales Tax Estimated
Amount"). Such KPMG Sales Tax Estimated Amount shall reduce the Deferred Payment
in accordance with Section 3.1(d) hereof.
(p) Interests of Officers. None of FCP's officers or directors has
any material interest in any property, real or personal, tangible or intangible,
used in or pertaining to its business, including any interest in the FCP
Intellectual Property Rights, except for rights as a shareholder.
(q) Technology.
(i) FCP owns, or is licensed or otherwise entitled to use rights
to all patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, mask-works, net lists, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that in any material respect are used or
currently proposed to be used in the business of FCP (the "FCP Intellectual
Property Rights"). The FCP Disclosure Schedule lists all trademarks, registered
and material unregistered copyrights, trade names and service marks, and any
applications therefor, included in the FCP Intellectual Property Rights, and
specifies the jurisdictions in which each such FCP Intellectual Property Right
has been issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers, together with a list of all of FCP's currently marketed
software products and an indication as to which, if any, of such software
products have been registered for copyright protection with the United States
Copyright Office and any foreign offices.
(ii) The FCP Disclosure Schedule also lists all material
licenses, sublicenses and other agreements as to which FCP is a party and
pursuant to which FCP, or any other
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person is authorized to use any FCP Intellectual Property Right or other trade
secret material to FCP, and includes the identity of all parties thereto. FCP is
not, or as a result of the execution and delivery of this Agreement or the
performance of FCP`s obligations hereunder will not be, in violation of any
material license, sublicense or agreement described in the FCP Disclosure
Schedule.
(iii) FCP is the sole and exclusive owner or licensee of, with
all right, title and interest in and to (free and clear of any liens or
encumbrances), the FCP Intellectual Property Rights, and has sole and exclusive
rights (and except as set forth in the FCP Disclosure Schedule is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the FCP Intellectual Property
Rights are being used. Except as set forth in the FCP Disclosure Schedule, no
claims with respect to the FCP Intellectual Property Rights have been asserted
or, to the knowledge of FCP after reasonable investigation, are threatened by
any person, nor does FCP know of any valid grounds for any bona fide claims (i)
to the effect that the manufacture, sale or use of any product or the sale of
any service as now offered or proposed for use or sale by FCP infringes on any
copyright, patent or trade secret, (ii) against the use by FCP of any
trademarks, trade names, trade secrets, copyrights, technology, know-how or
computer software programs and applications used in the business of FCP as
currently conducted or as proposed to be conducted, or (iii) challenging the
ownership, validity or effectiveness of any of the FCP Intellectual Property
Rights.
(iv) To FCP's knowledge, after reasonable investigation, all
registered trademarks and copyrights held by FCP are valid and subsisting. To
FCP's knowledge, after reasonable investigation, there is no material
unauthorized use, infringement or misappropriation of any of the FCP
Intellectual Property Rights by any third party, including any employee or
former employee of FCP. FCP (i) has not been sued or charged in writing as a
defendant in any claim, suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks or copyrights and which
has not been finally terminated prior to the date hereof, (ii) has no knowledge
of any such charge or claim or (iii) has no knowledge of any infringement
liability with respect to, or infringement by, FCP of any patent, trademark,
service xxxx or copyright of another. No FCP Intellectual Property Right is
subject to any outstanding order, judgment, decree, stipulation or agreement
restricting in any manner the licensing thereof by FCP. FCP has not entered into
any agreement to indemnify any other person against any charge of infringement
of any FCP Intellectual Property Right.
(r) Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon FCP which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of FCP, any acquisition of property by FCP or
the conduct of business by FCP as currently conducted or as currently proposed
to be conducted.
(s) Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment.
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(i) The FCP Disclosure Schedule sets forth a true and complete
list of all real property owned or leased by FCP and the aggregate annual rental
or other fee payable under any such Lease.
(ii) FCP owns a 99.9% interest in the limited partnership and
Xxxxxxx Xxxxxxxxx owns a 0.1% interest in the limited partnership which owns
FCP's principal executive offices (such limited partnership hereinafter referred
to as the "FCP Property Partnership"). FCP, as general partner of the FCP
Property Partnership, hereby agrees to amend the lease with FCP to provide for a
month to month lease following the Closing Date; provided that FCP shall not
terminate such lease before December 31, 1996.
(iii) FCP has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens, charges, pledges, security interests or other encumbrances,
except as reflected in the FCP Financial Statements and except for such
imperfections of title and encumbrances, if any, which are not substantial in
character, amount or extent, and which do not materially detract from the value,
or interfere with the present use, of the property subject thereto or affected
thereby.
(iv) The equipment (the "FCP Equipment") owned or leased by FCP
is, taken as a whole, (A) adequate for the conduct of the business of FCP
consistent with its past practice, (B) suitable for the uses to which it is
currently employed, (C) in good operating condition, (D) regularly and properly
maintained, (E) not obsolete, dangerous or in need of renewal or replacement,
except for renewal or replacement in the ordinary course of business, and (F)
free from any defects.
(t) Governmental Authorizations and Licenses. FCP is the holder of
all licenses, authorizations, permits, concessions, certificates and other
franchises of any Governmental Entity required to operate its business
(collectively, the "FCP Licenses"). The FCP Licenses are in full force and
effect. There is not now pending, or to the best knowledge of FCP is there
threatened, any action, suit, investigation or proceeding against FCP before any
Governmental Entity with respect to the FCP Licenses, nor is there any issued or
outstanding notice, order or complaint with respect to the violation by FCP of
the terms of any FCP License or any rule or regulation applicable thereto.
(u) Environmental Matters.
(i) No substance that is regulated by any Governmental Entity or
that has been designated by any Governmental Entity to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment (a "Hazardous
Material") is present in, on or under any property that FCP has at any time
owned, operated, occupied or leased.
(ii) FCP has not transported, stored, used, manufactured,
released or exposed its employees or any other person in any material way to any
Hazardous Material in violation of any applicable statute, rule, regulation,
order or law.
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(iii) FCP has obtained all permits, licenses and other
authorizations ("Environmental Permits") required to be obtained by any of them
under the Laws of any Governmental Entity relating to pollution or protection of
the environment (collectively, "Environmental Laws"). The FCP Disclosure
Schedule sets forth a true and complete list of all Environmental Permits, each
of which is in full force and effect. FCP (A) is in compliance with all terms
and conditions of the Environmental Permits and (B) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. FCP has not received any notice and is not aware of any
past or present condition or practice of the business conducted by FCP which
forms or could form the basis of any claim, action, suit, proceeding, hearing or
investigation against FCP arising out of the manufacture, processing,
distribution, use, treatment, storage, spill, disposal, transport, or handling,
or the emission, discharge, release or threatened release into the environment,
of any Hazardous Material.
(v) Insurance. The FCP Disclosure Schedule lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of FCP. There is no
claim by FCP pending under any of such policies or bonds as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums payable under all such policies and bonds have been paid and
FCP is otherwise in full compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). Such policies of insurance and bonds are of the type and in amounts
customarily carried by persons conducting business similar to that of FCP. FCP
does not know of any threatened termination of or material premium increase with
respect to, any of such policies.
