<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,1997
------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from _________to_________
--------------------
Commission File No. 0-15551
DATAFLEX CORPORATION
--------------------
(Exact name of Registrant as specified in its charter)
NEW JERSEY 22-2163376
---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2145 CALUMET STREET
CLEARWATER, FLORIDA 34625
------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 562-2200
N/A
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---- ----
As of July 21, 1997, there were 5,961,169 shares of the Registrant's Common
Stock outstanding.
<PAGE> 2
DATAFLEX CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997
(unaudited) and March 31, 1997 1
Consolidated Statements of Operations - Three
months ended June 30, 1997 and June 30, 1996
(unaudited) 2
Consolidated Statements of Cash Flows - Three
months ended June 30, 1997 and June 30, 1996 3
(unaudited)
Notes to Consolidated Financial Statements -
June 30, 1997 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE> 3
DATAFLEX CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 301,354 $ 1,721,922
Restricted Cash 3,875,202
Accounts Receivable, Net 20,309,455 21,719,863
Inventory, Net 5,262,791 5,489,153
Net Assets Held for Sale - 3,800,063
Income Taxes Receivable 1,342,702 1,908,222
Other Current Assets 2,075,540 2,979,125
------------ ------------
Total Current Assets 29,291,842 41,493,550
Property and Equipment, Net 3,024,746 2,708,408
Other Assets 847,978 853,228
Deferred Tax Asset 6,183,780 6,183,780
Assets Held for Sale - Long Term 1,150,000 1,150,000
Goodwill 8,580,891 8,685,745
------------ ------------
Total Assets $ 49,079,237 $ 61,074,711
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-Term Debt $ 1,730,362 $ 1,730,362
Short-Term Debt 13,053,731 20,374,713
Accounts Payable 2,937,580 5,938,021
Accrued Expenses and Other Payables 2,837,885 4,735,576
------------ ------------
Total Current Liabilities 20,559,558 32,778,672
Long-Term Debt 2,993,746 3,141,701
------------ ------------
Total Liabilities 23,553,304 35,920,373
------------ ------------
Commitments and Contingencies
Shareholders' Equity:
Common Stock - No Par Value;
Authorized 20,000,000 Shares; Issued
5,961,169 and 5,587,661 Shares at
June 30, 1997 and March 31, 1997 24,017,343 24,017,343
Less: Loans Receivable for Exercised
Stock Options (201,069) (194,269)
Retained Earnings 2,313,137 1,934,742
Less: Treasury Stock - At Cost;
113,901 shares at June 27, 1997 and
March 31, 1997 (603,478) (603,478)
------------ ------------
Total Shareholders' Equity 25,525,933 25,154,338
------------ ------------
Total Liabilities and Shareholders' Equity $ 49,079,237 $ 61,074,711
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE> 4
DATAFLEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Revenue
Equipment $ 31,337,072 $ 75,951,996
Services 3,241,070 10,079,398
------------ ------------
34,578,142 86,031,394
------------ ------------
Cost of Revenue
Equipment 27,758,085 67,376,631
Services 2,868,719 8,285,911
------------ ------------
30,626,804 75,662,542
------------ ------------
Gross Profit 3,951,338 10,368,852
Selling, General and
Administrative Expenses 3,125,783 9,430,563
Amortization of Goodwill 104,854 190,710
------------ ------------
Operating Income 720,701 747,579
Interest Expense, Net 94,157 1,683,688
------------ ------------
Income (Loss) Before Income Taxes 626,544 (936,109)
Provision (Benefit from) for
Income Taxes 248,152 (402,527)
------------ ------------
Net Income (Loss) $ 378,392 $ (533,582)
============ ============
Earnings (Loss) Per
Common Share $ 0.06 $ (0.10)
============ ============
Weighted Average Common
Shares Outstanding 6,149,100 5,482,123
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 5
DATAFLEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Operating Activities:
Net Income $ 378,392 $ (533,582)
Adjustments to Reconcile Net Income to Net Cash:
Depreciation and Amortization 255,202 808,144
Amortization of Restricted Stock Grants - 77,533
Deferred Taxes - 939,488
Changes in Assets and Liabilities:
Restricted Cash 3,875,202
Accounts Receivable 1,410,409 12,992,026
Inventory 226,362 (3,815,999)
Other Current Assets 903,585 (3,138,320)
Other Assets - 131,741
Accounts Payable (3,000,441) (22,457,754)
Accrued Expenses and Other Payables (1,897,691) (672,538)
Income Taxes Receivable 565,520 (1,377,223)
Other Long-Term Liabilities - (15,401)
------------ -------------
2,716,540 (17,061,885)
------------ -------------
Investing Activities:
Capital Expenditures (461,434) (918,647)
Sale of Net Assets 3,800,063 40,729,410
------------ -------------
3,338,629 39,810,763
------------ -------------
Financing Activities:
Proceeds from Issuance of Notes Payable - 40,855,362
Payments of Notes Payable/Short Term Debt (7,320,982) (62,307,323)
Payments on Long-Term Borrowings (147,955) (21,999)
Proceeds from Common Stock and Options - 54,181
Receipts on Officer's Loans Receivable - 235,290
Interest on Loans Receivable
for Exercised Stock Options (6,800) -
------------ -------------
(7,475,737) (21,184,489)
------------ -------------
Net Increase (Decrease) in Cash (1,420,568) 1,564,389
Cash - Beginning of Year 1,721,922 499,144
------------ -------------
Cash - End of Year $ 301,354 $ 2,063,533
============ =============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 6
DATAFLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the Company and its wholly-owned
subsidiary. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-Q. Certain information and footnote disclosures
normally included in consolidated financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations.
These consolidated financial statements should be read in conjunction with the
summary of accounting policies and notes to consolidated financial statements
included in the Company's Annual Report on Form 10-KA for the fiscal year ended
March 31, 1997.
In the opinion of management, the consolidated financial statements reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial condition, results of operations and cash
flows for such periods. However, these results are not necessarily indicative
of the results for any other interim period or the full year.
B) DISPOSITION OF BUSINESSES
In October 1996, the Company completed the sale of substantially all the assets
and the transfer of certain liabilities of its Eastern and Midwestern regional
operations (located in Edison, New Jersey, New York City, New York,
Bensenville, Illinois and Milwaukee, Wisconsin) for $42,300,000 in cash, after
reconciliation in accordance with the sale agreement, and $1,900,000 in
accounts receivable of the former Midwestern and Eastern regional operations.
The cash proceeds were used to reduce the Company's Line of Credit. The loss
on this transaction of $8,978,970 is included in the Consolidated Statement of
Operations for the year ended March 31, 1997. The Eastern and Midwestern
regions had combined revenues of $39,782,720 for the three months ended June
30, 1996.
In May 1996, the Company completed the sale of substantially all the assets and
the transfer of substantially all the liabilities of its Western region
(primarily its Alameda, California and Tempe, Arizona locations) for
approximately $38,100,000 and $400,000 in vendor receivables, after the
settlement of contingencies in accordance with the agreement. The cash
proceeds were used to reduce the Company's accounts payable and
interest-bearing obligations on its credit facility. The Loss on disposition
of $4,631,820 was recorded in the March 31, 1996 Consolidated Statement of
Operations.
4
<PAGE> 7
In July 1996, the Company completed the sale of substantially all the assets
and the transfer of substantially all the liabilities of its Valtron division
for $2,900,000 in cash, $750,000 in forgiveness of a note payable and the
receipt of a three-year note of $850,000, bearing interest at 9% per annum.
The Valtron Division had revenues of $3,387,528 for the quarter ended June 30,
1996.
On April 18, 1997, the Company completed the sale of certain assets of its
Kindergarten through 12th Grade Education division (the Education division) to
Computer Plus, Inc. for approximately $4,400,000, including a $150,000 escrow
pending the future settlement of contingencies as described in the agreement.
The estimated fair market value of the net assets were included "Assets Held
for Sale" in the March 31, 1997 Consolidated Balance Sheet. The proceeds from
the sale were used to reduce the Company's short term debt. The Company
recorded a loss on impairment of $2,941,185 related to this transaction
primarily due to the write off of Goodwill of $5.8 million attributable to the
Education division. The Education division recorded revenues of $5,071,557 for
the quarter ended June 30, 1996.
C) LOSS ON IMPAIRMENT OF ASSETS
The Company also recorded a loss on impairment of $339,040 on the proposed sale
of certain land and buildings. In August 1997, the Company completed the
sale of its headquarters located in Clearwater, Florida for approximately $1
million in cash and $150,000 in deferred rent expense. The $1 million was used
to pay off the Company's mortgage on the property. The estimated fair market
value of the net assets to be disposed was included in the "Assets Held for
Sale - Long Term" at March 31, 1997. The loss on impairment was included in
the March 31, 1997 "Consolidated Statement of Operations".
D) CREDIT FACILITY
In December 1996, the Company entered into a two year $38,000,000 credit
facility with NationsCredit and NationsBank which replaces its former
$120,000,000 agreement with another bank. The new facility reduces interest
rates the Company is paying for its working capital loans. The structure of
the short-term debt includes a revolving line of credit and an inventory
financing agreement.
E) CONTINGENCIES
In August 1996, the Company and Richard C. Rose were named as defendants in a
suit filed in state court in New Jersey, by Gordon McLenithan, a former
executive officer of the Company. Mr. McLenithan alleges that the Company
failed to pay him an amount allegedly owed to Mr. McLenithan upon a change in
control of the Company. Mr. McLenithan also charges Mr. Rose with defamation
and interference with contractual relations. The lawsuit is in the initial
stages of litigation and the Company has denied Mr. McLenithan's allegations
and intends to vigorously contest the suit. The Company is currently unable to
predict the outcome of this lawsuit.
