SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 27, 1997
SOUTHERN ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-16345 22-2715444
(State of (Commission File No.) (I.R.S. Employer
incorporation) Identification No.)
4916 North Royal Atlanta Drive
Tucker, Georgia 30085
(Address of principal executive offices, including zip code)
(770) 491-8962
(Registrant's telephone number, including area code)
Items 2 and 5. Acquisition or Disposition of Assets, Other Events
On June 30, 1997 (the "Closing Date"), SED International, Inc., a
Delaware corporation ("SED") and wholly-owned subsidiary of Southern
Electronics Corporation, a Delaware corporation ("Registrant"),
acquired certain significant domestic vendor product lines and other
specified assets from Globelle, Inc., a New Jersey corporation
("Globelle"), in exchange for approximately $13,000,000, pursuant to
an Asset Purchase Agreement dated as of June 27, 1997 (the "Purchase
Agreement"), by and between SED and Globelle. Globelle was formerly
engaged in the business of the wholesale distribution of
microcomputers, computer printers, plotters, facsimile machines and
computer peripheral products and the assembly and configuration of
such microcomputers and computer peripheral products (the "Business")
and, following the Closing Date, will wind down such Business. The
assets transferred to SED consisted of Globelle's domestic
distribution rights with certain vendor product lines, including those
of Hewlett-Packard Company; specified equipment; other tangible and
intangible assets of Globelle and certain books and records relating
to the aforementioned assets (collectively, the "Assets"). SED did
not assume any of Globelle's liabilities, inventories or accounts
receivable.
The aggregate consideration paid by SED for the Assets was
approximately $13,000,000, payable as follows: (i) $11,000,000 paid by
SED to Globelle on the Closing Date; (ii) $1,350,000 (the "Hold-Back
Amount") to be paid by SED to Globelle in accordance with the terms of
a Hold-Back Agreement between SED and Globelle dated as of June 27,
1997 (the "Hold-Back Agreement"); (iii) $650,000 (the "Escrow Amount")
placed in escrow pursuant to an Escrow Agreement between SED and
Globelle dated June 27, 1997 (the "Escrow Agreement"). Funding
for the transaction was provided pursuant to a First Amendment to
Credit Agreement dated June 27, 1997, among Registrant, SED, Wachovia
Bank, N.A. ("Wachovia"), and National City Bank of Columbus.
Pursuant to the Hold-Back Agreement, SED promised to pay Globelle
the Hold-Back Amount when and if certain U.S. distributor agreements
for product lines (the "Vendor Contracts") between Globelle and
certain vendors are assigned to or executed by SED. Payment of the
Hold-Back Amount is secured by standby letters of credit issued to
Globelle at closing. SED is not obligated to pay that portion of the
Hold-Back Amount related to any Vendor Contract not so assigned to or
executed by SED before June 27, 1998.
Pursuant to the Escrow Agreement, the Escrow Amount was placed in
escrow to support the indemnity provided by Globelle in favor of SED
under the Purchase Agreement and for certain other matters. Subject
to the resolution of any disputes between SED and Globelle with
respect to the distribution of the Escrow Amount, the balance of the
Escrow Amount remaining in escrow will be transferred to Globelle on
or about April 1, 1998.
SED entered into certain non-competition and non-use agreements
with Globelle and Globelle Corporation, a Canadian corporation
("Parent") and the indirect sole shareholder of Globelle. The
non-competition agreements prohibit Globelle and Parent for a
specified period from engaging in the Business within the United
States, the District of Columbia or Puerto Rico (collectively, the
"Territory") or from disclosing certain confidential information or
trade secrets. The non-use agreements prohibit Globelle and Parent for
a specified period of time from using certain tradenames within the
Territory.
Globelle and SED have agreed to indemnify each other against
certain matters, as more fully described in the Purchase Agreement.
Prior to and in connection with the closing of the transaction
with Globelle, SED agreed to reimburse Globelle for certain costs and
expenses related to certain sales employees of Globelle for the month
of June 1997. Following closing, SED hired a number of the former
sales employees of Globelle.
Item 7. Financial Statements and Exhibits
(c) Exhibits
In accordance with Item 7(c) of Form 8-K, the following
exhibits are included in this report:
(2) Asset Purchase Agreement dated as of June 27, 1997, between
SED International, Inc. and Globelle, Inc. The following is
a list of omitted schedules and exhibits which Registrant
agrees to furnish supplementally to the Commission upon
request:
Schedules to Agreement
2.01(a) Equipment
2.01(b) Contract Rights - Vendors
4.01(a) Qualification
4.01(c) Officers and Directors
4.02 Financial Statements
4.04(b)(2) General Description and Location of any Personal
Property not at Company's Principal Place of Business
4.07(a) Litigation Claims
4.07(b) Judgments, Orders, Writs
4.08 Salaried Employees
4.09(a)(1) Employee Benefit Plans
4.09(a)(2) Plan Compliance
4.12(b) Tax Returns
4.12(c) Tax Audits
4.12(d) Tax Sharing Agreements
4.14 Insurance Policies
4.15 Major Vendors and Customers
4.17 No Conflict
4.18 Agreements in Full Force and Effect
4.19 Required Consents and Approvals
4.20 Absence of Certain Changes and Events
6.01 3Com Inventory List and 3Com Letter of June 18, 1997 to
Buyer
6.05 Facilities
Exhibits to Agreement
2.04(b) Hold-Back Agreement
2.04(c)(1) Security Agreement
2.04(c)(2) Escrow Agreement
2.07(a) Parent Non-Competition Agreement
2.07(b) Seller Non-Competition Agreement
4.06(a) Seller Non-Use Agreement
4.06(b) Parent Non-Use Agreement
9.15 License Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
behalf of the undersigned hereunto duly authorized.
SOUTHERN ELECTRONICS CORPORATION
Date: July 14, 1997 By:/s/ LARRY G. AYERS
Larry G. Ayers
Chief Financial Officer,
Vice President-Finance,
Treasurer and Secretary
EXHIBIT INDEX
Exhibit No. Document
No.
2. Asset Purchase Agreement dated as of June 27, 1997,
between SED International, Inc. and Globelle, Inc. The
following is a list of omitted schedules and exhibits which
Registrant agrees to furnish supplementally to the Commission
upon request:
Schedules to Agreement
2.01(a) Equipment
2.01(b) Contract Rights - Vendors
4.01(a) Qualification
4.01(c) Officers and Directors
4.02 Financial Statements
4.04(b)(2) General Description and Location of any Personal
Property not at Company's Principal Place of Business
4.07(a) Litigation Claims
4.07(b) Judgments, Orders, Writs
4.08 Salaried Employees
4.09(a)(1) Employee Benefit Plans
4.09(a)(2) Plan Compliance
4.12(b) Tax Returns
4.12(c) Tax Audits
4.12(d) Tax Sharing Agreements
4.14 Insurance Policies
4.15 Major Vendors and Customers
4.17 No Conflict
4.18 Agreements in Full Force and Effect
4.19 Required Consents and Approvals
4.20 Absence of Certain Changes and Events
6.01 3Com Inventory List and 3Com Letter of June 18, 1997 to
Buyer
6.05 Facilities
Exhibits to Agreement
2.04(b) Hold-Back Agreement
2.04(c)(1) Security Agreement
2.04(c)(2) Escrow Agreement
2.07(a) Parent Non-Competition Agreement
2.07(b) Seller Non-Competition Agreement
4.06(a) Seller Non-Use Agreement
4.06(b) Parent Non-Use Agreement
9.15 License Agreement
ASSET PURCHASE AGREEMENT
BETWEEN
SED INTERNATIONAL, INC.
AND
GLOBELLE, INC.
Dated June 27, 1997
TABLE OF CONTENTS
Article Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PURCHASE AND SALE OF ASSETS . . . . . . . . . . . 3
2.01 Transfer of the Assets. . . . . . . . . . . . . . 3
2.02 Aggregate Purchase Price of the Assets. . . . . . 3
2.03 Allocation. . . . . . . . . . . . . . . . . . . . 3
2.04 Method of Payment . . . . . . . . . . . . . . . . 3
2.05 Manner of Effecting Sale. . . . . . . . . . . . . 4
2.06 No Liabilities Assumed. . . . . . . . . . . . . . 5
2.07 Name Change and Non-Competition . . . . . . . . . 5
2.08 Closing . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III [Reserved]. . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . 5
4.01 Organization and Authorization. . . . . . . . . . 5
4.02 Financial Statements. . . . . . . . . . . . . . . 6
4.03 No Violation of Law . . . . . . . . . . . . . . . 7
4.04 Property. . . . . . . . . . . . . . . . . . . . . 7
4.05 [Reserved]. . . . . . . . . . . . . . . . . . . . 8
4.06 Intellectual Property . . . . . . . . . . . . . . 8
4.07 Litigation. . . . . . . . . . . . . . . . . . . . 9
4.08 Salaried Employees. . . . . . . . . . . . . . . . 9
4.09 Employee Benefit Plans. . . . . . . . . . . . . . 9
4.10 Collective Bargaining . . . . . . . . . . . . . . 10
4.11 Labor Disputes. . . . . . . . . . . . . . . . . . 10
4.12 Tax Matters . . . . . . . . . . . . . . . . . . . 11
4.13 [Reserved]. . . . . . . . . . . . . . . . . . . . 12
4.14 Insurance Policies. . . . . . . . . . . . . . . . 12
4.15 Major Vendors and Customers . . . . . . . . . . . 12
4.16 Contracts and Commitments . . . . . . . . . . . . 13
4.17 No Conflict . . . . . . . . . . . . . . . . . . . 13
4.18 Agreements in Full Force and Effect . . . . . . . 13
4.19 Required Consents and Approvals . . . . . . . . . 13
4.20 Absence of Certain Changes and Events . . . . . . 13
4.21 Disclosure. . . . . . . . . . . . . . . . . . . . 14
4.22 No Fraudulent Intent. . . . . . . . . . . . . . . 14
4.23 Transaction in Best Interests of Seller and Seller's
Creditors; Consideration. . . . . . . . . . . . . 14
4.24 Environmental Requirements. . . . . . . . . . . . 14
4.25 Rental Obligations. . . . . . . . . . . . . . . . 15
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF
BUYER . . . . . . . . . . . . . . . . . . . . . . 15
5.01 Organization. . . . . . . . . . . . . . . . . . . 15
5.02 Authorization . . . . . . . . . . . . . . . . . . 15
5.03 No Conflict . . . . . . . . . . . . . . . . . . . 15
5.04 Disclosure. . . . . . . . . . . . . . . . . . . . 15
5.05 Covenant Not to Purchase. . . . . . . . . . . . . 16
ARTICLE VI COVENANTS OF SELLER . . . . . . . . . . . . . . . . . 16
