IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS SCHEDULE 13D IS
BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
ELTRAX SYSTEMS, INC.
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class of Securities)
290375 10 4
(CUSIP Number)
Howard B. Norton
c/o DATATECH
27126 Paseo Espada, Suite 1602
San Juan Capistrano, California 92675
(714) 493-2028
(Name, Address and Telephone Number
of Person Authorized to Receive Notices
and Communications)
May 17, 1996
(Date of Event which Required
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: |_|
Check the following box if a fee is being paid with this statement: |X|
SCHEDULE 13D
CUSIP No. 290375 10 4
- --------------------------------------------------------------------------------
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Howard B. Norton
- --------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
- --------------------------------------------------------------------------------
3) SEC USE ONLY
- --------------------------------------------------------------------------------
4) SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) |_|
- --------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7) SOLE VOTING POWER
-0-
NUMBER OF SHARES BENEFICIALLY 8) SHARED VOTING POWER
OWNED BY EACH REPORTING PERSON 1,983,000
WITH (SEE ITEM 5)
9) SOLE DISPOSITIVE POWER
-0-
10) SHARED DISPOSITIVE POWER
1,983,000
- --------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
1,983,000
- --------------------------------------------------------------------------------
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |_|
- --------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.5%
- --------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON
IN
SCHEDULE 13D
CUSIP No. 290375 10 4
- --------------------------------------------------------------------------------
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Ruby Lee Norton
- --------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
- --------------------------------------------------------------------------------
3) SEC USE ONLY
- --------------------------------------------------------------------------------
4) SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) |_|
- --------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7) SOLE VOTING POWER
-0-
NUMBER OF SHARES BENEFICIALLY 8) SHARED VOTING POWER
OWNED BY EACH REPORTING PERSON 1,983,000
WITH (SEE ITEM 5)
9) SOLE DISPOSITIVE POWER
-0-
10) SHARED DISPOSITIVE POWER
1,983,000
- --------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
1,983,000
- --------------------------------------------------------------------------------
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |_|
- --------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.5%
- --------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON
IN
SCHEDULE 13D
Item 1. Security and Issuer.
This Statement on Schedule 13D (the "Statement") relates to the Common
Stock, $.01 par value (the "Common Stock"), of Eltrax Systems, Inc., a Minnesota
corporation (the "Issuer"). The principal executive offices of the Issuer are
located at Rush Lake Business Park, 1775 Old Highway 8, St. Paul, Minnesota
55112.
Item 2. Identity and Background.
(a)-(c) This Statement is being filed on behalf of Howard B. and Ruby
Lee Norton (the "Reporting Persons" or individually the "Reporting Person") with
respect to their acquisition of One Million Nine Hundred Eighty-Three Thousand
(1,983,000) shares (the "Acquired Shares") of Common Stock from the Issuer in
connection with the acquisition by the Issuer from the Reporting Persons on May
17, 1996 of all of the outstanding shares of common stock of Nordata, Inc., a
California Corporation ("Nordata") and Rudata, Inc., a California corporation
("Rudata" and together with Nordata, the "Acquired Companies"). The names,
addresses, principal occupation and/or nature of business of each Reporting
Person are:
1. Name: Howard B. Norton
Address: c/o DATATECH
27126 Paseo Espada, Suite 1602
San Juan Capistrano, California 92675
Principal Occupation: President
DATATECH
27126 Paseo Espada, Suite 1602
San Juan Capistrano, California 92675
2. Name: Ruby Lee Norton
Address: c/o DATATECH
27126 Paseo Espada, Suite 1602
San Juan Capistrano, California 92675
Principal Occupation: Secretary
DATATECH
27126 Paseo Espada, Suite 1602
San Juan Capistrano, California 92675
(d)-(e) During the last five years, none of the Reporting Persons have
been convicted in a criminal proceeding (excluding traffic violations and
similar misdemeanors) nor have any been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, Federal
or state securities laws or finding any violation with respect to such laws.
(f) Each of the Reporting Persons is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
The source and the amount of funds for the acquisition of shares of
Eltrax Common Stock is hereafter described. All of the shares of Acquired Stock
acquired by the Reporting Persons were issued on May 17, 1996, by the Issuer in
connection with the merger of a wholly-owned subsidiary of the Issuer, Datatech
Acquisition Corporation into Nordata pursuant to the terms of that certain
Agreement and Plan of Merger dated May 14, 1996, between the Issuer, two
wholly-owned subsidiaries of the Issuer, Datatech Acquisition Corporation, a
Minnesota corporation ("Datatech Acquisition Corp.") and Rudata Acquisition
Corporation, a Minnesota corporation ("Rudata Acquisition Corp."), Nordata,
Rudata, and the Reporting Persons (as amended by the parties on May 17, 1996,
the "Definitive Merger Agreement"). Under the terms of the Definitive Merger
Agreement, all of the previously outstanding shares of Nordata were canceled in
exchange for the issuance of the Acquired Shares to the Reporting Persons. All
of the Acquired Shares are held as personal assets of the Reporting Persons.
Item 4. Purpose of Transaction.
On March 19, 1996, the Issuer, Howard B. Norton, Ruby Lee Norton,
Nordata and Rudata signed a letter agreement that contemplated the acquisition
of all of the outstanding Common Stock of Rudata and Nordata in exchange for the
issuance of 2,045,000 shares of Eltrax Common Stock and $830,000, subject to
definitive documentation and closing. The Definitive Merger Agreement was
executed on May 14, 1996, and amended on May 17, 1996 in connection with the
closing (the "Closing") of the transaction on May 17, 1996. Pursuant to the
terms of the Definitive Merger Agreement, 1,983,000 shares of Eltrax were issued
to Howard B. and Ruby Lee Norton, as community property, at the Closing in
connection with the merger of Datatech Acquisition Corp. with and into Nordata
and $1,016,000 was paid to the Reporting Persons in connection with the merger
of Rudata Acquisition Corp. with and into Rudata. The 1,983,000 shares of Eltrax
Common Stock issued in connection with the merger represented approximately
30.5% of the outstanding shares of Common Stock of the Issuer after the Closing
and approximately 43.5% of such outstanding Common Stock of the Issuer prior to
the Closing, without giving effect to outstanding options and warrants, and
25.2% and 33.7%, respectively, after giving effect to all outanding options and
warrants. Of the 1,983,000 shares of Eltrax Common Stock issued to the Reporting
Persons, 450,000 shares (the "Escrowed Shares") were issued in the name of Emseg
& Co., as Escrow Agent under the terms of that certain Escrow Agreement between
the Issuer, the Reporting Persons, and Norwest Bank Minnesota, National
Association, the terms of which provide for the release of the Escrowed Shares
to the Reporting Persons on May 17, 1998, subject to certain claims and
conditions. All of the Acquired Shares issued to the Reporting Persons in
connection with the Merger are "restricted stock," as defined in the rules
promulgated under the Securities Act of 1933, as amended, and have certain Form
S-3 demand registration rights, and "piggyback" registration rights. All
expenses of such registration will be borne by the Issuer.
The Issuer agreed to elect Howard B. Norton to the Issuer's Board of
Directors.
Pursuant to the terms of that certain Agreement dated as of May 17,
1996 by and between the Issuer, the Reporting Persons and William P. O'Reilly,
Clunet R. Lewis, and Mack V. Traynor, III (collectively, the "Eltrax
Principals"): (a) the Reporting Persons have the right from September 1, 1996 to
May 31, 1998 to request the assistance of the Issuer in effecting a private sale
of a portion (the "Assistance Portion") of the Acquired Shares (the Assistance
Portion of the Acquired Shares subject to the foregoing is equal to the lesser
of 1,000,000 shares or shares with $4,000,000 in value); (b) prior to the sale
of the Assistance Portion of the Acquired Shares or the registration of all of
the Acquired Shares for sale in accordance with the Securities Act of 1933, the
Reporting Persons have the right to participate in any private placement
transaction undertaken by the Issuer (other than pursuant to the exercise of
outstanding options, warrants and other pre-existing rights to purchase Eltrax
Common Stock or under the Eltrax 1995 Stock Incentive Plan), and (c) the Eltrax
Principals are restricted from selling any of their shares of Eltrax Common
Stock until the Eltrax Principals have arranged for the sale by the Reporting
Persons of the Assistance Portion of the Acquired Shares; provided, however,
that the foregoing restriction shall lapse on December 31, 1996, if the
Reporting Persons have not notified Eltrax and the Eltrax Principals of their
request for assistance pursuant to clause (a) above by December 31, 1996.
In addition to the foregoing, Nordata, Inc., now a wholly owned
subsidiary of the Issuer, entered into an Employment and NonCompetition
Agreement with each of Howard B. and Ruby Lee Norton, the terms of which
generally provides for the employment by Nordata of Howard B. and Ruby Lee
Norton for a period of five years from May 17, 1996. In addition, the Employment
and NonCompetition Agreement of Howard B. Norton provides for the payment of
certain incentive payments to Howard B. Norton based upon the performance of
Nordata, Inc.
Except as disclosed in this Item 4, no Reporting Person has any current
plans or proposals which relate to or would result in any of the events
described in Items (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a)-(b) The following table sets forth information regarding the
beneficial ownership of the Common Stock and Common Stock Equivalents of the
Issuer as of June 30, 1995, unless otherwise noted, by each Reporting Person.
///
///
///
Shares of Common Stock (or Common
Name Stock Equivalents) Beneficially Owned(1)(2)
- ---- -------------------------------------------
Percent of
Amount Class(3)(4)
------ -----------
Howard B. Norton 1,983,000 30.5%
and Ruby Lee
Norton as community
Property(2)
(c) Other than as described in Item 4 above, during the past 60 days,
the Reporting Persons have not effected any other transactions in any shares of
Eltrax stock.
(d)-(e) Items 5(d) and (e) are inapplicable to the Reporting Persons.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
For additional information on contracts, arrangements, understandings
or relationship with respect to securities of the Issuer, see Item 4 above.
- --------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them within 60 days, whether by the
exercise of options or warrants, are deemed outstanding in determining
the amount and percent owned by such person or group.
(2) All of the shares shown are held by Howard B. and Ruby Lee Norton, as
Community Property, and the Reporting Persons share voting and
investment power with respect to such shares.
(3) For purposes of calculating the percent of class for each person or
group, all rights to acquire Common Stock within 60 days, whether by
the exercise of options or warrants, are deemed outstanding for such
person or group. Such rights to acquire Common Stock are not, however,
deemed to be outstanding for the purpose of computing the percentage of
the class by any other person or group.
(4) For purposes of calculating the percent of class for each person or
group on a fully diluted basis, all outstanding Preferred Stock is
deemed to have been converted into Common Stock. Rights to acquire
Common Stock within 60 days, other than the conversion of Preferred
Stock into Common Stock, are deemed outstanding for each person or
group, but are not deemed to be outstanding for the purpose of
computing the percentage of the class on a fully diluted basis by any
other person or group.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 Letter Agreement between Eltrax Systems, Inc.,
Nordata, Inc., Rudata, Inc., Howard B. and Ruby Lee
Norton and Garte Torre Global Capital Markets dated
March 19, 1996.
Exhibit 2 Agreement and Plan of Merger by and among Eltrax
Systems, Inc., Datatech Acquisition Corporation,
Rudata Acquisition Corporation, Nordata, Inc.,
Rudata, Inc., and Howard B. and Ruby Lee Norton
dated May 14, 1996, as amended by the First
Amendment to Agreement and Plan of Merger dated May
17, 1996.
Exhibit 3 Escrow Agreement between Eltrax Systems, Inc.,
Howard B. and Ruby Lee Norton, and Norwest Bank
Minnesota, National Association dated May 17, 1996.
Exhibit 4 Agreement between Eltrax Systems, Inc., Clunet R.
Lewis, William P. O'Reilly, and Mack V. Traynor,
III, and Howard B. and Ruby Lee Norton dated May 17,
1996.
Exhibit 5 Employment and Non-Competition Agreement between
Nordata, Inc. and Howard B. Norton dated May 17,
1996.
Exhibit 6 Employment and Non-Competition Agreement between
Nordata, Inc. and Ruby Lee Norton dated May 17,
1996.
SIGNATURE
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
Statement is true, complete and correct.
Date: May 28, 1996 /s/ HOWARD B. NORTON
HOWARD B. NORTON
/s/ RUBY LEE NORTON
RUBY LEE NORTON
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
1 Letter Agreement between Eltrax Systems, Inc., Nordata, Inc., Rudata, Inc., Howard B. 011
and Ruby Lee Norton and Garte Torre Global Capital Markets dated March 19, 1996.
2 Agreement and Plan of Merger by and among Eltrax Systems, Inc., Datatech Acquisition 016
Corporation, Rudata Acquisition Corporation, Nordata, Inc., Rudata, Inc., and
Howard B. and Ruby Lee Norton, dated May 14, 1996, as amended by the First Amendment
to Agreement and Plan of Merger, dated May 17, 1996.
3 Escrow Agreement between Eltrax Systems, Inc., Howard B. and Ruby Lee Norton, and 078
Norwest Bank Minnesota, National Association dated May 17, 1996.
4 Agreement between Eltrax Systems, Inc., Clunet R. Lewis, William P. O'Reilly, and 086
Mack V. Traynor, III, and Howard B. and Ruby Lee Norton dated May 17, 1996.
5 Employment and Non-Competition Agreement between Nordata, Inc. and Howard B. Norton 093
dated May 17, 1996.
6 Employment and Non-Competition Agreement between Nordata, Inc. and Ruby Lee Norton 103
dated May 17, 1996.
</TABLE>
Mr. and Mrs. Howard Norton
Datatech
27126 Paseo Espada, Suite 1602
San Juan Capistrano, CA 92675
Mr. Harvey Garte
Mr. Richard R. Torte
Garte Torte Global Capital Markets
19200 Von Karman, Suite 525
Irvine, CA 92715
Re: Proposed Acquisition of Datatech
Dear Howard, Ruby, Harvey, and Richard:
We are pleased to submit the following offer for Eltrax to acquire all of the
issued and outstanding stock of Nordata, Inc. and Rudata, Inc. dba Datatech (and
hereinafter referred to as "Datatech"). This offer is based on our understanding
that Howard & Ruby are the only shareholders of 100% of the issued and
outstanding stock of both companies.
Eltrax proposes to acquire Datatech on the following terms and conditions:
1. Eltrax will acquire Datatech by a merger of Datatech and Datatech Acquiring
Corp., a wholly-owned subsidiary of Eltrax, in a transaction qualifying under
I.R.C. Section 368, with the following merger consideration to the Nortons:
a) 2,045,000 shares of E1trax; and
b) $830,000 of cash at closing.
2. The Nortons shall have the right to demand registration of their shares on
two occasions. Upon such demand, as soon as feasible under SEC rules, Eltrax
will, at Eltrax's cost, file a registration statement with the SEC for the
resale of the Nortons' shares, and Eltrax will maintain the registration
statement effective until such shares are sold. In addition, the Nortons shall
have piggyback registration rights to include all or any portion of their shares
in any registration statement filed by Eltrax. Such piggyback registration
rights shall provide that any reduction in the number of shares offered, at the
request of underwriters, shall be pro-rata among all shareholders desiring to
sell their shares pursuant to such registration statement.
3. Eltrax will extend its ISO (Incentive Stock Option) Plan to cover all
employees of Datatech.
4. The following are conditions to closing, unless waived by Eltrax and the
Nortons:
a) appropriate due diligence by Extrax and the Nortons, not to
exceed 60 days;
b) completion and execution of necessary and appropriate
definitive agreements and other transaction documents,
containing such provisions and terms and conditions as are
mutually agreeable to all parties. All parties agree to use
their good faith efforts to complete such documents within the
next 30 days;
c) closing on or before May 31, 1996;
d) the execution of mutually agreeable 5 year employment and 2
year noncompete agreements between Datatech and the Nortons,
which employment agreements will provide for Howard and Ruby
Norton to be paid annual base salaries of One Hundred Fifty
Thousand ($150,000) and One Hundred Thousand ($100,000)
Dollars, respectively, plus the following incentive
compensation payable to Howard:
i) year 1 - 10% of Datatech pretax, net income from
Datatech operations, in excess of $1.5 million
ii) year 2 - 10% of Datatech pretax, net income from
Datatech operations, in excess of $1.75 million
iii) year 3 - 10% of Datatech pretax, net income from
Datatech operations, in excess of $2.0 million
iv) year 4 - 10% of Datatech pretax, net income from
Datatech operations, in excess of $2.25 million
v) year 5 - 10% of Datatech pretax, net income from
Datatech operations, in excess of $2.5 million.
In computing pretax net income, Howard Norton's bonus will not be used in the
calculation.
5. During the period between the execution of this Letter of Intent and the
closing, Nortons and Datatech agree as follows:
a) Datatech will continue to be operated in a manner consistent
with the current operations of Datatech;
b) there will be no changes in the capital structure of Datatech,
other than in the ordinary course of business;
c) there will be no discussions with any third parties regarding
a sale of Datatech or any interest in Datatech;
d) the Nortons and Datatech will fully cooperate with Eltrax in
the Eltrax due diligence efforts and will make the Datatech
staff, attorney and accountants available to Eltrax.
6. During the period between the execution of this Letter of Intent and the
closing, Eltrax agrees as follows:
a) Eltrax will continue to be operated in a manner consistent
with the current operations of Eltrax;
b) there will be no changes in the capital structure of Eltrax,
other than in the ordinary course of business;
c) Eltrax will full cooperate with the Nortons in their due
diligence efforts and will make the Eltrax staff, attorneys
and accountants available to the Nortons.
7. Upon consummation of this merger, Eltrax (or its subsidiary) will be
responsible for payment of the broker's fee due to Garte Torre Global. It is
agreed that this fee will be $160,000 cash plus 5,000 shares of Eltrax common
stock at closing and 80,000 shares of Eltrax common stock to be issued on
January 2, 1997, all of which will be privately placed to Garte Torte Global
(or, alternatively, at the election of Harvey and Richard, 42,500 shares will be
privately placed to each of Harvey and Richard). These 85,000 shares will have
full piggyback registration rights with any registration statement filed by
Eltrax pursuant to paragraph 2 of this letter. If they cannot be piggybacked,
Garte Torte shall have the right to demand registration of their shares. Upon
such demand, as soon as feasible under SEC rules, Eltrax will, at Eltrax's cost,
file a registration statement with the SEC for the resale of the Garte Torte's
shares, and Eltrax will maintain the registration statement effective until such
shares are sold.
8. Eltrax has reviewed the financial statements of Datatech and is aware of a
cash to accrual change in accounting required. Eltrax will be responsible for
the payment of any income tax liabilities, including penalties and interest, of
Datatech for 1995 taxable income and for taxable income resulting from the
change in accounting method from cash basis to accrual basis (however, the
Nortons will be responsible for the payment of any penalties resulting from
Datatech's failure to pay the 1995 income tax due at the time that extensions
for the 1995 returns were filed). Furthermore, Eltrax will indemnify the Nortons
for any income tax liabilities, including penalties and interest, resulting from
any pass through taxable income from Rudata, due to the change in accounting
method from cash basis to accrual basis, up to the amount of the C corp income
tax on such taxable income if it had been taxable after closing.
9. Eltrax will indemnify the Nortons with respect to any claims against the
Nortons based on Federal or State securities laws, resulting from or related to
any press release, statement or regulatory filing related to the transaction
described in this letter, other than claims which are based on actual misconduct
by the Nortons.
10. Upon closing, the Board of Directors of Eltrax shall appoint Howard Norton
as one of the members of the Board of Directors of Eltrax, and give him the
title of President and CEO of Datatech and Ruby Norton the title of Vice
President of Datatech.
11. Closing of this transaction will occur at a date and time set by Eltrax, on
or before May 31, 1996. Time is of the essence. If the transaction does not
close on or before May 31, 1996, this agreement shall terminate, except
paragraphs 9, 12 and 14.
12. The Nortons and Eltrax shall pay their own expenses, including attorney and
accounting fees, associated with this transaction, except as provided in
paragraph 7.
13. Datatech and Eltrax will notify each other of any press releases or other
public comments regarding this transaction and will provide a reasonable
opportunity to comment prior to release.
14. The terms of the Confidentiality Agreement dated January 29, 1996, between
Garte Torte Global and Eltrax shall remain in effect.
Eltrax System, Inc.
By: /s/ Mack V. Traynor, III
Mack V. Traynor, III
President and CEO
Agreement and Acknowledgment
Nordata, Inc.
By: /s/ Howard Norton
Howard Norton,
President
Rudata, Inc.
By: /s/ Ruby Norton
Ruby Norton,
President
/s/ Howard Norton
Howard Norton, Individually
/s/ Ruby Norton
Ruby Norton, Individually
Garte Torre Global Market
By:
Harvey Garte
AGREEMENT AND PLAN OF MERGER
by and among
ELTRAX SYSTEMS, INC.,
DATATECH ACQUISITION CORPORATION,
RUDATA ACQUISITION CORPORATION,
NORDATA, INC.,
RUDATA, INC.
AND
HOWARD B. AND RUBY LEE NORTON
May 14, 1996
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER.............................................. 1
1.1 The Merger; Surviving Corporations...................... 1
1.2 Effective Time.......................................... 2
1.3 Conversion of Shares.................................... 2
1.4 Closing................................................. 2
1.5 Merger Consideration.................................... 3
1.6 Exchange of Acquisition Sub Common Stock................ 3
1.7 Surrender of Companies' Stock Certificates.............. 4
1.8 Articles of Incorporation............................... 4
1.9 Bylaws.................................................. 4
1.10 Directors and Officers.................................. 4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION SUB....................... 4
2.1 Parent's Disclosure Schedule............................ 4
2.2 Organization............................................ 4
2.3 Authority and Validity of Agreement..................... 5
2.4 Consents and Approvals.................................. 5
2.5 Capitalization.......................................... 5
2.6 Commission Reports...................................... 6
2.7 No Brokers or Finders................................... 6
2.8 Non-Contravention....................................... 6
2.9 Loss Contingencies; Other Non-Accrued Liabilities....... 7
2.10 Investigations; Litigation.............................. 7
2.11 Absence of Certain Changes.............................. 7
2.12 Title to Property; Condition............................ 8
2.13 Tax Returns............................................. 8
2.14 Insurance............................................... 9
2.15 Benefit Plans........................................... 9
2.16 Contracts and Commitments; No Default................... 12
2.17 Compliance with Law..................................... 13
2.18 Accuracy of Information................................. 13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS..................................... 14
3.1 Shareholders' Disclosure Schedule....................... 14
3.2 Corporate Organization.................................. 14
3.3 Capitalization.......................................... 14
3.4 Authorization........................................... 15
3.5 Non-Contravention....................................... 15
3.6 Consents and Approvals.................................. 15
3.7 Financial Statements.................................... 16
3.8 Loss Contingencies; Other Non-Accrued Liabilities....... 16
3.9 Investigations; Litigation.............................. 16
3.10 Absence of Certain Changes.............................. 17
3.11 Title to Property; Condition............................ 17
3.12 Inventories............................................. 18
3.13 Receivables and Payables................................ 18
3.14 Tax Returns............................................. 18
3.15 Insurance............................................... 20
3.16 Benefit Plans........................................... 20
3.17 Bank Accounts; Powers of Attorney....................... 23
3.18 Contracts and Commitments; No Default................... 23
3.19 Orders, Commitments and Returns......................... 24
3.20 Labor Matters........................................... 25
3.21 Dealers and Suppliers................................... 25
3.22 Licenses and Other Operating Rights..................... 25
3.23 Compliance with Law..................................... 25
3.24 Physical Assets of Business............................. 26
3.25 Brokers................................................. 26
3.26 Accuracy of Information................................. 26
3.27 Shareholders Representations............................ 26
ARTICLE 4 COVENANTS............................................... 27
4.1 Companies' Agreements as to Specified Matters........... 27
4.2 Conduct of the Companies' Business...................... 28
4.3 No Solicitation of Alternate Transaction by the
Shareholders or Companies............................... 29
4.4 Full Access to Parent................................... 29
4.5 Confidentiality......................................... 30
4.6 Consummation; Consents; Removal of Objections........... 30
4.7 Further Assurances; Cooperation; Notification........... 30
4.8 Supplements to Disclosure Schedule...................... 30
4.9 Public Announcements.................................... 31
4.10 Broker Fee Arrangements................................. 31
4.11 Tax Liability of Surviving Corporations................. 31
4.12 Registration Rights..................................... 31
4.13 Employment Terms for Employees of Surviving Corporation. 31
4.14 Restrictive Legend...................................... 31
4.15 Maintenance of and Access to Books and Records.......... 32
4.16 Preparation of Tax Returns.............................. 32
4.17 Amendment of Prior Returns; Audit....................... 32
4.18 Successors and Assigns.................................. 32
4.19 Loans to Shareholders................................... 33
4.20 Schedule 13D............................................ 33
4.21 Divestment of Interest.................................. 33
ARTICLE 5 CONDITIONS TO OBLIGATION OF PARENT...................... 33
5.1 Representations and Warranties True..................... 33
5.2 Performance............................................. 33
5.3 Required Approvals and Consents......................... 33
5.4 Adverse Changes......................................... 34
5.5 No Proceeding or Litigation............................. 34
5.6 Opinion of Counsel for the Companies and Shareholders... 34
5.7 Legislation............................................. 34
5.8 Acceptance by Counsel to Parent......................... 34
5.9 Certificates............................................ 34
5.10 Due Diligence........................................... 34
5.11 Escrow Agreement........................................ 34
5.12 Employment and Noncompete Agreements.................... 34
5.13 Divestiture of Interest................................. 34
ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANIES AND
SHAREHOLDERS............................................ 35
6.1 Representations and Warranties True..................... 35
6.2 Performance............................................. 35
6.3 Required Approvals and Consents......................... 35
6.4 No Proceeding or Litigation............................. 35
6.5 Certificates............................................ 35
6.6 Opinion of Parent Counsel............................... 35
6.7 Escrow Agreement........................................ 35
6.8 Acceptance by Counsel to Shareholders................... 36
6.9 Employment and Noncompete Agreement with Shareholders... 36
6.10 Adverse Changes......................................... 36
6.11 Legislation............................................. 36
6.12 Assistance Agreement.................................... 36
ARTICLE 7 TERMINATION AND ABANDONMENT............................. 36
7.1 Methods of Termination.................................. 36
7.2 Procedure Upon Termination.............................. 37
ARTICLE 8 SURVIVAL AND INDEMNIFICATION............................ 37
8.1 Survival................................................ 37
8.2 Indemnification by Parent............................... 37
8.3 Indemnification by Shareholders......................... 37
8.4 Indemnification by Shareholders -- Other................ 38
8.5 Limitation on Indemnification........................... 38
8.6 Indemnification De Minimis Threshold.................... 38
8.7 Claims for Indemnification.............................. 39
ARTICLE 9 MISCELLANEOUS PROVISIONS................................ 40
9.1 Expenses................................................ 40
9.2 Amendment and Modification.............................. 40
9.3 Waiver of Compliance; Consents.......................... 40
9.4 No Third Party Beneficiaries............................ 40
9.5 Notices................................................. 41
9.6 Assignment.............................................. 42
9.7 Governing Law........................................... 42
9.8 Counterparts............................................ 42
9.9 Headings................................................ 42
9.10 Entire Agreement........................................ 42
9.11 Injunctive Relief....................................... 42
9.12 Arbitration............................................. 43
9.13 List of Defined Terms................................... 43
9.14 Attorneys Fees.......................................... 43
9.15 Knowledge of the Companies and Shareholders............. 43
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit 1.1(a) Articles of Merger - Datatech Acquisition Sub into Nordata - Minnesota
Exhibit 1.1(b) Articles of Merger - Rudata Acquisition Sub into Rudata - Minnesota
Exhibit 1.1(c) Agreement of Merger - Datatech Acquisition Sub into Nordata - California
Exhibit 1.1(d) Agreement of Merger - Rudata Acquisition Sub into Rudata - California
Exhibit 1.5(a) Allocation of Merger Consideration
Exhibit 1.5(b) Escrow Agreement
Exhibit 1.10 List of Directors and Officers of Acquisition Subs
Exhibit 2.1 Parent's Disclosure Schedule
Exhibit 2.5 Parent's Commission Reports
Exhibit 3.1 Shareholders' Disclosure Schedule
Exhibit 3.7 Financial Statements of the Companies
Exhibit 4.10 Broker Fee Arrangements
Exhibit 4.12 Registration Rights of Shareholders
Exhibit 5.6 Form of Opinion of Counsel for the Companies and Shareholders
Exhibit 5.12 Form of Employment and Noncompete Agreements
Exhibit 6.6 Form of Opinion of Counsel for the Parent and Acquisition Subs
Exhibit 9.13 List of Defined Terms
</TABLE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 14, 1996 (the
"Agreement"), is by and among ELTRAX SYSTEMS, INC., a Minnesota corporation (the
"Parent"), DATATECH ACQUISITION CORPORATION, a Minnesota corporation and a
wholly owned subsidiary of the Parent ("Datatech Acquisition Sub"), RUDATA
ACQUISITION CORPORATION, a Minnesota corporation and a wholly owned subsidiary
of the Parent ("Rudata Acquisition Sub") (Datatech Acquisition Sub and Rudata
Acquisition Sub are herein after referred to collectively as the "Acquisition
Subs") and NORDATA, INC., a California corporation ("Nordata"), Rudata, Inc., a
California corporation ("Rudata") and Howard B. and Ruby Lee Norton, the sole
shareholders of Nordata and Rudata (individually, a "Shareholder" and
collectively, the "Shareholders"). Nordata and Rudata are sometimes hereinafter
referred to as the "Companies." The Companies and Acquisition Subs are sometimes
hereinafter referred to as the "Constituent Corporations."