Other claims, suits and complaints arise in the ordinary course of the
Company's business. In the opinion of Company management, such pending matters
are without merit or are of such kind, or involve such amounts, as would not
have a material adverse effect on the financial position or results of
operations of the Company.
5
<PAGE> 8
Item 2.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to total revenues of the items listed in the Company's
Consolidated Statement of Operations:
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Revenue 100.0 % 100.0 %
Cost of Revenue 88.6 87.9
----- -----
Gross Profit 11.4 12.1
Selling, General and Administrative Expenses 9.0 11.0
Amortization of Goodwill 0.3 0.2
----- -----
Operating Income 2.1 0.9
Interest Expense, Net 0.3 2.0
----- -----
(Loss) Income Before Income Taxes 1.8 (1.1)
(Benefit) Provision for Income Taxes 0.7 (0.5)
----- -----
Net (Loss) Income 1.1 % (0.6) %
===== =====
</TABLE>
Revenues decreased by $51,453,252 or 59.8%, to $34,578,142 for the quarter
ended June 30, 1997, as compared with $86,031,394 for the quarter ended June
30, 1996. The decrease in revenues is due primarily to the sale of the
Midwestern and Eastern region's operations on October 4, 1996 and the sale of
the Education division. On a comparable basis, excluding revenues for the
Midwestern and Eastern regions and the Education division, revenues decreased
by $3,211,447, or 9.3% for the three month period ended June 30, 1997, as
compared with the same period in the prior year. This decrease is due to the
Company's decision to concentrate on business opportunities that offer a higher
gross margin percentage.
Gross Profit decreased by $6,417,514, or 61.9%, to $3,951,338 in the first
quarter of the current fiscal year as compared with $10,368,852 in the first
quarter of last fiscal year. This decrease relates primarily to the
exclusion of gross profit contribution of the Midwestern and Eastern regions
and the Education division for the three month period. On a comparable basis,
excluding the Midwestern and Eastern regions and the Education division, gross
profit decreased by $146,810, or 3.6% for the three month period ended June 30,
1997. As stated above, this decrease is due to the Company's decision to
concentrate on business opportunities that offer a higher gross margin
percentage, as evidenced by the increase in gross margin as a percentage of
sales for the remaining divisions of the Company.
6
<PAGE> 9
As a percentage of revenues, gross profit was 11.4% and 12.1% for the three
month periods. The decrease in gross profit as a percentage of sales reflects
the disposition of the Midwestern and Eastern regions, whose revenues included
a higher percentage of service sales, which yield a higher gross margin
percentage. On a comparable basis, excluding the Midwestern and Eastern
regions and the Education division, the gross profit percentage was 11.4% for
the three month period ended June 30, 1997 and 10.8% for the three month period
ended June 30, 1996.
Selling, general and administrative expenses decreased by $6,304,780, or 66.9%
to $3,125,783 as compared with $9,430,563 for the three month periods ended
June 30, 1997 and June 30, 1996, respectively. This decrease primarily relates
to the sale of the Midwestern and Eastern regions in October, 1996 and the sale
of the Education division in April, 1997. As a percentage of revenues,
selling, general and administrative expenses were 9.0% and 11.0% for the three
month periods ended June 30, 1997 and June 30, 1996 respectively. The
decrease in selling, general and administrative expenses as a percentage of
revenues for the three months, as compared with the prior year, reflects lower
corporate overhead due to the sales of the Midwestern, Eastern and Education
divisions.
Amortization of goodwill decreased by $85,856, or 45%, to $104,854 in the three
months ended June 30, 1997, as compared with $190,710 in the three months ended
June 30, 1997, due to the dispositions of the Midwestern operating region and
the Education division.
Interest expense decreased by $1,589,531 or 94.4%, to $94,157 from $1,683,688
for the three month periods ended June 30, 1997 and June 30, 1996, respectively.
The decrease primarily relates to reduced average borrowings resulting from the
reduction of debt from the use of the proceeds of the sales of the Western,
Midwestern and Eastern regions and the Education division and a reduction in
interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was funded primarily by the release
of restricted cash associated with the disposition of the Midwestern and
Eastern region operations and the Education division and cash flow from
operations.
Investing activities provided $3.8 million, net, for the sale of the Company's
Education division. The funds were received in April, 1997 and were used to
further reduce the balance under the Line of Credit. The Company retained
approximately $2.8 million in accounts receivable in connection with the sale,
and has collected approximately $2.4 million of these receivables through July
15, 1997.
7
<PAGE> 10
Cash used in investing activities of $461,000 reflects capital expenditures in
support of the Company's growth. The Company has no material commitments for
capital expenditures for the year ending March 31, 1998.
Net cash used in financing activities primarily reflects a net decrease in
short term debt of $7.3 million resulting from the use of proceeds from the
dispositions of the Company's Education division and the Midwestern and Eastern
operating regions. In April, 1997, the Company received approximately $4.2
million in cash from the disposition of the Education division. In March,
1997, the Company had $5 million in escrow from the sale of its Midwestern and
Eastern regional operations. In May, 1997, the Company reconciled amounts due
under the agreement with the buyer and received approximately $3.8 million in
cash. The funds were used to decrease amounts outstanding under the Line of
Credit. The Company also received $1.9 million in accounts receivable
originating from the former Midwestern and Eastern operating regions.
The Company believes that the cash flow from operations, the Line of Credit and
trade credit from its vendors will be sufficient to satisfy its working capital
and capital expenditure requirements through March 31, 1998. At June 30, 1997,
the Company had approximately $13 million outstanding under its $38 million
credit facility.
8
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) On April 4, 1997 the Company held its Annual Meeting of
Shareholders ("Annual Meeting").
(c) The following matters were voted upon at the Annual Meeting:
(1) the election of directors and (2) the ratification of
Price Waterhouse LLP as the Company's independent public
accountants for the year 1997. The results of voting for
each matter, as reported by the Inspector of Elections, are
as follows:
Proposal One: Election of Directors
<TABLE>
<CAPTION>
Votes For Withheld Broker Non-Votes
<S> <C> <C> <C>
Anthony G. Lembo 4,652,846 103,358 0
W. Keith Schilit 4,652,846 103,358 0
Barry M. Alpert 4,652,244 103,958 0
</TABLE>
Proposal Two: Ratify the Appointment of Independent
Certified Public Accountants for the year 1997
Votes For 4,717,359
Against 27,143
Abstain 11,702
Broker Non-Vote 0
Item 5. Other Information
None
9
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10 -- Asset Purchase Agreement between the Company and Computer Plus,
Inc., dated April 18, 1997.
27.1 -- Financial Data Schedule (for SEC use only).
</TABLE>
(b) Reports on Form 8-K.
A report on Form 8-K was filed on April 28, 1997, to report the sale
of certain assets constituting its K-12 Education Division to Computer Plus,
Inc.
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 12, 1997
DATAFLEX CORPORATION
By: /s/ Richard C. Rose
--------------------------------------
Richard C. Rose
Chairman and Chief Executive Officer
By: /s/ Anthony G. Lembo
--------------------------------------
Anthony G. Lembo
President, Chief Operating Officer
and Chief Financial Officer
11
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10 -- Asset Purchase Agreement between the Company and Computer Plus,
Inc., dated April 18, 1997.
27.1 -- Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10
ASSET PURCHASE AGREEMENT
by and between
COMPUTER PLUS, INC.