6.01 Return of Certain Inventory to 3Com Corporation . 16
6.02 Access. . . . . . . . . . . . . . . . . . . . . . 16
6.03 [Reserved]. . . . . . . . . . . . . . . . . . . . 17
6.04 Preparation of Supporting Documents . . . . . . . 17
6.05 Use of Facilities . . . . . . . . . . . . . . . . 17
ARTICLE VII COVENANTS OF THE PARTIES . . . . . . . . . . . . . 17
7.01 Confidentiality . . . . . . . . . . . . . . . . . 17
7.02 Employee Benefits Plan . . . . . . . . . . . . . . 18
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF SELLER. . . . . . . . 19
8.01 Representations and Warranties True at
Closing Date . . . . . . . . . . . . . . . . . . . 19
8.02 Litigation . . . . . . . . . . . . . . . . . . . . 20
8.03 Documents Satisfactory in Form and Substance . . . 20
8.04 Required Governmental Approvals . . . . . . . . . 20
ARTICLE IX CONDITIONS TO OBLIGATIONS OF BUYER . . . . . . . . 20
9.01 Representations and Warranties True at
Closing Date . . . . . . . . . . . . . . . . . . . 20
9.02 Assignment of Maintenance Contracts. . . . . . . . 21
9.03 Litigation . . . . . . . . . . . . . . . . . . . . 21
9.04 Required Governmental Approvals. . . . . . . . . . 21
9.05 Other Necessary Consents . . . . . . . . . . . . . 21
9.06 Opinions of Counsel to Parent and Seller . . . . . 21
9.07 Documents Satisfactory in Form and Substance . . . 21
9.08 Actions by Boards of Directors . . . . . . . . . . 21
9.09 Escrow Agreement . . . . . . . . . . . . . . . . . 22
9.10 Hold-Back Agreement. . . . . . . . . . . . . . . . 22
9.11 Non-Competition Agreements . . . . . . . . . . . . 22
9.12 Non-Use Agreements . . . . . . . . . . . . . . . . 22
9.13 Assignment of "FACTS" License. . . . . . . . . . . 22
9.14 Form UCC Financing Statements. . . . . . . . . . . 22
9.15 Occupancy of Facilities. . . . . . . . . . . . . . 22
9.16 Officers' Certificate. . . . . . . . . . . . . . . 23
ARTICLE X POST-CLOSING ADJUSTMENTS . . . . . . . . . . . . . 23
10.01 Taxes, Utilities, Assessments and
Similar Adjustments. . . . . . . . . . . . . . . . 23
ARTICLE XI INDEMNIFICATION BY SELLER. . . . . . . . . . . . . 24
11.01 Remedies . . . . . . . . . . . . . . . . . . . . . 24
11.02 Indemnity Claims . . . . . . . . . . . . . . . . . 25
11.03 Notice of Claim . . . . . . . . . . . . . . . . . 25
11.04 Defense. . . . . . . . . . . . . . . . . . . . . . 26
11.05 Limitations. . . . . . . . . . . . . . . . . . . . 26
ARTICLE XII INDEMNIFICATION BY BUYER . . . . . . . . . . . . . 27
12.01 Remedies . . . . . . . . . . . . . . . . . . . . . 27
12.02 Indemnity Claims . . . . . . . . . . . . . . . . . 27
12.03 Notice of Claim. . . . . . . . . . . . . . . . . . 28
12.04 Defense. . . . . . . . . . . . . . . . . . . . . . 28
12.05 Limitations. . . . . . . . . . . . . . . . . . . . 28
12.06 Customer Claims. . . . . . . . . . . . . . . . . . 29
ARTICLE XIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . 29
13.01 Bulk Sales Law . . . . . . . . . . . . . . . . . . 29
13.02 No Liens Created . . . . . . . . . . . . . . . . . 29
13.03 Entire Agreement . . . . . . . . . . . . . . . . . 29
13.04 Amendment. . . . . . . . . . . . . . . . . . . . . 29
13.05 Parties Bound by Agreement; Successors and
Assigns. . . . . . . . . . . . . . . . . . . . . . 29
13.06 Counterparts . . . . . . . . . . . . . . . . . . . 30
13.07 Headings . . . . . . . . . . . . . . . . . . . . . 30
13.08 Modification and Waiver. . . . . . . . . . . . . . 30
13.09 Expenses . . . . . . . . . . . . . . . . . . . . . 30
13.10 Notices. . . . . . . . . . . . . . . . . . . . . . 30
13.11 Brokerage. . . . . . . . . . . . . . . . . . . . . 31
13.12 Governing Law. . . . . . . . . . . . . . . . . . . 32
13.13 Public Announcements . . . . . . . . . . . . . . . 32
13.14 "Seller's Knowledge" . . . . . . . . . . . . . . . 32
13.15 Construction . . . . . . . . . . . . . . . . . . . 32
13.16 No Third-Party Beneficiaries . . . . . . . . . . . 32
13.17 "Including". . . . . . . . . . . . . . . . . . . . 32
13.18 References . . . . . . . . . . . . . . . . . . . . 32
SCHEDULES
2.01(a) Equipment
2.01(b) Contract Rights - Vendors
4.01(a) Qualification
4.01(c) Officers and Directors
4.02 Financial Statements
4.04(b)(2) General Description and Location of any Personal
Property not at Company's Principal Place of Business
4.07(a) Litigation Claims
4.07(b) Judgments, Orders, Writs
4.08 Salaried Employees
4.09(a)(1) Employee Benefit Plans
4.09(a)(2) Plan Compliance
4.12(b) Tax Returns
4.12(c) Tax Audits
4.12(d) Tax Sharing Agreements
4.14 Insurance Policies
4.15 Major Vendors and Customers
4.17 No Conflict
4.18 Agreements in Full Force and Effect
4.19 Required Consents and Approvals
4.20 Absence of Certain Changes and Events
6.01 3Com Inventory List and 3Com Letter of
June 18, 1997 to Buyer
6.05 Facilities
EXHIBITS
2.04(b) Hold-Back Agreement
2.04(c)(1) Security Agreement
2.04(c)(2) Escrow Agreement
2.07(a) Parent Non-Competition Agreement
2.07(b) Seller Non-Competition Agreement
4.06(a) Seller Non-Use Agreement
4.06(b) Parent Non-Use Agreement
9.06(a) Opinion of Counsel to Seller
9.06(b) Opinion of Counsel to Parent
9.14 Form UCC-3 Partial Termination Statements and
Form UCC-1 Financing Statements of Seller
9.15 License Agreement
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, effective as of the 27th day of June, 1997, by
and between Globelle, Inc., a New Jersey corporation ("Seller"), and
SED International, Inc., a Delaware corporation ("Buyer");
W I T N E S S E T H:
WHEREAS, Seller is in the business of the wholesale distribution
of microcomputers, computer printers, plotters, facsimile machines and
computer peripheral products and the assembly and configuration of
such microcomputers and computer peripheral products (the "Business");
WHEREAS, upon and subject to the terms and conditions contained
herein, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, certain domestic vendor product lines, the customer list
and other assets of Seller;
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and upon and subject to the terms and conditions
hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I
DEFINITIONS
Certain of the defined terms used herein shall have the meanings
ascribed to them below:
"Agreement" means this Asset Purchase Agreement between the
Seller and the Buyer, together with all Schedules and Exhibits
attached hereto.
"Assets" means the (i) Equipment, (ii) Contract Rights, (iii)
Records, (iv) Non-Competition Agreements and (v) Non-Use Agreements.
"Contract Rights" means all rights of the Seller in, to and under
the authorized distributor agreements or relationships with the
vendors listed on Schedule 2.01(b).
"Closing" means the consummation of the purchase of the Assets.
"Closing Date" means the date specified in Section 2.08 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Equipment" means all items described in Schedule 2.01(a),
together with any and all assignable warranties of third parties
covering same.
"Facilities" means the buildings and office space leased by
Seller, as of the date hereof, for use by Seller's sales force and
configuration department and described in Schedule 6.05.
"Non-Competition Agreements" mean that certain Seller
Non-Competition Agreement and that certain Parent Non-Competition
Agreement.
"Non-Use Agreements" means that certain Seller Non-Use Agreement
and that certain Parent Non-Use Agreement.
"Parent" means Globelle Corporation, a corporation organized
under the laws of the province of Ontario, Canada and the sole
beneficial shareholder of Seller.
"Parent Non-Competition Agreement" means that certain
Non-Competition Agreement of even date herewith between Buyer and
Parent substantially in the form of Exhibit 2.07(a) hereto.
"Parent Non-Use Agreement" means that certain Non-Use Agreement
of even date herewith between Buyer and Parent substantially in the
form of Exhibit 4.06(b) hereto.
"Records" means all books and records, wherever located and in
whatever medium, of Seller related to the Assets, including but not
limited to catalogs, sales materials, telephone, computer and software
manuals, customer lists, historical credit and sales data by customer
and historical sales data by vendor and SKU.
"Security Agreement" means that certain Security Agreement of
even date herewith between Buyer and Seller substantially in the form
of Exhibit 2.04(c)(1) hereto.
"Seller Non-Competition Agreement" means that certain
Non-Competition Agreement of even date herewith between Buyer and
Seller substantially in the form of Exhibit 2.07(b) hereto.
"Seller Non-Use Agreement" means that certain Non-Use Agreement
of even date herewith between Buyer and Seller substantially in the
form of Exhibit 4.06(a) hereto.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.01 Transfer of the Assets. Subject to the terms and conditions
set forth in this Agreement, as of the effective time of Closing on
the Closing Date, Seller agrees to sell, convey, assign and transfer
to Buyer, and Buyer agrees to purchase, accept and take from Seller
all of the Assets.
2.02 Aggregate Purchase Price of the Assets. The aggregate
purchase price of the Assets (the "Purchase Price") shall be Thirteen
Million and 00/100 Dollars ($13,000,000) to be adjusted and allocated
as set forth in Section 2.03 below.
2.03 Allocation. The Purchase Price shall be allocated as
follows:
(a) One Million Dollars ($1,000,000) to the tangible
assets included in the Assets;
(b) Eleven Million Eight Hundred Ninety-Nine Thousand
Dollars ($11,899,000) to the intangible assets (other than as
specifically identified in Section 2.03(c) and (d) hereof)
included in the Assets;
(c) One Hundred Thousand Dollars ($100,000) to Seller as
consideration under the Seller Non-Competition Agreement; and
(d) One Thousand Dollars ($1,000) to Parent as
consideration under the Parent Non-Competition Agreement.
Notwithstanding anything to the contrary contained in this
Section 2.03, the Purchase Price shall be adjusted if, and to the
extent, Buyer is not assigned or does not enter into written
authorized distributor agreements with each of the vendors named on
Schedule 2.01(b) within one year after the Closing Date, as more fully
described in such Schedule.
