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SECURITIES AND ECHANGE COMMISSION
Washington, D.C. 20549
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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) December 31, 1999
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Alpha Microsystems
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(Exact name of registrant as specified in charter)
California 0-10558 95-3108178
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2722 South Fairview Street, Santa Ana, California 92704
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 957-8500
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Not Applicable
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(Former name or former address, if changed since last report.)
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Item 5. Other Event
On January 4, 2000, Alpha Microsystems (the "Company") issued a press
release announcing that it had entered into a definitive asset purchase
agreement with R. E. Mahmarian Enterprises LLC which is owned by Richard E.
Mahmarian, a current member of the Company's Board of Directors, for the sale of
certain assets associated with its Alpha Micro Services Division and proprietary
Alpha Micro Operating System computer hardware manufacturing group.
A copy of the press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Item Exhibit No.
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Asset Purchase Agreement dated as of
December 31, 1999 10.1
Press Release issued January 4, 2000 99.1
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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.
Date: January 14, 2000 ALPHA MICROSYSTEMS
By: /s/ Robert O. Riiska
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Robert O. Riiska
Chief Financial Officer
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EXHIBIT INDEX
Item Exhibit No.
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Asset Purchase Agreement dated as of
December 31, 1999 10.1
Press Release issued January 4, 2000 99.1
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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is entered into as of December
31, 1999, by and among ALPHA MICROSYSTEMS, a California corporation doing
business as AlphaServ.com (the "Seller") and R.E. MAHMARIAN ENTERPRISES, LLC, a
California limited liability company (the "Buyer").
R E C I T A L S :
WHEREAS, among the business operations of Seller are the following: (i)
multi-vendor computer hardware and software maintenance and repair services
throughout the United States and Canada via a network of field offices linked to
a national dispatch and advisory center through its "Alpha Micro Services
Division" ("AMSO"); and (ii) the manufacture and sale of computer hardware,
including hardware based upon its proprietary Alpha Micro Operating System
("AMOS") through a network of value added resellers (the "VAR Business") (AMSO,
AMOS and the VAR Business being collectively referred to herein as the
"Business").
WHEREAS, Seller desires to sell and Buyer desires to purchase certain
of the assets associated with the Business, and Seller desires to assign and
delegate to Buyer and Buyer will be willing to assume certain of the liabilities
and obligations associated with the Business, all upon the terms and conditions
set forth herein. The sale of such assets, and the assignment and assumption of
such liabilities and obligations, are hereinafter together referred to as the
"Acquisition."
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES
SECTION 1.01. PURCHASE AND SALE OF ASSETS.
(a) Agreement to Purchase and Sell. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Seller and Seller
agrees to sell, transfer, convey and deliver to Buyer, all of the Acquired
Assets at the Closing for the consideration specified herein.
(b) Acquired Assets and Retained Assets. Other than the "Retained
Assets" set forth under separate headings with respect to Seller on Schedule
1.01-A, the term "Acquired Assets" shall mean all right, title and interest in
and to all of the tangible and
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intangible assets of the Business owned as of the Closing Date by Seller which
are set forth on the following Schedules which have been prepared under separate
headings to list or describe the Acquired Assets as of the date hereof, and
which Schedules, together with every other Schedule referred to in this
Agreement, shall be updated as of the Closing Date:
(i) Personal Property. The tangible and intangible personal
property owned by Seller, arising out of or in connection with the
ownership, marketing, sale and/or operation of the Business
(collectively, "Personal Property"), a list of all such items of
tangible Personal Property being transferred pursuant to this Agreement
is set forth on Schedule 1.01-B and a list of all such items of
intangible Personal Property being transferred pursuant to this
Agreement is set forth on Schedule 1.01-C.
(ii) Permits and Licenses. To the extent assignable or
transferable by Seller, the authorizations, approvals, variances,
permits, licenses in connection with the management or operation of the
Business, issued by or in favor of any federal, state, local, municipal
or other governmental, quasi-governmental, or private authorities,
districts or jurisdictions (including the applications and/or documents
filed, and/or fees paid, in connection therewith) (collectively,
"Permits and Licenses"), a list and description of which Permits and
Licenses is set forth on Schedule 1.01-D.
(iii) Leases. Seller's interests with respect to the Business
as lessor, master lessor, lessee or sublessee in, to and under leases,
subleases, occupancy agreements, concessions and licenses to which
Seller is a party, together with any and all guaranties of Seller's
interest as a tenant or subtenant under any such leases and all rents,
rentals and security deposits (collectively, the "Leases"), a list of
which Leases being transferred pursuant to this Agreement is set forth
on Schedule 1.01-E.
(iv) Contracts. The (A) personal property leases and equipment
leases, (B) maintenance contracts, (C) labor union contracts,
employment agreements and management agreements, and (D) other
contracts and agreements to which Seller is a party or by which the
Acquired Assets are bound (collectively, "Contracts"), a list of which
Contracts being transferred pursuant to this Agreement is set forth on
Schedule 1.01-F.
(v) Accounts Receivable and Other Assets. The outstanding
receivables, security and utility deposits, prepaid expenses and other
assets of the Business as of the Closing Date that are set forth on
Schedule 1.01-G.
SECTION 1.02. ASSUMPTION OF LIABILITIES. Upon the terms and subject to
the conditions contained herein, effective on the Closing Date, Buyer will
assume all of the obligations and liabilities of Seller which are related to the
Business and the Acquired Assets, including those obligations and liabilities
set forth on Schedule 1.02. The obligations and liabilities set forth on
Schedule 1.02 together with the obligations and liabilities otherwise assumed by
Buyer pursuant
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to this Agreement are collectively referred to as the "Assumed Liabilities".
Buyer shall not assume any obligations or liabilities of the Seller other than
those specifically described in this Section 1.02 and otherwise assumed by Buyer
pursuant to this Agreement.
SECTION 1.03. PURCHASE PRICE. As and in consideration of the sale,
transfer, assignment, conveyance and delivery of the Acquired Assets and the
promises and agreements made by Seller on the Closing Date, Buyer shall deliver
to or for the benefit or for the account of the Seller the following:
(a) Accounts Receivable. The accounts receivable in the amount
set forth on Schedule 1.01A which have been retained by Seller.
(b) Assumption of Liabilities. Assumption documents with
respect to the Assumed Liabilities.
(c) Contingent Payment.
(i) In the event that Buyer, at any time following
the Closing Date, engages in any transaction or series of
transactions involving (A) the sale of all or substantially
all of the Business or Acquired Assets, (B) a public offering
of any of the securities of Buyer or any affiliate of Buyer,
(C) the merger, acquisition, joint venture, business
partnering of Buyer or any affiliate with any other person or
entity as a result of which Buyer or the Managing Member of
Buyer is not in control of the entity that survives any such
merger or acquisition or is not in control of the entity that
controls such joint venture of the partnering relationship, or
(D) any sale/lease-back transactions involving all or
substantially all of the Business or the Acquired Assets, or
(E) any financings of all or substantially all of the Business
or the Acquired Assets that are non-recourse to Buyer (each a
"Triggering Event"), then Buyer shall pay to Seller an amount
(the "Contingent Payment") equal to the greater of Five
Hundred Thousand Dollars ($500,000) or ten percent (10%) of
the gross cash proceeds and ten percent (10%) "in kind" of any
noncash proceeds received by Buyer in connection with any such
Triggering Event. The Contingent Payment shall only be payable
with respect to the first of any such Triggering Event to
occur.
