UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): October 1, 1997
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SENTO TECHNICAL INNOVATIONS CORPORATION
---------------------------------------
(Exact name of registrant as specified in its charter)
Utah 0 6425 87-0284979
---------------- ----------- --------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification
incorporation) No.)
311 North State Street
Salt Lake City, Utah 84057
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(Address of principal executive
offices, including zip code)
(801) 226-6222
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(Registrant's telephone number,
including area code)
_______________________________________________________________________________
<PAGE>
ITEM 2. ACQUISITION OF ASSETS.
On October 1, 1997, the Registrant executed an Acquisition Agreement (the
"Acquisition Agreement") by and among the Registrant, PC Business Solutions,
Inc. ("PCBS") and Mindy Beckstead, Wayne Beckstead, Larry Pendleton and Karen
Pendleton (collectively, the "PCBS Shareholders") and closed the transactions
contemplated by the Acquisition Agreement (collectively, the "Acquisition"),
consisting principally of the following:
(a) The Registrant acquired all of the issued and outstanding capital
stock of PCBS in exchange for the issuance to the PCBS Shareholders
of 250,000 shares (the "Shares") of the Registrant's common stock,
par value $0.25 per share, as such may be reduced in order to account
for any deficiency in the net worth of PCBS as set forth in certain
financial statements to be prepared within 60 days of the closing of
the Acquisition;
(b) The PCBS Shareholders deposited 25,000 of the Shares in escrow
pursuant to a Stock Escrow Agreement securing certain indemnification
and restrictive covenant obligations undertaken by PCBS and the PCBS
Shareholders pursuant to the Acquisition Agreement.
(c) The Registrant executed employment agreements with each of Larry
Pendleton and Wayne Beckstead, the President and Chief Financial
Officer of PCBS, respectively, pursuant to which the Registrant
agreed to employ Messrs. Pendleton and Beckstead as Western Regional
Vice Presidents of Spire Technologies, Inc. ("Spire"), a wholly owned
subsidiary of the Registrant.
PCBS is an information technology value-added reseller and services
company headquarted in Upland, California. Founded in 1986, PCBS provides
organizations with expertise in accounting solutions and services, network
design and installation, custom database design and development, and other
technical services. The Registrant will account for the Acquisition as a
pooling of interests.
The consideration paid by the Registrant in connection with the
Acquisition was determined through arms-length negotiations between the
Registrant and the other parties to the Acquisition, based upon the business,
assets, liabilities, operations and prospects of PCBS. The Acquisition was
funded by the issuance of the Shares without any borrowing of funds. Prior to
the closing of the Acquisition, there was no material relationship between any
of the PCBS Shareholders and the Registrant or any of its affiliates, any
director or officer of the Registrant or any associate of any such director or
officer.
Copies of the Acquisition Agreement and of a press release announcing the
consummation of the Acquisition are attached to this Report as Exhibits 10 and
99, respectively. Certain financial statements and pro forma information
relating to the Registrant and the Acquisition are included herein under Item 7
below.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
The financial statements required pursuant to this Item 7(a) are
filed as part of this Report.
(b) Pro forma financial information.
The pro forma financial information required pursuant to this Item
7(b) are filed as part of this Report.
(c) Exhibits.
The following exhibits are included herein:
REG S-B EXHIBIT
EXHIBIT NO. DESCRIPTION NO.
10 Acquisition Agreement dated as of October 1, 1997 10
99 Press Release dated October 1, 1997 99
______________________________
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned thereunto duly authorized.
SENTO TECHNICAL INNOVATIONS CORPORATION
/s/ Robert K. Bench
--------------------------
Robert K. Bench, President
Dated: October 15, 1997
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements have
been prepared using the historical financial statements of the Company, and the
historical financial statements of PCBS. The pro forma financial information
reflects the adjustments that will result from the acquisition as if it had
occurred as of the beginning of the period presented with respect to pro forma
statements of operations data and as of the balance sheet date with respect to
pro forma balance sheet data. The pro forma financial data is provided for
analysis purposes only and does not purport to indicate the results which
actually would have been obtained if the acquisition had been effected on the
dates indicated, or of the results which may be obtained in the future.
The pro forma financial information is based on the pooling of interests method
of accounting. The pro forma adjustments are described in the accompanying
notes to the unaudited pro forma condensed combined financial statements. The
unaudited pro forma condensed combined balance sheet shows the combined
positions of the Company and PCBS as of June 30, 1997. The unaudited pro
forma condensed combined financial statements of income combines the results of
the Company with the results of PCBS for the three months ended June 30, 1997,
the eleven months ended March 31, 1997 (as previously reported in the Company's
annual report) with the eleven months ended March 31, 1997 for PCBS, and for
the year ended April 31, 1996 (as previously reported in the Company's annual
report) with the results of PCBS for the year ended April 31, 1996.
<PAGE>
Sento Technical Innovations Corporation and PC Business Solutions, Inc.
Unaudited Pro Forma Condensed Balance Sheets
As of June 30, 1997
Historical Historical Pro Forma
Sento PCBS Adjustments Combined
Assets
Current assets:
Cash $2,506,981 $15,197 $2,522,178
Accounts Receivable (Net) 3,728,708 127,579 3,856,287
Inventories 269,459 84,564 354,023
Other current assets 327,121 1,160 328,281
Deferred tax assets 98,917 98,917
--------- ------- ------ ---------
Total current assets 6,931,186 228,500 0 7,159,686
Fixed assets
Land 36,021 36,021
Building 250,489 250,489
Leasehold Improvements 28,101 28,101
Furniture and equipment 796,452 37,579 834,031
Transportation 11,516 54,560 66,076
Acc. depreciation (378,114) (36,900) (415,014)
--------- -------- ------ --------
Net fixed assets 716,364 83,340 0 799,704
Other assets 448,800 988 449,788
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$8,096,350 $ 312,828 0 $8,409,178
<PAGE>
Sento Technical Innovations Corporation and PC Business Solutions, Inc.
Unaudited Pro Forma Condensed Balance Sheets
As of June 30, 1997
Historical Historical Pro Forma
Sento PCBS Adjustments Combined
Liabilities and Stockholders
Equity
Current liabilities
Due to bank and current $8,286 $95,140 $103,426
portion of long-term debt
Accounts payable 2,509,897 95,888 2,605,785
Accrued liabilities 499,347 20,861 520,208
Income taxes payable 132,207 132,207
Deferred maintenance 1,247,452 1,247,452
revenue
Other deferred revenue 4,959 4,959
--------- ------- ------ ---------
Total current liabilities 4,402,148 211,890 0 4,614,038
Long-term liabilities:
Long-term debt, net 206,065 49,087 255,152
Deferred tax liability 5,333 5,333
------- ------ ------ -------
Total long-term liabilities 211,398 49,087 0 260,485
Stockholders' equity
Common stock 1,088,251 200 (200)(1) 1,150,751
62,500 (1)
Additional paid-in capital 1,597,145 (62,300)(1) 1,534,845
AAA Distributions (50,000) (50,000)
Subscriptions 762,500 762,500
Deferred compensation (100,000) (100,000)
Retained earnings 134,909 101,651 236,560
--------- ------- ------ ---------
Total stockholders' equity 3,482,804 51,851 0 3,534,655
$8,096,350 $313,828 0 $8,409,178
<PAGE>
Sento Technical Innovations Corporation and PC Business Solutions, Inc.
Unaudited Pro Forma Condensed Income Statements
For the three months ended June 30, 1997
Historical Historical Pro Forma
Sento PCBS Adjustments Combined
Revenues $3,984,514 $450,750 $4,435,264
Cost of Sales 2,651,706 267,530 2,919,236
--------- ------- ---------
Gross Profit 1,332,808 183,219 1,516,028
Operating Expenses
Selling, general and 1,675,663 150,536 1,826,199
administrative
Research and development 78,750 78,750
--------- ------- ---------
Income (loss) from operations (421,605) 32,683 388,922
Other income (expense) 26,274 290 26,564
Income before taxes (395,331) 32,973 (362,358)
Income tax expense 250 - 250
---------- ------- ---------
Net Income (loss) $(395,581) $32,973 $(362,608)
Net Income (loss) per common $(0.09) $(.08)
share
<PAGE>
Sento Technical Innovations Corporation and PC Business Solutions, Inc.