(w) Labor Matters. FCP is in compliance in all material respects
with all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment and wages and
hours and occupational safety and health and employment practices, and is not
engaged in any unfair labor practice. FCP has not received any notice from any
Governmental Entity, and there has not been asserted before any Governmental
Entity, any claim, action or proceeding to which FCP is a party or involving
FCP, and there is neither pending nor, to FCP's best knowledge, threatened any
investigation or hearing concerning FCP arising out of or based upon any such
laws, regulations or practices.
(x) Customers. Attached as Exhibit 4.1(x) hereto is a schedule of
FCP customers which in the aggregate accounted for not less than 80% of FCP net
revenue for the 12 months ended June 30, 1996. Except for project oriented
contracts and bids, FCP has no reason to believe that any of such customers
listed on Exhibit 4.1(x) intends to terminate its business relationship with FCP
or to materially reduce the dollar amount of its business with FCP.
(y) Disclosure. No representation or warranty made by FCP in this
Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished or to be
prepared and furnished by FCP or its representatives pursuant hereto
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or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. To the knowledge of FCP after reasonable inquiry, there is no event,
fact or condition that materially and adversely affects the Business Condition
of FCP that has not been set forth in this Agreement or in the FCP Disclosure
Schedule. The financial projections relating to FCP delivered to Entex prior to
the date hereof were prepared in good faith based upon reasonable assumptions.
(z) Intelligent Electronics. FCP is a party to that certain reseller
agreement dated December 1, 1994 between FCP and Intelligent Electronics ("IE")
(the "Reseller Agreement"). FCP agrees to terminate this Reseller Agreement as
soon as practicable, and as of the May 4 Balance Sheet represents that the net
asset and liability position relating to all open account transactions specific
to IE, as reflected on the May 4 Balance Sheet, will not exceed the lesser of
$270,000 or the net asset and liability position relating to open account
transactions specific to IE, as reflected on the May 4 Balance Sheet determined
in accordance with GAAP ("the IE Setoff"). In the event that the parties are in
dispute with regard to the IE Setoff, KPMG Peat Marwick shall determine the IE
Setoff, and such determination shall be binding upon the parties. FCP represents
and warrants that the amounts represented by such net balance sheet position
will satisfy all obligations of FCP to IE arising out of or related to any past,
current, or future defaults or obligations agreed to between the parties, or the
termination of the Reseller Agreement.
4.2 Representations and Warranties of Entex and Sub. Except as disclosed
in a document referring specifically to the representations and warranties in
this Agreement which is delivered by Entex to FCP prior to the execution of this
Agreement (as may be supplemented in a nonmaterial manner prior to Closing) (the
"Entex Disclosure Schedule"), Entex and Sub represent and warrant to, and agree
with, FCP as follows, which representations and warranties will be true and
correct as of the date of this Agreement and will be true and correct as of the
Closing Date:
(a) Organization, Standing and Power. Entex is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and each of Entex and Sub has
all requisite power and authority to own, operate and lease its properties and
to carry on its business as now being conducted. Each of Entex and Sub is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on the
corporation's Business Condition. Entex has delivered to FCP complete and
correct copies of the Certificate of Incorporation and Bylaws of each of Entex
and Sub as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of Entex
consists of to 10,000,000 shares of common stock, $.0001 par value, and
2,000,000 shares of preferred stock, $.0001 par value. At the close of business
on June 30, 1996, there were 7,706,000 shares of Entex Common issued and
outstanding or reserved for issuance upon the exercise of outstanding stock
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options issued under Entex stock benefit plans or other outstanding options and
warrants. As of June 30, 1996, there were no shares of Preferred Stock
outstanding.
The authorized Common Stock of Sub consists of 1,000 shares of
common stock, $.001 par value. At the date hereof there were 1,000 shares of Sub
Common Stock outstanding. All outstanding shares of Entex Common and Sub Common
Stock are, and any shares of Entex Common issued upon exercise of any Entex
Option, will be, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, Entex's or Sub's Certificate of
Incorporation or Bylaws or any agreement to which Entex or Sub is a party or may
be bound. Except for the shares listed above issuable pursuant to Entex Options,
there are no options, warrants, calls, conversion rights, commitments or
agreements of any character to which Entex or Sub is a party or by which either
is bound that do or may obligate Entex or Sub to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of Entex Common or that
do or may obligate Entex or Sub to grant, extend or enter into any such option,
warrant, call, conversion right, commitment or agreement.
(e) Authority. Each of Entex and Sub has all requisite corporate
power and authority to enter into this Agreement (and, in the case of Sub, the
Merger Agreement) and, subject to approval of Entex as the sole shareholder of
Sub, to perform its obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement (and, in the
case of Sub, the Merger Agreement), the performance by each of Entex and Sub of
its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of each of Entex and
Sub, and have been unanimously approved by the Board of Directors of each of
Entex and Sub. No other corporate proceeding on the part of Entex or Sub is
necessary to authorize this Agreement or the Merger Agreement or the performance
of Entex's or Sub's obligations hereunder or thereunder or the consummation of
the transactions contemplated hereby or thereby, other than the approval of the
Merger by the Entex Shareholders and Entex as the sole shareholder of Sub. This
Agreement (and, in the case of Sub, the Merger Agreement) have been duly
executed and delivered by Entex and Sub and constitute legal, valid and binding
obligations of Entex and Sub enforceable against each of Entex and Sub in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought. Subject to satisfaction of the conditions set forth in
Article VII, the execution and delivery of this Agreement (and, in the case of
Sub, the Merger Agreement) do not, and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in any
violation of any material statute, law, rule, regulation, judgment, order,
decree, or ordinance applicable to Entex or Sub or their properties or assets,
or conflict with or result in any breach or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of a material lien or encumbrance on any of the
properties or assets of Entex or Sub pursuant to (i) any provision of the
Certificate of Incorporation or Bylaws of Entex or Sub or (ii) any material
agreement, contract, note, mortgage, indenture, lease, instrument, permit,
concession, franchise or license to which Entex or Sub
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is a party or by which Entex or Sub or any of its properties or assets may be
bound or affected. No consent, approval, order or authorization of, or
registration, declaration or filling with, any court, administrative agency,
commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to Entex or Sub in connection with the execution and delivery of
this Agreement or the Merger Agreement by Entex and Sub or the consummation by
Entex or Sub of the transactions contemplated hereby or thereby, except for (i)
the obtaining of the approval of the Merger by Entex as the sole shareholder of
Sub, (ii) the filing of the Merger Agreement and officers' certificates with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which Entex and Sub are qualified to do
business, (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country, which if not obtained or made would not have a material adverse effect
on the Business Condition of Entex and (iv) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would not
have a material adverse effect on the Business Condition of Entex.
(d) Financial Statements. Entex has furnished FCP with (a) its
audited financial statements for each of the fiscal years ended December 31,
1993, December 31, 1994 and December 31, 1995, including a balance sheet of
Entex as at December 31, 1994 and December 31, 1995 and the related statements
of income and cash flow, (b) unaudited financial statements as of March 31,
1996, including a balance sheet as at March 31, 1996 and the related statement
of income and cash flow for the quarter then ended (the foregoing financial
statements are referred to collectively as the "Entex Financial Statements").