(ii) Buyer shall provide Seller with prompt written
notice of its intention to engage in any activity reasonably
calculated to result in a Triggering Event and shall, during
the pendency of closing any such Triggering Event, deliver to
Seller such information, financial or otherwise, as Seller may
reasonably request in order to assess the Triggering Event and
to calculate the amount of the Contingent Payment to be paid
to Seller upon the closing of such Triggering Event.
SECTION 1.04. ALLOCATION OF PURCHASE PRICE. The Buyer and Seller agree
to report this transaction for tax purposes in accordance with the allocation of
the Purchase Price set forth on Schedule 1.04 which shall be attached to this
Agreement or the Closing Date, and to execute IRS Form 8594 reflecting the same,
which form shall be appropriately filed with the Internal
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Revenue Service as soon as practicable thereafter and in any event by the date
the same is due. If the Buyer and Seller are, however, unable to agree on such
allocations, each party shall be free to make such allocations as it reasonably
determines to be appropriate.
ARTICLE II
THE CLOSING
SECTION 2.01. THE CLOSING. The closing of the transactions contemplated
by this Agreement ("Closing") shall occur on or before January 31, 2000 (or such
earlier date as the third party consents are obtained), unless a later date is
agreed to by Buyer and Seller ("Closing Date"). At least two (2) Business Days
prior to the Closing Date, Seller shall deliver all of the updated Schedules to
Buyer. The Closing shall take place at the offices of Allen Matkins Leck Gamble
& Mallory LLC, 18400 Von Karman, Third Floor, Irvine, California 92612,
commencing at 5:00 p.m. California time on the Closing Date.
SECTION 2.02. ACTIONS TO BE TAKEN AT CLOSING. The following actions
shall be taken by the respective parties at the Closing:
(a) Actions to be Taken by Seller. Seller shall take the
following actions and deliver the following to Buyer:
(i) Bills of Sale. Duly executed bills of sale with
respect to all of the Personal Property.
(ii) Assignment of Leases. Duly executed assignments
of all Leases in form and substance reasonably satisfactory to
Buyer, together with the originals of all Leases; provided,
however, that with respect to any Lease that is not assigned
to Buyer on the Closing Date, Seller shall maintain, until the
expiration of the term of such Lease, the contractual
relationship established therein, to the extent reasonably
practicable.
(iii) Assignments of Contracts. Duly executed
assignments of the Contracts in form and substance reasonably
satisfactory to Buyer; provided, however, that with respect to
any Contract that is not assigned to Buyer on the Closing Date
and which Contract is not a contract for service or
maintenance, Seller shall maintain until the expiration of the
term of such Contract, the contractual relationship
established therein, to the extent reasonably practicable and,
with respect to any Contract that is a contract for service or
maintenance, Seller shall maintain to the extent reasonably
practicable, the contractual relationship established therein
for a one (1) year period following the Closing Date unless
such Contract expires earlier in accordance with its terms or
is otherwise terminated other than by Seller.
(iv) Consents. All of the governmental or third-party
notices, consents, waivers and approvals set forth on Schedule
2.02, which are required for the valid transfer of the
Acquired Assets.
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(v) Books and Records. All of Seller's books, records
and files relating to the Acquired Assets and the Business;
provided, however, that such books and records shall be
jointly held by Buyer and Seller until such time as Seller
shall have filed its Annual Report on Form 10-K with the
Securities Exchange Commission and thereafter Seller shall
have continuing access to such books and records with respect
to its financial reporting/accounting and tax requirements.
(vi) License Agreement. A license agreement
substantially in the form attached hereto as Exhibit A
("License Agreement") providing Buyer with the right to use
the AlphaCONNECT technology as currently being utilized by the
Business, solely for Buyer's internal use in the continuing
operation of the Business (but not to provide for resale or
distribution) for a term of up to five (5) years at a license
fee of $2,000 per month.
(vii) Licenses and Permits. Originals or copies of
all Licenses and Permits related to the Business.
(viii) Sublease. An agreement, substantially in the
form of Exhibit B attached hereto, to sublease the space
presently occupied by the Business as 2722 South Fairview
Street, Santa Ana, CA 92704 for a term expiring on December
31, 2000 which shall provide for free rent during the three
(3) month period following the Closing Date, and thereafter
shall provide for Buyer to pay an amount of rent determined on
the basis of the pro rata amount of space utilized by Buyer,
which space shall constitute at least 60% of available square
footage.
(ix) Updated Schedules. Revised copies of each of the
Schedules prepared by Seller and delivered on the date of this
Agreement, which Schedules shall be updated to the Closing
Date.
(x) Tradename and Other Licenses. Subject only to the
Seller's right to use and the currently existing rights of
others, Buyer shall receive an exclusive, fully paid,
perpetual, world wide license to use the name Alpha
Microsystems (and all associated logos, marks and trade dress
related to the Business) in all forms of business.
(b) Actions to be Taken by Buyer. Buyer shall take the
following actions:
(i) Assumption Agreement. Deliver to Seller duly
executed Assumption Agreements with respect to the Assumed
Liabilities substantially in the form attached hereto as
Exhibit C.
(ii) Updated Schedules. Revised copies of each of the
Schedules prepared by Buyer and delivered on the date of this
Agreement, which Schedules shall be updated to the Closing
Date.
(c) Actions to be Taken by Buyer and Seller with Respect to
Employees. Those persons who are employed by Seller as of the Closing
Date as employees of the
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Business (which persons shall be set forth on Schedule 2.02(c) as
prepared by Buyer and delivered to Seller prior to the Closing Date)
shall be terminated as employees of record of Seller and shall be
simultaneously hired as employees of record of Buyer under comparable
compensation, terms and conditions of employment, including credit for
time of service with Seller for purposes of future severance, vacation
and sick pay accrual. Seller shall be responsible for all applicable
accrued wage and bonus obligations to employees up to the Closing Date
when such employees are terminated by Seller and simultaneously
employed by Buyer. Buyer shall be responsible for all wages, vacation,
bonuses, sick pay and severance obligations to employees of Buyer
accruing with respect to periods following their employment by Buyer on
the Closing Date and shall be responsible for all of Seller's accrued
vacation, sick pay and severance obligations with respect to such
employees for all periods up to the Closing Date.
