ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MRK TECHNOLOGIES, LTD.
("SELLER")
AND
ATLANTIC NETWORK SYSTEMS, INC.
("BUYER")
TABLE OF CONTENTS
PAGE
ARTICLE 1 PURCHASE AND SALE OF ACQUIRED ASSETS . . . . . . . . . . . . . . . .1
1.1. Acquisition of the Acquired Assets. . . . . . . . . . . . . . . . . .1
1.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE 2 - ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . . . . .3
2.1. Liabilities Assumed . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE 3 - PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . .3
3.1. Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE 4 COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4.1. Collection of Payments. . . . . . . . . . . . . . . . . . . . . . . .4
4.2. Seller's Agreements as to Specified Matters . . . . . . . . . . . . .5
4.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . .5
4.5. Further Assurances and Cooperation. . . . . . . . . . . . . . . . . .5
4.6. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4.7. MST Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4.8. Non-Compete Agreement . . . . . . . . . . . . . . . . . . . . . . . .8
4.9. Support Services. . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.10. Margins on Open Sales Orders . . . . . . . . . . . . . . . . . . . .8
4.11.Evaluation Units. . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.12. Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.13. MST Product Returns by Customer. . . . . . . . . . . . . . . . . . .9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . .9
5.1. Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . .9
5.2. Corporate Organization. . . . . . . . . . . . . . . . . . . . . . . .9
5.3. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
5.4. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 10
5.6. Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . 10
5.7. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.8. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.9. Accounts Payable. . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.10. Intangible Assets. . . . . . . . . . . . . . . . . . . . . . . . . 11
5.11. Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.12. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.13. Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.14. Compensation Arrangements. . . . . . . . . . . . . . . . . . . . . 11
5.15. Orders, Commitments and Returns. . . . . . . . . . . . . . . . . . 11
5.16. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.17. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . . 13
6.1. Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2. Authority; Binding Effect . . . . . . . . . . . . . . . . . . . . . 13
6.3. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.4. Funds.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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ARTICLE 7 TERMINATION AND ABANDONMENT. . . . . . . . . . . . . . . . . . . . 13
7.1. Methods of Termination: . . . . . . . . . . . . . . . . . . . . . . 13
7.2. Procedure Upon Termination. . . . . . . . . . . . . . . . . . . . . 14
7.3. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 8 SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 14
8.1. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.2. Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . 14
8.3. Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . 15
8.4. Claims for Indemnification. . . . . . . . . . . . . . . . . . . . . 15
8.5. Exception Amount on Certain Indemnification Claims. . . . . . . . . 16
ARTICLE 9 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.1. Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.2. Closing Deliveries by Seller. . . . . . . . . . . . . . . . . . . . 17
9.3. Closing Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 10 CLOSING PROCEDURES AND SCHEDULES. . . . . . . . . . . . . . . . . 18
10.1. Preclosing and Closing Procedures. . . . . . . . . . . . . . . . . 18
10.2. Preparation of Schedule of MST Inventory.. . . . . . . . . . . . . 18
10.3. Vendor Credits . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 11 CONDITIONS PRECEDENT TO BUYER AND SELLER'S OBLIGATION TO
CONSUMMATE TRANSACTIONS. . . . . . . . . . . . . . . . 20
11.1. Conditions to Buyer's Obligations. . . . . . . . . . . . . . . . . 20
11.2. Conditions to Seller's Obligations . . . . . . . . . . . . . . . . 21
ARTICLE 12 MISCELLANEOUS PROVISIONS AND AGREEMENTS . . . . . . . . . . . . . 22
12.1. Consummation of Transactions . . . . . . . . . . . . . . . . . . . 22
12.2. Access to Records. . . . . . . . . . . . . . . . . . . . . . . . . 22
12.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.4. Amendment and Modification.. . . . . . . . . . . . . . . . . . . . 22
12.5. Waiver of Compliance; Consents . . . . . . . . . . . . . . . . . . 23
12.6. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . 23
12.7. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 23
12.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.9. Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
12.10. No Third Party Beneficiary. . . . . . . . . . . . . . . . . . . . 25
12.11. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.12. Binding Effect; Assignment. . . . . . . . . . . . . . . . . . . . 25
12.13. Headings; Recitals. . . . . . . . . . . . . . . . . . . . . . . . 25
12.14. Exhibits and Schedules. . . . . . . . . . . . . . . . . . . . . . 25
12.15. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 25
12.16. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.17. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.18. Definition of Material Adverse Effect . . . . . . . . . . . . . . 26
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EXHIBITS
5 Disclosure Schedule
9.2(a) ▇▇▇▇ of Sale and Assignment
SCHEDULES
1.1(a) MST Inventory
1.1(b) Business Contracts
1.1(c) Personal Property
2.1(a) Open Purchase Orders
2.1(c) Open Sales Orders
4.7(a) Transferred Employees and Compensation Arrangements
4.7(d) Transferred Employees Estimated Commissions
4.9 Support Services
10.2(c) Excluded Inventory
10.3 Vendor Credits
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made this 29th day of
January 1997, by and among MRK TECHNOLOGIES, LTD., an Ohio limited liability
company ("Seller") and ATLANTIC NETWORK SYSTEMS, INC. a North Carolina
corporation ("Buyer").
WITNESSETH:
A. Seller owns and operates a business division (the "Division")
engaged in the business of value-added distribution of wide-area network
hardware (the "Business") under the name "MST Distribution."
B. Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller, certain of the assets of the Division upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
ARTICLE
1.
PURCHASE AND SALE OF
ACQUIRED ASSETS
1.1. ACQUISITION OF THE ACQUIRED ASSETS. Subject to the terms and
conditions hereof, at the Closing Date, as defined herein, Seller shall
sell, transfer, convey, assign and deliver to the Buyer, and Buyer shall
purchase and acquire from Seller, all of Seller's right, title and
interest in and to the following assets (the "Assets"):
(a) MST INVENTORY. The inventory of the Business which is set forth on
Schedule 1.1(a) to be attached to the Closing Statement, as provided
in Section 10.2 (the "MST Inventory"), and the inventory that is
delivered to Buyer's facility in North Carolina after the Closing
Date pursuant to Open Purchase Orders as provided in Section 2.1(b);
and
(b) BUSINESS CONTRACTS. The contracts which are set forth on Schedule
1.1(b), including all work-in-progress related to such contracts and
rights for services rendered or products provided under such
contracts that were not billed out as of the Closing Date, except
with respect to Excluded Inventory set forth on Schedule 10.2(c); and
(c) PERSONAL PROPERTY. The furniture, fixtures, equipment and office
supplies which are set forth on Schedule 1.1(c) attached hereto (the
"Personal Property"); and
1
(d) INTANGIBLE PROPERTY. The names "MST," "MST Distribution" and all
derivatives thereof, including the trademark and servicemark
registrations related thereto, MST's telephone numbers (including 800
numbers) and, to the extent assignable, in all intangible property
rights used or held for use by Seller in the conduct of the Business,
including goodwill and customer lists, which are primarily relating
to the Business or the Assets, including all rights of Seller in and
under any trademark, servicemark or trade name (and registrations and
applications therefore), and trademark licenses, confidential
information, logos, and similar rights and other intellectual
properties used in the Business (collectively, the "Intangible
Assets"); and
(e) OPEN SALE ORDERS. Seller's Open Sales Orders as defined in Section
2.1(d); and
(f) BOOKS AND RECORDS. Copies of all books and records primarily used or
held in the operation of the Business or related to the Assets,
including, for at least the two (2) years prior to the Closing Date,
all (i) lists of past and present customers and suppliers; (ii) price
and supply quotations and books; (iii) sales orders; (iv) a diskette
containing master files on MST product advertising materials, mailing
lists, sales materials and records; (v) MST product catalogs; and
(vi) files, records and data related to the foregoing (collectively,
the "Books and Records").
