EXHIBIT 2.
Agreement and Plan of Reorganization dated December 14, 1995,
among USC Acquisition Corporation, U.S. Computer of
North America, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇.
AGREEMENT AND
PLAN OF REORGANIZATION
between
U.S. COMPUTER OF NORTH AMERICA, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇
and
USC ACQUISITION CORPORATION
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRANSFER OF ASSETS AND ASSUMPTION OF ASSUMED LIABILITIES . . . . . 4
2.01 Transfer of Assets of Transferor. . . . . . . . . . . . . . 4
2.02 Assumption of Assumed Liabilities . . . . . . . . . . . . . 4
ARTICLE III
CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.01 Stock Consideration . . . . . . . . . . . . . . . . . . . . 4
3.02 Method of Payment . . . . . . . . . . . . . . . . . . . . . 4
3.03 Surrender of Stock, Liquidation . . . . . . . . . . . . . . 5
3.04 Returns of Merchandise. . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TITLE AND AUTHORITY OF ▇▇▇▇▇▇▇ . 5
4.01 Power and Authority of ▇▇▇▇▇▇▇. . . . . . . . . . . . . . . 5
4.02 ▇▇▇▇▇▇▇'▇ Intent. . . . . . . . . . . . . . . . . . . . . . 6
4.03 Other Adverse Information . . . . . . . . . . . . . . . . . 6
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TRANSFEROR
AND ▇▇▇▇▇▇▇. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.01 Organization and Authorization. . . . . . . . . . . . . . . 6
5.02 Authorized and Outstanding Stock. . . . . . . . . . . . . . 7
5.03 Absence of Other Claims . . . . . . . . . . . . . . . . . . 7
5.04 Financial Statements. . . . . . . . . . . . . . . . . . . . 8
5.05 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . 8
5.06 No Violation of Law . . . . . . . . . . . . . . . . . . . . 8
5.07 Transferred Assets. . . . . . . . . . . . . . . . . . . . . 9
5.08 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.09 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . .10
5.10 Intellectual Property . . . . . . . . . . . . . . . . . . .10
5.11 Litigation. . . . . . . . . . . . . . . . . . . . . . . . .11
5.12 Employees.. . . . . . . . . . . . . . . . . . . . . . . . .12
5.13 Employee Benefits . . . . . . . . . . . . . . . . . . . . .12
5.14 Collective Bargaining . . . . . . . . . . . . . . . . . . .14
5.15 Labor Disputes. . . . . . . . . . . . . . . . . . . . . . .14
5.16 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . .14
5.17 Investments . . . . . . . . . . . . . . . . . . . . . . . .14
5.18 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . .14
5.19 Environmental Requirements. . . . . . . . . . . . . . . . .17
5.20 Required Licenses and Permits . . . . . . . . . . . . . . .19
5.21 Insurance Policies. . . . . . . . . . . . . . . . . . . . .19
5.22 Major Suppliers and Customers . . . . . . . . . . . . . . .20
5.23 Contracts and Commitments . . . . . . . . . . . . . . . . .20
5.24 No Conflict . . . . . . . . . . . . . . . . . . . . . . . .21
5.25 Agreements in Full Force and Effect . . . . . . . . . . . .22
5.26 Required Consents and Approvals . . . . . . . . . . . . . .22
5.27 Absence of Certain Changes and Events . . . . . . . . . . .22
5.28 Accounts Receivable . . . . . . . . . . . . . . . . . . . .24
5.29 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .24
5.30 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ . . . . . . . . . . . . . . . . . . . . .24
5.31 Transferor Net Worth. . . . . . . . . . . . . . . . . . . .24
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF TRANSFEREE . . . . . . . . . . .25
6.01 Organization. . . . . . . . . . . . . . . . . . . . . . . .25
6.02 Authorization . . . . . . . . . . . . . . . . . . . . . . .25
6.03 No Conflict . . . . . . . . . . . . . . . . . . . . . . . .25
6.04 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .25
6.05 Stock Consideration . . . . . . . . . . . . . . . . . . . .26
ARTICLE VII
COVENANTS OF TRANSFEROR AND ▇▇▇▇▇▇▇. . . . . . . . . . . . . . . .26
7.01 Pre-Closing Operations of Transferor. . . . . . . . . . . .26
7.02 Access. . . . . . . . . . . . . . . . . . . . . . . . . . .28
7.03 Interim Financials. . . . . . . . . . . . . . . . . . . . .28
7.04 Maia Receivable . . . . . . . . . . . . . . . . . . . . . .28
7.05 Preparation of Supporting Documents . . . . . . . . . . . .28
7.06 Distribution of Stock and Plan of Reorganization. . . . . .29
7.07 Notice of Breach or Potential Breach. . . . . . . . . . . .29
ARTICLE VIII
COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . .29
8.01 Approvals of Third Parties; Satisfaction of
Conditions to Closing . . . . . . . . . . . . . . . . . . .29
8.02 Confidentiality . . . . . . . . . . . . . . . . . . . . . .29
8.03 Condemnation. . . . . . . . . . . . . . . . . . . . . . . .30
8.04 Tax Elections . . . . . . . . . . . . . . . . . . . . . . .31
8.05 Termination of Existing Tax-Sharing Agreements. . . . . . .31
8.06 Tax Matters and Post-Closing Cooperation. . . . . . . . . .31
8.07 Registration. . . . . . . . . . . . . . . . . . . . . . . .32
ARTICLE IX
NON-COMPETITION, NONDISCLOSURE . . . . . . . . . . . . . . . . . .32
9.01 Non-Competition; Nonsolicitation. . . . . . . . . . . . . .32
9.02 Confidential Information. . . . . . . . . . . . . . . . . .33
9.03 Trade Secrets . . . . . . . . . . . . . . . . . . . . . . .34
ARTICLE X
CONDITIONS TO OBLIGATIONS OF TRANSFEROR AND ▇▇▇▇▇▇▇. . . . . . . .35
10.01 Representations and Warranties True at Closing Date . . . .35
10.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . .35
10.03 Opinion of Counsel to Transferee. . . . . . . . . . . . . .35
10.04 Documents Satisfactory in Form and Substance. . . . . . . .35
10.05 Required Governmental Approvals . . . . . . . . . . . . . .35
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF TRANSFEREE. . . . . . . . . . . . . .36
11.01 Representations and Warranties True at Closing Date . . . .36
11.02 No Material Change. . . . . . . . . . . . . . . . . . . . .36
11.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . .36
11.04 Required Governmental Approvals . . . . . . . . . . . . . .36
11.05 Other Necessary Consents. . . . . . . . . . . . . . . . . .36
11.06 Opinion of Counsel to Transferor and ▇▇▇▇▇▇▇. . . . . . . .37
11.07 Documents Satisfactory in Form and Substance. . . . . . . .36
11.08 Action by Board of Directors of Transferee. . . . . . . . .37
11.09 Due Diligence Review. . . . . . . . . . . . . . . . . . . .37
11.10 Non-Competition Agreement . . . . . . . . . . . . . . . . .37
11.11 Employment Agreements . . . . . . . . . . . . . . . . . . .37
11.12 Escrow Agreements . . . . . . . . . . . . . . . . . . . . .37
11.13 Closing of Assignment of Dinorall Option. . . . . . . . . .37
11.14 Termination of Option Agreement . . . . . . . . . . . . . .37
11.15 Approval of Transaction by SEC's Board. . . . . . . . . . .37
ARTICLE XII
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
12.01 Closing Date. . . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE XIII
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . .38
13.01 Agreement of ▇▇▇▇▇▇▇ and Transferor to Indemnify
Transferee. . . . . . . . . . . . . . . . . . . . . . . . .38
13.02 Indemnity Claims. . . . . . . . . . . . . . . . . . . . . .39
13.03 Agreement of Transferee to Indemnify ▇▇▇▇▇▇▇ and
Transferor. . . . . . . . . . . . . . . . . . . . . . . . .39
13.04 Certain Tax Liability . . . . . . . . . . . . . . . . . . .40
13.05 Survival; Time to Assert Claims . . . . . . . . . . . . . .40
13.06 Procedures for Indemnification. . . . . . . . . . . . . . .40
13.07 Defense of Third Party Claims . . . . . . . . . . . . . . .41
13.08 Settlement of Third Party Claims. . . . . . . . . . . . . .42
13.09 No Prejudice. . . . . . . . . . . . . . . . . . . . . . . .42
ARTICLE XIV
OBLIGATIONS OF TRANSFEROR AFTER CLOSING. . . . . . . . . . . . . .42
14.01 Change of Name. . . . . . . . . . . . . . . . . . . . . . .42
14.02 Dissolution . . . . . . . . . . . . . . . . . . . . . . . .42
14.03 Transferor's Corporate Records. . . . . . . . . . . . . . .43
ARTICLE XV
TERMINATION PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . .43
15.01 Termination of Agreement. . . . . . . . . . . . . . . . . .43
15.02 Termination of Obligations. . . . . . . . . . . . . . . . .44
ARTICLE XVI
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .44
16.01 Entire Agreement. . . . . . . . . . . . . . . . . . . . . .44
16.02 Amendment . . . . . . . . . . . . . . . . . . . . . . . . .44
16.03 Parties Bound by Agreement; Successors and Assigns. . . . .44
16.04 Counterparts. . . . . . . . . . . . . . . . . . . . . . . .45
16.05 Headings. . . . . . . . . . . . . . . . . . . . . . . . . .45
16.06 Modification and Waiver . . . . . . . . . . . . . . . . . .45
16.07 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .45
16.08 Notices . . . . . . . . . . . . . . . . . . . . . . . . . .45
16.09 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . .46
16.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . .47
16.11 Public Announcements. . . . . . . . . . . . . . . . . . . .47
16.12 Acquisition Proposals . . . . . . . . . . . . . . . . . . .47
16.13 Transferor's Knowledge. . . . . . . . . . . . . . . . . . .47
16.14 No Third-Party Beneficiaries. . . . . . . . . . . . . . . .48
16.15 "Including" . . . . . . . . . . . . . . . . . . . . . . . .48
16.16 Gender and Number . . . . . . . . . . . . . . . . . . . . .48
16.17 Attorneys' Fees and Costs . . . . . . . . . . . . . . . . .48
16.18 References. . . . . . . . . . . . . . . . . . . . . . . . .48
SCHEDULES
1 Excluded Liabilities
2 Excluded Assets
5.01(a) Foreign Qualification; Foreign Countries
5.01(b) Subsidiaries
5.01(d) Officers and Directors
5.02 Authorized and Outstanding Stock
5.03 Absence of Other Claims
5.04 Financial Statements
5.05 Undisclosed Liabilities
5.07(a) Description of Transferred Assets
5.07(b)(1) Permitted Liens
5.07(b)(2) General Description and Location of any Personal
Property not at Transferor's
Principal Place of Business
5.07(c) Other Encumbrances
5.07(f) Certain Inventory
5.08 Leases
5.09 Indebtedness
5.10(a) Intellectual Property
5.10(b) Computer Software Functional Specifications
5.11(a) Litigation Claims
5.11(b) Judgments, Orders, Writs
5.12 Employees
5.13(a) Employee Benefit Plans and Arrangements
5.16 Bank Accounts
5.17 Investments
5.18(b) Tax Liabilities and Contested Taxes
5.18(c) Tax Deficiencies, Audits and Proceedings
5.18(d) Tax Sharing Agreements
5.18(f) Tax Returns Furnished
5.18(g) Tax Elections and Special Tax Status
5.18(h)(1) Tax Basis and Other Tax Attributes
5.18(h)(2) Net Operating Losses and Other Tax Attributes
5.19 Environmental Requirements
5.20 Permits
5.21 Insurance Policies
5.22 Major Suppliers and Customers
5.23 Contracts and Commitments
5.24(b) No Conflict - Contracts
5.24(d) No Conflict - Encumbrances
5.25 Agreements in Full Force and Effect
5.26 Required Consents and Approvals
5.27 Absence of Certain Changes and Events
5.27(f) Payment of Obligations
5.28 Accounts Receivable
10.02 Litigation
14.09 Brokers
EXHIBITS
1 Short Term Stock Escrow Agreement
2 Supplemental Stock Escrow Agreement
3 Territory
4 Opinion of Counsel to Transferee
5 Opinion of Counsel to Transferor and ▇▇▇▇▇▇▇
6 Non-Competition Agreement for ▇▇▇▇▇ ▇▇▇▇▇▇▇
7 Employment Agreement for ▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND
PLAN OF REORGANIZATION
THIS AGREEMENT, effective as 12:01 a.m. of the 14th day of December,
1995, by and among ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), U.S. Computer of North
America, Inc., a Florida corporation ("Transferor"), and USC Acquisition
Corporation, a Delaware corporation ("Transferee");
W I T N E S S E T H:
WHEREAS, Transferee is a wholly-owned subsidiary of Southern
Electronics Corporation, a Delaware corporation ("SEC");
WHEREAS, ▇▇▇▇▇▇▇ owns all of the outstanding and issued capital
stock of Transferor, which is engaged in the business of the wholesale
distribution of microcomputers, computer printers, plotters, computer
peripheral products and calculators (the "Business");
WHEREAS, upon and subject to the terms and conditions contained
herein, Transferor desires to transfer to Transferee, and Transferee desires
to acquire from Transferor, the Business and all of the Transferred Assets of
Transferor, subject to the assumption of the Assumed Liabilities, as those
terms are herein defined, in exchange for certain voting common stock of SEC;
WHEREAS, upon consummation of the transactions contemplated
herein, Transferor desires to distribute such common stock of SEC to ▇▇▇▇▇▇▇,
its sole shareholder, and liquidate its assets and dissolve pursuant to a plan
of reorganization;
WHEREAS, for federal income tax purposes, it is intended that
the transactions contemplated by this Agreement shall qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, to avoid the diminution of the value of such
Transferred Assets to Transferee, the parties hereto have agreed that
Transferor shall not compete with Transferee or SEC in the Business, as
provided herein;
NOW, THEREFORE, for and in consideration of the premises, and
the mutual representations, warranties, covenants and agreements herein, and
upon and subject to the terms and the conditions hereinafter set forth, the
parties do hereby agree as follows:
ARTICLE I
DEFINITIONS
Certain of the defined terms used herein shall have the meanings
ascribed to them below:
"Affiliate" means any Person that controls, is controlled by or under
common control with another Person.
"Agreement" means this Agreement and Plan of Reorganization among
Transferee, Transferor and ▇▇▇▇▇▇▇.
"Assumed Liabilities" means the following specific liabilities of
Transferor assumed by Transferee, unless otherwise deemed an Excluded
Liability:
(a) All of Transferor's obligations and liabilities arising
from and as of the Closing Date pursuant to the terms of the leases,
contracts, agreements and commitments set forth in Schedules 5.08 and 5.23,
excluding any obligations or liabilities arising from or relating to any
default thereunder by Transferor;
(b) All sales commitments of Transferor entered into prior to
the Closing Date and entered into in the ordinary course of business at prices
and in quantities substantially consistent with Transferor's practice prior
hereto;
(c) All purchase orders of Transferor entered into prior to the
Closing Date issued in the ordinary course of business at prices and in
quantities substantially consistent with Transferor's practice prior hereto;
and
(d) The commitments for capital expenditures set forth in
Schedule 5.23.
"Closing" means the consummation of the transfer of the Transferred
Assets and the assumption of the Assumed Liabilities.
"Closing Date" means the date specified in Article XII of this
Agreement.
"Contract Rights" means all rights of Transferor in, to and under the
leases, contracts, commitments and purchase and sales orders set forth in
Schedules 5.08 and 5.23.