(d) Actions to Be Taken by Both Buyer and Seller. Buyer and
Seller each shall do or cause to be done such other matters and things,
including the execution and delivery of additional documents of
assignment and assumption, as shall be necessary or reasonably
expeditious to close the transactions contemplated herein in the manner
contemplated herein. To the extent that a form of any document to be
delivered hereunder is not attached as a schedule hereto, the
instrument shall be in form and substance, and shall be executed and
delivered in a manner, reasonably satisfactory to the Buyer and Seller.
SECTION 2.03. CONDITIONS TO OBLIGATION OF BUYER. The obligation of
Buyer to consummate the Closing shall be subject to satisfaction of the
following conditions (any one or more of which may be waived by Buyer, but only
in a writing signed by Buyer):
(a) Accuracy of Representations and Warranties. The
representations and warranties set forth in Article III shall be true
and correct in all material respects at and as of the Closing Date with
the same force and effect as if they had been made on the Closing Date.
(b) Compliance with Covenants. Seller shall have performed and
complied with all of its covenants hereunder in all material respects
through the period ending on the Closing Date.
(c) Legal Restraint. No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, commonwealth, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (i) prevent consummation of
any of the transactions contemplated by this Agreement, (ii) cause any
of the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely the right of Buyer to
own any material portion of the Acquired Assets (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect).
(d) Compliance Certificate. Seller shall have delivered to
Buyer a certificate executed by Seller's Chief Executive Officer and
Chief Financial Officer to the effect that
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the conditions specified above in subsections (a)-(c) are satisfied in
all respects to their knowledge after reasonable inquiry.
(e) Consents. Seller shall have procured all of the
third-party consents set forth on Schedule 2.02, provided, however,
that with respect to any Contract that is not consented to on the
Closing Date and which contract is not a contract for service or
maintenance, Seller shall maintain until the expiration of the term of
such Contract, the contractual relationship established therein, to the
extent reasonably practicable and, with respect to any Contract that is
a contract for service or maintenance, Seller shall maintain to the
extent reasonably practicable, the contractual relationship established
therein for a one (1) year period following the Closing Date unless
such Contract expires earlier in accordance with its terms or is
otherwise terminated other than by Seller.
(f) Illegality. No statute, rule, regulation, executive order
or decree shall have been enacted, promulgated or enforced (and not
repealed, superseded or otherwise made inapplicable) by any
governmental authority or private person or entity which prohibits the
consummation of the transactions contemplated by this Agreement or
which would prohibit or impair the acquisition of the Acquired Assets.
(g) Sale and Transfer of Assets. Seller shall have delivered
to Buyer good and sufficient bills of sale, which shall be in form and
substance satisfactory to Buyer, selling, delivering and transferring
to Buyer all of Seller's right, title and interest to the Acquired
Assets.
(h) Assignments of Agreements. Seller shall have delivered to
Buyer good and sufficient assignments of the Leases and Contracts;
provided, however, that with respect to any Contact that is not
assigned to Buyer on the Closing Date and which Contract is not a
contract for service or maintenance, Seller shall maintain until the
expiration of the term of such Contract, the contractual relationship
established therein, to the extent reasonably practicable and, with
respect to any Contract that is a contract for service or maintenance,
Seller shall maintain to the extent reasonably practicable, the
contractual relationship for a one (1) year period following the
Closing Date unless such Contract expires earlier in accordance with
its terms or is otherwise terminated other than by Seller.
(i) Other Assignment and Transfer Documentation. Seller shall
have delivered to Buyer such other separate instruments of sale,
assignment or transfer that Seller and Buyer may reasonably deem
necessary or appropriate in order to perfect, confirm or evidence in
Buyer title to all or any part of the Acquired Assets.
(j) Certified Board Resolutions. Seller shall have delivered
to Buyer copies of the resolutions adopted by Seller's board of
directors approving the execution of this Agreement and the
consummation of the transactions contemplated hereby, which resolutions
shall be certified by the Secretary of Seller.
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(k) Actions Taken at Closing. Seller shall have taken all of
the actions contemplated by Section 2.02(a) at the Closing and all
actions required of Seller at the Closing under Section 2.02(c).
SECTION 2.04. CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the Closing shall be subject to satisfaction of the
following conditions (any one or more of which may be waived by Seller, but only
in a writing signed by Seller):
(a) Accuracy of Representations and Warranties. The
representations and warranties set forth in Article IV shall be true
and correct in all material respects at and as of the Closing Date with
the same force and effect as if they had been made on the Closing Date.
(b) Compliance with Covenants. Buyer shall have performed and
complied with all of its covenants hereunder in all material respects
through the period ending on the Closing Date.
(c) Legal Restraint. No action, suit, or proceeding shall be
pending or overtly threatened before any court or quasi-judicial or
administrative agency of any federal, state, commonwealth, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (i) prevent consummation of
any of the transactions contemplated by this Agreement or (ii) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect).
(d) Compliance Certificate. Buyer shall have delivered to
Seller a certificate executed by Buyer's Managing Member to the effect
that the conditions specified above in subsections (a)-(c) are
satisfied in all respects.
(e) Illegality. No statute, rule, regulation, executive order
or decree shall have been enacted, promulgated or enforced (and not
repealed, superseded or otherwise made inapplicable) by any
governmental authority which prohibits the consummation of the
transactions contemplated by this Agreement.
(f) Assumption of Liability. Buyer shall have delivered to
Seller such instruments of assumption that Seller may reasonably deem
necessary or appropriate in order to perfect, confirm or evidence the
assumption by Buyer of the Assumed Liabilities.
(g) Certified Consents and Actions. Buyer shall have delivered
to Seller copies of the Buyer's Managing Member consents and any other
actions approving the execution of this Agreement and the consummation
of the transactions contemplated hereby.
(h) Actions Taken at Closing. Buyer shall have taken all of
the actions contemplated by Section 2.02(b) at the Closing and all
actions required of Buyer under Section 2.02(c).
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(i) Fairness Opinion. Seller shall have received a fairness
opinion (the "Fairness Opinion") from an investment banking firm chosen
by Seller, which Fairness Opinion shall state that the terms of the
transactions contemplated by this Agreement are fair, from a financial
point of view, and which Fairness Opinion shall be in form and
substance reasonably satisfactory to Seller.
(j) Lender and Preferred Shareholder Consent. Seller shall
have received the written consent of each of Imperial Bank and
Hampshire Equity Partners with respect to the sale of the Business and
the Acquired Assets, in form and substance reasonably satisfactory to
Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that the statements contained
in this Article III are 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
accompanying this Agreement which shall be prepared by Seller and delivered to
Buyer prior to the Closing Date hereof ("Disclosure Schedule III"). Disclosure
Schedule III will be arranged in paragraphs corresponding to the Section numbers
contained in this Article III.