1.2. EXCLUDED ASSETS. The parties to this Agreement expressly understand
and agree that Seller is not selling, assigning, transferring or conveying
to Buyer the following assets, rights and properties (the "Excluded
Assets"):
(a) CASH AND CASH EQUIVALENTS. All of Seller's cash or cash equivalents;
and
(b) ACCOUNTS RECEIVABLE. All of Seller's accounts receivable; and
(c) CONTRACTS NOT ASSUMED. All of Seller's rights to and under any
contracts, agreements or other documents or instruments which are not
listed on Schedule 1.1(b); and
(d) EMPLOYEE BENEFIT PLANS. Any interest in, or assets related to, any
employee benefit plan (health or otherwise) of Seller; and
(e) PROCEEDS. All rights of Seller under this Agreement, including the
proceeds of the sale contemplated herein, or any other payments to
Seller contemplated herein.
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ARTICLE
2.
ASSUMPTION OF LIABILITIES
2.1. LIABILITIES ASSUMED. Subject to the Closing, and as of the Closing
Date, the Buyer assumes and will discharge only the following obligations
of the Seller (the "Assumed Liabilities"):
(a) Seller's obligations under Seller's open purchase orders with vendors
related to the Business which will be set forth on Schedule 2.1(a) to
be attached to the Closing Statement to the extent, and as and when,
the underlying inventory is actually received by Buyer at its North
Carolina facility ("Open Purchase Orders"); and
(b) Seller's obligations under those certain contracts which will be set
forth on Schedule 1.1(b) to be attached to the Closing Statement,
with respect to operations of the Business after the Closing Date;
and
(c) Seller's obligations under Seller's open sales orders with customers
of the Division which will be set forth on Schedule 2.1(c) to be
attached to the Closing Statement (the "Open Sales Orders").
(d) Seller's obligations to pay commissions to Transferred Employees
(and payroll taxes payable as required by law) only in accordance
with Section 4.7(d).
The above liabilities assumed by Buyer are the only liabilities of the
Seller to be assumed by the Buyer. Other than the Assumed Liabilities
above, Buyer is not assuming any liability of the Seller, the Division
or the Business.
ARTICLE
3.
PURCHASE PRICE
3.1. PURCHASE PRICE.
(a) The total consideration to be paid by Buyer to the Seller for the
Assets (the "Purchase Price") will be an amount equal to:
(i) One Million Two Hundred Sixty-Five Thousand Dollars
($1,265,000) for the name, customer lists and goodwill of the
Division; and
(ii) Plus, the amount specified on the MST Inventory list as set
forth on Schedule 1.1(a); and
(iii) Plus Thirty Thousand Dollars ($30,000) for the Personal
Property.
3
(b) PAYMENT OF PURCHASE PRICE. At the Closing, the Buyer will pay the
Seller, by federal wire transfer, immediately available funds in the
amount of the Closing Statement Price, as defined in Section 10.1 of
this Agreement, to Seller's bank account pursuant to written
instructions given to the Buyer at least 48 hours prior to Closing.
ARTICLE
4.
COVENANTS
4.1. COLLECTION OF PAYMENTS. The parties acknowledge that from time to
time following the Closing Date, each party may receive one or more
payments from customers of the Business which are actually intended for or
are made payable to the other party. In such event, the party receiving
the check or payment shall immediately remit the same to the other party
and if the payment is in the form of a check made payable to the other
party, such check will not be negotiated by the receiving party absent
written permission of the other party unless received directly into a
lock-box facility, in which case the party shall promptly cause such funds
to be remitted to the other party. Each party agrees to report to the
other with respect to such matters on a reasonably prompt basis.
4.2. SELLER'S AGREEMENTS AS TO SPECIFIED MATTERS. Except as specifically
set forth in this Agreement or on the Disclosure Schedule, and except as
may be otherwise agreed in writing by the Buyer, from the date hereof
until the Closing, the Seller will conduct the business and operations of
the Division according to its ordinary and usual course of business, to
preserve substantially intact the Business and the Assets and to preserve
the Division's current relationships with customers, employees and
suppliers. Without limiting the generality of the foregoing, and, except
as otherwise expressly provided in this Agreement, prior to the Closing
Date, without the prior written consent of the Buyer, the Seller will not:
(a) Take any action that will have a Material Adverse Effect on the
condition of the Assets or the Business;
(b) Permit or allow any of the Assets to be subjected to any liens, other
than liens which Seller will cause to be released not later than the
Closing Date;
(c) Enter into sales orders for the sale of products and performance of
services relating to the Business ("Sales Orders") except on pricing
terms that are in the ordinary course of its business and on an
arms-length basis;
(d) Place purchase orders for inventory of the Business ("Purchase
Orders") other than in the ordinary course of its business; or
(e) Agree, whether in writing or otherwise, to take any action described
in this subsection.
4
4.3. FULL ACCESS TO BUYER. Throughout the period prior to Closing, the
Seller will afford to the Buyer and their directors, officers,
employees, counsel, accountants, investment advisors and other
authorized representatives and agents access to the facilities,
properties, books and records of the Division in order that the Buyer
may make such investigations as it will desire to make of the affairs
of the Division. In order to meet Buyer's reporting requirements under
applicable rules and regulations of the Securities and Exchange
Commission, the Seller will furnish such additional financial and
operating data and other information as the Buyer will, from time to
time, reasonably request, whether before or after Closing, including
without limitation access to the working papers of its independent
certified public accountants ("Accountants"). Seller will authorize and
direct Seller's Accountants to be reasonably available to Buyer to
respond to questions and make available documents and working papers
with respect to such information. Any expenses incurred by Seller with
respect to making Seller's Accountants available to Buyer shall be
borne by Seller if the services relating to those expenses were
rendered prior to the Closing, and by Buyer if the services were
rendered after the Closing.
4.4. CONFIDENTIALITY. Each of the parties hereto agrees that it will not
use, or permit the use of, any of the information relating to any other
party hereto furnished to it in connection with the transactions
contemplated herein ("Information") in a manner or for a purpose
detrimental to such other party or otherwise than in connection with
the transaction, and that they will not disclose, divulge, provide or
make accessible (collectively, "Disclose"), or permit the Disclosure
of, any of the Information to any person or entity, other than their
respective directors, officers, employees, investment advisors,
accountants, counsel and other authorized representatives and agents,
except as may be required by judicial or administrative process or, in
the opinion of such party's counsel, by other requirements of law;
provided, however, that prior to any Disclosure of any Information
permitted hereunder, the disclosing party will first obtain the
recipients' undertaking to comply with the provisions of this
subsection with respect to such information. The term "Information" as
used herein will not include any information relating to a party which
the party disclosing such information can show: (i) to have been
properly obtained and rightfully in its possession prior to its receipt
from another party hereto; (ii) to be now or to later become generally
available to the public through no fault of the disclosing party; (iii)
to have been available to the public at the time of its receipt by the
disclosing party; (iv) to have been received separately by the
disclosing party in an unrestricted manner from a person authorized to
disclose such information; or (v) to have been developed independently
by the disclosing party without regard to any information received in
connection with this transaction. Each party hereto also agrees to
promptly return to the party from whom it originally received such
information all original and duplicate copies of written materials
containing Information should the transactions contemplated herein not
occur. A party hereto will be deemed to have satisfied its obligations
to hold the Information confidential if it exercises the same care as
it takes with respect to its own similar information.
