UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 5, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20022
POMEROY COMPUTER RESOURCES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 31-1227808
-------- ----------
(State or jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1020 Petersburg Road, Hebron, KY 41048
--------------------------------------
(Address of principal executive offices)
(606) 586-0600
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days.
YES ___X___NO___
The number of shares of common stock outstanding as of August 5, 1999 was
11,748,073.
For the second quarter of 1999, Pomeroy Select Integration Solutions, Inc.'s, a
wholly-owned subsidiary, pro rata share of the selling, general and
administrative expenses were not allocated in accordance with the administrative
services agreement between the Company and the subsidiary. Therefore,
reclassifications have been made to reflect the proper allocation of such
expenses for the products and services segments. See Note 7 of the Notes to
Consolidated Financial Statements for restated segment information. The
Company's consolidated net income and earnings per share were unchanged as a
result of these reclassifications.
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<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
TABLE OF CONTENTS
Part I. Financial Information
Item 1. Financial Statements: Page
----
<S> <C> <C>
Consolidated Balance Sheets as of
January 5, 1999 and July 5, 1999 3
Consolidated Statements of Income for
the Quarters Ended July 5, 1998 and 1999 4
Consolidated Statements of Income for
the Six Months Ended July 5, 1998 and 1999 5
Consolidated Statements of Cash Flows
for the Six Months Ended July 5, 1998 and 1999 6
Notes to Consolidated Financial
Statements (restated as to Note 7 only) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information 14
SIGNATURE 18
</TABLE>
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<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, July 5,
1999 1999
----------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,962 $ 5,146
Accounts and note receivable, less allowance of $598 and $1,097
at January 5, 1999 and July 5, 1999, respectively . . . . . . 164,991 178,209
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . 33,333 38,249
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,084 3,263
----------- --------
Total current assets . . . . . . . . . . . . . . . . . . . 204,370 224,867
----------- --------
Equipment and leasehold improvements. . . . . . . . . . . . . . . . 23,796 24,356
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . 10,323 11,373
----------- --------
Net equipment and leasehold improvements . . . . . . . . . 13,473 12,983
----------- --------
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,383 39,273
----------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 254,226 $277,123
=========== ========
LIABILITIES & EQUITY
Current liabilities:
Current portion of notes payable . . . . . . . . . . . . . . . . $ 5,028 $ 4,512
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 78,817 74,718
Bank notes payable.. . . . . . . . . . . . . . . . . . . . . . . 39,629 57,087
Other current liabilities. . . . . . . . . . . . . . . . . . . . 9,532 12,675
----------- --------
Total current liabilities. . . . . . . . . . . . . . . . . 133,006 148,992
----------- --------
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,231 4,098
Equity:
Preferred stock (no shares issued or outstanding). . . . . . . . - -
Common stock (11,707 and 11,730 shares issued and outstanding
at January 5, 1999 and July 5, 1999, respectively). . . . . . 117 117
Paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . 64,394 64,690
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . 48,800 59,548
----------- --------
113,311 124,355
Less treasury stock, at cost (31 shares at January 5, 1999 and
July 5, 1999) . . . . . . . . . . . . . . . . . . . . . . . . 322 322
----------- --------
Total equity. . . . . . . . . . . . . . . . . . . . . . . . . 112,989 124,033
----------- --------
Total liabilities and equity. . . . . . . . . . . . . . . . . $ 254,226 $277,123
=========== ========
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Quarter Ended
--------------------------
July 5, July 5,
1998 1999
--------------- ---------
<S> <C> <C>
Net sales and revenues. . . . . . . . . $ 158,843 $186,848
Cost of sales and service . . . . . . . 138,065 163,140
--------------- ---------
Gross profit . . . . . . . . . 20,778 23,708
--------------- ---------
Operating expenses:
Selling, general and administrative. 9,953 11,258
Rent expense . . . . . . . . . . . . 626 696
Depreciation . . . . . . . . . . . . 954 702
Amortization . . . . . . . . . . . . 453 692
Provision for doubtful accounts. . . - 46
--------------- ---------
Total operating expenses . . . 11,986 13,394
--------------- ---------
Income from operations. . . . . . . . . 8,792 10,314
--------------- ---------
Other expense (income):
Interest expense . . . . . . . . . . 877 865
Miscellaneous. . . . . . . . . . . . (33) (16)
--------------- ---------
Total other expense. . . . . . 844 849
--------------- ---------
Income before income tax . . . . . . 7,948 9,465
Income tax expense . . . . . . . . . 2,940 3,785
--------------- ---------
Net income . . . . . . . . . . . . . $ 5,008 $ 5,680
=============== =========
Weighted average shares outstanding:
Basic. . . . . . . . . . . . . . . . 11,450 11,697
=============== =========
Diluted. . . . . . . . . . . . . . . 11,804 11,791
=============== =========
Earnings per common share:
Basic. . . . . . . . . . . . . . . . $ 0.44 $ 0.49
=============== =========
Diluted. . . . . . . . . . . . . . . $ 0.42 $ 0.48
=============== =========
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Six Months Ended
--------------------
July 5, July 5,
1998 1999
--------- ---------
<S> <C> <C>
Net sales and revenues. . . . . . . . $294,041 $350,772
Cost of sales and service . . . . . . 255,500 304,205
--------- ---------
Gross profit . . . . . . . . 38,541 46,567
--------- ---------
Operating expenses:
Selling, general and administrative 18,804 22,621
Rent expense. . . . . . . . . . . . 1,188 1,402
Depreciation. . . . . . . . . . . . 1,806 1,797
Amortization. . . . . . . . . . . . 762 1,315
Provision for doubtful accounts . . - 46
--------- ---------
Total operating expenses . . 22,560 27,181
--------- ---------
Income from operations. . . . . . . 15,981 19,386
--------- ---------
Other expense(income):
Interest expense. . . . . . . . . . 1,300 1,650
Miscellaneous . . . . . . . . . . . (56) (45)
--------- ---------
Total other expense. . . . . 1,244 1,605
--------- ---------
Income before income tax. . . . . . 14,737 17,781
Income tax expense. . . . . . . . . 5,452 7,033
--------- ---------
Net income. . . . . . . . . . . . . $ 9,285 $ 10,748
========= =========
Weighted average shares outstanding:
Basic . . . . . . . . . . . . . . . 11,421 11,691
========= =========
Diluted . . . . . . . . . . . . . . 11,758 11,820
========= =========
Earnings per common share:
Basic . . . . . . . . . . . . . . . $ 0.81 $ 0.92
========= =========
Diluted . . . . . . . . . . . . . . $ 0.79 $ 0.91
========= =========
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Six Months Ended
--------------------
July 5, July 5,
1998 1999
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net cash flows used in operating activities $ (4,622) $ (8,685)
Cash Flows from Investing Activities:
Capital expenditures. . . . . . . . . . . . (1,932) (1,489)
Acquisition of reseller assets, net of cash
acquired . . . . . . . . . . . . . . . . . . . (11,229) (1,082)
--------- ---------
Net investing activities . . . . . . . . . . . (13,161) (2,571)
--------- ---------
Cash Flows from Financing Activities:
Net borrowings on bank note. . . . . . . . . . 18,722 17,308
Net payments on notes payable. . . . . . . . . (696) (5,164)
Proceeds from exercise of stock options. . . . 1,395 296
--------- ---------
Net financing activities. . . . . . . . . . 19,421 12,440
--------- ---------
Increase (decrease) in cash. . . . . . . . . . 1,638 1,184
Cash:
Beginning of period . . . . . . . . . . . . 380 3,962
--------- ---------
End of period . . . . . . . . . . . . . . . $ 2,018 $ 5,146
========= =========
</TABLE>
See notes to consolidated financial statements.
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POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED AS TO NOTE 7 ONLY)
1. Basis of Presentation
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Except as
disclosed herein, there has been no material change in the information disclosed
in the notes to consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended January 5, 1999. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the interim period have been made. The results of
operations for the six-month period ended July 5, 1999 are not necessarily
indicative of the results that may be expected for future interim periods or for
the year ending January 5, 2000.
2. Cost of sales and service
In the first quarter of 1999, the Company changed the manner in which services'
labor costs are reported. The Company now classifies direct costs of service
personnel in cost of sales and service; previously, such costs were included in
selling, general and administrative expenses. Prior periods have been
reclassified to conform with the current year's presentation.
3. Borrowing Arrangements
At January 5 and July 5, 1999, bank notes payable include $12.6
million and $18.7 million, respectively, of overdrafts in accounts with a
participant bank to the Company's credit facility. These amounts were
subsequently funded through the normal course of business.
4. Earnings per Common Share
The following is a reconciliation of the number of shares used in the basic EPS
and diluted EPS computations:
<TABLE>
<CAPTION>
Quarter Ended July 5,
---------------------------------------
1998 1999
------------------- -------------------
Per Share Per Share
Shares Amount Shares Amount
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Basic EPS. . . . . 11,450 $ 0.44 11,697 $ 0.49
Effect of dilutive
Stock options. . 354 (0.02) 94 (0.01)
------ ----------- ------ -----------
Diluted EPS. . . . 11,804 $ 0.42 11,791 $ 0.48
====== =========== ====== ===========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended July 5,
---------------------------------------
1998 1999
------------------- -------------------
Per Share Per Share
Shares Amount Shares Amount
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Basic EPS. . . . . 11,421 $ 0.81 11,691 $ 0.92
Effect of dilutive
Stock options. . 337 (0.02) 129 (0.01)
------ ----------- ------ -----------
Diluted EPS. . . . 11,758 $ 0.79 11,820 $ 0.91
====== =========== ====== ===========
</TABLE>
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5. Supplemental Cash Flow Disclosures
Supplemental disclosures with respect to cash flow information and non-cash
investing and financing activities are as follows:
<TABLE>
<CAPTION>
Six Months Ended July 5,
------------------------
1998 1999
------- ------
<S> <C> <C>
Interest paid . . . . . . . . . . . $ 1,045 $1,668
======= ======
Income taxes paid . . . . . . . . . $ 9,353 $5,558
======= ======
Adjustments to purchase
price of acquisition assets . . . $ - $1,740
======= ======
Business combinations accounted for
as purchases:
Assets acquired. . . . . . . . $31,734 $2,601
Liabilities assumed. . . . . . 18,505 973
Notes payable. . . . . . . . . 2,000 546
------- ------
Net cash paid. . . . . . . . . $11,229 $1,082
======= ======
</TABLE>
6. Litigation
There are various legal actions arising in the normal course of business that
have been brought against the Company. Management believes these matters will
not have a material adverse effect on the Company's financial position or
results of operations.
7. Segment Information (restated)
Summarized financial information concerning the Company's reportable segments is
shown in the following table. (in thousands)
<TABLE>
<CAPTION>
Quarter Ended July 5, 1998
-----------------------------------
Products Services Consolidated
--------- --------- -------------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . $ 142,062 $ 16,781 $ 158,843
Income from operations. . . . 6,603 2,189 8,792
Total assets. . . . . . . . . 169,267 39,409 208,676
Capital expenditures. . . . . 425 98 523
Depreciation and amortization 1,176 231 1,407
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended July 5, 1999 (restated)
-----------------------------------
Products Services Consolidated
--------- --------- -------------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . $ 161,703 $ 25,145 $ 186,848
Income from operations. . . . 5,704 4,610 10,314
Total assets. . . . . . . . . 228,403 48,720 277,123
Capital expenditures. . . . . 293 240 533
Depreciation and amortization 1,065 329 1,394
</TABLE>
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<TABLE>
<CAPTION>
Six Months Ended July 5, 1998
-----------------------------------
Products Services Consolidated
--------- --------- -------------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . $ 262,473 $ 31,568 $ 294,041
Income from operations. . . . 11,898 4,083 15,981
Total assets. . . . . . . . . 169,267 39,409 208,676
Capital expenditures. . . . . 1,723 209 1,932
Depreciation and amortization 2,149 419 2,568
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended July 5, 1999 (restated)
-----------------------------------
Products Services Consolidated
--------- --------- -------------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . $ 303,372 $ 47,400 $ 350,772
Income from operations. . . . 9,929 9,457 19,386
Total assets. . . . . . . . . 228,403 48,720 277,123
Capital expenditures. . . . . 1,027 462 1,489
Depreciation and amortization 2,475 637 3,112
</TABLE>
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Special Cautionary Notice Regarding Forward-Looking Statements
--------------------------------------------------------------
Certain of the matters discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contain certain
forward looking statements regarding future financial results of the Company.
The words "expect," "estimate," "anticipate," "predict," and similar expressions
are intended to identify forward-looking statements. Such statements are
forward-looking statements for purposes of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. Important factors that could cause the actual
results, performance or achievements of the Company to differ materially from
the Company's expectations are disclosed in this document including, without
limitation, those statements made in conjunction with the forward-looking
statements under "Management's Discussion and Analysis of Financial Condition
and Results of Operations". All written or oral forward-looking statements
attributable to the Company are expressly qualified in their entirety by such
factors.