2.04 Method of Payment. The Purchase Price shall be paid by
Buyer to Seller as follows:
(a) At Closing, Eleven Million Dollars ($11,000,000),
less certain expenses of the Closing to be paid by Seller as
agreed by Buyer and Seller, shall be paid by wire transfer from
Buyer to Seller, pursuant to wire transfer instructions to be
provided by Seller prior to Closing; and
(b) One Million Three Hundred Fifty Thousand Dollars
($1,350,000) (the "Hold-Back Amount") shall be paid by Buyer to
Seller in accordance with the terms of a Hold-Back Agreement
between Seller and Buyer dated of even date herewith ("Hold-Back
Agreement") substantially in the form attached hereto as Exhibit
2.04(b) and Schedule 2.01(b) attached hereto; and
(c) At Closing, Six Hundred Fifty Thousand Dollars
($650,000) (the "Escrow Amount") shall be paid by check to
Seller, with Seller thereupon endorsing such check as payable to
the order of Buyer and delivering the check, as so endorsed, to
Buyer, together with the Security Agreement substantially in the
form of Exhibit 2.04(c)(1); immediately thereafter, Buyer shall
deliver such check for deposit in an interest bearing account to
its bailee, The Bank of New York, and Buyer, Seller and The Bank
of New York, as escrow agent, shall thereupon execute an escrow
agreement (the "Escrow Agreement") substantially in the form
attached hereto as Exhibit 2.04(c)(2).
2.05 Manner of Effecting Sale. The sale, conveyance, transfer,
assignment and delivery of the Assets by Seller to Buyer shall be
effected by such deeds, bills of sale, endorsements, assignments,
transfers and other instruments of transfer and conveyance in such
form, including, without limitation, warranties of title, as Buyer or
Buyer's counsel shall reasonably request and shall be free and clear
of all liens, claims, encumbrances or other rights that any party may
have over the Assets. The party legally obligated to pay any asset
sales or transfer taxes or other like taxes imposed as a result of the
sale, conveyance, transfer, assignment and delivery of the Assets to
Buyer shall pay such taxes.
In connection with the transfer of all intangible Assets, Seller
shall provide to Buyer any and all written or recorded information
concerning any such property, including, without limitation, documents
evidencing Seller's right, title and interest to the software,
databases, instruction manuals and similar intellectual property
related thereto, Seller's sales and purchase records, accounts and
similar documentation, including the Seller's Records, Seller's know
how concerning any aspect of the Assets, as well as all of Seller's
business documents and correspondence related thereto. To the extent
the customer information, cost and supply data, or know how are not
evidenced by or reflected in existing corporate documents, records or
other sources which are to be transferred in accordance with this
Agreement, Seller shall so inform Buyer of such information, data and,
at Buyer's request, know how, in order to disclose fully and
effectually such information, data and know how to Buyer. The parties
expressly agree that Seller shall be entitled to retain an original,
at its sole cost and expense, of any Records relating to Taxes and a
copy, at its sole expense, of any other Records, and shall
be granted reasonable access during normal business hours, and upon
reasonable prior written notice to Buyer, to the originals of its
Records transferred to Buyer under this Agreement in
order to avail itself of any claims or defenses against a third party
in any matters accruing prior to Closing. Any such access granted to
Seller shall be at Seller's sole cost and expense.
2.06 No Liabilities Assumed. Notwithstanding anything in this
Agreement to the contrary, it is expressly understood and agreed by
Buyer and Seller that Buyer shall not assume or become liable for the
payment of any debts, liabilities, losses, accounts payable, bank
indebtedness, mortgages, or other obligations of Seller, whether the
same are known or unknown, now existing or hereafter arising, of
whatever nature or character, whether absolute or contingent,
liquidated or disputed, other than any liabilities for breaches by
Buyer specifically enumerated in Section 12.01 of this Agreement.
2.07 Name Change and Non-Competition. Until December 31, 1997,
Seller shall have the right to use the name "Globelle" solely for the
purpose of liquidating its inventory and collecting its accounts
receivable. Thereafter, Seller and Globelle US Holdings Corp.,
Seller's sole direct stockholder, shall not, and shall not allow any
affiliate under their control to, engage in any business or other
activity in the United States using the name Globelle or any
confusingly similar name except as permitted under the terms of the
Parent Non-Competition Agreement. At Closing, Parent and Seller shall
each enter into Non-Competition Agreements with Buyer substantially in
the forms attached hereto as Exhibits 2.07(a) and (b), respectively.
2.08 Closing. Subject to the satisfaction or waiver of the
conditions set forth herein, the consummation of the purchase and sale
of the Assets (the "Closing") shall take place at 10:00 a.m. on June
30, 1997, effective as of June 27, 1997, in the offices of Long
Aldridge Norman LLP, located at Suite 5300, 303 Peachtree Street,
Atlanta, Georgia, or on such other date and at such other time and
place as the parties shall agree in writing (the "Closing Date").
ARTICLE III
[Reserved]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement, Seller hereby
represents and warrants to Buyer as follows:
4.01 Organization and Authorization.
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of New
Jersey and has all requisite power and authority, corporate or
otherwise, to conduct its Business as it is now being conducted
and to own or lease its properties and assets, and is duly
qualified and in good standing in the jurisdictions set forth on
Schedule 4.01(a). Seller is duly qualified and in good standing
in every jurisdiction of the United States in which the failure
to be so qualified would have a material adverse effect on its
business, operations or financial condition.
(b) The copies of the charter documents and bylaws of
Seller that have been previously delivered to Buyer are the
complete, true and correct charter documents and bylaws of Seller
in effect as of the date hereof.
(c) The current officers and directors of Seller are listed
on Schedule 4.01(c).
(d) Seller has the right, power and capacity to execute,
deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly and validly
authorized by all necessary action, corporate or otherwise, on
the part of Seller. This Agreement has been duly and validly
executed and delivered by Seller and constitutes Seller's legal,
valid and binding obligation, enforceable in accordance with its
terms.
4.02 Financial Statements. Schedule 4.02 contains the audited
balance sheet of GBC Technologies, Inc. and Subsidiaries for the six
months ended May 31, 1996 and of Technology Marketing Group, Inc. for
the year ended November 30, 1995 and the period from February
1, 1994 to November 30, 1994 and the related audited statements of
income, retained earnings, and cash flows for the periods then ended,
and the related notes thereto; and the unaudited balance sheet of
Seller as of February 28, 1997, and the related unaudited profit and
loss statements for the nine (9) month period then ended (the "Audited
Financial Statements" and the "Interim Financial Statements,"
respectively, and collectively the "Financial Statements"). In
addition, Seller hereby agrees to provide the audited balance sheet of
Seller as of the fiscal year ended May 31, 1997 and the related
audited statements of income, retained earnings and cash flows for the
year then ended, and the related notes thereto (the "1997 Audited
Financial Statements"), together with the report thereon by Deloitte &
Touche, independent public accountants, to Buyer on or before
September 30, 1997. The Audited Financial Statements are true,
correct and complete and present fairly the financial position of
Seller as of the dates thereof, and the related results of its
operations for the periods then ended. To the best of Seller's
knowledge, the Interim Financial Statements are true, correct
and complete and present fairly the financial position of Seller as of
the date thereof, and the related results of its operations for the
periods then ended. The Audited Financial Statements have been
prepared and the 1997 Audited Financial Statements will be prepared in
accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis. The audited balance sheet as of May
31, 1996 included in the Audited Financial Statements is referred to
herein as the "Audited Balance Sheet" and the unaudited balance sheet
as of May 31, 1997 included in the Interim Financial Statements is
referred to herein as the "Interim Balance Sheet." Buyer acknowledges
that the Audited Financial Statements were prepared on a going concern
basis and that the Interim Financial Statements contain some
adjustments but not all adjustments necessary to reflect the financial
position of Seller on a liquidation basis.
4.03 No Violation of Law. To the best of Seller's knowledge,
Seller is not, has not been and will not be (by virtue of any past or
present action, omission to act, contract to which it is a party or
any occurrence or state of facts whatsoever) in violation of any
applicable local, state or federal law, ordinance, regulation, order,
injunction or decree, or any other requirement of any governmental
body, agency or authority or court binding on it, or relating to its
property or business or its advertising, sales or pricing practices
(including, without limitation, any antitrust laws and regulations)
that could cause any liability to Buyer.
4.04 Property.
(a) Schedules 2.01(a) and (b) set forth a complete and
accurate list and description of all Equipment and Contract
Rights constituting the Assets.
(b) Seller (i) has good and valid title to all the Assets
and (ii) except for Permitted Liens (as defined hereafter), owns
such Assets free and clear of all title defects or objections,
liens, restrictions, claims, charges, security interests,
easements or other encumbrances of any nature whatsoever,
including any mortgages, leases, chattel mortgages, conditional
sales contracts, collateral security arrangements and other title
or interest retention arrangements. "Permitted Liens" shall mean
liens for taxes not yet due and payable. All Assets are in the
possession or control of Seller. Schedule 4.04(b)(2) sets forth a
general description and the location of any Assets which are not
located on the premises of the principal business operations of
Seller in Minneapolis, Minnesota. All workstations constituting
Equipment are in good working condition, subject to normal wear
and tear, on the Closing Date.
(c) Except for Permitted Liens, the Facilities are not
subject (i) to the knowledge of Seller, to any governmental
decree or order (or threatened or proposed order known to Seller)
to be sold or taken by public authority; or (ii) to the knowledge
of Seller and subject to the compliance by Seller with its
covenant in Section 4.25 of this Agreement, to any rights of way,
building use restrictions, exceptions, variances, reservations or
limitations of any nature whatsoever, not of record
(collectively, "Facilities Restrictions") which would impede
Buyer's unrestricted access to, and use and enjoyment of, the
Facilities during the respective periods described in the License
Agreement to the same extent Seller has had such access, use and
enjoyment; provided, however, the phrase "to the knowledge of
Seller" in this clause (ii) shall not apply to any such
Facilities Restrictions under any of the realty leases for
Facilities identified in the License Agreement.
(d) All Equipment being sold, transferred and conveyed to
Buyer is "as is, where is," except as to any warranties of right,
title and interest and as to workstations which shall be as
otherwise set forth in this Agreement.
4.05 [Reserved].
4.06 Intellectual Property.
(a) Generally. Seller represents and warrants that it owns
all right, title and interest to the trade names GBC Technology,
TMG, Technology Marketing Group, Vitek and Storquest and has not
authorized any person to use, or given any person the right to
use, in any business or commercial activity, any of such trade
names. Moreover, Seller represents and warrants that, except as
provided in Section 2.07 of this Agreement, it is not currently
using and covenants that it will not use any of such trade names
and the trade name "Globelle" in the territory and for the period
described in the Non-Use Agreement between Seller and Buyer
substantially in the form of Exhibit 4.06(a) hereto. Seller does
not know of any person infringing upon any of Seller's
intellectual property rights related to such trade names.
(b) Telephonic and Computer Hardware, Software and
Databases. To the best of Seller's knowledge, Schedule 2.01(a)
accurately identifies, and describes the functions of, all
telephonic and computer hardware, software and databases owned,
licensed, leased, internally developed or otherwise used in
connection with the Assets. At Closing, Seller hereby grants to
Buyer a nonexclusive, royalty free, perpetual license (but Buyer
shall not have any right to sublicense or assign this license to
any third-party non-affiliate) to use any modifications or
upgrades developed for and owned by Seller in and to the
operating system and application software known as "FACTS,"
designed by Software Solutions, Inc. Seller will also assign at
Closing all of Seller's right, title and interest in and to
Seller's other telephonic and computer hardware, software and
databases forming a part of the Assets and all documentation
relating to all such telephonic and computer hardware, software
and databases. All third party consents necessary for Seller to
assign, transfer and convey to Buyer the license for the
application software known as "FACTS," designed by Software
Solutions, Inc., and maintenance contracts for the Seller's
Fujitsu 9600 Model M telephone equipment and DEC Alpha 8400
computer equipment have been received and will be delivered to
Buyer at Closing, except for the license for the application
software known as "FACTS," for which a new license will be
delivered to Buyer on June 30, 1997. Seller has not sold,
licensed, leased or otherwise transferred or granted any interest
or rights to any of the telephonic and computer hardware,
software and databases which are part of the Assets, other than
that certain Software License Agreement dated April 18, 1995
between ScanSource, Inc. and Seller.