4.5. FURTHER ASSURANCES AND COOPERATION. Each party hereto will, before, at
and after Closing, execute and deliver such instruments and take such
other actions as the other
5
party or parties, as the case may be, may reasonably require in order
to carry out the intent of this Agreement. Without limiting the
generality of the foregoing, at any time after the Closing, at the
request of the Buyer and without further consideration, the Seller will
execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as the Buyer may
reasonably deem necessary or desirable in order to more effectively
transfer, convey and assign to the Buyer, and to confirm the Buyer's
title to, all of the Assets, to put the Buyer in actual possession
thereof. Not later than thirty (30) days after Closing, Seller will
take all action, and will cause any creditor to take all action,
necessary to have all liens against the Assets which are in existence
on the Closing Date to be released therefrom, and all UCC financing
statements with respect thereto to be properly terminated. Seller will
indemnify Buyer for any loss, liability or damage actually incurred by
Buyer with respect to the existence of liens and the failure to remove
them.
4.6. TAX MATTERS.
(a) TRANSACTIONAL TAXES. In addition to and without limiting those
representations and warranties set forth in Section 5.12 of this
Agreement, in the event that any sales or use tax, or any tax in
the nature of a sales or use tax, or any transactional tax is
payable or assessed relative to the transactions described herein,
the Seller will pay all such taxes that are imposed by law on the
Seller, and the Buyer will pay all such taxes that are imposed by
law on the Buyer. The parties hereto will cooperate to make any
necessary filings with state and local taxing authorities and to
furnish any required supplemental information with respect to any
state and local tax liabilities resulting from the consummation of
the transactions contemplated herein.
(b) COOPERATION AND RECORDS RETENTION. The Seller and the Buyer will
(i) each provide the other with such assistance as may reasonably
be requested by any of them in connection with the preparation of
any tax return, audit or other examination by any taxing authority
or judicial or administrative proceedings relating to liability
for taxes, (ii) each retain and provide the other with any records
or other information which may be relevant to such tax return,
audit or examination, proceeding or determination, and (iii) each
provide the other with any final determination of such audit or
examination, proceeding or determination that affects any amount
required to be shown on any tax return of the other for any
period. Without limiting the generality of the foregoing, the
Seller and the Buyer will retain, until the applicable statutes of
limitations (including all extensions) have expired, copies of all
tax returns, supporting work schedules and other records or
information which may be relevant to such tax returns for all tax
periods or portions thereof ending on or before the Closing Date
and will not destroy or otherwise dispose of any such records
without first providing the other party with a reasonable
opportunity to review and copy the same.
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4.7. MST EMPLOYEES.
(a) Buyer intends to extend offers of employment to certain of
Seller's employees listed on Schedule 4.7(a) hereto for employment
beginning on February 1, 1997. The terms and conditions of each
such offer and of any continuing employment will be determined by
the Buyer in its sole discretion and any resulting employment
relationship will be at will. Any employee of the Division of the
Seller who accepts such an employment offer and reports for work
on the date directed by the Buyer will be sometimes hereinafter
referred to as a "Transferred Employee." The Seller hereby
authorizes the Buyer to enter into discussions with any of such
employees listed on Schedule 4.7(a) concerning the future
employment of such individual by the Buyer; provided, however,
that all such discussions will be conducted in such a manner as
not to interfere unreasonably with the business operations of the
Division of the Seller.
(b) The Seller will not, for a period of two (2) years after the
Closing Date, take any action, other than with the written consent
of the Buyer, to induce any Transferred Employee, while still
employed by the Buyer or any subsidiary of Buyer, to enter into
the employ of the Seller or any affiliate of the Seller. As of
the Closing Date, Seller will terminate all non-compete agreements
and covenants as they relate to the Business of the Division and
Buyer between Seller or the Division and the Transferred Employees
who accept employment with Buyer.
(c) Buyer hereby specifically disclaims any assumption of, or
liability with respect to, any collective bargaining agreement or
employee benefit plan, policy, practice or agreement to which the
Seller is a party or under which any of the Seller's employees or
former employees are covered. Without limiting the generality of
the foregoing, (i) Buyer is not assuming any obligation to
contribute to, or has any obligation or liability for any
withdrawal liability arising in connection with, any Multiemployer
Plan ("Multiemployer Plan") within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")
attributable to participation therein by current or former
employees of the Seller as a result of this Agreement and the
transactions contemplated hereby or otherwise, and (ii) with
respect to each current or former employee of the Seller,
including a Transferred Employee, and each other individual who is
a "qualified beneficiary" with respect to such current or former
employee in connection with any "group health plan" (as such terms
are defined in Section 4980B of the Internal Revenue Code of 1986,
as amended (the "Code")) maintained by the Seller or any of its
affiliates, as between Buyer, on the one hand, and the Seller, on
the other hand, the Seller is responsible for providing group
health plan continuation coverage in accordance with Section 4980B
of the Code and Part 6 of Subtitle B of Title I of ERISA (without
regard to whether Buyer is ultimately determined to be responsible
to provide such coverage to any such current or former employee)
and Seller will indemnify, defend and hold harmless the Buyer, and
its affiliates from and against any liability, expense, cost, tax
or obligation of any nature with
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respect to such current or former employee or other individual
arising in connection with group health plan coverage required
under Section 4980B of the Code or Part 6 of Subtitle B of Title I
of ERISA.
(d) Seller will prepare a Schedule 4.7(d) of all commissions estimated
to be due to the Transferred Employees for sales prior to the
Closing, including payroll taxes (calculated at a rate of 7.65% of
the commission payable). Such commissions will be calculated as
if all related accounts receivable had been collected as of
January 31, 1997, irrespective of the Seller's policy otherwise.
This aggregate commission amount will be a credit to the Buyer on
the Closing Statement. Buyer will pay the amount to the
Transferred Employees promptly on or after Closing, and these
amounts will be trued-up by the Buyer and Seller within
thirty-five (35) days after Closing.
4.8. NON-COMPETE AGREEMENT. For a period of two (2) years after the Closing
Date, Seller will not, either alone nor in any capacity with another
person or firm, directly or indirectly, sell any products of the
vendors listed on Schedule 1.1(a) to any re-sellers.
4.9. SUPPORT SERVICES. Seller and Buyer agree that for the month of
February 1997, Seller will provide the services set forth on Schedule
4.9 at no cost to Buyer (notwithstanding the quoted prices on such
Schedule) except for the actual cost of the direct pass through
separately charged telephone calls (for example, long distance).
4.10. MARGINS ON OPEN SALES ORDERS. Seller and Buyer agree that with respect
to the gross margin received by Buyer on the Open Sales Orders, Buyer
will pay the sales commission to the Transferred Employees, and the net
amount (gross margin less the sales commission) will be split one-half
to the Seller and one-half to the Buyer. Buyer will provide a written
report with respect to the calculation of the sales commissions owing
and will pay Seller its share in accordance with this Section on a
monthly basis as and when Buyer receives payment with respect to the
Open Sales Orders.
4.11. EVALUATION UNITS. Seller represents that there are MST products worth
an amount not to exceed $20,000 that are in the field being evaluated
by customers of MST who are re-sellers (the "Evaluation Units."). If
such Evaluation Units are returned to the Seller after the Closing
Date, and Seller delivers such Evaluation Units to Buyer (at Seller's
cost) before the end of February 1997 in salable condition (that is,
the Evaluation Units are undamaged, in the box and with all manuals and
warranty papers), then Buyer will promptly pay to Seller the Seller's
net cost from the manufacturer with respect to such Evaluation Units.
4.12. ACCOUNTS PAYABLE. Seller will pay, not later than the Closing Date,
all outstanding vendor accounts payable (with respect to which invoices
have been received by Seller, whether or not then due) with respect to
MST Inventory set forth on Schedule 1.1(a), except as provided in
Section 10.3. On or before the Closing Date, Seller will provide to
Buyer proper written evidence that such accounts payable have been
paid. Seller further
8
agrees to promptly pay all invoices received by Seller after the
Closing Date, which relate to MST Inventory.