A. WHEREAS, the Boards of Directors of Parent, Datatech Acquisition Sub
and Nordata each have approved the merger of Datatech Acquisition Sub with and
into Nordata, upon the terms and subject to the conditions set forth herein and
deem it advisable and in the best interests of their respective shareholders
that the foregoing merger be consummated;
B. WHEREAS, the Boards of Directors of Parent, Rudata Acquisition Sub
and Rudata each have approved the merger of Rudata Acquisition Sub with and into
Rudata, upon the terms and subject to the conditions set forth herein and deem
it advisable and in the best interests of their respective shareholders that the
merger described in this paragraph B be consummated (the merger described in
paragraph A above and the merger described in this paragraph B are hereinafter
referred to collectively as the "Merger");
C. WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code") by reason of Section
368(a)(2)(E) of the Code; and
D. WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger; Surviving Corporations. Subject to the terms and
conditions of this Agreement and the articles of merger attached hereto as
Exhibit 1.1(a) and 1.1(b) to be filed in the State of Minnesota and the
agreements of merger attached hereto as Exhibit 1.1(c) and 1.1(d) to be filed in
the State of California(collectively the "Plan of Merger"), at the Effective
Time (as defined in Section 1.2 hereof), Datatech Acquisition Sub will be merged
with and into Nordata and Rudata Acquisition Sub will be merged with and into
Rudata, in accordance with the applicable provisions of the Minnesota Business
Corporation Act (the "MBCA") and the California General Corporation Law (the
"CGCL"), whereupon the separate existence of Datatech Acquisition Sub and Rudata
Acquisition Sub will cease and Nordata and Rudata will continue as the surviving
corporations (collectively the "Surviving Corporations").
1.2 Effective Time. Simultaneously with the Closing, the parties hereto
will effect the Merger by filing the required number of originals of articles of
merger (substantially in the form provided for in the Plan of Merger) in
accordance with the applicable provisions of the MBCA and the CGCL (the
"Articles of Merger"). The Merger will become effective at the time of filing of
the Articles of Merger. The time when the Merger will become effective is
referred to herein as the "Effective Time."
1.3 Conversion of Shares. At the Effective Time:
(a) Each share of common stock of Nordata, no par value (the
"Nordata Common Stock"), issued and outstanding immediately prior
thereto (except for shares referred to in Section 1.3(c) hereof) will,
by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive a proportionate
part of the Merger Consideration (as defined in Section 1.5(a) herein).
Each share of common stock of Rudata, no par value (the "Rudata Common
Stock"), issued and outstanding immediately prior thereto (except for
shares referred to in Section 1.3(c)) hereof, will, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into the right to receive a proportionate part of the Merger
Consideration (as defined in Section 1.5(a) herein).
(b) Each share of common stock of Datatech Acquisition Sub,
par value $.01 per share (the "Datatech Acquisition Sub Common Stock"),
issued and outstanding immediately prior thereto will, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into one share of the common stock of Nordata, no par value
(the "Nordata Surviving Corporation Common Stock").
(c) Each share of common stock of Rudata Acquisition Sub, par
value $.01 per share (the "Rudata Acquisition Sub Common Stock"),
issued and outstanding immediately prior thereto, will, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into one share of the common stock of Rudata, par value $.01
per share (the "Rudata Surviving Corporation Common Stock").
(d) The Shareholders of Nordata Common Stock and Rudata Common
Stock will cease to have any rights as shareholders of the Companies,
except such rights, if any, as they may have pursuant to the MBCA and
the CGCL.
1.4 Closing. Unless this Agreement has been terminated and the
transactions contemplated herein have been abandoned pursuant to Article 7
hereof, a closing (the "Closing") will be held on or before May 22, 1996 (the
"Closing Date"); provided, however, that if any of the conditions provided for
in Articles 5 and 6 hereof have not been satisfied or waived by such date, then
the party to this Agreement which is unable to satisfy such condition or
conditions, despite the best efforts of such party, will be entitled to postpone
the Closing by notice to the other parties until such condition or conditions
have been satisfied (which such notifying party will seek to cause to happen at
the earliest practicable date) but in no event later than May 30, 1996 (the
"Termination Date"). The Closing will be held at the offices of Brown & Streza,
7700 Irvine Center Drive, Suite 900, Irvine, CA 92718 or such other place as the
parties may agree, at 9:00 a.m., local time or such other time as the parties
may agree, at which time and place the documents and instruments necessary or
appropriate to effect the transactions contemplated herein will be exchanged by
the parties.
1.5 Merger Consideration.
(a) Merger Consideration and Nature of Payment. The aggregate
consideration payable to the Shareholders upon consummation of the
Merger and the surrender of all the issued and outstanding shares of
capital stock of each of the Companies (the "Merger Consideration")
will be equal to One Million Nine Hundred Eighty Three Thousand
(1,983,000) shares of common stock, par value $.01 per share, of Parent
(the "Parent Common Stock"), and One Million Sixteen Thousand Dollars
($1,016,000). Each such share of Parent Common Stock will be fully paid
and nonassessable and will be restricted, as defined in Rule 144
promulgated by the Securities and Exchange Commission (the
"Commission"). The Merger Consideration payable to the Shareholders
hereunder will be allocated among the Shareholders in the manner set
forth in Exhibit 1.5(a) hereof. If the allocation of the Merger
Consideration is not completed on the date of execution of this
Agreement, the parties agree that such allocation will be prepared by
Parent and its certifying independent accountant in such a manner that
will preserve the tax free nature of the exchange of stock in the
transactions contemplated by this Agreement (other than with respect to
the cash portion of the Merger Consideration).
(b) Payment of Merger Consideration. At the Closing upon
surrender of all the issued and outstanding shares of capital stock of
each of the Companies, Parent will pay to the Shareholders the
aggregate sum of One Million Sixteen Thousand Dollars ($1,016,000) and
will deliver to the Shareholders on the Closing Date One Million Five
Hundred Thirty-Three Thousand (1,533,000) shares of restricted (as
defined in Commission Rule 144) Parent Common Stock, all such
consideration to be allocated to the Shareholders in accordance with
Exhibit 1.5(a) hereof. In addition, Parent will deliver certificates
representing Four Hundred Fifty Thousand (450,000) shares of Parent
Common Stock (the "Escrowed Shares"), allocated between the
Shareholders in accordance with Exhibit 1.5(a) hereof, to be placed in
escrow subject to the terms and conditions of the Escrow Agreement in
the form of Exhibit 1.5(b) hereof (the "Escrow Agreement"). The
Escrowed Shares will be held as a source of funds for the
indemnification obligations of the Shareholders set forth in Article 8
hereof.
1.6 Exchange of Acquisition Sub Common Stock. From and after the
Effective Time, each outstanding certificate previously representing shares of
Datatech Acquisition Sub Common Stock will be deemed for all purposes to
evidence ownership of and to represent the number of shares of Nordata Surviving
Corporation Common Stock into which such shares of Datatech Acquisition Sub
Common Stock have been converted. From and after the Effective Time, each
outstanding certificate previously representing shares of Rudata Acquisition Sub
Common Stock will be deemed for all purposes to evidence ownership of and to
represent the number of shares of Rudata Surviving Corporation Common Stock into
which such shares of Rudata Acquisition Sub Common Stock have been converted.
Promptly after the Effective Time, each of the Surviving Corporations will issue
to the Parent a stock certificate or certificates representing such shares of
the Surviving Corporations' Common Stock in exchange for the certificate or
certificates which formerly represented shares of the respective Acquisition Sub
Common Stock, which will be cancelled.
1.7 Surrender of Companies' Stock Certificates.
(a) At Closing, the Shareholders will deliver the share
certificates representing all of the issued and outstanding shares of
capital stock of each of the Companies, and the certificates so
surrendered will forthwith be cancelled.
(b) The Merger Consideration payable to the Shareholders
pursuant to Section 1.5 hereof will be deemed to have been paid and
issued in full satisfaction of all rights of the Shareholders
pertaining to each of such Shareholder's shares of capital stock of
each of the Companies.
1.8 Articles of Incorporation. The articles of incorporation of Nordata
and Rudata as in effect immediately prior to the Effective Time will be the
articles of incorporation of the respective Surviving Corporations until further
amended in accordance with applicable law.
1.9 Bylaws. The bylaws of Nordata and Rudata as in effect immediately
prior to the Effective Time will be the bylaws of the respective Surviving
Corporations until amended or repealed in accordance with the articles of
incorporation of the respective Surviving Corporations and applicable law.
1.10 Directors and Officers. Immediately after the Effective Time of
the Merger, the directors and officers of the respective Surviving Corporations
will be as set forth in Exhibit 1.10 attached hereto, and will serve in such
capacities until their respective successors are duly elected and qualified.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION SUBS
The Parent and Acquisition Subs jointly and severally represent and
warrant to the Shareholders as follows:
2.1 Parent's Disclosure Schedule. The Parent's Disclosure Schedule
marked as Exhibit 2.1 hereto (the "Parent's Disclosure Schedule") is divided
into sections which correspond to the Sections of this Article 2. The Parent's
Disclosure Schedule is accurate and complete. For purposes of the Parent's
Disclosure Schedule, disclosure in one Section will constitute disclosure for
purposes of any other Section of this Agreement.
2.2 Organization. Each of the Parent and the Acquisition Subs is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and each has all requisite corporate power and
authority to own, lease and operate its respective properties and to carry on
its business as now being conducted. Each of the Parent and the Acquisition Subs
is duly qualified and in good standing to do business in each jurisdiction in
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary and where the failure to
qualify could have a material adverse effect on the business, results of
operations or financial condition of the Parent and its subsidiaries taken as a
whole. The Parent has previously delivered to the Shareholders or their
representative, accurate and complete copies of the articles of incorporation
and bylaws, as currently in effect, of each of the Parent and each of the
Acquisition Subs.
2.3 Authority and Validity of Agreement. Each of the Parent and the
Acquisition Subs has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized and
approved by the Boards of Directors of the Parent and the Acquisition Subs and
by the Parent as the sole shareholder of the Acquisition Subs, and no other
corporate proceedings on the part of the Parent or the Acquisition Subs are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of the Parent and the Acquisition Subs and constitutes a valid
and binding obligation of the Parent and the Acquisition Subs, enforceable
against each of them in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or similar
laws from time to time in effect which affect creditors' rights generally.
2.4 Consents and Approvals. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not:
(a) violate any provision of the articles of incorporation or bylaws of the
Parent or the Acquisition Subs; (b) violate any statute, rule, regulation, order
or decree of any public body or authority by which the Parent or any of its
respective properties or assets may be bound or affected; (c) except for any
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act") and state securities laws, and the filing and recordation of appropriate
merger documents as required by the MBCA and the CGCL (as the case may be),
require any filing with or permit, consent or approval of any public body or
authority or any other person or entity; or (d) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any obligation, agreement,
commitment or authorization, to which the Parent or any is a party, or by which
any of them or any of their respective properties or assets may be bound or
affected.
2.5 Capitalization. The authorized capital stock of the Parent consists
of 8,000,000 shares of Parent Common Stock and 1,000,000 shares of undesignated
preferred stock, of which there are 4,498,563 shares of Parent Common Stock and
4,000 shares of Series A Preferred Stock issued and outstanding (which shares of
Series A Preferred Stock are convertible into 40,000 shares of Parent Common
Stock). The authorized capital stock of Datatech Acquisition Sub consists of
1,000 shares of Datatech Acquisition Sub Common Stock, all of which are issued
and outstanding and owned by the Parent. The authorized Stock of Rudata
Acquisition Sub consists of 1,000 shares of Rudata Acquisition Sub Common Stock,
all of which are issued and outstanding and owned by the Parent. All shares of
Parent Common Stock to be issued and delivered in the Merger pursuant to Article
1 hereof will be, at the time of issuance and delivery, validly issued, fully
paid, nonassessable and free of preemptive rights. Except options to purchase
499,090 shares of Parent Common Stock heretofore granted pursuant to the
Parent's 1995 Stock Incentive Plan (the "1995 Plan") and 1992 Stock Incentive
Plan (the "1992 Plan") and currently outstanding, non-plan options (options
granted by the Company not under either the 1992 Plan or the 1995 Plan) to
purchase 45,000 shares of Parent Common Stock heretofore granted by the Parent
and currently outstanding, warrants to purchase 819,497 shares of Parent Common
Stock heretofore granted by the Parent and currently outstanding, there are not
any outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments, restrictions, arrangements or any other agreements of any character
that, directly or indirectly, (a) obligate the Parent to issue any shares of
capital stock or any securities convertible into, or exercisable or exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock, (b)
call for or relate to the sale, pledge, transfer or other disposition or
encumbrance by the Parent of any shares of its capital stock, or (c) relate to
the voting or control of such capital stock.
2.6 Commission Reports. Parent has duly and timely made all required
filings with the Commission under the Securities Act of 1933 and the Securities
Exchange Act of 1934, each as amended, and all of the reports, forms and
documents so filed complied in all material respects with all applicable
requirements. Parent has heretofore delivered to Shareholders and the Companies
accurate and complete copies of the reports, proxy statements and registration
statements listed on Exhibit 2.5 hereto which have been filed with the
Securities and Exchange Commission. To the knowledge of Parent, none of such
reports, proxy statements or registration statements contained any untrue
statements of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. To the
knowledge of Parent, the consolidated financial statements and schedules of
Parent contained in such public reports (or incorporated therein by reference)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis, except as noted therein, and fairly present the
consolidated financial condition and results of operations of Parent and its
subsidiaries as at the respective dates thereof and for the periods indicated
therein, subject (in the case of interim unaudited financial statements) to
normal year-end audit adjustments, none of which will be material.
2.7 No Brokers or Finders. Except with respect to the Broker Fee
Agreement dated as of May 17, 1996 by and among Parent, Garte Torre Global
Capital Markets and Harvey Garte and Richard M. Torre, neither the Parent nor
any Acquisition Sub has employed any broker, agent or finder or incurred any
liability for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated hereby.
2.8 Non-Contravention. Neither the execution, delivery and performance
of this Agreement nor the consummation of the transactions contemplated herein
will: (i) violate or be in conflict with any provision of the articles or
certificate of incorporation or bylaws of the Parent; (ii) except for such
violations, conflicts, defaults, accelerations, terminations, cancellations,
impositions of fees or penalties, mortgages, pledges, liens, security interests,
encumbrances, restrictions and charges which would not, individually or in the
aggregate, have a material adverse affect on the business of the Parent taken as
a whole (A) be in conflict with, or constitute a default under, any note, bond,
lease, mortgage, indenture, license, contract, franchise, permit, instrument or
other agreement or obligation to which the Parent is a party or (B) result in
the creation or imposition of any mortgage, lien, security interest, encumbrance
or charge of any kind, upon any property or assets of the Parent under any
contract, agreement or commitment to which the Parent is a party; or (iii) to
the Parent's knowledge, violate any law, judgement, decree, order, regulation or
ordinance or other similar authoritative matters of any foreign, federal, state
or local governmental or quasi-governmental, administrative, regulatory or
judicial court, department, commission, agency, board, bureau, instrumentality
or other authority (hereinafter sometimes separately referred to as an
"Authority" and sometimes collectively as "Authorities") (sometimes hereinafter
separately referred to as a "Law" and sometimes collectively as "Laws") by which
the Parent is bound or affected.
2.9 Loss Contingencies; Other Non-Accrued Liabilities. Except as
described on the Parent's Disclosure Schedule, to the Parent's knowledge, Parent
does not have (i) any loss contingencies which are not required by generally
accepted accounting principles to be accrued; (ii) any loss contingencies
involving an unasserted claim or assessment which are not required by generally
accepted accounting principles to be disclosed because the potential claimants
have not manifested to Parent an awareness of a possible claim or assessment; or
(iii) any categories of known liabilities or obligations (other than non-pension
post-retirement medical care, dental care, life insurance or other benefits)
which are not required by generally accepted accounting principles to be
accrued. For purposes of this Agreement, "loss contingency" will have the
meaning accorded to it by generally accepted accounting principles.
2.10 Investigations; Litigation. Except as set forth in the Parent's
Disclosure Schedule, to the Parent's knowledge, there are no claims, actions,
suits or proceedings by any private party or by any governmental body or
authority (including any nongovernmental self-regulatory agency), nor any
investigations or reviews by any federal, state, local or foreign body or
authority (including any nongovernmental self-regulatory agency), against or
affecting the Parent, that are pending or, to the Parent's knowledge threatened,
at law or in equity. To the Parent's knowledge, there is no basis for any such
investigation, review, claim, action, suit or proceeding.
2.11 Absence of Certain Changes. Except as set forth on the Parent's
Disclosure Schedule, except as expressly authorized by this Agreement, and
except as is in the ordinary course of business and consistent with past
practice, since December 31, 1995, Parent has not:
(a) Suffered any adverse change in its condition (financial or
otherwise), working capital, assets, properties, liabilities,
obligations, reserves or businesses, or experienced any event or failed
to take any action which could reasonably be expected to have a
material adverse effect on the business of the Parent;
(b) Suffered any loss, damage, destruction or other casualty
(whether or not covered by insurance) or suffered any loss of officers,
employees, dealers, distributors, independent contractors, customers,
or suppliers or other favorable business relationships which could
reasonably be expected to have a material adverse affect on the
business of the Parent;
(c) Declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock, or purchased or redeemed
any shares of its capital stock;
(d) Except in accordance with the Parent's 1995 Plan or
pursuant to the exercise of outstanding warrants or options previously
granted by Parent, issued or sold any shares of its capital stock, or
any options, warrants, conversion, exchange or other rights to purchase
or acquire any such shares or any securities convertible into or
exchangeable for such shares;
(e) Incurred any indebtedness for borrowed money;
(f) Mortgaged, pledged, or subjected to any material lien,
lease, security interest or other charge or encumbrance any of its
properties or assets, tangible or intangible;
(g) Acquired or disposed of any material assets or properties;
(h) Forgiven or cancelled any material debts or claims, or
waived any material rights;
(i) Entered into any material transaction other than in the
ordinary course of business;
(j) Granted to any officer or salaried employee or any other
employee any material increase in compensation in any form or made any
material payments for severance or termination pay;
(k) Entered into any material commitment for capital
expenditures for additions to plant, property or equipment; or
(l) Agreed, whether in writing or otherwise, to take any
action described in this Section.
2.12 Title to Property; Condition. Except as set forth on the Parent's
Disclosure Schedule, Parent has good and merchantable right, title and interest
in and to all of the machinery, equipment, terminals, computers, vehicles,
personal property and all other assets reflected in the Parent's balance sheet
as of December 31, 1995 included in the Parent's unaudited financial statements
included in the Parent's most recent Form 10-QSB for the quarter ended December
31, 1995 ("Parent's Latest Balance Sheet") and all of the assets purchased or
otherwise acquired since the date of Parent's Latest Balance Sheet (except for
such assets as may have been sold or otherwise disposed of in the ordinary
course of business since the date of Parent's Latest Balance Sheet), subject to
no mortgage, pledge, lien or security interest of any kind or nature (whether or
not of record). Except as set forth on the Parent's Disclosure Schedule, the
items of equipment and other personal property of Parent that are necessary to
the conduct of the business of Parent is in good operating condition and repair
and fit for the intended purpose thereof, ordinary wear and tear excepted, and
no material maintenance, replacement or repair has been deferred or neglected.
2.13 Tax Returns. For purposes of this Agreement, the term "Taxes"
means all federal, state, local, foreign and other net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, real or personal property, windfall
profits, customs, duties or other taxes, fees, assessments, charges or levies of
any kind whatever, together with any interest and any penalties, additions to
tax or additional amounts with respect thereto, and the term "Tax" means any one
of the foregoing Taxes. In addition, the term "Tax Returns" means all returns,
declarations, reports, statements and other documents required to be filed with
any Authority in respect of Taxes, and the term "Tax Return" means any one of
the foregoing Tax Returns. Except as set forth on the Parent's Disclosure
Schedule, to the knowledge of Parent:
(a) LIABILITY FOR TAXES. Parent has been responsible for and
will pay all Taxes attributable to or arising from the business and
operations of Parent conducted on or before the Closing Date.
(b) FILING OF TAX RETURNS. All Tax Returns required to be
filed on or prior to the date hereof by Parent with respect to Taxes of
Parent have been properly completed and duly filed on a timely basis
and in correct form. As of the time of filing, the foregoing Tax
Returns correctly reflected the facts regarding the income, business,
assets, operations, activities, status or other matters of Parent or
any other information required to be shown thereon. There is no
material omission, deficiency, error, misstatement or
misrepresentation, whether innocent, intentional or fraudulent, in any
Tax Return filed by the Parent for any period.
(c) PAYMENT OF TAXES. With respect to all amounts of Taxes
imposed upon the Parent, or for which Parent is or could be liable,
whether to taxing Authorities (as, for example, under Law) or to other
persons or entities (as, for example, under tax allocation agreements),
with respect to all taxable periods or portions of periods ending on or
before the Closing Date, all applicable Tax Laws and agreements have
been or will be fully complied with, and all such amounts of Taxes
required to be paid by Parent to taxing Authorities or others on or
before the date hereof have been duly paid or will be paid on or before
the Closing Date; the reserves for all such Taxes reflected in the
Parent's Latest Balance Sheet are adequate and there are no liens for
such Taxes upon any property or assets of the Parent. Parent withheld
and remitted all amounts required to be withheld and remitted by it in
respect of Taxes.
(d) AUDITS AND EXTENSIONS. Neither the federal Tax Returns of
the Parent nor any state or local or foreign Tax Return of the Parent
has been examined by the Internal Revenue Service or any similar state
or local or foreign Authority. There are no outstanding agreements or
waivers extending the statutory period of limitations applicable to any
Tax Return for any period.
(e) INDEPENDENT CONTRACTORS AND EMPLOYEES. For purposes of
computing Taxes and the filing of Tax Returns, Parent has not failed to
treat as "employees" any individual providing services to Parent who
would be classified as an "employee" under the applicable rules or
regulations of any Authority with respect to such classification.
2.14 Insurance. Parent maintains adequate insurance policies covering
fire and other casualty, general liability, theft, life, workers' compensation,
health, directors and officers liability, business interruption and other forms
of insurance owned or held by Parent. All present policies are in full force and
effect and all premiums with respect thereto have been paid. Parent has not been
denied any form of insurance and no policy of insurance has been revoked or
rescinded during the past three years.
2.15 Benefit Plans. Except as set forth on the Parent's Disclosure
Schedule:
(a) Neither the Parent nor any other "person" within the
meaning of Section 7701(a)(1) of the Code, that together with the
Companies are considered a single employer pursuant to Sections 414(b),
(c), (m) or (o) of the Code or Sections 3(5) or 4001(b)(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(an "Affiliated Organization") sponsors, maintains, contributes to, is
required to contribute to or has any liability of any nature, whether
known or unknown, direct or indirect, absolute or contingent, with
respect to, any "employee pension benefit plan" ("Pension Plan") as
such term is defined in Section 3(2) of ERISA, including without
limitation, any such plan that is excluded from coverage by Section
4(b)(5) of ERISA or is a "Multiemployer Plan" within the meaning of
Section 3(37) or 4001(a)(3) of ERISA. Each such Pension Plan has been
operated in all material respects in accordance with its terms and in
material compliance with the applicable provisions of ERISA, the Code
and all other applicable Law. All Pension Plans which the Companies
operate as plans that are intended to qualify under the provisions of
Section 401(a) of the Code materially satisfy in all material respects
in form and operation the requirements of Section 401(a) and all other
sections of the Code incorporated therein, including without limitation
Sections 401(k) and 401(m) of the Code.
(b) Neither the Parent nor any Affiliated Organization has any
liability of any nature, whether known or unknown, direct or indirect,
or absolute or contingent, to any Pension Plan, the Pension Benefit
Guaranty Corporation ("PBGC") or any other person, arising directly or
indirectly under Title IV of ERISA. No "reportable event," within the
meaning of Section 4043(b) of ERISA, has occurred with respect to any
Pension Plan. Neither of the Parent nor any Affiliated Organization has
ceased operations at any facility or withdrawn from any Pension Plan in
a manner which could subject the Affiliated Companies or Affiliated
Organization to liability under Section 4062(e), 4063 or 4064 of ERISA.
