<PAGE> 1
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 24, 1998
-------------
PROCOM TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
California 0-21053 33-0268063
- --------------------------------------------------------------------------------
(State or other (Commission (IRS employer
jurisdiction of file number) identification
incorporation) number)
2181 Dupont Drive,
Irvine, CA 92612
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code:
- --------------------------------------------------------------------------------
(714) 852-1000
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 24, 1998, the Registrant, through its wholly-owned subsidiary,
Invincible Technologies Acquisition Corporation ("ITAC"), completed the
acquisition of substantially all of the assets and liabilities of Invincible
Technologies Corporation, a Massachusetts-based developer and reseller of high
capacity, fault tolerant network storage solutions ("Invincible"). The assets
acquired included certain machinery and equipment used to manufacture high
capacity, fault tolerant data storage products for computer network
environments, as well as the office equipment, furniture, accounts receivable,
inventory and substantially all of the other assets of Invincible. The net
purchase price consisted of approximately $1.0 million in cash and ITAC's
assumption of certain specified liabilities of Invincible in excess of net
assets acquired of approximately $1.6 million, for a total net purchase price of
approximately $2.6 million. The Company used its cash to pay the $1.0 million
cash portion of the purchase price. The purchase price was the result of
arms'-length negotiations between the Registrant and Invincible. The Registrant
currently intends to continue to use the acquired assets (as applicable) in the
business substantially as conducted by Invincible immediately prior to the
acquisition, which business the Company is now conducting through ITAC. A copy
of the Asset Purchase Agreement, dated June 24, 1998, is attached hereto as
Exhibit 2.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
The financial statements required by Item 7(a) of Form 8-K shall
be filed by an amendment to this Report on Form 8-K to be filed not later than
60 days after the date of this Report.
(b) Pro Forma Financial Information.
The pro forma financial information required by Item 7(b) of Form
8-K shall be filed by an amendment to this Report on Form 8-K to be filed not
later than 60 days after the date of this Report.
(c) Exhibits.
Exhibit No. Description
- ----------- -----------
2.1 Asset Purchase Agreement, dated June 24, 1998, among Invincible
Technologies Acquisition Corporation, Invincible Technologies
Corporation and certain stockholders of Invincible Technologies
Corporation named therein
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PROCOM TECHNOLOGY, INC.
Date: October 29, 1998 By: /s/ Alex Razmjoo
-----------------------------
Name: Alex Razmjoo
Title: Chairman of the Board,
President and Chief
Executive Officer
3
<PAGE> 4
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Asset Purchase Agreement, dated June 24, 1998, among Invincible
Technologies Acquisition Corporation, Invincible Technologies
Corporation and certain stockholders of Invincible Technologies
Corporation named therein
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
Invincible Technologies Acquisition Corporation
AND
Invincible Technologies Corporation
AND
Certain Stockholders of Invincible Technologies Corporation
June 24, 1998
<PAGE> 2
TABLE OF CONTENTS
1. Definitions
2. Basic Transaction
(a) Purchase and Sale of Assets
(b) Assumption of Liabilities
(c) Purchase Price
(d) Purchase Price Holdback
(e) Cash Payment to Target
(f) The Closing
(g) Deliveries at the Closing
(h) Allocation
3. Representations and Warranties of the Target
(a) Organization of the Target
(b) Authorization of Transaction
(c) Noncontravention
(d) Brokers' Fees
(e) Title to Tangible Assets
(f) Subsidiaries
(g) Financial Statements
(h) Events Subsequent to Most Recent Fiscal Month End
(i) Legal Compliance
(j) Labor Relations
(k) Accounts Receivable
(l) Intellectual Property
(m) Contracts
(n) Environmental Matters
(o) Litigation
(p) Employee Benefits
(q) Certain Business Relationships with the Target and Its
Subsidiaries
(r) Insurance
(s) Inventory
(t) Suppliers and Customers
(u) Disclosure
4. Representations and Warranties of the Buyer
(a) Organization of the Buyer
(b) Authorization of Transaction
(c) Noncontravention
(d) Brokers' Fees
5. Representations and Warranties of the Target Stockholders
(a) Organization of Certain Target Stockholders
(b) Authorization
(c) Noncontravention
ii
<PAGE> 3
(d) Target Preferred Stock
6. Post-Closing Covenants
(a) General
(b) Litigation Support
(c) Transition
(d) Access to Employees
(e) Reseller's Certificate
7. Remedies for Breaches of This Agreement
(a) Survival of Representations and Warranties
(b) Indemnification Provisions for Benefit of the Buyer
(c) Indemnifications Provisions for Benefit of the Target Stockholders
(d) Matters Involving Third Parties
(e) Effect of Indemnification
(f) Indemnification As Sole Remedy
8. Miscellaneous
(a) Press Releases and Public Announcements
(b) No Third Party Beneficiaries
(c) Entire Agreement
(d) Succession and Assignment
(e) Counterparts
(f) Headings
(g) Notices
(h) Governing Law
(i) Amendments and Waivers
(j) Severability
(k) Expenses
(l) Construction
(n) Incorporation of Exhibits and Schedules
(o) Bulk Transfer Laws
Annex List of Target Stockholders, shares owned
Exhibit A Escrow Agreement
Exhibit B Assignment and Assumption Agreement
Exhibit C Allocation Schedule
Exhibit D Financial Statements
Disclosure Schedule Exceptions to Representation and Warranties
iii
<PAGE> 4
ASSET PURCHASE AGREEMENT
Agreement entered into as of June 24, 1998, by and between
Invincible Technologies Acquisition Corporation, a Delaware corporation (the
"Buyer"), Invincible Technologies Corporation, a Delaware corporation (the
"Target"), and those certain holders (the "Target Stockholders") of shares of
the Target's Series B Preferred Stock, par value $0.01 per share and shares of
the Target's Series C Preferred Stock, par value $0.01 per share (all shares
issued and outstanding of the Series B Preferred Stock and the Series C
Preferred Stock defined hereinafter collectively as the "Target Preferred
Stock"), all as set forth on the Annex attached hereto (the "Agreement"). The
Buyer, the Target and the Target Stockholders referred to collectively herein as
the "Parties".
This Agreement contemplates a transaction in which the Buyer shall
purchase substantially all of the assets (and assume substantially all of the
liabilities as provided herein) of the Target in return for cash. The Buyer and
the Target make certain representations, warranties, and covenants herein which
shall survive the Closing for purposes of potential indemnification. The Target
Stockholders, however, intend to cause the Target to liquidate and dissolve
immediately after the Closing. The Buyer and the Target Stockholders therefore
wish to provide for post-Closing indemnification against breaches of these
representations, warranties, and covenants and to make certain other covenants
among themselves.
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.