The Entex Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto) and fairly present the financial position of Entex as at
the dates thereof and the results of its operations and changes in financial
position for the periods then ended.
(e) Compliance with Law. Entex is in compliance and has conducted
its business so as to comply with all laws, rules and regulations, judgments,
decrees or orders of any Governmental Entity applicable to is operations or with
respect to which compliance is a condition of engaging in the business thereof,
except to the extent that failure to comply would, individually or in the
aggregate, not have had and is expected not to have a material adverse effect on
the Business Condition of Entex. There are no material judgments or orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration) against Entex or against any of its
respective properties or businesses.
(f) No Defaults. Entex is not, nor has received notice that it would
be with the passage of time, (i) in violation of any provision of the
Certificate of Incorporation or Bylaws of Entex or (ii) in default or violation
of any material term, condition or provision of (A) any material judgment,
decree, order, injunction or stipulation applicable to Entex or (B) any material
agreement, note, mortgage, indenture, contract, lease or instrument, permit,
concession, franchise or license to which Entex is a party or by which Entex or
its properties or assets may be bound.
(g) Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the best knowledge of Entex, threatened, against
Entex which could, individually or in the
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aggregate, have a material adverse effect on the Business Condition of Entex or
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay any of the transactions contemplated hereby.
(h) Disclosure. No representation or warranty made by Entex or Sub
in this Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished or to be
prepared and furnished by Entex or Sub or their representatives pursuant hereto
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
(i) Assets and Liabilities of Sub. As of the date hereof and at the
Effective Time of the Merger, the assets of Sub are and will consist of cash and
Sub does not and will not have conducted any material operations or have any
liabilities, except possible liabilities for organizational expenses and
expenses in connection with the Merger.
ARTICLE V
EMPLOYMENT AGREEMENTS; STOCK OPTIONS; RETENTION PROGRAM
5.1 Employment Agreements with Xxxxxxx and Xxx Xxxxxxxxx. At the
Closing, Entex shall enter into Employment Agreements with Xxxxxxx Xxxxxxxxx and
Xxx Xxxxxxxxx.
5.2 FCP Retention Bonus Program. Entex shall reserve $1,000,000 in cash,
subject to any reduction pursuant to Section 8.4(b), for payment under the FCP
Retention Bonus Program attached as Exhibit 5.2 hereto.
5.3 Grant of Stock Options to Xxxxxxx and Xxx Xxxxxxxxx. At the Closing,
Entex shall grant the following stock options to Xxxxxxx and Xxx Xxxxxxxxx:
(a) 30,977 Share Option to Xxxxxxx Xxxxxxxxx. Entex shall grant to
Xxxxxxx Xxxxxxxxx, within ten (10) days from the Closing Date, a nonqualified
stock option to purchase 30,977 shares of Entex Common Stock at an exercise
price of $50.00 (the "Option"). The Option shall be issued pursuant to, and
governed by, the terms of Entex's 1996 Stock Option Plan and a Stock Option
Agreement dated as of even date herewith by and between Entex and Employee (the
"Option Agreement"). The Option Agreement shall provide, among other things,
that the Option shall vest with respect to 50% of the shares upon the second
anniversary of the date of grant and 50% of the shares upon the third
anniversary of the date of grant; provided, however, that the Option will vest
in full in the event Employee's employment is Involuntarily Terminated without
Cause (including a Constructive Termination) (as such capitalized terms are
defined in the Option Agreement).
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(b) 30,978 Share Option to Xxx Xxxxxxxxx. Entex shall grant to Xxx
Xxxxxxxxx, within ten (10) days from the Closing Date, a nonqualified stock
option to purchase 30,978 shares of Entex Common Stock at an exercise price of
$50.00 (the "Option"). The Option shall be issued pursuant to, and governed by,
the terms of Entex's 1996 Stock Option Plan and a Stock Option Agreement dated
as of even date herewith by and between Entex and Employee (the "Option
Agreement"). The Option Agreement shall provide, among other things, that the
Option shall vest with respect to 50% of the shares upon the second anniversary
of the date of grant and 50% of the shares upon the third anniversary of the
date of grant; provided, however, that the Option will vest in full in the event
Employee's employment is Involuntarily Terminated without Cause (including a
Constructive Termination) (as such capitalized terms are defined in the Option
Agreement).
5.4 Grant of Stock Options to FCP Key Employees. Entex shall grant
to those FCP employees listed in Exhibit 5.4(a) options to purchase an aggregate
of 26,103 shares of Entex Common at an exercise price of $50.00 per share under
its 1996 Stock Option Plan, pursuant to an option agreement in substantially the
form attached hereto as Exhibit 5.4(b); provided, however that certain changes
to the form of option agreement may be made to reflect certain requirements
under Rule 16(b)(3) of the Securities Exchange Act of 1934 and to reflect the
merger of Entex Holdings Inc., with and into Entex. Subject to continued
employment with Entex, the option shall be exercisable with respect to 50% of
the shares subject thereto on the second anniversary of the Closing and the
other 50% on the third anniversary of the Closing.
ARTICLE VI
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE
TIME, ADDITIONAL AGREEMENTS
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time of the
Merger, the parties hereto agree (except to the extent that the other parties
hereto shall otherwise consent in writing) that:
6.1 Conduct of Business of FCP. Except as disclosed in item 4.1(j) on
the FCP Disclosure Schedule or as otherwise disclosed on the FCP Disclosure
Schedule with a reference to this Section 6.1 (a), FCP shall carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent with such business,
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organizations, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it (except as may be otherwise requested by Entex in
writing), to the end that its goodwill and ongoing business shall be unimpaired
at the Effective Time of the Merger. FCP shall promptly notify Entex of any
event or occurrence or emergency not in the ordinary course of business of FCP,
and any event which could have a material and adverse effect on the Business
Condition of
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FCP. Except as expressly contemplated by this Agreement or the FCP Disclosure
Schedule, FCP shall not, without the prior written consent of Entex:
(a) Enter into any commitment or transaction not in the ordinary
course of business consistent with past practices;
(b) Grant any severance or termination pay (A) to any director or
(B) to any employee except (x) payments made pursuant to standard written
agreements outstanding on the date hereof or (y) in the case of employees who
are not officers, grants which are made in the ordinary course of business in
accordance with FCP's standard past practices;
(c) Except in the ordinary course of business consistent with past
practices, transfer to any person or entity any rights to the FCP Intellectual
Property Rights;
(d) Enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or other rights of any type or scope with
respect to any products or services of FCP;
(e) Except in the ordinary course of business with prior notice to
Entex, violate, amend or otherwise modify the terms of any of the contracts set
forth on the FCP Disclosure Schedule;
(f) Commence a lawsuit other than (A) for the routine collection of
bills, (B) for software piracy, (C) in such cases where FCP in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of FCP's business, provided that FCP consults with Entex
prior to filing such suit, or (D) following a breach of this Agreement;
(g) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of the FCP Common or FCP
Preferred, or split, combine or reclassify any of the FCP Common or FCP
Preferred or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of FCP Common or FCP Preferred, or
repurchase or otherwise acquire, directly or indirectly, any shares of FCP
Common or FCP Preferred except from former employees, directors and consultants
in accordance with agreements providing for the repurchase of shares in
connection with any termination of service to FCP;
(h) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of FCP
Common or FCP Preferred or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities, other than the conversion into FCP Common of outstanding shares of
FCP Preferred,
(i) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws,
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(j) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Business
Condition of FCP;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets which are material, individually or in the aggregate, to
the Business Condition of FCP except in the ordinary course of business
consistent with past practices;
(l) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of FCP or guarantee any debt
securities of others, except as disclosed under the FCP Disclosure Schedule;
(m) Adopt or amend any Plan, or enter into any employment contract,
pay any special bonus or special remuneration to any director or employee, or
increase the salaries or wage rates of its employees other than pursuant to
scheduled employee reviews under FCP's normal employee review cycle, as the case
may be, or in connection with the hiring of employees other than officers in the
ordinary course of business, in all cases consistent with FCP's past practices;
(n) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(o) Pay, discharge or satisfy in an amount in excess of $50,000 in
any one case any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in the financial statements (or the notes thereto) of FCP;
(p) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 6.l(a)(i) through (xvi) above, or any action which
would make any of the representations or warranties or covenants of FCP
contained in this Agreement materially untrue or incorrect.