"Excluded Liabilities" means those liabilities (a) not specifically
assumed under this Agreement and (b) if disclosed on a schedule delivered by
Transferorpursuant to this Agreement, specifically excluded on Schedule 1
hereto.
"Excluded Assets" means those assets of Transferor specifically
retained by ▇▇▇▇▇▇▇ and set forth in Schedule 2 hereto that are not a part of
the Transferred Assets.
"Encumbrances" mean any and all liens, restrictions, claims,
equities, charges, options, rights of first refusal, mortgages, leases,
chattel mortgages, conditional sales contracts, collateral security
arrangements, other title or interest retention arrangements,encumbrances or
defects of title on or with respect to any Transferred Asset, except Permitted
Liens.
"Environmental Law" means any statute, law, regulation, order,
notice, rule, ordinance or requirement purporting to regulate the use, misuse,
pollution or preservation of the land, air and water resources of or utilized
by Transferor.
"Equipment" means all machinery, spare parts, equipment, furniture
and fixtures of Transferor, wherever located, and any and all assignable
warranties of third parties covering the Equipment.
"Escrow Agent" means Wachovia Bank of Georgia N.A.
"Intellectual Property" means, collectively, the patents, trademarks,
service marks and any applications and registrations therefor, label filings,
copyrights and inventions, both registered and unregistered, foreign and
United States, including those set forth in Schedule 5.10(a).
"Inventory" means all of the inventory of work in process, samples,
finished goods, raw material and supplies of Transferor, wherever located, and
any and all assignable warranties of third parties covering the Inventory.
"Leased Real Property" means Transferor's rights in, to and under the
real estate leases described in Schedule 5.07(a), together with all of its
right, title and interest in the buildings, office, warehouse or plant space,
fixtures and improvements thereon and any and all assignable warranties of
third parties covering such buildings, fixtures and improvements.
"Permits" means, to the extent assignable, all permits, licenses,
certificates and governmental authorizations which Transferor requires and has
obtained for the conduct of the Business.
"Permitted Liens" means (a) the security interests, easements or
other Encumbrances described in Schedule 5.07(b)(1); and (b) liens for taxes
not yet due and payable.
"Person" means any person, firm, partnership, corporation, or
unincorporated association of any kind.
"Records" means all books and records, wherever located, of
Transferor related to the Transferred Assets, the Assumed Liabilities and the
operation of the Business of Transferor.
"Rolling Stock" means the vehicles, trucks, forklifts and other
rolling stock set forth in Schedule 5.07(a).
"Transferred Assets" means (i) the Leased Real Property, (ii) the
Equipment, (iii) the Contract Rights, (iv) the Inventory, (v) the Rolling
Stock, (vi) the Intellectual Property, (vii) the Records, (viii) the Permits
and (ix) all cash, securities, notes receivable, accounts receivable, and
other assets identified on the Balance Sheet of Transferor dated December 14,
1995, all as of the Closing Date and excluding the Excluded Assets, such
Transferred Assets constituting "substantially all of the properties" of
Transferor, as that term is interpreted under Section 368 of the Code.
ARTICLE II
TRANSFER OF ASSETS AND
ASSUMPTION OF ASSUMED LIABILITIES
2.01 Transfer of Assets of Transferor. Upon the terms and subject to
the conditions of this Agreement, Transferor shall transfer to Transferee, and
Transferee shall acquire from Transferor, at the Closing all of the
Transferred Assets of Transferor.
2.02 Assumption of Assumed Liabilities. Upon the terms and subject
to the conditions of this Agreement, Transferee shall assume the Assumed
Liabilities as of the Closing Date.
ARTICLE III
CONSIDERATION
3.01 Stock Consideration. The aggregate consideration for the
Transferred Assets and the Assumed Liabilities shall be the Stock
Consideration, as defined below. "Stock Consideration" means One Hundred
Seventy-Five Thousand (175,000) shares of common stock, $.01 par value per
share of Southern Electronics Corporation, a Delaware corporation
(individually, a "Share" and collectively, the "Shares"). The Stock
Consideration, pursuant to Transferee's Certificate of Incorporation, is
entitled to one vote per Share.
3.02 Method of Payment. At Closing, Transferee shall deliver to
Transferor a certificate or certificates representing the Stock Consideration.
Transferor shall immediately transfer the Stock Consideration to ▇▇▇▇▇▇▇,
pursuant to Section 3.03 hereof and ▇▇▇▇▇▇▇ shall then deliver a certificate
or certificates representing the portion of the Stock Consideration to be
placed in the Short Term Stock Escrow, pursuant to the Short Term Stock Escrow
Agreement attached hereto as Exhibit 1, into such escrow and certificates
representing the remaining Stock Consideration shall be placed into escrow
(the "Escrowed Stock") with the Escrow Agent pursuant to the terms of the
Supplemental Stock Escrow Agreement substantially in the form attached hereto
as Exhibit 2. The Stock Consideration held in the Short Term Stock Escrow and
the Supplemental Stock Escrow shall be released to according to the terms of
the respective escrow agreements.
3.03 Surrender of Stock, Liquidation. Upon receipt of the Stock
Consideration, Transferor immediately shall transfer the Stock Consideration
to ▇▇▇▇▇▇▇, subject to the Short Term Stock Escrow Agreement and the
Supplemental Stock Escrow Agreement, and ▇▇▇▇▇▇▇ immediately will surrender to
Transferor all of ▇▇▇▇▇▇▇'▇ shares of Transferor's stock owned or controlled
by ▇▇▇▇▇▇▇ in consideration for and cancellation of Transferor's stock.
Transferor shall then begin dissolution proceedings pursuant to a liquidation
and plan of reorganization duly adopted by the Board of Directors and
Shareholders of Transferor. Costs and expenses of Transferor's liquidation
and dissolution shall be paid by Transferor, subject to the provisions of
Section 16.07 hereof.
3.04 Returns of Merchandise. From and after the Closing Date,
Transferee will act on behalf of Transferor in the acceptance of returns of
merchandise by former customers of Transferor relating to goods invoiced or
shipped to such customers prior to the Closing Date. Transferee shall pay
costs and expenses for acceptance of returns up to and including $10,000 per
customer returning merchandise and up to and including $20,000 in the
aggregate for all customers returning merchandise. Transferor and ▇▇▇▇▇▇▇,
jointly and severally, will pay promptly any additional expenses or costs
incurred by Transferee in acting on behalf of Transferor in relation to
returned or replacement goods upon notification thereof by Transferee. ▇▇▇▇▇▇▇
will have the opportunity to review each such request for return.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TITLE AND
AUTHORITY OF ▇▇▇▇▇▇▇
To induce Transferee to enter into this Agreement, ▇▇▇▇▇▇▇ hereby
represents and warrants to Transferee as follows:
4.01 Power and Authority of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ has the right, power
and capacity to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by ▇▇▇▇▇▇▇ and constitutes ▇▇▇▇▇▇▇'▇ legal,
valid and binding obligation, enforceable in accordance with its terms, except
as may be limited by bankruptcy, insolvency or other laws generally affecting
creditors' rights. The execution and delivery of this Agreement by ▇▇▇▇▇▇▇,
the consummation by ▇▇▇▇▇▇▇ of the transactions contemplated herein, and the
performance of the covenants and agreements of ▇▇▇▇▇▇▇, subject to the
fulfillment of the conditions set forth in Article X hereof, will not,
with or without the giving of notice or the lapse of time, or both, (I)
violate, conflict with or result in a breach or default under or cause the
termination of any term or condition of any mortgage, indenture, contract,
license, permit, instrument, trust document or other agreement, document or
instrument to which ▇▇▇▇▇▇▇ is a party or by which ▇▇▇▇▇▇▇ or any of his
properties may be bound; or (ii) violate any provision of law, statute, rule,
regulation, court order, judgment or decree, or ruling of any governmental
authority, to which ▇▇▇▇▇▇▇ is a party or by which ▇▇▇▇▇▇▇ or his properties
may be bound.
4.02 ▇▇▇▇▇▇▇'▇ Intent. ▇▇▇▇▇▇▇ represents and warrants that he has
no plan or intention to sell, exchange or otherwise dispose of a number of
shares of SEC Stock received in the transactions contemplated hereby that
would reduce his ownership of SEC Stock to a number of shares having a value,
as of the Closing Date, of less than 40% of the value of all of the formerly
outstanding stock of Transferor as of the Closing Date. For purposes of this
representation, shares of Transferor's capital stock and shares of SEC Stock
held by ▇▇▇▇▇▇▇ and otherwise sold, redeemed or disposed of prior or
subsequent to the Closing Date will be considered.
4.03 Other Adverse Information. ▇▇▇▇▇▇▇ has not knowingly withheld
information which could reasonably be expected to have any material adverse
effect on the value of the Transferred Assets or the Business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TRANSFEROR AND ▇▇▇▇▇▇▇
To induce Transferee to enter into this Agreement, Transferor and
▇▇▇▇▇▇▇ hereby jointly and severally represent and warrant to Transferee as
follows (for purposes of the following representations and warranties, the
defined term Transferor shall be deemed to include any Subsidiary of
Transferor, as such term is defined below, and any matters set forth on any
Schedule relating to any Subsidiary shall specifically refer to such
Subsidiary):
5.01 Organization and Authorization.
(a) Transferor is duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has all
requisite power and authority, corporate or otherwise, to carry on and
conduct its Business as it is now being conducted and to own or lease its
properties and assets. Transferor is duly qualified and in good standing in
every state of the United States in which the ownership of its properties and
assets requires it to be so qualified, such jurisdictions set forth on
Schedule 5.01(a). Transferor has not qualified to do business in any foreign
country in which it currently does business. The foreigncountries in which
Transferor does business are set forth in Schedule 5.01(a).
(b) Transferor neither owns, nor will own prior to the Closing,
outstanding equity, directly or indirectly of any entity.
(c) The copies of the charter documents and bylaws of
Transferor that have been previously delivered to Transferee are the complete,
true and correct charter documents and bylaws of Transferor in effect as of
the date hereof. The minutes of directors' and shareholders' meetings and the
stock books of Transferor that have previously been delivered to Transferee
are the complete, true and correct records of directors' and shareholders'
meetings and stock issuances through and including the date hereof and reflect
all transactions and other matters required to be reflected in such records,
as well as such other matters customarily contained in records of such type.
(d) The current officers and directors of Transferor are listed
on Schedule 5.01(d).
(e) Transferor has the right, power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, have
been duly and validly authorized by all necessary action, corporate or
otherwise, on the part of Transferor. This Agreement and each other
agreement, document and instrument executed by Transferor in connection with
the transactions contemplated hereby has been duly and validly executed and
delivered by Transferor and constitutes Transferor's legal, valid and binding
obligation, enforceable in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency or other laws generally affecting
creditors' rights.
5.02 Authorized and Outstanding Stock. The authorized capital stock
of Transferor, the number of issued and outstanding shares thereof and the
record holdersof such issued and outstanding shares of Transferor's capital
stock are set forth in Schedule 5.02. All of such issued and outstanding
shares of capital stock of Transferor are validly issued, fully paid and
nonassessable. All issuances, transfers or purchases of the capital stock of
Transferor have been in compliance with all applicable agreements and all
applicable laws, including federal and state securities laws, and all taxes
thereon have been paid. There are no shares of capital stock held in the
treasury of Transferor.
5.03 Absence of Other Claims. Except for the option granted to
Dinorall Corporation and more particularly described in Section 11.13 of the
Agreement, there is no outstanding, nor is Transferor bound by, any
subscriptions, options, preemptive rights, warrants, calls, commitments or
agreements or rights of any character requiring Transferor to issue or
entitling any person or entity to acquire any shares of capital stock or any
other equity security of Transferor, including any right of conversion or
exchange under any outstanding security or other instrument, and Transferor
is not obligated to issue or transfer any shares of its capital stock for any
purpose. There are no outstanding obligations of Transferor to repurchase,
redeem or otherwise acquireany outstanding shares of capital stock of
Transferor.
5.04 Financial Statements. Schedule 5.04 contains the audited
balance sheet of Transferor as of each of December 31, 1992 and 1994 and the
related audited statements of income, retained earnings and cash flows for the
years then ended, and the related notes thereto; and the unaudited balance
sheet of Transferor as each of1993 and September 30, 1995, and the related
unaudited statements of income, retained earnings and cash flows for the year
and the 12 periods, respectively, then ended (the "Audited Financial
Statements" and the "Interim Financial Statements," respectively, and
collectively, the "Financial Statements"). The Audited Financial Statements
are true, correct and complete and present fairly the financial position of
Transferor as of the date thereof, and the related results of its operations
for the years then ended. The Interim Financial Statements are true, correct
and complete and present fairly the financial position of Transferor as of the
date thereof, and the related results of its operations for the periods then
ended. The Audited Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent
basis, and the Interim Financial Statements have been prepared in accordance
with GAAP for interim statements on a basis consistent with prior periods.
All adjustments, consisting of normal, recurring accruals necessary for a fair
presentation have been made in the Interim Financial Statements. The audited
balance sheet as of December 31, 199 included in the Audited Financial
Statements is referred to herein as the "Audited Balance Sheet" and the
unaudited balance sheet as of September 30, 1995 included in the Interim
Financial Statements is referred to herein as the "Interim Balance Sheet."
5.05 No Undisclosed Liabilities. Except as and to the extent
reflected and adequately reserved against in the Interim Balance Sheet or as
shown on Schedule 5.05, as of September 30, 1995, Transferor had no liability
or obligation whatsoever, whether accrued, absolute, contingent or otherwise.
Since September 30, 1995, Transferor has not incurred any liability or
obligation whatsoever, except for liabilities and obligations incurred by
Transferor in the ordinary course of its business consistent with past
practice.
5.06 No Violation of Law. Subject to the provisions of Section 5.19
hereof, Transferor is not, has not been and will not be (by virtue of any past
or presentaction, omission to act, contract to which it is a party or any
occurrence or state of facts whatsoever) in violation of any applicable local,
state or federal law, ordinance, regulation, order, injunction or decree, or
any other requirement of any governmental body, agency or authority or court
binding on it, or relating to its property or business or its advertising,
sales or pricing practices (including, without limitation, any antitrust laws
and regulations), nor will Transferor hereafter suffer or incur any loss,
liability, penalty or expense (including, without limitation, attorneys' fees)
by virtue of any such violation or alleged violation.
5.07 Transferred Assets.
(a) Schedule 5.07(a) sets forth a complete and accurate list
and description of the Transferred Assets, except with respect to Transferred
Assets that may be deemed personal property the net book value of which, as
properly reflected in the books and records of Transferor, on an individual
item-by-item basis, is less than $1,000.00. With respect to each parcel of
the Leased Real Property listed or described in Schedule 5.07(a), Transferor
has made available to Transferee true, correct and complete copies of the
document(s) evidencing Transferor's leasehold interest in such property, each
Encumbrance thereon known to Transferor or ▇▇▇▇▇▇▇, each instrument (if any)
evidencing a grant by or to Transferor of an option to purchase or lease such
property, each lease and leasehold mortgage (if any) with respect to any
Leased Real Property or Equipment and any insurance policies or commitments or
surveys with respect to such Leased Real Property. Transferor owns no real
property nor has any other interests in or rights to real property other than
the Leased Real Property.
