1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MLC HOLDINGS, INC.
AND
MLC NETWORK SOLUTIONS, INC.
AND
COMPUVENTURES OF PITT COUNTY, INC.
AND
THE STOCKHOLDERS OF COMPUVENTURES OF PITT COUNTY, INC.
JULY 24, 1997
2
TABLE OF CONTENTS
PAGE
NUMBER
------
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Terms Defined in this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 MERGER; EFFECTIVE TIME; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3 ARTICLES OF INCORPORATION; BY-LAWS; AND DIRECTORS AND OFFICERS OF SURVIVING CORPORATION . . . . . . . . . . . 6
3.1 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 4 MERGER CONSIDERATION; PAYMENT OF MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Merger Consideration; Conversion or Cancellation of Compuventures Common Shares in Merger . . . . . . . . 7
4.2 Determination of Merger Consideration; Payment of Merger Consideration . . . . . . . . . . . . . . . . . 7
4.3 Fractional MLC Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Transfer of Compuventures Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 5 Representations and Warranties of the Individual Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.3 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Compuventures Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 6 Representations and Warranties of Solutions and MLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Organization of Solutions and MLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Authorization for Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-i-
3
TABLE OF CONTENTS
PAGE
NUMBER
------
6.5 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.6 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.7 Nasdaq National Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.8 Ownership of Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 7 Representations and Warranties Concerning Compuventures. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1 Organization, Qualification, and Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.8 Events Subsequent to Most Recent Fiscal Year End . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.13 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.14 Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.15 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.16 Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.17 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.19 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.21 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.22 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.23 Environment, Health, and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.24 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.25 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-ii-
4
TABLE OF CONTENTS
PAGE
NUMBER
------
7.26 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.27 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.28 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.29 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.30 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 8 Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.3 Maintenance of Business; Prohibited Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.4 Full Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.5 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.6 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.7 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.8 Compuventures Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.9 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.10 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 9 Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.3 Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.5 Covenant Not to Compete. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.6 MLC Common Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.7 Continuity of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8 Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.9 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.10 Computation of Final Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.11 Reporting of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.12 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 10 Conditions to Obligation to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.1 Conditions to Each Party's Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-iii-
5
PAGE
NUMBER
------
10.2 Conditions to Obligation of Solutions and MLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Conditions to Obligation of the Stockholders and Compuventures . . . . . . . . . . . . . . . . . . . 32
ARTICLE 11 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.2 Termination by Either MLC or Compuventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.3 Effect of Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.4 Nonsolicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.1 Indemnity Obligations of the Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.2 Indemnity Obligations of MLC and Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.3 Appointment of Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.4 Notification of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.6 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.7 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.8 Payment of Indemnity Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 13 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.1 Press Releases and Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.2 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.4 Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.12 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.13 Incorporation of Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.14 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-iv-
6
TABLE OF CONTENTS
PAGE
NUMBER
------
13.15 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SCHEDULES AND EXHIBITS:
Exhibit A-1 - Form of Employment Agreement
Exhibit A-2 - Form of Employment Agreement
Exhibit A-3 - Form of Employment Agreement
Exhibit B - Form of Escrow Agreement
Disclosure Schedule - Exceptions to Representations and Warranties Concerning
the Stockholders and Compuventures
-v-
7
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as
of this 24th day of July 1997, by and among MLC Holdings, Inc., a Delaware
corporation ("MLC"), and MLC Network Solutions, Inc., a Delaware corporation
and wholly-owned subsidiary of MLC ("Solutions"), and Compuventures of Pitt
County, Inc., a North Carolina corporation ("Compuventures"), and Xxxxx X.
Xxxxxxx, Xxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xx., Xxxxxxx X. Xxxxxx, Xxxxx X.
Xxxx, III and Xxx X. Xxxxxxxxx, the sole stockholders of Compuventures
(collectively, the "Stockholders"). MLC, Solutions, Compuventures and the
Stockholders are referred to collectively herein as the "Parties" and
individually as a "Party."
RECITALS:
WHEREAS, the Parties hereto desire to consummate a merger (the
"Merger") whereby Compuventures will be merged with and into Solutions and
Solutions will be the surviving corporation in the Merger, upon the terms and
subject to the conditions of this Agreement and in accordance with the Delaware
General Corporation Law (the "Delaware GCL") and the North Carolina Business
Corporation Act (the "North Carolina BCA"); and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code"), pursuant to which each
issued and outstanding share of Compuventures common stock shall be converted
into the right to receive shares of MLC common stock.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Terms Defined in this Agreement. As used in this Agreement,
the following terms shall have the respective meanings set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504.
"Agreement" has the meaning set forth in the preface above.
"Average Share Price" has the meaning set forth in Section 4.2(a)
below.
8
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms the basis for any specified
consequence.
"Closing" has the meaning set forth in Section 2.3 below.
"Closing Date" has the meaning set forth in Section 2.3 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compuventures AAA Account" means Compuventures accumulated adjustment
account as described in Section 1368 of the Code.
"Compuventures" has the meaning set forth in the preface above.
"Compuventures Certificate of Merger" has the meaning set forth in
Section 2.2 below.
"Compuventures Common Shares" means the shares of the common stock,
$1.00 par value, of Compuventures.
"Compuventures Common Share Certificates" has the meaning set forth in
Section 4.1 below.
"Confidential Information" means any information concerning the
businesses and affairs of Compuventures or MLC, if any, that is not already
generally available to the public.
"Delaware GCL" has the meaning set forth in the first paragraph of the
Recitals above.
"Disclosure Schedule" has the meaning set forth in the first paragraph
of Article 7 below.
"Effective Time" has the meaning set forth in Section 2.2 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) tax-qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) tax-qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare
Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery
- 2 -
9
Act of 1976, and the Occupational Safety and Health Act of 1970, each as
amended, together with all other laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof) concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section 7.7 below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (d)
all mask works and all applications, registrations, and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all computer
software (including data and related documentation), (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever form
or medium).
"Indemnification Threshold" has the meaning set forth in Section 12.6
below.
"Knowledge" means the collective knowledge of all of the Stockholders
after reasonable investigation. For the purposes of this Agreement, the
knowledge of one Stockholder shall be attributed to the other Stockholders.
- 3 -
10
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means, as to any Party, a material adverse
effect on the business, properties, operations, condition or future prospects
(financial or otherwise) of such Party.
"Merger" shall mean the merger of Compuventures with and into
Solutions in accordance with the terms of this Agreement.
"Merger Consideration" has the meaning set forth in Section 4.2(a)
below.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 7.7 below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
7.7 below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 7.7
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"MLC" has the meaning set forth in the preface above.
"MLC Common Shares" shall mean the shares of common stock, par value
$0.01, of MLC.
"Nasdaq" means the Nasdaq National Market.
"North Carolina BCA" has the meaning set forth in the first paragraph
of the Recitals above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Party" or "Parties has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
- 4 -
11
"Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Representative" has the meaning set forth in Section 12.3 below.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"Solutions" has the meaning set forth in the preface above.
"Solutions Certificate of Merger" has the meaning set forth in Section
2.2 below.
"Special Claims" has the meaning set forth in Section 12.6 below.
"Stockholders" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Surviving Corporation" has the meaning set forth in Section 2.1
below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not, of
Compuventures.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes of Compuventures,
including any schedule or attachment thereto, and including any amendment
thereof.
- 5 -
12
"Third Party Claim" has the meaning set forth in Section 12.4 below.
ARTICLE 2
MERGER; EFFECTIVE TIME; CLOSING
2.1 Merger. Subject to the terms and conditions of this
Agreement, the Delaware GCL and the North Carolina BCA, at the Effective Time,
Solutions and Compuventures shall consummate the Merger in which (i)
Compuventures shall be merged with and into Solutions and the separate
corporate existence of Compuventures shall thereupon cease, (ii) Solutions
shall be the successor or surviving corporation in the Merger and shall
continue to be governed by the laws of the State of Delaware and (iii) the
separate corporate existence of Solutions with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
corporation surviving the Merger is sometimes hereinafter referred to as the
"Surviving Corporation." The Merger shall have the effects set forth in the
Delaware GCL and the North Carolina BCA.
2.2 Effective Time. On the Closing Date, subject to the terms and
conditions of this Agreement, Solutions and Compuventures shall (i) cause to be
executed (A) a Certificate of Merger in the form required by the Delaware GCL
(the "Solutions Certificate of Merger") and (B) a Certificate of Merger in the
form required by the North Carolina BCA (the "Compuventures Certificate of
Merger"), and (ii) cause the Solutions Certificate of Merger to be filed with
the Delaware Secretary of State as provided in the Delaware GCL and
Compuventures Certificate of Merger to be filed with the North Carolina
Secretary of State as provided in the North Carolina BCA. The Merger shall
become effective at (i) such time as the Solutions Certificate of Merger has
been duly filed with the Delaware Secretary of State and Compuventures
Certificate of Merger has been duly filed with the North Carolina Secretary of
State or (ii) such other time as is agreed upon by the Representative and MLC
and specified in the Solutions Certificate of Merger and Compuventures
Certificate of Merger. Such time is hereinafter referred to as the "Effective
Time."