Neither the Parent nor any Affiliated Organization maintains,
contributes to, has participated in or agreed to participate in any
Multiemployer Plan (either pension or welfare). Neither the Parent nor
any Affiliated Organization currently has any obligation, known or
unknown, direct or indirect, absolute or contingent, to make any
withdrawal liability payment to any Multiemployer Plan. Neither the
Parent nor any Affiliated Organization has been a party to a sale of
assets to which Section 4204 of ERISA applied with respect to which it
could incur any withdrawal liability (including any contingent or
secondary withdrawal liability) to any Multiemployer Plan. Neither the
Parent nor any Affiliated Organization has incurred (or has experienced
an event that will, within the ensuing 12 months, result in) a
"complete withdrawal" or "partial withdrawal," as such terms are
defined respectively in Sections 4203 and 4205 of ERISA, with respect
to a Multiemployer Plan, and nothing has occurred that could to result
in such a complete or partial withdrawal.
(c) Neither the Parent nor any Affiliated Organization
sponsors, maintains, contributes to, is required to contribute to or
has any liability of any nature, whether known or unknown, direct or
indirect, or absolute or contingent, with respect to, any "employee
welfare benefit plan" ("Welfare Plan") as such term is defined in
Section 3(1) of ERISA, whether insured or otherwise. Each Welfare Plan
has been operated in all material respects in accordance with its terms
and in material compliance with the applicable provisions of ERISA, the
Code and all other applicable Law. Neither the Parent nor any
Affiliated Organization has established or contributed to, is required
to contribute to or has any liability of any nature, whether known or
unknown, direct or indirect, or absolute or contingent, with respect to
any "voluntary employees' beneficiary association" within the meaning
of Section 501(c)(9) of the Code, "welfare benefit fund" within the
meaning of Section 419 of the Code, "qualified asset account" within
the meaning of Section 419A of the Code or "multiple employer welfare
arrangement" within the meaning of Section 3(40) or ERISA. No Welfare
Plan which is a Multiemployer Plan within the meaning of Section 3(37)
of ERISA imposes any post-withdrawal liability or contribution
obligations upon the Companies or Affiliated Organizations. Neither the
Parent nor any Affiliated Organization maintains, contributes to or has
any material liability of any nature, whether known or unknown, direct
or indirect, or absolute or contingent, with respect to medical,
health, life or other welfare benefits for present or future terminated
employees or their spouses or dependents other than as required by Part
6 of Subtitle B of Title I of ERISA or any comparable state law.
(d) Neither the Parent nor any Affiliated Organization is a
party to, maintains, contributes to, is required to contribute to or
has or could have any liability of any nature, whether known or
unknown, direct or indirect, or absolute or contingent, with respect
to, any bonus plan, incentive plan, stock plan or any other current or
deferred compensation (other than current salary or wages paid in the
form of cash), separation, retention, severance, paid time off or
similar agreement, arrangement or policy, or any individual employment
or consulting or personal service agreement, other than a Pension Plan
or Welfare Plan ("Compensation Plans"). Each Compensation Plan has been
operated in all material respects in accordance with its terms and in
compliance with the applicable provisions of all applicable Law.
(e) There are no facts or circumstances which could, directly
or indirectly, subject the Companies or any Affiliated Organization to
any excise tax or other liability under Chapters 43, 46 or 47 of
Subtitle D of the Code, penalty tax or other liability under Chapter 68
of Subtitle F of the Code or civil penalty arising under Section 502 of
ERISA.
(f) Full payment has been made of all amounts which the Parent
or any Affiliated Organization are required, under applicable Law, the
terms of any Pension Plan, Welfare Plan or Compensation Plan, or any
agreement relating to any Pension Plan or Welfare Plan or Compensation
Plan, to have paid as a contribution, premium or other remittance
thereto or benefit thereunder. Each Pension Plan that is subject to the
minimum funding standards of Section 412 of the Code and Section 302 of
ERISA meets those standards and has not incurred any accumulated
funding deficiency within the meaning of Section 412 or 418B of the
Code and no waiver of any minimum funding requirement under Section 412
of the Code has been applied for or obtained with respect to any such
Pension Plan. The Parent and each Affiliated Organization have made
adequate provisions for reserves or accruals in accordance with
generally accepted accounting principles to meet contribution, benefit
or funding obligations arising under applicable Law or the terms of any
Pension Plan or Welfare Plan or Compensation Plan or related agreement.
There will be no change on or before Closing in the operation of any
Pension Plan, Welfare Plan or Compensation Plan or any documents with
respect thereto which will result in an increase in the benefit
liabilities under such plans, except as may be required by law.
(g) The Parent and each Affiliated Organization have timely
complied in all material respects with all reporting and disclosure
obligations with respect to the Pension Plans, Welfare Plans and
Compensation Plans imposed by Title I of ERISA or other applicable Law.
(h) There are no pending or, to the knowledge of the Parent,
threatened audits, investigations, claims, suits, grievances or other
proceedings, and there are no facts that could give rise thereto,
involving, directly or indirectly, any Pension Plan, Welfare Plan or
Compensation Plan, or any rights or benefits thereunder, other than the
ordinary and usual claims for benefits by participants, dependents or
beneficiaries.
(i) The transactions contemplated herein do not result in the
acceleration of accrual, vesting, funding or payment of any
contribution or benefit under any Pension Plan, Welfare Plan or
Compensation Plan. No payment made or to be made to any individual
pursuant to any agreement with the Parent or any Affiliated
Organization could reasonably be expected individually or collectively
(and assuming that any contingencies or conditions occur in a manner
that maximizes payment) to give rise to a "parachute payment" within
the meaning of Section 280G of the Code.
(j) No action or omission of any of the Parent or any
director, officer, employee, or agent thereof in any way restricts,
impairs or prohibits Parent, or any successor from amending, merging,
or terminating any Pension Plan, Welfare Plan or Compensation Plan in
accordance with the express terms of any such plan and applicable law.
(k) Section 2.15(k) on the Disclosure Schedule lists and the
Parent has delivered to Shareholders true and complete copies of (i)
all Pension, Welfare and Compensation Plans and related trust
agreements or other agreements or contracts evidencing any funding
vehicle with respect thereto, (ii) the three most recent annual reports
on Treasury Form 5500, including all schedules and attachments thereto,
with respect to any Plan for which such a report is required, (iii) the
three most recent actuarial reports with respect to any Pension Plan
that is a "defined benefit plan" within the meaning of Section 414(j)
of the Code, (iv) the form of summary plan description, including any
summary of material modifications thereto or other modifications
communicated to participants, currently in effect with respect to each
Pension Plan, Welfare Plan or Compensation Plan, (v) the most recent
determination letter with respect to each Pension Plan intended to
qualify under Section 401(a) of the Code and the full and complete
application therefor submitted to the Internal Revenue Service and (vi)
accurate estimates of the withdrawal liability which would be imposed
by any Multiemployer Plan (either pension or welfare) if the Companies
and Affiliated Organizations were to withdraw from the Plan in a
complete withdrawal, the date as of which such estimates are made and
the factors used to make such estimates.
2.16 Contracts and Commitments; No Default.
(a) Except as set forth on the Parent's Disclosure Schedule
and except as otherwise has been filed with the Commission, Parent:
1. does not have any written or oral contract,
commitment, agreement or arrangement with any person which is
required to be disclosed or filed as an exhibit pursuant to
Regulation S-B promulgated by the Commission;
2. does not pay any person or entity for services
rendered as an employee or consultant cash remuneration in
such amounts or upon such terms which are required to be
disclosed or which require any agreement to be filed as an
exhibit pursuant to Regulation S-B promulgated by the
Commission;
3. is not restricted by agreement from carrying on
its business or any part thereof in any geographical area or
from competing in any line of business with any person or
entity;
4. is not subject to any obligation or requirement to
provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any person or
entity;
5. is not party to any agreement, contract,
commitment or loan which is required to be disclosed or filed
as an exhibit pursuant to Regulation S-B promulgated by the
Commission, to which any of its directors, officers or any of
the shareholders or any "affiliate" or "associate" (as defined
in Rule 405 as promulgated under the Securities Act of 1933)
thereof is a party;
6. is not subject to any contract, commitment,
agreement or arrangement with any "disqualified individual"
(as defined in Section 280G(c) of the Code) which contains any
severance or termination pay liabilities which would result in
a disallowance of the deduction for any "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code) under
Section 280G of the Code; and
7. does not have any distributorship, dealer,
manufacturer's representative, franchise or similar sales
contract relating to the payment of a commission.
(b) True and complete copies (or summaries, in the case of
oral items) of all items disclosed pursuant to Section 2.16(a) have
been made available to Shareholders and its counsel for review. Except
as set forth on the Parent's Disclosure Schedule, all such items are
valid and enforceable by and against the Parent in accordance with
their respective terms; the Parent is not in breach, violation or
default, in any material respect, in the performance of any of its
obligations thereunder, and no facts or circumstances exist which,
whether with the giving of due notice, lapse of time, or both, would
constitute a breach, violation or default, in any material respect,
thereunder or thereof; and, to the knowledge of the Parent no other
parties thereto are in breach, violation or default, in any material
respect, thereunder or thereof, and no facts or circumstances exist
which, whether with the giving of due notice, lapse of time, or both,
would constitute such a breach, violation or default in any material
respect thereunder or thereof.
2.17 Compliance with Law. Except as set forth on the Parent's
Disclosure Schedule, and without limiting the scope of any other representations
or warranties contained in this Agreement, but without intending to expand the
scope of such other representations and warranties, to the knowledge of Parent,
the assets, properties, business and operations of the Parent are and have been
in compliance in all material respects when taken as a whole with all laws
applicable to the ownership and conduct of their assets, properties, business
and operations.
2.18 Accuracy of Information. To the knowledge of Parent, after
diligent review, no representation or warranty by the Parent in this Agreement
contains or will contain any untrue statement of material fact or omits or will
omit to state any material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading as of the date of the representation or warranty.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each of the Shareholders, jointly and severally, represent and warrant
to the Parent and the Acquisition Subs as follows:
3.1 Shareholders' Disclosure Schedule. The Shareholders' Disclosure
Schedule marked as Exhibit 3.1 hereto (the "Shareholders' Disclosure Schedule")
is divided into sections which correspond to the Sections of this Article 3. The
Shareholders' Disclosure Schedule is accurate and complete. For purposes of the
Shareholders' Disclosure Schedule, disclosure in one Section will constitute
disclosure for purposes of any other Section of this Agreement.
3.2 Corporate Organization. Each of the Companies is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, has full corporate power and authority to carry on its business
as it is now being conducted and to own, lease and operate its properties and
assets. Each of the Companies has heretofore delivered to Parent complete and
correct copies of its articles or certificate of incorporation and bylaws, as
presently in effect. Each of the Companies is duly qualified or licensed to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the character or location of the properties and assets owned, leased or
operated by it or the nature of the business conducted by it requires such
qualification or licensing, except where the failure to be so qualified,
licensed or in good standing in such other jurisdiction could not, individually
or in the aggregate, have a material adverse effect on the business of the
Companies taken as a whole. Shareholders have previously delivered to the Parent
accurate and complete copies of the articles of incorporation and bylaws of the
Companies, as currently in effect. The Companies do not, directly or indirectly,
own or control or have any capital, equity, partnership, participation or other
interest in any corporation, partnership, joint venture or other business
association or entity.
3.3 Capitalization. The authorized capital stock of Nordata consists of
1,000 shares of common stock, no par value, of which 1,000 shares are issued and
outstanding. The authorized capital stock of Rudata consists of 1,000,000 shares
of common stock, no par value, of which 20,000 shares are issued and
outstanding. All issued and outstanding shares of capital stock of each of the
Companies are duly authorized, validly issued, fully paid and nonassessable and
are without, and were not issued in violation of, any preemptive rights. All
issued and outstanding shares of capital stock of each of the Companies are
owned solely by the Shareholders in the exact amounts as shown on the
Shareholders' Disclosure Schedule. Except as set forth under Section 3.3 on the
Shareholders' Disclosure Schedule: (i) there are no outstanding options,
warrants, conversion privileges or other rights to purchase or acquire any
shares of capital stock or other equity securities of either of the Companies or
any outstanding securities that are convertible into or exchangeable for such
shares, securities or rights; and (ii) there are no contracts, commitments,
understandings, arrangements or restrictions by which either of the Companies is
bound to issue or acquire any additional shares of its capital stock or other
equity securities or any options, warrants, conversion privileges or other
rights to purchase or acquire any capital stock or other equity securities of
either of the Companies or any securities convertible into or exchangeable for
such shares, securities or rights.
3.4 Authorization. Each of the Companies has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated herein. Shareholders, and each of them, have the legal capacity to
enter into this Agreement and to carry out the transactions contemplated herein,
including without limitation the legal capacity to execute, deliver and perform
the agreements or contracts, if any, required by Sections 5.11 and 5.12 to be
executed and delivered by either of them as a condition to the Closing. The
Shareholders and the Board of Directors of each of the Companies have taken all
action required by law, the articles or certificate of incorporation and bylaws
of each of the Companies and otherwise to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein. This Agreement has been duly and validly executed and
delivered by each of the Companies, and this Agreement is the valid and binding
legal obligation of each of the Companies, enforceable against each of the
Companies in accordance with its terms, subject to the affect of applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance and
other laws affecting the rights of creditors generally or the availability of
specific performance, injunctive relief and other equitable remedies and to
general principles of equity (regardless of whether such principles are
considered in a proceeding in equity or at law). This Agreement has been duly
and validly executed by the Shareholders. This Agreement is the valid and
binding legal obligation of each of the Shareholders, enforceable against each
of the Shareholders in accordance with its terms.
3.5 Non-Contravention. Except as set forth on the Shareholders'
Disclosure Schedule, neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated herein will: (i)
violate or be in conflict with any provision of the articles or certificate of
incorporation or bylaws or either of the Companies; (ii) except for such
violations, conflicts, defaults, accelerations, terminations, cancellations,
impositions of fees or penalties, mortgages, pledges, liens, security interests,
encumbrances, restrictions and charges which would not, individually or in the
aggregate, have a material adverse affect on the business of the Companies taken
as a whole (A) be in conflict with, or constitute a default under, any note,
bond, lease, mortgage, indenture, license, contract, franchise, permit,
instrument or other agreement or obligation to which either of the Companies is
a party or (B) result in the creation or imposition of any mortgage, lien,
security interest, encumbrance or charge of any kind, upon any property or
assets of either of the Companies under any contract, agreement or commitment to
which either of the Companies or either of the Shareholders is a party; or (iii)
to the knowledge of each of the Companies and the Shareholders, violate any law,
judgement, decree, order, regulation or ordinance or other similar authoritative
matters of any foreign, federal, state or local governmental or
quasi-governmental, administrative, regulatory or judicial court, department,
commission, agency, board, bureau, instrumentality or other authority
(hereinafter sometimes separately referred to as an "Authority" and sometimes
collectively as "Authorities") (sometimes hereinafter separately referred to as
a "Law" and sometimes collectively as "Laws") by which either of the Companies
or either of the Shareholders is bound or affected.
3.6 Consents and Approvals. Except as set forth on the Shareholders'
Disclosure Schedule, with respect to each of the Companies, no consent,
approval, order or authorization of or from, or registration, notification,
declaration or filing with (hereinafter sometimes separately referred to as a
"Consent" and sometimes collectively as "Consents") any individual, governmental
or regulatory authority or other person or entity is required in connection with
the execution, delivery or performance of this Agreement by either of the
Companies or by either of the Shareholders or the consummation by either of the
Companies or either of the Shareholders of the transactions contemplated herein.
3.7 Financial Statements. The Shareholders have furnished to Parent
summaries of the unaudited combined balance sheet and unaudited combined
statement of income for the Companies on a combined basis as of and for each of
the fiscal years ended December 31, 1991, 1992, 1993 and 1994, which are
attached hereto as Exhibits 3.7 (the "Financial Statements"). The Shareholders
have delivered to Parent an unaudited balance sheet for the Companies on a
combined basis as of February 29, 1996, which unaudited balance sheet is
attached hereto as a part of Exhibit 3.7 referred to herein as the "Latest
Balance Sheet." Except as disclosed therein, the Financial Statements (i) are in
accordance with the books and records of the respective Companies and have been
consistently prepared as of the dates reflected therein and for all periods
reflected therein, (ii) fairly present the financial position of the respective
Companies as of the respective dates thereof, and with respect to the statements
of income for the periods then ended, and (iii) accurately state the various
account balances as of the dates reflected therein and accurately state the
changes in such account balances for the periods reflected therein. Except as
set forth on the Shareholders' Disclosure Schedule, to the knowledge of the
Shareholders and each of the Companies, neither of the Companies has any
liability or obligation of any nature, asserted or unasserted, accrued, absolute
or contingent or otherwise, and whether due or to become due, that is required
to be set forth in accordance with generally accepted accounting principles that
is not reflected or reserved against on the most recent balance sheet for such
Companies included in the Financial Statements, except those that may have been
incurred after the date of the most recent balance sheet of the Companies
included in the Financial Statements in the ordinary course of business and
consistent with past practices.
3.8 Loss Contingencies; Other Non-Accrued Liabilities. Except as
described on the Shareholders' Disclosure Schedule, to the knowledge of the
Shareholders and each of the Companies, neither of the Companies has (i) any
loss contingencies which are not required by generally accepted accounting
principles to be accrued; (ii) any loss contingencies involving an unasserted
claim or assessment which are not required by generally accepted accounting
principles to be disclosed because the potential claimants have not manifested
to Companies an awareness of a possible claim or assessment; or (iii) any
categories of known liabilities or obligations (other than non-pension
post-retirement medical care, dental care, life insurance or other benefits)
which are not required by generally accepted accounting principles to be
accrued. For purposes of this Agreement, "loss contingency" will have the
meaning accorded to it by generally accepted accounting principles.
3.9 Investigations; Litigation. To the knowledge of each of the
Companies and the Shareholders, there are no claims, actions, suits or
proceedings by any private party or by any governmental body or authority
(including any nongovernmental self-regulatory agency), nor any investigations
or reviews by any federal, state, local or foreign body or authority (including
any nongovernmental self-regulatory agency), against or affecting either of the
Companies or the Shareholders, that are pending or, to the knowledge of the
Companies and the Shareholders, threatened, at law or in equity. To the best of
the knowledge of the Companies and the Shareholders, there is no basis for any
such investigation, review, claim, action, suit or proceeding.
3.10 Absence of Certain Changes. Except as set forth on the
Shareholders' Disclosure Schedule, except as expressly authorized by this
Agreement, and except as is in the ordinary course of business and consistent
with past practice, since December 31, 1995, each of the Companies has not:
(a) Suffered any adverse change in its condition (financial or
otherwise), working capital, assets, properties, liabilities,
obligations, reserves or businesses, or experienced any event or failed
to take any action which could reasonably be expected to have a
material adverse effect on the business of the Companies taken as a
whole;
(b) Suffered any loss, damage, destruction or other casualty
(whether or not covered by insurance) or suffered any loss of officers,
employees, dealers, distributors, independent contractors, customers,
or suppliers or other favorable business relationships which could
reasonably be expected to have a material adverse affect on the
business of the Companies taken as a whole;
(c) Declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock, or purchased or redeemed
any shares of its capital stock;
(d) Issued or sold any shares of its capital stock, or any
options, warrants, conversion, exchange or other rights to purchase or
acquire any such shares or any securities convertible into or
exchangeable for such shares;
(e) Incurred any indebtedness for borrowed money;
(f) Mortgaged, pledged, or subjected to any material lien,
lease, security interest or other charge or encumbrance any of its
properties or assets, tangible or intangible;
(g) Acquired or disposed of any material assets or properties;
(h) Forgiven or cancelled any material debts or claims, or
waived any material rights;
(i) Entered into any material transaction other than in the
ordinary course of business;
(j) Granted to any officer or salaried employee or any other
employee any material increase in compensation in any form or made any
material payments for severance or termination pay;
(k) Entered into any material commitment for capital
expenditures for additions to plant, property or equipment; or
(l) Agreed, whether in writing or otherwise, to take any
action described in this Section.
3.11 Title to Property; Condition. Except as set forth on the
Shareholders' Disclosure Schedule, each of the Companies has good and
merchantable right, title and interest in and to all of the machinery,
equipment, terminals, computers, vehicles, personal property and all other
assets reflected in the Latest Balance Sheet for each such Companies included in
the Financial Statements and all of the assets purchased or otherwise acquired
since the date of the Latest Balance Sheet for each such Companies (except for
such assets as may have been sold or otherwise disposed of in the ordinary
course of business since the date of the most recent balance sheet included in
the Financial Statements), subject to no mortgage, pledge, lien or security
interest of any kind or nature (whether or not of record). Except as set forth
on the Shareholders' Disclosure Schedule, the items of equipment and other
personal property of each of the Companies that are necessary to the conduct of
the business of each of the Companies are in good operating condition and repair
and fit for the intended purpose thereof, ordinary wear and tear excepted, and
no material maintenance, replacement or repair has been deferred or neglected.
3.12 Inventories. Except as set forth on the Shareholders' Disclosure
Schedule, all inventory or each of the Companies reflected in the Latest Balance
Sheet consists of a quality and quantity usable and salable in the ordinary
course of business, and the present quantities of all inventory of each of the
Companies are reasonable in the present circumstances of the business of each of
the Companies as currently conducted, except for items of obsolete or below
standard quality, all of which are immaterial to the overall financial condition
of the Company taken as a whole.
3.13 Receivables and Payables. Except as set forth on the Shareholders'
Disclosure Schedule, (i) each of the Companies has good right, title and
interest in and to all its accounts receivable, notes receivable and other
receivables reflected in the Latest Balance Sheet for such Companies and those
acquired and generated since the date of the Latest Balance Sheet for such
Companies included in the Financial Statements (except for those paid since such
date); (ii) none of such receivables is subject to any mortgage, pledge, lien or
security interest of any kind or nature (whether or not of record); (iii) except
to the extent of applicable reserves shown in the Latest Balance Sheet for such
Companies included in the Financial Statements, all of the receivables owing to
each of the Companies constitute valid and enforceable claims arising from bona
fide transactions in the ordinary course of business, and neither of the
Companies has received any written or oral claims or refusals to pay, or granted
any rights of set-off, against any thereof; and (iv) to the knowledge of each of
the Companies and the Shareholders, there is no reason why any receivable will
not be collected in accordance with its terms, other than for such receivables
which are not in excess of the reserves established therefor and reflected in
the most recent balance sheet for such Companies included in the Financial
Statements. Included in the Shareholders' Disclosure Schedule is a schedule of
the aging of accounts receivable of each of the Companies (by monthly integrals)
as of March 31, 1996 prepared in accordance with generally accepted accounting
procedures consistently applied.
3.14 Tax Returns. To the knowledge of each of the Companies and the
Shareholders, except as set forth on the Shareholders' Disclosure Schedule:
(a) LIABILITY FOR TAXES. The Companies and the Shareholders
have been responsible for and will pay all Taxes attributable to or
arising from the business and operations of the Companies conducted on
or before the Closing Date and will be responsible for their own income
and franchise Taxes, if any, arising from the transactions contemplated
by this Agreement, except as provided in Sections 4.11 and 8.2(c)
hereof.
(b) FILING OF TAX RETURNS. All Tax Returns required to be
filed on or prior to the date hereof by the Companies or the
Shareholders with respect to Taxes of the Companies have been properly
completed and duly filed on a timely basis and in correct form. As of
the time of filing, the foregoing Tax Returns correctly reflected the
facts regarding the income, business, assets, operations, activities,
status or other matters of the Companies and the Shareholders or any
other information required to be shown thereon. There is no material
omission, deficiency, error, misstatement or misrepresentation, whether
innocent, intentional or fraudulent, in any Tax Return filed by the
Companies or the Shareholders for any period. Any Tax Returns filed
after the date hereof, but on or before the Closing Date, will conform
with the provisions of this Section 3.15(b).
(c) PAYMENT OF TAXES. With respect to all amounts of Taxes
imposed upon the Companies or the Shareholders, or for which the
Companies or the Shareholders are or could be liable, whether to taxing
Authorities (as, for example, under Law) or to other persons or
entities (as, for example, under tax allocation agreements), with
respect to all taxable periods or portions of periods ending on or
before the Closing Date, all applicable Tax Laws and agreements have
been or will be fully complied with, and all such amounts of Taxes
required to be paid by the Companies or the Shareholders to taxing
Authorities or others on or before the date hereof have been duly paid
or will be paid on or before the Closing Date; the reserves for all
such Taxes reflected in the Latest Balance Sheet are adequate and there
are no liens for such Taxes upon any property or assets of the
Companies. The Companies have withheld and remitted all amounts
required to be withheld and remitted by it in respect of Taxes. No
Shareholder of any of the Companies which is an S Corporation under the
Code has since the Latest Balance Sheet received any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any such Companies capital stock or equity
interest to pay Taxes.
(d) AUDITS AND EXTENSIONS. Except as set forth in the
Shareholders' Disclosure Schedule, neither the federal Tax Returns of
the Companies (and of the Shareholders to the extent the operations of
the Companies are reflected in the Shareholders' Tax Returns) nor any
state or local or foreign Tax Return of the Companies have been
examined by the Internal Revenue Service or any similar state or local
or foreign Authority and, except to the extent shown therein, all
deficiencies asserted as a result of such examinations have been paid
or finally settled and no issue has been raised by the Internal Revenue
Service or any similar state or local or foreign Authority in any such
examination which, by application of similar principles, reasonably
could be expected to result in a proposed deficiency for any other
period not so examined. Except as set forth in the Shareholders'
Disclosure Schedule, all deficiencies and assessments of Taxes of the
Companies (or any of the Shareholders' to the extent attributable to
the business or operations of the Companies) resulting from an
examination of any Tax Returns by any Authority have been paid and
there are no pending examinations currently being made by any Authority
nor has there been any written or oral notification to the Companies or
the Shareholders of any intention to make an examination of any Taxes
by any Authority. Except as set forth in the Shareholders' Disclosure
Schedule, there are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Tax Return for any
period.
(e) INDEPENDENT CONTRACTORS AND EMPLOYEES. For purposes of
computing Taxes and the filing of Tax Returns, the Companies have not
failed to treat as "employees" any individual providing services to the
Companies who would be classified as an "employee" under the applicable
rules or regulations of any Authority with respect to such
classification.
(f) S CORPORATION ELECTIONS. Rudata has had in effect a valid
election under Code Section 1362 to be treated as an "S corporation"
for each of their taxable years since inception. Neither the Companies
nor either of the Shareholders have taken any action to revoke that
election. Neither the Companies nor the Shareholders are aware of any
basis or the existence of any facts that would permit the Internal
Revenue Service to revoke that election for any period prior to the
Closing Date. Except as described on the Shareholders' Disclosure
Schedule, since the effective date of Rudata's election as an S
corporation to and including the Closing Date, the Companies will not
have incurred or become liable for the payment of any corporate-level
income tax, or any related penalties or interest.
