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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) APRIL 13, 1998
PRECEPT BUSINESS SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Texas 000-23735 75-2487353
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(State or other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification No.)
1909 Woodall Rodgers Freeway, Suite 500, Dallas, Texas 75201
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 754-6600
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 13, 1998, Precept Business Services, Inc., a Texas corporation
(the "Company"), through a wholly owned subsidiary, acquired all of the
issued and outstanding stock of InfoGraphix, Inc., a Massachusetts
corporation ("InfoGraphix"), pursuant to that certain Stock Purchase
Agreement dated as of April 8, 1998 by and among the Company, Precept
Business Products, Inc., a Delaware corporation and a wholly owned subsidiary
of the Company, InfoGraphix and James Gorin, the President and sole
stockholder of InfoGraphix. Boston-based InfoGraphix is a single source
provider of products and services to corporate marketing departments and a
distributor of document management services.
To the best knowledge of the Company, at the time of the acquisition of
InfoGraphix there was no material relationship between (i) InfoGraphix on the
one hand and (ii) the Company, or any of its affiliates, its shareholders,
any director or officer of the Company, or any associate of such director or
officer on the other.
The aggregate consideration paid by the Company as a result of the
acquisition of InfoGraphix was $9,125,000, payable by the issuance of
2,058,077 shares of the Company's Class A Common Stock, par value $.01. The
consideration for the acquisition was determined by arms-length negotiations
between the parties to the Stock Purchase Agreement.
2
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit No. Description
----------- -----------
2.1 Stock Purchase Agreement by and among Precept Business
Products, Inc., Precept Business Services, Inc.,
InfoGraphix, Inc. and James Gorin (1)
4.1 Amended and Restated Articles of Incorporation (2)
4.2 Bylaws (2)
4.3 Form of the Company's Class A Common Stock Certificate (2)
99.1 Press Release issued by Precept Business Services, Inc.
dated April 23, 1998 (1)
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(1) Filed herewith
(2) Previously filed as an exhibit to the Company's Registration Statement
on Form S-4/A (No. 333-42689) and incorporated herein by reference
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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 hereunto duly authorized.
PRECEPT BUSINESS SERVICES, INC.
Date: April 28, 1998 By: /s/ David L. Neely
--------------------------------
David L. Neely
Chairman and CEO
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INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1 Stock Purchase Agreement by and among Precept Business Products, Inc.,
Precept Business Services, Inc., InfoGraphix, Inc. and James Gorin.
(1)
4.1 Amended and Restated Articles of Incorporation (2)
4.2 Bylaws (2)
4.3 Form of the Company's Class A Common Stock Certificate (2)
99.1 Press Release issued by Precept Business Services, Inc. dated April
23, 1998. (1)
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(1) Filed herewith
(2) Previously filed as an exhibit to the Company's Registration Statement
on Form S-4/A (No. 333-42689) and incorporated herein by reference
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STOCK PURCHASE AGREEMENT
BY AND AMONG
PRECEPT BUSINESS PRODUCTS, INC.
PRECEPT BUSINESS SERVICES, INC.
INFOGRAPHIX, INC.
AND
JAMES GORIN
April 8, 1998
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TABLE OF CONTENTS
<TABLE>
Page No.
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<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
SALE AND PURCHASE OF THE SHARES . . . . . . . . . . . . . . . . . . 4
2.1 Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND GORIN . . . . . . . . . . . . . . . . . . . . . 6
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Title to the Shares. . . . . . . . . . . . . . . . . . . . . . 7
3.6 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.7 Governmental Consents. . . . . . . . . . . . . . . . . . . . . 8
3.8 Financial Statements; Accounts Receivable. . . . . . . . . . . 8
3.9 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 9
3.10 Absence of Material Adverse Change . . . . . . . . . . . . . . 9
3.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.13 Compliance with Laws and Regulations . . . . . . . . . . . . . 11
3.14 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.15 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . 12
3.16 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 12
3.17 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . 14
3.18 Condition of Properties. . . . . . . . . . . . . . . . . . . . 15
3.19 Material Agreements. . . . . . . . . . . . . . . . . . . . . . 15
3.20 Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.21 Intellectual Property Rights . . . . . . . . . . . . . . . . . 16
3.22 Subsidiaries and Investments . . . . . . . . . . . . . . . . . 17
3.23 Competing Interests. . . . . . . . . . . . . . . . . . . . . . 17
3.24 Illegal or Unauthorized Payments; Political Contributions. . . 17
3.25 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 17
3.26 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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3.27 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.28 Bank Accounts and Powers of Attorney . . . . . . . . . . . . . 19
3.29 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.30 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.31 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . 19
3.32 Pooling. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND PRECEPT . . . . . . . . 20
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Governmental Consents. . . . . . . . . . . . . . . . . . . . . 21
4.6 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 Finders' Fees. . . . . . . . . . . . . . . . . . . . . . . . . 21
4.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.9 Absence of Material Adverse Changes. . . . . . . . . . . . . . 22
4.10 Tax-Free Reorganization. . . . . . . . . . . . . . . . . . . . 22
4.11 No Misrepresentations. . . . . . . . . . . . . . . . . . . . . 23
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . 23
5.1 Certain Excluded Assets. . . . . . . . . . . . . . . . . . . . 23
5.2 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . 23
5.3 No-Shop Provisions . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Access and Information . . . . . . . . . . . . . . . . . . . . 24
5.5 Information for Filings. . . . . . . . . . . . . . . . . . . . 24
5.6 Fulfillment of Conditions by the Company and Gorin . . . . . . 24
5.7 Fulfillment of Conditions by Buyer and Precept . . . . . . . . 24
5.8 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.9 Release by Gorin . . . . . . . . . . . . . . . . . . . . . . . 25
5.10 Covenants Relating to Taxes. . . . . . . . . . . . . . . . . . 25
5.11 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 25
5.12 Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.13 Tax-Free Reorganization. . . . . . . . . . . . . . . . . . . . 26
5.14 Customer Visits. . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI
CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . 27
6.1 Conditions to Obligations of Buyer . . . . . . . . . . . . . . 27
6.2 Conditions to Obligations of Gorin . . . . . . . . . . . . . . 28
<PAGE>
ARTICLE VII
INDEMNIFICATION; HOLDBACK . . . . . . . . . . . . . . . . . . . . . 28
7.1 Indemnification of Buyer . . . . . . . . . . . . . . . . . . . 28
7.2 Notification of Claim. . . . . . . . . . . . . . . . . . . . . 29
7.3 Defense of Claims. . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Holdback for Claims. . . . . . . . . . . . . . . . . . . . . . 30
7.5 No Claims by Gorin Against the Company . . . . . . . . . . . . 32
7.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . 32
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 33
8.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 34
8.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 34
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 35
8.10 Arbitration Proceedings. . . . . . . . . . . . . . . . . . . . 35
8.11 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 36
8.12 Counterparts; Facsimile Signatures . . . . . . . . . . . . . . 36
8.13 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.14 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 36
LIST OF EXHIBITS
Exhibit A Employment Agreement with Gorin
Exhibit B Employment Agreement with St. Martin
Exhibit C Confidentiality and Noncompetition Agreement with Gorin
Exhibit D Affiliate Agreement with Gorin
Exhibit E Closing Certificate for Gorin and the Company
Exhibit F Closing Certificate for Buyer
Exhibit G Secretary's Certificate for Buyer and the Company
Exhibit H Opinion of Counsel of the Company and Gorin
Exhibit I Opinion of Counsel of Buyer
Exhibit I-A Opinion of General Counsel of Precept
Exhibit J Excluded Assets
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of April 8, 1998 by and among Precept Business Products, Inc., a
Delaware corporation (the "Buyer"), Precept Business Services, Inc., a Texas
corporation ("Precept"), InfoGraphix, Inc., a Massachusetts corporation (the
"Company"), and James Gorin ("Gorin").
RECITALS:
WHEREAS, all of the issued and outstanding capital stock of the Company
consists of an aggregate of 110 shares of Common Stock, no par value per
share (the "Shares"), all of which are owned by Gorin;
WHEREAS, Buyer desires to acquire from Gorin, and Gorin desires to sell
to Buyer, all of the Shares, on the terms and subject to the conditions set
forth in this Agreement in a transaction that is intended to qualify as a
tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended; and
WHEREAS, the transaction contemplated hereby is intended to be treated
as a "pooling of interests" for financial accounting purposes.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants, promises, representations, warranties and agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings set forth below or in the section of this Agreement
referenced below:
"Accounts Receivable" is defined in Section 3.8(b).
"Affiliate" shall mean any director, officer, employee or shareholder of
the Company, or member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or any member of
the family of any such person, has a substantial interest or is an officer,
director, trustee, partner or holder of more than five percent (5%) of the
outstanding capital stock thereof.
"Agreement" shall mean this Stock Purchase Agreement.
"Buyer" shall mean Precept Business Products, Inc., a Delaware
corporation.
<PAGE>
"Buyer Party" is defined in Section 7.1(a).
"CERCLA" is defined in Section 3.25.
"Claim" is defined in Section 7.2.
"Closing" is defined in Section 2.3.
"Closing Date" is defined in Section 2.3.
"Code" is defined in Section 3.16(a).
"Common Stock" shall mean the Company's common stock, no par value.
"Company" shall mean InfoGraphix, Inc., a Massachusetts corporation.
"Customer Due Diligence" is defined in Section 5.14.
"Disclosure Schedule" is defined in the introductory paragraph to Article III.
"Dispute Notice" is defined in Section 8.10(a).
"Effective Date" is defined in Section 4.6(b).
"Employee Benefit Plans" is defined in Section 3.16(c).
"Environmental Laws" is defined in Section 3.25.
"ERISA" is defined in Section 3.16(a).
"Excluded Assets" is defined in Section 5.1.
"Execution Date" is defined in Section 5.14.
"Financial Statements" is defined in Section 3.8(a).
"GAAP" shall mean United States generally accepted accounting principles as may
be modified from time to time.
"Gorin" shall mean James Gorin, the Company's President.
"Governmental Body" is defined in Section 3.7.
"Holdback Period" is defined in Section 7.4(b).
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"Holdback Shares" is defined in Section 7.4(a).
"Intellectual Property" is defined in Section 3.21.
"Liabilities" is defined in Section 3.9.
"Lien" is defined in Section 3.5.
"Losses" is defined in Section 7.1.
"Material Agreements" is defined in Section 3.19.
"Negotiation Period" is defined in Section 8.10(a).
"New Shares" is defined in Section 7.4(d)(i).
"Panel" is defined in Section 8.10(b).
"Parent Class A Common Stock" shall mean the Class A Common Stock, par value
$0.01, of Precept Business Services, Inc., a Texas corporation.
"Pension Plans" is defined in Section 3.16(a).
"Permits" is defined in Section 3.14.
"Person" is defined in Section 3.12.
"Plans" is defined in Section 3.16(e).
"Precept" shall mean Precept Business Services, Inc., a Texas corporation.
"Purchase Price" is defined in Section 2.2.
"RCRA" is defined in Section 3.25.
"Registered Intellectual Property" is defined in Section 3.21.
"S-4 Registration Statement" is defined in Section 4.6.
"Securities Act" is defined in Section 4.6(b).
"SEC" shall mean the Securities and Exchange Commission.
"Shares" shall mean the shares of Common Stock owned by Gorin.
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"St. Martin" shall mean Joe St. Martin, the Company's Chief Operating Officer
and Treasurer.
"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 Section 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.
"Tax Return" means any return, declaration, report, claim for refund,
information return or statement relating to Taxes, including any Schedule or
attachment thereto, and including any amendment thereof.
"Transaction Documents" is defined in Section 3.2.
"Welfare Benefit Plans" is defined in Section 3.16(b).
ARTICLE II
SALE AND PURCHASE OF THE SNARES
2.1 SALE OF SHARES. At the Closing (as defined in SECTION 2.3 hereof),
subject to the terms and conditions of this Agreement, and on the basis of
the representations, warranties and agreements herein contained, Gorin shall
sell, convey, assign, transfer and deliver the Shares to Buyer, and Buyer
will purchase, acquire and accept the Shares from Gorin, free and clear of
all liens, encumbrances, mortgages, pledges, security interest, restrictions
or charges of any kind or character, but together with all rights, privileges
and advantages attached or accruing thereto.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") payable
to Gorin for the Shares shall be $9,125,000, payable by the issuance of
2,058,077 shares of Parent Class A Common Stock. On the Closing Date and
subject to the other terms and conditions hereof, Precept shall issue the
requisite number of shares of Parent Class A Common Stock to Gorin on behalf
of Buyer in accordance with this SECTION 2.2.
2.3 CLOSING. The Closing of the purchase and sale of the Shares
contemplated by this Agreement (the "Closing") will take place at the offices
of Goodwin Procter & Hoar LLP, Exchange Place, Boston, Massachusetts
02109-2881 on April 13, 1998 (the "Closing Date"), or at such other place and
on such other date as the parties may agree.
2.4 CLOSING DELIVERIES. At the Closing, the certificate(s), documents
and other items listed below will be executed and delivered by the
appropriate parties:
4
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(a) Gorin will deliver stock certificate(s) to Buyer representing
all of the Shares to be sold by Gorin, duly endorsed for transfer and
accompanied by duly executed stock power(s);
(b) Buyer will deliver a stock certificate to Gorin representing
the shares of Parent Class A Common Stock to be delivered as Purchase Price;
(c) Buyer and Gorin will execute and deliver an Employment
Agreement substantially in the form of EXHIBIT A hereto;
(d) Buyer and St. Martin will execute and deliver an Employment
Agreement substantially in the form of EXHIBIT B hereto;
(e) Buyer and Gorin will execute and deliver a Confidentiality and
Noncompetition Agreement substantially in the form of EXHIBIT C hereto;
(f) Buyer and Gorin will execute and deliver an Affiliate
Agreement substantially in the form of EXHIBIT D hereto;
(g) Gorin and the Company will execute and deliver to Buyer a
Closing Certificate substantially in the form of EXHIBIT E hereto;
(h) Buyer and Precept will execute and deliver to the Company and
Gorin a Closing Certificate substantially in the form of EXHIBIT F hereto;
(i) The Company will execute and deliver to Buyer, and Buyer will
execute and deliver to the Company and Gorin, a Secretary's Certificate
substantially in the form of EXHIBIT G hereto;
(j) If and to the extent requested by Buyer, each director and
officer of the Company will deliver to Buyer a written resignation;
(k) The Company and Gorin will deliver to Buyer a legal opinion of
their counsel substantially in the form of EXHIBIT H hereto;
(l) Buyer will deliver to the Company and Gorin a legal opinion of
its counsel substantially in the form of EXHIBIT I hereto; and
(m) General Counsel for Precept will deliver to the Company and
Gorin a legal opinion substantially in the form of EXHIBIT I-A hereto.
5
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2.5 FURTHER ASSURANCES. At or after the Closing, and without further
consideration, Gorin will execute and deliver to Buyer and/or the Company
such further instruments of conveyance and transfer and such other documents
as Buyer may reasonably request in order to more effectively convey and
transfer to Buyer all of the Shares and to put Buyer in operational control
of the Company and its assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND GORIN
The Company (until the Closing) and Gorin (after the Closing) hereby
represent and warrant to Buyer that the statements contained in this Article
III are true, correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article III), except as set forth in the Disclosure Schedule
attached hereto and delivered by Gorin to Buyer on the date hereof (the
"Disclosure Schedule"). Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or a warranty made
herein, however, unless the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing
(or inclusion of a copy) of a document or other item 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 a
document or other item itself). The Disclosure Schedule will be arranged in
sections corresponding to the lettered and numbered sections contained in
this Article III.
3.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has full corporate power to own its properties and to
conduct its business as presently conducted. The Company is duly authorized,
qualified or licensed to do business and is in good standing as a foreign
corporation in each state or other jurisdiction in which its assets are
located or in which its business or operations as presently conducted make
such qualification necessary, except where the failure to be so licensed or
qualified would not be expected to have a material adverse effect on the
Company; such jurisdictions are listed in SECTION 3.1 OF THE DISCLOSURE
SCHEDULE.
3.2 AUTHORITY. The Company has all requisite corporate power and
authority, and Gorin has all requisite power and authority, to execute,
deliver and perform under this Agreement and, where applicable, other
instruments, agreements or documents to be executed and delivered pursuant to
this Agreement (collectively, the "Transaction Documents"). The execution,
delivery and performance of the Transaction Documents, by the Company and
Gorin, as the case may be, have been duly authorized by all necessary action,
corporate or otherwise, on the part of the Company and Gorin. This Agreement
has been, and the other Transaction Documents at Closing will be, duly
executed and delivered by the Company and Gorin and, where applicable, each
of
6
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the Transaction Documents at Closing will be legal, valid and binding
agreements of the Company and Gorin, respectively, enforceable against each
of them in accordance with their respective terms, except (a) as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (b) as may be limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
3.3 MINUTE BOOKS. The Company and Gorin have made available to Buyer
true, correct and complete copies of the Company's charter, bylaws, minute
books, stock certificate books and stock record books. The minute books of
the Company contain minutes or consents reflecting all material actions taken
by the directors (including any committees) and shareholders of the Company.
3.4 CAPITALIZATION. The authorized capital stock of the Company consists
solely of 7,500 shares of common stock, no par value, of which 110 shares are
issued and outstanding and all of which are held beneficially and of record
by Gorin. The Shares are validly issued, fully paid and non-assessable and
are held by Gorin free and clear of preemptive or similar rights. The Shares
constitute all of the issued and outstanding capital stock of the Company.
There are no outstanding options, warrants, convertible securities or other
rights, agreements, arrangements or commitments obligating the Company, any
shareholders of the Company (including Gorin) or any other person or entity
to issue or sell any securities or ownership interests in the Company. Except
as set forth in SECTION 3.4 OF THE DISCLOSURE SCHEDULE or otherwise disclosed
in this Agreement, there are no shareholders' agreements, voting agreements,
voting trusts or similar agreements or restrictions binding on any of the
shareholders of the Company (including Gorin) or applicable in any way to the
Shares. All of the outstanding capital stock of the Company has been offered
and sold in compliance with all applicable securities laws, rules and
regulations.
3.5 TITLE TO THE SHARES. Except as set forth in SECTION 3.5 OF THE
DISCLOSURE SCHEDULE, Gorin owns the Shares, of record and beneficially, free
and clear of any lien, pledge, security interest, liability, charge or other
encumbrance or claim of any person or entity, voting trusts, proxies,
preemptive rights, rights of first refusal, buy-sell arrangements or other
shareholder agreements (a "Lien"). Gorin owns the Shares, of record and
beneficially, free and clear of any Lien. Upon delivery of the Shares to
Buyer at the Closing in accordance with the terms and conditions of this
Agreement, Buyer will acquire the entire legal and beneficial interest in all
of the Shares, free and clear of any Lien.
3.6 NO VIOLATION. Except as described in SECTION 3.6 OF THE DISCLOSURE
SCHEDULE, neither the execution nor the delivery of the Transaction Documents
nor the consummation of the transactions contemplated thereby, including
without limitation, the transfer of the Shares to Buyer, will conflict with,
contravene or result in the material breach of any term or provision of; or
violate, or constitute a material default under, or result in the creation of
any Lien on the Company's assets pursuant to, or relieve any third party of
any obligation or give any third party the right to terminate or accelerate
any obligation under, any charter provision, bylaw, material
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agreement (including those listed in SECTION 3.19 OF THE DISCLOSURE SCHEDULE
or with any customer set out in such SECTION 3.20 OF THE DISCLOSURE
SCHEDULE), Permit, order, law or regulation to which any of the shareholders
of the Company (including Gorin) is a party or by which the Company, any of
the shareholders of the Company (including Gorin) or any of their assets is
in any way bound or obligated.
3.7 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of; or registration, qualification, designation, declaration or filing with,
any governmental or quasi-governmental agency, authority, commission, board
or other body (collectively, a "Governmental Body") is required on the part
of the Company or any of the shareholders of the Company (including Gorin) in
connection with the transactions contemplated by this Agreement.
3.8 FINANCIAL STATEMENTS; ACCOUNTS RECEIVABLE.
(a) Attached as SECTION 3.8(a) OF THE DISCLOSURE SCHEDULE
are true and complete copies of (i) the unaudited balance sheet of the
Company for the Company's fiscal year ended September 30, 1997 and the
unaudited statements of income, retained earnings and cash flows for
the Company's fiscal years ended September 30, 1995, 1996 and 1997, as
reviewed by Robert Sharkansky & Company Certified Public Accountants
and (ii) the unaudited balance sheet and related statements of income
and retained earnings of the Company for the period ended February 28,
1998 (collectively, the "Financial Statements"). The Financial
Statements present fairly the financial condition of the Company at
the dates specified and the results of its operations for the periods
specified and have been prepared in accordance with GAAP (except for
the absence of footnote disclosure in the case of the unaudited
financials), except that the Company's unaudited balance sheet and
income statement, dated February 28, 1998, has not been prepared in
accordance with GAAP. The Financial Statements do not contain any
items of a special or nonrecurring nature, except as expressly stated
therein. The Financial Statements have been prepared from the books
and records of the Company, which accurately and fairly reflect all
the material transactions of; acquisitions and dispositions of assets
by, and incurrence of liabilities by the Company.
(b) SECTION 3.8(b) OF THE DISCLOSURE SCHEDULE sets forth
the accounts receivable of the Company (including, without limitation,
all unbilled accounts receivable and miscellaneous receivables) from
sales made as of March 31, 1998 (the "Accounts Receivable"), and the
payments and rights to receive payments related thereto. The amounts
of all Accounts Receivable, unbilled invoices and other debts due or
recorded in the records and books of account of the Company as being
due to the Company as of the Closing Date constitute valid claims
against third parties not affiliated with either Gorin or the Company
and arise from bona fide transactions in the ordinary course of the
business of the Company. Except as set forth in SECTION 3.8(b)-1 OF
THE DISCLOSURE SCHEDULE, the Accounts Receivable arose in the ordinary
course of business and are fully collectible in the ordinary course of
business, without resort to litigation, at the face
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amount thereof, less any reserve reflected in the Company's unaudited
balance sheet, dated as of February 28, 1998, and in all cases are not
subject to counterclaim, set-off or other reduction.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. At the Closing, the aggregate
amount of the Company's indebtedness for borrowed money (which excludes accounts
payable arising in the ordinary course of business) will not exceed $2.8
million. The Company does not have any direct or indirect debts, obligations or
liabilities of any nature, whether absolute, accrued, contingent, liquidated or
otherwise, and whether due or to become due, asserted or unasserted, known or
unknown (collectively, "Liabilities") that would, individually or in the
aggregate, be expected to have a material adverse effect on the Company, except
for (a) Liabilities specifically identified in this Agreement or in the
Company's unaudited balance sheet, dated February 28, 1998, and (b) obligations
to be performed in the ordinary course of business or under the Material
Agreements (as defined in SECTION 3.19 below).
3.10 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date of the Company's
unaudited balance sheet, dated February 28, 1998, except as set forth in SECTION
3.10 OF THE DISCLOSURE SCHEDULE, there has not been: (a) any material adverse
change in the condition (financial or otherwise), results of operations,
business, prospects, assets or Liabilities of the Company or with respect to the
manner in which the Company conducts its business or operations; (b) any payment
(including without limitation any dividend or other distribution or repayment of
indebtedness) to any shareholder of the Company (including Gorin), other than
(i) payment of compensation to employees of the Company in the ordinary course
of business and consistent with past practices, and (ii) distributions on
account of Subchapter S taxes in accordance with accruals contained in the
Financial Statements; (c) any breach or default (or event that with notice or
lapse of time or both would constitute a breach or default), termination or
threatened termination under any Material Agreement; (d) any material theft,
damage, destruction, casualty loss, condemnation or eminent domain proceeding
affecting any of the Company's assets, whether or not covered by insurance; (e)
any sale, assignment or transfer of any of the assets of the Company, except in
the ordinary course of business and consistent with past practices; (f) any
waiver by the Company of any material rights related to the Company's business,
operations or assets; (g) any other transaction, agreement or commitment entered
into by the Company or its shareholders affecting the Company's business,
operations or assets, except in the ordinary course of business and consistent
with past practices; or (h) any agreement or understanding to do or resulting in
any of the foregoing.
3.11 TAXES.
(a) FILING OF TAX RETURNS. The Company has duly and timely
filed with the appropriate governmental agencies all income, excise,
corporate, franchise, property, sales, use, payroll, withholding and
other Tax Returns (including information returns) and reports required
to be filed by the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns
or reports are complete and
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accurate in all material respects and properly reflect the taxes of
the Company for the periods covered thereby.
(b) PAYMENT OF TAXES. The Company has paid or accrued all
Taxes, penalties and interest that have become due with respect to any
Tax Returns that it has filed and any assessments of which it is
aware. The Company is not delinquent in the payment of any Tax,
assessment or governmental charge.
(c) NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR
AUDITS. No Tax deficiency or delinquency has been asserted against the
Company. There is no unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the Taxes of
the Company that could be asserted by any taxing authority. There is
no taxing authority audit of the Company pending or threatened, and
the results of any completed audits are properly reflected in the
Financial Statements. The Company has not violated any federal, state,
local or foreign tax law.
(d) NO EXTENSION OF LIMITATION PERIOD. The Company has not
been granted an extension by any taxing authority of the limitation
period during which any tax liability may be assessed or collected or
waived any statute of limitation in respect of Taxes.
(e) ALL WITHHOLDING REQUIREMENTS SATISFIED. All monies
required to be withheld by the Company and paid to governmental
agencies for all income, social security, unemployment insurance,
sales, excise, use and other Taxes have been (i) collected or withheld
and either paid to the respective governmental agencies or set aside
in accounts for such purpose or (ii) properly reflected in the
Financial Statements.
(f) STATE UNEMPLOYMENT TAXES. In respect of the Company's
most recently completed reporting period, the Company has paid all
state unemployment taxes to the Commonwealth of Massachusetts of the
wages paid by the Company during such period that are subject to such
tax. The Company does not know or have reason to know of any increase
or proposed increase, or facts that would lead to an increase, in the
rate of such state unemployment tax for any period in the future.
(g) TAX LIABILITY IN FINANCIAL STATEMENTS. The liabilities
(including deferred taxes) shown in the Financial Statements and to be
accrued on the books and records of the Company through the Closing
Date for Taxes, interest and penalties are and will be adequate
accruals and have been and will be accrued in a manner consistent with
the practices utilized for accruing tax liabilities in the tax year
ended September 30, 1997 and take into account net operating losses,
investment credits and other carryovers for periods ended prior to the
Closing Date.
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(h) INDEPENDENT CONTRACTORS. Except as set forth in SECTION
3.11(h) OF THE DISCLOSURE SCHEDULE, all persons characterized as
independent contractors, and not as employees, were properly
characterized for all purposes under applicable laws (including,
without limitation, their characterization as independent contractors
for income and employment tax withholdings and payments).
(i) LIENS. There are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Company.
(j) NO RULINGS OR REQUESTS FOR RULINGS. There are no
outstanding rulings of; or requests for rulings with, any Tax
authority addressed to the Company that are, or if issued would be,
binding on the Company.
(k) VALID S CORPORATION. At all times since October 1,
1987, the Company has been an S corporation within the meaning of
Section 1361 of the Code.
3.12 LITIGATION. Except as described in SECTION 3.12 OF THE DISCLOSURE
SCHEDULE, there are currently no pending or, to the knowledge of the Company
or Gorin, threatened claims, actions, lawsuits, administrative proceedings or
reviews, or formal or informal complaints or investigations by any
individual, corporation, partnership, Governmental Body or other entity
(collectively, a "Person") against or relating to the Company or any of its
directors, employees or agents (in their capacities as such) or to which any
assets of the Company are subject. The Company is not subject to or bound by
any currently existing judgment, order, writ, injunction or decree.
3.13 COMPLIANCE WITH LAWS AND REGULATIONS. The Company is currently
complying with and has at all times complied with, and the use, operation and
maintenance of its assets comply with and have at all times complied with,
and neither the Company, its assets nor the use, operation or maintenance of
such assets is in violation or contravention of (a) any applicable statute,
law, ordinance, decree, order, rule or regulation, of any Governmental Body,
or (b) any federal, state and local laws relating to occupational health and
safety, employment and labor matters except where the failure to so comply
would not be expected to have a material adverse effect on the Company.
3.14 PERMITS. The Company owns or possesses from each appropriate
Governmental Body all right, title and interest in and to all permits,
licenses, authorizations, approvals, quality certifications, franchises or
rights (collectively, "Permits") issued by any Governmental Body necessary to
conduct its business except where the failure to do so would not be expected
to have a material adverse effect on the Company. Each of such Permits is
described in SECTION 3.14 OF THE DISCLOSURE SCHEDULE. No loss or expiration
of any such Permit is pending or, to the knowledge of the Company or Gorin,
threatened or reasonably foreseeable, other than expiration in accordance
with the terms thereof of Permits that may be renewed in the ordinary course
of business without lapsing.
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3.15 EMPLOYEE MATTERS. Set forth in SECTION 3.15 OF THE DISCLOSURE SCHEDULE
is a complete list of all current employees of the Company, including date of
employment, current title and compensation, and date and amount of last increase
in compensation. Except as set forth in SECTION 3.15 OF THE DISCLOSURE SCHEDULE,
the consummation of the transactions contemplated by this Agreement will not
accelerate the time of payment or vesting or increase the amount of compensation
due to any director, officer or employee (present or former) of the Company. The
Company does not have any collective bargaining, union or labor agreements,
contacts or other arrangements with any group of employees, labor union or
employee representative. Neither the Company nor Gorin know of any organization
effort currently being made or threatened by or on behalf of any labor union
with respect to employees of the Company. Except as set forth in SECTION 3.15 OF
THE DISCLOSURE SCHEDULE, (a) the Company is in compliance in all material
respects with all federal, state or other applicable laws, domestic or foreign,
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice, except where any such noncompliance will not have a material
adverse effect on the Company; (b) no unfair labor practice complaint against
the Company is pending before the National Labor Relations Board or any similar
agency; (c) there is no labor strike, dispute, slow down or stoppage actually
pending or, to the Company's or Gorin's knowledge, threatened against or
involving the Company; (d) no representation question exists respecting the
employees of the Company; (e) no grievance that might have a material adverse
effect upon the Company or the conduct of its respective business exists, no
arbitration proceeding arising out of or under any collective bargaining
agreement is pending, and to the Company's or Gorin's knowledge, no such claim
has been asserted; (f) no collective bargaining agreement is currently being
negotiated by the Company; (g) the Company has not experienced any material
labor difficulty or organizing activity during the last three years; (h) there
has not been any material adverse change in relations with employees of the
Company as a result of any announcement of the transaction contemplated by this
Agreement; and (i) to the Company's and Gorin's knowledge, and except as set
forth in SECTION 3.15 OF THE DISCLOSURE SCHEDULE, no director, officer or other
key employee of the Company intends to terminate his employment with the
Company. The Company has noncompetition agreements with each of the Company's
employees listed in SECTION 3.15 OF THE DISCLOSURE SCHEDULE, and no employee has
breached or, to the Company's and Gorin's knowledge threatened to breach, such
employee's respective noncompetition agreement.
3.16 EMPLOYEE BENEFIT PLANS.
(a) SECTION 3.16 OF THE DISCLOSURE SCHEDULE lists all "employee
pension benefit plans," as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), ever
maintained or contributed to (or required to be contributed to) by the
Company or any Affiliate (the "Pension Plans"). As used in this
SECTION 3.16, "Affiliate" means any corporation, trade or business the
employees of which, together with the employees of the Company, are
required to be treated as
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employed by a single employer under the provisions of ERISA or Section
414 of the Internal Revenue Code of 1986, as amended (the "Code").
(b) SECTION 3.16 OF THE DISCLOSURE SCHEDULE lists each
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
that the Company or any Affiliate maintains, contributes to or is
required to contribute to on behalf of any employee or former
employee, including any multi-employer welfare plan (the "Welfare
Benefit Plans"), and sets forth the amount of any Liability of the
Company or any Affiliate for any payment past due with respect to each
Welfare Benefit Plan as of the date of the Closing. No voluntary
employees' beneficiary association or other finding arrangement (other
than insurance contracts) are being used to find or implement any
Welfare Benefit Plan. Except as set forth in SECTION 3.16 OF THE
DISCLOSURE SCHEDULE, the Company has not made any written or oral
representations to any employee or former employee promising or
guaranteeing any employer payment or funding for the continuation of
benefits or coverage under any Welfare Benefit Plan for any period of
time beyond the end of the current plan year (except to the extent
required under Code Section 4980B).
(c) SECTION 3.16 OF THE DISCLOSURE SCHEDULE lists each
deferred compensation plan, bonus plan, stock option plan, employee
stock purchase plan, and any other employee benefit plan, arrangement,
or commitment (whether written or oral) not required to be listed
under paragraph (a) or (b) above (other than normal policies
concerning holidays, vacations and salary continuation during short
absences for illness or other reasons) maintained by the Company for
employees (the "Employee Benefit Plans").
(d) Neither the Company nor any Affiliate maintains, or,
within the last five years, has maintained, contributed to, been
required to contribute to or had any employees participating in, any
"defined benefit plan" (as defined in Section 3(35) of ERISA) or any
multi-employer plan (as defined in Section 3(37) of ERISA).
(e) The Pension Plans, the Welfare Benefit Plans and the
Employee Benefit Plans and related trusts and insurance contracts
(collectively, the "Plans") are legally valid and binding and in fill
force and effect. All of the Plans comply currently, and have complied
in all material respects in the past, both as to form and operation,
with the provisions of all laws, rules and regulations governing or
applying to such Plans, including but not limited to ERISA, the Code,
the Americans with Disabilities Act, the Family and Medical Leave Act
of 1993 and the Age Discrimination in Employment Act; all necessary
governmental approvals for the Pension Plans and the Welfare Benefit
Plans have been obtained; and a favorable determination as to the
qualification under the Code of each of the Pension Plans and each
amendment thereto, if any, has been made by the Internal Revenue
Service, and nothing has occurred since the date of such determination
letters that could adversely affect the qualification of such Plans or
the tax exempt status of the related trust. All reports and filings
required by any Governmental Body (including without limitation Form
5500 Annual Reports, Summary Annual Reports and Summary
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Plan Descriptions) with respect to each Plan have been timely and
completely filed, and have been distributed to participants as
required by applicable law. Neither the Company, any Affiliate or any
plan fiduciary of any Plan has engaged in any transaction in violation
of Section 406(a) or (b) of ERISA or any "prohibited transaction" (as
defined in Code Section 4975(c)(l)) that would subject the Company to
any taxes, penalties or other Liabilities resulting from such
transaction. None of the Plans is being audited or investigated by any
Governmental Body. With respect to such Plans, there are no actions,
suits or claims (other than routine claims for benefits in the
ordinary course) pending or, to the knowledge of the Company or Gorin,
threatened, and there are no facts that could reasonably be expected
to give rise to any such actions, suits or claims.
(f) The Company does not have any Liabilities to any Person
with respect to any Plan, except for (i) Liabilities that are filly
funded by assets set aside in trust or irrevocably dedicated for that
purpose, the fair market value of which assets are equal to or exceed
the Liabilities to which they are set aside or dedicated, (ii)
Liabilities that have been filly accrued on the Financial Statements,
and (iii) Liabilities that are fully funded through insurance
contracts. The Company may terminate any Welfare Benefit Plan or any
Employee Benefit Plan immediately following the Closing without any
Liability to employees, former employees, beneficiaries or any other
Person except to the extent such Liabilities have been accrued or
funded as described in the preceding sentence.
(g) True and complete copies of the following documents
have been delivered by the Company or Gorin (or have been made
available) to Buyer: (i) each Welfare Benefit Plan and each Pension
Plan and each related trust agreement or annuity contract (or other
finding instrument); (ii) the most recent determination letter issued
by the Internal Revenue Service with respect to each Pension Plan;
(iii) Annual Reports on Form 5500 Series required to be filed with any
Governmental Body for each Welfare Benefit Plan and each Pension Plan
for the two most recent plan years; and (iv) the most recent actuarial
report for each Pension Plan.
3.17 TITLE TO ASSETS. Set forth in SECTION 3.17 OF THE DISCLOSURE SCHEDULE
is a complete list of (a) all real property owned by the Company; (b) all real
property leased by the Company; (c) each vehicle owned or leased by the Company;
and (d) each asset of the Company with a book value or fair market value greater
than $5,000. The Company has good and marketable title to, or a valid leasehold
interest in, all of its assets, including without limitation, the assets listed
in SECTION 3.17 OF THE DISCLOSURE SCHEDULE, the assets reflected on the
Company's unaudited balance sheet, dated February 28, 1998, and all assets used
by the Company in the conduct of its business (except for assets disposed of in
the ordinary course of business and consistent with past practices since the
date of such balance sheet and except for assets held under leases or licenses
disclosed pursuant to SECTION 3.19), subject to no Liens, except for (a) Liens
for current taxes not yet due; (b) minor imperfections of title and encumbrances
that do not materially detract from or interfere with the present use or value
of such assets; and (c) Liens disclosed in SECTION 3.17 OF THE DISCLOSURE
SCHEDULE.
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3.18 CONDITION OF PROPERTIES. Except as set forth in SECTION 3.18 OF THE
DISCLOSURE SCHEDULE, all facilities, machinery, equipment, fixtures, vehicles
and other tangible property owned, leased or used by the Company are in good
operating condition and repair, normal wear and tear excepted, are reasonably
fit and usable for the purposes for which they are being used, will not likely
require major overhaul or repair in the foreseeable future, are adequate and
sufficient for the Company's business and substantially conform with all
applicable laws, rules and regulations. The Company maintains policies of
insurance issued by insurers of recognized responsibility insuring the Company
and its assets and business against such losses and risks.
3.19 MATERIAL AGREEMENTS.
(a) SECTION 3.19 OF THE DISCLOSURE SCHEDULE lists the
following agreements and arrangements (whether written or oral and
including all amendments thereto), other than purchase orders executed
in the normal course of business for customer resale, to which the
Company is a party or a beneficiary or by which the Company or any of
its assets is bound and that is material to the Company (collectively,
the "Material Agreements"): (i) any real estate leases; (ii) any
contracts for the provision of goods or services by the Company; (iii)
any agreement evidencing, securing or otherwise relating to any
indebtedness for which the Company is liable; (iv) any capital or
operating leases, value-added reseller, reseller, or conditional sales
agreements relating to vehicles, equipment or other assets of the
Company; (v) any supply or manufacturing agreements or arrangements
pursuant to which the Company is entitled or obligated to acquire any
assets from a third party; (vi) any insurance policies; (vii) any
employment, consulting, noncompetition, separation, collective
bargaining, union or labor agreements or arrangements; (viii) any
agreement with any shareholder of the Company (including Gorin),
director, officer or employee of the Company, or any Affiliate or
family member thereof; (ix) any joint marketing or similar agreement
or arrangement; and (x) any other agreement or arrangement pursuant to
which, based on historical or projected volume, the Company could be
required to make, or be entitled to receive, aggregate payments in
excess of $50,000 during any calendar year. SECTION 3.19 OF THE
DISCLOSURE SCHEDULE indicates each agreement that is subject to laws,
rules or regulations relating to the Small Business Administration,
Minority Business Enterprises or Women Owned Business Enterprises.
(b) The Company has performed all material obligations
required to be performed by it in connection with the agreements and
arrangements required to be disclosed in SECTION 3.19 OF THE
DISCLOSURE SCHEDULE and is not in receipt of any claim of default
under any agreement or arrangement required to be disclosed in such
Schedule by this SECTION 3.19; the Company has no present expectation
or intention of not fully performing any material obligation pursuant
to any agreement or arrangement required to be disclosed in SECTION
3.19 OF THE DISCLOSURE SCHEDULE; and neither the Company nor Gorin has
any knowledge of any breach or anticipated breach by any other party
to any
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agreement or arrangement required to be disclosed in SECTION 3.19 OF
THE DISCLOSURE SCHEDULE.
(c) The Company has delivered to Buyer a copy of the
agreements and arrangements (including all amendments and
modifications thereto) required to be disclosed in SECTION 3.19 OF THE
DISCLOSURE SCHEDULE and its standard form of customer agreement, all
training manuals and a description (with any written or other
instructional materials) of how the Company operates its business,
undertakes projects for customers or trains its employees.
3.20 CUSTOMERS. Set forth in SECTION 3.20 OF THE DISCLOSURE SCHEDULE is
a complete list of customers as of March 31, 1998, which also shows for each
such customer (i) revenues, if any, actually received by the Company during
the Company's fiscal year ended September 30, 1997, and (ii) the expiration
date of the contract or agreement. Except as set forth in SECTION 3.20 OF THE
DISCLOSURE SCHEDULE, no customer has advised the Company of such customer's
intent to discontinue doing business with the Company or to reduce the volume
of goods or services purchased from or supplied to the Company. Except as
set forth in SECTION 3.20 OF THE DISCLOSURE SCHEDULE, the Company has not
received from any customer either oral or written notice of such customer's
intention to terminate its account with the Company.
3.21 INTELLECTUAL PROPERTY RIGHTS. Set forth in SECTION 3.21 OF THE
DISCLOSURE SCHEDULE is a complete list of all registered patents, trademarks,
service marks, trade names and copyrights, and applications for and licenses
(to or from the Company) with respect to any of the foregoing (collectively,
"Registered Intellectual Property"), owned by the Company or with respect to
which the Company has any rights. The Company has the right to use all
Registered Intellectual Property and other computer software (both
proprietary and third party) and software licenses, intellectual property,
proprietary information, trade secrets, trademarks, trade names, copyrights,
material and manufacturers specifications, drawings and designs
(collectively, "Intellectual Property") used by the Company or necessary in
connection with the operation of the Company's business, without infringing
on or otherwise acting adversely to the rights or claimed rights of any
Person, and neither the Company nor Gorin is obligated to pay any royalty or
other consideration to any Person in connection with the use of any such
Intellectual Property. SECTION 3.21 OF THE DISCLOSURE SCHEDULE also includes
a description of the nature of the Company's rights in and to the
Intellectual Property. To the knowledge of the Company and Gorin, no other
Person is infringing the rights of the Company with respect to any of its
Intellectual Property. Except for the consent of applicable governmental
registration authorities: (i) no consent of any third parties would be
required for the transfer of Intellectual Property rights to Buyer or the use
thereof by Buyer at Closing upon consummation of the transactions
contemplated hereby (other than with respect to required consents of third
party licensors and licensees of software under applicable licenses), and
(ii) the Intellectual Property rights (other than with respect to required
consents of third party licensors and licensees of software under applicable
licenses) are freely transferable. The Company is the sole and exclusive
owner of all rights in and to the software described in SECTION 3.21 OF THE
DISCLOSURE SCHEDULE, including all
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source and object code and documentation related thereto, except the third
party software listed in SECTION 3.21 OF THE DISCLOSURE SCHEDULE, as to which
the Company has been granted all rights and licenses necessary for the
Company to sublicense such software to third parties or to provide services
to third parties in the manner in which the Company has done so through the
date hereof and the date of Closing. The Company has licensed the software
only to the third parties listed in SECTION 3.21 OF THE DISCLOSURE SCHEDULE.
There are no existing material defaults, events of default or events,
occurrences, acts or omissions that, with the giving of notice or lapse of
time or both, would constitute material defaults by the Company or, to the
Company's or Gorin's knowledge, the other parties thereto, with respect to
the Company's licenses of the software to licensees or the Company's licenses
with third parties with respect to third party software included in the
Company's software.
3.22 SUBSIDIARIES AND INVESTMENTS. Except as disclosed in SECTION 3.22
OF THE DISCLOSURE SCHEDULE, the Company does not own any direct or indirect
equity or debt interest in any other Person, including without limitation,
any interest in a partnership or joint venture, and is not obligated or
committed to acquire any such interest.
3.23 COMPETING INTERESTS. Except as disclosed in SECTION 3.23 OF THE
DISCLOSURE SCHEDULE, neither the Company, its shareholders (including Gorin)
nor any director, officer, relative or Affiliate of any of the foregoing
owns, directly or indirectly, an interest in any Person that is a competitor,
customer or supplier of the Company or that otherwise has material business
dealings with the Company.
3.24 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL CONTRIBUTIONS. Neither
the Company nor any of its officers, directors, employees, agents or other
representatives or, to the knowledge of the Company or Gorin, any other
Affiliate of the Company, has, directly or indirectly, made or authorized any
payment, contribution or gift of money, property or services, whether or not
in contravention of applicable law, (a) as a kickback or bribe to any Person
or (b) to any political organization, or the holder of or any aspirant to any
elective or appointive public office, except for personal political
contributions not involving the direct or indirect use of funds of the
Company. The Company has not violated any federal or state antitrust
statutes, rules or regulations, including without limitation those relating
to unfair competition, price fixing or collusion.
3.25 ENVIRONMENTAL MATTERS. Except for matters disclosed in SECTION 3.25
OF THE DISCLOSURE SCHEDULE and to the knowledge of the Company and Gorin, (a)
the properties, operations, and activities of the Company are in compliance
in all material respects with all applicable Environmental Laws (as defined
below); (b) the Company and the properties and operations of the Company are
not subject to any existing, pending, or, to the knowledge of the Company and
Gorin, threatened action, suit, claim, investigation, inquiry or proceeding
by or before any governmental entity under any Environmental Laws (c) all
notices, permits, licenses or similar authorizations, if any, required to be
obtained or filed by the Company under any Environmental Laws in connection
with any aspect of the business of the Company have been
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duly obtained or filed and will remain valid and in effect as of the Closing
Date, and the Company is in compliance in all material respects with the
terms and conditions of all such notices, permits, licenses, and similar
authorizations; (d) there are no physical or environmental conditions
existing on any property of the Company or resulting from the Company's
operations or activities, past or present, at any location, that would give
rise to any on-site or off-site remedial obligations imposed on the Company
under any Environmental Laws; (e) there has been no material release of
hazardous substances or any pollutant or contaminant into the environment by
the Company; and (f) the Company has made available to the Buyer all internal
and external environmental audits and studies and all correspondence on
material environmental matters in the possession of the Company relating to
any of the current or former properties or operations of the Company.
For purposes of this Agreement, the term "ENVIRONMENTAL LAWS" means any
and all laws, statutes, ordinances, rules, regulations, or orders of any
Governmental Body pertaining to health or the environment currently in effect
in any and all jurisdictions in which the Company owns property or conducts
business, including without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of
1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous
Materials Transportation Act, as amended, the Oil Pollution Act of 1990, any
state laws implementing the foregoing federal laws, and all other
environmental conservation or protection laws. For purposes of this
Agreement, the terms "hazardous substance" and "release" have the meanings
specified in CERCLA and RCRA, and the term "disposal" has the meaning
specified in RCRA; provided, however, that to the extent the laws of the
state in which the property is located establish a meaning for "hazardous
substance," "release," or "disposal" that is broader than that specified in
either CERCLA or RCRA, such broader meaning will apply.
3.26 BROKERS. Except to the extent disclosed in SECTION 3.26 OF THE
DISCLOSURE SCHEDULE, no broker, finder, or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company or Gorin.
3.27 INSURANCE. Set forth in SECTION 3.27 OF THE DISCLOSURE SCHEDULE is
a list of all insurance policies currently in effect under which the Company
is a beneficiary or an insured. Such insurance coverage will remain in effect
(or will be replaced by similar policies) with respect to the Company and its
properties as to all events occurring on or prior to the Closing. As of the
date of this Agreement, neither the Company nor Gorin has received any notice
that any of the policies listed in SECTION 3.27 OF THE DISCLOSURE SCHEDULE
has been or will be cancelled prior to its scheduled termination date, or
would not be renewed substantially on the same terms now in effect if the
insured party requested renewal or has received notice from any of its
insurance
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carriers that any insurance premiums will be subject to increase in an amount
materially disproportionate to the amount of the increases with respect
thereto (or with respect to similar insurance) in prior years. The Company is
not in default under any such policy and all premiums due and payable with
respect to such coverage have been paid or accrued.
3.28 BANK ACCOUNTS AND POWERS OF ATTORNEY. Set forth in SECTION 3.28 OF
THE DISCLOSURE SCHEDULE is a complete list of (a) the name and address of
each bank or other depository institution in which the Company has an account
or safe deposit box, the number of such account or safe deposit box and the
names of all persons authorized to draw thereon or to have access thereto,
and (b) the names of all persons, if any, holding powers of attorney from the
Company and a summary statement of the terms thereof.
3.29 WARRANTIES. SECTION 3.29 OF THE DISCLOSURE SCHEDULE summarizes all
material claims outstanding, pending or, to the knowledge of the Company and
Gorin, threatened for breach of any warranty relating to any products or
services sold by the Company prior to the date hereof. The description of the
Company's product and service warranties set forth in SECTION 3.29 OF THE
DISCLOSURE SCHEDULE is correct and complete in all material respects.
3.30 INVENTORY. SECTION 3.30 OF THE DISCLOSURE SCHEDULE sets forth, as
of March 31, 1998, all inventory of the Company that is (a) owned by the
Company, and (b) owned by customers of the Company. The inventory owned by
the Company is, in all material respects, merchantable and fit for the
purpose for which it was procured or manufactured, and no material portion of
such inventory is obsolete, damaged or defective in any amount. Such
inventory' is owned by the Company and is not subject to any liens, charges,
pledges, security interests or other encumbrances.
3.31 AFFILIATE TRANSACTIONS. Except as disclosed in SECTION 3.31 OF THE
DISCLOSURE SCHEDULE and other than pursuant to this Agreement and the
Transaction Documents, neither Gorin nor any Affiliate has any agreement,
undertaking or understanding with the Company (other than normal employment
arrangements) or any interest in any property, real, personal or mixed,
tangible or intangible (including, without limitation, intellectual property
rights), used in or pertaining to the business of the Company (other than
ownership of capital stock of the Company). Neither Gorin nor any Affiliate
has any direct or indirect interest in any competitor, supplier or customer
of the Company or in any person, firm or entity from whom or to whom the
Company leases any property, or in any other person, firm or entity with whom
the Company transacts business of any nature. For purposes of this SECTION
3.31 the members of the immediate family of a director, officer, employee or
shareholder shall consist of the spouse, parents, children, siblings,
mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and
sisters in-law of such director, officer, employee or shareholder.
3.32 NO MISREPRESENTATIONS. The representations and warranties made by
the Company and Gorin in or pursuant to this Agreement (including the
Disclosure Schedule) are true, complete and correct in all material respects
and do not contain any untrue statement of a
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material fact or omit to state any material fact necessary to make any such
representation or warranty, under the circumstances in which it is made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND PRECEPT
Buyer and Precept, respectively, represent and warrant to the Company
(until the Closing) and Gorin as follows:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
Precept is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Each of Buyer and Precept is
duly authorized, qualified or licensed to do business and is in good standing
as a foreign corporation in each state or other jurisdiction in which its
assets are located or in which its business or operations as presently
conducted make such qualification necessary, except where the failure to be
so licensed or qualified would not be expected to have a material adverse
effect on Buyer or Precept; such jurisdictions are listed in SECTION 4.1 OF
THE DISCLOSURE SCHEDULE.
4.2 AUTHORITY. Buyer and Precept have all requisite corporate power and
authority to execute, deliver and perform under the Transaction Documents.
The execution, delivery and performance of the Transaction Documents by Buyer
and Precept have been duly authorized by all necessary action, corporate or
otherwise, on the part of Buyer and Precept. This Agreement has been, and the
Transaction Documents at Closing will be, duly executed and delivered by
Buyer and Precept and are legal, valid and binding agreements of Buyer and
Precept, enforceable against each of them in accordance with their respective
terms, except (a) as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (b) as may be limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.
4.3 CAPITALIZATION. The authorized capital stock of Precept consists of
(a) 110,500,000 shares of Common Stock, of which 100,000,000 shares have been
designated Class A Common Stock, $0.01 par value per share, of which
45,612,500 shares are issued and outstanding as of March 31, 1998 and
10,500,000 shares of which have been designated Class B Common Stock, of
which 10,102,997 shares are issued and outstanding as of March 31, 1998, and
(b) 3,000,000 shares of Preferred Stock, of which no shares are issued and
outstanding as of March 31, 1998. All of such shares are validly issued,
frilly paid and non-assessable and were offered and sold in compliance with
all applicable securities laws and regulations. Except as otherwise set forth
in this Agreement or the Transaction Documents, there are no provisions of
Precept's Articles of Incorporation, Bylaws or any other material agreement
that would restrict Gorin's ability to transfer the shares of Parent Class A
Common Stock delivered to Gorin at Closing.
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4.4 NO VIOLATION. The execution, delivery and performance of the
Transaction Documents by Buyer and Precept will not conflict with or result
in the breach of any term or provision of' or violate or constitute a default
under any charter provision or bylaw or under any material agreement,
instrument, order, law or regulation to which Buyer or Precept is a party or
by which Buyer or Precept is in any way bound or obligated.
4.5 GOVERNMENTAL CONSENTS. To the knowledge of Buyer and Precept, no
consent, approval, order or authorization of' or registration, qualification,
designation, declaration or filing with, any Governmental Body is required on
the part of Buyer or Precept in connection with the transactions contemplated
by this Agreement.
4.6 SEC DOCUMENTS.
(a) Precept has furnished or made available to the Company or Gorin
a true and complete copy of its Registration Statement on Form S-4 filed
under the Securities Act of 1933, as filed with the SEC and declared
effective on February 10, 1998 (the "S-4 Registration Statement"). The S-4
Registration Statement is currently effective, and the shares of parent Class
A Common Stock to be delivered to Gorin at the Closing will be registered
under the Securities Act pursuant to the S-4 Registration Statement.
(b) The S-4 Registration Statement was prepared in compliance in
all material respects with the applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act"). As of February 10, 1998 (the
"Effective Date"), the S-4 Registration Statement (i) complied as to form in
all material respects with the applicable requirements of the Securities Act
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. Each of the consolidated balance sheets of Precept.
included in the S-4 Registration Statement (including the related notes and
schedules) fairly presents the consolidated financial position of Precept as
of the dates set forth therein and each of the consolidated statements of
income, cash flows and shareholders' equity included in the S-4 Registration
Statement (including any related notes and schedules) fairly presents the
results of income, cash flows and shareholders' equity, as the case may be,
of Precept for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments that would not be
material in amount or effect), in each case in accordance with GAAP
consistently applied during the periods involved, except as may otherwise be
noted therein. The shares of Parent Class A Common Stock to be delivered to
Gorin at the Closing have been listed for trading on the Nasdaq SmallCap
Market.
4.7 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on
behalf of the Buyer who might be entitled to any fee or commission from Gorin
or the Company upon consummation of the transactions contemplated by this
Agreement.
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4.8 LITIGATION. Except as set forth in the S-4 Registration Statement,
there are currently no pending or, to the knowledge of Precept or Buyer,
threatened material claims, actions, lawsuits, administrative proceeding or
reviews of formal or informal complaints or investigations by any person
against or relating to Precept or the Buyer or any of its directors,
employees, or agents (in their capacities as such) or to which any assets of
Precept or Buyer are subject. Except as otherwise set forth in the S-4
Registration Statement, neither Precept nor Buyer is bound by, or subject to,
any currently existing judgment, order, writ, injunction or decree that would
have a material adverse effect on Buyer or Precept.
4.9 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the Effective Date and
except as otherwise set forth in SECTION 4.9 OF THE DISCLOSURE SCHEDULE,
there has not been: (a) any material adverse change in the condition
(financial or otherwise), results of operations, business, prospectus, assets
or Liabilities of Precept or Buyer; (b) any payment (including without
limitation any dividend or other distribution or repayment of indebtedness)
to any shareholder of Precept, other than payment of compensation to
employees of Precept or Buyer in the ordinary course of business and
consistent with past practices; (c) any breach or default (or event that with
notice or lapse of time or both would constitute a breach or default) under
any material agreement of Precept or Buyer; (d) any material theft, damage,
destruction, casualty loss, condemnation or eminent domain proceeding
affecting any of assets of Precept or Buyer, whether or not covered by
insurance; (e) any sale, assignment or transfer of any of the assets of
Precept or Buyer, except in the ordinary course of business and consistent
with past practices; (f) any waiver by Precept or Buyer of any material
rights related to Precept's or Buyer's respective business, operations or
assets; (g) any other transaction, agreement or commitment entered into by
the Company or its shareholders affecting Precept's or Buyer's respective
business, operations or assets, except in the ordinary course of business and
consistent with past practices, or (h) any agreement or understanding to do
or resulting in any of the foregoing. Since the Effective Date, Precept has
filed all required reports with the SEC.
4.10 TAX-FREE REORGANIZATION.
(a) Neither Buyer nor Precept nor any of their Affiliates has
taken or agreed to take any action that would prevent the transaction
contemplated hereby from constituting a reorganization qualifying under the
provisions of Section 368(A)(1)(B) of the Code.
(b) Buyer and Precept have no plan or intention to liquidate the
Company, to merge the Company into any other corporation, to cause the
Company to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business, or to sell or otherwise
dispose of any of the Company stock acquired in the transaction contemplated
hereby, except for transfers described in Section 368(a)(2)(C) of the Code.
(c) Buyer and Precept have no plan or intention to reacquire any
of the Parent Class A Common Stock issued in the transaction contemplated
hereby.
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(d) It is the present intention of Buyer to continue at least one
significant historic business line of the Company, or to use at least a
significant portion of the Company's historic business assets in a business,
in each case within the meaning of Treasury Regulations Section 1.368-1(d).
4.11 NO MISREPRESENTATIONS. The representations and warranties made by
Buyer and Precept in or pursuant to this Agreement (including the Disclosure
Schedule) are true, complete and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make any such representation or warranty, under the
circumstance in which it was made, not misleading.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 CERTAIN EXCLUDED ASSETS. Buyer, Gorin and the Company acknowledge
and agree that certain of the Company's assets set forth in EXHIBIT J hereto
shall be excluded from the transaction contemplated hereby (collectively, the
"Excluded Assets").
5.2 CONDUCT OF BUSINESS. Prior to the Closing, other than the transfer
of the Excluded Assets to Gorin and those certain items described in EXHIBIT J
hereto, the Company will, and Gorin will cause the Company to (a) operate in
the ordinary course of business and consistent with past practices and use
their reasonable best efforts, consistent with past practice to preserve the
goodwill of the Company and of their employees, customers, suppliers,
Governmental Bodies and others having business dealings with the Company; (b)
except as contemplated by this Agreement, not engage in any transaction
outside the ordinary course of business, including without limitation by
making any material expenditure, investment or commitment or entering into
any material agreement or arrangement of any kind; (c) maintain all insurance
policies and all Permits that are required for the Company to carry on its
business; (d) maintain books of account and records in the usual, regular and
ordinary manner and consistent with past practices; and (e) not take any
action that would result in a breach (as of the Closing) of the
representations and warranties set forth in SECTION 3.10.
5.3 NO-SHOP PROVISIONS. Neither the Company for Gorin has entered into
any agreement, commitment or understanding with any other Person with respect
to the sale of the Shares or a substantial portion of the business or assets
of the Company (whether through an asset sale, stock sale, merger or
otherwise). Until the Closing, the Company and Gorin agree to negotiate
exclusively and in good faith with Buyer with respect to the sale of the
Shares or the Company's assets, and neither the Company nor Gorin will,
directly or indirectly (through agents or otherwise), encourage or solicit
any inquiries or accept any proposals by, or engage in any discussions or
negotiations with or furnish any information to, any other Person concerning
a sale of the Shares or a substantial portion of the assets or business of
the Company (whether through an asset sale, stock sale, merger or otherwise),
and the Company and Gorin will promptly
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communicate to Buyer the material substance of any inquiry or proposal
concerning any such transaction that may be received.
5.4 ACCESS AND INFORMATION. The Company will permit Buyer and its
representatives to have reasonable access to the Company's directors,
officers, employees, agents, assets and properties and all relevant books,
records and documents of or relating to the business and assets of the
Company during normal business hours and will furnish to Buyer such
information, financial records and other documents relating to the Company
and their respective operations and business as Buyer may reasonably request.
The Company and Gorin will permit Buyer and its representatives reasonable
access to the Company's accountants and auditors having dealings with the
Company for consultation or verification of any information obtained by Buyer
on or prior to the date of execution and delivery of this Agreement, and will
use their respective best efforts to cause such Persons to cooperate with
Buyer and its representatives in such consultation and in verifying such
information.
5.5 INFORMATION FOR FILINGS. Prior to Closing, Gorin and the Company
will furnish Buyer with all information concerning the Company as is required
for inclusion in any application or filing made by Buyer to any Governmental
Body in connection with the transactions contemplated by this Agreement,
subject to any confidentiality obligations under SECTION 5.11 hereof.
5.6 FULFILLMENT OF CONDITIONS BY THE COMPANY AND GORIN. The Company
and Gorin agree not to take any action that would cause the conditions on the
obligations of the parties to effect the transactions contemplated hereby not
to be fulfilled, including without limitation, by taking or causing to be
taken any action that would cause the representations and warranties made by
the Company or Gorin herein not to be true and correct as of the Closing. The
Company and Gorin will take all reasonable steps to cause to be fulfilled the
conditions precedent to Buyer's and Precept's obligations to consummate the
transactions contemplated hereby that are dependent on the actions of the
Company or Gorin, respectively.
5.7 FULFILLMENT OF CONDITIONS BY BUYER AND PRECEPT. Buyer and Precept
agree not to take any action, unless otherwise required by applicable legal
requirements, that would cause the conditions on the obligations of the
parties to effect the transactions contemplated hereby not to be fulfilled,
including without limitation, by taking or causing to be taken any action
that would cause the representations and warranties made by Buyer or Precept
herein not to be true and correct as of the Closing. Buyer and Precept will
take all reasonable steps to cause to be fulfilled the conditions precedent
to the Company's and Gorin's obligations to consummate the transactions
contemplated hereby that are dependent on the actions of Buyer or Precept,
respectively.
5.8 PUBLICITY. Buyer, Precept, the Company and Gorin will cooperate with
each other in the development and distribution of all news releases and other
public disclosures relating to the transactions contemplated by this
Agreement. Neither Buyer or Precept, on the one hand, nor
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the Company or Gorin, on the other hand, will issue or make, or allow to have
issued or made, any press release or public announcement concerning the
transactions contemplated by this Agreement without the advance approval in
writing of the form and substance thereof by the other parties, unless
otherwise required by applicable legal requirements; provided, however, such
approval shall not be unreasonably withheld.
5.9 RELEASE BY GORIN. Effective upon the Closing, Gorin, for himself and
his heirs, executors, administrators, successors and assigns, hereby fully
and unconditionally releases and forever discharges and holds harmless the
Company, Buyer, Precept and their respective employees, officers, directors,
successors and assigns from any and all claims, demands, losses, costs,
expenses (including reasonable attorneys' fees and expenses), obligations,
liabilities and/or damages of every kind and nature whatsoever, whether or
not now existing or known, relating in any way, directly or indirectly, to
the Company, this Agreement or the transactions contemplated hereby, that
Gorin may now have or may hereafter claim to have against the Company or any
of such employees, officers, directors, successors or assigns; provided that
the foregoing release will not affect any obligations of Buyer or Precept to
Gorin under this Agreement or any other Transaction Documents.
5.10 COVENANTS RELATING TO TAXES.
(a) Gorin shall prepare and file all Tax Returns for the
Company for all periods ending on or prior to the Closing Date that
are required to be filed after the Closing Date.
(b) Notwithstanding anything to the contrary contained
herein, Buyer shall file any necessary Tax Return or other
documentation with respect to all transfer, sales, stamp, registration
or other similar Taxes or fees incurred in connection with this Agreement
and shall be responsible for payment of any such Tax; provided, however,
any federal, state or local tax audits that pertain to any dates or time
periods prior to the Closing Date shall be the sole responsibility of
Gorin, and Gorin hereby agrees to pay any and all cost and expense
associated with such audits.
(c) Except as otherwise provided in the Agreement, Gorin
and Buyer agree to cooperate filly with each other with respect to the
preparation of all Tax Returns and with respect to all matters
relating to Taxes, and to keep each other advised as to any issue
relating to Taxes which could have a bearing on such other party's
responsibilities hereunder.
5.11 CONFIDENTIALITY. From the date hereof to and including the Closing
Date, the parties hereto shall maintain, and cause their directors,
employees, agents and advisors to maintain, in confidence and not disclose or
use for any purpose, except the evaluation of the transactions contemplated
hereby and the accuracy of the respective representations and warranties of
the parties hereto contained herein, information concerning the other parties
hereto
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and obtained directly or indirectly from such parties, or their directors,
employees, agents or advisors, except such information as is or becomes (a)
available to the non-disclosing party from third parties not subject to an
undertaking of confidentiality or secrecy; (b) generally available to the
public other than as a result of a breach by the non-disclosing party
hereunder; or (c) required to be disclosed under applicable law; and except
such information that was in the possession of such party prior to obtaining
such information from such other party (as to which the fact of prior
possession such possessing party shall have the burden of proof). In the
event that the transactions contemplated hereby shall not be consummated, all
such information that is in writing shall be returned to the party furnishing
the same, including to the extent reasonably practicable, copies or
reproductions thereof which may have been prepared.
5.12 REPORTING. Precept shall file in a timely manner any and all reports
required to be filed and shall take all actions necessary to maintain its status
as a reporting company under the Securities Exchange Act of 1934, as amended.
5.13 TAX-FREE REORGANIZATION.
(a) Neither Buyer nor Precept nor any of their Affiliates will take
any action that would prevent the transaction contemplated hereby from
constituting a reorganization qualifying under the provisions of Section
368(a)(1)(B) of the Code.
(b) Buyer and Precept will not within one (1) year after the Closing
liquidate the Company, merge the Company into another corporation, cause the
Company to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business, or sell or otherwise
dispose of any of the Company stock acquired in the transaction contemplated
hereby, except for transfers described in Section 368(a)(2)(C) of the Code.
(c) Buyer and Precept will not within one (1) year after the Closing
reacquire any of the Parent Class A Common Stock issued in the transaction
contemplated hereby.
(d) Buyer for at least one (1) year after the Closing will continue at
least one (1) significant historic business line of the Company, or use at least
a significant portion of the Company's historic business assets in a business,
in each case within the meaning of Treasury Regulations Section 1.368-1(d).
5.14 CUSTOMER VISITS. Upon the execution of this Agreement (the "Execution
Date"), Precept and/or Buyer shall conduct due diligence on the customers,
suppliers and Governmental Bodies having dealings with the Company in such
manner and with such customers, suppliers and Governmental Bodies as mutually
agreed upon by the parties hereto (the "Customer Due Diligence").
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ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer and
Precept under this Agreement are subject to the satisfaction at or prior to the
Closing of the following conditions, but compliance with any such conditions may
be waived by Buyer and Precept in writing:
(a) All representations and warranties of the Company and Gorin
contained in this Agreement shall be true and correct at and as of the
Closing Date with the same effect as though such representations and
warranties were made at and as of the Closing Date.
(b) The Company and Gorin shall have performed and complied with all
the covenants and agreements and satisfied the conditions required by this
Agreement to be performed, complied with or satisfied by them at or prior
to the Closing Date, including without limitation the delivery of all items
required to be delivered by them pursuant to SECTION 2.4.
(c) There shall be no pending or threatened litigation in any court
or any proceeding before or by any Governmental Body against the
shareholders of the Company (including Gorin), the Company, Precept or
Buyer to restrain or prohibit or obtain damages or other relief with
respect to this Agreement or the consummation of the transactions
contemplated hereby.
(d) All necessary contractual, governmental or other (including
shareholder) consents, approvals, orders or authorizations, if any,
necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been obtained and all necessary contractual,
governmental or other notices, if any, necessary to permit the consummation
of the transactions contemplated by this Agreement shall have been given.
(e) Buyer shall be satisfied, in its sole discretion, with the
Customer Due Diligence.
(f) There shall have been no material adverse change in the assets,
liabilities or financial condition of the Company prior to the Closing as
reflected in the Financial Statements, except for those certain items in
EXHIBIT J hereto and the removal of the Excluded Assets.
(g) Precept and Buyer shall have been advised in writing by Ernst &
Young LLP prior to the Closing Date that the transaction contemplated
hereby shall be treated
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for financial accounting purposes as a "pooling of interests" in
accordance with GAAP and the rules, regulations and interpretations of
the SEC.
6.2 CONDITIONS TO OBLIGATIONS OF GORIN. The obligations of Gorin under
this Agreement are subject to the satisfaction at or prior to the Closing of
the following conditions, but compliance with any such conditions may be
waived by Gorin in writing:
(a) All representations and warranties of Buyer contained
in this Agreement shall be true and correct at and as of the Closing
Date with the same effect as though such representations and
warranties were made at and as of the Closing Date.
(b) Buyer shall have performed and complied with the
covenants and agreements and satisfied the conditions required by this
Agreement to be performed, complied with or satisfied by it at or
prior to the Closing Date, including without limitation the delivery
of all items required to be delivered by Buyer pursuant to SECTION 2.4.
(c) There shall be no pending or threatened litigation in
any court or any proceeding before or by any Governmental Body against
the shareholders of the Company (including Gorin), the Company or
Buyer to restrain or prohibit or obtain damages or other relief with
respect to this Agreement or the consummation of the transactions
contemplated hereby.
(d) All necessary contractual, governmental, or other
consents, approvals, orders or authorizations shall have been obtained
and all necessary governmental notices shall have been given, provided
that receipt of third party consents by Gorin shall not be deemed a
condition to the Closing on the part of Gorin if Buyer provides
satisfactory indemnification to Gorin against any liabilities related
to failure to obtain such consents.
(e) There shall have been no material adverse change in the
assets, liabilities or financial condition of Buyer or Precept prior
to the Closing.
ARTICLE VII
INDEMNIFICATION; HOLDBACK
7.1 INDEMNIFICATION OF BUYER. The Company (until the Closing) and Gorin
(after the Closing) hereby agree to indemnify, defend and hold Precept, Buyer
and their subsidiaries (including the Company after the Closing) and their
respective directors, officers, employees and agents (each a "Buyer Party" and
collectively, the "Buyer Parties") harmless from any and all liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
court costs and reasonable attorneys' fees (collectively, "Losses"), that any
Buyer Party may suffer or incur as a result of or relating to a breach of any
agreement, representation, warranty or covenant
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made by the Company or Gorin in this Agreement or the Transaction Documents
or pursuant hereto or thereto, or in any certificate or the Disclosure
Schedule delivered hereunder, but only to the extent such Losses exceed
$150,000 individually or in the aggregate; provide& however, in the event
Losses resulting from or attributable to any single breach of any such
agreement, representation, warranty or covenant or any single event or
occurrence exceed $ 150,000, Buyer Parties shall be indemnified against the
&11 amount of such Losses. The maximum amount of Losses for which Buyer
Parties shall be entitled to indemnification by Gorin (or the Company, if
applicable) shall be $4,562,500, except with respect to intentional
misrepresentations or fraud by Gorin, in which case the limitation on
indemnification set forth in the preceding sentence shall not apply. The
indemnification obligations under this Article VII shall expire on December
31, 1998, except for any Claims (as defined below) of the Buyer Parties
pending as of such date (which Claims shall continue until the final
resolution thereof but, in no event, shall such Claims remain unresolved past
the first anniversary of the Closing Date). Accordingly, each party hereto
agrees to filly and finally resolve any pending Claims for indemnification on
or before the first anniversary of the Closing Date.
7.2 NOTIFICATION OF CLAIM. Any of the Buyer Parties seeking
indemnification under this Article VII will promptly give notice to Gorin (or
the Company; if applicable) of any Losses or claims as to. which it asserts a
right to indemnification ("Claim"), and within thirty (30) days thereafter,
further notice Gorin (or the Company, if applicable) of the details of such
Claim and the amount thereof; provided, however, that the failure to give
such notification shall not relieve Gorin (or the Company, if applicable)
from any liability which they may have pursuant to the provisions of this
Article VII as long as the failure to give such notice within such time is
not prejudicial to Gorin or the Company. Notice to one of the Buyer Parties
for the purpose of this SECTION 7.2 shall mean the filing of the service upon
such of the Buyer Parties of any legal action, receipt of any claim in
writing or similar form of actual notice.
7.3 DEFENSE OF CLAIMS. If any Claim by one of the Buyer Parties arises
out of a claim by a person other than one of the Buyer Parties, Buyer will
promptly give notice to Gorin (or the Company, if applicable) of any such
Claim, and thereafter Gorin (or the Company, if applicable) may, by written
notice, undertake to conduct any proceedings or negotiations in connection
therewith or necessary to defend the Buyer Parties and take all other steps
or proceedings to settle or contest such claim, including, without
limitation, the employment of counsel; provided, however, that (a) Gorin (or
the Company, if applicable) shall not enter into any agreement in compromise
or settlement of any claim that could affect the Taxes attributable to any
taxable period of the Company beginning on or after the Closing Date without
the prior written consent of Buyer, and (b) Gorin (or the Company, if
applicable) shall reasonably consider the advice of the Buyer Parties as to
the defense and settlement of such claim and the Buyer Parties shall have the
right to participate, at their own expense, in such defense. Except as
otherwise provided herein, control of such litigation and settlement shall
remain with Gorin (or the Company, if applicable). The Buyer Parties shall
provide all reasonable cooperation in connection with any such defense by
Gorin (or the Company, if applicable). Counsel and auditor fees, filing fees
and court fees of all proceedings, contests or lawsuits with respect to any
such claim shall be borne
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by Gorin (or the Company, if applicable). if any such Claim is made hereunder
and Gorin (or the Company, if applicable) elects not to undertake the defense
thereof by written notice to the Buyer Parties, the Buyer Parties shall be
entitled to indemnification with respect thereto pursuant to the terms of
this Article VII. If any Claim for indemnification by Buyer arises out of a
Claim by Buyer and not a third party, then Buyer shall be entitled to
immediate indemnification hereunder.
7.4 HOLDBACK FOR CLAIMS.
(a) Recourse to Holdback Account. At the Closing, 124,049
shares of Parent Class A Common Stock (plus any additional New Shares
(as defined below) as may be issued in respect thereof after the
Closing) (collectively, the "Holdback Shares"), will be issued in the
name of Gorin and held by Buyer to partially secure the
indemnification obligations of Gorin under SECTION 7.1.
(b) HOLDBACK PERIOD; DISTRIBUTION UPON TERMINATION OF
HOLDBACK PERIOD. Subject to the following requirements, the Holdback
Shares shall be retained by Buyer until December 31, 1998 (the
"Holdback Period"). Upon the expiration of the Holdback Period, Buyer
will deliver to Gorin the remaining Holdback Shares, if any; PROVIDED,
HOWEVER, that the number of Holdback Shares with a value (as
determined in accordance with SECTION 7.4(e)(ii) hereof) equal to the
amount of the Losses or other indemnification obligations as to which
the Buyer has properly made a Claim under SECTION 7.2 shall be
retained by Buyer until such Claims have been resolved (subject,
however, to SECTION 7.4(h) hereof). Within five (s) business days
following resolution of such Claims, Buyer shall deliver to Gorin all
Holdback Shares and New Shares, if any, by Buyer and not required to
satisfy such Claims.
(c) PROTECTION OF HOLDBACK SHARES. Buyer shall hold and
safeguard the Holdback Shares during the term of the Holdback Period,
shall treat such Holdback Shares as a trust fund in accordance with
the terms of this Agreement and not as the property of Buyer and shall
hold and dispose of the Holdback Shares only in accordance with the
terms hereof.
(d) DISTRIBUTIONS; VOTING.
(i) Any shares of Parent Class A Common Stock or other
equity securities issued or distributed by Precept (including shares
issued upon a stock split) ("New Shares") in respect of Holdback
Shares that have not been released to Gorin shall be added to the
Holdback Shares and become a part thereof New Shares issued in respect
of Holdback Shares that have been released shall not be added to the
Holdback Shares, but shall be distributed to the holders thereof. When
and if cash dividends on Holdback Shares shall be declared and paid,
they shall not be added to the Holdback Shares but shall be paid to
those on whose behalf such Parent Class A Common Stock is held.
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(ii) Gorin shall be the record owner of the Holdback Shares
and shall have voting rights with respect to the Holdback Shares (including
any New Shares that are voting securities) so long as such Holdback Shares
are retained by Buyer.
(e) CLAIM UPON HOLDBACK SHARES.
(i) Upon written notification to Gorin by Buyer at any time
on or before the last day of any Holdback Period:
(A) that Buyer has paid or properly accrued Losses in an
aggregate stated amount to which Buyer is entitled to indemnity pursuant to
this Agreement, and
(B) in the case of such Losses, specifying in reasonable
detail the individual items of Losses included in the amount so stated, the
date each such item was paid or properly accrued, and the nature of the
misrepresentation or breach of warranty, if any, or claim to which such item
is related; then Buyer shall, unless Gorin objects in accordance with the
provisions of SECTION 7.4(f) hereof, cancel the number of shares of Parent
Class A Common Stock having a value equal to such Losses.
(ii) For the purposes of determining the number of shares of
Parent Class A Common Stock to be cancelled from the Holdback Shares pursuant
to SECTION 7.4(e)(i), the shares of Parent Class A Common Stock shall be
valued using the average closing price of a share of Parent Class A Common
Stock for the twenty-five (25) calendar days immediately prior to such
cancellation, as reported on the Nasdaq SmallCap Market.
(f) OBJECTIONS TO CLAIMS. At the time of receipt of any
notification as set forth in SECTION 7.4(e)(i), Gorin shall have a period of
thirty (30) days after such delivery to object in a written statement to the
claim made in the notification, and such statement shall be delivered to
Buyer prior to the expiration of such thirty (30) day period. If Buyer does
not receive any such objection within such thirty (30) day period, Buyer may
cancel the Holdback Shares if and to the extent such Losses are paid or
properly accrued.
(g) NO LIMITATION. The existence of this SECTION 7.4 and the
rights set forth herein are not intended to limit any other claims by Buyer
for indemnification against Gorin (or the Company, if applicable).
(h) ONE YEAR LIMITATION. Notwithstanding anything to the contrary
herein, each party hereto agrees to fully and finally resolve any pending
Claims on or before the first anniversary of the Closing Date and, therefore,
the Holdback Shares, if any, shall be either cancelled or returned to Gorin
on or before the first anniversary of the Closing Date.
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7.5 NO CLAIMS BY GORIN AGAINST THE COMPANY. The parties acknoWledge that
inasmuch as the Company will be a wholly-owned subsidiary of Precept after the
Closing Date, in the event that Buyer makes a claim for indemnification against
Gorin pursuant to this Article VII, Gorin shall have no right to make any claim,
cross claim or counter claim against the Company for indemnification,
contribution or otherwise.
7.6 SURVIVAL. All representations and warranties made in or pursuant to
this Agreement will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, but such representations
and warranties shall survive only until December 31, 1998 and the right to
indemnification with respect thereto shall expire on such date (unless there is
a Claim pending on such date, in which case the indemnification obligations,
hereunder shall continue until the final resolution of such Claim but, in no
event, shall such indemnification obligations extend beyond the first
anniversary of the Closing Date). All statements contained in any Schedule to
this Agreement will constitute representations and warranties under this
Agreement.
7.7 EXCLUSIVE REMEDY. Subject to the terms and conditions of SECTION 7.1,
the indemnification provisions of this Article VII shall be the sole and
exclusive remedy of Precept or Buyer for a breach of any representation,
warranty, covenant or agreement of the Company or Gorin under this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 TERMINATION OF AGREEMENT. Certain of the parties to this Agreement
may terminate this Agreement as follows:
(a) Buyer, Precept and Gorin may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Buyer and Precept may terminate this Agreement by giving written
notice to at any time prior to the Closing Date in the event the Company or
Gorin has breached any representation or warranty pursuant to Article III
of this Agreement or otherwise materially breached any covenant or
agreement herein;
(c) Buyer and Precept may terminate this Agreement by giving written
notice to Gorin at any time prior to the Closing Date if the Closing shall
not have occurred on or before April 15, 1998, by reason of the failure
of any condition precedent set forth in Article VI hereof (unless the
failure results primarily from Buyer or Precept breaching any
representation, warranty or covenant contained in this Agreement);
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(d) Gorin may terminate this Agreement by giving written
notice to Buyer and Precept at any time prior to the Closing Date if
the Closing shall not have occurred on or before April 15, 1998, by
reason of the failure of any condition precedent set forth in Article
VI hereof (unless the failure results primarily from Gorin himself
breaching any representation, warranty or covenant contained in this
Agreement); or
(e) Gorin may terminate this Agreement by giving written
notice to Buyer and Precept at any time prior to the Closing Date in
the event Buyer or Precept has breached any representation or warranty
pursuant to Article IV of this Agreement or otherwise materially
breached any covenant or agreement herein.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement as
provided in SECTION 8. 1, this Agreement shall forthwith become void, there
shall be no liability on the part of Buyer and Precept, on the one hand, and the
Company and Gorin, on the Other, and all rights and obligations of any party
hereto shall cease, except that nothing herein shall relieve any party of any
liability for (i) any breach of such party's covenants or agreements contained
in this Agreement, or (ii) any willful breach of such party's representations or
warranties contained in this Agreement
8.3 NOTICES. All notices that are required or may be given pursuant to this
Agreement must be in writing and delivered personally, by a recognized courier
service, by a recognized overnight delivery service, by facsimile or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this SECTION
8.3):
IF TO BUYER: Precept Business Services, Inc.
1909 Woodall Rodgers Freeway, Suite 500
Dallas, Texas 75201
Attention: General Counsel
Facsimile No. 214/220-1082
WITH A COPY TO: Munsch Hardt Kopf Harr & Dinan, P.C.
5000 Plaza on the Lake, Suite 270
Austin, Texas 78746
Attention: William L. Deckelman, Jr., Esq.
Facsimile No. 512/306-6201
IF TO GORIN: 235 Rice Road
Wayland, Massachusetts 01778
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WITH A COPY TO: Goodwin, Procter & Hoar, LAP
53 State Street, Exchange Place
Boston, Massachusetts 02109-2881
Attention: Stuart M. Cable, Esq.
Facsimile No. 617/523-1231
Any such notice or other communication will be deemed to have been given
and received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or by
facsimile or, if mailed, when actually received.
8.4 EXPENSES. Any costs, expenses or fees payable to any financial
advisors, attorneys, accountants or other representatives incurred by Gorin
and the Company for services rendered after November 1, 1997 shall be paid
one-half by Gorin and one-half by the Company, except that the Company (and
not Gorin) shall pay all costs and expenses associated with the preparation
of that certain "pooling" letter prepared by Robert Sharkansky & Company
Certified Public Accountants. Buyer and its Affiliates shall bear any costs,
expenses or fees payable to any financial advisors, attorneys, accountants or
other representatives retained by Buyer or its Affiliates with regard to the
transaction contemplated by this Agreement. If attorneys', accountants' or
financial advisors' fees or other fees or costs are incurred to secure
performance of any obligations under this Agreement or any agreement
contemplated hereby, or to establish damages for the breach thereof or to
obtain any other appropriate relief; whether by way of prosecution or
defense, the prevailing party will be entitled to recover reasonable
attorneys' fees and costs incurred in connection therewith.
8.5 FURTHER ASSURANCES. Each party agrees to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated
hereby.
8.6 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder will be assigned or delegated by the Company, Gorin
or Buyer, without the prior written consent of the other parties hereto;
except that Buyer may assign its rights and obligations under this Agreement
to any direct or indirect subsidiary of Precept (provided that Buyer shall
remain obligated to perform Buyer's obligations hereunder) and except that
the rights of Gorin shall inure to the benefit of his heirs, executors,
administrators and beneficiaries. This Agreement is not intended to confer
any rights or benefits to any Person (including without limitation any
employees of the Company) other than the parties hereto.
8.7 ENTIRE AGREEMENT. This Agreement, the other Transaction Documents,
and the documents contained as Exhibits and Disclosure Schedules hereto
contain the entire understanding of the parties relating to the subject
matter hereof and supersede all prior written or oral and all contemporaneous
oral agreements and understandings relating to the subject matter hereof.
This Agreement cannot be modified or amended except in writing signed by the
party against whom enforcement is sought. The Exhibits and Disclosure
Schedules to this
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Agreement are hereby incorporated by reference into and made a part of this
Agreement for all purposes.
8.8 SEVERABILITY. If any provision of this Agreement is declared or
found to be illegal, unenforceable or void, in whole or in part, then the
parties will be relieved of all obligations arising under such provision, but
only to the extent it is illegal, unenforceable or void. The intent and
agreement of the parties to this Agreement is that this Agreement will be
deemed amended by modifying any such illegal, unenforceable or void provision
to the extent necessary to make it legal and enforceable while preserving its
intent, or if that is not possible, by substituting another provision that is
legal and enforceable and achieves the same objectives as the provisions.
Notwithstanding the foregoing, if the remainder of this Agreement will not be
affected by such declaration or finding and is capable of substantial
performance, then each provision not so affected will be enforced to the
extent permitted by law.
8.9 GOVERNING LAW. This Agreement will be governed by and construed and
interpreted in accordance with the substantive laws of the State of Texas,
without giving effect to any conflicts of law rule or principle that might
require the application of the laws of another jurisdiction.
8.10 ARBITRATION PROCEEDINGS.
(a) NEGOTIATION PERIOD. Any dispute, controversy or claim
arising out of or relating to this Agreement, or any alleged breach
hereof, will be subject to binding arbitration in accordance with this
SECTION 8.10. If such a dispute, controversy or claim exists, the
parties shall attempt for a 30-day period (the "Negotiation Period")
from the date any party gives any one or more of the other parties
notice (a "Dispute Notice") pursuant to this Section, to negotiate in
good faith, a resolution of the dispute. The Dispute Notice shall set
forth with specIfIcity the basis of the dispute. During the
Negotiation Period, representatives of each party involved in the
dispute who have authority to settle the dispute shall meet at
mutually convenient times and places and use their best efforts to
resolve the dispute.
(b) COMMENCEMENT OF ARBITRATION. If a resolution is not
reached by the parties prior to the end of the Negotiation Period,
either party may provide a written request to the American Arbitration
Association within ten (10) days from the end of such period
requesting the selection of three (3) arbitrators (the "Panel") to
arbitrate the parties' respective rights and obligations with respect
to the matters set forth in the Dispute Notice. Each arbitrator on the
Panel shall be experienced in the arbitration of complex commercial
disputes.
(c) DISCOVERY. Each party to an arbitration shall be
entitled to such discovery as the Panel shall determine is appropriate.
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(d) EXPENSES OF ARBITRATORS. The expenses of the Panel shall be paid
by the party that does not substantially prevail on the merits in the
arbitration (as determined by the award of the Panel).
(e) Location of Arbitration. The arbitration shall take
place in Boston, Massachusetts.
(f) AAA Rules. Except as expressly provided in this
SECTION 8.10, the arbitration shall be conducted in accordance with
the Commercial Rules of the American Arbitration Association as then
in effect.
8.11 INTERPRETATION. When used in this Agreement, the masculine,
feminine or neuter gender and the singular or plural number shall each be
deemed to include the others whenever the context so indicates or permits.
8.12 COUNTERPARTS; FACSIMILE SIGNATURES. One or more counterparts of
this Agreement may be delivered by facsimile transmission, with the intention
that they shall have the same effect as an original counterpart hereof. This
Agreement may be executed by the parties on one or more counterparts, all of
which shall be deemed an original, but all of which taken together shall
constitute one and the sane instrument.
8.13 HEADINGS. The section headings contained in this Agreement are
included for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.14 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
BUYER: COMPANY:
PRECEPT BUSINESS PRODUCTS, INC. INFOGRAPHIX, INC.,
a Delaware corporation a Massachusetts corporation
By: /s/ DAVID L. NEELY By: /s/ JAMES GORIN
----------------------------- -----------------------------
David L. Neely, James Gorin, President
Chief Executive Officer
GORIN:
/s/ JAMES GORIN
James Gorin
PRECEPT:
PRECEPT BUSINESS SERVICES, INC,
a Texas corporation
By: /s/ DAVID L. NEELY
-----------------------------
David L. Neely,
Chief Executive Officer
<PAGE>
THURSDAY APRIL 23, 9:24 AM EASTERN TIME
COMPANY PRESS RELEASE
PRECEPT COMPLETES ACQUISITION OF INFOGRAPHIX
DALLAS--(BUSINESS WIRE)--April 23, 1998--Precept Business Services, Inc.
(NASDAQ:PBSIA - NEWS) announced today it has successfully closed on its
announced acquisition of Boston-based InfoGraphix, Inc., a single source
provider of products and services to corporate marketing departments, and a
distributor of document management services.
InfoGraphix, Inc., with annualized revenues of $25 million, was issued shares of
Precept Class A Common Stock in consummation of the transaction that was
structured to be accounted for as a pooling of interest.
"The market presence of InfoGraphix in the Boston area is just outstanding,"
voiced Precept Chairman & CEO David Neely. "Jim Gorin, who founded InfoGraphix,
has put together a fantastic team there that fits beautifully with the Precept
group and our plans to the be 'Consolidator of Choice' with the industries
independent distributor network." All existing management and personnel are
expected to remain in place.
"We view this acquisition of InfoGraphix as a strategic opening move of a game
plan to quickly take Precept to $500 million in annual revenue," added Neely.
Precept is already recognized as the nation's largest independent distributor of
business printing, forms, and document management services with sales and
distribution throughout the continental United States.
(Statements about the company's outlook and all other statements in this release
other than historical facts are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements rely on a number of assumptions concerning future events and are
subject to a number of uncertainties and factors, many of which are outside
Precept's control, that could cause actual results to differ materially from
such statements. While the company believes that the assumptions concerning
future events are reasonable, it cautions that there are inherent difficulties
in predicting certain important factors, especially the timing and magnitude of
technological advances; the performance of recently acquired businesses; the
prospects for future acquisitions; the possibility that a current customer could
be acquired or otherwise affected by a future event that would diminish their
business requirements; the competition within this industry and the impact of
such competition on pricing, revenues and margins; the degree to which business
entities continue to purchase and/or need goods and/or services provided by
Precept; uncertainties surrounding budget reductions or changes in funding
priorities or existing business programs; and the cost of attracting and
retaining highly skilled personnel. These factors, when applicable, are
discussed in the company's filings with the Securities and Exchange Commission,
copies of which may be obtained through the company without charge. Precept
disclaims any intention or obligation to revise any forward-looking statements
whether as a result of new information, future event, or otherwise.)
- ----------------
CONTACT:
1 of 2
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Precept Business Services, Inc.
Scott Walker, 214/754-6618 (CFO)
Nora Donnelly, 214/754-6618 (Corp. Comm.)
2 of 2