4.13. MST PRODUCT RETURNS BY CUSTOMER. With respect to MST products sold by
Seller prior to Closing, the parties agree that: (a) if such MST
products are returned by the customer to Seller, Seller may ship such
products to Buyer (at Seller's cost), and if any such product is in
salable condition (that is, the product is undamaged, in the box and
with all manuals and warranty papers), then Buyer will promptly pay to
Seller the Seller's net cost from manufacturer with respect to such
product; and (b) if such MST products are returned by the customer to
Buyer, and such product is in salable condition (as described above),
then Buyer will notify Seller of such facts, Seller will credit that
customer's account (assuming the return is authorized by Seller) and
Buyer will promptly pay to Seller the Seller's net cost from
manufacturer with respect to such product. Buyer will ship back to
Seller MST products that are not in salable condition.
ARTICLE
5.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer, as of the date of this Agreement, that:
5.1. DISCLOSURE SCHEDULE. The disclosure schedule of Seller attached as
Exhibit 5 hereto (the "Disclosure Schedule") is divided into sections
which correspond to the subsections of this Article 5. The Disclosure
Schedule is accurate and complete at the time this Agreement is
executed and will be accurate and complete on the Closing Date.
Nothing in the Disclosure Schedule will be deemed adequate to disclose
an exception to a representation or warranty made herein, unless the
Disclosure Schedule identifies the exception with reasonable
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 will 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). Disclosures in any
subsection thereof will not constitute disclosure for purposes of any
other subsection and any other section or subsection of this Agreement
or any exhibit to or other writing which is designated herein as being
part of this Agreement.
5.2. CORPORATE ORGANIZATION. The Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Ohio.
5.3. AUTHORIZATION. The Seller has full corporate power and authority to
enter into this Agreement and to carry out the transactions
contemplated herein and therein. The Members of the Seller has taken
all action required by law, the Seller's articles of organization and
bylaws and otherwise to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein. This Agreement has been duly and validly executed
and delivered by the Seller
9
and no other corporate action is necessary. This Agreement is, when
executed, a valid and binding legal obligation of the Seller,
enforceable against it in accordance with their respective terms.
5.4. NON-CONTRAVENTION. Neither the execution, delivery and performance of
this Agreement, nor the consummation of the transactions contemplated
herein or therein will violate or be in conflict with any provision of
the articles of incorporation or bylaws of the Seller.
5.5. FINANCIAL STATEMENTS. Section 5.5 of the Disclosure Schedule contains
true and complete copies of the calculation of contribution margin of
the Division for the following periods: the seven-month period ended
December 31, 1994, the twelve-month period ended December 31, 1995 and
the twelve-month period ended December 31, 1996. Except as disclosed
therein, the foregoing calculations of contribution margin and the
accounts reflected therein: (i) are in accordance with the books and
records of the Seller and have been prepared consistently for all
periods, and (ii) fairly present the identified accounts thereon for
the periods shown.
5.6. ABSENCE OF CERTAIN CHANGES. Except as set forth on the Disclosure
Schedule, since December 31, 1996, the Seller has owned and operated
the Assets and operated the Business in the ordinary course of business
and substantially consistent with past practice. Without limiting the
generality of the foregoing and except as set forth on the Disclosure
Schedule, the Seller has not suffered any loss, damage, destruction or
other casualty (whether or not covered by insurance) or suffered any
loss of officers, employees, distributors, independent contractors,
customers, or suppliers which had or may reasonably be expected to
result in a Material Adverse Effect on the condition of the Assets and
the Business, since December 31, 1996.
5.7. TITLE TO ASSETS. Except as set forth in the Disclosure Schedule, the
Seller has good and marketable right, title and interest in and to all
of the Assets. Except as set forth in the Disclosure Schedule, there
are no leasehold interests relating to the Personal Property. Except
as set forth in the Disclosure Schedule, none of the Assets is subject
to any mortgage, pledge, lien, security interest or encumbrance of any
kind or nature (whether or not of record), and will not become subject
to any such mortgage, pledge, lien, security interest or encumbrance
(including any UCC Article 6 liens) because of the transactions
described herein, other than liens which Seller will cause to be
released on the Closing Date (and the related financing statements
which Seller will cause to be terminated within 30 days after the
Closing Date).
5.8. INVENTORIES. All MST Inventory will be valued on Schedule 1.1(b) at
Seller's net cost from the manufacturer without reduction for marketing
development or co-op funds.
5.9. ACCOUNTS PAYABLE. On or before the Closing Date, Seller has paid all
outstanding vendor accounts payable with respect to the Assets of the
Business with respect to invoices received by Seller, except as
provided in Section 10.3.
10
5.10. INTANGIBLE ASSETS. Except as set forth in the Disclosure Schedule,
the Seller owns or has the unrestricted right to use, and to assign and
sell, all the Intangible Assets. Except as set forth on the Disclosure
Schedule, the use of all Intangible Assets does not and will not infringe
or violate or allegedly infringe or violate the intellectual property
rights of any person or entity. Except as described on the Disclosure
Schedule, the Seller (i) does not own or use any Intangible Assets
pursuant to any written license agreement; and (ii) has not granted any
person or entity any rights, pursuant to written license agreement or
otherwise, to use the Intangible Assets.
5.11. LITIGATION. Except as set forth in the Disclosure Schedule, there is
no action, suit, proceeding at law or in equity by any person or entity,
or any arbitration or any administrative or other proceeding by or before
(or any investigation by) any Authority, pending or, to the best of
Seller's knowledge, threatened, against the Seller affecting the Assets,
or which questions or challenges the validity of this Agreement or any
action taken or to be taken by the parties hereto pursuant to this
Agreement or in connection with the transactions contemplated herein,
and there does not exist any valid basis for any such action, proceeding
or investigation.
5.12. TAX MATTERS. There are no facts or circumstances which could,
directly or indirectly, subject the Buyer or any of its affiliates to any
liability of any nature with respect to any federal, state, local,
foreign or other income, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, real or
personal property, windfall profits, customs, duties or other taxes that
was or will be owing by the Seller with respect to the Assets. Seller
is not required by the Ohio state taxing authority to obtain any tax
clearance certificate or similar document(s) in order to relieve the
Buyer of any obligation to withhold any portion of the Purchase Price.
5.13. BENEFIT PLANS. There are no facts or circumstances which could,
directly or indirectly, subject Buyer or any of its affiliates to any
liability of any nature with respect to any pension, welfare, incentive,
perquisite, paid time off, severance or other benefit plan, policy,
practice or agreement sponsored, maintained or contributed to by the
Seller or any affiliate, to which the Seller or any affiliate is a party
or with respect to which the Seller or any affiliate could have any
liability.
5.14. COMPENSATION ARRANGEMENTS. Schedule 4.7(a) sets forth a true and
complete listing of the base salary and other compensation and benefits
arrangements for each of the Transferred Employees for the calendar year
1996.
5.15. ORDERS, COMMITMENTS AND RETURNS. Except as set forth in the Disclosure
Schedule, all Open Sales Orders and all Open Purchase Orders were made
in bona fide transactions in the ordinary course of business. Except as
set forth in the Disclosure Schedule, to the best of Seller's knowledge,
there are no claims against the Seller to return products of the Division
by reason of alleged over-shipments, defective products or otherwise
(except the
11
Micom EREs), or of products in the hands of customers, retailers or
distributors under an understanding that such products would be
returnable.