6.2 Access to Information. FCP shall afford Entex and its respective
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time of the Merger to
(a) all of FCP' properties, books, contracts, commitments and records, and (b)
all other information concerning the business, properties and personnel of FCP
as Entex may reasonably request. FCP agrees to provide to Entex and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request. No information or knowledge obtained in any
investigation pursuant to this Section 6.2 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
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6.3 Exclusivity; Acquisition Proposals. Unless and until this Agreement
shall have been terminated by either party pursuant to Section 9.1 hereof, FCP
shall not, directly or indirectly, through any of its officers or directors, or
agents, representatives or affiliates, solicit, encourage, initiate or entertain
any proposals or offers from any party other than Entex: and Sub relating to the
acquisition of FCP by merger, consolidation, purchase of all or substantially
all of FCP's assets, tender or exchange offer, stock purchase or other business
combination (each of the foregoing, an "Acquisition"), nor will FCP directly or
indirectly, through any of its officers, directors, agents, representatives or
affiliates, participate in any negotiations regarding, or furnish to any person
any information with respect to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any person (other than Entex or Sub) to do or
seek any Acquisition.
6.4 Breach of Representations and Warranties. Except as permitted under
Section 6.1, each of Entex and FCP shall not take any action which would cause
or constitute a breach of any of their respective representations and warranties
set forth in this Agreement or which would cause any of such representations and
Warranties to be inaccurate as of the Effective Time of the Merger. In the event
of, and promptly after becoming aware of, the occurrence of or the pending or
threatened occurrence of any event which would cause or constitute such a breach
or inaccuracy, each party shall give detailed notice thereof to the other and
shall use its best efforts to prevent or promptly remedy such breach or
inaccuracy.
6.5 Consents. Each of Entex and FCP shall promptly apply for or
otherwise seek, and use its best efforts to obtain, all consents and approvals
required to be obtained by it for the consummation of the Merger, and FCP shall
use its best efforts to obtain all necessary consents, waivers and approvals
under any of FCP's material agreements, contracts or licenses in connection with
the Merger, except consents under FCP real property leases and such other
consents and approvals as Entex and FCP agree FCP shall not seek to obtain, as
contemplated by the FCP Disclosure Schedule.
6.6 Best Efforts. Entex and FCP shall each use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement.
6.7 FIRPTA. FCP shall deliver to the Internal Revenue Service a notice
regarding the statement described in Section 7.2(h) hereof, in accordance with
the requirements of Treasury Regulation Section 1.897-2(h)(2).
6.8 FCP Shareholders' Approval. FCP agrees to submit this Agreement and
the Merger Agreement to its shareholders for approval and adoption, all as
provided by law and its Certificate of Incorporation and Bylaws, at a meeting
which will be held on the earliest practicable date following the execution of
this Agreement. The Board of Directors of FCP will unanimously recommend to the
FCP Shareholders that such shareholders approve the transactions contemplated by
this Agreement and the Merger Agreement.
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6.9 Conversion of FCP Preferred. FCP agrees to solicit from the holders
of FCP Preferred consent to convert all of the shares of FCP Preferred into
shares of FCP Common immediately prior to the Effective Time of the Merger.
6.10 FCP Dissenting Shares. As promptly as practicable after the date of
the FCP Shareholders' Meeting and prior to the Closing Date, FCP shall furnish
Entex with the name and address of each FCP Dissenting Shareholder and the
number of FCP Dissenting Shares owned by such FCP Dissenting Shareholder.
6.11 Communications. Between the date hereof and the Effective Time of
the Merger, neither Entex nor FCP will furnish any communication to its
shareholders (other than the Proxy Statement) or to the public generally if the
subject matter thereof relates to the other party or to the transactions
contemplated by this Agreement or the Merger Agreement without the prior
approval of the other party as to the content thereof, which approval shall not
be unreasonably withheld. Nothing contained herein shall prevent either party at
any time from furnishing any information to any governmental agency or from
issuing any release where it reasonably believes it is legally required to do
so.
6.12 Legal Conditions to the Merger.
(a) FCP shall take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on FCP with respect to
the Merger and will promptly cooperate with and furnish information to Entex in
connection with any such requirements imposed upon Entex or Sub in connection
with the Merger. FCP shall take all reasonable actions to obtain (and to
cooperate with Entex and Sub in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity, required to be
obtained or made by FCP (or by Entex or Sub) in connection with the Merger or
the taking of any action contemplated thereby, by this Agreement or by the
Merger Agreement, and to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby, to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby, and to effect all necessary registrations and filings and
submissions of information requested by any Governmental Entity, and to fulfill
all conditions to this Agreement.
(b) Each of Entex and Sub shall take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the Merger and will promptly cooperate with and furnish
information to FCP in connection with any such requirements imposed upon FCP in
connection with the Merger. Entex and Sub shall take all reasonable actions to
obtain (and to cooperate with FCP in obtaining) any consent, authorization,
order or approval of, or exemption by, any Governmental Entity required to be
obtained or made by Entex or Sub (or by FCP) in connection with the Merger or
the taking of any action contemplated thereby, by this Agreement or by the
Merger Agreement, and to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby, to lift or rescind any injunction or restraining order or other order
adversely affecting the
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ability of the parties to consummate the transactions contemplated hereby, and
to effect all necessary registrations and filings and submissions of information
requested by any Governmental Entity, and to fulfill all conditions to this
Agreement.
6.13 Employee Benefits. Entex and FCP agree to appoint personnel from
their respective human relations departments who will meet and coordinate the
manner of transition of the insurance and other benefit plans of FCP after the
Merger. It is intended that the benefits provided by Entex taken as a whole will
be substantially consistent with those provided by Entex to its employees and
that such benefits taken as a whole will not be materially less favorable than
those currently provided by FCP.
