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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 31, 2000
VERTEX INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
New Jersey 0-15066 22-2050350
- ---------------------------- ------------------------- ---------------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Identification No.)
of Incorporation)
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23 Carol Street
PO Box 996
Clifton, New Jersey 07014
- ---------------------------------------- ----------------------
(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: (973) 777-3500
N/A
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 31, 2000, Vertex Interactive, Inc., a New Jersey corporation
(the "Company") acquired all of the stock of Data Control Systems, Inc., a New
York corporation ("Data Control"), pursuant to a Stock Purchase Agreement, dated
as of March 1, 2000, by and among the Company, Data Control, Paul Buccola,
Seymour Klausner, Timothy Callahan and Alvin Levenberg (the "Stock Purchase
Agreement"; the Stock Purchase Agreement is attached as an Exhibit and is hereby
incorporated by reference). The purchase price for the acquisition is $14.25
million, payable in cash. Data Control is a leading provider of software-based,
wireless inventory, order fulfillment, tracking and warehouse management
systems.
The Company used a portion of the cash consideration received in the
private placement referred to in Item 5 below to acquire Data Control.
ITEM 5. OTHER EVENTS.
On March 30, 2000, the Company completed a private placement by issuing
2,950,000 restricted Company Shares to various investors for $23,600,000.
Pursuant to a Registration Agreement, dated as of March 30, 2000, among the
Company and the various investors named therein, the Company is obligated to
file a registration statement registering such shares for sale under applicable
federal securities laws no later than 180 days after March 30, 2000 (the
"Registration Agreement"; the Registration Agreement is attached as an Exhibit
and is hereby incorporated by reference).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The financial statements required by this Item will be filed by an
amendment no later than 60 days after the date hereof.
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(c) EXHIBITS
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2.1 Stock Purchase Agreement, dated as of March 1, 2000,
by and among Vertex Interactive, Inc., Data Control
Systems, Inc., Paul Buccola, Seymour Klausner,
Timothy Callahan and Alvin Levenberg.
4.1 Registration Agreement, dated as of March 30, 2000,
by and among Vertex Interactive, Inc. and the various
investors listed on the signature pages thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VERTEX INTERACTIVE, INC
/s/ Ronald C. Byer
------------------------------------
Name: Ronald C. Byer
Title: President
DATED: April 12, 2000
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EXHIBIT INDEX
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Exhibit No. Description Page
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2.1 Stock Purchase Agreement, dated as of March 1, 2000, by and
among the Company, Data Control, Paul Buccola, Seymour
Klausner, Timothy Callahan and Alvin Levenberg
4.1 Registration Agreement, dated as of March 30, 2000, by and
among Vertex Interactive, Inc. and the various investors
listed on the signature pages thereto.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
by and among
VERTEX INTERACTIVE, INC.,
DATA CONTROL SYSTEMS, INC.
and
THE STOCKHOLDERS OF DATA CONTROL SYSTEMS, INC.
LISTED ON ANNEX 1 HERETO
Dated as of March 1, 2000
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STOCK PURCHASE AGREEMENT dated as of March 1, 2000 (the "Agreement"),
among Vertex Interactive, Inc., a New Jersey corporation ("Vertex"), Data
Control Systems, Inc., a New York corporation ("DCS"), and the stockholders of
DCS listed on Annex 1 hereto (collectively, the "Stockholders").
WITNESSETH:
WHEREAS, DCS is engaged in the business of the provision of pick to
light warehouse management systems (the "Business");
WHEREAS, the Boards of Directors of Vertex and DCS have determined that
it is advisable and in the best interests of their respective stockholders for
Vertex to acquire DCS by purchasing all of the issued and outstanding shares of
capital stock of DCS from the Stockholders, subject to the conditions set forth
herein;
WHEREAS, the Stockholders also own DCS Capital Corp., a New Jersey
corporation ("DCSCC") whose only assets are cash and accounts receivable, which
will be merged with and into DCS prior to the Closing Date (as defined herein);
and
WHEREAS, the Stockholders desire that Vertex acquire DCS pursuant to
such stock acquisition transaction and that DCS thereby become a wholly-owned
subsidiary of Vertex;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Vertex, DCS and the Stockholders hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms.
As used herein, the terms below shall have the following meanings:
"Affiliate" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Ancillary Agreements" means the Indemnification Escrow Agreement, the
Employment Agreements, the Noncompetition Agreements and all other agreements
required hereunder to consummate the transactions contemplated hereby.
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"Assets" means the right, title and interest of DCS in and to each of
its properties, assets and rights of any kind, whether tangible or intangible,
real or personal, including without limitation the right, title and interest in
the following:
(a) all Contracts and Contract Rights;
(b) all Fixtures and Equipment;
(c) all Inventory;
(d) all Books and Records;
(e) all Proprietary Rights;
(f) all Permits;
(g) all return and other rights under or pursuant to all
warranties, representations and guarantees made by suppliers and other third
parties in connection with the Assets or services furnished to such Person;
(h) all cash, accounts receivable, deposits and prepaid
expenses; and
(i) all goodwill.
"Balance Sheet" means the consolidated balance sheet of DCS as of the
Balance Sheet Date.
"Balance Sheet Date" means November 30, 1999.
"Benefit Arrangement" means any employment, consulting, severance or
other similar employee related contract, arrangement or policy (written or oral)
and each plan, arrangement, program, agreement or commitment (written or oral)
providing for welfare insurance coverage (including, without limitation, any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including, without limitation, any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the
Internal Revenue Code providing for the same or other benefits) or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights,
stock purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (a) is not a Welfare Plan, Pension
Plan or Multiemployer Plan, (b) is entered into, maintained, contributed to or
required to be contributed to, as the case may be, by DCS or any ERISA Affiliate
or under which DCS or any ERISA Affiliate has incurred any liability, and (c)
covers any employee or former employee of DCS or any ERISA Affiliate (with
respect to their relationship with such any entity).
"Books and Records" means (a) all product, business and marketing
plans, sales and promotional literature and artwork relating to the Assets or
the Business, (b) all books, records, lists, ledgers, financial data, files,
reports, product and design manuals, plans, drawings, technical
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manuals and operating records of every kind relating to the Assets or the
Business (including records and lists of customers, distributors, suppliers and
personnel) and (c) all telephone and fax numbers used in the Business, in each
case whether maintained as hard copy or stored in computer memory and whether
owned by DCS or its Affiliates.
"Business" means the business and operations of DCS, consisting of the
provision of pick to light warehouse management systems.
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" means the date of the Closing.
"Consents" means any and all Permits and any and all consents,
approvals or waivers from third parties that are required for the consummation
of the transactions contemplated by this Agreement.
"Contract Rights" means all rights and obligations under the Contracts.
"Contracts" means all agreements, contracts, leases (whether for real
or personal property), purchase orders, undertakings, covenants not to compete,
employment agreements, confidentiality agreements, licenses, instruments,
obligations and commitments to which DCS is a party or by which DCS or any of
the Assets are bound or affected, whether written or oral.
"Court Order" means any judgment, decision, consent decree, injunction,
ruling or order of any foreign, federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.
"DCS Material Adverse Effect" or "DCS Material Adverse Change" means a
Material Adverse Effect with respect to DCS, the Business or the Assets.
"Default" means (a) a breach of or default under any Contract, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of or default under any Contract, or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both would give rise to a right of termination, renegotiation or
acceleration under any Contract.
"Employee Plans" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"Employees" means all officers and directors of DCS and all other
Persons employed by DCS on a full or part-time basis as of the relevant date.
"Employment Agreements" shall mean the Employment Agreements between
Vertex and Messrs. Buccola, Klausner and Callahan in substantially the form
attached hereto as Exhibit A.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction,
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conditional sales agreement, encumbrance or other right of third parties,
whether voluntarily incurred or arising by operation of law, and includes any
agreement to give any of the foregoing in the future, and any contingent sale or
other title retention agreement or lease in the nature thereof.
"Environment" shall mean ambient air, surface water, groundwater,
surface or subsurface soil or other geologic media, sediment and all plants and
wildlife present therein or thereon.
"Environmental Claims" means any notices, notifications, directives,
citations, summonses, orders, complaints, assessments, liens, claims, demands,
suits, or causes of action (collectively "Claims") in whole or in part relating
to, arising under or issued or asserted pursuant to Environmental Laws or
Environmental Conditions. By way of example only (and not by way of limitation),
Environmental Claims shall include Claims for or relating to: (i) any damage,
including, without limitation, personal injury, property damage (including,
without limitation, any depreciation or diminution of property values), lost use
of property or consequential damages, arising directly or indirectly out of
Environmental Conditions or Environmental Laws, (ii) violations of or
obligations under any contract related to Environmental Laws or Environmental
Conditions between DCS and any other person, (iii) actual or threatened damages
to natural resources, (iv) nuisance or its statutory equivalent, (v) the
recovery of sampling, monitoring, remediation or response costs, or the
performance of investigations, sampling, monitoring, remediation or response or
remedial actions under any Environmental Laws, (vi) requirements to implement
"corrective action" pursuant to any Environmental Laws, including without
limitation any order or permit issued pursuant to the Resource Conservation and
Recovery Act, as amended ("RCRA"), or similar provisions of applicable state
law, (vii) requirements to effect compliance with Environmental Laws, (viii)
restitution, contribution, or indemnity, (ix) fines, penalties or liens of any
kind against property related to or arising under or pursuant to Environmental
Laws or Environmental Conditions, (x) injunctive relief or other orders or
notices of violation from any Governmental Authority, and (xi) exposure to or
injury from Environmental Conditions.
"Environmental Conditions" means the contamination or pollution of the
Environment, including without limitation such contamination or pollution
relating to or arising out of the use, handling, storage, treatment, recycling,
generation or transportation of Hazardous Substances, or the Release or
threatened Release of Hazardous Substances to the Environment. With respect to
Environmental Claims by third parties including any Governmental Authority,
Environmental Conditions shall also include the exposure of persons to Hazardous
Substances at the work place or the exposure of persons or property to Hazardous
Substances migrating from or otherwise emanating from or located on property
owned or occupied by DCS .
"Environmental Laws" means all applicable federal, state, regional,
county, district and local laws, statutes, ordinances, decisional law, rules,
regulations, codes, orders, decrees, consent orders, judgments, notices,
permits, or common law relating to pollution, damage to or protection of the
Environment, the Release or threatened Release of Hazardous Substances into the
Environment, Environmental Conditions, or the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport or other handling of Hazardous Substances. Environmental
Laws shall include the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Toxic
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Substances Control Act, as amended, the Hazardous Materials Transportation Act,
as amended, RCRA, the Clean Water Act, as amended, the Safe Drinking Water Act,
as amended, the Clean Air Act, as amended, the Occupational Safety and Health
Act, as amended, the New Jersey Industrial Site Recovery Act (N.J.S.A. 13:1K-6
et seq.) ("ISRA"), the New Jersey Spill Compensation and Control Act (N.J.S.A.
58:10-23.11, et seq.) (the "Spill Act"), the New Jersey Water Pollution Control
Act (N.J.S.A. 58:10A-1 et seq.), the New Jersey Sanitary Landfill Facility
Closure and Contingency Fund Act (N.J.S.A. 13:1E-100 et seq.), the New Jersey
Underground Storage of Hazardous Substances Act (N.J.S.A. 58:10A-21 et seq.),
the New Jersey Toxic Catastrophe Prevention Act (N.J.S.A. 13:1K-19 et seq.), and
the New Jersey Environmental Rights Act, N.J.S.A. 2A:35A-1 et seq. ("ERA").
"Environmental Reports" means any and all written reports, workplans,
proposals, recommendations, audits, field and laboratory data, analyses,
summaries or explanations, in the possession or control of DCS, relating to (a)
any Environmental Conditions in, on or about the Facilities, or (b) DCS's
compliance with Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is a member of a "controlled
group of corporations" with, under "common control" with, or a member of an
"affiliated service group" with, or otherwise required to be aggregated with,
DCS as set forth in Section 414(b), (c), (m) or (o) of the Code.
"Escrow Agent" means the escrow agent under the Escrow Agreement, or
any successor agent designated in accordance with the terms of the Escrow
Agreement.
"Facilities" means all plants, offices, manufacturing facilities,
stores, warehouses, administration buildings and all real property and related
facilities owned, controlled or leased by DCS in connection with the operation
of the Business, including without limitation the Facilities identified or
listed on Schedule 3.8(b).
"Financial Statements" means (a) the compiled, combined balance sheets
of DCS and DCSCC as of November 30, 1998 and 1999 and the related statements of
income, changes in stockholders' equity and cash flows, of DCS and DCSCC for the
years then ended, together with the report of Jay Fox, CPA thereon, and (b) the
combined balance sheets of DCS and DCSCC as of February 29, 2000 and the related
statements of income, changes in stockholders' equity and cash flows, of DCS and
DCSCC for the three months then ended.
"Fixtures and Equipment" means all of the furniture, fixtures,
furnishings, machinery, computer hardware, and other tangible personal property
owned by DCS, wherever located and including any such Fixtures and Equipment in
the possession of any of DCS's respective suppliers or other vendors.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the
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accounting profession), or in such other statements by such entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the facts and circumstances on the date of determination.
"Governmental Authority" means any nation or government, any state,
county, city, locality, municipality or political subdivision thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, any
government authority, agency, department, board or commission.
"Hazardous Substances" means any materials, substances, pollutants,
contaminants, chemicals and wastes (whether solids, liquids, or gases) that are
carcinogenic, flammable, explosive, radioactive, infectious, ignitable,
corrosive, reactive, toxic or hazardous or that are listed, defined or included
under, or subject to regulation, control or remediation under, Environmental
Laws.
"Indemnification Escrow Agreement" shall have the meaning provided in
Section 2.7 and be in substantially the form attached hereto as Exhibit B.
"Inventory" means all merchandise owned and intended for resale and all
raw materials, work in process, finished goods, wrapping, supply and packaging
items and similar items, whether or not located on the premises, on consignment
to a third party, or in transit or storage.
"knowledge" or "to the knowledge" of a party (or similar phrases) means
matters (i) which are actually known by such party or (ii) which, based on facts
of which such party is aware, would be known to a reasonable Person in similar
circumstances; provided, however, that representations and warranties contained
herein that are qualified as to the knowledge of DCS or its stockholders shall
be deemed to refer to and include the knowledge only of the Stockholders.
"Liability" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"Material Adverse Effect" or "Material Adverse Change" or a similar
phrase means, with respect to any Person, any material adverse effect on or
change with respect to (i) the business, operations, assets (taken as a whole),
liabilities (taken as a whole), condition (financial or otherwise) or results of
operations, of such Person and its Subsidiaries, taken as a whole, or (ii) the
right or ability of such Person to consummate any of the transactions
contemplated hereby.
"Multiemployer Plan" means any "multiemployer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) DCS or any ERISA Affiliate
contributes to or is required to contribute to, or under which DCS or any ERISA
Affiliate may reasonably be expected to incur any liability and (b) covers any
employee or former employee of DCS or any ERISA Affiliate (with respect to their
relationship with any such entity).
"NJDEP" means the New Jersey Department of Environmental Protection,
its divisions, subdivisions and bureaus.
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"Noncompetition Agreements" shall mean the Noncompetition Agreement
between Vertex and each of the Stockholders in substantially the form attached
hereto as Exhibit C.
"Permitted Encumbrances" means (a) liens for Taxes or governmental
charges or claims (i) not yet due and payable, or (ii) being contested in good
faith, if a reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made therefor, (b) statutory liens of landlords, liens
of carriers, warehouse persons, mechanics and material persons and other liens
imposed by law incurred in the ordinary course of business for sums (i) not yet
due and payable, or (ii) being contested in good faith, if a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor, (c) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, in each case in the ordinary course of
business, consistent with past practice, and (d) easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case, which do
not interfere with the ordinary conduct of business of DCS and do not materially
detract from the value of the property upon which such encumbrance exists.
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any Governmental
Authority that are required under law, including, without limitation,
Environmental Laws, for the conduct or operation of the Business or ownership of
the Assets.
"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"Proprietary Rights" means all (a) U.S. and foreign patents, patent
applications, patent disclosures and improvements thereto, including petty
patents and utility models and applications therefor, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate names
and the goodwill associated therewith and registrations and applications for
registration thereof, (c) U.S. and foreign copyrights and registrations and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration thereof, if any, (e) Trade
Secrets, (f) copies and tangible embodiments thereof (in whatever form or
medium) and (g) licenses granting any rights with respect to any of the
foregoing.