1. Definitions.
"Acquired Assets" means all of Target's right, title, and interest
in and to all of its assets, including (and whether or not reflected on the Most
Recent Financial Statements) all of its (a) real property, leaseholds and
subleaseholds in real property, improvements, fixtures, and fittings thereon,
and easements, rights-of-way, and other appurtenants thereto (including
appurtenant rights in and to public streets); (b) tangible personal property
(including machinery, equipment, inventories of raw materials and supplies,
manufactured and purchased parts, goods in process and finished goods,
furniture, automobiles, trucks, tractors, trailers, tools, jigs, and dies); (c)
intellectual property, including marks, copyrights, patents (including
applications therefor), trade secrets, secret processes, confidential
information and know-how, inventions, designs and improvements related to the
business of the Target, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and any rights, claims or choses in
action relating to or deriving from any of the foregoing; (d) leases, subleases,
and rights thereunder; (e) agreements, contracts, indentures, mortgages,
instruments, security interests, guaranties, other similar arrangements, and
rights thereunder; (f) accounts receivable owing to the Target or any Subsidiary
or Affiliate of the Target, together with any security interest or lien rights
therefor, and all notes and any other receivables; (g) securities; (h) claims,
deposits, prepayments, refunds, causes of action, choses in action, rights of
recovery, rights of set off, and rights of recoupment (including any such item
relating to the payment of taxes); (i) franchises, approvals, permits, licenses,
orders, registrations, certificates, variances, and similar
1
<PAGE> 5
rights obtained from governments and/or governmental agencies; and (j) books,
records, ledgers, files, documents, correspondence, sales data and information,
customer lists, supplier lists, catalogs, brochures, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials; provided,
however, that the Acquired Assets shall not include (i) the corporate charter,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other corporate organizational documents, or (ii) any of the
rights of the Target under this Agreement (or under any side agreement between
the Target on the one hand and the Buyer on the other hand entered into on or
after the date of this Agreement).
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Allocable Portion" means, with respect to the share of any Target
Stockholder in a particular amount, that fraction equal to the number of shares
of Target Preferred Stock such Target Stockholder holds over the total number of
shares of Target Preferred Stock held by all of the Target Stockholders in the
aggregate, without including in such denominator the number of shares of Target
Preferred Stock held by any holders of Target Preferred Stock other than the
Target Stockholders, in each case as set forth on the Annex.
"Assumed Liabilities" means the following obligations and
liabilities of Target and no other obligations or liabilities of any kind: (a)
all liabilities of the Target reflected on the balance sheet contained in the
Most Recent Financial Statements (other than in any notes thereto); (b) all
liabilities of the Target which have arisen in the period from the Most Recent
Fiscal Month End and ending immediately prior to the Closing in the Ordinary
Course of Business (other than any liability resulting from, arising out of,
relating to, in the nature of, or caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law); (c) all obligations of the
Target under the agreements, contracts, leases, licenses, and other arrangements
referred to in the definition of Acquired Assets (other than any liability
resulting from, arising out of, relating to, in the nature of, or caused by any
breach of contract, breach of warranty, tort, infringement or violations of law
for actions or omissions occurring or arising prior to the Closing Date;
provided, however, that the Buyer shall assume all such liabilities and
obligations arising from or caused by the assignment or purported assignment of
such contracts, leases, licenses or other arrangements referred to in the
definition of Acquired Assets to the Buyer hereunder); (d) all liabilities and
obligations of the Target under its ERISA Plans and Non-ERISA Plans to the
extent reflected in the balance sheet contained in the Most Recent Financial
Statements (other than in any notes thereto); (e) all liabilities of the Target
for costs and expenses (including legal fees and expenses) the Target and the
Target Stockholders have incurred in connection with this Agreement and the
transactions contemplated hereby (not to
2
<PAGE> 6
exceed fifty thousand dollars ($50,000) in the aggregate); (f) all liabilities
of the Target for transfer, sales, use, and similar taxes arising in connection
with the consummation of the transactions contemplated hereby (but not including
any Income Taxes arising because the Target is transferring the Acquired
Assets); and (g) all other liabilities and obligations of the Target set forth
in the Disclosure Schedule; provided, however, that (except to the extent
reflected in the balance sheet contained in the Most Recent Financial Statements
(other than in any notes thereto)) the Assumed Liabilities shall not include any
liability or obligations of the Target for: (1) any Income Taxes arising because
the Target is transferring the Acquired Assets; (2) any liability or obligation
of the Target under this Agreement (or under any side agreement between the
Target on the one hand and the Buyer on the other hand entered into on or after
the date of this Agreement); (3) any liabilities or obligations relating to the
employment of any employee of the Target, including any severance obligations
and costs (including those that may be occasioned by the termination of such
employment due to transactions contemplated hereby) and any employment related
claims, in each case arising out of employment with the Target prior to the
Closing Date or based on any facts, circumstances, actions or omissions of the
Target, existing or occurring prior to the Closing Date; (4) any environmental
litigation or any environmental liability of any kind whatsoever imposed upon
the Target or the Acquired Assets, or to which the Target or the Acquired Assets
is or may become subject, either by contract or applicable law, based on any
facts, circumstances, actions or omissions of the Target, existing or occurring
prior to the Closing Date; (5) any action, suit, proceeding at law or in equity
by any Person based on any facts, circumstances, actions or omissions of the
Target, existing or occurring prior to the Closing Date; (6) any obligations of
the Target to indemnify any Person (including any of the Target Stockholders) by
reason of the fact that such Person was a director, officer, employee, or agent
of the Target; (7) any action, suit, proceeding at law or in equity by any
Person based on any challenge or objection to (A) the validity of this
Agreement, (B) the consummation of any of the transactions contemplated hereby,
(C) the validity or conformity with applicable law or the Target's Certificate
of Incorporation of the approval of this Agreement by the Target's board of
directors and/or stockholders (including any action, suit or proceeding alleging
that the Target's board of directors breached its fiduciary duties or otherwise
acted improperly in connection with this Agreement or the transactions
contemplated hereby); (8) any action, suit, proceeding at law or in equity by
any Person based on or arising out of the non-compliance by any of the parties
hereto with the bulk transfer or similar laws of any jurisdiction; and (9) any
liabilities or obligations to pay taxes (whether assessed or unassessed) of the
Target or any of its Subsidiaries or Affiliates for any period ending on or
prior to the Closing Date other than transfer, sales, use, and similar taxes
arising in connection with the consummation of the transactions contemplated
hereby.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents including marketable
securities and short term investments calculated in accordance with GAAP applied
on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in ss.2(f) below.
3
<PAGE> 7
"Closing Date" has the meaning set forth in ss.2(f) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Disclosure Schedule" has the meaning set forth in 3 below.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Financial Statement" has the meaning set forth in ss.3(g) below.
"Escrow Agreement" has the meaning set forth in ss.2(d) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Holdback" has the meaning set forth in ss.2(d) below.
"Holdback Termination Date" has the meaning set forth in ss.2(d)
below.
"Income Tax" means any federal, state, local, or foreign income
tax, including any interest, penalty, or addition thereto, whether disputed or
not.
"Indemnified Party" has the meaning set forth in ss.7(d) below.
"Indemnifying Party" has the meaning set forth in ss.7(d) below.
"Knowledge" means actual knowledge without independent
investigation.
"Most Recent Financial Statements" has the meaning set forth in
ss.3(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in
ss.3(g) below.
"Net Worth Adjustment" has the meaning set forth in ss.2(c) below.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"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).
"Purchase Price" has the meaning set forth in ss.2(c) below.
4
<PAGE> 8
"Requisite Target Stockholders" means Target Stockholders holding
a majority in interest of the total number of Target Preferred Stock that all of
the Target Stockholders hold in the aggregate as set forth in the Annex.
"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.
"Target" has the meaning set forth in the preface above.
"Target Stockholder" has the meaning given in the opening recital
to this Agreement.
"Third Party Claim" has the meaning set forth in ss.7 (d) below.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Target, and
the Target agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
ss.2.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. The Buyer shall not assume or
have any responsibility whatsoever, however, with respect to any other
obligation or liability of the Target not included within the definition of
Assumed Liabilities.