Unaudited Pro Forma Condensed Income Statements
For the eleven months ended March 31, 1997
Historical Historical Pro Forma
Sento PCBS Adjustments Combined
Revenues $17,609,586 $1,184,313 $18,793,899
Cost of Sales 11,441,558 556,786 11,998,344
---------- --------- ----------
Gross Profit 6,168,028 627,527 6,795,555
Operating Expenses
Selling, general and 5,711,061 524,296 6,235,357
administrative
Research and development 524,787 524,787
--------- ------- ---------
Income (loss) from operations (67,820) 103,231 35,411
Other income (expense) 106,375 2,322 108,697
Income before taxes 38,555 105,553 144,108
Income tax expense 16,139 - 21,110 (2) 37,249
-------- ------- ------ --------
Net Income (loss) $22,416 $105,553 21,110 $106,859
Net Income (loss) per common $0.01 $.02
share
<PAGE>
Sento Technical Innovations Corporation and PC Business Solutions, Inc.
Unaudited Pro Forma Condensed Income Statements
For the year ended April 30, 1996
Historical Historical Pro Forma
Sento PCBS Adjustments Combined
Revenues $13,873,401 $817,188 $14,690,589
Cost of Sales 8,452,043 372,530 8,824,573
----------- -------- -----------
Gross Profit 5,421,358 444,658 5,866,016
Operating Expenses
Selling, general and 4,605,402 388,635 4,994,037
administrative
Research and development 268,028 268,028
--------- ------- ---------
Income (loss) from operations 547,928 56,023 603,951
Other income (expense) (11,628) 170 (11,458)
Income before taxes 536,300 56,193 592,493
Income tax expense 196,745 11,239 (2) 207,984
-------- ------- ------ --------
Net Income (loss) $339,555 $56,193 11,239 $395,748
Net Income (loss) per common $0.08 $.10
share
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma adjustments have been made to the historical
condensed consolidated balance sheet of Sento Technical Innovations
Corporation to give effect to the acquisition of PC Business Solutions, Inc.
1. To record the acquisition of all of the issued and outstanding
capital stock of PCBS in exchange for the issuance to PCBS shareholders
of 250,000 shares of common stock, par value $0.25 per share.
2. PC Business Solutions is recognized as an S Corporation under
Federal and California laws and as such, income taxes are the
responsibility of its owners. An adjustment was made to income tax
expense to record the tax liability due based on the combined results
of Sento and PCBS.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to Current Report to be signed
on its behalf by the undersigned thereunto duly authorized.
SENTO TECHNICAL INNOVATIONS CORPORATION
(Registrant)
By: /s/ Robert K. Bench
-------------------
Robert K. Bench, President
Date: October 15, 1997
____________________
ACQUISITION AGREEMENT
BY AND AMONG
SENTO TECHNICAL INNOVATIONS, INC.,
PC BUSINESS SOLUTIONS, INC.
AND
THE SHAREHOLDERS OF
PC BUSINESS SOLUTIONS, INC.
____________________
<PAGE>
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT, dated as of October 1, 1997 (this
"Agreement"), by and among Sento Technical Innovations Corporation, a Utah
corporation ("Sento"), PC BUSINESS SOLUTIONS, INC., a California corporation
("PCBS"), and the shareholders of PCBS set forth on the signature page hereof
(the "PCBS Shareholders").
WITNESSETH:
WHEREAS, PCBS is in the business of software and hardware distribution,
service and support (the "Business");
WHEREAS, the PCBS Shareholders are the owners of all of the issued and
outstanding shares of the capital stock of PCBS;
WHEREAS, Sento desires to acquire all of the capital stock of PCBS in
exchange solely for 250,000 shares of the voting common stock of Sento, $.25
par value (the "Sento Common Stock"), whereby Sento shall immediately
thereafter become the sole shareholder of PCBS;
WHEREAS, the respective Boards of Directors of Sento and PCBS have
approved and adopted this Agreement providing for the acquisition by Sento of
all of the capital stock of PCBS and the consummation of the related
transactions described in this Agreement (the "Acquisition") in exchange for
Sento's issuance of such shares of Sento Common Stock, upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, it is the intention of the parties that (i) for United States
federal income tax purposes, the Acquisition qualify as a reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) for accounting purposes, the Acquisition shall be recorded as
a pooling of interests; and
WHEREAS, Sento, PCBS and the PCBS Shareholders desire to make certain
representations, warranties and agreements in connection with the Acquisition
and also to prescribe various conditions to the Acquisition.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements herein contained, Sento, PCBS and
the PCBS Shareholders agree as follows:
1. THE ACQUISITION.
(a) ACQUISITION OF PCBS CAPITAL STOCK. Subject to the terms and
conditions of this Agreement, Sento or its designee will acquire all of
the issued and outstanding shares of the capital stock of PCBS in exchange
solely for shares of Sento Common Stock, as set forth in Section 1(b)
below. As contemplated pursuant to Section 11(m) below, Sento may assign
its rights to an affiliated entity. Upon such assignment, all rights,
duties, interest and obligations of Sento hereunder shall be transferred
to Sento's designees and all references to Sento in this Agreement shall
be construed to apply to such designee on the same basis as Sento.
(b) CONSIDERATION. Subject to the provisions of Section 1(c) below,
the total consideration to be provided by Sento in exchange for the
performance by PCBS and the PCBS Shareholders of their respective
obligations under this Agreement, including, without limitation, the
transfer to Sento of all of the shares of capital stock of PCBS, subject
to all of the terms, covenants, and conditions set forth herein, shall
consist of 250,000 shares of Sento Common Stock (the "Shares"). The
Shares will be issued and delivered by Sento to each of the PCBS
Shareholders in the following amounts: Larry and Karen Pendleton, 125,000
shares; Wayne and Mindy Beckstead, 125,000 shares.
(c) OFFSET. Within sixty (60) days of the Closing Date (as set
forth in Section 2 below), PCBS shall obtain from a reputable certified
public accounting firm approved by Sento in advance, an audited balance
sheet setting forth the financial condition of PCBS as of December 31,
1996 (the "Audited Balance Sheet"), which Audit Balance Sheet shall be
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"). PCBS Shareholders shall pay the amount for
any and all expenses relating to the preparation and auditing of the Audit
Balance Sheet that exceeds in aggregate the amount of Five Thousand
Dollars ($5,000). In the event that the "PCBS Balance Sheet" (as defined
in Section 3(g) below) reveals that the net worth of PCBS (calculated in
accordance with GAAP) is more than Five Thousand Dollars ($5,000) less
than as set forth on the PCBS Balance Sheet in Schedule 3(g), the number
of Shares to be delivered by Sento shall be reduced by an amount equal to
the aggregate amount of the difference between the PCBS Balance Sheet as
conformed to GAAP and the PCBS Balance Sheet as set forth in Schedule
3(g). For purposes of determining the number of Shares to be subject to
the reduction described in the preceding sentence, the value of each Share
shall be equal to the closing sale price for the Sento Common Stock, as
reported by the National Association of Securities Dealers, Inc. (the
"NASD"), as of the Closing Date. Each of Sento, PCBS and the PCBS
Shareholders acknowledges and agrees that, to the extent Sento is
permitted to reduce the number of Shares as permitted under this Section
1(c), Sento is hereby authorized to instruct the escrow agent acting
pursuant to the terms of the "Stock Escrow Agreement" (as defined in
Section 2(c) below) to return to Sento a number of Shares equal to the
amount of the reduction, which Shares shall be cancelled by Sento and
shall not be delivered to the PCBS Shareholders.
(d) ACCOUNTING FOR TRANSACTION. The Acquisition will be accounted
for as a pooling of interests.