2.3 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Shaw,
Pittman, Xxxxx & Xxxxxxxxxx, 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000,
commencing at 9:00 a.m. local time on such date as within five (5) business
days following the fulfillment or waiver of the conditions set forth in Article
10 (other than conditions which by their nature are intended to be fulfilled at
the Closing) or such other place or time or on such other date as MLC and the
Representative may agree or as may be necessary to permit the fulfillment or
waiver of the conditions set forth in Article 10 (the "Closing Date").
ARTICLE 3
ARTICLES OF INCORPORATION; BY-LAWS; AND
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
3.1 Articles of Incorporation. The articles of incorporation of
the Solutions, as in effect immediately prior to the Effective Time, shall be
the articles of incorporation of the
- 6 -
13
Surviving Corporation until thereafter amended as provided therein and under
the Delaware GCL.
3.2 By-Laws. The by-laws of the Solutions, as in effect
immediately prior to the Effective Time, shall be the by-laws of the Surviving
Corporation.
3.3 Directors and Officers. The directors and officers of
Solutions immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation from and after the Effective Time until
their successors have been duly elected, appointed or qualified or until their
earlier death, resignation or removal in accordance with the articles of
incorporation and by-laws of the Surviving Corporation.
ARTICLE 4
MERGER CONSIDERATION; PAYMENT OF MERGER CONSIDERATION
4.1 Merger Consideration; Conversion or Cancellation of
Compuventures Common Shares in Merger. At the Effective Time, by virtue of the
Merger and without any action by the Parties, all of the outstanding
Compuventures Common Shares (i) shall be converted into the right to receive
the Merger Consideration set forth in Section 4.2, (ii) shall cease to be
outstanding, and (iii) shall be canceled and retired and shall cease to exist,
and each Stockholder, as the holder of certificates representing such
Compuventures Common Shares (the "Compuventures Common Share Certificates"),
shall cease to have any rights with respect thereto, except the right to
receive Merger Consideration therefor upon the surrender of such certificates
in accordance with this Section 4.1 and cash in lieu of fractional MLC Common
Shares as set forth in Section 4.3.
4.2 Determination of Merger Consideration; Payment of Merger
Consideration.
(a) The consideration payable by MLC in connection with the Merger
shall be $3,384,584 (the "Merger Consideration"). The Merger Consideration
shall be payable in the form of MLC Common Shares, the number of which to be
determined by dividing the Merger Consideration by the price of a MLC Common
Share, rounded to the nearest cent, which is the average closing price for a
MLC Common Share as reported on the Nasdaq over the 20 trading days immediately
preceding a date which is five days prior to the Closing Date (the "Average
Share Price").
(b) At the Closing, upon surrender to MLC of Compuventures Common
Share Certificates by the Stockholders for cancellation, together with any
other required documents, the Stockholders shall receive the Merger
Consideration pro rata based on their relative equity interests in
Compuventures as of the Closing Date.
4.3 Fractional MLC Common Shares. No certificates representing
fractional MLC Common Shares shall be issued upon surrender of any
Compuventures Common Share Certificates. In lieu of any fractional MLC Common
Shares, there shall be paid to each holder of
- 7 -
14
Compuventures Common Shares who otherwise would be entitled to receive a
fractional MLC Common Share an amount of cash (without interest) determined by
multiplying such fraction by the Average Share Price.
4.4 Transfer of Compuventures Common Shares. No transfers of
Compuventures Common Shares shall be made on the stock transfer books of
Compuventures after the date of this Agreement, and each Stockholder agrees not
to transfer any Compuventures Common Shares after the date of this Agreement
and before the Closing Date.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE INDIVIDUAL STOCKHOLDERS
Each of the Stockholders, severally, but not jointly, represents and
warrants to Solutions and MLC that the statements contained in this Article 5
are correct and complete as of the date hereof with respect to himself:
5.1 Authorization of Transaction. Each of the Stockholders has
full power and authority to execute and deliver this Agreement and to perform
his obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of each of the Stockholders, enforceable in accordance with
its terms and conditions. None of the Stockholders need give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement, except in connection with federal securities
laws and any applicable "Blue Sky" or state securities laws.
5.2 Noncontravention. Except as set forth on Section 5.2 of the
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (A) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which any Stockholder is subject, or (B) result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the any Stockholder is a party or by which he or she is
bound or to which any of his assets is subject.
5.3 Investment. Each of the Stockholders (A) understands that the
MLC Common Shares acquired by such Stockholder pursuant to this Agreement have
not been registered under the Securities Act, or under any state securities
laws, and are being exchanged in reliance upon federal and state exemptions for
transactions not involving a public offering, (B) is acquiring the MLC Common
Shares solely for his own account for investment purposes, and not with a view
towards the distribution thereof, (C) is a sophisticated investor with
knowledge and experience in business and financial matters, (D) has received
certain information concerning MLC, including, without limitation, (i) the
most recent annual report on Form 10-K, (ii) the three most recent quarterly
reports on Form 10-Q, (iii) any current reports on Form 8-K since December 31,
1996, in each case as filed by MLC under the Securities Exchange Act, and (iv)
the most recent annual
- 8 -
15
report to stockholders of MLC, and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent
in holding MLC Common Shares, and (E) is able to bear the economic risk and
lack of liquidity inherent in holding MLC Common Shares which have not been
registered under the Securities Act.
5.4 Compuventures Common Shares. Except for the agreements set
forth on Section 5.4 of the Disclosure Schedule, each of the Stockholders holds
of record and owns beneficially the number of Compuventures Common Shares set
forth next to his name in Section 7.2 of the Disclosure Schedule, free and
clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. Except for the agreements set forth on Section 5.4 of the Disclosure
Schedule, none of the Stockholders is a party to any option, warrant, purchase
right, or other contract or commitment that could require one or more
Stockholders to sell, transfer, or otherwise dispose of any Compuventures
Common Shares (other than pursuant to this Agreement) or is a party to any
voting trust, proxy, or other agreement or understanding with respect to the
voting of any of Compuventures Common Shares.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SOLUTIONS AND MLC
Solutions and MLC jointly and severally represent and warrant to the
Stockholders and Compuventures that the statements contained in this Article 6
are correct and complete as of the date hereof:
6.1 Organization of Solutions and MLC. Each of Solutions and MLC
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware.
6.2 Capital Stock. The authorized capital stock of MLC consists
of 10,000,000 shares of common stock, $.01 par value (the "MLC Common Shares"),
of which 5,311,329 shares are outstanding as of July 17, 1997, and 2,000,000
shares of preferred stock, $.01 par value, of which no shares are outstanding.
Since December 31, 1996, MLC has not issued any shares of capital stock except
pursuant to the exercise of options outstanding on such date to purchase MLC
Common Shares. All outstanding MLC Common Shares are, and all MLC Common
Shares issuable under stock option plans of MLC, will be when issued in
accordance with the terms thereof, duly authorized, validly issued, fully paid
and nonassessable. Except for the 400,000 MLC Common Shares reserved for
issuance pursuant to stock option plans of MLC, there are outstanding on the
date hereof no options, warrants, calls, rights, commitments or any other
agreements of any character to which MLC is a party or by which it may be
bound, requiring it to issue, transfer, sell, purchase, register, redeem or
acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for or evidencing the right to subscribe for or acquire any
shares of its capital stock.
6.3 Authorization for Common Stock. The MLC Common Shares to be
issued as Merger Consideration will, when issued, be duly authorized, validly
issued, fully paid and
- 9 -
16
nonassessable, and no stockholder of MLC will have any preemptive right or
similar rights of subscription or purchase in respect thereof. The MLC Common
Shares to be issued as Merger Consideration will, subject to the accuracy of
the Stockholders' representations contained in Section 5.3 hereof, be exempt
from registration under the Securities Act and will be registered or exempt
from registration under all applicable state securities laws. The MLC Common
Shares to be issued as Merger Consideration will, when issued, be approved for
listing on the Nasdaq, subject to official notice of issuance.
6.4 Authorization of Transaction. Each of Solutions and MLC has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its respective obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of each of Solutions and MLC, enforceable in accordance with its terms and
conditions. Neither Solutions nor MLC need give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement, except in connection with federal securities laws and any
applicable "Blue Sky" or state securities laws.
6.5 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which either Solutions or MLC is
subject or any provision of its articles of incorporation or by-laws or (B)
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which either Solutions or MLC is a party or
by which it is bound or to which any of its assets is subject.
6.6 Brokers' Fees. Neither Solutions nor MLC has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
6.7 Nasdaq National Market. MLC is in compliance in all material
respects with its Nasdaq Listing Agreement.