(b) Subject to Section 5.07(c) hereof, Transferor (i) has good
and valid title to all the personal and mixed, tangible and intangible
properties and assets which it purports to own, including all the personal
properties and assets reflected, but not shown as leased, on the Audited
Balance Sheet and Interim Balance Sheet (except for inventory and assets sold
in the ordinary course of business consistent with past practice and supplies
consumed in the ordinary course of business consistent with past practice);
and (ii) except for Permitted Liens set forth in Schedule 5.07(b)(1), owns
such personal property free and clear of all Encumbrances. All properties and
assets of Transferor are in the possession or control of Transferor. Schedule
5.07(b)(2) sets forth a general description and the location of any personal
property and leasehold improvements which are not located on the premises of
the principal business operations of Transferor.
(c) Except for Permitted Liens, no Leased Real Property leased
by Transferor is subject to (i) any governmental decree or order (or
threatened or proposed order known to Transferor) to be sold or taken by
public authority; or (ii) any rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any nature whatsoever,
not of record or set forth in the Lease to such property.
(d) The plants, structures and Equipment owned or leased by
Transferor are structurally sound with no known material defects, are in good
and safe operating condition and repair and are adequate for the uses to which
they are being put.
(e) The rights, properties and other assets presently owned,
leased or licensed by Transferor and described in Schedule 5.07(a) include all
rights, properties and other assets necessary to permit Transferor to conduct
its business in the same manner as its business has been conducted since
January 1, 1995, without any need for replacement, refurbishment or
extraordinary repair.
(f) All of the inventories of Transferor included on the
Interim Balance Sheet are merchantable and of a quality and quantity usable
and saleable as first quality goods in the ordinary and usual course of the
business of Transferor, and the quantities of each type of inventory (whether
raw materials, work-in-process, or finished goods) are not excessive, but are
reasonable, adequate and appropriate in the present circumstances of
Transferor, except as otherwise listed on Schedule 5.07(f), which also
identifies the accounting cost less reserves therefor. All of the Inventories
included on the Interim Balance Sheet are valued for the purposes thereof at
the lower of cost or market.
5.08 Leases. Schedule 5.08 contains a complete and accurate list of
all leases (including any capital leases) and lease-purchase arrangements
pursuant to which Transferor leases real or personal property from others and
which (i) require Transferor to pay, for rent and any obligatory improvements,
more than $5,000.00 in any single year or $10,000.00 during the entire term of
such lease or lease-purchase arrangement (including any renewal term that
Transferor may not avoid by refusing to renew in its sole discretion); or (ii)
provide for a purchase option for a price of more than $10,000.00. Schedule
5.08 specifies which of such leases, if any, are capital leases. All leases
that are required to be capitalized by GAAP have been so accounted for in the
Financial Statements. Transferor has made available to Transferee a true,
correct and complete copy of each of the items listed on Schedule 5.08.
5.09 Indebtedness. Schedule 5.09 sets forth a complete and accurate
list and description of all instruments or other documents relating to any
direct or indirect indebtedness for borrowed money of Transferor, as well as
indebtedness by way of lease-purchase arrangements, guarantees, undertakings
on which others rely in extending credit and all conditional sales contracts,
chattel mortgages and other security arrangements with respect to personal
property used or owned by Transferor. Transferor has made available to
Transferee a true, correct and complete copy of each of the items listed on
Schedule 5.09.
5.10 Intellectual Property.
(a) Generally. Schedule 5.10(a) sets forth a complete and
accurate list and description of (i) all Intellectual Property owned or used
by Transferor and all agreements with respect thereto, and the jurisdiction(s)
in or by which such Intellectual Property has been registered, filed or
issued; (ii) all trade names owned or used by Transferor, including the
registered trademark "U.S. Computer" (with logo) and, in the case of each
trade name owned by Transferor, the jurisdiction(s) in which such trade name
has been registered or filed; and (iii) all contracts, agreements or
understandings pursuant to which Transferor has authorized any person to use
or any person has the right to use, in any business or commercial activity,
any of the items listed in clauses (I) and (ii) above that are owned or used
by Transferor. Transferor has not heretofore knowingly infringed upon, and it
is not now knowingly infringing upon, and in the continuation of Transferor's
business as presently conducted Transferor knowingly will not infringe upon,
any Intellectual Property belonging to any other person, and Transferor is not
aware of any infringement or possible infringement by Transferor upon any
Intellectual Property of any third party. Transferor has not agreed to
indemnify any person for or against any infringement of the Intellectual
Property set forth on Schedule 5.10(a). Transferor does not know of any person
infringing upon any of Transferor's Intellectual Property. Except as
disclosed on Schedule 5.10(a), no royalties or fees are payable by Transferor
to any person for use of the Intellectual Property. Transferor has made
available to Transferee true, correct and complete copies of each registration
or application for its Intellectual Property in Schedule 5.10(a) and each
assignment or license with respect to any thereof.
(b) Computer Software and Databases. Schedule 5.10(b)
accurately identifies, and describes the functions of, all computer software
and databases owned, licensed, leased, internally developed or otherwise used
in connection with Transferor's business. Transferor has, and upon
consummation of the transactions contemplated by this Agreement, Transferee
will have, all computer software and databases that are necessary to conduct
the business as conducted by Transferor since January 1, 1995 and all
documentation relating to all such computer software and databases. The
computer software and databases perform in accordance with the documentation
related thereto or used in connection therewith and are free of defects in
programming and operation. Schedule 5.10(b) identifies each person to whom
Transferor has sold, licensed, leased or otherwise transferred or granted any
interest or rights to any of the computer software and databases and the date
of each such sale, license, lease or other transfer or grant. Transferor has
previously delivered to Transferee complete and accurate copies of all
documents relating to each such sale, license, lease or other transfer or
grant.
5.11 Litigation. Schedule 5.11(a) (i) sets forth all litigation,
claims, suits, actions, investigations, indictments or informations,
proceedings or arbitrations, grievances or other procedures (including grand
jury investigations, actions or proceedings, and product liability and
workers' compensation suits, actions or proceedings) pending, or to the
knowledge of Transferor or ▇▇▇▇▇▇▇, threatened, before any court, commission,
arbitration tribunal, or judicial, governmental or administrative department,
body, agency, administrator or official, grand jury, or any other forum for
the resolution of grievances, against Transferor or involving any of its
property or business, and (ii) indicates which of such matters are being
defended by an insurance carrier and which of the matters being so defended
are being defended under a reservation of rights. Further, except as set
forth in Schedule 5.11(b), there are no judgments, orders, writs, injunctions,
decrees, indictments or informations, grand jury subpoenas or civil
investigative demands, plea agreements, stipulations or awards (whether
rendered by a court, commission, arbitration tribunal or judicial,
governmental or administrative department, body, agency, administrator or
official, grand jury or any other forum for the resolution of grievances)
against orrelating to Transferor or involving any of its property or business.
Transferor hasmade available to the Transferee true, correct and complete
copies of pleadings, briefs and other documents filed in each pending
litigation, claim, suit, action, investigation, indictment or information,
proceeding, arbitration, grievance or other procedure listed in Schedule
5.11(a), and the judgments and informations, grand jury subpoenas and civil
investigative demands, plea agreements, stipulations and awards listed in
said Schedule.
5.12 Employees. Schedule 5.12 sets forth the names and current
compensation (identified by category, e.g., salary, bonus, commission) of all
employees, consultants and independent contractors of Transferor, together
with the date and amount of the last increase in compensation, as well as the
title and "essential functions" (as defined in 29 CFR Section 1630.2(n)), of
each such person.
5.13 Employee Benefits.
(a) All Employee Benefit Plans and Arrangements.
(i) List and Description of Plans and Arrangements.
Schedule 5.13(a)(1) sets forth a complete and accurate list and description of
all agreements, arrangements, commitments, policies or understandings of any
kind (whether written or oral) (A) which relate to employee benefits; (B)
which pertain to present or former employees, retirees, directors or
independent contractors (or their beneficiaries, dependents or spouses) of
Transferor or its predecessors in interest; and (C) which are currently or
expected to be adopted, maintained by, sponsored by, or contributed to by
Transferor, any of its predecessors in interest or any employer which, under
Section 414 of the Code, would constitute a single employer with Transferor (a
"Company Affiliate") or as to which Transferor, any of its predecessors in
interest or any Company Affiliate has any ongoing liability or obligation
whatsoever (collectively, "Employee Benefit Plans"), including, but not
limited to, all: (1) employee benefit plans as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (2) all
other deferred compensation, early retirement, incentive, profit-sharing,
thrift, stock ownership, stock appreciation rights, bonus, stock option, stock
purchase, welfare or vacation, or other nonqualified benefit plans or
arrangements; and (3) trusts, group annuity contracts, insurance policies or
other funding media for the plans and arrangements described hereinabove.
(ii) Compliance with ERISA and the Code. Except as set
forth on Schedule 5.13(a)(2), Transferor, its predecessors in interest and all
Company Affiliates have complied with all of their respective obligations with
respect to all Employee Benefit Plans (including, but not limited to, (A)
filing or distributing allreports or notices required by ERISA or the Code and
(B) complying with all requirements of Part 6 of Title I of ERISA and Code
Section 4980B) and have maintained the Employee Benefit Plans in compliance
with all applicable laws and regulations (including but not limited to ERISA
and the Code). Each eligible Employee Benefit Plan has received a favorable
determination letter from the Internal Revenue Service, and the Internal
Revenue Service has not threatened or taken any action to revoke any favorable
determination letter issued with respect to any such Employee Benefit Plan.
No amendment to any Employee Benefit Plan or related trust has been adopted
since receipt of the most recent determination letter issued with respect to
the Employee Benefit Plan or related trust which would cause disqualification
of the Employee Benefit Plan or related trust.
(iii) Copies of Documents Provided to Transferee.
Transferor has made available to Transferee true, correct and complete copies
of all documents relating to the Employee Benefit Plans that Transferee has
requested, including, but not limited to the following documents, which are
hereby requested: (A) all plan texts, amendments, trust instruments and other
agreements adopted or entered into in connection with each of the Employee
Benefit Plans; (B) all insurance and annuity contracts related to any Employee
Benefit Plan; (c) the notices and election forms used to notify employees and
their dependents of their continuation coverage rights under Transferor's
group health plans (under Code Section 4980B(f) and ERISA Section 606), if
applicable; and (D) the most recently available Form 5500 annual reports,
certified financial statements, actuarial reports, summary plan descriptions
and favorable determination letters, if applicable, for Employee Benefit
Plans. Since the date such documents were supplied to Transferee, no plan
amendments have been adopted, no changes to the documents have been made, and
no such amendments or changes shall be adopted or made prior to the Closing
Date.
(iv) Agreements to Create, Continue or Terminate Plans.
Neither Transferor, its predecessors in interest nor any Company Affiliate has
any agreement, arrangement, commitment or understanding, whether legally
binding or not, to create any additional Employee Benefit Plan or to continue,
modify, change in any material respect, or terminate any existing Employee
Benefit Plan.
(v) Agency Review, Taxes and Fiduciary Liability. None of
the Employee Benefit Plans is currently under audit, review or, to the best of
Transferor's and ▇▇▇▇▇▇▇'▇ knowledge, investigation by the Department of
Labor, the Internal Revenue Service or any other federal or state agency or is
liable for any federal, state, local or foreign taxes. There is no
transaction in connection with which Transferor, any Company Affiliate or any
fiduciary of any of the Employee Benefit Plans could be subject to either a
civil penalty assessed pursuant to ERISA Section 502, a tax imposed by Code
Section 4975 or liability for a breach of fiduciary responsibility under
ERISA.
(vi) Claims Against Plans and Fiduciaries. Other than
routine claims for benefits payable to participants or beneficiaries in
accordance with the terms of the Employee Benefit Plans, there are no claims,
pending, anticipated or threatened, by any participant or beneficiary against
any of the Employee Benefit Plans or any fiduciary of any of the Employee
Benefit Plans, and no basis for any such claim or claims exists.
(vii) Insurance Reserves. The levels of insurance
reserves and accrued liabilities with regard to all Employee Benefit Plans (to
which such reservesor liabilities do or should apply) are set forth on
Schedule 5.13(a)(7), and such levels are reasonable and sufficient to provide
for all incurred but unreported claims of which Transferor or ▇▇▇▇▇▇▇ have
knowledge and any retroactive or prospective premium adjustments of which
Transferor or ▇▇▇▇▇▇▇ have knowledge.
(viii) Retiree Welfare Benefits. Neither Transferor, its
predecessors in interest nor any Company Affiliate has maintained an Employee
Benefit Plan providing group health, dental, vision, life insurance or other
welfare benefits to employees following retirement or other separation from
service, except to the extent required under Part 6 of Title I of ERISA and
Code Section 4980B.
(b) Defined Benefit and Multiemployer Plans. Neither
Transferor, its predecessors in interest nor any Company Affiliate has at any
time maintained, sponsored or contributed to, nor is obligated to contribute
to, any "employee benefit pension plan" as defined in ERISA Section 3(2) which
is subject to Title IV of ERISA. Neither Transferor nor any Company Affiliate
contributes or has contributed or is obligated to contribute to a
"multiemployer plan" (as defined in Section 3(37) or 4001(a)(3) of ERISA).
5.14 Collective Bargaining. There are no labor contracts, collective
bargaining agreements, letters of understanding or other arrangements, formal
or informal, with any union or labor organization covering any of Transferor's
employees and none of said employees are represented by any union or labor
organization.
5.15 Labor Disputes. Transferor is in compliance with all federal
and state laws respecting employment and employment practices, terms and
conditions of employment, wages and hours. Transferor is not and has not been
engaged in any unfair labor practice, and no unfair labor practice complaint
against Transferor is pending before the National Labor Relations Board.
Neither Transferor nor ▇▇▇▇▇▇▇ knows or has reason to know of any labor strike
or other labor trouble actually pending, being threatened against, or
affecting Transferor. Relations between management and labor are amicable and
there have not been, nor are there presently, any attempts to organize
non-union employees, nor are there plans for any such attempts.
5.16 Bank Accounts. Schedule 5.16 sets forth a complete and accurate
list of each bank or financial institution in which Transferor has an account
or safe deposit box (giving the address and account numbers) and the names of
the persons authorized to draw thereon or to have access thereto.
5.17 Investments. Except as disclosed on Schedule 5.17, Transferor
does not own any capital stock or other securities or have any other
investment in any person or other entity.
5.18 Tax Matters.
(a) Definitions. For purposes of this Agreement, the following
definitions shall apply:
(i) The term "Group" shall mean, individually and
collectively, (A) Transferor, (B) ▇▇▇▇▇▇▇ and (C) any individual, trust,
corporation, partnership or any other entity as to which Transferor is liable
for Taxes incurred by such individual or entity either as a transferee, or
pursuant to Treasury Regulations Section 1.1502-6, or pursuant to any other
provision of federal, territorial, state, local or foreign law or regulations.
(ii) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of
any such government, which taxes shall include, without limiting the
generality of the foregoing, all income or profits taxes (including, but not
limited to, federal income taxes and state income taxes), payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal property
taxes, stamp taxes, environmental taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which the Group is required to pay, withhold or
collect, except as provided in Section 13.04 hereof.
(iii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
(b) Returns Filed and Taxes Paid. Except as otherwise
disclosed in Schedule 5.18(b): (i) all Returns required to be filed by or on
behalf of members of the Group have been duly filed on a timely basis and such
Returns are true, complete and correct; (ii) all Taxes shown to be payable on
the Returns or on subsequent assessments with respect thereto have been paid
in full on a timely basis, and no other Taxes are payable by the Group or any
member of the Group with respect to items or periods covered by such Returns
(whether or not shown on or reportable on such Returns) or with respect to any
period prior to the date of this Agreement; (iii) each member of the Group has
withheld and paid over all Taxes required to have been withheld and paid
over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto,
in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party; and (iv) there are no liens on
any of the assets of any member of the Group with respect to Taxes, other than
liens for Taxes not yet due and payable or for Taxes that a member of the
Group is contesting in good faith through appropriate proceedings and for
which appropriate reserves have been established, which contested Taxes are
disclosed in Schedule 5.18(b).