and
DATAFLEX CORPORATION
AS OF
MARCH 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Agreement to Sell and Agreement to Purchase........................... 2
1.1 Assets to be Conveyed........................................... 2
1.2 Excluded Assets ................................................ 2
1.3 Further Assurances.............................................. 3
1.4 Closing......................................................... 3
2. Consideration to be Paid by Buyer..................................... 3
2.1 Purchase Price and Allocation................................... 3
2.2 Payment of Purchase Price for Acquisition Assets................ 4
3. Assumption of Executory and Other Liabilities......................... 4
3.1 Executory Liabilities Assumed by Buyer.......................... 4
3.2 Liabilities Not Assumed by Buyer................................ 4
4. Representations and Warranties of Seller.............................. 4
4.1 Organization and Good Standing.................................. 4
4.2 Authorization of Agreement...................................... 4
4.3 Ownership of Acquisition Assets................................. 5
4.4 Property of Seller.............................................. 5
4.4.1 Real Property............................................ 5
4.4.2 Tangible Personal Property............................... 6
4.4.3 Intangible Personal Property............................. 6
4.5 Financial Statements and Other Information;
Financial Condition............................................. 6
4.6 Absence of Certain Changes or Events............................ 7
4.7 Agreement Not in Breach of Other Instruments.................... 8
4.8 Labor and Employment Matters.................................... 8
4.9 Pension and Employee Benefits Plans............................. 8
4.10 Litigation...................................................... 9
4.11 Contracts....................................................... 9
4.12 Regulatory Approvals............................................10
4.13 Compliance with Law.............................................10
4.14 Insurance.......................................................10
4.15 Customers.......................................................11
4.16 Environmental Compliance........................................11
4.17 Disclosure......................................................12
5. Representations and Warranties of Buyer...............................12
5.1 Organization and Corporate Authority............................12
5.2 Agreement Not in Breach of Other Instruments....................12
5.3 Regulatory Approvals............................................12
5.4 Disclosure......................................................12
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6. Certain Agreements of the Parties..................................... 13
6.1 Access.......................................................... 13
6.2 Confidentiality................................................. 13
6.3 Conduct of Business............................................. 13
6.4 Preservation of Organization.................................... 13
6.5 Covenant Not to Compete......................................... 13
6.6 Personal Property Tax Adjustments After the Closing Date........ 14
6.7 Condition to Transfer of Certain Contracts...................... 14
6.8 Warranty Obligations............................................ 15
6.9 Employees and Employment Contract............................... 16
6.10 Non-Solicitation................................................ 16
6.11 Operation of the Business before Closing........................ 16
6.12 Sublease and Services........................................... 16
7. Indemnification....................................................... 16
7.1 Indemnification by Seller....................................... 17
7.2 Indemnification by Buyer........................................ 17
7.3 Claims for Indemnification...................................... 17
7.4 Defense by Indemnifying Party................................... 18
7.5 Limitations on Indemnification.................................. 18
8. Conditions to Closing................................................. 19
8.1 Conditions to Obligations of Each Party......................... 19
8.1.1 No Action or Proceeding................................. 19
8.1.2 Compliance with Law..................................... 19
8.1.3 Consents to Assignments of Certain Contracts............ 19
8.2 Conditions to Obligations of Buyer.............................. 19
8.2.1 Representations and Warranties True..................... 19
8.2.2 Seller's Performance.................................... 19
8.2.3 Authority............................................... 19
8.2.4 Additional Closing Documents of Seller.................. 19
8.2.5 No Adverse Changes...................................... 20
8.3 Conditions to Obligations of Seller............................. 20
8.3.1 Representations and Warranties True..................... 20
8.3.2 Buyer's Performance..................................... 20
8.3.3 Authority............................................... 20
8.3.4 Additional Closing Documents of Buyer................... 21
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9. Dispute Resolution.................................................... 21
9.1 Mediation....................................................... 21
9.2 Arbitration..................................................... 21
9.3 Costs and Attorneys' Fees....................................... 22
9.4 Tolling Statute of Limitations.................................. 22
10. Miscellaneous......................................................... 22
10.1 Notices......................................................... 22
10.2 Assignability and Parties in Interest........................... 23
10.3 Governing Law................................................... 23
10.4 Counterparts.................................................... 23
10.5 Indemnification for Brokerage................................... 23
10.6 Publicity....................................................... 23
10.7 Complete Agreement.............................................. 24
10.8 Modifications, Amendments and Waivers........................... 24
10.9 Interpretation.................................................. 24
10.10 Severability.................................................... 24
10.11 Due Diligence Investigation..................................... 24
10.12 Expenses of Transactions........................................ 25
</TABLE>
EXHIBIT A - Fair Market Value of Fixed Assets
EXHIBIT B - Counties and Political Subdivisions
EXHIBIT C - Employment Contract
EXHIBIT D - Description of Sublease and Service Terms
SELLER'S SCHEDULE
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
the 31st day of March, 1997 between DATAFLEX CORPORATION., a New Jersey
corporation ("Seller"), and COMPUTER PLUS, INC., a Nevada corporation
("Buyer").
RECITALS:
A. Seller's DataFlex Education division is engaged in the business
("Business") of providing services and training, including, without limitation,
network services, computer products, professional development, warranty,
installation, consulting, temporary staffing, maintenance services and training
to the kindergarten through twelfth grade educational market, and the Apple
Repair Exchange Program.
B. Seller conducts the operations of the Business at the following
facilities ("Operations Facilities"):
6870 Hillshire #15
Memphis, TN 38134
One University Place
8801 J.M. Keynes, Suite 450
Charlotte, NC 28262
861 Hercules Avenue North
Clearwater, Florida 34625
2145 Calument Street
Clearwater, Florida 34625
2514 Hollywood Boulevard, Suite 201
Hollywood, Florida 33020
1900 Lake Park Drive, Suite 350
Smyrna, Georgia 30080
C. Seller desires to sell to Buyer the Business, including
substantially all of the assets of its DataFlex Education division (except
those hereinafter specifically excluded from such sale), and Buyer desires to
acquire the Business and assets on the terms and conditions hereinafter set
forth.
<PAGE> 6
D. Buyer will not assume any liabilities of the Business, except
for certain enumerated contractual obligations of the Business, as set forth
below.
AGREEMENT:
In consideration of the foregoing and the mutual promises,
representations, covenants and conditions contained herein, the parties agree as
follows:
1. AGREEMENT TO SELL AND AGREEMENT TO PURCHASE.
1.1 ASSETS TO BE CONVEYED. On the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as that term is defined below)
Seller shall convey and deliver to Buyer, and Buyer shall acquire, the
following assets, properties and rights of Seller ("Acquisition Assets") which
exist at the close of business on March 31, 1997 ("Determination Date"):
(a) The Business, together with all books, records and accounts,
correspondence, production records, employment records and any confidential
information which has been reduced to writing relating to or arising out of
the Business;
(b) All rights of Seller under express or implied warranties from
the suppliers of Seller with respect to the Acquisition Assets;
(c) Subject to Section 6.7, all of Seller's right, title and
interest in and to each lease, license, contract, agreement, purchase or sales
order (including releases of quantities pursuant thereto), indenture or
commitment, written, electronic or oral, relating to the Business, including,
without limitation, employee secrecy agreements between Seller and any employee
of the Business (all of the foregoing to be assigned to Buyer pursuant hereto
or the benefits under which are to be provided to Buyer pursuant to Section 6.7
of this Agreement are referred to collectively as the "Contracts" and
individually as a "Contract");
(d) All of the equipment and furniture set forth in Section 1.1(d)
of the scheduled attached hereto ("Seller's Schedule") executed by the
President or any Vice President and the Secretary or any Assistant Secretary of
Seller ("Fixed Assets");
(e) All of Seller's right, title and interest in the courseware set
forth in Section 1.1(e) of the Seller's Schedule ("Proprietary Rights");
(f) The inventory set forth set forth in Section 1.1(f) of the
Seller's Schedule; and
(g) Except as specifically provided in Section 1.2, all other
assets and properties of the Business whether tangible or intangible, real or
personal.
1.2 EXCLUDED ASSETS. In addition to assets excluded from the definition of
Acquisition Assets in Section 1.1 and notwithstanding anything contained in
Section 1.1 to the contrary, Seller
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is not selling, and Buyer is not purchasing, pursuant to this Agreement, any of
the following all of which shall be retained by Seller ("Excluded Assets");
(a) Any cash of Seller;
(b) Any inventory of Seller other than the inventory set
forth in Section 1.1(f) of the Seller's Schedule;
(c) Any claims asserted by Seller in any litigation
involving Seller, whether or not disclosed in Section 4.10 of the Seller's
Schedule, other than claims arising out of breaches of express or implied
warranties relating to any of the Acquisition Assets;
(d) Seller's minute books, tax returns and other corporate
documents;
(e) Seller's rights under the insurance policies disclosed
in Section 4.15 of the Seller's Schedule with respect to all occurrences prior
to the Closing Date; and
(f) All books, records, correspondence and other
information which relates exclusively to the assets of Seller to be retained by
it pursuant to the terms of this Agreement.
1.3 FURTHER ASSURANCES. From time to time after the Closing,
Seller will execute and deliver to Buyer such instruments of sale, transfer,
conveyance, assignment and delivery, consents, assurances, powers of attorney
and other instruments as may be reasonably requested by counsel for Buyer in
order to vest in Buyer all right, title and interest of Seller in and to the
Acquisition Assets and otherwise in order to carry out the purpose and intent
of this Agreement.
1.4 CLOSING. The closing of the transactions herein contemplated
shall, unless another date, time or place is agreed to in writing by the
parties, take place at the offices of Latham & Watkins, 633 W. 5th Street, Los
Angeles, California at 10:00 a.m., local time, on April 18, 1997 ("Closing" or
"Closing Date").
2. CONSIDERATION TO BE PAID BY BUYER
2.1 PURCHASE PRICE AND ALLOCATION. The purchase price for the
Acquisition Assets shall be Six Hundred Forty-Four Thousand Three Hundred
Eighty-Five Dollars ($644,385) (the fair market value of the Fixed Assets and
inventory on the Determination Date as set forth in Exhibit A), plus Three
Million Seven Hundred Fifty Thousand Dollars ($3,750,000). The purchase price
shall be increased by an additional Three Hundred Seventy-Five Thousand Dollars
($375,000) if Seller's Apple Sales Agent Contracts are renewed on or before
October 1, 1997. The parties agree that the portion of the purchase price
attributable to the fair market value of the Fixed Assets shall be allocated to
the Fixed Assets in accordance with that value. The additional Three Million
Seven Hundred Fifty Thousand Dollars ($3,750,000) shall be allocated Two
Million Dollars ($2,000,000) to goodwill and One Million Seven Hundred Fifty
Thousand Dollars ($1,750,000) to the covenant not to compete set forth in
Section 6.5, and the additional Three Hundred Seventy-Five Thousand Dollars
($375,000) shall be allocated to goodwill.
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2.2 PAYMENT OF PURCHASE FOR FOR ACQUISITION ASSETS. The purchase price
for the Acquisition Assets shall be paid by Buyer as follows:
(a) At the Closing Buyer shall pay to Seller the sum of Four Million
Two Hundred Forty-Four Thousand Three Hundred Eighty-Five Dollars ($4,244,385),
less the amount of the obligations assumed pursuant to Section 6.9, by delivery
of a bank cashier's check or other form of cash requested by Seller (including
wire transfer of immediately collectible funds).
(b) The additional Three Hundred Seventy-Five Thousand Dollars
($375,000) referred to in Section 2.l shall be paid to Seller within thirty
(30) days after written confirmation of the renewal of the Apple Sales Agent
Contract referred to in that Section.
(c) One Hundred Fifty Thousand Dollars ($150,000) (the "Retained
Amount") shall be retained by Buyer to satisfy claims for indemnity pursuant to
Article 7. Six (6) months from the Determination Date, Buyer shall pay to Seller
an amount equal to the Retained Amount minus all amounts applied by Buyer to
satisfy indemnity claims pursuant to Article 7.