5.16. LABOR MATTERS. Except as set forth in the Disclosure Schedule, in
connection with the business of the Division: (i) the Seller is and has
been in material compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment
and wages and hours, including without limitation any such laws
respecting employment discrimination and occupational safety and health
requirements, and has not and is not engaged in any unfair labor
practice; (ii) to the best of Seller's knowledge, there is no unfair
labor practice complaint against the Seller pending or threatened before
the National Labor Relations Board or any other comparable Authority;
(iii) to the best of Seller's knowledge, there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or
directly affecting the relating to the Division; (iv) no labor
representation question exists respecting the employees of the Division
and there is not pending or, to the best of Seller's knowledge,
threatened any activity intended or likely to result in a labor
representation vote respecting the employees of the Division; (v) no
grievance or any arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claims therefor exist
or, to the best of Seller's knowledge, have been threatened; (vi) no
collective bargaining agreement is binding and in force against the
Seller or currently being negotiated by the Seller relating to the
Division; (vii) the Seller has not experienced any significant work
stoppage relating to the Division; (viii) to the best of Seller's
knowledge, the Seller is not delinquent in payments to any persons
performing services for the Division for any wages, salaries,
commissions, bonuses or other direct or indirect compensation for any
services performed by them or amounts required to be reimbursed to such
persons, including without limitation any amounts due under any Pension
Plan, Welfare Plan or Compensation Plan; and (ix) upon termination of the
employment of any person, neither the Seller, nor Buyer nor any
subsidiary of Buyer will, by reason of anything done at or prior to or as
of the Closing Date, be liable to any of such persons for so-called
"severance pay" or any other payments (other than wages, vacation
benefits and other benefits which Seller will pay in accordance with
Seller's customary payroll practices).
5.17. DISCLOSURE. There is no material fact as of the date hereof which has
not been disclosed in writing to the Buyer related to the Division, the
Assets or the operations, properties, financial condition or prospects of
the Division which has a Material Adverse Effect or, in the future may
have a Material Adverse Effect on the Division or the Assets in the
context of this transaction taken as a whole. The representations and
warranties contained in this Article 5 or elsewhere in this Agreement or
any document delivered pursuant hereto will not be affected or deemed
waived by reason of the fact that the Buyer or their respective
representatives knew (other than as a result of the Disclosure Schedule
or other writing delivered to the Buyers on the Closing Date) or should
have known that any such representation or warranty is or might be
inaccurate in any respect.
12
ARTICLE
6.
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to Seller that:
6.1. ORGANIZATION. Buyer is a corporation duly existing and in good standing
under the laws of the State of North Carolina.
6.1. AUTHORITY; BINDING EFFECT. Buyer has full corporate power and authority
to execute, deliver and perform this Agreement and the other instruments,
agreements and documents to be executed by it hereunder and to consummate
the transactions provided for herein and therein. Such execution,
delivery and performance have been duly authorized by all necessary
action on the part of Buyer and does not and will not contravene the
articles of incorporation or bylaws of Buyer. This Agreement is, and
each of such other instruments, agreements and documents will be, when
executed and delivered, a valid and binding obligation of Buyer.
6.3. LITIGATION. There is no action, suit, proceeding or investigation at law
or in equity or by or before any governmental instrumentality or other
judicial or quasi-judicial agency threatened or now pending, against
Buyer, or any affiliate or subsidiary of Buyer, which would adversely
affect the business or financial condition of the Buyer or the ability of
Buyer to consummate the transactions contemplated hereby.
6.4. FUNDS. At the Closing Date, and any other time thereafter necessitating
the transfer of funds by Buyer to Seller contemplated herein, Buyer will
have the funds required to consummate the Transactions contemplated
hereby.
ARTICLE
7.
TERMINATION AND ABANDONMENT
7.1. METHODS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time, but not
later than the Closing:
(a) By mutual written consent of the Buyer and the Seller; or
(b) By the Buyer on or after the Termination Date or such later date as
may be established pursuant to Section 1 hereof, if any of the
conditions provided for in Section 11.1 of this Agreement will not
have been satisfied or waived in writing by the Buyer prior to such
date; or
(c) By the Seller on or after the Termination Date or such later date as
may be established pursuant to Section 1 hereof, if any of the
conditions provided for in Section 11.2 of this Agreement will not
have been satisfied or waived in writing by the Seller prior to such
date; or
13
(d) By any party if the Closing will not have occurred on or before
February 7, 1997 ("Termination Date").
7.2. PROCEDURE UPON TERMINATION. In the event of termination and abandonment
pursuant to Section 7.1(a), written notice thereof will forthwith be
given to the other party or parties, and the provisions of this Agreement
will terminate, and the transactions contemplated herein will be
abandoned, without further action by any party hereto.
7.2. EFFECT OF TERMINATION. If this Agreement is terminated as provided
herein: (i) each party will, upon request, redeliver all documents, work
papers and other material of any other party (and all copies thereof)
relating to the transactions contemplated herein, whether so obtained
before or after the execution hereof, to the party furnishing the same;
(ii) the confidentiality obligations of Section 4.4 will continue to be
applicable; and (iii) except as provided in this subsection, no party
will have any liability for a breach of any representation, warranty,
agreement, covenant or other provision of this Agreement, unless such
breach was due to a willful or bad faith action or omission of such party
or any representative, agent, employee or independent contractor thereof.
If either party fails to close after all conditions to that party's
obligation to close have been satisfied, and the other party is not in
breach of any material obligation or representation under this initial
Agreement, then the party that fails to close shall pay the other party a
break-up fee in the amount of One Hundred Thousand Dollars ($100,000).
ARTICLE
8.
SURVIVAL AND INDEMNIFICATION
8.1. SURVIVAL. All representations, warranties, covenants, indemnities and
agreements of each of the parties hereto contained in this Agreement
(including any exhibits, certificates, or documents delivered pursuant
hereto) survive the Closing (and not be affected in any respect by the
Closing) of the transactions contemplated hereby for a period of eighteen
(18) months therefrom.
8.2. INDEMNIFICATION BY BUYER. The Buyer agrees to indemnify, defend and
hold the Seller harmless from and against any and all loss, liability or
damage suffered or incurred by Seller by reason of:
(a) any untrue representation of, or breach of any warranty,
representation or agreement by the Buyer in any part of this
Agreement; and
(b) any nonfulfillment of any covenant, agreement or undertaking of the
Buyer in any part of this Agreement which by its terms is to remain
in effect after the Closing and has not been specifically waived in
writing at the Closing by the party or parties hereto entitled to
the benefits thereof; and
14
(c) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the
foregoing.
8.3. INDEMNIFICATION BY SELLER. The Seller agrees to indemnify, defend and
hold the Buyer harmless from and against any and all loss, liability or
damage suffered or incurred by the Buyer or any of its affiliates by
reason of:
(a) any untrue representation of, or breach of any warranty,
representation or agreement by the Seller in any part of this
Agreement;
(b) any nonfulfillment of any covenant, agreement or undertaking of the
Seller in this Agreement which by its terms is to remain in
effect after the Closing and has not been specifically waived in
writing at the Closing by the party or parties hereto entitled to
the benefits thereof; and
(c) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the
foregoing.
8.4. CLAIMS FOR INDEMNIFICATION. Whenever any claim will arise for
indemnification hereunder (other than a claim to be submitted pursuant
to aforesaid terms and provisions), the party seeking indemnification
(the "Indemnified Party") will promptly notify the party from whom
indemnification is sought (the "Indemnifying Party") of the claim and,
when known, all of the facts constituting the basis for such claim.
The failure so to notify the Indemnifying Party will not relieve the
Indemnifying Party of any liability that it may have to the
Indemnified Party except to the extent the Indemnifying Party
demonstrates that the defense of such action is prejudiced thereby.