(c) Tax Deficiencies; Audits; Statutes of Limitations. Except
as otherwise disclosed in Schedule 5.18(c): (i) the Returns of any member of
the Group have never been audited by a government or taxing authority, nor is
any such audit in process, pending or threatened (either in writing or
verbally, formally or informally); (ii) no deficiencies exist or have been
asserted (either in writing or verbally, formally or informally) or are
expected to be asserted with respect to Taxes of any member of the Group, and
no member of the Group has received notice (either in writing or verbally,
formally or informally) or expects to receive notice that it has not filed a
Return or paid Taxes required to be filed or paid by it; (iii) no member of
the Group is either a party to any action or proceeding for assessment or
collection of Taxes, nor has such event been asserted or threatened (either in
writing or verbally, formally or informally) against any member of the Group
or any of their assets; (iv) no waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of any member of the
Group; and (v) Transferor and each member of the Group have disclosed on its
respective federal income tax returns all positions taken therein that could
give rise to a substantial understatement penalty within the meaning of
Section 6662 of the Code.
(d) Tax Sharing Agreements. Except as otherwise disclosed in
Schedule 5.18(d), no member of the Group is (nor has it ever been) a party to
any tax sharing agreement.
(e) Tax Reserves. The amount of Transferor's liability for
unpaid Taxes for all periods ending on or before the date of this Agreement do
not, in the aggregate, exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) with respect to Transferor, as
such accruals are reflected on the Interim Balance Sheet and the amount of
Transferor's liability for unpaid Taxes for all periods ending on or before
the Closing Date shall not, in the aggregate, exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes) solely
with respect to Transferor, as such accruals are reflected on the Interim
Balance Sheet.
(f) Tax Returns Furnished. Transferor has furnished Transferee
with true, correct and complete copies of (i) income tax audit reports,
statements of deficiencies, closing or other agreements and private letter
rulings received by Transferor or on behalf of Transferor relating to Taxes,
and (ii) all federal and state income or franchise tax returns for Transferor
for all periods ending on and after December 31, 1992. Except as otherwise
disclosed in Schedule 5.18(f), Transferor has never been a member of an
affiliated group (as defined in Section 1504 of the Code) filing consolidated
returns, and Transferor does not do business in or derive income from any
state, local, territorial or foreign taxing jurisdiction other than those
for which all Returns have been furnished to Transferee pursuant to (ii)
above.
(g) Tax Elections and Special Tax Status. Except as otherwise
disclosed in Schedule 5.18(g), (i) Transferor is not a party to any safe
harbor lease within the meaning of Section 168(f)(8) of the Code, as in effect
prior to amendment by the Tax and Fiscal Responsibility Act of 1982; (ii)
Transferor is not a "consenting corporation" under Section 341(f) of the Code;
(iii) Transferor has not entered into any compensatory agreements with respect
to the performance of services which payment thereunder would result in a
nondeductible expense to the Group pursuant to Section 4999 of the Code; (iv)
Transferor has not made nor will it make (A) a deemed dividend election under
Treasury Regulations section 1.1502-32(f)(2) or (B) a consent dividend under
Section 565 of the Code; (v) Transferor has not agreed, nor is it required, to
make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise; (vi) Transferor has not participated in an
international boycott as defined in Section 999 of the Code; (vii) Transferor
is not and it never has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code; (viii) Transferor is
not a party to an advance pricing agreement under Section 482 of the Code;
(ix) Transferor is not a party to a Section 6038A agreement under Treasury
Regulations section 1.6038A-3(e); (x) none of the assets of Transferor
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code; (xi) none of the assets of Transferor is
"tax-exempt use property" within the meaning of Section 168(h) of the Code;
and (xii) Transferor is not a party to any joint venture, partnership or other
arrangement or contract which could be treated as a partnership for federal
income tax purposes
(h) Tax Basis and Tax Attributes. Schedule 5.18(h)(1) contains
an accurate and complete description of Transferor's tax basis in its assets
as of September 30, 1995; (ii) Transferor's current and accumulated earnings
and profits; (iii) Transferor's Tax carryovers; and (iv) Tax elections made by
Transferor. Except as otherwise disclosed in Schedule 5.18(h)(2), Transferor
has no net operating losses or other tax attributes presently subject to
limitation under Code Sections 382, 383 or 384, or the federal consolidated
return regulations.
5.19 Environmental Requirements.
(a) General Representation and Warranty. Transferor is in
compliance with all applicable requirements, restrictions, limitations,
conditions, standards, prohibitions and obligations contained in all federal,
state and local laws relating to environmental, land use, health or safety
matters, including any and all regulations, codes, plans, orders, decrees,
judgments and notices issued, entered, promulgated or approved thereunder
(hereinafter referred to as "Environmental Requirements"), other than such
noncompliance which could not have a material adverse effect on the Business,
financial condition, assets or prospects of Transferor. Except as set forth in
Schedule 5.19, there are no existing violations of any Environmental
Requirements by Transferor with respect to the use, condition or operation of
Transferor's Leased Real Property, other than such noncompliance or violation
which could not have a material adverse effect on the Business, financial
condition, assets or prospects of Transferor. Neither Transferor nor ▇▇▇▇▇▇▇
are aware of any past or existing noncompliance with or violation of any
Environmental Requirement with respect to the use, condition or operation of
Transferor's Leased Real Property.
(b) Particular Representations and Warranties. Without limiting
the generality of the foregoing, Transferor particularly represents and
warrants as follows:
(i) Permits and Licenses. Transferor has obtained all
Permits and has filed all notices, reports and other statements, which are
required to be obtained or filed under Environmental Requirements;
(ii) Compliance. Transferor is in compliance with all
terms and conditions of all such Permits within the scope of the preceding
Section 5.19(b)(i); and
(iii) Underground Storage Tanks. Schedule 5.19 sets forth
a list of (A) all underground storage tanks and connected pipes, valves and
associated appurtenances ("USTs") and other underground storage facilities
presently located on the Leased Real Property or any such tanks or facilities
located at the Leased Real Property while such Leased Real Property was
leased, operated or managed by Transferor and, (B) to the best of Transferor's
and ▇▇▇▇▇▇▇'▇ knowledge after reasonable investigation, all USTs and other
underground storage facilities previously located at the Leased Real Property
while the Leased Real Property was owned, leased, operated or managed by any
predecessor of Transferor.
In particular, Transferor and ▇▇▇▇▇▇▇ jointly and severally
represent and warrant that:
(1) All USTs and underground storage facilities on
the Leased Real Property of which Transferor and ▇▇▇▇▇▇▇ have
knowledge have been registered or licensed as required by
Environmental Requirements;
(2) All USTs and underground storage facilities of
which Transferor and ▇▇▇▇▇▇▇ have knowledge comply with all
present and future Environmental Requirements, as such
requirements now exist, and to ▇▇▇▇▇▇▇'▇ and transferor's
knowledge, no removal of, alteration of, addition to, or
replacement of such USTs is or will be required;
(3) All USTs and underground storage facilities on
the Leased Real Property of which Transferor and ▇▇▇▇▇▇▇
have knowledge are sound and have not leaked, emitted, or
released any regulated substances into the environment,
including the soil surrounding the storage tanks and all
groundwater at or near the Leased Real Property; and
(4) All USTs and underground storage facilities of
which Transferor and ▇▇▇▇▇▇▇ have knowledge meet all
requirements for corrosion protection, leak detection, and
spill and overflow protection which are now applicable or
will be applicable in the future under present Environmental
Requirements.
(iv) Asbestos Containing Materials. Except as set forth in
Schedule 5.19, Transferor and ▇▇▇▇▇▇▇ are not aware of any building or other
improvement on the Leased Real Property contains or may contain any asbestos-
containing materials.
(v) PCBs. Except as set forth in Schedule 5.19, the
Leased Real Property does not contain any PCBs in any form of which Transferor
and ▇▇▇▇▇▇▇ are aware.
(vi) Hazardous Substances. Except as set forth in Schedule
5.19, Transferor has not used the Leased Real Property or any other asset of
Transferor for the handling, treatment, storage, processing or disposal of any
"hazardous substances," as that term is used in the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Paragraphs 6901 et seq., and, to the best of Transferor's and ▇▇▇▇▇▇▇'▇
knowledge after reasonable inquiry, no predecessor of Transferor has so used
the Leased Real Property or any other asset of Transferor. Except as set
forth in Schedule 5.19, no release, discharge, spillage or disposal of any
hazardous substance of which Transferor and ▇▇▇▇▇▇▇ have knowledge has
occurred prior to Transferor's use or operation of the Leased Real Property or
has occurred or is occurring at or on the Leased Real Property in a manner
that would violate any applicable Environmental Requirement during
Transferor's use and operation of the Leased Real Property.
(c) Warranty of Future Liability. There are no past or present
events, conditions, circumstances, activities, practices, incidents, actions
or plans associated in any way with the ownership, use, condition or operation
of the Leased Real Property by Transferor or with any property or facility
previously owned, used or operated by Transferor:
(i) Which interferes with or prevents continued compliance in
any respect with any Environmental Requirement; or
(ii) Which may give rise to or which has given rise to any
common law liability or liability under the Environmental Requirements; or
(iii) Which may otherwise form the basis of any claim by
any person based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling by Transferor or the
emission, discharge, release or threatened release into the environment by
Transferor or from the Leased Real Property of any pollutant, contaminant or
hazardous or toxic material or waste, including any and all "hazardous waste"
as that term is used in the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Paragraph 6901 et seq., and any "hazardous substances," as
that term is used in the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, 42 U.S.C. Paragraphs 6901 et seq.
5.20 Required Licenses and Permits. Transferor has all licenses,
permits or other authorizations of governmental authorities necessary for the
assembly, manufacture and/or sale of its goods and all other licenses, permits
or other authorizations of governmental authorities necessary for the conduct
of its business. A correct and complete list of all such material licenses,
permits and other authorizations is set forth on Schedule 5.20. Transferor
has made available to Transferee true, correct and complete copies of all
written licenses and permits listed on Schedule 5.20.
5.21 Insurance Policies. Schedule 5.21 sets forth a complete and
accurate list and description of all insurance policies in force naming
Transferor, or any employees or directors thereof in their capacity as such,
as an insured or beneficiary or as a loss payable payee, or for which
Transferor has paid or is obligated to pay all or part of the premiums.
Transferor has not received notice of any pending or threatened termination or
premium increase (retroactive or otherwise) with respect thereto, and
Transferor is in compliance with all conditions contained therein. There have
been no lapses (whether cured or not) in the coverage provided under the
insurance policies, referenced herein and as set forth on Schedule 5.21,
during the term of such policies, as extended or renewed. Transferor has made
available to Transferee true, correct and complete copies of each of the
policies listed on Schedule 5.21.
5.22 Major Suppliers and Customers. Schedule 5.22 sets forth a list
of each supplier of goods or services to, and each customer of, Transferor, to
whom Transferor paid or billed in the aggregate more than $5,000.00 during the
12-month period ended September 30, 1995, together, in each case, with the
amount paid or billed during such period. Transferor is not engaged in any
dispute with any of such suppliers or customers other than as disclosed in
Schedule 5.22. Transferor does not know or have any reason to believe that
the consummation of the transactions contemplated hereunder will have any
adverse effect on the business relationship of Transferor with any such
supplier or customer.
5.23 Contracts and Commitments. Except as set forth in Schedules
5.08, 5.09, 5.10, 5.21, and 5.23:
(a) Transferor does not have any agreement or contract that is
material to its business, operations or prospects;
(b) No contracts or commitments of Transferor continue for a
period of more than six (6) months from the date hereof or require payments,
in the aggregate, in excess of $1,000.00;
(c) Transferor does not have any outstanding contract, written
or oral, with any officer, employee, agent, consultant, advisor, salesman,
manufacturer's representative, distributor, dealer, subcontractor or broker
that is not cancelable by Transferor on notice of not longer than thirty (30)
days and without liability, penalty or premium of any kind, except liabilities
which arise as a matter of law upon termination of employment, or any
agreement or arrangement providing for the payment of any bonus or commission
based on sales or earnings;
(d) Transferor is not under any liability or obligation under
any agreement pursuant to which third parties have been provided with goods
that can be returned to Transferor in the event they are not sold and which
could involve a liability of Transferor of $1,000.00 or more in the aggregate;
(e) Transferor does not have (i) any outstanding loan or loan
commitment (excluding credit extended in the ordinary course of business
consistent with past practice to purchasers of inventory) to any person, or
(ii) any factoring, credit line or subordination agreement;
(f) Transferor does not have any power of attorney outstanding
or any contract, commitment or liability (whether absolute, accrued,
contingent or otherwise), as guarantor, surety, co-signer, endorser, co-maker,
indemnitor in respect of the contract or commitment of any other person,
corporation, partnership, joint venture, association, organization or other
entity;
(g) There are no contracts or agreements with any director,
officer or shareholder of Transferor, or with any person related to any such
person or with any company or other organization in which any director,
officer or shareholder of Transferor, or anyone related to any such person,
has a direct or indirect financial interest;
(h) Other than as contemplated in Article IX of the Agreement,
Transferor is not subject to any contract or agreement containing covenants
limiting the freedom of Transferor to compete in any line of business in any
geographic area;
(i) To the knowledge of Transferor and ▇▇▇▇▇▇▇, Transferor is
not a party to or bound by any presently existing contract, agreement or other
arrangement that has had or may in the future have a material adverse effect
upon the business, prospects, earnings or financial condition of Transferor or
upon its assets;
(j) There is no contract, agreement or other arrangement
entitling any person or other entity to any profits, revenues or cash flows of
Transferor or requiring any payments or other distributions based on such
profits, revenues or cash flows; and
(k) Transferor has made available to Transferee true, correct
and complete copies of each of the agreements listed in Schedule 5.23.
5.24 No Conflict. The execution and delivery of this Agreement by
Transferor, the consummation of the transactions contemplated herein by
Transferor, and the performance of the covenants and agreements of Transferor,
subject to fulfillment of the conditions set forth in Sections 10.04 and 10.05
hereof, will not, with or without the giving of notice or the lapse of time,
or both, (a) violate or conflict with any of the provisions of any charter
document or bylaw of Transferor; or (b), except as disclosed in Schedule
5.24(b), violate, conflict with or result in a breach or default under or
cause the modification, termination or acceleration of any term or condition
of any mortgage, indenture, contract, license, permit, instrument, trust
document, will or other agreement, document or instrument to which Transferor
is a party or by which Transferor or its properties may be bound; or (c)
violate any provision of law, statute, ordinance, rule, regulation, court
order or ruling of any governmental authority, to which Transferor is a party
or by which Transferor or its properties may be bound or may materially and
adversely affect the Business as presently conducted by Transferor; or (d),
except as disclosed in Schedule 5.24(d), result in the creation or imposition
of any Encumbrance upon any asset of Transferor.
5.25 Agreements in Full Force and Effect. Except as expressly set
forth in Schedule 5.25, all contracts, agreements, plans, leases, policies and
licenses referred to, or required to be referred to, in any Schedule delivered
hereunder are valid and binding, and are in full force and effect and are
enforceable in accordance with their terms. No event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence
of any other event) would constitute a default thereunder by Transferor or, to
the knowledge of Transferor or ▇▇▇▇▇▇▇, any other party thereto.
