ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is
entered into this 24th day of July, 1997, by, between and among
POMEROY COMPUTER RESOURCES, INC., a Delaware corporation, (the
"Purchaser"), MICROCARE, INC., an Indiana corporation ("Seller
No. 1"), MICROCARE COMPUTER SERVICES, INC., an Indiana
corporation ("Seller No. 2"), and ROBERT L. VERSPRILLE (the
"Shareholder").
W I T N E S S E T H :
WHEREAS, Seller No. 1 is a full service provider of a variety of
computer service and support solutions to large and medium size
commercial, governmental and other professional customers
throughout the Indianapolis, Indiana Metropolitan area as well as
the entire state of Indiana; and
WHEREAS, Seller No. 2 provides a variety of computer service and
support solutions to the State of Indiana;
WHEREAS, Shareholder is the owner of 100 shares of the
outstanding stock of Seller No. 1 and 100 shares of the
outstanding stock of Seller No. 2, which stock constitutes 100%
of the outstanding stock of each corporation and Shareholder is
the sole director of Seller No. 1 and Seller No. 2; and
WHEREAS, Purchaser desires to purchase certain of the assets of
Seller No. 1 and of Seller No. 2 used in their operations (the
"Business") and assume certain of the liabilities of Seller No. 1
in connection with the Business, and Seller No. 1 and Seller No.
2 desire to sell certain of such assets, subject to such
liabilities, but only (i) upon the terms and subject to the
conditions set forth in this Agreement, (ii) the representations,
warranties, covenants, indemnifications, assurances and
undertakings of Seller No. 1, Seller No. 2, Shareholder and of
Purchaser contained in this Agreement, (iii) the agreements of
Seller No. 1 and Seller No. 2 to refrain from competition with
Purchaser for four (4) years from the closing of this transaction
and (iv) the agreement of Shareholder to refrain from competition
for the later of four (4) years from the Closing date or one (1)
year after the termination of Shareholder's employment with
Purchaser pursuant to and in accordance with, the terms of his
Employment Agreement to be executed upon Closing.
NOW, THEREFORE, in consideration of the above premises and the
mutual promises, covenants, agreements, representations and
warranties herein contained, the parties hereto agree as follows:
1.
DEFINITIONS
1.1 Affiliate. "Affiliate" shall mean (i) in the case of an
entity, any person (the term "person" for these purposes means an
individual, partnership, firm, corporation or other entity) who
or which, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common
control with, any specified person (the term "control" for these
purposes means the ability, whether by ownership of shares or
other equity interests, by contract or otherwise, to elect a
majority of the directors of a corporation, to select the
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managing or general partner of a partnership, or otherwise to
select, or have the power to remove and then select, a majority
of those persons exercising governing authority over an entity)
or (ii) in the case of an individual, such individual's spouse,
descendants or parents or a trust primarily for the benefit of
such individual or any of the foregoing.
1.2 Assumed Liabilities. The "Assumed Liabilities" are the
liabilities of Seller No. 1 and Seller No. 2 assumed or paid at
Closing by the Purchaser pursuant to Sections 3.1 and 3.2 of this
Agreement.
1.3 Balance Sheets. The "Balance Sheets" are the unaudited
balance sheet of Seller No. 1 and Seller No. 2, respectively, as
of June 30,1997, included as part of the Financial Statements.
1.4 Closing. The "Closing" shall be the consummation of the
transactions contemplated under this Asset Purchase Agreement.
1.5 Closing Date. The "Closing Date" shall be as of 10:00 a.m.,
E.D.T., July 24, 1997.
1.6 Code. The "Code" is the Internal Revenue Code of 1986, as
amended, 26 U.S.C. 1 et seq.
1.7 Court. A "Court" is any federal, state, municipal,
domestic, foreign or other governmental tribunal or an arbitrator
or person with similar power or authority.
1.8 Disclosure Schedule. The "Disclosure Schedule" is the
Disclosure Schedule dated the date of this Agreement and
delivered by Seller No. 1 and Seller No. 2 to Purchaser.
1.9 Encumbrance. An "Encumbrance" is any security interest,
lien, or encumbrance whether imposed by agreement,
understanding, law or otherwise, on any of Purchased Assets No. 1
and/or Purchased Assets No. 2 (as defined herein).
1.10 Excluded Assets. An "Excluded Asset" is any asset set forth
in Section 2.4.
1.11 Financial Statements. The "Financial Statements" are the
unaudited financial statements of Seller No. 1 for the years
ended March 31, 1997 and March 31, 1996 and the unaudited interim
balance sheets of Seller No. 1 and Seller No. 2 as of June 30,
1997, including any and all notes thereto. The "Financial
Statements do not include the Pro Forma Balance Sheet.
1.12 Governmental Entity. A "Governmental Entity" is any Court
or any federal, state, municipal, domestic, foreign or other
administrative agency, department, commission, board, bureau or
other governmental authority or instrumentality.
1.13 Pro Forma Balance Sheet. The "Pro Forma Balance Sheet" is
the unaudited balance sheet of Seller No. 1 prepared as described
in Section 4.1(c) and adjusted for Excluded Assets of Seller No.
1 per Section 2.4 and Excluded Liabilities of Seller No. 1 per
Section 3.3 as of July 23, 1997.
1.14 Purchase Price. The "Purchase Price" is the total
consideration paid by Purchaser to Seller No. 1 and Seller No. 2
for Purchased Assets No. 1 and Purchased Assets No. 2 as set
forth in Sections 4.1, 4.2 and 4.4.
1.15 Purchased Assets No. 1. The "Purchased Assets No. 1" are
the assets of Seller No. 1, used in the Business, acquired by the
Purchaser pursuant to the terms of this Agreement.
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1.16 Purchased Assets No. 2. The "Purchased Assets No. 2" are
the assets of Seller No. 2, used in the Business, acquired by the
Purchaser pursuant to the terms of this Agreement.
1.17 Taxes. "Taxes" means all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross
receipts, excise, property, sales, use, license, payroll and
franchise taxes, imposed by any Governmental Entity and includes
any estimated tax, interest and penalties or additions to tax.
1.18 Tax Return. A "Tax Return" is a report, return or other
information required to be supplied to a Governmental Entity in
connection with Taxes including, where permitted or required,
combined or consolidated returns for any group of entities that
includes Seller No. 1 and Seller No. 2.
1.19 Actual Knowledge of Seller No. 1 and Seller No. 2. For
purposes of this Agreement, Actual Knowledge of Seller No. 1 and
Seller No. 2 shall be limited to the actual knowledge of the
Shareholder.
1.20 Best Knowledge of Seller No. 1 and Seller No. 2. For
purposes of this Agreement, Best Knowledge of Seller No. 1 and
Seller No. 2 shall be limited to the best knowledge of the
Shareholder.
2.
TERMS
2.1 Agreement.
Seller No. 1 agrees to sell and convey to Purchaser the
Purchased Assets No. 1 as hereinafter set forth in Section 2.2.
Seller No. 2 agrees to sell and convey to Purchaser the Purchased
Assets No. 2 as hereinafter set forth in Section 2.3. Purchaser
agrees to purchase said assets. The agreements of Purchaser and
Seller No. 1 and Seller No. 2 are expressly conditioned upon the
terms, conditions, covenants, representations and warranties as
hereinafter set forth.
2.2 Assets to be Sold by Seller No. 1 and Purchased by
Purchaser.
At the Closing of this Agreement, Purchaser shall purchase
and Seller No. 1 shall sell the following assets of Seller No. 1
used in the Business of Seller No. 1:
(a) Certain inventory of computers, related equipment and
service parts held by Seller No. 1 as set forth on Exhibit A
attached hereto;
(b) Certain vehicles of Seller No. 1 set forth on attached
Exhibit B (excepting the four (4) vehicles to be retained by
Seller No. 1 as set forth in Section 2.4);
(c) Certain fixed assets and equipment of Seller No. 1 as
set forth on attached Exhibit C;
(d) All of Seller No. 1's fixed rate contracts and time and
material contracts with the State of Indiana and other
organizations set forth on attached Exhibit D;
(e) All of Seller No. 1's service contracts which are set
forth on attached Exhibit E;
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(f) All intangible assets of Seller No. 1 which are used in
the Business of Seller No. 1, including without limitation, all
purchase orders, contracts, rights and agreements, work in
process, customers lists, supplier agreements, patents,
trademarks and service marks (including the goodwill associated
with the marks), computer programs, the right to the use of the
corporate and trade names of or used by Seller No. 1, or
derivative thereof, as all or a part of a corporate or trade name
(excepting the intangible assets to be retained by Seller No. 1
as set forth in Section 2.4);
(g) All distribution contracts and authorizations of Seller
No. 1;
(h) All base artwork, photo materials, plates (if owned by
Seller No. 1), separations and other materials that are used by
Seller No. 1 for printing brochures and promotional materials
including all intellectual property rights therein; and
(i) The assignment of any telephone numbers used in the
Business of Seller No. 1.
2.3 Assets to be Sold by Seller No. 2 and Purchased by
Purchaser.
At the Closing of this Agreement, Purchaser shall purchase
and Seller No. 2 shall sell the following assets of Seller No. 2
used in the Business of Seller No. 2:
(a) Seller No. 2's agreement( whether oral or written) with
the State of Indiana dated the 1st day of July, 1997, set forth
on attached Exhibit F;
(b) All of Seller No. 2's service contracts, if any, which
are set forth on attached Exhibit G;
(c) All intangible assets of Seller No. 2 which are used in
the Business of Seller No. 2, including without limitation, all
purchase orders, contracts, rights and agreements, work in
process, customers lists, supplier agreements, patents and
trademarks and service marks (including the goodwill associated
with the marks) the right to use the corporate and trade name of
or used by Seller No. 2, or derivative thereof, as all or part of
a corporate or trade name (excepting the intangible assets to be
retained by Seller No. 2 as set forth in Section 2.4); and
(d) The assignment of any telephone number used in the
Business of Seller No. 2.
2.4 Excluded Assets.
Seller No. 1 and Seller No. 2 shall not sell and Purchaser
shall not purchase any of the assets of Seller No. 1 and/or
Seller No. 2, except the assets set forth in Sections 2.2 and 2.3
above. Specifically, Seller No.1 and Seller No. 2 are not
selling and Purchaser is not purchasing any of Seller No. 1's or
Seller No. 2's cash or cash equivalents, investment accounts,
accounts receivable, officers life insurance, including its
surrender value, four vehicles, consisting of a 1994 Cadillac, a
1994 Corvette, a 1994 Plymouth Colt Vista, and a 1996 Suburban,
any federal, state or local tax refunds, if any, owed to Seller
No. 1 or Seller No. 2 presently or in the future, any prepaid
items (except as related to the executory contracts being assumed
by Purchaser in Section 3.2), any part of the Purchase Price to
be received by Seller No. 1 and Seller No. 2 for the sale of the
assets, the minute books of Seller No. 1 or Seller No. 2, their
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tax returns, corporate seals and stock records and any other
assets not specifically set forth in Sections 2.2 and 2.3 above.
In addition, Seller No. 1 and Seller No. 2 will each interim
bill (and shall be entitled to receive and retain payment for),
as of the Closing, or as soon thereafter as is customary with the
billing practices of any partially completed contract, all
partially completed work that Seller No. 1 and Seller No. 2 have
performed on any of its contracts up to the date of Closing. In
addition, to the extent that Seller No. 1 and Seller No. 2 are
unable to interim bill for any partially completed contracts,
Seller No. 1 and Seller No. 2 will each bill Purchaser within
thirty (30) days of the Closing date, for all work that Seller
No. 1 and Seller No. 2 have performed on any such unbilled
partially completed contracts up to the date of Closing. A list
of all such unbilled partially completed work is set forth on
Exhibit H attached hereto. Seller No. 1 and Seller No. 2 will
bill Purchaser for such work at a rate of $20.00 per hour for
labor and at cost for parts incident to such work. Purchaser
covenants and agrees to diligently complete such work and
promptly upon completion undertake reasonable efforts to bill and
collect for such work. Upon collection by Purchaser for such
work, Purchaser covenants and agrees to promptly reimburse Seller
No. 1 and Seller No. 2 for such work according to the billings
received by Purchaser from Seller No. 1 and Seller No. 2 as
provided above. Seller No. 1 and Seller No. 2 shall be solely
responsible for any liability or costs relating to such completed
or partially completed work. In the event that Purchaser incurs
any cost for correcting any defective work performed by Seller
No. 1 or Seller No. 2 prior to the closing date, Seller No. 1 and
Seller No. 2 shall promptly reimburse Purchaser for all costs
that may be incurred by Purchaser to correct such prior work
performed by Seller No. 1 and/or Seller No. 2.