POMEROY COMPUTER RESOURCES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW. The Company's business is comprised of (1) the sale and leasing of a
broad range of computer equipment including hardware, software, and related
products, and (2) the provision of information technology (IT) services which
support such computer products. On January 6, 1999, the Company transferred the
assets, liabilities, business, operations and personnel comprising its IT
services business (excluding procurement and configuration services) in exchange
for 10 million shares of Class B common stock of Pomeroy Select Integration
Solutions, Inc., a wholly-owned subsidiary. The separation of the IT services
business is a part of the Company's ongoing strategy to expand its services
revenue. The Company now classifies the direct costs of service personnel in
cost of sales and service. See Notes 2 and 7 of the Notes to Consolidated
Financial Statements.
TOTAL NET SALES AND REVENUES. Total net sales and revenues increased $28
million, or 17.6%, to $186.8 million in the second quarter of fiscal 1999 from
$158.8 million in the second quarter of fiscal 1998. This increase was
attributable to an increase in sales to existing and new customers and to
acquisitions completed in fiscal years 1999 and 1998. Additionally, this
increase reflects a greater increase in sales volume as unit prices have
declined as compared to the second quarter of fiscal 1998. Excluding
acquisitions completed in fiscal years 1999 and 1998, total net sales and
revenues increased 9.8%. Product sales increased $19.6 million, or 13.8%, to
$161.7 million in the second quarter of fiscal 1999 from $142.1 million in the
second quarter of fiscal 1998. Excluding acquisitions completed in fiscal years
1999 and 1998, product sales increased 6.9%. Service revenues increased $8.4
million, or 49.8%, to $25.1 million in the second quarter of fiscal 1999 from
$16.8 million in the second quarter of fiscal years 1999 and 1998. Excluding
acquisitions completed in fiscal years 1999 and 1998, service revenues increased
34.4%.
Total net sales and revenues increased $56.7 million or 19.3%, to $350.8 million
in the first half of 1999 from $294.0 million in the first half of 1998.
Excluding acquisitions completed in fiscal years 1999 and 1998, total net sales
and revenues increased 9.6%. Product sales increased $40.9, or 15.6%, to $303.4
million in the first half of 1999 from $262.5 million in the first half of 1998.
Excluding acquisitions completed in fiscal years 1999 and 1998, product sales
increased 6.9%. Service revenues increased
$15.8 million, or 50.2%, to $47.4 million in the first half of 1999 from 31.6
million in the first half of 1998. Excluding acquisitions completed in fiscal
years 1999 and 1998, service revenues increased 31.9%.
GROSS MARGINS. Gross margin was 12.7% in the second quarter of fiscal 1999
compared to 13.1% in the second quarter of fiscal 1998. The decrease in gross
margin resulted primarily from the Company's strategic decision to obtain new
business and increase sales by aggressively pricing certain products. Service
revenues increased to 13.5% of total net sales and revenues in the second
quarter of fiscal 1999 compared to 10.6% of total net sales and revenues in the
second quarter of fiscal 1998. Service gross margin increased to 42.6% of total
gross margin in the second quarter of fiscal 1999 from 31.3% in the second
quarter of fiscal 1998. This increase in service gross margin was primarily due
to improved productivity of technical personnel. Factors that may have an impact
on gross margin in the future include the further decline of unit prices, the
percentage of equipment or service sales with lower-margin customers, the ratio
of service revenues to total net sales and revenues, and personnel utilization
rates.
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<PAGE>
Gross margin was 13.3% in the first half of fiscal 1999 compared to 13.1% in the
first half of fiscal 1998. This improved overall gross margin in the first half
of fiscal 1999 can be attributed to an increase in the volume of higher-margin
service revenues and improved gross margin of service revenues which were offset
by the decline in product gross margin and the growth in such lower-margin
product sales. Service revenues increased to 13.5% of total net sales and
revenues in the first half of fiscal 1999 compared to 10.7% of total net sales
and revenues in the first half of fiscal 1998. Service gross margin increased to
42.7% of total gross margin in the first half of fiscal 1999 from 31.1% in the
first half of fiscal 1998. This increase in service's gross margin was primarily
due to improved productivity of technical personnel. Factors that may have an
impact on gross margin in the future include the further decline of unit prices,
the percentage of equipment or service sales with lower-margin customers, the
ratio of service revenues to total net sales and revenues, and personnel
utilization rates.
OPERATING EXPENSES. Selling, general and administrative expenses (including
rent expense) expressed as a percentage of total net sales and revenues
decreased to 6.4% in the second quarter of fiscal 1999 from 6.7% in the second
quarter of fiscal 1998. This decrease is primarily due to the growth in net
sales and revenues exceeding the growth in selling, general and administrative
expenses. Excluding acquisitions completed in fiscal years 1999 and 1998,
selling, general and administrative expenses expressed as a percentage of total
net sales and revenues would have been 5.9% in the second quarter of fiscal
1999. Total operating expenses expressed as a percentage of total net sales
and revenues decreased to 7.2% in the second quarter of fiscal 1999 from 7.6% in
the second quarter of fiscal 1998 for the reason noted above. Excluding
acquisitions completed in fiscal years 1999 and 1998, total operating expenses
expressed as a percentage of total net sales and revenues would have been 6.7%
in the second quarter of fiscal 1999.
Selling, general and administrative expenses (including rent expense) expressed
as a percentage of total net sales and revenues increased to 6.9% in the first
half of fiscal 1999 from 6.8% in the first half of fiscal 1998. This increase
is primarily attributable to the increased selling and administrative payroll
costs experienced in the first quarter of fiscal 1999. Excluding acquisitions
completed in fiscal years 1999 and 1998, selling, general and administrative
expenses expressed as a percentage of total net sales and revenues would have
been 6.6% in the first half of fiscal 1999. Total operating expenses expressed
as a percentage of total net sales and revenues increased to 7.8% in the first
half of fiscal 1999 from 7.7% in the first half of fiscal 1998 for the reason
noted above and the increase in amortization expense as a result of
acquisitions. Excluding acquisitions completed in fiscal years 1999 and 1998,
total operating expenses expressed as a percentage of total net sales and
revenues would have been 7.8% in the second quarter of fiscal 1999.
INCOME FROM OPERATIONS. Income from operations increased $1.5 million, or
17.3%, to $10.3 million in the second quarter of fiscal 1999 from $8.8 million
in the second quarter of fiscal 1998. The Company's operating margin was 5.5% in
the second quarter of fiscal 1999 and fiscal 1998.
Income from operations increased $3.4 million, or 21.3%, to $19.4 million in the
first half of fiscal 1999 from $16.0 million in the first half of fiscal 1998.
The Company's operating margin increased to 5.5% in the first half of fiscal
1999 as compared to 5.4% in the first half of fiscal 1998 as the increase in
gross margin offset the increase in operating expenses as a percent of net sales
and revenues.
INTEREST EXPENSE. Interest expense was $0.9 million in the second quarter of
fiscal 1999 and 1998. Interest expense was $1.7 million in the first half of
fiscal 1999 as compared to $1.3 million in the first half of fiscal 1998.
This increase in interest expense in the first half of fiscal 1999 as compared
to the first half of fiscal 1998 is primarily due to the Company's increase in
overall debt borrowings in the first quarter of fiscal 1999 as compared to
the first quarter of fiscal
1998.
11 of 18
<PAGE>
INCOME TAXES. The Company's effective tax rate was 40.0% in the second quarter
of fiscal 1999 compared to 37.0% in the second quarter of fiscal 1998. The
adjustment to the effective tax rate in the second quarter of fiscal 1999
resulted in an overall effective tax rate of 39.6% for the first half of fiscal
1999. For the first half of fiscal 1999, the Company's effective tax rate was
39.6% as compared to 37.0% for the first half of fiscal 1998. During fiscal
1998, the Company's effective tax rate was reduced due to the availability of
the Kentucky Jobs Development Act ("KJDA") credit pertaining to the initial
eligible start-up costs component of the credit. For fiscal 1999, the Company's
KJDA benefit will be reduced to the annual eligible lease payments component of
the credit plus any carryforward from prior years.
NET INCOME. Net income increased $0.7 million, or 13.4%, to $5.7 million in the
second quarter of fiscal 1999 from $5.0 million in the second quarter of fiscal
1998 due to the factors described above. Net income increased $1.5 million, or
15.8%, to $10.8 million in the first half of fiscal 1999 from $9.3 million in
the first half of fiscal 1998 due to the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities was $8.7 million in the first half of fiscal
1999. Cash used in investing activities included $1.5 million for capital
expenditures and $1.1 million for acquisitions. Cash provided by financing
activities included $17.3 million of net borrowings on bank notes payable, $0.3
million from the exercise of stock options less $5.2 million for repayments on
notes payable.
A significant part of the Company's inventories is financed by floor plan
arrangements with third parties. At July 5, 1999, these lines of credit totaled
$72.0 million, including $60.0 million with Deutsche Financial Services ("DFS")
and $12.0 million with IBM Credit Corporation ("ICC"). Borrowings under both
floor plan arrangements are made on thirty day notes. All such borrowings are
secured by the related inventory. Financing on many of the arrangements is
interest free due to subsidies by manufacturers. The average rate on the plans
overall is less than 1.0% per annum. The Company classifies amounts outstanding
under the floor plan arrangements as accounts payable.
The Company's financing of receivables is provided through its Credit Facility
with DFS which permits the Company to borrow up to the lesser of $60.0 million
or an amount based upon a formula of eligible trade receivables. The Credit
Facility, which expires July 14, 2000, carries a variable interest rate based
solely on the prime rate less 125 basis points. At July 5, 1999, the amount
outstanding, which included $18.7 million of overdrafts in accounts with a
participant bank to the Company's credit facility, was $57.1 million at an
interest rate of 6.75%. Under the terms of the Credit Facility, the Company is
prohibited from paying any cash dividends and is subject to various restrictive
covenants.
The Company believes that the anticipated cash flow from operations and current
financing arrangements will be sufficient to satisfy the Company's capital
requirements for the next 12 months.
OTHER
Year 2000 Issues
Background. The following is a discussion of the Year 2000 date issue
("Year 2000 issue") as it affects the Company. Many computer programs and
embedded chips in other forms of technology use only the last two digits to
identify a year in a date field. As a result of this design decision, some of
these systems could fail to operate or fail to produce correct results if "00"
is interpreted to mean 1900, rather than 2000. These problems are widely
expected to increase in frequency and severity as the year 2000 approaches.
Assessment. The Company currently believes its potential exposure to
problems arising from the Year 2000 issue lies primarily in three areas:
(1) The Company's internal operating systems which may not be Year 2000
compliant;
(2) Potential Year 2000 non-compliance of systems of third parties with whom
the Company has a business relationship; and,
(3) Non-compliance of information technology products developed by third
parties on which the Company performs services.
12 of 18
<PAGE>
The Company has completed an assessment of its principal internal systems.
However, it continues to assess its Year 2000 exposure with respect to third
parties. While the cost of these assessment efforts is not expected to be
material to the Company's financial position or results of operations, there is
no assurance that this will be the case.
Internal Operating Systems. The Company is dependent upon management
information systems for all phases of its operations and financial reporting.
The Company began addressing the affect of the Year 2000 issue in 1996. The
Company has acquired Year 2000 compliant versions for all of its principal
systems and modules. The Company is in the process of testing the Year 2000
compliant versions of all hardware and software components and applications
pertaining to its internal operating systems upon which the Company relies.
There may be some non-critical applications that are not Year 2000 compliant.
Third-Party Relationships. The failure of a supplier to deliver timely
Year 2000 compliant products to our customers could jeopardize the Company's
ability to meet obligations to customers. In addition, we may be liable for Year
2000 non-compliance of information technology products on which the Company
performs services. The Company is conducting a program to identify and resolve
Year 2000 exposure from third parties. Any failure of third parties with whom
the Company has a business relationship to resolve Year 2000 problems with their
products in a timely manner could materially adversely affect our business,
financial condition or results of operations. The Company is also dependent on
third party service providers, such as telephone companies, banks and insurance
carriers. The Company is not aware of any significant Year 2000 exposure,
however, we have not inquired or implemented any program to assure Year 2000
compliance by them.
State of Readiness. The Company has completed testing of its principal
information technology systems. The Company is now converting all operations
to the Year 2000 compliant system, which is estimated to be operational by the
end of third quarter of fiscal 1999.
Costs to Address Year 2000 Issues. Other than time spent by the
Company's own personnel, the Company has not incurred any significant costs in
identifying Year 2000 issues. The Company does not anticipate any significant
costs to make its internal systems Year 2000 compliant because no remediation is
expected to be required. Accordingly, the Company has not deferred other
information technology projects due to Year 2000 efforts.
Risks of Year 2000 Issues. The Company believes the most
reasonably likely worst case Year 2000 scenario would include a combination of
some or all of the following:
(1) Internal IT modules or systems may fail to operate or may give
erroneous information. Such failure could result in shipping delays, reduced
utilization of technical personnel, inability to timely generate financial
reports and statements, inability of the Company to communicate with its branch
offices, and computer network downtime resulting in numerous inefficiencies and
higher payroll expenses.
(2) Non-IT components in HVAC, lighting, telephone, security and similar
systems might fail and cause the entire system to fail.
(3) Communications with customers that depend upon IT or non-IT
technology, such as EDI (including automatic ordering by and for customers), and
obtaining current pricing from vendors, may fail or give erroneous information.
These types of problems could result in such difficulties as the inability to
receive or process customer orders, shipping delays, or sale of products at
erroneous prices.