5.26 Required Consents and Approvals. Except as set forth in
Schedule 5.26, no consent or approval is required by virtue of the execution
hereof by Transferor or the consummation of any of the transactions
contemplated herein by Transferor to avoid the violation or breach of, or the
default under, or the creation of an Encumbrance on assets of Transferor
pursuant to the terms of, any regulation, order, decree or award of any court
or governmental agency or any lease, agreement, contract, mortgage, note,
license or any other instrument to which Transferor is a party or to which it
or any of its property or any of its capital stock is subject.
5.27 Absence of Certain Changes and Events. Except as set forth in
Schedule 5.27, since January 1, 1995, Transferor has conducted its businesses
only in the ordinary course, and has not:
(a) suffered any damage or destruction adversely affecting the
properties, assets or business of Transferor;
(b) made any declaration, setting aside or payment of any
dividend or other distribution of assets (whether in cash, stock or property)
with respect to the capital stock of Transferor, or any direct or indirect
redemption, purchase or other acquisition of such stock, or otherwise made any
payment of cash or any transfer of other assets, to any shareholder or
affiliate thereof; or transferred any assets from any Company Affiliate; or
transferred any assets from any Company Affiliate to Transferor;
(c) suffered any material adverse change in its working
capital, assets, liabilities, financial condition, business prospects or
relationships with any suppliers or customers listed on Schedule 5.22, other
than as disclosed on Schedule 5.22 with respect to Hewlett-Packard Company;
(d) except as provided in the employment agreements listed on
Schedule 5.12 and for customary increases based on term of service or regular
promotion of non-officer employees, increased (or announced any increase in)
the compensation payable or to become payable to any employee, consultant or
independent contractor or increased (or announced any increase in) any bonus,
insurance, pension or other employee benefit plan, payment or arrangement for
such employees, or entered into or amended any employment, consulting,
severance or similar agreement;
(e) incurred, assumed or guaranteed any liability or obligation
(absolute, accrued, contingent or otherwise) other than in the ordinary course
of business consistent with past practice;
(f) paid, discharged, satisfied or renewed any claim, liability
or obligation other than payment in the ordinary course of business and
consistent with past practice, other than as set forth in Schedule 5.27(f);
(g) permitted any of its assets to be subjected to any
Encumbrance except for Permitted Liens;
(h) waived any material claims or rights;
(i) sold, transferred or otherwise disposed of any of its
assets, except in the ordinary course of business consistent with past
practice;
(j) made any single capital expenditure or investment in excess
of $5,000.00;
(k) made any change in any method, practice or principle of
financial or tax accounting;
(l) managed receivables, other current assets (excluding cash),
trade payables and other current liabilities in a fashion inconsistent with
past practice, including the failure to sell inventory and other property in
an orderly and prudent manner or the failure to make all budgeted and other
normal capital expenditures, repairs, improvements and dispositions;
(m) paid, loaned, advanced, sold, transferred or leased any
asset to any officer, employee, consultant or independent contractor except
for normal compensation involving salary and benefits;
(n) issued or sold any of its capital stock or issued any
warrant, option or other right to purchase shares of its capital stock, or any
security convertible into its capital stock except as set forth on Schedule
5.02;
(o) entered into any material commitment or transaction, other
than in the ordinary course of business consistent with past practice,
affecting the operations of Transferor; or
(p) agreed in writing, or otherwise, to take any action
described in this Section.
5.28 Accounts Receivable.
(a) All accounts receivable owed to Transferor by any director,
officer, shareholder or employee of Transferor or any relative of any such
person (including those accounts receivable reflected on the Interim Balance
Sheet and incurred since the date of the Interim Balance Sheet) have been paid
in full prior to the date hereof or shall have been paid in full prior to the
Closing Date.
(b) All accounts receivable of Transferor (i) are valid,
existing and fully collectible (subject to an allowance for doubtful accounts
in the amount of $500,000) without resort to legal proceedings or collection
agencies, (ii) represent monies due for goods sold or services rendered in the
ordinary course of business, and (iii), to ▇▇▇▇▇▇▇'▇ and Transferor's
knowledge, are not subject to any defenses, rights of set-off, assignment,
restrictions, security interests or other encumbrances. All such accounts
receivable were current, and there is no dispute regarding the collectability
of any such accounts receivable above such allowance for doubtful accounts.
All reserves shown on the Financial Statements were adequate as of such dates,
and calculated consistent with past practice. Notwithstanding the foregoing,
the account receivable in the amount of $119,975 owed by ▇▇▇▇▇▇ ▇▇▇▇ or an
Affiliate thereof to Transferor (the "Maia Receivable") shall not be subject
to the aforementioned allowance for doubtful accounts. Schedule 5.28 shows
all of the accounts receivable of Transferor as of the Closing Date.
5.29 Disclosure. No representation, warranty, assurance or statement
by Transferor or ▇▇▇▇▇▇▇ in this Agreement and no statement contained in any
document (including the Financial Statements and the Schedules), certificate
or other writing furnished or to be furnished by Transferor or ▇▇▇▇▇▇▇ (or
caused to be furnished by Transferor or ▇▇▇▇▇▇▇) to Transferee or any of its
representatives pursuant to the provisions hereof contains or will contain any
untrue statement of material fact, or omits or will omit to state any fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein or therein not misleading.
5.30 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The "Person" which includes the "ultimate
parententity" of Transferor, as Target (as such terms are defined by 16 C.F.R.
Paragraph 801.1(a)), did not produce or derive annual sales or revenues in
excess of $1,000,000 from products within industries 2,000-3999 as coded in
the Standard Industrial Classification Manual (1972 edition), published by the
Executive Office of the President, Office of Management and Budget. The
"total assets" of the "Person" which includes the "ultimate parent entity" (as
such terms are defined by 16 C.F.R. Paragraph 801.1) of Transferor, as
reflected on its last regularly prepared balance sheet, are less than
$10,000,000.
5.31 Transferor Net Worth. The excess (the "Excess") of the Assumed
Liabilities over Transferred Assets is less than or equal to, as of 12:01 a.m.
on the Closing Date, $4,300,000, which Excess Transferor and ▇▇▇▇▇▇▇ agree and
acknowledge will be verified by an audit conducted by Deloitte & Touche LLP,
independent auditors for the Company, whose determination shall be final and
binding.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF TRANSFEREE
To induce Transferor and ▇▇▇▇▇▇▇ to enter into this Agreement,
Transferee hereby represents and warrants to Transferor as follows:
6.01 Organization. Transferee is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority to effect
the transactions contemplated hereunder.
6.02 Authorization. Subject to the authorization and approval of
Transferee's Board of Directors, Transferee has the right, power and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. Subject to the foregoing, this Agreement
constitutes Transferee's legal, valid and binding obligation, enforceable in
accordance with its terms, except as may be limited by bankruptcy, insolvency
or other laws generally affecting creditors' rights. Following execution of
this Agreement, the President of Transferee shall present this Agreement to
Transferee's Board of Directors for consideration and approval.
6.03 No Conflict. The execution and delivery of this Agreement by
Transferee, the consummation of the transactions contemplate herein by
Transferee, and the performance of the covenants and agreements of Transferee
will not, with or without the giving of notice or the lapse of time, or both,
(a) violate or conflict with any of the provisions of any charter document or
bylaw of Transferee; (b) violate, conflict with or result in breach or default
under or cause termination of any term or condition of any mortgage,
indenture, contract, license, permit, instrument, trust document or other
agreement, document or instrument to which Transferee is a party or by which
Transferee or any of its properties may be bound; or (c) violate any provision
of law, statute, rule, regulation, court order, judgment or decree, or ruling
of any governmental authority, to which Transferee is a party or by which
Transferee or its properties may be bound.
6.04 Disclosure. No representation, warranty, assurance or statement
by Transferee in this Agreement and no statement contained in any document,
certificate or other writing furnished or to be furnished by Transferee (or
caused to be furnished by Transferee) to Transferor or ▇▇▇▇▇▇▇ or any of their
representatives pursuant to the provisions hereof contains or will contain any
untrue statement of material fact, or omits or will omit to state any fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein or therein not misleading.
6.05 Stock Consideration. The shares representing the Stock
Consideration, when issued as contemplated herein, will be (i) validly issued,
fully paid and nonassessable, and (ii) with the exception of encumbrances
contemplated by the Escrow Agreement, are free and clear of any Encumbrances.
As soon as reasonably practicable after the Closing Date, Transferee shall use
its best efforts to file on behalf of ▇▇▇▇▇▇▇ a registration statement with
the Securities and Exchange Commission (the "Commission") for resale of the
Stock Consideration and shall use its best efforts to cooperate with the
Commission in order to have such registration statement declared effective by
the Commission as soon as reasonably possible. Transferee shall pay all
filing fees with the Commission and the National Association of Securities
Dealers, Inc. and the fees and expenses of the Transferee's counsel and
accountants arising in connection therewith, and the reasonable fees incurred
to audit Transferor's financial statements for fiscal 1993, which are required
to be included in such registration statement.
ARTICLE VII
COVENANTS OF TRANSFEROR AND ▇▇▇▇▇▇▇
7.01 Pre-Closing Operations of Transferor. Transferor and ▇▇▇▇▇▇▇
hereby represent and warrant that, except as consented to in writing by
Transferee, pending the Closing, Transferor will operate and conduct its
business and ▇▇▇▇▇▇▇ will cause Transferor to operate and conduct its
business only in the ordinary course in accordance with prior practice, and
carry on its business diligently and substantially in the manner as heretofore
conducted and not make or institute any methods of manufacture, purchase,
sale, lease, management, accounting or operation except in the ordinary course
of business consistent with past practice. Pursuant thereto and not in
limitation of the foregoing:
(a) Transferor shall manage its working capital, including
cash, receivables, other current assets, trade payables and other current
liabilities, in a fashion consistent with past practice, including by selling
inventory and other property in an orderly and prudent manner and paying
outstanding obligations, trade accounts and other indebtedness as they come
due.
(b) No material contract or commitment of any kind relating to
Transferor shall be entered into without the prior written consent of
Transferee (for purposes hereof, the word "material" shall refer to any
contract or commitment which, if it had been entered into prior to execution
of this Agreement, would have been disclosed in Schedules 5.08, 5.09, 5.13,
5.21 or 5.23). Any such contract entered into with the prior written consent
of the Transferee shall be deemed to have been disclosed in the appropriate
schedule.
(c) Transferor shall maintain its assets in their present state
of repair (ordinary wear and tear excepted), shall use its best efforts to
keep available the services of its employees, and preserve the good will of
its business and relationships with the customers, licensors, suppliers,
distributors and brokers with whom it has business relations.
(d) Transferor shall not take any of the following actions
after the date of this Agreement without the prior written consent of
Transferee:
(i) Dispose of any assets other than in the ordinary
course of business consistent with past practice;
(ii) Mortgage, pledge or subject to liens or other
encumbrances any assets, except by incurring Permitted Liens;
(iii) Purchase or commit to purchase any capital asset
for a price exceeding $1,000.00;
(iv) Except for planned or normal increases in the ordinary
course of business consistent with past practice and specifically disclosed in
a Schedule hereto with respect to non-officer employees, increase (or announce
any increase of) any salaries, wages or employee benefits or hire, commit to
hire or terminate any employee whose annual compensation would exceed
$20,000.00;
(v) Amend any charter document or bylaw;
(vi) Issue, sell or repurchase any of its capital stock, or
make any change in its issued and outstanding capital stock, or issue any
warrant, option or other right to purchase shares of its capital stock or any
security convertible into its capital stock, or redeem, purchase or otherwise
acquire any shares of its capital stock, or declare any dividends or make any
other distribution with respect to its stock;
(vii) Incur, assume or guarantee any obligation or
liability for borrowed money, or exchange, refund or renew any outstanding
indebtedness in such a manner as to reduce the principal amount of such
indebtedness and increase the interest rate or balance outstanding;
(viii) Cancel any debts other than the repayment of
$144,000 (plus accrued interest thereon for the month of December, 1995 to the
Closing Date equal to $560.98) from Transferor to ▇▇▇▇▇▇▇ as disclosed in the
Interim Balance Sheet;
(ix) Amend or terminate any material agreement, including
any employee benefit plan (except as otherwise contemplated by this Agreement)
or any insurance policy, in force on the date hereof;
(x) Solicit or entertain any offer for, or sell or agree
to sell, or participate in any business combination with respect to, any of
the shares of its capital stock;
(xi) Make any changes in accounting methods, principles or
practices;
(xii) Do any act, omit to do any act or permit any act
within ▇▇▇▇▇▇▇'▇ or Transferor's control which will cause a breach of any
representation, warranty or obligation contained in this Agreement or any
obligations contained in any contract; or
(xiii) Issue substitute stock certificates to replace
certificates which have been lost, misplaced, destroyed, stolen or are
otherwise irretrievable, unless an adequate bond or indemnity agreement
approved by Transferee has been duly executed and delivered to Transferor.
7.02 Access. From the date of this Agreement through the Closing
Date, Transferor shall (i) provide Transferee and its designees (officers,
counsel, accountants, actuaries and other authorized representatives) with
such information as Transferee may from time to time reasonably request with
respect to Transferor and the transactions contemplated by this Agreement;
(ii) provide Transferee and its designees access during regular business hours
and upon reasonable notice to the books, records, offices, personnel, counsel,
accountants and actuaries of Transferor, as Transferee or its designees may
from time to time reasonably request; and (iii) permit Transferee and
its designees to make such inspections thereof as Transferee may reasonably
request. Any investigation shall be conducted in such a manner so as not to
interfere unreasonably with the operation of the business of Transferor. No
such investigation shall limit or modify in any way ▇▇▇▇▇▇▇'▇ or Transferor's
obligations with respect to any breach of their representations, warranties,
covenants or agreements contained herein.
7.03 Interim Financials. As promptly as practicable after each
regular accounting period subsequent to September 30, 1995 and prior to the
Closing Date, Transferor will deliver to Transferee periodic financial reports
in the form which it customarily prepares for its internal purposes concerning
Transferor and, if available, unaudited statements of the financial position
of Transferor as of the last day of each accounting period and statements of
income and changes in financial position of Transferor for the period then
ended.
7.04 Maia Receivable. ▇▇▇▇▇▇▇ hereby unconditionally guarantees the
payment to Transferee of the Maia Receivable (as defined in Section 5.28
hereof) if such receivable has not been paid in full to Transferee by January
31, 1996. ▇▇▇▇▇▇▇ further agrees that Transferee may set off any amounts owed
under the Maia Receivable to Transferee after January 31, 1996, against any
Shares held in the Short Term Stock Escrow. ▇▇▇▇▇▇▇ agrees that this guaranty
is enforceable without Transferee first having to proceed against ▇▇▇▇▇▇ ▇▇▇▇
or any Affiliate thereof for payment of the Maia Receivable. ▇▇▇▇▇▇▇ hereby
waives all diligence, presentments, demands, notices of dishonor, protests,
notices of protest and all other notices whatsoever permitted by law to be
waived.
7.05 Preparation of Supporting Documents. In addition to such
actions as Transferor may otherwise be required to take under this Agreement
or applicable law in order to consummate this Agreement and the transactions
contemplated hereby, Transferor and ▇▇▇▇▇▇▇ shall take such action, shall
furnish such information, and shall prepare, or cooperate in preparing, and
execute and deliver such certificates, agreements and other instruments as
Transferee may reasonably request from time to time, before, at or after the
Closing, with respect to compliance with the obligations of Transferee,
Transferor or ▇▇▇▇▇▇▇ in connection with the transactions contemplated herein.