"Regulations" means any laws, statutes, ordinances, regulations, rules,
notice requirements, court decisions, agency guidelines, principles of law and
orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation energy, motor
vehicle safety, public utility, zoning, building and health codes, Environmental
Laws, occupational safety and health and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.
"Related Party" means (i) any of DCS's officers, directors and
Stockholders, and any spouse, children or siblings of any such officers,
directors or Stockholders, and (ii) any Affiliate
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of any of the foregoing Persons.
"Release" means intentional or unintentional release, burial, deposit,
discharge, spill, leaking, pumping, pouring, emitting, emptying, injection,
disposal or dumping into the Environment.
"Representative" of any Person means any officer, director, principal,
attorney, agent, employee or other representative of such Person.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which at least 50% of the securities or interests having, by their terms,
ordinary voting power to elect members to the board of directors, or other
persons performing similar functions with respect to such corporation, is held,
directly or indirectly, by such Person, (b) any partnership or limited liability
company of which (i) such Person is a general partner or managing member or (ii)
such person possesses a 50% or greater interest in the total capital or total
income of such partnership or limited liability company.
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, any documents with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
"Taxes" mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, service, license, net worth, payroll, franchise and transfer
and recording, imposed by the Internal Revenue Service or any taxing authority
(whether domestic or foreign, including any federal, state, county, local or
foreign government or any subdivision or taxing agency thereof (including a U.S.
possession)), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments.
"Trade Secrets" means all trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
research and development information, software, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information).
"Transmittal Letter" has the meaning set forth in Section 2.9 hereof.
"Vertex Material Adverse Effect" means a Material Adverse Effect with
respect to Vertex.
"Welfare Plan" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which (a) DCS or any ERISA Affiliate maintains,
administers, contributes to or is
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required to contribute to, or under which DCS or any ERISA Affiliate has
incurred any liability and (b) covers any employee or former employee of DCS or
any ERISA Affiliate (with respect to their relationship with any such entity).
1.2 Certain Additional Defined Terms.
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Term: Defined in Section:
Actions.......................................................3.16
Agreement.....................................................Recitals
Certificates..................................................2.9(a)
Claim.........................................................9.2(b)
Claim Notice..................................................9.2(b)
Code..........................................................Recitals
Damages.......................................................9.2(a)
DCS...........................................................Recitals
DCS Closing Certificate.......................................7.1
DCS Indemnifying Parties......................................9.2(a)(iv)
DCS Stock.....................................................Recitals
Indemnification Escrow Amount.................................2.3
Indemnified Party.............................................9.2(b)
Indemnifying Party............................................9.2(b)
Leased Property...............................................3.8(c)
Proposed Acquisition Transaction..............................5.4
Salary Table..................................................3.18(d)
Stockholders..................................................Recitals
Stockholder Indemnified Parties...............................9.2(a)
Stockholder's Closing Certificate.............................7.1
Surviving Corporation.........................................2.1(a)
Third-Party Claim.............................................9.2(b)
Total Consideration...........................................2.6(d)
Vertex........................................................Recitals
Vertex Closing Certificate....................................6.1
Vertex Indemnified Parties....................................9.2(a)
</TABLE>
1.3 Interpretation Provisions.
(a) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement, and article, section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The term "or" is disjunctive but
not necessarily exclusive. The terms "include" and "including" are not limiting
and mean "including without limitation."
(b) References to agreements and other documents shall be
deemed to include all subsequent amendments and other modifications thereto.
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(c) References to statutes shall include all regulations
promulgated thereunder and references to statutes or regulations shall be
construed as including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation.
(d) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(e) The language used in this Agreement shall be deemed to be
the language chosen by the parties to express their mutual intent, and no rule
of strict construction shall be applied against either party.
(f) The annexes, schedules and exhibits to this Agreement are
a material part hereof and shall be treated as if fully incorporated into the
body of the Agreement.
ARTICLE 2
PURCHASE AND SALE OF STOCK
2.1 Purchase and Sale; Closing.
(a) Purchase and Sale; Purchase Price. On the Closing Date and
upon the terms and subject to all of the conditions set forth herein, each
Stockholder agrees to sell to Vertex, and Vertex agrees to purchase, all shares
of issued and outstanding capital stock of DCS owned by such Stockholder, as
reflected on Schedule 3.2(a) hereto (all such shares sold to Vertex by all
Stockholders pursuant hereto collectively, the "Shares"), for the purchase price
of Seventy One Thousand Two Hundred Fifty Dollars $71,250 per share, or an
aggregate purchase price for all Shares of Fourteen Million Dollars
($14,250,000.00) (the "Aggregate Purchase Price").
(b) Closing. Unless this Agreement shall have been terminated
pursuant to Section 10.1, and subject to the satisfaction or waiver, if
permissible, of the conditions set forth in Articles 6 and 7, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place (i)
at the offices of McCarter & English, LLP as promptly as practicable (and in any
event within five business days) after satisfaction or waiver, if permissible,
of the conditions set forth in Articles 6 and 7 or (ii) at such other time, date
or place as Vertex and DCS may mutually agree.
(c) Deliveries at Closing. At the Closing, (i) subject to the
escrow provisions set forth in Section 2.3 hereof, Vertex shall deliver to each
Stockholder a wire transfer in the amount of $3,206,250 (ii) each Stockholder
shall deliver to Vertex the stock certificate or certificates evidencing the
Shares sold by such Stockholder to Vertex pursuant hereto, duly endorsed for
transfer to Vertex or accompanied by blank stock powers, and (iii) DCS and each
Stockholder (each a "DCS Party," and collectively, the "DCS Parties") shall
deliver to Vertex, and Vertex shall deliver to the appropriate DCS Party or DCS
Parties, all other items referenced in Section 8.1 hereof, and such other
certificates, instruments, agreements and other documents as may be reasonably
requested by Vertex or the DCS Parties, as the case may be.
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2.2 DCS Working Capital; Working Capital Adjustment. (a) As of March 1,
2000, the working capital of DCS, defined as the amount by which (x) the sum of
DCS' cash, cash equivalents and net accounts receivable as of such date, exceed
(y) DCS' total current liabilities as of such date ("Working Capital"), as
determined in accordance with GAAP, shall be not less than $1,716,772 (the
"Target Working Capital"). Not later than two business days prior to the Closing
Date, DCS shall deliver to Vertex a preliminary statement of DCS' estimated
Working Capital as of March 1, 2000 as determined in accordance with GAAP,
demonstrating to the reasonable satisfaction of Vertex that the foregoing
condition has been met. On the Closing Date, DCS shall deliver to Vertex an
officer's certificate, signed by the President and Chief Financial Officer of
DCS, certifying that (A) on and as of the Closing Date, the Working Capital of
DCS is adequate for DCS' reasonably foreseeable needs, and (B) since March 1,
2000, there has been no dividend or other distribution, or other payment outside
of the ordinary course of business, paid or declared to be paid to any
Stockholder, except as permitted by Section 2.4.
(b) Within 45 days after the Closing Date, the Stockholders
shall cause DCS's regularly retained accounting firm to prepare and deliver to
Vertex and the Stockholders a final statement of DCS' Working Capital as of
March 1, 2000, as determined in accordance with GAAP (the "Final Working Capital
Statement"). Vertex shall have 15 days following receipt of the Final Working
Capital Statement to notify the Stockholders in writing of any dispute with
respect thereto. In the event of such a notification, Vertex and the
Stockholders shall negotiate in good faith to resolve the dispute. If they are
unable to resolve such dispute within 15 days after the commencement of such
negotiations, a firm of independent certified public accountants of national
reputation reasonably acceptable to Vertex, on the one hand, and a majority of
the Stockholders, on the other hand, shall be retained to resolve such dispute.
The determination of such accounting firm shall be final and binding upon all
parties. Vertex, on the one hand, and the Stockholders, on the other hand, shall
share the costs and expenses of retaining such accounting firm equally as
between them.
(c) Upon completion of the Final Working Capital Statement in
the manner described in paragraph (b) of this Section 2.2, the Aggregate
Purchase Price shall be subject to adjustment in the following manner: if the
Target Working Capital of DCS shall exceed the Working Capital of DCS as
reflected on the Final Working Capital Statement, the Aggregate Purchase Price
shall be decreased, dollar for dollar, by the amount of such excess, and each
Stockholder shall promptly pay to Vertex his pro rata share of the amount of
such excess. If the Working Capital as reflected on the Final Working Capital
Statement shall exceed the Target Working Capital, the Aggregate Purchase Price
shall be increased, dollar for dollar, by the amount of the difference, and such
increase in the Aggregate Purchase Price shall promptly be paid to the
Stockholders. All obligations of the Stockholders under this clause may be
satisfied out of the Indemnification Escrow Amount (as defined below).
2.3 Indemnification Escrow. At the Closing, Vertex shall deliver to the
Escrow Agent the aggregate sum of One Million Four Hundred Twenty Five Thousand
Dollars ($1,425,000.00), constituting 10% of the Aggregate Purchase Price (the
"Indemnification Escrow Amount"), which sum shall be deducted, on a pro rata
basis, from the purchase price payable to each Stockholder by Vertex pursuant to
Section 2.1 hereof. The Indemnification Escrow Amount, together with any
earnings on or accretions thereto, shall be held by the Escrow Agent pursuant to
the terms of the Indemnification Escrow Agreement.
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2.4 Stockholder Expenses. The Stockholders shall be solely obligated to
pay all fees and expenses that may be incurred by DCS and the Stockholders in
connection with the preparation, negotiation and execution of this Agreement and
the consummation of the transactions contemplated hereby, including, but not
limited to, the fees and disbursements of outside counsel and auditors to DCS
and any other agents, consultants and experts specially employed by DCS and/or
the Stockholders in connection with the transactions contemplated hereby, but
such fees and expenses may be paid by the Company and treated as an account
payable for purposes of Section 2.2(a).
2.5 Taking of Necessary Action; Further Action. Each of Vertex, DCS and
each Stockholder will take all such reasonable lawful action as may be necessary
or appropriate in order to effect the transactions contemplated by this
Agreement as promptly as practicable. If, at any time after the Closing Date,
any such further action is necessary or desirable to carry out the purposes of
this Agreement, to vest Vertex with full right, title and possession to all the
property, rights, privileges, power and franchises of DCS and to vest the
Stockholders with full right, title and (subject to the terms hereof) possession
of Aggregate Purchase Price provided in Section 2.1 hereof, the officers and
directors of Vertex and DCS immediately prior to the Closing Date are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DCS AND THE STOCKHOLDERS
As an inducement to Vertex to enter into this Agreement, DCS and each
Stockholder hereby makes, jointly and severally, as of the date hereof and as of
the Closing Date, the following representations and warranties to Vertex:
3.1 Organization of DCS. DCS is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York. DCS has
full corporate power and authority to conduct the Business as it is presently
being conducted and to own or lease, as applicable, the Assets owned or leased
by it. DCS is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which such qualification is necessary
under applicable law as a result of the conduct of the Business or the ownership
of its properties and where the failure to be so qualified would have a DCS
Material Adverse Effect. Each jurisdiction in which DCS is qualified to do
business as a foreign corporation is set forth in Schedule 3.1.
3.2 Capitalization of DCS.
(a) As of the date of this Agreement, there are 200 shares of DCS
Stock authorized under its Certificate of Incorporation, all of which are issued
and outstanding. DCS has no other capital stock authorized, issued or
outstanding. Schedule 3.2(a) sets forth the name of each holder of shares of DCS
Stock, as well as the number of shares of DCS Stock held by each such holder.
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(b) As of the date of this Agreement, DCS has not issued any
options or created an option plan for its employees.
(c) There are no outstanding options, warrants, convertible
securities or rights of any kind to purchase or otherwise acquire any shares of
capital stock or other securities of DCS. No shares of capital stock of DCS are
reserved for issuance.
(d) All outstanding shares of DCS Stock are validly issued, fully
paid and non-assessable. All outstanding shares of DCS Stock have been issued in
compliance with all federal and state corporate and securities laws.
(e) Other than the transactions contemplated by this Agreement,
there is no outstanding vote, plan, pending proposal or right of any Person to
cause any redemption of DCS Stock or the merger or consolidation of DCS with or
into any other entity.
3.3 Stockholders' Agreements, Etc. Except as set forth on Schedule 3.3,
there are no stockholder agreements, voting trusts, proxies or other agreements
or understandings with respect to or concerning the purchase, sale or voting of
the capital stock of DCS.
3.4 Authorization. DCS has all necessary corporate or other power and
authority to enter into this Agreement and the Ancillary Agreements to which DCS
is a party and has taken all corporate, shareholder or other action necessary to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. This Agreement has been duly executed and
delivered by DCS, and this Agreement is, and upon execution and delivery each of
the Ancillary Agreements to which DCS is a party will be, a valid and binding
obligation of DCS, enforceable against DCS in accordance with its terms, except
that enforceability may be limited by the effect of (a) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws relating
to or affecting the rights of creditors or (b) general principals of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
3.5 Officers and Directors. Schedule 3.5 contains a true, correct and
complete list of all the officers and directors of DCS.
3.6 Bank Accounts. Schedule 3.6 contains a list of all of DCS's bank
accounts, safe deposit boxes, and persons authorized to draw thereon or have
access thereto.
3.7 Subsidiaries, Etc.
DCS has no Subsidiaries nor any equity investment in any Person.
3.8 Real Property.
(a) General. DCS leases all real property necessary for the conduct
of its business as presently conducted.
(b) Owned Real Property. DCS does not own any real property.
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(c) Leased Real Property. Schedule 3.8(c) sets forth all Leases
pursuant to which Facilities are leased by DCS (as lessee), true and correct
copies of which have been delivered to Vertex. Such Leases constitute all
Leases, subleases or other occupancy agreements pursuant to which DCS occupies
or uses Facilities (the "Leased Property"). With respect to each such parcel of
Leased Property none of DCS or to the knowledge of DCS, any third party has
entered into any sublease, license, option, right, concession or other agreement
or arrangement, written or oral, granting to any person the right to use or
occupy such Leased Property or any portion thereof or interest therein and DCS
has not received notice of any pending or threatened special assessment relating
to such Leased Property. Each leased Facility is supplied with utilities
necessary for the operation of such Facility.
With respect to each Lease listed on Schedule 3.8(c), except as set
forth on Schedule 3.8(c), (i) there has been no material Default under any such
Lease by DCS thereto or, to the knowledge of DCS, by any other party, (ii) the
execution, delivery and performance of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby will not cause a material Default under any such Lease, although it may
give rise to a requirement that the Landlord's prior consent be obtained, (iii)
such Lease is a valid and binding obligation of DCS, is in full force and effect
with respect to DCS and is enforceable against DCS in accordance with its terms,
except as the enforceability thereof may be limited by (1) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
similar laws in effect which affect the enforcement of creditors' rights
generally or (2) general principles of equity, whether considered in a
proceeding at law or in equity, (iv) no action has been taken by DCS no event
has occurred which, with notice or lapse of time or both, would permit
termination, modification or acceleration by a party thereto other than DCS or
any party thereto without the consent of DCS, under any such Lease that is
material to DCS, (v) no party has repudiated in writing any term thereof or
threatened in writing to terminate, cancel or not renew any such Lease that is
material to DCS thereto and (vi) DCS thereto has not assigned, transferred,
conveyed, mortgaged or encumbered any interest therein or in any leased property
subject thereto (or any portion thereof).
3.9 Personal Property.
(a) General. DCS owns or leases all personal property Assets
necessary for the conduct of its business as presently conducted, and the
personal property Assets (taken as a whole) are in such operating condition and
repair (subject to normal wear and tear) as is necessary for the conduct of its
business as presently conducted.
(b) Owned Personal Property. Schedule 3.9(b) lists all personal
property owned by DCS. DCS has good and marketable title to all such personal
property owned by it, free and clear of any and all Encumbrances other than
Permitted Encumbrances. With respect to each such item of personal property (i)
there are no Leases, subleases, licenses, options, rights, concessions or other
agreements, written or oral, granting to any party or parties the right of use
of any portion of such item of personal property (except licenses of Proprietary
Rights in the ordinary course of business), (ii) there are no outstanding
options or rights of first refusal in favor of any other party to purchase any
such item of personal property or any portion thereof or
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interest therein and (iii) there are no parties (other than DCS) who are in
possession of or who are using any such item of personal property.