(4) The unavailability of product as a result of Year 2000 problems
experienced by one or more key vendors of the Company, or as a result of changes
in inventory levels of aggregators, VARs and similar providers in response to an
anticipated Year 2000 problem or the inability of the Company to develop
alternative sources for products.
(5) Products sold to some of the Company's customers could fail to
perform some or all of their intended functions. In such a situation, the
Company's maximum obligation would be to repair or replace the defective
products to the extent the Company is required to do so under manufacturer
warranty.
Contingency Plans. The Company believes its plans for addressing the
Year 2000 issue are adequate. The Company does not believe it will incur a
material financial impact from system failures, or from the costs associated
with assessing the risks of failure, arising from Year 2000 problems.
Consequently, the Company does not intend to create a detailed contingency plan.
In the event the Company does not adequately identify and resolve Year 2000
issues, the absence of a detailed contingency plan may adversely affect its
business, financial condition and results of operations.
13 of 18
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
PART II - OTHER INFORMATION
Items 1 to 3 None
Item 4 Submission of Matters to a Vote of Security Holders
On June 9, 1999, the Company held its annual meeting of stockholders
for the following purposes:
1. To elect seven directors;
2. To approve an increase in the number of shares of common stock reserved
for issuance under the Company's 1992 Non-Qualified and Incentive Stock Option
Plan from 1,850,000 shares to 2,350,000.
The voting on the above matters by the stockholders was as follows:
<TABLE>
<CAPTION>
Matter For Withheld
- ---------------------------------------- ---------- --------
Election of Directors:
- ----------------------------------------
<S> <C> <C>
David B. Pomeroy, II 10,225,563 626,494
Stephen E. Pomeroy 10,221,303 630,764
Dr. David Rosenthal 10,224,989 627,068
Michael Rohrkemper 10,229,291 622,766
James H. Smith, III 10,228,391 623,666
William H. Lomicka 10,227,066 624,991
Vincent Rinaldi 10,226,966 625,091
Approve an increase in the number of
Shares of common stock reserved for
issuance under the Company's 1992
Non-Qualified and Incentive Stock Option
Plan from 1,850,000 to 2,350,000 shares 8,434,860 332,256
</TABLE>
Holders of 12,944 shares abstained from voting on the forgoeing proposal. The
number of shares voted in favor of the proposal was sufficient for its passage.
Item 5 None
Item 6 Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
- -------------
<C> <C> <S>
10(i) Material Agreements
(hh)(1) The Asset Purchase Agreement dated
May 6, 1999 by, between and among
Pomeroy Computer Resources, Inc.,
Pomeroy Select Integration Solutions,
Inc., Systems Atlanta Commercial
Systems, Inc. and B. Scott Dobson,
Charley G. Dobson, Betty H. Dobson,
and Tyler H. Dobson
14 of 18
<PAGE>
(hh)(2) Employment Agreement by and
between Pomeroy Computer
Resources, Inc. and B. Scott Dobson,
dated May 6, 1999
(hh)(3) Subordinated Promissory Note issued
by Pomeroy Computer Resources,
Inc. to Systems Atlanta Commercial
Systems, Inc., dated May 6, 1999
(hh)(4) Subordinated Promissory Note issued
by Pomeroy Select Integration
Solutions, Inc. to Systems Atlanta
Commercial Systems, Inc., dated May
6, 1999
(hh)(5) General Bill of Sale and Assignment of
the Asset Purchase Agreement with
Pomeroy Computer Resources, Inc.
(hh)(6) General Bill of Sale and Assignment of
the Asset Purchase Agreement with
Pomeroy Select Integration Solutions,
Inc.
(hh)(7) Assignment and Assumption
Agreement by and between Systems
Atlanta Commercial Systems, Inc. and
Pomeroy Computer Resources, Inc.,
dated May 6, 1999
(hh)(8) Assignment and Assumption
Agreement by and between Systems
Atlanta Commercial Systems, Inc. and
Pomeroy Select Integration Solutions,
Inc.
(hh)(9) Assumption of Liabilities of the Asset
Purchase Agreement by and between
Systems Atlanta Commercial
Systems, Inc. and Pomeroy Computer
Resources, Inc., dated May 6, 1999
(hh)(10) Assumption of Liabilities of the Asset
Purchase Agreement by and between
Systems Atlanta Commercial
Systems, Inc. and Pomeroy Select
Integration Solutions, Inc.
(hh)(11) Letter Agreement regarding Contracts
by and between Systems Atlanta
Commercial Systems, Inc. and
Pomeroy Computer Resources, Inc.,
dated May 6, 1999
(hh)(12) Letter Agreement regarding Contracts
by and between Systems Atlanta
Commercial Systems, Inc. and
Pomeroy Select Integration Solutions,
Inc.
15 of 18
<PAGE>
(hh)(13) Power of Attorney issued to Pomeroy
Computer Resources, Inc. by Systems
Atlanta Commercial Systems, Inc.,
dated May 6, 1999
(hh)(14) Power of Attorney issued to Pomeroy
Select Integration Solutions, Inc. by
Systems Atlanta Commercial
Systems, Inc., dated May 6, 1999
(hh)(15) Consent for Use of Similar Name by
Systems Atlanta Commercial
Systems, Inc. to Pomeroy Computer
Resources, Inc., dated May 6, 1999
(hh)(16) Consent for Use of Similar Name by
Systems Atlanta Commercial
Systems, Inc. to Pomeroy Select
Integration Solutions, Inc., dated May
6, 1999
(hh)(17) Noncompetition Agreement by and
between Systems Atlanta Commercial
Systems, Inc. and Pomeroy Computer
Resources, Inc., dated May 6, 1999
(hh)(18) Noncompetition Agreement by and
between Systems Atlanta Commercial
Systems, Inc. and Pomeroy Select
Integration Solutions, Inc., dated May
6, 1999
(hh)(19) Noncompetition Agreement by and
between B. Scott Dobson and
Pomeroy Computer Resources, Inc.,
dated May 6, 1999
(hh)(20) Noncompetition Agreement by and
between B. Scott Dobson and
Pomeroy Select Integration Solutions,
Inc., dated May 6, 1999
(hh)(21) Employment Agreement by and
between Pomeroy Computer
Resources, Inc. and Tyler H. Dobson
(hh)(22) Award Agreement between Pomeroy
Computer Resources, Inc. and B.
Scott Dobson, dated May 6, 1999
(hh)(23) Award Agreement between Pomeroy
Computer Resources, Inc. and Tyler
H. Dobson, dated May 6, 1999
Incentive Deferred Compensation
(hh)(24) Agreement by and between Pomeroy
Computer Resources, Inc. and B.
Scott Dobson, dated May 6, 1999
16 of 18
<PAGE>
Incentive Deferred Compensation
(hh)(25) Agreement by and between Pomeroy
Computer Resources, Inc. and Tyler
H. Dobson, dated May 6, 1999
Noncompetition Agreement by and
(hh)(26) between Tyler H. Dobson and
Pomeroy Select Integration Solutions,
Inc., dated May 6, 1999
Noncompetition Agreement by and
(hh)(27) between Tyler H. Dobson and
Pomeroy Computer Resources,
Inc., dated May 6, 1999
Noncompetition Agreement by and
(hh)(28) between Charley G. Dobson and
Pomeroy Select Integration Solutions,
Inc., dated May 6, 1999
Noncompetition Agreement by and
(hh)(29) between Charley G. Dobson and
Pomeroy Computer Resources,
Inc., dated May 6, 1999
Noncompetition Agreement by and
(hh)(30) between Betty H. Dobson and
Pomeroy Computer Resources,
Inc., dated May 6, 1999
Noncompetition Agreement by and
(hh)(31) between Betty H. Dobson and
Pomeroy Select Integration Solutions,
Inc., dated May 6, 1999
General Bill of Saleand Assignment of
(hh)(32) the Asset Purchase Agreement
between Systems Atlanta Commercial
Systems, Inc. and Pomeroy Computer
Resources, Inc.
General Bill of Sale and Assignment of
(hh)(33) the Asset Purchase Agreement
between Systems Atlanta Commercial
Systems, Inc. and Pomeroy Select
Integration Solutions, Inc.
11 Computation of Earnings per Share
27 Financial Data Schedules
</TABLE>
17 of 18
<PAGE>
(b) Reports on Form 8-K On June 10, 1999, the Company filed a current
report on Form 8-K announcing the execution
of a definitive agreement whereby the Company
would purchase the assets and assume certain
liabilities of Systems Atlanta Commercial
Systems, Inc.
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.
POMEROY COMPUTER RESOURCES, INC.
--------------------------------
(Registrant)
Date: November 23, 1999 By: /s/ Stephen E. Pomeroy
----------------------
Stephen E. Pomeroy
Chief Financial Officer and
Chief Accounting Officer
18 of 18
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is entered into this
6th day of May, 1999, by, between and among POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation, ("Purchaser No. 1"), POMEROY SELECT INTEGRATION SOLUTIONS,
INC. (Purchaser No. 2"), SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia
corporation (Seller) and B. SCOTT DOBSON (S. Dobson), CHARLEY G. DOBSON, (C.
Dobson), BETTY H. DOBSON (B. Dobson) and TYLER H. DOBSON (T. Dobson) (S. Dobson,
C. Dobson, B. Dobson and T. Dobson hereinafter referred to collectively as the
"Shareholders and individually as the Shareholder). Systems Atlanta, Inc., a
Georgia corporation and an affiliate of Seller (SAI) is also a party to this
Agreement for purposes of Section 13.
W I T N E S S E T H :
WHEREAS, Seller is a full service provider of a variety of computer service and
support solutions to large and medium size commercial, governmental and other
professional customers throughout the Atlanta, Georgia Metropolitan area; and
WHEREAS, Shareholders are the owners of 100,000 shares of the outstanding stock
of Seller, in the following proportions: S. Dobson - 44,178 shares, C. Dobson -
42,587, T. Dobson - 12,435; and B. Dobson - 800, which stock constitutes 100% of
the outstanding stock of Seller; and
WHEREAS, Purchaser No. 1 is in the business of marketing and selling a broad
range of microcomputers and related products including equipment selection,
procurement and configuration; and
WHEREAS, Purchaser No. 2, a wholly-owned subsidiary of Purchaser No. 1, is a
single source provider of integrated desktop management and network services
including life cycle services, internetworking services, and end user support
services; and
WHEREAS, Purchaser No. 1 desires to purchase certain of the assets of Seller
used in its business of marketing and selling a broad range of microcomputers
and related products including equipment selection, procurement and
configuration (Business No. 1") and assume certain of the liabilities of Seller
in connection with Business No. 1 and Purchaser No. 2 desires to purchase
certain of the assets of Seller used in its integrated desktop management and
network services business (Business No. 2") and assume certain of the
liabilities of Seller in connection with Business No. 2; and Seller desires to
sell certain of such assets, subject to such liabilities, but only (i) upon the
terms and subject to the conditions set forth in this Agreement, (ii) the
representations, warranties, covenants, indemnifications, assurances and
undertakings of Seller, Shareholder and of Purchaser No. 1 and Purchaser No. 2
contained in this Agreement, (iii) the agreement of Seller to refrain from
competition with Purchaser No. 1 and Purchaser No. 2 for five (5) years from the
<PAGE>
Closing of this transaction, and (iv) the agreements of Shareholders to refrain
from competition for the later of five (5) years from the Closing Date or one
(1) year after the termination of each respective Shareholder's employment with
Purchaser No. 1 pursuant to and in accordance with, the terms of his respective
Employment Agreement to be executed upon Closing.
NOW, THEREFORE, in consideration of the above premises and the mutual promises,
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
1.
DEFINITIONS
-----------
1.1 Affiliate. "Affiliate" shall have the meaning ascribed to such term in Rule
---------
405 promulgated under the Securities Act of 1933, as amended.
1.2 Assumed Liabilities No 1. The "Assumed Liabilities No. 1" are the
---------------------------
liabilities of Seller assumed or paid at Closing by Purchaser No. 1
pursuant to Section 3.1 of this Agreement.
1.3 Assumed Liabilities No 2. The "Assumed Liabilities No. 2" are the
---------------------------
liabilities of Seller assumed or paid at Closing by Purchaser No. 2
pursuant to Section 3.2 of this Agreement.
1.4 Balance Sheet. The "Balance Sheet" is the unaudited balance sheet of Seller
-------------
as of March 31, 1999, included as part of the Financial Statements.
1.5 Closing. The "Closing" shall be the consummation of the transactions
-------
contemplated under this Asset Purchase Agreement.
1.6 Closing Date. The "Closing Date" shall be as of 10:00 a.m., E.D.T., May 6,
------------
1999.
1.7 Code. The "Code" is the Internal Revenue Code of 1986, as amended, 26
----
U.S.C. 1 et seq.
------
1.8 Court. A "Court" is any federal, state, municipal, domestic, foreign or
-----
other governmental tribunal or an arbitrator or person with similar power
or authority.
1.9 Disclosure Schedule. The "Disclosure Schedule" is the Disclosure Schedule
-------------------
dated the date of this Agreement and delivered by Seller to Purchaser No. 1
and Purchaser No. 2, respectively.