2.5 Instruments of Transfer.
Except as otherwise provided herein, at Closing, Seller No.
1 and Seller No. 2 will deliver, respectively, to Purchaser such
bills of sale, endorsements, assignments and other good and
sufficient instruments of transfer and assignment as shall be
effective to vest in Purchaser good and marketable title and
interest in and to Purchased Assets No. 1 and Purchased Assets
No. 2, respectively. At or after the Closing, and without
further consideration, Seller No. 1 and Seller No. 2 will execute
and deliver to Purchaser such further instruments of conveyance
and transfer and take such other action as Purchaser may
reasonably request in order to more effectively convey and
transfer to Purchaser any of the Purchased Assets No. 1 and/or
Purchased Assets No. 2 or for aiding and assisting and collecting
and reducing to possession and exercising rights with respect
thereto. Seller No. 1, Seller No. 2 and the Shareholder agree to
use their best efforts to obtain and deliver to Purchaser such
consents, approvals, assurances and statements from third parties
as Purchaser may reasonably require in a form reasonably
satisfactory to Purchaser. In addition to the foregoing, Seller
No. 1 and Seller No. 2 will deliver to Purchaser the originals or
copies of all of Seller No. 1's and Seller No. 2's books, records
and other data relating to Purchased Assets No. 1 and Purchased
Assets No. 2, respectively; and simultaneously with such
delivery, Seller No. 1 and Seller No. 2 shall take all such acts
as may be necessary to put Purchaser in actual possession, and
operating control of Purchased Assets No. 1 and Purchased Assets
No. 2. Seller No. 1 and Seller No. 2 shall cooperate with
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Purchaser to permit Purchaser, if possible, to enjoy Seller No.
1's and Seller No. 2's ratings and benefits under workmen's
compensation laws and unemployment compensation laws to the
extent permitted by such laws.
2.6 Instruments Giving Certain Powers and Rights.
To the extent that any assignment does not result in a
complete transfer of the contracts to Purchaser because of a
provision in any contract against Seller No. 1's or Seller No.
2's assignment of any its right thereunder, Seller No. 1 and
Seller No. 2 shall cooperate with Purchaser in any reasonable
manner proposed by Purchaser to complete the acquisition of the
contracts and Seller No. 1's and Seller No. 2's rights, benefits
and privileges thereunder in order to fulfill and carry out
Seller No. 1's and Seller No. 2's obligations under this
Agreement. Such additional action may include, but is not
limited to: (i) entering into a subcontract between Seller No. 1
and/or Seller No. 2 and Purchaser which allows Purchaser to
perform Seller No. 1's and Seller No. 2's duties under such
contracts and to enforce Seller No. 1's and Seller No. 2's rights
thereunder; (ii) the sale of Seller No. 1's and Seller No. 2's
stock owned by Shareholder to Purchaser on terms to which the
parties may mutually agree to allow Purchaser to operate Seller
No. 1 and Seller No. 2 as wholly-owned subsidiaries to enforce
the contracts; or (iii) entering into a new multi-party agreement
with such customers which allows Purchaser to perform Seller No.
1's and Seller No. 2's obligations and enforce Seller No. 1's and
Seller No. 2's rights under the contracts.
3.
ASSIGNMENT OF LIABILITIES
3.1 Liabilities to be Paid Off at Closing or Assumed.
A. At the Closing, Purchaser shall pay off the debt on
certain vehicles being transferred to it in the approximate
amount of $12,457.48 as of the date hereof and shall assume
Seller No. 1's deferred service contract liability in the
approximate amount of $31,405.00 as of the date hereof.
Purchaser shall secure the release of any personal guarantees
executed by Shareholder relating to the indebtedness securing the
vehicles of Seller No. 1 being purchased by Purchaser.
B. At the Closing, Purchaser shall assume and pay, perform
and discharge when due all of Seller No. 1's employees' accrued
vacation time, which on the date of Closing is $13,357.38.
3.2 Executory Contracts.
At the Closing, Purchaser shall assume and pay, perform and
discharge when due the following:
(a) All the obligations and liabilities of Seller No. 1 and
Seller No. 2 arising after the Closing under the contracts
described in Sections 2.2 and 2.3; and
(b) Seller No. 1's obligations and liabilities under
executory contracts arising after the Closing relating to Seller
No. 1's Yellow Pages advertisements (projected to cost Twelve
Thousand Six Hundred Eighteen Dollars ($12,618.00) for the period
August, 1997 through July, 1998) and Centrix agreements.
(c) All product warranty liabilities and obligations of
Seller No. 1 arising after Closing with respect to products
assembled, manufactured, distributed or sold on or prior to the
Closing Date up to a maximum aggregate liability of $2,000.00.
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(d) All future liabilities for merchandise in transit
F.O.B. shipping point which has not been received and/or entered
into inventory by Seller No. 1 or Seller No. 2 as of the Closing
and for which no bill has been posted by Seller No. 1 or Seller
No. 2 as of the Closing.
3.3 Excluded Liabilities.
Notwithstanding anything in this Agreement to the contrary,
Purchaser shall not assume or become responsible for any claim,
liability or obligation of any nature whatsoever, whether known
or unknown, accrued, absolute, contingent or otherwise (a
"Liability") of Seller No. 1 and/or Seller No. 2 except the
Assumed Liabilities. Without limiting the generality of the
foregoing, the following are included among the Liabilities of
Seller No. 1 and Seller No. 2 which Purchaser shall not assume or
become responsible for (unless specifically included as Assumed
Liabilities):
(a) all of the trade accounts payable, accrued expenses and
capital leases of Seller No. 1 and/or Seller No. 2;
(b) any indebtedness relating to the vehicles being
retained by Seller No. 1 as set forth in Section 2.4.
(c) all Liabilities for any Taxes whether deferred or which
have accrued or may accrue or become due and payable by Seller
No. 1 and/or Seller No. 2 either prior to, on or after the
Closing Date, including, without limitation, all taxes and fees
of a similar nature arising from the sale and transfer of
Purchased Asset No. 1 and Purchased Assets No. 2 to Purchaser;
(d) all Liabilities and obligations to directors, officers,
employees or agents of Seller No. 1 and Seller No. 2, including,
without limitation, all Liabilities and obligations for wages,
salary, bonuses, commissions, vacation (except to the extent
Purchaser agrees to assume such item as set forth in Section
3.1(B)) or severance pay, profit sharing or pension benefits, and
all Liabilities and obligations arising under any bonus,
commission, salary or compensation plans or arrangements, whether
accruing prior to, on or after the Closing Date;
(e) all Liabilities and obligations with respect to
unemployment compensation claims and workmen's compensation
claims and claims for race, age and sex discrimination or sexual
harassment or for unfair labor practice based on or arising from
occurrences, circumstances or events, or exposure to conditions,
existing or occurring prior to the Closing Date and for which any
claim may be asserted by any of Seller No. 1's and/or Seller No.
2's employees, prior to, on or after the Closing Date;
(f) all Liabilities of Seller No. 1 and/or Seller No. 2 to
third parties for personal injury or damage to property based on
or arising from occurrences, circumstances or events, or exposure
to conditions, existing or occurring prior to the Closing Date
and for which any claim may be asserted by any third party prior
to, on or after the Closing Date;
(g) all Liabilities and obligations of Seller No. 1 and/or
Seller No. 2 arising under or by virtue of federal or state
environmental laws based on or arising from occurrences,
circumstances or events, or exposure to conditions, existing or
occurring prior to the Closing Date and for which any claim may
be asserted prior to, on or after the Closing Date;
(h) all Liabilities of Seller No. 1 and/or Seller No. 2,
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including any costs of attorneys' fees incurred in connection
therewith, for litigation, claims, demands or governmental
proceedings arising from occurrences, circumstances or events, or
exposure to conditions occurring or existing prior to the Closing
Date;
(i) all Liabilities based on any theory of liability or
product warranty (except to the extent assumed in Section 3.2(c))
with respect to any product manufactured or sold prior to the
Closing Date and for which any claim may be asserted by any third
party, prior to, on or after the Closing Date;
(j) all attorneys' fees, accountants or auditors' fees, and
other costs and expenses incurred by Seller No. 1, Seller No. 2
and/or Shareholder in connection with the negotiation,
preparation and performance of this Agreement or any of the
transactions contemplated hereby;
(k) all Liabilities of Seller No. 1 and/or Seller No. 2 in
connection with the Excluded Assets;
(l) any Liabilities of Seller No. 1 and/or Seller No. 2
with respect to any options, warrants, agreements or convertible
or other rights to acquire shares of its capital stock of any
class; and
(m) all other debts, Liabilities, obligations, contracts
and commitments (whether direct or indirect, known or unknown,
contingent or fixed, liquidated or unliquidated, and whether now
or hereinafter arising) arising out of or relating to the
ownership, operation or use of any of Purchased Assets No. 1
and/or Purchased Assets No. 2 on or prior to the Closing Date or
the conduct of the Business of Seller No. 1 and/or Seller No. 2
prior to the Closing Date, except only for the liabilities and
obligations to be assumed or paid, performed or discharged by
Purchaser constituting the Assumed Liabilities.
Seller No. 1 and Seller No. 2 shall pay all of their
respective liabilities not being assumed hereunder by Purchaser
within the customary time for payment of such liabilities.
It is the intent of the parties that upon Closing, all
employees of Seller No. 1 and Seller No. 2 will be terminated by
such parties and Purchaser will extend offers of employment to
such individuals and use its best efforts to offer employment
agreements to such employees within sixty (60) days of Closing
upon such terms and conditions as shall be mutually agreed upon
by Purchaser and Shareholder.
4.
CONSIDERATION FOR
PURCHASED ASSETS NO. 1 AND PURCHASED ASSETS NO. 2
4.1 Purchase Price for Purchased Assets No. 1.
Subject to the other terms of this Agreement, the Purchase
Price for Purchased Assets No. 1 shall be the sum of:
(a) Five Hundred Thirty-Six Thousand Six Hundred Dollars
($536,600); and
(b) The liabilities assumed or paid off at Closing under
Section 3.1 relating to the debt on certain vehicles which
currently equals Twelve Thousand Four Hundred Fifty-Seven and
48/100 Dollars ($12,457.48) and as shall be adjusted to the date
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of Closing relating to the debt on certain vehicles and the
deferred service contract liability which currently equals Thirty-
one Thousand Four Hundred Five Dollars ($31,405.00) and as shall
be adjusted to the date of Closing.
(c) Seller No. 1's accrued vacation time in the amount of
Thirteen Thousand Three Hundred Fifty-seven Thousand and 38/100
Dollars (13,357.38).
The sum of the items contained in Sections 4.1(a) and 4.1(b)
above shall be either adjusted upward or downward by the amount
determined under Section 4.1(c).
(c) Prior to the closing, Seller No. 1 shall prepare and
deliver to Purchaser a Pro Forma Balance Sheet which shall set
forth the purchased assets consisting of the inventory and
service parts valued at cost and the net book value of the fixed
assets, vehicles and equipment being purchased from Seller No. 1
less the assumed liabilities relating to the debt on the
vehicles, the deferred service contract liability and the accrued
vacation liability being assumed by Purchaser. The Pro Forma
Balance Sheet shall be prepared using the same accounting
methods, policies, practices and procedures with consistent
classifications, judgments and estimation methodology as used in
the preparation of the December 31, 1996 balance sheet.