6.8 Ownership of Solutions. MLC owns, and will own at the
Effective Time, 100% of the equity securities of Solutions.
6.9 Disclosure. MLC is in compliance in all material respects
with its obligation under the Securities Exchange Act to publicly disclose
material information in a timely fashion.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES CONCERNING COMPUVENTURES
The Stockholders and Compuventures represent and warrant to Solutions
and MLC that the statements contained in this Article 7 are correct and
complete as of the date hereof, except as
- 10 -
17
set forth in the disclosure schedule delivered by the Stockholders and
Compuventures to Solutions and MLC on the date hereof (the "Disclosure
Schedule"). Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein, however,
unless the Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Article 7.
7.1 Organization, Qualification, and Corporate Power.
Compuventures is a corporation duly organized, validly existing, and in good
standing under the laws of North Carolina. Compuventures is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to so qualify or
obtain authorization would not have a Material Adverse Effect on Compuventures.
Compuventures has full corporate power and authority and all licenses, permits,
and authorizations necessary to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. Section 7.1 of the
Disclosure Schedule lists the directors and officers of Compuventures. The
Stockholders have delivered to Solutions and MLC correct and complete copies of
the articles of incorporation and by-laws of Compuventures (as amended to
date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of
Compuventures are correct and complete. Compuventures is not in default under
or in violation of any provision of its articles of incorporation or by-laws.
7.2 Capitalization. The entire authorized capital stock of
Compuventures (the "Compuventures Common Shares") consists of 100,000 shares of
common stock, $1.00 par value, of which 3,064 shares are issued and
outstanding. No Compuventures Common Shares are held in treasury. All of the
issued and outstanding Compuventures Common Shares have been duly authorized,
are validly issued, fully paid, and nonassessable, and are held of record by
the respective Stockholders as set forth in Section 7.2 of the Disclosure
Schedule. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require Compuventures to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Compuventures. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of Compuventures Common Shares.
7.3 Authorization of Transaction. Compuventures has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Compuventures,
enforceable in accordance with its terms and conditions. Compuventures is not
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to
- 11 -
18
consummate the transactions contemplated by this Agreement, except in
connection with federal securities laws and any applicable "Blue Sky" or state
securities laws.
7.4 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Compuventures is subject or
any provision of the charter or bylaws of Compuventures or (ii) result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Compuventures is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets).
7.5 Title to Assets. Compuventures has good title to, or a valid
leasehold interest in, the properties and assets used by it, located on its
premises, or shown on the Most Recent Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for properties and
assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet.
7.6 Subsidiaries. Compuventures does not have any Subsidiaries,
operating or otherwise.
7.7 Financial Statements. Compuventures has delivered
(collectively, the "Financial Statements") to MLC its (i) compiled balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the fiscal years ended December 31, 1995, and December 31, 1996
(the "Most Recent Fiscal Year End"); and (ii) unaudited balance sheets and
statements of income (the "Most Recent Financial Statements") as of and for the
five months ended May 31, 1997 (the "Most Recent Fiscal Month End"). The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of Compuventures as of
such dates and the results of operations of Compuventures for such periods, and
are consistent with the books and records of Compuventures (which books and
records are correct and complete in all material respects)
7.8 Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any Material Adverse Effect in
the business, financial condition, operations, results of operations, or future
prospects of Compuventures. Without limiting the generality of the foregoing,
since that date:
(a) Compuventures has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(b) Compuventures has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $25,000 or outside the Ordinary Course of
Business;
- 12 -
19
(c) no party (including Compuventures) has accelerated,
terminated, modified, or canceled any material agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses) to
which Compuventures is a party or by which it is bound;
(d) Compuventures has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(e) Compuventures has not made any capital expenditure (or series
of related capital expenditures) either involving more than $25,000 or outside
the Ordinary Course of Business;
(f) Compuventures has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions);
(g) Compuventures has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation;
(h) Compuventures has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
(i) Compuventures has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) outside
the Ordinary Course of Business;
(j) Compuventures has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(k) there has been no change made or authorized in the articles of
incorporation or by-laws of Compuventures;
(l) Compuventures has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
(m) except for distributions to the Stockholders out of
Compuventures AAA account or distributions to the Stockholders for the purpose
of satisfying their income Tax obligations in an aggregate amount not to exceed
$410,000, Compuventures has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(n) Compuventures has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(o) Compuventures has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
- 13 -
20
(p) Compuventures has not, outside the Ordinary Course of
Business, entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such contract
or agreement;
(q) Compuventures has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(r) Compuventures has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(s) Compuventures has not made any other change in employment
terms for any of its directors, officers, and employees outside the Ordinary
Course of Business or in the terms of its agreements with any independent
contractors;
(t) Compuventures has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(u) there has not been any occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business which
would have a Material Adverse Effect on Compuventures; and
(v) Compuventures is not under any legal obligation, whether
written or oral, to do any of the foregoing.
7.9 Undisclosed Liabilities. Compuventures does not have any
Liability (and to the Knowledge of the Stockholders, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving rise to any Liability), except
for (i) Liabilities set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (ii) Liabilities which have arisen after
the Most Recent Fiscal Month End in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
7.10 Legal Compliance. Compuventures has complied in all material
respects with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no notice has been received by the Stockholders or Compuventures regarding any
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice that has been filed or commenced against Compuventures
alleging any failure so to comply.
- 14 -
21
7.11 Tax Matters.
(a) Compuventures has filed all Tax Returns that it was required
to file, including, without limitation, any Tax Returns required to be filed
with any state. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by Compuventures (whether or not shown on any Tax
Return) have been paid. Compuventures currently is not the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where Compuventures does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of Compuventures that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) Compuventures has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(c) No Stockholder expects any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax Liability of Compuventures either (A) claimed or
raised by any authority in writing or (B) as to which any of the Stockholders
has Knowledge. Section 7.11(c) of the Disclosure Schedule lists all federal,
state, local, and foreign income Tax Returns filed with respect to
Compuventures for taxable periods ended on or after December 31, 1994,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Compuventures has delivered
to Solutions and MLC correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against
or agreed to by Compuventures since December 31, 1994.
(d) Compuventures has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) Compuventures has not filed a consent under Code Section
341(f) concerning collapsible corporations. Compuventures has not made any
payments, is not obligated to make any payments, or is not a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G. Compuventures
has not been a United States real property holding corporation within the
meaning of Code Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii). Compuventures has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662. Compuventures is not a party to any Tax allocation or sharing
agreement. Compuventures (A) has not been a member of an Affiliated Group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was Compuventures) or (B) has any Liability for the Taxes of
any Person (other than Compuventures) under Treas. Reg. Section 1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
- 15 -
22
(f) Compuventures has been a subchapter S corporation for federal
income taxes since January 1, 1988 and has made all requisite filings under the
Code.
7.12 Real Property. Section 7.12(a) of the Disclosure Schedule
lists and describes briefly all real property owned, leased or subleased to
Compuventures. The Stockholders have delivered to Solutions and MLC correct and
complete copies of the leases and subleases listed in Section 7.12(b) of the
Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in Section 7.12(b) of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(b) no consent is required with respect to any lease or sublease
as a result of this Agreement, and the actions contemplated by this Agreement
will not result in the change of any terms of any lease or sublease or
otherwise affect the ongoing validity of any lease or sublease;
(c) to the Knowledge of the Stockholders and Compuventures, no
party to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;
(d) to the Knowledge of the Stockholders and Compuventures, no
party to the lease or sublease has repudiated any provision thereof;
(e) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(f) with respect to each sublease, the representations and
warranties set forth in subsections (a) through (e) above are true and correct
with respect to the underlying lease;
(g) Compuventures has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(h) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and permits)
required by Compuventures in connection with the operation thereof and, to the
Knowledge of Compuventures, have been operated and maintained by Compuventures
in accordance with applicable laws, rules, and regulations; and
(i) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for Compuventures' operation of
said facilities.
- 16 -
23
7.13 Intellectual Property.
(a) Compuventures owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property used in
the operation of the businesses of Compuventures as presently conducted. Each
item of Intellectual Property owned or used by Compuventures immediately prior
to the Closing hereunder will be owned or available for use by the Surviving
Corporation on identical terms and conditions immediately subsequent to the
Closing hereunder. Compuventures has taken all necessary action to maintain
and protect each item of Intellectual Property that it owns or uses.
(b) Compuventures has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Stockholders and the directors and
officers (and employees with responsibility for Intellectual Property matters)
of Compuventures has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that Compuventures must license or refrain from
using any Intellectual Property rights of any third party). To the Knowledge
of the Stockholders, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of Compuventures.
(c) Compuventures has no patent or registration which has been
issued to Compuventures with respect to any of its Intellectual Property.