1.10 Encumbrance. An "Encumbrance" is any security interest, lien, or
-----------
encumbrance whether imposed by agreement, understanding, law or otherwise,
on any of Purchased Assets No. 1 and/or Purchased Assets No. 2 (as defined
herein).
1.11 Excluded Assets. An "Excluded Asset" is any asset set forth in Section 2.4.
---------------
1.12 Financial Statements. The "Financial Statements" are the audited financial
--------------------
statements of Seller for the years ended October 2, 1998 and October 3,
1997, including any and all notes thereto and the unaudited financial
statements of Seller for the period commencing October 4, 1998 and ending
March 31, 1999.
2
<PAGE>
1.13 Governmental Entity. A "Governmental Entity" is any Court or any federal,
--------------------
state, municipal, domestic, foreign or other administrative agency,
department, commission, board, bureau or other governmental authority or
instrumentality.
1.14 Knowledge of Seller and Shareholders or Sellers Knowledge. Knowledge of
------------------------------------------------------------
Seller and Shareholders and/or Sellers Knowledge shall mean actual
knowledge of any Shareholder.
1.15 Net Asset Amount No. 1. Net Asset Amount No. 1 shall have the meaning set
-----------------------
forth in Section 5.1.
1.16 Net Asset Amount No. 2. Net Asset Amount No. 2" shall have the meaning set
-----------------------
forth in Section 5.1.
1.17 Person. Any natural person, firm, partnership, association, corporation,
------
company, limited liability company, limited partnership, trust, business
trust, governmental authority or other entity.
1.18 Pro Forma Balance Sheet No. 1. The "Pro Forma Balance Sheet No. 1" is the
-------------------------------
audited balance sheet of Seller prepared as described in Section 5.1 and
adjusted for Excluded Assets of Seller and Excluded Liabilities relating to
Business No. 1 of Seller as of the Closing Date.
1.19 Pro Forma Balance Sheet No. 2. The "Pro Forma Balance Sheet No. 2" is the
-------------------------------
audited balance sheet of Seller prepared as described in Section 5.1 and
adjusted for Excluded Assets of Seller and Excluded Liabilities relating to
Business No. 2 of Seller as of the Closing Date.
1.20 Pro Forma EBIT. The earnings of Purchaser No. 1's Atlanta Division and
--------------
Purchaser No. 2's Atlanta Division for the period commencing on the Closing
Date and ending January 5, 2000 before interest and taxes, and without
incorporating gains or losses realized on the disposition of assets other
than in the ordinary course of business. The determination of Pro Forma
EBIT shall be determined in accordance with the provisions set forth in
Section 5.2.
1.21 Purchase Price No. 1. The "Purchase Price No. 1" is the total consideration
---------------------
paid by Purchaser No. 1 to Seller for Purchased Assets No. 1 as set forth
in Sections 4.1, 4.2(d), 4.2(f) and 4.6.
1.22 Purchase Price No. 2. The "Purchase Price No. 2" is the total consideration
--------------------
paid by Purchaser No. 2 to Seller for Purchased Assets No. 2 as set forth
in Sections 4.2, 4.2 (e), 4.2(f) and 4.6
1.23 Purchased Assets No. 1. The "Purchased Assets No. 1" are the assets of
------------------------
Seller, used in Business No. 1, acquired by Purchaser No. 1 pursuant to the
terms of this Agreement.
1.24 Purchased Assets No. 2. The Purchased Assets No. 2 are the assets of
-------------------------
Seller, used in Business No. 2, acquired by Purchaser No. 2 pursuant to the
terms of this Agreement.
3
<PAGE>
1.25 Sellers Accountant. Sellers Accountant shall mean Thigpen, Jones, Seaton
-------------------
and Company, P.C.
1.26 March 31st Pro-Forma Balance Sheet No. 1. The March 31st Pro-Forma Balance
-----------------------------------------
Sheet No. 1" is the unaudited balance sheet of Seller adjusted for Excluded
Assets of Seller and Excluded Liabilities relating to Business No. 1 of
Seller as of March 31, 1999.
1.27 March 31st Pro-Forma Balance Sheet No. 2. The March 31st Pro-Forma Balance
-----------------------------------------
Sheet No. 2" is the unaudited balance sheet of Seller adjusted for Excluded
Assets of Seller and Excluded Liabilities relating to Business No. 2 of
Seller as of March 31, 1999.
1.28 Tax or Taxes: Any federal, state, provincial, local, foreign or other
------------
income, alternative, minimum, any taxes under Section 1374 of the Code, any
taxes under Section 1375 of the Code, accumulated earnings, personal
holding company, franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, sales, use, goods and
services, excise, customs duties, transfer, conveyance, mortgage,
registration, stamp, documentary, recording, premium, severance,
environmental, including taxes under Section 59A of the Code), real
property, personal property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care, withholding,
estimated or other similar tax, duty or other governmental charge or
assessment or deficiencies thereof (including all interest and penalties
thereon and additions thereto whether disputed or not).
1.29 Tax Return. A "Tax Return" is a report, return or other information
-----------
required to be supplied to a Governmental Entity in connection with Taxes
including, where permitted or required, combined or consolidated returns
for any group of entities that includes Seller.
2.
TERMS
-----
2.1 Agreement.
---------
Seller agrees to sell and convey to Purchaser No. 1 the Purchased Assets
No. 1 as hereinafter set forth in Section 2.2. Seller agrees to sell and
convey to Purchaser No. 2 the Purchased Assets No. 2 as hereinafter set
forth in Section 2.3. Purchaser No. 1 agrees to purchase the Purchased
Assets No. 1 and Purchaser No. 2 agrees to purchase the Purchased Assets
No. 2. The agreements of Purchaser No. 1 and Purchaser No. 2 and Seller are
expressly conditioned upon the terms, conditions, covenants,
representations and warranties as hereinafter set forth.
2.2 Assets to be Sold by Seller and Purchased by Purchaser No. 1.
------------------------------------------------------------
At the Closing of this Agreement, Purchaser No. 1 shall purchase and Seller
shall sell all the assets of Seller used in Business No. 1, except for the
Excluded Assets relating to Business No. 1. The Purchased Assets No. 1
shall include, but not be limited to:
4
<PAGE>
(a) The tangible personal property and assets of Seller of every kind and
description, real, personal or mixed, wherever located, used in
Business No. 1, including without limitation, all such assets as
reflected on the March 31, 1999 Pro Forma Balance Sheet No. 1
(excepting those assets disposed of, and including those assets
acquired, in the ordinary course of business since the date of the
March 31, 1999 Pro Forma Balance Sheet No. 1).
(b) All intangible assets of Seller which are used in Business No. 1 of
Seller, including without limitation, all purchase orders, contract
rights and agreements, work in process, customer lists, supplier
agreements, patents, trademarks and service marks (including the
goodwill associated with the marks), office supplies, computer
programs, claims of the Seller, the right to use of the corporate and
trade names of or used by the Seller, or any derivative thereof, as
all or part of a corporate or trade name;
(c) All investment securities, cash and cash equivalents and customer
notes receivable relating to Business No. 1;
(d) All inventory of Business No. 1 which shall be valued on a moving
average basis at the lower of cost of acquisition, less any trade or
cash discounts, or market;
(e) All accounts receivable and vendor receivables relating to Business
No. 1;
(f) Certain vehicles of Seller set forth on attached Exhibit A;
(g) All prepaid expenses applicable to Business No. 1, including but not
limited to all prepaid software licenses;
(h) All vendor rebates, spiff money, retainage amounts under any contracts
and any customer deposits relating to Business No. 1;
(i) All distribution contracts and authorizations of Seller relating to
Business No. 1;
(j) All base artwork, photo materials, plates (if owned by Seller),
separations and other materials that are used by Seller for printing
brochures and promotional materials including all intellectual
property rights therein relating to Business No. 1;
(k) The assignment of any telephone numbers used in Business No. 1 of
Seller;
(l) The entire right, title, benefit and interest of Seller now existing
or hereafter arising, in or to all indemnities, guaranties,
warranties, claims and choses of action of Seller against other
parties with respect to Purchased Assets No. 1, including by way of
example and not limitation, any rights under insurance policies and
any other rights thereunder, but only with respect to Purchased Assets
No. 1;
(m) Sellers rights under the agreements set forth in Schedule 2.2(m) with
respect to the parties set forth therein, pursuant to which such
parties agreed not to disclose, use or communicate information
regarding such parties business (which is part of Business No. 1) and
not to engage in certain activities competitive with Business No. 1.
5
<PAGE>
2.3 Assets to be Sold by Seller and Purchased by Purchaser No. 2.
------------------------------------------------------------
At the Closing of this Agreement, Purchaser No. 2 shall purchase and Seller
shall sell all the assets of Seller used in Business No. 2, except for the
Excluded Assets relating to Business No. 2. The Purchased Assets No. 2
shall include, but not be limited to:
(a) The tangible personal property and assets of Seller of every kind and
description, real, personal or mixed, wherever located, used in
Business No. 2, including without limitation, all such assets as
reflected on the March 31, 1999 Pro Forma Balance Sheet No. 2
(excepting those assets disposed of, and including those assets
acquired, in the ordinary course of business since the date of the
March 31, 1999 Pro Forma Balance Sheet No. 2).
(b) All intangible assets of Seller which are used in Business No. 2 of
Seller, including without limitation, all purchase orders, contract
rights and agreements, work in process, customer lists, supplier
agreements, patents, trademarks and service marks (including the
goodwill associated with the marks), office supplies, computer
programs, claims of the Seller, the right to use of the corporate and
trade names of or used by the Seller, or any derivative thereof, as
all or part of a corporate or trade name;
(c) All investment securities, cash and cash equivalents and customer
notes receivable relating to Business No. 2;
(d) All inventory of Business No. 2 which shall be valued on a moving
average basis at the lower of cost of acquisition, less any trade or
cash discounts, or market;
(e) All accounts receivable and vendor receivables relating to Business
No. 2;
(f) Certain vehicles of Seller set forth on attached Exhibit A-1;
(g) All prepaid expenses applicable to Business No. 2, including but not
limited to all prepaid software licenses;
(h) All of Sellers fixed rate contracts and time and material contracts
relating to Business No. 2;
(i) All vendor rebates, spiff money, retainage amounts under any contracts
and any customer deposits relating to Business No. 2;
(j) All of Sellers service contracts relating to Business No. 2;
(k) All distribution contracts and authorizations of Seller relating to
Business No. 2;
(l) All base artwork, photo materials, plates (if owned by Seller),
separations and other materials that are used by Seller for printing
brochures and promotional materials including all intellectual
property rights therein relating to Business No. 2;
6
<PAGE>
(m) The assignment of any telephone numbers used in Business No. 2 of
Seller;
(n) The entire right, title, benefit and interest of Seller now existing
or hereafter arising, in or to all indemnities, guaranties,
warranties, claims and choses of action of Seller against other
parties with respect to Purchased Assets No. 2, including by way of
example and not limitation, any rights under insurance policies and
any other rights thereunder, but only with respect to Purchased Assets
No. 2; and
(o) Sellers rights under the agreements set forth in Schedule 2.3(o) with
respect to the parties set forth therein, pursuant to which such
parties agreed not to disclose, use or communicate information
regarding such parties business (which is part of Business No. 2) and
not to engage in certain activities competitive with Business No. 2.
2.4 Excluded Assets.
---------------
The Excluded Assets are set forth on Exhibit B hereto.
2.5 Lease Agreements.
----------------
Seller is the lessee under certain lease agreements calling for payments of
more than $5,000.00 per year covering the following real and personal
properties:
(i) Real property located at 200 North Cobb Parkway, Suite 413, Marietta,
Georgia 30062; and
(ii) Lease Agreement for computer equipment entered into on February 23,
1998 with Green Tree at a monthly rate of $333.34 for thirty-six
months. The term of the lease is February 23, 1998 to February 23,
2001.
At the Closing, Seller and Purchaser No. 1 or Purchaser No. 2 shall execute
necessary documentation for the assignment of these leases and all of
Seller's right and interest thereunder to Purchaser No. 1 and/or Purchaser
No. 2, as agreed upon by the parties and, at the Closing, Seller shall
assign all its rights and interest in said leases to Purchaser No. 1 and/or
Purchaser No. 2, as applicable. Purchaser No. 1 and Purchaser No. 2 agree
to indemnify and hold Seller harmless from any liability with respect to
the aforementioned leases occurring after the Closing Date which is assumed
by such party. To the extent that the assignment of any lease shall require
the consent of other parties thereto, this Agreement shall not constitute
an assignment thereof and Seller shall obtain any such necessary consents
or assignments by the Closing, or as reasonably possible after the Closing.
2.6 Instruments of Transfer.
-------------------------
Except as otherwise provided herein, at Closing, Seller will deliver to
Purchaser No. 1 and Purchaser No. 2, respectively, such bills of sale,
endorsements, assignments and other good and sufficient instruments of
transfer and assignment as shall be effective to vest in Purchaser No. 1
and Purchaser No. 2, as applicable, good title and interest in and to
Purchased Assets No. 1 and Purchased Assets No. 2, respectively. At or
after the Closing, and without further consideration, Seller will execute
and deliver to Purchaser No. 1 and Purchaser No. 2, as applicable, such
further instruments of conveyance and
7
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transfer and take such other action as Purchaser No. 1 and/or Purchaser No.