If the net asset amount (as defined below) shown on the
Pro Forma Balance sheet is less than Two Hundred Thirty-Five
Thousand Six Hundred Dollars ($235,600.00), the Purchase Price to
be paid to Seller No. 1 shall be decreased on a dollar-for-dollar
basis for such difference. Any such reduction shall be offset
against the cash portion of the Purchase Price as set forth
above, provided, Seller No. 1 shall have the right to transfer
accounts receivable, the collectibility of which shall be
guaranteed by Seller No. 1, in lieu thereof. If the net asset
amount shown on the Pro Forma Balance Sheet equals or exceeds Two
Hundred Thirty-Five Thousand Six Hundred Dollars ($235,600.00),
the Purchase Price shall be increased on a dollar-for-dollar
basis for such difference and Purchaser shall have the option of
paying additional cash to Seller No. 1 or assuming a set amount
of accounts payable of Seller No. 1.
The net asset amount shall mean the sum of the
inventory and service parts acquired hereunder valued at their
cost and the net book value of the fixed assets, vehicles and
equipment acquired by Purchaser from Seller No. 1 less the
assumed liabilities relating to the debt on the vehicles, the
deferred service contract liability, and the accrued vacation
liability being assumed by Purchaser in each case as shown on the
Pro Forma Balance Sheet.
4.2 Purchase Price for Purchased Assets No. 2.
Subject to the other terms of this Agreement, the Purchased
Price for Purchased Assets No. 2 shall be One Million Six Hundred
Fifty-Nine Thousand Eight Hundred Dollars ($1,659,800.00) plus
any additional amount, if any, that may be paid pursuant to
Section 4.4.
4.3 Payment of the Purchase Price for Purchased Assets No. 1 and
Purchased Assets No. 2.
Subject to the conditions, covenants, representations and
warranties hereof, at Closing, Purchaser shall deliver:
(a) By certified or bank cashier's check or by wire
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transfer to Seller No. 1's bank account, the amount of Five
Hundred Thirty-Six Thousand Six Hundred Dollars ($536,600.00) as
either adjusted upward or downward as determined under Section
4.1(c) hereof;
(b) The assumption or payment of the liabilities of Seller
No. 1 assumed by Purchaser pursuant to Section 3.1;
(c) By certified or bank cashier's check or by wire
transfer to Seller No. 2's bank account, the amount of Five
Hundred Thirty-Six Thousand Six Hundred Dollars ($536,600.00);
(d) The sum of Three Hundred Twenty-One Thousand Nine
Hundred Sixty Dollars ($321,960.00) shall be payable in the form
of the common stock of Purchaser. The number of shares of
Purchaser's stock to be issued to Seller No. 2 under this Section
shall be determined by dividing $321,960.00 by the average of the
closing price for Purchaser's stock on the over-the-counter
market for the twenty (20) previous business days preceding the
closing date. Incident to the issuance of such shares, Seller
No. 2 shall execute such documentation containing such
representations concerning the holding of Purchaser's shares,
including that Seller No. 2 is able to bear the economic risk of
holding the shares to be delivered hereunder for the period
required by applicable federal securities laws because such
shares will not have been registered under the Securities Act of
1933 and therefore cannot be sold unless they are subsequently
registered under the Act or an exemption from registration is
available. The form of the documentation to be executed by
Seller No. 2 incident to the issuance of these shares is attached
hereto as Exhibit I. In the event the base period price of the
Purchaser's common stock is greater than $27.00 per share or is
less than $17.00 per share, the parties agree to engage in good
faith negotiations to renegotiate the economics of this aspect of
the transaction on the Closing Date.
(e) The remaining sum of Eight Hundred One Thousand Two
Hundred Forty Dollars ($801,240.00) shall be payable pursuant to
the terms of Purchaser's promissory note. The note shall bear
interest at the prime rate of Star Bank, N.A. as of the date of
closing. The principal of the note shall be payable in three (3)
equal installments with the first principal payment commencing on
the first annual anniversary of the closing and the remaining two
(2) principal payments being due on the next two successive
annual anniversary dates. Interest on the unpaid principal
balance of the note shall be paid quarterly. Such note and all
obligations of Purchaser thereunder will be subordinated and made
junior in right of payment to the extent and in the manner
provided in a Subordination Agreement to be executed between Star
Bank, N.A. and Purchaser and Seller No. 2. A copy of said note
is attached hereto as Exhibit J. Such note shall be subordinate
to Purchaser's lender pursuant to the terms of a Subordination
Agreement in the form attached hereto as Exhibit K.
4.3 Allocation of Purchase Price.
The Purchase Price to be paid to Seller No. 1 and Seller No.
2 hereunder, including the liabilities assumed or paid by
Purchaser pursuant to Section 3.1, shall be allocated as set
forth on Exhibit L attached hereto. Seller No. 1, Seller No. 2,
Shareholder and Purchaser agree that each shall act in a manner
consistent with such allocation in (a) filing Internal Revenue
Form 8594; and (b) in paying sales and other transfer taxes in
connection with the purchase and sale of assets pursuant to this
Agreement.
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4.4 Potential Adjustment to Purchase Price.
If the earnings before interest and taxes ("EBIT") of the
Purchaser's Indiana Division during July 24, 1997 through January
5, 1998, during the fiscal years 1998 or 1999 or during the first
seven months twenty-three days of the year 2000 exceed Five
Hundred Thirty-six Thousand Six Hundred Dollars ($536,600.00)
("EBIT Threshold") (prorated to $235,221.92 in 1997 and
$301,378.08 in 2000 based on the date of Closing), Purchaser
shall pay Seller No. 2 cash, by bank check or wiring within
ninety (90) days following the end of the fiscal year, except for
the period ending July 23, 2000, which such payment shall be made
within sixty (60) days of the expiration of such period, an
amount equal to fifty percent (50%) of the EBIT of Purchaser's
Indiana Division in excess of the EBIT Threshold for the
applicable year or portion thereof, subject to a cumulative
limitation of One Million Five Hundred Thousand Dollars
($1,500,000.00) during such aggregate period. Such cash payment
by the Purchaser shall be additional Purchase Price which will be
added to the good will allocation of the Purchase Price. For the
year 1997, in making the determination of EBIT for the
Purchaser's Indiana Division, a 1.5% MAS royalty fee on gross
sales by the Purchaser's Indiana Division shall be made incident
to said determination. A MAS royalty fee is a fee charged to
each branch of the Purchaser for the following services performed
by the Purchaser's corporate headquarters: marketing,
advertising, professional, accounting and other related expenses.
For each subsequent year described above in this paragraph for
which the Purchaser may be required to pay additional Purchase
Price, the parties shall, in good faith, agree upon a MAS royalty
fee to be charged hereunder based on the level of services and
support being provided by the Purchaser to its Indiana Division.
Provided, however, such MAS royalty fee shall be 1.5% if the
parties are unable to come to an agreement for each subsequent
year. For purposes of this Section, the term "Indiana Division"
shall include, but not be limited to, the business acquired from
Seller No. 1 and Seller 2 together with the business conducted in
Indiana by the Purchaser on the date of the Closing. The
Purchaser agrees to conduct the business of the Indiana Division
in the ordinary course generally consistent with past practice.
For purposes of this Section, the term "EBIT" shall mean the
net income before taxes and before interest expense of the
Purchaser's Indiana Division (and before amortization or other
deduction of the payments to be made pursuant to this Section
4.4) during the applicable period. The EBIT shall be determined
by the independent accountant regularly retained by the Purchaser
in the manner set forth above in accordance with generally
accepted accounting principles, subject to verification as
described below. For purposes of determining the EBIT for any
particular year, except as noted above, no item of income or
expense will be allocated by the Purchaser to Purchaser's Indiana
Division unless such items are reasonably calculated to
contribute to the increase profits of such Indiana Division, it
being the intent of the parties that the Purchaser shall exercise
the utmost good faith with respect to allocations of income and
expense to Purchaser's Indiana Division. Incident to the
determination of EBIT of Purchaser's Indiana Division, no
compensation of any executive or other employee of Purchaser or
its affiliates who do not work directly for Purchaser's Indiana
Division shall be allocated to such division. Any payment made
to Seller No. 2 pursuant to this Section 4.4 shall not be charged
against the EBIT for any year.
Within forty-five (45) days after the end of each calendar
year or period described herein, Purchaser will deliver to Seller
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No. 2 a copy of the report of EBIT prepared by Purchaser's
certified public accountants for the subject period along with
any supporting documentation reasonably requested by Seller No.
2. Within thirty (30) days following delivery to Seller No. 2 of
such report, Seller No. 2 shall have the right to object in
writing to the results contained in such determination. If
timely objection is not made by the Seller No. 2 to such
determination, such determination shall become final and binding
for purposes of this Agreement. If timely objection is made by
Seller No. 2 to Purchaser and Seller No. 2 and Purchaser are able
to resolve their differences in writing within thirty (30) days
following the expiration of the thirty-day (30-day) period, then
such determination shall become final and binding as it regards
to this Agreement. If timely objection is made by Seller No. 2
to Purchaser and Seller No. 2 and Purchaser are unable to resolve
their differences in writing within thirty (30) days following
the expiration of the thirty-day (30-day) period, then all
disputed matters pertaining to the report shall be submitted to
and reviewed by an arbitrator (the "Arbitrator") which shall be
an independent accounting firm selected by Purchaser and Seller
No. 2. If Purchaser and Seller No. 2 are unable to agree
promptly on an accounting firm to serve as the Arbitrator, each
shall select by no later than the 30th day following the
expiration of the sixty-day (60-day) period, an accounting firm,
and the two selected accounting firms shall be instructed to
select promptly another accounting firm, such newly selected firm
to serve as the Arbitrator. The Arbitrator shall consider only
the disputed matters pertaining to the determination and shall
act promptly to resolve all disputed matters, and its decision
with respect to all disputed matters shall be final and binding
upon Seller No. 2 and Purchaser. Expenses of the Arbitration
(including reasonable attorney and accounting fees) shall be
borne equally by Seller No. 2 and Purchaser, unless the
Arbitrator determines that the determination of EBIT is greater
by Fifty Thousand Dollars ($50,000.00) or more than the
determination made by Purchaser's accounting firm, in which case
the expense of the arbitration (including reasonable attorney and
accounting fees) shall be borne by the Purchaser.
4.5 Certain Closing Expenses.
Seller No. 1 and Seller No. 2 shall be liable for and shall
pay all federal, state and local sales taxes (if any),
documentary stamp taxes, and all other duties, or other like
charges properly payable by Seller No. 1 and Seller No. 2 upon
and in connection with the conveyance and transfer of Purchased
Assets No. 1 and Purchased Assets No. 2 by Seller No. 1 and
Seller No. 2, respectively, to Purchaser.
5.
EMPLOYMENT AGREEMENT
5.1 Employment Agreement of Shareholder.
At Closing, Purchaser shall enter into an Employment
Agreement with Shareholder. A Copy of said Employment Agreement
is attached hereto and made a part hereof as Exhibit M.
6.
REPRESENTATIONS AND WARRANTIES OF SELLER NO. 1,
SELLER NO. 2 AND THE SHAREHOLDER
Except as set forth in the Disclosure Schedule attached
hereto, Seller No. 1, Seller No. 2 and Shareholder, jointly and
severally, represent and warrant to Purchaser that the following
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statements are true and correct as of the date hereof and shall
remain true and correct as of the Closing as if made again at and
as of that time:
6.1 Organization, Good Standing, Qualification and Power of
Seller No. 1 and Seller No. 2.
Seller No. 1 and Seller No. 2 are corporations duly
organized and validly existing under the laws of the State of
Indiana and have the corporate power and authority to own, lease
and operate Purchased Assets No. 1 and Purchased Assets No. 2,
respectively, and to conduct the Businesses currently being
conducted by them. Seller No. 1 and Seller No. 2 have no
subsidiaries. The Disclosure Schedule correctly lists with
respect to Seller No. 1 and Seller No. 2, each jurisdiction in
which it is qualified to do business as a foreign corporation.
6.2 Capitalization.
The authorized capitalization of Seller No. 1 and Seller No.
2 consists of 1,000 and 1,000 shares of no par common stock, of
which 100 shares of each corporation representing one hundred
percent (100%) of the issued stock are currently owned by
Shareholder and are fully paid and nonassessable and have not
been issued in violation of the preemptive rights of any person.
Neither Seller No. 1 nor Seller No. 2 is obligated to issue or
acquire any of its respective securities, nor has either
corporation granted options or any similar rights with respect to
any of its securities.