In the case of any such claim for indemnification hereunder resulting
from or in connection with any claim or legal proceedings of a third
party (a "Proceeding"), the Indemnifying Party will, unless the claim
involves taxes, be entitled to participate in such legal proceedings
and, to the extent that it will wish (unless the Indemnifying Party
is also a party to such Proceeding and the Indemnified Party
determines in good faith that joint representation would be
inappropriate or the Indemnifying Party fails to provide reasonable
assurance to the Indemnified Party of its financial capacity to defend
such Proceeding and provide indemnification with respect thereto), to
control the defense thereof with counsel reasonably satisfactory to
the Indemnified Party and, after notice from Indemnifying Party to the
Indemnified Party of its election so to control the defense thereof,
the Indemnifying Party will not be liable to such the Indemnified
Party under this Section for any fees of other counsel or any other
expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the Indemnified Party in connection with the
defense thereof, other than reasonable costs of investigation. If an
Indemnifying Party controls the defense of such a Proceeding, (i) no
compromise or settlement thereof may be effected by the Indemnifying
Party without the Indemnified Party's consent unless (A) there is no
finding or admission of any violation of Law or any violation of the
15
rights of any person and no effect on any other claims that may be
made against the Indemnified Party and (B) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party and
(ii) the Indemnifying Party will have no liability with respect to any
compromise or settlement thereof effected without its consent. If
notice is given to an Indemnifying Party of the commencement of any
Proceeding and it does not, within ten (10) days after the Indemnified
Party's notice is given, give notice to the Indemnified Party of its
election to assume the defense thereof, the Indemnifying Party will be
bound by any determination made in such action or any compromise or
settlement thereof effected by the Indemnified Party. Notwithstanding
the foregoing, if an Indemnified Party determines in good faith that
there is a reasonable probability that a Proceeding may adversely
effect it or its affiliates other than as a result of monetary
damages, or the Proceeding involves taxes, such Indemnified Party may,
by notice to the Indemnifying Party, assume the exclusive right to
defend, compromise or settle such Proceeding, but the Indemnifying
Party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement thereof effected without its
consent (which will not be unreasonably withheld).
8.5. EXCEPTION AMOUNT ON CERTAIN INDEMNIFICATION CLAIMS. Buyer will not be
entitled to indemnification pursuant to Article 8 with respect to a
loss, liability or damage amount that relates to any untrue
representation or warranty of Seller set forth in Sections 5.2, 5.3,
5.4, 5.5, 5.6, 5.10, 5.11 and 5.16 hereof unless and until the
aggregate amount of all indemnification claims with respect to such
representations or warranties is more than Twenty-Five Thousand
Dollars ($25,000) (the "Exception Amount"). Seller will not be
entitled to indemnification pursuant to Article 8 with respect to a
loss, liability or damage amount that relates to any untrue
representation or warranty of Buyer set forth in Sections 6.1, 6.2 and
6.3 unless and until the aggregate amount of all indemnification
claims with respect to such representations and warranties is more
than the Exception Amount. The Exception Amount applies only to the
indemnification claims of each party with respect to these specified
representations and warranties and does not apply to any other valid
indemnification claim by such party. Buyer or Seller, as the case may
be, will be entitled to full indemnification of the entire amount of
such claims if the amount of such claims (individually or in the
aggregate) exceeds the Exception Amount. The parties hereto do not
intend that the Exception Amount be deemed to be a definition of what
is "material" for purposes of this Agreement.
ARTICLE
9.
CLOSING
9.1. CLOSING DATE. The closing of the transactions described herein
("Closing") shall be held at 11:00 A.M., Cleveland time on Friday,
January 31, 1997 (the "Closing Date"), at the Seller's place of
business located at ▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇. A pre-closing shall be held at 1:00 P.M. on Thursday, January
30, 1997 at the same location.
16
9.2. CLOSING DELIVERIES BY SELLER. At the Closing, Seller shall, subject
to the fulfillment to its satisfaction of the conditions set forth in
Section 11.2 or its waiver thereof, deliver to Buyer:
(a) a ▇▇▇▇ of Sale and Assignment in the form attached hereto as Exhibit
9.2(a), dated the Closing Date and duly executed by an authorized
officer of Seller for all the Assets;
(b) Closing Statement, including the Schedules thereto, dated as of the
Closing Date and duly executed by an authorized officer of Seller;
(c) possession of the Assets;
(d) a certificate by the Seller, dated the Closing Date and executed by
a duly authorized officer of Seller, certifying that the
conditions set forth in Section 11.1 have been satisfied;
(e) copies of a resolutions of Seller's Members authorizing this
Agreement and the transactions described herein relating to the
Agreement, certified by the authorized representative of Seller
as being in full force and effect on the Closing Date;
(f) certificate of good standing of Seller indicating that Seller is an
Ohio limited liability company, duly organized and in good
standing in the State of Ohio;
(g) letters and partial releases from Deutsche Financial Services Corp.
(formerly known as ITT Commercial Finance Corp.), IBM and any other
third party having a secured interest in all or a portion of the
Assets or such other evidence of termination as is reasonably
equivalent; and
(h) documentation evidencing the proper termination of all rights and
obligations of all parties in connection with any employment,
non-competition and other agreements with respect to the
Transferred Employees who accept employment with Buyer.
9.3. CLOSING DELIVERIES BY BUYER. Contemporaneous with the execution and
delivery of this Agreement, Buyer shall have executed and delivered, in
a form acceptable to Seller, the following:
(a) the Closing Statement Price;
(b) a Closing Statement, dated as of the Closing Date and duly executed
by an officer of the Buyer;
(c) a certificate, dated the Closing Date and executed by a duly
authorized officer of Buyer, certifying that the conditions set
forth in Section 11.2 have been satisfied;
17
(d) copies of the resolutions of the Boards of Directors of Buyer and
other requisite approvals authorizing the transactions
contemplated hereby or otherwise relating to this Agreement and
the transactions contemplated hereby, certified by the Secretary
of Buyer as being in full force and effect on the Closing Date;
(e) certificates or other evidence satisfactory to Seller that each Buyer
is duly incorporated and in good standing in North Carolina; and
(f) such other documents and instruments as are required to be delivered
to Seller by Buyer pursuant to this Agreement at or prior to Closing.
ARTICLE
10.
CLOSING PROCEDURES AND SCHEDULES
10.1. PRECLOSING AND CLOSING PROCEDURES.
(a) The parties agree that at the execution of this Agreement, the
schedules of MST Inventory and Open Purchase Orders, Vendor
Credits and Transferred Employees Estimated Commissions will not
be attached to the Agreement, but will be prepared by Seller,
reviewed by Buyer, initialed by the parties and included in the
Closing Statement to be delivered on the Closing Date. The Open
Sales Orders Schedule will not be attached at execution of the
Agreement. Seller will prepare an estimated Schedule of Open
Sales Orders at Closing and will deliver the final such schedule
to Buyer as soon as possible after Closing.
(b) On the Closing Date, the Closing Statement will set forth the
Purchase Price calculation and will reflect all adjustments to
the Purchase Price agreed upon by the parties, including a credit
to the Buyer for the commissions payable by Buyer pursuant to
Section 4.7(d) and a credit to the Buyer for the amount of the
Credit Holdback as defined under Section 10.3 herein. The
Purchase Price, as adjusted, shall be the "Closing Statement
Price."
10.2. PREPARATION OF SCHEDULE OF MST INVENTORY.
(a) Seller agrees that no shipments of MST Inventory will be made out of
Seller's facility, nor shipments of MST Inventory received into
Seller's facility, after the close of business on Thursday,
January 30, 1997.
(b) Seller represents that it has not, and agrees that it will not, place
Open Purchase Orders with vendors where the expected receipt of
such inventory is a delivery date on or after January 31, 1997.