3. ASSUMPTION OF EXECUTORY AND OTHER LIABILITIES.
3.1 STATUTORY LIABILITIES ASSUMED BY BUYER. As further consideration for
consummation of the transactions contemplated by this Agreement, subject to
Section 3.2, at the Closing Buyer shall assume and agree to pay when due and
discharge and indemnify Seller and hold Seller harmless with respect to (i) the
executory liabilities and obligations of Seller under each Contract in effect on
the Closing Date and assigned to Buyer pursuant to Section 1.1.(c) and (ii) the
liabilities of Seller to be assumed by Buyer pursuant to Sections 6.7 and 6.9.
3.2 LIABILITIES NOT ASSUMED BY BUYER. Buyer shall not be deemed by anything
contained in this Agreement to have assumed and Seller hereby agrees to
indemnify Buyer and hold it harmless with respect to any liability of Seller
except those specifically assumed by Buyer pursuant to Section 3.1.
4 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to
Buyer that;
4.1 ORGANIZATION AND GOOD STANDING. Seller is duly organized, validly
existing and in good standing under the laws of the State of New Jersey, with
full corporate power to carry on the Business as it is now and has since its
organization been conducted, and to own, lease or operate the Acquisition
Assets. Seller is qualified to do business and is in good standing in each
jurisdiction in which the nature of the Business or the character of Seller's
properties makes such qualification necessary.
4.2 AUTHORIZATION OF AGREEMENT. Seller has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. This Agreement and all other agreements and
instruments to be executed by Seller in connection with this Agreement have been
(or upon execution will have been) duly executed and delivered by
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Seller have been effectively authorized by all necessary action, corporate or
otherwise, and constitute (or upon execution will constitute) legal, valid and
binding obligations of Seller.
4.3 OWNERSHIP OF ACQUISITION ASSETS. Seller is the lawful owner of or has
the right to use and transfer to Buyer each of the Acquisition Assets, and the
Acquisition Assets are free and clear of all liens, mortgages, pledges, security
interests, restrictions, prior assignments, encumbrances and claims of any kind
or nature whatsoever, except as disclosed in Section 4.3 of the Seller's
Schedule. The delivery to Buyer of the instruments of transfer of ownership
contemplated by this Agreement will vest good and marketable title to the
Acquisition Assets in Buyer, free and clear of all liens, mortgages, pledges,
security interests, restrictions, prior assignments, encumbrances and claims of
any kind or nature whatsoever.
4.4 PROPERTY OF SELLER.
4.4.1 Real Property. Seller owns no real property which is used in the
Business. There is listed in Section 4.4.1 of the Seller's Schedule an
identification of each lease of real property under which Seller is a lessee or
sublessee and which is used in the Business. Except as indicated in Section
4.4.1 of the Seller's Schedule:
(a) Each of the leases described in Section 4.4.1 of the Seller's
Schedule is a valid and binding obligation of Seller, and Seller does not have
any knowledge that any of those leases is not a valid and binding obligation of
each of the other parties thereto;
(b) Seller is not, and Seller has no knowledge that any other party
to any such lease is, in default with respect to any material term or condition
thereof, and Seller has no knowledge that any event has occurred which through
the passage of time or the giving of notice, or both, would constitute a default
thereunder or would cause the acceleration of any obligation of any party
thereto or the creation of a lien or encumbrance upon any of the Acquisition
Assets;
(c) All of the buildings, fixtures and other improvements located on
the real property described in Section 4.4.1 of the Seller's Schedule are in
good operating condition and repair, and the operation thereof as presently
conducted is not in violation of any applicable building code, zoning ordinance
or other law or regulation;
(d) Seller holds valid and effective certificates of occupancy,
underwriters' certificates relating to electrical work, zoning, building,
housing, safety, fire and health approvals and all other permits and licenses
required by applicable law relating to the operation of such real properties and
leaseholds; and
(e) Seller has not experienced during the two years preceding the
date hereof any material interruption in the delivery of adequate quantities of
any utilities (including, without limitation, electricity, natural gas, potable
water, water for cooling or similar purposes and fuel oil) or other public
services (including, without limitation, sanitary and industrial sewer service)
required by Seller in the operation of the Business during such period
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<PAGE> 10
4.4.2 TANGIBLE PERSONAL PROPERTY. There is listed in Section 4.4.2 of
of the Schedule (i) a description and the location of each item of tangible
personal property owned by Seller or in the possession of Seller which is to be
transferred to Buyer pursuant hereto having on the date hereof a depreciated
book value per unit in excess of Five Thousand Dollars ($5,000); and (ii) an
identification of the owner of, and any agreement relating to the use of, each
item of tangible personal property the rights to which are to be transferred to
Buyer pursuant hereto under leases or other similar agreement which provide for
rental payments at a rate in excess of Two Hundred Fifty Dollars ($250) per
month. Except as indicated in Section 4.4.2 of the Seller's Schedule, each item
of such tangible personal property is in good operating condition and repair.
4.4.3 INTANGIBLE PERSONAL PROPERTY. There is listed in Section 4.4.3 of
the Seller's Schedule (i) an identification of each item of the Proprietary
Rights and (ii) a true and complete list of all licenses or similar agreement or
arrangements to which Seller is a party either as licensee or licensor for each
such item of the Proprietary Rights. Except as indicated in Section 4.4.3 of the
Seller's Schedule:
(a) There have been no actions or other judicial or adversary
proceedings involving Seller concerning any of the items of the Proprietary
Rights nor, to the best knowledge of Seller, is any such action or proceeding
threatened;
(b) Seller has the right and authority to use the items of the
Proprietary Rights in connection with the conduct of the Business in the manner
presently conducted and to convey that right and authority to Buyer, and such
use does not conflict with, infringe upon or violate any patent, trademark or
registration of any other person, firm or corporation;
(c) There are no outstanding nor, to the best knowledge of Seller,
threatened, disputes or disagreements with respect to any licenses or similar
agreements or arrangements described in Section 4.4.3 of the Seller's Schedule;
(d) Each item of the Proprietary Rights that was developed for Seller
by a consultant or other outside party was so developed under a "work made for
hire" agreement and is owned by Seller free of any claims by any such developers
or outside parties. Copies of all such agreements have been attached to the
Seller's Schedule; and
(e) The conduct of the Business by Seller does not conflict with
valid patents, copyrights, trademarks, trade secrets or trade names of others in
any way likely to affect materially and adversely the Business, the Acquisition
Assets, or the condition (financial or otherwise) or prospects of the Business.
4.5 FINANCIAL STATEMENTS AND OTHER INFORMATION; FINANCIAL CONDITION.
Seller has furnished to Buyer copies of: (a) unaudited statements of income for
the Business for the fiscal years ended March 31, 1996 and 1995, and (b) an
unaudited statement of income for the period ended February 28, 1997. All
financial statements referred to in this Section 4.5 ("Financial Statements")
are complete and correct, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
respective periods, and fairly present the results
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of operations of the Business for the respective periods covered by the
statements of income contained therein.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Section 4.6 of the Seller's Schedule, since February 28, 1997, there has not
been any:
(a) Transection by Seller with respect to the Business except in the
ordinary course of the business as conducted on that date;
(b) Destruction, damage to, or loss of any material asset of the
Business (whether or not covered by insurance);
(c) Labor dispute or other event or condition of any character
materially and adversely affecting the prospects, earnings, properties or
condition, financial or otherwise, of the Business;
(d) Change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates) by
Seller related to the Business;
(e) Increase in the salary or other compensation payable or to become
payable by Seller to any employees of the Business, or the declaration, payment,
or commitment or obligation of any kind for the payment, by Seller, of a bonus
or other additional salary or compensation to any such person;
(f) Amendment or termination of any contract, agreement or license
affecting the Business to which Seller is a party, or by which it or any of its
assets or properties are subject, except in the ordinary course of the Business;
(g) Waiver or release of any right or claim of Seller which relates
to the Business;
(h) Citation or notice of threatened citation received for any
violations of any act, law, rule or regulation of any governmental entity or
agency related to the Business;
(i) Claim incurred for damages or alleged damages for actual or
alleged negligence or other tort or breach of contract (whether or not fully
covered by insurance) related to the Business;
(j) Sales, transfers, disposals of or agreements to sell, transfer or
otherwise dispose of any of the assets, properties or rights of the Business,
except in the ordinary course of the Business consistent with the past practices
of Seller;
(k) Agreements entered into granting any preferential rights to
purchase any of the assets, properties or rights of the Business, or requiring
the consent of any party to the transfer or assignment of any such assets,
properties or rights;
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(l) Agreement by Seller to do any of the things described in clauses
(a) through (k) above; or
(m) Other changes in the condition, financial or otherwise, of the
Business, or in its prospects, earnings or properties, whether or not arising
from transactions in the ordinary course of business, that, individually or in
the aggregate, have been materially adverse to the prospects, earning,
properties or condition, financial or otherwise of the Business.
4.7 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. Except as indicated in
Section 4.7 of the Seller's Schedule, the execution and delivery of this
Agreement by Seller and the consummation of the transactions contemplated hereby
will not result in a breach of any of the teens and provisions of, or constitute
a default under, or conflict with, any Contract, the Articles of Incorporation
or Bylaws of Seller, any judgment, decree, order or award of any court,
governmental body or arbitrator, or any law, rule or regulation applicable to
the Business.
4.8 LABOR AND EMPLOYMENT MATTERS. Section 4.8 of the Seller's Schedule
contains a true and complete list of the names of all employees of the Business
and all consultants material to the Business, their position with the Business,
and their salary, bonus, employee benefits, accrued vacation times, sick pay,
severance and other compensation as of the date hereof. There is no collective
bargaining agreement or other labor agreement affecting any of the employees of
the Business. Seller has complied in all material respects with all applicable
laws, rules and regulations relating to the employment of labor related to the
Business, including those related to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by appropriate
governmental authorities and has withheld and paid to the appropriate
governmental authorities or is holding for payment not yet due to such
authorities, all amounts required to be withheld from all employees of the
Business and is not liable for any arrears of wages, taxes, penalties or other
sums for failure to comply with any of the foregoing. Except as set forth in
Section 4.8 or 4.9 of the Seller's Schedule, there is no unfair labor practice
complaint against Seller pending before any federal, state or local agency
related to the Business; pending labor strike or other material labor trouble
affecting the Business; material labor grievance pending against Seller
relating to the Business; or pending representation question respecting the
employees of the Business. Except as indicated in Section 4.8 of the Seller's
Schedule, there are no employment or consulting contracts with employees of the
Business not terminable on thirty (30) days' notice or less, and all employees
of the Business are "at will" employees.
4.9 PENSION AND EMPLOYEE BENEFIT PLANS. Except as set for in Section 4.9
of the Seller's Schedule,
(a) Seller does not presently maintain, contribute to or have any
plan or arrangement that (i) could subject Seller or Buyer (under any successor
liability theory) to any current or potential multi-employer plan withdrawal
liability under Title IV of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") or (ii) is an unfunded or funded medical, health or life
insurance plan or arrangement for present or future retirees or present or
future terminated employees which is an "employee welfare benefit plan" as such
term is defined in Section
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3(1) of ERISA, except as required by section 4980B of the Code or sections 601
through 609 of ERISA.
(b) With respect to each of the employee benefit plans in which any
employee of the Business participates, Seller has furnished to Buyer true and
complete copies of (i) the plan documents (including any related trust
agreements), and (ii) the most recent determination letter received from the
Internal Revenue Service, if applicable.
(c) Seller shall be responsible for satisfying the requirements of
Section 4980B of the Code and Sections 601 through 609 of ERISA ("COBRA
requirements) with respect to any employee of the Business who had a qualifying
event prior to the Closing or for any employee of the Business not otherwise
employed by Buyer after the Closing, to the extent required under the COBRA
requirements. Buyer shall be responsible for satisfying the COBRA requirements
for any employee of the Business employed by Buyer after the Closing, to the
extent required under the COBRA requirements.
4.10 LITIGATION. Except for (i) claims listed in Section 4.10 of the
Seller's Schedule and (ii) claims for the collection of accounts arising out of
the sale of goods or services in the ordinary course of business involving less
than Two Thousand Dollars ($2,000) individually or Ten Thousand Dollars
($10,000) in the aggregate, there are no claims, disputes, actions, proceedings
or investigations of any nature pending or, to the best knowledge of Seller,
threatened against or involving the Business or any of the employees of the
Business in connection with the Business conducted by Seller.
4.11 CONTRACTS. Section 4.11 of the Seller's Schedule sets forth a true and
correct list of each Contract, except:
(a) Any Contract which is specifically identified in Section 4.4.1,
4.4.2, 4.4.3, 4.8 or 4.9 of the Seller's Schedule or which would be required to
be disclosed therein but for specific exemptions contained in any of Sections
4.4.1, 4.4.2, 4.4.3, 4.8 or 4.9 of this Agreement;
(b) Agreements for the purchase by Seller of goods, materials or
services in the ordinary course of the Business involving less than Ten
Thousand Dollars ($10,000) in consideration in each such case; and
(c) Agreements for the sale by Seller of goods or services in the
ordinary course of the Business in which the sales price of the goods or
services to be sold is less than Five Thousand Dollars ($5,000) in each case.
Except as set forth in Section 4.11 of the Seller's Schedule:
(i) Each Contract is a valid and binding agreement of Seller,
and Seller does not have any knowledge that any of the Contracts is not a
valid and binding agreement of the other parties thereto;
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(ii) Seller has fulfilled all material obligations required
pursuant to each Contract to have been performed by Seller on its part prior
to the date hereof, and Seller has no reason to believe that it will not be
able to fulfill, when due, all of Seller's obligations under the Contracts
which remain to be performed after the date hereof;
(iii) There have been no material defaults under any Contract by
Seller; Seller does not have any knowledge of any material default under any
Contract by the other parties thereto; and Seller does not have any
knowledge of any event which, with the giving of notice or the lapse of
time, or both, would constitute a material default under any Contract;
(iv) Seller has no actual knowledge of any fact which reasonably
could be expected to cause Seller to be in material default under any
Contract; and
(v) Seller is under no liability or obligation for the return
of inventory or products sold by Seller which is in the possession of
customers.
Except as set forth in Section 4.11 of the Seller's Schedule, each Contract is
fully assignable by Seller to Buyer and does not require the consent of any
third party to effectuate such assignment.
4.12 REGULATORY APPROVALS. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by Seller and which are necessary for the execution and
delivery by Seller of this Agreement and the consummation of the transactions
contemplated by this Agreement have been obtained and satisfied.
4.13 COMPLIANCE WITH LAW. Except as set forth in Section 4.13 of the
Seller's Schedule, the Business as conducted within the past three (3) years has
not violated, and on the date hereof does not violate, in any material respect
any federal, state, local or foreign laws, regulations or orders (including, but
not limited to, any of the foregoing relating to employment discrimination,
occupational safety, conservation or corrupt practices), the enforcement of
which would have a material and adverse effect on the results of operations,
condition (financial or otherwise) or prospects of the Business, and Seller has
received no notice of any such violation within the past three (3) years.
4.14 INSURANCE. Section 4.14 of the Seller's Schedule sets forth a true and
correct list of all insurance policies of any nature whatsoever affecting the
Business and maintained by Seller at any time during the past year. There are no
outstanding requirements or recommendations by any insurance company that issued
any such policy or by any Board of Fire Underwriters or other similar body
exercising similar functions or by any governmental authority exercising similar
functions which requires or recommends any changes in the conduct of the
Business of, or any repairs or other work to be done on or with respect to any
of the Acquisition Assets. Seller has not received any notice or other
communication from any insurance company within the past year canceling any of
these insurance policies and, to the best knowledge of Seller, no such
cancellation is threatened. All
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such insurance has, at all times during the past year been carried on an
occurrence, as opposed to a claims made, basis.
4.15 CUSTOMERS. Except as disclosed in Section 4.15 of the Seller's
Schedule, during the past twelve (12) months, not more than five percent (5%)
of the revenues of the Business was attributable to a single customer or group
of affiliated customers. To the best knowledge of Seller, no customer intends
to cease doing business or materially decrease the amount of business it does
with Seller or any successor to the Business, as a result of this transaction
or for any other reason.
4.16 ENVIRONMENTAL COMPLIANCE
(a) Except as set forth in Section 4.16 of the Seller's Schedule, as
of the Closing, no Hazardous Material (as defined in paragraph (d) below),
underground storage tanks, pipes, or sumps are present on any Operations
Facility, and to the best of Seller's knowledge, no reasonable likelihood exists
that any Hazardous Material present on other property will come to be present on
any Operations Facility. Seller has conducted no Hazardous Materials Activity in
connection with the Business or at any of the Operations Facilities.
(b) Seller has obtained no Environmental Permits (as defined in
paragraph (d) below) in connection with the conduct of the Business, and none
are required.
(c) Seller has delivered to Buyer all records concerning activities of
Seller and all environmental audits and environmental assessments of any
Operations Facility conducted at the request of, or otherwise possessed by,
Seller. Seller has complied with all environmental disclosure obligations
imposed upon it with respect to the Business or the transactions contemplated
herein under any applicable law.
(d) For purposes of this Section 4.16, the following capitalized
terms shall have the following meanings:
(i) "Environmental Laws" shall mean all laws, rules,
regulations, orders, treaties, statutes and codes of any federal, state, or
local governmental authority relating to human health, safety, or the
environment.
(ii) "Environmental Permit" shall mean any approval, permit,
license, clearance or consent required to be obtained from any private
person or any governmental authority pursuant to any Environmental Law.
(iii) "Hazardous Material" shall mean any material or substance
that is prohibited or regulated by any Environmental Law or that has been
designated by any governmental authority to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment.
(iv) "Hazardous Materials Activity" shall mean the
transportation, transfer, recycling, storage, use, treatment, manufacture,
investigation, removal,
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remediation, release, exposure of others to, sale, handling, or
distribution of any Hazardous Material or any product containing a
Hazardous Material.
4.17 DISCLOSURE. This Agreement (including the Exhibits, the Seller's
Schedule and any other writing to be provided by Seller pursuant hereto) does
not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated herein or therein or necessary to
make the statements and facts contained herein or therein, in light of the
circumstances in which they are made, not false or misleading. Copies of all
documents heretofore or hereafter delivered or made available to Buyer pursuant
hereto were or will be complete and accurate records of such documents.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Seller that:
5.1 ORGANIZATION AND CORPORATE AUTHORITY. Buyer is duly organized, validly
existing and in good standing under the laws of the State of Nevada and has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Buyer is qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the character of its properties makes such qualification necessary.
This Agreement and all other agreements contemplated to be executed in
connection herewith have been (or upon execution will have been) duly executed
and delivered by Buyer, have been effectively authorized by all necessary
action, corporate or otherwise, and constitute (or upon execution will
constitute legal, valid and binding obligations of Buyer.
5.2 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and the fulfillment of the terms hereof will not result in a breach of
any of the terms or provisions of, or constitute a default under, or conflict
with, any material agreement, indenture or other instrument to which Buyer is
a party or by which it is bound, Buyer's Articles of Incorporation or Bylaws,
any judgment, decree, order or award of any court, governmental body or
arbitrator, or any law, rule or regulation applicable to Buyer.
5.3 REGULATORY APPROVAL. All consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation which must be obtained or
satisfied by Buyer and which are necessary for the consummation of the
transactions contemplated by this Agreement have been obtained and satisfied.
5.4 DISCLOSURE. This Agreement (including the Exhibits and any other
writing to be provided by Buyer pursuant hereto) does not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein or necessary to make the statements and
facts contained herein or therein, in light of the circumstances which they are
made, not false or misleading.
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6. Certain Agreements of the Parties.
6.1 Access. Between the date hereof and and Closing Date, (i) upon
reasonable advance notice, authorized representatives of Buyer shall have
reasonable access during normal business hours to all properties, books,
records, contracts and documents of Seller which pertain to the Business, (ii)
Seller will furnish to Buyer all information with respect to the Business that
Buyer may reasonably request, and (iii) Buyer shall have the right to discuss
the Business with the employees and customers of the Business.
6.2 Confidentiality. Until the Closing, all information relating to
seller obtained by Buyer and its authorized representatives pursuant to Section
6.1 or otherwise in connection with the transactions contemplated hereby shall
be kept confidential by Buyer and shall not be used by it for any purpose other
than in connection with the transactions contemplated hereby; provided,
however, that the foregoing shall not apply to (i) any information generally
available to the public on the date hereof or which becomes generally available
to the public through no fault of Buyer, (ii) any information obtained by Buyer
from a third party, having the right to disclose such information; and (iii)
any information known by Buyer on December 31, 1996.
6.3 Conduct of Business. The Business shall be conducted from the date
hereof through the Closing Date in accordance with prior practice and in the
ordinary course of the Business, and without limiting the generality of the
foregoing Seller shall not, with respect to the Business (except with the prior
written consent of Buyer): (i) enter any material transaction not in the
ordinary course of the Business; (ii) sell or transfer any of the Acquisition
Assets, including, without limitation, rights to know-how, intellectual
property or other intangible assets, except sales in the ordinary course of the
Business of inventory or immaterial amounts of other tangible personal property
not required in the Business; (iii) mortgage, pledge, or encumber any of the
Acquisition Assets; (iv) materially amend, modify or terminate any material
Contract affecting the Business other than in the ordinary course of the
Business; (v) increase, or commit to increase, the compensation payable to any
employees of the Business, other than routine increases in the ordinary course
of the Business not exceeding the greater of ten percent (10%) per annum or
Five Thousand Dollars ($5,000) per annum for any of them individually; or (vi)
materially alter the manner of keeping its books, accounts or records, or its
accounting practices.
6.4 Preservation of Organization. Seller shall use its reasonable best
efforts to preserve the Business to keep available to Buyer the services of the
employees of the Business, and to preserve for Buyer Seller's favorable
business relationships with suppliers, customers and others with whom business
relationships exist.
6.5 COVENANT NOT TO COMPETE.
(a) Subject to the Closing having occurred, without the prior written
consent of Buyer, Seller will not, directly or indirectly (whether through any
partnership or limited liability company of which it is a member, through any
trust in which it is a beneficiary, or through a corporation or other
association in which it has any interest, legal or equitable, or in any other
capacity whatsoever), engage in any business competitive with the Business
(including, without
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limitation, the service and training aspects of the Business but excluding
equipment sales and services incidental to government contracts not relating
primarily to the kindergarten through twelfth grade education market) in any
county or any other political subdivision of any state of the United States of
America, including those counties in California listed on Exhibit B. This
covenant not to compete shall extend for a period of three (3) years from the
Closing Date.
(b) Seller acknowledges that it intends to convey to Buyer all
Proprietary Rights relating to the Business. Accordingly, notwithstanding
the expiration of the covenant not to compete set forth in this Section 6.5
on the third (3rd) anniversary of the Closing Date, at all times thereafter
Seller shall keep confidential and shall not disclose to others any
Proprietary Rights and shall not use or permit to be used any Proprietary
Rights.
(c) The parties agree that the duration and area for which the
covenant not to compete set forth in this Section 6.5 is to be effective
are reasonable. If any court determines that the time period or the
area, or both, are unreasonable and that such covenant is to that extent
unenforceable, the parties agree that the covenant shall remain in full force
and effect for the greatest time period and in the greatest area that would
not render it unenforceable. The parties intend that this covenant shall be
deemed to be a series of separate covenants, one for each and every county of
each and every state of the United States of America where this covenant is
intended to be effective. Seller agrees that damages are an inadequate remedy
for any breach of this covenant and that Buyer shall, whether or not it is
pursuing any potential remedies at law, be entitled to equitable relief in the
form of preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this covenant.
(d) This covenant not to compete shall not bind a successor by merger
to the Company in any states other than Alabama, Arkansas, Florida, Georgia,
Louisiana, Mississippi, North Carolina, South Carolina and Tennessee,
provided that such successor, prior to the merger, is not under common control
with the Company and is engaged, in those other states, in sales of computer
equipment and services to the kindergarten through twelfth grade education
market at THE time of the merger.
6.6 PERSONAL PROPERTY TAX ADJUSTMENTS AFTER CLOSING DATE. Personal
property taxes with respect to the Acquisition Assets to be conveyed to Buyer
pursuant hereto shall be prorated through the Closing Due, and such taxes shall
be adjusted between the parties from time to time after the determination of
the Closing Date Statement when such amounts become fixed, if the amounts
accrued on the Closing Date Statement with respect thereto differ from the
actual amounts.
6.7 CONDITION TO TRANSFER OF CERTAIN CONTRACTS.
(a) Seller agrees that between the date hereof and the Closing Date it
will use its reasonable best efforts to obtain the necessary consents to the
assignment of each Contract which by its terms requires the consent of any of
the other contracting parties thereto to an assignment to Buyer. As provided in
Section 8.1.3, it is a condition precedent to the obligations of each party
hereto to close the transactions contemplated hereby that all required consents
be obtained for each of the Contracts listed in Section 6.7 of the Seller's
Schedule ("Contracts Requiring Consents").
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(b) At the Closing Buyer may elect to close the transactions
contemplated hereby notwithstanding the fact that Seller may have failed to
obtain consents to the transfer of one or more Contracts (other than Contracts
Requiring Consents) which by their terms require the consent of any other
contracting party thereto to the assignment thereof to Buyer. The terms of this
paragraph (b) shall govern the transfer of the benefits of each such Contract
(other than Contracts Requiring Consents). Notwithstanding anything herein to
the contrary, the parties acknowledge and agree that at the Closing Seller will
not assign to buyer any such Contract which by its terms requires the consent
of any other contracting party thereto unless each consent has been obtained
prior to the Closing Date. With respect to each such unassigned Contract, after
the Closing Date Seller shall continue TO deal with the other contracting
party(ies) to that Contract as the prime contracting party and shall use its
reasonable best efforts to obtain the consent of all required parties to the
assignment of such Contract, but Buyer shall be entitled to the benefits of
such Contract accruing after the Closing Date to the extent that Seller may
provide Buyer with such benefits without violating the terms of such Contract;
Buyer agrees to perform at its sole expense all of the obligations of Seller to
be performed under such Contract the benefits of which Buyer is receiving after
the Closing Date.
6.8 Warranty Obligations.
(a) Except as provided in this Section 6.8, at the Closing Buyer shall
assume and thereafter discharge all responsibilities of Seller to those in
direct contractual relationship with Seller or Buyer, as the case may be, for
breach (a "Breach of Warranty") of any express or implied warranty (including,
without limitation, the implied warranties of merchantability and fitness for a
particular purpose) granted by Seller within the two (2) year period
immediately preceding the Closing Date in connection with Seller's conduct of
the Business; provided, however, that if the aggregate amount of all claims,
losses, damages, liabilities and expenses (including, without limitation,
settlement costs and any legal, accounting and other expenses for investigating
or defending any actions or threatened actions) (collectively, "Losses")
reasonably incurred by Buyer in connection with all Breaches of Warranty
exceeds Twenty-Five Thousand Dollars ($25,000), Seller shall indemnity and hold
harmless Buyer for the amount by which such Losses exceeds Twenty-Five Thousand
Dollars ($25,000).
(b) Notwithstanding the terms of paragraph (a) above, Buyer shall not
assume any of Seller's responsibilities for, and Seller hereby agrees to
indemnify and hold harmless Buyer with respect to, all Losses incurred in
connection with any claim for Breach of Warranty based upon facts known by
Seller on or at any time prior to the Closing Date, including, without
limitation, all claims for Breaches of Warranty disclosed in any section of the
Seller's Schedule.
(c) Buyer shall have the exclusive right In its sole discretion to
defend, settle and compromise any claim of a type covered by the
indemnification provisions of paragraph (a) above; provided, however, that if
at any time the Losses incurred by Buyer in connection with all Breaches of
Warranty which may give rise to an indemnity obligation of Seller exceed
Twenty-Five Thousand Dollars ($25,000), Buyer will promptly notify Seller of
each such claim and, when known, the facts constituting the basis for the
claim. With respect to each claim described In the foregoing provisions of this
Section 6.8, Seller and Buyer shall have the rights of an indemnifying party
and indemnified
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party, respectively, set forth in Article 7 with respect to each claim which
may give rise to an indemnity obligation of Seller, and shall be subject to the
limitations on indemnity set forth in Section 7.5.
(d) Seller shall have the exclusive right in its sole discretion to
defend, settle and compromise any claims of a type covered by the
indemnification provisions of paragraph (b) above.
6.9 EMPLOYEES AND EMPLOYMENT CONTRACT. Seller acknowledges that Buyer
intends to hire those employees of Seller listed on Section 4.8 of the Seller's
Schedule. Seller will cooperate fully in providing the necessary information or
to perform any other duties as may be reasonably requested by Buyer to
accomplish this result. The employees listed on Section 4.8 of the Seller's
Schedule shall be terminated by Seller immediately prior to the Closing and
deemed a "new hire" by Buyer; provided, however, that Buyer shall give credit,
for seniority, vesting, vacation and similar purposes, for time served with
Seller by those employees. Buyer shall assume the obligations of Seller for
vacation pay and related matters (if any) in the amounts which are listed on
Section 4.8 of the Seller's Schedule, and the aggregate amount of those
obligations shall be deducted from the purchase price. In addition, at the
Closing, Buyer will enter into an employment contract substantially in the form
attached hereto as Exhibit C with Steve Morse ("Employment Contract").
6.10 NON-SOLICITATION. Except for employees of Seller to be hired by
Buyer at the closing, neither Buyer nor Seller will, for a period of three (3)
years from the date of this Agreement, directly or indirectly, solicit for
employment, or knowingly permit any company or business organization controlled
by it to solicit for employment, any person who is currency employed by the
other party; provided, however, that such restriction shall not apply with
respect to an individual whose employment with either Buyer or Seller has been
terminated for a period of three (3) months or longer.
6.11 OPERATION OF THE BUSINESS BEFORE CLOSING. During the period
beginning (and including) April 1, 1997, and through the Closing, Seller shall
operate the Business for the benefit of Buyer (except for the collection of
accounts receivable which existed as of the close of business on March 31,
1997, which belong to Seller) in the same manner as if Seller were continuing
to operate the Business for its own benefit, including use of the same overhead
allocation methodology. At the Closing, Seller shall deliver to Buyer a
schedule setting forth (reasonable detail) its actual direct expenses and
cost of goods sold (other than goods already purchased by Buyer pursuant to
Section 1.1) in running the Business during that period, which shall be
reimbursed by Buyer at the Closing net of any revenues (other than as
described above) generated by the Business during that period.
6.12 SUBLEASE AND SERVICES. As soon as possible after the Closing,
Buyer and Seller shall negotiate in good faith and enter into an agreement to
provide for the sublease of certain office space by Buyer from Seller and for
the provision of certain services by Seller to Buyer. A general description of
the terms to be contained in that agreement are set forth on Exhibit D.
7. INDEMNIFICATION. In addition to the indemnity payable by Seller and
Buyer pursuant to Section 6.8, the following Sections 7.1 through 7.6 provide
for the payment of certain other
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indemnities by the parties hereto. Payment of indemnity for items specified in
this Article 7 shall be governed exclusively by the terms of this Article, and
payment of indemnity for items specified in Section 6.8 shall be governed by
said Section.
7.1 INDEMNIFICATION BY SELLER. Seller shall indemnify and hold Buyer
harmless with respect to any and all Losses reasonably incurred by Buyer, in
connection with each and all of the following:
(a) Any breach of any representation or warranty made by Seller in
this Agreement;
(b) The breach of any covenant, agreement or obligation of Seller
contained in this Agreement or any other instrument contemplated by this
Agreement;
(c) Any misrepresentation contained in any statement or certificate
furnished by Seller pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement;
(d) Any claims against, or liabilities or obligations of, Seller not
specifically assumed by Buyer pursuant TO this Agreement; and
(e) The failure of Buyer to obtain the protections afforded by
compliance with the notification requirements of the Bulk Sales Laws in force in
the jurisdictions in which such laws may be applicable either to Seller or to
the transactions contemplated by this Agreement
7.2 INDEMNIFICATION BY BUYER. Buyer shall indemnity and hold harmless
Seller in respect of any and all Losses reasonably incurred by Seller, in
connection with each and all of the following:
(a) Any breach of any representation or warranty made by Buyer in this
Agreement;
(b) The breach of any covenant, agreement or obligation of Buyer
contained in this Agreement or any other instrument contemplated by this
Agreement;
(c) Any misrepresentation contained in any statement or certificate
furnished by Buyer pursuant to this Agreement; and
(d) Any liability or obligation specifically assumed by Buyer pursuant
to this Agreement.
7.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification ("indemnified
party") shall promptly notify the other party ("indemnifying party") of the
claim and, when known, the facts constituting the basis for such claim. In the
event of any claim for indemnification hereunder resulting from or in
connection with any claim or legal proceedings by a third party, the notice to
the indemnifying party shall specify,
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if known, the amount or amount estimate of the liability arising herefrom. The
indemnified party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder, without the prior written
consent of the indemnifying party (which shall not be unreasonably withheld)
unless suit shall have been instituted against it and the indemnifying party
shall not have taken control of such suit after notification as provided in
Section 7.4.
7.4 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the indemnifying
party at its sole cost and expense may, upon written notice to the indemnified
party, assume the defense of any such claim or legal proceeding if it
acknowledges to the indemnified parry in writing its obligations to indemnity
the indemnified party with respect to all elements of such claim. The
indemnified party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
indemnifying party does not assume the defense of any such claim or litigation
resulting therefrom, (a) the indemnified party may defend against such claim or
litigation, in such manner as it may deem appropriate, including, but not
limited to, settling such claim or litigation, after giving notice of the same
to the indemnifying party, on such terms as the indemnified party may deem
appropriate, and (b) the indemnifying party shall be entitled to participate in
(but not control) the defense of such action, with its counsel and at its own
expense. If the indemnifying party thereafter seeks to question the manner in
which the indemnified party defended such third party claim or the amount or
nature of any such settlement, the indemnifying party shall have the burden to
prove by a preponderance of the evidence that the indemnified party did not
defend or settle such third party claim in reasonably prudent manner.
7.5 LIMITATIONS ON INDEMNIFICATION. All representations and
warranties made by the parties herein or in any instrument or document furnished
in connection herewith shall survive the Closing and any investigation as any
time made by or on behalf of the parties hereto and shall expire on the first
(1st) anniversary of the Closing Date, except (i) as to any matter as to which
a claim is submitted in writing to the indemnifying party prior to such first
(1st) anniversary and identified as claim for indemnification pursuant to this
Agreement and (ii) as to any matter which is based upon willful fraud by the
indemnifying party, with respect to which the representations and warranties
set forth in this Agreement shall expire only upon expiration of the applicable
statute of limitations. No claim or action for indemnity pursuant to Sections
7.1 or 7.2 for breach of any representation or warranty shall be asserted or
maintained by any party hereto after the expiration of such representation or
warranty pursuant to the preceding sentence except for claims made in writing
prior to such expiration and actions (whether instituted before or after such
expiration) based on any claim made in writing prior to such expiration. In the
absence of fraud or gross negligence, all indemnification under this Agreement
shall be limited to Four Hundred Thousand Dollars ($400,000). If fraud or gross
negligence is present, such indemnification shall be limited to the amount of
the purchase price for the Acquisition Assets.
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8. Conditions to Closing
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The obligations of Seller
and Buyer to consummate the transactions contemplated hereby shall be subject
to the fulfillment, at or prior to the Closing Date, of the following
conditions:
8.1.1 NO ACTION OR PROCEEDING. No claim, action, suit, investigation
or other proceeding shall be pending or threatened before any court or
governmental agency which presents a substantial risk of the restraint or
prohibition of the transactions contemplated by this Agreement or the obtaining
of material damages or other relief in connection therewith.
8.1.2 COMPLIANCE WITH LAW. All permits, approvals, and consents
of all governmental bodies or agencies which counsel for Buyer or for Seller
may reasonably deem necessary or appropriate so that consummation of the
transactions contemplated by this Agreement will be in compliance with
applicable laws shall have been obtained.
8.1.3 CONSENTS TO ASSIGNMENTS OF CONTRACTS. All necessary consents
to the assignment of all Contracts Requiring Consents shall have been obtained
in written instruments reasonably satisfactory to Buyer and Seller.
8.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the transaction contemplated hereby shall be, at the option of
Buyer, subject to the fulfillment, at or prior to the Closing Date, of the
following additional conditions:
8.2.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Seller contained in this Agreement or in any other document of
Seller delivered pursuant hereto shall be true and correct in all material
respects on the closing Date, and at the Closing Seller shall have delivered to
Buyer a certificate to such effect signed by the President or any Vice
President and the Secretary or any Assistant Secretary of Seller.
8.2.2 SELLER'S PERFORMANCE. Each of the obligations of Seller to be
performed by it on or before the Closing Date pursuant to the terms of this
Agreement shall have been duly performed in all material respects on or before
the Closing Date, and at the Closing Seller shall have delivered to Buyer a
certificate to such effect signed by the President or any Vice President and
the Secretary or any Assistant Secretary of the Seller.
8.2.3 AUTHORITY. All actions required to be taken by, or on the part
of, Seller to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors of Seller.
8.2.4 ADDITIONAL CLOSING DOCUMENTS OF SELLER. Buyer shall have
received at the Closing the following documents, dated the Closing Date:
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(a) Copies, certified by the Secretary an Assistant Secretary of
Seller, of resolutions of the Board of Directors of Seller authorizing the
execution, delivery and performance of this Agreement and all other agreements,
documents and instruments relating hereto and the consummation of the
transactions contemplated hereby;
(b) Bills of sale and assignment, in form and substance reasonably
satisfactory to counsel for Buyer, covering the items of personal property
included in the Acquisition Assets;
(c) Such further instruments of sale, transfer, conveyance, assignment
or delivery covering the Acquisition Assets or any part thereof as Buyer may
reasonably require to assure the full and effective transfer to it of the
Acquisition Assets;
(d) The Employment Contract duly executed by Steve Morse; and
(e) Such other documents as Buyer may reasonably request.
8.2.5 NO ADVERSE CHANGES. Between the date of this Agreement and the
Closing Date no damage, destruction or loss of any of the Acquisition Assets,
whether or not covered by insurance, which has had or may reasonably be
expected to have a material and adverse effect on the Business or its prospects
shall have occurred, nor shall any other event or condition which has had or
which reasonably may be expected to have a material and adverse effect on the
results of operations, condition (financial or otherwise), assets, properties
or prospects of the Business have occurred.