6.3 Authority to Make Agreement.
Except as otherwise provided herein, Seller No. 1, Seller
No. 2 and Shareholder have the full power and authority to enter
into, execute, deliver and perform their respective obligations
under this Agreement and each of the other agreements and
instruments to be executed and delivered incident hereto ("Other
Seller Documents"). This Agreement and the Other Seller
Documents have been duly and validly executed and delivered by
Seller No. 1, Seller No. 2 and Shareholder, as applicable, and
are the legal and binding obligation of each of them, enforceable
in accordance with their respective terms, subject to principles
of equity, bankruptcy laws, and laws affecting creditors' rights
generally. Seller No. 1 and Seller No. 2 have taken all
necessary action (including action of their respective Boards of
Directors and Shareholder) to authorize and approve the execution
and delivery of this Agreement and the Other Seller Documents,
the performance of its obligations thereunder and the
consummation of the transactions contemplated thereby.
6.4 Existing Agreements, Governmental Approvals and Permits.
(a) Except as otherwise provided herein, the execution,
delivery and performance of this Agreement and the Other Seller
Documents by Seller No. 1 and Seller No. 2, the sale, transfer,
conveyance, assignment and delivery of Purchased Assets No. 1 and
Purchased Assets No. 2 to Purchaser as contemplated in this
Agreement, and the consummation of the other transactions
contemplated thereby: (i) do not violate any provisions of law,
statute, ordinance or regulation applicable to Seller No. 1,
Seller No. 2, Shareholder, Purchased Assets No. 1 or Purchased
Assets No. 2; (ii) (except for Seller No. 1's and/or Seller No.
2's secured creditors, which consent(s) shall be obtained prior
to Closing and except for the Government Contracts (as herein
defined)) will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under
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(in each case whether with or without the giving of notice or the
lapse of time or both) the Articles of Incorporation or Bylaws of
Seller No. 1 or Seller No. 2 or any indenture, mortgage, lease,
deed of trust, or other instrument, contract or agreement or any
license, permit, approval, authority, or any order, judgment,
arbitration award, or decree to which Seller No. 1 or Seller No.
2 or the Shareholder is a party or by which Seller No. 1 or
Seller No. 2 or the Shareholder or any of their assets and
properties are bound (including, without limitation, Purchased
Assets No. 1 and/or Purchased Assets No. 2), and (iii) will not
result in the creation of any encumbrance upon any of the
properties, assets, or Business of Seller No. 1 or Seller No. 2
or of the Shareholder . Neither Seller No. 1, Seller No. 2, or
the Shareholder, nor any of their assets or properties
(including, without limitation, Purchased Assets No. 1 and/or
Purchased Assets No. 2) is subject to any provision of any
mortgage, lease, contract, agreement, instrument, license,
permit, approval, authority, order, judgment, arbitration award
or decree, or to any law, rule, ordinance, or regulation, or any
other restriction of any kind or character, which would prevent
Seller No. 1 or Seller No. 2 or the Shareholder from entering
into this Agreement or any of the Other Seller Documents or from
(except for the Government Contracts) consummating the
transactions contemplated thereby.
(b) Except for the Government Contracts, neither Seller No.
1, Seller No. 2 nor the Shareholder is a party to, subject to or
bound by any agreement, judgment, award, order, writ, injunction
or decree of any court, governmental body or arbitrator which
would prevent the use by Purchaser of Purchased Assets No. 1
and/or Purchased Assets No. 2 in accordance with present
practices of Seller No. 1 and/or Seller No. 2 after the Closing
Date or which, by operation of law, or pursuant to its terms,
would be breached, terminate, lapse or be subject to termination
or default under (in each case whether with or without notice,
the passage of time or both) upon the consummation of the
transactions contemplated in this Agreement.
(c) Except for the Government Contracts, no approval,
authority or consent of, or filing by Seller No. 1 or Seller No.
2 with, or notification to, any foreign, federal, state or local
court, authority or governmental or regulatory body or agency or
any person is necessary to authorize the execution and delivery
of this Agreement or the Other Seller Documents by Seller No. 1
or Seller No. 2 or the Shareholder, the sale, transfer,
conveyance, assignment and delivery of Purchased Assets No. 1 and
Purchased Assets No. 2 to Purchaser, or the consummation of the
other transactions contemplated thereby, or to continue the use
and operation of Purchased Assets No. 1 and Purchased Assets No.
2 by Purchaser after the Closing Date.
(d) Purchaser acknowledges that consents from the State of
Indiana and various agencies of the State of Indiana
(collectively, the State of Indiana and such agencies thereof may
be referred to herein as the "State of Indiana") under contracts
between the State of Indiana and Seller No. 1 and Seller No. 2
(collectively, the "Government Contracts") to the transfer and
assignment of the Government Contracts to the Purchaser may be
required by the Government Contracts, but that no such consents
will be solicited or obtained prior to Closing. Notwithstanding
anything expressed or implied to the contrary in this Agreement,
the failure of Seller No. 1, Seller No. 2 or Shareholder to
secure the consent from the State of Indiana to the transfer and
assignment to the Purchaser of any Government Contract or the
fact that such consent may be required under such Government
Contract shall not be deemed to be and shall not constitute a
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breach of or inaccuracy in any representation, warranty or
covenant made by Seller No. 1, Seller No. 2 or Shareholder under
this Agreement. Notwithstanding the foregoing sentence, Seller
No. 1, Seller No. 2 and Shareholder shall execute and deliver to
Purchaser such reasonable and appropriate instruments of
conveyance and transfer and take such other action as Purchaser
may reasonably request in order to more effectively convey and
transfer to Purchaser the Government Contracts or for aiding and
assisting in collecting and reducing to possession and exercising
rights with respect thereto. Seller No. 1, Seller No. 2 and
Shareholder agree to use their best efforts after the Closing to
obtain and deliver to Purchaser such consents, approvals,
assurances and statements from the State of Indiana as Purchaser
may reasonably require in a form reasonably satisfactory to
Purchaser.
6.5 Financial Statements.
Copies of the Financial Statements are attached to the
Disclosure Schedule. Each of the Financial Statements were
prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
indicated (except as noted on such Financial Statements) and
fairly present in all material respects the financial condition
of Seller No. 1 and Seller No. 2 as of the respective dates
thereof and the results of its operation and changes in financial
position for the respective periods then ended; provided however,
that (a) the Financial Statements lack footnotes and other
presentation items, (b) all interim financial statements are
subject to normal year-end adjustments (which will not
individually or in the aggregate be material) and (c) any service
contract representing less than Five Thousand Dollars
($5,000.00) on an annual basis has been taken into income and has
not been accrued for as an accrued service contract liability or
otherwise. Seller No. 1 and Seller No. 2 represent that the
total of service contracts for which an accrued service contract
liability has not been accrued does not exceed an average of
$25,000.00 per month in the aggregate.
6.6 Customers.
The Disclosure Schedule includes a correct list of the
twenty-five (25) largest customers of Seller No. 1 and Seller No.
2 by sales in dollars for the past year and the amount of
business done by Seller No. 1 and Seller No. 2 with each such
customer for such year. Assuming that Purchaser continues to
conduct the Business in the ordinary course consistent with
Seller No. 1's and Seller No. 2's prior practices generally and
specifically with respect to Seller No. 1's and Seller No. 2's
current customers, Shareholder has no actual knowledge that any
of the current customers of Seller No. 1 or Seller No. 2 will or
intend to (a) cease doing business with Seller No. 1 or Seller
No. 2; or (b) materially alter the amount of business they are
presently doing with Seller No. 1 or Seller No. 2; or (c) not do
business with the Purchaser after the Closing.
6.7 Intangible Property.
The Disclosure Schedule includes an accurate list and
summary description of all patents, franchises, distributorships,
registered copyrights, registered and unregistered trademarks,
trade names and service marks, licenses, brand names and company
lists and all applications for the foregoing, presently owned
and/or held (as a licensee or otherwise) by Seller No. 1 and
Seller No. 2. Neither Seller No. 1 nor Seller No. 2 is a
licensor in respect to any patents, trade secrets, inventions,
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shop rights, know-how, trademarks, trade names, copyrights, or
applications therefor. All of the above-mentioned intangibles
used in Seller No. 1's or Seller No. 2's Business are the sole
property of such party, do not require the consent of or consent
to any other person as a condition to their use or the
transaction provided for herein and do not infringe upon the
rights of others.
6.8 Significant Agreements.
The Disclosure Schedule contains an accurate and complete
list of all contracts, agreements, licenses, instruments and
understandings (whether or not in writing) to which either Seller
No. 1 or Seller No. 2 is a party or is bound:
(a) Providing for payments of more than Ten Thousand
($10,000.00) per year;
(b) Limiting the ability of Seller No. 1 or Seller No. 2 to
conduct its Business or any other business or to otherwise
compete in its or any other business, including as to manner or
place;
(c) With any Affiliate of Seller No. 1 or Seller No. 2;
(d) With any labor union or employees' association
connected with the Business of Seller No. 1 or Seller No. 2;
(e) Which are leases or subleases with respect to any
property, real, personal or mixed, in which Seller No. 1 or
Seller No. 2 is involved, as lessor or lessee; and
(f) Any employment agreement with any employee which does
not provide for termination at will by Seller No. 1 or Seller No.
2 without further costs or other liability to Seller No. 1 or
Seller No. 2 as of or at any time after the Closing.
True and correct copies of all items so disclosed in the
Disclosure Schedule have been provided or made available to
Purchaser. Each of such items listed, or required to be listed,
is a valid and binding obligation of the parties thereto
enforceable in accordance with its terms, subject to principles
of equity, bankruptcy laws, and laws affecting creditors' rights
generally, and there have been no material defaults or claims of
material default by Seller No. 1 and Seller No. 2 and there are
no facts or conditions that have occurred or that are anticipated
to occur which, through the passage of time or the giving of
notice, or both, would constitute a default by Seller No. 1 or
Seller No. 2, or would cause the acceleration of any obligation
of any party thereto or the creation of an Encumbrance upon any
asset of Seller No. 1 or Seller No. 2. There are no material
oral contracts, agreements or understandings made by the
Shareholder, whether or not binding, material to Seller No. 1 or
Seller No. 2, except such as have been disclosed in the
Disclosure Schedule and for which an accurate summary description
has been provided.
6.9 Inventory.
Exhibit A contains a copy of Seller No. 1's inventory as of
July 23, 1997. No item included in the Inventory of Seller No. 1
is held by Seller No. 1 on consignment from others.
6.10 Taxes.
Except as to taxes not yet due and payable, and except for
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taxes the payment of which is being diligently contested in good
faith and by proper proceedings and for which adequate reserves
have been established in accordance with generally accepted
accounting principles, Seller No. 1 and Seller No. 2 have filed
all returns and reports that are now required to be filed by it
in connection with any federal, state or local tax, duty or
charge levied, assessed or imposed upon it, or its property,
including unemployment, social security and similar taxes; and
all of such taxes have been either paid or adequate reserves or
other provision has been made therefor.
6.11 Title to Purchased Assets No. 1 and Purchased Assets No. 2.
Except as otherwise provided herein, with respect to all
Purchased Assets No. 1 and Purchased Assets No. 2 sold, at the
Closing, Seller No. 1 and Seller No. 2 shall have good and
marketable title to the respective Purchased Assets No. 1 and
Purchased Assets No. 2 being acquired by Purchaser, free and
clear of all liens, security interests, encumbrances, leases and
charges whatsoever; immediately after the transfer of all the
Purchased Assets No. 1 and Purchased Assets No. 2 being acquired
by Purchaser from Seller No. 1 and Seller No. 2, Purchaser will
own all of said Purchased Assets No. 1 and Purchased Assets No. 2
free and clear of all leases, liens and encumbrances and charges
whatsoever, whether perfected or unperfected, other than the
Assumed Liabilities.
6.12 Pending Actions.
Neither Seller No. 1 nor Seller No. 2 have been served with
or received notice of any actions, suits, arbitrations, IOSHA,
EPA or other governmental violations, or any other proceedings or
investigations, either administrative or judicial, strikes,
lockouts or NLRB charges or complaints ("Actions and Disputes").
To the best of Seller No. 1's and Seller No. 2's knowledge, there
are no Actions or Disputes pending or threatened against or
affecting (directly or indirectly) Seller No. 1 or Seller No. 2
or their property or assets.