(c) Purchase Price. The Buyer agrees to pay to the Target at the
Closing one million, one hundred thousand dollars ($1,100,000) (the "Purchase
Price") by delivery of cash for the Purchase Price payable by wire transfer or
delivery of other immediately available funds. In the event that the Target's
actual net worth as of the Closing Date, as determined by the Target's auditors
in accordance with GAAP within forty-five (45) days after the Closing Date, is
less than negative four hundred and fifty thousand dollars (-$450,000), the
Purchase Price shall be adjusted downward by an amount equal to the difference
between negative four hundred and fifty thousand dollars (-$450,000) and the
Target's actual net worth on the Closing Date (the "Net Worth Adjustment"), as
follows:
(i) The Buyer shall, within forty-five (45) days after the Closing
Date, provide to the Target Stockholders (pursuant to ss.8(g) below) its
calculation of the Net Worth Adjustment (together with supporting
financial information) (the "Buyer's Notice"). The Buyer shall make
available to the Target Stockholders books and records reasonably
adequate to permit the review of the Buyer's Calculation. Each of the
Target Stockholders shall have a period of fifteen (15) days from its
receipt of the Buyer's Notice to dispute the computation by delivering a
written notice to the Buyer pursuant to ss.8(g) hereof (the "Target
Stockholders' Notice"). The Parties shall then engage a
5
<PAGE> 9
nationally recognized accounting firm, to be selected by the Buyer's
regular auditor, to make such calculation. The determination of such
accounting firm with regard to such calculation shall be final and
binding. The costs of such a determination shall be borne
proportionately by the Parties, computed in direct proportion to the
amount the final determination relates to the initial calculations
provided by the Parties. (By way of example only, if the Target
calculates a net worth of $200,000, the Buyer calculates a net worth of
$100,000, and the final determination of net worth is: (A) $140,000,
then the Buyer shall bear 40% of such costs and the Target Stockholders
shall bear their Allocable Portion of 60% of such costs; (B) any amount
less than $100,000, then the Target Stockholders shall bear their
Allocable Portion of all of such costs; and (C) any amount greater than
$200,000, then the Buyer shall bear all of such costs.)
(ii) If the Net Worth Adjustment is caused by any action or
omission which is not also a breach of the Target's representations and
warranties contained in ss.3(k) or ss.3(s), then, notwithstanding any
other provision in this Agreement, the Buyer shall be entitled to obtain
payment from the Holdback as an offset to such Net Worth Adjustment,
pursuant to the terms of the Escrow Agreement, and, to the extent such
Net Worth Adjustment exceeds the Holdback, each Target Stockholder shall
promptly pay to the Buyer its Allocable Portion of the full amount of
such excess.
(iii) If the Net Worth Adjustment is caused by any action or
omission which is also a breach of the Target's representations and
warranties contained in ss.3(k) or ss.3(s), then, notwithstanding any
other provision in this Agreement, the Buyer may elect either (A) to
obtain payment from the Holdback as an offset to such Net Worth
Adjustment, pursuant to the terms of the Escrow Agreement, and to the
extent such Net Worth Adjustment exceeds the Holdback, each Target
Stockholder shall promptly pay to the Buyer its Allocable Portion of the
full amount of such excess, or, alternatively, (B) to proceed to seek
indemnification for such breach or breaches pursuant to the procedures
provided in ss.7 hereunder. In no event may the Buyer seek payment for
such Net Worth Adjustment pursuant to both methods described herein
above.
(d) Purchase Price Holdback. Funds in the amount of one hundred
and sixty-five thousand dollars ($165,000) (the "Holdback") shall be placed in
escrow at the closing and withheld from payment until the later of the
expiration of the ninety (90) day period immediately following the Closing Date
or the resolution of any claims for indemnification pending on the expiration of
such ninety (90) day period (the later of such times being the "Holdback
Termination Date"). The Holdback shall act as the security for (i) the
indemnification obligations of the Target Stockholders hereunder and (ii) the
obligations of the Target Stockholders pursuant to a Net Worth Adjustment. At
the Holdback Termination Date, the remaining amount, if any, of the Holdback,
less any amount reasonably necessary to pay any claim or Net Worth Adjustment
with respect to which a notice of claim has been given, shall be delivered to
the Target Stockholders. The Holdback shall be held and administered in
accordance with this ss.2(d) and the Escrow Agreement (the "Escrow Agreement")
among the Buyer, the Target Stockholders and the Escrow Agent, a form of which
is attached hereto as Exhibit A.
6
<PAGE> 10
(e) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Bingham Dana
LLP in Boston, Massachusetts as of the date of this agreement (the "Closing
Date").
(f) Deliveries at the Closing. At the Closing, (i) the Target
shall deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.6(a) below; (ii) the Buyer shall deliver to the Target the
various certificates, instruments, and documents referred to in ss.6(b) below;
(iii) the Target shall execute, acknowledge (if appropriate), and deliver to the
Buyer (A) an assignment and assumption agreement in the form attached hereto as
Exhibit B and (B) such other instruments of sale, transfer, conveyance, and
assignment as the Buyer and its counsel reasonably may request; (iv) the Buyer
shall execute, acknowledge, and deliver to the Target (A) such assignment and
assumption agreement in the form attached hereto as Exhibit B, and (B) such
other instruments of assumption as the Target and its counsel reasonably may
request; and (v) the Buyer shall deliver to the Target the consideration
specified in ss.2(c) above.
(g) Allocation. The Parties agree to allocate the Purchase Price
(and all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) in accordance with the
allocation schedule attached hereto as Exhibit C, provided that the Buyer shall
have forty-five (45) days from the Closing Date in which to review the details
of Target's assets and liabilities and to conform such financial reporting to
the Buyer's financial reporting standards and policies in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby. If in the
Buyer's reasonable discretion changes to such allocation are to be made, the
Buyer shall provide the Target with a copy of its proposed revised allocation
schedule and the parties shall negotiate in good faith to arrive at a fair
determination of such allocation, taking into account all tax and accounting
consequences to any of the parties hereto of such revision.
3. Representations and Warranties of the Target. The Target
represents and warrants to the Buyer that the statements contained in this ss.3
are correct and complete as of the Closing Date, in each case except as set
forth in the disclosure schedule accompanying this Agreement (the "Disclosure
Schedule"). The Disclosure Schedule shall be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this ss.3.
(a) Organization of the Target. The Target is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as now conducted and to
enter into this Agreement and the related agreements contemplated hereby and to
perform its obligations hereunder and thereunder. The Target has delivered to
the Buyer complete and correct copies of its Certificate of Incorporation and
bylaws and all amendments thereto. Section 3(a) of the Disclosure Schedule lists
each jurisdiction in which the Target is qualified or licensed to do business as
a foreign corporation. The Target is duly qualified and in good standing as a
foreign corporation in all jurisdictions in which the character or location of
the properties owned or leased or the nature of the activities conducted by it
makes such qualification necessary, except where the failure to obtain or
maintain such qualification would not have a material adverse effect on the
Acquired Assets or the conduct of
7
<PAGE> 11
the Target's business by the Target or by the Buyer upon and after the
consummation of the transactions contemplated hereby.
(b) Authorization of Transaction. The Target has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors and stockholders (including
the Target Stockholders) of the Target have duly authorized and approved, in
accordance with all applicable law, the Target's charter and bylaws, and any
other applicable agreement or instrument, the execution, delivery, and
performance of this Agreement by the Target. This Agreement has been duly
executed and delivered by the Target and constitutes the valid and legally
binding obligation of the Target, enforceable in accordance with its terms and
conditions, subject only to the effects of bankruptcy, insolvency and similar
laws of general application.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), shall
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target is subject or any provision of
the charter or bylaws of the Target.