Any information so furnished by Transferor or ▇▇▇▇▇▇▇ shall be true, current
and complete and shall not contain any untrue statement of fact or omit to
state a fact required to be stated therein or necessary to make the statements
made therein not misleading.
7.06 Distribution of Stock and Plan of Reorganization. Transferor
immediately shall distribute the Stock Consideration to ▇▇▇▇▇▇▇, its sole
shareholder, and as soon as practicable after the Closing Date, liquidate its
assets and dissolve pursuant to a plan of reorganization and liquidation as
required by Section 368(a)(2)(G) of the Code.
7.07 Notice of Breach or Potential Breach. Transferor and ▇▇▇▇▇▇▇
shall promptly notify Transferee of any change, circumstance or event which
would cause any of the representations or warranties made by Transferor or
▇▇▇▇▇▇▇ pursuant to this Agreement to be untrue as of the date hereof or at
the Closing or which prevents Transferor or ▇▇▇▇▇▇▇ from complying with any of
their obligations hereunder.
ARTICLE VIII
COVENANTS OF THE PARTIES
Transferor, ▇▇▇▇▇▇▇ and Transferee, respectively, hereby covenant to
and agree with one another as follows:
8.01 Approvals of Third Parties; Satisfaction of Conditions to
Closing. Transferor, ▇▇▇▇▇▇▇ and Transferee will use their reasonable, good
faith efforts and will cooperate with one another to secure all necessary
consents, approvals, authorizations and exemptions from governmental agencies
and other third parties, including, without limitation, all consents required
by Sections 10.05 and 11.04 hereof. Transferor and ▇▇▇▇▇▇▇ will use their
reasonable, good faith efforts to cause or obtain the satisfaction of the
conditions specified in Article XI. Transferee will use its reasonable, good
faith efforts to cause or obtain the satisfaction of the conditions specified
in Article X.
8.02 Confidentiality. In connection with this Agreement the parties
may have access to information which is nonpublic, confidential or proprietary
in nature. All of such information, in whole or in part, together with any
analyses, compilations, studies or other documents prepared by any party,
which contain or otherwise reflect any such information is hereinafter
referred to as the "Information". The term "Information" does not include
information which (a) was known to any party about another party prior to its
disclosure, or has been independently acquired or developed by either party
without violating any of its obligations under this Agreement, provided that
such information was lawfully obtained or developed, (b) becomes generally
available to the public other than as a result of a disclosure by a party in
violation of this Agreement, or (c) was available or later becomes available
from a source other than a party to this Agreement, if the source is not bound
by a confidentiality agreement and such source lawfully obtained such
information. Each party hereby further agrees as follows:
(i) The Information will be kept confidential and shall
not, without the prior mutual written consent of the parties, be disclosed, in
any manner whatsoever, in whole or in part, and shall not be used by any party
following the termination of this Agreement. Each party agrees to transmit
the Information only to its respective employees and representatives who need
to know the Information and who shall agree to be bound by the terms and
conditions of this Agreement. In any event, each party shall be responsible
for any breach of this Agreement by its respective employees or
representatives.
(ii) In the event any party becomes legally compelled to
disclose any of the Information, such party will provide to the other parties
prompt notice so that each other party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Agreement. In the event that such protective order or other remedy is not
obtained, or compliance with the provisions of this Agreement is waived, a
party will furnish only that portion of the Information which is legally
required, and to the extent requested by the other party, will exercise its
reasonable efforts, at the other party's expense, to obtain a protective order
or other reliable assurance that confidential treatment will be accorded the
Information.
8.03 Condemnation. If prior to the Closing any of Transferor's
Leased Real Property shall have been taken by condemnation in any proceeding
by a public authority or other body vested with the power of eminent domain or
shall have been acquired by a public or quasi-public body for public purposes,
or if condemnation proceedings therefor shall have been instituted, Transferor
and ▇▇▇▇▇▇▇ shall give Transferee prompt notice of such occurrence. If such
condemnation takes, or proposes to take, all of Transferor's Leased Real
Property, Transferee may cancel this Agreement by giving ▇▇▇▇▇▇▇ and
Transferor notice to such effect within ten (10) days after ▇▇▇▇▇▇▇'▇ and
Transferor's notice to Transferee of such occurrence, with the date of the
Closing to be extended, if necessary, to provide such a ten (10) day period.
If Transferee shall so elect to cancel this Agreement, the parties hereto
shall have no further rights, duties, or obligations hereunder. If the taking
or proposed taking is to include such portion of Transferor's Leased Real
Property as shall, in Transferee's judgment, materially and substantially
interfere with Transferee's intended uses of the Transferred Assets, then
Transferee may cancel this Agreement by giving ▇▇▇▇▇▇▇ and the Transferor
written notice to such effect within ten (10) days after receipt of ▇▇▇▇▇▇▇'▇
and Transferor's notice of such occurrence, with the date of the Closing to be
extended, if necessary, to provide such ten (10) day period. If Transferee
shall so elect, this Agreement shall be terminated and the parties hereto
shall have no further rights, duties or obligations hereunder. If this
Agreement is not terminated as provided above, this Agreement shall remain in
full force and effect and the purchase contemplated herein, less any portion
of Transferor's Leased Real Property taken by eminent domain or condemnation,
or sold in lieu thereof, shall be consummated without reduction of the Stock
Consideration. In such event, Transferor shall, at the Closing, assign,
transfer and set over unto Transferee all of Transferor's right, title and
interest in and to any awards or proceeds paid or payable for such taking or
sale in lieu thereof.
8.04 Tax Elections. No new elections with respect to Taxes, or any
changes in current elections with respect to Taxes, affecting Transferor will
be made after the date of this Agreement without the prior written consent of
Transferee.
8.05 Termination of Existing Tax-Sharing Agreements. All tax sharing
agreements or similar arrangements with respect to or involving Transferor
shall be terminated on or before the Closing Date and, after the Closing Date,
Transferor shall not be bound thereby or have any liability thereunder for
amounts due in respect of periods ending on or before the Closing Date.
8.06 Tax Matters and Post-Closing Cooperation.
(a) Subject to the provisions of Section 13.04 hereof,
▇▇▇▇▇▇▇ shall pay any and all Taxes arising from the sale by him of any of the
Stock Consideration. Transferor shall pay all other Taxes that may be due
before or after the Closing Date that are allocable to the period prior to and
including the Closing Date. In order to appropriately apportion any of these
Taxes relating to a period that includes (but that would not, but for this
section, close on) the Closing Date, the parties hereto shall, to the extent
permitted by applicable law, elect with the relevant taxing authorities
to treat for all purposes the Closing Date as the last day of a taxable period
of Transferor, and such period shall be treated as a "Short Period" and a
"Pre-Closing Period" for purposes of this Agreement. In any case where
applicable law does not permit Transferor to treat the Closing Date as the
last day of a Short Period, then for purposes of this Agreement, the portion
of such Taxes that is attributable to the operations of Transferor for such
Interim Period (as defined below) shall be (I) in the case of Taxes that are
not based on income or gross receipts, the total of such Taxes for the period
in question multiplied by a fraction, the numerator of which is the total
number of days in the entire period in question, and (ii) in the case of Taxes
that are based on income or gross receipts, the Taxes that would be due with
respect to the Interim Period, if such Interim Period were a Short Period.
"Interim Period" means with respect to any Taxes imposed on Transferor on a
periodic basis for which the Closing Date is not the last day of a Short
Period, the period of time beginning on the first day of the actual taxable
period that includes (but does not end on) the Closing Date.
(b) Transferee and Transferor shall cooperate in preparing and
filing any Returns required to be filed by Transferor after the Closing Date.
Transferor agrees that it shall provide, and shall cause its accountants and
other representatives to provide, to Transferee on a timely basis the
information, including but not limited to all work papers and records relating
to Transferor that it or its accountants or other representatives have within
their control and that may be reasonably necessary or related to (i) the
preparation of any and all Returns, information returns and reports
required to be filed by Transferee or Transferor with governmental agencies
and (ii) audits or other tax determinations or proceedings by or before such
agencies, such information to be provided in the form in which it has in the
past been maintained by ▇▇▇▇▇▇▇, Transferor or their accountants or other
representatives.
(c) Transferor, on the one hand, and Transferee, on the other
hand, agree to give prompt notice to each other of any proposed adjustment to
Taxes for periods ending on or prior to the Closing Date or any Interim
Period. Transferor and Transferee shall cooperate with each other in the
conduct of any audit or other proceedings involving Transferor for such
periods and each may participate at its own expense, provided that Transferee
shall have the right to control the conduct of any such audit or proceeding
for which Transferee (I) agrees that any resulting Tax is covered by the
indemnity provided in Article XIII hereof, and (ii) demonstrates to Transferor
the ability to make such indemnity payment. Notwithstanding the foregoing,
Transferee may not settle or otherwise resolve any such claim, suit or
proceeding without the consent of Transferor, which consent shall not be
unreasonably withheld.
(d) Transferor, on the one hand, and Transferee, on the other
hand, agree to furnish or cause to be furnished to each other, upon request,
as promptly as practicable, such information and assistance (including access
to books and records) relating to Transferor as is reasonably necessary for
the preparation of any Return, claim for refund or audit, and the prosecution
or defense of any claim, suit or proceeding relating to any proposed
adjustment.
(e) Notwithstanding the foregoing, all sales or transfer taxes
of Transferor, including but not limited to, document recording fees, real
property transfer taxes, and sales and excise taxes arising out of or in
connection with the consummation of the transactions contemplated hereby shall
be paid by Transferee.
8.07 Registration. As soon as reasonably practicable after the
Closing Date, Transferee shall use its best efforts to file on behalf of
▇▇▇▇▇▇▇ a registration statement with the Commission for resale of the Stock
Consideration and shall use its best efforts to cooperate with the Commission
in order to have such registration statement declared effective by the
Commission as soon as reasonably possible.
ARTICLE IX
NON-COMPETITION, NONDISCLOSURE
9.01 Non-Competition; Nonsolicitation. For the period prior to the
liquidation and dissolution of Transferor as required under Section
368(a)(2)(G) of the Code and by Section 14.02 hereof, Transferor, either in
partnership, jointly, or in conjunction with any Person, whether as principal,
agent, consultant or shareholder, except that nothing herein shall be
construed to prevent Transferor from owning or controlling less than five
percent of the outstanding stock of any publicly-traded company, hereby agrees
not to:
(a) engage in the Business in the Territory;
(b) solicit or contact Customers or Potential Customers (as
defined below) on behalf of, associate with, invest in, obtain any interest
in, advise, lend money to, or guarantee the debts or obligations of any Person
which is engaged in the Business in the Territory;
(c) solicit or accept business from any of the Customers or
Potential Customers of SEC or Transferee for the purposes of providing
products or services the same as or substantially similar to any of those
provided in connection with the Business;
(d) persuade or attempt to persuade any employee who is
employed with Transferee or its Affiliates as of the date hereof to terminate
such employee's service with Transferee or such Affiliate of Transferee, as
the case may be; or
(e) persuade or attempt to persuade any Customer, Potential
Customer or supplier of Transferee or its Affiliates to terminate or modify
such Customer's, Potential Customer's or supplier's relationship with
Transferee or such Affiliate of Transferee, as the case may be.
For the purposes of this Agreement, "Territory," "Customer" and
"Potential Customer" shall have the meanings set forth below:
"Territory" means the geographic areas set forth on Exhibit 3,
attached hereto.
"Customer" means any customer, within the 12 month period
immediately prior to any alleged breach of this Agreement, (i) that has
engaged in business with Transferor and (ii) with which Transferor has had
substantial contact, directly or indirectly.
"Potential Customer" means any customer, within the 12 month
period immediately prior to any alleged breach of this Agreement, (i) that
Transferor has actively solicited for business and (ii) with which Transferor
has had substantial contact, directly or indirectly.
9.02 Confidential Information. For the period prior to the
liquidation and dissolution of Transferor as required under Section
368(a)(2)(G) of the Code and by Section 14.02 hereof, Transferor shall not
use, reveal or divulge any "Confidential Information." For the purposes of
this Agreement, "Confidential Information" shall have the meaning set forth
below:
"Confidential Information" means information, as of the date
hereof, that, although not a "Trade Secret" (as defined below), is not
generally known and from which Transferee, its Affiliates or Transferor
derives actual or potential economic value because such information is not
generally known by others. Confidential Information includes, but is not
limited to, sales and marketing information, customer account records,
training and operations materials and memoranda, personnel records, pricing
and financial information relating to the business, accounts, customers,
employees and affairs of Transferee and its Affiliates, respectively, any
information marked "Confidential" by Transferor or an Affiliate of Transferor,
and any other such information that does not rise to the level of a Trade
Secret.
Notwithstanding the foregoing, Transferor shall not be subject
to the restrictions set forth in this Section 9.02 with respect to information
which:
(a) becomes generally available to the public other than as a
result of disclosure by Transferor or his respective agents or
representatives;
(b) becomes available to Transferor on a non-confidential basis
from a source other than Transferee, Transferee's Affiliates or their
respective agents provided that to Transferor's knowledge such source lawfully
obtained such information and is not bound by a confidentiality agreement with
Transferee or such Affiliate of Transferee; or
(c) is required by law to be disclosed.
9.03 Trade Secrets. At any time during or after the term of this
Agreement, Transferor shall not use, reveal or divulge any "Trade Secret" of
Transferee, its Affiliates or Transferor. For the purposes of this Agreement,
"Trade Secret" shall have the meaning set forth below:
"Trade Secret" means information, as of the date hereof,
including but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing,
a process, financial data, financial plans, product plans or a list of actual
or potential customers or suppliers which:
(a) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use; and
(b) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF TRANSFEROR AND ▇▇▇▇▇▇▇
Each of the obligations of Transferor and ▇▇▇▇▇▇▇ to be performed
hereunder shall be subject to the satisfaction (or waiver by Transferor) at or
prior to the Closing Date of each of the following conditions:
10.01 Representations and Warranties True at Closing Date. Each
of Transferee's representations and warranties contained in this Agreement
shall be true in all respects on and as of the Closing Date with the same
force and effect as though made on and as of such date; Transferee shall have
complied in all respects with the covenants and agreements set forth herein to
be performed or complied with by it on or before the Closing Date; and
Transferee shall have delivered to ▇▇▇▇▇▇▇ and the Transferor a certificate
dated the Closing Date and signed by its duly authorized officer to all such
effects, and confirming such other matters as may be reasonably requested by
▇▇▇▇▇▇▇ and the Transferor.
10.02 Litigation. Except as described in Schedule 10.02, no
suit, investigation, action or other proceeding shall be pending or overtly
threatened against Transferor, ▇▇▇▇▇▇▇ or Transferee before any court or
governmental agency which has resulted in the restraint or prohibition of
Transferor or ▇▇▇▇▇▇▇, or could in the reasonable opinion of counsel for
▇▇▇▇▇▇▇, result in the obtaining of material damages or other relief from
Transferor or ▇▇▇▇▇▇▇, in connection with this Agreement or the consummation
of the transactions contemplated hereby.
10.03 Opinion of Counsel to Transferee. ▇▇▇▇▇▇▇ and Transferor
shall have received from counsel to Transferee an opinion, dated the Closing
Date, substantially in the form of Exhibit 4.
10.04 Documents Satisfactory in Form and Substance. All
agreements, certificates, opinions and other documents delivered by Transferee
to ▇▇▇▇▇▇▇ and the Transferor hereunder or in connection herewith shall be in
form and substance satisfactory to counsel for Transferor, in the exercise of
such counsel's reasonable judgment.