6.13 Insurance.
The Disclosure Schedule contains an accurate and complete
listing (showing type of insurance, amount, insurance company,
annual premium and special exclusions) of all policies of fire,
liability, worker's compensation and other forms of insurance
owned or held by Seller No. 1 or Seller No. 1. All such policies
are in full force and effect; are sufficient for compliance with
all requirements of law and of all agreements to which Seller No.
1 or Seller No. 2 is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage for the
assets and operations of Seller No. 1 and Seller No. 2 and will
remain in full force and effect through the Closing. There are
no outstanding requirements or recommendations by any insurance
company that issued a policy with respect to any of the
properties and assets of Seller No. 1 and Seller No. 2 by any
Board of Fire Underwriters or other body exercising similar
functions or by any Governmental Entity requiring or recommending
any repairs or other work to be done on or with respect to any of
the properties and assets of Seller No. 1 or Seller No. 2 or
requiring or recommending any equipment or facilities to be
installed on or in connection with any of the properties or
assets of Seller No. 1 or Seller No. 2.
6.14 Status of Business.
(a) Since March 31, 1997, the Business of Seller No. 1 and
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Seller No. 2 has been operated only in the ordinary course and,
except as set forth in the Disclosure Schedule, there has not
been with respect to the Business:
(i) Any material change in its condition (financial or
other), assets, liabilities, obligations, business or earnings,
except changes in the ordinary course of business, none of which
in the aggregate has been materially adverse;
(ii) Any material liability or obligation incurred or
assumed, or any material contract, agreement, arrangement, lease
(as lessor or lessee), or other commitment entered into or
assumed, on behalf of the Business, whether written or oral,
except in the ordinary course of business;
(iii) Any purchase or sale of material assets in
anticipation of this Agreement, or any purchase, lease, sale,
abandonment or other disposition of material assets, except in
the ordinary course of business;
(iv) Any waiver or release of any material rights,
except for rights of nominal value;
(v) Any cancellation or compromise of any material
debts owed to Seller No. 1 or Seller No. 2 or material claims
known by Seller No. 1 or Seller No. 2 against another person or
entity, except in the ordinary course of business;
(vi) Any damage or destruction to or loss of any
physical assets or property of Seller No. 1 or Seller No. 2 which
materially adversely affects the Business or any of the
properties of Seller No. 1 or Seller No. 2 (whether or not
covered by insurance);
(vii) Any material changes in the accounting practices,
depreciation or amortization policy or rates theretofore adopted
by Seller No. 1 or Seller No. 2, or any material revaluation or
write-up or write-down of any of its assets;
(viii) Any direct or indirect redemption, purchase or
other acquisition for value by Seller No. 1 or Seller No. 2 of
its respective shares, or any agreement to do so;
(ix) Any material increase in the compensation levels
or in the method of determining the compensation of any of Seller
No. 1's or Seller No. 2's officers, directors, agents or
employees, or any bonus payment or similar arrangement with or
for the benefit of any such person, any increase in benefits
expense to Seller No. 1 or Seller No. 2, any payments made or
declared into any profit-sharing, pension, or other retirement
plan for the benefit of employees of Seller No. 1 or Seller No.
2, except in the ordinary course of business;
(x) Any material contract canceled or the terms
thereof amended or any notice received with respect to any such
contract terminating or threatening termination or amendment of
any such contract;
(xi) Any transfer or grant of any material rights under
any leases, licenses, agreements, or with respect to any trade
secrets or know-how;
(xii) Any labor trouble or employee controversy
materially adversely affecting its Business or assets; or
(xiii) Any dividend or other distribution on or in
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respect of shares of its capital stock.
(b)Seller No. 1 and Seller No. 2 are not
(i) in violation of any outstanding judgment, order,
injunction, award or decree specifically relating to the
Business, or
(ii) in violation of any federal, state or local law,
ordinance or regulation which is applicable to the Business,
except where such violation does not have a materially adverse
effect on the Business.
Seller No. 1 and Seller No. 2 have all permits, licenses,
orders, approvals, authorizations, concessions and franchises of
any federal, state or local governmental or regulatory body that
are material to or necessary in the conduct of the Business,
except where failure to have such permit, license, order,
approval, authorization, concession or franchise does not have a
materially adverse effect on the Business. All such permits,
licenses, orders, approvals, concessions and franchises are set
forth on the Disclosure Schedule and are in full force and effect
and there is no proceeding, or to the best knowledge of Seller
No. 1 or Seller No. 2, threatened to revoke or limit any of them.
(c)No claim, litigation, action or proceeding is pending or,
to the knowledge of Seller No. 1 or Seller No. 2, threatened, and
no order, injunction or decree is outstanding, against or
relating to the Business or its assets.
(d)To the best of Seller No. 1's and Seller No. 2's
knowledge, Seller No. 1 and Seller No. 2 are in compliance with
all federal, state and local laws, ordinances and regulations
relating to employment and employment practices at the Business,
and all employee benefit plans and tax laws relating to
employment at the Business, except where such non-compliance
would not have a materially adverse effect on the Business.
There is no unfair labor practice complaint against Seller No. 1
or Seller No. 2 relating to the Business pending before the
National Labor Relations Board or similar agency or body and, to
the best of Seller No. 1's and Seller No. 2's knowledge, no
condition exists that could give rise to any unfair labor
practice complaint. There is no labor strike, dispute, slowdown
or stoppage actually pending or, to the best knowledge of Seller
No. 1 or Seller No. 2, threatened against or involving the
Business.
6.15 Environmental Laws.
(a) To the best of Seller No. 1's and Seller No. 2's
knowledge, the real estate located at 3144 North Shadeland
Avenue, Indianapolis, Indiana 46226 has not been used or operated
in any fashion involving producing, handling and disposing of
chemicals, toxic substances, wastes and effluent materials, x-
rays or other materials or devices in material violation of any
laws, rules, regulations or orders, and to the best of Seller No.
1's and Seller No. 2's knowledge, the Real Estate is in material
compliance with applicable laws, regulations, ordinances, decrees
and orders arising under or relating to health, safety, and
environmental laws and regulations, including without limitation
the Federal Occupation and Safety Health Act, 29 U.S.C. 651, et
seq.; Federal Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. 6901, et seq.; Federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
9601, et seq.; the Federal Clean Air Act, 42 U.S.C. 2401, et
seq.; the Federal Clean Water Act, 33 U.S.C. 1251, et seq.; and
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all state and local laws that correspond therewith or supplement
such laws.
(b) To the best of Seller No. 1's and Seller No. 2's
knowledge, the Real Estate has not been operated, in violation of
any laws, rules, regulations or orders, so as to involve or
create any surface impoundments, incinerators, land fills, waste
storage tanks, waste piles, or deep well injection systems or for
the purpose of storage, treatment or disposal of a hazardous
waste as defined by RCRA or hazardous substance, pollutant or
contaminate as defined by CERCLA and, to the best of Seller No.
1's and Seller No. 2's knowledge, no acts have been committed
that would make the Real Estate or any part thereof subject to
remedial action under RCRA or CERCLA or corresponding state or
local laws.
(c) To the best of Seller No. 1's and Seller No. 2's
knowledge, there have not been, are not now and as of the Closing
Date, there will be no solid waste, hazardous waste, hazardous
substance, toxic substance, toxic chemicals, pollutants or
contaminants, underground storage tanks, purposeful dumps, or
accidental spills in, on or about the Real Estate or any of the
assets of Seller No. 1 or Seller No. 2, whether real or personal,
owned or leased, or stored on any real property owned or leased
by Seller No. 1 or Seller No. 2.
(d) Neither Seller No. 1 nor Seller No. 2 is engaged in,
and to the best of Seller No. 1's and Seller No. 2's knowledge,
is not threatened with any litigation, or governmental or other
proceeding which may give rise to any claim against the Real
Estate.
(e) The Disclosure Schedule will list all waste disposal
sites, dump sites and other areas either on the Real Estate or
offsite at which hazardous or toxic waste generated by Seller No.
1 or Seller No. 2 has been disposed (in each case identifying
such waste) and it will specifically identify each such site or
area which is or has been included in any published federal,
state or local (domestic or foreign) superfund or other list of
hazardous or toxic waste sites or areas.
(f) To the best of Seller No. 1's and Seller No. 2's
knowledge, Seller No. 1 and Seller No. 2 have obtained all
permits, and licenses and other authorizations required by all
environmental laws; and all of such permits, licenses and other
authorizations are in full force and effect as of the date
hereof. A true and correct list of all such permits, licenses
and other authorizations is set forth in the Disclosure Schedule.
6.16 Certain Employees
(a) Each of the following is included in the list of
agreements set forth in the Disclosure Schedule: all collective
bargaining agreements, employment and consulting agreements,
bonus plans, deferred compensation plans, employee pension plans
or retirement plans, employee profit-sharing plans, employee
stock purchase and stock option plans, hospitalization insurance,
and other plans and arrangements providing for employee benefits
of employees of Seller No. 1 and Seller No. 2.
(b) The Disclosures Schedule contains a true, complete and
accurate list of the following: the names, positions, and
compensation of the present employees of Seller No. 1 and Seller
No. 2, together with a statement of the annual salary payable to
salaried employees and a summary of the bonuses and description
of agreements for additional compensation and other like
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benefits, if any, paid or payable to such persons for the period
set forth in the Disclosure Schedule. Except as listed in the
Disclosure Schedule, to the best of Seller No. 1's and Seller No.
2's knowledge, all employees of Seller No. 1 and Seller No. 2 are
employees-at-will.
(c) Seller No. 1 and Seller No. 2 have no retired
employees who are receiving or are entitled to receive any
payments, health or other benefits from Seller No. 1 and Seller
No. 2.
6.17 Payments to Employees.
All accrued obligations of Seller No. 1 and Seller No. 2
relating to employees and agents of Seller No. 1 and Seller No.
2, whether arising by operation of law, by contract, or by past
service, for payments to trusts or other funds or to any
governmental agency, or to any individual employee or agent (or
his heirs, legatees, or legal representatives) with respect to
unemployment compensation benefits, profit sharing or retirement
benefits, or social security benefits have been paid or accrued
by Seller No. 1 and Seller No. 2. Except as otherwise provided
herein, all obligations of Seller No. 1 and Seller No. 2 as an
employer or principal relating to employees or agents, whether
arising by operation of law, by contract, or by past practice,
for vacation and holiday pay, bonuses, and other forms of
compensation which are or may become payable to such employees or
agents, have been paid or will be paid or accrued by Seller No. 1
and Seller No. 2.
6.18 Change of Corporate Name.
At the Closing, Seller No. 1, if requested by Purchaser will
adopt and file with the Secretary of State of Indiana an
amendment to the Articles of Incorporation of Seller No. 1
changing the name of Seller No. 1 to a name substantially
dissimilar to "Microcare, Inc." and Seller No. 1 shall also
execute a Consent for Use of Similar Name form, as set forth in
the Disclosure Schedule granting to Purchaser the use of the name
"Microcare, Inc." In addition, Seller No. 2, if requested by
Purchaser, will adopt and file with the Secretary of State of
Indiana an amendment to the Articles of Incorporation of Seller
No. 2 changing the name of Seller No. 2 to a name substantially
dissimilar to "Microcare Computer Services, Inc." and Seller No.
2 shall also execute a Consent for Use of Similar Name form, as
set forth in the Disclosure Schedule granting to Purchaser the
use of the name "Microcare Computer Services, Inc."
6.19 Brokers and Finders.
Except as set forth in the Disclosure Schedule, no broker,
finder or other person or entity acting in a similar capacity has
participated on behalf of Seller No. 1 or Seller No. 2 in
bringing about the transaction herein contemplated, or rendered
any service with respect thereto or been in any way involved
therewith.
6.20 Preservation of Organization.
Except as set forth on the Disclosure Schedule, since March
31, 1997, Seller No. 1 and Seller No. 2 have kept intact the
Business and organization of Seller No. 1 and Seller No. 2;
retained the services of all Seller No. 1's and Seller No. 2's
material employees and agents, retained Seller No 1's and Seller
No. 2's arrangements with the manufacturers of the products
distributed by Seller No. 1 and Seller No. 2 in the same manner
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as conducted prior to such date, and engaged in no transaction
other than in the ordinary course of Seller No. 1's or Seller No.