(d) Section 7.13(d) of the Disclosure Schedule identifies each
material item of Intellectual Property owned by Compuventures or each item of
Intellectual Property that any third party owns and that Compuventures uses
pursuant to license, sublicense, agreement, or permission. The Stockholders
have delivered to Solutions and MLC correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
(e) The Stockholders and Compuventures have no Basis to believe
that anything will interfere with, infringe upon, misappropriate, or otherwise
come into conflict with, any Intellectual Property rights of third parties as a
result of the continued operation of its business as presently conducted.
7.14 Tangible Assets. Compuventures owns or leases all buildings,
machinery, equipment, and other tangible assets used in the conduct of its
business as presently conducted and as presently proposed to be conducted. Each
such tangible asset is free from all material defects, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used. The Most Recent Balance Sheet sets forth all of
the material assets necessary to conduct Compuventures' business as it is
currently being conducted.
7.15 Contracts. Section 7.15 of the Disclosure Schedule lists the
following contracts and other agreements to which Compuventures is a party:
- 17 -
24
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(b) any agreement concerning a partnership or joint venture;
(c) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(d) any agreement concerning confidentiality or noncompetition;
(e) any agreement with any of the Stockholders and their
Affiliates (other than Compuventures);
(f) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(g) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $60,000 or providing severance benefits;
(h) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary Course of
Business;
(i) the agreement between Compuventures and MicroAge InfoSystems
Services, Inc. (the "MicroAge M.I.S. Agreement"); or
(j) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect.
The Stockholders have delivered to Solutions and MLC a correct and complete
copy of each written agreement listed in Section 7.15 of the Disclosure
Schedule (as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 7.15 of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) to the Knowledge of the Stockholders and
Compuventures, no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; and (D)
no notice has been received by Compuventures or the Stockholders that any party
has repudiated any provision of the agreement.
- 18 -
25
7.16 Notes and Accounts Receivable. All notes and accounts
receivable of Compuventures are reflected properly on its books and records,
are valid receivables subject to no setoffs or counterclaims, and are current
and collectible in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of Compuventures.
7.17 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of Compuventures.
7.18 Insurance. Section 7.18 of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which Compuventures has been a
party, a named insured, or otherwise the beneficiary of coverage at any time
within the past five years: (i) the name, address, and telephone number of the
agent; (ii) the name of the insurer, the name of the policyholder, and the name
of each covered insured; (iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on a claims
made, occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage; and (v) a
description of any retroactive premium adjustments or other loss-sharing
arrangements. With respect to each insurance policy that is currently in
effect: (A) the policy is legal, valid, binding, enforceable, and in full force
and effect; (B) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) to the Knowledge of
the Stockholders and Compuventures, neither Compuventures nor any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (D) no
notice has been received by Compuventures or the Stockholders that any party to
the policy has repudiated any provision thereof. To the Knowledge of the
Stockholders and Compuventures, Compuventures has been covered during the past
five years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. Section
7.18 of the Disclosure Schedule describes any self-insurance arrangements
affecting Compuventures.
7.19 Litigation. Section 7.19 of the Disclosure Schedule sets
forth each instance in which Compuventures (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 7.19 of the Disclosure Schedule could
result in any Material Adverse Effect on Compuventures. None of the
Stockholders has any Basis to believe that any such action, suit, proceeding,
hearing, or investigation may be brought or threatened against Compuventures.
- 19 -
26
7.20 Employees. To the Knowledge of the Stockholders and
Compuventures, no executive, key employee, or group of employees currently has
any plans to terminate employment with Compuventures or as a result of this
Agreement. Compuventures has not committed any unfair labor practice. None of
the Stockholders or Compuventures has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of Compuventures.
7.21 Employee Benefits.
(a) Section 7.21 of the Disclosure Schedule lists each Employee
Benefit Plan that Compuventures maintains or to which Compuventures
contributes.
(b) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and other
applicable laws.
(c) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, and Summary Plan Descriptions) have
been filed or distributed appropriately with respect to each such Employee
Benefit Plan. The material requirements of Part 6 of Subtitle B of Title 1 of
ERISA and of Code Section 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which are not
yet due have been paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of Compuventures. All premiums or
other payments for all periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(e) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code Section
401(a).
(f) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan (other than any Multiemployer
Plan), subject to Title IV of ERISA, equals or exceeds the present value of all
vested and nonvested Liabilities thereunder determined in accordance with PBGC
methods, factors, and assumptions applicable to an Employee Pension Benefit
Plan terminating on the date for determination.
(g) The Stockholders have delivered to Solutions and MLC correct
and complete copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
- 20 -
27
(h) With respect to each Employee Benefit Plan that Compuventures
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
(i) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan), subject to Title IV
of ERISA, has been completely or partially terminated or been the subject of a
Reportable Event as to which notices would be required to be filed with the
PBGC. No proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted or threatened.
(ii) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending or,
to the Knowledge of the Stockholders, threatened. None of the Stockholders has
any Knowledge of any Basis for any such action, suit, proceeding, hearing, or
investigation.
(iii) Compuventures has not incurred, and none of the
Stockholders and the directors and officers (and employees with responsibility
for employee benefits matters) of Compuventures has any Basis to expect that
Compuventures or the Surviving Corporation will incur, any Liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(i) Compuventures does not contribute to, ever has contributed to,
or ever has been required to contribute to any Multiemployer Plan or has any
Liability (including withdrawal Liability) under any Multiemployer Plan.
(j) Compuventures does not maintain or ever has maintained or
contributes, ever has contributed, or ever has been required to contribute to
any Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Code Section 4980B).
7.22 Guaranties. Compuventures is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any other
Person.
- 21 -
28
7.23 Environment, Health, and Safety.
(a) To the Knowledge of the Stockholders, Compuventures has
complied with all Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against it alleging any failure so to comply.
Without limiting the generality of the preceding sentence, Compuventures has
obtained and been in compliance with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
(b) To the Knowledge of the Stockholders, Compuventures does not
have any Liability and has not handled or disposed of any substance, arranged
for the disposal of any substance, exposed any employee or other individual to
any substance or condition, or owned or operated any property or facility in
any manner that could form the Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
Compuventures giving rise to any Liability for damage to any site, location, or
body of water (surface or subsurface), for any illness of or personal injury to
any employee or other individual, or for any reason under any Environmental,
Health, and Safety Law.
(c) To the Knowledge of the Stockholders, all properties and
equipment used in the business of Compuventures has been free of asbestos,
PCB's, methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
7.24 Customers. The names and addresses of the top ten (based on
total revenues) customers of Compuventures during fiscal year 1996 and the top
ten (based on expected total revenues) non-retail customers known as of the
Closing Date who are anticipated to be customers during fiscal 1997 are listed
in the Disclosure Schedule. All contracts and agreements with such customers
are valid, effective and enforceable and the Disclosure Schedule sets forth all
customers who have account balances that are in excess of 90 days past due.
Compuventures knows of no written or oral communication, fact, event or action
which exists or has occurred within 120 days prior to the date of this
Agreement which would indicate that any of the following shall terminate or
materially reduce its business with Compuventures:
(i) any current customer of Compuventures which accounted
for over 1% of total net sales of Compuventures for its most recently completed
fiscal year; or
(ii) any current supplier to Compuventures of items
essential to the conduct of the business, which items cannot be replaced at
comparable cost and the loss of which would have an Material Adverse Effect on
Compuventures.
Since the Most Recent Balance Sheet Date, (A) Compuventures has
retained all sales personnel employed in connection with the operation of the
business and (B) no customer (or
- 22 -
29
group of customers) purchasing in the aggregate of $50,000 in products and
services on a yearly basis has terminated its relationship with Compuventures.
7.25 Related Party Agreements. Section 7.25 of the Disclosure
Schedule sets forth all indebtedness to Compuventures of the Stockholders or
the officers, directors or employees of Compuventures. All of such
indebtedness has been or will be repaid on or before the Closing Date. Section
7.25 of the Disclosure Schedule sets forth all employees of Compuventures who
have been issued credit cards for the account of Compuventures and the maximum
charging limit with respect to each such credit card. The Disclosure Schedule
sets forth all agreements between (i) Compuventures and its employees and (ii)
Compuventures and the Stockholders.
7.26 Product Liability. To the Knowledge of the Stockholders and
Compuventures, Compuventures has no liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against Compuventures giving rise to any liability)
arising out of any injury to individuals or property as a result of the
ownership, possession or use of any product manufactured, sold, leased or
delivered by Compuventures.
7.27 Bank Accounts. The Disclosure Schedule sets forth all bank
accounts and marketable securities (both debt and equity) of Compuventures.
7.28 Change in Control. Compuventures is not a party to any
contract or arrangement, which contains a "change in control," "potential
change in control" or similar provision, and the consummation of the Merger
shall not (either alone or upon the occurrence of additional acts or events)
result in any payment or payments becoming due from Compuventures to any person
or give any person the right to terminate or alter the provisions of any
agreement to which Compuventures is a party.