SECTION 3.01. DUE ORGANIZATION, AUTHORIZATION, ETC. Seller is a
corporation, duly organized and validly existing and in good standing under the
laws of the State of California. Seller is qualified to do business and is in
good standing under the laws of each state where such qualification is necessary
in connection with the Business. Seller has the right, power and authority to
make and perform its obligations under this Agreement, and the execution,
delivery and performance of this Agreement does not violate the articles of
incorporation or bylaws of Seller or any material contract, agreement or
commitment to which Seller is a party or by which the Business or the Acquired
Assets are bound. The execution and delivery of this Agreement and the
performance by Seller of its obligations hereunder have been duly authorized by
all necessary action on the part of Seller. This Agreement constitutes the valid
and binding obligation of Seller, enforceable against Seller in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization and other similar laws of general applicability relating to
creditors' rights and to general equity principles. No consent, approval, order
or authorization of, or registration, declaration or filing with, any court,
administrative agency, commission, regulatory authority or other governmental
authority or instrumentality, whether domestic or foreign (each a "Governmental
Entity"), is required by or with respect to Seller in connection with the
execution, delivery and performance of this Agreement which has not been
obtained prior to execution of this Agreement.
SECTION 3.02. NO CONFLICT OR DEFAULT. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any statute, regulation or ordinance of any
governmental authority, or conflict with or result in the breach of any
provision of the articles of incorporation or bylaws of Seller, of any material
agreement, contract, writ, order, decree or instrument to which Seller is a
party or by which Seller, the Business or the Acquired Assets are bound, or
constitute a default (or an event which,
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with the lapse of time or the giving of notice, or both, would constitute a
default) thereunder, or result in the creation or imposition of any lien, charge
or encumbrance, or restriction of any nature whatsoever with respect to the
Business or the Acquired Assets or give to others any rights of termination,
acceleration or cancellation in or with respect to the Business or the Acquired
Assets.
SECTION 3.03. COMPLIANCE WITH LAW. As of the date of this Agreement,
there has been no order issued, investigation or proceeding pending, or to the
knowledge of Seller, threatened, or notice served with respect to any violation
of any law, ordinance, order, writ, decree, injunction, judgment, rule,
regulation, decision or requirement applicable to the Business or the Acquired
Assets.
SECTION 3.04. TAXES. The Business and the Acquired Assets have no Tax
(as defined below), deficiency or claim outstanding or assessed against any of
them, or, to the knowledge of Seller, proposed to be assessed against them, and,
to the knowledge of Seller, there is no basis for any such deficiency or claim,
which is reasonably likely to result in the imposition of any lien, claim or
encumbrance on the Acquired Assets or Business or against Buyer. For purposes of
this Agreement, "Tax" shall mean any federal, state, local, commonwealth, or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, 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, exaction fee, assessment or charge of any kind whatsoever, or any
payment in lieu thereof, including any interest, penalty, or addition thereto,
whether disputed or not.
SECTION 3.05. LITIGATION. There is no material litigation, arbitration,
action, suit or proceeding, administrative or judicial, pending or, to the
knowledge of Seller, threatened against the Business or the Acquired Assets, at
law or in equity except as may be set forth on Schedule 3.05 which shall also
set forth a true, correct and complete list of material contingent liabilities
affecting the Business and the Acquired Assets, including, without limitation, a
description of any such material contingent liability made against or known to
Seller with respect to the Business or the Acquired Assets.
SECTION 3.06. TANGIBLE ASSETS. Seller owns good and marketable title to
all tangible assets included within the Acquired Assets.
SECTION 3.07. ABSENCE OF DEFAULTS. Seller is not in material default of
any material obligations or liabilities pertaining to the Acquired Assets or the
Business, nor is there any state of facts or circumstances or condition or event
known to Seller which, after notice or lapse of time or both, would constitute
or result in any such material default.
SECTION 3.08. TITLE TO AND CONDITION OF ACQUIRED ASSETS.
(a) The Acquired Assets include all assets of Seller that are
material to the ownership and operation of the Business, except for the
Retained Assets.
(b) Seller has good and marketable title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of
the Acquired Assets free and clear of any
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Liens, except for such imperfections of title and encumbrances, if any,
which are not substantial in character, amount or extent, and which do
not materially detract from the value, or materially interfere with the
present use or contemplated development, marketing and use of the
property subject thereto or affected thereby. For purposes of this
Agreement, the term "Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset. Seller has possession (either directly
or through employees, agents, or consultants) of all of the Acquired
Assets, except for such portions thereof which, considered in the
aggregate, do not represent a material portion of Acquired Assets,
considered as a whole, the absence of which, disappearance of which, or
failure to have or otherwise possess which do not materially interfere
with the conduct, development or marketing of the Business, except as
the Business may relate to the Retained Assets.
SECTION 3.09. SUBSEQUENT CHANGES. Seller will promptly give Buyer
notice of any event or occurrence which would cause any of Seller's above
representations and warranties to cease to be true or correct in any respect
prior to the Closing Date.
SECTION 3.10. FINANCIAL STATEMENTS. Seller has delivered to Buyer the
financial statements and information and the reports requested by Buyer which
are listed on Schedule 3.10.
SECTION 3.11. NO INFRINGEMENT. To Seller's knowledge, there is no
infringement by Seller upon the trademarks, trade names, patents, service marks,
trade secrets, copyrights or other intellectual property rights of others, and
no claim with respect thereto is pending or, to the knowledge of Seller,
threatened against Seller.
SECTION 3.12. EMPLOYEES AND LABOR RELATIONS.
(a) Schedule 3.12-A lists the name of each employee of Seller
whose time is dedicated primarily to the Business and their positions
and present compensation levels, exclusive of bonuses and benefits.
(b) Except with respect to unemployment compensation claims
and except as provided on Schedule 3.12-B, with respect to the
Business, there are no pending or, to the knowledge of Seller,
threatened claims against Seller by any employee or former employee,
and there are no material labor controversies pending or, to the
knowledge of Seller, threatened between Seller and any of the employees
of Seller or any labor union or other collective bargaining unit
representing any of such employees, and Seller is not aware of any
basis for such controversies.
(c) Seller is not a party to any collective bargaining or
union contract in connection with its operation of the Business; and,
except as provided on Schedule 3.12-C, Seller is not a party to or
bound by any consulting or employment contracts with any of the persons
employed by the Business.
SECTION 3.13. EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule
3.13, with respect to the Business, Seller has not established, does not
maintain and is not obligated to make contributions to or under, or to otherwise
participate in: (i) any bonus or other type of incentive
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compensation plan or arrangement; (ii) any pension, profit sharing, retirement
or other plan, program or arrangements; or (iii) any other employee benefit plan
program, including, but not limited to, those plans or programs described in
Section (3)of ERISA (collectively, the "Employee Benefit Plan(s)") with respect
to those Employee Benefit Plans listed on Schedule 3.13 hereto:
(a) Each such Employee Benefit Plan (and related trust,
insurance contract or fund) complies in form and to the knowledge of
Seller, in operation in all respects with the applicable requirements
of ERISA and the Internal Review Code of 1986, as amended (the "Code"),
except where the failure to comply would not have a material adverse
effect on the Seller.