(d) Brokers' Fees. The Target has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer is or could
become liable or obligated to pay or bear.
(e) Title to and Sufficiency of Acquired Assets. Except as set
forth on ss.3(e) of the Disclosure Schedule, (i) the Target has good and
marketable title to each of the Acquired Assets, all free and clear of all
liens, pledges, charges, security interests, mortgages, encumbrances or title
retention agreements of any kind or nature, and (ii) all such properties and
assets are in good condition and repair and are adequate and sufficient to carry
on the business of the Target as presently conducted without the need for any
additional material investment or expenditure (other than expenditures to be
incurred in the Ordinary Course of Business). Section 3(e) of the Disclosure
Schedule sets forth a complete and correct description of all leases of real or
personal property under which the Target is lessor or lessee. Each such lease is
valid and subsisting and no event or condition exists which constitutes, or
after notice or lapse of time or both would constitute, a material default
thereunder. All Acquired Assets which are leased are used and/or operated in
compliance and conformity with the terms and conditions of the applicable lease.
Except as set forth on ss.3(e) of the Disclosure Schedule, the leasehold
interests of the Target are subject to no lien or other encumbrance, and the
Target is in quiet possession of the properties covered by such leases.
(f) Subsidiaries. The Target does not have any Subsidiaries or any
other ownership interest in any Person.
(g) Financial Statements. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"): (i)
audited balance sheets and
8
<PAGE> 12
statements of income, changes in stockholders' equity, and cash flow as of and
for the fiscal year ended March 31, 1996 for the Target; (ii) unaudited balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the fiscal year ended March 31, 1997 for the Target; and (iii)
unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements" as of and for the
month ended April 30, 1998 (the "Most Recent Fiscal Month End") for the Target,
each as certified by the chief financial officer of the Target. The Financial
Statements (including the notes thereto) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby and
present fairly the financial condition of the Target as of such dates and the
results of operations of the Target for such periods; provided, however, that
the Most Recent Financial Statements are subject to normal, non-recurring
year-end adjustments and lack footnotes and other presentation items. At the
dates of such Financial Statements, the Target did not have any material
liability (actual, contingent or accrued) that, in accordance with GAAP applied
on a consistent basis, should have been shown or reflected therein but were not.
(h) Events Subsequent to Most Recent Fiscal Month End. Except as
set forth on ss.3(h) of the Disclosure Schedule, since the Most Recent Fiscal
Month End, there has not been, occurred or arisen: (i) any change in the assets,
liabilities, sales, income or business of the Target or in its relationships
with suppliers, customers or lessors, other than changes which were both in the
Ordinary Course of Business and have not been, either in any individual case or
in the aggregate, materially adverse; (ii) any acquisition or disposition by the
Target of any asset or property other than in the Ordinary Course of Business;
(iii) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting, either in any individual case or in the
aggregate, the Acquired Assets; (iv) any declaration, setting aside or payment
of any dividend or any other distributions in respect of any class of the
capital stock of the Target; (v) any issuance of any shares of any class of the
capital stock of the Target or any direct or indirect redemption, purchase or
other acquisition of any of any class of the capital stock of the Target; (vi)
any increase in the compensation, pension or other benefits payable or to become
payable by the Target to any of its officers or employees, or any bonus payments
or arrangements made to or with any of them; (vii) any forgiveness or
cancellation of any debt or claim by the Target or any waiver of any right of
material value other than compromises of accounts receivable in the Ordinary
Course of Business; (viii) any entry by the Target into any transaction other
than in the Ordinary Course of Business; (ix) any incurrence by the Target of
any obligations or liabilities, whether absolute, accrued, contingent or
otherwise (including, without limitation, liabilities as guarantor or otherwise
with respect to obligations of others), other than obligations and liabilities
incurred in the Ordinary Course of Business; (x) any mortgage, pledge, lien,
lease, security interest or other charge or encumbrance on any of the Acquired
Assets; (xi) any change in accounting principles, practices or methods used by
the Target; (xii) any strike or labor dispute; or (xiii) any discharge or
satisfaction by the Target of any lien or encumbrance or payment by the Target
of any obligation or liability (fixed or contingent) other than (A) current
liabilities included in the unaudited balance sheet as of March 31, 1998 and (B)
current liabilities incurred since March 31, 1998 in the Ordinary Course of
Business.
9
<PAGE> 13
(i) Legal Compliance. The Target has complied with, and is in
compliance with, (i) all laws, statutes, governmental regulations and all
judicial or administrative tribunal orders, judgments, writs, injunctions,
decrees or similar commands applicable to its business, (ii) all unwaived terms
and provisions of all contracts, agreements and indentures to which the Target
is a party, or by which the Target or any of its properties is subject (except
for those terms or provisions which purport to limit or condition the
assignability of same), and (iii) its charter and by-laws, each as amended to
date, in each case except where such compliance would not have a material
adverse effect on the business of the Target or the Acquired Assets. To its
Knowledge, the Target has not committed, been charged with, or been under
investigation with respect to, nor does there exist, any violation by the Target
of any provision of any federal, state or local law or administrative
regulation. The Target has and maintains all licenses, permits and other
authorizations from all such governmental authorities as are necessary or
desirable for the conduct of its business or in connection with the ownership or
use of the Acquired Assets, all of which are in full force and effect, and true
and complete copies of all of which have previously been delivered to the Buyer.
(j) Labor Relations. The Target is in full compliance with all
federal, state and local laws respecting employment and employment practices,
terms and conditions of employment, wages and hours and nondiscrimination in
employment, and is not engaged in any unfair labor practice. There is no charge,
claim, or action pending or threatened against the Target alleging unlawful
discrimination in employment practices, breach of contract, unpaid wages or any
other violations of law respecting employment practices before any court or
agency and there is no charge of or proceeding with regard to any unfair labor
practice against the Target pending before the National Labor Relations Board.
There is no labor strike, dispute, slow-down or work stoppage actually pending
or threatened against or involving the Target. No representation question exists
respecting any of the employees of the Target. No grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is
pending against the Target and no claim therefor has been asserted. None of the
employees of the Target is covered by any collective bargaining agreement, and
no collective bargaining agreement is currently being negotiated by the Target
and no union has been certified as the exclusive bargaining representative of
any employees of the Target. The Target has not experienced any work stoppage or
other material labor difficulty during the last five years. Except as set forth
on ss.3(j) of the Disclosure Schedule, there are no employment agreements,
written or oral, restricting Target's right to terminate any employee without
cause and without notice.
(k) Accounts Receivable. Except as specifically set forth in
ss.3(k) of the Disclosure Schedule, all accounts and notes receivable reflected
on the Most Recent Financial Statements, and all accounts and notes receivable
arising subsequent to March 31, 1998, have arisen in the Ordinary Course of
Business, represent valid obligations to the Target and, subject only to
consistently recorded reserves for bad debts, have been collected or are
collectible in the aggregate recorded amounts thereof in accordance with their
terms. The reserves for bad debts reflected in the balance sheet are adequate to
cover the uncollectable portion of such accounts receivable and since March 31,
1998 there has occurred no event or circumstance which would require any
increase in such reserves. The Target has delivered to the Buyer a complete and
accurate aging list of all receivables of the Target.