7.29 Inventory. The inventory of Compuventures is in good and
marketable condition and is capable of being sold in the ordinary course of
business without discounts to the FIFO purchase cost at which such inventory is
recorded on the books and records of Compuventures as of the date of the Most
Recent Balance Sheet.
7.30 Disclosure. The representations and warranties contained in
this Article 7 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Article 7 not misleading.
ARTICLE 8
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
8.1 General. Each of the Parties will use his or its reasonable
best efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make
- 23 -
30
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Article 10
below).
8.2 Notices and Consents. Compuventures shall give any notices to
third parties and shall use its reasonable best efforts to obtain any third
party consents that MLC and Solutions may reasonably request in connection with
the matters referred to in Section 7.3 above. Each of the Parties shall give
any notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Section
5.1, Section 6.4, and Section 7.3 above.
8.3 Maintenance of Business; Prohibited Acts. During the period
from the date of this Agreement to the Effective Time, the Stockholders will
not, and will not cause Compuventures to, take any action that adversely
affects the ability of Compuventures (i) to pursue its business in the ordinary
course, (ii) to seek to preserve intact its current business organizations,
(iii) to keep available the service of its current officers and employees and
(iv) preserve its relationships with customers, suppliers and others having
business dealings with it; and the Stockholders will not allow Compuventures
to, without MLC's prior written consent (which consent shall not be
unreasonably withheld or delayed):
(a) issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, delivery, sale, disposition or
pledge or other encumbrances of (i) any additional shares of its capital stock
of any class (including Compuventures Common Shares), or any securities or
rights convertible into, exchangeable for or evidencing the right to subscribe
for any shares of its capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire any
shares of its capital stock or any other securities or rights convertible into,
exchangeable for or evidencing the right to subscribe for any shares of its
capital stock, or (ii) any other securities in respect of, in lieu of or in
substitution for Compuventures Common Shares outstanding on the date hereof;
(b) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including
Compuventures Common Shares);
(c) split, combine, subdivide or reclassify any shares of its
capital stock or otherwise make any payments to the Stockholders in their
capacities as stockholders of Compuventures; provided, however, that nothing
shall prohibit (subject to applicable pooling restrictions): (i) the payment of
any ordinary distribution or dividend in respect of its capital stock at such
times and in such manner and amount as may be consistent with Compuventures'
past practice (which in any event shall include any and all compensation paid
or payable or expenses reimbursed or reimbursable for the period from April 1,
1997 through the Effective Time, to the extent not otherwise paid or
distributed to the Stockholders), including, without limitation, distributions
to the Stockholders from Compuventures AAA Account to pay Taxes on revenues
derived by Compuventures in an aggregate amount not to exceed $150,000 or (ii)
any distribution of property necessary for the representation and warranty set
forth in Section 7.11 to be true and correct;
- 24 -
31
(d) (i) grant any increases in the compensation of any of its
directors, officers or executives or grant any increases in compensation to any
of its employees, (ii) pay or agree to pay any pension retirement allowance or
other employee benefit not required or contemplated by any Employee Benefit
Plan as in effect on the date hereof to any such director, officer or employee,
whether, past or present, (iii) enter into any new or amend any existing
employment or severance agreement with any such director, officer or employee,
except as approved by MLC in its sole discretion, (iv) except for the bonuses
set forth in Section 8.3(d) of the Disclosure Schedule, pay or agree to pay any
bonus to any director, officer or employee (whether in the form of cash,
capital stock or otherwise), or (v) except as may be required to comply with
applicable law, amend any existing, or become obligated under any new Employee
Benefit Plan, except in the case of (i) through (v) inclusive, under and
pursuant to the employment agreements referred to in Section 10.1(f);
(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
(other than the Merger);
(f) make any acquisition, by means of merger, consolidation or
otherwise, of any direct or indirect ownership interest in or assets comprising
any business enterprise or operation;
(g) adopt any amendments to its articles of incorporation or
by-laws;
(h) incur any indebtedness for borrowed money or guarantee such
indebtedness or agree to become contingently liable, by guaranty or otherwise,
for the obligations or indebtedness of any other person or make any loans,
advances or capital contributions to, or investments in, any other corporation,
any partnership or other legal entity or to any other persons, except for bank
deposits and other investments in marketable securities and cash equivalents
made in the ordinary course of its business;
(i) engage in the conduct of any business the nature of which is
materially different from the business in which Compuventures is currently
engaged;
(j) except for expenses to be paid to Xxxxxxxx, Xxxxxxx & Co.,
enter into any agreement providing for acceleration of payment or performance
or other consequence as a result of a change of control of Compuventures;
(k) forgive any indebtedness owed to Compuventures or convert or
contribute by way of capital contribution any such indebtedness owed;
(l) authorize or enter into any agreement providing for management
services to be provided by Compuventures to any third-party or an increase in
management fees paid by any third-party under existing management agreements;
(m) mortgage, pledge, encumber, sell, lease or transfer any
material assets of Compuventures except with the prior written consent of MLC
or as contemplated by this Agreement,
- 25 -
32
(n) authorize or announce an intention to do any of the foregoing,
or enter into any contract, agreement, commitment or arrangement to do any of
the foregoing; or
(o) perform any act or omit to take any action that would make any
of the representations made above inaccurate or materially misleading as of the
Effective Time.
8.4 Full Access. Compuventures shall permit representatives of MLC
and Solutions to have full access at all reasonable times, and in a manner so
as not to interfere with the normal business operations of Compuventures to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to Compuventures.
8.5 Notice of Developments. Each of the Stockholders and
Compuventures shall give prompt written notice to MLC and Solutions of any
material adverse development occurring after the date hereof causing a breach
of any of the representations and warranties in Article 7 above. Each Party
will give prompt written notice to the others of any material adverse
development occurring after the date hereof causing a breach of any of his own
representations and warranties in Articles 5 and 6 above. No disclosure by any
Party pursuant to this Section 8.5, however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant. Notwithstanding the foregoing, in
the event that, after receipt of such additional disclosure, MLC and Solutions
close the transactions contemplated by this Agreement, MLC and Solutions shall
be deemed to have waived any right to seek indemnification pursuant to Section
12 for any breach of such representation and warranty or covenant that would
have otherwise occurred as a result of such additional disclosure.
8.6 Tax Matters. Each of the Stockholders, Compuventures and MLC
agrees to report the Merger on all Tax Returns and, if applicable, other
filings as a reorganization under Section 368(a)(2)(D) of the Code to the
extent permitted by law.
8.7 Reorganization. From and after the date hereof and prior to
the Effective Time, except for the transactions contemplated or permitted
herein, none of Compuventures, the Stockholders or MLC shall knowingly take any
action that would be inconsistent with the representations and warranties made
by it herein, including, but not limited to, knowingly taking any action, or
knowingly failing to take any action, that is known to cause disqualification
of the Merger as a reorganization within the meaning of Section 368(a)(2)(D) of
the Code.
8.8 Compuventures Stockholder Approval. Each of the Stockholders
hereby agrees to vote, at the Compuventures Stockholders Meeting, the
Compuventures Common Shares owned by such Stockholder in favor of the Agreement
and the transactions contemplated hereby.
8.9 Exclusivity. None of the Stockholders or Compuventures shall
(i) solicit, initiate, or encourage the submission of any proposal or offer
from any Person relating to the acquisition of any capital stock or other
voting securities or any substantial portion of the assets of Compuventures
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information
- 26 -
33
with respect to, assist or participate in, or facilitate in any other manner
any effort or attempt by any Person to do or seek any of the foregoing. None of
the Stockholders shall vote their Compuventures Common Shares in favor of any
such acquisition structured as a merger, consolidation, or share exchange. The
Stockholders and Compuventures shall notify MLC immediately if any Person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
8.10 Pooling of Interests. None of Compuventures, MLC or Solutions
shall take any action which would prevent the Merger from being accounted for
as a pooling of interests for financial reporting purposes.
ARTICLE 9
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
9.1 General. In the event that at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Article 12 below). The Stockholders acknowledge and agree that
from and after the Closing, the Surviving Corporation and MLC will be entitled
to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to Compuventures. MLC and
Solutions acknowledge and agree that they shall retain all Tax records for a
period of at least four years and that the Stockholders will be entitled to
reasonable access to and copies of all documents, books, records (including tax
records), agreements and financial data of any sort relating to Compuventures
(subject to obligations regarding confidentiality binding upon the
Stockholders) in connection with (i) the preparation of any federal, state or
local income or use tax returns, (ii) any audit being conducted by a
governmental authority or (iii) for other similar purposes.
9.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Compuventures, each of the other Parties will
cooperate with him and his counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Article 12 below).
9.3 Transition. None of the Stockholders will take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other
- 27 -
34
business associate of Compuventures from maintaining the same business
relationships with the Surviving Corporation after the Closing as it maintained
with Compuventures prior to the Closing.