(b) With respect to each Employee Benefit Plan that Seller
maintains or has ever maintained or to which it contributes, ever has
contributed or ever has been required to contribute:
(i) Except as set forth in Schedule 3.13, no such
Employee Benefit Plan is now or was ever subject to Title IV
of ERISA.
(ii) No action, suit, proceeding, hearing or
investigation with respect to the administration or the
investment of assets of any Employee Pension Plan (other than
routine claims for benefits) is pending or, to the knowledge
of the Seller threatened, except where the action, suit,
proceeding, hearing or investigation would not have a material
adverse effect on Seller.
(c) Seller does not contribute to and has not contributed to
and has not been required to contribute to any Multiemployer Plan as
defined in Section 3(37)(A) of ERISA, and has no liability (including
withdrawal liability) under any Multiemployer Plan.
(d) Seller does not have any obligation to provide health or
other welfare benefits to former, retired or terminated employees,
except as specifically required under Section 4980B of the Code. With
respect to all of its past and present employees, Seller has complied
in all material respects with the notice and continuation requirements
of Part 6 of Subtitle B of Title I of ERISA and of Section 4980B of the
Code.
SECTION 3.14. BROKERS, FINDERS. The transactions contemplated hereby
were not submitted to Seller by any broker, finder or other person entitled to a
commission, fee or like payment thereon, and the actions of Seller have not
given rise to any claim by any person against Buyer, the Acquired Assets or the
Business for a commission, fee or like payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that the statements contained
in this Article IV are 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 IV).
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SECTION 4.01. ORGANIZATION OF BUYER. Buyer is a limited liability
company duly organized and validly existing, and in good standing under the laws
of the state of California.
SECTION 4.02. AUTHORITY. Buyer has full power and authority to enter
into this Agreement, perform its obligations hereunder and consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered and constitutes the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization and
other similar laws of general applicability relating to creditors' rights and to
general equity principles. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Buyer in connection with the execution, delivery and
performance of this Agreement.
SECTION 4.03. NO CONFLICT OR DEFAULT. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby and thereby, will violate any statute, regulation or
ordinance of any governmental authority, or conflict with or result in the
breach of any provision of the charter or bylaws of Buyer or of any material
agreement, deed, contract, mortgage, indenture, writ, order, decree or
instrument to which Buyer is a party or by which it is bound, or constitute a
default (or an event which, with the lapse of time or the giving of notice, or
both, would constitute a default) thereunder.
SECTION 4.04. LITIGATION. There is no claim, litigation, action, suit
or other administrative or judicial proceeding pending, and, to the knowledge of
Buyer, there is no material litigation, action, suit, or other administrative or
judicial proceeding threatened, against Buyer that would in any manner impair
Buyer's ability to close the Acquisition, acquire the Acquired Assets, assume
the Assumed Liabilities, or that in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated hereby.
SECTION 4.05. NO RELIANCE. Buyer possesses the level of sophistication
requisite to its determination to enter into the transactions contemplated by
this Agreement and has based such determination upon its own independent
investigation as to the financial and other merits of such transactions and not
in reliance upon the accuracy or completeness of any financial information,
documents or other information, written or oral, other than the representations
and warranties contained in Article III hereof. Buyer has sought the advice of
its legal counsel, tax advisors and business and investment advisors in
analyzing the merits and risks of the transactions contemplated by this
Agreement.
SECTION 4.06. NO IMPLIED WARRANTIES. Buyer understands, agrees and
acknowledges that the Acquired Assets are being purchased and sold on an "AS IS,
WHERE IS" basis. ALL IMPLIED WARRANTIES EXISTING UNDER ANY APPLICABLE LAW WITH
RESPECT TO THE ACQUIRED ASSETS OR TO THE SALE THEREOF ARE HEREBY EXPRESSLY
DISCLAIMED AND NEGATED BY SELLER. PARTICULARLY, BUT WITHOUT LIMITING THE
FOREGOING, SELLER HEREBY NEGATES AND DISCLAIMS ANY IMPLIED WARRANTY OF
MERCHANTABILITY AND ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND
ANY IMPLIED WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MODELS. BUYER AND
SELLER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE
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DISCLAIMERS OF IMPLIED WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS"
DISCLAIMERS FOR THE PURPOSE OF ANY APPLICABLE LAW, RULE OR ORDER.
SECTION 4.07. BROKERS, FINDERS. The transactions contemplated hereby
were not submitted to Buyer by any broker, finder or other person entitled to a
commission, fee or like payment thereon, and the actions of Buyer have not given
rise to any claim by any person against Seller for a commission, fee or like
payment.
ARTICLE V
PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
SECTION 5.01. GENERAL. Each of the parties will use its reasonable good
faith efforts to take all action and to do all things consistent with the
provisions of this Agreement that are necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Article II).
SECTION 5.02. NOTICES AND CONSENTS.
(a) The parties will give any notices to third parties and
governmental authorities, and the parties will use their commercially
reasonable efforts, without cost or liability to such parties, to
obtain any third-party and governmental consents, that may be required
in connection with the consummation of the Acquisition; except to the
extent that such party is otherwise maintaining the contractual
relationship to which such notice or consent relates, in accordance
with the provisions of this Agreement relating thereto.
(b) Each of the parties will take any additional action,
consistent with the provisions of this Agreement and without cost or
liability to such parties, that may be reasonably necessary, proper or
advisable in connection with any other notices to, filings with, and
authorizations, consents and approvals of governments, governmental
agencies and third parties that it may be required to give, make or
obtain.
SECTION 5.03. PRE-CLOSING OPERATION OF THE BUSINESS. Seller shall
operate the Business in the ordinary course consistent with Seller's past
practice and maintain the Acquired Assets in normal operating condition and
repair in a manner consistent with Seller's past practice, with only such
material deviations as shall be approved by Buyer, which approval shall not be
unreasonably withheld. Without limiting the generality of the foregoing, during
said period Seller shall not do any of the following, unless otherwise consented
to by Buyer in writing, which consent shall not be unreasonably withheld:
(a) Transfer any of the Acquired Assets or create or, except
as existing on the date hereof, permit or suffer to exist on any of the
Acquired Assets any Liens, except in each case in the ordinary course
of business consistent with Seller's past practice.
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(b) Enter into, extend or renew any material Contracts or any
other contracts or other commitments regarding the Acquired Assets or
the Assumed Liabilities of the type that would be required to be
disclosed under this Agreement in a Schedule, other than in the
ordinary course of business consistent with Seller's past practice.
SECTION 5.04. NOTICE OF DEVELOPMENTS. Seller shall give prompt written
notice to Buyer of any material development affecting the Acquired Assets or
Assumed Liabilities or affecting the business, financial condition, operations,
results of operations or future prospects of the Business. Each party will give
prompt written notice to the others of any material development affecting the
ability of the parties to consummate the transactions contemplated by this
Agreement.