18
(c) Seller will prepare the MST Inventory for physical count. After the
physical count on January 31, Seller will keep the MST Inventory
secure, and Buyer will remove it from Seller's warehouse not
later than February 1, 1997.
(d) On Friday, January 31, 1997, the parties agree to together conduct a
physical inventory of the MST Inventory, commencing at 5:00 a.m.
In the preparation of Schedule 1.1(a), the parties will use the
Seller's net cost from the manufacturer for all MST Inventory.
The MST Inventory will not include any items which are listed on
Schedule 10.2(d), which will be the list of Excluded Inventory.
10.3. VENDOR CREDITS.
(a) Seller represents that it has certain credit rights known as co-op
credits, MDF credits, stock rotation credits, price protection
credits and promotional credits, of which an amount not to exceed
$60,000 are listed on Schedule 10.3 (collectively, the "Credits,"
and individually, a "Credit" and relate to a particular "Credit
Holdback Vendor"). which Seller has deducted from its accounts
payable balances before payment pursuant to Section 4.12.
(b) At the Closing, Buyer shall be entitled to a credit on the Closing
Statement in an amount equal to the Credits (the "Credit Holdback");
(c) In the event that any Credit Holdback Vendor of Seller listed on
Schedule 10.3 (a "Vendor") asserts a claim against Buyer for any
unpaid account payable, then Buyer may pay such unpaid account
payable amount, after notifying Seller at least seven (7) days
prior thereto and granting Seller the opportunity within such
seven (7) days the ability to satisfy its obligation to such
Credit Holdback Vendor. For the purpose of this paragraph, a
claim by a Credit Holdback Vendor need not be a legal proceeding,
but must be more than a request for payment. The term "claim"
will include any legal proceeding or threat thereof, any credit
hold or threat thereof, and any cancellation or other substantial
alteration of the business relationship between the Credit
Holdback Vendor and the Buyer or threat thereof. Payments by
Buyer made under this subsection shall reduce the Credit Holdback.
(d) As and when Seller delivers to Buyer credit memos or other proper
written evidence that the Credit Holdback Vendor has agreed to
the Credit having been applied to the accounts payable balance,
as described in Section 10.3(a), then Buyer shall promptly pay
the amount of the Credit to Seller, until the Credit Holdback is
exhausted.
(e) If there is any Credit Holdback remaining on June 1, 1997, then Buyer
shall promptly pay such amount to Seller.
(f) In no event shall payments by Buyer hereunder be more than the
original Credit Holdback.
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ARTICLE
11.
CONDITIONS PRECEDENT TO BUYER AND SELLER'S OBLIGATION TO
CONSUMMATE TRANSACTIONS
11.1. CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of Buyer are
subject to satisfaction, prior to or at the Closing, of each of the
following conditions (all or any of which may be waived in whole or in
part by Buyer):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller contained in this
Agreement (including the Schedules, and in all certificates
and other documents delivered and to be delivered by Seller to
Buyer in connection with the transactions described herein)
and the covenants made hereunder by Seller shall be true,
complete, accurate, and correct in all material respects when
made and, except as contemplated or permitted herein or therein
or except as consented to by Buyer in writing, shall continue to
be true and correct in all material respects as of the Closing
Date with the same effect as though made at the Closing Date,
and Seller shall have performed and complied with, in all
material respects, all agreements, obligations and conditions
required by this Agreement to be performed or complied with by
Seller prior to or at the Closing.
(b) LITIGATION. No action, suit, investigation, inquiry or proceeding
relating to the transactions contemplated hereby shall be
instituted or threatened by any party, governmental body or
other person, in which there is, or is likely to be, sought a
temporary, preliminary or permanent judgment, order or decree
restraining or enjoining consummation of the transactions
contemplated hereby, requiring any holding separate or
divestiture of any substantial portion of the Assets by Buyer
or which questions the validity or legality of the
transactions contemplated hereby.
(c) PERFORMANCE. Seller shall have performed and complied with all
agreements, obligations and conditions required by this Agreement
to be performed or complied with by them on or prior to the
Closing.
(d) NO INJUNCTION. On the Closing Date there shall be no effective
injunction, writ, preliminary restraining order or any order of
any nature issued by a court of competent jurisdiction directing
that the transactions provided for herein or any of them not be
consummated as so provided or imposing any conditions on the
consummation of the transactions contemplated hereby.
(e) CERTIFICATES. Seller shall have furnished Buyer with such
certificates of their officers and others to evidence compliance
with the conditions set forth in Section 9.2 this Section 11.1 as
may be reasonably requested by Buyer.
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(f) DOCUMENTATION FOR CONVEYANCE OF THE ASSETS. The Buyer will have
received, in a form and substance reasonably satisfactory to Buyer
and its counsel, dated the Closing Date, all bills of sale, deeds,
assignments and other conveyance documentation as set forth in
this Agreement to vest title in the Assets in the Buyer.
(g) RELEASE LETTER. Seller will have furnished Buyer with a letter
satisfactory in form and substance to the parties from creditors
who have existing security interests in the Assets, including
Deutsche Financial Services Corp. (formerly known as ITT
Commercial Finance Corp.), pursuant to which such creditors
release their security interests against the Assets.
11.2. CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller under
this Agreement are subject to satisfaction, prior to or at the Closing,
of each of the following conditions (all or any of which may be waived
in whole or in part by Seller):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Buyer contained in this Agreement (including the
Schedules, and in all certificates and other documents
delivered or to be delivered by Buyer to Seller in connection
with the transactions described herein) shall have been true
and correct in all respects when made and, except as otherwise
provided or permitted herein or except as consented to by
Seller in writing, shall continue to be true and correct in
all material respects on and as of the Closing Date with the
same effect as though made at the Closing Date, and Buyer
shall have performed and complied with, in all material
respects, all agreements, obligations and conditions required by
this Agreement to be performed or complied with by its prior to or
at the Closing.
(b) LITIGATION. No action, suit or proceeding relating to the
transactions contemplated hereby shall be instituted by any
party and remain pending, in which there is, or is likely to
be sought, a temporary, preliminary or permanent judgment,
order injunction or decree restraining or enjoining
consummation of the transactions contemplated hereby.
(c) PERFORMANCE. Buyer shall have performed and complied with all
agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior
to the Closing.
(d) NO INJUNCTION. On the Closing Date there shall be no effective
injunction, writ, preliminary restraining order or any order
of any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein or any of
them not be consummated as so provided or imposing any
conditions on the consummation of the transactions contemplated
hereby.
21
(e) CERTIFICATES. Buyer shall have furnished Seller with such
certificates of their officers and others to evidence
compliance with the conditions set forth in Section 9.3 or
this Section 11.2 as may be reasonably requested by Seller.
ARTICLE
12.
MISCELLANEOUS PROVISIONS AND AGREEMENTS
12.1. CONSUMMATION OF TRANSACTIONS. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto agrees to use
its best efforts (i) to take, or cause to be taken, all such actions
and to do, or cause to be done, all other things necessary to carry
out its obligations hereunder; (ii) to cause the conditions to the
obligations of the other party hereto to be satisfied prior to or at
the Closing; and (iii) to consummate and make effective, as soon as
reasonably practicable, the transactions contemplated by this
Agreement; provided, however, that this Section 12.1 shall not
require either party to take any action the result of which, in its
reasonable judgment, would be to impose material limitations on its
ability to consummate and retain the full benefits of the transactions
contemplated hereby.
12.2. ACCESS TO RECORDS. Each party to this Agreement agrees that on and
after the Closing it will permit the other party and its
representatives, during normal business hours, to have access to and
examine and make copies of all of any books and records with respect
to costs, inventory and guaranty and warranty information, which are
delivered to the other party pursuant hereto in order to confirm
such party's compliance with respect to any ongoing obligation
hereunder. Each party also agrees that it will cooperate with the
other party and make information available to each party as
reasonably requested by it in connection with any litigation. All
such books and records which are delivered to the other party will
be preserved by such party for a period of seven (7) years after the
Closing.