3.15 Insurance. Section 3.16 of the Shareholders' Disclosure Schedule
contains an accurate and complete list of all policies of fire and other
casualty, general liability, theft, life, workers' compensation, health,
directors and officers liability, business interruption and other forms of
insurance owned or held by each of the Companies, specifying the insurer, the
policy number, the term of the coverage and, in the case of any "claims made"
coverage, the same information as to predecessor policies for the previous five
years. All present policies are in full force and effect and all premiums with
respect thereto have been paid. Neither of the Companies has been denied any
form of insurance and no policy of insurance has been revoked or rescinded
during the past three years, except as described under Section 3.15 on the
Shareholders' Disclosure Schedule.
3.16 Benefit Plans. Except as set forth on the Shareholders' Disclosure
Schedule:
(a) Neither the Companies, Shareholders nor any other "person"
within the meaning of Section 7701(a)(1) of the Code, that together
with the Companies are considered a single employer pursuant to
Sections 414(b), (c), (m) or (o) of the Code or Sections 3(5) or
4001(b)(1) of ERISA (a "Datatech Affiliated Organization") sponsors,
maintains, contributes to, is required to contribute to or has any
liability of any nature, whether known or unknown, direct or indirect,
absolute or contingent, with respect to, any "employee pension benefit
plan" ("Datatech Pension Plan") as such term is defined in Section 3(2)
of ERISA, including without limitation, any such plan that is excluded
from coverage by Section 4(b)(5) of ERISA or is a "Multiemployer Plan"
within the meaning of Section 3(37) or 4001(a)(3) of ERISA. Each such
Datatech Pension Plan has been operated in all material respects in
accordance with its terms and in compliance with the applicable
provisions of ERISA, the Code and all other applicable Law. All Pension
Plans which the Companies operate as plans that are intended to qualify
under the provisions of Section 401(a) of the Code satisfy in all
material respects in form and operation the requirements of Section
401(a) and all other sections of the Code incorporated therein,
including without limitation Sections 401(k) and 401(m) of the Code.
(b) Neither the Companies nor any Datatech Affiliated
Organization has any liability of any nature, whether known or unknown,
direct or indirect, or absolute or contingent, to any Datatech Pension
Plan, the Pension Benefit Guaranty Corporation ("PBGC") or any other
person, arising directly or indirectly under Title IV of ERISA. No
"reportable event," within the meaning of Section 4043(b) of ERISA, has
occurred with respect to any Datatech Pension Plan. Neither any of the
Companies nor any Datatech Affiliated Organization has ceased
operations at any facility or withdrawn from any Datatech Pension Plan
in a manner which could subject the Companies or Datatech Affiliated
Organization to liability under Section 4062(e), 4063 or 4064 of ERISA.
Neither any of the Companies nor any Datatech Affiliated Organization
maintains, contributes to, has participated in or agreed to participate
in any Multiemployer Plan (either pension or welfare). Neither any of
the Companies nor any Datatech Affiliated Organization currently has
any obligation, known or unknown, direct or indirect, absolute or
contingent, to make any withdrawal liability payment to any
Multiemployer Plan. Neither the Companies nor any Datatech Affiliated
Organization has been a party to a sale of assets to which Section 4204
of ERISA applied with respect to which it could incur any withdrawal
liability (including any contingent or secondary withdrawal liability)
to any Multiemployer Plan. Neither the Companies nor any Datatech
Affiliated Organization has incurred (or has experienced an event that
will, within the ensuing 12 months, result in) a "complete withdrawal"
or "partial withdrawal," as such terms are defined respectively in
Sections 4203 and 4205 of ERISA, with respect to a Multiemployer Plan,
and nothing has occurred that could result in such a complete or
partial withdrawal.
(c) Neither the Companies nor any Datatech Affiliated
Organization sponsors, maintains, contributes to, is required to
contribute to or has any liability of any nature, whether known or
unknown, direct or indirect, or absolute or contingent, with respect
to, any "employee welfare benefit plan" ("Datatech Welfare Plan") as
such term is defined in Section 3(1) of ERISA, whether insured or
otherwise. Each Datatech Welfare Plan has been operated in all material
respects in accordance with its terms and in compliance with the
applicable provisions of ERISA, the Code and all other applicable Law.
Neither the Companies nor any Datatech Affiliated Organization has
established or contributed to, is required to contribute to or has any
liability of any nature, whether known or unknown, direct or indirect,
or absolute or contingent, with respect to any "voluntary employees'
beneficiary association" within the meaning of Section 501(c)(9) of the
Code, "welfare benefit fund" within the meaning of Section 419 of the
Code, "qualified asset account" within the meaning of Section 419 of
the Code, "qualified asset account" within the meaning of Section 419A
of the Code or "multiple employer welfare arrangement" within the
meaning of Section 3(40) or ERISA. No Datatech Welfare Plan which is a
Multiemployer Plan within the meaning of Section 3(37) of ERISA imposes
any post-withdrawal liability or contribution obligations upon the
Companies or Datatech Affiliated Organizations. Neither the Companies
nor any Datatech Affiliated Organization maintains, contributes to or
has any material liability of any nature, whether known or unknown,
direct or indirect, or absolute or contingent, with respect to medical,
health, life or other welfare benefits for present or future terminated
employees or their spouses or dependents other than as required by Part
6 of Subtitle B of Title I of ERISA or any comparable state law.
(d) Neither the Companies nor any Datatech Affiliated
Organization is a party to, maintains, contributes to, is required to
contribute to or has or could have any liability of any nature, whether
known or unknown, direct or indirect, or absolute or contingent, with
respect to, any bonus plan, incentive plan, stock plan or any other
current or deferred compensation (other than current salary or wages
paid in the form of cash), separation, retention, severance, paid time
off or similar agreement, arrangement or policy, or any individual
employment or consulting or personal service agreement, other than a
Datatech Pension Plan or Datatech Welfare Plan ("Datatech Compensation
Plans"). Each Datatech Compensation Plan has been operated in all
material respects in accordance with its terms and in compliance with
the applicable provisions of all applicable Law.
(e) There are no facts or circumstances which could, directly
or indirectly, subject the Companies or any Datatech Affiliated
Organization to any excise tax or other liability under Chapters 43, 46
or 47 of Subtitle D of the Code, penalty tax or other liability under
Chapter 68 of Subtitle F of the Code or civil penalty arising under
Section 502 of ERISA.
(f) Full payment has been made of all amounts which the
Companies or any Datatech Affiliated Organization are required, under
applicable Law, the terms of any Datatech Pension Plan, Datatech
Welfare Plan or Datatech Compensation Plan, or any agreement relating
to any Datatech Pension Plan or Datatech Welfare Plan or Datatech
Compensation Plan, to have paid as a contribution, premium or other
remittance thereto or benefit thereunder. Each Datatech Pension Plan
that is subject to the minimum funding standards of Section 412 of the
Code and Section 302 of ERISA meets those standards and has not
incurred any accumulated funding deficiency within the meaning of
Section 412 or 418B of the Code and no waiver of any minimum funding
requirement under Section 412 of the Code has been applied for or
obtained with respect to any such Datatech Pension Plan. The Companies
and each Datatech Affiliated Organization have made adequate provisions
for reserves or accruals in accordance with generally accepted
accounting principles to meet contribution, benefit or funding
obligations arising under applicable Law or the terms of any Datatech
Pension Plan or Datatech Welfare Plan or Datatech Compensation Plan or
related agreement. There will be no change on or before Closing in the
operation of any Datatech Pension Plan, Datatech Welfare Plan or
Datatech Compensation Plan or any documents with respect thereto which
will result in an increase in the benefit liabilities under such plans,
except as may be required by law.
(g) The Companies and each Datatech Affiliated Organization
have timely complied in all material respects with all reporting and
disclosure obligations with respect to the Datatech Pension Plans,
Datatech Welfare Plans and Datatech Compensation Plans imposed by Title
I of ERISA or other applicable Law.
(h) There are no pending or, to the knowledge of the
Shareholders and the Companies, threatened audits, investigations,
claims, suits, grievances or other proceedings, and there are no facts
that could give rise thereto, involving, directly or indirectly, any
Datatech Pension Plan, Datatech Welfare Plan or Datatech Compensation
Plan, or any rights or benefits thereunder, other than the ordinary and
usual claims for benefits by participants, dependents or beneficiaries.
(i) The transactions contemplated herein do not result in the
acceleration of accrual, vesting, funding or payment of any
contribution or benefit under any Datatech Pension Plan, Datatech
Welfare Plan or Datatech Compensation Plan. No payment made or to be
made to any individual pursuant to any agreement with any of the
Companies or any Datatech Affiliated Organization could reasonably be
expected individually or collectively (and assuming that any
contingencies or conditions occur in a manner that maximizes payment)
to give rise to a "parachute payment" within the meaning of Section
280G of the Code.
(j) No action or omission of any of the Companies or any
director, officer, employee, or agent thereof in any way restricts,
impairs or prohibits Parent, or any of the Companies or any successor
from amending, merging, or terminating any Datatech Pension Plan,
Datatech Welfare Plan or Datatech Compensation Plan in accordance with
the express terms of any such plan and applicable law.
(k) Section 3.16(k) on the Shareholders' Disclosure Schedule
lists and the Companies have delivered to the Parent true and complete
copies of (i) all Datatech Pension, Datatech Welfare and Datatech
Compensation Plans and related trust agreements or other agreements or
contracts evidencing any funding vehicle with respect thereto, (ii) the
three most recent annual reports on Treasury Form 5500, including all
schedules and attachments thereto, with respect to any Plan for which
such a report is required, (iii) the three most recent actuarial
reports with respect to any Datatech Pension Plan that is a "defined
benefit plan" within the meaning of Section 414(j) of the Code, (iv)
the form of summary plan description, including any summary of material
modifications thereto or other modifications communicated to
participants, currently in effect with respect to each Datatech Pension
Plan, Datatech Welfare Plan or Datatech Compensation Plan, (v) the most
recent determination letter with respect to each Datatech Pension Plan
intended to qualify under Section 401(a) of the Code and the full and
complete application therefor submitted to the Internal Revenue Service
and (vi) accurate estimates of the withdrawal liability which would be
imposed by any Multiemployer Plan (either pension or welfare) if the
Companies and Datatech Affiliated Organizations were to withdraw from
the Plan in a complete withdrawal, the date as of which such estimates
are made and the factors used to make such estimates.
3.17 Bank Accounts; Powers of Attorney. Section 3.17 of the
Shareholders' Disclosure Schedule sets forth: (i) the names of all financial
institutions, investment banking and brokerage houses, and other similar
institutions at which the Companies and its Subsidiaries maintain accounts,
deposits, safe deposit boxes of any nature, and the names of all persons
authorized to draw thereon or make withdrawals therefrom; (ii) the terms and
conditions thereof and any limitations or restrictions as to use, withdrawal or
otherwise; and (iii) the names of all persons or entities holding general or
special powers of attorney from each of the Companies and a summary of the terms
thereof.
3.18 Contracts and Commitments; No Default.
(a) Except as set forth on the Shareholders' Disclosure
Schedule, neither of the Companies:
1. has any written or oral contract, commitment,
agreement or arrangement with any person which (1) requires
payments individually in excess of $10,000 annually or in
excess of $20,000 over its term (including without limitation
periods covered by any option to extend or renew by either
party) and (2) is not terminable on thirty (30) days' or less
notice without cost or other liability;
2. pays any person or entity cash remuneration at the
annual rate (including without limitation guaranteed bonuses)
of more than $10,000 for services rendered as an employee or
consultant;
3. is restricted by agreement from carrying on its
business or any part thereof in any geographical area or from
competing in any line of business with any person or entity;
4. is subject to any obligation or requirement to
provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any person or
entity;
5. is party to any agreement, contract, commitment or
loan requiring payments in excess of $20,000 over its term and
not terminable by the Companies on thirty (30) days' or less
notice without cost or liability to which any of its
directors, officers or any of the Shareholders or any
"affiliate" or "associate" (as defined in Rule 405 as
promulgated under the Securities Act of 1933) thereof is a
party;
6. is subject to any contract, commitment, agreement
or arrangement with any "disqualified individual" (as defined
in Section 280G(c) of the Code) which contains any severance
or termination pay liabilities which would result in a
disallowance of the deduction for any "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code) under
Section 280G of the Code; and
7. has any distributorship, dealer, manufacturer's
representative, franchise or similar sales contract relating
to the payment of a commission.
(b) True and complete copies (or summaries, in the case of
oral items) of all items disclosed pursuant to Section 3.18(a) have
been made available to Parent and its counsel for review. Except as set
forth under Section 3.18 on the Shareholders' Disclosure Schedule, to
the knowledge of each of the Companies and the Shareholders, all such
items are valid and enforceable by and against the respective Companies
and the Shareholders, as the case may be, in accordance with their
respective terms; neither of the Companies is in breach, violation or
default, in any material respect, in the performance of any of its
obligations thereunder, and no facts or circumstances exist which,
whether with the giving of due notice, lapse of time, or both, would
constitute a breach, violation or default, in any material respect,
thereunder or thereof; and, to the knowledge of each of the Companies
and the Shareholders, no other parties thereto are in breach, violation
or default, in any material respect, thereunder or thereof, and no
facts or circumstances exist which, whether with the giving of due
notice, lapse of time, or both, would constitute such a breach,
violation or default in any material respect thereunder or thereof.
3.19 Orders, Commitments and Returns. Except as set forth on the
Shareholders' Disclosure Schedule and except as are not material to the business
of the Companies taken as a whole, all accepted and unfulfilled orders for the
sale of products and the performance of services entered into by each of the
Companies and all outstanding contracts or commitments for the purchase of
supplies, materials and services by or from the Companies were made in bona fide
transactions in the ordinary course of business. Except as set forth on the
Shareholders' Disclosure Schedule and except as are not material to the business
of the Companies taken as a whole, to the knowledge of each of the Companies and
the Shareholders, there are no claims against either of the Companies to return
products by reason of alleged over-shipments, defective products or
otherwise, or of products in the hands of customers, retailers or distributors
under an understanding that such products would be returnable.
3.20 Labor Matters. Except as set forth on the Shareholders' Disclosure
Schedule and except as are not material to the business of the Companies taken
as a whole: (i) to the knowledge of each of the Companies and the Shareholders,
each of the Companies is and has at all times been in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination and occupational safety and
health requirements, and has not and is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice complaint against either of the
Companies or the Shareholders pending or, to either of the knowledge of the
Shareholders or the Companies, threatened before the National Labor Relations
Board or any other comparable government authority; (iii) there is no labor
strike, dispute, slowdown or stoppage actually pending or, to either of the
Companies' or the Shareholders' knowledge, threatened against or directly
affecting either of the Companies; (iv) no collective bargaining agreement is
binding and in force against either of the Companies or the Shareholders or
currently being negotiated by either of the Companies or the Shareholders; (v)
neither of the Companies is delinquent in payments to any person for any wages,
salaries, commissions, bonuses or other direct or indirect compensation for any
services performed by them or amounts required to be reimbursed to such persons,
including without limitation any amounts due under any Pension Plan, Welfare
Plan or Compensation Plan; and (vi) within the 12 month period prior to the date
hereof there has not been any expression of intention to either of the Companies
by any officer or key employee to terminate such employment.
3.21 Dealers and Suppliers. Except as set forth on the Shareholders'
Disclosure Schedule, there has not been in the 12 month period prior to the date
hereof any material adverse change in the business relationship of either of the
Companies with any dealer or supplier to either of the Companies.
3.22 Licenses and Other Operating Rights. To the knowledge of each of
the Companies and the Shareholders, each of the Companies has all material
licenses, permits, approvals and other governmental authorizations necessary to
own its properties and assets and to carry on its business as presently being
conducted (individually and collectively, the "License(s)"). All such Licenses
are listed under Section 3.22 on the Shareholders' Disclosure Schedule and,
except as set forth therein, each of the Companies has complied in all material
respects with the provisions of each License. Each such License is valid and in
full force and effect. Except as set forth on the Shareholders' Disclosure
Schedule, the continuation, validity and effectiveness of each such License will
in no way be affected by the consummation of the transactions contemplated by
this Agreement. To the knowledge of each of the Companies and the Shareholders,
neither of the Companies has breached any material provision of, nor is in
default in any material respect under the terms of, any such License and no
action or proceeding looking to or contemplating the revocation or suspension of
any such License is pending or threatened.
3.23 Compliance with Law. Except as set forth on the Shareholders'
Disclosure Schedule, and without limiting the scope of any other representations
or warranties contained in this Agreement, but without intending to expand the
scope of such other representations and warranties, to the knowledge of each of
the Companies and the Shareholders, the assets, properties, business and
operations of each of the Companies are and have been in compliance in all
material respects when taken as a whole with all laws applicable to the
ownership and conduct of their assets, properties, business and operations.
3.24 Physical Assets of Business. The physical assets owned or leased
by each of the respective Companies constitute all of the physical assets held
for use or used primarily in connection with such Company's business and are
adequate to carry on such business as presently conducted and as contemplated by
such Company to be conducted.
3.25 Brokers. Except as set forth on the Shareholders' Disclosure
Schedule, neither of the Companies nor any of their respective directors,
officer or employees has employed any broker, finder, or financial advisor or
incurred any liability for any brokerage fee or commission, finder's fee or
financial advisory fee, in connection with the transactions contemplated hereby,
nor is there any basis known to either of the Companies for any such fee or
commission to be claimed by any person or entity.
3.26 Accuracy of Information. To the best of the knowledge of the
Companies and the Shareholders, after diligent review, no representation or
warranty by either of the Companies in this Agreement contains or will contain
any untrue statement of material fact or omits or will omit to state any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading as of the
date of the representation or warranty.
3.27 Shareholders Representations. In addition to the foregoing
representations of each of the Shareholders, each of the Shareholders hereby
represents and warrants to Parent as follows, provided that such representations
and warranties are made by each Shareholder individually and not with respect to
any other Shareholder:
(a) The Shareholders have the legal capacity to enter into
this Agreement and to carry out the transactions contemplated herein,
including without limitation the legal capacity to execute, deliver and
perform the agreements or contracts, if any, required by Article 5
hereof to be executed and delivered by the Shareholders as a condition
to the Closing. The execution, delivery and performance of this
Agreement by the Shareholders and the consummation of the transactions
contemplated herein will not conflict with, or constitute a default
under any note, bond, lease, mortgage, indenture, license, contract,
franchise, permit, instrument or other agreement or obligation to which
the Shareholders are party or violate any law, judgment, decree, order,
regulation or ordinance by or to which the Shareholders are a bound or
subject. No consent, approval, order or authorization of or from, or
registration, notification, declaration or filing with any individual,
governmental or regulatory authority or other person or entity is
required to be obtained by the Shareholders for the Shareholders to
surrender the shares of capital stock of the Companies held by the
Shareholders.
(b) The Shareholders received the documents and information as
filed with the Commission as set forth on Exhibit 2.5 and had
sufficient time to review and consider such documents and information
(all of the foregoing documents and reports being hereinafter referred
to as the "Eltrax Reports").
(c) The Shareholders are acquiring the shares of Parent's
Common Stock to be acquired by him or her pursuant to the Merger for
such Shareholders' sole account (and such Shareholders will be the sole
beneficial owners thereof) for the purpose of investment and not with a
view to distribution thereof within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"), nor with any present
intention of distribution or selling such shares of Parent Common Stock
in connection with any such distribution, and such Shareholders
understand that such shares have not been registered under the
Securities Act and therefore cannot be resold unless they are
registered under the Securities Act or unless an exemption from
registration is available.
(d) The Shareholders have been afforded an opportunity to ask
questions of and receive answers from representatives of Parent
concerning the terms and conditions of the transactions contemplated by
this Agreement and to obtain any additional information as such
Shareholders have requested in writing to verify the accuracy of the
Eltrax Reports and copies of any exhibits identified in such documents
that such Shareholders have requested.
ARTICLE 4
COVENANTS
4.1 Companies' Agreements as to Specified Matters. Except as
specifically set forth on the Disclosure Schedule, and except in the ordinary
course of business and consistent with past practice, and except as may be
expressly authorized by this Agreement or otherwise agreed in writing by Parent,
from the date hereof until the Closing, neither of the Companies will:
(a) Amend its articles or certificate of incorporation or
bylaws;
(b) Borrow or agree to borrow any funds;
(c) Incur, assume, suffer or become subject to, whether
directly or by way of guarantee or otherwise, any claims, obligations,
liabilities or loss contingencies which, individually or in the
aggregate, are material to the conduct of the businesses of the
Companies and its Subsidiaries or have or would have a material adverse
effect on the financial condition of the Companies and its
Subsidiaries;
(d) Pay, discharge or satisfy any claims, liabilities or
obligations;
(e) Permit or allow any of its properties or assets material
to the operation of its businesses to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of
any kind, except liens that relate to current taxes and assessments not
yet due and payable or that are being contested in good faith;
(f) Write down the value of any inventory or write off as
uncollectible any notes or accounts receivable or any trade accounts or
trade notes;
(g) Cancel or amend any debts, waive any claims or rights or
sell, transfer or otherwise dispose of any properties or assets, other
than for such debts, claims, rights, properties or assets which,
individually or in the aggregate, are not material to the conduct of
its businesses;
(h) License, sell, transfer, pledge, modify, disclose, dispose
of or permit to lapse any right to the use of any intellectual property
rights other than for such intellectual property rights which,
individually or in the aggregate, are not material to the conduct of
its businesses;
(i) (A) Terminate, enter into, adopt, institute or otherwise
become subject to or amend in any material respect any collective
bargaining agreement or employment or similar agreement or arrangement
with any of its directors, officers or employees; (B) terminate, enter
into, adopt, institute or otherwise become subject to or amend in any
material respect any Compensation Plan; (C) contribute, set aside for
contribution or authorize the contribution of any amounts for any such
Compensation Plan except as required (and not discretionary) by the
terms of such Compensation Plan; or (D) grant or become obligated to
grant any general increase in the compensation of any directors,
officers or employees (including without limitation any such increase
pursuant to any Compensation Plan);
(j) Make or enter into any commitment for capital expenditures
for additions to property, plant or equipment individually in excess of
$5,000.00;
(k) (A) Declare, pay or set aside for payment any dividend or
other distribution in respect of its capital stock or other securities
(including without limitation distributions in redemption or
liquidation) or redeem, purchase or otherwise acquire any shares of its
capital stock or other securities; (B) issue, grant or sell any shares
of its capital stock or equity securities of any class, or any options,
warrants, conversion or other rights to purchase or acquire any such
shares or equity securities or any securities convertible into or
exchangeable for such shares or equity securities, except issuance of
the Companies Common Stock pursuant to the exercise of stock options
outstanding on the date hereof; (C) become a party to any merger,
exchange, reorganization, recapitalization, liquidation, dissolution or
other similar corporate transaction; or (D) organize any new
subsidiary, acquire any capital stock or other equity securities or
other ownership interest in, or assets of, any person or entity or
otherwise make any investment by purchase of stock or securities,
contributions to capital, property transfer or purchase of any
properties or assets of any person or entity;
(l) Pay, lend or advance any amounts to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any director, officer, employee or shareholder;
(m) Terminate, enter into or amend in any material respect any
item identified in Section 3.19 of the Disclosure Schedule, or take any
action or omit to take any action which will cause a breach, violation
or default (however defined) under any such item; or
(n) Agree, whether in writing or otherwise, to take any action
described in this Section.
4.2 Conduct of the Companies' Business. Each of the Companies will
maintain its assets and properties and carry on its businesses and operations
only in ordinary course in substantially the same manner as planned and
previously operated; and each of the Companies will use and cause it to use its
best efforts to preserve intact its business organizations, existing business
relationships (including without limitation its relationships with officers,
employees, dealers, distributors, independent contractors, customers and
suppliers), goodwill and going concern value.
4.3 No Solicitation of Alternate Transaction by the Shareholders or
Companies. From the execution of this Agreement until the Closing Date or
earlier termination of this Agreement, Companies and Shareholders will not, and
will use their best efforts to ensure that the Companies' directors, officers
and employees, independent contractors, consultants, counsel, accountants,
investment advisors and other representatives and agents will not, directly or
indirectly, solicit, initiate or encourage discussions or negotiations with,
provide any nonpublic information to, or enter into any agreement with, any
third party concerning (or concerning the business of the Companies and its
Subsidiaries in connection with) any tender offer (including a self tender
offer), exchange offer, merger, consolidation, sale of substantial assets or of
a significant amount of assets, sale of securities, acquisition of beneficial
ownership of or the right to vote securities representing more than five percent
(5%) of the total voting power of either of the Companies, liquidation,
dissolution or similar transactions involving either of the Companies or any
division or Subsidiary of the Companies (such proposals, announcements or
transactions being called herein "Acquisition Proposals"). Notwithstanding the
foregoing, it is permissible to (1) communicate with (but not solicit, initiate,
encourage or negotiate with, other than pursuant to clause (2) of this sentence)
any third party; (2) if any third party makes a Bona Fide Unsolicited Offer,
furnish information concerning either of the Companies and its Subsidiaries or
their businesses to, and negotiate with, such third party. For the purposes of
this Section, a "Bona Fide Unsolicited Offer" will mean any unsolicited written
inquiry, proposal or offer respecting a potential Acquisition Proposal, other
than any such inquiry, proposal or offer that, after due consideration thereof
by the Board of Directors of the Companies, is expressly determined by such
Board of Directors not to be reasonably likely to result in the receipt of a
consideration superior to the consideration to be paid by Parent as described
herein; and (3) furnish information concerning either of the Companies and its
Subsidiaries or their businesses to a third party making a Bona Fide Unsolicited
Offer, or from taking any other action, if the Board of Directors of the
Companies concludes, after due consideration which will include consultation
with legal counsel, that there is a fiduciary duty to furnish such information
or take such other action. Each of the Companies and the Shareholders will
promptly inform Parent of any Bona Fide Unsolicited Offer, including the terms
thereof and the identity of the person or entity making such offer.
4.4 Full Access to Parent. From the execution of this Agreement until
the Closing Date or earlier termination of this Agreement, each of the Companies
and the Shareholders will afford to Parent and its directors, officers,
employees, counsel, accountants, investment advisors and other authorized
representatives and agents free and full access to the facilities, properties,
books and records of the Companies and its Subsidiaries in order that Parent may
have full opportunity to make such investigations as it desires to make of the
affairs of each of the Companies and the Shareholders provided, however, that
any such investigation will be conducted in such a manner as not to interfere
unreasonably with business operations; and each of the Companies and its
Subsidiaries will furnish such additional financial and operating data and other
information as Parent, from time to time, reasonably requests, including without
limitation access to the working papers of their independent certified public
accountants; and, provided, further, that any such investigation will not affect
or otherwise diminish or obviate in any respect any of the representations and
warranties of the Companies or Shareholders herein.