SECTION 5.05. CONFIDENTIALITY. After the date hereof and prior to the
Closing, no party to this Agreement will directly or indirectly make or cause to
be made any public announcement or disclosure, or issue any notice with respect
to this Agreement or the transactions contemplated hereby without advising the
other parties hereto and providing such parties with a reasonable opportunity to
comment thereon.
ARTICLE VI
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the
Closing:
SECTION 6.01. FURTHER ASSURANCES. In case at any time after the Closing
any further action is necessary or desirable to carry out the intent of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party reasonably may request, all at the cost and expense of the requesting
party (unless the action requested is made the obligation of the requested party
pursuant to another provision of this Agreement); provided that nothing
contained in this Section 6.01 is intended to negate, impair, or diminish any
indemnification right or obligation under Article VII. In addition, after the
Closing Buyer and Seller shall provide notice of the Acquisition to parties with
whom Seller has contractual relationships regarding the Business advising them
of the Acquisition and of appropriate addresses for future notices to Seller and
to Buyer.
SECTION 6.02. SHARING OF CONTRACT RIGHTS. The parties recognize that
certain of Seller's existing contracts, agreements and arrangements will relate
directly or indirectly to both Acquired Assets and Retained Assets. Accordingly,
the parties agree that they shall cooperate in good faith in the post-Closing
administration of such contracts, agreements and understandings with a view
toward allocating those rights and obligations thereunder relating to the
Acquired Assets to Buyer and allocating those rights and obligations thereunder
relating to the Retained Assets to Seller.
SECTION 6.03. EMPLOYMENT MATTERS. Buyer covenants and agrees that it
shall (i) maintain the employment of Seller's former employees set forth on
Schedule 2.02(c) at sufficient levels for at least ninety (90) days following
the Closing Date, in order that no notice or other obligations are created under
the WARN Act; (ii) comply with any and all state or
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federal laws and/or notice obligations (including under the WARN Act) which
arise from any acts or omissions of Buyer after the Closing Date; and (iii)
assume all liability under Section 4980(B) of the Code including liability for
continuation coverage for those employees of Seller terminated by Seller prior
to the Closing Date.
SECTION 6.04. ACCESS TO BOOKS AND RECORDS. Buyer shall provide to
Seller after the Closing Date such access to the books, records and files
transferred to Buyer hereunder as Seller shall reasonably request.
SECTION 6.05. PERIODIC FINANCIAL STATEMENTS. From the Closing Date and
until such time as a Triggering Event has occurred, Buyer shall provide Seller
with copies of all of Buyer's consolidated periodic financial statements and
reports on a monthly basis until the first anniversary of this Agreement and
thereafter on a quarterly basis.
SECTION 6.06. DIVIDEND RESTRICTION. For the twelve (12) month period
following the closing Date, Buyer shall not make any dividend or other
distribution to any member or to any holder of its securities and shall not pay
excessive compensation to the extent it would be a "deemed distribution" under
the Code.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. SURVIVAL. All of the representations, warranties and
covenants of Buyer and Seller contained in this Agreement (other than the
provisions of Sections 1.03(c), 7.02 and 7.03(b)-(d), which shall survive and
operate in accordance with their respective terms) shall survive the Closing and
continue in full force and effect until the first anniversary of the Closing
Date (the "Expiration Date").
SECTION 7.02. INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER. In the
event Seller breaches any of its representations, warranties, and covenants
contained in this Agreement, and provided that Buyer makes a written claim for
indemnification against Seller on or prior to the Expiration Date, then Seller
agrees to indemnify Buyer up to an aggregate ceiling amount of $1,000,000 from
and against the entirety of any Damages Buyer may suffer through and after the
date of the claim for indemnification resulting from, arising out of, relating
to, in the nature of, or caused by the breach; provided, however, that the
amount of such Damages either on a per occurrence basis or in the aggregate for
multiple occurrences is greater than or equal to $25,000. For purposes of this
Agreement, "Damages" shall mean all out-of-pocket charges, complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions, losses, damages, punitive damages,
treble damages, dues, deficiencies, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, taxes, liens, losses, expenses, interests,
and fees, including but not limited to, all fees, disbursements and expenses of
counsel, experts and consultants and court costs in defending against any
complaint, claim or action.
SECTION 7.03. INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER.
(a) In the event Buyer breaches any of its representations,
warranties, and covenants contained in this Agreement, and provided
that Seller makes a written claim
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for indemnification against Buyer on or prior to the Expiration Date,
then Buyer agrees to indemnify Seller from and against the entirety of
any Damages Seller may suffer through and after the date of the claim
for indemnification resulting from, arising out of, relating to, in the
nature of, or caused by the breach; provided, however, that the amount
of such Damages either on a per occurrence basis or in the aggregate
for multiple occurrences is greater than or equal to $25,000.
(b) Buyer agrees to indemnify Seller from and against any and
all Damages Seller may suffer resulting from, arising out of, relating
to, in the nature of, or caused by any Assumed Liability; it being
understood and agreed by Buyer that Seller shall have no
responsibility, liability or obligation of any kind whatsoever with
respect to any of the Assumed Liabilities after the Closing Date.
(c) Buyer agrees to indemnify Seller from and against any and
all Damages Seller may suffer resulting from, arising out of, relating
to, in the nature of, or caused by any act or omission or strict
liability relating to the Business or the Acquired Assets occurring
after the Closing Date.
(d) Buyer agrees to indemnify Seller from and against any and
all Damages Seller may suffer resulting from, arising out of, relating
to, in the nature of, or caused by any act or omission or strict
liability relating to the termination or employment by Buyer of any of
the Seller's prior employees, Buyer's failure to employ any of Seller's
prior employees and/or Buyer's employment of any other employees after
the Closing Date.
(e) The aggregate ceiling amount of Buyer's indemnification
pursuant to this Section 7.03 shall be $1,000,000.
SECTION 7.04. MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any party hereto (the
"Indemnified Party") with respect to any matter which may give rise to
a claim for indemnification against the other party hereto (the
"Indemnifying Party") under this Article VII, then the Indemnified
Party shall notify the Indemnifying Party thereof promptly; provided,
however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party
from any liability or obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is damaged. In the event the
Indemnifying Party notifies the Indemnified Party within 15 days after
the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter
with counsel of the Indemnifying Party's choice reasonably satisfactory
to the Indemnified Party, (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the
Indemnifying Party will be responsible for the fees and expenses of the
separate co-counsel to the extent the Indemnified Party reasonably
concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to
the entry of any judgment or enter into any settlement with respect to
the matter without the written consent of the Indemnifying Party (not
to be withheld unreasonably), and (iv) the Indemnifying Party will not
consent
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to the entry of any judgment with respect to the matter, or enter into
any settlement which does not include a provision whereby the plaintiff
or claimant in the matter releases the Indemnified Party from all
liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld unreasonably). In the event the
Indemnifying Party fails to notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, the Indemnified
Party may defend against, or enter into any settlement with respect to,
the matter in any manner it reasonably may deem appropriate.