(c) Leased Personal Property. Subject to the agreements of the
Stockholders set forth in Section 5.7 hereof, Schedule 3.9(c) lists all personal
property which is leased by DCS. DCS is not a party to any Lease for personal
property involving annual payments in excess of $25,000.
With respect to each Lease listed on Schedule 3.9(c), (i) there has
been no material Default under any such Lease by DCS or, to the knowledge of DCS
by any other party, (ii) the execution, delivery and performance of this
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby will not cause a material Default under any such
Lease, (iii) such Lease is a valid and binding obligation of DCS is in full
force and effect with respect to DCS and is enforceable against DCS in
accordance with its terms, except as the enforceability thereof may be limited
by (1) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect which affect the enforcement of creditors'
rights generally or (2) general principles of equity, whether considered in a
proceeding at law or in equity, (iv) no action has been taken by DCS and no
event has occurred which, with notice or lapse of time or both, would permit
termination, modification or acceleration by a party thereto other than DCS
without the consent of DCS under any such Lease that is material to DCS (v) no
party has repudiated in writing any term thereof or threatened in writing to
terminate, cancel or not renew any such Lease that is material to DCS and (vi)
subject to the agreements of the Stockholders set forth in Section 5.7 hereof,
DCS has not assigned, transferred, conveyed, mortgaged or encumbered any
interest therein or in any leased property subject thereto (or any portion
thereof).
3.10 Environmental Matters.
(a) DCS is in compliance with all Environmental Laws
applicable to, and all Permits required under Environmental Laws to conduct, its
business as it is currently being conducted or proposed to be conducted, except
for such non-compliance that would not have a Material Adverse Effect. All such
Permits are listed on Schedule 3.10. DCS has not received any notice to the
effect that, or otherwise has knowledge that, DCS is not in compliance in any
material respect with, or is in violation of, any such Environmental Laws or
Permits. DCS has not taken any action during the previous five years that would,
to the knowledge of DCS or any Stockholder, constitute a violation of any
Environmental Laws.
(b) DCS has not received written notification of any
Environmental Claims against DCS or any of the Facilities, nor has DCS received
any written notification of any allegation of any actual, or potential
responsibility or liability for, or any inquiry or investigation regarding, any
Release or threatened Release at any location of any Hazardous Substance
generated, used, handled, stored, disposed of or transported by or on behalf of
DCS.
(c) To the knowledge of DCS, there have been no Releases of
Hazardous Substances by DCS on, at, under or into any of the Facilities other
than such Releases as are authorized by Environmental Laws including, without
limitation, the Permits. In addition, to the knowledge of DCS, there have been
no Releases by DCS or any of its corporate predecessors on,
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at, under or into any real property in the vicinity of any of the Facilities
other than such Releases as are authorized by Environmental Laws;
(d) DCS is not a party, whether as a direct signatory or as
successor, assignee or third-party beneficiary, or otherwise bound, to any Lease
or other Contract (excluding insurance policies disclosed on the Schedules)
under which DCS is obligated by or entitled to the benefits of, directly or
indirectly, any representation, warranty, indemnification, covenant, restriction
or other undertaking concerning Environmental Conditions or Environmental Laws.
(e) DCS has not released any other person from any claim under
any Environmental Law or waived any rights concerning any Environmental
Condition.
(f) There are no consent decrees, consent orders, judgments,
judicial or administrative orders or agreements (other than Permits) with or
liens by, any Governmental Authority or quasi-governmental entity relating to
any Environmental Law which regulate, obligate or bind DCS.
(g) To the knowledge of DCS, there are no Environmental
Reports.
(h) The Standard Industrial Classification number of the
business operations that have been conducted by DCS at the Facilities, as
determined pursuant to the guidelines set forth in the Standard Industrial
Classification Manual issued by the Office of Management and Budget in the
Executive Office of the President of the United States (1987 ed.), is 7373.
3.11 Contracts.
(a) Disclosure. Schedule 3.11 sets forth a complete and
accurate list of all of the Contracts of the following categories:
(i) Contracts not made in the ordinary course of business;
(ii) Manufacturing or joint development agreements;
(iii) License agreements or royalty agreements, whether
DCS is the licensor or licensee thereunder;
(iv) Confidentiality and non-disclosure agreements
(whether DCS is the beneficiary or the obligated party thereunder);
(v) Customer orders or sales contracts under which the
customer is to make a payment after the date hereof of $10,000 or more;
(vi) Contracts or commitments involving future
expenditures or Liabilities, actual or potential, in excess of $10,000 after the
date hereof or otherwise material to the Business or the Assets;
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(vii) Contracts or commitments relating to commission
arrangements with others;
(viii) Employment contracts, consulting contracts and
severance agreements, including contracts (A) to employ or terminate executive
officers or other personnel and other contracts with present or former officers
or directors of DCS or (B) that will result in the payment by, or the creation
of any liability of DCS, the Stockholders or Vertex to pay any severance,
termination, "golden parachute," or other similar payments to any present or
former personnel following termination of employment or otherwise as a result of
the consummation of the transactions contemplated by this Agreement;
(ix) Indemnification agreements;
(x) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money, whether DCS the borrower, lender or
guarantor thereunder (excluding credit provided by DCS in the ordinary course of
business to purchasers of its products and obligations to pay vendors in the
ordinary course of business and consistent with past practice);
(xi) Contracts containing covenants limiting the freedom
of DCS or any officer, director, Employee or Affiliate of DCS to engage in any
line of business or compete with any Person that relates directly or indirectly
to the Business;
(xii) Any Contract with the federal, state or local
government or any agency or department thereof;
(xiii) Any Contract with a Related Party;
(xiv) Leases of real or personal property involving annual
payments of more than $10,000; and
(xv) Any other Contract under which the consequences of a
Default or termination would reasonably be expected to have a Material Adverse
Effect on DCS, individually or in the aggregate.
(b) Availability; Summary. Complete and accurate copies of all of
the Contracts listed on Schedule 3.11, including all amendments and supplements
thereto, have been made available to Vertex. DCS has included as part of
Schedule 3.11 a brief summary of the material terms of each oral Contract.
(c) Absence of Defaults. All of the Contracts are valid, binding
and enforceable in accordance with their terms with no existing (or to the
knowledge of DCS or any of the Stockholders, threatened) Default or dispute. DCS
has fulfilled, or taken all action necessary to enable it to fulfill when due,
all of its material obligations under each of such Contracts. To the knowledge
of DCS or any of the Stockholders, all parties to such Contracts have complied
in all material respects with the provisions thereof, no party is in Default
thereunder and no notice of any claim of Default has been given to DCS or any of
the
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Stockholders. None of the Stockholders or DCS has any reason to believe that the
products or services called for by any executory Contract cannot be supplied in
accordance with the terms of such Contract, including time specifications, and
has no reason to believe that any unfinished Contract will, upon performance by
DCS result in a loss to DCS.
(d) Product Warranty. To its knowledge, except as set forth on
Schedule 3.11, DCS has committed no act, and there has been no omission, which
may result in, and there has been no occurrence which may give rise to, product
liability or Liability for breach of warranty (whether covered by insurance or
not) on the part of DCS, with respect to products designed, manufactured,
assembled, sold, repaired, maintained, delivered or installed or services
rendered prior to or on the Closing Date, other than in the ordinary course of
business.
3.12 No Conflict or Violation; Consents. Except as set forth on
Schedule 3.12, none of the execution, delivery or performance of this Agreement
or any Ancillary Agreement, the consummation of the transactions contemplated
hereby or thereby, nor compliance by DCS or any Stockholder with any of the
provisions hereof or thereof, will (a) violate or conflict with any provision of
the governing documents of DCS, (b) violate, conflict with, or result in a
breach of or constitute a Default (with or without notice or passage of time)
under, or result in the termination of, or accelerate the performance required
by, or result in a right to terminate, accelerate, modify or cancel under, or
require a notice under, or result in the creation of any Encumbrance upon any of
its respective assets under any Contract, (c) violate any applicable Regulation
or Court Order or (d) impose any Encumbrance on any Assets or the Business.
Except as set forth on Schedule 3.12, no notices to, declaration, filing or
registration with, approvals or Consents of, or assignments by, any Persons
(including any federal, state or local governmental or administrative
authorities) are necessary to be made or obtained by DCS in connection with the
execution, delivery or performance of this Agreement or any Ancillary Agreement
or the consummation of the transactions contemplated hereby or thereby.
3.13 Permits. Schedule 3.13 sets forth a complete list of all material
Permits, all of which are as of the date hereof, and will be as of the Closing
Date, in full force and effect. DCS has, and at all times has had, all material
Permits required under any applicable Regulation in its operation of the
Business or in its ownership of the Assets. DCS is not in Default, nor has DCS,
received any notice of any claim of Default, with respect to any such Permit.
Except as otherwise governed by law, all such Permits are renewable by their
terms or in the ordinary course of business without the need to comply with any
special qualification procedures or to pay any amounts other than routine filing
fees and, except as set forth on Schedule 3.13, will not be adversely affected
by the completion of the transactions contemplated by this Agreement or the
Ancillary Agreements.
3.14 Financial Statements; Books and Records.
Except as described in Schedule 3.14:
(a) The Financial Statements are complete, are in accordance with
the Books and Records, fairly present the Assets and Liabilities of DCS and
financial condition and results of operations indicated thereby in accordance
with GAAP consistently applied throughout the periods covered thereby.
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(b) The Books and Records, in reasonable detail, accurately and
fairly reflect the activities of DCS and the Business and have been provided to
Vertex for its inspection.
(c) DCS has not engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank accounts or
funds which have been and are reflected in the Books and Records.
(d) The stock records and minute books of DCS that are made
available to Vertex fully reflect all minutes of meetings, resolutions and other
material actions and proceedings of their respective stockholders and boards of
directors and all committees thereof, all issuances, transfers and redemption's
of capital stock of which DCS or the Stockholders are aware and contain true,
correct and complete copies of their respective Certificate of Incorporation and
Bylaws and all amendments thereto through the date hereof.
3.15 Absence of Certain Changes or Events. Except as set forth on
Schedule 3.15, since the Balance Sheet Date there has not been any:
(a) Material Adverse Change with respect to DCS;
(b) failure to operate the Business in the ordinary course so as
to use its commercially reasonable efforts to preserve the Business intact and
to preserve the continued services of its Employees and the goodwill of
suppliers, customers and others having business relations with DCS.
(c) resignation or termination of any officer or Employee, or,
except as set forth in the Salary Table, any increase in the rate of
compensation payable or to become payable to any officer, Employee or
Representative of DCS, including the making of any loan to, or the payment,
grant or accrual of any bonus, incentive compensation, service award or other
similar benefit to, any such Person, or the addition to, modification of, or
contribution to any Employee Plan;
(d) payment, loan or advance of any amount to or in respect of, or
the sale, transfer or lease of any properties or the Assets to, or entering into
of any Contract with, any Related Party except (i) directors' fees and (ii)
compensation to Employees at the rates disclosed pursuant to Section 3.18(d).
(e) sale, assignment, license, transfer or Encumbrance of any of
the Assets, tangible or intangible, singly or in the aggregate, other than sales
of products and services in the ordinary course of business and consistent with
past practice;
(f) new Contracts, or extensions, modifications, terminations or
renewals thereof, except for Contracts entered into, modified or terminated in
the ordinary course of business and consistent with past practice;
(g) actual or threatened termination of any material customer
account or group of accounts or actual or threatened material reduction in
purchases or royalties payable by any
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such customer or occurrence of any event that is likely to result in any such
termination or reduction;
(h) disposition or lapsing of any Proprietary Rights of DCS, in
whole or in part, or any disclosure of any trade secret, process or know-how to
any Person not an Employee other than in the ordinary course of business;
(i) change in accounting methods or practices by DCS;
(j) revaluation by DCS of any of the Assets, including writing off
notes or accounts receivable other than for which adequate reserves have been
established;
(k) damage, destruction or loss (whether or not covered by
insurance) with a Material Adverse Effect on the Assets, the Business or the
prospects of DCS;
(l) declaration, setting aside or payment of dividends or
distributions in respect of any capital stock of DCS or any redemption, purchase
or other acquisition of any equity securities of DCS;
(m) issuance or reservation for issuance by DCS of, or commitment
of it to issue or reserve for issuance, any shares of capital stock or other
equity securities or obligations or securities convertible into or exchangeable
for shares of capital stock or other equity securities;
(n) increase, decrease or reclassification of the capital stock of
DCS;
(o) amendment of the Certificate of Incorporation or Bylaws of
DCS;
(p) capital expenditure or execution of any lease or any incurring
of liability therefor by DCS, involving payments in excess of $10,000 in the
aggregate;
(q) failure to pay any material obligation of DCS when due;
(r) cancellation of any indebtedness or waiver of any rights of
substantial value to DCS, except in the ordinary course of business and
consistent with past practice;
(s) indebtedness incurred by DCS for borrowed money or any
commitment to borrow money entered into by DCS, or any loans made or agreed to
be made by DCS;
(t) liability incurred by DCS except in the ordinary course of
business and consistent with past practice, or any increase or change in any
assumptions underlying or methods of calculating any bad debt, contingency or
other reserves;
(u) payment, discharge or satisfaction of any Liabilities of DCS
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of Liabilities reflected or reserved
against in the Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date;
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(v) acquisition of any equity interest in any other Person; or
(w) agreement by DCS to do any of the foregoing.
3.16 Liabilities. DCS has no Liabilities or obligations (absolute,
accrued, contingent or otherwise) except (i) Liabilities which are reflected and
properly reserved against in the Financial Statements, (ii) Liabilities incurred
in the ordinary course of business and consistent with past practice since the
Balance Sheet Date and (iii) liabilities arising under the Contracts (other than
obligations which are required to be reflected on a balance sheet prepared in
accordance with GAAP) set forth on Schedule 3.11 or which are not required to be
disclosed on such Schedule and which have arisen or been incurred in the
ordinary course of business. None of the Liabilities described in this Section
3.16 relates to any breach of Contract, breach of warranty, tort, infringement
or violation of law or arose out of any action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding,
investigation or dispute (collectively, "Actions"). The reserves set forth on
the Balance Sheet for Liabilities are reasonable.
3.17 Litigation. There is no Action, pending or, to the knowledge of
DCS or any Stockholder, threatened in writing or orally (i) against, relating to
or affecting DCS, any of the Assets or any of its officers and directors as
such, (ii) which seeks to enjoin or obtain damages in respect of the
transactions contemplated hereby or by the Ancillary Agreements or (iii) with
respect to which there is a reasonable likelihood of a determination which would
prevent DCS or any of the Stockholders from consummating the transactions
contemplated hereby. There are presently no outstanding judgments, decrees or
orders of any court or any governmental or administrative agency against or
affecting DCS, the Business or any of the Assets. Schedule 3.17 contains a
complete and accurate description of all Actions since December 31, 1997 to
which DCS has been a party or which relate to any of the Assets or their
respective officers or directors as such, or any such Actions which were settled
prior to the institution of formal proceedings, other than Actions brought by
DCS for collection of monies owed in the ordinary course of business. No
representation is made in this Section 3.17 with respect to matters covered in
Section 3.23 (Tax matters).
3.18 Labor Matters.
(a) DCS is not a party to any labor agreement with respect to
its Employees with any labor organization and has not experienced any attempt by
organized labor or its representatives to make DCS conform to demands of
organized labor relating to its Employees or to enter into a binding agreement
with organized labor that would cover the Employees of DCS. There is no unfair
labor practice charge or complaint against DCS pending before the National Labor
Relations Board or any other governmental agency arising out of DCS's
activities, and none of DCS or any Stockholder has any knowledge of any facts or
information which would give rise thereto; there is no labor strike or labor
disturbance pending or threatened against DCS nor is any grievance currently
being asserted against it, and DCS has not experienced a work stoppage or other
labor difficulty. There are no material controversies pending or, to the
knowledge of DCS, threatened, between DCS and any of its Employees, and none of
DCS or any Stockholder is aware of facts which could reasonably result in any
such controversy.
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(b) DCS each in material compliance with all applicable
Regulations respecting employment practices, terms and conditions of employment,
wages and hours, equal employment opportunity, and the payment of social
security and similar taxes, and none of them are engaged in any unfair labor
practice. DCS is not liable for any claims for past due wages or, to the best of
its knowledge, any penalties for failure to comply with any of the foregoing.