2 may reasonably request in order to more effectively convey and transfer
to Purchaser No. 1 and/or Purchaser No. 2, as applicable, any of the
Purchased Assets No. 1 and/or Purchased Assets No. 2 or for aiding and
assisting and collecting and reducing to possession and exercising rights
with respect thereto. Seller and Shareholders agree to use their best
efforts to obtain and deliver to Purchaser No. 1 and Purchaser No. 2, as
applicable, such consents, approvals, assurances and statements from third
parties as Purchaser No. 1 and Purchaser No. 2, as applicable, may
reasonably require in a form reasonably satisfactory to Purchaser No. 1 and
Purchaser No. 2. In addition to the foregoing, Seller will deliver to
Purchaser No. 1 and Purchase No. 2, as applicable, the originals or copies
of all of Seller's books, records and other data relating to Purchased
Assets No. 1 and Purchased Assets No. 2, respectively; and simultaneously
with such delivery, Seller shall take all such acts as may be necessary to
put Purchaser No. 1 in actual possession, and operating control of
Purchased Assets No. 1 and put Purchaser No. 2 in actual possession, and
operating control of Purchased Assets No. 2. Seller shall cooperate with
Purchaser No. 1 and Purchaser No. 2 to permit such parties, if possible, to
enjoy Sellers ratings and benefits under workmen's compensation laws and
unemployment compensation laws to the extent permitted by such laws.
2.7 Instruments Giving Certain Powers and Rights.
-------------------------------------------------
At the Closing, Seller shall, by appropriate instrument, constitute and
appoint Purchaser No. 1 and Purchaser No. 2, their respective successors
and assigns, the true and lawful attorney of Seller with full power of
substitution, in the name of Purchaser No. 1 and/or Purchaser No. 2, as
applicable, or the name of Seller, on behalf of and for the benefit of
Purchaser No. 1 and Purchaser No. 2, as applicable, to collect all accounts
receivable and/or vendor receivables and other items being transferred and
assigned to Purchaser No. 1 and/or Purchaser No. 2, as applicable, as
provided herein, to endorse, without recourse, any and all checks in the
name of Seller the proceeds of which Purchaser No. 1 and/or Purchaser No.
2, as applicable, is entitled to hereunder, to institute and prosecute, in
the name of Seller or otherwise, all proceedings which Purchaser No. 1
and/or Purchaser No. 2, as applicable, may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to Purchased
Assets No. 1 and/or Purchased Assets No. 2, as applicable, to defend and
compromise any and all actions, suits and proceedings in respect of any of
Purchased Assets No. 1 and/or Purchased Assets No. 2, as applicable, and to
do all such acts and things in relation thereto as such party may deem
advisable. Purchaser No. 1 and/or Purchaser No. 2, as applicable, shall
provide Seller with notice of any collection action(s) instituted by it
under this provision. Seller agrees that the foregoing powers are coupled
with an interest and shall be irrevocable by Seller, directly or
indirectly, by the dissolution of Seller or in any manner or for any
reason. Seller further agrees that Purchaser No. 1 and/or Purchaser No. 2,
as applicable, shall retain for its own respective account any amounts
collected pursuant to the foregoing powers, and Seller shall pay or
transfer to Purchaser No.1 and/or Purchaser No. 2, as applicable, if and
when received, any amounts which shall be received by Seller
8
<PAGE>
after the Closing in respect of any such receivables or other assets,
properties, rights or business to be transferred and assigned to Purchaser
No. 1 and/or Purchaser No. 2, as provided herein. Seller further agrees
that, at any time or from time to time after the Closing, it will, upon the
request of Purchaser No. 1 and/or Purchaser No. 2 and at Seller's expense,
do, execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged or delivered, all such further reasonable acts, assignments,
transfers, powers of attorney or assurances as may be required in order to
further transfer, assign, grant, assure and confirm to Purchaser No. 1
and/or Purchaser No. 2, as applicable, or to aid and assist in the
collection or granting of possession by Purchaser No. 1 and/or Purchaser
No. 2, as applicable, of any of the Purchased Assets No. 1 and/or the
Purchased Assets No. 2, or to vest in Purchaser No. 1 good and marketable
title to Purchased Assets No. 1 and to vest in Purchaser No. 2 good and
marketable title to Purchased Assets No. 2.
To the extent that any assignment does not result in a complete transfer of
the contracts to Purchaser No. 1 and/or Purchaser No. 2, as applicable,
because of a provision in any contract against Seller's assignment of any
its right thereunder, Seller shall cooperate with Purchaser No. 1 and
Purchaser No. 2 in any reasonable manner proposed by Purchaser No. 1 and/or
Purchaser No. 2, as applicable, to complete the acquisition of the
contracts and Seller's rights, benefits and privileges thereunder in order
to fulfill and carry out Seller's obligations under this Agreement. Such
additional action may include, but is not limited to: (i) entering into a
subcontract between Seller and Purchaser No. 1 and/or Purchaser No. 2, as
applicable, which allows such party to perform Seller's duties under such
contracts and to enforce Seller's rights thereunder; (ii) the sale of
Seller's stock owned by Shareholders to Purchaser No. 1 and/or Purchaser
No. 2, as applicable, on terms to which all parties may mutually agree in
good faith to allow such party to operate Seller as a wholly or
partially-owned subsidiary to enforce the contracts; or (iii) entering into
a new multi-party agreement with such customers which allows Purchaser No.
1 and/or Purchaser No. 2, as applicable, to perform Seller's obligations
and enforce Seller's rights under the contracts.
3.
ASSIGNMENT OF LIABILITIES
-------------------------
3.1 Liabilities to be Paid Off at Closing or Assumed by Purchaser No. 1.
-----------------------------------------------------------------------
A. At the Closing, Purchaser No. 1 shall assume and pay off or discharge
when due (and secure the release of Seller and any Shareholder from
any and all personal liability or guaranty with respect to such
obligation), the following:
(i) Sellers obligation to SAI (whose obligation is to AT&T - Finova)
under a floor plan credit facility, the outstanding amount of
which on the March 31, 1999 Pro Forma Balance Sheet No. 1 is
$522,731.86 and as of the Closing Date is $227,585.40, which is
collateralized by a security interest in SAIs assets;
(ii) Sellers obligation to SAI (whose obligation is to the Bank of
Canton) under a term financing line, the outstanding amount of
which on the March 31, 1999 Pro Forma Balance Sheet No. 1 is
$0.00 and as of the Closing Date, is $138,581.91, which is
collateralized by a security interest in certain of SAIs assets;
(iii)Sellers obligation to GMAC on a vehicle being transferred to
Purchaser No. 1, the outstanding amount of which on the March 31,
1999 Pro Forma Balance Sheet is $12,052.93 and as of the Closing
Date, is $11,729.69, which is collateralized by a security
interest in said vehicle.
9
<PAGE>
The Assumed Liabilities to be paid off as set forth in Sections 3.1 A. (i),
(ii) and (iii), as may be incurred, increased or decreased since the March
31, 1999 Pro Forma Balance Sheet No. 1 to the Pro Forma Balance Sheet No. 1
for operations in the ordinary course of business or any other transaction
permitted by this Agreement, and subject to the satisfaction of the Net
Asset Amount No. 1 requirement set forth in Section 4.1(d) as of the
Closing Date.
It is intent of the parties that Purchaser No. 1 shall pay off at Closing,
or assume and pay off or discharge when due, all obligations of Seller set
forth in Section 3.1 A above for which any Shareholder has personal
liability and Purchaser No. 1 agrees to use its best efforts to secure the
release of any Shareholder from such liability after the Closing if such
releases are not secured prior to Closing.
B. All of the trade accounts payable of the Seller relating to Business
No. 1 incurred in the ordinary course of business consistent with
Sellers prior practices, the outstanding amount of which is
$334,937.90 on the March 31, 1999 Pro Forma Balance Sheet No. 1, and
as may be incurred, increased or decreased since the March 31, 1999
Balance Sheet No. 1 to the Pro Forma Balance Sheet No. 1for operations
in the ordinary course of business or any other transaction provided
by this Agreement, and subject to the satisfaction of the Net Asset
Amount No. 1 requirement set forth in Section 4.1(d) as of the Closing
Date.
3.2 Liabilities to be Paid Off at Closing or Assumed by Purchaser No. 2.
-----------------------------------------------------------------------
At the Closing, Purchaser No. 2 shall assume and pay off or discharge when
due (and secure the release of Seller and any Shareholder from any and all
personal liability or guaranty with respect to such obligation), the
following:
A. All of the trade accounts payable of the Seller relating to Business
No. 2 incurred in the ordinary course of business consistent with
Sellers prior practices, the outstanding amount of which is $5,959.43
on the March 31, 1999 Pro Forma Balance Sheet No. 2; and as may be
incurred, increased or decreased since the March 31, 1999 Balance
Sheet No. 2 to the Pro Forma Balance Sheet No. 2 for operations in the
ordinary course of business or any other transaction provided by this
Agreement, and subject to the satisfaction of the Net Asset Amount No.
2 requirement set forth in Section 4.1(d) as of the Closing Date.
3.3 Executory Contracts to be Assumed by Purchaser No. 1.
------------------------------------------------------------
At the Closing, Purchaser No. 1 shall assume and pay, perform and discharge
when due the following:
(i) All of the obligations and liabilities of Seller arising after the
Closing under the contracts described in Section 2.2.
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<PAGE>
(ii) All future liabilities for merchandise in transit FOB shipping point
relating to Business No. 1 which has not been received and/or entered
into inventory by Seller and for which no bill has been posted by
Seller as of the Closing.
(iii) Greentree Leasing Contract.
3.4 Executory Contracts to be Assumed by Purchaser No. 2.
------------------------------------------------------------
At the Closing, Purchaser No. 2 shall assume and pay, perform and discharge
when due the following:
(i) All of the obligations and liabilities of Seller arising after the
Closing under the contracts described in Section 2.3.
(ii) All future liabilities for merchandise in transit FOB shipping point
relating to Business No. 2 which has not been received and/or entered
into inventory by Seller and for which no bill has been posted by
Seller as of the Closing.
3.5 Excluded Liabilities.
---------------------
Notwithstanding anything in this Agreement to the contrary, Purchaser No. 1
and Purchaser No. 2 shall not assume or become responsible for any claim,
liability or obligation of any nature whatsoever, whether known or unknown,
accrued, absolute, contingent or otherwise (a "Liability") of Seller except
Assumed Liabilities No. 1 and Assumed Liabilities No. 2 that are
specifically assumed by such party. Without limiting the generality of the
foregoing, the following are included among the Liabilities of Seller which
Purchaser No. 1 and Purchase No. 2 shall not assume or become responsible
for (unless specifically included as Assumed Liabilities No. 1 or Assumed
Liabilities No. 2):
(a) all Liabilities for any Taxes whether deferred or which have accrued
or may accrue or become due and payable by Seller either prior to, on
or after the Closing Date, including, without limitation, all Taxes
and fees of a similar nature arising from the sale and transfer of
Purchased Assets No. 1 and Purchased Assets No. 2 to Purchaser No. 1
and Purchaser No. 2, respectively;
(b) all Liabilities and obligations to directors, officers, employees or
agents of Seller, including, without limitation, all Liabilities and
obligations for wages, salary, bonuses, commissions, vacation (except
to the extent Purchaser No. 1 and/or Purchaser No. 2, as applicable,
agrees to assume such item as set forth in Section 3.1 and/or 3.2,
respectively) or severance pay, profit sharing or pension benefits,
and all Liabilities and obligations arising under any bonus,
commission, salary or compensation plans or arrangements, whether
accruing prior to, on or after the Closing Date;
(c) all Liabilities and obligations with respect to unemployment
compensation claims and workmen's compensation claims and claims for
race, age and sex discrimination or sexual harassment or for unfair
labor practice based on or arising from occurrences, circumstances or
events, or exposure to conditions, existing or occurring prior to the
Closing Date and for which any claim may be asserted by any of Sellers
employees, prior to, on or after the Closing Date;
11
<PAGE>
(d) all Liabilities of Seller to third parties for personal injury or
damage to property based on or arising from occurrences, circumstances
or events, or exposure to conditions, existing or occurring prior to
the Closing Date and for which any claim may be asserted by any third
party prior to, on or after the Closing Date;
(e) all Liabilities and obligations of Seller arising under or by virtue
of federal or state environmental laws based on or arising from
occurrences, circumstances or events, or exposure to conditions,
existing or occurring prior to the Closing Date and for which any
claim may be asserted prior to, on or after the Closing Date;
(f) all Liabilities of Seller including any costs of attorneys' fees
incurred in connection therewith, for litigation, claims, demands or
governmental proceedings arising from occurrences, circumstances or
events, or exposure to conditions occurring or existing prior to the
Closing Date;
(g) all Liabilities based on any theory of liability or product warranty
with respect to any product manufactured or sold prior to the Closing
Date and for which any claim may be asserted by any third party, prior
to, on or after the Closing Date;
(h) all attorneys' fees, accountants or auditors' fees, and other costs
and expenses incurred by Seller and/or Shareholders in connection with
the negotiation, preparation and performance of this Agreement or any
of the transactions contemplated hereby;
(i) all Liabilities of Seller in connection with the Excluded Assets;
(j) any Liabilities of Seller with respect to any options, warrants,
agreements or convertible or other rights to acquire shares of its
capital stock of any class; and
(k) any Liabilities of Seller incurred incident to any indemnification for
breach of any representations, warranties, covenants, or other
agreements made by Seller under any of the asset purchase, stock,
reorganization, or other legal transaction(s) set forth in Disclosure
Schedule 2.2(k).
