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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 30, 1998
MLC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 0-28926 54-1817218
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(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
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11150 Sunset Hills Road, Suite 110, Reston, VA 20190
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 834-5710
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ITEM 5. OTHER EVENTS
Effective June 30, 1998, the Company amended its committed recourse
line of credit with First Union National Bank, successor by merger to CoreStates
Bank. Under the amendment the credit facility loan committment was increased
from $25 million to $35 million and the inventory sub-limit was increased from
$1 million to $5 million.
Pursuant to the terms of an Agreement and Plan of Merger dated July 1,
1998 (the "Merger Agreement") by and among MLC Holdings, Inc. (the "Company"),
MLC Network Solutions of Virginia, Inc. ("MLC Network Solutions") (a newly
formed 100% owned subsidiary of the Company), PC Plus, Inc. ("PC Plus") and the
stockholders of PC Plus the Company acquired PC Plus through a merger of PC Plus
and MLC Network Solutions from the stockholders of PC Plus. The consideration
for the transaction consisted of an aggregate of $7,245,673 (the "Merger
Consideration") payable in the form of 50% cash and 263,478 shares of the
Company's common stock. The purchase price was determined based on arms-length
negotiation. PC Plus is a computer reseller and value added services provider
headquartered in Reston, Virginia. PC Plus had revenues of approximately $38
million for its year ending March 31, 1998. PC Plus was founded in 1987 and has
approximately 30 employees.
In addition, founder, President and CEO of PC Plus, Nadim Achi, entered
into a two year employment agreement with the Company renewable for one year
terms. The employment agreement contains non-compete, non-solicitation and
confidentiality provisions. Under the employment agreement, Mr. Achi is entitled
to a base salary of $150,000, discretionary bonus and stock options to purchase
10,000 shares of Common Stock.
There was no affiliation or relationship between the Company, its
affiliates, officers or directors or associates of such persons and PC Plus or
any of its officers, directors or stockholders prior to the execution of the
Merger Agreement on the Closing Date.
The above descriptions of the agreements entered into by the Company
and PC Plus relating to the acquisition are not complete. Reference is made to
the Merger Agreement, a copy of which is filed as an exhibit to this report and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a); (b) Financial Statements; Pro Forma Financial Information.
Not applicable.
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(c) Exhibits
The following exhibits are filed herewith:
2.3 Agreement and Plan of Merger dated July 1, 1998, by and among
MLC Holdings, Inc., MLC Network Solutions of Virginia, Inc., PC Plus,
Inc., and the Stockholders of PC Plus, Inc.
10.27 Employment Agreement between the Company and Nadim Achi
10.28 Escrow Agreement between the Company, Crestar Bank and Nadim Achi as
representative of the PC Plus, Inc. shareholders dated July 1, 1998.
10.29 Amendment No. 3 dated June 30, 1998 to Credit Agreement dated June 5,
1997 between MLC Group, Inc. and First Union National Bank, successor
to CoreStates Bank, N.A.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MLC Holdings, Inc.
(Registrant)
Dated: July ____, 1997 By:________________________________
Phillip G. Norton
Chairman and Chief Executive Officer
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EXHIBIT INDEX
The following exhibits are filed as part of this report:
Exhibit No. Item
2.3 Agreement and Plan of Merger dated July 1, 1998, by and among
MLC Holdings, Inc., MLC Network Solutions of Virginia, Inc.,
PC Plus, Inc., and the Stockholders of PC Plus, Inc.
10.27 Employment Agreement between the Company and Nadim Achi
10.28 Escrow Agreement between the Company, Crestar Bank and Nadim Achi as
representative of the PC Plus, Inc. shareholders dated July 1, 1998
10.29 Amendment No. 3 dated June 30, 1998 to Credit Agreement dated June 5,
successor to 1997 between MLC Group, Inc. and First Union National Bank,
CoreStates Bank, N.A.
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Exhibit 2.3
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MLC HOLDINGS, INC.
AND
MLC NETWORK SOLUTIONS OF VIRGINIA, INC.
AND
PC PLUS, INC.
AND
THE STOCKHOLDERS OF PC PLUS, INC.
July 1, 1998
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as
of this 1st day of July 1998, by and among MLC Holdings, Inc., a Delaware
corporation ("MLC"), MLC Network Solutions of Virginia, Inc., a Virginia
corporation and wholly-owned subsidiary of MLC ("Network Solutions"), PC Plus,
Inc., a Delaware corporation ("PCPlus"), and the sole stockholders of PCPlus set
forth on the signature page attached hereto (collectively, the "Stockholders").
MLC, Network Solutions, PCPlus and the Stockholders are referred to collectively
herein as the "Parties" and individually as a "Party."
RECITALS:
WHEREAS, the Parties hereto desire to consummate a merger (the
"Merger") whereby PCPlus will be merged with and into Network Solutions and
Network Solutions will be the surviving corporation in the Merger, upon the
terms and subject to the conditions of this Agreement and in accordance with the
Delaware General Corporation Law (the "Delaware GCL") and the Virginia State
Corporation Act (the "Virginia CA"); and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code"),
pursuant to which each issued and outstanding share of PCPlus common stock shall
be converted into the right to receive shares of MLC common stock.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1. Terms Defined in This Agreement. As used in this Agreement, the following
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terms shall have the respective meanings set forth below:
"Additional Consideration" has the meaning set forth in Section 4.2(a)
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below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
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promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
ss.1504.
"Agreement" has the meaning set forth in the preface above.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms the basis for any specified
consequence.
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"Business Day" means any day of the week other than Saturday, Sunday or
any day that is a legal holiday in the District of Columbia. When the date for
performance of any obligation hereunder falls on a Saturday, Sunday or legal
holiday in the District of Columbia, such performance shall be considered as due
on the next Business Day.
"Cash Consideration" has the meaning set forth in Section 4.2(a) below.
"Certificate of Merger" has the meaning set forth in Section 2.2 below.
"Closing" has the meaning set forth in Section 2.3 below.
"Closing Date" has the meaning set forth in Section 2.3 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information of a proprietary
nature concerning the businesses and affairs of PCPlus or MLC, if any, that is
not already generally available to the public or that has not been obtained from
an independent source that was not bound by a duty of confidentiality with
respect to such information.
"Delaware GCL" has the meaning set forth in the first paragraph of the
Recitals above.
"Disclosure Schedule" has the meaning set forth in the first paragraph of
Article 7 below.
"Effective Time" has the meaning set forth in Section 2.2 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
tax-qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) tax-qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss.3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Consideration" has the meaning set forth in Section 4.2(a) below.
"Extremely Hazardous Substance" has the meaning set forth in ss.302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statements" has the meaning set forth in Section 7.7 below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"ImagingCo" means the entity to which the Spin-Off Assets have been
transferred.
"Intellectual Property" means, to the extent such items are eligible
for legal protection in their stage of development, (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Indemnification Threshold" has the meaning set forth in Section 12.6
below.
"Initial Cash Consideration" has the meaning set forth in Section 4.2(a) below.
"Initial MLC Common Shares" has the meaning set forth in Section 4.2(a) below.
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"Knowledge" means the collective knowledge of all of the Stockholders
and PCPlus after reasonable investigation. For the purposes of this Agreement,
the knowledge of one Stockholder shall be attributed to the other Stockholders
and PCPlus, except as to representations or warranties made severally.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means, as to any Party, a material adverse
effect on the business, properties, operations, condition or future prospects
(financial or otherwise) of such Party.
"Merger" shall mean the merger of PCPlus with and into Network Solutions in
accordance with the terms of this Agreement.
"Merger Consideration" has the meaning set forth in Section 4.2(a) below.
"Merger Share Price" has the meaning set forth in Section 4.2(a) below.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section 7.7
below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 7.7
below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 7.7
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"MLC" has the meaning set forth in the preface above.
"MLC Common Shares" shall mean the shares of common stock, par value
$0.01, of MLC.
"Nasdaq" means the Nasdaq National Market.
"Network Solutions" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" or "Parties has the meaning set forth in the preface above.
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"PBGC" means the Pension Benefit Guaranty Corporation.
"PCPlus" has the meaning set forth in the preface above.
"PCPlus Common Shares" means the shares of the common stock, $.05 par
value, of PCPlus.
"PCPlus Common Share Certificates" has the meaning set forth in Section 4.1
below.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Representative" has the meaning set forth in Section 12.3 below.
"Sales Transaction" has the meaning set forth in Section 8.10 below.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Share Consideration" has the meaning set forth in Section 4.2(a) below.
"Special Claims" has the meaning set forth in Section 12.6 below.
"Spin-Off Assets" has the meaning set forth in Section 7.30 below.
"Stockholders" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
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"Surviving Corporation" has the meaning set forth in Section 2.1 below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not, of PCPlus.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes of PCPlus, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 12.4 below.
ARTICLE 2
MERGER; EFFECTIVE TIME; CLOSING
2.1 Merger. Subject to the terms and conditions of this Agreement and the
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Delaware GCL, at the Effective Time, Network Solutions and PCPlus shall
consummate the Merger in which (i) PCPlus shall be merged with and into Network
Solutions and the separate corporate existence of PCPlus shall thereupon cease,
(ii) Network Solutions shall be the successor or surviving corporation in the
Merger and shall be governed by the laws of the State of Virginia and (iii) the
separate corporate existence of Network Solutions with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. The corporation surviving the Merger is sometimes hereinafter referred
to as the "Surviving Corporation." The Merger shall have the effects set forth
in the Delaware GCL and the Virginia CA. Immediately upon the consummation of
the Merger, Network Solutions will change its name to PCPlus, Inc.
2.2 Effective Time. On the Closing Date, subject to the terms and
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conditions of this Agreement, Network Solutions and PCPlus shall (i) cause to be
executed (A) a Certificate of Merger in the form required by the Virginia CA
(the "Solutions Certificate of Merger") and (B) a Certificate of Merger in the
form required by the Delaware GCL (the "PC Plus Certificate of Merger"), and
(ii) cause the Solutions Certificate of Merger to be filed with the Virginia
State Corporation Commission as provided in the Virginia CA and the PC Plus
Certificate of Merger to be filed with the Delaware Secretary of State as
provided in the Delaware GCL. The Merger shall become effective at (i) such time
as the Solutions Certificate of Merger has been duly filed with the Virginia
State Corporation Commission and the PC Plus Certificate of Merger has been duly
filed with the Delaware Secretary of State or (ii) such other time as is agreed
upon by the Representative and MLC and specified in the Solutions Certificate of
Merger and the PC Plus Certificate of Merger. Such time is hereinafter referred
to as the "Effective Time."
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2.3. The Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of Shaw Pittman Potts
& Trowbridge, 2300 N Street, N.W., Washington, D.C. 20037, commencing at 9:00
a.m. local time on such date as within five (5) Business Days following the
fulfillment or waiver of the conditions set forth in Article 10 (other than
conditions which by their nature are intended to be fulfilled at the Closing) or
such other place or time or on such other date as MLC and the Representative may
agree or as may be necessary to permit the fulfillment or waiver of the
conditions set forth in Article 10 (the "Closing Date").
ARTICLE 3
ARTICLES OF INCORPORATION; BY-LAWS; AND
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
3.1. Articles of Incorporation. The articles of incorporation of Network
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Solutions, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation until thereafter amended
as provided therein and under the Virginia CA.
3.2. By-Laws. The by-laws of the Network Solutions, as in effect
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immediately prior to the Effective Time, shall be the by-laws of the Surviving
Corporation, unless and until thereafter amended.
3.3. Directors and Officers. Except as provided below, the directors and
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officers of Network Solutions immediately prior to the Effective Time shall be
the directors and officers of the Surviving Corporation from and after the
Effective Time until their successors have been duly elected, appointed or
qualified or until their earlier death, resignation or removal in accordance
with the articles of incorporation and by-laws of the Surviving Corporation.
Notwithstanding the foregoing, Nadim Achi will act as president and chief
operating officer of the Surviving Corporation pursuant to the terms of his
employment agreement and will become a director of the Surviving Corporation.
ARTICLE 4
MERGER CONSIDERATION; PAYMENT OF MERGER CONSIDERATION
4.1. Merger Consideration; Conversion or Cancellation of PCPlus Common
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Shares in Merger. At the Effective Time, by virtue of the Merger and without any
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action by the Parties, (A) all of the outstanding PCPlus Common Shares (i) shall
be converted into the right to receive the Merger Consideration set forth in
Section 4.2, (ii) shall cease to be outstanding, and (iii) shall be canceled and
retired and shall cease to exist, and each Stockholder, as the holder of
certificates representing such PCPlus Common Shares (the "PCPlus Common Share
Certificates"), shall cease to have any rights with respect thereto, except the
right to receive Merger Consideration therefor upon the surrender of such
certificates in accordance with this Section 4.1 and cash in lieu of fractional
MLC Common Shares as set forth in Section 4.3 and (B) each outstanding share of
common stock, $.01 par value, of Network Solutions shall remain unaffected as a
result of the Merger and continue to be outstanding following the Effective
Time.
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4.2. Determination of Merger Consideration
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4.2a. The consideration payable by MLC in connection with the Merger shall
be an amount, based on the Merger Share Price (as defined below), of not less
than $6,600,000 nor greater than $7,245,659 (the "Merger Consideration"). Except
as provided below, the Merger Consideration shall be payable in the following
manner: (i) $3,300,000 in the form of cash (the "Initial Cash Consideration")
and (ii) 286,957 MLC Common Shares, assuming the Merger Share Price is equal to
$11.50 (the "Additional Consideration"). In the event that the closing price of
a MLC Common Share as reported on the Nasdaq Stock Market on the Business Day
immediately preceding the Closing Date (the "Merger Share Price") is greater
than $11.50, the Additional Consideration shall be payable in the following
manner: (i) $3,300,000 in the form of MLC Common Shares based on the Merger
Share Price (the "Initial MLC Common Shares") plus (ii) the Excess
Consideration. The "Excess Consideration" shall equal the difference between (i)
286,957 times the Merger Share Price and (ii) $3,300,000. The Excess
Consideration shall be payable 50% in the form of cash and 50% in the form of
MLC Common Shares based on the Merger Share Price. Notwithstanding the
foregoing, in no event shall the Excess Consideration exceed $645,659. By way of
example, in the event that the Merger Share Price is $13, the Merger
Consideration shall consist of (i) the Initial Cash Consideration, (ii) 253,846
Initial MLC Common Shares ($3,300,000 divided by $13) and (iii) Excess
Consideration in the amount of $430,441 ([$13 times 286,957] minus $3,300,000),
payable $215,220.50 in the form of cash and $215,220.50 in the form of MLC
Common Shares (or 16,555.42 MLC Common Shares based on the Merger Share Price).
In the event the Merger Share Price exceeds $13.75, the Excess Consideration
shall be $645,659 and shall consist of $322,829.50 in the form of cash and
$322,829.50 in the form of MLC Common Shares based on the Merger Share Price. In
the event that the Merger Share Price is less than $11.50, the Additional
Consideration shall consist solely of $3,300,000 in the form of MLC Common
Shares based on the Merger Share Price. The Initial Cash Consideration plus the
cash component of the Excess Consideration is hereinafter referred to as the
"Cash Consideration" and the MLC Common Shares issued as Additional
Consideration is hereinafter referred to as the "Share Consideration."
4.2.b. At the Closing, upon surrender to MLC of PCPlus Common Share
Certificates by the Stockholders for cancellation, together with any other
required documents, the Stockholders shall receive the Merger Consideration pro
rata based on their relative equity interests in PCPlus as of the Closing Date.
4.3. Post Closing Adjustment. As soon as practicable following the Closing Date
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but in no event greater than 60 days from the Closing Date, PCPlus shall prepare
and cause to be audited, the financial statements of PCPlus for the year ended
March 31, 1998 (the "1998 Financial Statements"). PCPlus shall deliver to MLC a
copy of the 1998 Financial Statements promptly after Coopers & Lybrand LLC has
furnished its report with respect thereto. In the event that PCPlus' operating
income (i.e., net income before interest and taxes) as reflected in the 1998
Financial Statements are less than $855,000 (90 percent of $950,000) (the
amount, if any, by which such operating income is less than $855,000 shall be
the "Deficiency Amount"), the Stockholders shall remit to MLC an amount in cash
equal to the Deficiency Amount times 7.5. Such payment shall be made as soon as
practicable after the determination of the Deficiency Amount, but in any event
not later than five Business Days following the Representative's receipt of
written notice from MLC that such payment is required.
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4.4 Fractional MLC Common Shares. No certificates representing fractional
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MLC Common Shares shall be issued upon surrender of any PCPlus Common Share
Certificates or in connection with the Contingent Amount. In lieu of any
fractional MLC Common Shares, there shall be paid to each holder of PCPlus
Common Shares who otherwise would be entitled to receive a fractional MLC Common
Share an amount of cash (without interest) rounded to the nearest cent
determined by multiplying such fraction by the Merger Share Price.
4.5 Transfer of PCPlus Common Shares. No transfers of PCPlus Common Shares
---------------------------------
shall be made on the stock transfer books of PCPlus after the date of this
Agreement, and each Stockholder agrees not to transfer any PCPlus Common Shares
after the date of this Agreement and before the Closing Date.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE INDIVIDUAL STOCKHOLDERS
Each of the Stockholders, severally, but not jointly, represents and warrants to
Network Solutions and MLC that the statements contained in this Article 5 are
correct and complete as of the date hereof with respect to himself:
5.1. Authorization of Transaction. Each of the Stockholders has full power
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and authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of each of the Stockholders, enforceable in accordance with its terms
and conditions, except as may be limited by the availability of equitable
remedies or by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally. None of the Stockholders need
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement, except in connection with federal
securities laws and any applicable "Blue Sky" or state securities laws.