(b) With respect to those third party claims referred to in
Section 7.04(a) above, Seller and Buyer agree that they shall work
together to coordinate their defense efforts; provided, however, that
such agreement shall in no way restrict the ability of Buyer to take
any necessary action to cause Seller to be added as a co-defendant to
any legal action. If Damages shall at any time be assessed against
Buyer in connection with any such third-party claim and as a result
thereof Seller shall make an indemnification payment to Buyer pursuant
to Section 7.02 above, then Buyer agrees that it shall take all
necessary action to cause Seller to be subrogated to Buyer's rights as
against third parties with respect to such claim, including rights to
equitable contribution, up to an amount equal to the amount of the
indemnification payment actually made by Seller.
ARTICLE VIII
TERMINATION
SECTION 8.01. TERMINATION OF AGREEMENT. This Agreement may be
terminated prior to Closing in the manner provided below:
(i) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing.
(ii) If Buyer is not in material breach of its obligations
under this Agreement, Buyer may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing in the event
that Seller is in breach of any material representation, warranty or
covenant contained in this Agreement in any material respect and such
breach has not been promptly cured after such notice has been
delivered, which notice shall be in reasonable detail.
(iii) If Seller is not in material breach of its obligations
under this Agreement, Seller may terminate this Agreement by giving
written notice to Buyer at any time prior to Closing in the event that
Buyer is in breach of any material representation, warranty or covenant
contained in this Agreement in any material respect and such breach has
not been promptly cured after such notice has been delivered, which
notice shall be in reasonable detail.
(iv) Seller may terminate this Agreement at any time prior to
the Closing Date if it does not receive the Fairness Opinion or the
consent of either of Imperial Bank or Hampshire Equity Partners.
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In the event this Agreement is terminated by Buyer pursuant to Section 8.01(ii)
or by Seller pursuant to Section 8.01(iv), Seller shall pay Buyer a termination
fee in the amount of $50,000. In the event this Agreement is terminated by
Seller pursuant to Section 8.01(iii) or by Buyer other than pursuant to Section
8.01(ii), Buyer shall pay Seller a termination fee in the amount of $200,000.
SECTION 8.02. EFFECT OF TERMINATION. If any party shall terminate this
Agreement pursuant to Section 8.01 above, all obligations of the parties
hereunder shall terminate, except as set forth in Section 5.05. Notwithstanding
the foregoing, in the event of a breach of this Agreement by any party hereto,
nothing herein shall limit the remedies at law or in equity of the other parties
with respect thereto.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person or entity other than the actual
parties hereto, and their respective successors and permitted assigns.
SECTION 9.02. ENTIRE AGREEMENT. This Agreement (together with the
Schedules hereto) constitutes the entire understanding and agreement of the
parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements or understandings, inducements or conditions, express
or implied, written or oral, between the parties with respect hereto.
SECTION 9.03. SUCCESSION AND ASSIGNMENT. Buyer shall not assign their
rights under this Agreement without Seller's prior written consent, which Seller
shall not unreasonably withhold as to an assignment to a wholly owned subsidiary
of Buyer, provided that no such assignment shall relieve Buyer of any obligation
hereunder and Buyer shall continue to be fully liable and responsible therefor.
Seller shall not assign its respective rights and obligations under this
Agreement without Buyer's prior written consent. Any other attempted transfer or
assignment of this Agreement shall be null and void.
SECTION 9.04. HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 9.05. NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, postage prepaid, or sent by prepaid overnight
courier or confirmed telecopier, and addressed to the intended recipient as set
forth below:
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If to Seller: Alpha Microsystems
2722 South Fairview St.
Santa Ana, California 92704
(Ph) 714-957-8500
(Fax) 714-957-8705
Attn: Douglas Tullio
Chief Executive Officer
with copy to: Allen Matkins Leck Gamble & Mallory LLP
18400 Von Karman, 4th Floor
Irvine, California 92612
(Ph) 949-553-1313
(Fax) 949-553-8354
Attn: Gregory W. Preston, Esq.
If to Buyer: R.E. Mahmarian Enterprises LLC
21 Caballeros Road
Rolling Hills, California 90274
Attn: Richard E. Mahmarian
Managing Member
with copy to: Williams & Kilkowski
1900 Avenue of the Stars, 25th Floor
Los Angeles, California 90067-4506
(Ph) 310-282-8995
(Fax) 310-282-8930
Attn: Lee D. Williams, Esq.
Such communications shall be effective when they are received by the addressee
thereof. Any party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other party notice in the manner herein set forth.
SECTION 9.06. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of California.
SECTION 9.07. AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer and Seller. No waiver by any party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
SECTION 9.08. SEVERABILITY. Any provision of this Agreement which is
found by a court of competent jurisdiction to be illegal, invalid or
unenforceable shall be deemed severed from the Agreement and shall not affect
the continuing legality, validity or enforceability of the remaining terms and
provisions.
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SECTION 9.09. CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party. Any
reference to any federal, state, commonwealth, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. Nothing in the Schedules
attached to and made part of this Agreement shall be deemed adequate to disclose
an exception to a representation or warranty made herein unless a reasonable
person would conclude that the particular Schedule relating to such warranty or
representation identifies the exception with sufficient detail and particularity
to give reasonable notice thereof or, if the disclosure is made in a different
Schedule and not in the particular Schedule relating to such warranty or
representation, such Schedule identifies such exception with sufficient
particularity so that a reasonable person reading this Agreement and Schedules
with the keen interest that could normally be attributed to someone making a
commitment as substantial as that the Buyer will be making by closing based on
the terms of this Agreement and Schedules hereto would recognize the matter as
an exception to such warranty and representation. The parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance.
SECTION 9.10. TRANSFER TAXES. Seller shall pay, or cause to be paid,
all sales, use, transfer, stamp, duties, recording and similar taxes, if any,
required to be paid in connection with the sale of the Acquired Assets pursuant
to this Agreement.
SECTION 9.11. INCORPORATION OF SCHEDULES. The Schedules identified in
this Agreement are incorporated herein by reference and made part hereof.
SECTION 9.12. TIME OF THE ESSENCE. Time is of the essence of every
provision of this Agreement.
SECTION 9.13. ATTORNEYS' FEES. In the event of any litigation between
Buyer and Seller arising under or relating to this Agreement or the transactions
contemplated hereby, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and court costs incurred, including but not limited
to attorneys' fees after the award, and prior to the payment, of any judgment or
other settlement.
SECTION 9.14. BUSINESS DAY. The term "Business Day" shall mean any day
other than a Saturday, Sunday or day on which banks in California are authorized
to be closed for business.