4.5 Confidentiality. The parties hereto will not use, or permit the use
of, any of the information relating to any other party hereto furnished to it in
connection with the transactions contemplated herein ("Information") in a manner
or for a purpose detrimental to such other party or otherwise than in connection
with the transaction, and that they will not disclose, divulge, provide or make
accessible (collectively, "Disclose"), or permit the Disclosure of, any of the
Information to any person or entity, other than their responsible directors,
officers, employees, investment advisors, accountants, counsel and other
authorized representatives and agents, except as may be required by judicial or
administrative process or, in the opinion of such party's regular counsel, by
other requirements of Law, unless the disclosing party first obtains the prior
written consent of the other parties hereto. The term "Information" as used
herein will not include any information relating to a party which the party
disclosing such information can show: (i) to have been in its possession prior
to its receipt from another party hereto; (ii) to be now or to later become
generally available to the public through no fault of the disclosing party;
(iii) to have been available to the public at the time of its receipt by the
disclosing party; (iv) to have been received separately by the disclosing party
in an unrestricted manner from a person entitled to disclose such information;
or (v) to have been developed independently by the disclosing party without
regard to any information received in connection with this transaction. The
parties hereto also will promptly return to the party from whom originally
received all original and duplicate copies of written materials containing
Information should the transactions contemplated herein not occur. A party
hereto will be deemed to have satisfied its obligations to hold the Information
confidential if it exercises the same care as it takes with respect to its own
similar information. This Section 4.5 survives Closing and any termination of
this Agreement.
4.6 Consummation; Consents; Removal of Objections. Subject to the terms
and conditions herein provided, each of the parties hereto will use its best
efforts to take or cause to be taken all actions and do or cause to be done all
things necessary, proper or advisable under applicable Laws to consummate and
make effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation; (i) obtaining all Consents of any person
or entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein; (ii) the removal or
satisfaction, if possible, of any objections to the validity or legality of the
transactions contemplated herein; and (iii) the satisfaction of the conditions
to consummation of the transactions contemplated hereby.
4.7 Further Assurances; Cooperation; Notification.
(a) Each party hereto will, before, at and after Closing,
execute and deliver such instruments and take such other actions as the
other party or parties, as the case may be, may reasonably require in
order to carry out the intent of this Agreement.
(b) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the occurrence of
any event which it reasonably believes will or may result in a failure
by such party to satisfy the conditions specified in Article 5 and
Article 6 hereof.
4.8 Supplements to Disclosure Schedule. Prior to the Closing, each of
the Companies and the Shareholders will supplement or amend the Disclosure
Schedule with respect to any event or development which is necessary to correct
any information under Section 4.8 on the Disclosure Schedule or in any
representation and warranty of the Companies or Shareholders which has been
rendered inaccurate by reason of such event or development.
4.9 Public Announcements. None of the parties hereto will make any
public announcement with respect to the transactions contemplated herein without
the prior written consent of the other parties, which consent will not be
unreasonably withheld or delayed; provided, however, that any of the parties
hereto may at any time make any announcements which are required by applicable
Law so long as the party so required to make an announcement promptly upon
learning of such requirement notifies the other parties of such requirement and
discusses with the other parties in good faith the exact proposed wording of any
such announcement.
4.10 Broker Fee Arrangements. Upon consummation of the Merger, the
Parent (or any of its subsidiaries) will be responsible for payment of the
broker's fee due to Garte Torre Global Capital Markets ("GTG") in accordance
with the agreement between Parent and GTG attached hereto as Exhibit 4.10.
4.11 Tax Liability of Surviving Corporations. Subject to Section 8.3(b)
hereof, Parent acknowledges that Nordata, as a Surviving Corporation, will be
responsible for the payment of any income tax liabilities, including penalties
and interest, for its 1995 taxable income, and for its taxable income resulting
from the change in accounting method from cash basis to accrual basis (the
"Accounting Method Change"). Parent and Shareholders agree to attempt to obtain
the consent of the relevant IRS district director to permit the filing of a Form
3115 with the appropriate Authorities promptly after the Closing Date to
effectuate the Accounting Method Change. In the event such IRS district
director's consent is not timely obtained, Parent and Shareholders agree to take
such other steps or file such other documents as required by any Authority to
effectuate the Accounting Method Change.
4.12 Registration Rights. Parent agrees to provide the Shareholders
with the registration rights with respect to Parent Common Stock they receive as
Merger Consideration as set forth on Exhibit 4.12 hereto.
4.13 Employment Terms for Employees of Surviving Corporation. All of
the employees of the respective Surviving Corporations that are retained by
Parent following the Closing Date will be entitled to participate in Parent's
1995 Incentive Stock Option Plan in accordance with the terms and conditions of
such Plan as and to the extent that other similarly situated employees of Parent
are eligible to participate in such Plans.
4.14 Restrictive Legend. Each of the Shareholders consents to the
placing of the following legend on the certificate or certificates for shares of
Parent Common Stock to be issued to each such Shareholder in connection with the
Merger:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS AND MAY BE SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED ONLY IF A REGISTRATION STATEMENT WITH RESPECT TO SUCH
TRANSACTION IS IN EFFECT PURSUANT TO THE PROVISIONS OF SUCH LAWS OR IF,
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS IS AVAILABLE.
4.15 Maintenance of and Access to Books and Records. For three (3)
years after the Closing, the Parent will cause the Surviving Corporations to
maintain all of the financial, accounting, tax and other books and records of
the Companies with respect to any period prior to the Closing and to cooperate
with and provide the Shareholders and their authorized representatives
reasonable access to any and all of such records during normal business hours.
4.16 Preparation of Tax Returns. The Parent and the Shareholders will
cooperate and jointly prepare and/or cause Rudata to prepare, at the Parent's
expense, any and all of Rudata's income tax returns, consents, statements,
and/or elections necessary for the period (the "Interim Period") beginning on
January 1, 1996 and ending immediately prior to the Closing. Any and all such
income tax returns for the Interim Period will be based upon an election by
Rudata under Section 1377(a)(2) of the Code to have the rules under Section
1377(a)(1) of the Code apply as if Rudata's taxable year consisted of two
taxable years, one of which coincides with the Interim Period and one of which
begins immediately after the Interim Period.
4.17 Amendment of Prior Returns; Audit. Unless advised by the Parent's
accountants or tax advisers that an amendment is required under applicable tax
laws or regulations, neither of the Surviving Corporations will file any amended
federal, state, local or other tax return, or take any other action which would
increase the taxable income or tax liability of any of the Shareholders for any
period prior to the Closing without the written consent of the Shareholders,
which consent will not be unreasonably withheld. In the event of an audit of any
of the tax returns of any of the Companies for any period prior to the Closing,
the Parent will provide copies of any and all notices of such audit and
correspondence related to such audit to the Shareholders, who will have the
right to participate in the conduct of the audit, and any appeal or other
proceeding resulting therefrom. Neither the Parent nor either of the Surviving
Corporations will agree to any assessment, adjustment or other modification of
the tax returns or tax liability of either of the Companies for any period prior
to the Closing without the prior written consent of the Shareholders, which
consent will not be unreasonably withheld.
4.18 Successors and Assigns. The Parent will not assign or otherwise
transfer control of either Surviving Corporation or approve any liquidation,
merger, consolidation, or sale of substantially all of the assets of the
Surviving Corporation, unless the person or persons acquiring control of such
acquiring Corporation, or the successor-in-interest of the Surviving Corporation
in the event of any such action other than a transfer of the Surviving
Corporation's Stock, agrees to the foregoing covenants set forth in Section 4.15
to 4.18 hereof.
4.19 Loans to Shareholders. Parent acknowledges that the Companies have
made loans in the aggregate amount of approximately $186,000 to the Shareholders
(the "Loans"). Simultaneously upon the Closing, the Shareholders jointly and
severally agree to repay the Loans by paying $186,000 cash to the Companies.
4.20 Schedule 13D. The Shareholders will cause to be filed a Schedule
13D with the Commission in accordance with applicable rules of the Commission,
which Schedule 13D will include disclosure consistent with Section 3.27 hereof
and this Agreement.
4.21 Divestment of Interest. The Shareholders will cause to occur a
divestiture of all Shareholders' and the Companies' beneficial ownership in, and
any interest as a debt or equity holder of, TechLine prior to the Closing Date.
ARTICLE 5
CONDITIONS TO OBLIGATION OF PARENT
Notwithstanding any other provision of this Agreement to the contrary,
the obligation of Parent to effect the transactions contemplated herein will be
subject to the satisfaction at or prior to the Closing of each of the following
conditions:
5.1 Representations and Warranties True. The representations and
warranties of the Companies and the Shareholders contained in this Agreement,
including without limitation in the Disclosure Schedule initially delivered to
Parent as Exhibit 3.1 (and not including any changes or additions delivered to
Parent pursuant to Section 4.8), will be in all material respects true, complete
and accurate as of the date when made and at and as of the Closing as though
such representations and warranties were made at and as of such time, except for
changes specifically permitted or contemplated by this Agreement, and except
insofar as the representations and warranties relate expressly and solely to a
particular date or period, in which case they will be true and correct in all
material respects at the Closing with respect to such date or period.
5.2 Performance. Each of the Companies and the Shareholders will have
performed and complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by the Companies and the Shareholders on or prior to the Closing.
5.3 Required Approvals and Consents.
(a) All action required by law and otherwise to be taken by
the Board of Directors of the Companies and the shareholders of the
Companies to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
will have been duly and validly taken.
(b) All Consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, and all Consents of
or from all persons and entities other than Authorities that are
identified under Section 5.3 on the Disclosure Schedule will have been
delivered, made or obtained, and Parent will have received copies
thereof.
5.4 Adverse Changes. No material adverse change will have occurred in
the businesses of the Companies.
5.5 No Proceeding or Litigation. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will have
been instituted or threatened which questions the validity or legality of the
transactions contemplated hereby or which, if successfully asserted, would
individually or in the aggregate otherwise have a material adverse effect on the
conduct of the businesses of the Companies.
5.6 Opinion of Counsel for the Companies and Shareholders. Parent will
have received an opinion of Brown & Streza, Irvine, California, counsel for the
Companies and the Shareholders, dated the Closing Date, substantially in the
form and substance set forth as Exhibit 5.6 hereto.
5.7 Legislation. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby or
any of the conditions to the consummation of such transaction.
5.8 Acceptance by Counsel to Parent. The form and substance of all
legal matters contemplated hereby and of all papers delivered hereunder will be
reasonably acceptable to Oppenheimer Wolff & Donnelly, counsel to Parent.
5.9 Certificates. Parent will have received such certificates of the
Companies' officers and of each of the Shareholders, in a form and substance
reasonably satisfactory to Parent, dated the Closing Date, to evidence
compliance with the conditions set forth in this Article 5 and such other
matters as may be reasonably requested by Parent.
5.10 Due Diligence. Parent will have received all information requested
by it pursuant to Section 4.4 hereof and will be satisfied with all financial
information and with all other aspects of the Companies and that no information
acquired during due diligence could result in a material adverse change in the
business or prospects of the Companies following the Closing.
5.11 Escrow Agreement. The parties thereto will have executed and
delivered the Escrow Agreement.
5.12 Employment and Noncompete Agreements. Shareholders will have
executed and delivered to Parent the employment and noncompete agreements in the
form of agreement included as Exhibit 5.12.
5.13 Divestiture of Interest. Shareholders will have executed and
delivered to Parent copies of all documents needed to divest the Shareholders
and the Companies of any and all interest in the equity or debt of TechLine.
ARTICLE 6
CONDITIONS TO THE OBLIGATION OF THE COMPANIES AND SHAREHOLDERS
Notwithstanding anything in this Agreement to the contrary, the
obligation of the Companies and Shareholders to effect the transactions
contemplated herein will be subject to the satisfaction at or prior to the
Closing of each of the following conditions:
6.1 Representations and Warranties True. The representations and
warranties of Parent contained in this Agreement will be in all material
respects true, complete and accurate as of the date when made and at and as of
the Closing, as though such representations and warranties were made at and as
of such time, except for changes permitted or contemplated in this Agreement,
and except insofar as the representations and warranties relate expressly and
solely to a particular date or period, in which case they will be true and
correct in all material respects at the Closing with respect to such date or
period.
6.2 Performance. Parent will have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by Parent at or
prior to the Closing.
6.3 Required Approvals and Consents.
(a) All action required to be taken by Parent to authorize the
execution, delivery and performance of this Agreement by Parent and the
consummation of the transactions contemplated hereby will have been
duly and validly taken.
(b) All Consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, and all Consents of
or from all persons and entities other than Authorities that are
identified under Section 6.3(b) on the Disclosure Schedule will have
been delivered, made or obtained, and the Companies will have received
copies thereof.
6.4 No Proceeding or Litigation. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will have
been instituted or threatened which questions the validity or legality of the
transactions contemplated hereby or which, if successfully asserted, would
individually or in the aggregate otherwise have a material adverse effect on the
conduct of the business of the Parent.
6.5 Certificates. Parent will have furnished the Companies and
Shareholders with such certificates of the Companies officers, in a form and
substance reasonably acceptable to Companies and Shareholders, dated the Closing
Date, to evidence compliance with the conditions set forth in this Article 6 and
such other matters as may be reasonably requested by Companies.
6.6 Opinion of Parent Counsel. Parent will have delivered to the
Companies and the Shareholders an opinion from Oppenheimer Wolff & Donnelly,
Minneapolis, Minnesota, counsel to Parent, dated the Closing Date, in the form
and substance set forth as Exhibit 6.6 hereto.
6.7 Escrow Agreement. The parties thereto will have executed and
delivered the Escrow Agreement and the appropriate deposit obligations with
respect thereto will have been satisfied.
6.8 Acceptance by Counsel to Shareholders. The form and substance of
all legal matters contemplated hereby and of all papers delivered hereunder will
be reasonably acceptable to Brown & Streza, counsel to the Companies and
Shareholders.
6.9 Employment and Noncompete Agreement with Shareholders. Parent will
have executed and delivered to Shareholders the employment and noncompete
agreements in the form of agreement included as Exhibit 5.12.
6.10 Adverse Changes. No material adverse change will have occurred in
the business of Parent since the date hereof.
6.11 Legislation. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transaction contemplated hereby or
any of the conditions to the consummation of such transaction.
6.12 Assistance Agreement. Parent and the Eltrax Principals will have
executed and delivered to Shareholders the Agreement to be dated the closing
date among Parent, Shareholders and the Eltrax Principals concerning the
assistance by Parent and the Eltrax Principals with a possible private
placement.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 Methods of Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time notwithstanding
approval thereof by the Shareholders, but not later than the Closing:
(a) By mutual written consent of Parent, Acquisition Subs,
Companies and Shareholders; or
(b) By Parent and Acquisition Subs on or after the Termination
Date or such later date as may be established pursuant to Section 1.4,
if any of the conditions provided for in Article 5 has not been
satisfied or waived in writing by Parent prior to such date; or
(c) By the Companies and Shareholders on or after the
Termination Date or such later date as may be established pursuant to
Section 1.4, if any of the conditions provided for in Article 6 have
not been satisfied or waived in writing by the Companies and
Shareholders prior to such date;
(d) By Parent and Acquisition Subs or the Companies and
Shareholders if the Closing has not occurred on or before May 30, 1996;
or
(e) By the Parent and Acquisitions Subs at any time prior to
the Closing in the event that the Parent determines that the results of
its investigation and due diligence under Section 5.10 hereof is
unsatisfactory.
7.2 Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 7.1(a), written notice thereof will forthwith be
given to the other party or parties, and the provisions of this Agreement
(except to the extent provided in Section 9.1) will terminate, and the
transactions contemplated herein will be abandoned, without further action by
any party hereto. If this Agreement is terminated as provided herein: (i) each
party will, upon request, redeliver all documents, work papers and other
material of any other party (and all copies thereof) relating to the
transactions contemplated herein, whether so obtained before or after the
execution hereof, to the party furnishing the same; (ii) the confidentiality
obligations of Section 4.5 will continue to be applicable; and (iii) except as
provided in this Section, no party will have any liability for a breach of any
representation, warranty, agreement, covenant or other provision of this
Agreement, unless such breach was due to a willful or bad faith action or
omission of such party or any representative, agent, employee or independent
contractor thereof.
ARTICLE 8
SURVIVAL AND INDEMNIFICATION
8.1 Survival. The representations and warranties of each of the parties
hereto will survive the Closing until the second anniversary of the Closing
Date.
8.2 Indemnification by Parent. (a) Parent agrees to indemnify each of
the Shareholders from and against any and all loss, liability or damage suffered
or incurred by it including any and all costs and expenses, including without
limitation legal fees and expenses, in connection with enforcing the
indemnification rights of Shareholders pursuant to this Section 8.2 by reason of
(i) any untrue representation of, or breach of warranty by, Parent in any part
of this Agreement, provided, however, that no claim for indemnity may be made
pursuant to this Section after the second anniversary of the Closing Date; and
(ii) any nonfulfillment of any covenant, agreement or undertaking of Parent in
any part of this Agreement which by its terms is to remain in effect after the
Closing and has not been specifically waived in writing at the Closing by the
party or parties hereof entitled to the benefits thereof; (b) Parent agrees to
indemnify the Shareholders from and against any and all loss, liability or
damage suffered or incurred by them with respect to any claims against the
Shareholders based on violations of federal or state securities laws resulting
from or related to any press release, statement or regulatory filing related to
the Merger, other than claims that are based on (i) Shareholders' intentional or
negligent misstatement or omission of material facts concerning the Companies,
the Companies' financial condition and business prospects, (ii) breaches of any
of Shareholders' representations, warranties, covenants or agreements in this
Agreement, and (iii) the actual misconduct by the Shareholders; (c) Parent
agrees to indemnify each of the Shareholders from and against any income tax
liabilities, including penalties, interest and actual tax liability, but
excluding any other consequential damages, loss or liability, resulting directly
from any pass through taxable income from Rudata resulting directly from the
Accounting Method Change, up to but not exceeding the amount of the tax
liability that Rudata would have incurred if it were a C corporation income
taxpayer on the taxable income if it had been taxable after Closing, on a
combined basis with Nordata without giving effect to the surtax exemption,
provided, however that Parent's indemnification obligation pursuant to this
Section 8.2(c) shall be limited to the actual tax liability, including penalties
and interest, if any, that would have been assessed if Rudata had filed a Form
3115 requesting a change in accounting method and such request on Form 3115 had
been approved prior to the receipt of the IRS Correspondence (as defined in
Section 8.3(b)(ii)).
8.3 Indemnification by Shareholders.
(a) Untrue Representation or Breach of Warranty. Each Shareholder,
jointly and severally, agrees to indemnify Parent, its directors, officers,
employees and agents, from and against any and all loss, liability or damage
suffered or incurred by it by reason of any untrue representation of, or breach
of warranty by Companies or any Shareholder in this Agreement, provided,
however, that no claim for indemnity may be made pursuant to this Section after
the second anniversary of the Closing Date.
(b) Tax Liability. Each Shareholder, jointly and severally, hereby
agrees to reimburse Nordata for each of the following:
(i) Any penalties or interest assessed against Nordata by any
Authority resulting from Nordata's failure to timely pay its
1995 income tax liability;
(ii) With respect to any income tax liability assessed against
Nordata as a result of the Accounting Method Change (the
"Accounting Change Tax Liaiblity"), any penalties or interest
assessed against Nordata by any Authority which would not
otherwise have been assessed by such Authority had Nordata
filed a Form 3115 requesting a change of accounting method and
such request on Form 3115 had been approved by such Authority
prior to Nordata's receipt of the correspondence from the
Internal Revenue Service dated April 25, 1996 (the "IRS
Correspondence"); and
(iii) In the event that Nordata is required to pay the
Accounting Change Tax Liability in a manner that is less
favorable to Nordata than would have been available to Nordata
had it filed a Form 3115 requesting a change of accounting
method and had such request been approved prior to receipt of
the IRS Correspondence, the cost to Nordata of the loss of the
use of the money to pay the Accounting Change Tax Liability
using an interest rate equal to the interest rate applicable
to underpayments of federal income tax.
8.4 Indemnification by Shareholders -- Other. Each Shareholder, jointly
and severally, agrees to indemnify Parent, its directors, officers, employees
and agents from and against: (i) any and all loss, liability or damage suffered
or incurred by it by reason of any nonfulfillment of any covenant, agreement or
undertaking of the Companies or any Shareholder in this Agreement which by its
terms is to remain in effect after the Closing and has not been specifically
waived in writing at the Closing by the party or parties hereto entitled to the
benefits thereof; and (ii) any and all costs and expenses, including without
limitation legal fees and expenses, in connection with enforcing the
indemnification rights of Parent pursuant to Sections 8.3 and 8.4.
8.5 Limitation on Indemnification. Except as provided in Sections
8.3(b) and 8.6(b), the Shareholders' indemnification obligations under this
Article 8 will be limited to Five Million Dollars ($5,000,000).
8.6 Indemnification De Minimis Threshold.
(a) Except as expressively provided otherwise herein, and subject to
the provisions of Section 8.6(b), neither of the Shareholders nor the Parent as
the case may be, will be entitled to indemnification under this Agreement unless
the aggregate of all claims with respect to untrue representations or breaches
of warranties hereunder is more than Two Hundred Fifty Thousand Dollars
($250,000)(the "Threshold Amount"). When the aggregate amount of all such
indemnification claims hereunder equals or exceeds the Threshold Amount, the
Parent or the Shareholders, as the case may be, will be entitled to full
indemnification of all claims, including the Two Hundred Fifty Thousand Dollars
($250,000) that amounted to the Threshold Amount. Once the aggregate
indemnification claims hereunder equal or exceed the Threshold Amount, the
Shareholders or the Parent, as the case may be, will be entitled to full
indemnification for all claims. The parties hereto agree that the Threshold
Amount is not a deductible amount, nor that the Threshold Amount will be deemed
to be a definition of "material" for any purpose in this Agreement. The parties
hereto acknowledge and agree that any claims made or reimbursement paid pursuant
to Section 8.3(b) shall not count towards the Threshold Amount.
(b) If either of the Shareholders or the Companies have breached a
representation, warranty, covenant or agreement, and such breaching party had
actual knowledge of the breach of the representation, warranty, covenant or
agreement herein, or had actual knowledge of the potential or probable loss,
liability or damage (based on actual knowledge of the facts and circumstances
giving rise to such loss, liability or damage) without disclosing such in the
Disclosure Schedule on or prior to the Closing Date, the Shareholders will
jointly and severally promptly pay Parent the full indemnification claim without
regard to the Threshold Amount set forth in this Section, and without regard to
the overall limitation on amount as set forth in Section 8.5.
8.7 Claims for Indemnification. The parties intend that all
indemnification claims hereunder be made as promptly as practicable by the party
seeking indemnification (the "Indemnified Party") and that in the case of Parent
all such claims be made pursuant to the terms and provisions of the Escrow
Agreement until and including the Termination Date, as defined in the Escrow
Agreement. After the Termination Date all such claims of Parent, including
without limitation pre-Termination Date claims which, on or prior to the
Termination Date, were admitted as valid pursuant to Escrow Agreement procedures
or are or become the subject of an arbitration award in favor of the Indemnified
Party but which are not satisfied pursuant to the Escrow Agreement, will be
presented to the Shareholders who, in the case of admitted claims and
arbitration awards as aforesaid, will pay such claims and awards, and, in the
case of all other claims, will proceed according to the remaining terms and
provisions of this Section. Whenever any claim arises for indemnification
hereunder (other than a claim to be submitted pursuant to aforesaid terms and
provisions), the Indemnified Party will promptly notify the party from whom
indemnification is sought (the "Indemnifying Party") of the claim and, when
known, the facts constituting the basis for such claim. In the case of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings of a third party, the notice to the Indemnifying
Party will specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The Indemnified Party will not settle or compromise
any claim by a third party for which it is entitled to indemnification hereunder
without the prior written consent of the Indemnifying Party, which will not be
unreasonably withheld. If the Indemnifying Party is of the opinion that the
Indemnified Party is not entitled to indemnification, or is not entitled to
indemnification in the amount claimed in such notice, it will deliver, within
ten (10) business days after the receipt of such notice, a written objection to
such claim and written specifications in reasonable detail of the aspects or
details objected to, and the grounds for such objection. If the Indemnifying
Party filed timely written notice of objection to any claim for indemnification,
the validity and amount of such claim will be determined by arbitration pursuant
to Section 9.12 hereof. If timely notice of objection is not delivered or if a
claim by an Indemnified Party is admitted in writing by an Indemnifying Party or
if an arbitration award is made in favor of an Indemnified Party, the
Indemnified Party, as a non-exclusive remedy, will have the right to set-off the
amount of such claim or award against any amount yet owed, whether due or to
become due, by the Indemnified Party or any subsidiary thereof to any
Indemnifying Party by reason of this Agreement or any agreement or arrangement
or contract to be entered into at the Closing.
8.8 Payment of Indemnification Claims by Shareholders. It is the
intention of the parties that Parent's indemnification claims shall be first
satisfied by the Shareholders jointly and severally out of the Escrowed Shares.
With respect to indemnification claims pursuant to Sections 8.3(a) or 8.4, the
parties agree that the maximum number of Escrowed Shares available to satisfy
Parent's indemnification claims will be Two Hundred Fifty Thousand (250,000). To
the extent that such indemnification claim exceeds the value of Two Hundred
Fifty Thousand (250,000) Escrowed Shares, Parent shall seek payment directly
from Shareholders, who will be jointly and severally liable therefor. With
respect to reimbursement claims pursuant to Section 8.3(b), the parties agree
that the maximum number of Escrow Shares available to satisfy Parent's
reimbursement claims will be Two Hundred Thousand (200,000) (the "Tax Escrow
Shares"). To the extent that such reimbursement claim exceeds the value of Two
Hundred Thousand (200,000) Escrowed Shares, Parent shall seek payment directly
from Shareholders, who will be jointly and severally liable therefor. Upon final
resolution of Shareholders' reimbursement obligations pursuant to Section
8.3(b), Parent, on the one hand, and Shareholders, on the other hand, agree to
issue a joint written instruction to the Escrow Agent to distribute any
remaining Tax Escrow Shares to the Shareholders in accordance with the Escrow
Agreement.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Expenses. Each of the parties hereto will bear its own costs, fees
and expenses in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including without limitation fees, commissions
and expenses payable to brokers, finders, investment bankers, consultants,
exchange or transfer agents, attorneys, accountants and other professionals,
whether or not the transactions contemplated herein is consummated, and in
particular, Shareholders agree to pay all fees and expenses payable to Brown &
Streza law firm, and to Allen Matkins Leck Gamble & Mallory law firm; and Parent
will pay the fees and expenses of Coopers & Lybrand and Oppenheimer Wolff &
Donnelly; provided, however, that Parent on the one hand, and Shareholders, on
the other, will each bear one-half (1/2) of all fees and expenses of any escrow
agent.