4.07 Litigation. Schedule 4.07(a) (i) sets forth a brief
description of all litigation, claims, suits, actions, investigations,
indictments or informations, proceedings or arbitrations, grievances
or other procedures (including grand jury investigations, actions or
proceedings, and product liability and workers' compensation suits,
actions or proceedings) pending (other than suits for which Seller has
not yet received a service of process and of which Seller has no
knowledge), or to the knowledge of Seller, threatened, before any
court, commission, arbitration tribunal, or judicial, governmental or
administrative department, body, agency, administrator or official,
grand jury, or any other forum for the resolution of grievances,
against Seller or involving any of its property or business, and (ii)
indicates which of such matters are being defended by an insurance
carrier, and which of the matters being so defended are being defended
under a reservation of rights. Notwithstanding the foregoing,
Schedule 4.07(a)(i) need not identify each threatened action by a
vendor of Seller, but may refer to all such threatened actions in the
aggregate. Further, except as set forth in Schedule 4.07(b), there
are no judgments, orders, writs, injunctions, decrees, indictments or
informations, grand jury subpoenas or civil investigative demands,
plea agreements, stipulations or awards (whether rendered by a court,
commission, arbitration tribunal, or judicial, governmental or
administrative department, body, agency, administrator or official,
grand jury or any other forum for the resolution of grievances)
against or relating to Seller or involving any of its property or
business. Seller has made available to the Buyer true, correct,
and complete copies of pleadings, briefs and other documents filed in
each pending litigation, claim, suit, action, investigation,
indictment or information, proceeding, arbitration, grievance
or other procedure listed in Schedule 4.07(a), and the judgments and
informations, grand jury subpoenas and civil investigative demands,
plea agreements, stipulations and awards listed in
said Schedule that Buyer has requested.
4.08 Salaried Employees. Schedule 4.08 sets forth the names and
current compensation (itemized by category, e.g., salary, bonus,
commission) of certain employees of Seller to whom Buyer has made or
is considering making offers of employment, together with the date and
amount of the last increase in compensation for each such person, as
well as the title and "essential functions" (as defined in 29 CFR
Section 1630.2(n)) of each such person.
4.09 Employee Benefit Plans.
(a) All Employee Benefit Plans and Arrangements.
(1) List and Description of Plans and Arrangements.
Schedule 4.09(a)(1) sets forth a complete and accurate list
and description of all of Seller's: (A) employee benefit
plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); (B) other
deferred compensation, early retirement, incentive,
profit-sharing, thrift, stock ownership, stock appreciation
rights, bonus, stock option, stock purchase, welfare or
vacation, or other nonqualified benefit plans or
arrangements; and (C) trusts, group annuity contracts,
insurance policies or other funding media for the plans and
arrangements described hereinabove.
(2) Compliance with ERISA and the Code. Except as set
forth on Schedule 4.09(a)(2), all of the plans and
arrangements listed on Schedule 4.09(a)(1) are in material
compliance with all applicable laws and regulations
(including ERISA and the Code).
(3) Copies of Documents Provided to Buyer. Seller has
made available to Buyer true, correct and complete copies of
all documents relating to the Employee Benefit Plans that
Buyer has requested, including: (i) all plan texts,
amendments, trust instruments and other agreements adopted
or entered into in connection with each of the Employee
Benefit Plans; (ii) all insurance and annuity contracts
related to any Employee Benefit Plan; (iii) the notices and
election forms used to notify employees and their dependents
of their continuation coverage rights under Seller's group
health plans (under Code Section 4980B(f) and ERISA Section
606), if applicable; and (iv) the most recently available
Form 5500 annual reports, certified financial statements,
actuarial reports, summary plan descriptions and favorable
determination letters, if applicable, for Employee Benefit
Plans. Subject to Schedule 4.09(a)(1), since the date such
documents were supplied to Buyer, no plan amendments have
been adopted, no changes to the documents have been made,
and no such amendments or changes shall be adopted or made
prior to the Closing Date.
(b) Defined Benefits and Multiemployer Plans. Neither
Seller, nor its predecessors in interest, nor any employer which,
under Section 414 of the Code, would constitute a single employer
with Seller (a "Plan Affiliate"), has at any time maintained,
sponsored, contributed to or had any obligation to contribute to,
(i) any "pension plan" as defined in ERISA Section 3(2) which is
subject to Title IV of ERISA, (ii) any plan which is a
multiemployer plan as defined in ERISA Section 3(37)(A), or (iii)
any plan which is a multiple employer welfare arrangement as
defined in ERISA Section 3(40)(A).
4.10 Collective Bargaining. There are no labor contracts,
collective bargaining agreements, letters of understanding or other
arrangements, formal or informal, with any union or labor organization
covering any of Seller's employees and none of said employees are
represented by any union or labor organization.
4.11 Labor Disputes. To the best of Seller's knowledge, Seller
is in compliance with all federal and state laws respecting employment
and employment practices, immigration, terms and conditions of
employment, wages and hours. To the best of Seller's knowledge,
Seller is not and has not been engaged in any unfair labor practice,
and no unfair labor practice complaint against Seller is pending
before the National Labor Relations Board. Seller does not
know or have reason to know of any labor strike or other labor trouble
actually pending, being threatened against, or affecting Seller. To
the best of Seller's knowledge, there have not been, nor are there
presently, any attempts to organize non-union employees, nor are there
plans for any such attempts.
4.12 Tax Matters.
(a) Definitions. For purposes of this Agreement, the
following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other
additions to tax that may become payable in respect thereof,
imposed by any federal, territorial, state, local or foreign
government or any agency or political subdivision of any
such government, which taxes shall include, without limiting
the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and
state income taxes), payroll and employee withholding taxes,
unemployment insurance, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes,
gross receipts taxes, business license taxes, occupation
taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation,
Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or
of a similar nature to any of the foregoing, which Seller is
required to pay, withhold or collect.
(ii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information
statements and returns relating to, or required to be filed
in connection with, any Taxes, including information returns
or reports with respect to backup withholding and other
payments to third parties.
(b) Returns Filed and Taxes Paid. Except as otherwise
disclosed in Schedule 4.12(b), (i) all Returns required to be
filed by or on behalf of Seller have been duly filed on a timely
basis and such Returns are true, complete and correct; (ii) all
Taxes shown to be payable on the Returns or on subsequent
assessments with respect thereto have been paid in full on a
timely basis, and no other Taxes are payable by Seller with
respect to items or periods covered by such Returns (whether or
not shown on or reportable on such Returns) or with respect to
any period prior to the date of this Agreement; (iii) Seller has
withheld and paid over all Taxes required to have been withheld
and paid over, and complied with all information reporting and
backup withholding requirements, including maintenance of
required records with respect thereto, in connection with amounts
paid or owing to any employee, creditor, independent contractor,
or other third party; and (iv) there are no liens on any of the
assets of Seller with respect to Taxes, other than liens for
Taxes not yet due and payable or for Taxes that Seller is
contesting in good faith through appropriate proceedings and for
which appropriate reserves have been established, which contested
Taxes are disclosed in Schedule 4.12(b).
(c) Tax Deficiencies; Audits; Statutes of Limitations.
Except as otherwise disclosed in Schedule 4.12(c): (i) the
Returns of Seller have never been audited by a government or
taxing authority, nor is any such audit in process, pending or
threatened (either in writing or verbally, formally or
informally); (ii) no deficiencies exist or have been asserted
(either in writing or verbally, formally or informally) or are
expected to be asserted with respect to Taxes of Seller, and
Seller has not received notice (either in writing or verbally,
formally or informally) or expects to receive notice that it has
not filed a Return or paid Taxes required to be filed or paid by
it; (iii) Seller is neither a party to any action or proceeding
for assessment or collection of Taxes, nor has such event been
asserted or threatened (either in writing or verbally, formally
or informally) against Seller or any of its assets; (iv) no
waiver or extension of any statute of limitations is in effect
with respect to Taxes or Returns of Seller; and (v) Seller has
disclosed on its federal income tax returns all positions taken
therein that could give rise to a substantial understatement
penalty within the meaning of Section 6662 of the Code.
4.13 [Reserved].
4.14 Insurance Policies. Schedule 4.14 sets forth a complete and
accurate list and description of all insurance policies relating to
the Assets and Seller's employees in force naming Seller, or any
employees thereof in their capacity as such, as an insured or
beneficiary or as a loss payable payee, or for which Seller has paid
or is obligated to pay all or part of the premiums. Seller has not
received notice of any pending or threatened termination or premium
increase (retroactive or otherwise) with respect thereto, and Seller
is in compliance with all conditions contained therein. There have
been no lapses (whether cured or not) in the coverage provided under
the insurance policies, referenced herein and as set forth on Schedule
4.14, during the term of such policies, as extended or renewed.
Seller has made available to Buyer true, correct, and complete copies
of each of the policies listed on Schedule 4.14.
4.15 Major Vendors and Customers. Schedule 4.15 sets forth a
list of (i) each vendor of goods or services to, and each customer of,
Seller, to whom Seller paid or billed in the aggregate more than
$5,000 during the twelve (12) month period ended May 31, 1997,
together, in each case, with the amount paid or billed during such
period and (ii) each customer (together with the most recently known
address, telephone number and contact person with such customer) that
has purchased goods from Seller having an aggregate gross
purchase price of $50,000 or more since June 1, 1996.
4.16 Contracts and Commitments. To the knowledge of Seller,
Seller is not a party to or bound by any presently existing contract,
agreement or other arrangement that has had or may in the future have
an adverse effect upon the Assets.
4.17 No Conflict. The execution and delivery of this Agreement
by Seller, the consummation of the transactions contemplated herein by
Seller, and the performance of the covenants and agreements of Seller,
subject to fulfillment of the conditions set forth in Article VIII
hereof, will not, with or without the giving of notice or the lapse of
time, or both, (i) violate or conflict with any of the provisions of
any charter document or bylaw of Seller; or (ii) except as set forth
in Schedule 4.17, violate, conflict with or result in a breach or
default under or cause termination of any material term or condition
of any material mortgage, indenture, contract, license, permit,
instrument, trust document, will, or other agreement, document or
instrument (other than the leases for the Facilities described on
Schedule 6.05) to which Seller is a party or by which Seller or its
properties may be bound; or (iii) violate any provision of law,
statute, regulation, court order or ruling of any governmental
authority, to which Seller is a party or by which it or its properties
may be bound, or (iv) result in the creation or imposition of any
lien, claim, charge, restriction, security interest or encumbrance
of any kind whatsoever upon any asset of Seller.