10
<PAGE> 14
(l) Intellectual Property. Section 3(l) of the Disclosure Schedule
hereto sets forth a complete and accurate list of (i) all patents, trademarks,
trade names and copyrights registered in the name of the Target and any other
intellectual property used or proposed to be used by the Target, all
applications therefor, and all licenses and other agreements relating thereto,
and (ii) all written agreements relating to technology, know-how and processes
which the Target has licensed or authorized for use by others. Except to the
extent set forth in ss.3(l) of the Disclosure Schedule, the Target owns or has
the sole and exclusive right to use all patents, trademarks, trade names and
copyrights and any other intellectual property used or necessary for the
Ordinary Course of Business as presently conducted or proposed to be conducted,
in each case without payment or any other obligation to any other Person, and
the consummation of the transactions contemplated hereby shall not materially
alter or impair any such right. The Target has complied with all of its
obligations of confidentiality in respect of the claimed trade secrets or
proprietary information of others and knows of no violation of such obligations
of confidentiality as are owed to the Target. No employee, agent or consultant
of the Target is subject to confidentiality restrictions in favor of any third
person the breach of which could subject the Target or the Acquired Assets to
any material liability. No claims have been asserted, and no claims are pending,
by any person regarding the use of any such trademarks, trade names, copyrights,
technology, know-how or processes, or challenging or questioning the validity or
effectiveness of any license or agreement, and there is no basis for such claim.
The use by the Target of such patents, trademarks, trade names, copyrights,
technology, know-how or processes and/or intellectual property does not infringe
on the rights of any person.
(m) Contracts. Section 3(m) of the Disclosure Schedule sets forth
a complete and accurate list of all contracts and other agreements included
among the Purchased Assets, and pursuant to which the Target has expended or may
be required, absolutely or contingently, to expend, more than twenty thousand
dollars ($20,000), except other contracts listed in the Disclosure Schedule. As
used in this Agreement, the word "contract" means and includes every agreement
or understanding of any kind, written or oral, which is legally enforceable by
or against the Target, including, without limitation: (i) contracts and other
agreements with any current or former officer, director, employee, consultant or
shareholder or any partnership, corporation, joint venture or any other entity
in which any such person has an interest; (ii) agreements with any labor union
or association representing any employee; (iii) contracts and other agreements
for the provision of goods or services by the Target; (iv) bonds or other
security agreements provided by any party in connection with the business of the
Target; (v) contracts and other agreements for the sale of any of its assets or
properties other than in the Ordinary Course of Business or for the grant to any
person of any rights to purchase any of its assets or properties; (vi) joint
venture agreements relating to the assets, properties or business of the Target
or by or to which it or any of its assets or properties are bound or subject;
(vii) contracts or other agreements under which the Target agrees to indemnify
any party, to share tax liability of any party, or to refrain from competing
with any party; (viii) any contracts or other agreements with regard to borrowed
money or the leasing of property; or (ix) any other contract or other agreement
whether or not made in the Ordinary Course of Business. Except as otherwise
indicated on ss.3(m) of the Disclosure Schedule, each of the contracts listed on
ss.3(m) of the Disclosure Schedule was entered into in the Ordinary Course of
Business, was in full force and effect immediately before the Closing, and the
Target is not in default under any of them, nor is any other party to any such
contract in default thereunder, nor does any event or condition
11
<PAGE> 15
exist (other than the assignment hereunder) which after notice or lapse of time
or both would constitute a default thereunder, except where such default would
not have a material adverse effect on the business of the Target, the Acquired
Assets or the ability of the Buyer to conduct the business of the Target as
conducted immediately prior to the Closing Date. The Target has delivered to the
Buyer true, correct and complete copies of all written such contracts, together
with all modifications and supplements thereto.
(n) Environmental Matters.
(i) Except as set forth on ss.3(n)(i) of the Disclosure Schedule,
no underground storage tanks and no amount of any substance that has
been designated by any governmental entity or by applicable federal,
state, local or other applicable law to be radioactive, toxic, hazardous
or otherwise a danger to health or the environment, including PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or defined
as a hazardous waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations promulgated
pursuant to said laws, but excluding office and janitorial supplies
properly and safely maintained (a "Hazardous Material"), are present in,
on or under any property, including the land and the improvements,
ground water and surface water thereof, that the Target or any of its
Subsidiaries has or have at any time owned, operated, occupied or leased
and/or which is included among the Acquired Assets. Section 3(n) of the
Disclosure Schedule identifies all underground and aboveground storage
tanks, and the capacity, age, and contents of such tanks, located on
real property owned or leased by the Target or any of its Subsidiaries.
(ii) Neither the Target nor any of its Subsidiaries has
transported, stored used, manufactured, disposed of or released, or
exposed its employees or others to Hazardous Materials in violation of
any law in effect on or before the Closing Date, nor has the Target
disposed of, transported, sold or manufactured any product containing a
Hazardous Material (collectively, the "Target Hazardous Materials
Activities") in violation of any formal rule, regulation, treaty or
statute promulgated by any governmental entity in effect prior to or as
of the date hereof to prohibit, regulate or control Hazardous Materials
or Target Hazardous Material Activities.
(iii) Except as set forth on ss.3(n)(iii) of the Disclosure
Schedule, the Target currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Target Hazardous Material Activities of
the Target as such activities and business are currently being
conducted. Except as set forth on ss.3(n)(iii) of the Disclosure
Schedule, all Environmental Permits are in full force and effect, and
included among the Acquired Assets. The Target and each of its
Subsidiaries (A) is in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
laws of all governmental entities relating to pollution or protection of
the environment or contained in any regulation or decree or judgment
issued, entered, promulgated or approved thereunder. There are no
12
<PAGE> 16
circumstances that may prevent or interfere with such compliance in the
future. Section 3(n)(iii) of the Disclosure Schedule includes a listing
and description of all Environmental Permits currently held by the
Target.
(iv) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending, or to the Knowledge of
the Target, threatened concerning any Environmental Permit, Hazardous
Material or any Target Hazardous Material Activities or any of the
Acquired Assets. There are no past or present actions, activities,
circumstances, conditions, events, or incidents that are reasonably
expected to involve the Acquired Assets in any environmental litigation,
or impose upon the Target or the Acquired Assets, either by contract or
operation of law, any environmental liability, including common law tort
liability.
(o) Litigation. Except as set forth on ss.3(o) of the Disclosure
Schedule, no action, suit, proceeding or investigation (whether conducted by any
judicial or regulatory body or other person) is pending or, to the Knowledge of
the Target, threatened against the Target or the Acquired Assets (nor is there
any basis therefor known to the Target) which questions the validity of this
Agreement or any action taken or to be taken pursuant hereto or which, either in
any individual case or in the aggregate, has or, if determined adversely, would
reasonably be expected to have, a material adverse effect on the business of the
Target or the Acquired Assets.
(p) Employee Benefits.
(i) Except as set forth on ss.3(p)(i) of the Disclosure Schedule,
the Target does not maintain or have any obligation to make
contributions to, any employee benefit plan (an "ERISA Plan") within the
meaning of ss.3(3) of the United States Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any other retirement,
profit sharing, stock option, stock bonus or employee benefit plan (a
"Non-ERISA Plan"). None of the ERISA Plans set forth on ss.3(p)(i) of
the Disclosure Schedule is a "Multiemployer Plan" as that term is
defined by ERISA ss.3(37). The Target has heretofore delivered to Parent
true, correct and complete copies of each ERISA Plan and each Non-ERISA
Plan. All such ERISA Plans and Non-ERISA Plans have been maintained and
operated in all material respects in accordance with all federal, state
and local laws applicable to such plans, and the terms and conditions of
the respective plan documents.