In addition, in the event that the Merger is not consummated even after
all conditions to Closing as set forth in Article 5 (Conditions to Obligations
of Parent) hereof have been satisfied, Parent will promptly pay the Shareholders
the sum of Two Hundred Fifty Thousand Dollars ($250,000) as liquidated damages.
In addition, in the event the Merger is not consummated even after all
conditions to the Companies' and Shareholders' obligations have been satisfied
as set forth in Article 6 (Conditions to Obligations of the Companies and the
Shareholders) hereof, Shareholders will promptly pay Parent the sum of Two
Hundred Fifty Thousand Dollars ($250,000) as liquidated damages. The parties
hereto agree and acknowledge that the aforesaid amounts payable to each party
constitutes liquidated damages and not a penalty and represents the parties'
efforts to reasonably estimate a fair compensation for the foreseeable losses
that might be suffered by Parent in the event the transactions contemplated
herein will not be consummated for any of the above-described reasons.
9.2 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended or modified by the parties hereto at any time prior to
the Closing with respect to any of the terms contained herein; provided,
however, that all such amendments and modifications must be in writing duly
executed by all of the parties hereto.
9.3 Waiver of Compliance; Consents. Any failure of a party to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by the party entitled hereby to such compliance, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition will not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No single or partial exercise
of a right or remedy will preclude any other or further exercise thereof or of
any other right or remedy hereunder. Whenever this Agreement requires or permits
the consent by or on behalf of a party, such consent will be given in writing in
the same manner as for waivers of compliance.
9.4 No Third Party Beneficiaries. Nothing in this Agreement will
entitle any person or entity (other than a party hereto and his, her or its
respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind.
9.5 Notices. All notices, requests, demands and other communications
required or permitted hereunder will be made in writing and will be deemed to
have been duly given and effective: (i) on the date of delivery, if delivered
personally; (ii) on the earlier of the fourth (4th) day after mailing or the
date of the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or (iii) on the date of
transmission, if sent by facsimile, telecopy, telegraph, telex or other similar
telegraphic communications equipment:
If to either of the Companies or the Shareholders:
To: Datatech
27126 Paseo Espada, Suite 1602
San Juan Capistrano, CA 92675
Attention: Howard B. and Ruby Lee Norton
Fax: (714) 493-1840
With a copy to:
Brown and Streza
7700 Irvine Center Drive, Suite 900
Irvine, CA 92718
Attn: Richard E. Streza, Esq.
Fax: (714) 453-2916
or to such other person or address as either of the Companies will furnish to
the other parties hereto in writing in accordance with this Section.
If to Parent or either of the Acquisition Subs:
To: Eltrax Systems, Inc.
Rush Lake Business Park
1775 Old Highway 8
St. Paul, MN 55112
Attn: Mack V. Traynor III
Chief Executive Officer
Fax: 612-633-8372
With a copy to:
Oppenheimer Wolff & Donnelly
45 South Seventh Street
Suite 3400
Minneapolis, MN 55402
Attn: Thomas R. Marek, Esq.
Fax: 612-344-9376
or to such other person or address as Parent or either of the Acquisition Subs
will furnish to the other parties hereto in writing in accordance with this
Section.
9.6 Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned (whether
voluntarily, involuntarily, by operation of law or otherwise) by any of the
parties hereto without the prior written consent of the other parties, provided,
however, that Parent may assign this Agreement, in whole or in any part, and
from time to time, to a wholly-owned, direct or indirect, subsidiary of Parent,
if Parent remains bound hereby).
9.7 Governing Law. This Agreement and the legal relations among the
parties hereto will be governed by and construed in accordance with the internal
substantive laws of the State of Minnesota (without regard to the laws of
conflict that might otherwise apply) as to all matters, including without
limitation matters of validity, construction, effect, performance and remedies.
9.8 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.9 Headings. The table of contents and the headings of the sections
and Sections of this Agreement are inserted for convenience only and will not
constitute a part hereof.
9.10 Entire Agreement. The Disclosure Schedule and the exhibits and
other writings referred to in this Agreement and in the Disclosure Schedule or
any such exhibit or other writing are part of this Agreement, together with this
Agreement they embody the entire agreement and understanding of the parties
hereto in respect of the transactions contemplated by this Agreement and
together they are referred to as "this Agreement" or the "Agreement". There are
no restrictions, promises, warranties, agreements, covenants or undertakings,
other than those expressly set forth or referred to in this Agreement. This
Agreement supersedes all prior and contemporaneous oral and written agreements
and understandings between the parties with respect to the transaction or
transactions contemplated by this Agreement (including without limitation the
letter of intent dated March 19, 1996 between Parent and Shareholders and all
amendments and extensions thereof). Provisions of this Agreement will be
interpreted to be valid and enforceable under applicable Law to the extent that
such interpretation does not materially alter this Agreement; provided, however,
that if any such provision will become invalid or unenforceable under applicable
Law such provision will be stricken to the extent necessary and the remainder of
such provisions and the remainder of this Agreement will continue in full force
and effect.
9.11 Injunctive Relief. It is expressly agreed among the parties hereto
that monetary damages would be inadequate to compensate a party hereto for any
breach by any other party of its covenants and agreements in Sections 4.3 and
4.5 hereof. Accordingly, the parties agree and acknowledge that any such
violation or threatened violation will cause irreparable injury to the other and
that, in addition to any other remedies which may be available, such party will
be entitled to injunctive relief against the threatened breach of Sections 4.3
and 4.5 hereof or the continuation of any such breach without the necessity of
proving actual damages and may seek to specifically enforce the terms thereof.
9.12 Arbitration. With the sole exception of the injunctive relief
contemplated by Section 9.11 hereof, any controversy or claim arising out of or
relating to this Agreement, or the making, performance or interpretation hereof,
including without limitation alleged fraudulent inducement hereof, will be
settled by binding arbitration in Minneapolis, Minnesota by a panel of three
arbitrators in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Judgment upon any arbitration award may be entered in
any court having jurisdiction thereof and the parties consent to the
jurisdiction of the courts of the State of Minnesota for this purpose.
9.13 List of Defined Terms. Reference is made to Exhibit 9.13 for a
listing and location of terms defined in this Agreement.
9.14 Attorneys Fees. If any arbitration, litigation or similar
proceedings are brought by any party to enforce any obligation or to pursue any
remedy under this Agreement, the party prevailing in any such arbitration,
litigation or similar proceedings will be entitled to costs of collection, if
any, and reasonable attorneys fees incurred in connection with such proceedings
and in collecting or enforcing any award granted therein.
9.15 Knowledge of the Companies and Shareholders. Where any
representation or warranty contained in this Agreement is expressly qualified by
reference to the knowledge of each of the Companies and the Shareholders, such
phrase will include the actual present knowledge of either one or both of the
Shareholders assuming that such Shareholders have made reasonable diligent
inquiry as to the matters that are the subject of the representations and
warranties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PARENT: COMPANIES:
Eltrax Systems, Inc. Nordata, Inc.
By: /s/ By: /s/
Mack V. Traynor III Howard B. Norton
Its: Chief Executive Officer Its: President
ACQUISITION SUBS:
By: /s/
Datatech Acquisition Corporation Ruby Lee Norton
Its: Secretary
By: /s/
Mack V. Traynor III Rudata, Inc.
Its: President
By: /s/
Ruby Lee Norton
Rudata Acquisition Corporation Its: President
By: /s/
Mack V. Traynor III By: /s/
Its: President Howard B. Norton
Its: Secretary
SHAREHOLDERS:
/s/
Howard B. Norton
/s/
Ruby Lee Norton
EXHIBITS OMITTED WITH THE EXCEPTION OF
EXHIBIT 4.12
(ATTACHED HERETO)
Exhibit 4.12
REGISTRATION RIGHTS OF SHAREHOLDERS
(i) Shelf Registration. Upon the written demand of the Shareholders,
and as soon as feasible under the rules of the Securities and Exchange
Commission (the "Commission"), Parent will prepare and file a registration
statement under the Securities Act covering all of the shares of Parent Common
Stock issued to the Shareholders as Merger Consideration under this Agreement
(the "Shares") and not theretofore sold, will provide copies of such
registration statement, including all amendments thereto, to the Shareholders,
and will use its reasonable efforts to cause such registration statement to
become effective as soon as feasible under Commission rules. Such registration
statement will be on Form S-3 (or if Form S-3 is unavailable to Parent, on Form
SB-1 or SB-2). Parent will maintain the effectiveness of such registration
statement pursuant to Commission Rule 415 until all such shares are sold,
provided however, that if the Shareholders jointly have previously sold at least
one million (1,000,000) of the Shares, whether pursuant to a registration
statement or otherwise, Parent shall have no obligation to keep such
registration statement effective after the remaining shares of Parent Common
Stock held by Shareholders and registered thereunder are eligible for resale
pursuant to Commission Rule 144. If the effectiveness of such registration
statement lapses for any reason other than a reason attributable to the
Shareholders, subject to the proviso in the immediately preceding sentence,
Shareholders will be entitled to one (and only one) additional written demand
registration right on the same basis as provided above in this Section (i).
(ii) Incidental Registration.
Until three (3) years after the Closing Date, whenever Parent
proposes to file a registration statement at any time and from time to time, if
such registration statement would permit the inclusion of shares to be sold on
behalf of a selling Shareholder pursuant to the rules of the Commission, it
will, prior to such filing, give written notice to the Shareholders holding
Shares issued hereunder of its intention to do so and, upon the written request
of any of the Shareholders given within twenty (20) days after Parent provides
such notice (which request will state the intended method of disposition of the
shares), Parent will use its reasonable efforts to cause all such Shares which
Parent has been requested by such Shareholders to register to be included in
such registration statement to the extent necessary to permit their sale or
other disposition in accordance with the intended methods of distribution
specified in the request of such Shareholders; provided, that Parent will have
the right to postpone or withdraw any registration effected pursuant to this
Section (ii) without obligation to any of the Shareholders.
In connection with any offering under this Section (ii) involving an
underwriting, Parent will not be required to include any shares in such
underwriting unless the Shareholders accept the terms of the underwriting as
agreed upon between Parent and the underwriters selected by it and applicable to
all other sellers of the shares, and then only in such quantity as will not, in
the reasonable opinion of the underwriters, jeopardize the success of the
offering by the Companies. If in the reasonable opinion of the managing
underwriter the registration of all, or part of, the shares which the
Shareholders have requested to be included would materially and adversely affect
such public offering, then Parent will be required to include in the
underwriting only that number of shares, if any, which the managing underwriter
reasonably believes may be sold without causing such adverse effect. If the
number of shares to be included in the underwriting in accordance with the
foregoing is less than the total number of shares which the Shareholders have
requested to be included, then the Shareholders who have requested registration
and other holders of shares of Parent Common Stock entitled to include shares of
Common Stock in such registration will participate in the underwriting pro rata
based upon the number of shares each such Shareholder has requested to be
included in such registration.
(iii) Registration Procedures. If and whenever Parent is required by
the provisions of this Exhibit 4.12 to effect the registration of Shares under
the Securities Act, Parent will:
(A) prepare and file with the Commission a registration
statement with respect to such securities (each of the Shareholders
holding Shares participating in such registration hereby agreeing to
furnish Parent, with fifteen (15) days following a request by Parent,
with such information concerning such security holder to be included
in such registration statement as may be reasonably requested by
Parent), and with respect to registrations under Section (i), use its
reasonable efforts to cause such registration statement to become and
remain effective until such Shares are sold; provided, however, that
if the Shareholders jointly have previously sold at least one million
(1,000,000) of the Shares, whether pursuant to a registration
statement or otherwise, Parent shall have no obligation to keep such
registration statement effective after the remaining Shares are
eligible for sale pursuant to Commission Rule 144;
(B) with respect to registrations under Section (i),
prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective until such Shares are sold; provided, however, that if the
Shareholders jointly have previously sold at least one million
(1,000,000) of the Shares, whether pursuant to a registration
statement or otherwise, Parent shall have no obligation to keep such
registration statement effective after the remaining Shares held by
Shareholders and registered thereunder are eligible for sale pursuant
to Commission Rule 144;
(C) furnish to the Shareholders participating in such
registration such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such Shareholders may reasonably request in order to
facilitate the public offering of such securities;
(D) use its reasonable efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such
participating Shareholders may reasonably request in writing within
twenty (20) days following the original filing of such registration
statement, except that Parent will not for any purpose be required to
qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified;
(E) notify the Shareholders participating in such
registration, promptly after it will receive notice thereof, of the
time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration
statement has been filed;
(F) notify the Shareholders participating in such
registration promptly of any request by the Commission for the
amending or supplementing of such registration statement or
prospectus or for additional information;
(G) prepare and file with the Commission, promptly upon
the reasonable request of the Shareholders participating in such
registration, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such
holders (and concurred in by counsel for Parent), is required under
the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Shares by such Shareholder;
(H) prepare and promptly file with the Commission and
promptly notify the Shareholders participating in such registration
of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements
or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any
event has occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement
of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances in
which they were made, not misleading; and
(I) advise such Shareholders, promptly after Eltrax
receives notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any
proceeding for that purpose and promptly use its reasonable efforts
to prevent the issuance of any stop order or to obtain its withdrawal
if such stop order should be issued.
(iv) Expenses. With respect to each registration, including
registrations pursuant to Form S-3, requested pursuant to this Exhibit 4.12,
Parent will bear the following fees, costs and expenses: all registration,
filing and NASD or exchange listing fees, printing expenses, fees and
disbursements of counsel and accountants (including the expense of any special
audits incident to or required by any such registration) for Parent, all
internal Parent expenses, and all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified. Fees and disbursements of counsel and accountants for the selling
Shareholders, underwriting discounts and commissions and transfer taxes relating
to the shares included in the offering by the selling Shareholders, and any
other expenses directly incurred by the selling Shareholders not expressly
included above, will be borne by the selling Shareholders.
(v) Indemnification. In the event of any registration of any Shares
under the Securities Act pursuant to this Agreement, Parent will indemnify and
hold harmless the seller of such shares, each underwriter of such shares, and
each other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act or the Exchange Act against any losses, claims,
damages or liabilities, joint or several, to which such seller, underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act, state securities or blue sky laws or otherwise, insofar as such losses,
claims, damages or liabilities (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 statement under which such shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement to such registration statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and Parent
will reimburse such seller, underwriter and each such controlling person for any
legal or any other expenses reasonably incurred by such seller, underwriter or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that Parent will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or omission made
in such registration statement, preliminary prospectus or prospectus, or any
such amendment or supplement, in reliance upon and in conformity with
information furnished to Parent, in writing, by or on behalf of such seller,
underwriter or controlling person specifically for use in the preparation
thereof.
In the event of any registration of any shares of Parent Common Stock
under the Securities Act pursuant to this Agreement, each seller of shares,
severally and not jointly, will indemnify and hold harmless Parent, each of its
directors and officers and each underwriter (if any) and each person, if any,
who controls Parent or any such underwriter within the meaning of the Securities
Act or the Exchange Act against any losses, claims, damages or liabilities,
joint or several, to which Parent, such directors and officers, underwriter or
controlling person may become subject under the Securities Act, Exchange Act,
state securities or blue sky laws or otherwise insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained in the registration statement, or any amendment or supplement to the
registration statement, or arise out of or are based upon any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if the statement or
omission was made in reliance upon and in conformity with information furnished
in writing to Parent by or on behalf of such seller, specifically for use in
connection with the preparation of such registration statement, prospectus,
amendment or supplement.
Each party entitled to indemnification under this Section (v) (the
"Indemnifying Party") will give notice to the party required to provide
indemnficiation (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and will
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who will conduct the defense of such claim or litigation, will be
approved by the Indemnified Party (whose approval will not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein will not relieve the Indemnifying Party of its
obligations under this Section (v). The Indemnified Party may participate in
such defense at such party's expense; provided, however, that the Indemnifying
Party will pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation will, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party will
consent to entry of any judgment or settle such claim or litigation without the
prior written consent of the Indemnifying Party.
(vi) Restriction on Resale of Parent Common Stock. Notwithstanding
any other provision of this Agreement, from and until three (3) years after the
Closing Date, the Shareholders hereunder jointly and severally agree that during
any thirty (30) day period, such Shareholders collectively will not sell more
than ninety thousand (90,000) Shares beneficially owned by or controlled by such
person; provided that the foregoing restrictions will not apply to: (A) any
private resale of Shares by the Shareholders in an amount permitted under and in
accordance with the terms of that certain Agreement to be dated the Closing Date
by and among the Parent, the Shareholders and the Eltrax principals, (B) any
private resale of Shares by the Shareholders which Shares are registered under
an effective registration statement, so long as all purchaser(s) of such Shares
collectively first agree to enter into written agreements reasonably acceptable
to Parent under which such purchasers agree to be subject to the resale volume
restriction set forth in this Section (vi), or (C) any shares of Parent Common
Stock acquired by the Shareholders other than pursuant to this Agreement.
(vii) Granting of Registration Rights. Until three (3) years after
the Closing Date, prior to the registration of the Shares or in the event of
such registration, during any time when the Shares may not be sold pursuant to a
then-effective registration statement, Parent will not, without the prior
written consent of the Shareholders, which consent can not be unreasonably
withheld:
(a) only with respect to the first one million (1,000,000)
of the Shares and until such one million (1,000,000) Shares are sold,
grant to any owner of securities of the Parent registration rights
involving an underwriting, if such rights have priority over or are
on parity with the rights granted to the Shareholders pursuant to
this Agreement in terms of the number of Shares which such holders
may include in any registration, the rights of such holders to demand
registration of the Shares held by them at the time requested by
them, or in any other material respect;
(b) grant to any of the Eltrax Principals registration
rights involving an underwriting, if such rights give priority over
the rights granted to the Shareholders pursuant to this Agreement in
terms of the number of Shares which such holders may include in any
registration, the rights of such holders to demand registration of
the Shares held by them at the time requested by them, or in any
other material respect.
(viii) Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of restricted securities (as that term is used in Rule 144 under the 1933
Act) to the public without registration, the Parent agrees to:
(a) use its reasonable efforts to make and keep public
information available, as those terms are understood and defined in
Rule 144 under the Securities Act at all times;
(b) use its reasonable efforts to file with the Commission
in a timely manner all reports and other documents required by the
Company under the Securities Act and the Exchange Act; and
(c) so long as a Shareholder owns any Shares, furnish to
such Shareholder upon request a written statement by the Parent as to
its compliance with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Parent and such other reports and
documents so filed as such Shareholder may reasonably request in
availing itself of any rule or regulation of the Commission allowing
such Shareholder to sell any Shares without registration.
(ix) Listing Application. The Company will, at its expense, include
all of the Shares owned by the Shareholders in any listing application on any
national securities exchange on which any shares of any class of its common
stock are listed in accordance with applicable rules of such exchange.
(x) Assignment. The Shareholders will be entitled to assign all or
any portion of their rights, benefits and obligations hereunder with respect to
any Shares that may be transferred to any person or entity that acquires the
Shares from such Shareholder, without the prior consent of Parent or any other
party and such person or entity will be entitled to all of the rights and
benefits (to the extent assigned) of the Shareholders hereunder with respect to
the Shares so acquired, provided that (i) any such party agrees in writing to be
bound by all the terms hereof, and (ii) the Shareholders will notify Parent in
writing of any such assignment within five (5) business days of any such
assignment.
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of May
17, 1996 (the "First Amendment"), is by and among ELTRAX SYSTEMS, INC., a
Minnesota corporation, DATATECH ACQUISITION CORPORATION, a Minnesota corporation
and a wholly-owned subsidiary of the Parent, RUDATA ACQUISITION CORPORATION, a
Minnesota corporation and a wholly-owned subsidiary of the Parent, NORDATA,
INC., a California corporation ("Rudata"), and HOWARD B. and RUBY LEE NORTON,
the sole shareholders of Nordata and Rudata.
R E C I T A L S :
A. WHEREAS, the parties hereto have entered into an Agreement and Plan
of Merger dated as of May 14, 1996 (the "Agreement");
B. WHEREAS, the parties desire to amend certain terms, conditions and
covenants of the Agreement; and
C. WHEREAS, the parties acknowledge and agree that the merger of Rudata
Acquisition Sub and Rudata will not qualify as a reorganization within the
meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
A G R E E M E N T :
ARTICLE I
AMENDMENTS TO AGREEMENT
1.1 Amendment to Section 4.21. Section 4.21 of the Agreement is
restated as follows:
"4.21 Divestment of Interest. The Shareholders will cause to
occur a divestiture of all of the Shareholders' and the Companies'
beneficial ownership in, and any interest as a debt or equity holder
of, TechLine within ten (10) days of the Closing Date."
1.2 Amendment to Article 4. Article 4 of the Agreement is amended to
add the following new Section 4.22:
"4.22. Section 338(h)(10) Election. Shareholders agree to
cooperate with and join Parent in the making of an election pursuant to
Section 338(h)(10) of the Code with respect to the merger of Rudata,
if, in its sole discretion, Parent desires to make such an election.
If, as a direct result of making an election pursuant to Section
338(h)(10) of the Code, the Shareholders incur a federal or state
income tax liability that is greater than such Shareholders' income tax
liability if no such election had been made, Parent agrees to pay
Shareholders an amount equal to any such additional income tax
liability. Such payment shall be grossed up for any federal or state
income tax that may result from such payment so that on an after-tax
basis the Shareholders are made whole."
1.3 Amendment to Section 5.13. Section 5.13 of the Agreement is amended
by deleting such section in its entirety.
ARTICLE II
MISCELLANEOUS PROVISIONS
2.1 Incorporation by Reference. Article 9 of the Agreement is
incorporated herein by reference.
2.2 Capitalized Terms. Capitalized terms used herein and not otherwise
defined have the meaning set forth in the Agreement.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
duly executed as of the day and year first above written.
PARENT: COMPANIES:
Eltrax Systems, Inc. Nordata, Inc.
By: /s/ Mack V. Traynor, III By: /s/ Howard B. Norton
Mack V. Traynor, III Howard B. Norton
Its: Chief Executive Officer Its: President
ACQUISITION SUBS: By: /s/ Ruby Lee Norton
Ruby Lee Norton
Datatech Acquisition Corporation Its: Secretary
By: /s/ Mack V. Traynor, III Rudata, Inc.
Mack V. Traynor, III
Its: President
By: /s/ Ruby Lee Norton
Ruby Lee Norton
Rudata Acquisition Corporation Its: President
By: /s/ Mack V. Traynor, III By: /s/ Howard B. Norton
Mack V. Traynor, III Howard B. Norton
Its: President Its: Secretary
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is made and entered into as
of May 17, 1996 by and among Eltrax Systems, Inc., a Minnesota corporation
("Purchaser"), Howard B. and Ruby Lee Norton (the "Shareholders"), and Norwest
Bank Minnesota, National Association, a national banking association, as escrow
agent (the "Escrow Agent").
A. Purchaser, two subsidiaries of Purchaser, Datatech Acquisition
Corporation and Rudata Acquisition Corporation ("Acquisition Subs"), Nordata,
Inc. and Rudata, Inc. ("Companies") and Shareholders have entered into an
Agreement and Plan of Merger dated as of May 14, 1996 (the "Merger Agreement")
pursuant to which the Acquisition Subs will merge with and into the Companies,
with the Companies to survive the merger as wholly-owned subsidiaries of
Purchasers.
B. Pursuant to the terms of the Merger Agreement, Purchaser is to
deposit 450,000 shares of its Common Stock ("Purchaser's Common Stock") with the
Escrow Agent (with the certificate for such shares being registered in the name
of the Escrow Agent or its nominee) at the Closing, as defined in the Merger
Agreement.
Accordingly, for the purpose of establishing the terms and provisions
of escrow for the aforesaid shares and cash, the parties hereto agree as
follows:
1. Escrow Deposit. The Escrow Agent hereby acknowledges receipt of a
certificate for 450,000 shares of Purchaser's Common Stock (collectively, the
"Escrow Deposit"). The Escrow Agent is directed to hold, deal with and dispose
of the Escrow Deposit as hereinafter set forth, and agrees not to commingle the
Escrow Deposit with any other securities or funds held by the Escrow Agent. At
any time within ten (10) days of receiving a Shareholders' Notice (as defined
below), or at any other time on no more than two occasions during each calendar
year, Shareholders have the right to jointly notify the Escrow Agent and the
Purchaser that Shareholders wish to substitute cash in lieu of shares of
Purchaser's Common Stock held as the Escrow Deposit on the basis of $3.00 cash
for each one share of Purchaser's Common Stock to be so substituted (the
"Substituted Shares"). As soon as practicable upon receipt of such notice and
the correct cash amount from Shareholders, the Escrow Agent shall cancel the
stock certificate then representing Purchaser's Common Stock as the Escrow
Deposit and shall prepare new stock certificates representing the appropriate
number of shares of Purchaser's Common Stock. The Escrow Agent shall deliver the
certificates representing the Substituted Shares in accordance with the joint
instructions of the Shareholders, and will retain as the Escrow Deposit the
stock certificates representing the remaining shares of Parent Common Stock
together with the cash received for the Substituted Shares pursuant to the terms
of this Agreement.
2. Charges Against Escrow Deposit. The Escrow Deposit has been made for
the purpose of securing and providing a nonexclusive source for satisfying the
indemnification obligations of Shareholders to Purchaser pursuant to Article 8
of the Merger Agreement. The Escrow Deposit is not intended to limit or defeat
the ability of Purchaser to seek indemnification directly from the Shareholders
in the event the Escrow Deposit is insufficient in size or terminates or expires
before all claims are made or satisfied. In the event that, and from time to
time as, Purchaser determines that amounts are chargeable or can be reserved
against the Escrow Deposit pursuant to the aforesaid subsections of the Merger
Agreement, Purchaser ("Claimant") will provide a notice to the Escrow Agent, in
substantially the form attached hereto as Exhibit 1, of such charge or reserve
(a "Claim") against the Escrow Fund, stating the amount thereof and a brief
description of the facts upon which the claim is based. The Escrow Agent will
promptly deliver a copy of such notice to the Shareholders (the "Shareholder's
Notice"). Unless it receives prior notice from the Shareholders pursuant to
Section 3 below, the Escrow Agent will deliver to Claimant out of the Escrow
Fund that number of shares of Purchaser's Common Stock, valued at $3.00 per
share (hereinafter called the "Market Price") (but rounding such amount so as to
avoid a fractional share), or, at the option of the Shareholders acting jointly,
cash in lieu of that number of Shares of Purchaser's Common Stock (valued at the
Market Price) equal to the amount of such Claim, or in the case of a Claim for
the establishment of a reserve, the Escrow Agent will establish, by bookkeeping
entry, such reserve using the same valuation approach. To the extent that any
Claim is paid to Claimant after any record date for any dividend or distribution
on the shares held in the Escrow Fund, which record date is after the date of
this Agreement, the amount of such dividend(s) or distribution(s) relating to
the shares to be transferred to Claimant as aforesaid will also be delivered at
the same time. A Claim ultimately paid from a reserve will likewise include such
dividends and distributions, determined in the same manner. If only part of a
Claim is disputed pursuant to Section 3 below, the Escrow Agent will promptly
pay to the Purchaser the undisputed portion of such Claim.