(c) DCS has not entered into any severance or similar
arrangement in respect of any present or former Employee that will result in any
obligation (absolute or contingent) of Vertex, DCS to make any payment to any
present or former Employee following termination of employment or upon
consummation of the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement or any Ancillary Agreement nor the
consummation of the transactions contemplated hereby or thereby will result in
the acceleration or vesting of any other rights of any Person to benefits under
any Employee Plans.
(d) Attached hereto as Schedule 3.18 is a list of the names of
all present Employees. DCS has provided Vertex with a table setting forth the
current salary or hourly wages and other compensation payable by DCS to each of
its Employees (the "Salary Table").
3.19 Employee Benefit Plans.
(a) Schedule 3.19 contains a true and complete list of each
"employee pension benefit plan," as defined in Section 3(2) of the ERISA
("Pension Plan"), Welfare Plan, and each bonus, incentive or deferred
compensation, severance, termination or other separation benefits, retention,
change of control, stock option, stock appreciation, stock purchase, phantom
stock or other equity-based, fringe benefits or payroll practices, performance
or other employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, that is
maintained, sponsored, or contributed to by DCS or any ERISA Affiliate for the
benefit of any employee or former employee of the Company.
(b) True and complete copies of each of the following
documents have been delivered by DCS to Vertex: (i) each Employee Plan (and, if
applicable, related trust agreements, annuity contracts or other funding
instruments) which covers current or former employees of DCS (with respect to
their relationship with DCS) or with respect to which DCS has any liability to
current or former employees under any such plan which is terminated, and all
amendments thereto, all summary plan descriptions, summary of material
modifications (as defined in ERISA) and all written interpretations and
descriptions thereof which DCS generally has distributed to participants therein
and a complete description of any Employee Plan which is not in writing, (ii)
the most recent determination letter issued by the Internal Revenue Service and
any opinion letter (if any) issued by the Department of Labor with respect to
each Pension Plan and each voluntary employees' beneficiary association as
defined under Section 501(c)(9) of the Code (other than a Multiemployer Plan)
which covers or has covered employees of DCS (with respect to their relationship
with DCS), (iii) with respect to each Pension Plan, all material written
communications received from or sent to the IRS, including a request for a
compliance certificate under the IRS Voluntary Compliance Program (or similar
program), or an application under the IRS Closing Agreement Programs with
respect to any of the Plans, or the Department
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of Labor, (iv) for the three most recent plan years, Annual Reports on Form 5500
Series required to be filed with any governmental agency for each Pension Plan
or Welfare Plan which covers employees of DCS (with respect to their
relationship with DCS) or with respect to which DCS has any liability to current
or former employees, (v) all actuarial reports, if any, prepared for the last
three plan years for each Pension Plan which covers or has covered employees of
DCS (with respect to their relationship with DCS), and (vi) a description
setting forth the amount of any liability of DCS as of the Closing Date for
payments more than thirty (30) calendar days past due with respect to any
Welfare Plan.
(c) Each of the Employee Plans that is intended to meet the
requirements of Section 401(a) and, where applicable, Section 401(k) of the Code
has received a favorable determination letter as to its qualification under the
Code (or such a letter has been or will be applied for prior to expiration of
the applicable remedial amendment period), no such determination letter has been
revoked and, to the Stockholders' knowledge nothing has occurred, whether action
or failure to act, which would could reasonably be expected to cause the loss of
such qualification or which could reasonably be expected to result in a Material
Adverse Effect on the Company under the IRS' Closing Agreement Program,
Voluntary Compliance Resolution Program or Administrative Policy Regarding Self
Correction.
(d) Neither DCS nor its ERISA Affiliates maintains, sponsors,
or contributes to any single employer plan within the meaning of Section
4001(a)(15) of ERISA and no Employee Plan is or has been subject to Section 412
of the Code or Section 301 or Title IV of ERISA.
(e) Multiemployer Plans. Neither DCS nor any ERISA Affiliate
has any liability with respect to a Multiemployer Plan, and no liability will
arise or be imposed on DCS or any ERISA Affiliate under, or with respect to, any
Multiemployer Plan.
(f) Welfare Plans.
(i) Each Welfare Plan which currently covers
employees or former employees of DCS (with respect to their relationship with
DCS) currently complies in all material respects and has been maintained in
compliance in all material respects with its terms and, both as to form and
operation, with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Welfare Plan, including,
without limitation, ERISA and the Code.
(ii) Except as required by Section 4980B of
the Code or Part 6 of Title 1, Subtitle B of ERISA, none of DCS, any ERISA
Affiliate or any Welfare Plan has any present or future obligation to make any
payment to, or with respect to any present or former employee of DCS or any
ERISA Affiliate pursuant to, any retiree medical benefit plan, or other retiree
Welfare Plan, and each such plan contains provisions which permit DCS or an
ERISA Affiliate to amend or terminate any such benefit plan or such Welfare
Plan.
(iii) Each Welfare Plan which currently
covers employees or former employees of DCS (with respect to their relationship
with DCS) or with respect to which DCS has any liability to current or former
employees and which is a "group health plan," as
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defined in Section 607(1) of ERISA, presently complies in all material respects
with and has been operated in compliance in all material respects with
provisions of Part 6 of Title I, Subtitle B of ERISA and Sections 162(k) and
4980B of the Code at all times.
(iv) Neither DCS or any ERISA Affiliate has,
at any time, maintained, contributed to or had any obligation to maintain or
contribute to any Welfare Plan that is a "multiemployer plan," as defined in
Section 3(37) of ERISA.
(g) Benefit Arrangements. Each Benefit Arrangement presently
complies and has been maintained in compliance in all material respects with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Benefit Arrangement,
including, without limitation, the Code. Except as provided by law or in any
employment agreement set forth on Schedule 3.19, the Employment Agreements or
the Noncompetition Agreements, the employment of all persons presently employed
or retained by DCS is terminable at will.
(h) With respect to each Employee Plan which is a Pension
Plan, (i) all required contributions which are due for all periods ending prior
to or as of the Closing have been made, and (ii) all such contributions which
are not due as of the Closing have been properly accrued to the extent required
by GAAP, including the bonuses accrued in 1999 and set forth in Schedule
3.19(h).
(i) Other than the payment of benefits when due, (i) no
material liability has been or is expected to be incurred by DCS, or any ERISA
Affiliate (either directly or indirectly, including as a result of an
indemnification obligation) under or pursuant to ERISA or the penalty, excise
tax, or joint and several liability provisions of the Code relating to Employee
Plans that could, following the Closing, become or remain a liability of DCS or
the Surviving Corporation or become a liability of Vertex or any Employee Plan
established or contributed to by Vertex and, (ii) to DCS' Knowledge, no event,
transaction or condition has occurred or exists that could result in any such
liability to DCS or, following the Closing, Vertex, or the Surviving
Corporation.
(j) Unrelated Business Taxable Income; Unpaid Contributions.
No Employee Plan (or trust or other funding vehicle pursuant thereto) has
incurred any liability under Code Section 511. Neither DCS nor any ERISA
Affiliate has any liability for unpaid contributions under Section 515 of ERISA
with respect to any Employee Plan.
(k) Deductibility of Payments. There is no contract,
agreement, plan or arrangement covering any employee or former employee of DCS
(with respect to such employee's relationship with DCS ) that, individually or
collectively, requires the payment by DCS of any amount (i) that is not
deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
(l) Fiduciary Duties and Prohibited Transactions. None of DCS
or any plan fiduciary of any Welfare Plan or Pension Plan has engaged in, or has
any liability in respect of, any transaction in violation of Sections 404 or 406
of ERISA or any "prohibited transaction," as defined in Section 4975(c)(1) of
the Code, for which no exemption exists under
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Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code, or has otherwise
violated the provisions of Part 4 of Title I, Subtitle B of ERISA so as to
create any liability of DCS or any Employee Plan. DCS has not participated in a
violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of any
Welfare Plan or Pension Plan, and DCS has not been assessed any civil penalty
under Section 502(l) of ERISA.
(m) Litigation. There is no action, order, writ, injunction,
judgment or decree outstanding or claim (other than routine claims for
benefits), suit, litigation, proceeding, arbitration proceeding, governmental
audit or investigation relating to or seeking benefits under any Employee Plan
that is pending or, to the knowledge of DCS , anticipated or threatened against
DCS, any ERISA Affiliate or any Employee Plan.
(n) No Amendments. Neither DCS nor any ERISA Affiliate has
announced to employees, former employees, consultants or directors an intention
to create, or otherwise created, a legally binding commitment to adopt any
additional Employee Plan which is intended to cover employees or former
employees of DCS (with respect to their relationship with DCS ) or to amend or
modify any existing Employee Plan which covers or has covered employees or
former employees of DCS (with respect to their relationship with DCS).
(o) Insurance Contracts. None of DCS or any Employee Plan
(other than a Multiemployer Plan) holds as an asset of any Employee Plan any
interest in any annuity contract, guaranteed investment contract or any other
investment or insurance contract issued by an insurance company that is the
subject of bankruptcy, conservatorship or rehabilitation proceedings.
(p) No Acceleration or Creation of Rights. Neither the
execution and delivery of this Agreement or the Ancillary Agreements by DCS nor
the consummation of the transactions contemplated hereby or the related
transactions will result in the acceleration or creation of any rights of any
person to benefits under any Employee Plan (including, without limitation, the
acceleration of the vesting or exercisability of any stock options, the
acceleration of the vesting of any restricted stock, the acceleration of the
accrual or vesting of any benefits under any Pension Plan or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
(q) Severance Arrangements. Except with respect to the
Employment Agreements and the Noncompetition Agreements, DCS is not a party to
any severance or similar arrangement in respect of any Employees that will
result in any obligation (absolute or contingent) of DCS or Vertex after the
Closing to make any payment to any of such Employees following the consummation
of the transactions contemplated by this Agreement or termination of employment.
(r) To the knowledge of DES, neither DCS nor any of its ERISA
Affiliates is in violation of any workers compensation or similar laws. All
workers compensation claims filed against the DCS are set forth and described in
Schedule 3.19(r).
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3.20 Transactions with Related Parties. Except for employment
agreements and other compensation arrangements disclosed on Schedule 3.20, to
the knowledge of DCS, or any Stockholder, no Related Party has (a) borrowed or
loaned money or other property to DCS which has not been repaid or returned, (b)
any contractual or other claims, express or implied, of any kind whatsoever
against DCS or (c) any interest in any property used by DCS.
3.21 Compliance with Law. To the best of its knowledge, DCS has
conducted the Business in material compliance with all applicable Regulations
and Court Orders. Neither DCS nor any Stockholder has received any notice to the
effect that, or has otherwise been advised that, DCS is not in compliance with
any such Regulations or Court Orders.
3.22 Intellectual Property.
(a) General. Schedule 3.22 sets forth with respect to
Proprietary Rights of DCS (i) for each patent and patent application, including
petty patents and utility models and applications therefor, as applicable, the
number, normal expiration date, title and priority information for each country
in which such patent has been issued, or, the application number, date of
filing, title and priority information for each country, (ii) for each
trademark, tradename or service mark, whether or not registered, the date first
used, the application serial number or registration number, the class of goods
covered, the nature of the goods or services, the countries in which the names
or mark is used and the expiration date for each country in which a trademark
has been registered, (iii) for each copyright for which registration has been
sought, whether or not registered, the date of creation and first publication of
the work, the number and date of registration for each country in which a
copyright application has been registered, (iv) for each mask work, whether or
not registered, the date of first commercial exploitation and if registered, the
registration number and date of registration, (v) a description of all Trade
Secrets and (vi) all such Proprietary Rights in the form of licenses. True and
correct copies of all Proprietary Rights (including all pending applications,
application related documents and materials and written materials relating to
Trade Secrets) owned, controlled or used by or on behalf of DCS or in which DCS
has any interest whatsoever have been provided or made available to Vertex.
(b) Adequacy. The Proprietary Rights of DCS are all those
necessary for the normal conduct of the Business as presently conducted and as
presently contemplated, including the design, manufacture and sale of all
products currently under development, planned for development or in production.
(c) Royalties and Licenses. DCS has no obligation to
compensate any Person for the use of any of its Proprietary Rights nor, except
in the ordinary course of business, has DCS granted to any Person any license,
option or other rights to use in any manner any of its Proprietary Rights,
whether requiring the payment of royalties or not.
(d) Ownership. DCS owns or has a valid right to use its
Proprietary Rights, and such Proprietary Rights will not cease to be valid
rights of DCS or by reason of the execution, delivery and performance of this
Agreement or the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby. The patents are valid and in full force and
effect and are not subject to any fines, maintenance fees or Actions falling due
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within 90 days after the Closing Date.
(e) Absence of Claims. None of DCS, or any Stockholder (A) has
received any notice alleging, invalidity with respect to any of the Proprietary
Rights of DCS or (B) has received any notice of alleged infringement of any
rights of others due to any activity by DCS. To the knowledge of DCS, or any
Stockholder, DCS's use of its Proprietary Rights in its past, current and
planned products do not and would not infringe upon or otherwise violate the
valid rights of any third party anywhere in the world. No other Person (i) has
notified DCS, or any Stockholder that it is claiming any ownership of or right
to use any of DCS's Proprietary Rights or (ii) to the knowledge of DCS or any
Stockholder, is infringing upon any such Proprietary Rights in any way.
(f) Protection of Proprietary Rights. All of the pending
applications for DCS's Proprietary Rights have been duly filed.
3.23 Tax Matters.
(a) Filing of Tax Returns. DCS has timely filed with the
appropriate taxing authorities all Tax Returns in respect of Taxes required to
be filed through the date hereof. The Tax Returns filed are complete and
accurate in all material respects. Except as specified in Schedule 3.23, neither
DCS requested any extension of time within which to file Tax Returns in respect
of any Taxes. DCS has delivered to Vertex complete and accurate copies of
federal, state and local Tax Returns of DCS (if separate Tax Returns were filed)
for the years ended December 31, 1998, 1997 and 1996.
(b) Payment of Taxes. All Taxes due from DCS or for which DCS
could be liable (whether or not shown on any Tax Return), in respect of periods
(or portions thereof) beginning before the Closing Date have been timely paid or
an adequate reserve (in conformity with GAAP) has been established therefor, as
set forth in Schedule 3.23 or the Financial Statements, and DCS has no material
Liability for Taxes in excess of the amounts so paid or reserves so established.
All Taxes that DCS is required by law to withhold or collect have been duly
withheld or collected and have been timely paid over to the appropriate
governmental authorities to the extent due and payable.
(c) Audits, Investigations or Claims. No deficiencies for
Taxes of DCS have been claimed, proposed or assessed by any taxing or other
governmental authority. There are no pending audits, assessments or other
Actions for or relating to any Liability in respect of Taxes of DCS, and there
are no matters under discussion with any governmental authorities, with respect
to Taxes that are likely to result in an additional Liability for Taxes. Audits
of federal, state and local Tax Returns by the relevant taxing authorities have
been completed for the periods set forth on Schedule 3.23 and, except as set
forth in such Schedule, neither DCS has been notified that any taxing authority
intends to audit a Tax Return for any other period. No extension of a statute of
limitations relating to Taxes is in effect with respect to DCS.
(d) Lien. There are no Encumbrances for Taxes (other than for
current Taxes
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not yet due and payable) on any of the Assets.
(e) Tax Elections. All elections with respect to Taxes
affecting DCS, or its Assets as of the date hereof are set forth on DCS's latest
Tax Returns or on Schedule 3.23. DCS (i) has not consented at any time under
Section 341(f)(1) of the Code to have the provisions of Section 341(f)(2) of the
Code apply to any disposition of any Assets; (ii) has agreed, or is required, to
make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise; (iii) has made an election, or is required, to
treat any Asset as owned by another Person pursuant to the provisions of Section
168(f) of the Code or as tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the Code; (iv) directly or
indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code; or (v) has made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state or local
Tax provision.
(f) Prior Affiliated Groups. DCS (i) has not ever been a
member of an affiliated group of corporations within the meaning of Section 1504
of the Code or any group that has filed a combined consolidated or unitary state
or local return, or (ii) has no liability for the taxes of any other Person
under Treasury Regulation 1.1502-6 (or any similar provision of state, local or
foreign law) as a transferee or successor, by contract, or otherwise.
(g) Tax Sharing Agreements. There are no Tax-sharing
agreements or similar arrangements (including indemnity arrangements) with
respect to or involving DCS after the Closing Date, DCS shall not be bound by
any such Tax-sharing agreements or similar arrangements or have any Liability
thereunder for amounts due in respect of periods prior to the Closing Date.