12.3. EXPENSES. Buyer and Seller will each bear their own costs and
expenses relating to the transactions contemplated hereby, including
without limitation, fees and expenses of legal counsel, accountants,
investment bankers, brokers or finders, printers, copiers,
consultants or other representatives for the services used, hired or
connected with the transactions contemplated hereby. Buyer and
Seller will each pay any commission or finder's fee or similar
amount incurred by them by agreement or otherwise for retaining or
consulting any broker, finder or investment banker in connection
with the transactions contemplated by this Agreement.
12.4. AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement
may be amended or modified by the parties hereto at any time prior
to the Closing with respect to any of the terms contained herein;
provided, however, that all such amendments and modifications must
be in writing duly executed by all of the parties hereto.
22
12.5. WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to comply with
any obligation, covenant, agreement or condition herein may be
expressly waived in writing by the party entitled hereby to such
compliance, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition
will not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. No single or partial exercise of a
right or remedy will preclude any other or further exercise thereof
or of any other right or remedy hereunder. Whenever this Agreement
requires or permits the consent by or on behalf of a party, such
consent will be given in writing in the same manner as for waivers
of compliance.
12.6. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement will entitle
any person or entity (other than a party hereto and his, her or its
respective successors, heirs and assigns permitted hereby) to any
claim, cause of action, remedy or right of any kind.
12.7. FURTHER ASSURANCES. Each of the parties shall execute such documents
and other papers and take such further actions as may be reasonably
required or desirable in the judgment of their counsel to carry out the
provisions of this Agreement and the transactions contemplated hereby.
12.7. NOTICES. All notices, requests, demands and other communications made
hereunder shall be in writing and shall be deemed duly given when
personally delivered or sent by telecopier or telex (receipt
confirmed) or registered or certified mail, postage prepaid, as
follows, or to such other address or person as any party may designate
by notice to the other party:
If to Buyer: Atlantic Network Systems, Inc.
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Plaza VII
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If to Seller: MRK TECHNOLOGIES, LTD.
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
23
with a copy to: MRK TECHNOLOGIES, LTD.
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ Cargo, Vice President &
General Counsel
12.9. ARBITRATION.
(a) In the event that there shall be any controversy, claim or dispute
between the parties arising out of or relating to this Agreement
("Arbitrable Dispute"), the parties shall first attempt to resolve the
Arbitrable Dispute through a meeting or meetings between the senior
executive officers of each party. If, after thirty (30) calendar days
after the senior executive officers have first met to resolve an
Arbitrable Dispute, such Arbitrable Dispute is not resolved, then it
shall be resolved by final and binding arbitration as provided in
subsections (b) through (d) of this Section.
(b) Arbitration shall be initiated by one party making a written demand on
the other party and simultaneously filing copies of the demand,
together with the required fees, with the office of the American
Arbitration Association ("AAA") in Cleveland, Ohio. In no event,
however, may any demand for arbitration be made after the date that
institution of legal or equitable proceedings based upon the claim,
dispute or other Arbitrable Dispute would have otherwise been barred
by the applicable statute of limitations or otherwise barred by this
Agreement.
(c) The arbitration proceeding shall be conducted by one arbitrator who
may be a retired judge (the "Arbitrator") selected by the parties in
accordance with the rules of the American Arbitration Association
within 60 business days after notification of selection of the
Arbitrator. Arbitration shall be conducted under the auspices of AAA,
and the AAA's commercial arbitration rules of practice then in effect
(the "Rules") shall govern all proceedings unless otherwise provided
herein (or otherwise agreed to by the parties.) In case of conflict
between the Rules and this Agreement (or such other subsequent
understanding reached between the parties hereto), the provisions of
this Agreement (or such other agreement) shall govern.
(d) Within thirty (30) days of the selection of the Arbitrator, the
parties involved in the dispute shall meet in Cleveland, Ohio with
such Arbitrator at a place and time designated by the Arbitrator after
consultation with the parties and present their respective positions
on the dispute. Each party shall have no longer than two (2) days to
present its position and the entire proceeding shall be on no more
than (five) 5 consecutive business days in duration. The Arbitrator's
award, which may include equitable relief, shall be rendered within
ten (10) days following completion of the proceeding and shall be a
final and binding determination of the dispute and shall be fully
enforceable as an arbitration award in any court having jurisdiction
and venue over such parties. The prevailing party (as may be
24
determined by the Arbitrator) may in addition be awarded by the
Arbitrator such party's own attorneys' fees and expenses in connection
with such proceeding. The non-prevailing party (as may be determined
by the Arbitrator) shall pay the Arbitrator's fees and expenses.
12.10. NO THIRD PARTY BENEFICIARY. This Agreement shall not confer any
rights and remedies upon any person other than the parties hereto
and their respective successors and permitted assigns.
12.11. WAIVER. No waiver of compliance with any provision or condition
hereof and no consent provided for herein shall be effective unless
evidenced by an instrument in writing duly executed by the
appropriate party.
12.12. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective
successors and permitted assigns. Neither this Agreement nor the
rights and obligations of the Buyer hereunder shall be assignable,
except by operation of law and with prior written notice and consent
of Seller, provided, however, that Buyer may assign its rights (but
not its obligations) under this Agreement, in whole or in any part,
and from time to time, to a wholly-owned, direct or indirect
subsidiary or parent of Buyer.
12.12. HEADINGS; RECITALS. The Article and Section headings used herein
are for convenience of reference only and do not form a part hereof
and do not in any way modify, interpret or set forth the intentions
of the parties. The recitals appearing at the head of this Agreement
are hereby incorporated into this Agreement by this reference as if
the same were fully herein rewritten.
12.14. EXHIBITS AND SCHEDULES. The Exhibits and Schedules to this
Agreement are, by this reference, incorporated herein and made a
part of this Agreement as if fully set forth herein.
12.15. ENTIRE AGREEMENT. Upon the execution of this Agreement, the Letter
of Intent between the parties shall terminate. This Agreement and
the Exhibits and Schedules attached hereto, and the other writings
specifically identified herein, contain the entire agreement among
the parties hereto with respect to the transactions described herein
and supersede all previous written or oral statements, negotiations,
commitments, promises and writings.
12.16. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and
delivered such counterparts shall together constitute one and the
same instrument.
12.17. APPLICABLE LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Ohio
without regard to laws relating to conflicts of laws. Any legal
proceeding related to this Agreement will be brought in an
appropriate
25
Ohio court, and both parties hereby consent to the jurisdiction of
such court for this purpose.
12.18. DEFINITION OF MATERIAL ADVERSE EFFECT. For purposes of this
Agreement, the term, "Material Adverse Effect" means an event,
change or occurrence which has a material negative impact on the
condition (financial or otherwise), businesses, results of
operations or prospects of the Business, taken as a whole (and going
concern value, in the case of the Division), or the ability of the
Seller or the Buyer, as the case may be, to consummate the
transactions contemplated hereby, other than any such event, change
or occurrence resulting or arising from (i) general economic
conditions or (ii) the loss of any customer as a result of the
announcement or consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties, have each executed this Agreement as of
the day and year first set forth above.
BUYER:
ATLANTIC NETWORK SYSTEMS, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Its Vice President
------------------------------
(Print Name) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
SELLER:
MRK TECHNOLOGIES, LTD.
By /s/ Wm. ▇▇▇▇▇▇ Cargo
------------------------------
Its Vice President and Secretary
------------------------------
(Print Name) Wm. ▇▇▇▇▇▇ Cargo
---------------------
26