4.18 Agreements in Full Force and Effect. Except as expressly
set forth in Schedule 4.18, all contracts, agreements, plans, leases,
policies and licenses referred to, or required to be referred to, in
any Schedule delivered hereunder and relating to the Assets are valid
and binding, and are in full force and effect and are enforceable in
accordance with their terms, except to the extent that the validity or
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization and other similar laws affecting creditors' rights
generally.
4.19 Required Consents and Approvals. Except as set forth in
Schedule 4.19, no consent or approval is required by virtue of the
execution hereof by Seller or the consummation of any of the
transactions contemplated herein by Seller to avoid the violation
or breach of, or the default under, or the creation of a lien on any
of the Assets of Seller pursuant to the terms of, any regulation,
order, decree or award of any court or governmental agency or any
lease, agreement, contract, mortgage, note, license, or any other
instrument to which Seller is a party or to which it or any of its
Assets is subject.
4.20 Absence of Certain Changes and Events. Except as set forth
in Schedule 4.20, since March 31, 1997, Seller has not:
(a) suffered any damage or destruction adversely affecting
the Assets;
(b) permitted any of the Assets to be subjected to any
mortgage, lien, security interest, restriction, charge or other
encumbrance of any kind that have not been removed except for
Permitted Liens;
(c) waived any material claims or rights with respect to
the Assets;
(d) sold, transferred or otherwise disposed of any of the
Assets; or
(e) agreed in writing, or otherwise, to take any action
described in this Section.
4.21 Disclosure. Except as otherwise may be limited in this
Agreement by the phrase "to the knowledge of Seller" or similar
language qualifying Seller's knowledge, no representations,
warranties, assurances or statements by Seller in this Agreement and
no statement contained in any document (including the Financial
Statements and the Schedules), certificates or other writings
furnished or to be furnished by Seller (or caused to be furnished
by Seller) to Buyer or any of its representatives pursuant to the
provisions hereof contains or will contain any untrue statement of
material fact, or omits or will omit to state any fact necessary, in
light of the circumstances under which it was made, in order to make
the statements herein or therein not misleading.
4.22 No Fraudulent Intent. Seller represents and warrants that
neither the execution and delivery of this Agreement nor the
performance of any actions required hereunder, is being undertaken by
Seller with or as a result of any actual intent by Seller to hinder,
delay or defraud any entity to which Seller is now or will hereafter
become indebted.
4.23 Transaction in Best Interests of Seller and Seller's
Creditors; Consideration. Seller hereby represents and warrants (i)
that the transaction evidenced by this Agreement is in the best
interests of Seller and the creditors of Seller, and (ii) that the
benefits to inure to Seller pursuant to this Agreement constitute
"reasonably equivalent value" (as such term is used in Section 548 of
the Bankruptcy Code) and "valuable consideration," "fair value," and
"fair consideration," (as such terms are used in Section 101(32) of
the Federal Bankruptcy Code, Section 2 of either the Uniform
Fraudulent Transfer Act or the Uniform Fraudulent Conveyance Act or
the fraudulent conveyance and transfer laws of the State of Georgia or
such other jurisdiction whose laws shall be determined) to the
transactions contemplated by this Agreement, in exchange for the
benefits to be provided by Seller pursuant to this Agreement.
4.24 Environmental Requirements. Seller is not and, for the
period described in the License Agreement, will not be, in violation
of any applicable requirements, restrictions, limitations, conditions,
standards, prohibitions, and obligations contained in all federal,
state, and local laws relating to environmental, land use, health, or
safety matters, including any and all regulations, codes, plans,
orders, decrees, judgments, and notices issued, entered,
promulgated, or approved thereunder (hereinafter referred to as
"Environmental Requirements") such that Buyer's access, use and
enjoyment of the Facilities under the License Agreement could be
adversely affected.
4.25 Rental Obligations. As of the date hereof, Seller has fully
paid all base rent, operating expenses, common area expenses and other
charges (the "Lease Payments") due and payable under the lease
agreements (the "Leases") related to the Facilities. In addition,
Seller hereby covenants that it will cause any and all Lease Payments
to be fully paid in a timely manner from the date hereof through and
including the period during which Buyer is entitled to full access to,
and use and enjoyment of, the Facilities pursuant to the License
Agreement described in Section 9.15 hereof.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer hereby represents, warrants and covenants to Seller as
follows:
5.01 Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to effect
the transactions contemplated hereunder.
5.02 Authorization. Buyer has the right, power and authority to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Buyer.
This Agreement has been duly and validly executed and delivered by
Buyer and constitutes Buyer's legal, valid and binding obligation,
enforceable in accordance with its terms.
5.03 No Conflict. The execution and delivery of this Agreement
by Buyer, the consummation of the transactions contemplated herein by
Buyer, and the performance of the covenants and agreements of Buyer
will not, with or without the giving of notice or the lapse of time,
or both, (i) violate or conflict with any of the provisions of any
charter document or bylaw of Buyer; (ii) violate, conflict with or
result in breach or default under or cause termination of any material
term or condition of any material mortgage, indenture, contract,
license, permit, instrument, trust document, or other agreement,
document or instrument to which Buyer is a party or by which Buyer or
any of its properties may be bound; or (iii) violate any provision of
law, statute, rule, regulation, court order, judgment or decree, or
ruling of any governmental authority, to which Buyer is a party or by
which Buyer or its properties may be bound.
5.04 Disclosure. Except as otherwise may be limited in this
Agreement by the phrase "to the knowledge of Buyer" or similar
language qualifying Buyer's knowledge, no representations, warranties,
assurances or statements by Buyer in this Agreement and no statement
contained in any document, certificates or other writings furnished or
to be furnished by Buyer (or caused to be furnished by Buyer) to
Seller or any of its representatives pursuant to the provisions hereof
contains or will contain any untrue statement of material fact, or
omits or will omit to state any fact necessary, in light of the
circumstances under which it was made, in order to make the statements
herein or therein not misleading.
5.05 Covenant Not to Purchase. Until the earlier of (i) the
first anniversary of this Agreement, (ii) the date Buyer is assigned
or enters into a written authorized U.S. distributor agreement
covering products substantially similar to those products previously
sold by Seller with a vendor for which a Hold-Back Amount is
referenced on Schedule 2.01(b) hereto, or (iii) the date Buyer
otherwise pays Seller the portion of the Hold-Back Amount attributable
to a vendor as referenced on Schedule 2.01(b) hereto, Buyer agrees not
to purchase directly from any such vendor for which a Hold-Back Amount
is referenced on Schedule 2.01(b) that vendor's products for resale in
the U.S. which are substantially similar to those products sold
in the U.S. by Seller from that vendor since January 1, 1997.
ARTICLE VI
COVENANTS OF SELLER
6.01 Return of Certain Inventory to 3Com Corporation. On the
Closing Date, Seller shall release for shipment and promptly ship to
3Com Corporation ("3Com") in accordance with 3Com's directions each
item of inventory listed on Schedule 6.01, attached hereto and
incorporated by reference herein, in such a manner as reasonably to
provide that such inventory is received by 3Com within three (3) days
after shipment thereof. Seller shall insure with a commercially
creditworthy insurer all risks of shipment until so delivered and
accepted by 3Com in an aggregate insured amount of not less than
$3,100,000.00, plus the value of any deductibles or other payment
obligations of Seller under such policy. Such policy shall name
3Com as the named insured therein. Seller represents and warrants
that all such inventory to be so shipped will satisfy the requirements
set forth in 3Com's letter of June 18, 1997 to Buyer, a copy of which
is attached to Schedule 6.01 hereto.
6.02 Access. From and after the date of this Agreement, Seller
shall (i) provide Buyer and its designees (officers, counsel,
accountants, actuaries, and other authorized representatives) with
such information as Buyer may from time to time reasonably request
with respect to Seller and the transactions contemplated by this
Agreement; (ii) provide Buyer and its designees, access during regular
business hours and upon reasonable notice to the books, records,
offices, personnel, counsel, accountants and actuaries of Seller, as
Buyer or its designees may from time to time reasonably request; and
(iii) permit Buyer and its designees to make such inspections and
copies (at Buyer's expense) thereof as Buyer may reasonably
request. Any inspections shall be conducted in such a manner so as
not to interfere unreasonably with the operation of the business of
Seller. No such investigation shall limit or modify in any way
Seller's obligations with respect to any breach of its
representations, warranties, covenants or agreements contained in the
Agreement.
6.03 [Reserved].
6.04 Preparation of Supporting Documents. In addition to such
actions as Seller may otherwise be required to take under this
Agreement or applicable law in order to consummate this Agreement and
the transactions contemplated hereby, Seller shall take such action,
shall furnish such information, and shall prepare, or cooperate in
preparing, and execute and deliver such certificates, agreements and
other instruments as Buyer may reasonably request from time
to time, before, at or after the Closing, with respect to compliance
with obligations of Buyer or Seller in connection with the
transactions contemplated herein. Any information so
furnished by Seller after the Closing, shall be, to the best of
Seller's knowledge, true, correct and complete and shall not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
6.05 Use of Facilities. Seller will provide Buyer with full
access to, and use and enjoyment of, each of the Facilities for the
periods described in, and in accordance with, the License Agreement
described in Exhibit 9.15, and will pay all expenses relating to the
Facilities in a timely manner for such period, including rent,
utilities, insurance in the amount of loss coverage currently
maintained on the Facilities, and taxes, but not including the costs
of the telephone and data communication lines used solely by Buyer's
employees and constituting the Assets. Schedule 6.05 sets forth the
address of each Facility subject to the License Agreement.
ARTICLE VII
COVENANTS OF THE PARTIES
Seller and Buyer, respectively, hereby covenant to and agree with
one another as follows, which covenants shall continue in full force
and effect following the Closing:
7.01 Confidentiality. In connection with this Agreement the
parties may have access to information which is nonpublic,
confidential or proprietary in nature. All of such information, in
whole or in part, together with any analyses, compilations, studies or
other documents prepared by any party, which contain or otherwise
reflect any such information is hereinafter referred to as the
"Information." The parties acknowledge that: certain Information of
Seller is contained in databases and computer programs that are being
transferred hereunder as part of the Assets; said Information cannot
be removed from the transferred Assets without causing irreparable
damage to the Assets; such Information does not constitute part of the
Assets being transferred or sold hereunder; and ownership of said
Information is being retained by Seller. Each party hereby agrees as
follows: (i) the Information will be kept confidential and shall not,
without the prior mutual written consent of the parties, be disclosed,
in any manner whatsoever, in whole or in part, and shall not be used
by any party following the termination of this Agreement. Each party
agrees to transmit the Information only to its respective employees
and representatives who need to know the Information and who shall
agree to be bound by the terms and conditions of this Agreement.