2's Business.
6.21 Absence of Certain Payments.
To the best of Seller No 1's and Seller No. 2's knowledge,
neither Seller No. 1 nor Seller No. 2, nor any director, officer,
agent, Affiliate, employee or other person associated with or
acting on behalf of any of them, have used any corporate funds
for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, or made any
direct or indirect unlawful payments to foreign or domestic
government officials or employees from corporate funds, or made
or received any payment, whether direct or indirect, to or from
any supplier or customer of Seller No. 1 or Seller No. 2, for
purposes other than the satisfaction of lawful obligations, or
established or maintained any unlawful or unrecorded funds.
6.22 Suppliers.
The Disclosure Statement sets forth the names of and
description of contractual arrangements (whether or not binding
or in writing) with the twenty-five (25) largest suppliers of
Seller No. 1 and Seller No. 2 by sales or services in dollars.
Assuming that Purchaser continues to conduct the Business in the
ordinary course consistent with Seller No. 1's and Seller No. 2's
prior practices generally and specifically with respect to Seller
No. 1's and Seller No. 2's current suppliers, neither Seller No.
1 nor Seller No. 2 has any actual knowledge that any of the
current suppliers of Seller No. 1 or Seller No. 2 will, or intend
to, (a) cease doing business with Seller No. 1 or Seller No. 2;
or (b) materially alter the amount of business they are currently
doing with Seller No. 1 or Seller No. 2; or (c) not do business
with the Purchaser after the Closing.
6.23 Product Liability Claims.
To the best of Seller No. 1's and Seller No. 2's knowledge,
there are no material product liability claims against Seller No.
1 or Seller No. 2, either potential or existing, which are not
fully covered by product liability insurance coverage with a
responsible company which, if determined adversely to Seller No.
1 or Seller No. 2, would have a material adverse effect upon
Seller No. 1's or Seller No. 2's Business.
6.24 Employee Benefit Plans.
For the purposes of this Section 6.24, "Seller No. 1" and
"Seller No. 2" shall include all persons who are members of a
controlled group, a group of trades or businesses under common
control, or an affiliated service group (within the meanings of
Sections 414(b), (c) or (m) of the Code), of which Seller No. 1
or Seller No. 2 is a member.
(a) The Employee Benefit Plans presently maintained by
Seller No. 1 and Seller No. 2 or to which Seller No. 1 or Seller
No. 2 has contributed within the past six (6) years, including
any terminated or frozen plans which have not yet distributed all
plan assets, are fully set forth in the Disclosure Schedule.
For purposes of this provision, the term "Employee Benefit Plan"
shall mean:
(i) A Welfare Benefit Plan as defined in Section 3(1)
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") established for the purpose of providing for
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its participants or their beneficiaries, through the purchase of
insurance or otherwise, medical, surgical, or hospital care or
benefits, or benefits in the event of sickness, accident,
disability, death or unemployment (including any plan or program
of severance pay), or vacation benefits, apprenticeship or other
training programs, or day care centers, scholarship funds, or
prepaid legal services, or any benefit described in Section
302(c) of the Labor Management Relations Act of 1947;
(ii) An Employee Pension Benefit Plan as defined in
Section 3(2) of ERISA established or maintained by Seller No. 1
or Seller No. 2 for the purpose of providing retirement income to
employees or for the purpose of providing deferral of income by
employees for periods extending to the termination of covered
employment or beyond; and
(iii) Any other plan or arrangement not covered by
ERISA but which provides benefits to employees or former
employees and results in an accrued liability on the part of
Seller No. 1 or Seller No. 2 either by contract or by operation
of law.
(b) With respect to any such Employee Benefit Plans, Seller
No. 1 and Seller No. 2 represent and warrant that, to the best of
Seller No. 1's and Seller No. 2's knowledge;
(i) Neither Seller No. 1 nor Seller No. 2 has, with
respect to any Employee Benefit Plans, engaged in any prohibited
transaction, as such term is defined in Section 4975 of the Code
or Section 406 of ERISA.
(ii) Seller No. 1 and Seller No. 2 have, with respect
to any Employee Benefit Plans, complied with all reporting and
disclosure requirements required by Title I, Subtitle B, Part 1
of ERISA.
(iii) There was no accumulated funding deficiency
(as defined in section 302 of ERISA and Section 412 of the Code)
with respect to any Employee Pension Benefit Plan which is a
defined benefit pension plan, whether or not waived, as of the
last day of the most recent fiscal year of the plans ending prior
to the date of this Agreement.
(iv) There are no contributions due to any Employee
Pension Benefit Plan for the most recent fiscal year of the plans
ending prior to the date of this Agreement; and Seller No. 1's
and Seller No. 2's Financial Statements reflect any liability of
Seller No. 1 or Seller No. 2 to make contributions to the
Employee Pension Benefit Plans.
(v) No material liability to the Pension Benefit
Guaranty Corporation ("PBGC") has been asserted with respect to
any Employee Pension Benefit Plan which is a defined benefit
pension plan.
(vi) There has been no reportable event as described in
Section 4043(b) of ERISA since the effective date of Section 4043
of ERISA with respect to any Employee Pension Benefit Plan which
is a defined benefit plan.
(vii) Except for claims for benefits by
participants and beneficiaries in the normal course of events, to
the best of Seller No. 1's and Seller No. 2's knowledge, there
are no claims, pending or threatened, by any individual or
Governmental Entity, which, if decided adversely, would have a
material adverse effect upon the financial condition of any
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Employee Benefit Plan, the plan administrator of any Employee
Benefit Plan, or Seller No. 1 or Seller No. 2.
(viii) Seller No 1 and Seller No. 2 have made
available for inspection all annual reports for Seller No. 1 and
Seller No. 2 filed on Internal Revenue Service ("IRS") Form 5500
or 5500C, all reports for Seller No. 1 and Seller No. 2 prepared
by an actuary for the last three plan years, the plan and trust
documents and the Summary Plan Description, as amended, for each
Employee Benefit Plan and the last filed PBGC1 Form (if
applicable) for each Employee Benefit Plan, with respect to any
Employee Benefit Plans other than multi-employer plans (within
the meaning of Section 3(37) of ERISA), and other reports filed
with the PBGC during the last three plan years.
(ix) All Employee Pension Benefit Plans are intended to
be qualified retirements plans under the Code. The IRS has
issued, and Seller No. 1 and Seller No. 2 have made available for
inspection, one or more favorable determination letters with
respect to the qualification of all Employee Pension Benefit
Plans stating that from the inception of each such plan, such
plan has been qualified under Section 401(a) of the Code and each
trust maintained in connection with such plan has been and is
exempt under Section 501(a) if the Code. The time for adoption
of any amendments required by changes in the Code since such
determination letters were issued, or changes required by the IRS
as a condition for continued qualification of such plans has not
expired, or did not expire without such amendments being made.
Such plans are now, and always have been, established in writing
and maintained and operated in accordance with the plan
documents, ERISA, the Code, and all other applicable laws.
(x) Seller No. 1 and Seller No. 2 have timely made any
contributions they are obligated to make to any multi-employer
plan within the meaning of Section 3(37) of ERISA. Neither
Seller No. 1 nor Seller No. 2 has any liability arising as a
result of withdrawal from any multi-employer plan, no such
withdrawal liability has been asserted and no such withdrawal
liability will be asserted with regard to any withdrawal or
partial withdrawal on or before the date of this Agreement.
6.25 Full Disclosure.
None of the representations and warranties made by Seller
No. 1 or Seller No. 2 herein, including any disclosures made in
the Disclosure Schedule, contains or will contain, to the best of
Seller No. 1's or Seller No. 2's actual knowledge, any untrue
statement of a material fact.
7.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller No. 1, Seller
No. 2 and Shareholder that the following statements are true and
correct as of the date hereof and shall remain true and correct
as of the Closing as if made again at and as of that time.
7.1 Organization, Good Standing and Power of Purchaser.
(a) Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware and has full corporate power and lawful authority to
execute, deliver and perform this Agreement and conduct the
Business of Seller No. 1 and Seller No. 2 currently conducted by
Seller No. 1 and Seller No. 2 in each of the jurisdictions in
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which Seller No. 1 or Seller No. 2 currently conducts its
Business, which are the only jurisdictions where the failure to
be so qualified by Purchaser will have a material adverse effect
on the business prospects or financial condition of Purchaser.
7.2 Status of Agreements.
(a) All requisite corporate action (including action of its
Board of Directors) to approve, execute, deliver and perform this
Agreement and each of the other agreements, instruments and
other documents to be delivered by and on behalf of Purchaser
("Other Purchaser Documents") in connection herewith has been
taken by Purchaser. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes the valid and
binding obligation of Purchaser enforceable in accordance with
its terms, subject to principles of equity, bankruptcy laws, and
laws affecting creditors' rights generally. All Other Purchaser
Documents in connection herewith will, when executed and
delivered, constitute the valid and binding obligation of
Purchaser enforceable in accordance with their respective terms,
subject to principles of equity, bankruptcy laws, and laws
affecting creditors' rights generally.
(b) No authorization, approval, consent or order of, or
registration, declaration or filing with, any court, governmental
body or agency or other public or private body, entity or person
is required (except for Purchaser's primary lender, Star Bank,
N.A., whose consent shall be obtained prior to Closing) in
connection with the execution, delivery or performance of this
Agreement or any Other Purchaser Documents in connection
herewith.
(c) Neither the execution, delivery nor performance of this
Agreement or any of the Other Purchaser Documents in connection
herewith does or will:
(i) conflict with, violate or result in any
breach of any judgment, decree, order, statute, ordinance, rule
or regulation applicable to Purchaser;
(ii) conflict with, violate or result in any
breach of any agreement or instrument to which Purchaser is a
party or by which Purchaser or any of Purchaser's assets or
properties is bound, or constitute a default thereunder or give
rise to a right of acceleration of an obligation of Purchaser; or
(iii) conflict with or violate any provision of the
Articles of Incorporation or By-Laws of Purchaser.
7.3 Brokers and Finders.
No broker, finder or other person or entity acting in a
similar capacity has participated on behalf of Purchaser in
bringing about the transaction herein contemplated, or rendered
any service with respect thereto or been in any way involved
therewith.
7.4 MD&A Update.
Since April 5, 1997, there has been no material adverse
change in the results of operations or financial condition of
Purchaser, nor are there any trends, demands, commitments, events
or uncertainties known to Purchaser which could affect the
Purchaser's liquidity, capital resources or results of operations
as of the date hereof or as of the Closing (other than those
previously disclosed by Purchaser in its periodic reports filed
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with the Securities and Exchange Commission) that would require
discussion in Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") prepared in
accordance with Item 303 of Regulation S-K promulgated by the
Securities and Exchange Commission if such MD&A were required to
be updated through the date hereof and through the Closing.
7.5 Shares.
The shares of Common Stock of the Purchaser that are to be
issued to Seller No. 2 pursuant to this Agreement have been duly
authorized and, when issued in accordance with the terms of this
Agreement, will be validly issued and outstanding, fully paid and
non-assessable. Purchaser's common stock is properly listed and
authorized for quotation on the NASDAQ National Market System.
7.6 Full Disclosure
None of the representations and warranties made by Purchaser
herein, contains or will contain, to the best of Purchaser's
knowledge, any untrue statement of a material fact.
8.
COMPETITION
8.1 As an inducement for and in consideration of Purchaser
entering into this Agreement and based on the acknowledgement by
Seller No. 1, Seller No. 2 and Shareholder that Seller No. 1 and
Seller No. 2 and Shareholder as the sole Shareholder of such
corporations have received substantial consideration pursuant to
this Agreement, Seller No. 1, Seller No. 2 and Shareholder agree
to enter into Covenant Not to Compete Agreements, in the form of
Exhibits "N", "N-1" and "N-2", respectively, attached hereto and
made a part hereof.
9.