6.14 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, the Merger Agreement and
the transactions contemplated hereby and thereby shall be paid by the party
incurring such expense; provided, however, that in the event the Merger is
consummated, Entex shall pay the fees and expenses of X'Xxxxxx and Xxxxxx in
connection with the transactions contemplated under this Agreement and the
Merger Agreement (which payment shall be made no later nor earlier than the time
Entex pays the fees and expenses of its corresponding advisors relating to their
services to Entex in connection with the services contemplated under this
Agreement and the Merger Agreement).
6.15 Brokers or Finders. Each of Entex, Sub and FCP represents that no
agent, broker, investment banker or other firm or person is or will be entitled
to any broker's or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement, other
than a payment of up to $95,000 owed to MCK Associates which amount shall be
paid by Entex and which amount, if paid by Entex or by FCP, shall reduce the
Merger Payments by an equal amount.
6.16 Confidentiality. The parties agree and acknowledge that the
agreements regarding confidentiality executed prior to the execution of this
Agreement are still in full force and effect and nothing in this Agreement is
intended to or shall be construed to limit the obligations of the parties under
such confidentiality agreements.
6.17 Officers and Directors. Entex shall extend indemnification to all
current officers and directors of FCP to the maximum extent permitted by law. To
the extent permitted by law, Entex shall extend the indemnification provisions
of Entex's Certificate of Incorporation and Bylaws to the officers and directors
of FCP who shall become officers or directors of Entex.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Shareholder Approval.
(i) This Agreement and the Merger Agreement shall have been
approved and adopted by the affirmative vote of the holders of (A) at least a
majority of the outstanding shares of FCP Common, voting as a single class, and
(B) at least a majority of the outstanding shares of FCP Preferred, voting
together as a single class.
(ii) FCP shall have obtained from the holders of FCP Preferred
consent to convert all of the shares of FCP Preferred into shares of FCP Common
immediately prior to the Effective Time of the Merger.
(b) Approvals. All authorizations, consents, orders or approvals of,
or declarations or filings with any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, occurred or been obtained, other than filings and approvals relating to
the Merger or affecting Entex's ownership of FCP or any of its Subsidiaries or
any of their properties if failure to make such filing or obtain such approval
would not be materially adverse to Entex or FCP and their respective
Subsidiaries taken as a whole.
(c) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any Governmental Entity and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against FCP, the Surviving Corporation or Entex of
substantial damages if the Merger is consummated, shall be pending which, in the
good faith judgment of FCP's or Entex's Board of Directors (acting upon the
written opinion of their respective outside counsel) has a reasonable
probability of resulting in such order, injunction or damages. In the event any
such order or injunction shall have been issued, each party agrees to use its
reasonable efforts to have any such injunction lifted.
(d) Statutes. No action shall have been taken, and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity which would (i) make the
consummation of the Merger illegal, (ii) prohibit Entex's or FCP's ownership or
operation of all or a material portion of the business or assets of FCP or Entex
or compel Entex or FCP to dispose of or hold separate all or a material portion
of the business or assets of FCP or Entex as a result of be Merger or (iii)
render Entex, Sub or FCP unable to consummate the Merger.
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7.2 Conditions of Obligations of Entex and Sub. The obligations of Entex
and Sub to effect the Merger are subject to the satisfaction of the following
conditions, unless waived by Entex and Sub:
(a) Representations and Warranties. The representations and
warranties of FCP set forth in this Agreement shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) (i) as of the date
of this Agreement, (ii) as of the FCP Shareholders' Meeting Date and (iii) as of
the Closing Date, as though made on and as of each such date, except as
otherwise contemplated by this Agreement, and Entex shall have received a
certificate signed by the chief executive officer and the chief financial
officer of FCP to such effect on the Closing Date.
(b) No Material Adverse Change. Except as described in 4.1 (j) of
the FCP Disclosure Schedule, there shall have been no material adverse change in
the Business Condition of FCP on or before the Closing Date.
(c) Performance of Obligations of FCP. FCP shall have performed in
all material respects all obligations and covenants required to be performed by
it under this Agreement and the Merger Agreement prior to the Closing Date, and
Entex shall have received a certificate signed by the chief executive officer
and the chief financial officer of FCP to such effect.
(d) Opinion of FCP Counsel. Entex shall have received an opinion
dated the Closing Date of X'Xxxxxx & Xxxxxx, counsel to FCP, substantially in
the form set forth on Exhibit 7.2(d) hereto.
(e) FIRPTA. Entex, as agent for the shareholders of FCP, shall have
received a properly executed Foreign Investment and Real Property Tax Act of
1980 ("FIRPTA") Notification Letter, in form and substance satisfactory to
Entex, which states that shares of FCP Common and FCP Preferred do not
constitute "United States real property interests" under Section 897(c) of the
Code, for purposes of satisfying Entex's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
(f) Consents. Entex shall have received duly executed copies of all
material third-party consents and approvals contemplated by this Agreement or
the Entex Disclosure Schedule in form and substance reasonably satisfactory to
Entex, except for such consents and approvals as Entex and FCP shall have agreed
shall not be obtained, as contemplated by the Entex Disclosure Schedule.
(g) Resignation of Directors. The directors of FCP in office
immediately prior to the Effective Time of the Merger shall have reigned as
directors of the Surviving Corporation effective as of the Effective Time of the
Merger.
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(h) Resignation of Officers. The officers of FCP in office
immediately prior to the Effective Time of the Merger shall have reigned as
officers of the Surviving Corporation effective as of the Effective Time of the
Merger.
(i) Satisfactory Form of Legal and Accounting Matters. The form,
scope and substance of all legal and accounting matters contemplated hereby and
all closing documents and other papers delivered hereunder shall be acceptable
to Entex's counsel.
7.3 Conditions of Obligation of FCP. The obligation of FCP to effect the
Merger is subject to the satisfaction of the following conditions unless waived
by FCP:
(a) Representations and Warranties. The representations and
warranties of Entex and Sub set forth in this Agreement shall be true and
correct in all material respects (except for such representations and warranties
which are qualified by their terms by a reference to materiality, which
representations and warranties as so qualified shall be true in all respects)
(i) as of the date of this Agreement, and (ii) as of the Closing Date, as though
made on and as of each such date, except as otherwise contemplated by this
Agreement, and FCP shall have received a certificate signed by the chief
executive officer and the chief financial officer of Entex to such effect.
(b) Performance of Obligations of Entex and Sub. Entex and Sub shall
have performed in all material respects all obligations and covenants required
to be performed by them under this Agreement and the Merger Agreement prior to
the Closing Date, and FCP shall have received a certificate signed by the chief
executive officer and the chief financial officer of Entex to such effect.
(c) Opinion of Entex's Counsel. FCP shall have received an opinion
dated the Closing Date of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel to Entex, in
substantially the form set forth on Exhibit 7.3(c) hereto.
(d) Satisfactory Form of Legal Matters. The form, scope and
substance of all legal matters contemplated hereby and all closing documents and
other papers delivered hereunder shall be reasonably acceptable to counsel to
FCP.