(h) Partnerships. DCS has no interest in or is subject to any
joint venture, partnership, or other arrangement or contract which is treated as
a partnership for federal income tax purposes. DCS is not a successor to any
other Person by way of merger, reorganization or similar transaction.
(i) No Withholding. The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
3.24 Insurance. Subject to the agreements of the Stockholders set forth
in Section 5.7 hereof, Schedule 3.24 contains a complete and accurate list of
all policies or binders of insurance (showing as to each policy or binder the
carrier, policy number, coverage limits, expiration dates, annual premiums, a
general description of the type of coverage provided and any pending claims
thereunder) of which DCS is the owner, insured or beneficiary. DCS is not in
Default under any of such policies or binders, and has not failed to give any
notice or to present any claim under any such policy or binder in a due and
timely fashion. Such policies and binders are in full force and effect on the
date hereof and shall be kept in full force and effect by DCS through the
Closing Date.
3.25 Accounts Receivable. The accounts and notes receivable reflected
in the Balance Sheet, and all accounts or notes receivable arising since the
Balance Sheet Date, represent bona
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fide claims against debtors for sales, services performed or other charges
arising on or before the date of recording thereof, and all the goods delivered
and services performed which gave rise to said accounts were delivered or
performed in accordance with the applicable orders, Contracts or customer
requirements. To the knowledge of DCS all such receivables are fully collectible
in the ordinary course of business except to the extent of an amount not in
excess of the reserve for doubtful accounts reflected on the Balance Sheet and
additions to such reserves as reflected on the Books and Records.
3.26 Inventory. Except as set forth on Schedule 3.26, the value at
which the Inventory is shown on the Balance Sheet has been determined in
accordance with the normal valuation policy of DCS, consistently applied and in
accordance with GAAP. The Inventory (and the specific items acquired or
manufactured subsequent to the Balance Sheet Date) consists only of items of
quality and quantity commercially usable and salable in the ordinary course of
business, except for any items of obsolete or slow moving material or material
below standard quality, all of which have been written down to realizable market
value, or for which adequate reserves have been provided, and the present
quantity of all Inventory is reasonable in the present circumstances of the
Business. Schedule 3.26 contains a complete and accurate list of all Inventory
as of the Balance Sheet Date and the addresses at which the Inventory is
located.
3.27 Purchase Commitments and Outstanding Bids. (a) All accepted and
unfulfilled orders for the sale of Inventory entered into by DCS and the
aggregate of all Contracts for the purchase of supplies by DCS were made in the
ordinary course of business. There are no claims against DCS to return in excess
of an aggregate of $10,000 of merchandise by reason of alleged overshipments,
defective merchandise or otherwise, or of merchandise in the hands of customers
under an understanding that such merchandise would be returnable. To the
knowledge of DCS or any Stockholder, there is no outstanding bid, proposal,
contract or unfilled order of DCS which will or would, if accepted, result in a
net loss to DCS.
(b) Schedule 3.27 references the discontinued manufacture of
an integral part of DCS' light assembly. DCS will be able to redesign the
affected light module in such time frame, not to exceed 12 months from the date
hereof, as will enable DCS to fill customer orders without interruption
resulting from the discontinued part, for aggregate costs of $100,000 or less
incurred by DCS in connection with such redesign and the related integration of
the redesigned module into DCS' light assembly.
3.28 Customers and Suppliers. Schedule 3.28 sets forth a complete and
accurate list of the names and addresses of all customers who purchased from DCS
during its last fiscal year showing the approximate total sales in dollars to
each such customer during such fiscal year; and (ii) the five suppliers with the
greatest dollar volume of sales to DCS during the last fiscal year showing the
approximate total purchases in dollars by DCS from each such supplier during
such fiscal year. Since the Balance Sheet Date, there has been no DCS Material
Adverse Change in the business relationship of DCS with any customer or supplier
named on Schedule 3.28. Neither DCS has not received any written communication
from any customer or supplier named on Schedule 3.28 of any intention to return,
terminate or materially reduce purchases from or supplies to DCS.
3.29 Brokers; Transaction Costs. Except as specified on Schedule 3.29
hereto, neither
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DCS nor any Stockholder has entered into or will enter into any
contract, agreement, arrangement or understanding with any Person which will
result in the obligation of Vertex or DCS, pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
3.30 No Other Agreements to Sell DCS or the Assets. None of DCS or any
Stockholder has any legal obligation, absolute or contingent, to any other
Person to sell the Assets (other than Inventory in the ordinary course of
business) or to sell any capital stock of DCS or to effect any merger,
consolidation or other reorganization of DCS or to enter into any agreement with
respect thereto, except pursuant to this Agreement.
3.31 Material Misstatements or Omissions. No representations or
warranties by DCS or any Stockholder in this Agreement or any Ancillary
Agreement to which it is a party or in any document, written information,
exhibit, statement, certificate or schedule heretofore or hereinafter furnished
by DCS or such Stockholder, Vertex pursuant hereto, or in connection with the
transactions contemplated by this Agreement or by such Ancillary Agreements
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements or facts
contained therein not misleading.
ARTICLE 3A
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As an inducement to Vertex to enter into this Agreement, each
Stockholder hereby makes, severally, and not jointly, as of the date hereof and
as of the Closing Date with respect to itself only, the following
representations and warranties to Vertex:
3A.1 Authorization. This Agreement has been duly executed and delivered
by each Stockholder and is, and upon the execution and delivery thereof each
Ancillary Agreement to which it is a party will be, a valid and binding
obligation of each Stockholder, enforceable against each Stockholder in
accordance with its terms, except that enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors or (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
3A.2 No Conflict or Violation; Consents. None of the execution,
delivery or performance of this Agreement or any Ancillary Agreement, the
consummation of the transactions contemplated hereby or thereby, nor compliance
by any Stockholder with any of the provisions hereof or thereof, will (a)
violate, conflict with, or result in a breach of or constitute a Default (with
or without notice of passage of time) under, or result in the termination of, or
accelerate the performance required by, or result in a right to terminate,
accelerate, modify or cancel under, or require a notice under, or result in the
creation of any Encumbrance upon any of its respective assets under, any
Contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, security
interest or other arrangement to which any Stockholder is a party or by which
any Stockholder is bound or to which any of its assets are subject or (b)
violate any applicable Regulation or Court
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Order. Except as set forth on Schedule 3A.2, no notices to, declaration, filing
or registration with, approvals or Consents of, or assignments by, any Persons
(including any federal, state or local governmental or administrative
authorities) are necessary to be made or obtained by any Stockholder in
connection with the execution, delivery or performance of this Agreement or any
Ancillary Agreement or the consummation of the transactions contemplated hereby
or thereby.
3A.3 Ownership of DCS Stock; Title. The number of shares of DCS Stock
held by each Stockholder is accurately set forth on Schedule 3.2(a) and all of
such shares of DCS Stock are lawfully owned of record and, except as set forth
on Schedule 3A.3, beneficially owned by such Stockholder, free and clear of any
Encumbrances. Except as set forth on Schedule 3A.3, the DCS Shares held by such
Stockholder are not subject to any stockholder agreement, voting trust, proxy or
other agreement or understanding with respect to or concerning the purchase,
sale or voting of such DCS Stock.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF VERTEX
As an inducement to DCS and each of the Stockholders to enter into this
Agreement, Vertex hereby makes, as of the date hereof, and as of the Closing
Date, the following representations to DCS and the Stockholders:
4.1 Organization. Vertex is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey. Vertex
has full corporate power and authority to conduct its business as it is
presently being conducted and to own or lease, as applicable, the assets owned
or leased by it.
4.2 Authorization. Vertex has all necessary corporate power and
authority to enter into this Agreement and the Ancillary Agreements to which it
is a party and has taken all action necessary to consummate the transactions
contemplated hereby and thereby and to perform its respective obligations
hereunder and thereunder. This Agreement has been duly executed and delivered by
Vertex, and this Agreement is, and upon execution and delivery each of the
Ancillary Agreements to which Vertex is a party will be, a valid and binding
obligation of Vertex enforceable against Vertex in accordance with its terms,
except that enforceability may be limited by the effect of (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors or (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
4.3 No Conflict or Violation; Consents. None of the execution, delivery
or performance of this Agreement or any Ancillary Agreement, the consummation of
the transactions contemplated hereby or thereby, nor compliance by Vertex with
any of the provisions hereof or thereof, will (a) violate or conflict with any
provision of Vertex's governing documents to the extent applicable, (b) violate,
conflict with, or result in a breach of or constitute a Default (with or without
notice of passage of time) under, or result in the termination of, or accelerate
the performance required by, or result in a right to terminate, accelerate,
modify or cancel under, or require a notice under, or result in the creation of
any Encumbrance upon any of
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its assets under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Vertex is a party
or by which Vertex is bound or to which its assets are subject, (c) violate any
Regulation or Court Order applicable to Vertex, or (d) impose any Encumbrance on
any assets of Vertex. Except as set forth on Schedule 4.3, no notices to,
declaration, filing or registration with, approvals or Consents of, or
assignments by, any Persons (including any federal, state or local governmental
or administrative authorities) are necessary to be made or obtained by Vertex in
connection with the execution, delivery or performance of this Agreement or any
Ancillary Agreement or the consummation of the transactions contemplated hereby
or thereby.
4.4 Employee Benefit Plans. Vertex agrees to provide to DCS's
employees, for a period of at least one year following the Closing, employee
benefits and employee benefit plans that are not materially less favorable than
those currently provided by DCS to its employees (provided, however, that
nothing herein shall be construed as an obligation by Vertex to maintain the
employment of any employee of DCS following the Closing).
ARTICLE 5
ACTIONS BY DCS, THE STOCKHOLDERS
AND VERTEX PRIOR TO THE CLOSING
DCS, the Stockholders and Vertex, each as indicated below, covenant and
agree as follows for the period from the date hereof through the Closing Date
(or as otherwise expressly specified):
5.1 Conduct of Business. From the date hereof through the Closing, DCS
and the Stockholders shall, except as contemplated by this Agreement, or as
consented to by Vertex in writing, operate the Business in the ordinary course
of business and in accordance with past practice and will not take any action
inconsistent with this Agreement, the Ancillary Agreements or the consummation
of the Closing. Without limiting the generality of the foregoing, DCS shall not
and the Stockholders shall not cause DCS to, except as specifically contemplated
by this Agreement or as consented to by Vertex in writing:
(a) incur any indebtedness for borrowed money, or assume,
guarantee, endorse (other than endorsements for deposit or collection in the
ordinary course of business), or otherwise become responsible for obligations of
any other Person;
(b) issue or commit to issue any shares of its capital stock
or any other securities or any securities convertible into shares of its capital
stock or any other securities, including, without limitation, any options to
acquire capital stock;
(c) declare or incur any obligation to pay any dividend on its
capital stock or make or incur any obligation to make any distribution or
redemption with respect to capital stock;
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(d) make any change to DCS's Certificate of Incorporation or
Bylaws;
(e) except as contemplated by Section 5.7 below, mortgage,
pledge or otherwise encumber any Assets or sell, transfer, license or otherwise
dispose of any Assets except for the licensing of DCS's products and services in
the ordinary course of business and consistent with past practice;
(f) cancel, release or assign any indebtedness owed to it or
any claims or rights held by it, except in the ordinary course of business and
consistent with past practice;
(g) make any investment of a capital nature either by purchase
of stock or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person in
an amount in excess of $10,000;
(h) except as contemplated by Section 5.7 below, terminate any
material Contract or make any change in any material Contract except in the
ordinary course of business;
(i) Other than in the ordinary course of business, and
consistent with the Company's Practice of granting raises in April, enter into
or modify any employment Contract; pay any compensation to or for any Employee,
officer or director pay or agree to pay any bonus, incentive compensation,
service award or other like benefit; or enter into or modify any other Employee
Plan;
(j) except as contemplated by Section 5.7 below, enter into or
modify any Contract with a Related Party;
(k) make any change in any method of accounting or accounting
practice;
(l) fail to pursue the development and introduction of new
products and technology advances in connection with the Business on a basis
consistent with past practice;
(m) fail to comply with all Regulations applicable to the
Assets and the Business consistent with past practices;
(n) fail to use its commercially reasonable efforts to (i)
maintain the Business, (ii) retain the Employees so that such Employees will
remain available to Vertex on and after the Closing Date (provided that DCS
shall not be required by this Section 5.1(n) to enter into any employment
agreement with any Employee), (iii) maintain existing relationships with
suppliers and customers and others having business dealings with DCS and (iv)
otherwise to preserve the goodwill of the Business so that such relationships
and goodwill will be preserved on and after the Closing Date; or
(o) do any other act which would cause any representation or
warranty of DCS or Stockholders in this Agreement to be or become untrue in any
material respect or that is not in the ordinary course of business consistent
with past practice.
5.2 Investigation by Vertex. From the date hereof through the Closing
Date, DCS
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shall afford the Representatives of Vertex and its Affiliates access upon
reasonable notice and at all reasonable times to its Business for the purpose of
inspecting the same, and to its officers, Employees and Representatives,
properties, Books and Records, Contracts and other Assets, and shall furnish
Vertex and its Representatives, upon reasonable notice and in a timely manner,
all financial, operating and other data and information (including with respect
to Proprietary Rights) as Vertex or its affiliates, through their respective
Representatives, may reasonably request.
5.3 Notification of Certain Matters. DCS and the Stockholders, on the
one hand, and Vertex, on the other hand, shall give prompt notice to the other
of (i) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect
and (ii) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that such disclosure shall not be deemed to cure
any breach of a representation, warranty, covenant or agreement or to satisfy
any condition. Each party shall promptly notify the other of any Default, the
threat or commencement of any Action, or any development that occurs before the
Closing that could reasonably be expected to result in a DCS Material Adverse
Effect.
5.4 No Mergers, Consolidations, Sale of Stock, Etc. Neither DCS nor any
Stockholder will, directly or indirectly, (a) solicit any inquiries or proposals
or enter into or continue any discussions, negotiations or agreements relating
to (i) the sale or exchange of DCS's, capital stock, (ii) the merger of DCS
with, or the direct or indirect disposition of a significant amount of the
Assets or the Business to, any Person other than Vertex or its Affiliates or
(iii) the licensing of DCS's Proprietary Rights to any Person other than in the
ordinary course of business consistent with past practice or (b) provide any
assistance or any information to or otherwise cooperate with any Person in
connection with any such inquiry, proposal or transaction. DCS and the
Stockholders hereby represent that neither DCS, nor any Stockholder is now
engaged in discussions or negotiations with any party other than Vertex with
respect to any transaction of the kind described in clauses (a) (i) through (a)
(iii) of the preceding sentence (a "Proposed Acquisition Transaction"). DCS and
each Stockholder agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which any of them
is a party. DCS and the Stockholders shall (w) immediately notify Vertex (orally
and in writing) if any offer is made, any discussions or negotiations are sought
to be initiated, any inquiry, proposal or contact is made or any information is
requested with respect to any Proposed Acquisition Transaction, (x) promptly
notify Vertex of the terms of any proposal which it may receive in respect of
any such Proposed Acquisition Transaction, including, without limitation, the
identity of the prospective purchaser or soliciting party, (y) promptly provide
Vertex with a copy of any such offer, if written, or a written summary (in
reasonable detail) of such offer, if not in writing, and (z) keep Vertex
informed of the status of such offer and the offeror's efforts and activities
with respect thereto.
5.5 Further Assurances. Upon the terms and subject to the conditions
contained herein, the parties agree, in each case both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement and the Ancillary Agreements, (ii) to use their respective best
efforts to cause the acquisition to qualify, and will not take any actions which
to their knowledge could
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reasonably be expected to prevent the acquisition from qualifying, as a
reorganization under the provisions of Section 368(a) of the Code, (iii) to
execute any documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder and thereunder and (iv) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the parties agree
to use their respective reasonable efforts (A) to obtain any necessary Consents
(including, without limitation, all filings required to be made under the HSR
Act with respect to this Agreement and the transactions contemplated hereby) (B)
to give all notices to, and make all registrations and filings with third
parties, including submissions of information requested by governmental
authorities and (C) to fulfill all other conditions to this Agreement.