INTERIM OPERATIONS
9.1 Seller No. 1's and Seller No. 2's Covenants.
From the date of the Pro Forma Balance Sheet to the Closing
Date and except as set forth on the Disclosure Schedule, Seller
No. 1 or Seller No. 2 shall not:
(i) change its articles of incorporation or bylaws or merge
or consolidate with or into any entity, or acquire control of any
entity, or obligate itself to do so;
(ii) issue or agree to issue any shares of the capital stock
of Seller No. 1 or Seller No. 2 or any stock options, warrants,
rights, calls or commitments of any character calling for or
permitting the issue, transfer, sale or delivery of any such
capital stock;
(iii) declare, set aside or pay any dividend or other
distribution on or in respect of shares of its capital stock, or
purchase, redeem or otherwise acquire, or agree to purchase,
redeem or otherwise acquire, any of its capital stock;
(iv) authorize, guarantee or incur indebtedness for borrowed
money, including but not limited to, borrowing for the payment of
any taxes;
(v) sell or agree to sell any of Purchased Assets No. 1 or
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Purchased Assets No. 2, except in the ordinary course of
business;
(vi) mortgage, pledge or subject to any security interest
any of the Purchased Assets No. 1 or Purchased Assets No. 2;
(vii) make any capital expenditures or capital additions
or betterments, or commitments therefor, aggregating in excess of
$5,000.00;
(viii) refrain and cause its officers, employees and
agents to refrain from seeking other offers to purchase the stock
or certain assets of Seller No. 1 or Seller No. 2;
(ix) enter into any long-term contractual arrangements or
blanket purchase orders which extend past the closing date
without the express written consent of Purchaser;
(x) increase the salaries of any existing employees, hire
new managers or employees, pay or award bonuses, make loans, or
permit draws by any individuals without Purchaser's express
written consent.
9.2Conduct of Business.
Seller No. 1 and Seller No. 2 will operate the Business
substantially as presently operated and only in the ordinary
course of business and, consistent with such operation, will use
its best efforts to preserve intact for the benefit of Purchaser,
the present business organization of the Business and the
relationships and good will of suppliers, customers, clients and
others having business relations with the Business. Without
limiting the generality of the foregoing, neither Seller No. 1
nor Seller No. 2 will take any of the actions contemplated by, or
which would give rise to, a result contemplated by Section
6.14(a) hereof.
9.3 Access to Information.
From the date hereof until Closing, Seller No. 1 and Seller
No. 2 shall make available or cause to be made available to the
accountants, attorneys or other representatives of Purchaser for
examination during normal business hours, upon reasonable
requests, all properties, assets, books of accounts, title
papers, insurance policies, contracts, leases, commitments,
records and other documents of every character relating to the
Business.
9.4 Other Actions.
From the date hereof until Closing, Seller No. 1 and Seller
No. 2 shall not take any action which shall prevent the
representations, warranties and covenants of Seller No. 1 and
Seller No. 2 set forth herein from being true and correct at the
Closing.
10.
BULK SALES ACT
10.1 Compliance with Bulk Sales Act.
Purchaser waives compliance with the provisions of any
applicable bulk sales law and Seller No. 1, Seller No. 2 and
Shareholder, jointly and severally, agree to indemnify and hold
harmless Purchaser from any liability incurred as a result of the
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failure to so comply, except to liabilities explicitly assumed
hereunder by Purchaser.
11.
SURVIVAL OF AND RELIANCE UPON
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION
11.1 Survival of Representations and Warranties.
The parties acknowledge and agree that all representations,
warranties and agreements contained in this Agreement or in any
agreement, instrument, exhibit, certificate, schedule or other
document delivered in connection herewith, shall survive the
Closing and continue to be binding upon the party giving such
representation, warranty or agreement and shall be fully
enforceable to the extent provided for in Sections 11.3 and 11.4
hereof, at law or in equity, for the period beginning on the date
of Closing and ending three (3) years thereafter, except for the
representations, warranties and agreements designated and
identified in Sections 3.1, 3.2, 3.3, 4.2, 4.4, 6.3, 6.11, 6.15,
7.2 and 7.5 which shall survive the Closing and shall terminate
in accordance with the statute of limitations governing written
contracts in the State of Indiana and Exhibits "J", "M". "N", "N-
1" and "N-2", which shall terminate as provided therein.
11.2 Reliance Upon and Enforcement of Representations, Warranties
and Agreements.
(a) Seller No. 1 and Seller No. 2 hereby agree that,
notwithstanding any right of Purchaser to fully investigate the
affairs of Seller No. 1 and Seller No. 2, and notwithstanding
knowledge of facts determined or determinable by Purchaser
pursuant to such investigation or right of investigation,
Purchaser has the right to rely fully upon the representations,
warranties and agreements of Seller No. 1 and Seller No. 2
contained in this Agreement and upon the accuracy of any
document, certificate or exhibit given or delivered to Purchaser
pursuant to the provisions of this Agreement.
(b) Purchaser hereby agrees that, notwithstanding any right
of Seller No. 1 and Seller No. 2 to fully investigate the affairs
of Purchaser, and notwithstanding knowledge of facts determined
or determinable by Seller No. 1 and Seller No. 2 pursuant to such
investigation or right of investigation, Seller No. 1 and Seller
No. 2 have the right to rely fully upon the representations,
warranties and agreements of Purchaser contained in this
Agreement and upon the accuracy of any document, certificate or
exhibit given or delivered to Seller No. 1 and Seller No. 2
pursuant to the provisions of this Agreement.
11.3 Indemnification by Seller No. 1, Seller No. 2 and
Shareholder.
Provided Purchaser makes a written claim for indemnification
against Seller No. 1, Seller No. 2 and/or Shareholder within any
applicable survival period specified in Section 11.1, Seller No.
1, Seller No. 2 and Shareholder (jointly and severally, shall
indemnify Purchaser against and hold it harmless from:
(i) any and all loss, damage, liability or deficiency
resulting from or arising out of any inaccuracy in or breach of
any representation, warranty, covenant, or obligation made or
incurred by Seller No. 1 or Seller No. 2 herein or in any other
agreement, instrument or document delivered by or on behalf of
Seller No. 1 or Seller No. 2 pursuant to the provisions of the
Agreement;
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(ii) any imposition (including by operation of law) or
attempted imposition by a third party upon Purchaser of any
liability of Seller No. 1 or Seller No. 2 which Purchaser has not
specifically agreed to assume pursuant to Sections 3.1 and 3.2 of
this Agreement;
(iii) any liability (except for any Assumed Liabilities
described in Section 3.1 and 3.2) or other obligation incurred by
or imposed upon Purchaser resulting from the failure of the
parties to comply with the provisions of any law relating to bulk
transfers which may be applicable to the transaction herein
contemplated;
(iv) any liability relating to the correction of defective
work as described in Section 2.4; and
(v) any and all costs and expenses (including reasonable
legal and accounting fees) related to any of the foregoing,
subject to the provisions of Section 11.5.
Except as otherwise provided in this Agreement, nothing in this
Section 11.3 shall be construed to limit the amount to which, or
the time by which, by reason of offset or otherwise, the
Purchaser may recover from Seller No. 1, Seller No. 2 or the
Shareholder pursuant to this Agreement resulting from Seller No.
1's, Seller No. 2's or the Shareholder's breach or violation of
any representation, warranty, covenant or agreement contained
herein.
Any amounts to which Purchaser, its successors or assigns, is
entitled to indemnification pursuant to the provisions of this
Section, subject to the provisions of Section 11.5, shall first
be offset against the amount payable to Seller No. 2 under the
promissory note. Provided, however, the offset in any one year
may not exceed the aggregate amount of principal and interest due
on said promissory note for said year. Prior to any setoff,
Purchaser shall send written notice to the holder of the
Promissory Note (the "Holder") stating with reasonable
specificity the basis for Purchaser's right to such
indemnification payment. If within fifteen (15) days after
receipt of such notice of setoff, the Holder contests in writing
sent to Purchaser, Purchaser's claim of indemnification under
this Section 11, then the amount which Purchaser could otherwise
have paid to the holder but for the exercise of such right of
setoff shall be paid into an interest bearing escrow account
maintained by a bank selected by Purchaser pursuant to a written
escrow agreement signed by the parties to this Agreement or a
bank account under the joint control of the parties to this
Agreement, to be held in such account until Purchaser and the
Holder have reached Agreement as to the amount, if any, of such
indemnification payment and setoff, or until there has been a
judicial resolution of such matter, at which time the amount held
in such segregated account, together with any interest accrued
thereon, shall be released to the prevailing party, as
appropriate and/or instructed. Purchaser and the Holder agree
that they will use their best efforts to resolve any such dispute
within thirty (30) days of receipt of notice by Purchaser of the
Holder's objections to the setoff.
11.4Indemnification by Purchaser.
Provided Shareholder, Seller No. 1 and/or Seller No. 2,
makes a written claim for indemnification against Purchaser
within any applicable survival period specified in Section 11.1,
Purchaser shall indemnify Seller No. 1 and Seller No. 2 and
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Shareholder against and hold it harmless from any and all loss,
damage, liability or deficiency resulting from or arising out
of: (i) any Assumed Liabilities; (ii) any liability of Purchaser
arising out of Purchaser's operations subsequent to the Closing
(except to the extent such liability is the result of a breach of
a covenant or warranty of Seller No. 1 or Seller No. 2
hereunder); (iii) any inaccuracy in or breach of any
representation, warranty, covenant or obligation made or incurred
by Purchaser herein or in any other agreement, instrument, or
document delivered by or on behalf of Purchaser pursuant to the
provisions of this Agreement; and (iv) any and all related costs
and expenses (including reasonable legal and accounting fees),
subject to the provisions of 11.5. Except as otherwise provided
herein, nothing in this Section 11.4 shall be construed to limit
the amount to which, or the time by which, by reason of offset or
otherwise, that Seller No. 1 or Seller No. 2 may recover from
Purchaser pursuant to this Agreement resulting from its breach or
violation of any representation, warranty, covenant or agreement
contained herein.
11.5 Notification of and Participation in Claims.
(a) No claim for indemnification shall arise until notice
thereof is given to the party from whom indemnity is sought.
Such notice shall be sent within ten (10) days after the party to
be indemnified has received notification of such claim, but
failure to notify the indemnifying party shall in no event
prejudice the right of the party to be indemnified under this
Agreement, unless the indemnifying party shall be prejudiced by
such failure and then only to the extent of such prejudice. In
the event that any legal proceeding shall be instituted or any
claim or demand is asserted by any third party in respect of
which Seller No. 1/Seller No.2 and Shareholder on the one hand,
or Purchaser on the other hand, may have an obligation to
indemnify the other, the party asserting such right to indemnity
(the "Party to be Indemnified") shall give or cause to be given
to the party from whom indemnity is sought (the "Indemnifying
Party") written notice thereof. The Indemnifying Party may
elect, within thirty (30) days after receipt of such notice, or
five (5) days before the return date required by any citation,
claim or other statute, whichever occurs earlier, to contest or
defend against such claim at the Indemnifying Party's expense,
and shall give written notice to the Party to be Indemnified of
the commencement of such defense with reasonable promptness after
giving of the written notice of the claim by the Party to be
Indemnified. The Party to be Indemnified shall be entitled to
participate with the Indemnifying Party in such event (at the
cost and expense of the Party to be Indemnified) but shall not be
entitled in any way to release, waive, settle, modify, or pay
such claim without the consent of the Indemnifying Party if the
Indemnifying Party has assumed such defense. In the event that
the Party to be Indemnified determines to settle any such claim
without such prior consent of the Indemnifying Party, the
Indemnifying Party shall have no further indemnification
obligations under this Section 11 with respect to such claim. In
the event that the Indemnifying Party does not elect to contest,
defend, settle or pay the claim as provided above, the Party to
be Indemnified shall have the exclusive right to prosecute,
defend, compromise, settle or pay the claim in its sole
discretion and pursue its rights under this Agreement. In the
event the Indemnifying Party shall assume the defense, the
Indemnifying Party and the Party to be Indemnified shall
cooperate in the defense of such action and the records of each
shall be available to the other with respect to such defense.