(l) all other debts, Liabilities, obligations, contracts and commitments
(whether direct or indirect, known or unknown, contingent or fixed,
liquidated or unliquidated, and whether now or hereinafter arising)
arising out of or relating to the ownership, operation or use of any
of Purchased Assets No. 1 and/or Purchased Assets No. 2 on or prior to
the Closing Date or the conduct of the Business No. 1 of Seller and/or
Business No. 2 of Seller prior to the Closing Date, except only for
the liabilities and obligations to be assumed or paid, performed or
discharged by Purchaser No. 1 and/or Purchaser No. 2 constituting
Assumed Liabilities No. 1 or Assumed Liabilities No. 2.
Seller shall pay all liabilities not being assumed hereunder by Purchaser
No. 1 or Purchaser No. 2 within the customary time for payment of such
liabilities.
12
<PAGE>
It is the intent of the parties that upon Closing, all employees of Seller
will be terminated by such parties and Purchaser No. 1 or Purchaser No. 2
will extend offers of employment to such individuals.
4.
CONSIDERATION FOR
-----------------
PURCHASED ASSETS NO. 1 AND PURCHASED ASSETS NO. 2
-------------------------------------------------
4.1 Purchase Price No. 1 for Purchased Assets No. 1.
-------------------------------------------------------
Subject to the other terms of this Agreement, Purchase Price No. 1 for
Purchased Assets No. 1 shall be the sum of:
(a) Six Hundred Thirty-Six Thousand Four Hundred Twenty Dollars
($636,420.00); and
(b) The liabilities assumed or paid off at Closing under Section 3.1; and
(c) Any amount that may be paid pursuant to Section 4.6 that is allocated
to Purchase Price No. 1.
The sum of the items contained in Sections 4.1(a), (b) and (c) above shall
be adjusted by the amounts determined under Section 4.1(d) and Section
4.2(e).
(d) If Net Asset Amount No. 1 of Seller as of the Closing Date as shown on
the Pro Forma Balance Sheet No. 1 is less than $111,193.00, Purchase
Price No. 1 shall be decreased on a dollar-for-dollar basis to the
extent of such deficit. If Net Asset Amount No. 1 of Seller as of the
Closing Date as shown on Pro Forma Balance Sheet No. 1 is greater than
$111,193.00, Purchase Price No. 1 shall be increased on a
dollar-for-dollar basis to the extent of such excess. The
determination of Net Asset Amount No. 1 shall be made in the manner
provided for in Section 5.1 hereof.
4.2 Purchase Price No. 2 for Purchased Assets No. 2.
-------------------------------------------------------
Subject to the other terms of this Agreement, the Purchase Price for
Purchased Assets No. 2 shall be the sum of:
(a) One Hundred Eighty-Three Thousand One Hundred Fifteen Dollars
($183,115.00); and
(b) The liabilities assumed or paid off at Closing under Section 3.2; and
(c) Any amount that may be paid pursuant to Section 4.6 that is allocated
to Purchase Price No. 2
The sum of the items contained in Sections 4.2(a), (b), (c), above
shall be adjusted by the amounts determined under Sections 4.2(d) and
(e), as follows;
(d) If Net Asset Amount No. 2 of Seller as of the Closing Date as shown on
the Pro Forma Balance Sheet No. 2 is less than $31,913.00, Purchase
Price No. 2 shall be decreased on a dollar-for-dollar basis to the
extent of such deficit.
13
<PAGE>
If Net Asset Amount No. 2 of Seller as of the Closing Date as shown on
Pro Forma Balance Sheet No. 2 is greater than $31,913.00, Purchase
Price No. 2 shall be increased on a dollar-for-dollar basis to the
extent of such excess. The determination of Net Asset Amount No. 2
shall be made in the manner provided for in Section 5.1 hereof.
(e) In the event that Purchaser No. 1's and Purchaser No. 2's Atlanta
Divisions aggregate EBIT from their operations, from the Closing Date
to January 5, 2000 is less than Two Hundred Eighteen Thousand Five
Hundred Fifty-Nine and 78/100 Dollars ($218,559.78), the Purchase
Price shall be decreased on a dollar-for-dollar basis equal to the
difference between Two Hundred Eighteen Thousand Five Hundred
Fifty-Nine and 78/100 Dollars ($218,559.78) and the total of such Pro
Forma EBIT. The determination of Purchaser No. 1's and Purchaser No.
2's Atlanta Divisions aggregate Pro Forma EBIT shall be made in the
manner provided for in Section 5.2 hereof. Any adjustment to the
Purchase Price under this Section shall be made to the promissory
notes issued under Sections 4.3(c) and 4.4(c) based on the following
percentages: Purchaser No. 1's Subordinated Promissory Note - 77.7%;
Purchaser No. 2's Subordinated Promissory Note - 22.3%.
4.3 Payment of the Purchase Price for Purchased Assets No. 1.
--------------------------------------------------------
Subject to the conditions, covenants, representations and warranties
hereof, at Closing, Purchaser No. 1 shall deliver:
(a) By certified or bank cashier's check or by wire transfer to Seller,
the amount of Six Hundred Thirteen Thousand Nine Hundred Forty-Nine
Dollars ($613,949.00), of which Four Hundred One Thousand Nine Hundred
One Dollars ($401,901.00) is an advance payment by Purchaser No. 1 to
Seller for the amount projected in good faith by the parties to be
owed by Purchase No. 1 to Seller pursuant to the provisions of Section
4.1(d), which advance payment shall be credited against the amount
ultimately determined to be owed to Seller by Purchaser No. 1, to the
extent applicable, pursuant to the provisions of Section 5.1 upon the
conclusion of the determination of the Net Asset Amount No. 1;
(b) The Assumed Liabilities No. 1 assumed or paid off under Section 3.1;
and
(c) The remaining sum of Four Hundred Twenty-Four Thousand Three Hundred
Seventy-Two Dollars ($424,372.00) as may be adjusted as set forth in
Sections 5.1 and/or 5.2, shall be payable pursuant to the terms of
Purchaser No. 1's subordinated promissory note. The note shall bear
interest at the prime rate of Chase Manhattan Bank as of the date of
Closing. The principal of the note shall be payable in full on the
first annual anniversary of the Closing. Interest on the unpaid
principal balance of the note shall be paid quarterly with the first
interest payment being due and payable ninety (90) days from Closing.
Such note and all obligations of Purchaser No. 1 thereunder will be
subordinated and made junior in right of payment to the extent and in
the manner provided in a Subordination Agreement to be executed
between Deutsche Financial Services Company and Purchaser No. 1 and
Seller. A copy of said note is attached hereto as Exhibit C. Such note
shall be subordinate to Purchaser
14
<PAGE>
No.1's lender pursuant to the terms of a Subordination Agreement in
the form attached hereto as Exhibit D.
4.4 Payment of the Purchase Price for Purchased Assets No. 2.
--------------------------------------------------------
Subject to the conditions, covenants, representations and warranties
hereof, at Closing, Purchaser No. 2 shall deliver:
(a) By certified or bank cashier's check or by wire transfer to Seller,
the amount of One Hundred Seventy-Six Thousand Four Hundred
Seventy-Seven Dollars ($176,477.00) of which One Hundred Fifteen
Thousand Three Hundred Forty-Six Dollars ($115,346.00) is an advance
payment by Purchaser No. 2 to Seller for the amount projected in good
faith by the parties to be owed by Purchaser No. 2 to Seller pursuant
to the provisions of Section 4.2(d), which advance payment shall be
credited against the amount ultimately determined to be owed to Seller
by Purchaser No. 2, to the extent applicable, pursuant to the
provisions of Section 5.1 upon the conclusion of the determination of
the Net Asset Amount No. 2; and
(b) The Assumed Liabilities No. 2 assumed or paid off under Section 3.2;
and
(c) The remaining sum of One Hundred Twenty-One Thousand Nine Hundred
Eighty-Four Dollars ($121,984.00) as may be adjusted as set forth in
Sections 5.1 and/or 5.2, shall be payable pursuant to the terms of
Purchaser No. 2's subordinated promissory note. The note shall bear
interest at the prime rate of Chase Manhattan Bank as of the date of
Closing. The principal of the note shall be payable in full on the
first annual anniversary of the Closing. Interest on the unpaid
principal balance of the note shall be paid quarterly with the first
interest payment being due and payable ninety (90) days from Closing.
Such note and all obligations of Purchaser No. 2 thereunder will be
subordinated and made junior in right of payment to the extent and in
the manner provided in a Subordination Agreement to be executed
between Deutsche Financial Services Company and Purchaser No. 2 and
Seller. A copy of said note is attached hereto as Exhibit E. Such note
shall be subordinate to Purchaser No. 2's lender pursuant to the terms
of a Subordination Agreement in the form attached hereto as Exhibit F.
4.5 Allocation of Purchase Price.
----------------------------
Purchase Price No. 1 to be paid to Seller hereunder, including the
liabilities assumed or paid by Purchaser No. 1 pursuant to Section 3.1,
shall be allocated as set forth on Exhibit G attached hereto. Purchase
Price No. 2 to be paid to Seller hereunder, including the liabilities
assumed or paid by Purchaser No. 2 pursuant to Section 3.2, shall be
allocated as set forth in Exhibit G-1 attached hereto. Seller, Purchaser
No. 1, Purchaser No. 2 and Shareholders agree that each shall act in a
manner consistent with such allocation in (a) filing Internal Revenue Form
8594; and (b) in paying sales and other transfer taxes in connection with
the purchase and sale of assets pursuant to this Agreement.
4.6 Potential Adjustment to Purchase Price.
--------------------------------------
If the earnings before interest and taxes (EBIT) of the Purchaser No. 1's
and Purchaser No. 2's Atlanta Divisions in the aggregate during any of
fiscal
15
<PAGE>
years 1999 (May 6, 1999 to January 5, 2000), 2000, 2001, 2002 and (January
6, 2003 to May 5, 2003) exceed the applicable EBIT threshold for such year
set forth below:
Fiscal 1999 - $218,559
(May 6, 1999 to January 5, 2000)
Fiscal 2000 - $377,814
Fiscal 2001 - $427,814
Fiscal 2002 - $457,814
Fiscal 2003 - $169.254
(January 5, 2003 to May 5, 2003)
Purchaser No. 1 and Purchaser No. 2 (according to the percentages set forth
below) shall pay Seller, by bank check or wiring within ninety (90) days
following the end of the fiscal year, an amount equal to fifty percent (50%) of
the aggregate EBIT of Purchaser No. 1's and Purchaser No. 2's Atlanta Divisions
in excess of the EBIT Threshold for the applicable year or portion thereof,
subject to a cumulative limitation of One Million Four Hundred Seventy-Five
Thousand Dollars ($1,475,000.00) during such aggregate period. Any EBIT
shortfall in any year shall not be offset against any excess EBIT in any
subsequent year(s) hereunder, it being the intent of the parties that the EBIT
Threshold set forth herein shall apply to each applicable year separately,
subject, however, to the cumulative limitation of One Million Four Hundred
Seventy-Five Thousand Dollars ($1,475,000.00) during such aggregate period.
Such cash payment by Purchaser No. 1 and Purchaser No. 2 shall be additional
Purchase Price which will be added to the good will allocation of the Purchase
Price. Commencing on the closing date, a 1.8% royalty fee (MAS-1.5% and Adfund
fee-.3%) on gross sales by Purchaser No. 1's and Purchaser No. 2's respective
Atlanta Divisions shall be made incident to said determination. For each
subsequent year described above in this paragraph for which Purchaser No. 1 and
Purchaser No. 2 may be required to pay additional Purchase Price, the parties
shall, in good faith, agree upon the MAS and Adfund royalty fee to be charged
hereunder based on the level of services and support being provided by Purchaser
No. 1 and Purchaser No. 2 to its respective Atlanta Division. Provided,
however, such MAS and Adfund royalty fees shall be 1.8% if the parties are
unable to come to an agreement for each subsequent year. For purposes of this
Section, the term Atlanta Division shall be defined as Business No. 1 and
Business No. 2 acquired from Seller, by Purchaser No. 1 and Purchaser No. 2,
respectively, and Purchaser No. 1's and Purchaser No. 2's operations in Atlanta,
Georgia that existed prior to the closing of the Purchase Agreement. Purchaser
No. 1 and Purchaser No. 2 shall pay their respective percentage of any amounts
due hereunder, which percentage shall be predicated on the respective EBIT
contribution made by each of their Atlanta Divisions to the computation set
forth above.