3. Dispute of Claim Against Escrow Deposit.
(a) The Shareholders will have the right to dispute any Claim
against the Escrow Deposit within the ten (10) business day period following
delivery to the Shareholders of a Shareholder's Notice by delivering to the
Escrow Agent written notice in substantially the form attached hereto as Exhibit
2 (an "Objection Notice") that the Shareholders dispute the matter(s) set forth
in such Claim notice either with respect to the validity or the amount of the
Claim (or both). Such notice will include the basis, with reasonable
specificity, of the objection. The Escrow Agent will promptly furnish Purchaser
with a copy of any Objection Notice.
(b) Upon receipt of an Objection Notice from the
Shareholders, the Escrow Agent will set aside in a separate fund (a "Dispute
Fund") the number of shares that it would have delivered to Claimant or
established as a reserve had such Objection Notice not been received. The Escrow
Agent will take no action with respect to the Dispute Fund, except upon receipt
of joint written instructions from Purchaser and the Shareholders in
substantially the form attached hereto as Exhibit 3. Upon such notice, the
Escrow Agent will promptly follow the instructions therein.
(c) If the amount necessary to satisfy any Disputed Claim, as
ultimately determined via joint written instructions pursuant to Section 3(b)
above, is in excess of the amount held in the Dispute Fund with respect thereto,
valued at Market Price, an additional amount necessary to satisfy such Claim
will be delivered from the Escrow Fund to Claimant, valued at Market Price,
together with applicable dividends and distributions, or will be established as
a reserve to be administered according to the written instructions, as the case
may be.
(d) If an Objection Notice is timely delivered by the
Shareholders, the objections which are described in such notice will be resolved
by arbitration pursuant to Section 9.12 of the Merger Agreement.
4. Termination; Release of Escrow Fund. The Escrow Fund will terminate
on the second anniversary of the date of this Agreement (the "Termination
Date"). The Escrow Agent will, on the business day next succeeding the
Termination Date, deliver to the Shareholders in accordance with their
instructions, the shares of Purchaser's Common Stock and cash remaining in the
Escrow Fund (and applicable dividends and distributions) then held by it
hereunder, provided, however, that any unpaid amounts with respect to which the
Escrow Agent will have been given notice of a Claim (whether or not yet reserved
against) on or prior to such date and any amounts then being held in a Dispute
Fund (with all claims described in Claims notices received during the last ten
(10) business days ending on and including the Termination Date being deemed to
be held in a Dispute Fund) will continue to be held hereunder by the Escrow
Agent, and this Escrow Agreement will continue in full force and effect until
each existing dispute with respect thereto has been resolved and each
contingency applicable to each reserve has been satisfied and joint written
instructions are given pursuant to Section 3(b) above (which instructions will
include, without limitation, a direction to deliver shares to the Exchange
Agent).
5. Investments; Entitlement to Investment Earnings. All cash deposited
in the Escrow Fund and all cash distributions received on the deposited shares
will be invested and reinvested by the Escrow Agent in the Norwest Funds, Ready
Cash Investment Fund (Institutional Shares). After payment of the fees and
disbursements of the Escrow Agent from investment earnings, the balance of such
earnings, if any, will be disbursed to the Shareholders at the same time as the
final distribution made pursuant to Section 4 above.
6. Investment of Share Escrow Fund. The Escrow Agent will hold the
shares deposited in the Escrow Fund as such and will have no duty with respect
to reinvestment thereof, regardless of an increase or a decrease in the market
value thereof.
7. Designated Officers. The Shareholders and Purchaser will from time
to time each provide the Escrow Agent with a written notice, which will be
signed, in the case of the Shareholders, by the Shareholders, who will be the
sole agent of each of the Shareholders and the only person who may act for the
Shareholders in connection with this Escrow Agreement, and in the case of
Purchaser, by the person, identified below in this section, and will contain (a)
the name(s) of any substitute or additional person(s) who are authorized to
execute any written notice, instruction or certificate to the Escrow Agent
required or permitted by the terms of this Escrow Agreement, and (b) specimen
signature(s) of such authorized persons. The initial Shareholders and the
initial agent of Purchaser and their respective signatures are set forth below.
Each notice, instruction or other certificate required or permitted by the terms
hereof will be in writing and will be communicated by registered or certified
mail, return receipt requested, or telecopier, to the parties hereto at the
respective addresses shown below, or at such other address as any such party may
designate by notice given to the other parties:
(i) if to the Shareholders, to: with a copy to:
Datatech Brown and Streza
27126 Paseo Espada, Suite 1602 7700 Irvine Center Drive, Suite 900
San Juan Capistrano, CA 92675 Irvine, CA 92718
Attn: Howard and Ruby Norton Attn: Richard E. Streza, Esq.
Fax: 714/493-1840 Fax: 714/453-2916
(ii) if to Purchaser, to: with a copy to:
Eltrax Systems, Inc. Oppenheimer Wolff & Donnelly
Rush Lake Business Park Plaza VII, Suite 3400
1775 Old Highway 8 45 South Seventh Street
St. Paul, MN 55112 Minneapolis, MN 55402-1609
Attn: Mack V. Traynor, III Attn: Thomas R. Marek, Esq.
Chief Executive Officer Fax: 612/344-9376
Fax: 612/633-8372
(iii) if to the Escrow Agent, to:
Norwest Bank Minnesota, National Association
6th and Marquette
Minneapolis, MN 55479-0069
Attn: Michelle Healy
Fax: 612/667-9825
All notices, instructions or certificates given hereunder to the Escrow Agent
will be deemed delivered and to be effective only upon receipt by the Escrow
Agent. All notices given hereunder by the Escrow Agent will be effective and
deemed delivered and received three (3) calendar days after mailing by the
Escrow Agent. The Escrow Agent is not obligated to take any action with respect
to any request or demand of the Shareholders or Purchaser unless in the form
required hereunder and properly signed.
8. Regarding the Escrow Agent. In consideration of the acceptance by
the Escrow Agent of its duties hereunder, it is agreed by all parties hereto
that:
(a) The Escrow Agent's duties and responsibilities will be
limited to those expressly set forth in this Escrow Agreement, and it will not
be subject to, or obliged to recognize, any other agreement between the parties
hereto even though reference thereto may be made herein.
(b) The Escrow Agent is authorized, in its reasonable
discretion, to disregard any and all notices or instructions given by any of the
parties hereto or by any other person, firm or corporation, except only (i) such
notices or instructions as are herein specifically provided for, and (ii) orders
or process of any court with jurisdiction. If any property subject hereto is at
any time attached, garnished or levied upon or under any court order or in case
the payment, assignment, transfer, conveyance or delivery of any such property
is stayed or enjoined by any court order, or in case any order, judgment or
decree is made or entered by any court affecting such property or any part
thereof, then, and in any of such events, the Escrow Agent is authorized, in its
sole discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel of its own choosing is binding upon
it; and if it complies with any such order, writ, judgment or decree it will not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance even though such order, writ, judgment
or decree may be subsequently reversed, modified, annulled, set aside or
vacated.
(c) The Escrow Agent will not be personally liable for any
act taken or omitted hereunder if taken or omitted by it in good faith. In
taking any action whatsoever hereunder, the Escrow Agent will be protected in
relying upon any notice, paper or other document reasonably believed by it to be
genuine, or upon any evidence reasonably deemed by it to be sufficient. The
Escrow Agent may consult with counsel in connection with its duties hereunder
and will be fully protected in any act taken, suffered or permitted by it in
good faith in accordance with the advice of counsel. It will also be fully
protected in relying upon any written notice, demand, certificate or document
which it in good faith believes to be genuine. The Escrow Agent will not be
responsible for the sufficiently or accuracy of the form, execution, validity or
genuineness of documents now or hereafter deposited hereunder, nor will it be
responsible or liable in any respect on account of the identity, authority or
rights of the persons executing and delivering or purporting to execute or
deliver any such document.
(d) If the Escrow Agent believes it to be reasonably
necessary to consult with counsel concerning any of its duties in connection
with this Escrow Agreement, or in case it becomes involved in litigation on
account of being Escrow Agent hereunder or on account of having received
property subject hereto, then in either case, the Escrow Agent's costs,
expenses, and reasonable attorneys' fees will be paid as set forth in
subparagraph (e).
(e) The Escrow Agent will be entitled to a $1,000 acceptance
fee and a $1,000 annual administration fee, which two amounts, plus all
reasonable expenses of the Escrow Agent as shown on Exhibit 4 hereof, will be
invoiced to and paid by Purchaser to the extent there are not sufficient
investment earnings to apply for the purpose of making such payment, which
application Purchaser and Shareholders hereby authorize.
(f) The Escrow Agent may at any time resign by giving thirty
days written notice of resignation to Purchaser and to Shareholders. In such
event Purchaser and the Shareholders will appoint a successor escrow agent to be
effective on the effective date of the aforesaid resignation. All right, title
and interest to the Escrow Deposit and to the dividends and distributions and
the investment earnings with respect thereto will be transferred to the
successor agent and this Escrow Agreement will be assigned to such successor,
and the resigning Escrow Agent will thereupon be released from further
obligations hereunder.
9. Governing Agreement; Amendments. The Escrow Agent hereby
acknowledges receipt of a copy of the Merger Agreement, but except for reference
thereto for definitions of certain words and terms not defined herein, the
Escrow Agent is not charged with any duty or obligation arising under the Merger
Agreement and the responsibilities and duties of the Escrow Agent will be
governed by this Escrow Agreement. As between the Escrow Agent, on the one hand,
and the other parties hereto, on the other hand, this Escrow Agreement
constitutes the entire agreement with respect to the subject matter herein. As
between the other parties hereto, this Escrow Agreement will govern to the
extent of any conflict between it and the Merger Agreement or any other
agreement or writing. No change in, addition to, or waiver of the terms and
conditions hereof will be binding upon any of the parties hereto unless approved
in writing by the other parties hereto.
10. Binding Effect. This Escrow Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors, assigns
and legal representatives. Except with respect to such successions contemplated
in the Merger Agreement, or otherwise as contemplated in this Escrow Agreement,
no party hereto may assign any of its rights, interests or obligations
hereunder.
11. Applicable Law. This Escrow Agreement will be governed by and
construed in accordance with the laws of the State of Minnesota.
12. Counterparts and Definitions. This Escrow Agreement may be executed
in one or more counterparts, each of which is an original but all of which
together will constitute one and the same instrument. Terms not otherwise
defined herein will have the meaning given to them in the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be duly executed.
PURCHASER: ESCROW AGENT:
Eltrax Systems, Inc. Norwest Bank Minnesota, National Association,
as Escrow Agent
By: /s/ By: /s/
Title: Title:
SHAREHOLDERS:
/s/
Howard B. Norton
/s/
Ruby Lee Norton
[date]
FORM OF
NOTICE OF CLAIM FOR INDEMNITY
Norwest Bank Minnesota, National Association,
as Escrow Agent
6th and Marquestte
Minneapolis, MN 55479-0069
Attn: Michelle Healy
Re: [identify Escrow Agreement]
In accordance with the referenced Escrow Agreement, you are hereby
instructed to pay to the Purchaser the amount of $____________ by reason of the
following claim:
This claim is based on the following facts:
[stating the amount thereof and a statement of the facts constituting
the basis of the claim and including copies of all information and
documentation relating to the claim (including invoices and bills
substantiating the Claim amount to the extent such exist)]
You hereby are directed to furnish a copy of this Notice to
Shareholders.
[Purchaser]
By
Title:
[Escrow Exhibit 2]
[date]
FORM OF
OBJECTION NOTICE
Norwest Bank Minnesota, National Association,
as Escrow Agent
6th and Marquestte
Minneapolis, MN 55479-0069
Attn: Michelle Healy
Re: [Identify Escrow Agreement]
You hereby are notified that Shareholders dispute the Claim for
Indemnity set out in the Notice of Claim for Indemnity of Purchaser dated
____________ ("Claim"). The basis for disputing such Claims is:
[insert a paragraph stating with reasonable specificity the basis for
the objection and the amount in dispute and not in dispute, if any]
You hereby are directed to furnish a copy of this Objection Notice to
Purchaser.
SHAREHOLDERS
[Escrow Exhibit 3]
[date]
FORM OF
JOINT INSTRUCTIONS FOR DISPUTE RESOLUTION
Norwest Bank Minnesota, National Association,
as Escrow Agent
6th and Marquestte
Minneapolis, MN 55479-0069
Attn: Michelle Healy
Re: [Identify Escrow Agreement]
You hereby are authorized and instructed to take the following action
with respect to the Dispute Fund that was created by reason of Purchaser's
Notice of Claim Indemnity dated ______________ and Shareholders' Objection
Notice dated ____________ Objection Notice dated ____________:
[instructions for treatment of the Dispute Fund]
[describe any applicable arbitration award]
[Purchaser]
By:
Title
SHAREHOLDERS
AGREEMENT
THIS AGREEMENT, dated as of May 17, 1996 (the "Agreement"), is by and
among ELTRAX SYSTEMS, INC., a Minnesota corporation ("Eltrax" or the "Company"),
William P. O'Reilly, Clunet R. Lewis and Mack V. Traynor, III (collectively
referred to herein as the "Eltrax Principals") and Howard B. and Ruby Lee Norton
(collectively, the "Nortons").
A. WHEREAS, Eltrax has agreed to acquire in two merger transactions all
of the issued and outstanding capital stock of Nordata, Inc., a California
corporation and Rudata, Inc., a California corporation, which are wholly owned
by the Nortons, and the Nortons have agreed to sell Nordata and Rudata to Eltrax
(the foregoing transactions are hereinafter referred to collectively as the
"Merger");
B. WHEREAS, Eltrax has also agreed that, if so requested by the
Nortons, Eltrax will assist the Nortons to effectuate a private resale of Eltrax
Common Stock which the Nortons receive as consideration in the Merger (the
"Eltrax Common Stock").
C. WHEREAS, the parties hereto desire to make certain representations
and agreements to each other in connection with these agreements.
NOW, THEREFORE, in consideration of the mutual representations and
covenants contained herein, the parties hereto agree as follows:
ARTICLE 1
ASSISTANCE OF ELTRAX
1.1 Assistance of Eltrax. At any time after September 1, 1996 and
continuing until May 31, 1998, the Nortons have the right to request the
assistance of Eltrax to effect a private sale of a portion of the Nortons'
shares of Eltrax Common Stock. This private sale will be for the lesser of One
Million (1,000,000) shares of Eltrax Common Stock held by the Nortons or such
number of shares of Eltrax Common Stock having a then current market value of
Four Million Dollars ($4,000,000) (gross sales price before commissions,
expenses and other costs of sale). Upon such written request of the Nortons,
Eltrax will use its reasonable efforts to assist the Nortons in such private
sale, but Eltrax will in no way guarantee the success of such sale or the sale
price, nor will Eltrax be obligated to incur any costs in this effort. The
Nortons will use their reasonable efforts to cooperate with Eltrax in preparing
any appropriate disclosure documents.
1.2 Legal Opinion. Prior to any such transfer or sale of Eltrax Common
Stock by the Nortons in a private sale transaction as contemplated by this
Agreement, the Nortons shall cause their legal counsel to deliver an opinion to
Eltrax, which opinion shall be acceptable to Eltrax and its legal counsel, to
the effect that such sale transaction is an exempt transaction under applicable
federal and state securities laws and would not cause Eltrax to be in violation
of any such securities laws.
1.3 Co-Sale Right. If at any time before the Nortons have sold their
first One Million shares of Eltrax Common Stock or all shares owned by the
Nortons have been registered under the Securities Act of 1933, as amended,
Eltrax undertakes to issue and sell Eltrax Common Stock in a private placement
(other than pursuant to the exercise of outstanding options, warrants and other
pre-existing rights to purchase Eltrax Common Stock and other than under the
Eltrax 1995 Stock Incentive Plan), the Nortons shall have the right, but not the
obligation, to participate in such private placement transaction upon the same
terms and conditions applicable to Eltrax and in an amount of shares not to
exceed the lesser of fifty percent (50%) of the Eltrax shares so placed or the
same number of shares as provided in Section 1.1 hereof.
ARTICLE 2
COVENANT OF ELTRAX PRINCIPALS
2.1 Subject to this Section 2.1, each of the Eltrax Principals agrees
not to sell any of his shares of Eltrax common stock until the Nortons have
completed the sales of their Eltrax Common Stock in accordance with Section 1.1
hereof. This sale restriction will automatically be satisfied and will terminate
on the earlier of: (a) when the Eltrax Principals have arranged for the private
sale of an amount of shares of Eltrax common stock held by the Nortons equal to
the lesser of one million (1,000,000) shares or such number of shares having a
then current market value of Four Million Dollars ($4,000,000) (gross sales
price before commissions, expenses and other costs of sale), except if such sale
does not close for any reason other than the Norton's unwillingness to
consummate the transaction at a time when such purchaser(s) is ready, willing
and able to consummate the transaction, or (b) December 31, 1996 if, by such
date, the Nortons have not notified Eltrax and the Eltrax Principals with a bona
fide request for the assistance of the Eltrax Principals to effectuate the
Nortons' private sale of shares of Eltrax Common Stock in accordance with the
terms of this Agreement.
ARTICLE 3
MISCELLANEOUS PROVISIONS
3.1 Expenses. Each of the parties hereto shall bear its own costs, fees
and expenses in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including without limitation fees, commissions
and expenses payable to brokers, finders, investment bankers, consultants,
exchange or transfer agents, attorneys, accountants and other professionals,
whether or not the transactions contemplated herein is consummated.
3.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended or modified by the parties hereto at any time prior to
the Closing with respect to any of the terms contained herein; provided,
however, that all such amendments and modifications must be in writing duly
executed by all of the parties hereto.
3.3 Waiver of Compliance; Consents. Any failure of a party to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by the party entitled hereby to such compliance, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No single or partial exercise
of a right or remedy shall preclude any other or further exercise thereof or of
any other right or remedy hereunder. Whenever this Agreement requires or permits
the consent by or on behalf of a party, such consent shall be given in writing
in the same manner as for waivers of compliance.
3.4 No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any person or entity (other than a party hereto and his, her or its
respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind.
3.5 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be made in writing and shall be deemed to
have been duly given and effective: (i) on the date of delivery, if delivered
personally; (ii) on the earlier of the fourth (4th) day after mailing or the
date of the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or (iii) on the date of
transmission, if sent by facsimile, telecopy, telegraph, telex or other similar
telegraphic communications equipment:
If to the Nortons:
To: Howard and Ruby Norton
c/o Datatech
27126 Paseo Espada, Suite 1602
San Juan Capistrano, CA 92675
Fax: (714) 493-1840
With a copy to:
Brown and Streza
7700 Irvine Center Drive, Suite 900
Irvine, CA 92718
Attn: Richard E. Streza, Esq.
Fax: (714) 453-2916
or to such other person or address as either of the Companies shall furnish to
the other parties hereto in writing in accordance with this Section.
If to Eltrax:
To: Eltrax Systems, Inc.
Rush Lake Business Park
1775 Old Highway 8
St. Paul, MN 55112
Attn: Mack V. Traynor III
Chief Executive Officer
Fax: (612) 633-8372
With a copy to:
Oppenheimer Wolff & Donnelly
45 South Seventh Street
Suite 3400
Minneapolis, MN 55402
Attn: Thomas R. Marek, Esq.
Fax: (612) 344-9376
or to such other person or address as Eltrax or either of the Acquisition Subs
shall furnish to the other parties hereto in writing in accordance with this
Section.
3.6 Governing Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the
internal substantive laws of the State of Minnesota (without regard to the laws
of conflict that might otherwise apply) as to all matters, including without
limitation matters of validity, construction, effect, performance and remedies.
3.7 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3.8 Headings. The table of contents and the headings of the sections
and Sections of this Agreement are inserted for convenience only and shall not
constitute a part hereof.
3.9 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the arrangements concerning
the Nortons' potential sale of Eltrax Common Stock contemplated by this
Agreement. There are no restrictions, promises, warranties, agreements,
covenants or undertakings, other than those expressly set forth or referred to
in this Agreement. This Agreement supersedes all prior and contemporaneous oral
and written agreements and understandings between the parties with respect to
the transaction or transactions contemplated by this Agreement (including
without limitation the letter dated March 19, 1996, between the Eltrax
Principals and Shareholders and all amendments and extensions thereof).
Provisions of this Agreement shall be interpreted to be valid and enforceable
under applicable Law to the extent that such interpretation does not materially
alter this Agreement; provided, however, that if any such provision shall become
invalid or unenforceable under applicable Law such provision shall be stricken
to the extent necessary and the remainder of such provisions and the remainder
of this Agreement shall continue in full force and effect.
3.10 Injunctive Relief. It is expressly agreed among the parties hereto
that monetary damages would be inadequate to compensate a party hereto for any
breach by any other party of its covenants and agreements in this Agreement.
Accordingly, the parties agree and acknowledge that any such violation or
threatened violation shall cause irreparable injury to the other and that, in
addition to any other remedies which may be available, such party shall be
entitled to injunctive relief against the threatened breach of this Agreement or
the continuation of any such breach without the necessity of proving actual
damages and may seek to specifically enforce the terms thereof.
3.11 Arbitration. With the sole exception of the injunctive relief
contemplated by Section 3.11, any controversy or claim arising out of or
relating to this Agreement, or the making, performance or interpretation hereof,
including without limitation alleged fraudulent inducement hereof, shall be
settled by binding arbitration in Minneapolis, Minnesota by a panel of three
arbitrators in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Judgment upon any arbitration award may be entered in
any court having jurisdiction thereof and the parties consent to the
jurisdiction of the courts of the State of Minnesota for this purpose.
3.12 Attorneys Fees. If any arbitration, litigation or similar
proceedings are brought by any party to enforce any obligation or to pursue any
remedy under this Agreement, the party prevailing in any such arbitration,
litigation or similar proceedings shall be entitled to costs of collection, if
any, and reasonable attorneys fees incurred in connection with such proceedings
and in collecting or enforcing any award granted therein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Eltrax Systems, Inc.
By: /s/
Its: President and CEO
/s/
William P. O'Reilly
/s/
Clunet R. Lewis
/s/
Mack V. Traynor, III
/s/
Howard B. Norton
/s/
Ruby Lee Norton
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AGREEMENT is dated May 17, 1996, and is between NORDATA, INC., a
California corporation ("Nordata") and HOWARD B. NORTON, an individual residing
in the State of California (the "Employee").
RECITALS
A. Nordata wishes to continue the services of the Employee for at least
the duration of this Agreement, and the Employee wishes to provide his
services for such period.
B. Nordata desires reasonable protection of its confidential business and
technical information.
C. On May 17, 1996, Eltrax Systems, Inc. acquired in a merger Nordata,
Inc. and Rudata, Inc., which together constitute Datatech from Employee
and Employee's spouse in exchange for Eltrax Systems, Inc. common stock
and cash, the receipt and sufficiency of which is hereby acknowledged.
D. Nordata desires assurance that the Employee will not compete with it
for a reasonable period of time after termination of employment, and
Employee is willing to refrain from such competition.
E. Employee desires to be assured of a minimum Base Salary from Nordata
for Employee's services for the term of this Agreement (unless earlier
terminated), and to have the opportunity to earn certain incentive
payments provided for herein.
NOW, THEREFORE, in consideration of Employee's acceptance of and continuance in
Nordata's employment for the term of this Agreement and the parties' agreement
to be bound by the terms contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the following meanings:
1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses and incentive payments.
1.02 "COMMITTEE" shall mean a committee of the Board of Directors of Eltrax
consisting solely of directors who are not employees of Eltrax.
1.03 "COMPANY" shall mean Nordata, Inc., a California corporation.
1.04 "CONFIDENTIAL INFORMATION" shall mean information or material which is
not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice,
whether or not the underlying details are in the public domain,
including:
(a) information or material relating to the Company, and its
businesses as conducted or anticipated to be conducted,
business plans, operations, past, current or anticipated
software, products or services, customers or prospective
customers, or research, engineering, development,
manufacturing, purchasing, accounting, or marketing
activities;
(b) information or material relating to the Company's inventions,
improvements, discoveries, "know-how," technological
developments, or unpublished writings or other works of
authorship, or to the materials, apparatus, processes,
formulae, plans or methods used in the development,
manufacture or marketing of the Company's software, products
or services;
(c) information which when received is marked as "proprietary,"
"private," or "confidential";
(d) trade secrets;
(e) software in various stages of development, including computer
programs in source code and binary code form, software
designs, specifications, programming aids (including "library
subroutines" and productivity tools), programming languages,
interfaces, visual displays, technical documentation, user
manuals, data files and databases; and
(f) any similar information of the type described above which the
Company obtained from another party and which the Company
treats as or designates as being proprietary, private or
confidential, whether or not owned or developed by the
Company.
Notwithstanding the foregoing, "Confidential Information" does not
include any information which is properly published or in the public
domain; provided, however, that information which is published by or
with the aid of Employee outside the scope of employment or contrary to
the requirements of this Agreement will not be considered to have been
properly published, and therefore will not be in the public domain for
purposes of this Agreement.
1.05 "DATATECH" shall mean the business formerly owned by Employee and
operated under Nordata, Inc. and Rudata, Inc., and as such business
will be operated by Nordata.
1.06 "DISABILITY" shall mean the inability, as reasonably determined by the
Company, of Employee to perform his duties under this Agreement because
of illness or incapacity for a continuous period of six (6) months. In
the event that Employee objects that the Company has not reasonably
determined Employee's inability to perform his duties, the issue shall
be determined by three physicians, one selected by the Company, one by
Employee, and the third selected by the first two. The majority opinion
of the three physicians shall be final and binding on the Company and
Employee.
1.07 "ELTRAX" shall mean Eltrax Systems, Inc., a Minnesota corporation, and
shall include its Subsidiaries and successors in interest.
1.08 "PLAN" shall mean any profit sharing, pension, life insurance, accident
insurance, disability insurance, health insurance, hospitalization,
medical reimbursement or other employee benefit plan including, without
limitation, the Company's 401(K) Plan.
1.09 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of
whose securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of
the occurrence of a contingency) is at the time owned by the Company
and/or one or more Subsidiaries thereof; and (b) any division or
business unit (or portion thereof) of the Company or a corporation
described in clause (a) of this Section 1.08.
ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 EMPLOYMENT, POSITION. Upon the terms and conditions set forth in this
Agreement, Company hereby employs Employee, and Employee accepts such
employment. During the term of this Agreement, Employee shall serve as
President of Nordata. Termination of this Agreement prior to the end of
the term stated in Section 2.03 by either party shall also terminate
Employee's employment by the Company.
2.02 DUTIES.
(a) Employee shall devote his full-time and reasonable best
efforts to the Company and to fulfilling the duties of his
position which shall include such duties with respect to
Datatech and the Company as may from time to time be assigned
to him by the Eltrax Chief Executive Officer and the Eltrax
Board of Directors, provided that such duties are reasonably
consistent with Employee's education, experience and
background.