5.2. Noncontravention. Neither the execution and the delivery of this
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Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any Stockholder is subject, or (B) result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the any Stockholder is a party or by which he or she
is bound or to which any of his assets is subject.
5.3. PCPlus Common Shares. Each of the Stockholders holds of record and
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owns beneficially the number of PCPlus Common Shares set forth next to his name
in Section 7.2 of the Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions arising under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, claims, and demands. Except for the agreements set forth
on Section 5.3 of the Disclosure Schedule, none of the Stockholders is a party
to any option, warrant, purchase right, or other contract or commitment that
could require one or more Stockholders to sell, transfer, or otherwise dispose
of any PCPlus Common Shares (other than pursuant to this Agreement) or is a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any of PCPlus Common Shares.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF NETWORK SOLUTIONS AND MLC
Network Solutions and MLC jointly and severally represent and warrant to the
Stockholders and PCPlus that the statements contained in this Article 6 are
correct and complete as of the date hereof:
6.1 Organization of Network Solutions and MLC. Each of Network Solutions
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and MLC is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to own and lease its properties and carry on its business.
6.2. Capital Stock. The authorized capital stock of MLC consists of
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25,000,000 shares of common stock, $.01 par value (the "MLC Common Shares"), of
which 6,071,305 shares are issued and outstanding as of April 1, 1998, and
2,000,000 shares of preferred stock, $.01 par value, of which no shares are
issued and outstanding. Since December 31, 1997, MLC has not issued any shares
of capital stock except pursuant to the exercise of options outstanding on such
date to purchase MLC Common Shares. All outstanding MLC Common Shares are, and
all MLC Common Shares issuable under stock option plans of MLC, will be when
issued in accordance with the terms thereof, duly authorized, validly issued,
fully paid and nonassessable. Except for the 1,614,261 MLC Common Shares
reserved for issuance pursuant to stock option plans of MLC, there are
outstanding on the date hereof no options, warrants, calls, rights, commitments
or any other agreements of any character to which MLC is a party or by which it
may be bound, requiring it to issue, transfer, sell, purchase, register, redeem
or acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for or evidencing the right to subscribe for or acquire any
shares of its capital stock.
6.3. Authorization for Common Stock. The Share Consideration will, when
--------------------------------
issued, be duly authorized, validly issued, fully paid and nonassessable, and no
stockholder of MLC will have any preemptive right or similar rights of
subscription or purchase in respect thereof. The Share Consideration will,
subject to the accuracy of the Stockholders' representations contained in
Section 5.3 hereof, be exempt from registration under the Securities Act and
will be registered or exempt from registration under all applicable state
securities laws. The Share Consideration will, when issued, be approved for
listing on the Nasdaq, subject to official notice of issuance.
6.4. Authorization of Transaction. Each of Network Solutions and MLC has
-----------------------------
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its respective obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of each of Network Solutions and MLC, enforceable in accordance with its terms
and conditions. Neither Network Solutions nor MLC need give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement, except in connection with federal securities
laws and any applicable "Blue Sky" or state securities laws. The consummation of
the Merger does not require the approval of the stockholders of MLC and MLC, as
the sole stockholder of Network Solutions, shall, upon approval of the board of
directors of MLC, vote its shares in favor of the consummation of the Merger.
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6.5. Noncontravention. Neither the execution and the delivery of this
-----------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either Network Solutions or MLC is
subject or any provision of its articles of incorporation or by-laws or (B)
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which either Network Solutions or MLC is a party or by
which it is bound or to which any of its assets is subject.
6.6. Brokers' Fees. Neither Network Solutions nor MLC has any Liability or
--------------
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
6.7. Nasdaq National Market. MLC is in compliance in all material respects
-----------------------
with its Nasdaq Listing Agreement.
6.8. Ownership of Network Solutions. MLC owns, and will own at the
----------------------------------
Effective Time, 100% of the equity securities of Network Solutions.
6.9. Disclosure. MLC is in compliance in all material respects with its
-----------
obligation under the Securities Exchange Act to publicly disclose material
information in a timely fashion. No report or document filed by MLC pursuant to
Section 13, 14 or 15(d) of the Securities Exchange Act prior to the date hereof
contained or shall contain any untrue statement of a material fact or omitted or
shall omit to state a material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES CONCERNING PCPLUS
The Stockholders and PCPlus represent and warrant to Network Solutions and MLC
that the statements contained in this Article 7 are correct and complete as of
the date hereof, except as set forth in the disclosure schedule delivered by the
Stockholders and PCPlus to Network Solutions and MLC on the date hereof (the
"Disclosure Schedule"). Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Disclosure Schedule identifies the exception with
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
The Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Article 7.
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7.1. Organization, Qualification, and Corporate Power. PCPlus is a corporation
---------------------------------------------------
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. PCPlus is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required, except where the failure to so qualify or obtain authorization would
not have a Material Adverse Effect on PCPlus. PCPlus has full corporate power
and authority and all licenses, permits, and authorizations necessary to carry
on the businesses in which it is engaged and to own and use the properties owned
and used by it. Section 7.1 of the Disclosure Schedule lists the directors and
officers of PCPlus. The Stockholders have delivered to Network Solutions and MLC
correct and complete copies of the articles of incorporation and by-laws of
PCPlus (as amended to date). The minute books (containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
PCPlus are correct and complete. PCPlus is not in default under or in violation
of any provision of its articles of incorporation or by-laws.
7.2. Capitalization. The entire authorized capital stock of PCPlus (the "PCPlus
---------------
Common Shares") consists of (i) 5,000,000 shares of common stock, $.05 par
value, of which 2,279,621 shares are issued and outstanding and 478,836 PCPlus
Common Shares are held in treasury, and (ii) 150,000 shares preferred stock,
$1.00 par value, of which no shares are issued and outstanding. All of the
issued and outstanding PCPlus Common Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Stockholders as set forth in Section 7.2 of the Disclosure Schedule.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require PCPlus to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to PCPlus. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of PCPlus Common Shares.
7.3. Authorization of Transaction. PCPlus has full power and authority
-------------------------------
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of PCPlus, enforceable in accordance
with its terms and conditions, except as may be limited by the availability of
equitable remedies or by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally. PCPlus is not
required give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement, except in connection
with federal securities laws and any applicable "Blue Sky" or state securities
laws.
7.4. Noncontravention. Neither the execution and the delivery of this Agreement,
-----------------
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which PCPlus is subject or any provision of the charter or
bylaws of PCPlus or (ii) result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which PCPlus is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets).
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7.5. Title to Assets. PCPlus has good title to, or a valid leasehold interest
----------------
in, the properties and assets used by it, located on its premises, or shown on
the Most Recent Balance Sheet or acquired after the date thereof, free and clear
of all Security Interests, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet.
7.6. Subsidiaries. PCPlus does not have any Subsidiaries, operating or
-------------
otherwise.
7.7. Financial Statements. PCPlus has delivered (collectively, the "Financial
---------------------
Statements") to MLC its (i) reviewed balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal years
ended March 30, 1996, and March 29, 1997 (the "Most Recent Fiscal Year End");
and (ii) unaudited balance sheets and statements of income (the "Most Recent
Financial Statements") as of and for the eleven months ended February 27, 1998
(the "Most Recent Fiscal Month End"). The Financial Statements (including the
notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of PCPlus as of such dates and the results of operations of
PCPlus for such periods, and are consistent with the books and records of
PCPlus.
7.8 Events Subsequent to Most Recent Fiscal Year End. Since the Most Recent
-----------------------------------------------------
Fiscal Year End, there has not been any Material Adverse Effect in the business,
financial condition, operations, results of operations, or future prospects of
PCPlus. Without limiting the generality of the foregoing, since that date:
7.8.a. except for the Spin-Off Assets, PCPlus has not sold, leased,
transferred, or assigned any of its assets, tangible or intangible, other than
for a fair consideration in the Ordinary Course of Business;
7.8.b. PCPlus has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
either involving more than $50,000 or outside the Ordinary Course of Business;
7.8.c.no party (including PCPlus) has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) to which PCPlus is a party or by
which it is bound;
7.8.d. PCPlus has not imposed any Security Interest upon any of its assets,
tangible or intangible;
7.8.e. PCPlus has not made any capital expenditure (or series of related
capital expenditures) either involving more than $50,000 or outside the Ordinary
Course of Business;
7.8.f. except for assets acquired or funds advanced in the Ordinary Course
of Business, PCPlus has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions;
7.8.g. PCPlus has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation;
7.8.h. PCPlus has not delayed or postponed the payment of accounts payable
and other Liabilities outside the Ordinary Course of Business;
7.8.i. PCPlus has not canceled, compromised, waived, or released any right
or claim (or series of related rights and claims) outside the Ordinary Course of
Business;
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7.8.j. except in the Ordinary Course of Business in connection with its
imaging business, PCPlus has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
7.8.k. there has been no change made or authorized in the articles of
incorporation or by-laws of PCPlus;
7.8.l. PCPlus has not issued, sold, or otherwise disposed of any of its
capital stock, or granted any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its capital
stock;
7.8.m. except in connection with the transfer of assets to ImagingCo
described in Section 7.30 below, PCPlus has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
7.8.n. PCPlus has not experienced any material damage, destruction, or loss
(whether or not covered by insurance) to its property;
7.8.o. PCPlus has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
Ordinary Course of Business;
7.8.p. PCPlus has not entered into any employment contract outside the
Ordinary Course of business or collective bargaining agreement, written or oral,
or modified the terms of any such existing contract or agreement;
7.8.q. PCPlus has not granted any increase in the base compensation of any
of its directors, officers, and employees outside the Ordinary Course of
Business;
7.8.r. PCPlus has not adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
7.8.s. PCPlus has not made any other change in employment terms for any of
its directors, officers, and employees outside the Ordinary Course of Business
or in the terms of its agreements with any independent contractors outside the
Ordinary Course of Business;
7.8.t. PCPlus has not made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business;
7.8.u. to the Knowledge of PCPlus and the Stockholders, there has not been
any other material occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving PCPlus which could
reasonably be expected to have a Material Adverse Effect on PCPlus; and
7.8.v. to the Knowledge of PCPlus and the Stockholders, PCPlus is not under
any legal obligation, whether written or oral, to do any of the foregoing.
20
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7.9. Undisclosed Liabilities. PCPlus does not have any Liability (and to
-------------------------
the Knowledge of PCPlus and the Stockholders, there is no reasonable Basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving rise to any Liability), except for
(i) Liabilities set forth on the face of the Most Recent Balance Sheet and (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law); provided, however, this
representation shall not cover liabilities that result from a determination by
the Internal Revenue Service that the Merger is a taxable transaction, provided
such determination is not the result of any action or inaction on part of the
Stockholders or PCPlus.
7.10. Legal Compliance. PCPlus has complied in all material respects with
------------------
all applicable laws as in effect and as currently interpreted on the date hereof
and the Closing Date (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no notice has
been received by the Stockholders or PCPlus regarding any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
that has been filed or commenced against PCPlus alleging any failure so to
comply.
7.11. Tax Matters
------------
7.11a.PCPlus has filed all Tax Returns that it reasonably believed that it
was required to file, including, without limitation, any Tax Returns required to
be filed with any state. All such Tax Returns were correct and complete in all
material respects. To Knowledge of PCPlus and the Stockholders, all Taxes owed
by PCPlus (whether or not shown on any Tax Return) have been paid. PCPlus
currently is not the beneficiary of any extension of time within which to file
any Tax Return. PCPlus has not received any notice for any tax authority in a
jurisdiction where PCPlus does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction. There are no Security Interests on any of the
assets of PCPlus that arose in connection with any failure (or alleged failure)
to pay any Tax.
7.11.b. PCPlus has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
7.11.c. To the Knowledge of the Stockholders and PCPlus, there is no
reasonable Basis for which any authority could assess any material additional
Taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax Liability of PCPlus either (A) claimed or raised by
any authority in writing or (B) as to which any of the Stockholders has
Knowledge. Section 7.11(c) of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to PCPlus for taxable
periods ended on or after December 31, 1992, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of audit. PCPlus has delivered to Network Solutions and MLC correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by PCPlus since
December 31, 1991.
7.11.d. PCPlus has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
7.11.e. PCPlus has not filed a consent under Code ss.341(f) concerning
collapsible corporations. PCPlus has not made any payments, is not obligated to
make any payments, or is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code ss.280G. PCPlus has not been a United States real property holding
corporation within the meaning of Code ss.897(c)(2) during the applicable period
specified in Code ss.897(c)(1)(A)(ii). PCPlus is not a party to any Tax
allocation or sharing agreement. PCPlus (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was PCPlus) or (B) has any Liability for the
Taxes of any Person (other than PCPlus) under Treas. Reg. ss.1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
21
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7.12. Real Property. Section 7.12(a) of the Disclosure Schedule lists and
---------------
describes briefly all real property owned, leased or subleased to PCPlus. The
Stockholders have delivered to Network Solutions and MLC correct and complete
copies of the leases and subleases listed in Section 7.12(b) of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease listed in
Section 7.12(b) of the Disclosure Schedule:
7.12a. the lease or sublease is legal, valid, binding, enforceable, and in
full force and effect, except as may be limited by the availability of equitable
remedies or by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally;
7.12.b. no consent is required with respect to any lease or sublease as a
result of this Agreement, and the actions contemplated by this Agreement will
not result in the change of any terms of any lease or sublease or otherwise
affect the ongoing validity of any lease or sublease;
7.12.c. no party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
7.12.d. no party to the lease or sublease has repudiated any provision
thereof;
7.12.e. there are no disputes, oral agreements, or forbearance programs in
effect as to the lease or sublease;
7.12.f. with respect to each sublease, the representations and warranties
set forth in subsections (a) through (e) above are true and correct with respect
to the underlying lease;
7.12.g. PCPlus has not assigned, transferred, conveyed, mortgaged, deeded
in trust, or encumbered any interest in the leasehold or subleasehold;
7.12.h. all facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses and permits) required
by PCPlus in connection with the operation thereof and have been operated and
maintained by PCPlus in accordance with applicable laws, rules, and regulations;
and
7.12.i. all facilities leased or subleased thereunder are supplied with
utilities and other services to the extent reasonably necessary for PCPlus'
operation of said facilities.
To the extent that any representation or warranty in this Section 7.12 relates
to a lease or sublease to which PCPlus is not a party, such representation or
warranty shall be limited to the Knowledge of PCPlus and the Stockholders.
7.13.Intellectual Property
---------------------
7.13.a. PCPlus owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property used in the
operation of the VAR Business of PCPlus as presently conducted. Each item of
Intellectual Property owned or used by PCPlus in its VAR business immediately
prior to the Closing hereunder will be owned or available for use by the
Surviving Corporation on identical terms and conditions immediately subsequent
to the Closing hereunder. PCPlus has taken all necessary action reasonably
within its power to maintain and protect each item of Intellectual Property that
it owns or uses in the VAR Business.
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<PAGE>
7.13.b. PCPlus has not interfered with, infringed upon or misappropriated
any Intellectual Property rights of third parties. There are no pending charges,
complaints, claims, demands, or notices alleging any such interference,
infringement, misappropriation, or violation (including any claim that PCPlus
must license or refrain from using any Intellectual Property rights of any third
party). To the Knowledge of PCPlus and the Stockholders, no third party has
interfered with, infringed upon or misappropriated any Intellectual Property
rights of PCPlus.
7.13.c. PCPlus has no patent or registration which has been issued to
PCPlus with respect to any of its Intellectual Property.
7.13.d. Section 7.13(d) of the Disclosure Schedule identifies each material
item of Intellectual Property used in the VAR Business owned by PCPlus or each
item of Intellectual Property (other than shrink-wrapped software and similar
mass produced items nominally sold in the form of a license) that any third
party owns and that PCPlus uses pursuant to license, sublicense, agreement, or
permission. The Stockholders have delivered to Network Solutions and MLC correct
and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date).
7.13.e. The Stockholders and PCPlus have no Knowledge of anything that will
interfere with, infringe upon or misappropriate any Intellectual Property rights
of third parties as a result of the continued operation of its business as
presently conducted.
7.14 Tangible Assets. PCPlus owns or leases all buildings, machinery, equipment,
---------------
and other tangible assets used in the conduct of its business as presently
conducted and as presently proposed to be conducted. Each such tangible asset is
free from all material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and (other than inventory items subject to possible
technological obsolescence to the extent such possibility is taken into account
in valuing inventory on PCPlus' books and records and appropriate reserves for
such obsolescence are set forth on the face of the Most Recent Balance Sheet) is
suitable for the purposes for which it presently is used. The Most Recent
Balance Sheet sets forth all of the material tangible assets necessary to
conduct PCPlus' business as it is currently being conducted.