(ii) The Target has not engaged in any transaction in connection
with which it could be subject to either a civil penalty assessed
pursuant to ss.502(i) of ERISA, or a tax imposed by ss.4975 of the Code,
or any tax or penalty under any federal, state or local laws applicable
to any Non-ERISA Plan. Except as set forth on ss.3(p)(i) of the
Disclosure Schedule, no ERISA Plan or Non-ERISA Plan or any trust
created under any ERISA Plan or Non-ERISA Plan has been terminated since
September 2, 1974, and any termination so noted in the Disclosure
Schedule was accomplished in accordance with applicable federal, state
and local law. No material liability to the United States Pension
Benefit Guaranty Corporation ("PBGC"), or to any multi-employer pension
plan within the meaning of ss.3(37) of ERISA, or to any other
governmental authority, pension or
13
<PAGE> 17
retirement board, or other agency, under any federal, state or local
law, has been or is expected to be incurred by the Target with respect
to any ERISA Plan or Non-ERISA Plan. There has been no "reportable
event" within the meaning of ss.4043(b) of ERISA with respect to any
ERISA Plan, and no event or condition that presents a material risk of
termination of any ERISA Plan by the PBGC.
(iii) Full payment has been made of all amounts that the Target
is required under the terms of each ERISA Plan and Non-ERISA Plan, or
pursuant to applicable federal, state or local law, to have paid as
contributions to such ERISA Plan or Non-ERISA Plan as of the last day of
the most recent fiscal year of such ERISA Plan or Non-ERISA Plan ended
prior to the date hereof, and no accumulated funding deficiency (as
defined in ss.302 of ERISA and ss.412 of the Code), whether or not
waived, exists with respect to any ERISA Plan.
(q) Certain Business Relationships with the Target. Except as set
forth on ss.3(q) of the Disclosure Schedule, no Affiliate of the Target nor any
officer or director of any thereof has any interest in any of the Acquired
Assets; no such person is indebted or otherwise obligated to the Target; and the
Target is not indebted or otherwise obligated to any such Person, except for
amounts due under normal arrangements applicable to all employees generally as
to salary or reimbursement of ordinary business expenses in the Ordinary Course
of Business. The consummation of the transactions contemplated hereby shall not
(either alone, or upon the occurrence of any act or event, or with the lapse of
time, or both) result in any benefit or payment (severance or other) arising or
becoming due, other than in the Ordinary Course of Business, from the Target or
the successor or assign of the Target to any such Person. Except as set forth on
ss.3(q) of the Disclosure Schedule, the Target has not engaged in any
transaction with any Target Stockholders or any Affiliate of the Target
Stockholders. The consummation of the transactions contemplated hereby shall not
(either alone, or upon the occurrence of any act or event, or with the lapse of
time, or both) result in any payment arising or becoming due from the Target or
the successor or assign of the Target to any Target Stockholder or Affiliate of
any Target Stockholders, except for payments or obligations arising under this
Agreement.
(r) Insurance. Section 3(r) of the Disclosure Schedule lists the
policies of theft, fire, liability (including products liability), worker's
compensation, life, property and casualty and other insurance owned or held by
the Target. Such policies of insurance are maintained with financially sound and
reputable insurance companies, funds or underwriters and are of the kinds and
cover such risks and are in such amounts and with such deductibles and
exclusions as are consistent with prudent business practice. All such policies
are in full force and effect, are sufficient for compliance by the Target with
all requirements of law and of all agreements to which the Target is a party,
are valid, outstanding and enforceable policies as of the Closing Date. Target
does not have pending any claim under any such policies or any other insurance
policy, and has not permitted any claim under any insurance policy to lapse or
be forfeited.
14
<PAGE> 18
(s) Inventory. Except as set forth on ss.3(s) of the Disclosure
Schedule, all inventories of the Target are of good merchantable quality,
reasonably in balance, and salable within thirty (30) days (in the case of
inventory held for sale) or currently usable (in the case of other inventory) in
the Ordinary Course of Business. The value of obsolete, damaged or excess
inventory and of inventory below standard quality has been written down on the
Most Recent Financial Statements or, with respect to inventories purchased since
March 31, 1998, on the books and records of the Target, to ascertainable market
value, or adequate reserves described on the Most Recent Financial Statements
have been provided therefor, and the value at which inventories are carried
reflects the customary inventory valuation policies of the Target (which fairly
reflects the value of obsolete, spoiled or excess inventory) for stating
inventory, in accordance with GAAP applied on a consistent basis.
(t) Suppliers and Customers. Section 3(t) of the Disclosure
Schedule sets forth the ten (10) largest suppliers and ten (10) largest
customers of the Target as of the date hereof. The relationships of the Target
with its suppliers and customers are good commercial working relationships and,
except as set forth on ss.3(t) of the Disclosure Schedule, no supplier or
customer of material importance to the Target has cancelled or otherwise
terminated, or threatened in writing to cancel or otherwise to terminate, its
relationship with the Target or has during the last twelve (12) months decreased
materially, or threatened to decrease or limit materially, its services,
supplies or materials to the Target or its usage or purchase of the services or
products of the Target except for normal cyclical changes related to customers'
businesses. Except as set forth on ss.3(t) of the Disclosure Schedule, the
Target has no Knowledge that any such supplier or customer intends to cancel or
otherwise substantially modify its relationship with it or to decrease
materially or limit its services, supplies or materials to it, or its usage or
purchase of its services or products.
(u) Disclosure. No representation or warranty made by the Target
in this Agreement or in any exhibit, schedule, written statement, certificate or
other document delivered or to be delivered to the Buyer pursuant hereto or in
connection with the consummation of the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements contained
therein not false or misleading. There is no fact relating to the business of
the Target or the Acquired Assets known to the Target which the Target has not
disclosed to the Buyer in writing which might materially adversely affect the
business of the Target or the Acquired Assets or the ability of the Target to
perform this Agreement or any of the transactions contemplated hereby.
(v) Noncontravention of "Assumed Liabilities" Definition. No
disclosure by the Target to the Buyer on the Disclosure Schedule is intended,
nor shall be deemed or construed, as in any way modifying or changing the
definition of "Assumed Liabilities" provided in this Agreement and shall not
enlarge, diminish or change the liabilities or obligations of the Target assumed
by the Buyer pursuant to this Agreement.
4. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Target (and to the Target Stockholders for
purposes of the Agreement with Target Stockholders) that the statements
contained in this ss.4 are correct and complete as of the Closing Date.
15
<PAGE> 19
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. The Buyer 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 the Buyer, enforceable
in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), shall
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws. The Buyer does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in 2 above).
(d) Brokers' Fees. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Target is or could
become liable or obligated to pay or bear.
5. Representations and Warranties of the Target Stockholders. The
Target Stockholders jointly and severally represent and warrant to the Buyer
that the statements contained in this ss.5 are correct and complete as of the
Closing Date.
(a) Organization of Certain Target Stockholders. If the Target
Stockholder is a corporation or other business entity, the Target Stockholder is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization. The Target Stockholder has full power and
authority (including, if the Target Stockholder is a corporation, full corporate
power and authority) to execute and deliver this Agreement and to perform his or
its obligations hereunder. The transactions contemplated hereby have been duly
approved by the requisite vote of the Target's stockholders. This Agreement
constitutes the valid and legally binding obligation of the Target Stockholder,
enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement by the Target Stockholder, nor the performance by the Target
Stockholder of his or its obligations hereunder, shall violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
the Target Stockholder is subject (or, if the Target Stockholder is a
corporation, any provision of its charter or bylaws).