ARTICLE VIII
INDEMNIFICATION
8.1 FCP Indemnify. Subject to the terms and conditions of this Article
VIII, FCP hereby agrees to indemnify, defend and hold Entex, Sub and their
respective officers, directors, agents, employees, affiliates, successors and
assigns, harmless from and against all damages, including, without limitation,
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees and expenses, but excluding damages
resulting from business interruption and lost business opportunities
(collectively, "Damages"), asserted against, resulting to, imposed upon, or
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36
incurred by Entex or Sub by reason of or resulting from a breach of any
representation, warranty or covenant of FCP contained in Section 4.1 and Article
VI of this Agreement.
8.2 Entex's and Sub's Indemnity. Subject to the terms and conditions of
this Article VIII, Entex, Sub and their respective successors and assigns hereby
agree to indemnify, defend and hold FCP and its successors or assigns harmless
from and against all Damages asserted against, resulting to, imposed upon or
incurred by FCP by reason of or resulting from:
(a) a breach of any representation, warranty or covenant of Entex or
Sub contained in Section 4.2 and Article VI of this Agreement; or
(b) the failure of Entex or Sub to pay, perform and discharge when
due any of their respective other obligations under this Agreement.
8.3 Conditions of Indemnification for Third Party Claims. The respective
obligations and liabilities of FCP, Entex and Sub, as the case may be, (herein
sometimes referred to as the "indemnifying party"), to each other (herein
sometimes referred to as the "party to be indemnified") under Section 8.1 or 8.2
hereof with respect to claims resulting from the assertion of liability by third
parties shall be subject to the following terms and conditions:
(a) Within 20 days after receipt of notice of commencement of any
action evidenced by service of process or other legal pleading, or with
reasonable promptness after the assertion in writing of any claim by a third
party, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing.
(b) In connection with any such indemnification, the party to be
indemnified will cooperate in all reasonable requests of the indemnifying party.
(c) With respect to any claim covered by Sections 8.1 or 8.2 hereof,
in the event that the indemnifying party by the thirtieth (30th) day after
receipt of notice of any such claim (or, if earlier, by the tenth (10th) day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim)
notifies the party to be indemnified that it will not defend against such claim,
the party to be indemnified shall (upon further notice to the indemnifying
party) have the right, but not the obligation, to undertake the defense,
compromise or settlement of such claim on behalf of and for the account of and
at the sole expense of the indemnifying party, including all attorneys' fees
incurred, subject to the right of the indemnifying party to assume the defense
of such claims at any time prior to settlement, compromise or final
determination thereof on payment to the party to be indemnified of all expenses
incurred, including but not limited to attorneys' fees, to date.
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8.4 Offsets
(a) If Entex or Sub suffers any Damages as defined in Section 8.1
hereof as a result of a breach of any representation contained in Sections
4.1(d) Financial Statements, (e) Inventory, (f) Receivables, (j) No Material
Adverse Change, (k) Absence of Undisclosed Liabilities and (o) Taxes hereof,
then Entex may in its sole discretion offset the amount of such Damages against
the Deferred Payment.
(b) Following the offset of such Damages under 8.4(a) hereof, if
Entex suffers any Damages as defined in Section 8.1 hereof as a result of a
breach of any representation contained in Section 4.l(z) Intelligent Electronics
("IE Damages"), then Entex may in its sole discretion offset the amount of the
IE Damages against the Deferred Payment. To the extent that the Damages exceed,
in the aggregate (inclusive of IE Damages), one million dollars ($1,000,000),
then Entex may in its sole discretion reduce amounts otherwise payable under the
FCP Retention Bonus Program by the lesser of (x) the amount of IE Damages, or
(y) the amount in which Damages exceed, in the aggregate (inclusive of IE
Damages), one million dollars ($1,000,000).
(c) Prior to offsetting any amount as described in subsection (a) or
(b) hereof, Entex shall notify Xxxxxxx Xxxxxxxxx ("Xxxxxxxxx") (as the
designated fiduciary of the shareholders of FCP) in writing of the Damages
incurred, the amount to be offset and shall provide details as to how Entex
computed such Damages and the amount to be offset (the "Offset Notice"). Entex
may then offset the amount set forth in the Offset Notice, unless Xxxxxxxxx
disputes the computation of the amount to be offset by serving written notice
(the "Reply to Offset Notice") on Entex within 15 days after Xxxxxxxxx receives
the Offset Notice.
(d) If a Reply to Offset Notice is sent, Entex and Xxxxxxxxx shall
attempt to resolve the dispute within 30 days after Entex receives the Reply to
Offset Notice. If no resolution can be reached within such 30 day period, then
Xxxxxxxxx shall have the right to commence arbitration proceedings in accordance
with the provisions of Section 87 hereof within 15 days after the expiration of
such 30 day period.
(e) If arbitration proceedings are not commenced within such 15 day
period, then Entex may offset the amount described in the Offset Notice. If,
however, arbitration proceedings are commenced, Entex, may not offset any amount
until such arbitration proceedings are concluded, either by settlement or by an
award, and in such event may only offset either the amount agreed to by the
parties prior to the completion of the arbitration proceedings, or the amount
awarded to Entex by such arbitration proceedings.
8.5 Arbitration.
(a) At the option of either Entex or FCP, any and all disputes or
controversies whether of law or fact and of any nature whatsoever arising from
or respecting this Agreement shall
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be decided by arbitration under the rules and regulations of the American
Arbitration Association by one (l) arbitrator selected in accordance with such
rules
(b) Such arbitration shall take place in New York County, New York.
(c) At the request of either Entex or FCP, arbitration proceedings
will be conducted in the utmost secrecy; in such case all documents, testimony
and records shall be received, heard and maintained by the arbitrator in secrecy
under seal, available for the inspection only of Entex and FCP and their
respective attorneys and their respective experts who shall agree in advance and
in writing to receive all such information confidentially and to maintain such
information in secrecy until such information shall become generally known. The
arbitrator shall be able to decree any and all relief of an equitable nature,
including but not limited to such relief as a temporary restraining order, a
temporary and/or a permanent injunction, and shall also be able to award
damages, with or without an accounting and costs. The decree or judgment of an
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
(d) The arbitrator may award to a prevailing party the recovery of
costs and expenses, including legal fees and expenses.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of the Merger
by the shareholders of FCP:
(a) by mutual agreement of Entex, Sub and FCP;
(b) by Entex, if there has been a breach by FCP of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of FCP which FCP fails to cure within seven days after notice thereof
is given by Entex (except that no cure period shall be provided for a breach by
FCP which by its nature cannot be cured);
(c) by FCP, if there has been a breach by Entex or Sub of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of Entex or Sub which Entex or Sub, as the case may be, fails to cure
within seven days after notice thereof is given by FCP (except that no cure
period shall be provided for a breach by Entex or Sub which by its nature cannot
be cured);
(d) by Entex or FCP, if the Merger shall not have been consummated
on or before July 31, 1996;
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(e) by Entex or FCP if the required approval of the shareholders of
FCP contemplated by this Agreement shall not have been obtained by reason of the
failure to obtain the required vote upon a vote taken at the FCP Shareholders'
Meeting or at any adjournment thereof or by written consent of the FCP
Shareholders in accordance with applicable law;
(f) by either Entex or FCP if (i) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger or (ii) there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity which would make
consummation of the Merger illegal;
(g) by either Entex or FCP if there shall be any action taken, or
any statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would (A) prohibit
Entex's or FCP's ownership or operation of all or a material portion of the
business or assets of FCP or Entex and Sub taken as a whole, or compel Entex or
FCP to dispose of or hold separate all or a material portion of the business or
assets of FCP or Entex and Sub taken as a whole, as a result of the Merger or
(B) render Entex or FCP unable to consummate the, Merger, except for any waiting
period provisions; or
(h) by Entex, if there shall have been a material adverse change in
the Business Condition of FCP on or before the Closing Date.