For purposes of this Section, the term EBIT shall mean the net income
before taxes and before interest expense of Purchaser No. 1's and Purchaser
No. 2's Atlanta Divisions during the applicable period. The EBIT shall be
determined by the internally-generated financial statements of Purchaser
No. 1 and Purchaser No. 2 determined in the manner set forth above in
accordance with generally accepted accounting principles, consistently
applied, provided that no effect shall be given to any increase in the
amounts of depreciation, amortization or other expense or deduction taken
on tangible or intangible assets of Purchaser, if such increase is
attributable to a revaluation of such assets incident to their acquisition
pursuant to the terms of this Agreement. Said determination of EBIT shall
be subject to verification as described below. In addition, for purposes of
determining EBIT for any particular year, except as noted above, no item of
income or expense will be allocated by Purchaser No. 1 or Purchaser No. 2
to Purchaser No. 1's and/or Purchaser No. 2's Atlanta Division unless such
items are reasonably calculated to contribute to the
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increase in profits of such Atlanta Divisions, it being the intent of the
parties that the Purchaser No. 1 and Purchaser No. 2 shall exercise the
utmost good faith with respect to allocations of income and expense to
Purchaser No. 1's and Purchaser No. 2's Atlanta Division. Incident to the
determination of EBIT of Purchaser No. 1s and Purchase No. 2's Atlanta
Division, no compensation of any executive or other employee of Purchaser
No. 1 and/or Purchaser No. 2 or their respective affiliates who do not work
directly for Purchaser No. 1s and/or Purchaser No. 2's Atlanta Division
shall be allocated to such division. Any payment made to Seller pursuant to
this Section 4.5 shall not be charged against the EBIT for any year.
Within ninety (90) days after the end of each fiscal year or period
described herein, Purchaser No. 1 and Purchaser No. 2 will deliver to
Seller a copy of the report of EBIT prepared by Purchaser No. 1 and
Purchaser No. 2 for the subject period along with any supporting
documentation reasonably requested by Seller. Within thirty (30) days
following delivery to Seller of such report, Seller shall have the right to
object in writing to the results contained in such determination. If timely
objection is not made by the Seller to such determination, such
determination shall become final and binding for purposes of this
Agreement. If timely objection is made by Seller to Purchaser No. 1 and
Purchase No. 2 and Seller and Purchaser No. 1 and Purchaser No. 2 are able
to resolve their differences in writing within thirty (30) days following
the expiration of the thirty-day (30-day) period, then such determination
shall become final and binding as it regards to this Agreement. If timely
objection is made by Seller to Purchaser No. 1 and Purchaser No. 2 and
Seller and Purchaser No. 1 and Purchaser No. 2 are unable to resolve their
differences in writing within thirty (30) days following the expiration of
the thirty-day (30-day) period, then all disputed matters pertaining to the
report shall be submitted to and reviewed by an arbitrator (the Arbitrator)
which shall be an independent accounting firm selected by Purchaser No. 1
and Purchaser No. 2 and Seller. If Purchaser No. 1 and Purchaser No. 2 and
Seller are unable to agree promptly on an accounting firm to serve as the
Arbitrator, each shall select by no later than the 30th day following the
expiration of the sixty-day (60-day) period, an accounting firm, and the
two selected accounting firms shall be instructed to select promptly
another independent accounting firm, such newly selected firm to serve as
the Arbitrator. The Arbitrator shall consider only the disputed matters
pertaining to the determination and shall act promptly to resolve all
disputed matters, and its decision with respect to all disputed matters
shall be final and binding upon Seller and Purchaser. Expenses of the
Arbitration shall be borne one-half (1/2) by Purchaser No. 1 and Purchaser
No. 2 and one-half (1/2) by Seller. Each party shall be responsible for its
own attorney and accounting fees.
4.7 Certain Closing Expenses.
------------------------
Except as set forth below, Seller shall be responsible for and shall pay
all federal, state and local sales tax (if any), documentary stamp tax and
all other duties, or other like charges properly payable upon and in
connection with the conveyance and transfer of the Purchased Assets No. 1
by Seller to Purchaser No. 1 and the conveyance and transfer of the
Purchased Assets No. 2 by Seller to Purchaser No. 2.
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5.
POST-CLOSING ADJUSTMENTS
------------------------
5.1 Within sixty (60) days after the Closing Date (the Post Closing Date),
Sellers Accountant will perform an audit of the Seller as of the Closing
Date and Sellers Accountant will deliver to Purchaser No.1 and to Purchaser
No. 2 copies of Pro Forma Balance Sheet No. 1 and Pro Forma Balance Sheet
No. 2, respectively, prepared by Sellers Accountant along with any
supporting documentation reasonably requested by Purchaser No. 1 or
Purchaser No. 2 reflecting Net Asset Amount No. 1 and Net Asset Amount No.
2 as of the Closing which shall be defined as the total of the Purchased
Assets No. 1 less the total of the Assumed Liabilities No. 1 relating to
Business No. 1, as reflected on Pro Forma Balance Sheet No. 1 (the Net
Asset Report No. 1) and the total of the Purchased Assets No. 2 less the
total of the Assumed Liabilities No. 2 relating to Business No. 2, as
reflected on Pro Forma Balance Sheet No. 2 (the Net Asset Report No. 2").
The Pro Forma Balance Sheet No. 1 and the Pro Forma Balance Sheet No. 2
shall be prepared using the same accounting methods, policies, practices
and procedures, with consistent classifications, judgments, estimations and
methodologies as used in the preparation of the March 31, 1999 Pro Forma
Balance Sheet No. 1 and the March 31, 1999 Pro Forma Balance Sheet No. 2.
Within thirty (30) days following delivery to Purchaser No. 1 of Net Asset
Report No. 1 and to Purchaser No. 2 of Net Asset Report No. 2, Purchaser
No. 1 and Purchaser No. 2 shall have the right to object in writing to the
results contained therein. If timely objection is not made by Purchaser No.
1 and/or Purchaser No. 2 to Net Asset Report No. 1 and/or Net Asset Report
No. 2, as applicable, Net Asset Report No. 1 and Net Asset Report No. 2
shall become final and binding for purposes of this Agreement. If timely
objection is made by Purchaser No. 1 and/or Purchaser No. 2 to Net Asset
Report No. 1 and/or Net Asset Report No. 2, and Seller and Purchaser No. 1
and/or Purchaser No. 2, as applicable, are able to resolve their
differences in writing within fifteen (15) days following the expiration of
such thirty (30) day period, then Net Asset Report No. 1 and/or Net Asset
Report No. 2, as resolved, shall become final and binding as it relates to
this Agreement. If timely objection is made by Purchaser No. 1 and/or
Purchaser No. 2, as applicable, to Net Asset Report No. 1 and/or Net Asset
Report No. 2 and Seller and Purchaser No. 1 and/or Purchaser No. 2, as
applicable, are unable to resolve their differences in writing within such
fifteen (15) day period, then all disputed matters pertaining to Net Asset
Report No. 1 and/or Net Asset Report No. 2 shall be submitted to and
reviewed by an arbitrator (the Arbitrator) which shall be an independent
accounting firm selected by Seller and Purchaser No. 1 and/or Purchaser No.
2, as applicable. If Purchaser No. 1 and/or Purchaser No. 2, as applicable,
and Seller are unable to agree promptly on the accounting firm to serve as
the Arbitrator, each shall select by not later than the seventh (7th) day
following the expiration of the Net Asset Report objection period, a
nationally recognized accounting firm, and each selected accounting firm
shall be instructed to jointly select promptly another nationally
recognized accounting firm, such third accounting firm shall serve as the
Arbitrator. The Arbitrator shall consider only the disputed matters
pertaining to the determination and shall act promptly and fairly to
resolve all disputed matters and its decision with respect to all disputed
matters shall be final and binding upon Seller, Purchaser No. 1 and
Purchaser No. 2, as applicable. The expenses of the arbitration shall be
borne one-half (1/2) by Purchaser No. 1 and/or Purchaser No. 2, as
applicable, and one-half (1/2) by Seller. Each party shall be responsible
for its own attorney and accounting fees. If the Net Asset Amount No. 1 (as
shown on the Net Asset Report No. 1) is less than $111,193.00, the Purchase
Price No. 1 to be paid to Seller shall be decreased on a dollar-for-dollar
basis for such difference by
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Seller first repaying to Purchaser No. 1 by certified or cashier's check or
wire transfer, the advance payment made by Purchaser to Seller at Closing
against the Net Asset Amount No. 1 determination as set forth in Section
4.3(a) then by any other cash paid under Section 4.3(a), if necessary. If
the Net Asset Amount No. 1 (as shown on the Net Asset Report No. 1) is
greater than $111,193.00, the Purchase Price No. 1 to be paid to Seller
shall be increased on a dollar-for-dollar basis for such excess. In the
event such excess is greater than the advance payment made by Purchaser No.
1 to Seller under Section 4.3(a), any additional amount owing shall be paid
immediately by Purchaser No. 1 to Seller by certified or cashier's check or
wire transfer on the date of the resolution of this determination. In the
event the increase in Purchase Price No. 1 is less than the amount of the
advance payment made under Section 4.3(a) by Purchaser No. 1 to Seller, the
difference between the amount of the advance payment paid to Seller at
Closing and the amount that Seller is entitled pursuant to this provision,
shall be repaid to Purchaser No. 1 by Seller by certified or cashiers check
or wire transfer on the date of the resolution of this determination. If
the Net Asset Amount No. 2 (as shown on the Net Asset Report No. 2) is less
than $31,913.00, the Purchase Price No. 2 to be paid to Seller shall be
decreased on a dollar-for-dollar basis for such difference by Seller
repaying to Purchaser No. 2 by certified or cashier's check or wire
transfer the advance payment paid by Purchaser No. 2 to Seller at Closing
against the Net Asset Amount No. 2 determination as set forth in Section
4.4(a) then by any other cash paid under Section 4.4(a), if necessary. If
the Net Asset Amount No. 2 (as shown on the Net Asset Report No. 2) is
greater than $31,913.00, the Purchase Price No. 2 to be paid to Seller
shall be increased on a dollar-for-dollar basis for such excess. In the
event such excess is greater than the advance payment made by Purchaser No.
2 to Seller under Section 4.4(a), any additional amount owing shall be paid
immediately by Purchaser No. 2 to Seller by certified or cashier's check or
wire transfer on the date of the resolution of this determination. In the
event the increase in Purchase Price No. 2 is less than the amount of the
advance payment made under Section 4.4(a) by Purchaser No. 2 to Seller, the
difference between the amount of the advance payment paid to Seller at
Closing and the amount that Seller is entitled to pursuant to this
provision, shall be repaid to Purchaser No. 2 by Seller by certified or
cashier's check or wire transfer on the date of the resolution of this
determination.
Seller and Purchaser No. 1 and Purchaser No. 2 agree that any adjustments
made as a result of the issuance of Net Asset Report No. 1 and Net Asset
Report No. 2 that result in an adjustment to Purchase Price No. 1 and/or
Purchase Price No. 2 shall not constitute a breach of any representation or
warranty made by Seller as to such item under any of the pertinent
provisions of Section 8. Nothing herein contained shall be construed as a
release or waiver of any rights that Purchaser No. 1 and/or Purchaser No. 2
may have under this agreement that relate to any breach of representation
or warranty relating to an item that is not set forth in Net Asset Report
No. 1 and/or Net Asset Report No. 2.
5.2 Within sixty (60) days after January 5, 2000, Purchaser No. 1 and Purchaser
No. 2 will deliver to Seller a determination of the Atlanta Division's Pro
Forma aggregate EBIT prepared by Purchaser No. 1 and Purchaser No. 2 for
the period commencing on the Closing Date and ending January 5, 2000 along
with any supporting documentation reasonably requested by Seller. For
purposes of this Section, the term Atlanta Division shall be defined as
Business No. 1 and Business No. 2 acquired from Seller by Purchaser No. 1
and Purchaser No. 2, respectively, and Purchaser No. 1's and Purchaser No.
2's operations in Atlanta, Georgia that existed prior to the closing of the
Purchase Agreement. Incident to said Pro Forma EBIT determination, a 1.8%
royalty fee (MAS 1.5% and Adfund .3%) royalty fee on gross sales by
Purchaser No. 1's and Purchaser 2's respective Atlanta Divisions during
said period shall be made incident to said
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determination. Within thirty (30) days following delivery of such reports,
Seller shall have the right to object in writing to the results contained
in such determination. If timely objection is not made by Seller of such
determination, such determination shall become final and binding. If timely
objection is made by any party, and Purchaser No. 1 and Purchaser No. 2 and
Seller are able to resolve their differences in writing within fifteen (15)
days following the expiration of the Pro Forma EBIT objection period, then
such determination as resolved shall become final and binding as it relates
to this Agreement. If timely objection is made by Seller, and Seller and
Purchaser No. 1 and/or Purchaser No. 2 are unable to resolve their
differences in writing within fifteen (15) days following the expiration of
the Pro Forma EBIT objection period, then all disputed matters relating to
the report shall be submitted to and reviewed by an Arbitrator according to
the process and procedure set forth in Section 5.1 above. The expenses of
the arbitration shall be borne one-half (1/2) by Purchaser No. 1 and
Purchaser No. 2 and one-half by Seller. Each party shall be responsible for
its own attorney and accounting fees. Any net reduction in Purchase Price
No. 1 and Purchase Price No. 2 as a result of said adjustment shall be made
in the manner set forth in Section 4.2(e) and shall be reflected by
decreasing the face amount of the promissory notes as set forth in Sections
4.3(c) and 4.4(c). The parties agree to implement any adjustments to any
interest payments that may have been made prior to the date of such
determination to reflect the adjustment set forth above.