8.3 CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of Seller to
consummate the transactions contemplated hereby shall be, at the option of
Seller, subject to the fulfillment, at or prior to the Closing Date, of the
following additional conditions:
8.3.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Buyer contained in this Agreement or in any document delivered
pursuant hereto shall be true and correct in all material respects on the
Closing Date with the same effect as if made on the Closing Date, and at the
Closing Buyer shall have delivered to Seller a certificate to such effect,
signed by the President, any Executive Vice President, any Senior Vice
President, or any Vice President and the Secretary or any Assistant Secretary
of Buyer.
8.3.2 BUYER'S PERFORMANCE. Each of the obligations of Buyer to be
performed on or before the Closing Date pursuant to the terms of this Agreement
shall have been duly performed on or before the Closing Date, and at the
Closing Buyer shall have delivered to Seller a certificate to such effect
signed by the President, any Executive Vice President, any Senior Vice
President or any Vice President and the Secretary or any Assistant Secretary of
Buyer.
8.3.3 AUTHORITY. All actions required to be taken by, or on the part
of, Buyer to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors of Buyer.
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8.3.4 ADDITIONAL CLOSING DOCUMENT OF BUYER. Seller shall have received
at the Closing the following documents, each dated the Closing Date:
(a) Copies, certified by the Secretary or an Assistant Secretary of
Buyer, of resolutions of its Board of Directors authorizing the execution and
delivery of this Agreement and all other agreements, documents or instruments
relating hereto and the consummation of the transactions contemplated hereby;
(b) Instruments executed by Buyer, in form and substance reasonably
satisfactory to counsel for Seller, pursuant to which Buyer assumes the
executory obligations of Seller under each Contract;
(c) The check or other form of cash required to be delivered by Buyer
at the Closing pursuant to Section 2.2;
(d) The Employment contract executed by Buyer; and
(e) Such other closing documents as Seller may reasonably request.
9. DISPUTE RESOLUTION. Except for matters with respect to which injunctive
relief is sought, all claims, disputes and other matters in controversy (a
"dispute") arising directly or indirectly out of or related to this Agreement,
or the breach thereof, whether contractual or noncontractual, and whether
during the term or after the termination of this Agreement, shall be resolved
exclusively according to the procedures set forth in this Article 9.
9.1 MEDIATION. Neither party shall continence an arbitration
proceeding pursuant to the provisions of Section 9.2 unless that party first
gives a written notice (a "Dispute Notice") to the other party setting forth
the nature of the dispute. The parties shall attempt in good faith to resolve
the dispute by mediation under the Commercial Mediation Rules of the American
Arbitration Association ("AAA") in effect on the date of the Dispute Notice. If
the parties cannot agree on the selection of a mediator within twenty (20) days
after delivery of the Dispute Notice, the mediator will be selected by the AAA.
If the dispute has not been resolved by mediation as provided above within
sixty (60) days after delivery of the Dispute Notice, then the dispute shall be
determined by arbitration in accordance with the provisions of Section 9.2.
9.2 ARBITRATION.
(a) Any dispute that is not settled through mediation as provided in
Section 9.1 above shall be resolved by arbitration in Dallas, Texas, governed
by the Federal Arbitration Act, 9 U.S.C. section 1 et seq, and administered by
the American Arbitration Association under its Commercial Arbitration Rules in
effect on the date of the Dispute Notice, as modified by the provisions of this
Section 9.2, by a single arbitrator. Persons eligible to be selected as an
arbitrator shall be limited to lawyers with excellent academic and professional
credentials (i) who are or have been a partner in a highly respected law firm
for at least 15 years specializing in either general commercial litigation
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or general corporate matters and (ii) who have had both training and experience
as an arbitrator. Each party shall be entitled to strike on a peremptory basis,
for any reason or no reason, any or all of the names of potential arbitrators
on the list submitted to the parties by the AAA as being qualified in
accordance with the criteria set forth herein. If the parties cannot agree on a
mutually acceptable single arbitrator from the one or more lists submitted by
the AAA, the AAA shall designate three persons who, in its opinion, meet the
criteria set forth herein, which designees may include persons named on any
list previously submitted by the AAA. Each party shall be entitled to strike
one of such three designees on a peremptory basis, indicating its order of
preference with respect to the remaining designees, and the selection of the
arbitrator shall be made from among such designee(s) which have not been so
stricken by either party in accordance with their indicated order of mutual
preference to the extent possible. The arbitrator shall base the award on
applicable law and judicial precedent and, unless both parties agree otherwise,
shall include in such award the findings of fact and conclusions of law upon
which the award is based. Judgment on the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
(b) Notwithstanding the foregoing, if the dispute is determined by
a single arbitrator as contemplated, or if the parties agree to a panel of
three arbitrators to be selected in accordance with the applicable AAA rules,
and in the event the dispute is determined by less than the unanimous decision
of the three arbitrators, then upon the application by either party to a court
for an order confirming, modifying or vacating the award, the court shall have
the power to review whether, as a matter of law based on the findings of fact
determined by the arbitrator, the award should be confirmed, modified or
vacated in order to correct any errors of law made by the arbitrator. In order
to effectuate judicial review limited to issues of law, the parties agree (and
shall stipulate to the court) that the findings of fact made by the arbitrator
shall be final and binding on the parties and shall serve as the facts to be
submitted to and relied on by the court in determining the extent to which the
award should be confirmed, modified or vacated.
9.3 Costs and Attorneys' Fees, If either party fails to proceed with
mediation or arbitration as provided herein or unsuccessfully seeks to stay
such mediation or arbitration, or fails to comply with any arbitration award,
or is unsuccessful in vacating or modifying the award pursuant to a petition or
application for judicial review, the other party shall be entitled to be
awarded costs, including reasonable attorneys' fees, paid or incurred by such
other party in successfully compelling such arbitration or defending against
the attempt to stay, vacate or modify such arbitration award and/or
successfully defending or enforcing the award
9.4 Tolling Statute of Limitations. All applicable statutes of
limitations and defenses based upon the passage of time shall be tolled while
the procedures specified in this Article 9 are pending. The parties will take
such action, if any, required to effectuate such tolling.
10. Miscellaneous
10.1 Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or two (2) days after mailed by United States Express Mail
Service, postage prepaid, return receipt requested, to the parties, their
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successors in or assignees at the following addresses, or at such other
addresses as the parties may designate by written notice in the manner
aforesaid:
If to Buyer: Computer Plus, Inc.
295 Santa Ana Court
Sunnyvale, CA 94086-4512
Attention: Chairman and Chief Executive Officer
With a Copy to: Snell & Wilmer L.L.P.
1920 Main Street, Suite 1200
Irvine, CA 92614-7060
Attention: Gregg Amber, Esq.
If to Seller: DataFlex Corporation
2145 Calumet Avenue
Clearwater, FL 34625
Attention: President
With a Copy to: Holland & Knight
400 N. Ashley Drive, Suite 2300
Tampa, FL 33602-4300
Attn: Bob Grammig, Esq.
10.2 Assignability and Parties in Interest. This Agreement shall not
be assignable by any of the parties hereto. This Agreement shall inure to the
benefit of and be binding upon Buyer and Seller and their respective permitted
successors and assigns.
10.3 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of California
without regard to conflicts of law principles.
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
10.5 Indemnification for Brokerage. Buyer and Seller each represent
and warrant to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby. Each
party hereto agrees to indemnify and hold and save harmless the other from any
claim or demand for commissions or other compensation by any broker, finder or
similar agent claiming to have been employed by or on behalf of such party.
10.6 PUBLICITY. Seller and Buyer agree that press releases and other
announcements to be made by either of them with respect to the transactions
contemplated hereby shall be subject to mutual agreement. Notwithstanding the
foregoing, Seller and Buyer may respond to inquires relating to this Agreement
and the transactions contemplated hereby by the press, securities analysts,
employees or customers without any notice or further consent of the other.
23
<PAGE> 28
10.7 COMPLETE AGREEMENTS. This Agreement, the Exhibits hereto, the
Seller's Schedule and the documents delivered or to be delivered pursuant to
this Agreement contain or will contain the entire agreement between the
parties hereto with respect to the transactions contemplated herein and shall
supersede all previous oral and written and all contemporaneous oral
negotiations, commitments, and understandings.
10.8 MODIFICATIONS, AMENDMENTS AND WAIVERS. At any time prior to the
Closing Date or termination of this Agreement, the parties may, by written
agreement (but not otherwise):
(a) Extend the time for the performance of any of the obligations or
other acts of the parties hereto;
(b) Waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement;
(c) Waive compliance with any of the covenants or agreements
contained in this Agreement; or
(d) Amend or supplement any of the provisions of this Agreement.
10.9 INTERPRETATION. The headings contained in this Agreement are for
reference pruposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.10 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal, or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity, illegality, or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal, or unenforceable in any other jurisdiction.
10.11 DUE DILIGENCE INVESTIGATION. All representations and warranties
contained herein which are made to the best knowledge of a party shall require
that such party make reasonable investigation and inquiry with respect thereto
to ascertain the correctness and validity thereof.
24
<PAGE> 29
10.12 EXPENSES OF TRANSACTIONS. The parties shall be equally
responsible for paying all sales taxes arising out of the transfer of the
Acquisition Assets to Buyer pursuant to the terms of this Agreement. All other
fees, costs and expenses (including fees of investment bankers, if any)
incurred by Buyer or Seller in connection wiht the transactions contemplated by
this Agreement shall be borne by the party incurring them.
This Agreement has been executed as of the date first above written.
COMPUTER PLUS, INC.
By:/s/ Bob Walter
------------------------------------------------
Bob Walter, Chairman and Chief Executive Officer
"Buyer"
DATAFLEX CORPORATION
By:/s/ Anthony Lembo
------------------------------------------------
Anthony Lembo, President
"Seller"
25
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