(e) RESTRICTIONS ON TRANSFER OF SHARES. The Shares will not be
registered under the Securities Act of 1933, as amended (the "Securities
Act"), and may not be sold, transferred, or otherwise disposed of for
value unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Each certificate
evidencing the Shares shall be stamped or otherwise imprinted with a
legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE
MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD
OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE
SECURITIES ACT.
2. CLOSING. The Closing of the Acquisition (the "Closing") shall be on
a date and at such time on or prior to October 1, 1997 as the parties may agree
(the "Closing Date"), following the satisfaction of every material term,
covenant or condition set forth herein that is required to be satisfied prior
to Closing. At the Closing,
(a) the PCBS Shareholders shall transfer and deliver to Sento
certificates evidencing all of the issued and outstanding shares of the
common stock, no par value, of PCBS (the "PCBS Common Stock"),
constituting all of the capital stock of PCBS, Sento shall obtain and
possess all rights in respect thereof, and PCBS shall become a wholly-
owned subsidiary of Sento;
(b) Subject to the provisions of the Escrow Agreement described in
the following subsection, Sento shall issue and deliver to the PCBS
Shareholders, in the amounts set forth in Section 1(b) and through such
reasonable procedures as Sento may adopt, certificates evidencing 250,000
shares of Sento Common Stock, constituting all of the Shares;
(c)Sento and each of the PCBS Shareholders shall execute a Stock Escrow
Agreement, substantially in the form of Exhibit 2(c) (the "Stock Escrow
Agreement") attached hereto and incorporated herein by this reference, for
the purpose of securing the indemnification and restrictive covenant
obligations of PCBS and the PCBS Shareholders pursuant to Section 7 and 8,
and Sento shall deposit with the escrow agent identified in the Stock
Escrow Agreement 25,000 of the Shares, on the terms and subject to the
conditions set forth in the Stock Escrow Agreement.
(d) Sento and Larry Pendleton and Wayne Beckstead shall execute an
Employment Agreement, substantially in the form of Exhibit 2(d)(1) and
2(d)(2) attached hereto and incorporated herein by this reference, for the
purpose of setting forth the terms and conditions upon which Mr. Pendleton
and Mr. Beckstead will be employed by Sento or any of its affiliates,
including, without limitation, PCBS, as determined by Sento.
(e) each of the respective parties hereto shall execute, acknowledge
and deliver (or shall cause to be executed, acknowledged and delivered)
any and all documents, certificates, opinions, financial statements,
schedules, agreements, resolutions, rulings or other instruments required
by this Agreement to be so delivered at or prior to the Closing, together
with such other items as may be reasonably requested by the parties hereto
and their respective legal counsel in order to effectuate or evidence the
transactions contemplated hereby; and
(f) in addition to the foregoing, each of the parties shall execute
and deliver such additional documents as may reasonably be required in
order to effectuate the transactions herein contemplated in accordance
with the requirements of Section 368(a)(1)(B) of the Code and shall treat
such transactions for all tax purposes consistently with the other
parties' treatment thereof and with such other characterization as a
reorganization under such Code section.
3. REPRESENTATIONS AND WARRANTIES CONCERNING PCBS. To induce Sento to
enter into this Agreement and to complete the Acquisition, except as fully and
accurately described in Schedules to be prepared by PCBS and delivered to Sento
prior to the execution of this Agreement (the "PCBS Disclosure Schedules"),
each of PCBS Shareholders, jointly and severally, represents and warrants that
the following statements concerning the affairs of PCBS are true, correct and
complete as of the date hereof, and will be true, correct and complete as of
the Closing Date.
(a) ORGANIZATION, STANDING AND QUALIFICATION. PCBS is duly
organized, validly existing and in good standing under the laws of the
state of California and is authorized and qualified to own and operate its
properties and assets and conduct its business in all jurisdictions where
such properties and assets are owned and operated and such business
conducted. PCBS has all franchises, permits, licenses, and any similar
authority necessary for the conduct of the Business as now being conducted
by it, except where the lack of such would not materially adversely affect
the Business or the financial condition of PCBS. PCBS is not in default
in any material respect under any of such franchises, permits, licenses or
other similar authority.
(b) CAPITALIZATION; SUBSIDIARIES. The authorized capital stock of
PCBS consists solely of 500 shares of PCBS Common Stock, of which 200
shares and no more are issued and outstanding. All of the outstanding
shares of PCBS Common Stock were duly authorized and validly issued and
are fully paid and nonassessable. There are no outstanding subscriptions,
options, warrants, calls, contracts, demands, commitments, convertible
securities or other rights, agreements or arrangements of any character or
nature whatever relating to the issuance of capital stock or other
securities of PCBS. No holder of any security of PCBS is entitled to any
preemptive or similar rights to purchase any securities of PCBS. PCBS has
no subsidiaries and no other investment in any entity. PCBS is not a
participant in any joint venture, partnership or other similar
arrangement.
(c) NO DEFAULTS. PCBS is not in default under or in violation of
any provisions of its Articles of Incorporation or Bylaws. PCBS is not in
default under or in violation of any restriction, lien, encumbrance,
indenture, contract, lease, sublease, loan agreement, note or other
obligation or liability relating to the Business. Neither the execution
and delivery of this Agreement nor consummation of the transactions
contemplated hereby will conflict with or result in a breach of or
constitute a default under any provision of the Articles of Incorporation
or Bylaws of PCBS, any law, rule, regulation, judgment, decree, order or
other requirement, or any restriction, lien, encumbrance, indenture,
contract, lease, sublease, loan agreement, note or other obligation or
liability to which PCBS is a party or by which it is bound, or to which
any of its assets are subject, or result in the creation of any lien or
encumbrance upon said assets.
(d) CONSENTS AND APPROVALS. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby do not require PCBS or the PCBS Shareholders to obtain any consent,
approval or action of, or make any filing with or give notice to any
corporation, person or firm or any public, governmental or judicial
authority.
(e) Related-Party Transactions. No employee, officer, director or
shareholder of PCBS or member of his or her immediate family is indebted
to PCBS, nor is PCBS indebted (or committed to make loans or extend or
guarantee credit) to any such individuals. To the knowledge of the PCBS
Shareholders, none of such individuals has any direct or indirect
ownership interest in any firm or corporation with which PCBS is
affiliated or with which PCBS has a business relationship, or any firm or
corporation that competes with PCBS. No member of the immediate family of
any employee, officer, director or shareholder of PCBS is directly or
indirectly interested in any material contract with PCBS.
(f) COMPLIANCE WITH LAW. To the knowledge of PCBS and the PCBS
Shareholders, neither PCBS nor any of its directors, officers,
fiduciaries, agents or employees is in violation of any applicable
statute, law, rule, regulation or requirement of any governmental
authority in any way relating to the Business or PCBS's operations and no
material expenditure is or will be required in order to comply with any
such statute, law, rule, regulation or requirement. Consummation of the
transactions contemplated hereby will be in compliance with all presently
applicable laws, rules, regulations and requirements of all governmental
authorities without the necessity for any license or permit or other
action or permission in the nature thereof, or any registration with, or
consent of, any governmental authority.
(g) FINANCIAL STATEMENTS. The unaudited balance sheet of PCBS,
dated as of June 30, 1997 (the "PCBS Balance Sheet"), attached hereto as
Schedule 3(g), is correct and complete and presents fairly in all material
respects the financial condition of PCBS as of such date, and has been
prepared in accordance with generally accepted accounting principles
("GAAP"), consistently applied.
(h) TITLE TO ASSETS. PCBS has good and indefeasible title to and
possession of all furniture, machinery, tools, equipment and other
tangible assets used by PCBS in the course of conducting the Business (the
"PCBS Assets"). Except as set forth in Schedule 3(h), the PCBS Assets are
free and clear of all liens, claims, security interests, encumbrances,
restrictions and rights, title and interests in others. There are no
existing agreements, options or commitments or rights with, to or in any
third party to acquire any of the PCBS Assets or PCBS or any interest
therein, except for those entered into in the ordinary course of business
and not materially adversely affecting the PCBS Assets or property or any
other right of PCBS.