Where action is taken to terminate this Agreement pursuant to this Section 8.1,
it shall be sufficient for such action to be authorized by the Board of
Directors of the party taking such action
9.2 Effect of Termination. In the event of termination of this Agreement
by either Entex or FCP as provided in Section 8.1, this Agreement and the Merger
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Entex or FCP or their respective officers or directors
except as set forth in Sections 7.25 (Expenses) and 7.27 (Confidentiality) and
except to the extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be conditions
to the Merger and shall not survive the consummation of the Merger, except that
the agreements contained in Articles IV, VIII, IX and X herein shall survive the
consummation of the Merger.
10.2 Amendment. This Agreement may be amended by the parties hereto, at
any time before or after approval of the Merger by the FCP Shareholders;
provided that following approval of
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the Merger by the FCP Shareholders, no amendment shall be made which by law
requires the further approval of such shareholders without obtaining such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
10.3 Extension; Waiver. At any time prior to the Effective Time of the
Merger, each of FCP and Entex, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other, (ii) waive any inaccuracies in the representations and warranties made to
it contained herein or in any document delivered pursuant hereto, (iii) waive
compliance with any of the agreements or conditions for the benefit of it
contained herein and (iv) waive or modify performance of any of the obligations
of the other. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. No action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representation, warranty, condition or agreement contained herein. Waiver of
the breach of any one or more provisions of this Agreement shall not be deemed
or construed to be a waiver of other breaches or subsequent breaches of the same
provisions.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or sent by telecopy,
confirmation received, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified by
like notice):
(a) if to Entex or Sub, to:
Entex Information Systems, Inc.
0 Xxxxxxxxxxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000-0000
Attn: Vice President and General Counsel
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
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(b) if to FCP, to:
FCP Technologies, Inc.
0000 Xxxxxxxx Xxxx XX Xxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxxx Xxxxxxxxx, Chief Executive Officer
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
X'Xxxxxx & Xxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, XX, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx XxXxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
10.5 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
10.7 Entire Agreement. This Agreement and the schedules, exhibits,
documents and instruments and other agreements among the parties delivered
pursuant hereto constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and are not intended to confer upon any other person any
rights or remedies hereunder except as otherwise expressly provided herein.
10.8 No Transfer. This Agreement and the rights and obligations set
forth herein may not be transferred or assigned by operation of law or otherwise
without the consent of each party hereto. This Agreement is binding upon and
will inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10.9 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable
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42
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision.
10.10 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law or equity on
such party, and the exercise of any one remedy will not preclude the exercise of
any other.
10.11 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
10.12 Absence of Third Party Beneficial Rights. No provision of this
Agreement is intended, nor will be interpreted, to provide to create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee, partner or any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
10.13 Mutual Drafting. This Agreement is the joint product of Entex and
FCP, and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of Entex and FCP, and shall not be construed for or
against any party hereto.
10.14 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to its choice of law principles).
IN WITNESS WHEREOF, Entex, Sub and FCP have caused this Agreement to be
signed by their respective officers thereunto duty authorized, all as of the
date first written above.
EIS ACQUISITION CORPORATION FCP TECHNOLOGIES, INC.
By: /s/ Xxxx X. XxXxxxx By: /s/ Xxxxxxx Xxxxxxxxx
Xxxx X XxXxxxx, Xx., President Xxxxxxx Xxxxxxxxx
President
ENTEX INFORMATION SERVICES, INC.
By: /s/ Xxxx X. XxXxxxx
Xxxx X XxXxxxx, Xx., President
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EXHIBIT 5.4
[SHEET ONE OMITTED]
44
FCP Disclosure Schedule Under Section IV
----------------------------------------
The following represents those variant matters which are now known to exist and
which previously have been disclosed to ENTEX by documents provided by FCP
Technology, Inc. (hereafter FCP) and Computers Plus L.P. as part of the FCP
response to various due diligence requests, and which are also specifically
referenced by category in the Representations and Warranties section of the
Agreement and Plan of Reorganization of July 9, 1996, as follows:
(a) Organization, Standing and Power
FCP holds a 99.9% interest in Computers Plus L.P. as sole general
partner.
(c) Authority
Requisite shareholder approval, referenced in Article VII, is required
before this transaction can be completed.
(h) No Defaults
FCP received a notice on June 24, 1996, indicating that, pursuant to
Section 3.3 of the Reseller Agreement, IE exercised its right to terminate the
Reseller Agreement effective as of June 20, 1996.
(i) Litigation
A claim has been made by one Xxxxxxxx Xxxxx for an alleged employment
discrimination, which has been set for hearing in the District Court of
Xxxxxxxxx County for September 9, 1996. Damages are estimated to be $50,000.
(k) Absence of Undisclosed Liabilities
Under the terms of a purchase agreement with Intelligent Electronics
("I.E.") there is a dispute regarding FCP's refusal to meet certain minimal
purchase requirements. They have alleged that this failure gives rise to a
significant liability exposure to which the company objects and views as highly
inflated.
(n) Major Contracts
45
There is $120,780.74 owed to Xx. Xxxxxxxxx as deferred compensation due him; and
deferred interest of $85,21245 owed the Sandhurst Group, et. al. Additionally,
there are a number of normal incentive compensation plans which are attached
which have been instituted by the Company in the normal course of its business
to provide additional incentives to individuals and groups.
Leases in current force and effect include the following:
1. New Jersey: Lincoln National
2. King of Prussia: lease with Trilem Inc.
(AE Triad Inc. General Partner)
3. Boston: Reservoir Place Realty Trust
Also: Intelligent Electronics (previously referenced herein).
46
Exhibit 5.2 to Agreement and Plan of Reorganization
--------------------------------------------------
FCP RETENTION BONUS PROGRAM
On or before February 15, 1997 and subject in each case to the
attainment of the Individual Hurdle described in paragraph d. below, Entex shall
pay to the persons named on Attachment A hereto (which Attachment A shall be
prepared by Xxxxxxx and Xxx Xxxxxxxxx within 30 days of the Closing Date and
attached hereto) a payment (the "Retention Bonus") equal to the percentage set
forth opposite their respective names, multiplied by the Aggregate Retention
Bonus (as hereinafter defined). The term "Aggregate Retention Bonus" shall mean
the sum of the Employee Retention Amount, the Customer Retention Amount and the
Support Amount (each as hereinafter defined); provided, however, that if the sum
of the Employee Retention Amount, the Customer Retention Amount and the Support
Amount exceeds $1,000,000 the Aggregate Retention Amount shall be equal to
$1,000,000.