9.4 Confidentiality. Each of the Stockholders will treat and hold
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to MLC or lawfully destroy, at the request and option of MLC, all
tangible embodiments (and all copies) of the Confidential Information which are
in his possession. In the event that any of the Stockholders is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, the Stockholders will notify
MLC promptly of the request or requirement so that MLC may seek, at its sole
expense, an appropriate protective order or waive compliance with the
provisions of this Section 9.4. If, in the absence of a protective order or
the receipt of a waiver hereunder, any of the Stockholders is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or
else stand liable for contempt, then the Stockholders may disclose the
Confidential Information to such tribunal; provided, however, that the
disclosing Stockholder shall use his best efforts to obtain, at the request of
MLC and at MLC's expense, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as MLC shall designate. The foregoing provisions shall
not apply to any Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
9.5 Covenant Not to Compete. For a period of two years from and
after the Closing Date, neither of Xxxxxxx X. Xxxxxx nor Xxxxxx X. Xxxxxx will
engage directly or indirectly in any business that the Surviving Corporation or
MLC conducts as of the Closing Date including, without limitation, computer
equipment and peripheral leasing and financing and computer equipment and
computer equipment resales and servicing. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section 9.5
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed. The restrictions set forth in
this Section 9.5 shall be inapplicable in the event of MLC's bankruptcy,
dissolution or forced reorganization. Nothing in this Section 9.5 shall be
deemed to prohibit the any of the Stockholders from owning, solely as an
investment, securities of any person which are traded on a national securities
exchange or quoted on a inter-dealer quotation system, provided that such
securities constitute two percent (2%) or less of the outstanding equity
securities of any such person and the such Stockholder is not a controlling
person of, or a member of a group which controls, such person.
9.6 MLC Common Shares. Each certificate issued to the
Stockholders representing the MLC Common Shares will be imprinted with a legend
substantially in the following form:
- 28 -
35
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), IN
RELIANCE UPON THE EXEMPTION FROM REGISTRATION CONTAINED IN SECTION
4(2) OF THE 1933 ACT AND REGULATION D OF THE RULES AND REGULATIONS
PROMULGATED UNDER THE 1933 ACT, AND IN RELIANCE UPON THE
REPRESENTATION BY THE HOLDER THAT THEY HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO RESALE OR FURTHER
DISTRIBUTION. SUCH SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, HYPOTHECATED, NOR WILL ANY ASSIGNEE OR ENDORSEE
HEREOF BE RECOGNIZED AS AN OWNER HEREOF BY THE ISSUER FOR ANY PURPOSE,
UNLESS A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH SHARES SHALL THEN BE IN EFFECT OR
UNLESS THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION SHALL BE
ESTABLISHED TO THE REASONABLE SATISFACTION OF COUNSEL OF THE ISSUER.
Each Stockholder desiring to transfer any of the MLC Common Shares received in
connection with the Merger, other than in a registered offering or pursuant to
a sale which counsel for MLC confirms is in compliance with Rule 144 of the
Securities Act, must first furnish MLC with (i) a written opinion satisfactory
to MLC in form and substance from counsel reasonably satisfactory to MLC to the
effect that such Stockholder may transfer the MLC Common Shares as desired
without registration under the Securities Act and (ii) a written undertaking
executed by the desired transferee reasonably satisfactory to MLC in form and
substance agreeing to be bound by the restrictions on transfer contained
herein.
9.7 Continuity of Interest. The Stockholders as a group shall not
dispose of any of the MLC Common Shares received in the transaction in a manner
that would cause the transaction to violate the continuity of stockholder
interest requirement set forth in Treas. Reg. Section 1.368-1(b). Any
Stockholder wishing to dispose of any MLC Common Shares received in the
transaction within two years of the Effective Time shall provide MLC written
notice, not less than 15 days prior to the intended date of disposition,
specifying the number of shares which such Stockholder proposes to dispose of
and an opinion of counsel reasonably satisfactory to MLC that such transfer or
disposition will not violate the continuity of stockholder interest requirement
set forth in Treas. Reg. Section 1.368-1(b).
9.8 Listing. MLC shall use its best efforts to effect, at or
before the issuance of any MLC Common Shares issued as Merger Consideration
pursuant to Article 4, authorization for listing or quotation of such MLC
Common Shares on Nasdaq, subject to official notice of issuance, and shall
remain in compliance in all material respects with its Nasdaq listing
agreement.
9.9 Guarantees. MLC covenants and agrees to use commercially
reasonable efforts to have the Stockholders released from any and all
guarantees made by the Stockholders in
- 29 -
36
connection with the operation of the Compuventures' business. In the event
that MLC is unable to procure the release of the Stockholders from such
guarantees, MLC hereby covenants and agrees to indemnify and hold harmless each
Stockholder (and each of their spouses) from any loss, damage, deficiency,
claim, liability, obligation, suit, action, fee, cost or expense (including
reasonable attorneys' fees) of any nature whatsoever incurred by a Stockholder
resulting from any beneficiary of a guarantee attempting to enforce its rights
under such guarantee against a Stockholder.
9.10 Computation of Final Tax Liability. Within 90 days following
the Closing Date, the Stockholders shall cause Xxxxxxxx, Xxxxxxx & Co. (at
MLC's cost and expense) to prepare the final Tax Return for Compuventures for
the period of January 1, 1997 through the Effective Time. MLC and Solutions
shall use reasonable efforts to assist Xxxxxxxx, Xxxxxxx & Co. in the
preparation of such Tax Return and permit Xxxxxxxx, Xxxxxxx & Co., in
accordance with Section 9.1 above, reasonable access to the Tax records.
9.11 Reporting of Transaction. Each of the Parties shall report
the Merger on his, her or its respective Tax Returns as a reorganization within
the meaning of Section 368(a)(2)(D) of the Code.
9.12 Registration Statement. MLC shall cause to be filed with the
SEC a registration statement on either Form S-1 or Form S-3 no later than
November 15, 1997, registering one-half of the MLC Common Shares issued to the
Stockholders in connection with the Merger, and shall use its reasonable best
efforts to have such registration statement declared effective by the SEC as
soon as practicable after the date of such filing.
ARTICLE 10
CONDITIONS TO OBLIGATION TO CLOSE
10.1 Conditions to Each Party's Obligation. The respective
obligations of MLC, Solutions, Compuventures and the Stockholders to consummate
the transactions contemplated by this Agreement are subject to the fulfillment
at or prior to the Closing Date of each of the following conditions, which
conditions may be waived upon the written consent of MLC and the Stockholders:
(a) MLC Board Approval. The Board of Directors of MLC shall have
approved the Merger in accordance with applicable law and approved the issuance
of the MLC Common Shares to be issued as Merger Consideration pursuant to the
terms of this Agreement.
(b) Compuventures Board and Stockholder Approval. The Board of
Directors of Compuventures and the Stockholders shall have approved the Merger
in accordance with applicable law.
(c) Governmental Approvals. The Parties shall have received all
other authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 5.1, Section 6.4, and Section 7.3 above.
- 30 -
37
(d) No Injunction or Proceedings. There shall not be in effect
any action, suit, or proceeding pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge that would, in the
reasonable judgment of MLC or Compuventures, (A) prevent consummation of any of
the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of MLC to own the capital stock of
the Surviving Corporation, or (D) affect adversely the right of the Surviving
Corporation to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge is in effect).
(e) No Suspension of Trading, Etc. At the Effective Time, there
shall be no suspension of trading in MLC Common Shares on Nasdaq, declaration
of a banking moratorium by federal or state authorities or any suspension of
payments by banks in the United States (whether mandatory or not) or of the
extension of credit by lending institutions in the United States, or
commencement of war or other international, armed hostility or national
calamity directly or indirectly involving the United States, which war,
hostility or calamity (or any material acceleration or worsening thereof), in
the sole judgment of MLC, would have a Material Adverse Effect on Compuventures
or, in the sole judgment of the Stockholders, would have a Material Adverse
Effect on MLC.
(f) Employment Agreements. Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxx, and
Xxxxxx X. Xxxxxx shall have entered into an employment agreement with MLC in
substantially the form attach hereto as Exhibits X-0, X-0 and A-3,
respectively.
(g) Escrow Agreement. MLC and the Stockholders shall have
executed and delivered counterparts of the Escrow Agreement in the form
attached hereto as Exhibit B, together with any counterparts signed by the
Escrow Agent and blank stock powers executed by each of the Stockholders with
respect to the MLC Common Shares to be held in the Escrow Deposit.