16
<PAGE> 20
(d) Target Preferred Stock. The Target Stockholder holds of record
the number of shares of Target Preferred Stock set forth next to his or its name
on the Annex.
6. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
(a) General. In case 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 shall take such further action (including the execution and
delivery of such further instruments and documents or instruments necessary to
transfer title in the Acquired Assets) 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 ss.4 below).
(b) 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 the Target (unless such Parties are adversarial in
such proceeding), each of the other Parties shall cooperate with the contesting
or defending Party and his or its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to his or
its 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 ss.4 below).
(c) Transition. None of the Target Stockholders shall take any
action that is designed or intended to have, or has, the effect of discouraging
any lessor, licensor, customer, supplier, or other business associate of the
Target from maintaining the same business relationships with the Buyer after the
Closing as it maintained with the Target prior to the Closing.
(d) Access to Employees. The Buyer shall afford the Target and/or
the Target Stockholders sufficient reasonable access to such records,
documentation and employees of the Target as the Target and/or the Target
Stockholders may require in order that the affairs of the Target may be orderly
wound-down.
(e) Reseller's Certificate. The Buyer shall timely take such
further action as reasonably required to obtain and maintain a Massachusetts
Sales Tax Resale Certificate (as that form is provided by the Massachusetts
Department of Revenue ("DOR")), and to take such further reasonable actions as
may be required by the DOR to operate in Massachusetts the business acquired
hereby.
17
<PAGE> 21
7. Remedies for Breaches of This Agreement and this Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of (i) the Target contained in ss.3, (ii) the
Buyer contained in ss.4 and (iii) the Target Stockholders contained in ss.5
shall survive the Closing and continue in full force and effect for a period of
ninety (90) days thereafter. Notwithstanding anything to the contrary contained
herein, each of the representations and warranties of the parties hereto shall
expire only upon the one (1) year anniversary of the Closing, if the demand,
claim or lawsuit for which recovery is sought relates to a criminal
investigation, quasi-criminal investigation, governmental or regulatory claim
alleging fraud, or civil claim involving allegations of criminal or other
criminal conduct. A claim for indemnification under this ss.7 for breach of a
representation or warranty may be brought at any time during such applicable
survival period as determined above, and if such notice is given within such
period, all rights to indemnification with respect to such claim shall continue
in full force and effect.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event the Target or any of the Target Stockholders
breaches any of its representations, warranties, and covenants contained
herein, and, if there is an applicable survival period pursuant to
ss.7(a) above, provided that the Buyer makes a written claim for
indemnification against any of the Target Stockholders pursuant to
ss.8(g) below within such survival period, then the Target Stockholders
agree, jointly and severally, to indemnify the Buyer against any Adverse
Consequences the Buyer shall suffer that result from or arise out of
such breach; provided, however, that, subject to subparagraph (iii) of
this ss.7(b), the Target Stockholders shall not have any obligation to
indemnify the Buyer from and against any Adverse Consequences caused by
the breach of any representation or warranty of the Target contained
herein:
(A) until the Buyer has suffered Adverse Consequences by
reason of all such breaches in excess of fifty thousand dollars
($50,000), after which point the Target Stockholders shall be
obligated to indemnify the Buyer for the full amount of such
Adverse Consequences without deduction of such $50,000; or
thereafter
(B) in the event that Buyer has suffered Adverse
Consequences by reason of all such breaches in excess of the
Holdback but less than two hundred and sixty-five thousand dollars
($265,000), then the Target Stockholders shall not have any
obligation to so indemnify the Buyer for any amounts in excess of
the Holdback (and the Buyer shall only be entitled to
indemnification from the Holdback); or thereafter
(C) to the extent the Adverse Consequences the Buyer has
suffered by reason of all such breaches exceeds two hundred and
sixty-five thousand dollars ($265,000), then the Target
Stockholders shall be obligated, after the application of the
Holdback to offset such Adverse Consequences, to indemnify the
Buyer for the lesser of (I) an amount equal to one-half of the
aggregate Adverse Consequences the Buyer has suffered by reason of
all such breaches minus two
18
<PAGE> 22
hundred and sixty-five thousand dollars ($265,000), or (II)
three hundred and eighty-five thousand dollars ($385,000) (after
which point the Target Stockholders shall have no obligation to
indemnify the Buyer from and against further such Adverse
Consequences). The Buyer shall in any event first seek payments
for such indemnification from the Holdback pursuant to the terms
of the Escrow Agreement.
Notwithstanding anything to the contrary contained herein above, in the
event Target or any of the Target Stockholders breaches any of its
representations, warranties, and covenants contained herein, and, if
there is an applicable survival period pursuant to ss.7(a) above,
provided that the Buyer makes a written claim for indemnification
against the Target Stockholder pursuant to ss.8(g) below within such
survival period, and furthermore, if the demand, claim or lawsuit, for
which recovery is sought relates to a criminal investigation,
quasi-criminal investigation, governmental or regulatory claim alleging
fraud, or civil claim involving allegations of criminal conduct (a
"Claim for Fraud"), then the Target Stockholders shall be obligated,
jointly and severally, to indemnify the Buyer against any Adverse
Consequences the Buyer shall suffer that result from or arise out of
such Claim for Fraud or one million, one hundred thousand dollars
($1,100,000), whichever is less.
(ii) To the extent the Buyer suffers any Adverse Consequences
relating to or arising out of any obligation or liability of the Target
expressly excluded from the definition of "Assumed Liabilities" herein
above, such Adverse Consequences shall be deemed to be a breach of a
representation of the Target for all purposes under this Agreement,
including the applicable survival period of such representation. The
Target Stockholders shall not be obligated under any circumstance
whatsoever to indemnify the Buyer for any such Adverse Consequences
after the expiration of such survival period.
(iii) Notwithstanding anything herein this Agreement to the
contrary, the aggregate dollar value of all Adverse Consequences for
which each of the Target Stockholder shall be obligated to indemnify the
Buyer shall not exceed the greater of (A) his or its Allocable Portion
of five hundred and fifty thousand dollars ($550,000) for claims
pursuant to ss.7(b)(i) (except for a Claim for Fraud), ss.7(b)(ii) or
ss.2(c), or (B) his or its Allocable Portion of one million, one hundred
thousand dollars ($1,100,000) (including all amounts paid previously, if
any, to the Buyer pursuant to subsection (A) herein immediately above)
for a Claim for Fraud pursuant to 7ss.(b)(i).
(c) Indemnification Provisions for Benefit of the Target
Stockholders.
(i) In the event the Buyer breaches any of its representations,
warranties, and covenants contained herein, and, if there is an
applicable survival period pursuant to ss.7(a) above, provided that any
of the Target Stockholders makes a written claim for indemnification
against the Buyer pursuant to ss.8(g) below within such survival period,
then the Buyer agrees to indemnify each of the Target Stockholders from
and against the entirety of any Adverse Consequences the Target
Stockholder shall suffer that result from or arise out of such breach or
the Purchase Price, whichever is lesser; provided, however,
19
<PAGE> 23
that the Buyer shall not have any obligation to indemnify the Target
Stockholders from and against any Adverse Consequences caused by the
breach of any such representation or warranty (i) until the Target
Stockholders have suffered Adverse Consequences by reason of all such
breaches in excess of fifty thousand dollars ($50,000), after which
point the Buyer shall be obligated to indemnify the Target Stockholders
for the full amount of such Adverse Consequences without deduction of
such $50,000, and (ii) in excess of the Purchase Price (after which
point the Buyer shall have no obligation to indemnify the Target
Stockholders from and against further such Adverse Consequences).