a The Employee Retention Amount shall be determined by
calculating the number of Key FCP Employees (defined below) which remain
full-time employees of Entex or its subsidiaries at December 31, 1996 in
accordance with the following schedule:
Retained Employee Retention Retained Employee Retention Retained Employee Retention
Employeees Amount Employees Amount Employees Amount
77 $871,696 60 $679,245 43 $486,792
76 $860,377 59 $667,925 42 $427,925
75 $849,057 58 $656,604 41 $417,736
74 $837,736 57 $645,283 40 $407,547
73 $826,415 56 $633,962 39 $397,358
72 $815,094 55 $622,642 38 $387,170
71 $803,774 54 $611,321 37 $314,151
70 $792,453 53 $600,000 36 $305,660
69 $781,132 52 $588,679 35 $297,170
68 $769,811 51 $577,358 34 $288,679
67 $758,491 50 $566,038 33 $280,189
66 $747,170 49 $554,717 32 $181,132
65 $735,849 48 $543,396 31 $175,472
64 $724,528 47 $532,075 30 $169,811
63 $713,208 46 $520,755 29 $164,151
62 $701,887 45 $509,434 28 $158,491
61 $690,566 44 $498,113 27 $ 0
47
For purposes of this subparagraph, "Key FCP Employees" shall mean those
individuals named in Attachment B hereof.
b. The "Customer Retention Amount" shall be defined to mean an amount
based on the net revenues (revenues less warranty expenses, allowances and
returns; as derived from financial statements prepared in accordance with
generally accepted accounting principles applied on a consistent basis with
FCP's past practices) attributable to the FCP Customers (as hereinafter
defined), generated by the historic business of FCP from July 1, 1996 to
December 31, 1996 and determined in accordance with the following schedule:
Net Revenues Customer Retention Amount
------------ -------------------------
Greater than $18,000,000 $ 400,000
Greater than $15,000,000 but less than or equal to $18,000,000 $ 300,000
Greater than $12,000,000 but less than or equal to $15,000,000 $ 240,000
Greater than $10,000,000 but less than or equal to $12,000,000 $ 200,000
Greater than $ 8,000,000 but less than or equal to $10,000,000 $ 100,000
Less than or equal to $ 8,000,000 $ 0
For purposes of this subparagraph, "FCP Clients" shall mean the
companies and entities named in Attachment C hereto.
c. The term Support Amount shall be defined to mean an amount based on
FCP's Nation Support Center ("NSC") service gross margins from the July 1, 1996
to December 31, 1996 (which service gross margins shall be equal to Net Revenues
attributable to FCP's service and support activities less the cost of software
subscriptions and parts used (as derived from financial statements prepared on a
consistent basis with FCP's past practices) and determined in accordance with
the following schedule:
Service Gross Margins Support Amount
--------------------- --------------
Greater than $2,700,000 $ 400,000
Greater than $2,400,000 but less than or equal to $2,700,000 $ 300,000
Greater than $2,100,000 but less than or equal to $2,400,000 $ 280,000
Greater than $1,800,000 but less than or equal to $2, 1 00,000 $ 240,000
Greater than $1,500,000 but less than or equal to $1,800,000 $ 200,000
Greater than $1,200,000 but less than or equal to $1,500,000 $ 170,000
Greater than $1,000,000 but less than or equal to $1,200,000 $ 135,000
Greater than $ 800,000 but less than or equal to $1,000,000 $ 100,000
Less than or equal to $ 800,000 $ 0
d. With respect to each former FCP employee participating in this FCP
Retention Bonus Program, the payment of such former FCP employee's Retention
Bonus shall be further conditioned on the attainment or satisfaction of the
condition (the "Individual Hurdle") described opposite such former FCP
employee's name on Attachment A.
48
Attachment A
(to be completed by Xxxx and Xxx Xxxxxxxxx and attached within
30 days following the Closing Date)
Name Percentage Individual Hurdle
---- ---------- -----------------
Xxxxxxx Xxxxxxxxx none
Xxx Xxxxxxxxx none
[add other names]
49
Attachment B
KEY EMPLOYEES OF FCP TECHNOLOGIES, INC.
1. X. Xxxxxxx
2. X. Xxxx
3. X. Xxxxxxx
4. X. Xxxxxxxxxx
5. X. Xxxxxx
6. X. Xxxxxxxxx
7. X. Xxxxxx
8. X. Xxxxxx
9. X. Xxxxxxx
10. X. Xxxxxxx
11. X. Xxxxxxx
12. X. Xxxxxxxx
13. X. Xxxxxxx
14. X. Xxxxxx
15. X. Xxxxxx
16. X. Xxxxxx
17. X. Xxxxxx
18. X. Xxxxxxxxx
19. X. Xxxxxx
20. X. Xxxxxxx
21. X. Xxxxx
22. X. Xxxxxxxx
23. X. Xxxxxxx
24. X. Xxxxxx
25. X. Xxxxxx
26. X. Xxxxx
27. X. Xxxxxx
28. X. Xxxxxxxx
29. X. Xxxxx
30. X. Xxxxx
31. J. D'Antonio
32. X. Xxxxx
33. X. Xxxxx
34. X. Xxxxxxx
35. X. Xxxxxxx
36. X. Xxxxxxx
37. X. XxXxxxx
38. X. XxXxxxx
39. X. Xxxxxxx
40. X. Xxxxxxxxx
50
41. J. Shi
42. X. Xxxxxx
43. X. Xxxxxx
44. X. Xxxxxxxxx
45. X. Xxxxxxx
46. L. Palm
47. X. Xxxx
48. X. Xxxxxxxxxxx
49. X. Xxxxxx
50. X. Xxxxxxxx
51. X. Xxxxxxx
52. X. Xxxxxxx
53. X. Xxxxx
54. P. Hetteshelmer
55. P. Panzerrela
56. X. Xxxxxxx
57. X. Xxxxxxx
58. X. Xxxxxx
59. X. Xxxxxx
60. X. Xxxxxx
61. X. Xxxxxxxxx
62. X. Xxxxxxx
63. X. Xxxxxxx
64. X. Xxxxxx
65. X. Xxxxxxx
66. X. Xxxxx
67. X. Xxxx
68. X. Xxxxxxxx
69. X. Xxxxxxxx
70. X. Xxxxxxx
71. X. Xxxxxxxxxx
72. X. Xxxxx
73. X. Xxxxxx
74. X. Xxxxxxx
75. X. Xxxxxxx
76. T. Giffillan
77. X. Xxxxxx
51
Attachment C
CUSTOMER LIST (LESS ADVANTA AND ARMY)
27 Total Customers
1. BANM/XXXX
2. Elf Technologies (related)
3. Elf Atochem
4. SEI Corp/Capital Resources
5. Rite Aid
6. State of Delaware
7 State of New Jersey
8. Mobil
9. Commonwealth of Mass
10. Stone and Xxxxxxx
11. Xxxx Xxxxxx
12. National Medical Care
13. Xxxxxxx
14. Groundwater Tech
15. Foxboro
16. Xxxxxx Permanente
17. IMF
18. SCM Chemicals
19. Winchest Med. Center
20. Waverly Press
21. Barents
22. Xxxxx VHI
23. The Equitable
24. MCI
25. CommVault
26. BOC
27. ViaCom.