10.2 Conditions to Obligation of Solutions and MLC. The obligations
of Solutions and MLC to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the Stockholders and Compuventures shall have delivered to
Solutions and MLC a certificate to the effect that:
(i) the representations and warranties set forth in
Article 5 and Article 7 above are true and correct in all material respects at
and as of the Closing Date;
(ii) the Stockholders and Compuventures have performed and
complied with all of their covenants hereunder in all material respects at and
as of the Closing Date;
(iii) Compuventures has procured all of the third party
consents specified in Section 7.3 above; and
- 31 -
38
(iv) no action, suit, or proceeding is pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge that
would (A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, (C) affect adversely the right of MLC to
own the capital stock of the Surviving Corporation, or (D) affect adversely the
right of the Surviving Corporation to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or charge
is in effect);
(b) Solutions and MLC shall have received an opinion dated as of
the Closing Date from Knight, Clarke, Dolph & Rapaport, P.L.C., counsel to the
Stockholders and Compuventures, addressed and in form satisfactory to
Solutions and MLC;
(c) MLC shall have received the resignations, effective as of the
Closing, of each director and officer of Compuventures other than those whom
MLC shall have specified in writing prior to the Closing;
(d) MLC shall have received satisfactory evidence that all bonus
plans under which Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxxx and
Xxxxx Xxxx are beneficiaries have been terminated as of the Closing Date;
(e) MLC shall have received and approved a schedule of all accrued
and upaid bonuses as of the Closing Date; and
(f) Opinion of Certified Public Accountants. MLC shall have
received an opinion from Xxxxxxxx, Xxxxxxx & Co. , certified public accountants
and accountants to Compuventures, addressed to MLC, and dated as of the Closing
Date, that Xxxxxxxx, Xxxxxxx & Co. is not aware of any circumstance related to
Compuventures that would prohibit the Merger from being accounted for as a
pooling of interests for financial reporting purposes. MLC shall have received
an opinion from Deloitte & Touche LLP, certified public accountants and
independent accountants to MLC, addressed to MLC, and dated as of the Closing
Date, that the Merger shall be accounted for as a pooling of interests for
financial reporting purposes; provided, however, prior to invoking this
condition, MLC shall use all reasonable efforts to obtain such opinion from
Deloitte & Touche LLP. MLC may waive any condition specified in this Section
10.2 if it executes a writing so stating at or prior to the Closing.
10.3 Conditions to Obligation of the Stockholders and
Compuventures. The obligation of the Stockholders and Compuventures to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(a) Solutions and MLC shall have delivered to Stockholders and
Compuventures a certificate to the effect that:
- 32 -
39
(i) the representations and warranties set forth in
Article 6 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Solutions and MLC shall have performed and complied
with all of its covenants hereunder in all material respects through the
Closing; and
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(b) MLC shall have delivered to the Stockholders the MLC Common
Shares representing the Merger Consideration pursuant to Section 4.2.
(c) Since December 31, 1996, there shall not have occurred or been
threatened any material adverse changes in the business, properties, operations
or condition (financial or otherwise) of MLC; and
(d) the Stockholders shall have received an opinion dated as of
the Closing Date from Shaw, Pittman, Xxxxx & Xxxxxxxxxx, counsel to Solutions
and MLC, addressed and in form satisfactory to the Stockholders.
The Stockholders may waive any condition specified in this Section 10.3 if they
execute a writing so stating at or prior to the Closing.
ARTICLE 11
TERMINATION
11.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by the Stockholders or the stockholder of
Solutions, respectively, by the mutual written consent of MLC and the
Representative .
11.2 Termination by Either MLC or Compuventures. This Agreement
may be terminated and the Merger may be abandoned (a) by action of the Board of
Directors of MLC in the event of a failure of a condition to the obligations of
MLC or the Solutions set forth in Section 10.2 of this Agreement; or (b) by
majority vote of the Stockholders in the event of a failure of a condition to
the obligations of the Stockholders or Compuventures set forth in Section 10.3
of this Agreement; or (c) by MLC in its sole discretion in the event that the
Average Share price is less than $9.00; or (d) by the Representative in the
event that the Average Share Price is greater than $20.00; or (e) if a United
States federal or state court of competent jurisdiction or United States
federal or state governmental agency shall have issued an order,
- 33 -
40
decree or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement and
such other, decree, ruling or other action shall have become final and
non-appealable; or (f) the Effective Time has not occurred by July 31, 1997;
and provided, in the case of a termination pursuant to clause (a), (b) or (f)
above, that the terminating party shall not have breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the occurrence of the failure referred to in said
clause and provided further, in the case of a termination pursuant to clause
(d), that Compuventures shall provide MLC the exclusive right to renegotiate
the Merger Consideration for a period not to exceed 60 days after the
termination date.
11.3 Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article 11, no party hereto (or any of its directors or officers) shall have
any liability or further obligation to any other party to this Agreement,
except that nothing herein will relieve any party from liability for any breach
of this Agreement.
11.4 Nonsolicitation. MLC hereby covenants and agrees that in the
event that this Agreement is terminated and the Merger is not consummated, MLC
shall not solicit any employees of Compuventures for a period of two years from
the date of termination nor utilize any materials or information obtained by
MLC during its due diligence of Compuventures for the purpose of soliciting
Compuventure's customers.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnity Obligations of the Stockholders. Subject to Section
12.5 and Section 12.6, each of the Stockholders hereby jointly and severally
agrees to indemnify and hold MLC and Solutions harmless from, and to reimburse
MLC and Solutions for, any MLC Indemnity Claims arising under the terms and
conditions of this Agreement. For purposes of this Agreement, the term "MLC
Indemnity Claim" shall mean any loss, damage, deficiency, claim, liability,
obligation, suit, action, fee, cost or expense of any nature whatsoever
resulting from (i) any breach of any representation and warranty of the
Stockholders or Compuventures which is contained in this Agreement or any
Schedule, Exhibit or certificate delivered pursuant thereto; (ii) any breach or
non-fulfillment of, or any failure to perform, any of the covenants, agreements
or undertakings of the Stockholders or Compuventures which are contained in or
made pursuant to this Agreement (excluding the Exhibits hereto); and (iii) all
interest, penalties and costs and expenses (including, without limitation, all
reasonable fees and disbursements of counsel) arising out of or related to any
indemnification made under this Section 12.1.
12.2 Indemnity Obligations of MLC and Solutions. MLC and Solutions
hereby jointly and severally agree to indemnify and hold each of the
Stockholders harmless from, and to reimburse each of the Stockholders for, any
Stockholder Indemnity Claims arising under the terms and conditions of this
Agreement. For purposes of this Agreement, the term "Stockholder Indemnity
Claim" shall mean any loss, damage, deficiency, claim, liability, suit, action,
fee, cost
- 34 -
41
or expense of any nature whatsoever incurred by the Stockholders resulting from
(i) any breach of any representation and warranty of Solutions or MLC which is
contained in this Agreement or any Schedule, Exhibit or certificate delivered
pursuant thereto; (ii) any breach or non-fulfillment of, or failure to perform,
any of the covenants, agreements or undertakings of Solutions or MLC which are
contained in or made pursuant to the terms and conditions of this Agreement;
and (iii) all interest, penalties, costs and expenses (including, without
limitation, all reasonable fees and disbursements of counsel) arising out of or
related to any indemnification made under this Section 12.2.
12.3 Appointment of Representative. Each of the Stockholders
hereby appoints Xxxxxxx X. Xxxxxx as its exclusive agent to act on its behalf
with respect to any and all Stockholder Indemnity Claims and any and all MLC
Indemnity Claims arising under this Agreement or such other representative as
may be hereafter appointed by a majority in interest of the Stockholders. Such
agent is hereinafter referred to as the "Representative." The Representative
shall take, and the Stockholders agree that the Representative shall take, any
and all actions which the Representative believes are necessary, desirable or
appropriate under this Agreement for and on behalf of the Stockholders, as
fully as if such parties were acting on their own behalf, including, without
limitation, asserting Stockholder Indemnity Claims against MLC, defending all
MLC Indemnity Claims, consenting to, compromising or settling all Stockholder
Indemnity Claims and MLC Indemnity Claims, conducting negotiations with MLC and
its representatives regarding such claims, dealing with MLC and the Escrow
Agent under the Escrow Agreement referred to in Section 12.7(a) below with
respect to all matters arising under the Escrow Agreement, taking any and all
other actions specified in or contemplated by this Agreement and engaging
counsel, accountants or other representatives in connection with the foregoing
matters. MLC shall have the right to rely upon all actions taken or omitted to
be taken by the Representative pursuant to this Agreement, all of which actions
or omissions shall be legally binding upon the Stockholders. The
Representative, acting pursuant to this Section 12.3, shall not be liable to
any other Stockholder for any act or omission, except in connection with any
act or omission that was the result of the Representative's bad faith or gross
negligence.