Notwithstanding the foregoing, (y) no amendment or modification shall be made to
any Contract to obtain any required Consent without the prior written consent of
Vertex and (z) no party hereto or any of their respective Affiliates shall be
required to sell, transfer, divest or otherwise dispose of any of its respective
business, assets or properties in connection with this Agreement or any of the
transactions contemplated hereby.
5.6 ISRA. Prior to the Closing Date, DCS shall obtain from the NJDEP a
Letter of Non-Applicability ("LNA") stating that none of the Facilities is an
"industrial establishment" as such term is defined under ISRA. The form and
content of the application submitted to obtain such LNA shall be satisfactory to
Vertex.
5.7 Covenants and Agreements of Stockholders With Respect to Certain
Automobile Lease Obligations and Insurance. (a) Notwithstanding anything to the
contrary contained herein, DCS and the Stockholders understand and agree that
Vertex does not hereby, and will not, assume and pay the obligations of DCS
under the automobile leases referenced on Schedule 3.9(c) hereto, except for the
three automobile lease obligations referenced thereon as being assumed by Vertex
(collectively, the "Assumed Automobile Leases"). All obligations and liabilities
of DCS and/or any Stockholder under all automobile leases identified on Schedule
3.9(c) other than the Assumed Automobile Leases shall be expressly assumed in
writing by the respective Stockholders (allocated among themselves in whatever
manner they shall deem appropriate and set forth in writing in the instrument of
assumption) from and after March 1, 2000, and the Stockholders shall, at or
prior to the Closing, provide Vertex with evidence reasonably satisfactory to
Vertex of such assumption of liabilities and obligations (or, in the
alternative, of the termination of the related leases). At the Closing, each
Stockholder shall reimburse Vertex for his respective share (based upon the
allocation set forth in the instrument of assumption described above) of the
aggregate pro rata amount of all lease payments previously made by DCS under all
leases listed on Schedule 3.9(c) (other than the Assumed Automobile Leases) for
the period commencing on March 1, 2000 and ending on the Closing Date.
(b) Notwithstanding anything to the contrary contained herein,
and intending to be consistent with the covenants and agreements set forth in
paragraph (a) of this Section 5.7, DCS and the Stockholders understand and agree
that Vertex does not hereby, and will not, assume and pay insurance premiums
under (i) automobile insurance policies referenced on Schedule 3.24 relating to
any automobiles other than those to which the Assumed Automobile Leases relate
(the "Covered Automobiles"); or (ii) "package and umbrella" insurance coverage
referenced on Schedule 3.24 with respect to any company or person other than DCS
and DCS Capital Corp. (the "Covered Company") . At or prior to the Closing, the
Stockholders shall
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provide Vertex with evidence reasonably satisfactory to Vertex of either (i) the
removal of all automobiles other than the Covered Automobiles and all persons
other than the Covered Company from coverage under the relevant insurance
policies referenced on Schedule 3.24 from and after March 1, 2000, or (ii) the
respective agreements of the Stockholders to pay their pro rata shares (as
reasonably determined by Vertex's insurance consultant), as and when due, of all
premium payments due and payable by DCS with respect to all automobiles other
than the Covered Automobiles and all persons other than the Covered Company. At
the Closing, each Stockholder shall reimburse Vertex for his respective share
(based upon the allocation set forth in the instrument of assumption described
in paragraph (a) of this Section 5.7) of the aggregate pro rata amount of all
insurance premium payments previously made by DCS under all automobile insurance
policies and all "package and umbrella" coverage identified on Schedule 3.24
(other than with respect to the Covered Automobiles and the Covered Company) for
the period commencing on March 1, 2000 and ending on the Closing Date.
ARTICLE 6
CONDITIONS TO DCS's AND THE STOCKHOLDERS' OBLIGATIONS
The obligations of DCS and the Stockholders to complete the related
transactions contemplated by this Agreement are subject, in the discretion of
DCS and the Stockholders, to the satisfaction, on or prior to the Closing Date,
of each of the following conditions or the waiver of such conditions by DCS and
the Stockholders:
6.1 Representations, Warranties and Covenants. All representations and
warranties of Vertex contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date as if such representations
and warranties were made at and as of the Closing Date, and Vertex shall have
performed in all material respects all agreements and covenants required hereby
to be performed by it prior to or at the Closing Date. There shall be delivered
to DCS and the Stockholders a certificate signed by a senior officer of Vertex
to the foregoing effect ("Vertex Closing Certificate").
6.2 Consents. All Consents, approvals and waivers from governmental
authorities necessary to consummate the transactions contemplated hereby and by
the Ancillary Agreements shall have been obtained.
6.3 No Court Orders. No Action by any court, governmental authority or
other Person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and by the
Ancillary Agreements. There shall not be any Regulation or Court Order that
makes the acquisition of the DCS Stock contemplated hereby illegal or otherwise
prohibited.
6.4 Closing Documents. Vertex shall have delivered to the Stockholders
the documents and other items described in Section 8.2 and such other documents
and items as DCS or the Stockholders may reasonably require.
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6.5 No Actions or Court Orders. No Action by any court, governmental
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
by the Ancillary Agreements and which could reasonably be expected to damage
Vertex, the Assets or the Business materially if the transactions contemplated
hereby or thereby are consummated, including any Material Adverse Effect on the
right or ability of Vertex to own, operate or transfer DCS after the Closing.
There shall not be any Regulation or Court Order that makes the acquisition of
the DCS Stock contemplated hereby illegal or otherwise prohibited or that
otherwise may have a Vertex Material Adverse Effect.
ARTICLE 7
CONDITIONS TO VERTEX'S OBLIGATIONS
The obligations of Vertex to complete the related transactions
contemplated by this Agreement are subject, in the discretion of Vertex, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, or the waiver of such conditions by Vertex:
7.1 Representations, Warranties and Covenants. All representations and
warranties of DCS and each Stockholder contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and DCS
and each of the Stockholders shall have performed in all material respects all
agreements and covenants required hereby to be performed prior to or at the
Closing Date. There shall be delivered to Vertex a certificate signed by the
President and the Chief Financial Officer of DCS ("DCS Closing Certificate") and
each Stockholder to the foregoing effect (each, a "Stockholder's Closing
Certificate").
7.2 Consents. All required third party consents under Contracts, which
consents are listed on Schedule 3.12 hereto, have been obtained.
7.3 No Actions or Court Orders. No Action by any court, governmental
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
by the Ancillary Agreements and which could reasonably be expected to damage
Vertex, the Assets or the Business materially if the transactions contemplated
hereby or thereby are consummated, including any Material Adverse Effect on the
right or ability of Vertex to own, operate or transfer DCS after the Closing.
There shall not be any Regulation or Court Order that makes the acquisition of
the DCS Stock contemplated hereby illegal or otherwise prohibited or that
otherwise may have a DCS Material Adverse Effect.
7.4 Closing Documents. DCS and/or the Stockholders, as the case may be,
shall have delivered to Vertex the documents and other items described in
Section 8.1 and such other documents and items as Vertex may reasonably require.
7.5 Resignations of Directors and Officers. DCS shall cause each
director and officer of DCS holding office prior to the Closing to tender his or
her resignation prior to the Closing
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Date, with each such resignation to be effective as of the Closing Date.
7.6 Delivery of Certificates. Each Stockholder shall have delivered to
Vertex the Certificate or Certificates representing shares of DCS Stock held by
such stockholder, duly endorsed for transfer to Vertex or accompanied by blank
stock powers, together with an executed counterpart signature page to the
Indemnification Escrow Agreement and to the Noncompetition Agreement and the
Employment Agreement (if any) to which such Stockholder is a party.
7.7 Financing. Vertex shall have secured financing for the Aggregate
Purchase Price on such commercially reasonable terms as shall be satisfactory to
it, in its sole discretion.
7.8 Tax Matters. No new elections with respect to Taxes, or changes in
current elections with respect to Taxes, affecting DCS shall have been made
after the date of this Agreement without the prior written consent of Vertex.
7.9 Letter of Non-Applicability. DCS shall have secured a Letter of
Non-Applicability from the NJDEP stating that none of the Facilities is an
"industrial establishment" as such term is defined under ISRA (provided,
however, that the failure to have obtained such Letter of Non-Applicability
shall not itself constitute a failure to fulfill this condition to Closing
unless such failure is due to a determination by NJDEP that the Facilities do
constitute industrial establishments).
7.10 Termination of Certain Agreements. DCS and/or the Stockholders, as
the case may be, shall have terminated, and shall have paid or satisfied, prior
to, or simultaneously with, the Closing, all obligations and liabilities of any
of them (or, in the case of obligations and liabilities of the Stockholders,
shall pay or satisfy such obligations and liabilities out of their respective
proceeds from the sale of the Shares) under, (i) all agreements with DCS'
lenders with respect to credit lines or other financial commitments, and shall
have no outstanding payment or other obligations with respect thereto, and (ii)
all agreements with finders, brokers and investment bankers relating to the
transactions contemplated hereby or any other transactions involving DCS or its
affiliates (whether or not consummated) prior to the Closing Date.
ARTICLE 8
CLOSING
On the Closing Date:
8.1 Deliveries by DCS and the Stockholders to Vertex. DCS and each
Stockholder, as applicable, shall deliver (or cause to be delivered) to Vertex:
(a) the Ancillary Agreements, duly executed by each party
thereto other than Vertex;
(b) any Consents required to be obtained by DCS or the
Stockholders;
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(c) the DCS Closing Certificate and each of the Stockholder's
Closing Certificates;
(d) an opinion of Greenberg Traurig, counsel to DCS and the
Stockholders, dated as of the Closing Date, in a form reasonably satisfactory to
Vertex;
(e) a statement prepared in accordance with Section 1445 of
the Code and Treasury Regulations thereunder certifying that DCS is not, and was
not at any time after January 1, 1993, a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code;
(f) all Certificates representing the Shares; and
(g) the estimated financial statements and certificate
required by Section 2.2.
8.2 Deliveries by Vertex. Vertex shall deliver to the Stockholders, or
any other appropriate Persons:
(a) the Ancillary Agreements to which Vertex is a party, duly
executed by it;
(b) any Consents required to be obtained by Vertex;
(c) the Vertex Closing Certificate;
(d) an opinion of McCarter & English, LLP, special counsel to
Vertex, dated as of the Closing Date, in a form reasonably satisfactory to DCS
(which opinion may rely, as to certain matters, upon the opinion of Jeffrey
Marks, Esq., general counsel to Vertex);
(e) the Aggregate Purchase Price, payable as set forth in
Section 2.1(c) hereof.
ARTICLE 9
INDEMNIFICATION
9.1 Survival of Representations, Etc. All statements contained in this
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of the parties pursuant to this Agreement or in
connection with the transactions contemplated hereby, including, without
limitation, the Ancillary Agreements, shall be deemed to be representations and
warranties by such party hereunder. The representations and warranties contained
herein shall survive the Closing Date for a period of fifteen (15) months, and
claims based upon or arising out of such representations and warranties, as well
as any claims based upon or arising out of any covenants and agreements herein
or made hereunder, may be asserted at any time after
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the Closing Date within such period, with the exception of claims based upon or
arising out of Section 3.23, and claims alleging fraud, which shall survive the
Closing or, in the case of claims of fraud, be asserted and subject to
indemnification hereunder, until the expiration of the applicable statute or
statutes of limitation (including any extensions thereof). No investigation made
by any of the parties hereto (whether prior to, on or after the Closing Date)
shall in any way limit the representations and warranties of the parties. On the
Closing Date all representations and warranties contained in this Agreement and
made by DCS and the Stockholders shall expire as to DCS and thereafter will be
deemed to have been made exclusively by the Stockholders.
9.2 Indemnification.
(a) General.
(i) Subsequent to the Closing, the Stockholders
shall, jointly and severally, indemnify Vertex, its Affiliates, and each of
their respective officers, directors, employees, stockholders and agents
("Vertex Indemnified Parties") against, and hold each of the Vertex Indemnified
Parties harmless from any damage, claim, loss, cost, liability or expense,
including without limitation, interest, penalties, reasonable attorneys' fees
and expenses of investigation, diminution of value, response action, removal
action or remedial action (collectively "Damages") incurred by any such Vertex
Indemnified Party, that arise out of, in connection with, or related to, the
breach of any warranty, representation, covenant or agreement of DCS or any
Stockholder other than any warranty or representation contained in Article 3A of
this Agreement .
(ii) Subsequent to the Closing, each Stockholder
shall, severally and not jointly, indemnify the Vertex Indemnified Parties
against, and hold each of the Vertex Indemnified Parties harmless from, any
Damages incurred by such Vertex Indemnified Party, that arise out of, in
connection with, or related to, the breach of any warranty or representation of
such Stockholder contained in Article 3A of this Agreement.
(iii) Subsequent to the Closing, Vertex shall
indemnify the Stockholders, their Affiliates, and each of their respective
partners, officers, directors, employees, stockholders and agents, as the case
may be ("Stockholder Indemnified Parties"), against, and hold each of the
Stockholder Indemnified Parties harmless from, any Damages incurred by such
Stockholder Indemnified Party, that are incident to, arise out of, in connection
with, or related to, whether directly or indirectly, the breach of any warranty,
representation, covenant or agreement of Vertex contained in this Agreement, any
schedule or in any certificate or instrument of conveyance delivered by or on
behalf of Vertex pursuant to this Agreement or in connection with the
transactions contemplated hereby.
(iv) Notwithstanding the foregoing, the liability of
the Stockholders as indemnifying parties (the "DCS Indemnifying Parties") for
all claims hereunder, other than claims based upon or arising out of Section
3.23 or allegations of fraud, shall be subject to the following limitations: (A)
the DCS Indemnifying Parties shall have no liability for such claims until the
aggregate amount of the Damages incurred shall exceed $250,000, in which case
the DCS Indemnifying Parties shall be liable only for the portion of the Damages
exceeding
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$250,000; and (B) the DCS Indemnifying Parties' aggregate liability for all such
claims shall not exceed $3,000,000.
The term "Damages" as used in this Section 9.2 is not limited to
matters asserted by third parties against Stockholder Indemnified Parties or
Vertex Indemnified Parties, but includes Damages incurred or sustained by such
persons in the absence of third party claims.
(b) Procedure for Claims.
(i) If a claim for Damages (a "Claim") is to be made
by a person entitled to indemnification hereunder, the person claiming such
indemnification (the "Indemnified Party"), subject to clause (ii) below, shall
give written notice (a "Claim Notice") to the indemnifying person (the
"Indemnifying Party"), as soon as practicable after the Indemnified Party
becomes aware of any fact, condition or event which may give rise to Damages for
which indemnification may be sought under this Section 9.2. The failure of any
Indemnified Party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except and only to the extent that the Indemnifying
Party demonstrates actual material damage caused by such failure. In the case of
a Claim involving the assertion of a claim by a third party (whether pursuant to
a lawsuit or other legal action or otherwise, a "Third-Party Claim"), if the
Indemnifying Party shall acknowledge in writing to the Indemnified Party that
the Indemnifying Party shall be obligated to indemnify the Indemnified Party
under the terms of its indemnity hereunder in connection with such Third-Party
Claim, then (A) the Indemnifying Party shall be entitled and, if it so elects,
shall be obligated at its own cost, risk and expense, (1) to take control of the
defense and investigation of such Third-Party Claim and (2) to pursue the
defense thereof in good faith by appropriate actions or proceedings promptly
taken or instituted and diligently pursued, including, without limitation, to
employ and engage attorneys of its own choice reasonably acceptable to the
Indemnified Party to handle and defend the same, and (B) the Indemnifying Party
shall be entitled (but not obligated), if it so elects, to compromise or settle
such claim, which compromise or settlement shall be made only with the written
consent of the Indemnified Party, such consent not to be unreasonably withheld.