In any event, each party shall be responsible for any breach of this
Agreement by its respective employees or representatives; (ii) each
party agrees to keep a record of the location of the Information. If
the transactions contemplated hereunder are not consummated, the
Information, except for that portion of the Information which consists
of analyses, compilations, studies or other documents prepared by each
party's respective employees and representatives, will be returned to
the other party promptly upon request and no party shall
retain any copies. That portion of the Information, and all copies
thereof, which consists of analyses, compilations, studies or other
documents prepared by each party's respective employees and
representatives will be kept confidential and subject to the terms of
this Agreement or destroyed; and (iii) in the event any party becomes
legally compelled to disclose any of the Information, such party will
provide to the other parties prompt notice so that each other party
may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. In the event that
such protective order or other remedy is not obtained, or compliance
with the provisions of this Agreement is waived, a party will
furnish only that portion of the Information which is legally
required, and to the extent requested by the other party, will
exercise its best efforts to obtain a protective order or other
reliable assurance that confidential treatment will be accorded the
Information. The term "Information" does not include information
which (i) was known to any party about another party prior to its
disclosure, provided that such information was lawfully obtained or
developed, (ii) becomes generally available to the public other than
as a result of a disclosure by a party in violation of this Agreement,
or (iii) becomes available from a source other than a party to this
Agreement, if the source is not bound by a confidentiality agreement
and such source lawfully obtained such information.
7.02 Employee Benefits Plan.
(a) Buyer shall not adopt, assume or otherwise become
responsible for, either primarily, as a successor employer, or
otherwise, and shall have no liability whatsoever with respect
to, any "Controlled Group Employee Benefit Plan" (i.e., any
employee benefit plan (within the meaning of ERISA Pargraph 3(3))
or any other plan or arrangement, of, contributed to or sponsored
or maintained by, Seller or any affiliate of Seller or any such
plan or arrangement for which Seller or any affiliate of Seller
could incur liability). The preceding sentence applies to any
liability with respect to a Controlled Group Employee Benefit
Plan, regardless of whether such liability involves employees of
Seller, and regardless of when or how such liability arose. To
the extent that Buyer, any successors or assigns thereof, and any
employees, officers, directors, agents, independent contractors
and other persons affiliated with Buyer (the "Indemnitees") incur
any liability whatsoever with respect to any Controlled Group
Employee Benefit Plan from and after the Closing (whether such
liability be liability imposed under ERISA, the Code, or
otherwise), Seller shall indemnify each such Indemnitee for all
such Losses (as hereafter defined in Section 11.01) which result,
and shall take any action reasonably requested by Buyer to
prevent the imposition of any such liability. Notwithstanding
any provision of this Agreement to the contrary, the
indemnification of the preceding sentence shall survive the
Closing and shall remain in effect for the time period by which
Buyer may assert any claim for a Loss against Seller as provided
in Section 11.02(b) hereof. Additionally, Seller agrees not to
assert that Buyer is a successor employer of Seller or any entity
which, together with Seller, would constitute a single employer
under Section 414(b), (c), (m) or (o) of the Code. In particular,
Buyer shall not assume liability for any group health
continuation coverage or coverage rights under Section 4980B of
the Code or Part 6 of Title I of ERISA applicable to a group
health plan maintained by Seller (or any affiliate of Seller) at
any time prior to the Closing Date or which arises as a result of
Seller's (or such affiliate's) dissolution and/or termination of
its group health plan or plans, and if and to the extent that
Buyer is deemed by law or otherwise to be liable as a successor
employer for such group health continuation coverage purposes,
Seller shall indemnify Buyer for the full and complete costs,
fees and other liabilities which result (including professional
fees and expenses).
(b) With respect to current employees of Seller who
are hired by Buyer effective on the Closing Date, such employment
shall commence and be effective at 12:01 a.m., Eastern Daylight
Time on the Closing Date. Seller, in accordance with the
applicable workers' compensation laws, will pay any workers'
compensation claim arising out of a compensable accident which
occurred prior to 12:01 a.m. Eastern Daylight Time, on the
Closing Date. Buyer shall assume all liability for all such
claims arising on and after 12:01 a.m., Eastern Daylight Time, on
the Closing Date.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
Each of the obligations of Seller to be performed hereunder shall
be subject to the satisfaction (or waiver by Seller) at or prior to
the Closing Date of each of the following conditions:
8.01 Representations and Warranties True at Closing Date. Each
of Buyer's representations and warranties contained in this Agreement
shall be true and correct on and as of the Closing Date with the same
force and effect as though made on and as of such date; Buyer shall
have complied in all material respects with the covenants and
agreements set forth herein to be performed or complied with by it on
or before the Closing Date; and Buyer shall have delivered to Seller a
certificate dated the Closing Date and signed by its president to all
such effects, and confirming such other matters as may be reasonably
requested by Seller.
8.02 Litigation. No suit, investigation, action or other
proceeding shall be pending or overtly threatened against Seller or
Buyer before any court or governmental agency which has resulted in
the restraint or prohibition of Seller, or, could in the reasonable
opinion of counsel for Seller, result in the obtaining of material
damages or other relief from Seller, in connection with this Agreement
or the consummation of the transactions contemplated hereby.
8.03 Documents Satisfactory in Form and Substance. All
agreements, certificates, opinions and other documents delivered by
Buyer to Seller hereunder or in connection herewith shall be in form
and substance satisfactory to counsel for Seller, in the exercise of
such counsel's reasonable judgment.
8.04 Required Governmental Approvals. All governmental
authorizations, consents and approvals necessary for the valid
consummation of the transactions contemplated hereby shall have been
obtained and shall be in full force and effect. All applicable
governmental pre-acquisition filing, information furnishing and
waiting period requirements, including expiration of all applicable
waiting periods pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act ("H-S-R"), if applicable, shall have been met or such
compliance shall have been waived by the governmental authority having
authority to grant such waivers.
8.05 Letters of Credit. Buyer shall deliver at Closing letters
of credit in form and substance reasonably satisfactory to Seller as
security for Buyer's obligations under the Hold-Back Agreement.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to be performed hereunder shall be
subject to the satisfaction (or waiver by Buyer) on or before the
Closing Date of each of the following conditions:
9.01 Representations and Warranties True at Closing Date. Each
of the representations and warranties of Seller contained in this
Agreement shall be true and correct on and as of the Closing Date with
the same force and effect as though made on and as of such date;
Seller shall have performed and complied in all material respects with
the respective covenants and agreements set forth herein to be
performed or complied with by each of them on or before the Closing
Date; and Seller shall have delivered to Buyer a certificate signed on
behalf of Seller by its president to all such effects, and confirming
such other matters as may be reasonably requested by Buyer.
9.02 Assignment of Maintenance Contracts. Each of the
maintenance contracts for Seller's Fujitsu 9600 Model M telephone
equipment and DEC Alpha 8400 computer equipment shall have been
assigned to Buyer at Closing on terms reasonably acceptable to
Buyer.
9.03 Litigation. No suit, investigation, action or other
proceeding shall be pending or overtly threatened against Buyer or
Seller before any court or governmental agency, which has resulted in
the restraint or prohibition of any such party, or, in the reasonable
opinion of counsel for Buyer, could result in the obtaining of
material damages or other relief from any such party, in connection
with this Agreement or the consummation of the transactions
contemplated hereby.
9.04 Required Governmental Approvals. All governmental
authorizations, consents and approvals necessary for the valid
consummation of the transactions contemplated hereby shall have been
obtained and shall be in full force and effect. All applicable
governmental pre-acquisition filings, information furnishing and
waiting period requirements, including expiration of all applicable
waiting periods pursuant to H-S-R, if applicable, shall have been
met or such compliance shall have been waived by the governmental
authority having authority to grant such waivers.
9.05 Other Necessary Consents. Seller shall have obtained all
consents and approvals listed on Schedule 4.19. With respect to each
such consent or approval, Buyer shall have received written evidence,
satisfactory to it, that such consent or approval has been duly
and lawfully filed, given, obtained or taken and is effective, valid
and subsisting.
9.06 Opinions of Counsel to Parent and Seller. Buyer shall have
received from appropriate counsels to Seller and Parent opinions,
dated the Closing Date, in the form of Exhibits 9.06(a) and (b),
respectively.
9.07 Documents Satisfactory in Form and Substance. All
agreements, certificates, opinions and other documents delivered by
Parent and Seller to Buyer hereunder shall be in form and substance
satisfactory to counsel for Buyer, in the exercise of such counsel's
reasonable judgment.
9.08 Actions by Boards of Directors.
(a) The Board of Directors of Seller shall have approved
this Agreement, the Seller Non-Competition Agreement and each
other document, instrument and agreement to be executed by
Seller, and authorized the execution, delivery and performance by
Seller hereof and thereof and the transactions contemplated
hereby and thereby.
(b) The Board of Directors of Parent shall have approved the
Parent Non-Competition Agreement and each other document,
instrument and agreement to be executed and delivered by Parent,
and authorized the execution, delivery and performance by Parent
thereof and the transactions contemplated thereby.
(c) The Board of Directors of Buyer shall have approved this
Agreement, the respective Non-Competition Agreements and each
other document, instrument and agreement to be executed by Buyer,
and authorized the execution, delivery and performance by Buyer
hereof and thereof and the transactions contemplated hereby and
thereby.
9.09 Escrow Agreement. Buyer, Seller and The Bank of New York
shall each have executed and delivered to the other the Escrow
Agreement.
9.10 Hold-Back Agreement. Buyer and Seller shall each have
executed and delivered to the other the Hold-Back Agreement.
9.11 Non-Competition Agreements. Seller and Parent shall each
have executed and delivered to Buyer their respective Non-Competition
Agreements.
9.12 Non-Use Agreements. Seller and Parent shall each have
executed and delivered to Buyer their respective Non-Use Agreements.
9.13 Assignment of "FACTS" License. Seller shall have provided
to Buyer by June 30, 1997 a software license agreement duly issued by
Software Solutions, Inc. or its authorized reseller relating to the
"FACTS" operating system and application software permitting Buyer to
use such software designed by Software Solutions, Inc. for the full
operation of the Assets.
9.14 Form UCC Financing Statements. Seller shall deliver all
Form UCC-3 partial termination statements to be filed evidencing the
release of all liens, claims and security interests in and to the
Assets, other than Permitted Liens, and Form UCC-1 financing
statements, signed by Seller as debtor, evidencing Buyer's security
interest in the Escrow Amount.
9.15 Occupancy of Facilities. Buyer and Seller shall have
entered into an agreement dated of even date herewith (the "License
Agreement") substantially in the form of Exhibit 9.15 in which Seller
agrees to allow Buyer to full access to, and use and enjoyment of, the
Facilities without disturbance or interruption for a period beginning
on the Closing Date and expiring as set forth in the License
Agreement.
9.16 Officers' Certificate. Seller shall provide at Closing a
certificate, signed by the president and chief executive officer or
the secretary of the Seller, certifying that attached thereto are
true, correct and complete copies of (i) the Articles of Incorporation
and Bylaws of Seller, each as amended to the date of Closing, (ii) the
resolutions of the Board of Directors and sole shareholder of Seller
regarding the Agreement and the transactions contemplated thereby, and
(iii) the incumbency and signature of the officers of the Seller
authorized to execute the Agreement and each other document required
to be delivered by Seller thereby. Such officer shall further certify
that, within the twelve (12) month period immediately preceding the
Closing Date, Seller has sold inventory to its customers located in
each state of the United States, Puerto Rico and the District of
Columbia.