12.4 Notification of Claims. Subject to the provisions of Section
12.5 and Section 12.6, in the event of the occurrence of an event which any
party asserts constitutes a MLC Indemnity Claim or a Stockholder Indemnity
Claim, as applicable, such party shall provide the indemnifying party with
prompt notice of such event and shall otherwise make available to the
indemnifying party all relevant information which is material to the claim and
which is in the possession of the indemnified party. If such event involves
the claim of any third party (a "Third-Party Claim"), the indemnifying party
shall have the right to elect to join in the defense, settlement, adjustment or
compromise of any such Third-Party Claim, and to employ counsel to assist such
indemnifying party in connection with the handling of such claim, at the sole
expense of the indemnifying party, and no such claim shall be settled, adjusted
or compromised, or the defense thereof terminated, without the prior written
consent of the indemnifying party unless and until the indemnifying party shall
have failed, after the lapse of a reasonable period of time, but in no event
more than 30 days after written notice to it of the Third-Party Claim, to join
in the defense, settlement, adjustment or compromise of the same. An
indemnified party's failure to give timely notice or to furnish the
indemnifying party with any relevant data and documents in
- 35 -
42
connection with any Third-Party Claim shall not constitute a defense (in part
or in whole) to any claim for indemnification by such party, except and only to
the extent that such failure shall result in any material prejudice to the
indemnifying party. If so desired by any indemnifying party, such party may
elect, at such party's sole expense, to assume control of the defense,
settlement, adjustment or compromise of any Third-Party Claim, with counsel
reasonably acceptable to the indemnified parties, insofar as such claim relates
to the liability of the indemnifying party, provided that such indemnifying
party shall obtain the consent of all indemnified parties before entering into
any settlement, adjustment or compromise of such claims, or ceasing to defend
against such claims, if as a result thereof, or pursuant thereto, there would
be imposed on an indemnified party any material liability or obligation not
covered by the indemnity obligations of the indemnifying parties under this
Agreement (including, without limitation, any injunctive relief or other
remedy). In connection with any Third-Party Claim, the indemnified party, or
the indemnifying party if it has assumed the defense of such claim pursuant to
the preceding sentence, shall diligently pursue the defense of such Third-Party
Claim.
12.5 Survival. All representations and warranties, and, except as
otherwise provided in this Agreement, all covenants and agreements of the
parties contained in or made pursuant to this Agreement, and the rights of the
parties to seek indemnification with respect thereto, shall survive the
Closing. Such representations and warranties, and the rights of the parties to
seek indemnification with respect thereto, shall expire on the earlier of (i)
the date of issuance of the report of MLC's independent accountants with
respect to the audited consolidated financial statements of MLC for the fiscal
year ending March 31, 1998 or (ii) the first anniversary of the Closing Date.
12.6 Limitations. Notwithstanding the foregoing, any claim by an
indemnified party against any indemnifying party under this Agreement shall be
payable by the indemnifying party only in the event, and to the extent, that
the accumulated amount of the claims in respect of such indemnifying party's
obligations to indemnify under this Agreement shall exceed $25,000 in the
aggregate (the "Indemnification Threshold"); provided, however, that the
Indemnification Threshold shall not be applicable to MLC Indemnity Claims and
Third-Party Indemnity Claims resulting from breaches by Compuventures or the
Stockholders of the representations and warranties contained in Sections 5.4,
7.2, 7.11 and 7.23 (solely insofar as such representations and warranties
contained in Section 7.23 relate to environmental matters) ("Special Claims"),
which upon resolution of such Claims or judgment, shall be paid on a
dollar-for-dollar basis without regard to the Indemnification Threshold. In no
event shall the aggregate liability of the Stockholders under the Merger exceed
fifty percent (50%) of the aggregate fair market value of the MLC Common Shares
received by such Stockholders in the Merger, with such fair market value to be
determined on the basis of the Average Share Price.
12.7 Escrow.
(a) The Stockholders shall deposit into escrow, with the
Escrow Agent named in the Escrow Agreement, such number of MLC Common Shares
issued in connection with the Merger having an aggregate value (based on the
Average Share Price) of five percent of the Merger Consideration (such deposit
being referred to as the "Escrow Deposit"). Until such time
- 36 -
43
as the aggregate amount of MLC Indemnity Claims in excess of the
Indemnification Threshold and Special Claims which have been definitively
resolved to be payable in favor of MLC or Solutions shall equal or exceed the
amount of the Deemed Escrow Value (as hereinafter defined), all MLC Indemnity
Claims and Special Claims shall be satisfied first out of the MLC Common Shares
held in the Escrow Deposit, as further provided under the terms of the Escrow
Agreement. For purposes hereof, all MLC Common Shares returned to MLC in
settlement of any MLC Indemnity Claims under the Escrow Agreement shall be
valued at the Average Share Price. At such time as the aggregate amount of MLC
Indemnity Claims in excess of the Indemnification Threshold and Special Claims
which have been definitively resolved to be payable in favor of MLC or
Solutions shall exceed the Deemed Escrow Value, each of the Stockholders shall
thereafter be jointly and severally liable to MLC or Solutions for such claims.
The liability of the Stockholders for payable MLC Indemnity Claims in excess of
the Deemed Escrow Value may be satisfied, at the election of each Stockholder,
through (i) the delivery of MLC Common Shares to MLC, such shares to be valued
at the Average Share Price, (ii) the payment of cash or (iii) any combination
of such MLC Common Shares valued at the Average Share Price and cash.
(b) For purposes of this Agreement, the term "Deemed
Escrow Value" shall mean the value of the MLC Common Shares to be transferred
by the Stockholders into the Escrow Deposit, determined by multiplying such
number of MLC Common Shares times the Average Share Price.
12.8 Payment of Indemnity Claims. Notwithstanding anything to the
contrary herein, any liability of Solutions and MLC under this Agreement for
Stockholder Indemnity Claims (other than pursuant to item (iii) of Section
12.2) shall be satisfied solely through the issuance of additional MLC Common
Shares, such additional MLC Common Shares to be valued at the Average Share
Price and to be issued on a pro rata basis to the Stockholders based on their
relative equity interests in Compuventures immediately prior to the
consummation of the Merger. With respect to any MLC Common Shares to be
returned to the MLC by the Stockholders in settlement of MLC Indemnity Claims
pursuant to this Section 12.8, any dividends previously paid in respect of such
returned MLC Common Shares (whether paid in cash, MLC Common Shares or other
property) shall also be returned to the MLC, provided that the value of such
dividends shall not be taken into account for purposes of determining the value
of such returned MLC Common Shares, as contemplated under paragraph 47g of
Accounting Principles Board Opinion No. 16 (Interpretation No. 121).
ARTICLE 13
MISCELLANEOUS
13.1 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of MLC and the Representative; provided, however, that any Party may
make any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its best efforts to
advise the other Parties prior to making the disclosure).
- 37 -
44
13.2 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
13.3 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
13.4 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his rights, interests, or obligations hereunder without the prior
written approval of MLC and the Representative; provided, however, that MLC may
(i) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases MLC nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
13.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
13.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to Compuventures or the Stockholders:
Xxxxxxx X. Xxxxxx
President
Compuventures of Pitt County, Inc.
000-X Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy: (000) 000-0000
- 38 -
45
With copy to:
Knight, Clarke, Dolph & Rapaport, P.L.C.
Smithfield Building
Suite 101A
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attn: Cyrus X. Xxxxx, XX
Telecopy: (000) 000-0000
If to MLC and Solutions:
Xxxxxxx X. Xxxxxxxxx
Chief Financial Officer
MLC Holdings, Inc.
00000 Xxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx
Telecopy: (000) 000-0000
With copy to:
Shaw, Pittman, Xxxxx & Xxxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. XxXxxxxx, Esq.
Telecopy: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any notice, request, demand, claim or other communication that is sent by
telecopy, telex or electronic mail shall be followed up by a hard copy to the
Party addressed within a reasonable period of time not to exceed five days.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
13.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE COMMONWEALTH OF VIRGINIA
WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE COMMONWEALTH OF VIRGINIA OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
COMMONWEALTH OF VIRGINIA.
- 39 -
46
13.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by MLC
and the Representative. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
13.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
13.11 Expenses. Each of the Parties will bear his, her or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Stockholders
agree that except for an amount not to exceed $35,000 which will be assumed and
paid by MLC, Compuventures has not borne or will bear any of the Stockholders'
costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
13.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
13.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
13.14 Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 13.15 below), in addition to any other remedy to which they
may be entitled, at law or in equity.
- 40 -
47
13.15 Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the Commonwealth of
Virginia, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court.
13.16 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
MLC:
MLC HOLDINGS, INC.
By:
---------------------------------------
Its:
---------------------------------------
SOLUTIONS:
MLC NETWORK SOLUTIONS, INC.
By:
---------------------------------------
Its:
---------------------------------------
COMPUVENTURES:
COMPUVENTURES OF PITT COUNTY, INC.
By:
---------------------------------------
Its:
---------------------------------------
- 41 -
48
STOCKHOLDERS:
--------------------------------------------
Xxxxx X.Xxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx, Xx.
--------------------------------------------
Xxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxx X. Xxxx, III
--------------------------------------------
Xxx X. Xxxxxxxxx
- 42 -