11.6 Limitation on Liability
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Notwithstanding anything expressed or implied to the
contrary in this Agreement:
(a) Seller No. 1's liability under Section 11.3 shall not
exceed in the aggregate $536,600;
(b) Seller No. 2's liability under Section 11.3 shall not
exceed in the aggregate $1,659,800, plus any amount paid to
Seller No. 2 under Section 4.4;
(c) The liability of Shareholder, Seller No. 1 and Seller
No. 2 under Section 11.3 shall not exceed in the aggregate
$2,196,400, plus any amount paid to Seller No. 2 under Section
4.4; and
(d) Shareholder, Seller No. 1 and Seller No. 2 shall have
no liability under Section 11.3 until the aggregate amount of all
claims under Section 11.3 exceed a deductible of Ten Thousand
Dollars ($10,000); provided, however, that if such claims exceed
Ten Thousand Dollars ($10,000), then the indemnification provided
for in Section 11.3 shall apply to claims in excess of the Ten
Thousand Dollars ($10,000) deductible provided for above.
12.
EXPRESS CONDITIONS
12.1 Notwithstanding anything herein to the contrary, Purchaser's
obligations hereunder are subject to the following conditions:
(a) Purchaser shall have obtained from its primary lender,
Star Bank, N.A., consent to the transaction.
(b) Purchaser shall have acquired all necessary permits
from federal, state and local agencies that are necessary to
conduct business in the State of Indiana.
(c) Approval of the Board of Directors of Purchaser.
(d) Purchaser has completed its due diligence investigation
of the books and records and business prospects of Seller to its
satisfaction.
The contingencies set forth in this Section shall have all
been met, or rejected in writing, by Purchaser and Seller, where
applicable, no later than July 24, 1997.
13.
THE CLOSING
13.1 Date, Time and Place of Closing.
Consummation of the transactions contemplated hereby (the
"Closing") shall take place on July 24, 1997 (the "Closing
Date"), at 10:00 a.m. EST at the offices of Lindhorst & Dreidame,
312 Walnut Street, Suite 2300, Cincinnati, Ohio 45202, or on
such other Closing Date, or at such other time and/or place as
the parties may mutually agree upon.
13.2 Conditions Precedent to Purchaser's Obligations.
The obligation of Purchaser to perform in accordance with
this Agreement and to consummate the transactions herein
contemplated is subject to the satisfaction of the following
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conditions at or before the Closing:
(a) Seller No. 1 and Seller No. 2 shall have complied with
and performed all of the representations, warranties, agreements
and covenants hereunder required to be performed by it prior to
or at the Closing;
(b) There shall be no pending or threatened legal action
which, if successful, would prohibit consummation or require
substantial rescission of the transactions contemplated by this
Agreement;
(c) The business, aggregate properties and operations of
Seller No. 1 and Seller 2 shall not have been materially
adversely affected as a result of any fire, accident or other
casualty or any labor disturbance or act of God or the public
enemy, and there shall otherwise have been no material adverse
change to the business, aggregate properties, or operations of
Seller No. 1 and Seller No. 2 since March 31, 1997;
(d) Seller No. 1 and Seller No. 2 shall have delivered to
Purchaser, at or before the Closing, the following documents, all
of which shall be in form and substance reasonably acceptable to
the Purchaser and its counsel:
(i) The instruments of transfer required by Sections
2.5 and 2.6;
(ii) Releases (or copies thereof) of all liens, claims,
charges, encumbrances, security interests and restrictions on
Purchased Assets No. 1 and Purchased Assets No. 2 necessary to
provide Purchaser with good, marketable and indefeasible title to
each of the Purchased Assets No. 1 and Purchased Assets No. 2 at
the Closing;
(iii) Certified copies of the corporate actions taken by
the Board of Directors and Shareholder of Seller No. 1 and Seller
No. 2, authorizing the execution, delivery and performance of
this Agreement;
(iv) Certificates of Existence for Seller No. 1 and
Seller No. 2 from the Secretary of State of Indiana dated no
earlier than fifteen (15) days prior to Closing;
(v) Opinion letter of Leagre, Chandler & Millard, 9100
Keystone Crossing #800, Indianapolis, Indiana 46240, counsel for
Seller No. 1 and Seller No. 2 containing the opinion set forth in
Exhibit "O";
(vi) Seller No. 1 and Seller No. 2 shall have entered
into the Subordination Agreement in the form attached hereto as
Exhibit "K";
(vii) Seller No. 1, Seller No. 2 and the Shareholder
shall have entered into the non-competition agreements set forth
in Exhibits "N", "N-1" and "N-2";
(viii) Shareholder shall have entered into the Employment
Agreement set forth in Exhibit "M";
(ix) The express conditions set forth in Section 12
have been satisfied or waived.
(e)Seller No. 1 will adopt and file with the Secretary of State
of Indiana an amendment to the Articles of Incorporation of
Seller No. 1 changing the name of Seller No. 1 to a name
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substantially dissimilar to "Microcare, Inc." and Seller No. 1
shall also execute a Consent for Use of Similar Name form, as set
forth in the Disclosure Schedule granting to Purchaser the use of
the name "Microcare, Inc." In addition, Seller No. 2 will adopt
and file with the Secretary of State of Indiana an amendment to
the Articles of Incorporation of Seller No. 2 changing the name
of Seller No. 2 to a name substantially dissimilar to "Microcare
Computer Services, Inc." and Seller No. 2 shall also execute a
Consent for Use of Similar Name form, as set forth in the
Disclosure Schedule granting to Purchaser the use of the name
"Microcare Computer Services, Inc."
13.3Conditions Precedent to Seller No. 1's and Seller No. 2's
Obligations.
The obligation of Seller No. 1 and Seller No. 2 to perform
in accordance with this Agreement and to consummate the
transactions herein contemplated is subject to the satisfaction
of the following conditions at or before the Closing:
(a) Performance by Purchaser of all of the representations,
warranties, agreements and covenants to be performed by it at or
before the Closing;
(b) There shall be no pending or threatened legal action
which, if successful, would prohibit consummation or require
substantial rescission of the transactions contemplated by this
Agreement;
(c) Purchaser shall deliver to Seller No. 1 and Seller No.
2 at or before the Closing the following documents, all of which
shall be in form and substance acceptable to Seller No. 1, Seller
No. 2 and its counsel:
(i) A certified or bank cashier's check or wire
transfer for the aggregate amount to be paid to Seller No. 1 at
the Closing pursuant to Section 4.2 hereof;
(ii) A certified or bank cashier's check or wire
transfer for the aggregate amount to be paid to Seller No. 2 at
the Closing pursuant to Section 4.3(a) hereof;
(iii) Assumption of Liabilities Agreement under which
Purchaser assumes the Liabilities set forth in Sections 3.1 and
3.2;
(iv) A subordinated promissory note as set forth in
Section 4.3(e);
(v) The stock of Purchaser is delivered to Seller No.
2 pursuant to Section 4.3(d);
(vi) Certified copies of the corporate actions taken by
Purchaser authorizing the execution, delivery and performance of
this Agreement;
(vii) Certificate of Good Standing for Purchaser from
the Secretary of State of Delaware dated no earlier than fifteen
(15) days prior to the date of Closing;
(viii) Opinion letter of Lindhorst & Dreidame Co.,
L.P.A., counsel for Purchaser, addressed to Seller No. 1 and
Seller No. 2 and dated the Closing Date, containing the opinions
set forth on Exhibit "P";
(ix) All of the express conditions set forth in Section
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12 have been satisfied or waived.
(d)Purchaser shall have entered into the Employment Agreement
set forth in Exhibit "M".
14.
GENERAL PROVISIONS
14.1 Publicity.
All public announcements relating to this Agreement or the
transactions contemplated hereby will be made by Purchaser with
the consent of Seller No. 1 and Seller No. 2, which consent will
not be unreasonably withheld, except for any disclosure which may
be required because of Purchaser's being a publicly-traded
corporation on the over-the-counter market.
14.2 Expenses.
Purchaser will bear and pay all of its expenses incident to
the transactions contemplated by this Agreement which are
incurred by Purchaser or its representatives and Seller No. 1 and
Seller No. 2 shall bear and pay all of the expenses incident to
the transactions contemplated by this Agreement which are
incurred by Seller No. 1 or Seller No. 2 or their respective
representatives.
14.3 Notices.
All notices and other communications required by this
Agreement shall be in writing and shall be deemed given if
delivered by hand or mailed by registered mail or certified mail,
return receipt requested, to the appropriate party at the
following address (or at such other address for a party as shall
be specified by notice pursuant hereto):
(a) If to Purchaser, to:
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to:
James H. Smith III, Esq.
Lindhorst & Dreidame
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
(b) If to Seller No. 1, to:
Microcare, Inc.
14348 Strawtown Avenue
Noblesville, Indiana 46060
If to Seller No. 2, to:
Microcare Computer Services, Inc.
14348 Strawtown Avenue
Noblesville, Indiana 46060
With a copy to:
David Millard, Esq.
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Leagre, Chandler & Millard
9100 Keystone Crossing #800
Indianapolis, Indiana 46240
(c) If to Shareholder, to:
Robert L. Versprille
14348 Strawtown Avenue
Noblesville, Indiana 46060
14.4 Binding Effect.
Except as may be otherwise provided herein, this Agreement
and all the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
14.5 Headings.
The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
14.6 Exhibits.
The Exhibits referred to in this Agreement constitute an
integral part of this Agreement as if fully rewritten herein.
14.7 Counterparts.
This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which
constitute together one and the same document.
14.8 Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Indiana, without regard to
its laws regarding conflict of laws.
14.9 Severability.
If any provision of this Agreement shall be held
unenforceable, invalid, or void to any extent for any reason,
such provision shall remain in force and effect to the maximum
extent allowable, if any, and the enforceability or validity of
the remaining provisions of this Agreement shall not be affected
thereby.
14.10 Waivers; Remedies Exclusive.
No waiver of any right or option hereunder by any party
shall operate as a waiver of any other right or option, or the
same right or option with respect to any subsequent occasion for
its exercise, or of any right to damages. No waiver by any party
of any breach of this Agreement or of any representation or
warranty contained herein shall be held to constitute a waiver of
any other breach or a continuation of the same breach. No waiver
of any of the provisions of this Agreement shall be valid and
enforceable unless such waiver is in writing and signed by the
party granting the same. Except as otherwise provided in the
note issued pursuant to Section 4.3, the Employment Agreement and
the Covenant Not to Compete Agreements, the indemnification
provided for by Section 11 herein shall constitute the exclusive
remedy of any party with respect to (i) the matters for which
such indemnification is provided and (ii) any other matters
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arising out of, relating to or connected with this Agreement or
the transactions contemplated hereby, and whether any claims or
causes of action asserted with respect to any such matters are
brought in contract, tort or other legal theory whatsoever.
14.11 Assignments.
Except as otherwise provided in this Agreement, no party
shall assign its rights or obligations hereunder prior to
Closing without the prior written consent of the other party.
14.12 Entire Agreement.
This Agreement and the agreements, instruments and other
documents to be delivered hereunder constitute the entire
understanding and agreement concerning the subject matter hereof.
All negotiations between the parties hereto are merged into this
Agreement, and there are no representations, warranties,
covenants, understandings, or agreements, oral or otherwise, in
relation thereto between the parties other than those
incorporated herein and to be delivered hereunder. Except as
otherwise expressly contemplated by this Agreement, nothing
expressed or implied in this Agreement is intended or shall be
construed so as to grant or confer on any person, firm or
corporation other than the parties hereto any rights or privilege
hereunder. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the
parties hereto.
14.13 Business Records.
Seller No. 1, Seller No. 2 and Shareholder shall be
permitted to retain copies of such books and records relating to
Purchased Assets No. 1 and Purchased Assets No. 2 and relating to
the accounting and tax matters of the Business and to have access
to all original copies of records so delivered to Purchaser at
reasonable times, for any reasonable business purpose, for a
period of six (6) years after the Closing.
14.14 No Third Party Beneficiaries.
This Agreement shall not confer any rights or remedies upon
any persons or entities other than the parties hereto and their
respective successors, legal representatives, heirs and assigns.
The parties hereto have executed this Agreement as of the
date first above written.
WITNESSES: MICROCARE, INC.
___________________________
___________________________
By:________________________________
Robert L. Versprille,
President
___________________________ MICROCARE COMPUTER SERVICES, INC.
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___________________________
By:________________________________
Robert L. Versprille,
President
___________________________ POMEROY COMPUTER RESOURCES, INC.
___________________________
By:________________________________
___________________________
___________________________
__________________________________
ROBERT L. VERSPRILLE
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