9.17 Security Agreement. Buyer and Seller shall have each
executed and delivered to the other the Security Agreement.
9.18 General Assignment. Seller shall execute and deliver that
certain General Assignment transferring and conveying the Assets.
ARTICLE X
POST-CLOSING ADJUSTMENTS
10.01 Taxes, Utilities, Assessments and Similar Adjustments.
(a) Seller shall be responsible for the payment of the
following:
(i) all federal, state and other taxes imposed upon
Seller's net income from the transactions contemplated
hereunder (including but not limited to federal taxes based
upon depreciation recapture and federal taxes based upon the
recapture of investment tax credit);
(ii) taxes payable by Seller on gross income from
the sale of the Assets to Buyer hereunder;
(iii) all sales and use taxes imposed on the
purchase, sale, use or transfer of property by Seller prior
to the Closing;
(iv) any penalties, interest, or similar charges
with respect to the foregoing taxes enumerated in this
Section; and
(v) all rent, utility, insurance and tax expenses
incurred in connection with the occupancy of the Facilities
by Buyer as permitted by Section 6.05.
ARTICLE XI
INDEMNIFICATION BY SELLER
11.01 Remedies. Except as otherwise limited by this Article
XI, Seller shall indemnify and reimburse Buyer for any and all claims,
actions, threatened or asserted claims or actions (including, but not
limited to, any attempt by any third party to restrict Buyer's use
or enjoyment of or access to each of the Facilities during the periods
described in Section 6.05), losses, liabilities, damages, costs
(including court costs) and expenses (including reasonable attorneys'
and accountants' fees) (hereinafter, collectively, a "Loss" or
"Losses"), suffered or incurred by Buyer, its successors or assigns,
and their respective officers, employees, consultants and agents
(Buyer, together with such other parties, collectively called
the "Protected Buyer Parties"), as a result of, or with respect to,
(i) any breach or inaccuracy of any representation or warranty of
Seller set forth in this Agreement (provided, any breach
of the representation and warranty set forth in Section 4.02 of this
Agreement shall not give rise to a claim of indemnity or reimbursement
by a Protected Buyer Party for a Loss unless the financial statements
or any portion thereof referenced in Section 4.02 are included in a
securities filing of Buyer's parent corporation made under the federal
or state securities laws and the Loss is related to or arises out of
such filing) or in any certificate or other document delivered
pursuant hereto or in connection herewith, whether such breach or
inaccuracy exists or is made on the date of this Agreement or as of
the Closing Date; (ii) any breach or inaccuracy of any representation
or warranty of Seller set forth in any certificates to be
provided to Buyer by Seller pursuant to Article IX hereof; (iii) any
breach of or noncompliance by Seller with any covenant or agreement of
Seller contained in this Agreement or any other agreement executed by
Seller in connection with the transactions contemplated
hereby; (iv) any and all liabilities and obligations of Seller, none
of which are assumed by Buyer, expressly or implicitly; and (v) any
and all claims, actions, threatened or asserted claims and actions, by
Seller's creditors (for the purposes of this Article XI, "creditors"
shall mean (1) all persons or entities who are known by Seller to
assert claims against Seller even though such claims are disputed as
well as (2) all general creditors, all secured creditors, all
lien creditors, and all representatives of creditors) against Buyer or
any of its assets and properties.
In the event Buyer shall become a defendant in any action or
proceeding relating to the Assets or any portion thereof seeking to
recover any transfer made to Buyer pursuant to Sections 510, 545, 547,
548, 549, 550 or 553 of the Bankruptcy Code, or any similar state,
local or federal law, then Seller shall hereby indemnify and hold
harmless the Protected Buyer Parties from and against any and all
Losses. In the event (i) Parent and Seller, or either of them, shall
file or directly or indirectly cause to be filed on behalf of Seller,
a voluntary petition in bankruptcy under any Chapter of the Bankruptcy
Code or any similar petition under any other reorganization,
composition, insolvency or debtor relief law, (ii) an involuntary
petition in bankruptcy under any Chapter of the Bankruptcy Code or any
similar petition under any other reorganization, composition,
insolvency or debtor relief law is filed against Seller or
Parent, (iii) the Assets, or any portion thereof, shall ever become
the subject of any bankruptcy or insolvency proceeding, or (iv) the
Assets, or any portion thereof, shall become the property of any
bankruptcy or insolvency estate, then (aa) Seller shall indemnify and
hold harmless the Protected Buyer Parties from and against any and all
Losses incurred by the Protected Buyer Parties in any such bankruptcy
or insolvency proceedings, and (bb) notwithstanding anything to the
contrary contained in the Agreement, all reasonable attorneys'
fees and expenses incurred by the Protected Buyer Parties in
connection with a Loss indemnifiable hereunder shall be deemed to be
costs of collection which Seller shall be required to pay.
11.02 Indemnity Claims.
(a) Survival. The representations and warranties of
Seller contained herein or in any certificate or other document
delivered pursuant hereto or in connection herewith shall not be
extinguished by the Closing but shall survive the Closing,
subject to the limitations set forth in Section 11.02(b) hereof
with respect to the time periods within which claims for
indemnity must be asserted, and the covenants and agreements of
Seller contained in this Agreement or in any other agreement
executed in connection with the transactions contemplated hereby
shall survive the Closing, subject to the limitations set forth
in Section 11.02(b) hereof. No investigation or other
examination of Seller by Buyer or its designees, agents or
representatives shall affect the term of survival of any
representation or warranty contained herein or in any certificate
or other document delivered pursuant hereto or in connection
herewith, or the term of the right of the Protected Buyer Parties
to seek indemnification hereunder.
(b) Time to Assert Claims. All claims for
indemnification hereunder shall be asserted no later than
eighteen (18) months after the Closing Date.
Nothing herein shall be deemed to prevent the Buyer from making a
claim for a Loss hereunder for itself or any other Protected Buyer
Party for likely or contingent claims or demands provided the notice
of Loss sets forth the specific basis for any such potential or
contingent claim or demand to the extent then feasible and the Buyer
has reasonable grounds to believe that such a claim or demand may
become actual.
11.03 Notice of Claim. Buyer shall notify Seller in writing
of any claim for indemnification, specifying in reasonable detail the
nature of the Loss, and, if known, the amount, or an estimate of the
amount, of the liability arising therefrom. Buyer shall provide
to Seller as promptly as practicable thereafter such information and
documentation as may be reasonably requested by Seller to support and
verify the claim asserted, so long as such disclosure would not
violate the attorney-client privilege of Buyer.
11.04 Defense. If the facts pertaining to a Loss arise out
of the claim of any third party, or if there is any claim against a
third party (other than a Protected Buyer Party) available by virtue
of the circumstances of the Loss, Seller may assume the defense or the
prosecution thereof by prompt written notice to Buyer and the affected
Protected Buyer Party within ten (10) days after the giving of notice
of such claim, including the employment of counsel or accountants, at
its cost and expense. Buyer and the affected Protected Buyer Party
shall also have the right to employ counsel separate from counsel
employed by Seller in any such action and to participate therein at
the expense of Seller unless there is an identity of interest between
Seller and the affected Protected Buyer Party, in which event the fees
and expenses of such counsel employed by Buyer and the affected
Protected Buyer Party shall be at the expense of the Buyer and the
affected Protected Buyer Party. Seller shall not be liable for
any settlement of any such claim effected without its prior written
consent, which shall not be unreasonably withheld; provided, that if
Seller does not assume the defense or prosecution of a claim as
provided above within ten (10) days after the giving of notice thereof
from any Buyer or Protected Buyer Party, Buyer and the affected
Protected Buyer Party may settle such claim without Seller's consent.
Seller shall not agree to a settlement of any claim (i) which provides
for any relief other than the payment of monetary damages or (ii)
which could have an adverse precedential impact or adverse effect on
the business or financial condition of any Protected Buyer Party,
without Buyer's and the affected Protected Buyer Party's prior written
consent. In the event there is an identity of interest among the
parties and whether or not Seller chooses to so defend or prosecute
such claim, all the parties hereto shall cooperate in the defense or
prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings,
hearings, trials and appeals, as may be reasonably requested in
connection therewith. Seller shall be subrogated to all rights and
remedies of Buyer or any Protected Buyer Party, except to the extent
they apply against Buyer or another Protected Buyer Party.
11.05 Limitations. Notwithstanding anything in this
Agreement to the contrary, Seller shall have no liability nor be
subject to any claim under this Agreement with respect to any
breach of or default under any representation, warranty, covenant or
agreement of Seller in this Agreement (each a "Buyer Claim") with
respect to any single Buyer Claim unless and until the aggregate
amount of such Buyer Claim plus any other Buyer Claims exceed the sum
of $100,000, whereupon the indemnity and/or reimbursement set forth
above shall apply only to Buyer's Claims or portions thereof which
exceed, in the aggregate, the sum of $100,000, and Seller shall not
have any liability for the first $100,000 of Buyer's Claims, or
portions thereof, in the aggregate; provided, however, such $100,000
threshold amount shall not apply either to any amounts owing by Seller
to Buyer (i) with respect to Section 6.05 of this Agreement and
the License Agreement referenced therein or (ii) with respect to any
sales and use taxes owing or allegedly owing by Seller or any of its
predecessors or acquired corporations, all of which shall be
indemnified from the first dollar.
ARTICLE XII
INDEMNIFICATION BY BUYER
12.01 Remedies. Except as otherwise limited by this Article
XII, Buyer shall indemnify and reimburse Seller for any and all
Losses, suffered or incurred by Seller, its successors or assigns, and
their respective officers, employees, consultants and agents (Seller,
together with such other parties, collectively called the "Protected
Seller Parties"), as a result of, or with respect to, (i) any breach
or inaccuracy of any representation or warranty of Buyer
set forth in this Agreement or of Buyer in any certificate or other
document delivered pursuant hereto or in connection herewith, whether
such breach or inaccuracy exists or is made on the date of this
Agreement or as of the Closing Date; (ii) any breach or inaccuracy of
any representation or warranty of Buyer set forth in any certificates
to be provided to Seller by Buyer pursuant to this Agreement; and
(iii) any breach of or noncompliance by Buyer with any covenant or
agreement of Buyer contained in this Agreement or any other agreement
executed by Buyer in connection with the transactions contemplated
hereby.
12.02 Indemnity Claims.
(a) Survival. The representations and warranties of
Buyer contained herein or in any certificate or other document
delivered pursuant hereto or in connection herewith shall not be
extinguished by the Closing but shall survive the Closing,
subject to the limitations set forth in Section 12.02(b) hereof
with respect to the time periods within which claims for
indemnity must be asserted, and the covenants and agreements of
Buyer contained in this Agreement or in any other agreement
executed in connection with the transactions contemplated hereby
shall survive the Closing, subject to the limitations set forth
in Section 12.02(b) hereof. No investigation or other
examination of Buyer or its designees, agents or representatives
shall affect the term of survival of any representation or
warranty contained herein or in any certificate or other document
delivered pursuant hereto or in connection herewith, or the term
of the right of the Protected Seller Parties to seek
indemnification hereunder.