10.05 Required Governmental Approvals. All governmental
authorizations, consents and approvals necessary for the valid consummation of
the transactions contemplated hereby shall have been obtained and shall be in
full force and effect. All applicable governmental pre-acquisition filing,
information furnishing and waiting period requirements, including expiration
of all applicable waiting periods pursuant to H-S-R, if applicable, shall have
been met or such compliance shall have been waived by the governmental
authority having authority to grant such waivers.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF TRANSFEREE
The obligations of Transferee to be performed hereunder shall be
subject to the satisfaction (or waiver by Transferee) on or before the Closing
Date of each of the following conditions:
11.01 Representations and Warranties True at Closing Date. Each
of the representations and warranties of Transferor and ▇▇▇▇▇▇▇ contained in
this Agreement shall be true in all respects on and as of the Closing Date
with the same force and effect as though made on and as of such date;
Transferor and ▇▇▇▇▇▇▇ shall have performed and complied in all respects with
the respective covenants and agreements set forth herein to be performed or
complied with by each of them on or before the Closing Date; and Transferor
and ▇▇▇▇▇▇▇ shall have delivered to Transferee a certificate signed by ▇▇▇▇▇▇▇
and on behalf of Transferor by its President to all such effects, and
confirming such other matters as may be reasonably requested by Transferee.
11.02 No Material Change. Transferor shall not have suffered any
material adverse change since January 1, 1995 in its business, prospects,
financial condition, working capital, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves or operations.
11.03 Litigation. No suit, investigation, action or other
proceeding shall be pending or overtly threatened against Transferee,
Transferor or ▇▇▇▇▇▇▇ before any court or governmental agency, which has
resulted in the restraint or prohibition of any such party, or, in the
reasonable opinion of counsel for Transferee, could result in the obtaining of
material damages or other relief from any such party, in connection with this
Agreement or the consummation of the transactions contemplated hereby.
11.04 Required Governmental Approvals. All governmental
authorizations, consents and approvals necessary for the valid consummation of
the transactions contemplated hereby shall have been obtained and shall be in
full force and effect. All applicable governmental pre-acquisition filing,
information furnishing and waiting period requirements, including expiration
of all applicable waiting periods pursuant to H-S-R, if applicable, shall have
been met or such compliance shall have been waived by the governmental
authority having authority to grant such waivers.
11.05 Other Necessary Consents. Transferor and ▇▇▇▇▇▇▇ shall
have obtained all consents and approvals listed on Schedule 5.26. With respect
to each such consent or approval, Transferee shall have received written
evidence, satisfactory to it, that such consent or approval has been duly and
lawfully filed, given, obtained or taken and is effective, valid and
subsisting.
11.06 Opinion of Counsel to Transferor and ▇▇▇▇▇▇▇. Transferee
shall have received from counsel to Transferor and ▇▇▇▇▇▇▇ an opinion, dated
the Closing Date, substantially in the form of Exhibit 5.
11.07 Documents Satisfactory in Form and Substance. All
agreements, certificates, opinions and other documents delivered by Transferor
and ▇▇▇▇▇▇▇ to Transferee hereunder shall be in form and substance
satisfactory to counsel for Transferee, in the exercise of such counsel's
reasonable judgment.
11.08 Action by Board of Directors of Transferee. The Board of
Directors of Transferee shall have approved this Agreement and the
transactions contemplated hereby and authorized its execution, delivery and
performance by Transferee.
11.09 Due Diligence Review. Representatives of Transferee shall
have completed the due diligence review of the operations, condition
(financial and other), prospects, assets and liabilities of, and other matters
related to, Transferor and its business and the results of such due diligence
shall have been satisfactory to Transferee in its sole discretion.
11.10 Non-competition Agreement. ▇▇▇▇▇▇▇ shall have executed and
delivered to Transferee a non-competition agreement substantially in the form
of Exhibit 6 hereto.
11.11 Employment Agreements. ▇▇▇▇▇▇▇ shall have executed and
delivered to Transferee an employment agreement substantially in the form of
Exhibit 7 hereto.
11.12 Escrow Agreements. Transferor, Transferee and Escrow Agent
shall have executed and delivered to Transferee the Supplemental Stock Escrow
Agreement substantially in the form of Exhibit 2 hereto and the Short Term
Stock Escrow Agreement substantially in the form of Exhibit 1 hereto.
11.13 Closing of Assignment of Dinorall Option. (a) Dinorall
Corporation ("Dinorall") shall have obtained all necessary consents to the
assignment (the "Assignment") of that certain option agreement among Dinorall,
▇▇▇▇▇▇▇ and Transferor dated May 2, 1995 (the "Option Agreement"); (b)
Dinorall, ▇▇▇▇▇▇▇ and Transferor shall have consented to the Assignment; and
(c) Dinorall concurrently shall have closed the Assignment of the Option
Agreement to SEC concurrent with the Closing.
11.14 Termination of Option Agreement. Dinorall, SEC, ▇▇▇▇▇▇▇
and Transferor shall have agreed in writing to the termination of the Option
Agreement concurrent with the Closing.
11.15 Approval of Transaction by SEC's Board. The board of
directors of SEC shall have, among other things: (a) approved the execution,
delivery and performance of this Agreement by Transferee and the transactions
contemplated hereby; (b) approved the issuance by SEC of the shares of SEC
Stock constituting the Stock Consideration; (c) approved the execution,
delivery and performance of the Agreement between SEC and Dinorall relating to
the Memorandum of Understanding between SEC and Dinorall dated August 24, 1995
(the "Dinorall Agreement"); and (d) approved the definitive agreement
relating to the Assignment of the Option Agreement and the transactions
contemplated thereby.
ARTICLE XII
CLOSING
12.01 Closing Date. Subject to the satisfaction or waiver of the
conditions set forth herein, the Closing shall take place at 10:00 a.m. on
________________, December ___, 1995, in the offices of Long, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, or on such other
date at such other time and place as the parties shall agree (the "Closing
Date"). Transferee shall commence to operate and control the business of
Transferor as of the Closing.
ARTICLE XIII
INDEMNIFICATION
13.01 Agreement of ▇▇▇▇▇▇▇ and Transferor to Indemnify
Transferee. Except as otherwise limited by this Article XIII, ▇▇▇▇▇▇▇ and
Transferor, jointly and severally, shall indemnify and reimburse Transferee
for any and all claims, losses, liabilities, damages (including special and
consequential damages), costs (including court costs) and expenses (including
full and complete reasonable attorneys' and accountants' fees) (hereinafter
"Loss" or "Losses") suffered or incurred by Transferee or any of its
successors or assigns, and their respective officers, directors, employees,
consultants and agents ("Protected Parties"), as a result of, or with respect
to, (a) any breach or inaccuracy of any representation or warranty of
Transferor or ▇▇▇▇▇▇▇ set forth in this Agreement or in any certificate or
other document or agreement delivered pursuant hereto or in connection
herewith, whether such breach or inaccuracy exists or is made on the date of
this Agreement or as of the Closing Date; (b) any breach or partial breach of
or noncompliance by Transferor or ▇▇▇▇▇▇▇ with any covenant or agreement of
Transferor or ▇▇▇▇▇▇▇ contained in this Agreement; (c) any Excluded Liability;
(d) Transferor's noncompliance with the bulk transfer provisions of the
Uniform Commercial Code or any comparable state law to which the transactions
contemplated hereby are subject; (e) any product claims or losses (whether by
tort, contract, warranty, strict liability or any other theory of liability)
arising from any Inventory or any finished goods invoiced or shipped by
Transferor prior to the Closing Date; (f) any claim arising out of occurrences
that took place with respect to Transferor's operation of the Business,
including without limitation, general liability, product liability, automobile
liability and workers' compensation coverages; (g) arising out of any failure
of Transferor to qualify to do business in any jurisdiction in which
Transferor did business or is deemed to have conducted business prior to the
Closing Date; or (h) any Employee Benefit Plans.
13.02 Indemnity Claims.
(a) Survival. The representations and warranties of ▇▇▇▇▇▇▇
and Transferor contained herein or in any certificate or other document
delivered pursuant hereto or in connection herewith shall not be extinguished
by the Closing but shall survive the Closing, subject to the limitations set
forth in Section 13.02(b) hereof with respect to the time periods within which
claims for indemnity must be asserted, and the covenants and agreements of
▇▇▇▇▇▇▇ and Transferor contained herein shall survive without limitation as to
time except as may be otherwise specified herein. No investigation or other
examination of Transferor by Transferee, its designee or representatives shall
affect the term of survival of any representation or warranty contained herein
or in any certificate or other document delivered pursuant hereto or in
connection herewith, or the term of the right of Transferee to seek
indemnification under this Article XIII.
(b) Time to Assert Claims. ▇▇▇▇▇▇▇'▇ and Transferor's
obligation to indemnify Transferee and its Protected Parties for any Losses
described in clauses (a) and (b) of Section 13.01 (other than for
environmental and tax matters and other than for covenants or agreements under
which the performance obligations extend beyond the Closing Date (which are
defined for purposes of Article XIII as "executory covenants")) is subject to
the condition that ▇▇▇▇▇▇▇ and Transferor shall have received notice of the
Losses for which indemnity is sought within three (3) years after the Closing
Date. ▇▇▇▇▇▇▇'▇ and Transferor's obligation to indemnify Transferee and its
Protected Parties for any Losses described in clauses (a) and (b) of Section
13.01 and related to environmental matters is subject to the condition that
▇▇▇▇▇▇▇ or Transferor shall have received notice of the Losses for which
indemnity is sought within four (4) years after the Closing Date, and, with
respect to tax matters, prior to the expiration of the applicable statute of
limitations therefor. ▇▇▇▇▇▇▇'▇ and Transferor's obligation to indemnify
Transferee and to Protected Parties for any Losses described in clause (b) and
related to executory covenants, described in clauses (c) through (g) of
Section 13.01 hereof is subject to the condition that ▇▇▇▇▇▇▇ or Transferor
shall have received notice of the Losses for which indemnity is sought or
losses described in Section 13.04 prior to the expiration of the applicable
statute of limitations therefor or four (4) years after the Closing
Date, whichever is later.
13.03 Agreement of Transferee to Indemnify ▇▇▇▇▇▇▇ and
Transferor. Except as otherwise limited by this Article XIII, Transferee shall
indemnify and reimburse ▇▇▇▇▇▇▇ and Transferor and its Protected Parties for
all Losses suffered or incurred by ▇▇▇▇▇▇▇ and Transferor and its Protected
Parties as a result of, or with respect to, (a) any breach or inaccuracy of
any representation or warranty of Transferee set forth in this Agreement or in
any certificate or other document or agreement delivered pursuant hereto or in
connection herewith, whether such breach or inaccuracy exists or is made on
the date of this Agreement or as of the Closing Date; (b) any breach or
partial breach of or noncompliance by Transferee with any covenant or
agreement of Transferee contained in this Agreement; (c) Transferee's
assumption of the Assumed Liabilities; and (d) certain tax gain potential
liability as set forth in Section 13.04 herein, provided that nothing in this
Section 13.03 shall limit Transferee's rights to be indemnified by ▇▇▇▇▇▇▇ and
Transferor, jointly and severally, in accordance with Section 13.01 of this
Agreement.
13.04 Certain Tax Liability. Transferee shall indemnify ▇▇▇▇▇▇▇
for any and all taxes, penalties and interest arising from or relating solely
to the Section 368(a)(1)(C) reorganization contemplated by this Agreement if
any audit by any federal or state government agency results in the final
determination that any additional income taxes under the Code are owed by
▇▇▇▇▇▇▇, together with reasonable professional fees incurred in connection
with defending against any such determination. Transferee's indemnification
to ▇▇▇▇▇▇▇ for such taxes, penalties and interest due to the disallowance by
any such agency of the Section 368(a)(1)(C) reorganization, if assessed, shall
in no case exceed $1,360,000, plus assessed penalties and interest, if any.
13.05 (a) Survival. The representations and warranties of
Transferee contained herein or in any certificate or other document delivered
pursuant hereto or in connection herewith shall not be extinguished by the
Closing but shall survive the Closing, subject to the limitations set forth in
Section 13.05(b) hereof with respect to the time periods within which claims
for indemnity must be asserted, and the covenants and agreements of Transferee
contained herein shall survive without limitation as to time except as may be
otherwise specified herein. No investigation or other examination of
Transferee by either ▇▇▇▇▇▇▇ or Transferor, or their designees or
representatives shall affect the term of survival of any representation or
warranty contained herein or in any certificate or other document delivered
pursuant hereto or in connection herewith, or the term of the right of ▇▇▇▇▇▇▇
and Transferor to seek indemnification under this Article XIII.
(b) Time to Assert Claims. Transferee's obligation to
indemnify ▇▇▇▇▇▇▇ and Transferor hereunder is subject to the condition that
Transferee shall have received notice of the Losses described in clauses (a)
and (b) of Section 13.03 (other than for executory covenants) for which
indemnity is sought within three (3) years after the Closing Date, and, for
Losses described in clause (b) of Section 13.03 and related to executory
covenants, Losses described in clauses and (d) of Section 13.03, or Losses
described in Section 13.04, prior to the expiration of the applicable statute
of limitations therefor or four (4) years after the Closing Date, whichever is
later.
13.06 Procedures for Indemnification. As used herein, the term
"Indemnitor" means the party against whom indemnity hereunder is sought, and
the term "Indemnitee" means the party seeking indemnification hereunder.
(a) A claim for indemnification hereunder ("Indemnification
Claim") shall be made by Indemnitee by delivery of a written declaration to
Indemnitor requesting indemnification and setting forth the specific basis on
which indemnification is sought and the amount of asserted Losses and, in the
case of a Third Party Claim (as defined in Section 13.07 hereof), containing
such other information as Indemnitee shall have concerning such Third Party
Claim. Nothing herein shall be deemed to prevent Indemnitee from making a
claim for a Loss hereunder for potential or contingent claims or demands
provided the notice of Loss sets forth the specific basis for any such
potential or contingent claim or demand, to the extent then feasible and the
Indemnitee has reasonable grounds to believe that such a claim or demand may
become actual.
(b) If the Indemnification Claim involves a Third Party Claim,
the procedures set forth in Section 13.07 hereof shall be observed by
Indemnitee and Indemnitor.
(c) If the Indemnification Claim involves a matter other than a
Third Party Claim, the Indemnitor shall have ten (10) business days to object
to such Indemnification Claim by delivery of a written notice of such
objection to Indemnitee specifying in reasonable detail the basis for such
objection. Failure to timely so object shall constitute acceptance of the
Indemnification Claim by the Indemnitor and the Indemnification Claim shall be
paid in accordance with subsection (d) hereof.
(d) Upon final determination of the value of an Indemnification
Claim binding on Indemnitor and Indemnitee, Indemnitor shall pay the value of
such Indemnification Claim to Indemnitee within ten (10) business days of the
date such value is determined. All claims for indemnification to be paid
hereunder by Transferee to ▇▇▇▇▇▇▇ or to Transferor shall be paid in Shares of
SEC Stock. Within 30 days after the determination of the value of an
Indemnification Claim for which Transferor or ▇▇▇▇▇▇▇ is to be indemnified in
Shares, and provided the value of the Indemnification Claim is greater than
$100,000, Transferee shall use its best efforts to file on behalf of ▇▇▇▇▇▇▇ a
registration statement with the Commission for resale of such Shares and shall
use its best efforts to cooperate with the Commission in order to have such
registration statement declared effective by the Commission as soon as
reasonably practicable. All claims for indemnification to be paid hereunder by
▇▇▇▇▇▇▇ or Transferor to Transferee shall be paid in cash or by check.