SECTION 9.15. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
SECTION 9.16. FAX SIGNATURES. This Agreement may be executed by the
Seller's and Buyer's signatures transmitted by facsimile ("fax"), and copies of
this Agreement executed and delivered by means of faxed signatures shall have
the same force and effect as copies hereof executed and delivered with original
signatures. Seller and Buyer may rely upon faxed signatures as if such
signatures were originals. Seller and Buyer executing and delivering this
Agreement by fax shall promptly thereafter deliver a counterpart signature page
of this
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Agreement containing any such party's original signature. Seller and Buyer agree
that a faxed signature page may be introduced into evidence in any proceeding
arising out of or related to this Agreement as if it were an original signature
page.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLER:
ALPHA MICROSYSTEMS,
A CALIFORNIA CORPORATION
By:
-------------------------------------
Douglas Tullio
Chief Executive Officer
BUYER:
R.E. MAHMARIAN ENTERPRISES, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
By:
-------------------------------------
Richard E. Mahmarian
Managing Member
22
<PAGE> 1
EXHIBIT 99.1
[ALPHASERV.COM LETTERHEAD] NEWS RELEASE
MEDIA CONTACT: INVESTOR CONTACT:
Steve Shattuck Tamara Yanito
PR Manager Director, Investor Relations
714.641.6374 714.641.6216
[email protected] [email protected]
FOR IMMEDIATE RELEASE
ALPHASERV.COM STREAMLINES OPERATIONS WITH SALE OF MANAGED SERVICES AND
PROPRIETARY HARDWARE BUSINESS DIVISIONS
COMPANY FOCUSES ON EXPANSION OF ITS PROFESSIONAL IT SERVICES BUSINESS AND
ACCELERATED DEVELOPMENT OF ITS INTERNET DIVISION THROUGH SALE OF NON-CORE ASSETS
SANTA ANA, CALIF., JAN. 4, 2000 - ALPHASERV.COM (NASDAQNM: ALMI), announced
today that it has entered into a definitive agreement with California-based R.
E. Mahmarian Enterprises LLC ("REM") for the sale of its managed services
division, which includes its proprietary hardware manufacturing group. The
transaction is valued at approximately $2.8 to $3.2 million, consisting
primarily of liabilities to be assumed by REM. In addition, approximately $2.5
million of the division's accounts receivable will be retained by AlphaServ.com
and converted into cash within 60 to 90 days from the transaction's closing
date.
Richard E. Mahmarian, a current board member of AlphaServ.com, owns REM. Under
the terms of the agreement, AlphaServ.com will receive a ten percent contingent
interest upon the occurrence of certain liquidity events involving REM following
its acquisition of the managed services business. REM will have use of the name
Alpha Microsystems in addition to all trade names, logos and trademarks
associated with the managed services and proprietary hardware businesses. The
transaction is expected to close on or before Jan. 31, 2000 and is subject to
lender and preferred stockholder approval, as well as the receipt of a favorable
"fairness" opinion from an investment banking firm engaged by the special
committee of AlphaServ.com's board of directors.
"It is important that we stay focused on our strengths and objectives - the
growth of our Internet technology division and the expansion of our professional
services group," said Douglas J. Tullio, AlphaServ.com's chairman, chief
executive officer and president. "Although the managed services and proprietary
hardware businesses have played a role in our strategy in the past, the
company's ultimate goals are to provide innovative Internet technologies and
expand our role as a professional solutions provider, making the managed
services operations no longer synergistic to our future growth strategy," added
Tullio.
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AlphaServ.com Streamlines Operations with Sale of Managed Services and
Proprietary Hardware Businesses
Jan. 4, 2000
2-2-2
AlphaServ.com expects the sale to result in a pre-tax charge to operations of
approximately $3.9 to $6.6 million, or $0.34 to $0.57 per share, which will be
recorded in the fourth quarter ended Dec. 31, 1999. As a result of the
transaction, the company may retain up to approximately $2.7 million in deferred
revenue on its balance sheet and recognize this amount as a reduction to the
loss on disposition over the next 12 months as REM provides the services
relating to the deferred revenue. The company also anticipates other fourth
quarter charges related to this transaction. As previously announced, the
company expects a shortfall of revenue for the fourth quarter stemming from the
delay of technology services and projects due to the impact of anticipated Y2K
problems. Tullio continued, "This shortfall is expected to be followed by an
improved first quarter as our clients begin installation projects that have been
on hold for the last three to four months."
According to REM President Richard E. Mahmarian, the acquired operations, which
will operate under the Alpha Microsystems name, will maintain their present
management team and the vast majority of existing employees. "We will maintain a
strong alliance with AlphaServ.com as we continue to provide nationwide service
to AlphaServ.com's remaining customer base on a preferred vendor basis."
Mahmarian added, "Under a five-year licensing agreement, AlphaServ.com will
provide us with utilization of its AlphaCONNECT Internet technologies. This will
allow us to continue offering our customers a significant competitive advantage
through existing applications such as ServiceTrak(sm) and RangeFinder(sm), as
well as future applications developed under the AlphaCONNECT brand."
The company's professional services division will now be entirely focused on
providing high value-added professional services to major accounting firms,
financial institutions, hospitals and pharmaceutical companies located in the
Northeastern U.S. Tullio added, "At the same time, we will continue providing
our remaining customers with nationwide support through our preferred vendor
status with REM.
"In addition, management will be able to better focus its energies on expanding
the sales and marketing efforts of the company's Internet division, soon to be
operating under the name, NQL Solutions Inc., while identifying and evaluating a
number of strategic partnerships to provide the funding for establishing NQL
Solutions as a separate entity."
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AlphaServ.com Streamlines Operations with Sale of Managed Services and
Proprietary Hardware Businesses
Jan. 4, 2000
3-3-3
ABOUT ALPHASERV.COM
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AlphaServ.com, the name under which Alpha Microsystems does business, is a
premier provider of true multi-vendor and professional services to the IT
marketplace. The company's services include Internet and Intranet consulting and
networking, onsite network support and nationwide on-call support for customers
throughout North America. For more information, visit the company's Web site at
www.alphaserv.com. The AlphaCONNECT division of AlphaServ.com, which will be
marketing its technologies under the NQL Solutions name, is the premier provider
of intelligent agent technologies to the global marketplace. This division
develops and deploys enabling software technologies based on its Network Query
Language to partner systems integrators that create information solutions for
today's e-businesses, as well as to organizations developing software
applications and Internet services. For more information, visit
www.NQLsolutions.com or call 888.785.3370.
Certain statements in this press release, including statements regarding the
conditions for completing the transaction, expectations of charges and timing
relating to the transaction, 1999 fourth quarter and 2000 first quarter results,
and the company's intentions for its NQL Solutions division are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks and
uncertainties, including (i) the company's ability to attain necessary approvals
for consummation of transaction (ii) the actual timing and amounts of charges
relating to the transaction to occur as expected (iii) actual results from the
company's 1999 fourth quarter and 2000 first quarter (iv) REM's ability to
successfully fulfill and maintain service contracts with existing customers (v)
the ability of the company to identify and obtain additional funding for its NQL
Solutions subsidiary and other factors which may cause the actual results,
performance or achievements of the company, or industry results, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof.
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