(b) Time to Assert Claims. All claims for
indemnification hereunder shall be asserted no later than
eighteen (18) months after the Closing Date.
Nothing herein shall be deemed to prevent the Seller from making
a claim for a Loss hereunder for itself or any other Protected Seller
Party for likely or contingent claims or demands provided the notice
of Loss sets forth the specific basis for any such potential or
contingent claim or demand to the extent then feasible and the Seller
has reasonable grounds to believe that such a claim or demand may
become actual.
12.03 Notice of Claim. Seller shall notify Buyer in writing
of any claim for indemnification, specifying in reasonable detail the
nature of the Loss, and, if known, the amount, or an estimate of the
amount, of the liability arising therefrom. Seller shall provide to
Buyer as promptly as practicable thereafter such information and
documentation as may be reasonably requested by Buyer to support and
verify the claim asserted, so long as such disclosure would not
violate the attorney-client privilege of Seller.
12.04 Defense. If the facts pertaining to a Loss arise out
of the claim of any third party, or if there is any claim against a
third party (other than a Protected Seller Party) available by virtue
of the circumstances of the Loss, Buyer may assume the defense or the
prosecution thereof by prompt written notice to Seller and the
affected Protected Seller Party within ten (10) days after the giving
of notice of such claim, including the employment of counsel or
accountants, at its cost and expense. Seller and the affected
Protected Seller Party shall have the right to employ counsel separate
from counsel employed by Buyer in any such action and to participate
therein, but the fees and expenses of such counsel employed by Seller
and the affected Protected Seller Party shall be at their expense
unless there is no identity of interest between Seller and Buyer.
Buyer shall not be liable for any settlement of any such
claim effected without its prior written consent, which shall not be
unreasonably withheld; provided, that if Buyer does not assume the
defense or prosecution of a claim as provided above within ten (10)
days after the giving of notice thereof from any Seller or Protected
Seller Party, Seller and the affected Protected Seller Party may
settle such claim without Buyer's consent. Buyer shall not agree to a
settlement of any claim without Seller's and the affected Protected
Seller Party's prior written consent. In the event there is an
identity of interest among the parties and whether or not Buyer
chooses to so defend or prosecute such claim, all the parties hereto
shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and appeals, as
may be reasonably requested in connection therewith. Buyer shall be
subrogated to all rights and remedies of Seller or any Protected
Seller Party, except to the extent they apply against Seller or
another Protected Seller Party.
12.05 Limitations. Notwithstanding anything in this
Agreement to the contrary, Buyer shall have no liability nor be
subject to any claim under this Agreement with respect to any
breach of or default under any representation, warranty, covenant or
agreement of Buyer in this Agreement (each a "Seller Claim") with
respect to any single Seller Claim unless and until the aggregate
amount of such Seller Claim plus any other Seller Claims exceed the
sum of $20,000, whereupon the indemnity and/or reimbursement set forth
above shall apply only to Seller's Claims or portions thereof which
exceed, in the aggregate, the sum of $20,000, and Buyer shall not have
any liability for the first $20,000 of Seller's Claims, or portions
thereof, in the aggregate; provided, however, such $20,000 threshold
amount shall not apply either to any amounts owing by Buyer to Seller
(i) for the vendor contracts identified on Schedule 2.01(b) of this
Agreement, (ii) for the telephone and data lines used solely by
Buyer's employees and constituting the Assets at the Facilities or
(iii) amounts owing under that certain letter date May 30, 1997 from
Buyer to Seller regarding certain Seller employee base salary
and retention bonuses, all of which shall be indemnified from the
first dollar.
12.06 Customer Claims. Notwithstanding any other provision
herein to the contrary, Seller retains any and all rights and
obligations regarding the settlement or handling of any claims
("Customer Claims") relating to merchandise sold by Seller prior to
Closing. Seller shall not reimburse or indemnify Buyer, in any
manner, for any actions taken or costs incurred by Buyer, without the
consent of Seller, in connection with a Customer Claim.
ARTICLE XIII
MISCELLANEOUS
13.01 Bulk Sales Law. Buyer hereby waives compliance by
Seller with the provisions of the bulk sales law of any state, and
Seller covenants and agrees to indemnify and/or reimburse Buyer for
Losses pursuant to Article XI hereof incurred by Buyer as a result of
Seller's failure to comply with such bulk sales laws.
13.02 No Liens Created. This Agreement shall not be
construed to create any lien or encumbrance on any of the Assets, or
to create any rights in any third persons or to indicate
that Buyer is assuming any liabilities of Seller.
13.03 Entire Agreement. This Agreement (including the
Schedules and Exhibits hereto) constitutes the sole understanding of
the parties with respect to the subject matter hereof and supersedes
all prior understandings, agreements and acknowledgments, whether
verbal or in writing, between the parties; provided, however, that
this provision is not intended to abrogate any other written agreement
between the parties executed with or after this Agreement.
13.04 Amendment. No amendment, modification or alteration of
the terms or provisions of this Agreement shall be binding unless the
same shall be in writing and duly executed by each of the parties
hereto.
13.05 Parties Bound by Agreement; Successors and Assigns.
The terms, conditions and obligations of this Agreement shall inure to
the benefit of and be binding upon the parties hereto and the
respective successors and assigns thereof. Without the prior written
consent of Buyer, Seller may not assign its rights, duties or
obligations hereunder or any part thereof to any other person or
entity. Buyer may assign its rights and duties hereunder in whole or
in part (before or after the Closing) to one or more entities but if
it does so, it shall remain liable for all Buyer's obligations
hereunder.
13.06 Counterparts. This Agreement may be executed in
counterparts, each of which shall for all purposes be deemed to be an
original and all of which, when taken together, shall constitute the
same instrument.
13.07 Headings. The headings of the Sections and paragraphs
of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the
construction thereof.
13.08 Modification and Waiver. Any of the terms or
conditions of this Agreement may be waived in writing at any time by
the party which is entitled to the benefits thereof. No waiver of any
of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not
similar).
13.09 Expenses. Except as otherwise provided herein, Seller
and Buyer shall each pay all costs and expenses incurred by each of
them, or on their behalf respectively, in connection with this
Agreement and the transactions contemplated hereby, including fees and
expenses of their own financial consultants, accountants and counsel.
13.10 Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to any other party
hereto shall be in writing and delivered personally (including by
overnight courier or express mail service), by facsimile transmission,
or by U.S. registered or certified mail, postage or fees prepaid,
if to Seller to:
Globelle, Inc.
6100 West 110th Street
Minneapolis, Minnesota 55438
Facsimile: 612-996-5521
Attention: Kevin I. Dowd, President
with a copy to:
Holleb & Coff
55 East Monroe Street, Suite 4100
Chicago, Illinois 60603-5896
Facsimile: 312-807-3900
Attention: Allan S. Brilliant, Esq.
if to Buyer to:
SED International, Inc.
4916 N. Royal Atlanta Drive
Atlanta, Georgia 30085-5044
Facsimile: 770-938-2814
Attention: Ray D. Risner, President
with a copy to:
Long Aldridge Norman LLP
303 Peachtree Street, Suite 5300
Atlanta, Georgia 30308
Facsimile: 404-527-4198
Attention: Leonard A. Silverstein, Esq.
or at such other address for a party as shall be specified by like
notice to the other parties. Any notice which is delivered personally
or by overnight courier in the manner provided herein shall be deemed
to have been duly given to the party to whom it is directed upon
actual receipt by such party or the office of such party. Any notice
given by facsimile transmission shall be deemed to have been duly
given to the party to whom it is directed upon actual confirmed
receipt by such party or office of such party, provided such
transmission shall concurrently be addressed and mailed to such party
by U.S. certified or registered mail as hereinabove provided. Any
notice which is addressed and mailed in the manner herein
provided shall be conclusively presumed to have been duly given to the
party to which it is addressed at the close of business, local time of
the recipient, on the fourth business day after the day it is so
placed in the mail or, if earlier, the time of actual receipt.
13.11 Brokerage. Seller and Buyer do hereby expressly
warrant and represent, each to the other, that no broker, agent, or
finder has rendered services in connection with the transactions
contemplated under this Agreement, other than the services of Cleary
Gull retained by Buyer, and the services of Nightingale & Associates
retained by Seller. Seller hereby indemnifies and agrees to hold
harmless Buyer from and against any and all Losses arising or
resulting, or sustained or incurred by Buyer, by reason of any claim
by any broker, agent, finder, or other person or entity based upon any
arrangement or agreement made or alleged to have been made by Seller
or Parent in connection with the transactions contemplated
under this Agreement. Buyer does hereby indemnify and agree to hold
harmless Seller from and against any and all Losses arising or
resulting, or sustained or incurred by Seller, by reason of any claim
by any broker, agent, finder, or other person or entity based upon any
arrangement or agreement made or alleged to have been made by Buyer in
connection with the transaction contemplated under this Agreement.
13.12 Governing Law. This Agreement is executed by Buyer in,
and shall be construed in accordance with and governed by the laws of
the State of Georgia without giving effect to the principles of
conflicts of law thereof.
13.13 Public Announcements. No initial public announcement
shall be made by any person with regard to the Closing of the
transactions contemplated by this Agreement without the prior consent
of Seller and Buyer; provided that either party may make such
disclosure if advised by counsel that it is legally required to do so.
Seller and Buyer will discuss the initial public announcement or
disclosure concerning the Closing of the transactions contemplated by
this Agreement with the other party prior to making such announcement
or disclosure.
13.14 "Seller's Knowledge". References to the phrase "to the
knowledge of Seller" or similar language qualifying Seller's knowledge
shall mean the knowledge of Seller's officers and directors and other
persons named on Schedule 4.01(c) to this Agreement after reasonable
inquiry of those persons who assisted in the preparation of the
schedules to this Agreement.
13.15 Construction. This Agreement was the product of
negotiations between the parties and, therefore, the rule of contract
construction that an agreement shall be construed against the drafter
shall not be applied to this Agreement.
13.16 No Third-Party Beneficiaries. With the exception of
the parties to this Agreement, the Protected Buyer Parties and the
Protected Seller Parties, there shall exist no right of any person to
claim a beneficial interest in this Agreement or any rights occurring
by virtue of this Agreement.
13.17 "Including". Words of inclusion shall not be construed
as terms of limitation herein, so that references to "included"
matters shall be regarded as non-exclusive, non-characterizing
illustrations.
13.18 References. Whenever reference is made in this
Agreement to any Article, Section, Schedule or Exhibit, such reference
shall be deemed to apply to the specified Article or Section of this
Agreement or the specified Schedule or Exhibit to this Agreement.
[Signatures begin on following page]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date indicated
on the first page hereof.
BUYER:
SED INTERNATIONAL, INC.
By:
Name:
Title:
SELLER:
GLOBELLE, INC.
By:
Name:
Title:
