SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Filed pursuant to Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 30, 1994
INTELLIGENT ELECTRONICS, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 0-15991 23-2208404
(State or Other Jurisdiction Commission (I.R.S. Employer
of Incorporation or File Number Identification
Organization) Number)
411 Eagleview Boulevard
Exton, Pennsylvania 19341
(Address of Principal Executive Offices)
(610)458-5500
Telephone number, including area code, of agent for service
1 of 3 pages
Exhibit Index is on page 2
<PAGE>
Item 5. Other Events
------------
On November 1, 1994, Intelligent Electronics, Inc. (the "Company")
and The Future Now, Inc. ("TFN") executed a letter of intent setting forth
their mutual intentions with respect to the proposed acquisition by the
Company of certain of the assets of TFN and its subsidiaries. On December
30, 1994, the Company executed and delivered two Asset Purchase Agreements
(collectively, the "Asset Purchase Agreements") with TFN and certain wholly-
owned subsidiaries of TFN pursuant to which the Company, through two wholly-
owned subsidiaries (CS Computers of California, Inc., a California
corporation, and CS Computers, Inc., a Colorado corporation) acquired the
following branches of TFN: the Irvine, California branch, the San Francisco,
California branch, the New York, New York branch (which includes sites in New
York, New York, Melville, New York and Lawrenceville, New Jersey), the
Boston, Massachusetts branch, and the District of Columbia branch (which
includes sites in Timonium, Maryland and Fairfax, Virginia). The aggregate
price paid by the Company for the branches was approximately $34,161,000. In
addition, under the Asset Purchase Agreements, the Company will pay up to an
additional $6,000,000 for inventory at the branches pursuant to the
procedures relating to inventory selection contained in the Asset Purchase
Agreements. Copies of the Asset Purchase Agreements (exclusive of exhibits
thereto) are attached hereto as Exhibits A and B, respectively.
Concurrently with the closing under the Asset Purchase Agreements,
the Company and TFN executed and delivered a Management Agreement pursuant to
which TFN agreed to manage the acquired branches for the Company in exchange
for fixed compensation and compensation keyed to the profitability of the
branch operations. In addition, the Company will be required to pay TFN a
fee under certain conditions upon the sale of one or more branches and upon
a termination of the Management Agreement. A copy of the Management
Agreement is attached hereto as Exhibit C.
As of December 30, 1994, the Company beneficially owned an
aggregate of 2,344,026 shares of TFN's common stock representing 31% of TFN's
outstanding shares.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(c) Exhibits
--------
A Asset Purchase Agreement covering
non-California sites
B Asset Purchase Agreement covering
California sites
C Management Agreement
2 of 3 pages
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTELLIGENT ELECTRONICS, INC.
BY: /s/ STEPHANIE COHEN
-------------------------
Vice President, Secretary
and Treasurer
Dated: January 5, 1995
3 of 3 pages
Exhibit A
ASSET PURCHASE AGREEMENT
dated December 30, 1994
among
INTELLIGENT ELECTRONICS, INC.
THE FUTURE NOW, INC.
ENTRE COMPUTER CENTERS OF NEW YORK, INC.
THE FUTURE NOW OF MASSACHUSETTS, INC.
and
ENTRE COMPUTER CENTERS OF VIRGINIA, INC.
[Covering non-California Sites]
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE I - Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - Purchase and Sale of Assets. . . . . . . . . . . . . . . . 1
Section 2.1. Transfer of Assets; Assumption of
Assumed Liabilities. . . . . . . . . . . . . . . . . 1
Section 2.2. Management Agreement . . . . . . . . . . . . . . . . 2
ARTICLE III - Purchase Price. . . . . . . . . . . . . . . . . . . . . . 2
Section 3.1. Purchase Price . . . . . . . . . . . . . . . . . . . 2
Section 3.2. Nonassumed Liabilities . . . . . . . . . . . . . . . 3
ARTICLE IV - Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.1. The Closing Date . . . . . . . . . . . . . . . . . . 3
Section 4.2. Certificates, Instruments of Transfer,
Etc. . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE V - Representations and Warranties. . . . . . . . . . . . . . . 7
Section 5.1. Representations and Warranties of
Shareholder and Sellers. . . . . . . . . . . . . . . 7
Section 5.2. Representations and Warranties of Buyer. . . . . . . 20
ARTICLE VI - Conditions Precedent to Obligations
of Buyer, Shareholder and Sellers. . . . . . . . . . . . . 22
Section 6.1. Conditions Precedent to Obligation of
Buyer. . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.2. Conditions Precedent to Obligations of
Shareholder and Sellers. . . . . . . . . . . . . . . 26
ARTICLE VII - Documents to be Delivered on Closing Date . . . . . . . . 29
Section 7.1. Documents to be Delivered by Shareholder
and Sellers on Closing Date. . . . . . . . . . . . . 29
Section 7.2. Documents to be Delivered by Buyer on
Closing Date . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII - Further Covenants and Agreements
of Shareholder, Sellers and Buyer. . . . . . . . . . . . 31
Section 8.1. Further Covenants and Agreements of
Shareholders and Sellers . . . . . . . . . . . . . . 31
Section 8.2. Consents to Assignments; Permits . . . . . . . . . . 40
Section 8.3. Mutual Covenants . . . . . . . . . . . . . . . . . . 41
Section 8.4. Survival of Representations and
Warranties; Indemnities. . . . . . . . . . . . . . . 43
Section 8.5. Allocations of Purchase Price. . . . . . . . . . . . 47
Section 8.6. Inventory . . . . . . . . . . . . . . . . . . . . . 47
<PAGE>
ARTICLE IX - Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.1. Expenses . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.2. Termination. . . . . . . . . . . . . . . . . . . . . 49
Section 9.3. Benefit; Assignment. . . . . . . . . . . . . . . . . 50
Section 9.4. Governing Law; Bulk Sales Laws . . . . . . . . . . . 50
Section 9.5. Breach; Failure of Condition . . . . . . . . . . . . 50
Section 9.6. Notices. . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.7. Materiality; Exhibits. . . . . . . . . . . . . . . . 51
Section 9.8. Headings . . . . . . . . . . . . . . . . . . . . . . 52
Section 9.9. Counterparts . . . . . . . . . . . . . . . . . . . . 52
Section 9.10. Entire Agreement . . . . . . . . . . . . . . . . . . 52
Section 9.11. Waiver; Amendment; Modification. . . . . . . . . . . 52
Section 9.12. Severability . . . . . . . . . . . . . . . . . . . . 52
APPENDIX A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Exhibit A-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Exhibit A-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
<PAGE>
ASSET PURCHASE AGREEMENT dated December 30, 1994 (this
"Agreement"), by and among INTELLIGENT ELECTRONICS, INC., a Pennsylvania
corporation ("Buyer"), THE FUTURE NOW, INC., an Ohio corporation
("Shareholder"), ENTRE COMPUTER CENTERS OF NEW YORK, INC., a New York
corporation ("ENTRE New York"), THE FUTURE NOW OF MASSACHUSETTS, INC., a
Massachusetts corporation ("FNM"), and ENTRE COMPUTER CENTERS OF VIRGINIA,
INC., a Virginia corporation ("ENTRE Virginia") (ENTRE New York, FNM and
ENTRE Virginia are each referred to herein as "Seller" and collectively as
"Sellers"; and Sellers and Shareholder are sometimes collectively referred
to herein as "Seller Parties").
WHEREAS, Sellers wish to sell to Buyer and Buyer wishes to
purchase from Sellers, certain properties, rights and assets of Sellers,
and Buyer wishes to assume certain liabilities of Seller, on the terms and
conditions described herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
Definitions
-----------
For the purposes hereof, capitalized terms used herein shall have
the respective meanings assigned to them in Appendix A hereto or elsewhere
herein. References in this Agreement to articles, sections, paragraphs,
clauses and exhibits are to articles, sections, paragraphs, clauses and
exhibits in or to this Agreement unless otherwise indicated.
ARTICLE II
Purchase and Sale of Assets
---------------------------
Section 2.1. Transfer of Assets; Assumption of Assumed
Liabilities. Subject to the terms and conditions of this Agreement, on the
Closing Date: (a) Shareholder and Sellers shall, subject to Section 8.2,
sell, convey, assign, deliver and transfer to Buyer all of Shareholder's
and Sellers' rights, title and interest in, to and under (i) the Assigned
Agreements, (ii) the Receivables, (iii) the Purchased Inventory, (iv) the
Other Property and (v) all Qualified Documents not theretofore delivered to
Buyer, in the case of each of (i), (ii), (iii), (iv) and (v) as the same
may exist at the Closing Date, and (b) Buyer will undertake, assume and
agree to perform and otherwise pay, satisfy and discharge, in accordance
with their respective terms, the Assigned Agreements.
Section 2.2. Management Agreement. In the event that Buyer
exercises its right to assign this Agreement with respect to all of the
Branches to a third party, other than to one or more direct or indirect
subsidiaries of Buyer, prior to the Closing pursuant to Section 9.3 hereof
(a "Pre-Closing Assignment"), the Management Agreement shall not become
effective and execution and delivery of the Management Agreement shall
thereupon cease to be a condition to the obligations of the parties
hereunder to consummate the transactions contemplated hereby. In the event
of a Pre-Closing Assignment, the paragraphs contained in Exhibit A-3 hereto
shall be deemed to have automatically replaced in their entirety each of
the paragraphs contained in Section 8.1(b) hereof. In the event of a Pre-
Closing Assignment, Buyer shall pay Shareholder, within thirty (30) days of
the closing held by Seller Parties and the assignee pursuant to the Pre-
Closing Assignment, an amount equal to the greater of (i) $1,000,000 and
(ii) 50% of the Premium; provided that if any portion of the consideration
payable by the assignee to Buyer is not cash, Buyer shall determine in good
faith the fair market value of such non-cash consideration and pay
Shareholder on the basis of the cash equivalent; provided further that if
any portion of the consideration payable by the assignee to Buyer is in the
form of a promissory note, Buyer may remit to Shareholder the applicable
amounts as and when payments are made to Buyer pursuant to such promissory
note. No additional fee shall be payable by Buyer to Shareholder upon or
as the result of a Pre-Closing Assignment pursuant to Section 2.2 of the
California Purchase Agreement. In the event that the Closing occurs and a
Pre-Closing Assignment has not occurred, Buyer and Shareholder will execute
and deliver the Management Agreement at the Closing. As used in this
Section 2.2 and elsewhere in this Agreement, the term "subsidiary" shall
have the meaning assigned to it in Appendix A.
ARTICLE III
Purchase Price
--------------
Section 3.1. Purchase Price.
(a) In consideration of the sale and transfer of the
Purchased Assets and subject to the terms and conditions of this Agreement,
on the Closing Date, Buyer shall (i) pay the Purchase Price in an amount
equal to the Asset Price by wire transfer(s) as provided in paragraph (b)
below, and (ii) assume the Assumed Liabilities. Notwithstanding the
foregoing, Buyer may withhold $4,800,000 from its payment of the Purchase
Price until Buyer and Shareholder have agreed to the inventory that
constitutes Purchased Inventory pursuant to Section 8.6, whereupon Buyer
shall pay such withheld sum to Shareholder (subject to reduction as and to
the extent provided in Section 8.6).
(b) On or prior to the Closing Date, Shareholder shall
deliver to Buyer a list of those creditors of Seller Parties to which Buyer
shall pay, for the benefit of Seller Parties, the Purchase Price and
Shareholder and Sellers shall specify in such list the amount of the
Purchase Price that should be paid by Buyer to each such creditor.
Section 3.2. Nonassumed Liabilities. Buyer will not assume or
become liable to pay, perform, satisfy or discharge any obligation or
liability of Shareholder or Sellers, whether arising before, on or after
the Closing Date, other than the Assumed Liabilities, and Shareholder and
Sellers will jointly and severally remain obligated to pay, perform,
satisfy and discharge all such obligations and liabilities which do not
constitute Assumed Liabilities.
ARTICLE IV
Closing
-------
Section 4.1. The Closing Date. The purchase and sale provided
for in this Agreement (the "Closing") shall take place at the offices of
Buyer's counsel, on December 30, 1995, or such other time, date or place as
Sellers, Shareholder and Buyer may mutually agree (the "Closing Date").
Section 4.2. Certificates, Instruments of Transfer, Etc.
(a) Shareholder and each of Sellers agree that the sale and
transfer of the Purchased Assets shall be made by the bills of sale,
assignments and other instruments of transfer referred to in Section 7.1.
(b) Buyer, Shareholder and each of Sellers agree to use
reasonable efforts to minimize sales, use, transfer and similar transaction
Taxes, if any, payable in connection with the transactions contemplated by
this Agreement, provided that such efforts shall not expose any of such
parties to any additional cost or risk. Sellers and Shareholder, jointly
and severally, agree to pay one hundred percent (100%) of any such Taxes.
(c) (i) At the Closing, Shareholder and Sellers shall
transfer all of their right, title and interest in and to, and any
authority they may have over, the separate lock-box(es) established for
each Branch with PNC Bank Ohio, N.A. (the "Bank"), and shall give
instructions to the Bank that all collections on account of Receivables
shall be the sole property of Buyer until an aggregate of $23,000,000 (or
$18,400,000 if the closing under the California Purchase Agreement does not
occur) on account of Receivables (as defined in this Agreement) and
Receivables (as defined in the California Purchase Agreement) has been
collected. In connection with, and in furtherance of, such transfer and
the giving of such instructions, Shareholder and Sellers shall execute such
powers-of-attorney and give such additional authorizations as shall be
necessary to ensure that any checks mailed to the lock-boxes for deposit
may be immediately deposited therein for credit in accordance with the
Bank's standard arrangement for crediting deposits into said lock-boxes
while owned by Shareholder and Sellers. In order to further assure Buyer's
right to receive an aggregate of $23,000,000 (or $18,400,000 if the closing
under the California Purchase Agreement does not occur) of collections on
account of Receivables (as defined in this Agreement) and Receivables (as
defined in the California Purchase Agreement), Shareholder and Sellers will
obtain and deliver to Buyer, at or prior to the Closing, from any third
party to which any of them has granted a security interest in any
Receivables or which otherwise purports to hold a security interest in or
lien on any Receivables, an agreement releasing such security interest or
lien and agreeing that in the event any collections of Receivables are,
notwithstanding the foregoing, commingled with other funds of Shareholder
or Sellers, Buyer will have a prior right to all funds of Shareholder and
Sellers (whether then on hand or thereafter obtained) up to the amount of
collections on account of Receivables so commingled. In the event that
Shareholder and Sellers have remitted to Buyer less than $13,800,000 on
account of collection of Receivables on or prior to the ninetieth (90th)
day following the Closing Date (or, in the event that Buyer collects
Receivables pursuant to paragraph (ii) below, the amount collected by Buyer
on account of Receivables on or prior to such ninetieth (90th) day is less
than $13,800,000), Shareholder will pay to Buyer the difference in cash no
later than the fifth business day following such ninetieth (90th) day. In
the event that Shareholder and Seller have remitted to Buyer less than
$18,400,000 on account of collection of Receivables on or prior to the one
hundred and twentieth (120th) day following the Closing Date (or, in the
event that Buyer collects Receivables pursuant to paragraph (ii) below, the
amount collected by Buyer on account of Receivables on or prior to such one
hundred and twentieth (120th) day is less than $18,400,000), Shareholder
will pay to Buyer the difference in cash no later than the fifth business
day following such one hundred and twentieth (120th) day. Upon receipt by
Buyer of an aggregate of $23,000,000 (or $18,400,000 if the closing under
the California Purchase Agreement does not occur) of collections on account
of Receivables (as defined in this Agreement) and Receivables (as defined
in the California Purchase Agreement), Buyer shall: (i) make available to
Shareholder any returned products, the sale of which had given rise to
Receivables and (ii) pay to Shareholder, as and when additional amounts are
collected on account of Receivables, the amount of such collections. In
order to effectuate the foregoing with respect to the then uncollected
Receivables, Buyer shall instruct the Bank to pay over to Sellers amounts
deposited into the lock-boxes that constitute payment on account of (but
only on account of) such Receivables. At any time, Shareholder shall have
the right to pay Buyer an amount equal to the difference between
$23,000,000 (or $18,400,000 if the closing under the California Purchase
Agreement does not occur) and the aggregate amount of collections on
account of Receivables (as defined in this Agreement) and Receivables (as
defined in the California Purchase Agreement) which have theretofore been
remitted to Buyer, whereupon (as provided in the preceding sentence) Buyer
will assign over to Sellers (in accordance with their interests therein, as
specified by Shareholder) all of its right, title and interest in and to
the then uncollected Receivables. Until such time as $23,000,000 (or
$18,400,000 if the closing under the California Purchase Agreement does not
occur) of collections on account of Receivables (as defined in this
Agreement) and Receivables (as defined in the California Purchase
Agreement) have been remitted to Buyer, Shareholder and Buyer shall each be
entitled to receive from the Bank, on a daily basis, remittance advice from
the Bank with respect to the Receivables and, if available, an updated list
of Receivables detailing amounts collected on account thereof. References
in this Section 4.2(c) to "Receivables" shall mean Receivables outstanding
as of the Closing Date. The dollar amounts referenced in this Section
4.2(c) shall be proportionately reduced in the event of a reduction in the
Purchase Price pursuant to the proviso in Section 6.1(m). For example, if
the certificate delivered pursuant to Section 6.1(m) reflects outstanding
receivables on the Closing Date in an aggregate face amount (net of
reserves determined in accordance with generally accepted accounting
principles) of $16,400,000, and the Purchase Price and Asset Price are
reduced by $2,000,000, then references in this Section 4.2(c) to
$18,400,000 shall be changed to $16,400,000 and references in this Section
4.2(c) to $13,800,000 shall be changed to $12,300,000.
(ii) In the event that the Management Agreement is not
executed and delivered at Closing because of the occurrence of a Pre-
Closing Assignment or in the event that the Management Agreement terminates
for any reason after it has been executed and delivered, and Buyer elects
to collect the Receivables, Shareholder and Sellers will use their best
efforts to facilitate collection of the Receivables by Buyer, rather than
by Shareholder and Sellers. Without limiting the generality of the
foregoing, in order to facilitate the transition of collection
responsibility to Buyer while protecting Buyer's ownership interests in the
Receivables, Shareholder and Sellers agree that should they receive any
collections on account of Receivables, such collections shall be
immediately remitted to Buyer and until so remitted shall be deposited
solely in the applicable lock-box referenced in clause (i) above. Should
any such collections, notwithstanding the foregoing, be commingled with
other funds of Shareholder or Sellers, Buyer will, as provided in clause
(i) above, have a prior right to all funds of Shareholder and Sellers up to
the amount of collections on account of receivables so commingled. Buyer
will endeavor to collect the then uncollected Receivables using the same
degree of diligence and prudence which it would use in the collection of
its own accounts receivable, and will remit to Shareholder any amounts
collected on account of the Receivables after Buyer has received an
aggregate of $23,000,000 of collections on account of the Receivables.
(iii) Payments made by account obligors under
Receivables and under accounts receivable arising after the Closing Date
("Post-Closing Receivables") shall be applied against invoices in
accordance with the designation of the applicable account obligor. In the
event an account obligor under Receivables and under Post-Closing
Receivables has not designated the invoice against which its payment was
intended to be applied, each of Buyer and Shareholder shall have the right
to request the account obligor to designate the invoice against which its
payment was intended to be applied or provide evidence to the other as to
such intention.
(d) From and after the Closing Date, Buyer shall have the
sole right to compromise, settle and obtain the release of all claims and
liabilities related to the Assigned Agreements and, except as otherwise
specifically provided in the Management Agreement if the Management
Agreement is executed and delivered by Buyer and Shareholder, to open all
mail and packages and receive all communications and deliveries addressed
to Shareholder or any Seller at any of the Sites.
(e) For so long as the Management Agreement remains in
effect, Shareholder and Sellers will notify each of their current and
future secured and unsecured creditors holding claims aggregating in excess
of $10,000 that assets at the Sites are the property of Buyer and that
Shareholder and Sellers have no ownership interest in such assets. To
fulfill the foregoing obligation, Shareholder may arrange with a
fulfillment house to provide such notice to creditors on a quarterly basis,
and Buyer shall, upon receipt of appropriate invoices, pay the customary
charges of such fulfillment house in providing the foregoing notices to
creditors.
(f) At the Closing, Shareholder and Sellers will either
transfer to Buyer their rights in each of the depository accounts
established in connection with the day-to-day operations of the Business
(but Shareholder and Sellers may retain all monies then in such accounts)
or terminate such accounts.
ARTICLE V
Representations and Warranties
------------------------------
Section 5.1. Representations and Warranties of Shareholder and
Sellers. Shareholder and Sellers, jointly and severally, represent and
warrant to Buyer as follows (and, whenever a representation and warranty is
made to the knowledge of Shareholder and Sellers, such representation and
warranty shall be deemed to have been made based on both the actual
knowledge of Shareholder and Sellers and on the knowledge which Shareholder
and Sellers would have acquired had they conducted a reasonable inquiry of
the subject matter of the representation and warranty):
(a) Organization; Good Standing. Shareholder and each
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State or Commonwealth of its incorporation
and has the corporate power and authority to own or lease its properties
and to conduct its business as currently conducted. Shareholder and each
Seller is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the property owned, leased or operated by it
or the nature of the business conducted by it makes such qualification or
license necessary, except in such jurisdictions where the failure to be so
qualified or licensed would not have a material adverse effect on the
Business. Shareholder has informed Buyer that although ENTRE New York has
qualified to do business in New York, Shareholder has not qualified to do
business in such state, but such information shall not be construed to
enlarge the scope of the exception in the preceding sentence.
(b) Corporate Authorization. The execution, delivery and
performance by Shareholder and each Seller of this Agreement, the
Management Agreement, the Assumption Agreement, and the bills of sale,
assignments and other instruments of transfer referred to in this Agreement
to which it is a party have been authorized and approved by all requisite
corporate action on the part of Shareholder and each Seller, and no other
corporate approval or authorization is required on the part of Shareholder
or any Seller, any trustee, any party to the Borrowing Arrangements (except
as have been or will be obtained on or prior to the Closing Date) or any
other person by law or otherwise in order to make this Agreement, the
Management Agreement, the Assumption Agreement, and the bills of sale,
assignments and other instruments of transfer referred to in this Agreement
the valid and binding obligations of Shareholder and each Seller
enforceable in accordance with their respective terms (subject to the
receipt of required consents to assignments of the Assigned Agreements and
by any party to the Borrowing Arrangements), except as enforcement thereof
may be limited by bankruptcy, insolvency, or other similar laws affecting
the enforcement of creditors' rights in general or by general principles of
equity. No action or approval by, or consent or vote of, all or any
percentage of the holders of common stock of Shareholder is required to
authorize Shareholder to enter into this Agreement or to consummate the
transactions contemplated hereby. Shareholder has or will authorize each
Seller to enter this Agreement and to consummate the transactions
contemplated hereby. Shareholder is the owner, directly or indirectly, of
100% of the capital shares of each Seller free and clear of any Encumbrance
except under the Borrowing Arrangements.
(c) Purchased Assets; Business.
(1) Exhibit 5.1(c)(1) is an accurate list of each
Business Agreement (other than purchase orders and invoices open as of the
date hereof from customers and clients for the purchase of products or
services from the Business). True and complete copies of the Business
Agreements (including any side agreements, letters or other instruments
constituting amendments or modifications thereof), other than purchase
orders and invoices open as of the date hereof from customers and clients
for the purchase of products or services from the Business, have been
furnished to Buyer. Without limiting the generality of any other
representation and warranty made herein, those Business Agreements which
have not been identified on Exhibit 5.1(c)(1), whether considered
individually or in the aggregate, are on commercially reasonable terms and
have been entered into by Shareholder and Sellers in the ordinary course of
business, consistent with past practice, and those agreements which are
entered into by Shareholder or a Seller after the date hereof and prior to
Closing, pursuant to which products or services will be provided by or to
the Business, will, whether considered individually or in the aggregate, be
on commercially reasonable terms and conditions and will be entered into
only in the ordinary course of business, consistent with past practice.
Neither Shareholder nor any Seller has entered into any agreement with a
third party pursuant to which such third party provides services to more
than one Branch or pursuant to which such third party provides services at
a Branch and at any other non-Branch location owned or operated by a Seller
or Shareholder, except for any agreements that do not impose expense or
costs on any of the Branches. Nothing contained herein shall be construed
to limit the obligation of Seller Parties to make all payments under all
Assigned Agreements for services rendered or products provided to the
Business for the period preceding the Closing.
(2) Except as set forth on Exhibit 5.1(c)(2)(i),
neither Shareholder nor any Seller is in default (and, to Shareholder's and
Sellers' knowledge there is no other default and no event which, with
notice or lapse of time or both, would constitute a default) under any of
the Business Agreements. Each Business Agreement is in full force and
effect. Each Seller and Shareholder has the right to assign the Business
Agreements to which each is a party, subject to restrictions on assignment
contained therein and, with respect to those Business Agreements identified
on Exhibit 5.1(c)(1), specifically identified on Exhibit 5.1(c)(2)(ii).
Shareholders and Sellers, after a prudent investigation, have no reason to
believe that the restrictions on assignments contained in any of the
Business Agreements that are not identified on Exhibit 5.1(c)(1) are
reasonably likely to adversely impact operation of the Business following
acquisition of the Business by Buyer if consents to the assignments of such
Business Agreements to Buyer are not obtained. Except for the lien of
Taxes not yet due and Encumbrances set forth on Exhibit 5.1(c)(2)(iii),
which will be removed by Shareholder or Sellers on or prior to the Closing
Date, neither Shareholder nor any Seller has assigned, pledged or
encumbered its interest in the Business Agreements to which it is a party.
No obligation of Shareholder or any Seller under any Business Agreement is
in excess of the normal, ordinary and usual requirements of Shareholder or
such Seller or at an excessive price. The Business Agreements (considered
individually and in the aggregate) with respect to the Business at each
Site do not obligate Shareholder or any Seller to sell or deliver any
amount of product or services, which amount is material to such Business
individually, at a price which (in the aggregate with all other Business
Agreements with any single customer) does not cover the cost (including
labor, materials and production overhead) together with the customary
profit margin for such product or service in the light of the amount of
product or service provided and the type of customer involved. After
giving effect to the payment provided for in Section 7.1(j), neither
Shareholder nor any of Sellers will have received and retained, as of the
Closing Date, any payments for services to be rendered by Buyer to a third
party by virtue of Buyer's assumption of obligations under the Assigned
Agreements or payments relating to the period after the Closing Date in
excess of an aggregate of $50,000 (computed on a cumulative basis with any
payments received by a Seller Party under Assigned Agreements, as defined
in the California Purchase Agreement), and Buyer will become solely
entitled to receipt of such payments upon its assumption of Assumed
Liabilities. None of the Business Agreements contains any agreement,
understanding or relationship arising out of or relating to Shareholder's
or any Seller's status as a "small business concern", a "minority-owned
business concern" or other similar status. Upon and following the Closing,
each of the foregoing representations and warranties relating to Business
Agreements shall be automatically deemed to have been made by Shareholder
and Sellers with respect to the Assigned Agreements.
(3) Shareholder's and each Seller's interest in each
Site is a valid and subsisting leasehold interest in such Site pursuant to
the Lease thereof, and each such Lease affords the tenant thereunder the
legal right to occupy the Site leased thereby as of the date hereof and the
Closing Date in accordance with the terms thereof. The Leases are valid
and enforceable by Sellers and Shareholder. Sellers and Shareholder have
performed, and will continue to perform through Closing, all the
obligations required to be performed by them under the Leases and possess
and quietly enjoy the premises under the Leases, and Sellers and
Shareholder have no knowledge that such premises are subject to any
Encumbrances, easements, rights of way, building or use restrictions,
exceptions, reservations or limitations that interfere with or impair the
present and continued use thereof in the usual and normal conduct of the
Business. Neither Sellers nor Shareholder have received notice of
violation of any applicable zoning regulation, ordinance or other law,
order, regulation or requirement relating to the operations of such leased
properties, and neither any of Sellers nor Shareholder knows of any such
violation. Neither any of Sellers nor Shareholder has received notice of
any pending or threatened condemnation proceedings relating to any of the
properties that are the subject of the Leases and, so far as known to
Sellers or Shareholder, there are no such pending or threatened
proceedings. The structures, tangible properties and equipment owned,
operated or leased by Sellers or Shareholder (as lessor or as lessee) in
connection with the Business are used and useable by Sellers and
Shareholder in the present conduct of the Business and generate the
revenues set forth on the financial statements delivered to Buyer pursuant
to this Agreement.
(4) Shareholder and each Seller has good and
marketable title to the Purchased Assets owned or leased by it, free and
clear of all Encumbrances (other than any Encumbrances identified on
Exhibit 5.1(c)(4) all of which will be removed or terminated on or prior to
the Closing Date), subject to the rights of personal property lessors and
software licensors. In addition, at the Closing Date, all of the Purchased
Assets will be free and clear of all third party claims which do not
constitute Encumbrances other than any such third party claims
(collectively "TP Claims") which result from conduct of the Business in the
ordinary course, none of which, whether considered individually or in the
aggregate, will have a materially adverse effect on the Business if
resolved adversely to the Business. As of the date hereof, the face amount
of Receivables outstanding not more than 75 days from the earlier of the
shipment or the date of the invoice or other instrument giving rise
thereto, less applicable reserves determined in accordance with generally
accepted accounting principles, is not less than $18,400,000. As of the
Closing Date, the face amount of Receivables outstanding not more than 75
days from the earlier of the shipment or the date of the invoice or other
instrument giving rise thereto, less applicable reserves determined in
accordance with generally accepted accounting principles, will be not less
than $18,400,000. Each of the Receivables arose in the ordinary course of
the Business and constitutes a valid right to payment for goods sold and
leased or services rendered and creates a valid claim against the account
debtor with respect thereto. Shareholder and Sellers have no reason to
believe that at least $18,400,000 will not be collected on account of
Receivables outstanding on the Closing Date in accordance with the terms of
the invoices giving rise to such Receivables at the aggregate gross
recorded amounts thereof. Shareholder and Sellers have not provided any
extended or unusual terms with respect to any Receivables, which are
material with respect to the Business at any Site individually. There are
no defenses or rights to set-off available to any account debtor with
respect to any Receivable. Neither Shareholder nor any Seller has received
notice from account debtors with respect to Receivables that such account
debtors intend to return products that are the subject of a Receivable,
which in the aggregate with respect to the Business at any Site, exceed two
times the average monthly product returns at the Business at such Site
during calendar year 1994. Substantially all of the Furnishings are in
good working condition, ordinary wear and tear excepted.
(5) Exhibit 5.1(c)(5) sets forth the nature of the
operations at each Branch, lists the Inventory attributable to each Branch
as of December 16, 1994 and Receivables attributable to each Branch as of
November 30, 1994 and lists the Furnishings attributable to each Branch as
of November 30, 1994.
(6) Except as indicated on Exhibit 5.1(c)(6), the
Purchased Assets constitute all of the assets and business (including
rights under contracts and permits) of Shareholder and Sellers used by
Shareholder or Sellers in or necessary to conduct the Business of
Shareholder and each such Seller at each Site (subject to Section 8.2 and
other than any Inventory that will not constitute Purchased Inventory). To
the knowledge of Shareholder and Sellers, the aggregate fair market value
of the Furnishings is not less than $2,400,000. Buyer acknowledges that
neither Shareholder nor any Seller has received an appraisal of such value.
(7) Exhibit 5.1(c)(7) identifies the trade names under
which the Business at each Branch is conducted.
(8) Exhibit 5.1(c)(8) identifies the lock-box that has
been established for each Branch, and no other lock-box or similar
collection mechanism has been established in connection with the collection
of Receivables.
(d) Litigation. Except as set forth in Exhibit 5.1(d),
there is no litigation, action, suit, tax audit, proceeding or
investigation pending or, to Shareholder's or Sellers' knowledge,
threatened with respect to the Business of each Seller, any of the
Purchased Assets or any of the transactions contemplated hereby before or
by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, or any other entity
or person (including non-governmental entities and persons), which, if
adversely determined, could reasonably be expected to have a material
adverse impact upon the Purchased Assets taken as a whole or the conduct by
Buyer after the Closing Date of a business at the Sites substantially
similar to the Business of each Seller except as disclosed to Buyer in
writing. Neither Sellers nor Shareholder is in default with respect to any
order, writ, injunction or decree of any court or Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality which, if not cured, could reasonably be expected to have a
material adverse impact upon the Purchased Assets taken as a whole or the
conduct by Buyer after the Closing Date of a business at the Sites
substantially similar to the Business of each Seller.
(e) No Conflict. Except as set forth in Exhibit 5.1(e),
the execution, delivery and performance by Shareholder and each Seller of
this Agreement, the Management Agreement, the Assumption Agreement, and the
bills of sale, assignments and other instruments of transfer referred to in
this Agreement, compliance by Shareholder and each Seller with the
provisions of this Agreement and the consummation by Shareholder and each
Seller of the transactions contemplated hereby: (i) will not violate in
any material respect any provision of applicable law to which Shareholder
or any Seller is subject; (ii) will not conflict with any provision of the
Certificate of Incorporation or Code of Regulations or By-laws of
Shareholder or any Seller or conflict with or constitute a default (or, to
Shareholder's and Sellers' knowledge, are not events which, with notice or
lapse of time or both, would constitute a default) in any material respect
under, or result in the termination of, or accelerate the performance
required by any of the terms, conditions or provisions of any contract,
agreement or other instrument binding on Shareholder or Sellers, including
without limitation the Borrowing Arrangements; (iii) will not result in the
creation of any Encumbrance upon any of the Purchased Assets; (iv) do not
require the consent or approval of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, except for compliance with the requirements
of the HSR Act and any filings under state laws required in connection with
the conveyance of the vehicles; and (v) do not violate any order, writ,
injunction, decree, arbitral award, statute, rule or regulation applicable
to either Shareholder or any Seller, to any of the Purchased Assets or to
the Business, violation of which could reasonably be expected to have a
material adverse impact upon Buyer or the conduct by Buyer after the
Closing Date of a business at the Sites substantially similar to the
Business.
(f) Financial Statements; Books and Records; No Material
Adverse Change. Shareholder has delivered to Buyer copies of (i)
Shareholder's consolidated financial statements (including statements of
income, stockholders' equity and cash flows and a balance sheet) for
Shareholder for the fiscal years ended December 31, 1991, 1992 and 1993,
audited and certified by an independent certified public accountant and
(ii) the unaudited statements of profits and losses with respect to each
Site for the year ended December 31, 1993 and for the nine-month period
ended September 30, 1994. Such audited and unaudited financial statements
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except as
set forth in the notes thereto, and fairly present, in all material
respects, the financial condition of Shareholder as at said dates and for
the periods then ended. The unaudited statements are true and correct in
all material respects and fairly reflect the profits and losses and
business and operations of each Site as of September 30, 1994 and for the
nine months then ended. The books of account of Shareholder and Sellers
with respect to the Business fairly reflect in all material respects all
transactions of Shareholder and Sellers and other matters required to be
reflected therein consistent with the financial statements referred to
above. Exhibit 5.1(f)(i) sets forth a true and correct backlog report for
the Business attributable to each Branch as of December 3, 1994. Exhibit
5.1(f)(ii) sets forth a list of all deferred revenue and prepayments for
products or services received by Shareholder and Sellers on account of the
Business at each Branch as of October 31, 1994. Exhibit 5.1(f)(iii) sets
forth a true and correct operating expense register for each Branch for the
three-month period ended June 30, 1994 and for the three-month period ended
September 30, 1994. Between September 30, 1994 and the date hereof,
Shareholder and Sellers have not incurred expenses relating to the Business
of a kind or in an amount inconsistent with the kind and amount of expenses
reflected in the operating expense register set forth in Exhibit
5.1(f)(iii).
(g) Taxes. Each of Shareholder, each Seller, their
subsidiaries and affiliates, or an affiliated, combined or unitary group of
which any such corporation is or was a member, as the case may be
(individually an "Affiliate" of Shareholder or any Seller and collectively,
Shareholder's or any Seller's "Affiliates"), has, with respect to each Site
and, with respect to Shareholder and its consolidated subsidiaries, in all
material respects: (i) correctly prepared and timely filed all returns,
declarations, reports estimates, information returns and statements
("Returns") required to be filed or sent by or with respect to them in
respect of any Taxes; (ii) timely and properly paid all Taxes that are due
and payable except those on appeal or those that are being protested in
good faith; (iii) established on their books and records reserves that are
adequate for the payment of all Taxes not yet due and payable; and (iv)
complied in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and have timely and
properly withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid
over under all applicable laws. There are no liens for Taxes upon the
assets of Shareholder or any Seller or any of their Affiliates except liens
for Taxes not yet due. Neither Shareholder, any Seller nor any of their
Affiliates is a party to any agreement providing for the allocation,
sharing or indemnification of Taxes. Except as disclosed on Exhibit
5.1(g), neither Shareholder nor any of Sellers has any knowledge of any
current or potential federal, state or local audits with respect to Taxes
at any Site; provided, however, that such "knowledge" shall not be
construed to require Shareholder or Sellers to inquire of any taxing
authorities as to the existence of current or potential audits. Exhibit
5.1(g) also lists the dates of the last state and local audits with respect
to Taxes at each Site.
(h) No Brokers. Neither Shareholder nor any Seller has
made contact or had any dealings with or entered into, and will not enter
into, any agreement, arrangement or understanding with any broker, leasing
agent, finder or similar person or entity with respect to this Agreement
and the transactions contemplated hereby which will result in the
obligation of Buyer to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
(i) Environmental Compliance.
(i) Notwithstanding anything in this Agreement to the
contrary, all of Seller Parties' representations and warranties pertaining
to or relating to Hazardous Substances, Environmental Laws (as such terms
are defined below) and other environmental matters are contained solely and
exclusively in this Section 5.1(i) and are limited in all respects to the
Sites. Neither Shareholder nor any Seller has been notified that it is in
violation, or alleged to be in violation, of any judgment, decree, order,
law, license, rule or regulation pertaining to environmental matters,
including without limitation those arising under the Resource Conservation
and Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal
Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control
Act, or any state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter "Environmental
Laws"), which violation would have a material adverse effect on the
business, assets or financial condition of Shareholder or any Seller or the
Business.
(ii) Neither Shareholder nor any Seller has received
written notice from any third party, including without limitation any
federal, state or local governmental authority, (a) that Shareholder or any
Seller has been identified by the United States Environmental Protection
Agency ("EPA") as a potentially responsible party under CERCLA with respect
to a site listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B (1986); (b) that any hazardous waste, as defined by 42 U.S.C.
Section 6903(5), any hazardous substances, as defined by 42 U.S.C. Section
9601(14), any pollutant or contaminant, as defined by 42 U.S.C. Section
9601(33), and any toxic substances, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which either Shareholder or any Seller has generated, transported
or disposed of has been released at any site at which a federal, state or local
agency has conducted or has ordered that Shareholder or any Seller conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law or have named Shareholder or any Seller as a potentially
responsible party or are seeking contribution from Shareholder or any
Seller; or (c) that Shareholder or any Seller is or shall be named as a
defendant in or to any claim, action, cause of action, complaint, or legal
or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release of Hazardous
Substances ever in, on or from property of Seller Parties.
(iii) To the knowledge of Shareholder and each Seller,
to the extent such activities would have a material adverse effect on the
business, assets or financial condition of Shareholder or any Seller: (A)
no portion of the property of Shareholder or any Seller has been used by
Seller Parties for the handling, processing, storage or disposal of
Hazardous Substances except in accordance with applicable Environmental
Laws; and no underground tank or other underground storage receptacle for
Hazardous Substances is located on any portion of any of the Sites; (B) in
the course of any activities conducted by Shareholder or Sellers, no
Hazardous Substances have been generated or are being used on the property
except in accordance with applicable Environmental Laws; (C) there have
been no releases (i.e., any past or present releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Hazardous Substances on,
upon, into or from Seller Parties' property, which releases would have a
material adverse effect on the value of any of the property or, with
respect to any such releases from Seller Parties' property, adjacent
properties or the environment; and (D) any Hazardous Wastes, as defined by
42 U.S.C. Section 6903(5), if any, that have been generated by Seller Parties
on their property have been transported off site only by carriers having an
identification number issued by the EPA, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws, which transporters and facilities have
been and are, to the best of Shareholder's and each of Sellers' knowledge,
operating in material compliance with such permits and applicable
Environmental Laws.
(j) Insurance. Shareholder and Sellers maintain and have
in full force and effect the insurance policies covering the Purchased
Assets and the Business that are set forth on Exhibit 5.1(j). Copies of
the insurance policies covering the Purchased Assets and the Business have
been provided to Buyer.
(k) Intellectual Property; Confidentiality Agreements.
(1) Except for Intellectual Properties that are
proprietary to Buyer or that are identified on Exhibit 5.1(k)(1),
Shareholder and Sellers use no Intellectual Properties in the Business.
(2) Exhibit 5.1(k)(2)(i) contains a copy of the form
of confidentiality agreement which substantially all employees of Seller
Parties execute when they become employees.
(l) Client List; Product Suppliers. Exhibit 5.1(l)(i) sets
forth true, complete and accurate lists of the 20 largest customers or
clients (in terms of net revenues) and the five largest suppliers of
product with respect to each Branch during the 21 month period ended
December 15, 1994. Except as disclosed on Exhibit 5.1(l)(i), none of such
clients, customers or suppliers of Shareholder or any Seller, with respect
to any Branch, has provided notice to Shareholder or any Seller of its
intention to terminate its relationship with Shareholder or such Seller or
to substantially reduce the amount of business it provides to Shareholder
or such Seller. Except as disclosed on Exhibit 5.1(l)(i), neither
Shareholder nor any Seller has knowledge of any plan of any client,
customer or supplier to do so. In addition, except as disclosed on Exhibit
5.1(l)(ii), Shareholder and Sellers have no knowledge of any current
disputes with any customers or clients doing business with respect to the
Business at any Branch (and, for purposes of the foregoing provision,
"knowledge" shall be construed as actual knowledge) except for routine
disputes that have arisen in the ordinary course of business, none of
which, whether considered individually or in the aggregate with others, is
reasonably likely to have a material adverse effect on the Business.
Exhibit 5.1(l)(iii) sets forth true, correct and complete lists of each
customer or client of Shareholder and Sellers with respect to the Business
at each Branch who or which had aggregate purchases in the fiscal year
ended December 31, 1993 in excess of $100,000 or who or which had aggregate
purchases during the eleven-month period ended December 3, 1994 in excess
of $91,600 (individually, a "Significant Customer"). Exhibit 5.1(l)(iii)
also identifies the annual aggregate volume of purchases of each such
customer or client identified thereon in respect of each such year or
period.
(m) Absence of Certain Changes or Events. Since December
31, 1993, except as disclosed in Exhibits to this Agreement or in filings
made by Shareholder prior to the date hereof under the Securities and
Exchange Act of 1934, as amended, each of which filings is identified in
the response to Item 4 of the "Notification and Report Form for Certain
Mergers and Acquisitions (16 C.F.R. Part 803-Appendix)" dated November 18,
1994 filed by Shareholder with the Federal Trade Commission pursuant to the
HSR Act, there has not been any:
(i) change in the financial condition, assets,
liabilities, earnings or business of Sellers or Shareholder, with respect
to the Sites or the Business, except for changes which have been in the
ordinary course of business and which have not, individually or in the
aggregate, been materially adverse to Sellers or Shareholder with respect
to any Branch;
(ii) significant labor trouble, or any material
controversies or material unsettled grievances threatened between Sellers
or Shareholder, on the one hand, and any employee of any Seller or
Shareholder or a collective bargaining organization representing or seeking
to represent any such employee, on the other hand;
(iii) mortgage, pledge or subjection to any Encumbrance
of any of Shareholder's assets (relating to the Sites or the Business) or
Sellers' assets, except the lien of Taxes not yet due and payable;
(iv) sale, assignment or transfer of any assets of
Sellers or Shareholder that are material, singly or in the aggregate, to
the Business other than in the ordinary course;
(v) waiver of any rights of substantial value to
Shareholder (with respect to the Sites or the Business) or Sellers whether
or not in the ordinary course of business;
(vi) cancellation or termination by Shareholder (with
respect to the Sites or the Business) or Sellers of any material contract,
agreement or other instrument to which Shareholder or any of Sellers is or
was a party other than those listed on Exhibit 5.1(l)(i);
(vii) liability incurred by Shareholder (with respect to
the Sites or the Business) or any Seller except liabilities incurred in the
ordinary course of business;
(viii) capital expenditure or the incurring of any
liability therefor with respect to any aspect of the Business except as
reflected in the unaudited financial statements delivered to Buyer pursuant
to Section 5.1(f);
(ix) borrowing of money or guaranteeing of any
indebtedness of others by Shareholder (in respect of or relating to the
Sites or the Business) or any Seller;
(x) lending of any money or otherwise pledging the
credit of Shareholder (with respect to the Sites or the Business) or any
Seller;
(xi) failure to conduct the Business in the ordinary
course;
(xii) change in the method of accounting or accounting
practice of Shareholder (with respect to the Sites or the Business) or any
Seller;
(xiii) loss of services of any employee of any Seller or
Shareholder that is or are material, individually or in the aggregate, to
the conduct of the Business of a Branch;
(xiv) material cancellation by any supplier, customer or
contractor with respect to the Business;
(xv) extraordinary item of loss (as defined in Opinion
No. 30 of the Accounting Principles of Board of the American Institute of
Certified Public Accountants) with respect to or relating to the Sites or
the Business; or
(xvi) agreement by Sellers or Shareholders to do any of
the foregoing.
(n) Compliance with Laws. Sellers and Shareholder have
complied in all material respects with all applicable statutes,
regulations, orders, ordinances and other laws of the United States of
America, all state, local and foreign governments and other governmental
bodies and authorities, and agencies of any of the foregoing relating to
the Business to which they are subject and any undertakings of Sellers and
Shareholder to any of the foregoing. Sellers and Shareholder have not
received any notice to the effect that, or otherwise been advised that,
they are not in compliance with any of such statutes, regulations and
orders, ordinances, other laws or undertakings, and neither Sellers nor
Shareholder have any reason to anticipate that any presently existing
circumstances are likely to result in violations of any such regulations
which could reasonably be expected, in any one case or in the aggregate, to
cause a material loss to the business or otherwise have a material adverse
effect on the Business. To the best of Sellers' and Shareholder's
knowledge, there is not presently pending any proceeding, hearing or
investigation with respect to the adoption of amendments or modifications
to existing laws or ordinances, regulations or restrictions which, if
adopted, would reasonably be expected to materially adversely affect the
present Business.
(o) Transactions with Certain Persons. Except as disclosed
in Exhibit 5.1(o) hereto, no stockholder, officer, director or employee of
Shareholder or any Seller or member of his immediate family is presently a
party to any transaction with Shareholder or any Seller relating to the
Business that is not an arm's length market-priced transaction, including,
without limitation, any contract, agreement or other arrangement (i)
providing for the furnishing of services by, (ii) providing for the rental
of real or personal property from, or (iii) otherwise requiring payments to
(other than services as officers, directors or employees) any such person
or corporation, partnership, trust or other entity in which any such person
has a substantial interest as a shareholder, officer, director, trustee or
partner.
(p) Employees. Exhibit 5.1(p) is a true, correct and
complete list of all employees of Shareholder or any of the Sellers at each
of the Sites (prepared on a Site-by-Site basis) as of November 25, 1994.
(q) Disclosure. As of the date of this Agreement, the
representations of the Shareholder and Sellers in this Agreement or in any
schedule, exhibit, or other documents delivered or made available for
inspection pursuant hereto (taken together) do not include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements included therein or herein, in the light of
the circumstances in which they are made, not misleading.
Section 5.2. Representations and Warranties of Buyer. Buyer
represents and warrants to Shareholder and Sellers as follows (and,
whenever a representation and warranty is made to the knowledge of Buyer,
such representation and warranty shall be deemed to have been made based on
both actual knowledge of Buyer and on the knowledge which Buyer would have
acquired had it conducted a reasonable inquiry of the subject matter of the
representation and warranty):
(a) Organization; Good Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has corporate power and authority to own
or lease its properties and to conduct its business as currently conducted.
(b) Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement, the Management Agreement and the
Assumption Agreement have been authorized and approved by all requisite
corporate action, and no other corporate approval or authorization is
required on the part of Buyer or its shareholders in order to make this
Agreement, the Management Agreement and the Assumption Agreement the valid
and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms, except as enforcement thereof may be limited
by bankruptcy, insolvency, or other similar laws affecting the enforcement
of creditors' rights in general or by general principles of equity.
(c) No Conflict. The execution, delivery and performance
by Buyer of this Agreement, the Management Agreement and the Assumption
Agreement, compliance by Buyer with the provisions of this Agreement, and
the consummation by Buyer of the transactions contemplated hereby (i) will
not violate in any material respect any provision of applicable law to
which Buyer is subject, (ii) will not conflict with any provision of the
Certificate of Incorporation or By-laws of Buyer or conflict with or
constitute a default (or, to its knowledge, an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by any of the terms,
conditions or provisions of any contract, agreement or other instrument
binding on Buyer, which conflict, default, termination or acceleration
would have a material adverse impact upon Shareholder or Sellers, (iii)
except for compliance with the requirements of the HSR Act, does not
require the consent or approval of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, and (iv) does not violate any order, writ,
injunction, decree, arbitral award, statute, rule or regulation applicable
to Buyer, violation of which would have a material adverse impact upon
Shareholder or Sellers.
(d) No Brokers. Buyer has not made contact or had any
dealings with or entered into, and will not enter into, any agreement,
arrangement or understanding with any broker, leasing agent, finder or
similar person or entity with respect to this Agreement and the
transactions contemplated hereby which will result in the obligation of
Shareholder or Sellers to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
ARTICLE VI
Conditions Precedent to Obligations
of Buyer, Shareholder and Sellers
---------------------------------
Section 6.1. Conditions Precedent to Obligation of Buyer. The
obligation of Buyer to consummate the transaction contemplated by this
Agreement shall be subject to the fulfillment, or the waiver by Buyer, on
or prior to the Closing Date, of the following conditions:
(a) Compliance with Covenants. All the terms, covenants,
agreements and conditions of this Agreement and of the California Purchase
Agreement to be complied with and performed by Shareholder and Sellers on
or prior to the Closing Date (including without limitation all of their
obligations and agreements in Section 4.2(c) hereof) shall have been duly
complied with and performed in all material respects.
(b) Representations and Warranties. The representations
and warranties of Shareholder and Sellers contained in this Agreement shall
be true and correct as of the date made and, in addition, shall be deemed
to have been made again on and as of the Closing Date and shall then be
true and correct, and on the Closing Date, Shareholder and Sellers shall
have delivered to Buyer a certificate to such effect.
(c) Delivery of Closing Documents. Shareholder and Sellers
shall have delivered to Buyer on or prior to the Closing Date all the
documents required to be delivered pursuant to Section 7.1, and the final
terms and conditions of the Management Agreement shall be acceptable to
Buyer.
(d) Opinion of Counsel for Shareholders and Sellers. Buyer
shall have received an opinion of Norma Skoog, Esquire, general counsel of
Shareholder and Sellers, dated the Closing Date and addressed to Buyer, in
form and substance satisfactory to Buyer, to the effect that:
(i) Shareholder and each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its incorporation, and has the corporate power to carry on the
business of Shareholder and each Seller, as applicable, as it is being
conducted, except that Shareholder has not qualified to do business as a
foreign corporation in the State of New York, but the lack of such
qualification has no material adverse effect on the Business;
(ii) Shareholder and each Seller has full corporate
power and authority to enter into this Agreement, the Management Agreement,
the Assumption Agreement and the bills of sale, assignments and other
instruments of transfer referred to in this Agreement to which it is a
party and to consummate the transactions contemplated hereby, and all
corporate and other proceedings required to be taken by or on the part of
Shareholder and each Seller to authorize it to enter into this Agreement,
the Management Agreement, the Assumption Agreement and the bills of sale,
assignments and other instruments of transfer referred to in this Agreement
and to consummate the transactions contemplated hereby have been duly and
property taken;
(iii) This Agreement, the Management Agreement, the
Assumption Agreement, the bills of sale, assignments and other instruments
of transfer delivered by Shareholders and Sellers pursuant to Section 7.1
to which Shareholder and Sellers is or are a party have been duly executed
and delivered by Shareholder or Sellers, as appropriate, and each
constitutes a legal, valid and binding obligation of Shareholder and
Sellers, as the case may be, enforceable in accordance with its respective
terms;
(iv) The execution, delivery and performance by
Shareholder and Sellers of the agreements and instruments referred to in
paragraph (iii) above to which Shareholder and Sellers is or are a party,
(A) will not conflict with or violate any provision of any applicable law,
rule or regulation or any order, writ, injunction or decree known to such
counsel, (B) will not conflict with any provision of the Certificate of
Incorporation or Code of Regulations or By-laws of Shareholder or any
Seller and, to the knowledge of such counsel, will not conflict with or
result in the breach of any term or provision of, or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon
any of the Purchased Assets pursuant to, any indenture, mortgage, lease,
agreement or other instrument to which Shareholder or any Seller is a party
or by which it is bound (except as otherwise disclosed herein), (C) do not
require the consent or approval of all or any percentage of the
shareholders of Shareholder, and (D) do not require the consent or approval
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality
(except for compliance with the HSR Act); and
(v) To the knowledge of such counsel, there is no
action, suit or proceeding pending or threatened in any Federal, state,
municipal or other court, agency or other governmental body seeking to
restrain or prohibit the consummation of the transactions contemplated
hereby, except as described in such opinion;
and as to such other matters as Buyer may reasonably request. Such opinion
may be limited by its terms to the laws of the United States of America and
the State of Ohio and may be given subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally and be limited to the extent
that enforcement may be affected by the availability of equitable remedies
or the applicability of principles of equity. No opinion need be given
with respect to the bulk sales laws of any jurisdiction. Whenever the
foregoing opinion is qualified by "knowledge," such knowledge shall be
deemed to be both actual knowledge of such counsel and the knowledge which
such counsel would have acquired had such counsel conducted a reasonable
inquiry of the subject matter.
(e) Litigation. As of the Closing Date, there shall not be
in effect any judgment, order, injunction or decree of any court of
competent jurisdiction, the effect of which is to prohibit or restrain the
consummation of the transactions contemplated by this Agreement.
(f) No Material Adverse Effect. (i) There shall not have
been any material adverse change, and neither Shareholder nor any Seller
shall know of any fact, circumstance, event, occurrence, contingency or
condition which might reasonably be expected to result in any such change,
in the Purchased Assets or the Business from that set forth in the
unaudited financial statements for the nine-month period ended
September 30, 1994, except as and to the extent disclosed in the filings
made by Shareholder under the Securities Exchange Act of 1934, as amended,
which were filed prior to the date hereof and which are specifically
identified in the response to Item 4 of the filing identified in Section
5.1(m) hereof, and there shall not have been a material adverse change in
the business or operations of Shareholder or any Seller at any Site; (ii)
other than in the ordinary course of business and at prices and on terms
consistent with the past practice of Shareholder and Sellers, Shareholder
and Sellers shall have made no disposition of, or otherwise removed, any
portion of the Purchased Assets from the Sites; and (iii) the Business
shall have been operated in all material respects only in the ordinary
course of business and consistent with the past practice of Shareholder and
Sellers.
(g) No Change in Law. There shall not have been any
action, or any statute enacted, by any government or agency thereof which
would render the parties unable to consummate the transactions contemplated
herein or make the transactions contemplated herein illegal or prohibit or
restrict the consummation of the transactions contemplated herein. In the
case of failure of the condition set forth in this Section 6.1(g),
Shareholder and Sellers shall deliver to Buyer an opinion of counsel to
such effect, which opinion shall be reasonably acceptable to Buyer.
(h) Approvals and Consents. Consents to assignment of the
Leases and other Assigned Agreements listed on Exhibit 6.1(h) shall have
been obtained by Shareholder and/or Sellers. Each consent to assignment
with respect to each Lease and each other Assigned Agreement listed on
Exhibit 6.1(h) shall also state (i) that such Lease or other Assigned
Agreement has not been amended, modified or supplemented (except as
disclosed on Exhibit 5.1(c)(1)) and is in full force and effect on the
Closing Date, (ii) the date to which payments under such Lease or other
Assigned Agreement listed on Exhibit 6.1(h) has been made and an
acknowledgment that Buyer shall have no liability thereunder for matters
accrued or relating to periods of time on or prior to the Closing Date,
(iii) that there is no default or event which, with notice or the passing
of time or both, would constitute a default existing under such Lease or
other Assigned Agreement listed on Exhibit 6.1(h) and (iv) that there are
no setoffs, defenses or counterclaims against enforcement of the
obligations to be performed under such Lease or other Assigned Agreement in
favor of the party executing such consent.
(i) HSR Act. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
(j) Release of Borrowing Arrangements and Other Liens. The
lien of the Borrowing Arrangements and of any other Encumbrance on the
Purchased Assets shall have been released and executed instruments of
release and termination statements satisfactory to Buyer (including,
without limitation, the agreements pertaining to release of security
interests and related matters required by Section 4.2(c)) shall have been
delivered to Buyer.
(k) Purchase Orders and Invoices. All purchase orders and
invoices from customers and clients for the purchase of products or
services from the Business and that constitute Assigned Agreements shall be
reasonably satisfactory to Buyer; provided that the representations and
warranties of Seller Parties relating to Assigned Agreements shall in no
way be diminished by virtue of the satisfaction or waiver by Buyer of this
condition.
(l) Inventory Segregation. Shareholder shall have advised
Buyer in writing that the segregation of inventory pursuant to Section 8.6
will be completed by the opening of the first business day following the
Closing Date.
(m) Receivables Certification. The certificate delivered
by the Chairman of the Board or President of Shareholder pursuant to
Section 7.1(b) shall also certify that the aggregate face amount of
Receivables outstanding on the Closing Date not more than 75 days from the
earlier of the date of the shipment or the date of the invoice or other
instrument giving rise thereto, less applicable reserves determined in
accordance with generally accepted accounting principles, is not less than
$18,400,000; provided, however, that if such certificate reflects such
outstanding Receivables on the Closing Date in an aggregate face amount
(net of reserves determined in accordance with generally accepted
accounting principles) less than $18,400,000, Buyer shall have the right to
reduce the Purchase Price by a dollar amount equal to the dollar amount of
such shortfall.
(n) Lock-Box Agreements. Buyer shall have entered into
lock-box agreements with the Bank on terms and conditions acceptable to
Buyer with respect to the lock-boxes referred to in Section 4.2(c).
(o) Absence of Certain Actions; Receipt of Certain
Confirmations. No bankruptcy, reorganization, arrangement or insolvency
proceedings or other proceedings for relief under any bankruptcy or similar
law or laws for the relief of debtors shall have been instituted by or
against any of the Seller Parties, and no custodian, trustee or receiver
shall have been appointed for any of the Seller Parties.
Section 6.2. Conditions Precedent to Obligations of Shareholder
and Sellers. The obligations of Shareholder and Sellers to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment or waiver by Shareholder, on or prior to the Closing Date, of
the following conditions:
(a) Compliance With Covenants. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and
performed by Buyer on or prior to the Closing Date shall have been duly
complied with and performed in all material respects.
(b) Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall be true and
correct as of the date made and, in addition, shall be deemed to have been
made again on and as of the Closing Date and shall then be true and
correct, and on the Closing Date, Buyer shall have delivered to Shareholder
and Sellers a certificate to such effect.
(c) Delivery of Closing Documents. Buyer shall have
delivered to Shareholder and Sellers on or prior to the Closing Date all
the documents required to be delivered pursuant to Section 7.2, and the
final terms and conditions of the Management Agreement shall be acceptable
to Shareholder.
(d) Opinion of Counsel for Buyer. Shareholder shall have
received an opinion of counsel for Buyer dated the Closing Date and
addressed to Shareholder and Sellers, and in form and substance
satisfactory to Shareholder, to the effect that:
(i) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has corporate power to carry on the business of Buyer as
it is being conducted;
(ii) Buyer has full corporate power and authority to
enter into each of this Agreement, the Management Agreement and the
Assumption Agreement and to consummate the transactions contemplated
hereby, and all corporate and other proceedings required to be taken by or
on the part of Buyer to authorize it to enter into each of this Agreement,
the Management Agreement and the Assumption Agreement and to consummate the
transactions contemplated hereby have been duly and properly taken;
(iii) Each of this Agreement, the Management Agreement
and the Assumption Agreement has been duly executed and delivered by Buyer
and each constitutes a legal, valid and binding obligation of Buyer,
enforceable in accordance with its respective terms; and
(iv) The execution, delivery and performance by Buyer
of this Agreement, the Management Agreement and the Assumption Agreement,
(A) will not conflict with or violate any provision of any applicable law,
rule or regulation or any order, writ, injunction or decree known to such
counsel, (B) will not conflict with any provision of the Certificate of
Incorporation or By-laws of Buyer and, to the knowledge of such counsel,
will not conflict with or result in a breach of any term or provision of,
or constitute a default under, any indenture, mortgage, lease, agreement or
other instrument to which Buyer is a party or by which it is bound (except
as otherwise disclosed), (C) do not require the consent or approval of, or
registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality (except
for compliance with the HSR Act) and (D) do not require the approval or
consent of Buyer's shareholders;
(v) To the knowledge of such counsel, there is no
action, suit or proceeding pending or threatened in any Federal, state,
municipal or other court, agency or other governmental body seeking to
restrain or prohibit the consummation of the transactions contemplated
hereby, except as described in such opinion;
and as to such other matters as Shareholder and Sellers may reasonably
request. Such opinion may be limited by its terms to the laws of the
United States of American and the Commonwealth of Pennsylvania and may be
given subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforceability of
creditors' rights generally and be limited to the extent that enforcement
may be affected by the availability of equitable remedies or the
applicability of principles of equity. No opinion need be given with
respect to the bulk sales laws of any jurisdiction. Whenever the foregoing
opinion is qualified by "knowledge," such knowledge shall be deemed to be
both actual knowledge of such counsel and the knowledge such counsel would
have acquired had such counsel conducted a reasonable inquiry of the
subject matter.
(e) Consideration. The Purchase Price shall have been paid
to Sellers in accordance with Section 3.1.
(f) Litigation. As of the Closing Date, there shall not be
in effect any judgment, order, injunction or decree of any court of
competent jurisdiction, the effect of which is to prohibit or restrain the
consummation of the transactions contemplated by this Agreement.
(g) No Change in Law. There shall not have been any
action, or any statute enacted, by any government or agency thereof which
would render the parties unable to consummate the transactions contemplated
herein or make the transactions contemplated herein illegal or prohibit or
restrict the consummation of the transactions contemplated herein. In the
case of failure of the condition set forth in this Section 6.2(g), Buyer
shall deliver to Shareholder and Sellers an opinion of counsel to such
effect, which opinion shall be reasonably acceptable to Shareholder.
(h) HSR Act. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
ARTICLE VII
Documents to be Delivered on Closing Date
-----------------------------------------
Section 7.1. Documents to be Delivered by Shareholder and
Sellers on Closing Date. On the Closing Date, Shareholder and Sellers
shall deliver to Buyer, in form and substance reasonably satisfactory to
Buyer and its counsel:
(a) Conditions Precedent. The documents, agreements and
instruments referred to in Section 6.1 as conditions precedent to the
obligations of Buyer, and, if a Pre-Closing Assignment has not occurred, a
copy of the Management Agreement executed by Shareholder.
(b) Officer's Certificates. Certificates signed by the
Chairman of the Board or President of Shareholder and the Vice President
and Treasurer of each Seller to the effect set forth in Section 6.1(b) and
stating that the conditions set forth in Section 6.1 have been satisfied,
and that Shareholder and each Seller have complied with each of their
covenants and agreements contained in this Agreement.
(c) Bills of Sale. Bills of sale, assignments and other
instruments of transfer duly executed by the Sellers and Shareholder
conveying the Purchased Assets on the Closing Date to Buyer.
(d) Assumption Agreement. The Assumption Agreement duly
executed by Seller.
(e) Further Instruments. Such further instruments of
assignment, conveyance or transfer or other instruments covering the
Purchased Assets or any part thereof, and such further instruments with
respect to the transactions contemplated hereby, as Buyer may reasonably
request.
(f) Schedule of Receivables. A schedule of the Receivables
attributable to each Branch together with a statement of the aggregate
amount of the Sellers' reserve for doubtful accounts, as of the close of
business on the second business day prior to the Closing Date. Said
schedule of Receivables shall be attached to (or separately delivered in
connection with) the certificate of the Chairman of the Board or President
of Shareholder to be delivered pursuant to Section 6.1(m) and Section
7.1(b) and shall be updated to be as of the Closing Date within two
business days following the Closing Date.
(g) Satisfaction or Certain 1994 Tax Liabilities. Evidence
of payment of all calendar year 1994 unemployment, payroll, sales, use and
similar Tax liabilities of Shareholder and Sellers with respect to the
Business to the extent payable on or prior to the Closing Date and copies
of all documents filed in accordance with Section 8.1(h).
(h) Termination Statements and Financing Statements;
Notices to Creditors. UCC-3 termination statements terminating security
interests in the Purchased Assets and UCC-1 financing statements covering
the Receivables, Purchased Inventory and Other Property and identifying
Buyer as the secured party and Seller Parties as the debtors (such UCC-1
financing statements to be delivered and filed for notice purposes). In
furtherance of the agreement of Shareholder and Sellers in Section 4.2(e),
arrangements with a fulfillment house on terms reasonably satisfactory to
Buyer shall be in effect relating to notices to secured and unsecured
creditors holding claims aggregating in excess of $10,000 to the effect
that assets at the Sites are the property of Buyer and that Shareholder and
Sellers have no ownership interest in such assets.
(i) Termination of Certain Franchise Agreements.
Agreements pursuant to which Shareholder and Sellers (as applicable), as
franchisees, and RND, Inc., a wholly-owned subsidiary of Buyer, as
franchisor, terminate the franchise agreements (or applicable addenda to
franchise agreements) applicable to the Business and each Site; provided,
however, that the termination agreements shall not release Buyer,
Shareholder and Sellers from any unpaid or undischarged liabilities or
obligations they may have under such agreements as of the termination date
thereof; and provided further that the termination agreements shall not
restrict Shareholder from performing its obligations under, and in
accordance with, the Management Agreement.
(j) Adjustments Under Assigned Agreements. Payment in an
amount equal to the excess of (1) the aggregate amount of payments
Shareholder and any Sellers shall have received under the Assigned
Agreements (i) on account of services to be rendered by Buyer to any third
parties by virtue of Buyer's assumption of obligations under the Assigned
Agreements or (ii) relating to the period after the Closing Date over (2)
$50,000, together with a schedule, certified by the Chief Financial Officer
of Shareholder as to the components of such aggregate amount.
(k) Employees. A list of all employees of Shareholder or
any of the Sellers at each of the Sites (prepared on a Site-by-Site basis)
as of a date within ten business days prior to the Closing Date.
Section 7.2. Documents to be Delivered by Buyer on Closing Date.
On the Closing Date, Buyer shall deliver to Shareholder and Seller, in form
and substance reasonably satisfactory to Shareholder and Seller and their
counsel:
(a) Conditions Precedent. The payments, documents,
agreements and instruments referred to in Section 6.2 as conditions
precedent to the obligations of Shareholder and Sellers, and, if a Pre-
Closing Assignment has not occurred, a copy of the Management Agreement
executed by Buyer.
(b) Officer's Certificate. A certificate signed by the
President of Buyer to the effect set forth in Section 6.2(b) and stating
that the conditions set forth in Section 6.2 have been satisfied, and that
Buyer has complied with each of its covenants and agreements contained in
this Agreement.
(c) Assumption Agreement. The Assumption Agreement duly
executed by Buyer.
(d) Further Instruments. Such further instruments with
respect to the transactions contemplated hereby, including instruments of
assumption, as Shareholder may reasonably request.
ARTICLE VIII
Further Covenants and Agreements
of Shareholder, Sellers and Buyer
---------------------------------
Section 8.1. Further Covenants and Agreements of Shareholders
and Sellers.
(a) Conduct of Business Pending Closing. From and after
the date of this Agreement to and including the Closing Date, Shareholder
and each Seller:
(i) will maintain the Other Property and not remove
any Other Property from the Sites, except in the ordinary course of
business, and at prices and on terms consistent with past practices;
(ii) will perform, in all material respects, its
obligations under the Business Agreements and Assigned Agreements;
(iii) will conduct the Business only in the ordinary
course, consistent with past practice, and, without limiting the generality
of the foregoing, will not incur any expenses relating to the Business of a
kind or in an amount inconsistent with the kind and amount of expenses
reflected in the operating expense register contained in Exhibit
5.1(f)(iii);
(iv) will not do, or cause to be done, anything which
is represented or warranted not to have been done in this Agreement, except
as otherwise expressly permitted herein;
(v) will not (A) fail to comply in any material
respect with any laws, ordinances, regulations or other governmental
restrictions applicable in any respect to the business or any of the
Purchased Assets, (B) grant any powers of attorney to act for the Business
after the Closing Date, (C) mortgage or pledge or otherwise encumber any of
the Purchased Assets except as required under the Borrowing Arrangements,
(D) cancel or terminate any contract, agreement or other instrument
material to the Business, other than contracts, agreements and other
instruments that are not Purchased Assets unless Shareholder or Sellers are
otherwise obligated to maintain them in effect, (E) engage in or enter into
any material transaction with respect to the Business of any nature not
expressly provided for herein or (F) amend, modify or supplement any
Business Agreement or Assigned Agreement or grant any unusual or extended
terms with respect to any purchase order or invoice; and
(vi) will from and after the date hereof to and
including the Closing Date (A) take such action as may reasonably be
necessary to preserve the Purchased Assets, wherever located, (B) maintain
inventory of the kinds and in the quantities maintained in the ordinary
course of the Business, (C) maintain its books and records in a manner
consistent with past practices and promptly advise Buyer in writing of any
material adverse change in the condition (financial or otherwise) of the
Purchased Assets or the Business, (D) maintain in full force and effect the
insurance policies set forth in Exhibit 5.1(j) (or policies providing
substantially the same coverage, copies of which will be made available to
Buyer) and (E) use its best efforts to preserve the organization of the
Business intact and continue its operations at its present levels, and to
preserve the goodwill of Shareholder's and Sellers' suppliers, customers,
creditors and others having business relations with Shareholder and Sellers
in connection with the Business.
(b) Non-Competition; Non-Solicitation; Certain Other
Matters.
(i) From and after the Closing Date to and including
the first anniversary of the date of termination of the Management
Agreement with respect to any Branch: neither Shareholder, any Seller nor
any Affiliate or subsidiary of Shareholder or any Seller will (i) directly
or indirectly engage in any capacity in a business that is substantially
similar to the Business in the Business Area of such Branch or (ii) take
any action or omit to take any action which can reasonably be expected to
divert any business from any such Branch. In addition, at all times after
the Closing Date until the first anniversary of the date of termination of
the Management Agreement with respect to any Branch, neither Shareholder,
any Seller nor any Affiliate or subsidiary of Shareholder or any Seller
will conduct business within the Business Area of such Branch under any
trade names or trademarks currently or previously used by any of them in
the Business Area of such Branch. The foregoing restrictions shall not be
construed to restrict Shareholder from performing its obligations under,
and in accordance with, the Management Agreement. Until the later of
(i) the first anniversary of the termination Management Agreement in
respect of a Branch and (ii) the date on which Buyer has sold such Branch
to an unrelated third party, Buyer will have the right to operate each
Branch under the trade names currently owned and used by Seller Parties in
the operation of such Branch.
(ii) From and after the Closing Date to and including
the date on which Buyer transfers ownership of all of the Branches to an
unaffiliated third party, Shareholder will promptly notify Buyer (but only
if Buyer is Intelligent Electronics, Inc. or one or more direct or indirect
subsidiaries of Intelligent Electronics, Inc.), upon the request of Buyer,
of any agreement or transaction it or any of its subsidiaries has entered
into with a Significant Customer (or affiliate of a Significant Customer)
of any of the Branches then owned by Buyer and the nature and value of any
such agreement or transaction.
(iii) Shareholder hereby confirms that since November
25, 1994, it has not relocated any of the individuals identified on Exhibit
5.1(p) to a different location from the location specified thereon, and
agrees that from the date hereof until the date of termination of the
Management Agreement: (a) it will not relocate any of such individuals to
a different location without Buyer's prior written consent, and (b) it will
not permit or require any of such individuals to perform services for
Shareholder or Sellers or have responsibilities for Shareholder or Sellers
otherwise than in connection with the Management Agreement and operations
at the Sites. The confirmation and agreement of Shareholder contained in
this clause (iii) shall be applicable only to individuals who are located
at one of the Sites and (a) who have sales or customer support
responsibilities relating to the Business or (b) whose responsibilities
relate solely to the Business. In addition, Shareholder agrees that from
and after the date hereof until the date of termination of the Management
Agreement, it will not, without Buyer's prior written consent, permit or
require any individual (whether or not located at a Site) employed by
Shareholder to perform services for Shareholder or Sellers or have
responsibilities for Shareholder or Sellers inconsistent with such
individual's responsibilities as of November 1, 1994 if his or her
responsibilities as of November 1, 1994 were primarily sales-related or
customer-support-related in respect of any of the Branches and if any such
change in responsibilities would have an adverse effect on customer
relations of the Branches or sales efforts of, or for the benefit of, the
Branches.
(iv) All employees of Shareholder and Sellers as of the
Closing Date will remain employees of Shareholder and Sellers as of the
Closing Date, and for so long as such employees remain employed by
Shareholder or any Seller, Shareholder and Sellers will remain solely
responsible for compliance with, and will comply with, all federal, state
and local employment laws applicable to the employment of such employees.
Nothing in this Agreement, or in any other agreement between the parties,
shall be deemed to require Buyer to offer employment to any or all of the
employees of Shareholder or Sellers. Sellers and Shareholder shall be
solely responsible to provide any notices of layoff, termination or plant
closing under any applicable federal, state or local law, regulation or
ordinance including but not limited to the Worker Adjustment and Retraining
Notification Act.
(v) For the duration of the Management Agreement,
Buyer will not offer employment to any individual who is an employee of
Shareholder or Sellers at any Site covered by the Management Agreement,
unless: (a) such employee's employment with Shareholder or a Seller has
terminated, (b) Shareholder or a Seller consents to such offer, or (c)
either Shareholder or a Seller or Buyer has given notice of termination of
the Management Agreement with respect to such Site. Buyer will not be a
sponsor of any employee benefit plan provided by Shareholder or any Seller
to its employees, and will have no obligation to contribute to any such
employee benefit plan, directly or indirectly. In the event notice of
termination of the Management Agreement with respect to a Site is provided
by either Shareholder or Buyer and Buyer (or the purchaser of such Site
from Buyer) has expressed an intention to consider offering employment to
employees of Shareholder or a Seller at such Site (either directly or
through an affiliate), Shareholder shall:
(A) provide Buyer (or such purchaser) with a
listing of the name, location, title, date of employment, salary, and
bonuses of each such employee and use its best efforts to assist Buyer (or
such purchaser) in hiring each such employee and will release each such
employee from any non-competition agreement executed by such employee to
the extent such agreement would, by its terms, restrict such employee's
ability to work for Buyer (or such purchaser);
(B) provide Buyer (or such purchaser) with copies
of all employment agreements and collective bargaining agreements covering
any of such employees;
(C) disclose to Buyer (or such purchaser) any
pending or threatened charges, complaints, investigations, litigation,
grievances which are reasonably likely to have, either individually or in
the aggregate, a material adverse effect on the conduct of the operations
of the Business, or disputes involving any such employees or former
employees at the location, or involving any employee benefit plans covering
such employees or former employees;
(D) disclose to Buyer (or such purchaser) any
labor disputes, including but not limited to any union demands or efforts
to gain recognition as the bargaining representative of employees of
Shareholder and Sellers at any Site, any repeated or continued picketing at
any Site, or any repeated or continuing handbilling or other form of
concerted labor activity directed to Shareholder or any Seller or their
employees at any Site;
(E) as and when requested by Buyer (or such
purchaser), release each such employee from any confidentiality and non-
competition agreement between such employee and any Seller Parties or, at
Buyer's (or such purchaser's) option, assign such agreements to Buyer (but
only if such agreements are assignable); provided that Shareholder's
release of an employee from its obligations under a confidentiality
agreement for the benefit of a Buyer (or such purchaser) who is not
Intelligent Electronics, Inc. or one of its subsidiaries shall not extend
to any confidential information of Shareholder that a reasonable purchaser
of the Business in an arm's-length transaction would not expect the
employee to be able to utilize on its behalf following its acquisition of
the Business.
(F) disclose to Buyer (or such purchaser) whether
Shareholder or any Seller or any ERISA Affiliate has suffered a "plant
closing" or "mass layoff" within the meaning of the Worker Adjustment and
Retraining Notification Act;
(G) disclose to Buyer (or such purchaser) any
failure to comply in all material respects with any law, rule, or
regulation relating to the employment of such employees, including those
relating to wages, hours, terms and conditions of employment, collective
bargaining, and the payment of social security and unemployment taxes and
the forwarding of income taxes withheld from employees;
(H) provide Buyer (or such purchaser) with copies
of plan documents, plan descriptions, and employee communications, with
respect to all employee benefit plans covering any such employees during
the twelve-month period prior to such offer of employment;
(I) disclose to Buyer (or such purchaser) whether
any current or former employee is absent on a military leave of absence and
eligible for rehire under the terms of the Uniformed Services Employment
and Reemployment Rights Act of 1994 and whether any current or former
employee is absent on a period of disability or other leave of absence for
any other reason, which would, in any case, allow such employee either to
obtain restoration of any employee benefit plan contributions or accruals
or be reinstated as an employee;
(J) disclose to Buyer (or such purchaser) such
other employment-related information as Buyer may reasonably request,
subject to Shareholder's consent, which shall not be unreasonably withheld;
and
(K) until the first anniversary of the date of
termination of the Management Agreement, refrain from offering employment
to any person to whom Buyer (or such purchaser) or an affiliate of Buyer
(or such purchaser) offers employment unless (a) such employee's employment
with Buyer (or such purchaser) or an affiliate of Buyer (or such purchaser)
terminates or (b) Buyer (or such purchaser) consents to such offer.
For purposes of this Section, the term "employee benefit plan"
means any plan, program or arrangement providing nonqualified or qualified
deferred compensation, pension, profit sharing, stock option, stock
purchase, group insurance, accident, sickness, medical, dental, disability,
vacation pay, severance pay, incentive compensation, consulting agreements,
bonus or other employee benefits or fringe benefits, whether or not such
plans, programs and arrangements constitute "employee benefit plans" within
the meaning of Section 3(3) of ERISA, and whether or not such plans,
programs or arrangements are in the nature of formal or informal
understandings. As used in this Section, the term "ERISA" means the
Employment Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder or with respect thereto, and
the term "ERISA Affiliate" means any individual, corporation, or trade or
business that is a member of a controlled group of corporations or of a
trade or business under common control with Seller, as defined in Section
414(b), (c), (m), or (o) of ERISA.
(c) Certain Information; Access to Businesses. Shareholder
and Sellers will make available to Buyer prior to the Closing Date, upon
reasonable notice, any Qualified Documents and such other information as
Buyer shall reasonably request, provided that such information (i) relates
to the Business and (ii) is available to Shareholder or Sellers.
Shareholder and Sellers shall, from the date hereof up to and including the
Closing Date, permit Buyer and Buyer's attorneys, accountants, agents and
representatives full access to the books, records, business and assets of
Shareholder and Sellers (as such relate to the Business) at any reasonable
time and in any reasonable manner on reasonable advance notice and in a
manner that does not interrupt Shareholder's and Sellers' respective
businesses. Buyer shall have the right to meet with customers and
suppliers of Shareholder and Sellers with respect to the Sites and Sellers
and Shareholder will give Buyer full cooperation with respect thereto;
provided, however, that Shareholder and Sellers shall not be obligated to
cause such meetings to occur.
(d) Mutual Cooperation. The parties hereto will cooperate
with each other, and will use all reasonable efforts to cause the
fulfillment of the conditions to the parties' obligations hereunder and to
obtain as promptly as possible all consents, authorizations, orders or
approvals from each and every third party, whether private or governmental,
required in connection with the transactions contemplated by this
Agreement.
(e) Further Assurances. Sellers and Shareholder will
cooperate fully with Buyer in connection with the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, from
and after the Closing Date, from time to time, at Buyer's request and
without further consideration, Sellers and Shareholder will execute and
deliver such other instruments (including powers of attorney to the extent
required to collect the Receivables) and take such other action as Buyer
may reasonably request to more effectively put Buyer in possession and
operating control of all or any part of the Purchased Assets.
(f) No Mergers, Consolidations, Sales of Assets, Etc.
Until the earlier of the consummation of the transactions contemplated by
this Agreement, the termination date provided in Section 9.2 or, if all of
the conditions set forth in Section 6.1 have been satisfied or waived by
Buyer, January 15, 1995, neither Sellers nor Shareholder will, directly or
indirectly, through employees or agents: (i) enter into agreements
relating to the sale or exchange of the capital stock of Shareholder (other
than issuances of common stock pursuant to stock option plans of
Shareholder or the 401(k) plan of Shareholder in effect on the date hereof
or pursuant to conversion of convertible debt, whether or not outstanding
on the date hereof) or any Seller, the merger of Shareholder or any Seller
with, or the direct or indirect acquisition or disposition of all or any
material portion of the assets of Shareholder and its consolidated
subsidiaries (other than in the ordinary course of business consistent with
past practices), (ii) solicit any prospective purchaser for all or any part
of their properties, rights and assets relating to the Sites, other than in
the ordinary course of business consistent with their past practices, (iii)
hold discussions with any prospective purchaser for all or any part of
their properties, rights and assets relating to the Sites, other than in
the ordinary course of business consistent with their past practices, (iv)
provide any information to any prospective purchaser or an agent of any
such prospective purchaser which would facilitate purchase discussions
between Seller Parties and any such prospective purchaser or (v) take any
action which would reasonably be expected to materially and adversely
impact the consummation of the transactions contemplated hereby.
(g) Shareholder's Financial Statements. Shareholder will
deliver to Buyer, promptly after such statements become available, copies
of its statements of profits and losses for each Site for each of the
months ending after September 30, 1994 and prior to the Closing Date. Such
statements shall be prepared on a basis consistent with the unaudited
statements delivered pursuant to Section 5.1(f), and shall be true and
correct and shall fairly reflect the profits and losses and business
operations of each Site as at the date of each such statement. All
information in such monthly financial statements shall be separately stated
for each Site.
(h) Taxes. Seller Parties shall take all actions and shall
file all estimates or reports related to the state and local Tax
requirements of the States of Maryland, Massachusetts, New Jersey, New York
and Virginia to insure that Buyer (i) shall not be liable under the laws of
such States for the payment of any Taxes as a result of the consummation of
the transactions contemplated by this Agreement and (ii) to the extent
possible, will not be required to withhold any portion of the Purchase
Price. Seller Parties shall also pay all federal, state and local Taxes
relating to periods prior to the Closing, but payable after the Closing, as
or before such Taxes become due.
(i) Telephone and Facsimile Numbers. Shareholder and
Sellers shall have delivered to Buyer letters from Shareholder and Sellers
addressed to the telephone companies providing services to the Business
instructing such companies to transfer to Buyer the telephone and fax
numbers relating to the Business or shall have agreed in the Management
Agreement to effect the foregoing upon termination of the Management
Agreement.
(j) Availability of Documents for Audit. Until
December 31, 1997, Shareholder and Sellers agree to make available to
Buyer, upon written request of Buyer and at Buyer's expense, all financial
and accounting books, work papers and records and to make customary
representations and assurances to the auditors, in each case relating to
the Purchased Assets and the Sites necessary for the preparation of audited
financial statements with respect to the Sites for Buyer's 1991, 1992,
1993, 1994 and 1995 fiscal years by an independent certified public
accountant selected by Buyer.
(k) Access to Purchase Order and Invoice Records. Between
the date hereof and the Closing Date, Shareholder and Sellers will provide
Buyer and its accountants and representatives with reasonable access to all
purchase order invoice files and other records located at the Sites and in
Cincinnati, Ohio and facilities for the review and copying of such purchase
orders and invoices.
(l) Update of Backlog Report. On or prior to the second
business day following the Closing Date, Shareholder will provide Buyer
with a true and correct backlog report for the Business attributable to
each Branch as of the Closing Date and on or prior to the third business
day following the Closing Date, Shareholder will provide Buyer with a true
and correct backlog report as of the first business day after the Closing
Date.
Section 8.2. Consents to Assignments; Permits.
(a) Anything in this Agreement or the bills of sale
notwithstanding, but without limiting Buyer's rights under Section 6.1, to
the extent that any Assigned Agreement to be sold, assigned, transferred or
conveyed to Buyer, or any claim, right or benefit arising thereunder or
resulting therefrom (the "Interests"), is not capable of being sold,
assigned, transferred or conveyed without the approval, consent or waiver
of the other party thereto, or any third person (including a government or
governmental unit), or if such sale, assignment, transfer or conveyance or
attempted sale, assignment, transfer or conveyance would constitute a
breach thereof or a violation of any law, decree, order, regulation or
other governmental edict, except as expressly otherwise provided herein,
this Agreement shall not constitute a sale, assignment, transfer or
conveyance thereof, or an attempted sale, assignment, transfer or
conveyance thereof. After the Closing, until any Interest has been validly
and effectively sold, assigned and transferred to Buyer, Shareholder and
Sellers, as the case may be, shall hold such Interest in trust for the sole
benefit of Buyer and Buyer shall be entitled to receive all benefits under
such Interest and, on the condition that Buyer in fact realizes such
benefits, Buyer shall be responsible for the obligations under such
Interest to the extent relating to the benefits received.
Neither Shareholder nor Sellers are obligated to sell, assign,
transfer or convey to Buyer any of its rights and obligations in and to any
of the Interests without first obtaining all necessary approvals, consents
or waivers. Shareholder and Sellers shall use their best efforts, and
Buyer shall cooperate with Shareholder and Sellers, to obtain all necessary
approvals, consents or waivers, or to resolve any impracticalities of
transfer referred to in this Section necessary to sell, assign, transfer
and convey to Buyer each such Interest as soon as practicable; provided,
however, that neither Shareholder, Sellers nor Buyer shall be obligated to
pay any consideration therefor to the third party from whom such approval,
consent or waiver is requested or waive or compromise any rights against
such third party or commence any litigation or other proceeding against any
third party.
(b) Shareholder and Sellers shall cooperate with Buyer to
obtain as of the Closing Date or as promptly thereafter as practicable all
permits and licenses required to be obtained on the part of Buyer from any
governmental agency with respect to the operation by Buyer of the Purchased
Assets or the Business (including, without limitation, environmental and
other operating permits). Shareholder and Sellers will assign, transfer or
convey to Buyer at the Closing those permits and licenses which can be
assigned without having to obtain the consent of any third party with
respect thereto, and Shareholder and Sellers will cooperate with Buyer in
obtaining any third party consents necessary to the assignment or transfer
of any other permits and licenses which are not so assignable or
transferable. Subsequent to the Closing, to the extent permitted by law,
Shareholder and Sellers shall have the right to cancel any permits or
licenses or any bonds, guarantees or undertakings by Shareholder or Sellers
that do not constitute Purchased Assets or Assumed Liabilities.
(c) Seller Parties agree not to seek the return of any
deposit under a Lease until the earlier of (i) termination of such Lease
(together with a release by the landlord of Buyer from any liability under
the Lease for the period prior to the Closing) and (ii) the date on which
the landlords under each of the Leases has agreed that Buyer shall have no
liability thereunder for the period of time preceding the Closing.
Section 8.3. Mutual Covenants. Shareholder, Sellers and Buyer
each agree that:
(a) Best Efforts to Meet Closing Conditions. Shareholder,
Sellers and Buyer shall use their best efforts to cause the conditions
precedent set forth in Article VI to be satisfied; provided, however, that
neither Shareholder, Sellers nor Buyer shall be obligated to pay any
consideration therefor to any third party from whom an approval, consent or
waiver is requested or waive or compromise any rights against any third
party or commence any litigation or other proceeding against any third
party.
(b) Announcements; Confidentiality. Except as otherwise
required by law or order or decree of any court of competent jurisdiction
or governmental authority, (i) neither Shareholder, Sellers nor Buyer shall
issue any press releases or make any announcement to the public of the
transactions contemplated hereby other than jointly or as otherwise agreed
by them and (ii) Buyer, Shareholder and Sellers will keep confidential any
information not otherwise publicly available which is derived from access
to, or investigation or information furnished by, Buyer, Shareholder or
Sellers in connection with this Agreement, including the negotiations
conducted in connection herewith and all drafts hereof; provided that the
foregoing shall not restrict the ability of Buyer to provide to any third
party, in connection with a possible sale to such third party of one or
more of the Branches, such information as would be reasonably be expected
to be disclosed to a prudent buyer in an arm's-length transaction.
(c) HSR Filing. Buyer, Shareholder and Sellers have each
filed pursuant to the HSR Act and shall promptly and diligently provide any
additional information required or reasonably requested in order to comply
with the requirements of the HSR Act. All filing fees applicable to
compliance with the HSR Act in connection with this Agreement shall be
shared equally by Buyer and Seller Parties.
(d) Access to Records. Without limiting rights provided
elsewhere herein or in the Management Agreement, Shareholder and Sellers
will make available to Buyer and Buyer will make available to Shareholder
and Sellers at reasonable times and upon reasonable prior notice on and
after the Closing Date, reasonable access to all files, books, records and
customer data relating to the Business.
(e) Changes in Representations and Warranties. Between the
date of this Agreement and the Closing Date, neither Sellers nor
Shareholder shall permit Sellers to, nor shall Shareholder, enter into any
transaction, take any action, or by inaction, permit an event to occur,
which would result in any of the representations and warranties of Sellers
or Shareholder herein contained not being true and correct at and as of
(i) the time immediately following the occurrence of such transaction or
event or (ii) the Closing Date. Each of Sellers and Shareholder shall
promptly give written notice to Buyer upon becoming aware of (A) any fact
which, if known on the date hereof, would have been required to be set
forth or disclosed pursuant to this Agreement, and (B) any impending or
threatened breach in any material respect of any of the representations and
warranties contained in this Agreement and with respect to the latter shall
use all reasonable efforts to remedy same. Between the date of this
Agreement and the Closing Date, Buyer shall not enter into any transaction,
take any action, or by inaction, permit an event to occur, which would
result in any of the representations and warranties of Buyer herein
contained not being true and correct at and as of (i) the time immediately
following the occurrence of such transaction or event or (ii) the Closing
Date. Buyer shall promptly give written notice to Shareholder upon
becoming aware of (A) any fact which, if known on the date hereof, would
have been required to be set forth or disclosed pursuant to this Agreement,
and (B) any impending or threatened breach in any material respect of any
of the representations and warranties contained in this Agreement and with
respect to the latter shall use all reasonable efforts to remedy same.
Section 8.4. Survival of Representations and Warranties;
Indemnities. (a) All covenants and agreements of the parties made in this
Agreement or provided herein shall survive the Closing Date without limit,
unless otherwise specifically provided herein. All representations and
warranties of the parties made in this Agreement or as provided herein
shall survive the Closing Date for a period ending April 30, 1996,
notwithstanding any investigation at any time made by or on behalf of the
other party; provided, however, that the representations and warranties
relating to any Tax shall survive until six months after the applicable
statute of limitations (or any extension thereof) has expired (as the case
may be, the applicable "Survival Period"), and provided, further, that any
representation or warranty which is the subject of a claim or dispute
asserted prior to the expiration of the Survival Period shall survive with
respect to such claim or dispute until final resolution thereof.
(b) Shareholder and Sellers, jointly and severally, hereby
agree to indemnify and hold Buyer and its shareholders, subsidiaries,
officers, directors and other affiliates harmless from and against any and
all claims, liabilities, losses, damages or injuries, together with costs
and expenses, including reasonable legal fees, arising out of or resulting
from (i) any incorrectness in the representations and warranties made by
Shareholder or any Seller in this Agreement or the Management Agreement,
(ii) any breach in any material respect by Shareholder or any Seller,
unless waived, of any covenant or agreement of Shareholder or any Seller
contained in or arising out of this Agreement or the Management Agreement
and any claim by a third party that is found by a court of competent
jurisdiction to have resulted from the negligence or improper conduct of
Shareholder under the Management Agreement, (iii) any liabilities or
obligations of or relating to the Business, the Purchased Assets,
Shareholder or any Seller that do not constitute Assumed Liabilities
(including, without limitation, liabilities or obligations relating to
environmental matters, Taxes and TP Claims (as defined in Section 5.1(c)(4)
hereof)), (iv) any failure by Buyer, Shareholder or Sellers to comply with
the bulk sales laws (including any tax bulk sales laws) of any
jurisdiction, (v) any and all actions, suits, proceedings, claims, demands
and assessments relating to the Business, the Purchased Assets, Shareholder
or any Seller that relate to actions or events on or prior to the Closing
Date and (vi) any and all actions, suits, proceedings, claims, demands,
assessments and judgments incidental to the foregoing or the enforcement of
such indemnification.
In addition to the foregoing provisions of this Section 8.4(b)
and without limiting the generality of such provisions, each of Shareholder
and Sellers, jointly and severally, agrees to fully indemnify and hold
harmless Buyer, its shareholders, subsidiaries, officers, directors and
other affiliates against and in respect of and, on demand, will reimburse
Buyer, its shareholders, subsidiaries, officers, directors and other
affiliates for: (a) any and all liability whatsoever, and however imposed
(including any claim asserted against or deficiency assessed against or
collected from or paid by Buyer, Shareholder or any Seller or any
affiliates thereof), in respect of any Taxes of Sellers (or any
predecessors of Sellers) or Shareholder for any and all periods through the
period ending on the Closing Date, without regard to whether or not the
existence of such liability would constitute a breach of a representation
or warranty made by Shareholder and Sellers hereunder, and (b) any and all
liabilities of Shareholder or Sellers existing on, or arising under or
relating to activities or transactions of Shareholder or Sellers other than
the Assumed Liabilities.
(c) Buyer hereby agrees to indemnify and hold Shareholder
and Sellers, their respective shareholders and their respective officers,
directors and other affiliates harmless from and against any and all
claims, liabilities, losses, damages or injuries, together with costs and
expenses, including reasonable legal fees, arising out of or resulting from
(i) any incorrectness in the representations and warranties made by Buyer
in this Agreement or the Management Agreement, (ii) any breach in any
material respect by Buyer, unless waived, of any covenant or agreement of
Buyer contained in this Agreement or the Management Agreement and any claim
by a third party that is found by a court of competent jurisdiction to have
resulted from the negligence or improper conduct of Buyer under the
Management Agreement and (iii) the business conducted by Buyer at the
Sites, or otherwise in connection with the Purchased Assets after the
Closing Date, other than matters for which Shareholder and Sellers have
agreed to indemnify and hold harmless Buyer and its shareholders,
subsidiaries, officers, directors and other affiliates under Section 8.4(b)
and (iv) any and all actions, suits, proceedings, claims, demands,
assessments and judgements incidental to the foregoing or the enforcement
of such indemnification.
(d) Each party shall retain its own counsel and defend
itself, subject to being reimbursed by the Indemnifying Party (as defined
below) for reasonable attorneys' fees and expenses pursuant to this Section
8.4. Promptly after the receipt by any party hereto of notice of any
claim, action, suit or proceeding of any third party which is subject to
indemnification hereunder, such party (the "Indemnified Party") shall give
written notice of such claim to the party obligated to provide
indemnification hereunder (the "Indemnifying Party") as promptly as
practicable after receipt of notice thereof, stating the nature and basis
of such claim and the amount thereof, to the extent known; provided,
however, that failure to give such notice shall not affect the right to
indemnity hereunder except to the extent that the Indemnifying Party is
actually prejudiced by such failure. The Indemnifying Party shall be
entitled to participate in the defense or settlement of such matter and the
parties agree to cooperate in any such defense or settlement and to give
each other full access to all information relevant thereto. The
Indemnifying Party shall not be obligated to indemnify the Indemnified
Party hereunder for any settlement entered into without the Indemnifying
Party's prior written consent, which consent shall not be unreasonably
withheld. If the Indemnified Party does not assume the defense of any such
claim or litigation contemplated hereby, the Indemnifying Party may defend
against such claim or litigation in such manner as it may deem appropriate,
including settling such claim or litigation, after giving reasonable notice
of the same to the Indemnified Party (which reasonable notice shall not be
less than 5 business days) on such terms as the Indemnifying Party may
reasonably deem appropriate; provided, however, that the Indemnifying Party
may not settle any such claim or litigation other than by payment of
damages without the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld. With respect to any issue
involved in any such claim, as to which the Indemnifying Party shall have
acknowledged in writing the obligation to indemnify the Indemnified Party
hereunder, the Indemnifying Party shall have the sole right to defend,
settle or otherwise dispose of such claim, on such terms as the
Indemnifying Party, in its sole discretion, shall deem appropriate;
provided that such terms do not result in any expense to the Indemnified
Party or impair Buyer's right to use the Purchased Assets or operate the
Business.
(e) Remedies. Nothing herein shall preclude the assertion
by Buyer, Sellers or Shareholder, as applicable, of any rights or remedies
available to them at law or equity (including, but not limited to, any
right of set-off) in respect of the foregoing agreements of indemnity. The
aggregate liability of Shareholder and Sellers to indemnify Buyer and its
shareholders, subsidiaries, officers, directors and other affiliates under
Section 8.4(b) of this Agreement and Section 8.4(b) of the California
Purchase Agreement shall not exceed $9,500,000; provided, however, that the
foregoing dollar limitation shall be inapplicable to: (1) obligations of
Shareholder and Sellers arising under clause (iv) of Section 8.4(b) of this
Agreement and of Section 8.4(b) of the California Purchase Agreement and,
as applicable to such clause, clause (vi) of said Sections; (2) obligations
of Shareholder and Sellers arising under Sections 4.2(b) and 4.2(c) of this
Agreement and of the California Purchase Agreement; (3) obligations of
Shareholders and Sellers arising under clauses (i) and (ii) of, and the
second paragraph of, Section 8.4(b) of this Agreement and of the California
Purchase Agreement to the extent such clauses and/or paragraph relate to
inaccurate representations and warranties, breaches of covenants and
agreements or obligations relating to Taxes or breaches of covenants or
agreements contained in the Management Agreement or indemnifiable claims by
third parties that have been found by a court of competent jurisdiction to
have resulted from the negligence or improper conduct of Shareholder under
the Management Agreement and, as applicable to such clauses, clause (vi) of
said Section 8.4(b); (4) liabilities (other than Assumed Liabilities)
arising under contracts and agreements entered into by any Seller Party and
relating to the period of time prior to the Closing Date and any other
liabilities, including TP Claims, actually known to a Seller Party and
relating to the period of time prior to the Closing Date and, as applicable
to such liabilities, clause (vi) of Section 8.4(b) of this Agreement and of
the California Purchase Agreement; and (5) liabilities relating to the
period of time prior to the Closing Date to which Buyer may be subjected by
virtue of application of the doctrine generally known as the "fraudulent
conveyance doctrine" and, as applicable to such liabilities, clause (vi) of
Section 8.4(b) of this Agreement and the California Purchase Agreement; and
no amounts paid or discharged by or on behalf of Shareholder or any Seller
under any of such clauses or agreements shall be counted against the
foregoing dollar limitation. The aggregate liability of Buyer to indemnify
Shareholder and Sellers and their respective shareholders, officers,
directors and other affiliates under Section 8.4(c) of this Agreement and
Section 8.4(c) of the California Purchase Agreement shall not exceed
$8,500,000; provided, however, that the foregoing dollar limitation shall
be inapplicable to: (1) the obligations of Buyer under clause (iii) of
Section 8.4(c) of this Agreement and Section 8.4(c) of the California
Purchase Agreement (including, without limitation, any taxes attributable
exclusively to the operations of the Business after the Closing Date) and,
as applicable to such clauses, clause (iv) of said Section; (2) the
obligations of Buyer attributable to breaches of covenants and agreements
contained in the Management Agreement or indemnifiable claims by third
parties that have been found by a court of competent jurisdiction to have
resulted from the negligence or improper conduct of Buyer under the
Management Agreement and, as applicable to such obligations, clause (iv) of
Section 8.4(c); and (3) the payment obligation of Buyer arising under
Section 4.2(c) of this Agreement and of the California Purchase Agreement,
and no amounts paid or discharged by or on behalf of Buyer under such
clause or agreement shall be counted against the foregoing dollar
limitation.
Section 8.5. Allocations of Purchase Price. Buyer, Shareholder
and Sellers agree, for tax and accounting purposes, to allocate the
Purchase Price as provided on Exhibit 8.5. Following the Closing, Buyer
shall provide to Shareholder a copy of Buyer's IRS Form 8594 and any
required exhibits thereto. Such allocation shall be consistent with the
allocation set forth in Exhibit 8.5 hereto, which allocation is based on
the determination of Buyer and Seller Parties of the fair market value of
each Purchased Asset at Closing. Shareholder, Sellers and Buyer each
hereby covenants and agrees that it will not take, and will cause each of
its subsidiaries not to take, a position on any foreign, federal, state or
local tax return that is in any way inconsistent with the allocation made
pursuant to this Section 8.5, as set forth in Exhibit 8.5 and such Form
8594, unless advised by counsel that it may not take such position without
violating applicable law or without incurring penalties.
Section 8.6. Inventory Procedures. Prior to the first business
day following the Closing Date, Shareholder shall physically segregate all
inventory (including "demo trial inventory," as such phrase is defined in
the definition of the term "Furnishings" contained in Appendix A hereto) at
the Branches into the following categories: (i) items that are new, factory
sealed, on current vendor parts list; (ii) items for which a customer order
has been received; (iii) items that can be expected to fulfill large
account orders within 30 days of the Closing Date; (iv) demo trial items
relating to the "Solution and Training Center"; (v) demo trial items in
addition to those in clause (iv); and (vi) all other items.
Notwithstanding the counting, selection and valuation procedures set forth
below, all demo trial inventory included in the definition of the term
"Furnishings" shall be the property of Buyer, and Buyer shall not have any
obligation to pay Seller Parties any amounts for such inventory pursuant to
this Section 8.6 because Buyer shall be deemed to have already paid for
such inventory through its payment on the Closing Date. On the first
business day following the Closing Date, Shareholder and Sellers shall
conduct a physical inventory of the inventory, as previously segregated by
Shareholder, and Buyer's representatives shall participate in making the
visual inspection of such inventory. Shareholder shall count the inventory
in the order specified by Buyer and will keep Buyer informed of the Gross
Value of the items counted in the course of the physical inventory and will
keep Buyer informed of the cumulative Gross Value of inventory selected by
Buyer as constituting Purchased Inventory. Buyer shall retain full right
to substitute inventory that shall constitute Purchased Inventory until the
physical inventory and procedures identified in this section 8.6 have been
completed. Shareholder will provide Buyer with such assistance as Buyer
may request in the course of the physical inventory, including a Lotus or
similar spread sheet and computer hardware to assist Buyer in keeping track
of the inventory it has selected and the estimated Gross Value thereof and
as otherwise provided in Exhibit 8.6 hereto. In no event shall Buyer be
obligated to select any items of inventory that do not fall within the
definition of Inventory set forth in Appendix A hereto. Once Buyer has
selected inventory (other than demo trial inventory, which, as indicated
above, will be deemed to have been separately acquired by Buyer on the
Closing Date) having, in Buyer's reasonable opinion, an aggregate Gross
Value of at least $4,800,000, it shall so indicate to Shareholder and
Shareholder will, on such first business day following the Closing Date,
segregate and mark all inventory from the Sites which does not constitute
Purchased Inventory or demo trial inventory (hereinafter "Retained
Inventory") and remove such segregated Retained Inventory under Buyer's
supervision, from the Sites on or prior to the close of the fourth business
day following the Closing Date. Until the physical removal of the Retained
Inventory from the Sites has been completed, Shareholder will, at its
expense, retain a guard to monitor each Site to ensure that Purchased
Inventory, the demo trial inventory and Retained Inventory are not
commingled and that Retained Inventory is not used to fulfill orders of
customers arising after the Closing Date. At such time as all of the
foregoing procedures have been completed (other than the physical removal
of the Retained Inventory from the Sites), consistent with Exhibit 8.6,
Buyer will pay to Shareholder the Gross Value of the Purchased Inventory
(up to $4,800,000); provided that if the Gross Value of the Purchased
Inventory is less than $4,800,000, Buyer shall pay Shareholder such lesser
sum in full consideration of the Purchased Inventory. In no event will
Buyer be required to make payment on account of Purchased Inventory
pursuant to this Section 8.6 until it has received written advice from all
secured creditors who have a security interest in such inventory that such
security interest will be released and terminated upon or currently with
such payment. In recognition of the compressed time for conducting the
foregoing procedures and the fact that Shareholder does not carry inventory
on its books at Gross Value, Shareholder agrees that the foregoing
procedures shall not prevent Buyer from thereafter questioning the
determination of Gross Value as it applies to one or more items of
Inventory, and receiving appropriate reimbursement if the Gross Value for
any such item has been overstated. During the reconciliation, Shareholder
will provide Buyer supporting data on FIFO inventory layers and sourcing as
required to validate the valuation of Purchased Inventory. Shareholder and
Buyer expect that such inventory reconciliation will be completed within 30
days following Closing and Shareholder will provide Buyer all information
requested by Buyer to assist it in completing the reconciliation with
Shareholder. Additional details governing the handling of the matters
covered by this Section 8.6 are contained in Exhibit 8.6 hereto. In
addition, during such 30-day period following the Closing, Buyer shall have
the right to independently assess the fair market value of the Furnishings,
including the demo trial inventory, and if Buyer believes, in the exercise
of its reasonable discretion, that the fair market value of the Furnishings
is less then $2,700,000 (computed on a cumulative basis with the fair
market value of the Furnishings purchased pursuant to the California
Purchase Agreement) Buyer may so advise Shareholder, and Shareholder shall,
within five business days of its receipt of such advice, pay Buyer the
amount of such shortfall, together with accrued interest thereon at the
prime rate from the Closing Date.
ARTICLE IX
Miscellaneous
-------------
Section 9.1. Expenses. Each of the several parties hereto shall
bear the fees and expenses relating to its compliance with the various
provisions of this Agreement and its covenants to be performed hereunder,
and each of such parties shall pay all expenses (including legal fees and
expenses) incurred by it in connection with this Agreement and the
transactions contemplated hereby; provided, however, if the Closing does
not occur and the transactions contemplated hereby are not consummated on
account of a breach by one of the parties hereto of its obligations
hereunder, then the non-defaulting party shall be entitled to recover its
fees and expenses relating to the transactions contemplated hereby in
addition to such other damages, fees and expenses as it may be entitled to
under law.
Section 9.2. Termination. If the Closing pursuant to Section
4.1 shall not have occurred on or prior to January 31, 1995, this Agreement
and all obligations of Shareholder, Sellers and Buyer hereunder, except
obligations under Sections 8.3(b) and 9.1, shall terminate at 11:59 p.m.
New York time on such date, unless extended by mutual agreement of the
parties.
Section 9.3. Benefit; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and not to any other person. This
Agreement shall not be assigned by Sellers or any Shareholder, but may be
assigned, in whole or in part, without recourse, by Buyer to one or more
affiliated or unaffiliated third parties. Accordingly, nothing contained
herein shall restrict the ability of Buyer to cause one or more
subsidiaries to acquire the Purchased Assets. Upon an assignment of this
Agreement to a third party, all references herein to "Buyer" shall be
deemed to be references to such third party, and the "notice" provision in
Section 9.6 hereof shall be modified accordingly.
Section 9.4. Governing Law; Bulk Sales Laws. This Agreement
shall be construed and enforced in accordance with and governed by the laws
of the State of Ohio. The parties hereto hereby waive compliance with the
provisions of any applicable bulk sales laws, including Article 6 of the
Uniform Commercial Code, as enacted in each state and applied to Purchased
Assets located in each such state.
Section 9.5. Breach; Failure of Condition. If either party
shall believe at any time prior to the Closing Date that any other party
has breached any representation, warranty, covenant or agreement contained
in this Agreement, or that any condition to the Closing is not reasonably
likely to be satisfied, such party shall promptly so inform such other
party specifying the breach or condition concerned, and such other party
shall have a reasonable opportunity to correct such breach or cause such
condition to be satisfied, but failure to so notify shall not release the
other party from its obligations hereunder.
Section 9.6. Notices. Except as otherwise specifically provided
in this Agreement, all notices and other communications hereunder shall be
in writing and deemed to have been duly given when delivered by hand, when
mailed by registered or certified mail, postage prepaid, return receipt
requested, when given by prepaid courier delivery services such as Federal
Express, DHL or other similar services on the day following the date that
such notice is delivered to such courier, or when given by facsimile
transmission upon receipt by sender of confirmed answer-back, as follows:
<PAGE>
(a) if to Buyer, at
Intelligent Electronics, Inc.
411 Eagleview Boulevard
Exton, Pennsylvania 19341
Attention: Richard D. Sanford
with copies to:
Intelligent Electronics, Inc.
411 Eagleview Boulevard
Exton, Pennsylvania 19341
Attention: Legal Department
and
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Eighteen and Arch Streets
Philadelphia, PA 19103-2799
Attention: Barry M. Abelson
(b) if to Shareholder or Sellers, at
The Future Now
8044 Montgomery Road, Suite 601
Cincinnati, Ohio 45236
Attention: Terry L. Theye
with a copy to:
The Future Now
8044 Montgomery Road, Suite 601
Cincinnati, Ohio 45236
Attention: Norma Skoog
or at such other address as either such party shall request in writing.
Section 9.7. Materiality; Exhibits. Whenever any action,
representation or warranty contained herein is qualified by a "materiality"
standard applicable to the Businesses or the Sites as a whole, such
Businesses and Sites shall, for purposes of such materiality standard, be
considered collectively with the Businesses and Sites covered by the
California Purchase Agreement, but only from and after the date the Closing
under the California Purchase Agreement occurs. The parties hereto
specifically agree that any representations and warranties contained herein
which are not qualified by knowledge or words of similar import shall not
be deemed to be so qualified notwithstanding the appearance of any
knowledge qualification contained in any of the Exhibits hereto. To the
extent any Exhibit hereto covers or relates to Branches (as defined herein)
and Branches (as defined in the California Purchase Agreement), such
Exhibit shall, for purposes of this Agreement, be construed to apply only
to Branches (as defined herein).
Section 9.8. Headings. The headings of the articles, sections
and paragraphs contained in this Agreement are for convenience of reference
only and do not form a part hereof and in no way modify the meanings of
such articles, sections and paragraphs.
Section 9.9. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.
This Agreement shall become effective when one or more counterparts have
been signed by each of the parties hereto and delivered to the other
parties.
Section 9.10. Entire Agreement. This Agreement, including the
Exhibits hereto and the documents referred to herein, contains all the
terms agreed upon by the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements,
arrangements or understandings between such parties as to the subject
matter hereof.
Section 9.11. Waiver; Amendment; Modification. The parties may,
by written agreement, (a) extend the time for the performance of any of the
obligations or other acts of the parties hereto or (b) waive any
inaccuracies or breaches in the representations and warranties contained in
this Agreement or in any document delivered pursuant to this Agreement.
This Agreement may be amended or modified only by a written agreement
executed by the parties hereto or by their successors and assigns.
Section 9.12. Severability. To the extent that any provision of
this Agreement shall be invalid or unenforceable, it shall be considered
deleted herefrom and the remainder of such provision and of this Agreement
shall be unaffected and shall continue in full force and effect. In
furtherance and not in limitation of the foregoing, if the duration or
geographic extent of, or business activity covered by, any provision of
this Agreement shall be in excess of that which is enforceable under
applicable law, then such provision shall be construed to cover only that
duration, extent or activities which may be validly and enforceably
covered.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, all as of the day and year first above written.
INTELLIGENT ELECTRONICS, INC.
By: /s/ Gregory A. Pratt
-----------------------------------
Name: Gregory A. Pratt
Title: President
THE FUTURE NOW, INC.
By: /s/ Lewis Miller
-----------------------------------
Name: Lewis Miller
Title: President
PREMIUM COMPUTER CORPORATE CENTER
By: /s/ Timothy M. Mooney
-----------------------------------
Name: Timothy M. Mooney
Title: Vice President and Treasurer
ENTRE COMPUTER CENTERS OF NEW YORK, INC.
By: /s/ Timothy M. Mooney
-----------------------------------
Name: Timothy M. Mooney
Title: Vice President and Treasurer
THE FUTURE NOW OF MASSACHUSETTS, INC.
By: /s/ Timothy M. Mooney
-----------------------------------
Name: Timothy M. Mooney
Title: Vice President and Treasurer
ENTRE COMPUTER CENTERS OF VIRGINIA, INC.
By: /s/ Timothy M. Mooney
-----------------------------------
Name: Timothy M. Mooney
Title: Vice President and Treasurer
<PAGE>
APPENDIX A
DEFINITIONS
-----------
The following terms shall have the following meanings for all purposes of
this Agreement and such meanings are equally applicable both to the
singular and plural forms of the terms defined.
"Affiliates" shall have the meaning provided in Section 5.1(g).
"Asset Price" shall mean $30,275,000 subject to downward
adjustment as and to the extent provided in Sections 6.1(m) and 8.6.
"Assigned Agreements" shall mean each Lease of a Site and each
other agreement in effect as of the Closing Date with each customer, client
or other similar entity to whom products or services are provided in
connection with or related to the Business and each agreement in effect as
of the Closing Date pursuant to which products or services are provided to
Shareholder or any Seller at the Sites. In no event shall an invoice for
product or services provided to the Business be considered an Assigned
Agreement.
"Assumed Liabilities" shall be limited to the claims, liabilities
and obligations of Sellers with respect to the Assigned Agreements becoming
due in accordance with their terms after the Closing on account of services
rendered or products provided to the Business after the Closing.
"Assumption Agreement" shall mean an agreement substantially in
the form of Exhibit A-1.
"Borrowing Arrangements" shall mean:
(i) The Secured Credit Agreement, dated as of
September 9, 1993 among Shareholder, Sellers, Monterey-
Waldec, Inc., The Future Now, Inc. of Texas, The Future
Now, Inc. of Arkansas, The Future Now, Inc. of
Delaware, FKA Basicomputer Corporation, Integrators of
Enterprise Solutions, Inc., Integrators of Network
Computing, Inc., PNC Bank, Ohio, National Association
(as agent), The First National Bank of Chicago (as co-
agent) and the banks named therein (as lenders), as
amended pursuant to Amendment No. 1 to Credit
Agreement, Amendment No. 2 to Credit Agreement,
Amendment No. 3 to Credit Agreement, Amendment No. 4 to
Credit Agreement, Amendment No. 5 to Credit Agreement,
Amendment No 6 to Credit Agreement and Amendment No. 7
to Credit Agreement, having effective dates of
January 19, 1994, March 8, 1994, July 8, 1994,
September 30, 1994, October 11, 1994, October 21, 1994
and November 1, 1994, respectively;
(ii) The borrowing arrangements between one or more
Seller Parties and each of IBM Credit Corp. and ITT
Commercial Finance.
"Branch" shall mean any one of the three branches comprising all
the Businesses conducted at the Sites and consisting specifically of the
New York branch (which includes the Sites in New York, New York, Melville,
New York and Lawrenceville, New Jersey); the District of Columbia branch
(which includes the sites in Timonium, Maryland and Fairfax, Virginia); and
the Boston branch (which consists of the Site in Natick, Massachusetts).
"Business" shall mean each business conducted by Shareholder
and/or a Seller at a Site prior to the Closing Date and all the businesses
conducted by Shareholder and Sellers at the Sites prior to the Closing
Date.
"Business Agreement" shall mean each Lease of a Site and each
other agreement in effect as of the date hereof with each customer, client
or similar entity to whom products or services are provided in connection
with or related to the Business and each agreement in effect as of the date
hereof pursuant to which products or services are provided to Shareholder
or any Seller at the Sites. In no event shall an invoice for products or
services provided to the Business be considered a Business Agreement.
"Business Area" shall mean the following Primary Metropolitan
Statistical Areas: (i) Boston, (ii) New York-Northern New Jersey-Long
Island and (iii) Washington, D.C.
"California Purchase Agreement" shall mean the Asset Purchase
Agreement of even date herewith among the parties hereto.
"Closing" shall have the meaning specified in Section 4.1.
"Closing Date" shall have the meaning specified in Section 4.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Customer Data" shall mean (a) lists of customers of all the
Sites and (b) all other records regarding such customers.
"Encumbrance" shall mean any mortgage, claim, lien, pledge,
option, charge, security interest or other similar interest.
"Environmental Laws" shall have the meaning provided in Section
5.1(i)(i) of the Agreement.
"EPA" shall have the meaning provided in Section 5.1(i)(ii).
"Furnishings" shall mean the commercial vehicles, fixtures,
equipment (including computer equipment used in the operation of the
Business), leasehold improvements, security systems, telephone systems,
office supplies, display stands, furniture and similar furnishings located
at the Sites or at holding areas for the Sites. Furnishings shall also
mean and include all "demo trial inventory," including such inventory at
Solution and Training Centers of the Branches, on desk tops at the Branches
and at customer sites.
"Gross Value" shall mean, with respect to each individual item of
inventory, and for purposes of the inventory procedures being performed
pursuant to Section 8.6 hereof on the first business day following the
Closing Date: (i) with respect to items which were purchased from Buyer,
the current price of the product if purchased from Buyer on the Closing
Date less any vendor benefits which would be derived from that inventory
and (ii) with respect to items which were not purchased from Buyer, the
current price of the product if purchased from the supplier thereof on the
Closing Date less any vendor benefits which would be derived from that
inventory.
"Hazardous Substances" shall have the meaning provided in Section
5.1(i)(ii) of the Agreement.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"Indemnified Party" shall have the meaning provided in Section
8.4(d) of the Agreement.
"Indemnifying Party" shall have the meaning provided in Section
8.4(d) of the Agreement.
"Intellectual Properties" shall mean all patents of any
description and pending applications therefor, all registrations of
trademarks and of other marks, all registrations of trade names, assumed
names, service marks, logos, labels or other trade rights, all pending
applications for any such registrations, all copyright registrations and
pending applications therefor, all other copyrights, trademarks and other
marks, trade names, assumed names, service marks, logos, jingles, program
rights, non-governmental licenses, computer programs and slogans, and all
other inventions and designs, whether or not patentable, all to the extent
that the foregoing items are owned in whole or in part by Shareholder or
any Seller and used in the Business as of the date of this Agreement.
"Interests" shall have the meaning provided in Section 8.2(a).
"Inventory" shall mean products held for sale in the ordinary
course of business in Sellers' inventory located at the Sites. Inventory
shall be new, unused, undamaged, and unopened product in the original boxes
and treated by the manufacturer thereof as its current product at the
manufacturers' current pricing levels. Inventory at any time shall be
determined on the basis of the Inventory physically located at the Sites at
such time and not on the basis of accounting records. Inventory shall not
include property, products, fixtures and equipment used in the day-to-day
operation of the Business or any of the Other Property.
"IRS" shall mean the Internal Revenue Service.
"Leases" shall mean the leases described in Exhibit 5.1(c)(1), as
in effect on the date of execution of this Agreement, pursuant to which
Seller Parties, as lessee, lease the Sites.
"Management Agreement" shall mean an agreement substantially in
the form of Exhibit A-2 with any changes thereto to be mutually agreeable
to Buyer and Shareholder.
"Other Property" shall mean the Customer Data and Furnishings
used in the Business.
"Premium" shall mean, in the event of a Pre-Closing Assignment,
(i) the amount paid to Buyer by the assignee(s) in consideration of the
Pre-Closing Assignment minus (ii) the transaction costs incurred by Buyer
in connection with the transactions contemplated by this Agreement and the
California Purchase Agreement and in connection with the effectuation of
the Pre-Closing Assignment.
"Purchase Price" shall mean the amount required to be paid by
Buyer to Sellers as provided in Section 3.1.
"Purchased Assets" shall mean the assets and rights to be sold,
conveyed, assigned, delivered and transferred to Buyer on the Closing Date
pursuant to Section 2.1.
"Purchased Inventory" shall mean that Inventory (or, at Buyer's
sole option, inventory that does not qualify as Inventory) selected by
Buyer at the inventory conducted pursuant to Section 8.6, having an
aggregate Gross Value up to $4,800,000.
"Qualified Documents" shall mean all documents comprising or
pertaining to Purchased Assets, including financial and operating records,
manuals, certificates of occupancy, surveys and construction drawings.
"Receivables" shall mean all of Sellers' and Shareholder's
outstanding accounts receivable arising from the lease or sale of goods or
for services of the Business, but shall not include receivables relating to
contra-payable balances in the payable accounts of Sellers and Shareholder
and receivables attributable to manufacturers' and other vendors'
reimbursement policies.
"Returns" shall have the meaning provided in Section 5.1(g).
"SARA" shall have the meaning provided in Section 5.1(i)(i).
"Sites" shall mean the leased locations in Timonium, Maryland,
Natick, Massachusetts, Melville, New York, New York, New York,
Lawrenceville, New Jersey and Fairfax, Virginia and more specifically
identified in Exhibit 5.1(c)(5).
"Subsidiary" shall mean, with respect to any entity or person,
any corporation, association, joint venture, partnership or other business
entity (whether now existing or hereafter organized) of which at least a
majority of the voting stock or other ownership interests having ordinary
voting power for the election of directors (or the equivalent) is, at the
time as of which any determination is being made, owned or controlled by
such entity or person or one or more subsidiaries of such entity or person
or by such entity or person and one or more subsidiaries of such entity or
person.
"Survival Period" shall have the meaning provided in Section
8.4(a).
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including without limitation all net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance,
stamp, occupation, property or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) upon Shareholder (with respect to
the Sites) or any Seller or any subsidiary of either.
<PAGE>
Exhibit A-1
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of
____________, 1994 by and among INTELLIGENT ELECTRONICS, INC., a
Pennsylvania corporation ("Buyer"), THE FUTURE NOW, INC., an Ohio
corporation ("Shareholder"), PREMIUM COMPUTER CORPORATE CENTER, a
California corporation ("Premium"), ENTRE COMPUTER CENTERS OF NEW YORK,
INC., a New York corporation ("ENTRE New York"), THE FUTURE NOW OF
MASSACHUSETTS, INC., a Massachusetts corporation ("FNM"), and ENTRE
COMPUTER CENTERS OF VIRGINIA, INC., a Virginia corporation ("ENTRE
Virginia, each referred to as "Seller" and collectively as "Sellers").
W I T N E S S E T H :
WHEREAS, Buyer, Shareholder and Sellers have entered into that
certain Asset Purchase Agreement dated December __, 1994 (the "Purchase
Agreement") providing among other things, for the sale by Sellers to Buyer
of the Purchased Assets; and
WHEREAS, Shareholder and Sellers are entering into this
Assignment and Assumption Agreement for the purpose of assigning and
transferring to Buyer all of their respective rights, liabilities and
obligations to be transferred by it pursuant to the Purchase Agreement; and
WHEREAS, Buyer is executing and delivering this Assignment and
Assumption Agreement for the purpose of assuming Seller's liabilities and
obligations to be assumed by Buyer pursuant to the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties and agreements contained herein and in
the Purchase Agreement, the parties hereto, intending to be legally bound,
agree as follows:
Section 1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings assigned to
them in the Purchase Agreement.
Section 2. Assignment. Each of Shareholder and Sellers, for
good and valuable consideration, receipt of which is hereby acknowledged,
hereby sells, assigns, conveys, transfers and delivers to Buyer all of its
right, title and interest under and to the Purchased Assets.
Section 3. Assumption. Buyer accepts such assignment, and
hereby absolutely and irrevocably undertakes, assumes and agrees to
perform, pay, satisfy or discharge when due, and to be solely responsible
for, all Assumed Liabilities from and after the Closing Date.
Section 4. Binding Agreement; Amendments. This Assignment and
Assumption Agreement shall be binding on each of Shareholder, Sellers and
Buyer and their respective successors and assigns. This Assignment and
Assumption Agreement may not be modified except by an instrument in writing
which is signed by all parties hereto.
Section 5. Governing Law. This Assignment and Assumption
Agreement shall be construed and enforced in accordance with the laws of
the State of Ohio.
Section 6. Further Assurances. Shareholder and Sellers hereby
covenant and agree that, from time to time at Buyer's request after the
delivery of this Assignment and Assumption Agreement, and without further
consideration, Shareholder and Sellers will do, execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and delivered,
all and any such further acts, conveyances, transfers, assignments, powers
of attorney, instruments and assurances as may be reasonably required to
more effectively grant, convey, assign, transfer and set over to and vest
in Buyer any and all of the assets referred to above.
Section 7. Other Agreements Prevail. Each of Shareholder,
Sellers and Buyer hereby acknowledges and agrees that neither the
representations, warranties and covenants nor the rights or remedies of any
party under the Purchase Agreement shall be deemed to be enlarged, modified
or altered in any way by this Assignment and Assumption Agreement. In the
event of a conflict between the terms of this Assignment and Assumption
Agreement and the terms of the Purchase Agreement, the terms of the
Purchase Agreement shall prevail.
Section 8. Counterparts. This Agreement may be executed in any
number of counterparts all of which together shall constitute a single
instrument. It shall not be necessary that any counterpart be signed by
all parties hereto so long as each party shall sign at least one
counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption Agreement to be duly executed as of the date and
year first above written.
INTELLIGENT ELECTRONICS, INC.
By:___________________________________
Name:
Title:
THE FUTURE NOW, INC.
By:___________________________________
Name:
Title: President
ENTRE COMPUTER CENTERS OF NEW YORK, INC.
By:____________________________________
Name:
Title: Vice President and Treasurer
THE FUTURE NOW OF MASSACHUSETTS, INC.
By:_____________________________________
Name:
Title: Vice President and Treasurer
ENTRE COMPUTER CENTERS OF VIRGINIA, INC.
By:_____________________________________
Name:
Title: Vice President and Treasurer
<PAGE>
Exhibit A-3
Non-Competition; Non-Solicitation; Certain Other Matters.
--------------------------------------------------------
(1) From and after the Closing Date to and including
the first anniversary of the Closing Date: (i) neither Shareholder, any
Seller nor any Affiliate or subsidiary of Shareholder or any Seller will
directly or indirectly engage in any capacity in a business that is
substantially similar to the Business in the Business Area or (ii) take any
action or omit to take any action which can reasonably be expected to
divert any business from any Site. In addition, at all times after the
Closing Date, neither Shareholder, any Seller nor any Affiliate or
subsidiary of Shareholder or any Seller will conduct business within the
Business Area under any trade names or trademarks currently or previously
used by any of them in the Business Area, but Buyer will have the right to
operate each Site under the trade names currently used by Seller Parties in
the operation of such Sites.
(2) Subject to clause (3) below, all employees of
Shareholder and Sellers as of the Closing Date will remain employees of
Shareholder and Sellers as of the Closing Date, and for so long as such
employees remain employed by Shareholder or any Seller, Shareholder and
Sellers will remain solely responsible for compliance with, and will comply
with, all federal, state and local employment laws applicable to the
employment of such employees. Nothing in this Agreement, or in any other
agreement between the parties, shall be deemed to require Buyer to offer
employment to any or all of the employees of Shareholder or Sellers.
Sellers and Shareholder shall be solely responsible to provide any notices
of layoff, termination or plant closing under any applicable federal, state
or local law, regulation or ordinance including but not limited to the
Worker Adjustment and Retraining Notification Act.
(3) Provided Buyer has in good faith indicated in
writing to Shareholder that it intends to offer employment to at least a
majority of the employees of the Business (which expression of intent shall
not be binding and shall be subject to review by Buyer of the information
specified below), upon the request of Buyer, Shareholder shall promptly:
(a) provide Buyer with a listing of the name,
location, title, date of employment, salary, and bonuses of each then
current employee of Shareholder or a Seller and use its best efforts to
assist Buyer in hiring each such employee and, at the Closing, release each
such employee from any non-competition agreement executed by such employee
to the extent such agreement would, by its terms, restrict such employee's
ability to work for Buyer;
(b) provide Buyer with copies of all employment
agreements, safety and health training policies and records, and collective
bargaining agreements covering any of such employees;
(c) disclose any pending or threatened charges,
complaints, investigations, litigation, grievances which are reasonably
likely to, either individually or in the aggregate, have a material adverse
effect on the conduct of the operations of the Business, or disputes
involving any such employees or former employees at the location, or
involving any employee benefit plans covering such employees or former
employees;
<PAGE>
(d) disclose any labor disputes, including but
not limited to any union demands or efforts to gain recognition as the
bargaining representative of employees of Shareholder and Sellers at any
Site, any repeated or continued picketing at any Site, and any repeated or
continued handbilling or other form of concerted labor activity directed to
Shareholder or any Seller or their employees at any Site;
(e) as and when requested by Buyer, release each
such employee from any confidentiality and non-competition agreement
between such employee and any Seller Parties or, at Buyer's option, assign
such agreements to Buyer;
(f) disclose whether Shareholder or any Seller or
any ERISA Affiliate has suffered a "plant closing" or "mass layoff" within
the meaning of the Worker Adjustment and Retraining Notification Act;
(g) disclose any failure to comply in all
material respects with any law, rule, or regulation relating to the
employment of such employees, including those relating to wages, hours,
terms and conditions of employment, collective bargaining, and the payment
of social security and unemployment taxes and the forwarding of income
taxes withheld from employees;
(h) provide Buyer with copies of plan documents,
plan descriptions and employee communications, with respect to all employee
benefit plans covering any such employees during the twelve-month period
prior to such offer of employment.
(i) disclose whether any current or former
employee is absent on a military leave of absence and eligible for rehire
under the terms of the Uniformed Services Employment and Reemployment
Rights Act of 1994 and whether any current or former employee is absent on
a period of disability or other leave of absence for any other reason,
which would, in any case, allow such employee either to obtain restoration
of any employee benefit plan contributions or accruals or be reinstated as
an employee;
(j) disclose such other employment-related
information as Buyer may reasonably request, subject to Shareholder's
consent, which shall not be unreasonably withheld; and
(k) until the first anniversary of the Closing
Date, refrain from offering employment to any person to whom Buyer or an
affiliate of Buyer offers employment unless (a) such employee's employment
with Buyer or an affiliate of Buyer terminates or (b) Buyer consents to
such offer.
For purposes of this Section, the term "employee benefit plan"
means any plan, program or arrangement providing nonqualified or qualified
deferred compensation, pension, profit sharing, stock option, stock
purchase, group insurance, accident, sickness, medical, dental, disability,
vacation pay, severance pay, incentive compensation, consulting agreements,
bonus or other employee benefits or fringe benefits, whether or not such
plans, programs and arrangements constitute "employee benefit plans" within
the meaning of Section 3(3) of ERISA, and whether or not such plans,
programs or arrangements are in the nature of formal or informal
understandings. As used in this Section, the term "ERISA" means the
Employment Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder or with respect thereto, and
the term "ERISA Affiliate" means any individual, corporation, or trade or
business that is a member of a controlled group of corporations or of a
trade or business under common control with Seller, as defined in Section
414(b), (c), (m), or (o) of ERISA.
Exhibit B
ASSET PURCHASE AGREEMENT
dated December 30, 1994
among
INTELLIGENT ELECTRONICS, INC.
THE FUTURE NOW, INC.
PREMIUM COMPUTER CORPORATE CENTER
ENTRE COMPUTER CENTERS OF NEW YORK, INC.
THE FUTURE NOW OF MASSACHUSETTS, INC.
and
ENTRE COMPUTER CENTERS OF VIRGINIA, INC.
[Covering California Sites]
<PAGE>
TABLE OF CONTENTS
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Page
ARTICLE I - Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - Purchase and Sale of Assets. . . . . . . . . . . . . . . . 1
Section 2.1. Transfer of Assets; Assumption of
Assumed Liabilities. . . . . . . . . . . . . . . . . 1
Section 2.2. Management Agreement . . . . . . . . . . . . . . . . 2
ARTICLE III - Purchase Price. . . . . . . . . . . . . . . . . . . . . . 2
Section 3.1. Purchase Price . . . . . . . . . . . . . . . . . . . 2
Section 3.2. Nonassumed Liabilities . . . . . . . . . . . . . . . 3
ARTICLE IV - Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.1. The Closing Date . . . . . . . . . . . . . . . . . . 3
Section 4.2. Certificates, Instruments of Transfer,
Etc. . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE V - Representations and Warranties. . . . . . . . . . . . . . . 7
Section 5.1. Representations and Warranties of
Shareholder and Sellers. . . . . . . . . . . . . . . 7
Section 5.2. Representations and Warranties of Buyer. . . . . . . 20
ARTICLE VI - Conditions Precedent to Obligations
of Buyer, Shareholder and Sellers. . . . . . . . . . . . . 21
Section 6.1. Conditions Precedent to Obligation of
Buyer. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.2. Conditions Precedent to Obligations of
Shareholder and Sellers. . . . . . . . . . . . . . . 26
ARTICLE VII - Documents to be Delivered on Closing Date . . . . . . . . 29
Section 7.1. Documents to be Delivered by Shareholder
and Sellers on Closing Date. . . . . . . . . . . . . 29
Section 7.2. Documents to be Delivered by Buyer on
Closing Date . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII - Further Covenants and Agreements
of Shareholder, Sellers and Buyer. . . . . . . . . . . . 31
Section 8.1. Further Covenants and Agreements of
Shareholders and Sellers . . . . . . . . . . . . . . 31
Section 8.2. Consents to Assignments; Permits . . . . . . . . . . 40
Section 8.3. Mutual Covenants . . . . . . . . . . . . . . . . . . 41
Section 8.4. Survival of Representations and
Warranties; Indemnities. . . . . . . . . . . . . . . 43
Section 8.5. Allocations of Purchase Price. . . . . . . . . . . . 48
Section 8.6. Inventory . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IX - Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.1. Expenses . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.2. Termination. . . . . . . . . . . . . . . . . . . . . 51
Section 9.3. Benefit; Assignment. . . . . . . . . . . . . . . . . 51
Section 9.4. Governing Law; Bulk Sales Laws . . . . . . . . . . . 51
Section 9.5. Breach; Failure of Condition . . . . . . . . . . . . 51
Section 9.6. Notices. . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.7. Materiality; Exhibits. . . . . . . . . . . . . . . . 52
Section 9.8. Headings . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.9. Counterparts . . . . . . . . . . . . . . . . . . . . 53
Section 9.10. Entire Agreement . . . . . . . . . . . . . . . . . . 53
Section 9.11. Waiver; Amendment; Modification. . . . . . . . . . . 53
Section 9.12. Severability . . . . . . . . . . . . . . . . . . . . 53
APPENDIX A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Exhibit A-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Exhibit A-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
<PAGE>
ASSET PURCHASE AGREEMENT dated December 30, 1994 (this
"Agreement"), by and among INTELLIGENT ELECTRONICS, INC., a Pennsylvania
corporation ("Buyer"), THE FUTURE NOW, INC., an Ohio corporation
("Shareholder"), PREMIUM COMPUTER CORPORATE CENTER, a California
corporation ("Premium"), ENTRE COMPUTER CENTERS OF NEW YORK, INC., a New
York corporation ("ENTRE New York"), THE FUTURE NOW OF MASSACHUSETTS, INC.,
a Massachusetts corporation ("FNM"), and ENTRE COMPUTER CENTERS OF
VIRGINIA, INC., a Virginia corporation ("ENTRE Virginia") (Premium, ENTRE
New York, FNM and ENTRE Virginia are each referred to herein as "Seller"
and collectively as "Sellers"; and Sellers and Shareholder are sometimes
collectively referred to herein as "Seller Parties").
WHEREAS, Sellers wish to sell to Buyer and Buyer wishes to
purchase from Sellers, certain properties, rights and assets of Sellers,
and Buyer wishes to assume certain liabilities of Seller, on the terms and
conditions described herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
Definitions
-----------
For the purposes hereof, capitalized terms used herein shall have
the respective meanings assigned to them in Appendix A hereto or elsewhere
herein. References in this Agreement to articles, sections, paragraphs,
clauses and exhibits are to articles, sections, paragraphs, clauses and
exhibits in or to this Agreement unless otherwise indicated.
ARTICLE II
Purchase and Sale of Assets
---------------------------
Section 2.1. Transfer of Assets; Assumption of Assumed
Liabilities. Subject to the terms and conditions of this Agreement, on the
Closing Date: (a) Shareholder and Sellers shall, subject to Section 8.2,
sell, convey, assign, deliver and transfer to Buyer all of Shareholder's
and Sellers' rights, title and interest in, to and under (i) the Assigned
Agreements, (ii) the Receivables, (iii) the Purchased Inventory, (iv) the
Other Property and (v) all Qualified Documents not theretofore delivered to
Buyer, in the case of each of (i), (ii), (iii), (iv) and (v) as the same
may exist at the Closing Date, and (b) Buyer will undertake, assume and
agree to perform and otherwise pay, satisfy and discharge, in accordance
with their respective terms, the Assigned Agreements.
Section 2.2. Management Agreement. In the event that Buyer
exercises its right to assign this Agreement with respect to all of the
Branches to a third party, other than to one or more direct or indirect
subsidiaries of Buyer, prior to the Closing pursuant to Section 9.3 hereof
(a "Pre-Closing Assignment"), the Management Agreement shall not become
effective and execution and delivery of the Management Agreement shall
thereupon cease to be a condition to the obligations of the parties
hereunder to consummate the transactions contemplated hereby. In the event
of a Pre-Closing Assignment, the paragraphs contained in Exhibit A-3 hereto
shall be deemed to have automatically replaced in their entirety each of
the paragraphs contained in Section 8.1(b) hereof. In the event that the
Closing occurs and a Pre-Closing Assignment has not occurred, Buyer and
Shareholder will execute and deliver the Management Agreement at the
Closing unless the Management Agreement has previously been executed and
delivered at the closing held pursuant to the Basic Purchase Agreement. As
used in this Section 2.2 and elsewhere in this Agreement, the term
"subsidiary" shall have the meaning assigned to it in Appendix A.
ARTICLE III
Purchase Price
--------------
Section 3.1. Purchase Price.
(a) In consideration of the sale and transfer of the
Purchased Assets and subject to the terms and conditions of this Agreement,
on the Closing Date, Buyer shall (i) pay the Purchase Price in an amount
equal to the Asset Price by wire transfer(s) as provided in paragraph (b)
below, and (ii) assume the Assumed Liabilities. Notwithstanding the
foregoing, Buyer may withhold $1,200,000 from its payment of the Purchase
Price until Buyer and Shareholder have agreed to the inventory that
constitutes Purchased Inventory pursuant to Section 8.6, whereupon Buyer
shall pay such withheld sum to Shareholder (subject to reduction as and to
the extent provided in Section 8.6).
(b) On or prior to the Closing Date, Shareholder shall
deliver to Buyer a list of those creditors of Seller Parties to which Buyer
shall pay, for the benefit of Seller Parties, the Purchase Price and
Shareholder and Sellers shall specify in such list the amount of the
Purchase Price that should be paid by Buyer to each such creditor.
Section 3.2. Nonassumed Liabilities. Buyer will not assume or
become liable to pay, perform, satisfy or discharge any obligation or
liability of Shareholder or Sellers, whether arising before, on or after
the Closing Date, other than the Assumed Liabilities, and Shareholder and
Sellers will jointly and severally remain obligated to pay, perform,
satisfy and discharge all such obligations and liabilities which do not
constitute Assumed Liabilities.
ARTICLE IV
Closing
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Section 4.1. The Closing Date. The purchase and sale provided
for in this Agreement (the "Closing") shall take place at the offices of
Buyer's counsel on the day which is the second business day after the day
on which the last of the conditions set forth in Article VI hereof is
fulfilled or waived, or such other time, date or place as Sellers,
Shareholder and Buyer may mutually agree (the "Closing Date"); provided
that in no event shall the Closing take place prior to February 1, 1995
without Buyer's consent.
Section 4.2. Certificates, Instruments of Transfer, Etc.
(a) Shareholder and each of Sellers agree that the sale and
transfer of the Purchased Assets shall be made by the bills of sale,
assignments and other instruments of transfer referred to in Section 7.1.
(b) Buyer, Shareholder and each of Sellers agree to use
reasonable efforts to minimize sales, use, transfer and similar transaction
Taxes, if any, payable in connection with the transactions contemplated by
this Agreement, provided that such efforts shall not expose any of such
parties to any additional cost or risk. Sellers and Shareholder, jointly
and severally, agree to pay one hundred percent (100%) of any such Taxes.
(c) (i) At the Closing, Shareholder and Sellers shall
transfer all of their right, title and interest in and to, and any
authority they may have over, the separate lock-box(es) established for
each Branch with PNC Bank Ohio, N.A. (the "Bank"), and shall give
instructions to the Bank that all collections on account of Receivables
shall be the sole property of Buyer until an aggregate of $23,000,000 on
account of Receivables (as defined in this Agreement) and Receivables (as
defined in the Basic Purchase Agreement) has been collected. In connection
with, and in furtherance of, such transfer and the giving of such
instructions, Shareholder and Sellers shall execute such additional
authorizations as shall be necessary to ensure that any checks mailed to
the lock-boxes for deposit may be immediately deposited therein for credit
in accordance with the Bank's standard arrangement for crediting deposits
into said lock-boxes while owned by Shareholder and Sellers. In order to
further assure Buyer's right to receive an aggregate of $23,000,000 of
collections on account of Receivables (as defined in this Agreement) and
Receivables (as defined in the Basic Purchase Agreement), Shareholder and
Sellers will obtain and deliver to Buyer, at or prior to the Closing, from
any third party to which any of them has granted a security interest in any
Receivables or which otherwise purports to hold a security interest in or
lien on any Receivables, an agreement releasing such security interest or
lien and agreeing that in the event any collections of Receivables are,
notwithstanding the foregoing, commingled with other funds of Shareholder
or Sellers, Buyer will have a prior right to all funds of Shareholder and
Sellers (whether then on hand or thereafter obtained) up to the amount of
collections on account of Receivables so commingled. In the event that
Shareholder and Sellers have remitted to Buyer less than $3,450,000 on
account of collection of Receivables on or prior to the ninetieth (90th)
day following the Closing Date (or, in the event that Buyer collects
Receivables pursuant to paragraph (ii) below, the amount collected by Buyer
on account of Receivables on or prior to such ninetieth (90th) day is less
than $3,450,000), Shareholder will pay to Buyer the difference in cash no
later than the fifth business day following such ninetieth (90th) day. In
the event that Shareholder and Seller have remitted to Buyer less than
$4,600,000 on account of collection of Receivables on or prior to the one
hundred and twentieth (120th) day following the Closing Date (or, in the
event that Buyer collects Receivables pursuant to paragraph (ii) below, the
amount collected by Buyer on account of Receivables on or prior to such one
hundred and twentieth (120th) day is less than $4,600,000), Shareholder
will pay to Buyer the difference in cash no later than the fifth business
day following such one hundred and twentieth (120th) day. Upon receipt by
Buyer of an aggregate of $23,000,000 of collections on account of
Receivables (as defined in this Agreement) and Receivables (as defined in
the Basic Purchase Agreement), Buyer shall: (i) make available to
Shareholder any returned products, the sale of which had given rise to
Receivables, and (ii) pay to Shareholder, as and when additional amounts
are collected on account of Receivables, the amount of such collections.
In order to effectuate the foregoing with respect to the then uncollected
Receivables, Buyer shall instruct the Bank to pay over to Sellers amounts
deposited into the lock-boxes that constitute payments on account of (but
only on account of) such Receivables. At any time, Shareholder shall have
the right to pay Buyer an amount equal to the difference between
$23,000,000 and the aggregate amount of collections on account of
Receivables (as defined in this Agreement) and Receivables (as defined in
the Basic Purchase Agreement) which have theretofore been remitted to
Buyer, whereupon (as provided in the preceding sentence) Buyer will assign
over to Sellers (in accordance with their interests therein, as specified
by Shareholder) all of its right, title and interest in and to the then
uncollected Receivables. Until such time as $23,000,000 of collections on
account of Receivables (as defined in this Agreement) and Receivables (as
defined in the Basic Purchase Agreement) have been remitted to Buyer,
Shareholder and Buyer shall each be entitled to receive from Bank, on a
daily basis, remittance advice from the Bank with respect to the
Receivables and, if available, an updated list of Receivables detailing
amounts collected on account thereof. References in this Section 4.2(c) to
"Receivables" shall mean Receivables outstanding as of the Closing Date.
The dollar amounts referenced in this Section 4.2(c) shall be
proportionately reduced in the event of a reduction in the Purchase Price
pursuant to the proviso in Section 6.1(m). For example, if the certificate
delivered pursuant to Section 6.1(m) reflects outstanding receivables on
the Closing Date in an aggregate face amount (net of reserves determined in
accordance with generally accepted accounting principles) of $2,600,000,
and the Purchase Price and Asset Price are reduced by $2,000,000, then
references in this Section 4.2(c) to $4,600,000 shall be changed to
$2,600,000 and references in this Section 4.2(c) to $3,450,000 shall be
changed to $1,950,000.
(ii) In the event that the Management Agreement is not
executed and delivered at Closing because of the occurrence of a Pre-
Closing Assignment or in the event that the Management Agreement terminates
for any reason after it has been executed and delivered, and Buyer elects
to collect the Receivables, Shareholder and Sellers will use their best
efforts to facilitate collection of the Receivables by Buyer, rather than
by Shareholder and Sellers. Without limiting the generality of the
foregoing, in order to facilitate the transition of collection
responsibility to Buyer while protecting Buyer's ownership interests in the
Receivables, Shareholder and Sellers agree that should they receive any
collections on account of Receivables, such collections shall be
immediately remitted to Buyer and until so remitted shall be deposited
solely in the applicable lock-box referenced in clause (i) above. Should
any such collections, notwithstanding the foregoing, be commingled with
other funds of Shareholder or Sellers, Buyer will, as provided in clause
(i) above, have a prior right to all funds of Shareholder and Sellers up to
the amount of collections on account of receivables so commingled. Buyer
will endeavor to collect the then uncollected Receivables using the same
degree of diligence and prudence which it would use in the collection of
its own accounts receivable, and will remit to Shareholder any amounts
collected on account of the Receivables after Buyer has received an
aggregate of $23,000,000 of collections on account of the Receivables.
(iii) Payments made by account obligors under
Receivables and under accounts receivable arising after the Closing Date
("Post-Closing Receivable") shall be applied against invoices in accordance
with the designation of the applicable account obligor. In the event an
account obligor under Receivables and under Post-Closing Receivables has
not designated the invoice against which its payment was intended to be
applied, each of Buyer and Shareholder shall have the right to request the
account obligor to designate the invoice against which its payment was
intended to be applied or provide evidence to the other as to such
intention.
(d) From and after the Closing Date, Buyer shall have the
sole right to compromise, settle and obtain the release of all claims and
liabilities related to the Assigned Agreements and, except as otherwise
specifically provided in the Management Agreement if the Management
Agreement is executed and delivered by Buyer and Shareholder, to open all
mail and packages and receive all communications and deliveries addressed
to Shareholder or any Seller at any of the Sites.
(e) For so long as the Management Agreement remains in
effect, Shareholder and Sellers will notify each of their current and
future secured and unsecured creditors holding claims aggregating in excess
of $10,000 that assets at the Sites are the property of Buyer and that
Shareholder and Sellers have no ownership interest in such assets. To
fulfill the foregoing obligation, Shareholder may arrange with a
fulfillment house to provide such notice to creditors on a quarterly basis,
and Buyer shall, upon receipt of appropriate invoices, pay the customary
charges of such fulfillment house in providing the foregoing notices to
creditors.
(f) At the Closing, Shareholder and Sellers will either
transfer to Buyer their rights in each of the depository accounts
established in connection with the day-to-day operations of the Business
(but Shareholder and Sellers may retain all monies then in such accounts)
or terminate such accounts.
ARTICLE V
Representations and Warranties
------------------------------
Section 5.1. Representations and Warranties of Shareholder and
Sellers. Shareholder and Sellers, jointly and severally, represent and
warrant to Buyer as follows (and, whenever a representation and warranty is
made to the knowledge of Shareholder and Sellers, such representation and
warranty shall be deemed to have been made based on both the actual
knowledge of Shareholder and Sellers and on the knowledge which Shareholder
and Sellers would have acquired had they conducted a reasonable inquiry of
the subject matter of the representation and warranty):
(a) Organization; Good Standing. Shareholder and each
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State or Commonwealth of its incorporation
and has the corporate power and authority to own or lease its properties
and to conduct its business as currently conducted. Shareholder and each
Seller is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the property owned, leased or operated by it
or the nature of the business conducted by it makes such qualification or
license necessary, except in such jurisdictions where the failure to be so
qualified or licensed would not have a material adverse effect on the
Business. Shareholder has informed Buyer that although ENTRE New York has
qualified to do business in New York, Shareholder has not qualified to do
business in such state, but such information shall not be construed to
enlarge the scope of the exception in the preceding sentence.
(b) Corporate Authorization. The execution, delivery and
performance by Shareholder and each Seller of this Agreement, the
Management Agreement, the Assumption Agreement, and the bills of sale,
assignments and other instruments of transfer referred to in this Agreement
to which it is a party have been authorized and approved by all requisite
corporate action on the part of Shareholder and each Seller, and no other
corporate approval or authorization is required on the part of Shareholder
or any Seller, any trustee, any party to the Borrowing Arrangements (except
as have been or will be obtained on or prior to the Closing Date) or any
other person by law or otherwise in order to make this Agreement, the
Management Agreement, the Assumption Agreement, and the bills of sale,
assignments and other instruments of transfer referred to in this Agreement
the valid and binding obligations of Shareholder and each Seller
enforceable in accordance with their respective terms (subject to the
receipt of required consents to assignments of the Assigned Agreements and
by any party to the Borrowing Arrangements), except as enforcement thereof
may be limited by bankruptcy, insolvency, or other similar laws affecting
the enforcement of creditors' rights in general or by general principles of
equity. No action or approval by, or consent or vote of, all or any
percentage of the holders of common stock of Shareholder is required to
authorize Shareholder to enter into this Agreement or to consummate the
transactions contemplated hereby. Shareholder has or will authorize each
Seller to enter this Agreement and to consummate the transactions
contemplated hereby. Shareholder is the owner, directly or indirectly, of
100% of the capital shares of each Seller free and clear of any Encumbrance
except under the Borrowing Arrangements.
(c) Purchased Assets; Business.
(1) Exhibit 5.1(c)(1) is an accurate list of each
Business Agreement (other than purchase orders and invoices open as of the
date hereof from customers and clients for the purchase of products or
services from the Business). True and complete copies of the Business
Agreements (including any side agreements, letters or other instruments
constituting amendments or modifications thereof), other than purchase
orders and invoices open as of the date hereof from customers and clients
for the purchase of products or services from the Business have been
furnished to Buyer. Without limiting the generality of any other
representation and warranty made herein, those Business Agreements which
have not been identified on Exhibit 5.1(c)(1), whether considered
individually or in the aggregate, are on commercially reasonable terms and
have been entered into by Shareholder and Sellers in the ordinary course of
business, consistent with past practice, and those agreements which are
entered into by Shareholder or a Seller after the date hereof and prior to
Closing, pursuant to which products or services will be provided by or to
the Business, will, whether considered individually or in the aggregate, be
on commercially reasonable terms and conditions and will be entered into
only in the ordinary course of business, consistent with past practice.
Neither Shareholder nor any Seller has entered into any agreement with a
third party pursuant to which such third party provides services to more
than one Branch or pursuant to which such third party provides services at
a Branch and at any other non-Branch location owned or operated by a Seller
or Shareholder except for any agreements that do not impose expenses or
costs on any of the Branches. Nothing contained herein shall be construed
to limit the obligation of Seller Parties to make all payments under all
Assigned Agreements for services rendered or products provided to the
Business for the period preceding the Closing.
(2) Except as set forth on Exhibit 5.1(c)(2)(i),
neither Shareholder nor any Seller is in default (and, to Shareholder's and
Sellers' knowledge there is no other default and no event which, with
notice or lapse of time or both, would constitute a default) under any of
the Business Agreements. Each Business Agreement is in full force and
effect. Each Seller and Shareholder has the right to assign the Business
Agreements to which each is a party, subject to restrictions on assignment
contained therein and, with respect to those Business Agreements identified
on Exhibit 5.1(c)(1), specifically identified on Exhibit 5.1(c)(2)(ii).
Shareholders and Sellers, after a prudent investigation, have no reason to
believe that the restrictions on assignments contained in any of the
Business Agreements that are not identified on Exhibit 5.1(c)(1) are
reasonably likely to adversely impact operation of the Business following
acquisition of the Business by Buyer if consents to the assignments of such
Business Agreements to Buyer are not obtained. Except for the lien of
Taxes not yet due and Encumbrances set forth on Exhibit 5.1(c)(2)(iii),
which will be removed by Shareholder or Sellers on or prior to the Closing
Date, neither Shareholder nor any Seller has assigned, pledged or
encumbered its interest in the Business Agreements to which it is a party.
No obligation of Shareholder or any Seller under any Business Agreement is
in excess of the normal, ordinary and usual requirements of Shareholder or
such Seller or at an excessive price. The Business Agreements (considered
individually and in the aggregate) with respect to the Business at each
Site do not obligate Shareholder or any Seller to sell or deliver any
amount of product or services, which amount is material to such Business
individually, at a price which (in the aggregate with all other Business
Agreements with any single customer) does not cover the cost (including
labor, materials and production overhead) together with the customary
profit margin for such product or service in the light of the amount of
product or service provided and the type of customer involved. After
giving effect to the payment provided for in Section 7.1(j), neither
Shareholder nor any of Sellers will have received and retained, as of the
Closing Date, any payments for services to be rendered by Buyer to a third
party by virtue of Buyer's assumption of obligations under the Assigned
Agreements or payments relating to the period after the Closing Date in
excess of an aggregate of $50,000 (computed on a cumulative basis with any
payments received by a Seller Party under Assigned Agreements, as defined
in the Basic Purchase Agreement), and Buyer will become solely entitled to
receipt of such payments upon its assumption of Assumed Liabilities. None
of the Business Agreements contains any agreement, understanding or
relationship arising out of or relating to Shareholder's or any Seller's
status as a "small business concern", a "minority-owned business concern"
or other similar status. Upon and following the Closing, each of the
foregoing representations and warranties relating to Business Agreements
shall be automatically deemed to have been made by Shareholder and Sellers
with respect to the Assigned Agreements.
(3) Shareholder's and each Seller's interest in each
Site is a valid and subsisting leasehold interest in such Site pursuant to
the Lease thereof, and each such Lease affords the tenant thereunder the
legal right to occupy the Site leased thereby as of the date hereof and the
Closing Date in accordance with the terms thereof. The Leases are valid
and enforceable by Sellers and Shareholder. Sellers and Shareholder have
performed, and will continue to perform through Closing, all the
obligations required to be performed by them under the Leases and possess
and quietly enjoy the premises under the Leases, and Sellers and
Shareholder have no knowledge that such premises are subject to any
Encumbrances, easements, rights of way, building or use restrictions,
exceptions, reservations or limitations that interfere with or impair the
present and continued use thereof in the usual and normal conduct of the
Business. Neither Sellers nor Shareholder have received notice of
violation of any applicable zoning regulation, ordinance or other law,
order, regulation or requirement relating to the operations of such leased
properties, and neither any of Sellers nor Shareholder knows of any such
violation. Neither any of Sellers nor Shareholder has received notice of
any pending or threatened condemnation proceedings relating to any of the
properties that are the subject of the Leases and, so far as known to
Sellers or Shareholder, there are no such pending or threatened
proceedings. The structures, tangible properties and equipment owned,
operated or leased by Sellers or Shareholder (as lessor or as lessee) in
connection with the Business are used and useable by Sellers and
Shareholder in the present conduct of the Business and generate the
revenues set forth on the financial statements delivered to Buyer pursuant
to this Agreement.
(4) Shareholder and each Seller has good and
marketable title to the Purchased Assets owned or leased by it, free and
clear of all Encumbrances (other than any Encumbrance identified on Exhibit
5.1(c)(4), all of which will be removed or terminated on or prior to the
Closing Date), subject to the rights of personal property lessors and
software licensors. In addition, at the Closing Date, all of the Purchased
Assets will be free and clear of all third party claims which do not
constitute Encumbrances other than any such third party claims
(collectively, "TP Claims") which result from conduct of the Business in
the ordinary course, none of which, whether considered individually or in
the aggregate, will have a material adverse effect on the Business if
resolved adversely to the Business. As of the date hereof, the face amount
of Receivables outstanding not more than 75 days from the earlier of the
shipment or the date of the invoice or other instrument giving rise
thereto, less applicable reserves determined in accordance with generally
accepted accounting principles, is not less than $4,600,000. As of the
Closing Date, the face amount of Receivables outstanding not more than 75
days from the earlier of the shipment or the date of the invoice or other
instrument giving rise thereto, less applicable reserves determined in
accordance with generally accepted accounting principles, will be not less
than $4,600,000. Each of the Receivables arose in the ordinary course of
the Business and constitutes a valid right to payment for goods sold and
leased or services rendered and creates a valid claim against the account
debtor with respect thereto. Shareholder and Sellers have no reason to
believe that at least $4,600,000 will not be collected on account of
Receivables outstanding on the Closing Date in accordance with the terms of
the invoices giving rise to such Receivables at the aggregate gross
recorded amounts thereof. Shareholder and Sellers have not provided any
extended or unusual terms with respect to any Receivables, which are
material with respect to the Business at any Site individually. There are
no defenses or rights to set-off available to any account debtor with
respect to any Receivable. Neither Shareholder nor any Seller has received
notice from account debtors with respect to Receivables that such account
debtors intend to return products that are the subject of a Receivable,
which in the aggregate with respect to the Business at any Site, exceed two
times the average monthly product returns at the Business at such Site
during calendar year 1994. Substantially all of the Furnishings are in
good working condition, ordinary wear and tear excepted.
(5) Exhibit 5.1(c)(5) sets forth the nature of the
operations at each Branch, lists the Inventory attributable to each Branch
as of December 16, 1994 and Receivables attributable to each Branch as of
November 30, 1994 and lists the Furnishings attributable to each Branch as
of November 30, 1994.
(6) Except as indicated on Exhibit 5.1(c)(6), the
Purchased Assets constitute all of the assets and business (including
rights under contracts and permits) of Shareholder and Sellers used by
Shareholder or Sellers in or necessary to conduct the Business of
Shareholder and each such Seller at each Site (subject to Section 8.2 and
other than any Inventory that will not constitute Purchased Inventory). To
the knowledge of Shareholder and Sellers, the aggregate fair market value
of the Furnishings is not less than $600,000. Buyer acknowledges that
neither Shareholder nor any Seller has received an appraisal of such value.
(7) Exhibit 5.1(c)(7) identifies the trade names under
which the Business at each Branch is conducted.
(8) Exhibit 5.1(c)(8) identifies the lock-box that has
been established for each Branch, and no other lock-box or similar
collection mechanism has been established in connection with the collection
of Receivables.
(d) Litigation. Except as set forth in Exhibit 5.1(d),
there is no litigation, action, suit, tax audit, proceeding or
investigation pending or, to Shareholder's or Sellers' knowledge,
threatened with respect to the Business of each Seller, any of the
Purchased Assets or any of the transactions contemplated hereby before or
by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, or any other entity
or person (including non-governmental entities and persons), which, if
adversely determined, could reasonably be expected to have a material
adverse impact upon the Purchased Assets taken as a whole or the conduct by
Buyer after the Closing Date of a business at the Sites substantially
similar to the Business of each Seller except as disclosed to Buyer in
writing. Neither Sellers nor Shareholder is in default with respect to any
order, writ, injunction or decree of any court or Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality which, if not cured, could reasonably be expected to have a
material adverse impact upon the Purchased Assets taken as a whole or the
conduct by Buyer after the Closing Date of a business at the Sites
substantially similar to the Business of each Seller.
(e) No Conflict. Except as set forth in Exhibit 5.1(e),
the execution, delivery and performance by Shareholder and each Seller of
this Agreement, the Management Agreement, the Assumption Agreement, and the
bills of sale, assignments and other instruments of transfer referred to in
this Agreement, compliance by Shareholder and each Seller with the
provisions of this Agreement and the consummation by Shareholder and each
Seller of the transactions contemplated hereby: (i) will not violate in
any material respect any provision of applicable law to which Shareholder
or any Seller is subject; (ii) will not conflict with any provision of the
Certificate of Incorporation or Code of Regulations or By-laws of
Shareholder or any Seller or conflict with or constitute a default (or, to
Shareholder's and Sellers' knowledge, are not events which, with notice or
lapse of time or both, would constitute a default) in any material respect
under, or result in the termination of, or accelerate the performance
required by any of the terms, conditions or provisions of any contract,
agreement or other instrument binding on Shareholder or Sellers, including
without limitation the Borrowing Arrangements; (iii) will not result in the
creation of any Encumbrance upon any of the Purchased Assets; (iv) do not
require the consent or approval of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, except for compliance with the requirements
of the HSR Act and any filings under state laws required in connection with
the conveyance of the vehicles; and (v) do not violate any order, writ,
injunction, decree, arbitral award, statute, rule or regulation applicable
to either Shareholder or any Seller, to any of the Purchased Assets or to
the Business, violation of which could reasonably be expected to have a
material adverse impact upon Buyer or the conduct by Buyer after the
Closing Date of a business at the Sites substantially similar to the
Business.
(f) Financial Statements; Books and Records; No Material
Adverse Change. Shareholder has delivered to Buyer copies of (i)
Shareholder's consolidated financial statements (including statements of
income, stockholders' equity and cash flows and a balance sheet) for
Shareholder for the fiscal years ended December 31, 1991, 1992 and 1993,
audited and certified by an independent certified public accountant and
(ii) the unaudited statements of profits and losses with respect to each
Site for the year ended December 31, 1993 and for the nine-month period
ended September 30, 1994. Such audited and unaudited financial statements
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except as
set forth in the notes thereto, and fairly present, in all material
respects, the financial condition of Shareholder as at said dates and for
the periods then ended. The unaudited statements are true and correct in
all material respects and fairly reflect the profits and losses and
business and operations of each Site as of September 30, 1994 and for the
nine months then ended. The books of account of Shareholder and Sellers
with respect to the Business fairly reflect in all material respects all
transactions of Shareholder and Sellers and other matters required to be
reflected therein consistent with the financial statements referred to
above. Exhibit 5.1(f)(i) sets forth a true and correct backlog report for
the Business attributable to each Branch as of December 3, 1994. Exhibit
5.1(f)(ii) sets forth a list of all deferred revenue and prepayments for
products or services received by Shareholder and Sellers on account of the
Business at each Branch as of October 31, 1994. Exhibit 5.1(f)(iii) sets
forth a true and correct operating expense register for each Branch for the
three-month period ended June 30, 1994 and for the three-month period ended
September 30, 1994. Between September 30, 1994 and the date hereof,
Shareholder and Sellers have not incurred expenses relating to the Business
of a kind or in an amount inconsistent with the kind and amount of expenses
reflected in the operating expense register set forth in Exhibit
5.1(f)(iii).
(g) Taxes. Each of Shareholder, each Seller, their
subsidiaries and affiliates, or an affiliated, combined or unitary group of
which any such corporation is or was a member, as the case may be
(individually an "Affiliate" of Shareholder or any Seller and collectively,
Shareholder's or any Seller's "Affiliates"), has, with respect to each Site
and, with respect to Shareholder and its consolidated subsidiaries, in all
material respects: (i) correctly prepared and timely filed all returns,
declarations, reports estimates, information returns and statements
("Returns") required to be filed or sent by or with respect to them in
respect of any Taxes; (ii) timely and properly paid all Taxes that are due
and payable except those on appeal or those that are being protested in
good faith; (iii) established on their books and records reserves that are
adequate for the payment of all Taxes not yet due and payable; and (iv)
complied in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and have timely and
properly withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid
over under all applicable laws. There are no liens for Taxes upon the
assets of Shareholder or any Seller or any of their Affiliates except liens
for Taxes not yet due. Neither Shareholder, any Seller nor any of their
Affiliates is a party to any agreement providing for the allocation,
sharing or indemnification of Taxes. Except as disclosed on Exhibit
5.1(g), neither Shareholder nor any of Sellers has any knowledge of any
current or potential federal, state or local audits with respect to Taxes
at any Site; provided, however, that such "knowledge" shall not be
construed to require Shareholder or Sellers to inquire of any taxing
authorities as to the existence of current or potential audits. Exhibit
5.1(g) also lists the dates of the last state and local audits with respect
to Taxes at each Site.
(h) No Brokers. Neither Shareholder nor any Seller has
made contact or had any dealings with or entered into, and will not enter
into, any agreement, arrangement or understanding with any broker, leasing
agent, finder or similar person or entity with respect to this Agreement
and the transactions contemplated hereby which will result in the
obligation of Buyer to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
(i) Environmental Compliance.
(i) Notwithstanding anything in this Agreement to the
contrary, all of Seller Parties' representations and warranties pertaining
to or relating to Hazardous Substances, Environmental Laws (as such terms
are defined below) and other environmental matters are contained solely and
exclusively in this Section 5.1(i) and are limited in all respects to the
Sites. Neither Shareholder nor any Seller has been notified that it is in
violation, or alleged to be in violation, of any judgment, decree, order,
law, license, rule or regulation pertaining to environmental matters,
including without limitation those arising under the Resource Conservation
and Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal
Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control
Act, or any state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter "Environmental
Laws"), which violation would have a material adverse effect on the
business, assets or financial condition of Shareholder or any Seller or the
Business.
(ii) Neither Shareholder nor any Seller has received
written notice from any third party, including without limitation any
federal, state or local governmental authority, (a) that Shareholder or any
Seller has been identified by the United States Environmental Protection
Agency ("EPA") as a potentially responsible party under CERCLA with respect
to a site listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B (1986); (b) that any hazardous waste, as defined by 42 U.S.C.
Section 6903(5), any hazardous substances, as defined by 42 U.S.C. Section
9601(14), any pollutant or contaminant, as defined by 42 U.S.C. Section
9601(33), and any toxic substances, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which either Shareholder or any Seller has generated, transported
or disposed of has been released at any site at which a federal, state or local
agency has conducted or has ordered that Shareholder or any Seller conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law or have named Shareholder or any Seller as a potentially
responsible party or are seeking contribution from Shareholder or any
Seller; or (c) that Shareholder or any Seller is or shall be named as a
defendant in or to any claim, action, cause of action, complaint, or legal
or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release of Hazardous
Substances ever in, on or from property of Seller Parties.
(iii) To the knowledge of Shareholder and each Seller,
to the extent such activities would have a material adverse effect on the
business, assets or financial condition of Shareholder or any Seller: (A)
no portion of the property of Shareholder or any Seller has been used by
Seller Parties for the handling, processing, storage or disposal of
Hazardous Substances except in accordance with applicable Environmental
Laws; and no underground tank or other underground storage receptacle for
Hazardous Substances is located on any portion of any of the Sites; (B) in
the course of any activities conducted by Shareholder or Sellers, no
Hazardous Substances have been generated or are being used on the property
except in accordance with applicable Environmental Laws; (C) there have
been no releases (i.e., any past or present releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Hazardous Substances on,
upon, into or from Seller Parties' property, which releases would have a
material adverse effect on the value of any of the property or, with
respect to any such releases from Seller Parties' property, adjacent
properties or the environment; and (D) any Hazardous Wastes, as defined by
42 U.S.C. Section 6903(5), if any, that have been generated by Seller Parties
on their property have been transported off site only by carriers having an
identification number issued by the EPA, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws, which transporters and facilities have
been and are, to the best of Shareholder's and each of Sellers' knowledge,
operating in material compliance with such permits and applicable
Environmental Laws.
(j) Insurance. Shareholder and Sellers maintain and have
in full force and effect the insurance policies covering the Purchased
Assets and the Business that are set forth on Exhibit 5.1(j). Copies of
the insurance policies covering the Purchased Assets and the Business have
been provided to Buyer.
(k) Intellectual Property; Confidentiality Agreements.
(1) Except for Intellectual Properties that are
proprietary to Buyer or that are identified on Exhibit 5.1(k)(1),
Shareholder and Sellers use no Intellectual Properties in the Business.
(2) Exhibit 5.1(k)(2)(i) contains a copy of the form
of confidentiality agreement which substantially all employees of Seller
Parties execute when they become employees.
(l) Client List; Product Suppliers. Exhibit 5.1(l)(i) sets
forth true, complete and accurate lists of the 20 largest customers or
clients (in terms of net revenues) and the five largest suppliers of
product with respect to each Branch during the 21 month period ended
December 15, 1994. Except as disclosed on Exhibit 5.1(l)(i), none of such
clients, customers or suppliers of Shareholder or any Seller, with respect
to any Branch, has provided notice to Shareholder or any Seller of its
intention to terminate its relationship with Shareholder or such Seller or
to substantially reduce the amount of business it provides to Shareholder
or such Seller. Except as disclosed on Exhibit 5.1(l)(i), neither
Shareholder nor any Seller has knowledge of any plan of any client,
customer or supplier to do so. In addition, except as disclosed on Exhibit
5.1(l)(ii), Shareholder and Sellers have no knowledge of any current
disputes with any customers or clients doing business with respect to the
Business at any Branch (and, for purposes of the foregoing provision,
"knowledge" shall be construed as actual knowledge) except for routine
disputes that have arisen in the ordinary course of business, none of
which, whether considered individually or in the aggregate with others, is
reasonably likely to have a material adverse effect on the Business.
Exhibit 5.1(l)(iii) sets forth true, correct and complete lists of each
customer or client of Shareholder and Sellers with respect to the Business
at each Branch who or which had aggregate purchases from July 1, 1993
through December 31, 1993 in excess of $50,000 or who or which had
aggregate purchases during the eleven-month period ended December 3, 1994
in excess of $91,600 (individually, a "Significant Customer"). Exhibit
5.1(l)(iii) also identifies the annual aggregate volume of purchases of
each such customer or client identified thereon in respect of each such
year or period.
(m) Absence of Certain Changes or Events. Since December
31, 1993, except as disclosed in Exhibits to this Agreement or in filings
made by Shareholder prior to the date hereof under the Securities and
Exchange Act of 1934, as amended, each of which filings is identified in
the response to Item 4 of the "Notification and Report Form for Certain
Mergers and Acquisitions (16 C.F.R. Part 803-Appendix)" dated November 18,
1994 filed by Shareholder with the Federal Trade Commission pursuant to the
HSR Act, there has not been any:
(i) change in the financial condition, assets,
liabilities, earnings or business of Sellers or Shareholder, with respect
to the Sites or the Business, except for changes which have been in the
ordinary course of business and which have not, individually or in the
aggregate, been materially adverse to Sellers or Shareholder with respect
to any Branch;
(ii) significant labor trouble, or any material
controversies or material unsettled grievances threatened between Sellers
or Shareholder, on the one hand, and any employee of any Seller or
Shareholder or a collective bargaining organization representing or seeking
to represent any such employee, on the other hand;
(iii) mortgage, pledge or subjection to any Encumbrance
of any of Shareholder's assets (relating to the Sites or the Business) or
Sellers' assets, except the lien of Taxes not yet due and payable;
(iv) sale, assignment or transfer of any assets of
Sellers or Shareholder that are material, singly or in the aggregate, to
the Business other than in the ordinary course;
(v) waiver of any rights of substantial value to
Shareholder (with respect to the Sites or the Business) or Sellers whether
or not in the ordinary course of business;
(vi) cancellation or termination by Shareholder (with
respect to the Sites or the Business) or Sellers of any material contract,
agreement or other instrument to which Shareholder or any of Sellers is or
was a party other than those listed on Exhibit 5.1(l)(i);
(vii) liability incurred by Shareholder (with respect to
the Sites or the Business) or any Seller except liabilities incurred in the
ordinary course of business;
(viii) capital expenditure or the incurring of any
liability therefor with respect to any aspect of the Business except as
reflected in the unaudited financial statements delivered to Buyer pursuant
to Section 5.1(f).
(ix) borrowing of money or guaranteeing of any
indebtedness of others by Shareholder (in respect of or relating to the
Sites or the Business) or any Seller;
(x) lending of any money or otherwise pledging the
credit of Shareholder (with respect to the Sites or the Business) or any
Seller;
(xi) failure to conduct the Business in the ordinary
course;
(xii) change in the method of accounting or accounting
practice of Shareholder (with respect to the Sites or the Business) or any
Seller;
(xiii) loss of services of any employee of any Seller or
Shareholder that is or are material, individually or in the aggregate, to
the conduct of the Business of a Branch;
(xiv) material cancellation by any supplier, customer or
contractor with respect to the Business;
(xv) extraordinary item of loss (as defined in Opinion
No. 30 of the Accounting Principles of Board of the American Institute of
Certified Public Accountants) with respect to or relating to the Sites or
the Business; or
(xvi) agreement by Sellers or Shareholders to do any of
the foregoing.
(n) Compliance with Laws. Sellers and Shareholder have
complied in all material respects with all applicable statutes,
regulations, orders, ordinances and other laws of the United States of
America, all state, local and foreign governments and other governmental
bodies and authorities, and agencies of any of the foregoing relating to
the Business to which they are subject and any undertakings of Sellers and
Shareholder to any of the foregoing. Sellers and Shareholder have not
received any notice to the effect that, or otherwise been advised that,
they are not in compliance with any of such statutes, regulations and
orders, ordinances, other laws or undertakings, and neither Sellers nor
Shareholder have any reason to anticipate that any presently existing
circumstances are likely to result in violations of any such regulations
which could reasonably be expected, in any one case or in the aggregate, to
cause a material loss to the business or otherwise have a material adverse
effect on the Business. To the best of Sellers' and Shareholder's
knowledge, there is not presently pending any proceeding, hearing or
investigation with respect to the adoption of amendments or modifications
to existing laws or ordinances, regulations or restrictions which, if
adopted, would reasonably be expected to materially adversely affect the
present Business.
(o) Transactions with Certain Persons. Except as disclosed
in Exhibit 5.1(o) hereto, no stockholder, officer, director or employee of
Shareholder or any Seller or member of his immediate family is presently a
party to any transaction with Shareholder or any Seller relating to the
Business that is not an arm's length market-priced transaction, including,
without limitation, any contract, agreement or other arrangement (i)
providing for the furnishing of services by, (ii) providing for the rental
of real or personal property from, or (iii) otherwise requiring payments to
(other than services as officers, directors or employees) any such person
or corporation, partnership, trust or other entity in which any such person
has a substantial interest as a shareholder, officer, director, trustee or
partner.
(p) Employees. Exhibit 5.1(p) is a true, correct and
complete list of all employees of Shareholder or any of the Sellers at each
of the Sites (prepared on a Site-by-Site basis) as of November 25, 1994.
(q) Disclosure. As of the date of this Agreement, the
representations of the Shareholder and Sellers in this Agreement or in any
schedule, exhibit, or other documents delivered or made available for
inspection pursuant hereto (taken together) do not include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements included therein or herein, in the light of
the circumstances in which they are made, not misleading.
Section 5.2. Representations and Warranties of Buyer. Buyer
represents and warrants to Shareholder and Sellers as follows (and,
whenever a representation and warranty is made to the knowledge of Buyer,
such representation and warranty shall be deemed to have been made based on
both actual knowledge of Buyer and on the knowledge which Buyer would have
acquired had it conducted a reasonable inquiry of the subject matter of the
representation and warranty):
(a) Organization; Good Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has corporate power and authority to own
or lease its properties and to conduct its business as currently conducted.
(b) Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement, the Management Agreement and the
Assumption Agreement have been authorized and approved by all requisite
corporate action, and no other corporate approval or authorization is
required on the part of Buyer or its shareholders in order to make this
Agreement, the Management Agreement and the Assumption Agreement the valid
and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms, except as enforcement thereof may be limited
by bankruptcy, insolvency, or other similar laws affecting the enforcement
of creditors' rights in general or by general principles of equity.
(c) No Conflict. The execution, delivery and performance
by Buyer of this Agreement, the Management Agreement and the Assumption
Agreement, compliance by Buyer with the provisions of this Agreement, and
the consummation by Buyer of the transactions contemplated hereby (i) will
not violate in any material respect any provision of applicable law to
which Buyer is subject, (ii) will not conflict with any provision of the
Certificate of Incorporation or By-laws of Buyer or conflict with or
constitute a default (or, to its knowledge, an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by any of the terms,
conditions or provisions of any contract, agreement or other instrument
binding on Buyer, which conflict, default, termination or acceleration
would have a material adverse impact upon Shareholder or Sellers, (iii)
except for compliance with the requirements of the HSR Act, does not
require the consent or approval of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, and (iv) does not violate any order, writ,
injunction, decree, arbitral award, statute, rule or regulation applicable
to Buyer, violation of which would have a material adverse impact upon
Shareholder or Sellers.
(d) No Brokers. Buyer has not made contact or had any
dealings with or entered into, and will not enter into, any agreement,
arrangement or understanding with any broker, leasing agent, finder or
similar person or entity with respect to this Agreement and the
transactions contemplated hereby which will result in the obligation of
Shareholder or Sellers to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
<PAGE>
ARTICLE VI
Conditions Precedent to Obligations
of Buyer, Shareholder and Sellers
---------------------------------
Section 6.1. Conditions Precedent to Obligation of Buyer. The
obligation of Buyer to consummate the transaction contemplated by this
Agreement shall be subject to the fulfillment, or the waiver by Buyer, on
or prior to the Closing Date, of the following conditions:
(a) Compliance with Covenants. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and
performed by Shareholder and Sellers on or prior to the Closing Date
(including without limitation all of their obligations and agreements in
Section 4.2(c) hereof) shall have been duly complied with and performed in
all material respects.
(b) Representations and Warranties. The representations
and warranties of Shareholder and Sellers contained in this Agreement shall
be true and correct as of the date made and, in addition, shall be deemed
to have been made again on and as of the Closing Date and shall then be
true and correct, and on the Closing Date, Shareholder and Sellers shall
have delivered to Buyer a certificate to such effect.
(c) Delivery of Closing Documents. Shareholder and Sellers
shall have delivered to Buyer on or prior to the Closing Date all the
documents required to be delivered pursuant to Section 7.1.
(d) Opinion of Counsel for Shareholders and Sellers. Buyer
shall have received an opinion of Norma Skoog, Esquire, general counsel of
Shareholder and Sellers, dated the Closing Date and addressed to Buyer, in
form and substance satisfactory to Buyer, to the effect that:
(i) Shareholder and each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its incorporation, and has the corporate power to carry on the
business of Shareholder and each Seller, as applicable, as it is being
conducted, except that Shareholder has not qualified to do business as a
foreign corporation in the State of New York, but the lack of such
qualification has no material adverse effect on the Business;
(ii) Shareholder and each Seller has full corporate
power and authority to enter into this Agreement, the Management Agreement,
the Assumption Agreement and the bills of sale, assignments and other
instruments of transfer referred to in this Agreement to which it is a
party and to consummate the transactions contemplated hereby, and all
corporate and other proceedings required to be taken by or on the part of
Shareholder and each Seller to authorize it to enter into this Agreement,
the Management Agreement, the Assumption Agreement and the bills of sale,
assignments and other instruments of transfer referred to in this Agreement
and to consummate the transactions contemplated hereby have been duly and
property taken;
(iii) This Agreement, the Management Agreement, the
Assumption Agreement, the bills of sale, assignments and other instruments
of transfer delivered by Shareholders and Sellers pursuant to Section 7.1
to which Shareholder and Sellers is or are a party have been duly executed
and delivered by Shareholder or Sellers, as appropriate, and each
constitutes a legal, valid and binding obligation of Shareholder and
Sellers, as the case may be, enforceable in accordance with its respective
terms;
(iv) The execution, delivery and performance by
Shareholder and Sellers of the agreements and instruments referred to in
paragraph (iii) above to which Shareholder and Sellers is or are a party,
(A) will not conflict with or violate any provision of any applicable law,
rule or regulation or any order, writ, injunction or decree known to such
counsel, (B) will not conflict with any provision of the Certificate of
Incorporation or Code of Regulations or By-laws of Shareholder or any
Seller and, to the knowledge of such counsel, will not conflict with or
result in the breach of any term or provision of, or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon
any of the Purchased Assets pursuant to, any indenture, mortgage, lease,
agreement or other instrument to which Shareholder or any Seller is a party
or by which it is bound (except as otherwise disclosed herein), (C) do not
require the consent or approval of all or any percentage of the
shareholders of Shareholder, and (D) do not require the consent or approval
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality
(except for compliance with the HSR Act); and
(v) To the knowledge of such counsel, there is no
action, suit or proceeding pending or threatened in any Federal, state,
municipal or other court, agency or other governmental body seeking to
restrain or prohibit the consummation of the transactions contemplated
hereby, except as described in such opinion;
and as to such other matters as Buyer may reasonably request. Such opinion
may be limited by its terms to the laws of the United States of America and
the State of Ohio and may be given subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally and be limited to the extent
that enforcement may be affected by the availability of equitable remedies
or the applicability of principles of equity. No opinion need be given
with respect to the bulk sales laws of any jurisdiction. Whenever the
foregoing opinion is qualified by "knowledge," such knowledge shall be
deemed to be both actual knowledge of such counsel and the knowledge which
such counsel would have acquired had such counsel conducted a reasonable
inquiry of the subject matter.
(e) Litigation. As of the Closing Date, there shall not be
in effect any judgment, order, injunction or decree of any court of
competent jurisdiction, the effect of which is to prohibit or restrain the
consummation of the transactions contemplated by this Agreement.
(f) No Material Adverse Effect. (i) There shall not have
been any material adverse change, and neither Shareholder nor any Seller
shall know of any fact, circumstance, event, occurrence, contingency or
condition which might reasonably be expected to result in any such change,
in the Purchased Assets or the Business from that set forth in the
unaudited financial statements for the nine-month period ended
September 30, 1994, except as and to the extent disclosed in the filings
made by Shareholder under the Securities Exchange Act of 1934, as amended,
which were filed prior to the date hereof and which are specifically
identified in the response to Item 4 of the filing identified in Section
5.1(m) hereof, and there shall not have been a material adverse change in
the business or operations of Shareholder or any Seller at any Site; (ii)
other than in the ordinary course of business and at prices and on terms
consistent with the past practice of Shareholder and Sellers, Shareholder
and Sellers shall have made no disposition of, or otherwise removed, any
portion of the Purchased Assets from the Sites; and (iii) the Business
shall have been operated in all material respects only in the ordinary
course of business and consistent with the past practice of Shareholder and
Sellers.
(g) No Change in Law. There shall not have been any
action, or any statute enacted, by any government or agency thereof which
would render the parties unable to consummate the transactions contemplated
herein or make the transactions contemplated herein illegal or prohibit or
restrict the consummation of the transactions contemplated herein. In the
case of failure of the condition set forth in this Section 6.1(g),
Shareholder and Sellers shall deliver to Buyer an opinion of counsel to
such effect, which opinion shall be reasonably acceptable to Buyer.
(h) Approvals and Consents. Consents to assignment of the
Leases and other Assigned Agreements listed on Exhibit 6.1(h) shall have
been obtained by Shareholder and/or Sellers. Each consent to assignment
with respect to each Lease and each other Assigned Agreement listed on
Exhibit 6.1(h) shall also state (i) that such Lease or other Assigned
Agreement has not been amended, modified or supplemented (except as
disclosed on Exhibit 5.1(c)(1)) and is in full force and effect on the
Closing Date, (ii) the date to which payments under such Lease or other
Assigned Agreement listed on Exhibit 6.1(h) has been made and an
acknowledgment that Buyer shall have no liability thereunder for matters
accrued or relating to periods of time on or prior to the Closing Date,
(iii) that there is no default or event which, with notice or the passing
of time or both, would constitute a default existing under such Lease or
other Assigned Agreement listed on Exhibit 6.1(h) and (iv) that there are
no setoffs, defenses or counterclaims against enforcement of the
obligations to be performed under such Lease or other Assigned Agreement in
favor of the party executing such consent.
(i) HSR Act. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
(j) Release of Borrowing Arrangements and Other Liens. The
lien of the Borrowing Arrangements and of any other Encumbrance on the
Purchased Assets shall have been released and executed instruments of
release and termination statements satisfactory to Buyer (including,
without limitation, the agreements pertaining to release of security
interests and related matters required by Section 4.2(c)) shall have been
delivered to Buyer.
(k) Purchase Orders and Invoices. All purchase orders and
invoices from customers and clients for the purchase of products or
services from the Business and that constitute Assigned Agreements shall be
reasonably satisfactory to Buyer; provided that the representations and
warranties of Seller Parties relating to Assigned Agreements shall in no
way be diminished by virtue of the satisfaction or waiver by Buyer of this
condition.
(l) Inventory Segregation. Shareholder shall have advised
Buyer in writing that the segregation of inventory pursuant to Section 8.6
will be completed by the opening of the first business day following the
Closing Date.
(m) Receivables Certification. The certificate delivered
by the Chairman of the Board or President of Shareholder pursuant to
Section 7.1(b) shall also certify that the aggregate face amount of
Receivables outstanding on the Closing Date not more than 75 days from the
earlier of the date of the shipment or the date of the invoice or other
instrument giving rise thereto, less applicable reserves determined in
accordance with generally accepted accounting principles, is not less than
$4,600,000; provided, however, that if such certificate reflects such
outstanding Receivables on the Closing Date in an aggregate face amount
(net of reserves determined in accordance with generally accepted
accounting principles) less than $4,600,000, Buyer shall have the right to
reduce the Purchase Price by a dollar amount equal to the dollar amount of
such shortfall.
(n) Lock-Box Agreements. Buyer shall have entered into
lock-box agreements with the Bank on terms and conditions acceptable to
Buyer with respect to the lock-boxes referred to in Section 4.2(c).
(o) Closing under Basic Purchase Agreement. The closing
under the Basic Purchase Agreement shall have previously or
contemporaneously occurred.
(p) Absence of Certain Actions; Receipt of Certain
Confirmations. No bankruptcy, reorganization, arrangement or insolvency
proceedings or other proceedings for relief under any bankruptcy or similar
law or laws for the relief of debtors shall have been instituted by or
against any of the Seller Parties, and no custodian, trustee or receiver
shall have been appointed for any of the Seller Parties.
Section 6.2. Conditions Precedent to Obligations of Shareholder
and Sellers. The obligations of Shareholder and Sellers to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment or waiver by Shareholder, on or prior to the Closing Date, of
the following conditions:
(a) Compliance With Covenants. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and
performed by Buyer on or prior to the Closing Date shall have been duly
complied with and performed in all material respects.
(b) Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall be true and
correct as of the date made and, in addition, shall be deemed to have been
made again on and as of the Closing Date and shall then be true and
correct, and on the Closing Date, Buyer shall have delivered to Shareholder
and Sellers a certificate to such effect.
(c) Delivery of Closing Documents. Buyer shall have
delivered to Shareholder and Sellers on or prior to the Closing Date all
the documents required to be delivered pursuant to Section 7.2.
(d) Opinion of Counsel for Buyer. Shareholder shall have
received an opinion of counsel for Buyer dated the Closing Date and
addressed to Shareholder and Sellers, and in form and substance
satisfactory to Shareholder, to the effect that:
(i) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has corporate power to carry on the business of Buyer as
it is being conducted;
(ii) Buyer has full corporate power and authority to
enter into each of this Agreement, the Management Agreement and the
Assumption Agreement and to consummate the transactions contemplated
hereby, and all corporate and other proceedings required to be taken by or
on the part of Buyer to authorize it to enter into each of this Agreement,
the Management Agreement and the Assumption Agreement and to consummate the
transactions contemplated hereby have been duly and properly taken;
(iii) Each of this Agreement, the Management Agreement
and the Assumption Agreement has been duly executed and delivered by Buyer
and each constitutes a legal, valid and binding obligation of Buyer,
enforceable in accordance with its respective terms; and
(iv) The execution, delivery and performance by Buyer
of this Agreement, the Management Agreement and the Assumption Agreement,
(A) will not conflict with or violate any provision of any applicable law,
rule or regulation or any order, writ, injunction or decree known to such
counsel, (B) will not conflict with any provision of the Certificate of
Incorporation or By-laws of Buyer and, to the knowledge of such counsel,
will not conflict with or result in a breach of any term or provision of,
or constitute a default under, any indenture, mortgage, lease, agreement or
other instrument to which Buyer is a party or by which it is bound (except
as otherwise disclosed), (C) do not require the consent or approval of, or
registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality (except
for compliance with the HSR Act) and (D) do not require the approval or
consent of Buyer's shareholders;
(v) To the knowledge of such counsel, there is no
action, suit or proceeding pending or threatened in any Federal, state,
municipal or other court, agency or other governmental body seeking to
restrain or prohibit the consummation of the transactions contemplated
hereby, except as described in such opinion;
and as to such other matters as Shareholder and Sellers may reasonably
request. Such opinion may be limited by its terms to the laws of the
United States of American and the Commonwealth of Pennsylvania and may be
given subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforceability of
creditors' rights generally and be limited to the extent that enforcement
may be affected by the availability of equitable remedies or the
applicability of principles of equity. No opinion need be given with
respect to the bulk sales laws of any jurisdiction. Whenever the foregoing
opinion is qualified by "knowledge," such knowledge shall be deemed to be
both actual knowledge of such counsel and the knowledge such counsel would
have acquired had such counsel conducted a reasonable inquiry of the
subject matter.
(e) Consideration. The Purchase Price shall have been paid
to Sellers in accordance with Section 3.1.
(f) Litigation. As of the Closing Date, there shall not be
in effect any judgment, order, injunction or decree of any court of
competent jurisdiction, the effect of which is to prohibit or restrain the
consummation of the transactions contemplated by this Agreement.
(g) No Change in Law. There shall not have been any
action, or any statute enacted, by any government or agency thereof which
would render the parties unable to consummate the transactions contemplated
herein or make the transactions contemplated herein illegal or prohibit or
restrict the consummation of the transactions contemplated herein. In the
case of failure of the condition set forth in this Section 6.2(g), Buyer
shall deliver to Shareholder and Sellers an opinion of counsel to such
effect, which opinion shall be reasonably acceptable to Shareholder.
(h) HSR Act. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
ARTICLE VII
Documents to be Delivered on Closing Date
-----------------------------------------
Section 7.1. Documents to be Delivered by Shareholder and
Sellers on Closing Date. On the Closing Date, Shareholder and Sellers
shall deliver to Buyer, in form and substance reasonably satisfactory to
Buyer and its counsel:
(a) Conditions Precedent. The documents, agreements and
instruments referred to in Section 6.1 as conditions precedent to the
obligations of Buyer, and, if a Pre-Closing Assignment has not occurred, a
copy of the Management Agreement executed by Shareholder.
(b) Officer's Certificates. Certificates signed by the
Chairman of the Board or President of Shareholder and the Vice President
and Treasurer of each Seller to the effect set forth in Section 6.1(b) and
stating that the conditions set forth in Section 6.1 have been satisfied,
and that Shareholder and each Seller have complied with each of their
covenants and agreements contained in this Agreement.
(c) Bills of Sale. Bills of sale, assignments and other
instruments of transfer duly executed by the Sellers and Shareholder
conveying the Purchased Assets on the Closing Date to Buyer.
(d) Assumption Agreement. The Assumption Agreement duly
executed by Seller.
(e) Further Instruments. Such further instruments of
assignment, conveyance or transfer or other instruments covering the
Purchased Assets or any part thereof, and such further instruments with
respect to the transactions contemplated hereby, as Buyer may reasonably
request.
(f) Schedule of Receivables. A schedule of the Receivables
attributable to each Branch together with a statement of the aggregate
amount of the Sellers' reserve for doubtful accounts, as of the close of
business on the second business day prior to the Closing Date. Said
schedule of Receivables shall be attached to (or separately delivered in
connection with) the certificate of the Chairman of the Board or President
of Shareholder to be delivered pursuant to Section 6.1(m) and Section
7.1(b) and shall be updated to be as of the Closing Date within two
business days following the Closing Date.
(g) Satisfaction or Certain 1994 Tax Liabilities. Evidence
of payment of all calendar year 1994 unemployment, payroll, sales, use and
similar Tax liabilities of Shareholder and Sellers with respect to the
Business to the extent payable on or prior to the Closing Date and copies
of all documents filed in accordance with Section 8.1(h).
(h) Termination Statements and Financing Statements;
Notices to Creditors. UCC-3 termination statements terminating security
interests in the Purchased Assets and UCC-1 financing statements covering
the Receivables, Purchased Inventory and Other Property and identifying
Buyer as the secured party and Seller Parties as the debtors (such UCC-1
financing statements to be delivered and filed for notice purposes). In
furtherance of the agreement of Shareholder and Sellers in Section 4.2(e),
arrangements with a fulfillment house on terms reasonably satisfactory to
Buyer shall be in effect relating to notices to secured and unsecured
creditors holding claims aggregating in excess of $10,000 to the effect
that assets at the Sites are the property of Buyer and that Shareholder and
Sellers have no ownership interest in such assets.
(i) Termination of Certain Franchise Agreements.
Agreements pursuant to which Shareholder and Sellers (as applicable), as
franchisees, and RND, Inc., a wholly-owned subsidiary of Buyer, as
franchisor, terminate the franchise agreements (or applicable addenda to
franchise agreements) applicable to the Business and each Site; provided,
however, that the termination agreements shall not release Buyer,
Shareholder and Sellers from any unpaid or undischarged liabilities or
obligations they may have under such agreements as of the termination date
thereof; and provided further that the termination agreements shall not
restrict Shareholder from performing its obligations under, and in
accordance with, the Management Agreement.
(j) Adjustments Under Assigned Agreements. Payment in an
amount equal to the excess of (1) the aggregate amount of payments
Shareholder and any Sellers shall have received under the Assigned
Agreements (i) on account of services to be rendered by Buyer to any third
parties by virtue of Buyer's assumption of obligations under the Assigned
Agreements or (ii) relating to the period after the Closing Date over (2)
$50,000; provided that the foregoing $50,000 threshold shall be reduced
dollar for dollar by the amount of any payments retained by Shareholder or
any Seller pursuant to Section 7.1(j) of the Basic Purchase Agreement on
account the $50,000 threshold contained therein, together with a schedule,
certified by the Chief Financial Officer of Shareholder as to the
components of such aggregate amount.
(k) Employees. A list of all employees of Shareholder or
any of the Sellers at each of the Sites (prepared on a Site-by-Site basis)
as of a date within ten business days prior to the Closing Date.
Section 7.2. Documents to be Delivered by Buyer on Closing Date.
On the Closing Date, Buyer shall deliver to Shareholder and Seller, in form
and substance reasonably satisfactory to Shareholder and Seller and their
counsel:
(a) Conditions Precedent. The payments, documents,
agreements and instruments referred to in Section 6.2 as conditions
precedent to the obligations of Shareholder and Sellers, and, if a Pre-
Closing Assignment has not occurred, a copy of the Management Agreement
executed by Buyer.
(b) Officer's Certificate. A certificate signed by the
President of Buyer to the effect set forth in Section 6.2(b) and stating
that the conditions set forth in Section 6.2 have been satisfied, and that
Buyer has complied with each of its covenants and agreements contained in
this Agreement.
(c) Assumption Agreement. The Assumption Agreement duly
executed by Buyer.
(d) Further Instruments. Such further instruments with
respect to the transactions contemplated hereby, including instruments of
assumption, as Shareholder may reasonably request.
ARTICLE VIII
Further Covenants and Agreements
of Shareholder, Sellers and Buyer
---------------------------------
Section 8.1. Further Covenants and Agreements of Shareholders
and Sellers.
(a) Conduct of Business Pending Closing. From and after
the date of this Agreement to and including the Closing Date, Shareholder
and each Seller:
(i) will maintain the Other Property and not remove
any Other Property from the Sites, except in the ordinary course of
business, and at prices and on terms consistent with past practices;
(ii) will perform, in all material respects, its
obligations under the Business Agreements and Assigned Agreements;
(iii) will conduct the Business only in the ordinary
course, consistent with past practice, and, without limiting the generality
of the foregoing, will not incur any expenses relating to the Business of a
kind or in an amount inconsistent with the kind and amount of expenses
reflected in the operating expense register contained in Exhibit
5.1(f)(iii);
(iv) will not do, or cause to be done, anything which
is represented or warranted not to have been done in this Agreement, except
as otherwise expressly permitted herein;
(v) will not (A) fail to comply in any material
respect with any laws, ordinances, regulations or other governmental
restrictions applicable in any respect to the business or any of the
Purchased Assets, (B) grant any powers of attorney to act for the Business
after the Closing Date, (C) mortgage or pledge or otherwise encumber any of
the Purchased Assets except as required under the Borrowing Arrangements,
(D) cancel or terminate any contract, agreement or other instrument
material to the Business, other than contracts, agreements and other
instruments that are not Purchased Assets unless Shareholder or Sellers are
otherwise obligated to maintain them in effect, (E) engage in or enter into
any material transaction with respect to the Business of any nature not
expressly provided for herein or (F) amend, modify or supplement any
Business Agreement or Assigned Agreement or grant any unusual or extended
terms with respect to any purchase order or invoice; and
(vi) will from and after the date hereof to and
including the Closing Date (A) take such action as may reasonably be
necessary to preserve the Purchased Assets, wherever located, (B) maintain
inventory of the kinds and in the quantities maintained in the ordinary
course of the Business, (C) maintain its books and records in a manner
consistent with past practices and promptly advise Buyer in writing of any
material adverse change in the condition (financial or otherwise) of the
Purchased Assets or the Business, (D) maintain in full force and effect the
insurance policies set forth in Exhibit 5.1(j) (or policies providing
substantially the same coverage, copies of which will be made available to
Buyer) and (E) use its best efforts to preserve the organization of the
Business intact and continue its operations at its present levels, and to
preserve the goodwill of Shareholder's and Sellers' suppliers, customers,
creditors and others having business relations with Shareholder and Sellers
in connection with the Business.
(b) Non-Competition; Non-Solicitation; Certain Other
Matters.
(i) From and after the Closing Date to and including
the first anniversary of the date of termination of the Management
Agreement with respect to any Branch: neither Shareholder, any Seller nor
any Affiliate or subsidiary of Shareholder or any Seller will (i) directly
or indirectly engage in any capacity in a business that is substantially
similar to the Business in the Business Area of such Branch or (ii) take
any action or omit to take any action which can reasonably be expected to
divert any business from any such Branch. In addition, at all times after
the Closing Date until the first anniversary of the date of termination of
the Management Agreement with respect to any Branch, neither Shareholder,
any Seller nor any Affiliate or subsidiary of Shareholder or any Seller
will conduct business within the Business Area of such Branch under any
trade names or trademarks currently or previously used by any of them in
the Business Area of such Branch. The foregoing restrictions shall not be
construed to restrict Shareholder from performing its obligations under,
and in accordance with, the Management Agreement. Until the later of (i)
the first anniversary of the termination of the Management Agreement in
respect of a Branch and (ii) the date on which Buyer has sold such Branch
to an unrelated third party, Buyer will have the right to operate each
Branch under the trade names currently owned and used by Seller Parties in
the operation of such Branch.
(ii) From and after the Closing Date to and including
the date on which Buyer transfers ownership of all of the Branches to an
unaffiliated third party, Shareholder will promptly notify Buyer (but only
if Buyer is Intelligent Electronics, Inc. or one or more direct or indirect
subsidiaries of Intelligent Electronics, Inc.), upon the request of Buyer,
of any agreement or transaction it or any of its subsidiaries has entered
into with a Significant Customer (or affiliate of a Significant Customer)
of any of the Branches then owned by Buyer and the nature and value of any
such agreement or transaction.
(iii) Shareholder hereby confirms that since November
25, 1994, it has not relocated any of the individuals identified on Exhibit
5.1(p) to a different location from the location specified thereon, and
agrees that from the date hereof until the date of termination of the
Management Agreement: (a) it will not relocate any of such individuals to
a different location without Buyer's prior written consent, and (b) it will
not permit or require any of such individuals to perform services for
Shareholder or Sellers or have responsibilities for Shareholder or Sellers
otherwise than in connection with the Management Agreement and operations
at the Sites. The confirmation and agreement of Shareholder contained in
this clause (iii) shall be applicable only to individuals who are located
at one of the Sites and (a) who have sales or customer support
responsibilities relating to the Business or (b) whose responsibilities
relate solely to the Business. In addition, Shareholder agrees that from
and after the date hereof until the date of termination of the Management
Agreement, it will not, without Buyer's prior written consent, permit or
require any individual (whether or not located at a Site) employed by
Shareholder to perform services for Shareholder or Sellers or have
responsibilities for Shareholder or Sellers inconsistent with such
individual's responsibilities as of November 1, 1994 if his or her
responsibilities as of November 1, 1994 were primarily sales-related or
customer-support-related in respect of any of the Branches and if any such
change in responsibilities would have an adverse effect on customer
relations of the Branches or sales efforts of, or for the benefit of, the
Branches.
(iv) All employees of Shareholder and Sellers as of the
Closing Date will remain employees of Shareholder and Sellers as of the
Closing Date, and for so long as such employees remain employed by
Shareholder or any Seller, Shareholder and Sellers will remain solely
responsible for compliance with, and will comply with, all federal, state
and local employment laws applicable to the employment of such employees.
Nothing in this Agreement, or in any other agreement between the parties,
shall be deemed to require Buyer to offer employment to any or all of the
employees of Shareholder or Sellers. Sellers and Shareholder shall be
solely responsible to provide any notices of layoff, termination or plant
closing under any applicable federal, state or local law, regulation or
ordinance including but not limited to the Worker Adjustment and Retraining
Notification Act.
(v) For the duration of the Management Agreement,
Buyer will not offer employment to any individual who is an employee of
Shareholder or Sellers at any Site covered by the Management Agreement,
unless: (a) such employee's employment with Shareholder or a Seller has
terminated, (b) Shareholder or a Seller consents to such offer, or (c)
either Shareholder or a Seller or Buyer has given notice of termination of
the Management Agreement with respect to such Site. Buyer will not be a
sponsor of any employee benefit plan provided by Shareholder or any Seller
to its employees, and will have no obligation to contribute to any such
employee benefit plan, directly or indirectly. In the event notice of
termination of the Management Agreement with respect to a Site is provided
by either Shareholder or Buyer and Buyer (or the purchaser of such Site
from Buyer) has expressed an intention to consider offering employment to
employees of Shareholder or a Seller at such Site (either directly or
through an affiliate), Shareholder shall:
(A) provide Buyer (or such purchaser) with a
listing of the name, location, title, date of employment, salary, and
bonuses of each such employee and use its best efforts to assist Buyer (or
such purchaser) in hiring each such employee and will release each such
employee from any non-competition agreement executed by such employee to
the extent such agreement would, by its terms, restrict such employee's
ability to work for Buyer (or such purchaser);
(B) provide Buyer (or such purchaser) with copies
of all employment agreements and collective bargaining agreements covering
any of such employees;
(C) disclose to Buyer (or such purchaser) any
pending or threatened charges, complaints, investigations, litigation,
grievances which are reasonably likely to have, either individually or in
the aggregate, a material adverse effect on the conduct of the operations
of the Business, or disputes involving any such employees or former
employees at the location, or involving any employee benefit plans covering
such employees or former employees;
(D) disclose to Buyer (or such purchaser) any
labor disputes, including but not limited to any union demands or efforts
to gain recognition as the bargaining representative of employees of
Shareholder and Sellers at any Site, any repeated or continued picketing at
any Site, or any repeated or continuing handbilling or other form of
concerted labor activity directed to Shareholder or any Seller or their
employees at any Site;
(E) as and when requested by Buyer (or such
purchaser), release each such employee from any confidentiality and non-
competition agreement between such employee and any Seller Parties or, at
Buyer's (or such purchaser's) option, assign such agreements to Buyer (or
such purchaser) (but only if such agreements are assignable); provided that
Shareholder's release of an employee from its obligations under a
confidentiality agreement for the benefit of a Buyer (or such purchaser)
who is not Intelligent Electronics, Inc. or one of its subsidiaries shall
not extend to any confidential information of Shareholder that a reasonable
purchaser of the Business in an arm's-length transaction would not expect
the employee to be able to utilize on its behalf following its acquisition
of the Business;
(F) disclose to Buyer (or such purchaser) whether
Shareholder or any Seller or any ERISA Affiliate has suffered a "plant
closing" or "mass layoff" within the meaning of the Worker Adjustment and
Retraining Notification Act;
(G) disclose to Buyer (or such purchaser) any
failure to comply in all material respects with any law, rule, or
regulation relating to the employment of such employees, including those
relating to wages, hours, terms and conditions of employment, collective
bargaining, and the payment of social security and unemployment taxes and
the forwarding of income taxes withheld from employees;
(H) provide Buyer (or such purchaser) with copies
of plan documents, plan descriptions, and employee communications, with
respect to all employee benefit plans covering any such employees during
the twelve-month period prior to such offer of employment;
(I) disclose to Buyer (or such purchaser) whether
any current or former employee is absent on a military leave of absence and
eligible for rehire under the terms of the Uniformed Services Employment
and Reemployment Rights Act of 1994 and whether any current or former
employee is absent on a period of disability or other leave of absence for
any other reason, which would, in any case, allow such employee either to
obtain restoration of any employee benefit plan contributions or accruals
or be reinstated as an employee;
(J) disclose to Buyer (or such purchaser) such
other employment-related information as Buyer may reasonably request,
subject to Shareholder's consent, which shall not be unreasonably withheld;
and
(K) until the first anniversary of the date of
termination of the Management Agreement, refrain from offering employment
to any person to whom Buyer (or such purchaser) or an affiliate of Buyer
(or such purchaser) offers employment unless (a) such employee's employment
with Buyer (or such purchaser) or an affiliate of Buyer (or such purchaser)
terminates or (b) Buyer (or such purchaser) consents to such offer.
For purposes of this Section, the term "employee benefit plan"
means any plan, program or arrangement providing nonqualified or qualified
deferred compensation, pension, profit sharing, stock option, stock
purchase, group insurance, accident, sickness, medical, dental, disability,
vacation pay, severance pay, incentive compensation, consulting agreements,
bonus or other employee benefits or fringe benefits, whether or not such
plans, programs and arrangements constitute "employee benefit plans" within
the meaning of Section 3(3) of ERISA, and whether or not such plans,
programs or arrangements are in the nature of formal or informal
understandings. As used in this Section, the term "ERISA" means the
Employment Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder or with respect thereto, and
the term "ERISA Affiliate" means any individual, corporation, or trade or
business that is a member of a controlled group of corporations or of a
trade or business under common control with Seller, as defined in Section
414(b), (c), (m), or (o) of ERISA.
(c) Certain Information; Access to Businesses. Shareholder
and Sellers will make available to Buyer prior to the Closing Date, upon
reasonable notice, any Qualified Documents and such other information as
Buyer shall reasonably request, provided that such information (i) relates
to the Business and (ii) is available to Shareholder or Sellers.
Shareholder and Sellers shall, from the date hereof up to and including the
Closing Date, permit Buyer and Buyer's attorneys, accountants, agents and
representatives full access to the books, records, business and assets of
Shareholder and Sellers (as such relate to the Business) at any reasonable
time and in any reasonable manner on reasonable advance notice and in a
manner that does not interrupt Shareholder's and Sellers' respective
businesses. Buyer shall have the right to meet with customers and
suppliers of Shareholder and Sellers with respect to the Sites and Sellers
and Shareholder will give Buyer full cooperation with respect thereto;
provided, however, that Shareholder and Sellers shall not be obligated to
cause such meetings to occur.
(d) Mutual Cooperation. The parties hereto will cooperate
with each other, and will use all reasonable efforts to cause the
fulfillment of the conditions to the parties' obligations hereunder and to
obtain as promptly as possible all consents, authorizations, orders or
approvals from each and every third party, whether private or governmental,
required in connection with the transactions contemplated by this
Agreement.
(e) Further Assurances. Sellers and Shareholder will
cooperate fully with Buyer in connection with the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, from
and after the Closing Date, from time to time, at Buyer's request and
without further consideration, Sellers and Shareholder will execute and
deliver such other instruments (including powers of attorney to the extent
required to collect the Receivables) and take such other action as Buyer
may reasonably request to more effectively put Buyer in possession and
operating control of all or any part of the Purchased Assets.
(f) No Mergers, Consolidations, Sales of Assets, Etc.
Until the earlier of the consummation of the transactions contemplated by
this Agreement, the termination date provided in Section 9.2 or, if all of
the conditions set forth in Section 6.1 have been satisfied or waived by
Buyer, January 15, 1995, neither Sellers nor Shareholder will, directly or
indirectly, through employees or agents: (i) enter into agreements
relating to the sale or exchange of the capital stock of Shareholder (other
than issuances of common stock pursuant to stock option plans of
Shareholder or the 401(k) plan of Shareholder in effect on the date hereof
or pursuant to conversion of convertible debt, whether or not outstanding
on the date hereof) or any Seller, the merger of Shareholder or any Seller
with, or the direct or indirect acquisition or disposition of all or any
material portion of the assets of Shareholder and its consolidated
subsidiaries (other than in the ordinary course of business consistent with
past practices), (ii) solicit any prospective purchaser for all or any part
of their properties, rights and assets relating to the Sites, other than in
the ordinary course of business consistent with their past practices, (iii)
hold discussions with any prospective purchaser for all or any part of
their properties, rights and assets relating to the Sites, other than in
the ordinary course of business consistent with their past practices, (iv)
provide any information to any prospective purchaser or an agent of any
such prospective purchaser which would facilitate purchase discussions
between Seller Parties and any such prospective purchaser or (v) take any
action which would reasonably be expected to materially and adversely
impact the consummation of the transactions contemplated hereby.
(g) Shareholder's Financial Statements. Shareholder will
deliver to Buyer, promptly after such statements become available, copies
of its statements of profits and losses for each Site for each of the
months ending after September 30, 1994 and prior to the Closing Date. Such
statements shall be prepared on a basis consistent with the unaudited
statements delivered pursuant to Section 5.1(f), and shall be true and
correct and shall fairly reflect the profits and losses and business
operations of each Site as at the date of each such statement. All
information in such monthly financial statements shall be separately stated
for each Site.
(h) Taxes. Seller Parties shall take all actions and shall
file all estimates or reports related to the state and local Tax
requirements of the State of California to insure that Buyer (i) shall not
be liable under the laws of such State for the payment of any Taxes as a
result of the consummation of the transactions contemplated by this
Agreement and (ii) to the extent possible, will not be required to withhold
any portion of the Purchase Price. Seller Parties shall also pay all
federal, state and local Taxes relating to periods prior to the Closing,
but payable after the Closing, as or before such Taxes become due.
(i) Telephone and Facsimile Numbers. Shareholder and
Sellers shall have delivered to Buyer letters from Shareholder and Sellers
addressed to the telephone companies providing services to the Business
instructing such companies to transfer to Buyer the telephone and fax
numbers relating to the Business or shall have agreed in the Management
Agreement to effect the foregoing upon termination of the Management
Agreement.
(j) Availability of Documents for Audit. Until
December 31, 1997, Shareholder and Sellers agree to make available to
Buyer, upon written request of Buyer and at Buyer's expense, all financial
and accounting books, work papers and records and to make customary
representations and assurances to the auditors, in each case relating to
the Purchased Assets and the Sites necessary for the preparation of audited
financial statements with respect to the Sites for Buyer's 1991, 1992,
1993, 1994 and 1995 fiscal years by an independent certified public
accountant selected by Buyer.
(k) Access to Purchase Order and Invoice Records. Between
the date hereof and the Closing Date, Shareholder and Sellers will provide
Buyer and its accountants and representatives with reasonable access to all
purchase order invoice files and other records located at the Sites and in
Cincinnati, Ohio and facilities for the review and copying of such purchase
orders and invoices.
(l) Update of Backlog Report. On or prior to the second
business day following the Closing Date, Shareholder will provide Buyer
with a true and correct backlog report for the Business attributable to
each Branch as of the Closing Date and on or prior to the third business
day following the Closing Date, Shareholder will provide Buyer with a true
and correct backlog report as of the first business day after the Closing
Date.
Section 8.2. Consents to Assignments; Permits.
(a) Anything in this Agreement or the bills of sale
notwithstanding, but without limiting Buyer's rights under Section 6.1, to
the extent that any Assigned Agreement to be sold, assigned, transferred or
conveyed to Buyer, or any claim, right or benefit arising thereunder or
resulting therefrom (the "Interests"), is not capable of being sold,
assigned, transferred or conveyed without the approval, consent or waiver
of the other party thereto, or any third person (including a government or
governmental unit), or if such sale, assignment, transfer or conveyance or
attempted sale, assignment, transfer or conveyance would constitute a
breach thereof or a violation of any law, decree, order, regulation or
other governmental edict, except as expressly otherwise provided herein,
this Agreement shall not constitute a sale, assignment, transfer or
conveyance thereof, or an attempted sale, assignment, transfer or
conveyance thereof. After the Closing, until any Interest has been validly
and effectively sold, assigned and transferred to Buyer, Shareholder and
Sellers, as the case may be, shall hold such Interest in trust for the sole
benefit of Buyer and Buyer shall be entitled to receive all benefits under
such Interest and, on the condition that Buyer in fact realizes such
benefits, Buyer shall be responsible for the obligations under such
Interest to the extent relating to the benefits received.
Neither Shareholder nor Sellers are obligated to sell, assign,
transfer or convey to Buyer any of its rights and obligations in and to any
of the Interests without first obtaining all necessary approvals, consents
or waivers. Shareholder and Sellers shall use their best efforts, and
Buyer shall cooperate with Shareholder and Sellers, to obtain all necessary
approvals, consents or waivers, or to resolve any impracticalities of
transfer referred to in this Section necessary to sell, assign, transfer
and convey to Buyer each such Interest as soon as practicable; provided,
however, that neither Shareholder, Sellers nor Buyer shall be obligated to
pay any consideration therefor to the third party from whom such approval,
consent or waiver is requested or waive or compromise any rights against
such third party or commence any litigation or other proceeding against any
third party.
(b) Shareholder and Sellers shall cooperate with Buyer to
obtain as of the Closing Date or as promptly thereafter as practicable all
permits and licenses required to be obtained on the part of Buyer from any
governmental agency with respect to the operation by Buyer of the Purchased
Assets or the Business (including, without limitation, environmental and
other operating permits). Shareholder and Sellers will assign, transfer or
convey to Buyer at the Closing those permits and licenses which can be
assigned without having to obtain the consent of any third party with
respect thereto, and Shareholder and Sellers will cooperate with Buyer in
obtaining any third party consents necessary to the assignment or transfer
of any other permits and licenses which are not so assignable or
transferable. Subsequent to the Closing, to the extent permitted by law,
Shareholder and Sellers shall have the right to cancel any permits or
licenses or any bonds, guarantees or undertakings by Shareholder or Sellers
that do not constitute Purchased Assets or Assumed Liabilities.
(c) Buyer and Seller Parties agree that, notwithstanding
any other provisions hereof, for so long as the Management Agreement
remains in effect, the Agreement dated November 1, 1993, as amended by
amendment number one thereto dated May 1, 1994 (the "Becraft Agreement"),
between Premium and Becraft Enterprises, Inc. ("Becraft") will not be
assigned to Buyer, and Seller Parties shall remain responsible for all
commissions payable thereunder that relate to non-Branch sales effected by
Becraft, and any commissions payable thereunder relating to Branch sales
will constitute a direct expense of the Branch for purposes of the
Management Agreement. The computation of "gross profit" for purposes of the
5% threshold in Schedule B to the Becraft Agreement shall be computed with
respect to Branch sales only (not Branch and non-Branch sales combined).
The Becraft Agreement shall be assigned by Premium to Buyer or its assignee
at the termination of the Management Agreement only with the prior consent
of Becraft.
(d) Seller Parties agree not to seek the return of any
deposit under a Lease until the earlier of (i) termination of such Lease
(together with a release by the landlord of Buyer from any liability under
the Lease for the period prior to the Closing) and (ii) the date on which
the landlords under each of the Leases has agreed that Buyer shall have no
liability thereunder for the period of time preceding the Closing.
Section 8.3. Mutual Covenants. Shareholder, Sellers and Buyer
each agree that:
(a) Best Efforts to Meet Closing Conditions. Shareholder,
Sellers and Buyer shall use their best efforts to cause the conditions
precedent set forth in Article VI to be satisfied; provided, however, that
neither Shareholder, Sellers nor Buyer shall be obligated to pay any
consideration therefor to any third party from whom an approval, consent or
waiver is requested or waive or compromise any rights against any third
party or commence any litigation or other proceeding against any third
party.
(b) Announcements; Confidentiality. Except as otherwise
required by law or order or decree of any court of competent jurisdiction
or governmental authority, (i) neither Shareholder, Sellers nor Buyer shall
issue any press releases or make any announcement to the public of the
transactions contemplated hereby other than jointly or as otherwise agreed
by them and (ii) Buyer, Shareholder and Sellers will keep confidential any
information not otherwise publicly available which is derived from access
to, or investigation or information furnished by, Buyer, Shareholder or
Sellers in connection with this Agreement, including the negotiations
conducted in connection herewith and all drafts hereof; provided that the
foregoing shall not restrict the ability of Buyer to provide to any third
party, in connection with a possible sale to such third party of one or
more of the Branches, such information as would be reasonably be expected
to be disclosed to a prudent buyer in an arm's-length transaction.
(c) HSR Filing. Buyer, Shareholder and Sellers have each
filed pursuant to the HSR Act and shall promptly and diligently provide any
additional information required or reasonably requested in order to comply
with the requirements of the HSR Act. All filing fees applicable to
compliance with the HSR Act in connection with this Agreement shall be
shared equally by Buyer and Seller Parties.
(d) Access to Records. Without limiting rights provided
elsewhere herein or in the Management Agreement, Shareholder and Sellers
will make available to Buyer and Buyer will make available to Shareholder
and Sellers at reasonable times and upon reasonable prior notice on and
after the Closing Date, reasonable access to all files, books, records and
customer data relating to the Business.
(e) Changes in Representations and Warranties. Between the
date of this Agreement and the Closing Date, neither Sellers nor
Shareholder shall permit Sellers to, nor shall Shareholder, enter into any
transaction, take any action, or by inaction, permit an event to occur,
which would result in any of the representations and warranties of Sellers
or Shareholder herein contained not being true and correct at and as of
(i) the time immediately following the occurrence of such transaction or
event or (ii) the Closing Date. Each of Sellers and Shareholder shall
promptly give written notice to Buyer upon becoming aware of (A) any fact
which, if known on the date hereof, would have been required to be set
forth or disclosed pursuant to this Agreement, and (B) any impending or
threatened breach in any material respect of any of the representations and
warranties contained in this Agreement and with respect to the latter shall
use all reasonable efforts to remedy same. Between the date of this
Agreement and the Closing Date, Buyer shall not enter into any transaction,
take any action, or by inaction, permit an event to occur, which would
result in any of the representations and warranties of Buyer herein
contained not being true and correct at and as of (i) the time immediately
following the occurrence of such transaction or event or (ii) the Closing
Date. Buyer shall promptly give written notice to Shareholder upon
becoming aware of (A) any fact which, if known on the date hereof, would
have been required to be set forth or disclosed pursuant to this Agreement,
and (B) any impending or threatened breach in any material respect of any
of the representations and warranties contained in this Agreement and with
respect to the latter shall use all reasonable efforts to remedy same.
Section 8.4. Survival of Representations and Warranties;
Indemnities. (a) All covenants and agreements of the parties made in this
Agreement or provided herein shall survive the Closing Date without limit,
unless otherwise specifically provided herein. All representations and
warranties of the parties made in this Agreement or as provided herein
shall survive the Closing Date for a period ending April 30, 1996,
notwithstanding any investigation at any time made by or on behalf of the
other party; provided, however, that the representations and warranties
relating to any Tax shall survive until six months after the applicable
statute of limitations (or any extension thereof) has expired (as the case
may be, the applicable "Survival Period"), and provided, further, that any
representation or warranty which is the subject of a claim or dispute
asserted prior to the expiration of the Survival Period shall survive with
respect to such claim or dispute until final resolution thereof.
(b) Shareholder and Sellers, jointly and severally, hereby
agree to indemnify and hold Buyer and its shareholders, subsidiaries,
officers, directors and other affiliates harmless from and against any and
all claims, liabilities, losses, damages or injuries, together with costs
and expenses, including reasonable legal fees, arising out of or resulting
from (i) any incorrectness in the representations and warranties made by
Shareholder or any Seller in this Agreement or the Management Agreement,
(ii) any breach in any material respect by Shareholder or any Seller,
unless waived, of any covenant or agreement of Shareholder or any Seller
contained in or arising out of this Agreement or the Management Agreement
and any claim by a third party that is found by a court of competent
jurisdiction to have resulted from the negligence or improper conduct of
Shareholder under the Management Agreement, (iii) any liabilities or
obligations of or relating to the Business, the Purchased Assets,
Shareholder or any Seller that do not constitute Assumed Liabilities
(including, without limitation, liabilities or obligations relating to
environmental matters, Taxes and any TP Claims (as defined in Section
5.1(c)(4) hereof)), (iv) any failure by Buyer, Shareholder or Sellers to
comply with the bulk sales laws (including any tax bulk sales laws) of any
jurisdiction, (v) any and all actions, suits, proceedings, claims, demands
and assessments relating to the Business, the Purchased Assets, Shareholder
or any Seller that relate to actions or events on or prior to the Closing
Date and (vi) any and all actions, suits, proceedings, claims, demands,
assessments and judgments incidental to the foregoing or the enforcement of
such indemnification.
In addition to the foregoing provisions of this Section 8.4(b)
and without limiting the generality of such provisions, each of Shareholder
and Sellers, jointly and severally, agrees to fully indemnify and hold
harmless Buyer, its shareholders, subsidiaries, officers, directors and
other affiliates against and in respect of and, on demand, will reimburse
Buyer, its shareholders, subsidiaries, officers, directors and other
affiliates for: (a) any and all liability whatsoever, and however imposed
(including any claim asserted against or deficiency assessed against or
collected from or paid by Buyer, Shareholder or any Seller or any
affiliates thereof), in respect of any Taxes of Sellers (or any
predecessors of Sellers) or Shareholder for any and all periods through the
period ending on the Closing Date, without regard to whether or not the
existence of such liability would constitute a breach of a representation
or warranty made by Shareholder and Sellers hereunder, and (b) any and all
liabilities of Shareholder or Sellers existing on, or arising under or
relating to activities or transactions of Shareholder or Sellers other than
the Assumed Liabilities.
(c) Buyer hereby agrees to indemnify and hold Shareholder
and Sellers, their respective shareholders and their respective officers,
directors and other affiliates harmless from and against any and all
claims, liabilities, losses, damages or injuries, together with costs and
expenses, including reasonable legal fees, arising out of or resulting from
(i) any incorrectness in the representations and warranties made by Buyer
in this Agreement or the Management Agreement, (ii) any breach in any
material respect by Buyer, unless waived, of any covenant or agreement of
Buyer contained in this Agreement or the Management Agreement and any claim
by a third party that is found by a court of competent jurisdiction to have
resulted from the negligence or improper conduct of Buyer under the
Management Agreement, (iii) the business conducted by Buyer at the Sites,
or otherwise in connection with the Purchased Assets after the Closing
Date, other than matters for which Shareholder and Sellers have agreed to
indemnify and hold harmless Buyer and its shareholders, subsidiaries,
officers, directors and other affiliates under Section 8.4(b) and (iv) any
and all actions, suits, proceedings, claims, demands, assessments and
judgements incidental to the foregoing or the enforcement of such
indemnification.
(d) Each party shall retain its own counsel and defend
itself, subject to being reimbursed by the Indemnifying Party (as defined
below) for reasonable attorneys' fees and expenses pursuant to this Section
8.4. Promptly after the receipt by any party hereto of notice of any
claim, action, suit or proceeding of any third party which is subject to
indemnification hereunder, such party (the "Indemnified Party") shall give
written notice of such claim to the party obligated to provide
indemnification hereunder (the "Indemnifying Party") as promptly as
practicable after receipt of notice thereof, stating the nature and basis
of such claim and the amount thereof, to the extent known; provided,
however, that failure to give such notice shall not affect the right to
indemnity hereunder except to the extent that the Indemnifying Party is
actually prejudiced by such failure. The Indemnifying Party shall be
entitled to participate in the defense or settlement of such matter and the
parties agree to cooperate in any such defense or settlement and to give
each other full access to all information relevant thereto. The
Indemnifying Party shall not be obligated to indemnify the Indemnified
Party hereunder for any settlement entered into without the Indemnifying
Party's prior written consent, which consent shall not be unreasonably
withheld. If the Indemnified Party does not assume the defense of any such
claim or litigation contemplated hereby, the Indemnifying Party may defend
against such claim or litigation in such manner as it may deem appropriate,
including settling such claim or litigation, after giving reasonable notice
of the same to the Indemnified Party (which reasonable notice shall not be
less than 5 business days) on such terms as the Indemnifying Party may
reasonably deem appropriate; provided, however, that the Indemnifying Party
may not settle any such claim or litigation other than by payment of
damages without the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld. With respect to any issue
involved in any such claim, as to which the Indemnifying Party shall have
acknowledged in writing the obligation to indemnify the Indemnified Party
hereunder, the Indemnifying Party shall have the sole right to defend,
settle or otherwise dispose of such claim, on such terms as the
Indemnifying Party, in its sole discretion, shall deem appropriate;
provided that such terms do not result in any expense to the Indemnified
Party or impair Buyer's right to use the Purchased Assets or operate the
Business.
(e) Remedies. Nothing herein shall preclude the assertion
by Buyer, Sellers or Shareholder, as applicable, of any rights or remedies
available to them at law or equity (including, but not limited to, any
right of set-off) in respect of the foregoing agreements of indemnity. The
aggregate liability of Shareholder and Sellers to indemnify Buyer and its
shareholders, subsidiaries, officers, directors and other affiliates under
Section 8.4(b) of this Agreement and Section 8.4(b) of the Basic Purchase
Agreement shall not exceed $9,500,000; provided, however, that the
foregoing dollar limitation shall be inappli-cable to: (1) obligations of
Shareholder and Sellers arising under clause (iv) of Section 8.4(b) of this
Agreement and of Section 8.4(b) of the Basic Purchase Agreement and, as
applicable to such clause, clause (vi) of said Sections; (2) obligations of
Shareholder and Sellers arising under Sections 4.2(b) and 4.2(c) of this
Agreement and of the Basic Purchase Agreement; (3) obligations of
Shareholder and Sellers arising under clauses (i) and (ii) of, and the
second paragraph of, Section 8.4(b) of this Agreement and of the Basic
Purchase Agreement to the extent such clauses and/or paragraph relate to
inaccurate representations and warranties, breaches of covenants and
agreements or obligations relating to Taxes or breaches of covenants or
agreements contained in the Management Agreement or indemnifiable claims by
third parties that have been found by a court of competent jurisdiction to
have resulted from the negligence or improper conduct of Shareholder under
the Management Agreement and, as applicable to such clauses and paragraph,
clause (vi) of said Section 8.4(b); (4) obligations of Shareholder and
Sellers arising under paragraph (f) of this Section 8.4; (5) liabilities
(other than Assumed Liabilities) arising under contracts and agreements
entered into by any Seller Parties and relating to the period of time prior
to the Closing Date and any other liabilities, including TP Claims,
actually known to a Seller Party and relating to the period of time prior
to the Closing Date and, as applicable to such liabilities, clause (vi) of
Section 8.4(b) of this Agreement and of the Basic Purchase Agreement; and
(6) liabilities relating to the period of time prior to the Closing Date to
which Buyer may be subjected by virtue of application of the doctrine
generally known as the "fraudulent conveyance doctrine" and, as applicable
to such liabilities, clause (vi) of Section 8.4(b) of this Agreement and
the Basic Purchase Agreement; and no amounts paid or discharged by or on
behalf of Shareholder or any Seller under any of such clauses or agreements
shall be counted against the foregoing dollar limitation. The aggregate
liability of Buyer to indemnify Shareholder and Sellers and their
respective shareholders, officers, directors and other affiliates under
Section 8.4(c) of this Agreement and Section 8.4(c) of the Basic Purchase
Agreement shall not exceed $8,500,000; provided, however, that the
foregoing dollar limitation shall be inapplicable to: (1) the obligations
of Buyer under clause (iii) of Section 8.4(c) of this Agreement and Section
8.4(c) of the Basic Purchase Agreement (including without limitation, any
taxes attributable exclusively to the operations of the Business after the
Closing Date) and, as applicable to such clause, clause (iv) of said
Section; (2) the obligations of Buyer attributable to breaches of covenants
and agreements contained in the Management Agreement or indemnifiable
claims by third parties that have been found by a court of competent
jurisdiction to have resulted from the negligence or improper conduct of
Buyer under the Management Agreement and, as applicable to such
obligations, clause (iv) of Section 8.4(c); and (3) the payment obligation
of Buyer arising under Section 4.2(c) of this Agreement and of the Basic
Purchase Agreement, and no amounts paid or discharged by or on behalf of
Buyer under such clause or agreement shall be counted against the foregoing
dollar limitation.
(f) California Tax. For the period which (a) commences on
the Closing Date and (b) ends on the close of the Buyer's first fiscal year
beginning after the Closing Date and without limiting the obligations of
Shareholder and Sellers elsewhere herein, Shareholder and Sellers, jointly
and severally, hereby agree to indemnify and hold Buyer and its
shareholders, subsidiaries, officers, directors and other affiliates
harmless from and against the amount of California corporate income taxes
which equals the difference between (i) the California corporate income
taxes Buyer will be obligated to pay if Buyer is required to file a
combined report as a unitary business for California corporate income tax
purposes as a result of the operation of the Business by Buyer subsequent
to the Closing Date and (ii) the California corporate income taxes Buyer
would be required to pay if Buyer filed on a separate company basis with
respect to the operation of the Business by Buyer subsequent to the Closing
Date. The indemnification required under this paragraph (f) shall be
treated by Buyer and Sellers as a readjustment of the Purchase Price.
The following example illustrates the application of this Section
8.4(f):
Assume Buyer's overall operations generate $100 million
of taxable income and its operation of the Business
generates $1 million of taxable income. California's
corporate income tax rate is 9.3%. If Buyer filed a
separate company return which reflected only its
operation of the Business, Buyer would pay $93,000 in
California corporate income taxes. Assuming Buyer's
apportionment factor for California purposes is 5%, if
Buyer is required to file a combined return as a
unitary business, Buyer would pay $465,000 in
California corporate income taxes. Pursuant to this
Section, Shareholder and Sellers would be required to
pay Buyer $372,000 which equals the difference between
the taxes due if Buyer is required to file on a unitary
basis ($465,000) and the taxes due if Buyer filed on a
separate company basis ($93,000).
Section 8.5. Allocations of Purchase Price. Buyer, Shareholder
and Sellers agree, for tax and accounting purposes, to allocate the
Purchase Price as provided on Exhibit 8.5. Following the Closing, Buyer
shall provide to Shareholder a copy of Buyer's IRS Form 8594 and any
required exhibits thereto. Such allocation shall be consistent with the
allocation set forth in Exhibit 8.5 hereto, which allocation is based on
the determination of Buyer and Seller Parties of the fair market value of
each Purchased Asset at Closing. Shareholder, Sellers and Buyer each
hereby covenants and agrees that it will not take, and will cause each of
its subsidiaries not to take, a position on any foreign, federal, state or
local tax return that is in any way inconsistent with the allocation made
pursuant to this Section 8.5, as set forth in Exhibit 8.5 and such Form
8594, unless advised by counsel that it may not take such position without
violating applicable law or without incurring penalties.
Section 8.6. Inventory Procedures. Prior to the first business
day following the Closing Date, Shareholder shall physically segregate all
inventory (including "demo trial inventory," as such phrase is defined in
the definition of the term "Furnishings" contained in Appendix A hereto) at
the Branches into the following categories: (i) items that are new, factory
sealed, on current vendor parts list; (ii) items for which a customer order
has been received; (iii) items that can be expected to fulfill large
account orders within 30 days of the Closing Date; (iv) demo trial items
relating to the "Solution and Training Center"; (v) demo trial items in
addition to those in clause (iv); and (vi) all other items.
Notwithstanding the counting, selection and valuation procedures set forth
below, all demo trial inventory included in the definition of the term
"Furnishings" shall be the property of Buyer, and Buyer shall not have any
obligation to pay Seller Parties any amounts for such inventory pursuant to
this Section 8.6 because Buyer shall be deemed to have already paid for
such inventory through its payment on the Closing Date. On the first
business day following the Closing Date, Shareholder and Sellers shall
conduct a physical inventory of the inventory, as previously segregated by
Shareholder, and Buyer's representatives shall participate in making the
visual inspection of such inventory. Shareholder shall count the inventory
in the order specified by Buyer and will keep Buyer informed of the Gross
Value of the items counted in the course of the physical inventory and will
keep Buyer informed of the cumulative Gross Value of inventory selected by
Buyer as constituting Purchased Inventory. Buyer shall retain full right
to substitute inventory that shall constitute Purchased Inventory until the
physical inventory and procedures identified in this section 8.6 have been
completed. Shareholder will provide Buyer with such assistance as Buyer
may request in the course of the physical inventory, including a Lotus or
similar spread sheet and computer hardware to assist Buyer in keeping track
of the inventory it has selected and the estimated Gross Value thereof and
as otherwise provided in Exhibit 8.6 hereto. In no event shall Buyer be
obligated to select any items of inventory that do not fall within the
definition of Inventory set forth in Appendix A hereto. Once Buyer has
selected inventory (other than demo trial inventory, which, as indicated
above, will be deemed to have been separately acquired by Buyer on the
Closing Date) having, in Buyer's reasonable opinion, an aggregate Gross
Value of at least $1,200,000, it shall so indicate to Shareholder and
Shareholder will, on such first business day following the Closing Date,
segregate and mark all inventory from the Sites which does not constitute
Purchased Inventory or demo trial inventory (hereafter "Retained
Inventory") and remove such segregated Retained Inventory, under Buyer's
supervision, from the Sites on or prior to the close of the fourth business
day following the Closing Date. Until the physical removal of the Retained
Inventory from the Sites has been completed, Shareholder will, at its
expense, retain a guard to monitor each Site to ensure that Purchased
Inventory, the demo trial inventory and Retained Inventory are not
commingled and that Retained Inventory is not used to fulfill orders of
customers arising after the Closing Date. At such time as all of the
foregoing procedures have been completed (other than physical removal of
the Retained Inventory from the Sites), consistent with Exhibit 8.6, Buyer
will pay to Shareholder the Gross Value of the Purchased Inventory (up to
$1,200,000); provided that if the Gross Value of the Purchased Inventory is
less than $1,200,000, Buyer shall pay Shareholder such lesser sum in full
consideration of the Purchased Inventory. In no event will Buyer be
required to make payment on account of Purchased Inventory pursuant to this
Section 8.6 until it has received written advice from all secured creditors
who have a security interest in such inventory that such security interest
will be released and terminated upon or currently with such payment. In
recognition of the compressed time for conducting the foregoing procedures
and the fact that Shareholder does not carry inventory on its books at
Gross Value, Shareholder agrees that the foregoing procedures shall not
prevent Buyer from thereafter questioning the determination of Gross Value
as it applies to one or more items of Inventory, and receiving appropriate
reimbursement if the Gross Value for any such item has been overstated.
During the reconciliation, Shareholder will provide Buyer supporting data
on FIFO inventory layers and sourcing as required to validate the valuation
of Purchased Inventory. Shareholder and Buyer expect that such inventory
reconciliation will be completed within 30 days following Closing and
Shareholder will provide Buyer all information requested by Buyer to assist
it in completing the reconciliation with Shareholder. Additional details
governing the handling of the matters covered by this Section 8.6 are
contained in Exhibit 8.6 hereto. In addition, during such 30-day period
following the Closing, Buyer shall have the right to independently assess
the fair market value of the Furnishings, including the demo trial
inventory, and if Buyer believes, in the exercise of its reasonable
discretion, that the fair market value of the Furnishings is less than
$2,700,000 (computed on a cumulative basis with the fair market value of
the Furnishings purchased pursuant to the Basic Purchase Agreement) Buyer
may so advise Shareholder, and Shareholder shall, within five business days
of its receipt of such advice, pay Buyer the amount of such shortfall,
together with accrued interest thereon at the prime rate from the Closing
Date.
ARTICLE IX
Miscellaneous
-------------
Section 9.1. Expenses. Each of the several parties hereto shall
bear the fees and expenses relating to its compliance with the various
provisions of this Agreement and its covenants to be performed hereunder,
and each of such parties shall pay all expenses (including legal fees and
expenses) incurred by it in connection with this Agreement and the
transactions contemplated hereby; provided, however, if the Closing does
not occur and the transactions contemplated hereby are not consummated on
account of a breach by one of the parties hereto of its obligations
hereunder, then the non-defaulting party shall be entitled to recover its
fees and expenses relating to the transactions contemplated hereby in
addition to such other damages, fees and expenses as it may be entitled to
under law.
Section 9.2. Termination. If the Closing pursuant to Section
4.1 shall not have occurred on or prior to March 31, 1995, this Agreement
and all obligations of Shareholder, Sellers and Buyer hereunder, except
obligations under Sections 8.3(b) and 9.1, shall terminate at 11:59 p.m.
New York time on such date, unless extended by mutual agreement of the
parties.
Section 9.3. Benefit; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and not to any other person. This
Agreement shall not be assigned by Sellers or any Shareholder, but may be
assigned, in whole or in part, without recourse, by Buyer to one or more
affiliated or unaffiliated third parties. Accordingly, nothing contained
herein shall restrict the ability of Buyer to cause one or more
subsidiaries to acquire the Purchased Assets. Upon an assignment of this
Agreement to a third party, all references herein to "Buyer" shall be
deemed to be references to such third party, and the "notice" provision in
Section 9.6 hereof shall be modified accordingly.
Section 9.4. Governing Law; Bulk Sales Laws. This Agreement
shall be construed and enforced in accordance with and governed by the laws
of the State of Ohio. The parties hereto hereby waive compliance with the
provisions of any applicable bulk sales laws, including Article 6 of the
Uniform Commercial Code, as enacted in each state and applied to Purchased
Assets located in each such state.
Section 9.5. Breach; Failure of Condition. If either party
shall believe at any time prior to the Closing Date that any other party
has breached any representation, warranty, covenant or agreement contained
in this Agreement, or that any condition to the Closing is not reasonably
likely to be satisfied, such party shall promptly so inform such other
party specifying the breach or condition concerned, and such other party
shall have a reasonable opportunity to correct such breach or cause such
condition to be satisfied, but failure to so notify shall not release the
other party from its obligations hereunder.
Section 9.6. Notices. Except as otherwise specifically provided
in this Agreement, all notices and other communications hereunder shall be
in writing and deemed to have been duly given when delivered by hand, when
mailed by registered or certified mail, postage prepaid, return receipt
requested, when given by prepaid courier delivery services such as Federal
Express, DHL or other similar services on the day following the date that
such notice is delivered to such courier, or when given by facsimile
transmission upon receipt by sender of confirmed answer-back, as follows:
(a) if to Buyer, at
Intelligent Electronics, Inc.
411 Eagleview Boulevard
Exton, Pennsylvania 19341
Attention: Richard D. Sanford
with copies to:
Intelligent Electronics, Inc.
411 Eagleview Boulevard
Exton, Pennsylvania 19341
Attention: Legal Department
and
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Eighteen and Arch Streets
Philadelphia, PA 19103-2799
Attention: Barry M. Abelson
(b) if to Shareholder or Sellers, at
The Future Now
8044 Montgomery Road, Suite 601
Cincinnati, Ohio 45236
Attention: Terry L. Theye
with a copy to:
The Future Now
8044 Montgomery Road, Suite 601
Cincinnati, Ohio 45236
Attention: Norma Skoog
or at such other address as either such party shall request in writing.
Section 9.7. Materiality; Exhibits. Whenever any action,
representation or warranty contained herein is qualified by a "materiality"
standard applicable to the Businesses or the Sites as a whole, such
Businesses and Sites shall, for purposes of such materiality standard, be
considered collectively with the Businesses and Sites covered by the Basic
Purchase Agreement. The parties hereto specifically agree that any
representations and warranties contained herein which are not qualified by
knowledge or words of similar import shall not be deemed to be so qualified
notwithstanding the appearance of any knowledge qualification contained in
any of the Exhibits hereto. To the extent any Exhibit hereto covers or
relates to Branches (as defined herein) and Branches (as defined in the
Basic Purchase Agreement), such Exhibit shall, for purposes of this
Agreement, be construed to apply only to Branches (as defined herein).
Section 9.8. Headings. The headings of the articles, sections
and paragraphs contained in this Agreement are for convenience of reference
only and do not form a part hereof and in no way modify the meanings of
such articles, sections and paragraphs.
Section 9.9. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.
This Agreement shall become effective when one or more counterparts have
been signed by each of the parties hereto and delivered to the other
parties.
Section 9.10. Entire Agreement. This Agreement, including the
Exhibits hereto and the documents referred to herein, contains all the
terms agreed upon by the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements,
arrangements or understandings between such parties as to the subject
matter hereof.
Section 9.11. Waiver; Amendment; Modification. The parties may,
by written agreement, (a) extend the time for the performance of any of the
obligations or other acts of the parties hereto or (b) waive any
inaccuracies or breaches in the representations and warranties contained in
this Agreement or in any document delivered pursuant to this Agreement.
This Agreement may be amended or modified only by a written agreement
executed by the parties hereto or by their successors and assigns.
Section 9.12. Severability. To the extent that any provision of
this Agreement shall be invalid or unenforceable, it shall be considered
deleted herefrom and the remainder of such provision and of this Agreement
shall be unaffected and shall continue in full force and effect. In
furtherance and not in limitation of the foregoing, if the duration or
geographic extent of, or business activity covered by, any provision of
this Agreement shall be in excess of that which is enforceable under
applicable law, then such provision shall be construed to cover only that
duration, extent or activities which may be validly and enforceably
covered.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, all as of the day and year first above written.
INTELLIGENT ELECTRONICS, INC.
By: /s/ Gregory A. Pratt
----------------------------------------
Name: Gregory A. Pratt
Title: President
THE FUTURE NOW, INC.
By: /s/ Lewis Miller
----------------------------------------
Name: Lewis Miller
Title: President
PREMIUM COMPUTER CORPORATE CENTER
By: /s/ Timothy M. Mooney
----------------------------------------
Name: Timothy M. Mooney
Title: Vice President and Treasurer
ENTRE COMPUTER CENTER OF NEW YORK, INC.
By: /s/ Timothy M. Mooney
----------------------------------------
Name: Timothy M. Mooney
Title: Vice President and Treasurer
THE FUTURE NOW OF MASSACHUSETTS, INC.
By: /s/ Timothy M. Mooney
----------------------------------------
Name: Timothy M. Mooney
Title: Vice President and Treasurer
ENTRE COMPUTER CENTERS OF VIRGINIA, INC.
By: /s/ Timothy M. Mooney
----------------------------------------
Name: Timothy M. Mooney
Title: Vice President and Treasurer
<PAGE>
APPENDIX A
DEFINITIONS
-----------
The following terms shall have the following meanings for all
purposes of this Agreement and such meanings are equally applicable both to
the singular and plural forms of the terms defined.
"Affiliates" shall have the meaning provided in Section 5.1(g).
"Asset Price" shall mean $10,225,000 subject to downward
adjustment as and to the extent provided in Sections 6.1(m) and 8.6.
"Assigned Agreements" shall mean each Lease of a Site and each
other agreement in effect as of the Closing Date with each customer, client
or other similar entity to whom products or services are provided in
connection with or related to the Business and each agreement in effect as
of the Closing Date pursuant to which products or services are provided to
Shareholder or any Seller at the Sites. In no event shall an invoice for
product or services provided to the Business be considered an Assigned
Agreement.
"Assumed Liabilities" shall be limited to the claims, liabilities
and obligations of Sellers with respect to the Assigned Agreements becoming
due in accordance with their terms after the Closing on account of services
rendered or products provided to the Business after the Closing.
"Assumption Agreement" shall mean an agreement substantially in
the form of Exhibit A-1.
"Basic Purchase Agreement" shall mean the Asset Purchase
Agreement of even date herewith among the parties hereto.
"Borrowing Arrangements" shall mean:
(i) The Secured Credit Agreement, dated as of
September 9, 1993 among Shareholder, Sellers, Monterey-
Waldec, Inc., The Future Now, Inc. of Texas, The Future
Now, Inc. of Arkansas, The Future Now, Inc. of
Delaware, FKA Basicomputer Corporation, Integrators of
Enterprise Solutions, Inc., Integrators of Network
Computing, Inc., PNC Bank, Ohio, National Association
(as agent), The First National Bank of Chicago (as co-
agent) and the banks named therein (as lenders), as
amended pursuant to Amendment No. 1 to Credit
Agreement, Amendment No. 2 to Credit Agreement,
Amendment No. 3 to Credit Agreement, Amendment No. 4 to
Credit Agreement, Amendment No. 5 to Credit Agreement,
Amendment No 6 to Credit Agreement and Amendment No. 7
to Credit Agreement, having effective dates of
January 19, 1994, March 8, 1994, July 8, 1994,
September 30, 1994, October 11, 1994, October 21, 1994
and November 1, 1994, respectively;
(ii) The borrowing arrangement between one or more
Seller Parties and each of IBM Credit Corp. and ITT
Commercial Finance.
"Branch" shall mean any one of the two branches comprising all
the Businesses conducted at the Sites and consisting specifically of the
Irvine branch (which consists of the Site in Irvine, California) and the
San Francisco branch (which consists of the Site in San Francisco,
California).
"Business" shall mean each business conducted by Shareholder and/
or a Seller at a Site prior to the Closing Date and all the businesses
conducted by Shareholder and Sellers at the Sites prior to the Closing
Date.
"Business Agreement" shall mean each Lease of a Site and each
other agreement in effect as of the date hereof with each customer, client
or similar entity to whom products or services are provided in connection
with or related to the Business and each agreement in effect as of the date
hereof pursuant to which products or services are provided to Shareholder
or any Seller at the Sites. In no event shall an invoice for product or
services provided to the Business be considered a Business Agreement.
"Business Area" shall mean, collectively, the following Primary
Metropolitan Statistical Areas: (i) Los Angeles and Orange County,
California and (ii) San Francisco-Oakland, California.
"Closing" shall have the meaning specified in Section 4.1.
"Closing Date" shall have the meaning specified in Section 4.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Customer Data" shall mean (a) lists of customers of all the
Sites and (b) all other records regarding such customers.
"Encumbrance" shall mean any mortgage, claim, lien, pledge,
option, charge, security interest or other similar interest.
"Environmental Laws" shall have the meaning provided in Section
5.1(i)(i) of the Agreement.
"EPA" shall have the meaning provided in Section 5.1(i)(ii).
"Furnishings" shall mean the commercial vehicles, fixtures,
equipment (including computer equipment used in the operation of the
Business), leasehold improvements, security systems, telephone systems,
office supplies, display stands, furniture and similar furnishings located
at the Sites or at holding areas for the Sites. Furnishings shall also
mean and include all "demo trial inventory," including such inventory at
Solution and Training Centers of the Branches, on desk tops at the Branches
and at customer sites.
"Gross Value" shall mean, with respect to each individual item of
inventory, and for purposes of the inventory procedures being performed
pursuant to Section 8.6 hereof on the first business day following the
Closing Date: (i) with respect to items which were purchased from Buyer,
the current price of the product if purchased from Buyer on the Closing
Date less any vendor benefits which would be derived from that inventory
and (ii) with respect to items which were not purchased from Buyer, the
current price of the product if purchased from the supplier thereof on the
Closing Date less any vendor benefits which would be derived from that
inventory.
"Hazardous Substances" shall have the meaning provided in Section
5.1(i)(ii) of the Agreement.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"Indemnified Party" shall have the meaning provided in Section
8.4(d) of the Agreement.
"Indemnifying Party" shall have the meaning provided in Section
8.4(d) of the Agreement.
"Intellectual Properties" shall mean all patents of any
description and pending applications therefor, all registrations of
trademarks and of other marks, all registrations of trade names, assumed
names, service marks, logos, labels or other trade rights, all pending
applications for any such registrations, all copyright registrations and
pending applications therefor, all other copyrights, trademarks and other
marks, trade names, assumed names, service marks, logos, jingles, program
rights, non-governmental licenses, computer programs and slogans, and all
other inventions and designs, whether or not patentable, all to the extent
that the foregoing items are owned in whole or in part by Shareholder or
any Seller and used in the Business as of the date of this Agreement.
"Interests" shall have the meaning provided in Section 8.2(a).
"Inventory" shall mean products held for sale in the ordinary
course of business in Sellers' inventory located at the Sites. Inventory
shall be new, unused, undamaged, and unopened product in the original boxes
and treated by the manufacturer thereof as its current product at the
manufacturers' current pricing levels. Inventory at any time shall be
determined on the basis of the Inventory physically located at the Sites at
such time and not on the basis of accounting records. Inventory shall not
include property, products, fixtures and equipment used in the day-to-day
operation of the Business or any of the Other Property.
"IRS" shall mean the Internal Revenue Service.
"Leases" shall mean the leases described in Exhibit 5.1(c)(1), as
in effect on the date of execution of this Agreement, pursuant to which
Seller Parties, as lessee, lease the Sites.
"Management Agreement" shall mean an agreement substantially in
the form of Exhibit A-2 with any changes thereto to be mutually agreeable
to Buyer and Shareholder.
"Other Property" shall mean the Customer Data and Furnishings
used in the Business.
"Purchase Price" shall mean the amount required to be paid by
Buyer to Sellers as provided in Section 3.1.
"Purchased Assets" shall mean the assets and rights to be sold,
conveyed, assigned, delivered and transferred to Buyer on the Closing Date
pursuant to Section 2.1.
"Purchased Inventory" shall mean that Inventory (or, at Buyer's
sole option, inventory that does not qualify as Inventory) selected by
Buyer at the inventory conducted pursuant to Section 8.6, having an
aggregate Gross Value up to $1,200,000.
"Qualified Documents" shall mean all documents comprising or
pertaining to Purchased Assets, including financial and operating records,
manuals, certificates of occupancy, surveys and construction drawings.
"Receivables" shall mean all of Sellers' and Shareholder's
outstanding accounts receivable arising from the lease or sale of goods or
for services of the Business, but shall not include receivables relating to
contra-payable balances in the payable accounts of Sellers and Shareholder
and receivables attributable to manufacturers' and other vendors'
reimbursement policies.
"Returns" shall have the meaning provided in Section 5.1(g).
"SARA" shall have the meaning provided in Section 5.1(i)(i).
"Sites" shall mean the leased locations in Colton, California and
San Francisco, California and more specifically identified in
Exhibit 5.1(c)(5).
"Subsidiary" shall mean, with respect to any entity or person,
any corporation, association, joint venture, partnership or other business
entity (whether now existing or hereafter organized) of which at least a
majority of the voting stock or other ownership interests having ordinary
voting power for the election of directors (or the equivalent) is, at the
time as of which any determination is being made, owned or controlled by
such entity or person or one or more subsidiaries of such entity or person
or by such entity or person and one or more subsidiaries of such entity or
person.
"Survival Period" shall have the meaning provided in Section
8.4(a).
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including without limitation all net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance,
stamp, occupation, property or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) upon Shareholder (with respect to
the Sites) or any Seller or any subsidiary of either.
<PAGE>
Exhibit A-1
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of
____________, 1994 by and among INTELLIGENT ELECTRONICS, INC., a
Pennsylvania corporation ("Buyer"), THE FUTURE NOW, INC., an Ohio
corporation ("Shareholder"), PREMIUM COMPUTER CORPORATE CENTER, a
California corporation ("Premium"), ENTRE COMPUTER CENTERS OF NEW YORK,
INC., a New York corporation ("ENTRE New York"), THE FUTURE NOW OF
MASSACHUSETTS, INC., a Massachusetts corporation ("FNM"), and ENTRE
COMPUTER CENTERS OF VIRGINIA, INC., a Virginia corporation ("ENTRE
Virginia, each referred to as "Seller" and collectively as "Sellers").
W I T N E S S E T H :
WHEREAS, Buyer, Shareholder and Sellers have entered into that
certain Asset Purchase Agreement dated December 30, 1994 (the "Purchase
Agreement") providing among other things, for the sale by Sellers to Buyer
of the Purchased Assets; and
WHEREAS, Shareholder and Sellers are entering into this
Assignment and Assumption Agreement for the purpose of assigning and
transferring to Buyer all of their respective rights, liabilities and
obligations to be transferred by it pursuant to the Purchase Agreement; and
WHEREAS, Buyer is executing and delivering this Assignment and
Assumption Agreement for the purpose of assuming Seller's liabilities and
obligations to be assumed by Buyer pursuant to the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties and agreements contained herein and in
the Purchase Agreement, the parties hereto, intending to be legally bound,
agree as follows:
Section 1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings assigned to
them in the Purchase Agreement.
Section 2. Assignment. Each of Shareholder and Sellers, for
good and valuable consideration, receipt of which is hereby acknowledged,
hereby sells, assigns, conveys, transfers and delivers to Buyer all of its
right, title and interest under and to the Purchased Assets.
Section 3. Assumption. Buyer accepts such assignment, and
hereby absolutely and irrevocably undertakes, assumes and agrees to
perform, pay, satisfy or discharge when due, and to be solely responsible
for, all Assumed Liabilities from and after the Closing Date.
Section 4. Binding Agreement; Amendments. This Assignment and
Assumption Agreement shall be binding on each of Shareholder, Sellers and
Buyer and their respective successors and assigns. This Assignment and
Assumption Agreement may not be modified except by an instrument in writing
which is signed by all parties hereto.
Section 5. Governing Law. This Assignment and Assumption
Agreement shall be construed and enforced in accordance with the laws of
the State of Ohio.
Section 6. Further Assurances. Shareholder and Sellers hereby
covenant and agree that, from time to time at Buyer's request after the
delivery of this Assignment and Assumption Agreement, and without further
consideration, Shareholder and Sellers will do, execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and delivered,
all and any such further acts, conveyances, transfers, assignments, powers
of attorney, instruments and assurances as may be reasonably required to
more effectively grant, convey, assign, transfer and set over to and vest
in Buyer any and all of the assets referred to above.
Section 7. Other Agreements Prevail. Each of Shareholder,
Sellers and Buyer hereby acknowledges and agrees that neither the
representations, warranties and covenants nor the rights or remedies of any
party under the Purchase Agreement shall be deemed to be enlarged, modified
or altered in any way by this Assignment and Assumption Agreement. In the
event of a conflict between the terms of this Assignment and Assumption
Agreement and the terms of the Purchase Agreement, the terms of the
Purchase Agreement shall prevail.
Section 8. Counterparts. This Agreement may be executed in any
number of counterparts all of which together shall constitute a single
instrument. It shall not be necessary that any counterpart be signed by
all parties hereto so long as each party shall sign at least one
counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption Agreement to be duly executed as of the date and
year first above written.
INTELLIGENT ELECTRONICS, INC.
By:___________________________________
Name:
Title:
THE FUTURE NOW, INC.
By:___________________________________
Name:
Title: President
PREMIUM COMPUTER CORPORATE CENTER
By:____________________________________
Name:
Title: Vice President and Treasurer
ENTRE COMPUTER CENTER OF NEW YORK, INC.
By:____________________________________
Name:
Title: Vice President and Treasurer
THE FUTURE NOW OF MASSACHUSETTS, INC.
By:_____________________________________
Name:
Title: Vice President and Treasurer
ENTRE COMPUTER CENTERS OF VIRGINIA, INC.
By:_____________________________________
Name:
Title: Vice President and Treasurer
<PAGE>
Exhibit A-3
Non-Competition; Non-Solicitation; Certain Other Matters.
--------------------------------------------------------
(1) From and after the Closing Date to and including
the first anniversary of the Closing Date: (i) neither Shareholder, any
Seller nor any Affiliate or subsidiary of Shareholder or any Seller will
directly or indirectly engage in any capacity in a business that is
substantially similar to the Business in the Business Area or (ii) take any
action or omit to take any action which can reasonably be expected to
divert any business from any Site. In addition, at all times after the
Closing Date, neither Shareholder, any Seller nor any Affiliate or
subsidiary of Shareholder or any Seller will conduct business within the
Business Area under any trade names or trademarks currently or previously
used by any of them in the Business Area, but Buyer will have the right to
operate each Site under the trade names currently used by Seller Parties in
the operation of such Sites.
(2) Subject to clause (3) below, all employees of
Shareholder and Sellers as of the Closing Date will remain employees of
Shareholder and Sellers as of the Closing Date, and for so long as such
employees remain employed by Shareholder or any Seller, Shareholder and
Sellers will remain solely responsible for compliance with, and will comply
with, all federal, state and local employment laws applicable to the
employment of such employees. Nothing in this Agreement, or in any other
agreement between the parties, shall be deemed to require Buyer to offer
employment to any or all of the employees of Shareholder or Sellers.
Sellers and Shareholder shall be solely responsible to provide any notices
of layoff, termination or plant closing under any applicable federal, state
or local law, regulation or ordinance including but not limited to the
Worker Adjustment and Retraining Notification Act.
(3) Provided Buyer has in good faith indicated in
writing to Shareholder that it intends to offer employment to at least a
majority of the employees of the Business (which expression of interest
shall not be binding and shall be subject to review by Buyer of the
information specified below), upon the request of Buyer, Shareholder shall
promptly:
(a) provide Buyer with a listing of the name,
location, title, date of employment, salary, and bonuses of each then
current employee of Shareholder or a Seller and use its best efforts to
assist Buyer in hiring each such employee and, at the Closing, release each
such employee from any non-competition agreement executed by such employee
to the extent such agreement would, by its terms, restrict such employee's
ability to work for Buyer;
(b) provide Buyer with copies of all employment
agreements, safety and health training policies and records, and collective
bargaining agreements covering any of such employees;
(c) disclose any pending or threatened charges,
complaints, investigations, litigation, grievances which are reasonably
likely to have, either individually or in the aggregate, a material adverse
effect on the conduct of the operations of the Business, or disputes
involving any such employees or former employees at the location, or
involving any employee benefit plans covering such employees or former
employees;
(d) disclose any labor disputes, including but
not limited to any union demands or efforts to gain recognition as the
bargaining representative of employees of Shareholder and Sellers at any
Site, any repeated or continued picketing at any Site, and any repeated or
continuing handbilling or other form of concerted labor activity directed
to Shareholder or any Seller or their employees at any Site;
(e) as and when requested by Buyer, release each
such employee from any confidentiality and non-competition agreement
between such employee and any Seller Parties or, at Buyer's option, assign
such agreements to Buyer;
(f) disclose whether Shareholder or any Seller or
any ERISA Affiliate has suffered a "plant closing" or "mass layoff" within
the meaning of the Worker Adjustment and Retraining Notification Act;
(g) disclose any failure to comply in all
material respects with any law, rule, or regulation relating to the
employment of such employees, including those relating to wages, hours,
terms and conditions of employment, collective bargaining, and the payment
of social security and unemployment taxes and the forwarding of income
taxes withheld from employees;
(h) provide Buyer with copies of plan documents,
plan descriptions and employee communications, with respect to all employee
benefit plans covering any such employees during the twelve-month period
prior to such offer of employment.
(i) disclose whether any current or former
employee is absent on a military leave of absence and eligible for rehire
under the terms of the Uniformed Services Employment and Reemployment
Rights Act of 1994 and whether any current or former employee is absent on
a period of disability or other leave of absence for any other reason,
which would, in any case, allow such employee either to obtain restoration
of any employee benefit plan contributions or accruals or be reinstated as
an employee;
(j) disclose such other employment-related
information as Buyer may reasonably request, subject to Shareholder's
consent, which shall not be unreasonably withheld; and
(k) until the first anniversary of the Closing
Date, refrain from offering employment to any person to whom Buyer or an
affiliate of Buyer offers employment unless (a) such employee's employment
with Buyer or an affiliate of Buyer terminates or (b) Buyer consents to
such offer.
For purposes of this Section, the term "employee benefit plan"
means any plan, program or arrangement providing nonqualified or qualified
deferred compensation, pension, profit sharing, stock option, stock
purchase, group insurance, accident, sickness, medical, dental, disability,
vacation pay, severance pay, incentive compensation, consulting agreements,
bonus or other employee benefits or fringe benefits, whether or not such
plans, programs and arrangements constitute "employee benefit plans" within
the meaning of Section 3(3) of ERISA, and whether or not such plans,
programs or arrangements are in the nature of formal or informal
understandings. As used in this Section, the term "ERISA" means the
Employment Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder or with respect thereto, and
the term "ERISA Affiliate" means any individual, corporation, or trade or
business that is a member of a controlled group of corporations or of a
trade or business under common control with Seller, as defined in Section
414(b), (c), (m), or (o) of ERISA.
Exhibit C
Management Agreement
This Management Agreement ("Agreement") is entered into as of the 30th
day of December, 1994, by and between The Future Now, Inc., an Ohio
corporation, whose address is 8044 Montgomery Road, Cincinnati, Ohio
("TFN"), and Intelligent Electronics, Inc., a Pennsylvania corporation, whose
address is 411 Eagleview Boulevard, Exton, Pennsylvania ("IE").
Whereas on the date hereof, IE or one of its subsidiaries has acquired,
the Purchased Assets pursuant to the Asset Purchase Agreements covering
California and non-California Sites dated as of December 30, 1994 (the two
agreements covering the California and the non-California Sites together
referred to as the "Purchase Agreement") by and among IE, TFN and certain of
its wholly owned subsidiaries (the transaction contemplated by the Purchase
Agreement shall be referred to as the "Acquisition");
Whereas the Purchased Assets are related to five branch offices and
three satellite offices, all owned and operated by TFN prior to the
Acquisition (the "Branches");
Whereas TFN had performed certain services for the Branches prior to the
Acquisition in connection with TFN's management of the Branches;
Whereas, TFN is entering into this Agreement with IE with an expectation
of operating the Branches for the benefit of IE and with the intent of
operating the Branches so as to be profitable;
Whereas, terms used in this Agreement as defined terms but not otherwise
defined in this Agreement shall have the respective meanings set forth in the
Purchase Agreement;
Whereas TFN and IE deem it desirable that TFN continue to provide
complete day to day management of the Branches for a period of time;
Now, therefore, TFN and IE, in consideration of the mutual covenants and
agreements set forth in this Agreement, agree as follows:
1. Management Services
-------------------
1.1 Personnel. TFN will manage each of the Branches listed on Exhibit
1.1 for the benefit of IE for so long as IE owns such Branches with the same
degree of care and prudence as its uses in the management of its other branch
locations . These management services include all services provided by TFN
from time to time to its other branches including but not limited to
operations, accounting, marketing, sales, purchasing, inventory management,
contract preparation and review, equipment leasing and personnel
administration. Such services will not, however, include any service IE
elects not to have performed by TFN.
TFN will provide all personnel reasonably necessary to run the
Branches as well as the corporate functions attributable to the Branches, all
substantially similar to those provided from time to time by TFN to its other
branch locations. TFN shall advise its current employees at the Branches
that the Acquisition shall not affect their status as employees of TFN.
TFN will be responsible for all aspects of the employment of such
persons at the Branches including without limitation hiring, firing,
promotion, transfer, payroll, payroll taxes, and workers compensation,
provided however, that IE shall pay directly or reimburse TFN for any of
these items such as payroll which is a Direct Expense. All of such persons
will be employees or independent contractors of TFN. TFN will offer its
employees at the Branches employee benefits on terms comparable to those
offered from time to time by TFN to its other employees. IE and TFN further
acknowledge and agree that this paragraph shall not limit or change the
obligations of TFN set forth in Sections 8.1(b)(iv) and (v) of the Purchase
Agreement.
TFN and IE each agree and acknowledge that TFN will manage
compensation and compensation levels of TFN employees at the Branches as it
does from time to time for its employees at its other branch locations but at
levels consistent with the approved budgets.
IE shall also have the right to request from time to time that TFN
consent to terminate the employment of individuals at the Branches, and such
consent shall not be unreasonably withheld, provided however, that TFN may
withhold its consent if TFN reasonably believes any such termination will
violate or give rise to any claim under any employment law, rule or
regulation, excluding workers compensation or unemployment payment statutes.
1.2 Purchasing. TFN will process all purchases of product to fulfill
customer orders placed at or through the Branches. IE will own the product
until title transfers to the customer. TFN shall use standard TFN purchase
orders with the "bill to" made out to TFN as agent for IE. TFN acknowledges
that IE may notify TFN vendors that purchases made by TFN for its branch
locations other than the Branches are made by TFN for TFN and not as agent
for IE.
All customer lists and related customer data will be owned by IE.
IE will, however, allow TFN access to and use of such lists and data for the
term of the Agreement for the benefit of the Branches. TFN will maintain the
confidentiality of such information on behalf of IE in such manner as TFN
maintains its confidential information from time to time in the management of
its other branch locations.
1.3 Billing and Accounts Receivable. TFN will bill customers on IE's
behalf, at such times and frequencies as TFN bills other customers at its
other branches. TFN acknowledges and agrees that IE will own the accounts
receivable relating to any customer shipments from any of the Branches
after the effective date of the Agreement. TFN and IE will establish
procedures so that account debtors make payments directly to the account
established for IE's benefit pursuant to section 4.2(c) of the Purchase
Agreement. In the event, however, that remittances of any of such accounts
receivables are received directly by TFN, TFN will remit such receivables to
IE within one business day of discovery and upon their availability as
collected funds.
TFN shall allocate the revenues and expenses of any national
accounts which affect one or more of the Branches in a manner substantially
similar to the allocation TFN makes from time to time of any national account
which affects more than one of its other branches. TFN's current allocation
procedures concerning national accounts is set forth in Exhibit 1.3. TFN and
IE agree that IE shall approve any material change to such procedure prior
to implementation at the Branches. Such approval shall not be unreasonably
withheld. TFN shall provide IE with any such proposed change at least ten
business days prior to the proposed implementation date. Failure by IE to
notify TFN of an objection to any such proposed change within five business
days of such notice shall be deemed disapproval of the proposed change.
1.4 Credit and Collections. TFN will provide credit and collection
services for IE substantially similar to those used from time to time by TFN
at its other branches.
1.5 Inventory Management. TFN will manage all inventory at each of the
Branches which is not part of IE's CustomerCare Direct program as of the
effective date of this Agreement. TFN and IE each acknowledge that the
management of inventory will be in accordance with the then applicable
budget adopted by both parties pursuant to Section 3.4 of this Agreement.
TFN and IE each acknowledge it is the intent of the parties that all Branches
participate in the CustomerCare Direct program by June 30, 1995. TFN and IE
each agrees to use its best efforts to facilitate such participation.
TFN shall purchase on behalf and on the account of IE all such
product reasonably necessary for each of the Branches in accordance with
inventory level guidelines. IE shall be entitled to approve such inventory
guidelines as proposed by TFN and shall approve any material change to such
guidelines prior to implementation at the Branches. Such approval shall not
be unreasonably withheld. TFN shall provide IE with any such proposed change
at least ten business days prior to the proposed implementation date.
Failure by IE to notify TFN of an objection to any such proposed change
within five business days of such notice shall be deemed disapproval of the
proposed change.
TFN shall make such purchases of product through its normal
suppliers provided, however, that, to the extent such product is available
from IE, TFN shall purchase such product from IE. Upon request of IE, TFN
shall review a list of such suppliers with IE. IE may object to any
individual supplier in writing to TFN stating the reason for the objection.
TFN shall, to the extent reasonably possible and consistent with customer
satisfaction expectations, not place any orders from the Branches with any
such supplier.
To the extent IE supplies any product to the Branches, IE shall
supply TFN with the Cost of such product in sufficient detail to facilitate
TFN's preparation of Branch financial statements. "Cost" for such product
shall be deemed to equal IE's then current cost plus the amount of mark up
mutually agreed to from time to time by IE and TFN for product supplied by IE
to TFN for TFN's other branch locations.
In no event shall IE be required to pay for product purchases in
excess of the actual amount paid to the vendor as the purchase price for such
product net of any discounts.
TFN shall allocate or attribute to the Branches the benefit of any
and all vendor subsidies, rebates, market development funds, price protection
or stock rotation rights related to the Branches in the same fashion and on
the same bases as TFN from time to time so allocates or attributes to its
other branch locations. TFN and IE each acknowledge that TFN's current
practice is to allocate 100% of such monies or rights to its branches. IE
shall approve any material change to such practice prior to implementation at
the Branches. Such approval shall not be unreasonably withheld. TFN shall
provide IE with any such proposed change at least ten business days prior to
the proposed implementation date. Failure by IE to notify TFN of an
objection to any such proposed change within five business days of such
notice shall be deemed disapproval of the proposed change.
TFN and IE each agrees and acknowledges that, subject to the
provisions in Section 8.6 of the Purchase Agreement concerning removal of
certain inventory by TFN, IE will, as of the effective date of this
Agreement, own and be responsible for all of the inventory at the Branches.
Promptly after the effective date of this Agreement, IE and TFN will mutually
agree to procedures pursuant to which inventory will be placed by TFN at a
customer site ("Demo/trial Inventory") and the parties anticipate the cost of
providing such Demo/trial Inventory at a customer site will be reflected in
the annual budgets established pursuant to section 3.4 of this Agreement.
1.6 Management Information Services. TFN will provide all management
information services reasonably necessary to manage the Branches as well as
the corporate functions attributable to the Branches, all substantially
similar to those provided from time to time by TFN to its other branch
locations.
TFN shall provide any reports which relate to the operation of the
Branches as are available from its management information system upon
request from IE. In the event IE requests TFN to develop a report which is
not then used by TFN , TFN shall make reasonable efforts to develop such a
report. TFN will charge IE the then normal and customary fees for the
programming and other services reasonably necessary to develop each such
report. Any such charge will be a Direct Expense. TFN and IE each agree and
acknowledge that IE has requested TFN to provide IE with remote access to all
appropriate data relating exclusively to the Branches together with query
capability on such data and that TFN has undertaken to provide IE with an
estimate of the costs and the time reasonably required to make such provision
to IE. IE shall then inform TFN if it wishes TFN to proceed with this
project. If IE elects to have TFN proceed with this project, TFN shall
proceed in accordance with the time and costs estimates agreed upon by IE and
TFN. As part of the response to such request, IE and TFN shall consider any
level of priority requested by IE, and if such requested level of priority is
reasonable within the context of the request and, in TFN's reasonable
judgment, with TFN's other business needs, TFN will accommodate such request
for priority.
TFN shall provide IE through E-mail access to the following daily
reports which reflect the day to day activity at or for the Branches:
detailed general ledger expense posting, sales information, inventory,
collections, and aged trial balance, and any other reports which are related
to Branch activity and provided from time to time to TFN's other branch
locations or to TFN management.
1.7 Performance and Bid Bonds, Insurance. Any performance or bid bonds
required from time to time from business arising at any of the Branches shall
be secured in a timely fashion by IE upon request by TFN or, if IE so
requests, by TFN from an insurance company designated by IE. All such costs
of such performance and bid bonds shall be included as a Direct Expense of
the Branch.
IE shall be responsible for insuring all the properties and assets
at the Branches owned by IE as well as providing general liability insurance
for each of those facilities. IE acknowledges that TFN shall have no
obligation to obtain, maintain or monitor any such insurance coverage. TFN
will maintain commercial general and professional liability insurance in
connection with its management of the Branches. Each party agrees to provide
the other with information concerning the insurance coverage provided by it.
IE and TFN shall each allocate a reasonable portion of the total premiums for
such coverages to the Branches and such allocation shall be a Direct Expense.
In the event such coverage is specific to the Branches, the actual amount of
the premiums for such coverage shall be a Direct Expense.
1.8 Other Services. TFN shall provide other services as are, in TFN's
reasonable business judgment, necessary to perform the day to day management
of the Branches in the ordinary course of business. For example, TFN will,
on behalf of IE, purchase, sell or otherwise dispose of fixtures, furnishings
or other assets at the Branches (other than inventory or capital expenditures
unless provided for in the budget) on behalf of IE as would otherwise be done
in the ordinary course of business and subject to any limitations contained
in the budget approved by IE and TFN.
In addition, IE may from time to time request TFN to perform other
services or provide other information relating to the operation of the
Branches. TFN and IE shall each make their best efforts to agree on the
terms and conditions, including additional reasonable fees, for any such
requested service or information.
2. Financial Reporting.
-------------------
2.1 Monthly Reports. TFN will provide monthly financials to IE on the
Branches in such format as used from time to time for other TFN locations.
IE acknowledges that it has received and accepted the format currently used
by TFN, an example of which, the July 31, 1994 monthly financials statements,
has been previously delivered to IE as Exhibit 2.1, provided however, the
parties acknowledge that IE may request a change in such format and in the
level of detail included in such report pursuant to the procedures outlined
in Section 1.6 of this Agreement.
IE and TFN agree that IE and TFN shall use such monthly financials
to reconcile the amount owed by either party to the other for all costs and
expenses incurred in managing the Branches, including reasonable capital
expenditures. TFN agrees, however, that no such capital expenditure in an
amount exceeding $5,000 shall be made without IE's prior written approval,
which shall not be unreasonably withheld. Each party agrees and
acknowledges that it will not allocate any corporate overhead to the Branches
for purposes of these financial statements except for payments made by IE to
TFN pursuant to Section 3.3 of this Agreement.
TFN shall also make a copy of all monthly branch reconciliations
available to IE. For the purposes of clarification only, in connection with
making payments of Direct Expenses, IE may request financial information in
such reasonable detail or format and will be billed for any changes required
by such request pursuant to the procedures outlined in Section 1.6 of this
Agreement if such request is made after 90 days from the effective date of
this Agreement.
2.2 Quarterly Reports. TFN will provide quarterly financials to IE on
the Branches. IE acknowledges that it has received and accepted the format
proposed by TFN, an example of which, the September 30, 1994 quarterly
financials statements, has been previously delivered to IE as Exhibit 2.2,
provided, however, that such quarterly financials shall include a balance
sheet for each Branch. Such quarterly financials shall be based on IE's
quarter and fiscal year ends.
2.3 Other Reports. TFN will provide financial information to IE on the
Branches as reasonably required to facilitate financial reporting by IE
necessary to comply with federal securities laws and regulations and as
reasonably necessary for IE to prepare and file all required state and
federal tax returns relating to the Branches or the business conducted at the
branches, excluding payroll and other employee related taxes, all in such
format as used from time to time by TFN to prepare tax returns for other TFN
branch locations. TFN shall prepare initial drafts of local tax returns,
including without limitation sales and use tax returns, relating to the
Branches. IE shall review, finalize and file such returns. IE and TFN each
agrees and acknowledges that this accommodation to IE shall not cause TFN to
assume or be obligated for any liability as a preparer of such local tax
returns.
2.4 Management Availability. In connection with the financial and
other reports to be made and delivered by TFN to IE, TFN will make its
accounting, financial, tax and other management reasonably available to IE
and its auditors to assist IE in the preparation of its financial reports and
tax returns.
2.5 Accounting Principles and Practices. In the preparation of each of
the monthly, quarterly and other reports, TFN shall apply accounting
principles and practices substantially consistent with those used by TFN from
time to time in the preparation of similar reports relating to its other
branch locations, and to the extent reasonably practicable such monthly
financial statements shall be prepared in accordance with generally accepted
accounting principles applied on a consistent basis. The quarterly financial
statements shall be prepared in accordance with generally accepted accounting
principles applied on a consistent basis.
3. Fees and Charges.
----------------
3.1 Costs and Expenses. IE shall provide funds for all Direct
Expenses, to which TFN shall have access and which shall be sufficient to
enable TFN to pay all Direct Expenses as such expenses arise. TFN shall
provide IE with a check register detailing each check TFN proposes to issue
at least five business days prior to the proposed date of such check, or such
shorter time as the parties may from time to time agree, provided, however,
that IE and TFN agree that TFN shall provide such information to IE
concerning (i) Scheduled Principal Payments to IBM Credit Corporation and ITT
Commercial Finance and (ii) payroll checks for terminated employees in the
Branches located in California one business day prior to the proposed date of
such check. IE shall then provide sufficient funds to cover all such
checks, provided, however, if IE objects to any such check it shall
immediately notify TFN of the reason for the objection and TFN and IE shall
each make their best efforts to come to a mutually acceptable resolution of
such issue. Nothing provided in this paragraph, however, shall in any way
limit or negate IE's obligation to pay for all Direct Expenses.
IE shall also provide funds to TFN for the payroll attributable
to TFN employees at the Branches. TFN and IE agree that the procedure for
such payroll expenses shall be as follows. TFN shall send IE by facsimile a
payroll summary each Wednesday of any payroll week or, if not a Wednesday at
least two business days prior to any pay day. IE shall then wire transfer
such amount of payroll as shown on the payroll summary to the TFN bank
account, identified by TFN from time to time, on the next business day.
TFN's payroll processing agent, currently ADP, shall then debit such account
for such amount on the pay day which is the next business day. TFN shall
then include that amount as an expense on the monthly and quarterly financial
statements.
IE shall also establish an impound fund from which TFN may draw
monies for time to time for such miscellaneous expenses as are reasonably
needed to operate the Branches. TFN shall submit documentation to IE
reasonably necessary to substantiate each such withdrawal and upon review and
acceptance of such documentation IE shall then replenish the impound fund for
the amounts so expended.
IE and TFN agree and acknowledge that it is the responsibility of
TFN to provide documentation to IE as is reasonably necessary to
substantiate Direct Expenses reasonably sufficient to enable IE to provide
funds for such Direct Expenses. In the event it is reasonably determined
upon review of such documentation that IE has improperly paid a Direct
Expense, TFN shall reimburse IE for such amount together with interest
thereon at the rate provided in Section 3.5 of this Agreement. IE and TFN
agree and acknowledge that TFN will not send any check to any payee or
otherwise pay for a Direct Expense until IE has provided funds for each such
expense as TFN will not use any of its own monies for such expenses.
To the extent IE directly receives and pays any Direct Expense of
a Branch, including without limitation, fees and charges related to
performance and bid bonds, IE shall deliver to TFN a copy of the invoice and
other related information including the amount paid by IE. TFN shall then
include that amount as an expense on the monthly and quarterly financial
statements.
"Direct Expense" for the purposes of this Agreement shall include
all amounts included under the categories of Cost of Goods and/or Operating
Expenses as such categories are provided for and agreed to by the budget
process. Such amounts shall include all amounts expended for or in
connection with the day to day operation of the Branches. Such amounts shall
be reflected on the financial statements but shall exclude amortization of
intangibles. The parties agree, however, that Direct Expense shall not
include items shown on Exhibits 2.1 and 2.2 as "divisional fees" or "other
expenses" except for specific adjustments included in "other expenses" which
reduce costs as part of the consolidation/centralization plan dated October
11, 1994, previously delivered by TFN to IE.
Each party agrees to appoint one person to whom all communications
concerning payments to be made by IE to TFN under this section shall be
addressed. Each party further agrees that each such appointee shall make all
reasonable efforts to resolve each and every issue brought to him or her in
an efficient and timely manner.
The initial such appointees are as follows:
for TFN: Thomas A. Gregory
Assistant Treasurer
The Future Now, Inc.
Cincinnati, Ohio 45236
Telephone: 513 792 4585
Fax: 513 791 6833
for IE: Maryann Bixler
Intelligent Electronics, Inc.
411 Eagleview Boulevard
Exton, Pennsylvania 19341
Telephone: 610 458 6520
Fax : 610 458 -----
3.2 Incentive Compensation. IE shall also pay incentive compensation
to TFN based on a comparison of the Net Earnings Before Tax achieved each
quarter by the Branches in the aggregate to the budgeted Net Earnings Before
Tax each as set forth as a separate line item on the quarterly financial
statements. This incentive compensation shall be computed as set forth
below:
<PAGE>
Percent of Quarterly Percent of Net Earnings Before Tax
Budgeted Net Earnings Before Tax Achieved Paid as Incentive Compensation
75% - 84.99% 10%
85% - 94.99% 12.5%
95% - 109.99% 17.5%
110% or above 20%
The amount of incentive compensation shall be calculated by TFN from the
quarterly financial statements on a year to date basis and billed to IE at
such time as the quarterly financials are delivered to IE by TFN. An example
of such year to date calculation is attached to this Agreement as Exhibit
3.2. TFN and IE agree, however, that any incentive compensation paid to TFN
during any year shall be adjusted by any adjustments determined to be
appropriate during the year end audit or if it is determined through such
audit that revenues and expenses were improperly matched in any quarter.
Upon any such determination, IE shall pay TFN for any additional incentive
compensation determined to be due to TFN or TFN shall pay IE for any amount
of incentive compensation determined to have been overpaid to it by IE.
3.3 Corporate Overhead Allocation. IE shall also pay to TFN $20,000
per Branch each month in lieu of TFN allocating any corporate overhead to
the Branches.
3.4 Annual Budget. IE and TFN shall mutually agree on the annual
budget for each Branch which will be prepared on a monthly basis and will be
the base against which TFN's performance and entitlement to incentive
compensation under this Agreement shall be measured. The budget shall be
developed through practices and procedures reasonably consistent with those
used by TFN prior to the Acquisition or as are used from time to time by TFN
in the management of its other branch locations and reflected on the
financial statements included as Exhibits 1.1 and 2.1. TFN shall deliver to
IE its proposed budget for the Branches for 1995 on or prior to January 10,
1995, and each party agrees it shall make its best efforts to agree upon
such budget by January 31, 1995. IE and TFN agree and acknowledge that their
discussions concerning the budget for 1995 will take into account the
following guidelines: (i) income from operations of approximately $1.5
million, (ii) the understanding that product will be sold at the Branches on
terms of net 30 days, (iii) that 95% of outstanding accounts receivable will
be less than 60 days old (excluding those attributable to market development
funds), (iv) that inventory variances will be less than .75%, and that
inventory turns will equal 20 on an annualized basis, and (v) revenues for
the Branches will represent approximately 25% of the amount total TFN revenue
would have been if the revenue from the Branches was included therein.
For each subsequent year IE and TFN shall use their best efforts to
agree upon a budget for that year. Each such budget may be revised from time
to time during the year upon the request of either IE or TFN and each agrees
upon receipt of such request to reasonably consider each other's request, not
to unreasonably withhold its consent to the other's request and to use their
best efforts to agree upon a revised budget.
3.5 Payment. IE shall pay TFN any compensation or other monies owed to
TFN under this Agreement within ten days of billing. Interest at the then
bank prime lending rate (as published from time to time by First National
Bank of Chicago) plus 1.25% shall accrue on any undisputed amount not paid
when due. In the event, however, that any such dispute is resolved in whole
or in part in TFN's favor, such interest will be computed as if the amount
was not in dispute and shall then be due and payable by IE to TFN.
IE shall have the right, from time to time and upon reasonable
advance notice to TFN, to request an audit at its own expense of the
performance of the Branches. Such notice shall include a description of the
audit proposed to be done by IE.
4. Representations, Warranties and Covenants of TFN.
------------------------------------------------
TFN represents, warrants and covenants that it will:
a. manage the Branches in substantially the same manner as it from
time to time manages other TFN branch locations, including its employee
compensation and billing, purchasing, marketing, sales, credit and collection
policies and procedures; provided, however, IE agrees and acknowledges that
to the extent IE directs or, as the result of a request, causes TFN to manage
the Branches differently from its other TFN branch locations, TFN shall not
be in breach of this representation, warranty and covenant.
b. permit IE reasonable access to the Branches and branch management
from time to time and permit IE to have one representative present from time
to time at each of the Branches;
c. make its accounting, financial, tax and other management reasonably
available to IE and its auditors with respect to the operation and
management of the Branches;
d. not dispose of any asset at a Branch except those in the ordinary
course of business and agrees it will credit the appropriate Branch for any
proceeds from any such sale;
e. maintain business practices of its employees at the Branches so
that the safety of each person located or doing business at each Branch is
reasonably assured;
f. respond to each request by IE in a fashion reasonably likely to
meet the reasonable business needs of IE and the customers of the Branches;
g. maintain the insurance required by Section 1.7 of this Agreement;
and
h. not engage in any transaction to the benefit of TFN's other branch
locations which would be detrimental to the Branches.
5. Representations, Warranties and Covenants of IE.
-----------------------------------------------
IE represents, warrants and covenants that it will:
a. not interfere in day to day management of the Branches by TFN
provided, however, that this shall not be construed to limit IE's rights
provided elsewhere in this Agreement or as expressly provided in the
Purchase Agreement, provided however, that IE shall not be bound by this
covenant as to any Branch in the event any such Branch's performance does not
meet the performance levels set forth in the annual budget.
b. make its accounting, financial, tax and other management reasonably
available to TFN and its auditors with respect to the operation and
management of the Branches;
c. cooperate with TFN to ensure that the inventory and accounts
receivable owned by IE at the Branches are not "counted against" TFN's own
floor planning arrangements and secured credit agreement;
d. pay lease payments and other lease charges for the Branches as
well as Direct Expenses when due and do any other acts as reasonably required
to ensure Branch locations are maintained and are adequate to conduct the
business then being done at each Branch;
e. obtain and maintain its own insurance covering its assets and
properties at the Branches;
f. not unreasonably refuse any TFN request to relocate a Branch;
g. except as otherwise provided in Section 8.1(b)(v) of the Purchase
Agreement, not directly or indirectly employ, solicit, interfere with, or
endeavor to entice away any employee of TFN whether or not located at the
Branches; and
h. respond to each request by TFN in a fashion reasonably likely to
meet the reasonable business needs of TFN and the customers of the Branches.
6. Termination of Agreement.
------------------------
This Agreement shall terminate at the earlier of (i) December 31, 1996; (ii)
earlier termination in whole or in part by TFN or IE for cause; or (iii)
earlier termination of this Agreement in whole or in part by TFN or IE
without cause.
6.1 Termination Without Cause. TFN may terminate this Agreement
without cause upon 210 days prior written notice to IE. IE shall have the
right to terminate this agreement without cause on 90 days notice or shorter
notice upon payment to TFN of the respective termination fee set forth below:
(a) If IE desires to terminate this Agreement in its entirety upon
30 or fewer days notice to TFN, IE shall pay to TFN a termination
fee of $750,000 ;
(b) If IE desires to terminate this Agreement in its entirety upon
more than 30 and fewer than 60 days notice to TFN, IE shall pay to
TFN a termination fee of $500,000;
(c) If IE desires to terminate this Agreement in its entirety upon
more than 60 and fewer than 90 days notice to TFN, IE shall pay to
TFN a termination fee equal to the amount of expenses actually
incurred and paid by TFN as a direct result of IE's termination,
such as severance pay, which amount shall not exceed $250,000. TFN
shall deliver to IE evidence of such expenses reasonably
satisfactory to IE;
provided, however, that (i) any such termination fee shall be reduced by any
portion of the Premium which has then been or is then paid by IE to TFN; (ii)
IE shall not be obligated to pay any termination fee if it terminates this
Agreement upon at least 90 days notice to TFN and (iii) IE shall not be
obligated to pay any termination fee unless and until the Management
Agreement is terminated in its entirety by IE.
If IE desires to terminate this Agreement, in whole or in part, as a
result or condition of a sale of one or more of the Branches by IE prior to
January 1, 1996, IE shall pay to TFN a fee equal to 50% of the amount that
the payment on account of the goodwill that IE is to receive upon such sale
exceeds $8.5 million (the "Premium"). In the event IE sells less than all
the Branches in one such transaction, IE shall pay TFN the Premium as it is
received in each such sale, provided any such sale occurs prior to January 1,
1996. Such amount shall be paid to TFN by IE within five business days of
the closing of the sale to its buyer(s) except as provided in the last
sentence of this paragraph. Premium for purposes of this calculation shall
be reduced by the following: (i) transaction costs incurred by IE in the
purchase of the Branches from TFN; and (ii) any operating losses incurred by
IE from the Branches during the term of the Management Agreement. In the
event any of the purchase price received by IE is not in the form of cash, IE
shall deliver the portion of such amount to TFN within five business days of
the conversion of such amount into cash.
Upon such a sale of one or more Branches, this Agreement shall remain in
effect as to any Branch still owned by IE. The amount of all fees and
charges owed at the time of any termination shall be computed on a prorated
basis dependent upon the actual date of termination. IE and TFN shall each
mutually agree on such proration.
6.2 Termination With Cause. Either party may terminate this Agreement
for cause upon ten business days' prior written notice. Upon receipt of
such notice the party so notified shall have ten days to cure the alleged
breach of the Agreement, or if a cure cannot be reasonably completed within
such ten days, to have commenced reasonable efforts to affect such a cure
and such efforts are thereafter diligently pursued. Termination of the
Agreement for cause shall be effective only upon the failure of the party so
notified to cure or commence a cure prior to the expiration of the ten day
notice period.
"Cause" for the purposes of this Agreement shall mean a material
breach of the Agreement by either party or significant or repeated failure by
TFN or IE to perform or honor its obligations under the Agreement. "Cause"
shall not include a sale of one or more of the Branches by IE.
6.3 Conduct After Termination. IE and TFN each agree that upon
termination of the Agreement in whole or in part, they will each use their
best efforts to cause a smooth transition of the business conducted at the
Branches. This obligation on the part of TFN shall inure to the benefit of
IE or any entity to which IE sells one or more of the Branches so long as
TFN shall not be obligated to give one or more of its competitors any
information TFN reasonably believes should be kept confidential. This
provision shall not be construed, however, so that any entity to which IE
sells one or more of the Branches would not receive information which would
otherwise usually be provided to such a buyer in an arms-length purchase and
sale transaction.
Without limiting the foregoing obligations of either IE or TFN, TFN
agrees that upon termination of the Agreement in whole or in part, TFN shall
use its best efforts to transfer to IE, or the party to whom IE has sold one
or more of the Branches, the telephone and fax numbers relating to such
Branch or Branches.
IE's right or the right of such entity to which IE has sold one or
more of the Branches to offer employment to any of the employees at the
Branches shall be as set forth in Section 8.1(b)(v) of the Purchase
Agreement.
7. Resolution of Disputes.
----------------------
TFN and IE shall promptly seek to resolve any dispute arising under this
Agreement. If TFN and IE are unable to resolve any such dispute, IE and TFN
shall select an accounting firm if the dispute is financial in nature or an
arbitrator if the dispute is non-financial in nature, mutually acceptable to
them to resolve any remaining disputes. TFN and IE will share equally the
fees and expenses of the accounting firm or arbitrator designated to resolve
outstanding disputes. IE and TFN shall be bound by the determination of such
accounting firm or arbitrator.
Each party agrees to appoint one person to whom all communications
concerning such party's performance under this Agreement shall be addressed.
Each party further agrees that each such appointee shall make all reasonable
efforts to resolve each and every issue brought to him or her in an efficient
and timely manner including without limitation those issues affecting
customer satisfaction.
The initial such appointees are as follows:
for TFN: Jacqueline C. Neumann
Vice President and Controller
The Future Now, Inc.
Cincinnati, Ohio 45236
Telephone: 513 792 4550
Fax: 513 791 6833
for IE: Norm Shapero
Vice President
Intelligent Electronics, Inc.
411 Eagleview Boulevard
Exton, Pennsylvania 19341
Telephone: 610 458 6622
Fax : 610 458 8454
8. General Terms.
-------------
8.1 Term. Except as otherwise provided in this Agreement, the parties
agree that the services covered by this Agreement shall continue to be
provided until December 31, 1996. Such term may, however, be extended upon
the mutual agreement of TFN and IE.
8.2 Assignment. This Agreement shall not be assigned by either party
without the prior written consent of the other party, except that either
party may assign this Agreement to one or more of its subsidiaries without
the other's prior consent .
8.3 Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Ohio.
8.4 Waiver, Amendment. The parties may, by written agreement executed
by each of the parties, (a) waive any inaccuracies in or breaches of any of
the provisions of this Agreement; and (b) amend or modify this Agreement.
8.5 Entire Agreement. This Agreement, including the Exhibits to this
Agreement, contains all the terms agreed upon by the parties with respect to
the subject matter of this Agreement and supersedes all prior agreements,
arrangements or understandings between the parties as to the subject matter
of this Agreement, except as expressly set forth to the contrary in this
Agreement or as set forth in the Purchase Agreement.
8.6 Headings. The headings of the articles, sections and paragraphs
contained in this Agreement are for convenience of reference only and do not
form a part of this Agreement and in no way modify the meanings of such
articles, sections or paragraphs.
8.7 Severability. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted from this
Agreement and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect.
8.8 Notices. All notices and other communications hereunder shall be
in writing and deemed to have been duly given when delivered by hand, when
mailed by registered or certified mail, postage prepaid, return receipt
requested, when given by prepaid courier delivery service such as Federal
Express or other similar service on the day following the date that such
notice is delivered to such courier, as follows:
(a) if to TFN at
The Future Now, Inc.
8044 Montgomery Road, Suite 601
Cincinnati, Ohio 45236
Attention: Terry L. Theye
with a copy to:
The Future Now, Inc.
8044 Montgomery Road, Suite 601
Cincinnati, Ohio 45236
Attention: Norma Skoog
(b) if to IE at
Intelligent Electronics, Inc.
411 Eagleview Boulevard
Exton, Pennsylvania 19341
Attention: Richard D. Sanford
with a copy to:
Intelligent Electronics, Inc.
411 Eagleview Boulevard
Exton, Pennsylvania 19341
Attention: Legal Department
8.9 Consents. Notwithstanding anything to the contrary in this
Agreement, neither party will be deemed to have unreasonably withheld its
consent in the event it withholds its consent to a matter on the basis that
such could reasonably be expected to result in such party incurring
additional expense or receiving less revenue.
In Witness Whereof, the parties have caused this Agreement to be duly
executed as of the date and year first above written.
Intelligent Electronics, Inc. The Future Now, Inc.
By: /s/ Gregory A. Pratt By: /s/ Lewis E. Miller
-------------------------- -------------------------
Name: Lewis E. Miller
Title: President