(i) INTELLECTUAL PROPERTY. Except as set forth on Schedule 3(i) of
the PCBS Disclosure Schedules, PCBS owns all trade names, trademarks,
service marks, copyrights, inventions, software, discoveries, ideas,
research, engineering, methods, practices, processes, systems, formulae,
designs, drawings, products, projects, improvements, developments, know -
how, and trade secrets which are used in the conduct of the Business,
whether registered or unregistered (collectively, the "PCBS Intellectual
Property"). PCBS created or developed all such PCBS Intellectual Property
and such PCBS Intellectual Property is not subject to any restriction,
lien, encumbrance, right, title or interest in others. All of such PCBS
Intellectual Property that is not in the public domain stand solely in the
name of PCBS and not in the name of any shareholder, director, officer,
agent, partner or employee of PCBS or any other person, and none of the
same has any right, title, interest, restriction, lien or encumbrance
therein or thereon or thereto. PCBS's ownership and use of the PCBS
Intellectual Property do not and will not infringe upon, conflict with or
violate in any material respect any patent, trademark, service mark,
copyright, trade secret or other lawful proprietary right of any other
party, and no claim is pending or threatened to the effect that the
operations of PCBS infringe upon or conflict with the asserted rights of
any other person under any proprietary right, and to the knowledge of PCBS
and the PCBS Shareholders there is no reasonable basis for any such claim
(whether or not pending or threatened). No claim is pending or, to the
knowledge of PCBS and the PCBS Shareholders, threatened to the effect that
any such PCBS Intellectual Property is invalid or unenforceable by PCBS,
and, to PCBS's and the PCBS Shareholders' knowledge, there is no
reasonable basis for any such claim (whether or not pending or
threatened). PCBS has not been advised, nor, to the knowledge of the PCBS
Shareholders, is there any basis for any claim that PCBS's proprietary
rights are infringed by proprietary rights of any third party.
(j) LEASES. PCBS enjoys exclusive, peaceful and undisturbed
possession under all leases to which it is a party. All such leases are
identified on Schedule 3(j) of the PCBS Disclosure Schedules, are valid
and enforceable in accordance with their terms against PCBS and, to the
knowledge of PCBS and the PCBS Shareholders, against the other parties
thereto, and no party thereto is in default thereunder.
(k) INVENTORY. All finished goods, raw materials, merchandise,
stock in trade, packaging materials, maintenance supplies and other
inventory used in the Business (collectively, the "Inventory") are
accurately reflected on the PCBS Balance Sheet, were valued at cost
(determined on a first-in, first-out basis) or market, whichever is lower,
with proper allowances for obsolescence, in accordance with GAAP. Such
Inventory consists of items which PCBS reasonably believes are of quality
and quantity readily usable or saleable in PCBS's ordinary course of
business, except such amounts as have been revised in accordance with GAAP
and accurately reflected on the PCBS Balance Sheet.
(l) LICENSES. Each right or license to use the assets (tangible or
intangible) or property of any other party which is material to the
operation of the Business (collectively, the "Licenses") is identified on
Schedule 3(l) of the PCBS Disclosure Schedules. Each License is, and at
Closing shall be, in full force and effect and has not been assigned,
modified, supplemented or amended, and neither PCBS nor, to the knowledge
or PCBS or any PCBS Shareholders, the licensor under any such License is
in default under any such License, and, to the knowledge of PCBS and the
PCBS Shareholders, no circumstances or state of facts presently exists
which, with the giving of notice or passage of time, or both, would permit
the licensor under any License to terminate any License.
(m) MATERIAL CONTRACTS. Other than as disclosed on Schedule 3(m) of
the PCBS Disclosure Schedules, PCBS does not have any obligation,
contract, agreement, lease, sublease, commitment or understanding of any
kind, nature or description that is material to the Business, whether oral
or written, fixed or contingent, due or to become due, existing or
inchoate.
(n) NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule
3(n) of the PCBS Disclosure Schedules, there are no material liabilities
or obligations of PCBS, including, without limitation, contingent
liabilities for the performance of any obligation, except for liabilities
or obligations which are fully and accurately disclosed on the PCBS
Balance Sheet in accordance with GAAP. Without in any manner limiting the
foregoing, all revenues attributable to PCBS's sales of maintenance
services have been properly accounted for in accordance with GAAP and all
revenues, assets and liabilities attributable to any such contract are
accurately reflected on the PCBS Balance Sheet in accordance with GAAP.
(o) LITIGATION. There are no suits or proceedings at law or in
equity, or before or by any governmental agency or arbitrator, pending or
threatened, or to the knowledge of PCBS or the PCBS Shareholders,
anticipated or contemplated, which in any way materially affect PCBS, and
there are no unsatisfied or outstanding judgments, orders, decrees or
stipulations which in any way affect PCBS or its properties or assets or
to which it is or may become a party. There are no claims against PCBS
pending or threatened, or to the knowledge of PCBS or the PCBS
Shareholders, anticipated, or contemplated which, if valid, would
constitute or result in a breach of any representation, warranty or
agreement set forth herein. There are no existing or, to the knowledge of
PCBS and the PCBS Shareholders, threatened disputes, grievances,
harassment charges, controversies or other employment or labor troubles
affecting PCBS.
(p) TAXES. Except as disclosed in Schedule 3(p) of the PCBS
Disclosure Schedules, (i) PCBS has duly filed all federal, state, local
and other tax returns and reports required to be filed by PCBS (including
sales and use tax returns) on or prior to the date hereof with respect to
all taxes withheld by or imposed upon PCBS; (ii) all such returns or
reports reflect the liability for such taxes of PCBS as computed therein
for the periods indicated, and all taxes shown on such returns or reports
and all assessments received by PCBS have been paid, or fully reserved
for, to the extent that such taxes have become due; (iii) there are no
waivers or agreements by PCBS for the extension of time for the assessment
of such taxes; and (iv) there are no material questions of taxation which
are, as at the date hereof, the subject of dispute with any taxing
authority.
(q) LABOR AND EMPLOYMENT. Except as disclosed in Schedule 3(q) of
the PCBS Disclosure Schedules, PCBS is not a party to any oral or written
(i) contract for the employment of any officer, director or employee of
PCBS which is not terminable on 30 days (or less) notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance pay,
pension benefit or retirement plan, agreement or arrangement covered by
Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (iii) agreement, contract or indenture relating to the
borrowing of money; (iv) guarantee of any obligation for the borrowing of
money or otherwise; (v) consulting or other similar contract with an
unexpired term of more than one year or providing for payments in excess
of $10,000 in the aggregate; (vi) collective bargaining agreement; or
(vii) agreement with any present or former officer, director or employee
of PCBS. PCBS does not have, except as may be required by law, any
obligation or commitment to provide medical, dental or life insurance
benefits to or on behalf of any of its employees who may retire or any of
its former employees who have retired from employment with PCBS, including
those receiving disability benefits. The PCBS Balance Sheet fully and
accurately reflects, in accordance with GAAP, all employment or labor-
related obligations and liabilities of PCBS and all such obligations and
liabilities relating to the Business.
(r) ENVIRONMENTAL MATTERS. Except to the extent, if any, that would
not have a material adverse effect on PCBS, (i) PCBS has not received
notice of any violation of or investigation relating to any federal,
state, provincial or local environmental or pollution law, regulation, or
ordinance with respect to assets now or previously owned or operated by
PCBS that has not been fully and finally resolved; (ii) all permits,
licenses and other authorizations which are required under federal, state,
provincial and local laws with respect to pollution or protection of the
environment ("Environmental Laws") relating to assets now owned or
operated by PCBS or any of its subsidiaries, including Environmental Laws
relating to actual or threatened emissions, discharges or releases of
pollutants, contaminants or hazardous or toxic materials or wastes
("Pollutants"), have been obtained and are effective, and, with respect to
assets previously owned or operated by PCBS, were obtained and were
effective during the time of PCBS's operation; (iii) to the knowledge of
PCBS and the PCBS Shareholders, no conditions exist on, in or about the
properties now or previously owned or operated by PCBS or any third-party
properties to which any Pollutants generated by PCBS were sent or released
that could give rise on the part of PCBS to liability under any
Environmental Laws, claims by third parties under Environmental Laws or
under common law or the occurrence of costs to avoid any such liability or
claim; and (iv) to the knowledge of PCBS and the PCBS Shareholders, all
operators of PCBS's assets are in compliance with all terms and conditions
of such Environmental Laws, permits, licenses and authorizations, and are
also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in such laws or contained in any regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder, relating to PCBS's assets.
(s) NO ADVERSE CHANGE. Since the date of the PCBS Balance Sheet,
there has not been with respect to the Business:
(i) except as set forth in Schedule 3(s)any material adverse
change in the Business or the properties, assets or prospects of PCBS
or, to the knowledge of PCBS and the PCBS Shareholders, are any such
changes threatened, anticipated or contemplated;
(ii) any actual or, to the knowledge of PCBS and the PCBS
Shareholders, threatened, anticipated or contemplated damage,
destruction, loss, conversion, termination, cancellation, default or
taking by eminent domain or other action by any governmental
authority, which has affected or may hereafter materially affect the
Business or the properties, assets or prospects of PCBS;
(iii) any material and adverse dispute pending or
threatened, or, to the knowledge of PCBS and the PCBS Shareholders,
anticipated or contemplated of any kind with any customer, supplier,
source of financing, employee, landlord, subtenant or licensee of
PCBS which has not been disclosed in writing to Sento, or any pending
or threatened, or, to the knowledge of PCBS or the PCBS Shareholders,
anticipated or contemplated occurrence or situation of any kind,
nature or description which is reasonably likely to result in any
material reduction in the amount, or any change in the terms or
conditions, of business with any substantial customer, supplier or
source of financing;
(iv) any pending, threatened or contemplated occurrence or
situation of any kind, nature or description peculiar to the Business
and materially and adversely affecting PCBS's properties, assets or
prospects; or
(v) except as set forth on Schedule 3(s) of the PCBS Disclosure
Schedules, any reduction of capital, redemption of stock or dividend
or distribution with respect to stock, by PCBS.
(t) ACCURACY OF INFORMATION FURNISHED. Neither PCBS nor any of the
PCBS Shareholders has made any material misstatement of fact or omitted to
state any material fact necessary or desirable to make complete, accurate
and not misleading the representations, warranties and agreements set
forth herein, or in any exhibit or schedule hereto or certificate or other
document furnished in connection herewith.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE PCBS SHAREHOLDERS.
The consummation of the Acquisition constitutes the offer and sale of
securities under the Securities Act and applicable state statutes. Such
transactions shall be consummated in reliance on exemptions from the
registration and prospectus delivery requirements of such statutes which
depend, among other items, on the circumstances under which the PCBS
Shareholders acquire such securities.
(a) In order to provide documentation for reliance upon exemptions
from the registration and prospectus delivery requirements for such
transactions, the execution of this Agreement by each of the PCBS
Shareholders shall constitute his or her affirmation and acceptance of,
and concurrence in, the following representations and warranties:
(i) Such PCBS Shareholder acknowledges that neither the
Securities and Exchange Commission (the "SEC") nor the securities
commission of any state or other federal agency has made any
determination as to the merits of acquiring the Shares, and that this
transaction involves certain risks.
(ii) Such PCBS Shareholder (A) has such knowledge and experience
in business and financial matters that he or she is capable of
evaluating Sento and its business operations and (B) understands the
risks related to the consummation of the transactions contemplated
hereby.
(iii) Such PCBS Shareholder has been provided with a copy of
this Agreement and exhibits and schedules attached hereto, plus all
materials and information requested by such shareholder or his or her
representative, including any information requested to verify any
information furnished (to the extent such information is available or
can be obtained without unreasonable effort or expense), and such
shareholder has been provided the opportunity for direct
communication between Sento and its representatives and such
shareholder and his or her representatives regarding the transactions
contemplated hereby.
(iv) All information which such PCBS Shareholder has provided to
Sento or its agents or representatives concerning such PCBS
Shareholder's suitability to hold shares of Sento Common Stock
following the transactions contemplated hereby is complete, accurate,
and correct.
(v) Such PCBS Shareholder has not offered or sold any
securities of Sento or interest in this Agreement and has no present
intention of dividing the Shares or the rights under this Agreement
with others or of reselling or otherwise disposing of any portion of
such Shares or rights, either currently or after the passage of a
fixed or determinable period of time or on the occurrence or
nonoccurrence of any predetermined event or circumstance.
(vi) Such PCBS Shareholder was at no time solicited by any
leaflet, public promotional meeting, circular, newspaper or magazine
article, radio or television advertisement or any other form of
general advertising or solicitation in connection with the offer,
sale or purchase of the Shares through this Agreement.
(vii) Such PCBS Shareholder has adequate means of providing
for his or her current needs and possible personal contingencies and
has no need now, and anticipates no need in the foreseeable future,
to sell the Shares which the undersigned will receive. Such PCBS
Shareholder is able to bear the economic risks of this investment,
and consequently, without limiting the generality of the foregoing,
is able to hold the Shares to be received in connection with the
Acquisition for an indefinite period of time and has a sufficient net
worth to sustain a loss of the entire investment, in the event such
loss should occur.
(viii)Such PCBS Shareholder is (a) at least 21 years of age and
(b) a bona fide permanent resident of and is domiciled in the state
indicated on the signature page hereof, and has no present intention
of becoming a resident of any other state or jurisdiction.
(ix) Such PCBS Shareholder understands that the Shares have not
been registered, but are being acquired by reason of a specific
exemption under the Securities Act as well as exemptions under
certain state statutes and that any disposition of the Shares
acquired in connection with the Acquisition may, under certain
circumstances, be inconsistent with these exemptions and may cause
the undersigned to be deemed an "underwriter" within the meaning of
the Securities Act. Such PCBS Shareholder understands that the
definition of "underwriter" arises out of the concept of
"distribution" and that any subsequent disposition of the subject
Shares can only be effected in transactions which are not considered
distributions.
(x) Such PCBS Shareholder acknowledges that the Shares must be
held and may not be sold, transferred, or otherwise disposed of for
value unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Sento is
under no obligation to register the Shares to be acquired by the PCBS
Shareholders in connection with the Acquisition under the Securities
Act. Sento's registrar and transfer agent will maintain stop
transfer orders against the transfer of the Shares to be obtained by
the PCBS Shareholders in connection with the Acquisition, and the
certificates representing such Shares will bear a legend in
substantially the form set forth in Section 1(e).
(xi) Sento may refuse to effect transfers of the Shares in the
absence of compliance with Rule 144 promulgated under the Securities
Act unless the holder furnishes Sento with a "no-action" or
interpretive letter from the SEC or an opinion of counsel reasonably
acceptable to Sento stating that the transfer is proper. Further,
unless such interpretive letter or opinion states that the Shares are
free of any restrictions under the Securities Act, Sento may refuse
to transfer the Shares to any transferee who does not furnish in
writing to Sento the same representations and agree to the same
conditions with respect to such Shares as set forth herein. Sento
may also refuse to transfer the Shares if any circumstances are
present reasonably indicating that the transferee's representations
are not accurate.
(b) Each of the PCBS Shareholders, for the purpose of inducing Sento
to enter into this Agreement, consummate the Acquisition and complete the
other transactions contemplated hereby, represents and warrants to, and
covenants with, Sento as follows:
(i) such PCBS Shareholder is the legal and beneficial owner of
the number of shares of PCBS Common Stock set forth below his or her
name on the signature page hereof, and all such shares are owned by
such PCBS Shareholder free and clear of any lien, security interest,
charge, encumbrance, pre-emptive right or other restriction
whatsoever;
(ii) such PCBS Shareholder has not sold, transferred or
delivered any interest in the shares of PCBS Common Stock to be
transferred to Sento pursuant to the terms of this Agreement, there
are no outstanding options, warrants or other rights to purchase, or
claims against, such shares of PCBS Common Stock to be transferred by
such PCBS Shareholder and, upon delivery of such shares of PCBS
Common Stock to Sento, Sento will acquire good and marketable title
to such shares, free and clear of any lien, claim, demand,
encumbrance, security interest, community property right or
restriction on transfer.
(iii) such PCBS Shareholder has not elected to exercise
dissenters' rights in connection with the Acquisition and such PCBS
Shareholder shall not elect to do so subsequent to the execution of
this Agreement;
(iv) such PCBS Shareholder is not required to obtain any
consent, approval or authorization or to make any filing with, any
governmental authority or any other person in connection with the
execution of this Agreement and the consummation of the Acquisition
and the other transactions contemplated hereby;
(v) the execution of this Agreement by such PCBS Shareholder
and the consummation of the Acquisition and the other transactions
contemplated hereby will not violate, conflict with, result in a
breach of, or constitute a default under, any order of any
governmental authority or any provision of any indenture, mortgage,
contract, instrument or other agreement to which such PCBS
Shareholder is a party or by which he or she is bound.
(c) In order to more fully document reliance on the exemptions,
representations, warranties and covenants as provided herein, the PCBS
Shareholders shall execute and deliver to Sento such letters of
representation, acknowledgment, suitability or the like, as Sento and its
counsel may reasonably request in connection with reliance on exemptions
from registration under such securities laws and confirmation of the
foregoing representation, warranties and covenants.
(d) Each of the PCBS Shareholders acknowledges that the basis for
relying on exemptions from registration or qualification under federal and
state securities laws are factual, depending on the conduct of the various
parties, and that no legal opinion or other assurance will be required or
given to the effect that the transactions contemplated hereby are in fact
exempt from registration or qualification.
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SENTO. Sento
represents and warrants that:
(a) ORGANIZATION STANDING AND QUALIFICATION. Sento is duly
organized and validly existing and in good standing under the laws of the
State of Utah, and is authorized and qualified to own and operate its
properties and assets and conduct its business in all jurisdictions where
such properties and assets are owned and operated and such business
conducted, except where failure to so qualify would not have a material
adverse effect on the business or financial condition of Sento.
(b) AUTHORITY. Sento has full right, power and authority to
execute, deliver and perform the terms of this Agreement. This Agreement
has been duly authorized by Sento and constitutes a binding obligation of
Sento enforceable in accordance with its terms.
(c) SENTO COMMON STOCK. The Sento Common Stock issued to pursuant
to this Agreement will be duly authorized, validly issued and fully paid
and non-assessable.
(d) SEC DOCUMENTS. To the best knowledge of Sento, Sento has timely
filed with the SEC all required documents, and will timely file all
required SEC documents between the date hereof and the Closing (all such
documents are collectively referred to as the "Sento SEC Documents"). As
of their respective dates, the Sento SEC Documents complied or will comply
in all material respects with the requirements of the Securities Act or
the Securities Exchange Act of 1934, as the case may be, and none of the
Sento SEC Documents contained or will contain any untrue statement of a
material fact or omitted or will omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
consolidated financial statements of Sento included or to be included in
the Sento SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
GAAP (except, in the case of the unaudited statements, as permitted by
Form 10-QSB of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto) and
fairly present the consolidated financial position of Sento and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and statements of cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described
therein).
6. CONDITIONS OF PERFORMANCE.
(a) SENTO'S CONDITIONS. The obligation of Sento to consummate this
Agreement is subject to the satisfaction at the Closing, or waiver by
Sento in writing, of each of the following conditions:
(i) At the Closing Date, no governmental agency or body, or
other person or entity, shall have instituted or threatened any
action to restrain or prohibit any of the transactions contemplated
by this Agreement;
(ii) The representations and warranties of PCBS and the PCBS
Shareholders contained in this Agreement or in any certificate or
document delivered to Sento pursuant hereto shall be deemed to have
been made again at the Closing and shall then be true in all material
respects; PCBS and the PCBS Shareholders shall have performed and
complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to or at the
Closing; neither PCBS nor the PCBS Shareholders shall be in default
under any of the provisions of this Agreement; and Sento shall have
been furnished with one or more closing certificates of PCBS dated as
of the Closing date, in substantially the form of Schedule 6(a)(ii)
certifying (A) to the fulfillment of the conditions set forth in this
Section 6(a)(ii) and the due performance of such covenants and
agreements, (B) except as set forth in Schedule 3(s) that no material
change has occurred in PCBS's business, affairs, operations,
properties, assets or condition since the date of the PCBS Balance
Sheet, (C) that the representations and warranties set forth in this
Agreement are true and correct as of Closing, and (D) that neither
PCBS nor any of the PCBS Shareholders is a party to any litigation or
has knowledge of any claim, brought or threatened, seeking to recover
damages or to prevent PCBS from continuing to use PCBS assets or to
conduct business in the manner as the same were used or conducted
prior thereto, and which litigation or claim is likely to result in
any judgment, order, decree or settlement which will materially and
adversely affect the financial condition or business of PCBS;
(iii) PCBS and the PCBS Shareholders shall have executed and
delivered such other documents, instruments, certificates or
agreements as shall be reasonably necessary to consummate this
transaction, including, without limitation, the Stock Escrow
Agreement and the employment agreement described in Section 2.
(iv) PCBS's Board of Directors and the holders of all of the
outstanding shares of PCBS Common Stock shall have approved the
execution and delivery of this Agreement and no holder of outstanding
shares of PCBS Common Stock shall have asserted rights to receive
payment for his or her shares pursuant to the provisions of the
California Statute;
(v) Sento's Board of Directors shall have approved the
execution and delivery of this Agreement; and
(vi) All proceedings taken in connection with the transactions
contemplated herein and all instruments and documents required in
connection therewith or incident thereto shall be satisfactory in
form to Kimball, Parr, Waddoups, Brown & Gee, legal counsel for
Sento.
(b) PCBS CONDITIONS. The obligation of PCBS to consummate this
Agreement is subject to the satisfaction at the Closing, or waiver by PCBS
in writing, of each of the following conditions:
(i) The representations and warranties of Sento contained in
this Agreement or in any closing certificate or document delivered to
PCBS pursuant hereto shall be deemed to have been made again at the
Closing and shall then be true in all material respects; Sento shall
have performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by it
prior to or at the Closing;
(ii) Sento shall have executed and delivered such other
documents, instruments, certificates or agreements as shall be
reasonably necessary to consummate this transaction;
7. INDEMNIFICATION.
(a) Subject to the limitations set forth in Section 7(c) below, PCBS
and each PCBS Shareholder jointly and severally agrees to indemnify,
defend and hold Sento and its officers, directors, employees and agents
harmless from any and all claims, liabilities, lawsuits, demands, actions,
damages and expenses (including reasonable attorneys' fees) arising from
or out of any breach of the agreements, covenants, representations or
warranties of PCBS and the PCBS Shareholders contained in this Agreement.
As security for the obligations of PCBS and the PCBS Shareholders pursuant
to this Section 7(a), at the Closing Sento and the PCBS Shareholders shall
enter into the Stock Escrow Agreement, pursuant to which ten percent (10%)
of the total number of Shares shall be available for a period of twelve
(12) months for satisfaction of any claims of Sento under this Section
7(a). For purposes of this Section 7, the value of any Shares shall be
the closing sale price of the Sento Common Stock, as reported by the NASD,
on the Closing Date. Except as provided in Section 7(c) below, this
indemnity shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement or the
Stock Escrow Agreement.
(b) Sento agrees to indemnify, defend and hold PCBS and the PCBS
Shareholders harmless from any claims, liabilities, lawsuits, demands,
actions, damages and expenses (including reasonable attorneys' fees)
arising from or out of any breach of the agreements, covenants,
representations or warranties of Sento contained in this Agreement. This
indemnity shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement.
(c) Notwithstanding the provisions of Sections 7(a) and (b)above,
Sento, PCBS and the PCBS Shareholders agree that the following provisions
shall limit, the indemnification obligations set forth in Section 7(a)
above: (i) except with respect to claims, liabilities, lawsuits, demands,
actions, damages and expenses described in Section 7(c)(iii) below, the
maximum aggregate monetary amount for which each PCBS Shareholder shall be
liable to Sento in connection with the indemnification obligations set
forth in Section 7(a) shall be limited to the value of the Shares received
by such PCBS Shareholder in connection with the Acquisition; (b) except
with respect to claims, liabilities, lawsuits, demands, actions, damages
and expenses described in Section 7(c)(iii) below, the indemnification
obligations of PCBS, the PCBS Shareholders and Sento set forth in this
Section 7 shall terminate on the third anniversary of the Closing Date;
and (iii) the limitations described in Sections 7(c)(i) and (ii) above
shall not apply and, notwithstanding the occurrence of the third
anniversary of the Closing Date, each PCBS Shareholder shall be liable for
the full amount of any and all claims, liabilities, lawsuits, demands,
actions, damages and expenses resulting from (A) any fraudulent conduct of
such PCBS Shareholder and (B) any representation made by the PCBS
Shareholder which the PCBS Shareholder knows or has reason to know is
false or misleading at the time such representation is made or at the
Closing Date.
8. RESTRICTIVE COVENANTS.
(a) PROPRIETARY INFORMATION. Each PCBS Shareholder acknowledges
that his or her relationship with PCBS has created and may hereafter
create a relationship of confidence and trust with respect to information
of a confidential or secret nature that may be disclosed to him or her by
PCBS that relates to the business of PCBS or to the business of any
affiliate, customer, or supplier of PCBS (collectively, the "Proprietary
Information").
Such Proprietary Information includes, but is not limited to, any
information regarding inventions, marketing plans, product plans, business
strategies, financial information, forecasts, personnel information,
customer lists, software, hardware, processes, formulas, development or
experimental work, work in process, business, trade secrets, or any other
secret or confidential matter relating to the Business or any products,
projects, programs, sales, customer lists, price lists, or data of PCBS
which is not generally known to the public. At all times hereafter, each
PCBS Shareholder will keep all such Proprietary Information in confidence
and trust, and will not use or disclose any of such Proprietary
Information (except as may be required by law or to legal counsel or
accountants) without the prior written consent of Sento, except as may be
necessary to perform any duties he or she may now or hereafter have as an
employee of Sento. Each PCBS Shareholder further agrees that at the
Closing, and subsequently upon Sento's request or at the time of the
termination of the PCBS Shareholder's employment (if any) with PCBS or
Sento, as the case may be, the PCBS Shareholder will deliver to Sento, and
shall not retain for his or her own or others' use, any and all documents
and any other materials and all copies thereof relating to his or her
work, the Business and PCBS's products, projects, programs and prospects
of which the PCBS Shareholder had knowledge, or which contain any
Proprietary Information.
(b) PUBLICITY. PCBS and each PCBS Shareholder agree not to disclose
to any person or entity, (except as may be required by law or to legal
counsel or accountants) without the prior written consent of Sento, any of
the terms of this Agreement at any time prior to Closing or thereafter,
except as may be necessary for the performance of their obligations
hereunder or the operation of PCBS in the ordinary course of business.
Sento shall disclose and publicize this transaction in a press release the
content of which shall be reasonably satisfactory to PCBS or as required
by law.
(c) NON COMPETITION. Without the prior written consent of Sento,
from and after the Closing and for a period of two (2) years thereafter,
each PCBS Shareholder agrees not to engage in any Competitive Business (as
defined below) anywhere in the United States of America. As used herein,
the term "Competitive Business" means the Business or any other business
activity which would compete with the Business and shall include
participation as an owner, shareholder, partner or in any other capacity
or solicitation of any officer or other employee of Sento to terminate his
or her employment relationship with Sento or solicitation of any customer
of Sento to divert to any entity or person the business of such customer.
(d) SECURITY. As security for the obligations of PCBS and the PCBS
Shareholders pursuant to this Section 8, at the Closing Sento and the PCBS
Shareholders shall enter into the Stock Escrow Agreement, pursuant to
which the Shares shall be available for a period of twelve (12) months for
satisfaction of any claims of Sento under this Section 8. The value of
any Shares delivered in satisfaction of such claims shall be equal to the
closing sale price of the shares of Sento Common Stock, as reported by the
NASD, on the Closing Date.
9. OTHER COVENANTS OF PCBS AND THE PCBS SHAREHOLDERS.
(a) FURTHER ACTIONS. PCBS and each of the PCBS Shareholders warrant
and agree that all present shareholders, directors and officers of PCBS
will from time to time hereafter execute whatever minutes of meetings or
other instruments and take whatever actions Sento may reasonably deem
necessary or desirable to effect, or to carry out the intent and purposes
of the transactions contemplated hereby.
(b) EXPENSES. The PCBS Shareholders shall pay the amount for any
and all expenses relating to the preparation and auditing of the December
31, 1996 Balance Sheet that exceeds in aggregate the amount of Five
Thousand Dollars ($5,000). All legal and other transactional fees and
expenses incurred by PCBS and the PCBS Shareholders in connection with the
negotiation and execution of this Agreement and the consummation of the
various transactions contemplated hereby, including, without limitation,
fifty percent (50%) of all fees and expenses relating to the preparation
of the escrow agent under the Stock Escrow Agreement, shall be paid by the
PCBS Shareholders and, to the extent any such fees or expenses are paid by
Sento, the PCBS Shareholders shall reimburse Sento for the full amount of
such fees and expenses.
10. TERMINATION AND AMENDMENT.
(a) PRE-CLOSING. This Agreement may be terminated by Sento or PCBS
at any time prior to the time fixed for Closing in Section 2 hereof upon
written notice to the other parties:
(i) If any material representation, warranty, agreement or
condition of this Agreement to be complied with or performed by PCBS
or the PCBS Shareholders (in the case of Sento) or Sento (in the case
of PCBS) on or before the Closing shall not have then been complied
with or performed in some material respect and such material
noncompliance or nonperformance shall not have been waived by the
party giving notice of termination or shall not have been cured by
the defaulting party, or cure thereof commenced and diligently
prosecuted thereafter by such party within ten (10) days after
written notice of such material noncompliance or nonperformance is
given by the non-defaulting party;
(ii) If any governmental action is commenced to prevent the
consummation of the transactions contemplated hereby; or
(iii) By mutual consent of the parties.
(b) WAIVER. Any representations, warranties, agreements or
conditions of this Agreement may be waived at any time by the party
entitled to the benefit thereof by action taken and evidenced by a written
waiver executed by any such party.
11. MISCELLANEOUS.
(a) BROKERS. Each of Sento, PCBS and the PCBS Shareholders agrees
that there were no finders or brokers involved in bringing the parties
together or who were instrumental in the negotiation, execution or
consummation of this Agreement to whom either Sento, PCBS or any PCBS
Shareholder is obligated to pay any compensation.
(b) NO REPRESENTATION REGARDING TAX TREATMENT. No representation or
warranty is being made or legal opinion given by any party to any other
regarding the treatment of this transaction for federal, state or foreign
income taxation. Although this transaction has been structured in an
effort to qualify for treatment under Section 368(a)(1)(B) of the Code,
there is no assurance that any part of this transaction in fact meets the
requirements for such qualification. Each party has relied exclusively on
its own legal, accounting, and other tax advisers regarding the treatment
of this transaction for federal, state and foreign income tax purposes and
on no representation, warranty or assurance from any party hereto that
this transaction in fact meets the requirements for such qualification.
(c) GOVERNING LAW. This Agreement shall be governed by, enforced
and construed under and in accordance with the laws of the United States
of America and, with respect to matters of state law, with the laws of the
State of Utah, without reference to conflicts of law.
(d) NOTICES. Any notices or other communications to any party
required or permitted hereunder shall be sufficiently given if personally
delivered, if sent by facsimile or telecopy transmission or other
electronic communication confirmed by registered or certified mail,
postage prepaid, or if sent by prepaid overnight courier addressed as
follows:
If to Sento, to: Sento Technical Innovations, Inc.