In the event the Indemnifying Party elects to assume control of the defense and
investigation of such lawsuit or other legal action in accordance with this
Section 9.2(b), the Indemnified Party may, at its own cost and expense,
participate in the investigation, trial and defense of such Third-Party Claim;
provided that, if the named persons to a lawsuit or other legal action include
both the Indemnifying Party and the Indemnified Party and the Indemnified Party
has been advised in writing by counsel that there may be one or more legal
defenses available to such Indemnified Party that are different from or
additional to those available to the Indemnifying Party, the Indemnified Party
shall be entitled, at the Indemnifying Party's cost, risk and expense, to
separate counsel of its own choosing. If the Indemnifying Party fails to assume
the defense of such Third-Party Claim in accordance with this Section 9.2 within
10 calendar days after receipt of the Claim Notice, the Indemnified Party
against which such Third-Party Claim has been asserted shall (upon delivering
notice to such effect to the Indemnifying Party) have the right to undertake, at
the Indemnifying Party's cost, risk and expense, the defense, compromise and
settlement of such Third-Party Claim on behalf of and for the account of the
Indemnifying Party; provided that such Third-Party Claim shall not be
compromised or settled without the written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. In the event the Indemnifying
Party assumes the defense of the claim, the Indemnifying Party shall keep the
Indemnified Party reasonably
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informed of the progress of any such defense, compromise or settlement, and in
the event the Indemnified Party assumes the defense of the claim, the
Indemnified Party shall keep the Indemnifying Party reasonably informed of the
progress of any such defense, compromise or settlement. The Indemnifying Party
shall be liable for any settlement of any Third-Party Claim effected pursuant to
and in accordance with this Section 9.2 and for any final judgment (subject to
any right of appeal), and the Indemnifying Party agrees to indemnify and hold
harmless each Indemnified Party from and against any and all Damages by reason
of such settlement or judgment.
(ii) Notwithstanding clause (i) above, in the event
that any Indemnified Party is a Stockholder Indemnified Party, any Claim Notice,
election or other notification or correspondence required pursuant to such
clause (i) shall only be valid if it is delivered by the Stockholders to Vertex
or DCS.
9.3 No Right of Contribution. After the Closing, no Stockholder shall
have any right of contribution against the Surviving Corporation for any breach
of any representation, warranty, covenant or agreement of DCS. The Stockholders
and Vertex shall be entitled to specific performance and injunctive relief,
without posting bond or other security, for the purpose of asserting their
respective rights under this Article 9. The remedies described in this Article 9
shall be in addition to, and not in lieu of, any other remedies at law or in
equity that the parties may elect to pursue.
9.4 Indemnification Escrow. If the Indemnification Escrow Agreement is
in effect at the time an assertion of indemnification is made by a Vertex
Indemnified Party, the obligations of the Stockholders hereunder with respect to
the Damages may, at the option of the Vertex Indemnified Party, be satisfied
either by the distribution to the Vertex Indemnified Party of the
Indemnification Escrow Amount (or such part thereof as shall satisfy such
obligations) held pursuant to the Indemnification Escrow Agreement or by the
Stockholders directly in cash.
ARTICLE 10
MISCELLANEOUS
10.1 Termination.
(a) This Agreement may be terminated at any time prior to
Closing:
(i) By mutual written consent of Vertex and DCS;
(ii) By Vertex or DCS if the Closing shall not have
occurred on or before April 30, 2000, other than due to a breach of this
Agreement by the party seeking to terminate;
(iii) By Vertex if there is a material breach of any
representation or warranty set forth in Article 3 or 3A or any covenant or
agreement to be complied with or performed by DCS or any Stockholder pursuant to
the terms of this Agreement; or
43
<PAGE>
(iv) By DCS if there is a material breach of any
representation or warranty set forth in Article 4 hereof or of any covenant or
agreement to be complied with or performed by Vertex pursuant to the terms of
this Agreement;
(b) In the event of termination of this Agreement, no party
hereto shall have any liability to any other party to this Agreement, except for
any willful breach of, or knowing misrepresentation made in, this Agreement
occurring prior to the proper termination of this Agreement.
10.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by DCS or any Stockholder without the
prior written consent of Vertex, or by Vertex without the prior written consent
of DCS or the Stockholders.
10.3 Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the other
shall be in writing and delivered in person or by courier, telegraphed, telexed,
sent by facsimile transmission, sent via overnight delivery service or mailed by
registered or certified mail (such notice to be effective upon receipt), as
follows:
If to a Stockholder, to the address of such Stockholder as set forth on
Annex 1 hereto.
If prior to the Closing, to DCS:
Data Control Systems, Inc.
3619 Kennedy Road
South Plainfield, New Jersey 07080
Attention: Paul Buccola
With a copy to:
Greenberg Traurig
1750 Tysons Boulevard, 12th Floor
Tysons Corner, Virginia 22102
Attention: Lee R. Marks, Esq.
If to Vertex or, if after the Closing, to DCS:
Vertex Interactive, Inc.
23 Carol Street
Clifton, New Jersey 07014
Attention: Nicholas R. Toms
With a copy to:
McCarter & English, L.L.P.
Four Gateway Center
100 Mulberry Street
44
<PAGE>
Newark, New Jersey 07101-0652
Attention: David F. Broderick, Esq.
or to such other place and with such other copies as either party may
designate as to itself by written notice to the others.
10.4 Choice of Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
New Jersey.
10.5 Descriptive Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.6 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto, and the Ancillary Agreements, constitute
the entire agreement among the parties pertaining to the subject matter hereof
and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
10.7 Counterparts. This Agreement and all Ancillary Agreements may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
10.8 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
10.9. Publicity. Except as otherwise required by law, neither party
shall issue any press release or make any public statement regarding the
transactions contemplated hereby without the prior approval of the other
parties, and the parties hereto shall issue a mutually acceptable press release
as soon as practicable after the date hereof and after the Closing Date.
Notwithstanding the foregoing, Vertex shall be permitted to make any public
statement without obtaining the consent of any other party hereto if (i) the
disclosure is required by law and (ii) Vertex has first used its reasonable
efforts to consult with (but not to obtain the consent of) the other parties
about the form and substance of such disclosure.
10.10. No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, except
as specifically set forth in Article 9 hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
VERTEX INTERACTIVE, INC.:
By: /s/ Ronald C. Byer
-----------------------------------
Name: Ronald C. Byer
Title: President
DATA CONTROL SYSTEMS, INC.:
By: /s/ Paul Buccola
---------------------------------
Name: Paul Buccola
Title: President
STOCKHOLDERS:
/s/ Paul Buccola
---------------------------------
Paul Buccola
/s/ Seymour Klausner
---------------------------------
Seymour Klausner
/s/ Timothy Callahan
---------------------------------
Timothy Callahan
/s/ Alvin Levenberg
---------------------------------
Alvin Levenberg
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<PAGE>
ANNEX 1
STOCKHOLDERS OF DCS
<TABLE>
<CAPTION>
Name No. of Shares
<S> <C>
Paul Buccola 50
Seymour Klausner 50
Timothy Callahan 50
Alvin Levenberg 50
</TABLE>
<PAGE>
EXHIBIT 4.1
REGISTRATION AGREEMENT
REGISTRATION AGREEMENT dated as of March 30, 2000 among Vertex
Interactive, Inc., a New Jersey corporation (the "Company"), the clients of
Zesiger Capital Group LLC listed on the signature pages hereto ("Zesiger
Purchasers"), Federal Partners, L.P., a New York limited partnership
("Federal"), Sofaer Funds SCI Global Hedge Fund, MeesPierson (Cayman) Limited,
trustee ("Sofaer"), RIT Capital Partners plc, a corporation incorporated under
the laws of the United Kingdom ("Rothschild"), Mr. Baruch Halpern ("Mr.
Halpern"), Mr. Mayer Offman ("Mr. Offman"), P.A.W. Partners, L.P., a Delaware
limited partnership ("Partners"), P.A.W. Offshore Fund, Ltd., a Bahamas offshore
corporation ("Offshore"), and Mr. Antoine Tristani ("Mr. Tristani," and together
with the Zesiger Purchasers, Federal, Sofaer, Rothschild, Mr. Halpern, Mr.
Offman, Partners, and Offshore, the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Company and Zesiger Purchasers have entered into
a Subscription Agreement, dated as of the date hereof (the "Zesiger Subscription
Agreement"), pursuant to which Zesiger Purchasers purchased an aggregate of
1,250,000 shares (the "Zesiger Registrable Stock") of common stock, par value
$.005 per share, of the Company ("VTX Common Stock");
WHEREAS, the Company and Federal have entered into a
Subscription Agreement, dated as of the date hereof (the "Federal Subscription
Agreement"), pursuant to which Federal purchased 625,000 shares of VTX Common
Stock (the "Federal Registrable Stock");
WHEREAS, the Company and Sofaer have entered into a
Subscription Agreement, dated as of the date hereof (the "Sofaer Subscription
Agreement), pursuant to which Sofaer purchased 312,500 shares of VTX Common
Stock (the "Sofaer Registrable Stock);
WHEREAS, the Company and Rothschild have entered into a
Subscription Agreement, dated as of the date hereof (the "Rothschild
Subscription Agreement), pursuant to which Rothschild purchased 312,500 shares
of VTX Common Stock (the "Rothschild Registrable Stock);
WHEREAS, the Company and Mr. Halpern have entered into a
Subscription Agreement, dated as of the date hereof (the "Halpern Subscription
Agreement"), pursuant to which Mr. Halpern purchased 62,500 shares of VTX Common
Stock (the "Halpern Registrable Stock);
WHEREAS, the Company and Mr. Offman have entered into a
Subscription Agreement, dated as of the date hereof (the "Offman Subscription
Agreement"), pursuant to
<PAGE>
which Mr. Offman purchased 200,000 shares of VTX Common Stock (the "Offman
Registrable Stock);
WHEREAS, the Company and Partners have entered into a
Subscription Agreement, dated as of the date hereof (the "Partners Subscription
Agreement"), pursuant to which Partners purchased 62,500 shares of VTX Common
Stock (the "Partners Registrable Stock");
WHEREAS, the Company and Offshore have entered into a
Subscription Agreement, dated as of the date hereof (the "Offshore Subscription
Agreement"), pursuant to which Offshore purchased 62,500 shares of VTX Common
Stock (the "Offshore Registrable Stock");
WHEREAS, the Company and Mr. Tristani have entered into a
Subscription Agreement, dated as of the date hereof (the "Tristani Subscription
Agreement," and together with the Zesiger Subscription Agreement, the Federal
Subscription Agreement, the Sofaer Subscription Agreement, the Rothschild
Subscription Agreement, the Halpern Subscription Agreement, the Offman
Subscription Agreement, the Partners Subscription Agreement, and the Offshore
Subscription Agreement, the "Subscription Agreements"), pursuant to which Mr.
Tristani purchased 62,500 shares of VTX Common Stock (the "Tristani Registrable
Stock," and together with the Zesiger Registrable Stock, the Federal Registrable
Stock, the Sofaer Registrable Stock, the Rothschild Registrable Stock, the
Halpern Registrable Stock, the Offman Registrable Stock, the Partners
Registrable Stock, and the Offshore Registrable Stock, the "Registrable Stock");
NOW, THEREFORE, in consideration of the respective covenants
and conditions of the parties set forth herein and in the Subscription
Agreements, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. Registration of Registrable Stock.
(a) Filing of Registration Statement. The Company shall, as
soon as practicable following the date hereof but in no event later than 180
days after the date hereof, prepare and file a registration statement on Form
S-3 (the "Registration Statement") with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (collectively, the "Securities Act") covering
the offering and sale of the Registrable Stock by the Shareholders in privately
negotiated transactions, "brokers' transactions" or in transactions directly
with a "market maker," as such terms are defined in paragraphs (f) and (g) of
Rule 144 under the Securities Act ("Brokers' Transactions").
(b) Effectiveness; Amendments. The Company will use its
reasonable best efforts to cause to be declared effective as soon as possible
after filing and, except as set forth below, to remain effective under the
Securities Act, the Registration Statement and will prepare and file with the
SEC any amendments or post-effective amendments as may be necessary to keep the
Registration Statement effective under the Securities Act. The Company will
promptly
2
<PAGE>
notify the Shareholders in writing of the date on which the Registration
Statement is declared effective. Notwithstanding the foregoing, (i) the Company
shall not be required to keep the Registration Statement effective for purposes
of the sale of Registrable Stock thereunder at any time after the earlier of the
date (A) on which all shares of Registrable Stock have been sold or are no
longer outstanding, and (B) which is two years (plus any time for delays arising
from events described in clause (ii) below or Section 3(i) ) following the
acquisition from the Company of the Registrable Stock, or such earlier date as
of which the Shareholders shall be able to make use of the safe-harbor
provisions of Rule 144(k) under the Act (or any successor rule) with respect to
sales of Registrable Stock, and (ii) the Company shall not be obligated to keep
the Registration Statement or the prospectus included therein (the "Prospectus")
current during any period (A) of up to 60 days per calendar year if the
Company's chief executive officer advises the Shareholders that he has
determined in good faith that valid business reasons concerning a potential
corporate transaction make doing so inadvisable, or (B) when financial
statements do not satisfy the requirements of the last sentence of paragraph (b)
of Rule 3-12 of Regulation S-X (or any successor rule) to the extent, and only
to the extent, that the SEC interprets such sentence as being applicable to the
continued effectiveness of the Registration Statement.
(c) Copies of Documents. During the period that the Company
has agreed to use its reasonable best efforts to cause the Registration
Statement to remain effective (the "Effectiveness Period"), the Company shall
furnish to each Shareholder such number of copies of the Registration Statement,
the Prospectus and any amendments and supplements thereto and any documents
incorporated by reference in the Registration Statement as such Shareholder
shall reasonably request.
(d) Blue Sky Compliance. The Company shall register or qualify
or cooperate with the Shareholders in connection with the notification,
coordination, registration or qualification (or obtain exemption from such
registration or qualification) of the Registrable Stock under such other
securities or blue sky laws of such jurisdictions in the United States as the
Shareholders reasonably shall request and do any and all other acts and things
which may be reasonably necessary to enable the Shareholders to consummate the
disposition of the Registrable Stock by them under the Registration Statement in
such jurisdictions during the Effectiveness Period; provided, however, that in
no event shall the Company be required to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified, to subject itself
to taxation in any jurisdiction where it has not theretofore done so or to take
any action which would subject it to general service of process in any such
jurisdiction where it is not then so subject.
(e) Notification. During the Effectiveness Period, the Company
shall notify the Shareholders promptly, and (if requested by any Shareholder)
confirm such notice in writing, (i) of any request by the SEC or any other
regulatory authority for amendments or supplements to the Registration Statement
or the Prospectus or for additional information relating thereto, (ii) of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
(iii) of the receipt by the Company of any notification or stop order with
respect to the suspension of the registration, qualification or exemption from
registration or qualification of any of the shares of Registrable Stock covered
by the Registration Statement for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (iv) of the happening of any
event which
3
<PAGE>
makes any statement made in such Registration Statement or in the Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or which requires the making of any changes in
such Registration Statement or Prospectus so that such documents will not
contain any untrue statement of a material fact or omit to state any 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.
(f) Supplements and Post-Effective Amendments. Subject to the
provisions of clause (ii) of the third sentence of Section 1(b) above, during
the Effectiveness Period, upon the occurrence of any event contemplated by
clause (i) or (iv) of paragraph (e) above, the Company will prepare a supplement
or post-effective amendment to the Registration Statement or a supplement to the
Prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Stock being sold thereunder, the Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) Listing. The Company shall cause the Registrable Stock
covered by the Registration Statement to be listed on each securities exchange
or securities quotation system, if any, on which similar securities issued by
the Company are then listed.
(h) Correspondence with the SEC. The Company shall, upon
request from any Shareholder, deliver promptly to such Shareholder copies of all
correspondence between the SEC and the Company, its counsel or auditors.
(i) Stock Certificates. The Company will cooperate with the
Shareholders to facilitate the timely preparation and delivery of certificates
representing Registrable Stock sold under the Registration Statement, which
certificates shall not have any restrictive legends.
2. Piggyback Registration. If at any time prior to the second
anniversary of the date hereof the Company proposes to file a registration
statement under the Securities Act with respect to an offering of VTX Common
Stock (except on Form S-4 or Form S-8 or any successor forms thereto), for its
own account, then the Company shall give written notice of such proposed filing
to the holders of Registrable Stock as far in advance of the anticipated filing
date as is practicable (the "Piggyback Notice"). The Piggyback Notice shall
offer such holders the opportunity to register such amount of Registrable Stock
as each such holder may request (a "Piggyback Registration"); subject in all
events to the agreement of the underwriter or underwriters of the offering
contemplated by such registration statement that such shares of Registrable
Stock can be included in such registration statement without adversely affecting
such offering. Any reduction in the number of securities to be so offered shall
be (i) first, pro-rata among all security holders who are exercising "piggyback"
registration rights, based on the number of registrable securities originally
proposed to be sold by each of them, and (ii) second, pro-rata among all
security holders who are exercising "demand" registration rights pursuant to a
registration rights agreement with the Company, based on the number of
registrable securities originally proposed to be sold by each of them.