7.15. Contracts. Section 7.15 of the Disclosure Schedule lists the following
----------
contracts and other agreements to which PCPlus is a party:
7.15a. any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $25,000 per annum;
7.15.b. any agreement concerning a partnership or joint venture;
7.15.c. any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed money,
or any capitalized lease obligation or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
7.15.d. any agreement concerning confidentiality or noncompetition;
7.15.e. any agreement with any of the Stockholders and their Affiliates
(other than PCPlus);
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7.15.f. any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
7.15.g. any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing annual compensation in excess of
$60,000 or providing severance benefits;
7.15.h. any agreement under which it has advanced or loaned any amount to
any of its directors, officers, and employees outside the Ordinary Course of
Business; or
7.15.i. any agreement under which the consequences of a default or
termination could have a Material Adverse Effect.
The Stockholders have delivered to Network Solutions and MLC a correct and
complete copy of each written agreement listed in Section 7.15 of the Disclosure
Schedule (as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 7.15 of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect, except as may be
limited by the availability of equitable remedies or by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally; (B) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby, except as may be limited
by the availability of equitable remedies or by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) no
notice has been received by PCPlus or the Stockholders that any party has
repudiated any provision of the agreement.
7.16. Notes and Accounts Receivable. All notes and accounts receivable of PCPlus
------------------------------
are reflected properly on its books and records, are valid receivables subject
to no setoffs or counterclaims, and are current and collectible in accordance
with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth on the face of the Most Recent Balance Sheet as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of PCPlus.
7.17. Powers of Attorney. There are no outstanding powers of attorney executed
-------------------
on behalf of PCPlus.
7.18. Insurance. Section 7.18 of the Disclosure Schedule sets forth the
----------
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which PCPlus has been a party, a named insured,
or otherwise the beneficiary of coverage at any time within the past three
years: (i) the name, address, and telephone number of the agent; (ii) the name
of the insurer, the name of the policyholder, and the name of each covered
insured; (iii) the policy number and the period of coverage; (iv) the scope
(including an indication of whether the coverage was on a claims made,
occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage; and (v) a
description of any retroactive premium adjustments or other loss-sharing
arrangements. With respect to each insurance policy that is currently in effect:
(A) the policy is legal, valid, binding, enforceable, and in full force and
effect, except as may be limited by the availability of equitable remedies or by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally; (B) the policy will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) neither
PCPlus nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (D) no notice has been received by PCPlus or the Stockholders that
any party to the policy has repudiated any provision thereof. PCPlus has been
covered during the past five years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period. Section 7.18 of the Disclosure Schedule describes any
self-insurance arrangements affecting PCPlus.
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7.19. Litigation. Section 7.19 of the Disclosure Schedule sets forth each
-----------
instance in which PCPlus (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or, to the Knowledge of
PCPlus and the Stockholders, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. To the Knowledge of PCPlus and the
Stockholders, none of the actions, suits, proceedings, hearings, and
investigations set forth in Section 7.19 of the Disclosure Schedule could result
in any Material Adverse Effect on PCPlus. None of the Stockholders has any Basis
to believe that any such action, suit, proceeding, hearing, or investigation may
be brought or threatened against PCPlus.
7.20. Employees. To the Knowledge (without inquiry) of the Stockholders and
----------
PCPlus, no executive, key employee, or group of employees currently has any
plans to terminate employment with PCPlus or as a result of this Agreement.
PCPlus has not committed any unfair labor practice. None of the Stockholders or
PCPlus has any Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of
PCPlus.
7.21. Employee Benefits
-----------------
7.21a. Section7.22 of the Disclosure Schedule lists each Employee Benefit
Plan that PCPlus maintains or to which PCPlus contributes.
7.21.b. Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all respects with the
applicable requirements of ERISA, the Code, and other applicable laws.
7.21.c. All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, and Summary Plan Descriptions) have been filed
or distributed appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title 1 of ERISA and of Code
ss.4980B have been met with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
7.21.d All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which are not
yet due have been paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of PCPlus. All premiums or other
payments for all periods ending on or before the Closing Date have been paid
with respect to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
7.21.e. Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code ss.401(a)
and either is a prototype plan for which a favorable determination letter is not
required or has received, within the last two years, a favorable determination
letter from the Internal Revenue Service.
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7.21.f. The market value of assets under each such Employee Benefit Plan
which is an Employee Pension Benefit Plan (other than any Multiemployer Plan),
subject to Title IV of ERISA, equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
7.21.g. The Stockholders have delivered to Network Solutions and MLC
correct and complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
7.21.h. To the Knowledge of PCPlus and the Stockholders, with respect to
each Employee Benefit Plan that PCPlus maintains or ever has maintained or to
which it contributes, ever has contributed, or ever has been required to
contribute:
7.21.h.i. No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan), subject to Title IV of ERISA,
has been completely or partially terminated or been the subject of a Reportable
Event as to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension Benefit Plan
(other than any Multiemployer Plan) has been instituted or threatened.
7.21.h.ii. There have been no Prohibited Transactions with respect to any
such Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or threatened. None of the
Stockholders has any Knowledge of any Basis for any such action, suit,
proceeding, hearing, or investigation.
7.21.h.iii. PCPlus has not incurred, and none of the Stockholders and the
directors and officers (and employees with responsibility for employee benefits
matters) of PCPlus has any Basis to expect that PCPlus or the Surviving
Corporation will incur, any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any such Employee Benefit Plan
which is an Employee Pension Benefit Plan.
7.21.i PCPlus does not contribute to, ever has contributed to, or ever has
been required to contribute to any Multiemployer Plan or has any Liability
(including withdrawal Liability) under any Multiemployer Plan.
7.21.j. PCPlus does not maintain or ever has maintained or contributes,
ever has contributed, or ever has been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with Code
ss.4980B).
26
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7.22. Guaranties. PCPlus is not a guarantor or otherwise is liable for any
----------
Liability or obligation (including indebtedness) of any other Person.
7.23. Environment, Health, and Safety
-------------------------------
7.23a. To the Knowledge of PCPlus and the Stockholders, PCPlus has complied
with all Environmental, Health, and Safety Laws except where the failure to so
comply would not have a Material Adverse Effect on PCPlus, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against it alleging any failure so to comply.
7.23.b. To the Knowledge of PCPlus and the Stockholders, PCPlus does not
have any Liability and has not handled or disposed of any substance, arranged
for the disposal of any substance, exposed any employee or other individual to
any substance or condition, or owned or operated any property or facility in any
manner that could form the Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
PCPlus giving rise to any Liability for damage to any site, location, or body of
water (surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental, Health,
and Safety Law as in effect and as currently interpreted on the date hereof and
the Closing Date.
7.23.c. To the Knowledge of PCPlus and the Stockholders, all properties and
equipment used in the VAR Business of PCPlus has been free of asbestos and
Extremely Hazardous Substances.
7.24 Customers. The names of all customers of PCPlus during the period since the
----------
end of the Most Recent Fiscal Year are listed in Section 7.24 of the Disclosure
Schedule. All contracts and agreements with such customers are valid, effective
and enforceable, except as may be limited by the availability of equitable
remedies or by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally, and the Disclosure Schedule
sets forth all customers who have account balances that are in excess of 90 days
past due. Except pursuant to the terms of its existing agreements PCPlus knows
of no written or oral communication, fact, event or action which exists or has
occurred within 120 days prior to the date of this Agreement which would
indicate that any of the following shall terminate or materially reduce its
business with PCPlus:
7.24.d.i. any current customer of PCPlus which accounted for over 1% of
total net sales of PCPlus for its most recently completed fiscal year; or
7.24.d.ii. any current supplier to PCPlus of items essential to the conduct
of the business, which items cannot be replaced at comparable cost and the loss
of which would have an Material Adverse Effect on PCPlus.
Since the Most Recent Balance Sheet Date, PCPlus has retained or replaced all
sales personnel employed in connection with the operation of the VAR Business.
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7.25. Related Party Agreements. Other than advances to commissioned employees
-------------------------
not to exceed $50,000 in the aggregate, which shall generally be considered as
issued in the Ordinary Course of Business, the Disclosure Schedule sets forth
all indebtedness to PCPlus of the Stockholders or the officers, directors or
employees of PCPlus. Except for the advances to the commissioned employees
referred to above, all of such indebtedness has been or will be repaid on or
before the Closing Date. All credit cards issued for the account of PCPlus shall
be canceled prior to the Closing Date and, upon cancellation, all personal
charges shall be paid in full by the Stockholders. The Disclosure Schedule sets
forth all agreements between (i) PCPlus and its employees and (ii) PCPlus and
the Stockholders.
7.26. Product Liability. PCPlus has no liability (and to the Knowledge of PCPlus
------------------
and the Stockholders, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
PCPlus giving rise to any liability) arising out of any injury to individuals or
property as a result of the ownership, possession or use of any product
manufactured, sold, leased or delivered by PCPlus.
7.27. Bank Accounts. The Disclosure Schedule sets forth all bank accounts and
---------------
marketable securities (both debt and equity) of PCPlus.
7.28. Change in Control. PCPlus is not a party to any contract or arrangement,
------------------
which contains a "change in control," "potential change in control" or similar
provision, and the consummation of the Merger shall not (either alone or upon
the occurrence of additional acts or events) result in any payment or payments
becoming due from PCPlus to any person or give any person the right to terminate
or alter the provisions of any agreement to which PCPlus is a party.
7.29. Inventory. The inventory of PCPlus is in good and marketable condition and
---------
is capable of being sold in the ordinary course of business without discounts to
the perpetual weighted average cost, as adjusted to take into account possible
technological obsolescence, at which such inventory is recorded on the books and
records of PCPlus and appropriate reserves for such obsolescence are set forth
on the face of the Most Recent Balance Sheet.
7.30. Spin-Off Assets. Section 7.30 of the Disclosure Schedule sets forth all of
----------------
the assets and liabilities that either have been or will be transferred to
ImagingCo prior to the Closing Date (the "Spin-Off Assets"). There are no
agreements, whether written or oral, to transfer any other assets and
liabilities of PCPlus to ImagingCo or to any other party.
7.31. Disclosure. The representations and warranties contained in this Article 7
-----------
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Article 7 not misleading.
28
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ARTICLE 8
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing.
8.1. General. Each of the Parties will use his or its reasonable best efforts to
--------
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article 10 below).
8.2. Notices and Consents. PCPlus shall give any notices to third parties and
----------------------
shall use its reasonable best efforts to obtain any third party consents that
MLC and Network Solutions may reasonably request in connection with the matters
referred to in Section 7.3 above. Each of the Parties shall give any notices to,
make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 5.1, Section 6.4, and
Section 7.3 above.
8.3. Maintenance of Business; Prohibited Acts. During the period from the date
------------------------------------------
of this Agreement to the Effective Time, the Stockholders will not, and will not
cause PCPlus to, take any action that adversely affects the ability of PCPlus
(i) to pursue the VAR Business in the ordinary course, (ii) to seek to preserve
intact VAR Business organization, (iii) to keep available the service of its
current officers and employees and (iv) to preserve its relationships with
customers, suppliers and others having business dealings with it; and the
Stockholders will not allow PCPlus, without MLC's prior written consent (which
consent shall not be unreasonably withheld or delayed) to:
8.3.a.issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, delivery, sale, disposition or pledge or
other encumbrances of (i) any additional shares of its capital stock of any
class (including PCPlus Common Shares), or any securities or rights convertible
into, exchangeable for or evidencing the right to subscribe for any shares of
its capital stock, or any rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or acquire any shares of its
capital stock or any other securities or rights convertible into, exchangeable
for or evidencing the right to subscribe for any shares of its capital stock, or
(ii) any other securities in respect of, in lieu of or in substitution for
PCPlus Common Shares outstanding on the date hereof;
8.3.b. redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including
PCPlus Common Shares);
8.3.c. split, combine, subdivide or reclassify any shares of its capital
stock or otherwise make any payments to the Stockholders in their capacities as
stockholders of PCPlus, other than in connection with the transfer of the
Spin-Off Assets to ImagingCo described in Section 7.30 above;
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<PAGE>
8.3.d. (i) grant any increases in the compensation of any of its directors,
officers or executives or grant any increases in compensation to any of its
employees, (ii) pay or agree to pay any pension retirement allowance or other
employee benefit not required or contemplated by any Employee Benefit Plan as in
effect on the date hereof to any such director, officer or employee, whether,
past or present, (iii) enter into any new or amend any existing employment or
severance agreement with any such director, officer or employee, except as
approved by MLC in its sole discretion, (iv) pay or agree to pay any bonus to
any director, officer or employee (whether in the form of cash, capital stock or
otherwise), or (v) except as may be required to comply with applicable law,
amend any existing, or become obligated under any new Employee Benefit Plan,
except in the case of (i) through (v) inclusive, under and pursuant to the
employment agreements referred to in Section 10.1(f);
8.3.e. except for the distribution of the Spin-Off Assets, adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization (other than the Merger);
8.3.f. make any acquisition, by means of merger, consolidation or
otherwise, of any direct or indirect ownership interest in or assets comprising
any business enterprise or operation;
8.3.g. adopt any amendments to its articles of incorporation or by-laws;
8.3.h. incur any indebtedness for borrowed money or guarantee such
indebtedness or agree to become contingently liable, by guaranty or otherwise,
for the obligations or indebtedness of any other person or make any loans,
advances or capital contributions to, or investments in, any other corporation,
any partnership or other legal entity or to any other persons, except for bank
deposits and other investments in marketable securities and cash
8.3.i. equivalents made in the Ordinary Course of Business;
8.3.j. engage in the conduct of any business the nature of which is
materially different from the business in which PCPlus is currently engaged;
8.3.k. enter into any agreement providing for acceleration of payment or
performance or other consequence as a result of a change of control of PCPlus;
8.3.l. forgive any indebtedness owed to PCPlus or convert or contribute by
way of capital contribution any such indebtedness owed;
8.3.m. authorize or enter into any agreement providing for management
services to be provided by PCPlus to any third-party or an increase in
management fees paid by any third-party under existing management agreements;
8.3.n. mortgage, pledge, encumber, sell, lease or transfer any material
assets of PCPlus except with the prior written consent of MLC or as contemplated
by this Agreement,
8.3.o. authorize or announce an intention to do any of the foregoing, or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing; or
8.3.p. perform any act or omit to take any action that would make any of
the representations made above inaccurate or materially misleading as of the
Effective Time.
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<PAGE>
8.4.Full Access. PCPlus shall permit representatives of MLC and Network
-------------
Solutions to have full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of PCPlus to all premises,
properties, personnel, books, records (including Tax records), contracts, and
documents of or pertaining to PCPlus.
8.5. Notice of Developments. Each of the Stockholders and PCPlus shall give
------------------------
prompt written notice to MLC and Network Solutions of any material adverse
development occurring after the date hereof causing a breach of any of the
representations and warranties in Article 7 above. Each Party will give prompt
written notice to the others of any material adverse development occurring after
the date hereof causing a breach of any of his own representations and
warranties in Articles 5 and 6 above. No disclosure by any Party pursuant to
this Section 8.5, however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant. Notwithstanding the foregoing, in the event that, after
receipt of such additional disclosure, MLC and Network Solutions close the
transactions contemplated by this Agreement, MLC and Network Solutions shall be
deemed to have waived any right to seek indemnification pursuant to Section 12
for any breach of such representation and warranty or covenant that would have
otherwise occurred as a result of such additional disclosure.
8.6. Tax Matters. Each of the Stockholders, PCPlus and MLC agrees to report the
------------
Merger on all Tax Returns and, if applicable, other filings as a reorganization
under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code to the extent permitted
by law.
8.7 Reorganization. From and after the date hereof and prior to the Effective
---------------
Time, except for the transactions contemplated or permitted herein, none of
PCPlus, the Stockholders or MLC shall knowingly take any action that would be
inconsistent with the representations and warranties made by it herein,
including, but not limited to, knowingly taking any action, or knowingly failing
to take any action, that is known to cause disqualification of the Merger as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code.
8.8. PCPlus Stockholder Approval.Each of the Stockholders hereby agrees to vote,
---------------------------
at the PCPlus Stockholders Meeting, the PCPlus Common Shares owned by such
Stockholder in favor of the Agreement and the transactions contemplated hereby.
[MLC assumes Nadim will be granted a power of attorney to sign on behalf of the
Stockholders. If so, a copy of the power of attorney should be an Exhibit to
this Agreement]
8.9. Exclusivity. From the date hereof until the earlier of May 30, 1998 or the
------------
Closing Date, none of the Stockholders or PCPlus shall (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities or any
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<PAGE>
substantial portion of the assets of PCPlus (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. None of the
Stockholders shall vote their PCPlus Common Shares in favor of any such
acquisition structured as a merger, consolidation, or share exchange. The
Stockholders and PCPlus shall notify MLC as soon as reasonably practicable (but
in no event later than five Business Days after receipt) if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing. In
the event that this Section 8.9 (other than in connection with any unsolicited
proposal received by PCPlus or any officer, director, employee, agent or
Stockholder in which PCPlus or any officer, director, employee, agent or
Stockholder does not respond) is breached and the Merger is not consummated as a
result of such breach, PCPlus (and not the Stockholders) shall pay to MLC an
amount equal to all of MLC's out-of-pocket expenses incurred in connection with
this Agreement and the proposed Merger, including, without limitation,
reasonable attorneys' fees, up to a maximum amount of $100,000. In addition, in
the event that the Merger is not consummated as a result of a breach of this
Section 8.9 (other than in connection with any unsolicited proposal received by
PCPlus or any officer, director, employee, agent or Stockholder in which PCPlus
or any officer, director, employee, agent or Stockholder does not respond) and
PCPlus is acquired within one year from the date hereof, whether through merger,
consolidation, substantial asset purchase or share exchange (a "Sales
Transaction"), PCPlus (and not the Stockholders) shall promptly pay to MLC an
amount equal to one-third of the excess, if any, of the consideration paid in
the Sales Transaction allocable to the value added resale portion of the PCPlus
business over the Merger Consideration. The right of MLC to receive the payments
described above shall be in addition to, and not in lieu of, any other rights
and remedies available to MLC at law or in equity for breaches of this
Agreement.
ARTICLE 9
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the Closing:
9.1. General. In the event that at any time after the Closing any further action
--------
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Article 12
below). The Stockholders acknowledge and agree that from and after the Closing,
the Surviving Corporation and MLC will be entitled to possession of all
documents, books, records (including Tax records), agreements, and financial
data of any sort relating to PCPlus. MLC acknowledges and agrees that it shall
retain all Tax records for a period of at least three years, or such longer
period that the Stockholders may reasonably request before the end of the
three-year period, and that the Stockholders will be entitled to reasonable
access to and copies of all documents, books, records (including Tax records),
agreements and financial data of any sort relating to PCPlus (subject to
obligations regarding confidentiality binding upon the Stockholders) in
connection with (i) the preparation of any federal, state or local income or use
Tax returns, (ii) any audit being conducted by any governmental authority or
(iii) for other similar purposes.
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9.2. Litigation Support. In the event and for so long as any Party actively is
---------------------
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving PCPlus, each of the other Parties will cooperate with him and his
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Article 12 below).
9.3. Transition. None of the Stockholders will take any action that is designed
-----------
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of PCPlus from maintaining the same
business relationships with the Surviving Corporation after the Closing as it
maintained with PCPlus prior to the Closing.
9.4. Confidentiality
---------------
9.4.a. Except to the extent reasonably necessary to satisfy any Tax or
legal reporting requirement in connection with the conduct of ImagingCo's
business or the business of the Surviving Corporation, each of the Stockholders
will treat and hold as such all of the Confidential Information, refrain from
using any of the Confidential Information except in connection with this
Agreement, and deliver promptly to MLC or lawfully destroy, at the request and
option of MLC, all tangible embodiments (and all copies) of the Confidential
Information which are in his or her possession.
9.4.b. Except to the extent reasonably necessary to satisfy any Tax or
legal reporting requirement in connection with the conduct of VAR Business or
the business of the Surviving Corporation, MLC and Network Solutions will treat
and hold as such all of the Confidential Information that relates to the
Spin-Off Assets and the imaging business conducted by PCPlus, refrain from using
any of the Confidential Information except in connection with this Agreement,
and deliver promptly to the Stockholders or lawfully destroy, at the request and
option of the Stockholders, all tangible embodiments (and all copies) of the
Confidential Information which are in their possession.
9.4.c. In the event that either party (any Stockholder, with respect to
Confidential Information described in 9.4(a) above, and MLC with respect to
9.4(b) above) is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information under which he or it is under an obligation pursuant to this Section
9.4, such party will notify the other party promptly of the request or
requirement so that the other party may seek, at its sole expense, an
appropriate protective order or waive compliance with the provisions of this
Section 9.4. If, in the absence of a protective order or the receipt of a waiver
hereunder, any party is, on the advice of counsel, compelled to disclose any
33
<PAGE>
Confidential Information to any tribunal or else stand liable for contempt, then
such party may disclose the Confidential Information to such tribunal; provided,
however, that the disclosing party shall use his or its best efforts to obtain,
at the request of the nondisclosing party and at the nondisclosing party's
expense, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the nondisclosing party shall designate. The foregoing provisions
shall not apply to any Confidential Information which is generally available to
the public immediately prior to the time of disclosure.
9.5. Covenant Not to Compete. For a period of the greater of (i) four years from
------------------------
and after the Closing Date or (ii) two years from and after the date he ceases
employment with the Surviving Corporation for any reason, Nadim Achi will not
engage directly or indirectly in any VAR business that the Surviving Corporation
or MLC conducts as of the Closing Date including, without limitation, equipment
leasing and equipment financing. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 9.5 is invalid
or unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed. The restrictions set forth in this Section
9.5 shall be inapplicable in the event of MLC's bankruptcy, dissolution or
forced reorganization. Nothing contained in this Section 9.5 shall in any way
preclude the involvement of Nadim Achi in the imaging and other non-VAR
businesses of ImagingCo, provided that such non-VAR businesses do not consist of
businesses that relate to computer leasing and equipment financing.
9.6. Listing. MLC shall use its best efforts to effect, at or before the
--------
issuance of any MLC Common Shares issued as Merger Consideration pursuant to
Article 4, authorization for listing or quotation of such MLC Common Shares on
Nasdaq, subject to official notice of issuance.
9.7. Reporting of Transaction. Each of the Parties shall report the Merger on
--------------------------
his, her or its respective Tax Returns as a reorganization within the meaning of
Sections 368(a)1)(A) and 368(a)(2)(D) of the Code.
9.8. Reorganization. From and after the Effective Time, the Stockholders shall
---------------
not knowingly taking any action, or knowingly fail to take any action, that
would cause a disqualification of the Merger as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
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ARTICLE 10
CONDITIONS TO OBLIGATION TO CLOSE
10.1. Conditions to Each Party's Obligation. The respective obligations of MLC,
--------------------------------------
Network Solutions, PCPlus and the Stockholders to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Closing Date of each of the following conditions, which conditions may be waived
upon the written consent of MLC and the Stockholders:
10.2. MLC Board Approval. The Board of Directors of MLC shall have approved the
-------------------
Merger in accordance with applicable law and approved the issuance of the Share
Consideration pursuant to the terms of this Agreement.
10.3. PCPlus Board and Stockholder Approval. The Board of Directors of PCPlus
--------------------------------------
and the Stockholders shall have approved the Merger in accordance with
applicable law.
10.4. Governmental Approvals. The Parties shall have received all other
------------------------
authorizations, consents, and approvals of governments and governmental agencies
referred to in Section 5.1, Section 6.4, and Section 7.3 above.
10.5. No Injunction or Proceedings. There shall not be in effect any
-------------------------------
action, suit, or proceeding pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge that would, in the reasonable
judgment of MLC or PCPlus, (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation, (C) affect adversely
the right of MLC to own the capital stock of the Surviving Corporation, or (D)
affect adversely the right of the Surviving Corporation to own its assets and to
operate its businesses (and no such injunction, judgment, order, decree, ruling,
or charge is in effect).
10.6. No Suspension of Trading, Etc. At the Effective Time, there shall be no
-------------------------------
suspension of trading in MLC Common Shares on Nasdaq, declaration of a banking
moratorium by federal or state authorities or any suspension of payments by
banks in the United States (whether mandatory or not) or of the extension of
credit by lending institutions in the United States, or commencement of war or
other international, armed hostility or national calamity directly or indirectly
involving the United States, which war, hostility or calamity (or any material
acceleration or worsening thereof), in the sole judgment of MLC, would have a
Material Adverse Effect on PCPlus or, in the sole judgment of the Stockholders,
would have a Material Adverse Effect on MLC.
10.7. Employment Agreements. Nadim Achi shall have entered into an employment
-----------------------
agreement with MLC in substantially the form attach hereto as Exhibit A.
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10.8. Escrow Agreement. MLC and the Stockholders shall have executed and
-------------------
delivered counterparts of the Escrow Agreement in the form attached hereto as
Exhibit B, together with any counterparts signed by the Escrow Agent and blank
stock powers executed by each of the Stockholders with respect to the MLC Common
Shares to be held in the Escrow Deposit.
10.9. ImagingCo Lease. The lease, in substantially the form attached hereto as
----------------
Exhibit C, shall have been executed and delivered by the parties thereto.
10.10. Sales and Marketing Agreement. The sales and marketing agreement, in
-------------------------------
substantially the for attached hereto, shall have been executed and delivered by
the parties thereto.
10.11. Conditions to Obligation of Network Solutions and MLC. The obligations of
-------------------------------------------------------
Network Solutions and MLC to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
10.11.a. the Stockholders and PCPlus shall have delivered to Network
Solutions and MLC a certificate to the effect that:
10.11.a.i.. the representations and warranties set forth in Article 5 and
Article 7 above are true and correct in all material respects at and as of the
Closing Date;
10.11.a.ii. the Stockholders and PCPlus have performed and complied with
all of their covenants hereunder in all material respects at and as of the
Closing Date;
10.11.a.iii. PCPlus has procured all of the third party consents specified
in Section 7.3 above; and
10.11.a.iv. no action, suit, or proceeding is pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge that would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of MLC to own the capital
stock of the surviving Corporation, or (D) affect adversely the right of the
Surviving Corporation to own its assets and to operate its businesses (and no
such injunction, judgment, order, decree, ruling, or charge is in effect);
10.11.b. NetworkSolutions and MLC shall have received an opinion dated as
of the Closing Date from Silverstein and Mullens, P.L.L.C., counsel to the
Stockholders and PCPlus, addressed and in form satisfactory to Network Solutions
and MLC;
10.11.c. MLC shall have received the resignations, effective as of the
Closing, of each director and officer of PCPlus other than those whom MLC shall
have specified in writing prior to the Closing;
36
<PAGE>
10.11.d. MLC shall have received satisfactory evidence that all bonus plans
under which officers, directors or employees of PCPlus are beneficiaries have
been terminated as of the Closing Date; and
10.11.e. The Spin-Off Assets have been transferred to ImagingCo
substantially in the manner described on Schedule 10.2(e) attached hereto. MLC
may waive any condition specified in this Section 10.2 if it executes a writing
so stating at or prior to the Closing.
10.12. Conditions to Obligation of the Stockholders and PCPlus. The obligation
---------------------------------------------------------
of the Stockholders and PCPlus to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
10.12.a. Network Solutions and MLC shall have delivered to Stockholders and
PCPlus a certificate to the effect that:
10.12.a.i. the representations and warranties set forth in Article 6 above
shall be true and correct in all material respects at and as of the Closing
Date;
10.12.a.ii. Network Solutions and MLC shall have performed and complied
with all of its covenants hereunder in all material respects through the
Closing; and no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
10.12.b MLC shall have delivered to the Stockholders the Share
Consideration pursuant to Section 4.2 and shall have paid the Cash Consideration
by wire transfer, in immediate available funds, to an account at a bank
designated by the Representative.
10.12.c. since December 31, 1997, there shall not have occurred or been
threatened any changes in the business, properties, operations or condition
(financial or otherwise) of MLC which would have a Material Adverse Effect;
10.12.d. the Stockholders shall have received an opinion dated as of the
Closing Date from Hazel & Thomas, P.C., counsel to Network Solutions and MLC,
addressed and in form satisfactory to the Stockholders;
10.12.e. the Stockholders shall have received an opinion dated as of the
Closing Date from Shaw Pittman Potts & Trowbridge, counsel to Network Solutions
and MLC, addressed and in form satisfactory to the Stockholders; and
10.12.f. MLC and the Representative have reached an agreement as to MLC
stock options to be issued to employees of PC Plus who continue to work for
Network Solutions.
The Stockholders may waive any condition specified in this Section 10.3 if they
execute a writing so stating at or prior to the Closing.
37
<PAGE>
ARTICLE 11
TERMINATION
11.1. Termination by Mutual Consent. This Agreement may be terminated and the
--------------------------------
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the Stockholders or the stockholders of Network Solutions,
respectively, by the mutual written consent of MLC and the Representative.
11.2. Termination by Either MLC or PCPlus. This Agreement may be terminated and
------------------------------------
the Merger may be abandoned (a) by action of the Board of Directors of MLC in
the event of a failure of a condition to the obligations of MLC or the Network
Solutions set forth in Section 10.2 of this Agreement; or (b) by the
Representative in the event of a failure of a condition to the obligations of
the Stockholders or PCPlus set forth in Section 10.3 of this Agreement; or (c)
by MLC or the Representative, in their sole discretion, in the event that the
Merger Share price is less than $10.00; or (d) if a United States federal or
state court of competent jurisdiction or United States federal or state
governmental agency shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such other, decree, ruling or
other action shall have become final and non-appealable; or (e) the Effective
Time has not occurred by July 15, 1998; and provided, in the case of a
termination pursuant to clause (a), (b) or (e) above, that the terminating party
shall not have breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in said clause. In the event of a
termination by MLC pursuant to clause (c) above, MLC shall pay to PCPlus an
amount equal to all of PCPlus' out-of-pocket expenses incurred in connection
with this Agreement and the proposed Merger, including, without limitation,
reasonable attorneys' fees, up to a maximum amount of $100,000.
11.3. Effect of Termination and Abandonment. In the event of termination of this
--------------------------------------
Agreement and abandonment of the Merger pursuant to this Article 11, no party
hereto (or any of its directors or officers) shall, except as provided in
Section 11.2 above, have any liability or further obligation to any other party
to this Agreement, except that nothing herein will relieve any party from
liability for any breach of this Agreement.
38
<PAGE>
ARTICLE 12
INDEMNIFICATION
12.1. Indemnity Obligations of the Stockholders. Subject to Section 12.5 and
---------------------------------------------
Section 12.6, each of the Stockholders hereby jointly and severally agrees to
indemnify and hold MLC and Network Solutions harmless from, and to reimburse MLC
and Network Solutions for, any MLC Indemnity Claims arising under the terms and
conditions of this Agreement. For purposes of this Agreement, the term "MLC
Indemnity Claim" shall mean any loss, damage, deficiency, claim, liability,
obligation, suit, action, fee, cost or expense of any nature whatsoever
resulting from (i) any breach of any representation and warranty of the
Stockholders or PCPlus which is contained in this Agreement or any Schedule,
Exhibit or certificate delivered pursuant thereto; (ii) any breach or
non-fulfillment of, or any failure to perform, any of the covenants, agreements
or undertakings of the Stockholders or PCPlus which are contained in or made
pursuant to this Agreement; and (iii) all interest, penalties and costs and
expenses (including, without limitation, all reasonable fees and disbursements
of counsel) arising out of or related to any indemnification made under this
Section 12.1.
12.2. Indemnity Olbigations of MLC and Network Solutions. MLC and Network
-------------------------------------------------------
Solutions hereby jointly and severally agree to indemnify and hold each of the
Stockholders harmless from, and to reimburse each of the Stockholders for, any
Stockholder Indemnity Claims arising under the terms and conditions of this
Agreement. For purposes of this Agreement, the term "Stockholder Indemnity
Claim" shall mean any loss, damage, deficiency, claim, liability, suit, action,
fee, cost or expense of any nature whatsoever incurred by the Stockholders
resulting from (i) any breach of any representation and warranty of Network
Solutions or MLC which is contained in this Agreement or any Schedule, Exhibit
or certificate delivered pursuant thereto; any breach or non-fulfillment of, or
failure to perform, any of the covenants, agreements or undertakings of Network
Solutions or MLC which are contained in or made pursuant to the terms and
conditions of this Agreement; and (iii) all interest, penalties, costs and
expenses (including, without limitation, all reasonable fees and disbursements
of counsel) arising out of or related to any indemnification made under this
Section 12.2.
12.3. Appointment of Representative. Each of the Stockholders hereby appoints
------------------------------
Nadim Achi as its exclusive agent to act on its behalf with respect to any and
all Stockholder Indemnity Claims and any and all MLC Indemnity Claims arising
under this Agreement or such other representative as may be hereafter appointed
by a majority in interest of the Stockholders. Such agent is hereinafter
referred to as the "Representative." The Representative shall take, and the
Stockholders agree that the Representative shall take, any and all actions which
the Representative believes are necessary, desirable or appropriate under this
Agreement for and on behalf of the Stockholders, as fully as if such parties
were acting on their own behalf, including, without limitation, asserting
Stockholder Indemnity Claims against MLC, defending all MLC Indemnity Claims,
consenting to, compromising or settling all Stockholder Indemnity Claims and MLC
39
<PAGE>
Indemnity Claims, conducting negotiations with MLC and its representatives
regarding such claims, dealing with MLC and the Escrow Agent under the Escrow
Agreement referred to in Section 12.7(a) below with respect to all matters
arising under the Escrow Agreement, taking any and all other actions specified
in or contemplated by this Agreement and engaging counsel, accountants or other
representatives in connection with the foregoing matters. MLC shall have the
right to rely upon all actions taken or omitted to be taken by the
Representative pursuant to this Agreement, all of which actions or omissions
shall be legally binding upon the Stockholders. The Representative, acting
pursuant to this Section 12.3, shall not be liable to any other Stockholder for
any act or omission, except in connection with any act or omission that was the
result of the Representative's bad faith or gross negligence.
12.4. Notification of Claims. Subject to the provisions of Section 12.5 and
------------------------
Section 12.6, in the event of the occurrence of an event which any party asserts
constitutes a MLC Indemnity Claim or a Stockholder Indemnity Claim, as
applicable, such party shall provide the indemnifying party with prompt notice
of such event and shall otherwise make available to the indemnifying party all
relevant information which is material to the claim and which is in the
possession of the indemnified party. If such event involves the claim of any
third party (a "Third-Party Claim"), the indemnifying party shall have the right
to elect to join in the defense, settlement, adjustment or compromise of any
such Third-Party Claim, and to employ counsel to assist such indemnifying party
in connection with the handling of such claim, at the sole expense of the
indemnifying party, and no such claim shall be settled, adjusted or compromised,
or the defense thereof terminated, without the prior written consent of the
indemnifying party unless and until the indemnifying party shall have failed,
after the lapse of a reasonable period of time, but in no event more than 30
days after written notice to it of the Third-Party Claim, to join in the
defense, settlement, adjustment or compromise of the same. An indemnified
party's failure to give timely notice or to furnish the indemnifying party with
any relevant data and documents in connection with any Third-Party Claim shall
not constitute a defense (in part or in whole) to any claim for indemnification
by such party, except and only to the extent that such failure shall result in
any additional financial cost or material prejudice to the indemnifying party.
If so desired by any indemnifying party, such party may elect, at such party's
sole expense, to assume control of the defense, settlement, adjustment or
compromise of any Third-Party Claim, with counsel reasonably acceptable to the
indemnified parties, insofar as such claim relates to the liability of the
indemnifying party, provided that such indemnifying party shall obtain the
consent of all indemnified parties before entering into any settlement,
adjustment or compromise of such claims, or ceasing to defend against such
claims, if as a result thereof, or pursuant thereto, there would be imposed on
an indemnified party any material liability or obligation not covered by the
indemnity obligations of the indemnifying parties under this Agreement
(including, without limitation, any injunctive relief or other remedy). In
connection with any Third-Party Claim, the indemnified party, or the
indemnifying party if it has assumed the defense of such claim pursuant to the
preceding sentence, shall diligently pursue the defense of such Third-Party
Claim.
40
<PAGE>
12.5. Survival. All representations and warranties, and, except as otherwise
---------
provided in this Agreement, all covenants and agreements of the parties
contained in or made pursuant to this Agreement, and the rights of the parties
to seek indemnification with respect thereto, shall survive for a period of two
years from the Closing Date; provided, however, the representations and
warranties contained in Section 7.23 (solely insofar as such representations and
warranties contained in Section 7.23 relate to environmental matters) shall
survive for a period of three years from the Closing Date and the
representations and warranties contained in Sections and 7.11 shall survive
until the expiration of the applicable statute of limitations with respect to
the matters covered thereby. No claim shall be made after the applicable
survival period.
12.6. Limitations. Notwithstanding the foregoing, any claim by an indemnified
------------
party against any indemnifying party under this Agreement shall be payable by
the indemnifying party only in the event, and to the extent, that the
accumulated amount of the claims in respect of such indemnifying party's
obligations to indemnify under this Agreement shall exceed $60,000 in the
aggregate (the "Indemnification Threshold"); provided, however, that the
Indemnification Threshold shall not be applicable to MLC Indemnity Claims and
Third-Party Indemnity Claims resulting from breaches by PCPlus or the
Stockholders of the representations and warranties contained in Sections 5.4,
7.2 and 7.11 ("Special Claims"), which upon resolution of such Claims or
judgment, shall be paid on a dollar-for-dollar basis without regard to the
Indemnification Threshold.
12.7. Escrow.
12.7.a. The Stockholders shall deposit into escrow, with the Escrow Agent
named in the Escrow Agreement, such number of MLC Common Shares issued in
connection with the Merger having an aggregate value (based on the Merger Share
Price) of five percent of the Merger Consideration (such deposit being referred
to as the "Escrow Deposit"). Until such time as the aggregate amount of MLC
Indemnity Claims in excess of the Indemnification Threshold and Special Claims
which have been definitively resolved to be payable in favor of MLC or Network
Solutions shall equal or exceed the amount of the Deemed Escrow Value (as
hereinafter defined), all MLC Indemnity Claims and Special Claims shall be
satisfied first out of the MLC Common Shares held in the Escrow Deposit, as
further provided under the terms of the Escrow Agreement. For purposes hereof,
all MLC Common Shares returned to MLC in settlement of any MLC Indemnity Claims
under the Escrow Agreement shall be valued at the Merger Share Price. At such
time as the aggregate amount of MLC Indemnity Claims in excess of the
Indemnification Threshold and Special Claims which have been definitively
resolved to be payable in favor of MLC or Network Solutions shall exceed the
Deemed Escrow Value, each of the Stockholders shall thereafter be jointly and
severally liable to MLC or Network Solutions for such claims. The liability of
the Stockholders for payable MLC Indemnity Claims in excess of the Deemed Escrow
Value may be satisfied, at the election of each Stockholder, through (i) the
delivery of MLC Common Shares to MLC, such shares to be valued at the Merger
Share Price, (ii) the payment of cash or (iii) any combination of such MLC
Common Shares valued at the Merger Share Price and cash.
41
<PAGE>
12.7.b. For purposes of this Agreement, the term "Deemed Escrow Value"
shall mean the value of the MLC Common Shares to be transferred by the
Stockholders into the Escrow Deposit, determined by multiplying such number of
MLC Common Shares times the Merger Share Price.
12.7.c. Subject to the terms set forth in the Escrow Agreement, the maximum
term of the Escrow Agreement shall be for a period of two years and the MLC
Common Shares held in escrow shall be distributed to the Stockholders in
accordance with the terms thereof.
12.8. Payment of Indemnity Claims. Notwithstanding anything to the contrary
------------------------------
herein, any liability of Network Solutions and MLC under this Agreement for
Stockholder Indemnity Claims (other than pursuant to item (iii) of Section 12.2)
shall be satisfied solely through the issuance of additional MLC Common Shares,
such additional MLC Common Shares to be valued at the Merger Share Price and to
be issued on a pro rata basis to the Stockholders based on their relative equity
interests in PCPlus immediately prior to the consummation of the Merger. With
respect to any MLC Common Shares to be returned to the MLC by the Stockholders
in settlement of MLC Indemnity Claims pursuant to this Section 12.8, any
dividends previously paid in respect of such returned MLC Common Shares (whether
paid in cash, MLC Common Shares or other property) shall also be returned to the
MLC.
12.9. Offsets to Liability.
---------------------
12.9.a. If any claims are made by third parties against an indemnified
party for which an indemnifying party would be liable, and it appears likely
that such claims might also be covered by the indemnified party's insurance
policies, the indemnified party shall make a timely claim under such policies
and to the extent that such party obtains any recovery from such insurance, such
recovery shall be offset against any sums due from an indemnifying party (or
shall be repaid by the indemnified party to the extent that an indemnifying
party has already paid any such amounts). Notwithstanding the foregoing, the
failure, for any reason, of the indemnified party to receive a recovery under
such insurance policies on any claim shall in no way affect the rights of the
indemnified to seek payment with respect to such claim from the indemnifying
party.
12.9.b. Any sums otherwise due hereunder to an indemnified party shall be
reduced by the tax benefits realized or to be realized, if any, by such party as
a result of the losses, claims, obligations, payments or encumbrances with
respect to which indemnification is sought. All indemnification payments under
this Article 12 shall be deemed adjustments to the Merger Consideration
described in Article 4 above.
42
<PAGE>
ARTICLE 13
MISCELLANEOUS
13.1 Press Releases and Public Announcements. No Party shall issue any press
-------------------------------------------
release or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of MLC and the
Representative; provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Parties prior to
making the disclosure).
13.2. No Third Party Beneficiaries. This Agreement shall not confer any rights
------------------------------
or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
13.3. Entire Agreement. This Agreement (including the documents referred to
------------------
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
13.4. Succession and Assignment. This Agreement shall be binding upon and inure
---------------------------
to the benefit of the Parties named herein and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of his
rights, interests, or obligations hereunder without the prior written approval
of MLC and the Representative; provided, however, that MLC may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases MLC nonetheless shall remain responsible
for the performance of all of its obligations hereunder).
13.5. Counterparts. This Agreement may be executed in one or more counterparts,
-------------
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
13.6. Headings. The section headings contained in this Agreement are inserted
---------
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
43
<PAGE>
13.7. Notices. All notices, requests, demands, claims, and other communications
--------
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to PCPlus or the Stockholders:
---------------------------------
Nadim Achi
1851 Alexander Bell Drive
Reston, VA20191
With copy to:
-------------
Silverstein and Mullens, P.L.L.C.
1776 K Street, N.W.
Suite 800
Washington, D.C. 20006
Attn: John P. Warner, Esq.
Telecopy: (202) 452-7989
If to MLC and Network Solutions:
--------------------------------
Kleyton L. Parkhurst
Secretary and Treasurer
MLC Holdings, Inc.
11150 Sunset Hills Road
Suite 110
Reston, Virginia
Telecopy: (703) 834-5710
With copy to:
-------------
Shaw Pittman Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Attn: John M. McDonald, Esq.
Telecopy: (202) 663-8007
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
notice, request, demand, claim or other communication that is sent by telecopy,
telex or electronic mail shall be followed up by a hard copy to the Party
addressed within a reasonable period of time not to exceed five days. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
44
<PAGE>
13.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
---------------
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
13.9.Amendments and Waivers. No amendment of any provision of this Agreement
-----------------------
shall be valid unless the same shall be in writing and signed by MLC and
the Representative. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
13.10. Severability. Any term or provision of this Agreement that is
--------------
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
13.11. Expenses. The Stockholders agree that they, and not PCPlus, will
---------
bear all of the costs and expenses (including any of their legal fees and
expenses) incurred on their behalf or on behalf of PCPlus after the
Effective Time in connection with this Agreement or any of the transactions
contemplated hereby.
13.12. Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance.
13.13. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
----------------------------------------
identified in this Agreement are incorporated herein by reference and made
a part hereof.
13.14. Specific Performance. Each of the Parties acknowledges and agrees
----------------------
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter (subject to the
provisions set forth in Section 13.15 below), in addition to any other
remedy to which they may be entitled, at law or in equity.
45
<PAGE>
13.15. Submission to Jurisdiction. Each of the Parties submits to the
-----------------------------
jurisdiction of any state or federal court sitting in the Commonwealth of
Virginia, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court.
13.16. Counterparts. This Agreement may be executed in two or more
-------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
MLC:
MLC HOLDINGS, INC.
/s/ Phillip G. Norton
---------------------------
By: Phillip G. Norton
Its: Chairman, President
& CEO
NETWORK SOLUTIONS:
MLC NETWORK SOLUTIONS OF
VIRGINIA, INC.
/s/ Phillip G. Norton
---------------------
By: Phillip G. Norton
Its: Chairman and
Chief Operating Office
PCPLUS:
PCPLUS, INC.
/s/ Nadim Achi
---------------
By: Nadim Achi
Its: President
STOCKHOLDERS:
/s/ Camille Achi__________
Camille Achi
46
<PAGE>
/s/ Nabil Achi_____________
Nabil Achi
/s/ Nadim Achi_ ___________
Nadim Achi
/s/ Ramzi Achi_____________
Ramzi Achi
/s/ Walid Achi_____________
Walid Achi
/s/ Marwan Bitar___________
Marwan Bitar
/s/ Rachad Dernaika________
Rachad Dernaika
/s/ Sahar Dernaika ________
Sahar Dernaika
/s/ Mireille Fayad ________
Mireille Fayad
/s/ Noureddin Driss _______
Noureddin Driss
/s/ Khalil/Noura Haddad ___
Khalil/Noura
Haddad
/s/ Rony Seikaly __________
Rony Seikaly
47
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
Number
<C> <S> <C>
ARTICLE 1 DEFINITIONS ................................... 7
1.1 Terms Defined in this Agreement ......................... 7.00
ARTICLE 2 MERGER; EFFECTIVE TIME; CLOSING ............... 12.00
2.1 Merger .................................................. 12.00
2.2 Effective Time .......................................... 12.00
2.3 The Closing ............................................. 13.00
ARTICLE 3 ARTICLES OF INCORPORATION; BY-LAWS; AND DIRECTORS AND
OFFICERS OF SURVIVING CORPORATION 13
3.1 Articles of Incorporation ......................................... 13.00
3.2 By-Laws ........................................................... 13.00
3.3 Directors and Officers ............................................ 13.00
ARTICLE 4 MERGER CONSIDERATION; PAYMENT
OF MERGER CONSIDERATION ........................................... 13
4.1 Merger Consideration; Conversion or Cancellation of PCPlus Common
Shares in Merger ..................................... 13.00
4.2 Determination of Merger Consideration ................ 14.00
4.3 Post-Closing Adjustment .............................. 14.00
4.4 Fractional MLC Common Shares ......................... 15.00
4.5 Transfer of PCPlus Common Shares ..................... 15.00
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INDIVIDUAL STOCKHOLDERS 15
5.1 Authorization of Transaction ......................... 15.00
5.2 Noncontravention ..................................... 15.00
5.3 PCPlus Common Shares ................................. 15.00
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF NETWORK SOLUTIONS AND MLC 16
6.1 Organization of Network Solutions and MLC ................. 16.00
6.2 Capital Stock ............................................. 16.00
6.3 Authorization for Common Stock ............................ 16.00
6.4 Authorization of Transaction .............................. 16.00
6.5 Noncontravention .......................................... 17.00
6.6 Brokers' Fees ............................................. 17.00
6.7 Nasdaq National Market .................................... 17.00
6.8 Owner of Network Solutions ................................ 17.00
6.9 Disclosure ................................................ 17.00
ARTICLE 7 REPRESENTATIONS AND WARRANTIES CONCERNING PCPLUS. 17
7.1 Organization, Qualification, and Corporate Power .......... 18.00
7.2 Capitalization ............................................ 18.00
7.3 Authorization of Transaction .............................. 18.00
7.4 Noncontravention .......................................... 18.00
7.5 Title to Assets ........................................... 19.00
7.6 Subsidiaries .............................................. 19.00
7.7 Financial Statements ...................................... 19.00
7.8 Events Subsequent to Most Recent Fiscal Year End .......... 19.00
7.9 Undisclosed Liabilities.................................... 21.00
7.10 Legal Compliance........................................... 21.00
7.11 Tax Matters................................................ 21.00
7.12 Real Property.............................................. 22.00
7.13 Intellectual Property...................................... 22.00
7.14 Tangible Assets............................................ 23.00
7.15 Contracts.................................................. 23.00
7.16 Notes and Accounts Receivable.............................. 24.00
7.17 Powers of Attorney......................................... 24.00
7.18 Insurance.................................................. 24.00
7.19 Litigation................................................. 25.00
7.20 Employees.................................................. 25.00
7.21 Employee Benefits ......................................... 25.00
7.22 Guaranties ................................................ 27.00
7.23 Environment, Health, and Safety ........................... 27.00
7.24 Customers ................................................. 28.00
7.25 Related Party Agreements .................................. 28.00
7.26 Product Liability ......................................... 28.00
7.27 Bank Accounts ............................................. 28.00
7.28 Change in Control ......................................... 28.00
7.29 Inventory ................................................. 28.00
7.30 Spin-Off Assets ........................................... 28.00
7.31 Disclosures................................................ 28.00
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<PAGE>
ARTICLE 8 PRE-CLOSING COVENANTS ......................... 29
8.1 General ................................................. 29.00
8.2 Notices and Consents .................................... 29.00
8.3 Maintenance of Business; Prohibited Acts ................ 29.00
8.4 Full Access ............................................. 31.00
8.5 Notice of Developments .................................. 31.00
8.6 Tax Matters ............................................. 31.00
8.7 Reorganization ............................................. 31.00
8.8 PCPlus Stockholder Approval ................................ 31.00
8.9 Exclusivity ................................................ 31.00
ARTICLE 9 Post-Closing Covenants ........................... 32
9.1 General ..................................................... 32.00
9.2 Litigation Support .......................................... 33.00
9.3 Transition .................................................. 33.00
9.4 Confidentiality ............................................. 33.00
9.5 Covenant Not to Compete ..................................... 34.00
9.6 Listing ..................................................... 34.00
9.7 Reporting of Transaction .................................... 34.00
9.8 Reorganization .............................................. 34.00
ARTICLE 10 CONDITIONS TO OBLIGATION TO CLOSE ................ 35.00
10.1 Conditions to Each Party's Obligation ....................... 35.00
10.2 Conditions to Obligation of Network Solutions and MLC ....... 35.00
10.3 Conditions to Obligation of the Stockholders and PCPlus ..... 35.00
10.4 Governmental Approvals....................................... 35.00
10.5 No Injunction or Proceedings................................. 35.00
10.6 No Suspension of Trading..................................... 35.00
10.7 Employment Agreements........................................ 35.00
10.8 Escrow Agreement............................................. 36.00
10.9 ImagingCo Lease.............................................. 36.00
10.10 Sales and Marketing Agreement................................ 36.00
10.11 Conditions to Obligation of Network Solutions and MLC........ 36.00
10.12 Conditions to Obligation of the Stockholders and PCPlus...... 37.00
ARTICLE 11 TERMINATION ...................................... 38
11.1 Termination by Mutual Consent ............................... 38.00
11.2 Termination by Either MLC or PCPlus ......................... 38.00
11.3 Effect of Termination and Abandonment ....................... 38.00
ARTICLE 12 INDEMNIFICATION .................................. 39
12.1 Indemnity Obligations of the Stockholders ................... 39.00
12.2 Indemnity Obligations of MLC and Network Solutions .......... 39.00
12.3 Appointment of Representative ............................... 39.00
12.4 Notification of Claims ...................................... 40.00
12.5 Survival .................................................... 41.00
12.6 Limitations ................................................. 41.00
12.7 Escrow ............................................... 41.00
12.8 Payment of Stockholder Indemnity Claims .............. 42.00
12.9 Offsets to Liability ................................. 42.00
ARTICLE 13 MISCELLANEOUS ............................. 43
13.1 Press Releases and Public Announcements .............. 43.00
13.2 No Third Party Beneficiaries ......................... 43.00
13.3 Entire Agreement ..................................... 43.00
13.4 Succession and Assignment ............................ 43.00
13.5 Counterparts ......................................... 43.00
13.6 Headings ............................................. 43.00
13.7 Notices .............................................. 44.00
13.8 Governing Law ........................................ 45.00
13.9 Amendments and Waivers ............................... 45.00
13.10 Severability ......................................... 45.00
13.11 Expenses ............................................. 45.00
13.12 Construction ......................................... 45.00
13.13 Incorporation of Exhibits and Schedules .............. 45.00
13.14 Specific Performance ................................. 45.00
13.15 Submission to Jurisdiction ........................... 46.00
13.16 Counterparts ......................................... 46.00
</TABLE>
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<PAGE>
SCHEDULES AND EXHIBITS:
Exhibit A -- Form of Employment Agreement
Exhibit B -- Form of Escrow Agreement
Exhibit C -- Form of Lease
Disclosure Schedule -- Exceptions to Representations and Warranties
Concerning the Stockholders and PCPlus
Exhibit 10.27
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this ____ day of July, 1998,
by MLC Holdings, Inc. a Delaware corporation with its principal place of
business at 11150 Sunset Hills Road, Suite 110, Reston, Virginia (hereinafter
referred to as "MLC" and collectively with all of MLC's subsidiaries and
divisions, the "Employer"), and Nadim Achi residing at 1851 Alexander Bell
Drive, Reston, VA 20191 (the "Executive").
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of the
___ day of July, 1998 (the "Merger Agreement"), by and among MLC, MLC Network
Solutions of Virginia, Inc., a wholly owned subsidiary of MLC ("Network
Solutions"), PC Plus, Inc. ("PCPlus") and the stockholders of PCPlus, PCPlus
merged (the "Merger") with and into Network Solutions and Network Solutions was
the surviving corporation in the Merger;
WHEREAS, the delivery and execution of this Agreement by the Executive was
a material condition to the consummation of the Merger; and
WHEREAS, the parties wish to set forth the terms and conditions upon
which the Employer will employ the Executive.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1) Term of Employment; Title; Duties; Authority. The Employer hereby employs the
---------------------------------------------
Executive, and the Executive hereby accepts employment with the Employer, for a
period of two (2) years from the date hereof (the "Initial Term") and upon the
other terms set forth in this Agreement. The term of this Agreement shall renew
automatically for successive one (1) year periods (each, a "Renewal Term")
unless a party hereto provides written notice to terminate to the other party
prior to thirty (30) days before the end of the Initial Term or any Renewal
Term. The Executive shall serve as the President and Chief Executive Officer of
Network Solutions, which may be a subsidiary or a division of MLC, during the
term of his employment under this Agreement. The Executive shall report to the
person designated by the Chief Executive Officer of MLC and the Executive shall
perform such services consistent with his position as may be reasonably assigned
to him from time to time by such person.
2) Extent of Services. The Employee agrees to devote his entire business time
-------------------
(which shall exclude any permissible vacation time described in Section 7 below)
and attention to the performance of his duties under this Agreement. He shall
perform his duties to the best of his ability and shall use his best efforts to
further the interests of the Employer. To the extent necessary to reasonably
perform his duties hereunder, the Executive shall work at the principal office
of PCPlus located at 1851 Alexander Bell Drive, Reston, Virginia 20191. The
Executive represents and warrants to the
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Employer that he is able to enter into this Agreement and that his ability to
enter into this Agreement and to fully perform his duties hereunder are not
limited to or restricted by any agreements or understandings between the
Executive and any other person. For the purposes of this Agreement, the term
"person" means any natural person, corporation, partnership, limited liability
partnership, limited liability company, or any other entity of any nature.
Notwithstanding the foregoing, the Executive shall be permitted to serve as
chairman of, to provide general oversight services to, and otherwise to
participate in a non-executive capacity in the operations of ImagingCo (as
defined in the Merger Agreement) during non-business hours so as such
participation does not affect or interfere in any material manner, in the
reasonable discretion of Employer, the Executive's performance of his duties
pursuant to this Agreement. The Executive shall be given reasonable
accommodation, including the use of his vacation time or unpaid leave (each as
described in Section 7 below), to permit him to provide the foregoing services
to ImagingCo consistent with his duties hereunder.
3) Base Salary. The Employer shall pay the Executive a base annual salary of
------------
$150,000, subject to such increases as may be approved by the Chief Executive
Officer or the Board of Directors of MLC. The salary shall be payable in monthly
installments of $12,500, minus such deductions as may be required by law or
reasonably requested by the Executive.
4) Bonus. The Executive shall be eligible to receive annual discretionary
------
bonuses determined by the Chief Executive Officer or the Board of Directors of
MLC based on the Executive's performance. The Executive shall also be eligible
to be granted options as determined by the Board of Directors of MLC from time
to time in addition to the options granted pursuant to Section 6 of this
Agreement.
5) Severance.
----------
a) If the Executive is terminated by the Employer without cause at any time
during the term hereof, all of the Executive's non-vested stock options
that would have vested as set forth in Section 6 of this Agreement during
the year of this Agreement in which the termination occurred shall
immediately vest and shall be exercisable by the Employee in accordance
with their terms. If the Executive voluntarily terminates his employment
with Employer or is terminated for cause, no such stock options shall vest.
b) For the purposes of this Agreement, "cause" shall mean any of the
following: (i) gross or willful misconduct in the performance of the
Executive's duties hereunder; (ii) conviction of a crime (other than
traffic violations) involving dishonesty, fraud or moral turpitude; (iii)
physical or mental incapacity for a period of five (5) consecutive months
(such period of incapacity shall be deemed to be continuously consecutive
unless Executive has returned to work on a full-time basis for eight (8)
consecutive weeks); (iv) the occurrence of any wrongful and intentional act
or omission which has a material adverse impact on the financial condition
or financial prospects of Employer; or (v) the failure of the Executive,
for any reason, to devote all of his business time and efforts in a
diligent manner to the performance of his duties and responsibilities
hereunder.
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<PAGE>
6) Stock Options.
--------------
a) Pursuant to MLC's 1996 Stock Incentive Plan (the "Stock Incentive
Plan"), the Executive shall be granted stock options for the purchase of 10,000
shares of common stock of MLC with an exercise price equal to the fair market
value of the common stock on the date on which the Compensation Committee of the
Board of Directors of MLC grants the option (the "Date of Grant"). Subject to
partial early vesting as set forth in Section 5(a) of this Agreement and
provided that the Executive continues to be employed by the Employer, twenty
percent (20%) of such stock options shall vest on each anniversary date of this
Agreement; provided, however, in the event that the Executive voluntarily
terminates this Agreement or the Employer terminates the Executive for cause,
all vested options shall terminate ninety (90) days following the date of
termination. The stock option agreement for such options may contain such other
and further terms as are not inconsistent with this Agreement or the 1996 Stock
Incentive Plan.
b) Subject to Section 5(a), all unvested options shall expire on the date
in which the Executive is no longer employed by the Employer.
7) Fringe Benefits. The Executive shall be entitled to all benefits generally
----------------
available to employees of the Employer of similar levels of authority,
including, without limitation, eight weeks of paid vacation. In addition, the
Executive shall be entitled to the use, at Employer's expense, any car currently
leased by PCPlus until expiration of the lease term and of the use of a company
credit card for business purposes.
8) Reimbursement of Business Expenses. The Employer shall reimburse the
--------------------------------------
Executive in accordance with Employer's policies for all reasonable
out-of-pocket costs incurred or paid by the Executive in connection with, or
related to, the performance of his duties, responsibilities or services under
this Agreement, upon presentation by the Executive of documentation, expense
statements, vouchers, and/or such other supporting information as the Employer
may reasonably request.
9) Non-Competition and Non-Solicitation.
-------------------------------------
a) The Executive agrees that while the Executive is employed pursuant to
this Agreement and for a period of the greater of (i) four years from and after
the Closing Date (as defined in the Merger Agreement) or (ii) two years from and
after the date he ceases employment with the Employer for any reason (the
"Non-Competition Period"), whether by action of the Executive or the Employer,
the Executive will not, except as otherwise provided herein, engage or
participate, directly or indirectly, as principal, agent, executive, director,
proprietor, joint venturer, trustee, employee, employer, consultant,
stockholder, partner or in any other capacity whatsoever, in the conduct or
management of, or own any stock or any other equity investment in or debt of,
any VAR business that the Employer or its affiliates conduct as of the Closing
Date including, without limitation, equipment leasing and equipment financing;
provided, however, that the restrictions set forth in this Section 9(a) shall be
3
<PAGE>
inapplicable (i) with respect to any lines of business of the Employer or its
affiliates in which the Executive has not actively participated in the operation
or management in the event that (a) the Employer terminates the Executive for
any reason other than for cause, (b) the Executive terminates his employment
with Employer for cause or (ii) in the event of MLC's bankruptcy, dissolution or
forced reorganization.
b) During the Non-Competition Period, the Executive will not, for his/her
own benefit or for the benefit of any person or entity other than the Employer,
(i) solicit, or assist any person or entity other than the Employer to solicit,
any officer, director, executive or employee of the Employer to leave his/her
employment, (ii) hire or cause to be hired any present or former officer,
director, executive or employee of the Employer, or (iii) engage any present or
former officer, director, executive or employee of the Employer as a partner,
contractor, sub-contractor, employee or consultant.
c) During the Noncompetition Period, the Executive will not (i) solicit, or
assist any person or entity other than the Employer to solicit, any person or
entity that is a client of the Employer, or has been a client of the Employer
during the preceding twelve (12) months prior to the date of termination, to
lease and/or finance information technology assets or any other products or
services the Employer provides to a client, or (ii) interfere with any of
Employer's business relationships.
d) The Executive acknowledges that (i) the markets served by the Employer
are national in scope and are not dependent on the geographic location within
the United States of the executive personnel or the businesses by which they are
employed; and (ii) the above covenants are manifestly reasonable on their face,
and the parties expressly agree that such restrictions have been designed to be
reasonable and no greater than is required for the protection of the Employer.
e) Nothing in this Agreement shall be deemed to prohibit the Executive from
owning, solely as an investment, securities of any person which are traded on a
national securities exchange or quoted on a inter-dealer quotation system,
provided that such securities constitute two percent (2%) or less of the
outstanding equity securities of any such person and the Executive is not a
controlling person of, or a member of a group which controls, such person.
f) Nothing contained in this Section 9 shall in any way preclude the
involvement of the Executive in the imaging and other non-VAR businesses of
ImagingCo, provided that such non-VAR businesses do not consist of businesses
that involve computer leasing and equipment financing.
10) Confidential Information.
- -----------------------------
a) The Executive shall not (for his own benefit or the benefit of any
person or entity other than the Employer) use or disclose any of the Employer's
trade secrets or other confidential information. The term "trade secrets or
other confidential information" includes, by way of example, matters of a
technical nature, "know-how," computer programs (including documentation of such
programs), research projects, and matters of a business nature, such as
4
<PAGE>
proprietary information about costs, profits, markets, sales, lists of
customers, and other information of a similar nature to the extent not available
to the public and to the extent not independently generated by the Executive or
others without any reference to any of the Employer's trade secrets or other
confidential information, and such materials constituting plans for future
development. After termination of this Agreement, the Executive shall not use or
disclose trade secrets or other confidential information unless such information
becomes a part of the public domain other than through a breach of this
Agreement or is disclosed to the Executive by a third party who is entitled to
receive and disclose such information or such disclosure is required by law.
b) Upon the effective date of notice of the Executive's or the Employer's
election to terminate this Agreement, or at any time upon the request of the
Employer, the Executive (or his heirs or personal representatives) shall deliver
to the Employer all documents and materials containing trade secrets and
confidential information relating to the Employer's business and all documents,
materials and other property belonging to the Employer, which in either case are
in the possession or under the control of the Executive (or his heirs or
personal representatives).
c) All discoveries and works made or conceived by the Executive during and
in the course of his employment by the Employer, jointly or with others, that
relate to the Employer's activities shall be owned by the Employer. The terms
"discoveries and works" include, by way of example, inventions, computer
programs (including documentation of such programs), technical improvements,
processes, drawings, and works of authorship, including sales materials which
relate to direct sales, telemarketing, wall media products, sampling/comparing
or services. The Executive shall promptly notify and make full disclosure to,
and execute and deliver any documents requested by, the Employer to evidence or
better assure title to such discoveries and works by the Employer, assist the
Employer in obtaining or maintaining for itself at its own expense United States
and foreign patents, copyrights, trade secret protection and other protection of
any and all such discoveries and works, and promptly execute, whether during his
employment or thereafter, all applications or other endorsements necessary or
appropriate to maintain patents and other rights for the Employer and to protect
its title thereto. Any discoveries and works which, within six months after the
termination of the Executive's employment by the Employer, are made, disclosed,
reduced to a tangible or written form or description, or are reduced to practice
by the Executive and which pertain to work performed by the Executive while
with, and in his capacity as an employee of, the Employer shall, as between the
Executive and the Employer, be presumed to have been made during the Executive's
employment by the Employer.
11) Enforcement.
- ----------------
a) The parties to this Agreement mutually agree that, in recognition of
Employer's dependence on Executive's experience to carry out its business plan
and Executive's senior and key position in the Employer, the restrictions
detailed in Sections 9 and 10 of this Agreement are necessary and appropriate to
give effect to the intended relationships of the parties. Executive agrees that
because damages arising from violations of Sections 9 and 10 of this Agreement
5
<PAGE>
are extremely difficult to quantify with certainty, injunctive relief will be
necessary to effect the intent of such Sections. Accordingly, Executive hereby
consents to the imposition of otherwise appropriate equitable relief as a remedy
to his breach of Sections 9 and 10 of this Agreement.
b) It is the desire and intent of the parties hereto that the restrictions
set forth in Sections 9 and 10 of this Agreement shall be enforced and adhered
to in every particular, and in the event that any provision, clause or phrase
shall be declared by a court of competent jurisdiction to be judicially
unenforceable either in whole or in part -- whether the fault be in duration,
geographic coverage or scope of activities precluded -- the parties agree that
they will mutually petition the court to sever or limit the unenforceable
provision so as to retain and effectuate to the greatest extent legally
permissible the intent of the parties as expressed in Sections 9 and 10 of this
Agreement; provided, however, that any costs and expenses incurred by the
Executive as a result of such petition shall be reimbursed by the Employer to
the Executive.
12) Miscellaneous.
- ------------------
a) All notices required or permitted under this Agreement shall be in writing
and shall be deemed effective upon personal delivery or upon deposit with
the United States Postal Service, by registered or certified mail, postage
prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the
other in writing from time to time.
b) Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the
singular forms of nouns and pronouns shall include the plural, and vice
versa.
c) This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, whether written or
oral, relating to the subject matter of this Agreement.
d) This Agreement may be amended or modified only by a written instrument
executed by both the Employer and the Executive.
e) This Agreement shall be construed, interpreted and enforced in accordance
with the laws of the Commonwealth of Virginia, without regard to its
conflicts of laws principles.
f) This Agreement shall be binding upon and inure to the benefit of both
parties and their respective successors and assigns; provided, however,
that the obligations of the Executive are personal and shall not be
assigned or delegated by him.
g) No delays or omission by the Employer or the Executive in exercising any
right under this Agreement shall operate as a waiver of that or any other
6
<PAGE>
right. A waiver or consent given by the Employer or the Executive on any
one occasion shall be effective only in that instance and shall not be
construed as a bar or waiver of any right on any other occasion.
h) The captions appearing in this Agreement are for convenience of reference
only and in no way define, limit or affect the scope or substance of any
section of this Agreement
i) In case any provision of this Agreement shall be held by a court with
jurisdiction over the parties to this Agreement to be invalid, illegal or
otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
EXECUTIVE
EMPLOYER
MLC HOLDINGS, INC.
By: _/s/ Phillip G. Norton_________________ /s/ Nadim Achi________
Phillip G. Norton Nadim Achi
Chairman, President and
Chief Executive Officer
Exhibit 10.28
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made as of the 1st day of July, 1998, by and
among MLC Holdings, Inc., a Delaware corporation ("MLC"), Crestar Bank, a
Virginia banking association, as escrow agent (the "Escrow Agent"), and Nadim
Achi, as representative of the Stockholders (as defined below).
W I T N E S S E T H :
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of July
1, 1998 (the "Merger Agreement"), among MLC, MLC Network Solutions of Virginia,
Inc., a Virginia corporation and a wholly owned subsidiary of MLC ("Network
Solutions"), PCPlus, Inc. ("PCPlus"), and the stockholders of PCPlus
(collectively, the "Stockholders"), PCPlus was merged with and into Network
Solutions (the "Merger");
WHEREAS, in connection with the Merger, all of the outstanding shares
of PCPlus' common stock held by the Stockholders will be canceled and converted
into the right to receive the Merger Consideration (as defined in the Merger
agreement), which includes an aggregate of 263,478 shares of MLC's common stock,
$.01 par value (the "MLC Common Shares");
WHEREAS, the Merger Agreement provides that, as soon as practicable
after the Closing Date (as defined in the Merger Agreement), MLC Common Share
certificates representing five percent (5%) of the Merger Consideration based on
the Merger Share Price (as defined below) (the "Escrowed Shares") and stock
powers (executed in blank) with respect thereto shall be deposited by the
Stockholders in escrow (the "Escrow Deposit"), to be held and disposed of by the
Escrow Agent as provided herein;
WHEREAS, pursuant to the Merger Agreement, each of the Stockholders has
appointed Nadim Achi (or such individual as may succeed Nadim Achi pursuant to
the provisions of Section 3 hereof) as his exclusive agent (Nadim Achi or such
other individual being hereinafter referred to as the "Representative") to act
with full authority for him and on his behalf in all matters relating to the
subject matter of this Agreement; and
WHEREAS, MLC and the Representative wish to appoint the Escrow Agent to
serve as the escrow agent hereunder, and the Escrow Agent is willing to do so
upon the terms and conditions hereinafter set forth.
NOW THEREFORE, it is agreed:
1
<PAGE>
SECTION 1
APPOINTMENT OF ESCROW AGENT; CREATION OF ESCROW DEPOSIT
1.1. Appointment of Escrow Agent. MLC and the Representative hereby appoint the
----------------------------
Escrow Agent, and the Escrow Agent hereby agrees to act, as depository and
administrator of the Escrow Deposit, upon the terms and conditions set forth
below.
1.2. Creation of Escrow Deposit. Simultaneously with the execution and delivery
---------------------------
of this Agreement, the Stockholders, pursuant to the Merger Agreement, (i) have
executed and delivered to MLC irrevocable instructions to deduct the Escrowed
Shares from the number of MLC Common Shares otherwise deliverable to the
Stockholders in connection with the Merger and to deposit on behalf of the
Stockholders the Escrowed Shares with the Escrow Agent in the Escrow Deposit and
(ii) have delivered to the Escrow Agent, for deposit into the Escrow Deposit,
stock powers (executed in blank) covering the Escrowed Shares, the receipt of
such Escrowed Shares and stock powers is hereby acknowledged by the Escrow
Agent. In addition, the Representative hereby (i) authorizes MLC to deliver
directly to the Escrow Agent all dividends and other distributions made in
respect of any Escrowed Shares held in the Escrow Deposit (whether paid in cash,
securities or other property), all of which dividends and other distributions
shall be added to and become part of the Escrow Deposit, and (ii) agrees to
deliver or cause to be delivered to the Escrow Agent such additional stock
powers and other instruments of transfer (executed in blank) as MLC shall
reasonably request from time to time in respect of all securities and other
property deposited into the Escrow Deposit pursuant to clause (i) of this
sentence.
1.3. Stockholder Rights. While any MLC Common Shares are held in the
-------------------
Escrow Deposit, and pending the disbursement thereof to MLC or the Stockholders,
as the case may be, in connection with any disbursement of property from the
Escrow Deposit in accordance with Section 2, the Stockholders shall have all
rights with respect thereto (including, without limitation, the right to vote
such shares), except (i) the right of possession thereof, (ii) the right to
assign or pledge such shares or any interest therein and (iii) the right to
possession of any dividends or other distributions received in respect thereof.
1.4. Stockholder Percentage Interest in Escrow Deposit. Attached hereto as
-----------------------------------------------------
Schedule 1.4 is a schedule listing each Stockholder, such Stockholder's address
and Social Security or other tax identification number and such Stockholder's
interest in the Escrow Deposit (expressed as a percentage, based on the number
of Escrowed Shares delivered to the Escrow Agent at the Closing Date on behalf
of such Stockholder).
1.5. Merger Share Price. The average share price is $13.50 per Escrowed Share
-------------------
(the "Merger Share Price").
2
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SECTION 2
DISPOSITION OF ESCROW DEPOSIT
2.1. Term of Escrow Deposit.
----------------------
2.1.a. The Escrowed Shares held in the Escrow Deposit shall be held by the
Escrow Agent on the terms and subject to the conditions set forth herein and in
the Merger Agreement (but the Escrow Agent shall have no responsibility with
respect to the Merger Agreement other than to perform as provided in this
Agreement) to satisfy the indemnification obligations of the Stockholders
pursuant to Section 12 of the Merger Agreement. The Escrow Agent shall release a
portion of the Escrow Deposit to the Representative on the close of business on
the first anniversary of the Closing Date (the "Initial Expiration Date"),
subject to the terms and conditions set forth in Sections 2.7(a) and 2.8.
2.1.b. The Escrowed Shares held in the Escrow Deposit after the Initial
Expiration Date shall be held by the Escrow Agent on the terms and subject to
the conditions set forth herein and in the Arrow Agreement until the first
anniversary of the Closing Date (the "Final Expiration Date" and collectively
with the Initial Expiration Date, the "Expiration Dates"). Notwithstanding the
foregoing, any amount that constitutes a Claim Reserve (as defined in Section
2.6) shall be released prior to the Final Expiration Date in accordance with
Section 2.8. On the Final Expiration Date, the Escrow Agent shall release the
remaining Escrowed Purchase Price held in the Escrow Deposit to the Selling
Persons, subject to the terms and conditions set forth in Sections 2.7(b) and
2.8
2.2. MLC Indemnity Claims. In the event of the occurrence of an event which MLC
---------------------
in its reasonable judgment asserts constitutes a MLC Indemnity Claim (as defined
in the Merger Agreement), MLC shall furnish notice of such event (the "Indemnity
Notice") to the Representative and the Escrow Agent promptly (and in any event
on or prior to the Expiration Date), setting forth MLC's then good-faith
estimate of the reasonably foreseeable maximum amount of its MLC Indemnity
Claim, and shall make available to the Representative all relevant information
which is material to such MLC Indemnity Claim and which is in the possession of
MLC.
2.3. MLC Indemnity Claims Not Disputed by Representative. If, within thirty (30)
----------------------------------------------------
days after receipt of the Indemnity Notice, the Representative does not give the
notice provided for in Section 2.4, MLC shall be entitled to make demand upon
the Escrow Agent that it retain for future return to MLC as and when the amount
is determined, if the amount is not then determined, or that it then disburse to
MLC, if the amount has then been determined, a number of Escrowed Shares having
a value equal to the lesser of (i) the full amount set forth in the Indemnity
Notice (plus the value of all property held in the Escrow Deposit which arose in
respect of dividends and distributions on such Escrowed Shares) or (ii) the
entire Escrow Deposit. For purposes of this Agreement, the value of each
Escrowed Share returned to MLC in satisfaction of MLC Indemnity Claims shall be
calculated based upon the Merger Share Price.
3
<PAGE>
2.4. MLC Indemnity Claims Disputed by Representative in Whole. If the
-----------------------------------------------------------------
Representative disputes either the MLC Indemnity Claim described in the
Indemnity Notice or the amount MLC seeks as indemnity on account of such MLC
Indemnity Claim, the Representative shall, within thirty (30) days after his
receipt of the Indemnity Notice, notify the Escrow Agent and MLC of such
dispute, setting forth the basis therefor in reasonable detail, based on his
then good-faith belief. In the event the Representative disputes the entire MLC
Indemnity Claim, the Escrow Agent shall not distribute any amount with respect
thereto until the Escrow Agent receives a written agreement signed the
Representative and MLC stating the amount to which MLC is entitled in connection
with such MLC Indemnity Claim, or a copy of a court order or judgment together
with an opinion of counsel reasonably acceptable to the Escrow Agent to the
effect that such order or judgment is a final order or judgment of a court of
competent jurisdiction binding on MLC and the Stockholders from which no appeal
may be taken or for which the time to appeal has expired (a "Final Judgment"),
at which time the Escrow Agent shall disburse to MLC the lesser of (i) a number
of Escrowed Shares having a value (based on the Merger Share Price) equal to the
amount set forth in such agreement or Final Judgment (plus the value of all
property held in the Escrow Deposit which arose in respect of dividends and
distributions on such Shares) or (ii) the entire Escrow Deposit.
2.5. MLC Indemnity Claims Disputed by Representative in Part. In the event the
----------------------------------------------------------
Representative disputes part of, but not all of, a MLC Indemnity Claim, the
Escrow Agent shall, if the amount is undetermined, retain for future return to
MLC, or, if the amount is determined, return to MLC, the lesser of (i) a number
of Escrowed Shares having a value (based on the Merger Share Price) equal to an
amount attributable to that portion of the MLC Indemnity Claim which is not
disputed by the Representative (together with all property held in the Escrow
Deposit which arose in respect of dividends and distributions on such Escrowed
Shares) or (ii) the entire Escrow Deposit. The Escrow Agent shall not distribute
any amount with respect to the balance of such MLC Indemnity Claim except in
accordance with the procedures set forth in Section 2.4.
2.6. Notice to Withhold on the Expiration Dates. On or prior to the any of the
--------------------------------------------
Expiration Dates, MLC shall notify the Escrow Agent and the Representative of
the amount, if any, to be retained on account of MLC Indemnity Claims concerning
which MLC has given the notice specified in Section 2.2 which, in its reasonable
judgment, continue to constitute MLC Indemnity Claims and which are not, at such
time, absolute as to liability or liquidated as to amount, such notice to
contain the information specified in Section 2.2 to the extent it requires
supplementation or change based on MLC's knowledge on the notice date, whereupon
the Escrow Agent shall retain that portion of the Escrow Deposit (the "Claim
Reserve") having a value (determined in accordance with the last sentence of
Section 2.3 with respect to Escrowed Shares) equal to the amount set forth in
the notice given by MLC pursuant to this Section 2.6 (plus all property held in
the Escrow Deposit which constitutes, or arose in respect of, dividends,
distributions or interest on the Escrow Deposit). In the event MLC does not
timely provide the notice required by this Section 2.6, and continues to fail to
provide such notice within ten (10) business days after delivery by th
4
<PAGE>
Representative to MLC (with a copy to the Escrow Agent) of a demand that the
notice required by this Section 2.6 be delivered, all remaining property held in
the Escrow Deposit shall be distributed by the Escrow Agent to the Stockholders
in accordance with Section 2.7.
2.7. Distribution Following Expiration Dates.
-----------------------------------------
2.7.a. As soon as practicable following the Initial Expiration Date,
one-half of the Escrowed Shares and such other property as shall remain in the
Escrow Deposit after deduction of (i) all portions of the Escrow Deposit
required by MLC to be retained pursuant to notice given under Section 2.6 as a
Claim Reserve and (ii) all property held in the Escrow Deposit which
constitutes, or arose in respect of, dividends, other distributions or interest
on the Escrow Deposit referred to in clause (i) of this sentence shall be
released from the provisions of this Agreement and distributed promptly by the
Escrow Agent, as directed by the Representative, to the Stockholders, by a
nationally recognized overnight courier (at the risk of the Stockholders) to
such persons at the address as shall have been specified in a written notice to
the Escrow Agent from the Representative, with any cash amounts paid by wire
transfer to an account designated in writing by the Representative. In any such
notice, the Representative shall designate how much of the amount to be released
pursuant to Section 2.7(a) shall be payable in the form of Escrowed Shares
valued at the Average Share Price and how much shall be payable in the form of
cash..
2.7.b. As soon as practicable following the Final Expiration Date, the
remaining portion of the Escrow Deposit after deduction of (i) all amounts of
the Escrow Deposit required by MLC to be retained pursuant to notice given under
Section 2.6 and (ii) all property held in the Escrow Deposit which constitutes,
or arose in respect of, dividends, other distributions or interest on the Escrow
Deposit referred to in clause (i) of this sentence shall be released from the
provisions of this Agreement and distributed promptly by the Escrow Agent, as
directed by the Representative, to the Stockholders, by registered or certified
first class mail to such persons at the address as shall have been specified in
a written notice to the Escrow Agent from the Representative, with any cash
amounts paid in the form of a check issued by and drawn on the Escrow Agent.
2.8. Retention of Escrow Deposit After Expiration Dates. Upon receipt of a
--------------------------------------------------------
notice pursuant to Section 2.6, the Escrow Agent shall continue to hold after
the Expiration Dates, with respect to each MLC Indemnity Claim included in such
notice, the Claim Reserve until such time as the Escrow Agent receives a written
agreement signed by the Representative and MLC stating the amount, if any, to
which MLC is entitled from the Escrow Deposit in connection with such MLC
Indemnity Claim, or a copy of a Final Judgment with respect to such MLC
Indemnity Claim, at which time the Escrow Agent shall return to MLC, with
respect to such MLC Indemnity Claim, the portion of the Claim Reserve having a
value (determined in accordance with the last sentence of Section 2.3 with
respect to Escrowed Shares) equal to the amount specified in such agreement or
Final Judgment (plus the value of all property held in the Escrow Deposit which
5
<PAGE>
constitutes, or arose in respect of, dividends, distributions or interest on the
amount of the Claim Reserve to be distributed to MLC) and shall distribute, as
directed by the Representative, to the Stockholders, the remainder of the Claim
Reserve plus all property held in the Escrow Deposit which constitutes, or arose
in respect of, dividends, distributions or interest on such remainder; provided,
however, that, to the extent the distribution of the remainder of the Claim
Reserve to the Stockholders would cause the value of the property remaining in
the Escrow Deposit after such distribution to fall below the amount (as
stipulated in MLC's Section 2.6 notice) of all still unresolved MLC Indemnity
Claims identified in the Section 2.6 notice, such remainder shall be retained by
the Escrow Agent in the Escrow Deposit and shall be available for distribution
to MLC upon the resolution of any unresolved MLC Indemnity Claims, and such
remainder shall not be distributed to the Stockholders until such time, if any,
as such distribution can be made without causing the value of all property
remaining in the Escrow Deposit to fall below the amount of all remaining
unresolved MLC Indemnity Claims identified in the Section 2.6 notice.
2.9. Allocation of Escrowed Shares Distributed to MLC. In the event Escrowed
-----------------------------------------------------
Shares are retained by the Escrow Agent or distributed to MLC pursuant to any
provisions of this Section 2, such Escrowed Shares shall be taken from the
Escrowed Shares deposited by each Stockholder in proportion to such
Stockholder's percentage interest in the Escrow Deposit as set forth on Schedule
1.4.
2.10. Reservation of MLC's Rights. The rights of MLC to receive disbursements
----------------------------
from the Escrow Account in respect of MLC Indemnity Claims shall be without
prejudice to any other rights MLC may have, under the Merger Agreement, to seek
indemnity for MLC Indemnity Claims.
2.11. Fractional Escrowed Shares. In the event that a payment of any MLC
-----------------------------
Indemnity Claim would involve fractional Escrowed Shares, the Escrow Agent shall
round the amount of Escrowed Shares necessary to settle such MLC Indemnity Claim
to the nearest whole number.
SECTION 3
INVESTMENT OF ESCROW DEPOSIT AND ACCOUNTING
3.1. Investment of Escrow Deposit. All cash held in the Escrow Deposit shall be
-----------------------------
invested by the Escrow Agent in Crestfunds US Treasury Money Funds, so long as
such fund is rated in the highest investment category by Standard & Poor's
Rating Group or Moody's Investors Service, Inc., or in such other investments as
MLC and the Representative may agree in a writing delivered to the Escrow Agent.
In the event that the Crestfunds US Treasury Money Funds shall cease to be rated
in the highest investment category by Standard & Poors Rating Group or Moody's
Investment Service, Inc., the Escrow Agent shall notify MLC and the
Representative in writing and promptly deposit all cash held in the Escrow
Deposit in a fund that has such rating until such time as MLC and the
Representative shall direct the Escrow Agent in writing to deposit such funds
6
<PAGE>
elsewhere. All interest and other income earned on the Escrow Deposit shall be
added to, and become part of, the Escrow Deposit, and the distribution thereof
shall be subject to the terms of this Agreement.
3.2. Accounting. The Escrow Agent shall provide a written account to MLC and the
-----------
Representative at the end of each month prior to the Expiration Date (and
thereafter to the extent any amounts remain in escrow pursuant to Section 2.8)
listing all transactions with respect to the Escrow Deposit during the
immediately preceding month.
SECTION 4
ESCROW AGENT
4.1. Duties. The duties and obligations of the Escrow Agent shall be determined
--------
solely by the express provisions of this Agreement and shall be limited to the
performance of such duties and obligations as are specifically set forth in this
Agreement, as it may be amended from time to time with the Escrow Agent's
written consent as provided in Section 5.7.
4.2. Reliance. In the performance of its duties hereunder, the Escrow Agent
---------
shall be entitled to rely upon any document or instrument reasonably believed by
it to be genuine and signed by MLC or the Representative. The Escrow Agent may
assume that any person purporting to give any notice in accordance with the
provisions hereof has been duly authorized to do so. 4.3. Liability. The Escrow
Agent shall not be liable for any error of judgment, or any action taken or
omitted to be taken hereunder in good faith, except in the case of its bad
faith, gross negligence or willful misconduct. The Escrow Agent shall be
entitled to consult with counsel of its choosing (including internal counsel)
and shall not be liable for any act suffered or omitted by it in good faith in
accordance with the advice of such counsel.
4.4. Disputes. In the event that the Escrow Agent shall be uncertain as to its
---------
duties or rights hereunder, or shall receive instructions from any party hereto
with respect to the Escrow Deposit which, in its opinion, are in conflict with
any of the provisions of this Agreement, it shall be entitled to refrain from
taking any action until such time as there has been a final determination of the
rights of MLC and the Stockholders with respect to the Escrow Deposit (or
relevant portion thereof). For purposes of this Section 4.4, there shall be
deemed to have been a final determination of the rights of MLC and the
Stockholders with respect to the Escrow Deposit (or relevant portion thereof) at
such time as Escrow Agent shall receive (i) an executed counterpart of an
agreement between the Representative and MLC or (ii) a copy of a Final Judgment
which provides for the disposition of the Escrow Deposit (or relevant portion
thereof).
7
<PAGE>
4.5. Resignation. The Escrow Agent may resign at any time and be discharged of
------------
the duties imposed hereunder (but without prejudice for any liability in the
case of its bad faith, gross negligence or willful misconduct hereunder) by
giving notice to the Representative and MLC at least sixty (60) business days
prior to the date specified for such resignation to take effect, in which case,
upon the effective date of such resignation:
4.5.a. all property then held by the Escrow Agent hereunder shall be
delivered by it to such person as may be designated in writing by MLC and the
Representative, whereupon the Escrow Agent's obligations hereunder shall cease
and terminate;
4.5.b. if no such person has been designated by such date, all obligations
of the Escrow Agent hereunder shall, nevertheless, cease and terminate, subject
to clause (c) below; and
4.5.c. the Escrow Agent's sole responsibility thereafter shall be to keep
all property then held by it (and to make the investments as hereinbefore
provided) and to deliver the same to the successor escrow agent designated in
writing by MLC and the Representative or, if no such successor escrow agent
shall have been so designated, in accordance with the directions of a Final
Judgment, and the provisions of Section 4.7 and Section 4.8 shall remain in
effect.
4.6. Removal of Escrow Agent. MLC and the Representative may, upon at least
-------------------------
thirty (30) business days prior written notice to the Escrow Agent, dismiss the
Escrow Agent hereunder and appoint a successor. In such event, the Escrow Agent
shall promptly account for and deliver to the successor escrow agent named in
such notice the balance of the Escrow Deposit, including all investments thereof
and accrued income thereon, on the date of such accounting and delivery. Upon
acceptance thereof and of such accounting by such successor escrow agent, and
upon reimbursement to the Escrow Agent of all expenses due to it hereunder
through the date of such accounting and delivery, the Escrow Agent shall be
released and discharged from all of its duties and obligations hereunder, but
without prejudice to any liability of the Escrow Agent for its bad faith, gross
negligence or willful misconduct hereunder.
4.7. Compensation. From time to time upon the Escrow Agent's written request,
-------------
MLC shall pay the Escrow Agent 100% of its yearly compensation of $1,200 for its
services hereunder, including reasonable legal fees and other out-of-pocket
expenses incurred in the performance of its duties and the enforcement of its
rights hereunder.
4.8. Indemnification. MLC indemnify and hold the Escrow Agent harmless against
---------------
any loss, liability, claim, damage, injury, demand or expense, including
reasonable legal fees, arising out of or in connection with the performance of
the Escrow Agent's obligations hereunder, including the costs and expenses
incurred in connection with the collection of its fees and including the costs
and expenses of defending itself against any claim or liability arising out of
or in connection with the performance of its duties hereunder, except for any
loss, liability, claim, damage, injury, demand or expense resulting from the
8
<PAGE>
Escrow Agent's bad faith, gross negligence or willful misconduct; provided,
however, that promptly after the receipt by the Escrow Agent of notice of any
claim or the commencement of any suit, action or proceeding, the Escrow Agent
shall, if a claim of indemnification in respect thereof is to be made against
any of the other parties hereto, notify such other parties thereof in writing;
and provided, further, that the indemnifying party or parties shall be entitled,
jointly or severally and at their own expense, to participate in or assume the
defense of any such action, suit or proceeding. The right of the Escrow Agent
(or any successor escrow agent appointed hereunder) to indemnification under
this Section 4.8 shall survive the termination of this Agreement.
MISCELLANEOUS
5.1. Term. This Agreement shall continue in force until the final distribution
-----
of all amounts held by the Escrow Agent in the Escrow Deposit.
5.2. Notices. All notices and other communications hereunder shall be given in
--------
writing and delivered personally, by registered or certified mail (postage
prepaid, return receipt requested), by overnight courier (postage prepaid),
facsimile transmission or similar means, to the party to receive such notices or
communications at the address set forth below (or such other address as shall
from time to time be designated by such party to the other parties in accordance
with this Section 5.2):
(a) If to the Representative, addressed to:
Nadim Achi
President
1851 Alexander Bell Drive
Reston, VA 20191 Telecopy: (703) __________
with copy to:
Silverstein and Mullens, P.L.L.C.
1776 K Street, N.W.
Suite 800
Washington, D.C. 20006
Attn: John P. Warner, Esq.
Telecopy: (202) 452-7989
(b) If to MLC, addressed:
MLC Holdings, Inc.
11150 Sunset Hills Road Suite 110
Reston, Virginia
Attention: Kleyton L. Parkhurst
Telecopy: (703)834-5718
with a copy to:
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Attention: John M. McDonald, Esq.
Telecopy: (202) 663-8007
(c) If to Escrow Agent, addressed:
Crestar Bank
Corporate Trust Department
919 East Main Street, 10th Floor
Richmond, VA 23219
Attention: Mary Brewer
Telecopy: (804) 782-7855
All such notices and communications hereunder shall be deemed given when
received, as evidenced by the signed acknowledgment of receipt of the person to
whom such notice or communication shall have been personally delivered, the
acknowledgment of receipt returned to the sender by the applicable postal
authorities or the confirmation of delivery rendered by the applicable overnight
courier service. A copy of any notice or other communication given by any party
to any other party hereto, with reference to this Agreement, shall be given at
the same time to the other parties to this Agreement.
5.4. Assignment. This Agreement shall be binding upon and inure to the benefit
-----------
of the parties hereto and their respective representatives, successors and
assigns. Neither this Agreement nor any rights, duties or obligations hereunder
shall be assigned by any party hereto without the prior written consent of the
parties hereto; provided, however that no such consent shall be required to
confer the duties, rights, and obligations of the Representative hereunder upon
any person selected as the Representative pursuant to the Merger Agreement.
9
<PAGE>
5.5 GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS AGREEMENT, AND THE
---------------
RESPECTIVE RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
VIRGINIA, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREUNDER.
5.6. Counterparts. This Agreement may be executed in one or more counterparts,
-------------
each of which shall be deemed an original.
5.7. Headings. The Section headings in this Agreement are for convenience only
---------
and do not constitute part of this Agreement.
5.8. Amendment. This Agreement may be amended only by a writing signed by MLC,
----------
the Escrow Agent and the Representative.
ARBITRATION OF CERTAIN ISSUES
6.1. Scope and Procedure. In the event that the Representative believes that, as
--------------------
of any Expiration Date or as of any time after the Final Expiration Date, the
assertion by MLC of any MLC Indemnification Claim or the amount of an such MLC
Indemnification Claim asserted by MLC is not reasonable, the Representative
shall have the right to submit the issue of the reasonableness of such asserted
MLC Indemnification Claim or claim amount to arbitration as provided in this
Section 6. The parties shall mutually agree upon a single arbitrator, who shall
establish the rules applicable to the arbitration and whose decision in the
matter shall be final and binding upon all concerned. In the event that an
agreement on an arbitrator to settle the dispute is not reached within thirty
(30) days after notification of the request for arbitration, it is hereby agreed
that such breach or dispute shall be resolved by final and binding arbitration
in accordance with the commercial arbitration rules then in effect of the
American Arbitration Association; provided, however, that only a single
arbitrator shall be used.
6.2. Effect of Arbitration Decision. MLC agrees to take all action within its
--------------------------------
power necessary, including the execution of any written notices to the Escrow
Agent required under this Agreement, to effect the release from the Escrow
Deposit and the distribution as the Representative directs, of all funds found
by the arbitrator not be to reasonably retained on account of MLC Indemnity
Claims. Judgment upon any award rendered may be entered in any court having
jurisdiction over the person against whom such award is rendered. Any notice
served in connection with any such arbitration or entry of judgment may be
served in or out of the Commonwealth of Virginia or in such other manner as may
be permitted by said rules of any said court. Any expenses of such arbitration
shall be borne by the parties as the arbitrator shall determine; provided,
however, that each party shall bear his or her own attorney and expert witness
fees and expenses.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above set forth.
Amendment No. 3 to
Credit Agreement As of June 30, 1998
10
<PAGE>
MLC:
MLC HOLDINGS, INC.
/s/ Phillip G. Norton
---------------------
By: Phillip G. Norton
Its: Chairman, President & CEO
ESCROW AGENT:
CRESTAR BANK
/s/ M. Brewer
-------------
By: M. Brewer
Its: Trust Officer
REPRESENTATIVE:
Nadim Achi
Exhibit 10.29
AMENDMENT NO. 3
to
Credit Agreement
This Amendment No. 3 to Credit Agreement (this "Amendment") is made as
of June 30, 1998, by and between MLC GROUP, INC., a Virginia corporation ("MLC")
and FIRST UNION NATIONAL BANK, a national banking association ("First Union"),
successor by merger to CoreStates Bank, N.A. ("CoreStates"), for itself and as
agent for the Participants (defined below).
Preliminary Statement
WHEREAS, MLC and CoreStates are parties to that certain Credit
Agreement dated as of June 5, 1997 (the "Initial Agreement"), pursuant to which
CoreStates agreed to make available to MLC, upon the terms and conditions
expressed in the Initial Agreement, a credit facility (the "Credit Facility") in
the principal amount of up to $15,000,000.
WHEREAS, pursuant to that certain Amendment No. 1 to Credit Agreement
dated September 5, 1997 (the "First Amendment") between CoreStates and MLC, the
maximum principal amount available to MLC under the Credit Facility was
increased to $25,000,000.
WHEREAS, pursuant to that certain Amendment No. 2 to Credit Agreement
dated as of December 19, 1997 (the "Second Amendment") between CoreStates and
MLC, the maturity date of the Credit Facility was extended to December 19, 1998.
The Initial Agreement, the First Amendment and the Second Amendment are
collectively referred to as the "Credit Agreement". All capitalized terms used
herein and not otherwise defined shall have the respective meanings ascribed to
them in the Credit Agreement.
WHEREAS, Bank Leumi USA and Riggs Bank N.A. (together, the
"Participants") have obtained participation interests in the Credit Facility in
the amount of up to $5,000,000 for each Participant, with CoreStates acting as
agent for the Participants.
WHEREAS, First Union is the successor by merger to all of CoreStates'
right, title and interest in and to the Credit Agreement and the other Loan
Documents, including the right to act as Agent for the Participants. The
Participants, together with First Union, are referred to collectively as the
"Banks".
WHEREAS, MLC has requested that First Union: (i) increase from
$25,000,000 to $35,000,000 the Loan Commitment; and (ii) increase from
$1,000,000 to $5,000,000 the sublimit on Eligible Non-AMC Inventory and
Equipment contained in the calculation of the Borrowing Base.
WHEREAS, First Union is willing to agree to such request on the terms
and conditions set forth herein.
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<PAGE>
NOW, THEREFORE, in consideration of the premises and promises
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Section 1.1 of the Credit Agreement. In clause (iv) of the
-----------------------------------------
definition of "Borrowing Base" contained in Section 1.1 of the Credit Agreement,
the dollar amount "$1,000,000" is deleted and replaced with the dollar amount
"$5,000,000".
2. Section 2.1 of the Credit Agreement. The dollar amount of the Loan
-------------------------------------
Commitment set forth in ss.2.1 of the Credit Agreement as "$25,000,000" is
hereby deleted and it shall be and is hereby replaced by the dollar amount of
"$35,000,000".
3. Section 2.2 of the Credit Agreement. The dollar amount set forth in
------------------------------------
the first paragraph of ss.2.2 of the Credit Agreement as "TWENTY FIVE MILLION
DOLLARS ($25,000,000)" is hereby deleted and shall be and it is hereby replaced
by the dollar amount of "THIRTY FIVE MILLION DOLLARS ($35,000,000)."
4. Exhibit A to the Credit Agreement. Exhibit A to the Credit Agreement
----------------------------------
shall be and is hereby amended and restated in its entirety to be as set forth
in Exhibit A attached hereto. Upon delivery of the $35,000,000 Note, dated as of
June 15, 1998, to the First Union, First Union shall mark the $25,000,000 Note,
dated December 19, 1997, "canceled and replaced by $35,000,000 Note, dated as of
June 15, 1998."
5. Representations and Warranties. MLC hereby restates the
-----------------------------------
representations and warranties made in the Credit Agreement, including but not
limited to Article 3 thereof, on and as of the date hereof as if originally
given on this date.
6. Covenants. MLC hereby represents and warrants that it is in
----------
compliance and has complied with each and every covenant set forth in the Credit
Agreement, including but not limited to Articles 5 and 6 thereof, on and as of
the date hereof.
7. Corporate Authorization and Delivery of Documents. First Union shall
--------------------------------------------------
have received copies, certified as of the date hereof, of all action taken by
MLC and any other necessary Person to authorize this Amendment and such other
papers as First Union shall require.
8. Affirmation. MLC hereby affirms its absolute and unconditional
------------
promise to pay to First Union the Loans and all other amounts due under the
Credit Agreement and any other Loan Document on the maturity date(s) provided in
the Credit Agreement or any other Loan Document, as such documents may be
amended hereby.
9. Effect of Amendment. This Amendment amends the Credit Agreement only
--------------------
to the extent and in the manner herein set forth, and in all other respects the
Credit Agreement is ratified and confirmed.
10. Counterparts. This Amendment may be signed in any number of
-------------
counterparts, each of which shall be an original, with the same effect as if the
signatures hereto were upon the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Amendment
to be duly executed by their duly authorized representatives as of the date
first above written.
MLC GROUP, INC.
By _/s/ Phillip G. Norton___________________
--------------------------------------------
Phillip G. Norton, President
FIRST UNION NATIONAL BANK
By __/s/ Michael J. Labrum______________________
--------------------------------------------------
Michael J. Labrum, Vice President
The undersigned, MLC Holdings, Inc. ("Holdings"), the guarantor of the
obligations of MLC Group, Inc. to First Union National Bank (successor by merger
to CoreStates Bank, N.A.) pursuant to that certain Guaranty Agreement dated June
5, 1997 (the "Guaranty"): (i) hereby consents to the making of this Amendment
(and to all prior amendments to the Loan Documents); (ii) confirms the
continuing validity of the Guaranty; and (iii) restates all of the
representations and warranties of Holdings made in any of the Loan Documents
(including, without limitation, those set forth in Section 4 of the Guaranty),
on and as of the date hereof as if originally given on the date of this
Amendment.
MLC HOLDINGS, INC.
By:__/s/ Phillip G. Norton__________________________
----------------------------------------------------
Phillip G. Norton, President
3
<PAGE>
EXHIBIT A
Note
$35,000,000 Philadelphia, PA
As of June 30, 1998
For Value Received, MLC GROUP, INC., a Virginia corporation ("MLC"), hereby
promises to pay to the order of FIRST UNION NATIONAL BANK (the "First Union"),
successor by merger to CoreStates Bank, N.A., in lawful currency of the United
States of America in immediately available funds at First Union's offices
located at Broad and Chestnut Streets, Philadelphia, Pennsylvania, on the
earliest to occur of demand, acceleration of the maturity date as provided in
the Credit Agreement described below or the Credit Termination Date, the
principal sum of THIRTY FIVE MILLION DOLLARS ($35,000,000) or, if less, the then
unpaid principal amount of all Loans made by First Union pursuant to the Credit
Agreement (defined below).
MLC promises also to pay interest on the unpaid principal amount hereof in like
money at such office from the date hereof until paid in full at the rates and at
the times provided in the Credit Agreement.
This Note is the Note referred to in, is entitled to the benefits of and is
secured by security interests referred to in the Credit Agreement, dated as of
June 5, 1997 by and between MLC and CoreStates Bank, N.A. (as such Credit
Agreement may be amended, modified, supplemented, restated or replaced from time
to time, the "Credit Agreement") and is a replacement Note substituted in its
entirety for a Note dated December 19, 1997 in the amount of $25,000,000. As a
result of a merger between CoreStates Bank, N.A. and First Union, First Union
has succeeded to all of the right, title and interest of CoreStates Bank, N.A.
in the Credit Agreement and all of the Loan Documents. Capitalized terms used in
this Note but not defined herein shall have the meanings ascribed to such terms
in the Credit Agreement. This Note is subject to voluntary prepayment and
mandatory repayment prior to demand, acceleration of maturity or the Credit
Termination Date, in whole or in part, as provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the maturity date of
the principal of and the accrued interest on this Note may be accelerated and be
declared to be due and payable in the manner and with the effect provided in the
Credit Agreement.
MLC hereby waives presentment, demand, protest or notice of any kind in
connection with this Note.
Notwithstanding the face amount of this Note, the undersigned's liability
hereunder shall be limited, at all times, to the actual aggregate outstanding
indebtedness to First Union relating to First Union's Loans, including all
principal and interest, together with all fees and expenses as provided in the
Credit Agreement, as established by First Union's books and records which shall
be conclusive absent manifest error.
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THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OF CONFLICT OF LAWS.
MLC GROUP, INC.
By:__________________________
Phillip G. Norton, President
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