(b) Employee shall operate the business of Datatech in the best
interests of the Company and its shareholders.
(c) Employee shall comply with the Company's policies and
procedures to the extent they are not inconsistent with this
Agreement in which case the provisions of this Agreement
prevail. In addition, Employee shall comply with the Company's
policies on employee conduct and business ethics.
2.03 TERM. The term of this Agreement shall commence May 17, 1996 and shall
terminate on May 16, 2001 (the "Base Term"), unless earlier terminated
pursuant to Article IV of this Agreement. Commencing May 17, 2001 and
on each May 17 thereafter, the term of Employee's employment hereunder
shall be automatically extended for one (1) additional year unless on
or before the January 31 immediately preceding any such May 1 either
party gives written notice to the other of the cessation of further
extensions, in which case no further automatic extensions shall occur.
ARTICLE III
BASE COMPENSATION, EXPENSES, AND BENEFITS
3.01 BASE SALARY. For all services rendered under this Agreement during the
term of Employee's employment, the Company shall pay, in accordance
with Nordata's usual pay practices, Employee a Base Salary at an annual
rate of One Hundred Seventy-Five Thousand Dollars ($175,000).
3.02 BONUS. In addition to other compensation to be paid under this Article
III, the Company shall pay Employee a cash bonus payable by June 30,
1997 in an amount equal to 10% of the Company's net earnings before
income taxes from Datatech's operations for the fiscal year ending
March 31, 1997 in excess of $1,500,000; a cash bonus payable by June
30, 1998 in an amount equal to 10% of the Company's net earnings before
income taxes from Datatech's operations for the fiscal year ending
March 31, 1998 in excess of $1,750,000; a cash bonus payable by June
30, 1999 in an amount equal to 10% of the Company's net earnings before
income taxes from Datatech's operations for the fiscal year ending
March 31, 1999 in excess of $2,000,000; a cash bonus payable by June
30, 2000 in an amount equal to 10% of the Company's net earnings before
income taxes from Datatech's operations for the fiscal year ending
March 31, 2000 in excess of $2,250,000; and a cash bonus payable by
June 30, 2001 in an amount equal to 10% of the Company's net earnings
before income taxes from Datatech's operations for the fiscal year
ending March 31, 2001 in excess of $2,500,000. In computing net
earnings before income taxes from Datatech's operations, the bonus
payable to Employee pursuant to this Section 3.02 of this Agreement
will not be used in the calculation.
3.03 BENEFITS. In addition to other compensation to be paid under this
Article III, Employee shall be entitled to participate in all benefit
Plans available to all full-time, eligible employees currently
maintained or hereafter established by the Company generally, in
accordance with the terms and conditions of such Plans.
3.04 AUTOMOBILE. In addition to payment of compensation under this Article
III, the Company will provide Employee with the use of the leased
automobile he was using immediately prior to the date of this
Agreement.
ARTICLE IV
EARLY TERMINATION
4.01 EARLY TERMINATION. Subject to Article III and the respective continuing
obligations of the parties pursuant to Articles V, VI, VII and IX, this
Article sets forth the terms for early termination of this Agreement.
4.02 TERMINATION FOR CAUSE. The Company may terminate this Agreement and
Employee's employment immediately for cause. For the purpose hereof,
"cause" means (1) fraud, (2) theft or embezzlement of the Company's
assets, (3) willful violation of law constituting a felony, (4) the
continued failure by Employee to perform his duties as reasonably
assigned to Employee pursuant to Section 2.02 of Article II of this
Agreement for a period of 60 days after a written demand for such
performance, which written demand specifically identifies the manner in
which it is alleged Employee has not satisfactorily performed such
duties. At any time during the 60 day "cure" period described in clause
(4) above, at Employee's request the Eltrax Chief Executive Officer,
together with at least one member of the Committee, shall meet in
person to discuss the alleged performance deficiencies. In the event of
termination for cause pursuant to this Section 4.02, Employee shall be
paid at the usual rate of Employee's annual Base Salary through the
date of termination specified in any notice of termination and any
amounts to which the Executive is entitled under any Plan in accordance
with the terms of such Plan.
4.03 TERMINATION WITHOUT CAUSE. Either Employee or the Company may terminate
this Agreement and Employee's employment without cause on seventy-five
(75) days' written notice. In the event of termination of this
Agreement and of Employee's employment pursuant to this Section 4.03,
compensation shall be paid as follows:
(a) if the termination is by Employee, Employee shall be paid at
the usual rate of his annual Base Salary through the date of
termination specified in such notice (but not to exceed sixty
(60) days from the date of such notice);
(b) if the termination is by the Company, Employee shall be paid
at the usual rate of his annual Base Salary through the Base
Term.
4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement and
Employee's employment shall terminate in the event of death or
Disability of Employee.
(a) In the event of Employee's death, Base Salary shall be
terminated as of the end of the month in which death occurs.
In such case, Employee (or his estate) will be paid a pro-rata
portion of any Bonus to which Employee may be entitled in
accordance with Section 3.02.
(b) In the event of Disability, Base Salary shall be terminated as
of the end of the month in which the last day of the six-month
period of Employee's inability to perform his duties occurs.
4.05 ENTIRE TERMINATION PAYMENT. The compensation provided for in Articles
III and IV for early termination of this Agreement shall constitute
Employee's sole remedy for such termination. Employee shall not be
entitled to any other termination or severance payment which may be
payable to Employee under any other agreement between Employee and the
Company or any policy of the Company. This Section 4.05 shall not have
any effect on distributions to which Employee may be entitled at
termination from any tax-qualified Plan or any other Plan (other than a
severance payment or similar Plan).
ARTICLE VI
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.01 CONFIDENTIALITY. Employee will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any Confidential Information obtained while
employed by the Company. If Employee leaves the employ of the Company,
Employee will not, without its prior written consent, retain or take
away any drawing, writing or other record in any form containing any
Confidential Information.
5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with the
Company, Employee will engage in no activity or employment which may
conflict with the interest of the Company, and will comply with the
Company's policies and guidelines pertaining to business conduct and
ethics.
5.03 DISCLOSURE. Employee will disclose promptly in writing to the Company
all inventions, discoveries, software, writings and other works of
authorship which are conceived, made, discovered, or written jointly or
singly on the Company's business time or on Employee's own time during
the term of the Agreement, provided the invention, improvement,
discovery, software, writing or other work of authorship is capable of
being used by the Company or their respective affiliates in the normal
course of business, and all such inventions, improvements, discoveries,
software, writings and other works of authorship shall belong solely to
the Company.
5.04 INSTRUMENTS OF ASSIGNMENT. Employee will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Employee's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of
authorship in the Company, at the request and the expense of the
Company, and Employee will do all acts and sign all instruments of
assignment and other papers the Company may reasonably request relating
to applications for patents, patents, copyrights, and the enforcement
and protection thereof. If Employee is needed, at any time, to give
testimony, evidence, or opinions in any litigation or proceeding
involving any patents or copyrights or applications for patents or
copyrights, both domestic and foreign, relating to inventions,
improvements, discoveries, software, writings or other works of
authorship conceived, developed or reduced to practice by Employee,
Employee agrees to do so, and if Employee leaves the employ of the
Company, the Company shall pay Employee at a rate mutually agreeable to
Employee and the Company, plus reasonable traveling or other expenses.
5.05 SURVIVAL. The obligations of this Article V shall survive the
expiration or termination of this Agreement.
ARTICLE VI
NON-COMPETITION
6.01 NON-COMPETITION. Employee agrees that for a period of two (2) years
following termination of employment with the Company for any reason, or
if termination occurs any time after May 16, 2001 for a
period of time through May 16, 2003 but in any case not less
than a six (6) months period, Employee will not directly or indirectly,
alone or as a partner, officer, director, shareholder or employee of
any other firm or entity, engage in any commercial activity in
competition with any part of the Company's business which was under
Employee's management or supervision at any time during the term of
this Agreement or any part of the Company's business with respect to
which Employee has Confidential Information as governed by Article V of
this Agreement. For purposes of this Section 6.01, "shareholder" shall
not include beneficial ownership of less than five percent (5%) of the
combined voting power of all issued and outstanding voting securities
of a publicly held corporation whose voting stock is traded in a public
market. Also for purposes of this Section 6.01, "the Company's
business" shall include businesses conducted by the Company, any
Subsidiary of the Company and any affiliate of the Company and any
partnership or joint venture.
6.02 EFFECT OF TERMINATION. In the event Employee's employment terminates
for any reason, no additional compensation shall be paid for the
non-competition obligation.
6.03 SURVIVAL. The obligations of this Article VI shall survive the
expiration or termination of this Agreement.
ARTICLE VII
CHANGE OF OWNERSHIP OF THE BUSINESS
7.01 EFFECT. In the event that substantially all of the assets of the
Company are sold (other than as a result of the sale of the stock of
the Company) to a person or entity which is not an affiliate of the
Company:
(a) If Employee gives his written consent to the assignment of
this Agreement to the purchaser (and such assignment is
accepted), this Agreement shall remain in full force and
effect between Employee and the assignee.
(b) If such assignment is not accepted by the purchaser, then this
Agreement shall be deemed to have been terminated by the
Company without cause pursuant to Article IV; and
(c) If a proposed assignment is accepted by the purchaser, but
Employee does not provide his written consent to such
assignment (unless such consent is withheld because the
purchaser does not have creditworthiness reasonably equivalent
to the Company's and the Company does not agree to guarantee
the purchaser's performance of the Company's payment
obligations hereunder), this Agreement shall be deemed
terminated for cause pursuant to Article IV.
ARTICLE VIII
GENERAL PROVISIONS
8.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to
measure in money the damages which will accrue to either party by
reason of a failure to perform any of the obligations under this
Agreement. Therefore, if either party shall institute any action or
proceeding to enforce the provisions hereof, such party against whom
such action or proceeding is brought hereby waives the claim or defense
that such party has an adequate remedy at law, and such party shall not
urge in any such action or proceeding the claim or defense that such
party has an adequate remedy at law.
8.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VII,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Company whether by way of merger,
consolidation, operation of law, assignment, purchase or other
acquisition of substantially all of the assets or business of the
Company, and any such successor or assign shall absolutely and
unconditionally assume all of the Company's obligations hereunder.
8.03 NOTICES. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and
be delivered or mailed to any such party at its address which:
(a) In the case of the Company shall be:
Nordata, Inc.
c/o Eltrax Systems, Inc.
Rush Lake Business Park
1775 Old Highway 8
St. Paul, MN 55112
Attn: Chief Executive Officer
(b) In the case of Employee shall be:
Howard B. Norton
Any party may, by notice hereunder, designate a changed address. Any
notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed dispatched on the registered date or
that stamped on the certified mail receipt, and shall be deemed
received within the second business day thereafter or when it is
actually received, whichever is sooner.
8.04 CAPTIONS. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
8.05 GOVERNING LAW. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota
without giving effect to the conflict of laws principles thereof. The
parties hereto expressly recognize and agree that the implementation of
this Governing Law provision is essential in light of the fact that the
Company's corporate headquarters and its principal executive offices
are located within the State of Minnesota, and there is a critical need
for uniformity in the interpretation and enforcement of the employment
agreements between the Company and its key employees.
8.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
8.07 WAIVERS. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by any
related document or by law.
8.08 MODIFICATION. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
8.09 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the
matters herein agreed upon and supersedes all prior or contemporaneous
agreements, understandings and negotiations with respect to the subject
matter hereof.
8.10 ATTORNEYS' FEES. In the event there is litigation between the parties
hereto with respect to their rights and obligations under this
Agreement, the prevailing party in any such litigation shall be
entitled to recover from the opposing party all reasonable attorneys'
fees and expenses (including fees of accountants) incurred by the
prevailing party in connection with such proceeding.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
EMPLOYEE NORDATA, INC.
/s/ By /s/
Howard B. Norton Its Secretary
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AGREEMENT is dated May 17, 1996, and is between NORDATA, INC., a
California corporation ("Nordata") and RUBY LEE NORTON, an individual residing
in the State of California (the "Employee").
RECITALS
A. Nordata wishes to continue the services of the Employee for at least
the duration of this Agreement, and the Employee wishes to provide her
services for such period.
B. Nordata desires reasonable protection of its confidential business and
technical information.
C. On May 17, 1996, Eltrax System, Inc. acquired in a merger Nordata,
Inc. and Rudata, Inc. which together constitute Datatech from Employee
and Employee's spouse in exchange for Eltrax Systems, Inc. common stock
and cash, the receipt and sufficiency of which is hereby acknowledged.
D. Nordata desires assurance that the Employee will not compete with it
for a reasonable period of time after termination of employment, and
Employee is willing to refrain from such competition.
E. Employee desires to be assured of a minimum Base Salary from Nordata
for Employee's services for the term of this Agreement (unless earlier
terminated), and to have the opportunity to earn certain incentive
payments provided for herein.
NOW, THEREFORE, in consideration of Employee's acceptance of and continuance in
Nordata's employment for the term of this Agreement and the parties' agreement
to be bound by the terms contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the following meanings:
1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses and incentive payments.
1.02 "COMMITTEE" shall mean a committee of the Board of Directors of Eltrax
consisting solely of directors who are not employees of Eltrax.
1.03 "COMPANY" shall mean Nordata, Inc., a California corporation.
1.04 "CONFIDENTIAL INFORMATION" shall mean information or material which is
not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice,
whether or not the underlying details are in the public domain,
including:
(a) information or material relating to the Company, and its
businesses as conducted or anticipated to be conducted,
business plans, operations, past, current or anticipated
software, products or services, customers or prospective
customers, or research, engineering, development,
manufacturing, purchasing, accounting, or marketing
activities;
(b) information or material relating to the Company's inventions,
improvements, discoveries, "know-how," technological
developments, or unpublished writings or other works of
authorship, or to the materials, apparatus, processes,
formulae, plans or methods used in the development,
manufacture or marketing of the Company's software, products
or services;
(c) information which when received is marked as "proprietary,"
"private," or "confidential";
(d) trade secrets;
(e) software in various stages of development, including computer
programs in source code and binary code form, software
designs, specifications, programming aids (including "library
subroutines" and productivity tools), programming languages,
interfaces, visual displays, technical documentation, user
manuals, data files and databases; and
(f) any similar information of the type described above which the
Company obtained from another party and which the Company
treats as or designates as being proprietary, private or
confidential, whether or not owned or developed by the
Company.
Notwithstanding the foregoing, "Confidential Information" does not
include any information which is properly published or in the public
domain; provided, however, that information which is published by or
with the aid of Employee outside the scope of employment or contrary to
the requirements of this Agreement will not be considered to have been
properly published, and therefore will not be in the public domain for
purposes of this Agreement.
1.05 "DATATECH" shall mean the business formerly owned by Employee and
operated under Nordata, Inc. and Rudata, Inc., and as such business
will be operated by Nordata.
1.06 "DISABILITY" shall mean the inability, as reasonably determined by the
Company, of Employee to perform her duties under this Agreement because
of illness or incapacity for a continuous period of six (6) months. In
the event that Employee objects that the Company has not reasonably
determined Employee's inability to perform her duties, the issue shall
be determined by three physicians, one selected by the Company, one by
Employee, and the third selected by the first two. The majority opinion
of the three physicians shall be final and binding on the Company and
Employee.
1.07 "ELTRAX" shall mean Eltrax Systems, Inc., a Minnesota corporation, and
shall include its Subsidiaries and successors in interest.
1.08 "PLAN" shall mean any profit sharing, pension, life insurance, accident
insurance, disability insurance, health insurance, hospitalization,
medical reimbursement or other employee benefit plan including, without
limitation, the Company's 401(K) Plan.
1.09 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of
whose securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of
the occurrence of a contingency) is at the time owned by the Company
and/or one or more Subsidiaries thereof; and (b) any division or
business unit (or portion thereof) of the Company or a corporation
described in clause (a) of this Section 1.08.
ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 EMPLOYMENT, POSITION. Upon the terms and conditions set forth in this
Agreement, Company hereby employs Employee, and Employee accepts such
employment. During the term of this Agreement, Employee shall serve as
Vice President/Treasurer of Nordata. Termination of this Agreement
prior to the end of the term stated in Section 2.03 by either party
shall also terminate Employee's employment by the Company.
2.02 DUTIES.
(a) Employee shall devote her full-time and reasonable best
efforts to the Company and to fulfilling the duties of her
position which shall include such duties with respect to
Datatech and the Company as may from time to time be assigned
to her by the Eltrax Chief Executive Officer and the Eltrax
Board of Directors, provided that such duties are reasonably
consistent with Employee's education, experience and
background.
(b) Employee shall operate the business of Datatech in the best
interests of the Company and its shareholders.
(c) Employee shall comply with the Company's policies and
procedures to the extent they are not inconsistent with this
Agreement in which case the provisions of this Agreement
prevail. In addition, Employee shall comply with the Company's
policies on employee conduct and business ethics.
2.03 TERM. The term of this Agreement shall commence May 17, 1996 and shall
terminate on May 16, 2001 (the "Base Term"), unless earlier terminated
pursuant to Article IV of this Agreement. Commencing May 17, 2001 and
on each May 16 thereafter, the term of Employee's employment hereunder
shall be automatically extended for one (1) additional year unless on
or before the January 31 immediately preceding any such May 1 either
party gives written notice to the other of the cessation of further
extensions, in which case no further automatic extensions shall occur.
ARTICLE III
BASE COMPENSATION, EXPENSES, AND BENEFITS
3.01 BASE SALARY. For all services rendered under this Agreement during the
term of Employee's employment, the Company shall pay Employee in
accordance with Nordata's usual pay practices, a Base Salary at an
annual rate of Seventy-Five Thousand Dollars ($75,000).
3.02 BENEFITS. In addition to other compensation to be paid under this
Article III, Employee shall be entitled to participate in all benefit
Plans available to all full-time, eligible employees currently
maintained or hereafter established by the Company generally, in
accordance with the terms and conditions of such Plans.
3.03 AUTOMOBILE. In addition to payment of compensation under this Article
III, the Company will provide Employee with the use of the leased
automobile she used immediately prior to the date of this Agreement.
ARTICLE IV
EARLY TERMINATION
4.01 EARLY TERMINATION. Subject to Article III and the respective continuing
obligations of the parties pursuant to Articles V, VI, VII and IX, this
Article sets forth the terms for early termination of this Agreement.
4.02 TERMINATION FOR CAUSE. The Company may terminate this Agreement and
Employee's employment immediately for cause. For the purpose hereof,
"cause" means (1) fraud, (2) theft or embezzlement of the Company's
assets, (3) willful violation of law constituting a felony, (4) the
continued failure by Employee to perform her duties as reasonably
assigned to Employee pursuant to Section 2.02 of Article II of this
Agreement for a period of 60 days after a written demand for such
performance, which written demand specifically identifies the manner in
which it is alleged Employee has not satisfactorily performed such
duties. At any time during the 60 day "cure" period described in clause
(4) above, at Employee's request the Eltrax Chief Executive Officer,
together with at least one member of the Committee, shall meet in
person to discuss the alleged performance deficiencies. In the event of
termination for cause pursuant to this Section 4.02, Employee shall be
paid at the usual rate of Employee's annual Base Salary through the
date of termination specified in any notice of termination and any
amounts to which the Executive is entitled under any Plan in accordance
with the terms of such Plan.
4.03 TERMINATION WITHOUT CAUSE. Either Employee or the Company may terminate
this Agreement and Employee's employment without cause on seventy-five
(75) days' written notice. In the event of termination of this
Agreement and of Employee's employment pursuant to this Section 4.03,
compensation shall be paid as follows:
(a) if the termination is by Employee, Employee shall be paid at
the usual rate of her annual Base Salary through the date of
termination specified in such notice (but not to exceed sixty
(60) days from the date of such notice);
(b) if the termination is by the Company, Employee shall be paid
at the usual rate of her annual Base Salary through the Base
Term.
4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement and
Employee's employment shall terminate in the event of death or
Disability of Employee.
(a) In the event of Employee's death, Base Salary shall be
terminated as of the end of the month in which death occurs.
(b) In the event of Disability, Base Salary shall be terminated as
of the end of the month in which the last day of the six-month
period of Employee's inability to perform her duties occurs.
4.05 ENTIRE TERMINATION PAYMENT. The compensation provided for in Articles
III and IV for early termination of this Agreement shall constitute
Employee's sole remedy for such termination. Employee shall not be
entitled to any other termination or severance payment which may be
payable to Employee under any other agreement between Employee and the
Company or any policy of the Company. This Section 4.05 shall not have
any effect on distributions to which Employee may be entitled at
termination from any tax-qualified Plan or any other Plan (other than a
severance payment or similar Plan).
ARTICLE VI
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.01 CONFIDENTIALITY. Employee will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any Confidential Information obtained while
employed by the Company. If Employee leaves the employ of the Company,
Employee will not, without its prior written consent, retain or take
away any drawing, writing or other record in any form containing any
Confidential Information.
5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with the
Company, Employee will engage in no activity or employment which may
conflict with the interest of the Company, and will comply with the
Company's policies and guidelines pertaining to business conduct and
ethics.
5.03 DISCLOSURE. Employee will disclose promptly in writing to the Company
all inventions, discoveries, software, writings and other works of
authorship which are conceived, made, discovered, or written jointly or
singly on the Company's business time or on Employee's own time, during
the term of this Agreement, provided the invention, improvement,
discovery, software, writing or other work of authorship is capable of
being used by the Company or their respective affiliates in the normal
course of business, and all such inventions, improvements, discoveries,
software, writings and other works of authorship shall belong solely to
the Company.
5.04 INSTRUMENTS OF ASSIGNMENT. Employee will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Employee's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of
authorship in the Company, at the request and the expense of the
Company, and Employee will do all acts and sign all instruments of
assignment and other papers the Company may reasonably request relating
to applications for patents, patents, copyrights, and the enforcement
and protection thereof. If Employee is needed, at any time, to give
testimony, evidence, or opinions in any litigation or proceeding
involving any patents or copyrights or applications for patents or
copyrights, both domestic and foreign, relating to inventions,
improvements, discoveries, software, writings or other works of
authorship conceived, developed or reduced to practice by Employee,
Employee agrees to do so, and if Employee leaves the employ of the
Company, the Company shall pay Employee at a rate mutually agreeable to
Employee and the Company, plus reasonable traveling or other expenses.
5.05 SURVIVAL. The obligations of this Article V shall survive the
expiration or termination of this Agreement.
ARTICLE VI
NON-COMPETITION
6.01 NON-COMPETITION. Employee agrees that for a period of two (2) years
following termination of employment with the Company for any reason, or
if termination occurs any time after May 16, 2001 for a period of time
through May 16, 2003 but in any case not less than a six (6) month
period, Employee will not directly or indirectly, alone or as a
partner, officer, director, shareholder or employee of any other firm
or entity, engage in any commercial activity in competition with any
part of the Company's business which was under Employee's management or
supervision at any time during the term of this Agreement or any part
of the Company's business with respect to which Employee has
Confidential Information as governed by Article V of this Agreement.
For purposes of this Section 6.01, "shareholder" shall not include
beneficial ownership of less than five percent (5%) of the combined
voting power of all issued and outstanding voting securities of a
publicly held corporation whose voting stock is traded in a public
market. Also for purposes of this Section 6.01, "the Company's
business" shall include businesses conducted by the Company, any
Subsidiary of the Company and any affiliate of the Company and any
partnership or joint venture.
6.02 EFFECT OF TERMINATION. In the event Employee's employment terminates
for any reason, no additional compensation shall be paid for the
non-competition obligation.
6.03 SURVIVAL. The obligations of this Article VI shall survive the
expiration or termination of this Agreement.
ARTICLE VII
CHANGE OF OWNERSHIP OF THE BUSINESS
7.01 EFFECT. In the event that substantially all of the assets of the
Company are sold (other than as a result of the sale of the stock of
the Company) to a person or entity which is not an affiliate of the
Company:
(a) If Employee gives her written consent to the assignment of
this Agreement to the purchaser (and such assignment is
accepted), this Agreement shall remain in full force and
effect between Employee and the assignee.
(b) If such assignment is not accepted by the purchaser, then this
Agreement shall be deemed to have been terminated by the
Company without cause pursuant to Article IV; and
(c) If a proposed assignment is accepted by the purchaser, but
Employee does not provide her written consent to such
assignment (unless such consent is withheld because the
purchaser does not have creditworthiness reasonably equivalent
to the Company's and the Company does not agree to guarantee
the purchaser's performance of the Company's payment
obligations hereunder), this Agreement shall be deemed
terminated for cause pursuant to Article IV.
ARTICLE VIII
GENERAL PROVISIONS
8.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to
measure in money the damages which will accrue to either party by
reason of a failure to perform any of the obligations under this
Agreement. Therefore, if either party shall institute any action or
proceeding to enforce the provisions hereof, such party against whom
such action or proceeding is brought hereby waives the claim or defense
that such party has an adequate remedy at law, and such party shall not
urge in any such action or proceeding the claim or defense that such
party has an adequate remedy at law.
8.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VII,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Company whether by way of merger,
consolidation, operation of law, assignment, purchase or other
acquisition of substantially all of the assets or business of the
Company, and any such successor or assign shall absolutely and
unconditionally assume all of the Company's obligations hereunder.
8.03 NOTICES. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and
be delivered or mailed to any such party at its address which:
(a) In the case of the Company shall be:
Nordata, Inc.
c/o Eltrax Systems, Inc.
Rush Lake Business Park
1775 Old Highway 8
St. Paul, MN 55112
Attn: Chief Executive Officer
(b) In the case of Employee shall be:
Ruby Lee Norton
Any party may, by notice hereunder, designate a changed address. Any
notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed dispatched on the registered date or
that stamped on the certified mail receipt, and shall be deemed
received within the second business day thereafter or when it is
actually received, whichever is sooner.
8.04 CAPTIONS. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
8.05 GOVERNING LAW. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota
without giving effect to the conflict of laws principles thereof. The
parties hereto expressly recognize and agree that the implementation of
this Governing Law provision is essential in light of the fact that the
Company's corporate headquarters and its principal executive offices
are located within the State of Minnesota, and there is a critical need
for uniformity in the interpretation and enforcement of the employment
agreements between the Company and its key employees.
8.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
8.07 WAIVERS. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by any
related document or by law.
8.08 MODIFICATION. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
8.09 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the
matters herein agreed upon and supersedes all prior or contemporaneous
agreements, understandings and negotiations with respect to the subject
matter hereof.
8.10 ATTORNEYS' FEES. In the event there is litigation between the parties
hereto with respect to their rights and obligations under this
Agreement, the prevailing party in any such litigation shall be
entitled to recover from the opposing party all reasonable attorneys'
fees and expenses (including fees of accountants) incurred by the
prevailing party in connection with such proceeding.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
EMPLOYEE NORDATA, INC.
/s/
By /s/
Ruby Lee Norton Its Secretary