Attn: Robert K. Bench
311 North State Street
P.O. Box 1970
Orem, Utah 84059
If to PCBS, to: PC Business Solutions, Inc.
Attn: Larry W. Pendleton
280 North Benson Ave, Ste 6,
Upland, CA 91786
If to the PCBS Shareholders, to: Attn: Larry and Karen Pendleton
11146 Pacific Street
Alta Loma, CA 91701
Attn: Wayne and Mindy Beckstead
1938 Belmar Way
Upland, CA 91784
or such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or
communication shall be deemed to have been given as of the date so
delivered or sent by facsimile or telecopy transmission or other
electronic communication, or one day after the date so sent by overnight
courier.
(e) ATTORNEYS' FEES. In the event that any party institutes any
action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the breaching party or parties shall
reimburse the non-breaching party or parties for all costs, including
reasonable attorneys' fees, incurred in connection therewith and in
enforcing or collecting any judgment rendered therein.
(f) THIRD-PARTY BENEFICIARIES. This contract is solely between
Sento, PCBS and the PCBS Shareholders and, except as specifically provided
in Section 7, no director, officer, stockholder, employee, agent,
independent contractor or any other person shall be deemed to be a third
party beneficiary of this Agreement.
(g) ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof. All
previous agreements between the parties, whether written or oral, have
been merged into this Agreement. This Agreement alone fully and
completely expresses the agreement of the parties relating to the subject
matter hereof. There are no other courses of dealing, understandings,
agreements, representations, or warranties, written or oral, except as set
forth herein.
(h) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
taken together shall be but a single instrument.
(i) AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred
herein, at law or in equity, and may be enforced concurrently herewith,
and no waiver by any party of the performance of any obligation by the
other shall be construed as a waiver of the same or any other default
then, theretofore or thereafter occurring or existing. At any time prior
to the Closing Date, this Agreement may be amended by a writing signed by
all parties hereto, with respect to any of the terms contained herein, and
any term or condition of this Agreement may be waived or the time for
performance thereof may be extended by a writing signed by the party or
parties for whose benefit the provision is intended.
(j) INTERPRETATION: HEADINGS, REFERENCES AND KNOWLEDGE. The
article, section and subsection headings of this Agreement are for
convenience only, shall not be deemed part of this Agreement, and in no
way define, limit, augment, extend or describe the scope, content or
intent of any provision of this Agreement. References in this Agreement
to articles, sections and subsections shall refer to the articles,
sections and subsections of this Agreement unless expressly indicated
otherwise. Whenever any representation in this Agreement is made to the
"knowledge" of any party, it shall be deemed to be a representation as to
the actual knowledge of the party and the knowledge reasonably expected to
be possessed by the party.
(k) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by Sento, PCBS and the PCBS Shareholders in this
Agreement, or in any certificate, schedule, exhibit, statement or document
or instrument furnished hereunder or in connection with the negotiation,
execution and performance of this Agreement shall survive the Closing.
(l) SEVERABILITY. If any term or provision of this Agreement,
including the schedules and exhibits hereto, or the application thereof to
any person, property or circumstances, shall to any extent be invalid or
unenforceable, the remainder of this Agreement, including the schedules
and exhibits or the application of such term or provision to persons,
property or circumstances other than those as to which it is invalid and
unenforceable, shall not be affected thereby, and each term and provision
of this Agreement and the exhibits shall be valid and enforced to the
fullest extent permitted by law.
(m) ASSIGNMENT. Sento, in its absolute discretion, may assign all
of its rights, duties, obligations and interest under this Agreement to
any existing or future affiliate of Sento, including, without limitation,
Spire Technologies, Inc., Dew Point Distributed Solutions Inc. and Spire
Systems Inc.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
"Sento"
SENTO TECHNICAL INNOVATIONS CORPORATION,
a Utah corporation
By /s/ Robert K. Bench
-------------------
Its President
"PCBS"
PC BUSINESS SOLUTIONS, INC.,
a California corporation
By /s/ Larry W. Pendleton
----------------------
Its President
"PCBS Shareholders"
/s/ Larry W. Pendleton
----------------------
Larry Pendleton, an individual
100 shares PCBS Common Stock in joint
ownership with Karen Pendleton
State of Residence: California
/s/ Karen Pendleton
-------------------
Karen Pendleton, an Individual
100 shares PCBS Common Stock in joint
ownership with Larry Pendleton
State of Residence: California
/s/ Wayne Beckstead
-------------------
Wayne Beckstead, an individual
100 shares PCBS Common Stock in joint
ownership with Mindy Beckstead
State of Residence: California
/s/ Mindy Beckstead
-------------------
Mindy Beckstead, an Individual
100 shares PCBS Common Stock in joint
ownership with Wayne Beckstead
State of Residence: California
PRESS RELEASE
For Immediate Release
SENTO TECHNICAL INNOVATIONS CORPORATION
ANNOUNCES ACQUISITION OF PC BUSINESS SOLUTIONS
OREM, Utah October 1, 1997 Sento Technical Innovations Corporation
(NASDAQ symbol: SNTO) announced today the acquisition of PC Business
Solutions, a privately held information technology Value-Added Reseller (VAR)
and services company, headquartered in Upland, California.
In a transaction valued at $1.2 million, Sento has acquired PC Business
Solutions ("PCBS") through an exchange of stock in which Sento will issue to
PCBS 250,000 shares of its common stock. The acquisition will be accounted
for as a pooling of interests. Sento currently anticipates that PCBS will
merge with Spire Technologies, Inc., a wholly owned subsidiary of Sento.
PCBS's operations will be conducted under the name of Spire Technologies,
Inc., and will function as Spire's new Western Regional Office.
PCBS's President Larry Pendleton and CFO Wayne Beckstead will be retained as
Spire Western Regional Vice-Presidents. In addition to the products and
services which PCBS currently provides, its product line will be expanded to
include Spire's line of management, networking, and Internet security
applications for the Windows NT, UNIX, and OpenVMS marketplaces. PCBS'
technical services and consulting offerings will also be expanded to include
Spire's recently expanded resources.
"We are very excited about this acquisition," said Robert K. Bench, President
of Sento, "Bringing Spire and PCBS together will allow us to maximize our
growth in the Western United States by establishing a stronger presence among
our customers there."
Larry Pendleton, President of PC Business Solutions said, "For the past
several years we have watched Sento's growth. By our now being integrated
into the Sento family, it will encourage synergy of product offerings and
services to benefit our mutual clients. Under Sento's leadership, we remain
confident in our ability and combined strengths so that we can provide high
quality computing and accounting technologies to our customers worldwide."
Privately held PCBS, based in Upland, California, was founded in 1986. PCBS
provides corporations with business solutions with expertise in accounting
solutions and services, network design and installation, custom database
design and development, and technical services.
Spire Technologies, Inc. has been serving the server-based computing
environment since 1986. Spire provides organizations with leading system and
performance management tools, Internet and intranet solutions, user training
and support solutions, network management tools, and other office automation
software. As a strategic development partner with Corel Corporation, Spire
provides worldwide distribution and support for Corel WordPerfect for UNIX
and OpenVMS, as well as develops Corel WordPerfect for the Digital UNIX and
OpenVMS environments. Spire Technologies, Inc. is a wholly owned subsidiary
of Sento. For more information, visit Spire's web site at www.spire.com.
Sento Technical Innovations Corporation provides a full range of information
technology hardware, software, consultation, and support services to the
server-based computing market. Services include integrated software
solutions, Internet and intranetworking, security systems, data storage and
recovery, systems configuration, installation, and outsourcing. Sento
specializes in the Windows NT, UNIX, and OpenVMS computing environments. For
more information, visit Sento's home page at www.sento.com.
###
PRESS CONTACT:
Kathy Allred
Investor Relations
[email protected]
(801) 226-6222
Sento Technical Innovations Corporation
311 North State Street
Orem, Utah 84057
U.S.A.