4
<PAGE>
3. Obligations of Shareholders. Following the filing of the
Registration Statement and during any period that the Registration Statement is
effective, each Shareholder shall:
(a) not effect any stabilization transactions or engage in any
stabilization activity in connection with the Company common shares in
contravention of Regulation M under the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(b) furnish each broker through whom any Shareholder offers
Registrable Stock such number of copies of the Prospectus as the broker may
require and otherwise comply with prospectus delivery requirements under the
Securities Act;
(c) Intentionally omitted;
(d) not (and shall not permit any Affiliated Purchaser (as
defined in Rule 10b-6 under the Exchange Act) to) bid for or purchase for any
account in which any Shareholder has a beneficial interest, or attempt to induce
any other person to purchase, any Company common shares in contravention of
Regulation M under the Exchange Act;
(e) Intentionally omitted;
(f) cooperate with the Company as the Company fulfills its
obligations under Section 1(d) hereof;
(g) furnish such information concerning such Shareholder as
the Company may from time to time reasonably request;
(h) sell Registrable Stock only in privately negotiated
transactions or Brokers' Transactions; and
(i) not sell under the Registration Statement during any
period after the Company has provided notice to such Shareholder pursuant to
Section 1(e)(iv) above and until the Company provides to such Shareholder notice
that the Registration Statement no longer fails to state a material fact
required to be stated therein, misstates a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
made not misleading.
4. Expenses. The Company shall be responsible for the payment
of (x) all registration and filing fees relating to registration of the offering
by the Shareholders of the Registrable Stock, including, without limitation,
registration and filing fees (A) with respect to filings required to be made
with the SEC or the NASD and (B) with respect to registrations and filings made
under state securities or blue sky laws and (y) any expenses incurred by the
Company in connection with the preparation of the Registration Statement and the
Prospectus. The Shareholders shall be responsible for the payment of fees and
disbursements of counsel to the Shareholders in connection with the preparation
of the Registration Statement and the Prospectus and fees paid to brokers in
connection with the sale of any of the Registrable Stock.
5
<PAGE>
5. Indemnification.
(a) Indemnity by the Company. The Company shall (i) indemnify
and hold harmless each Shareholder and each person who controls such
Shareholder, within the meaning of Section 15 of the Securities Act, against any
losses, claims, damages or liabilities ("Losses"), to which each such
indemnified party may become subject, under the Securities Act or otherwise,
insofar as such Losses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or Prospectus, as amended or
supplemented if the Company has furnished any supplements or amendments thereto
(if used during the period the Company is required to keep the Registration
Statement and Prospectus current), or any document filed under a state
securities or blue sky law (collectively, "Registration Documents") or insofar
as any Losses (or actions in respect thereof) arise out of or are based upon the
omission or alleged omission to state in any Registration Document a material
fact required to be stated therein or necessary to make the statements made
therein (in the case of a prospectus, in the light of the circumstances under
which they were made), not misleading, and (ii) reimburse each indemnified party
for all legal or other expenses reasonably incurred by it in connection with
investigating or defending any such Losses or actions, including any amounts
paid in settlement of any litigation, commenced or threatened, if such
settlement is effected with the prior written consent of the Company; provided,
however, that the Company shall not be liable for any Losses arising out of or
based upon any untrue statement or omission made in any Registration Document in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Shareholder expressly for use in the preparation
of the Registration Document; and provided, further, that the Company shall not
be liable to a particular indemnified party under the indemnity agreement in
this Section 5(a) with respect to the Prospectus, as amended or supplemented, to
the extent that the Loss arises from the sale of any shares of Registrable Stock
by such indemnified party to the person asserting Loss and to which there was
not sent or given, within the time required by the Securities Act, a copy of the
Prospectus as then amended or supplemented, if the Company has previously
furnished copies thereof to such indemnified party and such Prospectus as then
amended or supplemented has corrected the misstatement or omission at issue.
(b) Indemnity by Shareholders. Each Shareholder shall,
severally and not jointly, (i) indemnify and hold harmless the Company, any
officer, director, employee or agent of the Company, and each other person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act against any Losses to which each such indemnified party may become subject
under the Securities Act or otherwise, insofar as such Losses (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Document, or
arise out of or are based upon the omission or alleged omission to state in any
Registration Document a material fact required to be stated therein or necessary
to make the statements made therein (in the case of a prospectus, in the light
of the circumstances under which they were made,) not misleading, and (ii)
reimburse each indemnified party for all legal or other expenses reasonably
incurred by it in connection with investigating or defending any such Losses or
action, including any amounts paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the prior written consent of
such Shareholder; provided, however, that such indemnification or
6
<PAGE>
reimbursement shall be payable only if, and to the extent that, any Losses arise
out of or are based upon an untrue statement or omission made in any
Registration Document in reliance upon and in conformity with written
information furnished to the Company by such Shareholder expressly for use in
the preparation thereof.
(c) Procedure for Indemnification. Promptly after receipt by
an indemnified party, under Section 5(a) or 5(b), of notice of the commencement
of any action, the indemnified party shall notify the indemnifying party in
writing of the commencement thereof, if a claim in respect thereof is to be made
against an indemnifying party under any of these Sections; but the omission of
such notice shall not relieve the indemnifying party from liability which it may
have to the indemnified party under this Section 5, except to the extent that
the indemnifying party is actually prejudiced in any material respect by such
failure to give notice, and shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than under this
Section 5. In case any action is brought against the indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and to the extent that
it chooses, to assume the defense thereof with counsel reasonably satisfactory
to the indemnified party, and after notice from the indemnifying party to the
indemnified party that it so chooses, the indemnifying party shall not be liable
for any legal or other expenses subsequently incurred by the indemnified party
in connection with the defense thereof; provided however, that (i) if the
indemnifying party fails to take reasonable steps necessary to defend diligently
the claim within 20 days after receiving notice from the indemnified party that
the indemnified party believes it has failed to do so, or (ii) if the
indemnified party who is a defendant in any action or proceeding which is also
brought against the indemnifying party reasonably shall have concluded that
there are legal defenses available to the indemnified party which are not
available to the indemnifying party, or (iii) if representation of both parties
by the same counsel is otherwise inappropriate under applicable standards of
professional conduct, the indemnified party shall have the right to assume or
continue its own defense as set forth above. In no event shall the indemnifying
party be responsible for more than one firm of counsel for all indemnified
parties.
(d) Non-Exclusive Indemnity. Any indemnity agreements
contained herein shall be in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law or contract
and shall remain operative and in full force and effect regardless of any
investigation made or omitted by or on behalf of any indemnified party.
(e) Contribution. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and the indemnified party on the other
(determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission), or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative fault of the indemnifying party and the
7
<PAGE>
indemnified party, but also the relative benefits received by the indemnifying
party on the one hand (taking into consideration the fact that the provision of
the registration rights hereunder served as an inducement to the Shareholders to
enter into the Subscription Agreements) and the indemnified party on the other,
as well as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
6. Miscellaneous.
(a) Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York without giving
effect to the choice of law principles thereof.
(b) Entire Agreement; Amendment; Waiver. This Agreement: (i)
contains the entire agreement among the parties hereto with respect to the
subject matter hereof, (ii) supersedes all prior written agreements and
negotiations and oral understandings, if any, with respect thereto, and (iii)
may not be amended or supplemented except by an instrument or counterparts
thereof in writing signed by the Company and each of the Shareholders. No waiver
of any term or provision of this Agreement shall be effective unless in writing
signed by the party to be charged. The waiver by any party of a breach of any
term or provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
(c) Binding Effect. This Agreement shall be binding on and
inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns; provided, however, that no party hereto
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the prior written consent of the other parties
hereto.
(d) Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
(e) Notices. All notices, requests, consents and other
communications to any party hereunder shall be in writing and shall be given
either by personal service, certified mail, return receipt requested, overnight
courier or telecopy, addressed as follows:
if to the Company, to:
Vertex Interactive, Inc.
23 Carol Street
Clifton, NJ 07014
Attn: Nicholas R.H. Toms
Facsimile No.: 973-472-0814
with a copy to:
8
<PAGE>
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attn: John T. O'Connor, Esq.
Facsimile No.: 212-530-5219
and to:
Law Offices of Jeffrey Marks, P.C.
415 Clifton Avenue
Clifton, NJ 07015
Attn: Jeffrey D. Marks
Facsimile No.: 973-253-8858
if to any Zesiger Purchaser, to:
Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Mary Estabil
Facsimile No.: 212-508-6359
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108
Attn: Lynette C. Fallon
Facsimile No.: 617-227-4420
if to Federal, to:
Federal Partners, L.P.
c/o The Clark Estates, Inc.
One Rockefeller Plaza
Suite 3100
New York, NY 10020
Attn: Stephen M. Duff
Facsimile No.: 212-977-3425
with a copy to:
Winthrop, Stimson, Putnam & Roberts
1 Battery Park Plaza
New York, NY 10004
Attn: Robin L. Spear
Facsimile No.: 212-858-1500
9
<PAGE>
if to Sofaer, to:
MeesPierson (Cayman) Limited as trustee of
Sofaer Funds SCI Global Hedge Fund
P.O. Box 2003 GT
Grand Pavillion Commercial Centre
Bougainvillea Way
802 West Bay Road
Grand Cayman
Facsimile No.: 345 9498340
Attn: Kevin Holloway
with a copy to:
Sofaer Capital Inc.
C/o Sofaer Administration Limited
22/F Entertainment Building
30 Queen's Road Central
Hong Kong
Facsimile No.: 852 25302913
Attn: Winnie Leung
if to Rothschild, to:
RIT Capital Partners plc
Spencer House
27 St. James's Place
London SW1A1NR
Facsimile No.: 44 171 493 5765
Attn: Duncan Budge
with a copy to:
Sofaer Capital Inc.
C/o Sofaer Administration Limited
22/F Entertainment Building
30 Queen's Road Central
Hong Kong
Facsimile No.: 852 2530 2913
Attn: Winnie Leung
if to Mr. Halpern, to:
10
<PAGE>
Mr. Baruch Halpern
c/o Halpern Capital Advisors
575 Lexington Avenue
4th Floor
New York, NY 10022
Facsimile No.: 212-527-7543
if to Mr. Offman, to:
Mr. Mayer Offman
265 E. 66th Street
Apt. 11C
New York, NY 10021
if to Partners, to:
P.A.W. Partners, L.P.
10 Glenville Street
Greenwich, Conn 06831
Attn: John Ernenwein
Facsimile No.: 203-531-8932
if to Offshore, to:
P.A.W. Offshore Fund, Ltd.
c/o P.A.W. Partners, L.P.
10 Glenville Street
Greenwich, Conn 06831
Attn: John Ernenwein
Facsimile No.: 203-531-8932
if to Mr. Tristani, to:
Mr. Antoine Tristani
2241 Sacramento Street
Apt. #2
San Francisco, CA 94115
or to such other address as any party may hereafter specify to the other parties
hereto by notice sent in accordance with this Section 6(e). Each such notice,
request or other communication shall be effective when delivered at the address
specified in this Section 6(e).
(f) Headings; Execution in Counterparts. The headings and
captions contained herein are for convenience of reference only and shall not
control or affect the meaning or construction of any provision hereof. This
Agreement may be executed in any number of
11
<PAGE>
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
(g) Zesiger Purchaser Representative. By the execution and
delivery of this Agreement, each Zesiger Purchaser irrevocably constitutes and
appoints Zesiger Capital Group LLC (the "Zesiger Purchasers' Representative") as
such Zesiger Purchasers' true and lawful attorney-in-fact, with full powers of
substitution to act in such Zesiger Purchaser's name, place and stead with
respect to the subject matter of this Agreement, as amended, and all matters
related thereto. Each of the parties hereto and all third parties may
conclusively and absolutely rely, without inquiry, upon the action of the
Zesiger Purchasers' Representative as the act of the Zesiger Purchasers in
connection with the subject matter of this Agreement. Notice of any change in
the identity of the Zesiger Purchasers' Representative shall be given to each of
the other parties hereto over the signature of each Zesiger Purchaser, and no
party hereto shall be required to recognize the resignation or replacement of
the Zesiger Purchasers' Representative until such notice is received by the
other parties hereto. Each Zesiger Purchaser ratifies and confirms all that the
Zesiger Purchasers' Representative shall do or cause to be done by virtue of its
appointment as the Zesiger Purchasers' Representative hereunder. Any notices or
documents to be delivered hereunder to any Zesiger Purchaser need only be made
to the Zesiger Purchaser Representative.
12
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by or on
behalf of each of the parties hereto as of the date first above written.
VERTEX INTERACTIVE, INC.
By: /s/ Nicholas R.H. Toms
----------------------
Name: Nicholas R.H. Toms
Title: CEO
FEDERAL PARTNERS, L.P.
By: /s/ Kevin S. Moore
------------------
Name: Kevin S. Moore
Title: President, Ninth Floor
Corporation, its general partner
RIT CAPITAL PARTNERS PLC
By: /s/ Michael Sofaer
------------------
Authorised Signatories of Sofaer Capital Inc.
As agent and authorised investment adviser
MeesPierson (Cayman) Limited as trustee of
Sofaer Funds/ SCI Global Hedge Fund
By: /s/ Michael Sofaer
------------------
Authorised signatories of Sofaer Capital Inc.
Authorised Investment Adviser
/s/ Baruch Halpern
------------------
MR. BARUCH HALPERN
<PAGE>
/s/ Mayer Offman
----------------
MR. MAYER OFFMAN
/s/ Antoine Tristani
--------------------
MR. ANTOINE TRISTANI
P.A.W. PARTNERS, L.P.
By: /s/ John Ernenwein
------------------
Name: John Ernenwein
Title: Chief Operating Officer of General
Partner
P.A.W. OFFSHORE FUND, LTD.
By: /s/ John Ernenwein
------------------
Name: John Ernenwein
Title: Chief Operating Officer of Investment
Advisor
ZESIGER PURCHASERS:
ALZA CORPORATION RETIREMENT PLAN
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
CITY OF MILFORD PENSION & RETIREMENT
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
NFIB EMPLOYEE PENSION TRUST
By: Zesiger Capital Group LLC,
as attorney-in-fact
<PAGE>
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
NFIB CORPORATE ACCOUNT
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
NORWALK EMPLOYEES' PENSION PLAN
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
PUBLIC EMPLOYEE RETIREMENT SYSTEM
OF IDAHO
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
CITY OF STAMFORD FIREMEN'S PENSION
PLAN
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
THE JENIFER ALTMAN FOUNDATION
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
<PAGE>
ASPHALT GREEN, INC.
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
DEAN WITTER FOUNDATION
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
LAZAR FOUNDATION
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
ROANOKE COLLEGE
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
A. CAREY ZESIGER
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
<PAGE>
ALEXA L. ZESIGER
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
BUTLER FAMILY LLC
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
DAVID ZESIGER
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
SALVADOR O. GUTIERREZ
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
THE FERRIS HAMILTON FAMILY TRUST
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
MARY ANN S. HAMILTON TRUST
FOR SELF
By: Zesiger Capital Group LLC,
as attorney-in-fact
<PAGE>
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
HBL CHARITABLE UNITRUST
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
ANDREW HEISKELL
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
HELEN HUNT
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
JEANNE L. MORENCY
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
PSYCHOLOGY ASSOCIATES
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
<PAGE>
LEONARD KINGSLEY
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
PETER LOORAM
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
MARY C. ANDERSON
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
MURRAY CAPITAL, LLC
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
DOMENIC J. MIZIO
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
MORGAN TRUST CO. OF THE BAHAMAS
LTD. AS TRUSTEE U/A/D 11/30/93
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
<PAGE>
NICOLA Z. MULLEN
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
SUSAN URIS HALPERN
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
WILLIAM B. LAZAR
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
WELLS FAMILY LLC
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
HAROLD & GRACE WILLENS JTWROS
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
ALBERT L. ZESIGER
By: Zesiger Capital Group LLC,
as attorney-in-fact
<PAGE>
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
BARRIE RAMSAY ZESIGER
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
DAVID C. HALPERT
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
JAMES F. CLEARY
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
JOHN J. & CATHERINE H. KAYOLA
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
MARY I. ESTABIL
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
<PAGE>
WOLFSON INVESTMENT PARTNERS LP
By: Zesiger Capital Group LLC,
as attorney-in-fact
/s/ James Cleary
----------------
Name: James Cleary
Title: Member