(ii) The Buyer agrees to indemnify each of the Target Stockholders
from and against the entirety of any Adverse Consequences the Target
Stockholder shall suffer caused proximately by any liability of the
Target which is an Assumed Liability, including any Adverse Consequences
the Target Stockholder shall suffer caused proximately by the assignment
or purported assignment of any agreements, contracts, indentures,
mortgages, instruments, security interests, guaranties, or other similar
arrangements assigned or purportedly assigned pursuant to the
transactions contemplated hereunder.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this ss.7, then the Indemnified Party shall
promptly (and in any event within five (5) business days after receiving
notice of the Third Party Claim) notify each Indemnifying Party thereof
in writing.
(ii) Any Indemnifying Party shall have the right at any time to
assume and thereafter conduct the defense of the Third Party Claim with
counsel of his or its choice reasonably satisfactory to the Indemnified
Party; provided, however, that the Indemnifying Party shall not consent
to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld, delayed or conditioned
unreasonably).
(iii) Unless and until an Indemnifying Party assumes the defense
of the Third Party Claim as provided in ss.7(d)(ii) above, however, the
Indemnified Party may defend against the Third Party Claim in any manner
he or it reasonably may deem appropriate.
(iv) In no event shall the Indemnified Party consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of each of the
Indemnifying Parties (not to be withheld, delayed or conditioned
unreasonably).
20
<PAGE> 24
(e) Effect of Indemnification. All indemnification payments under
this ss.7 shall be deemed adjustments to the one million, one hundred thousand
dollars ($1,100,000) paid at the Closing.
(f) Indemnification As Sole Remedy. The indemnification provisions
in this ss.7 shall be the exclusive remedy of any of the Parties for any action,
suit, proceeding at law or in equity by any Party based on any facts,
circumstances, actions or omissions of the Parties arising in connection with
the consummation of the transactions contemplated hereby.
8. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
hereof without the prior written approval of the other Parties, which approval
shall not be unreasonably withheld, delayed or conditioned; provided, however,
that any Target Stockholder 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
shall use its reasonable best efforts to advise the other Parties of such
disclosure).
(c) 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.
(d) 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.
(e) 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 or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Requisite Target Stockholders; provided,
however, that the Buyer 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
the Buyer nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(f) 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.
21
<PAGE> 25
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder shall 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 the Buyer:
Procom Technology, Inc.
2181 Dupont Drive
Irvine, California 92612
Attention: Alex Aydin
Frederick Judd
Facsimile: (714) 261-7336
with a copy to:
O'Melveny & Myers LLP
610 Newport Center Drive
Suite 1700
Newport Beach, California
92660-6429
Attention: J. Jay Herron
Facsimile: (714) 669-6994
If to the Target:
Invincible Technologies Corporation
4 Marc Road
Medway, Massachusetts 02053
Attention: Chief Executive Officer
Facsimile: (508) 533-3870
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Wayne D. Bennett, Esq.
Facsimile: (617) 951-8736
22
<PAGE> 26
If to the Target Stockholders:
GeoCapital III, L.P.
One Bridge Plaza
Fifth Floor
Fort Lee, NJ 07024
Attention: Lawrence Lepard
Facsimile: (201) 346-9191
MATRIX Partners IV, L.P.
c/o Matrix Partners
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Attention: Michael Humphreys
Facsimile: (781) 890-2288
MATRIX IV Entrepreneurs Fund, L.P.
c/o Matrix Partners
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Attention: Michael Humphreys
Facsimile: (781) 890-2288
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Wayne D. Bennett, Esq.
Facsimile: (617) 951-8736
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 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.
23
<PAGE> 27
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Target Stockholders. 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.
(j) 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.
(k) Expenses. Each of the Parties shall bear his or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby (except as otherwise
provided herein).
(l) 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.
(m) Incorporation of Annex, Exhibits and Schedules. The Annex,
Exhibits and Schedules are incorporated herein by reference and made a part
hereof.
(o) Employee Benefits Matters. The Buyer shall adopt and assume at
and as of the Closing each of the ERISA Plans and Non-ERISA Plans that the
Target maintains as follows: (i) the Guardian/PHCS Network (In-Network PPO);
(ii) the Guardian/PHCS (Out-of-Network PPO); (iii) Prescription Drug Card; (iv)
Short Term Disability Insurance Policy from Fortis Benefits Insurance Company;
(vii) Long Term Disability Insurance Policy from Fortis Benefits Insurance
Company; (viii) The Guardian Life Insurance Policy (ix) the Vision Service Plan,
and (x) the Guardian Dental Insurance Policy (collectively, the "Assumed
Plans"). Notwithstanding anything to the contrary herein, the Buyer shall not
assume or adopt the Target's 1994 Stock Option Plan, 1996 Stock Option Plan, or
401(k) Profit Sharing Plan and Trust. Within sixty (60) days after the Closing,
the Target shall offer lump-sum distributions from the 401(k) Profit Sharing
Plan and Trust to all employees of the Target as of the Closing Date who accept
employment with the Buyer. The Buyer's 401(k) Plan shall accept rollover
distributions from the Target's 401(k) Profit Sharing Plan and Trust with
respect to those
24
<PAGE> 28
employees who so elect. For the purposes of the Assumed Plans, the Buyer shall
ensure that the Assumed Plans treat employment with the Target prior to the
Closing Date the same as employment with any of the Buyer and its Subsidiaries
from and after the Closing Date for purposes of eligibility, vesting, and
benefit accrual. The Target shall transfer (or cause the plan administrators to
transfer) at and as of the Closing all of the corresponding assets associated
with the Assumed Plans.
(p) Bulk Transfer Laws. The Buyer acknowledges that the Target
shall not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
25
<PAGE> 29
[Signature Page To Asset Purchase Agreement Dated June 24, 1998]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as an instrument under seal as of the date and year first above written.
INVINCIBLE TECHNOLOGIES ACQUISITION
CORPORATION
By: /s/ Nick Shahrestany /s/ Frank Alaghband
-------------------------------------------
Name: Nick Shahrestany Frank Alaghband
Title: Executive Vice Executive Vice
President President
INVINCIBLE TECHNOLOGIES CORPORATION
By: /s/ Edward J. Lastes
-------------------------------------------
Name: Edward J. Lastes
Title: President
GEOCAPITAL III, L.P.
By: /s/ Richard Vines
-------------------------------------------
Name: Richard Vines
Title: General Partner
MATRIX PARTNERS IV, L.P.
By: /s/ W. Michael Humphreys
-------------------------------------------
Name: W. Michael Humphreys
Title:
MATRIX IV ENTREPRENEURS FUND, L.P.
By: /s/ W. Michael Humphreys
-------------------------------------------
Name: W. Michael Humphreys
Title:
1
<PAGE> 30
List of Omitted Annex, Exhibits and Disclosure Schedule*
-------------------------------------------------------
Annex List of Target Stockholders, shares owned
Exhibit A Escrow Agreement
Exhibit B Assignment and Assumption Agreement
Exhibit C Allocation Schedule
Exhibit D Financial Statements
Disclosure Schedule Exceptions to Representations and Warranties
*Registrant agrees to furnish supplementally a copy of any of the omitted Annex,
Exhibits and the Disclosure Schedule listed above to the Commission upon
request.
2