13.07 Defense of Third Party Claims. Should any claim be made,
or investigation, suit or proceeding (including, without limitation, a binding
arbitration or an audit or inquiry by any taxing authority) be instituted
against Indemnitee which, if prosecuted successfully, would be a matter for
which Indemnitee is entitled to indemnification under this Agreement (a "Third
Party Claim"), the obligations and liabilities of the parties hereunder with
respect to such Third Party Claim shall be subject to the following terms and
conditions:
(a) The Indemnitee shall give the Indemnitor written notice of
any such claim promptly after receipt by the Indemnitee of notice thereof, and
the Indemnitor will undertake the defense thereof by representatives of its
own choosing reasonably acceptable to the Indemnitee. The assumption of the
defense of any such claim by the Indemnitor shall, unless otherwise stated in
writing delivered to the Indemnitee, be an acknowledgment by the Indemnitor of
its obligation to indemnify the Indemnitee with respect to such claim
hereunder. If, however, the Indemnitor fails or refuses to undertake the
defense of such claim within ten (10) business days after written notice of
such claim has been given to the Indemnitor by the Indemnitee, the Indemnitee
shall have the right to undertake the defense, compromise and, subject to
Section 13.08, settlement of such claim with counsel of its own choosing. In
the circumstances described in the preceding sentence, the Indemnitee shall,
promptly upon its assumption of the defense of such claim, make an
Indemnification Claim as specified in Section 13.06(a).
(b) The Indemnitee and Indemnitor shall cooperate with each
other in all reasonable respects in connection with the defense of any Third
Party Claim, including making available records relating to such claim and
furnishing, without out-of-pocket expense to the Indemnitor, management
employees of the Indemnitee as may be reasonably necessary for the preparation
of the defense of any such claim or for testimony as witness in any proceeding
relating to such claim.
13.08 Settlement of Third Party Claims. No settlement of a Third
Party Claim involving the asserted liability of Indemnitor under this Article
XIII shall be made without the prior written consent by or on behalf of
Indemnitor, which consent shall not be unreasonably withheld or delayed.
Consent shall be presumed in the case of settlements of $20,000 or less where
the Indemnitor has not responded within five (5) business days of notice of a
proposed settlement. In the event of any dispute regarding the reasonableness
of a proposed settlement, the party that will bear the larger financial loss
resulting from such settlement shall make the final determination in respect
thereto, which determination shall be final and binding on all involved
parties.
13.09 No Prejudice. Nothing herein shall prevent Transferee from
making a claim for a Loss hereunder relating to a breach by ▇▇▇▇▇▇▇ or
Transferor of any of his or its respective representations and warranties or
his or its failure to perform and comply with the respective covenants and
agreements set forth in this Agreement notwithstanding Transferee's knowledge
of such breach or such failure on or prior to the Closing Date.
ARTICLE XIV
OBLIGATIONS OF TRANSFEROR AFTER CLOSING
14.01 Change of Name. On or immediately after the Closing Date,
Transferor will amend its Articles of Incorporation so as to change its
corporate name to a name that does not include any part of "U.S. Computer of
North America" or to a name that will not create a likelihood of confusion
with "U.S. Computer of North America" or "U.S. Computer." Transferor will
thereafter take such action as may reasonably be requested by Transferee to
make its present corporate name available to it. Transferor shall bear any
costs and expenses of transferring the corporate name to Transferee, subject
to the provisions of Section 16.07 hereof.
14.02 Dissolution. From and after the Closing Date, Transferor
will not engage in any business, will distribute the Stock Consideration
received pursuant to Article III hereof to its shareholders, subject to the
Escrow Agreement, in complete cancellation and redemption of their shares of
Transferor's capital stock and will then promptly liquidate and dissolve as a
corporation.
14.03 Transferor's Corporate Records. Transferee will make
available to ▇▇▇▇▇▇▇ for inspection and copying all Records hereby acquired by
Transferee or SEC upon reasonable request for access thereto during
Transferee's normal business hours; provided that ▇▇▇▇▇▇▇ shall be responsible
for all costs and expenses related to copying such records; and if at any time
Transferee proposes to discard or destroy such books and records, it will
first offer to transfer them without charge to ▇▇▇▇▇▇▇. If Transferor retains
any books or records relating to Transferor, it shall make available to SEC or
Transferee such books or records upon reasonable request for access thereto
during normal business hours and if at any time Transferor proposes to discard
or destroy such books and records, it will first offer to transfer them
without charge to Transferee or SEC.
ARTICLE XV
TERMINATION PRIOR TO CLOSING
15.01 Termination of Agreement. This Agreement may be terminated
at any time prior to the Closing:
(a) By the mutual written consent of Transferee, ▇▇▇▇▇▇▇ and
Transferor;
(b) By Transferor and ▇▇▇▇▇▇▇ in writing, without liability, if
Transferee shall (I) fail to perform in any material respect its agreements
contained herein required to be performed by it on or prior to the Closing
Date, or (ii) materially breach any of its representations, warranties or
covenants contained herein, which failure or breach is not cured within ten
(10) business days after Transferor and ▇▇▇▇▇▇▇ have notified Transferee of
their intent to terminate this Agreement pursuant to this subparagraph (b);
(c) By Transferee in writing, without liability, if either
Transferor or ▇▇▇▇▇▇▇ shall (i) fail to perform in any material respect their
agreements contained herein required to be performed by them on or prior to
the Closing Date, or (ii) materially breach any of their representations,
warranties or covenants contained herein, which failure or breach is not cured
within ten (10) business days after Transferee has notified Transferor and
▇▇▇▇▇▇▇ of its intent to terminate this Agreement pursuant to this
subparagraph (c);
(d) By either ▇▇▇▇▇▇▇, Transferor or Transferee, in writing,
without liability, if there shall be any order, writ, injunction or decree of
any court or governmental or regulatory agency binding on Transferee,
Transferor or ▇▇▇▇▇▇▇ which prohibits or restrains Transferee, Transferor or
▇▇▇▇▇▇▇ from consummating the transactions contemplated hereby, provided that
Transferee, Transferor and ▇▇▇▇▇▇▇ shall have used their reasonable, good
faith efforts to have any such order, writ, injunction or decree lifted and
the same shall not have been lifted within 30 calendar days after entry, by
any such court or governmental or regulatory agency; or
(e) By either Transferor or Transferee, in writing, without
liability, if for any reason the Closing has not occurred by December 31, 1995
other than as a result of the breach of this Agreement by the party attempting
to terminate the Agreement.
15.02 Termination of Obligations. Termination of this Agreement
pursuant to this Article XV shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 8.02, 15.02, 16.07 and
16.11 hereof; provided, however, that termination pursuant to subparagraphs
(b), (c) or (e) of Section 15.01 hereof shall not relieve a defaulting or
breaching party from any liability to the other party hereto. Upon
termination of this Agreement pursuant to this Article XV and for a period of
one year thereafter, the parties agree that neither party shall initiate
contact with any customers of the other party hereto or solicit for employment
any person who is an employee of the other party or any of such party's
subsidiaries. The parties further agree that in the event of termination of
this Agreement pursuant to this Article XV, each party shall return promptly
to the other party all records, documents, financial information and other
information and copies thereof given to the first party during the course of
the negotiation of the transactions contemplated hereby.
ARTICLE XVI
MISCELLANEOUS
16.01 Entire Agreement. This Agreement (including the Schedules
and Exhibits) constitutes the entire understanding of the parties with respect
to the subject matter hereof; provided, however, that this provision is not
intended to abrogate any other written agreement between the parties executed
with or after this Agreement.
16.02 Amendment. No amendment, modification or alteration of the
terms or provisions of this Agreement shall be binding unless the same shall
be in writing and duly executed by the parties hereto.
16.03 Parties Bound by Agreement; Successors and Assigns. The
terms, conditions and obligations of this Agreement shall inure to the benefit
of and be binding upon the parties hereto and the respective successors and
assigns thereof. Without the prior written consent of Transferee, neither
▇▇▇▇▇▇▇ nor Transferor may assign their rights, duties or obligations
hereunder or any part thereof to any other person or entity. Transferee may
assign its rights and duties hereunder in whole or in part (before or after
the Closing) to one or more affiliated entities but if it does so, it shall
remain liable for all Transferee's obligations hereunder.
16.04 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
16.05 Headings. The headings of the Sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
16.06 Modification and Waiver. Any of the terms or conditions of
this Agreement may be waived in writing at any time by the party which is
entitled to the benefits thereof. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar).
16.07 Expenses. Except as otherwise provided herein, ▇▇▇▇▇▇▇,
Transferor and Transferee shall each pay all costs and expenses incurred by
each of them, or on their behalf respectively, in connection with this
Agreement and the transactions contemplated hereby, including fees and
expenses of their own financial consultants, accountants and counsel.
Notwithstanding the foregoing, Transferee shall assume certain liabilities of
Transferor incurred solely in connection with the negotiations of and
transactions contemplated by this Agreement and the agreements related hereto,
within the meaning of Rev. Rule 73-54, in an amount not to exceed Fifty
Thousand Dollars ($50,000).
16.08 Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to any other party hereto
shall be in writing and delivered personally (including by overnight courier
or express mail service) or sent by registered or certified mail, postage or
fees prepaid,
if to Transferor to:
U.S. Computer of North America, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to ▇▇▇▇▇▇▇ to:
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Tralins and Associates
One Biscayne Tower, Suite 3310
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Transferee to:
USC Acquisition Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Long, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address for a party as shall be specified by like notice.
Any notice which is delivered personally in the manner provided herein shall
be deemed to have been duly given to the party to whom it is directed upon
actual receipt by such party or the office of such party. Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day
after the day it is so placed in the mail or, if earlier, the time of actual
receipt.
16.09 Brokerage. ▇▇▇▇▇▇▇ and Transferor jointly and severally
warrant and represent to Transferee, and Transferee warrants and represents to
Transferor and ▇▇▇▇▇▇▇, that no broker, agent or finder has rendered services
in connection with the transaction contemplated under this Agreement, other
than any such arrangements disclosed in Schedule 16.09. Transferor shall pay
the costs of any brokerage arrangements disclosed in Schedule 16.09 before or
at Closing, but in any case, prior to the transfer of assets. Transferor and
▇▇▇▇▇▇▇, jointly and severally, hereby indemnify and agree to hold harmless
Transferee from and against any and all losses, costs, damage, and expenses
(including reasonable attorneys' fees) arising or resulting, or sustained or
incurred by Transferee, by reason of any claim by any broker, agent, finder or
other person or entity based upon any arrangement or agreement made or alleged
to have been made by Transferor or ▇▇▇▇▇▇▇ in connection with the transactions
contemplated under this Agreement. ▇▇▇▇▇▇▇ shall have no right of contribution
against Transferor for any indemnification under this Section. Transferee
does hereby indemnify and agree to hold harmless ▇▇▇▇▇▇▇ and Transferor from
and against any and all losses, costs, damages and expenses (including
reasonable attorneys' fees) arising or resulting, or sustained or incurred by
▇▇▇▇▇▇▇ and Transferor by reason of any claim by any broker, agent, finder or
other person or entity based upon any arrangement or agreement made or alleged
to have been made by Transferee in connection with the transactions
contemplated under this Agreement. All claims for indemnification to be paid
hereunder by Transferee to ▇▇▇▇▇▇▇ or to Transferor shall be paid in Shares of
SEC Stock. All claims for indemnification to be paid hereunder by ▇▇▇▇▇▇▇ or
Transferor to Transferee shall be paid in cash or by check.
16.10 Governing Law. This Agreement is executed by ▇▇▇▇▇▇▇,
Transferor and Transferee in, and shall be construed in accordance with and
governed by the laws of the State of Georgia without giving effect to the
principles of conflicts of law thereof.
16.11 Public Announcements. No public announcement shall be made
by any person with regard to the transactions contemplated by this Agreement
without the prior consent of ▇▇▇▇▇▇▇ and Transferee; provided that any party
hereto may make such disclosure if advised by counsel that it is legally
required to do so. ▇▇▇▇▇▇▇, Transferor and Transferee will discuss any public
announcements or disclosures concerning the transactions contemplated by this
Agreement with the other parties prior to making such announcements or
disclosures.
16.12 Acquisition Proposals. Prior to the earlier of Closing,
December 31, 1995, or termination of this Agreement, ▇▇▇▇▇▇▇ shall not, and
shall not permit Transferor or any officer, director, employee or agent of
Transferor or any subsidiary thereof (a) to solicit, initiate or encourage
submission of proposals or offers, or accept any offers, from any person
relating to any acquisition or purchase of all or a material amount of the
assets of, or any equity interest in, or any merger, consolidation or business
combination with, Transferor (an "Acquisition Proposal"), or (b) to
participate in any discussions or negotiations regarding, or furnish to any
other person any information with respect to, or otherwise cooperate in any
way with or assist, facilitate or encourage any Acquisition Proposal by any
other person.
16.13 Transferor's Knowledge. As used herein, the terms
"Transferor's knowledge" or "to the knowledge of Transferor" shall mean the
knowledge of any director or officer of Transferor.
16.14 No Third-Party Beneficiaries. With the exception of the
parties to this Agreement, their successors or assigns, and their respective
officers, employees, consultants and agents, there shall exist no right of any
person to claim a beneficial interest in this Agreement or any rights
occurring by virtue of this Agreement.
16.15 "Including". Words of inclusion shall not be construed as
terms of limitation herein, so that references to "included" matters shall be
regarded as non-exclusive, non-characterizing illustrations.
16.16 Gender and Number. Where the context requires, the use of
a pronoun of one gender or the neuter is to be deemed to include a pronoun of
the appropriate gender, singular words are to be deemed to include the plural,
and vice versa.
16.17 Attorneys' Fees and Costs. In the event that a dispute
arises between the parties hereto and suit is instituted, the prevailing party
in such litigation shall be entitled to recover reasonable attorney's fees and
other costs and expenses from the nonprevailing party, whether incurred at the
trial level or in any appellate proceeding; provided that this Section 16.17
shall apply only to this Agreement and shall not apply to the Non-Competition
Agreement attached hereto as Exhibit 6, to the Employment Agreement attached
hereto as Exhibit 7 or to any other exhibit or agreement referenced herein or
attached hereto, unless otherwise stated in such other exhibit or agreement.
16.18 References. Whenever reference is made in this Agreement
to any Article, Section, Schedule or Exhibit, such reference shall be deemed
to apply to the specified Article or Section of this Agreement or the
specified Schedule or Exhibit to this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date indicated on the
first page hereof.
Transferee:
USC ACQUISITION CORPORATION
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇,
President
▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
(SEAL)
▇▇▇▇▇ ▇▇▇▇▇▇▇,
Transferor:
U.S. COMPUTER OF NORTH AMERICA, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇,
President
The undersigned, being the duly elected and acting President and
Chief Operating Officer of Southern Electronics Corporation, a Delaware
corporation ("SEC"), its successors and assigns, hereby agrees not
individually but on behalf of SEC and its successors and assigns, to
unconditionally guaranty the payment of any amounts owed by Transferee to
▇▇▇▇▇▇▇ or Transferor under Sections 13.03, 13.04 and 16.17 of this Agreement
following proper demand upon Transferee for such amounts and failure so to pay
by Transferee in accordance with the terms of this Agreement.
Dated this 14th day of December, 1995.
SOUTHERN ELECTRONICS CORPORATION
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇,
President and Chief Operating Officer