6.
EMPLOYMENT AGREEMENTS
---------------------
6.1 Employment Agreements of S. Dobson and T. Dobson.
------------------------------------------------
At Closing, Purchaser No. 1 shall enter into an Employment Agreement with
S. Dobson and T. Dobson, respectively. Copies of said Employment Agreements
are attached hereto and made a part hereof as Exhibits H and H-1.
7.
COVENANT NOT TO COMPETE AGREEMENTS
----------------------------------
7.1 Covenant Not to Compete Agreements of Seller and Shareholders.
-------------------------------------------------------------
At Closing, Seller and each Shareholder shall enter into Covenant Not to
Compete Agreements with Purchaser No. 1 and Purchaser No. 2. Copies of said
Covenant Not to Compete Agreements are attached hereto and made a part
hereof as Exhibits I, I-1, I-2, I-3, I-4, I-5, I-6, I-7, I-8 and I-9.
8.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
AND SHAREHOLDERS
----------------
Except as set forth in the Disclosure Schedule attached hereto, Seller and
Shareholders, jointly and severally, represent and warrant to Purchaser No.
1 and Purchaser No. 2 that the following statements are true and correct as
of the date hereof:
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8.1 Organization, Good Standing, Qualification and Power of Seller.
--------------------------------------------------------------
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia and has the corporate power
and authority to own, lease and operate the Purchased Assets No. 1 and the
Purchased Assets No. 2 and to conduct Business No. 1 and Business No. 2
currently being conducted by it. The Seller is duly qualified and validly
existing in Georgia and in good standing in each of the other jurisdictions
in which it is required by the nature of its business or the ownership of
its properties to so qualify. Seller has no subsidiaries. The Disclosure
Schedule correctly lists, with respect to the Seller, each jurisdiction in
which it is qualified to do business as a foreign corporation.
8.2 Capitalization.
--------------
The authorized capitalization of the Seller consists solely of one hundred
thousand (100,000) shares of common stock, par value one dollar ($1.00), of
which one hundred thousand (100,000) shares representing one hundred
percent (100%) of the issued stock are currently owned by the Shareholders,
are fully paid and nonassessable and have not been issued in violation of
the preemptive rights of any person. Except as set forth in Disclosure
Schedule, Seller is not obligated to issue or acquire any of its
securities, nor has it granted options or any similar rights with respect
to any of its securities.
8.3 Authority to Make Agreement.
------------------------------
Seller and each Shareholder have the full legal power and authority to
enter into, execute, deliver and perform their respective obligations under
this Agreement and each of the other agreements, instruments and other
instruments to be delivered incident hereto ("Other Seller Documents").
This Agreement and the Other Seller Documents have been duly and validly
executed and delivered by Seller and each Shareholder, and are the legal
and binding obligation of each of them, enforceable in accordance with
their respective terms, subject to principles of equity, bankruptcy laws,
and laws affecting creditors' rights generally. Seller has taken all
necessary action (including action of its Board of Directors and its
Shareholders) to authorize and approve the execution and delivery of this
Agreement and the Other Seller Documents, the performance of its
obligations thereunder and the consummation of the transactions
contemplated thereby.
8.4 Existing Agreements, Governmental Approvals and Permits.
------------------------------------------------------------
(a) The execution, delivery and performance of this Agreement and the
Other Seller Documents by Seller, the sale, transfer, conveyance,
assignment and delivery of the Purchased Assets No. 1 to Purchaser No.
1 and of the Purchased Assets No. 2 to Purchaser No. 2 as contemplated
in this Agreement, and the consummation of the other transactions
contemplated thereby: (i) do not violate any provisions of law,
statute, ordinance or regulation applicable to Seller, any Shareholder
or Purchased Assets No. 1 and/or Purchased Assets No. 2, (ii) (except
for Seller's secured creditors set forth in Sections 3.1 and/or 3.2,
whose consent shall be obtained prior to Closing and except as set
forth in Disclosure Schedule), will not conflict with, or result in
the breach or termination of any provision of, or constitute a default
under (in each case
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whether with or without the giving of notice or the lapse of time or
both) the Articles of Incorporation or Bylaws of Seller or any
indenture, mortgage, lease, deed of trust, or other instrument,
contract or agreement or any license, permit, approval, authority, or
any order, judgment, arbitration award, or decree to which Seller or
any Shareholder is a party or by which Seller or any Shareholder or
any of their assets and properties are bound (including, without
limitation, the Purchased Assets No.1 and/or Purchased Assets No. 2),
and (iii) will not result in the creation of any encumbrance upon any
of the properties, assets, or Business No. 1 or Business No. 2 of
Seller or of any Shareholder. Neither Seller, nor any Shareholder, nor
any of their assets or properties (including, without limitation, the
Purchased Assets No. 1 and/or Purchased Assets No. 2) is subject to
any provision of any mortgage, lease, contract, agreement, instrument,
license, permit, approval, authority, order, judgment, arbitration
award or decree, or to any law, rule, ordinance, or regulation, or any
other restriction of any kind or character, which would prevent Seller
or any Shareholder from entering into this Agreement or any of the
Other Seller Documents or from consummating the transactions
contemplated thereby.
(b) Neither Seller nor any Shareholder is a party to, subject to or bound
by any agreement, judgment, award, order, writ, injunction or decree
of any court, governmental body or arbitrator which would prevent the
use by Purchaser No. 1 of Purchased Assets No. 1 or by Purchaser No. 2
of Purchased Assets No. 2 in accordance with present practices of
Seller after the Closing Date or which, by operation of law, or
pursuant to its terms, would be breached, terminate, lapse or be
subject to termination or default under (in each case whether with or
without notice, the passage of time or both) upon the consummation of
the transactions contemplated in this Agreement.
(c) No approval, authority or consent of, or filing by Seller with, or
notification to, any foreign, federal, state or local court, authority
or governmental or regulatory body or agency or any person is
necessary to authorize the execution and delivery of this Agreement or
the Other Seller Documents by Seller or any Shareholder, the sale,
transfer, conveyance, assignment and delivery of the Purchased Assets
No. 1 to Purchaser No. 1 or of Purchased Assets No. 2 to Purchaser No.
2, or the consummation of the other transactions contemplated thereby,
or to continue the use and operation of Purchased Assets No. 1 by
Purchaser No. 1 or Purchased Assets No. 2 by Purchaser No. 2 after the
Closing Date.
8.5 Financial Statements.
---------------------
(a) Copies of the Financial Statements are attached to the Disclosure
Schedule. Each of the Financial Statements are true and complete in
all material respects and were prepared in accordance with generally
accepted accounting principles (except that the March 31, 1999 Pro
Forma Balance Sheet No. 1 and the March 31, 1999 Pro Forma Balance
Sheet No. 2 do not contain any footnotes and are subject to normal
year-end audit adjustments as shall be reflected on the Pro Forma
Balance Sheet No. 1 and Pro Forma Balance Sheet No. 2 of Seller which
will be prepared as set forth in Section 5.1) applied on a consistent
basis throughout the periods indicated (except as noted on such
Financial Statements) and fairly present in all material respects the
financial position and condition of the Seller as of the respective
dates thereof and the results of its operation and changes in
financial position for the respective periods then ended.
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(b) Except to the extent reflected, reserved against, or disclosed on Pro
Forma Balance Sheet No. 1 and/or Pro Forma Balance Sheet No. 2, the
Financial Statements, or the Disclosure Schedule, the Seller had, as
of such date, no material liabilities or obligations of any nature,
whether accrued, absolute, contingent, or otherwise, including without
limitation, unfunded pension or other retirement plan liabilities and
tax liabilities whether or not incurred in respect of or measured by
the Seller's income, for any period prior to the date of said
Financial Statements, or arising out of transactions entered into or
any set of facts existing prior thereto. Except to the extent
disclosed on the Disclosure Schedule, there exists no basis for the
assertion against Seller, as of the date of the Financial Statements
or of Pro Forma Balance Sheet No. 1 and/or Pro Forma Balance Sheet No.
2, of any material liability of any nature or in any amount not fully
reflected, reserved against, or disclosed in the Financial Statements
or in Pro Forma Balance Sheet No. 1 and/or Pro Forma Balance Sheet No.
2.
8.6 Customers.
---------
The Disclosure Schedule includes a correct list of the twenty-five (25)
largest customers of the Seller by sales in dollars for each of 1998 and
January through March of 1999 and the amount of business done by the Seller
with each such customer for such periods. Assuming that Purchaser No. 1
continues to conduct Business No. 1 and that Purchaser No. 2 continues to
conduct Business No. 2 in the ordinary course consistent with Seller's
prior practices generally and specifically with respect to Seller's current
customers, Seller has no knowledge that any of the current customers of
Seller will or intend to (a) cease doing business with the Seller; or (b)
materially alter the amount of business they are presently doing with the
Seller; or (c) not do business with the Purchaser No. 1 and/or Purchaser
No. 2, as applicable, after the Closing.
8.7 Intangible Property.
--------------------
The Disclosure Schedule includes an accurate list and summary description
of all patents, franchises, distributorships, registered and unregistered
trademarks, trade names and service marks, licenses, brand names and
company lists and all applications for the foregoing, presently owned
and/or held (as a licensee or otherwise) by the Seller. The Seller is not a
licensor in respect to any patents, trade secrets, inventions, shop rights,
know-how, trademarks, trade names, copyrights, or applications therefor.
The Disclosure Schedule contains an accurate and complete description of
such intangible property and the items of all licenses and other agreements
relating thereto. All of the above-mentioned intangibles used in the
Seller's Business No. 1 and/or Sellers Business No. 2 are the sole property
of the Seller, provided that such intangibles will continue to be used by
the Atlanta Divisions of Purchaser No. 1 and Purchaser No. 2 in the same
manner as conducted by Seller, do not require the consent of or consent to
any other person as a condition to their use or the transaction provided
for herein and do not infringe upon the rights of others.
23
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8.8 Significant Agreements.
-----------------------
The Disclosure Schedule contains an accurate and complete list of all
contracts, agreements, licenses, instruments and understandings (whether or
not in writing) to which the Seller is a party or is bound and that are
material to Business No. 1 and/or Business No. 2, assets, financial
condition or results of operations of the Seller. Without limiting the
generality of the foregoing, such list includes all such contracts,
agreements, licenses and instruments:
(a) Providing for payments of more than Five Thousand Dollars ($5,000.00)
per year, other than purchase orders incurred in the ordinary course
of business;
(b) Providing for the extension of credit other than consistent with
normal credit terms described in the Disclosure Schedule;
(c) Limiting the ability of the Seller to conduct its Business No. 1 or
its Business No. 2 or any other business or to otherwise compete in
its or any other business, including as to manner or place;
(d) Providing for a guarantee or indemnity by the Seller, including but
not limited to any indemnification provided under any asset purchase
agreement, stock purchase agreement, or other transaction that Seller
is a party to;
(e) With any Affiliate of Seller;
(f) With any labor union or employees' association connected with Seller's
Business No. 1 and/or Sellers Business No. 2;
(g) For the employment or retention of any director, officer, employee,
agent, shareholder, consultant, broker or advisor of Seller or any
other contract between Seller and any director, officer, employee,
agent, shareholder, consultant or advisor which does not provide for
termination at will by the Seller without further cost or other
liability to the Seller as of or at any time after the Closing.
(h) In the nature of a profit sharing, bonus stock option, stock purchase,
pension, deferred compensation, retirement, severance,
hospitalization, insurance or other plan or contract providing benefit
to any person or former director, officer, employee, agent,
shareholder, consultant, broker or advisor of Seller, or such person's
dependents, beneficiaries or heirs;
(i) In the nature of an indenture, mortgage, promissory note, loan or
credit agreement or other contract relating to the borrowing of money
or a line of credit by the Seller or relating to the direct or
indirect guarantee or assumption by the Seller of obligations of
others;
(j) Leases or subleases with respect to any property, real, personal or
mixed, in which the Seller is involved, as lessor or lessee; and
(k) Distributorship Agreement(s) or License Agreement(s) with respect to
any property which Seller has entered into as licensor.
24
<PAGE>
True and correct copies of all items so disclosed in the Disclosure
Schedule (if written) have been provided or made available to Purchaser No.
1 and/or Purchaser No. 2. Each of such items listed, or required to be
listed, is a valid and binding obligation of the parties thereto
enforceable in accordance with its terms, subject to principles of equity,
bankruptcy laws, and laws affecting creditors' rights generally, and there
have been no material defaults or claims of material default by the Seller
and there are no facts or conditions that have occurred or that are
anticipated to occur which, through the passage of time or the giving of
notice, or both, would constitute a default by the Seller, or would cause
the acceleration of any obligation of any party thereto or the creation of
an Encumbrance upon any asset of the Seller. There are no material oral
contracts, agreements or understandings made by any Shareholder, material
to Purchased Assets No. 1 or Purchased Assets No. 2, except such as have
been disclosed in the Disclosure Schedule and for which an accurate summary
description has been provided.
8.9 Inventory.
---------
Except as specifically described on the Disclosure Schedule, all inventory
is reflected on the April 5, 1999 list attached to the Disclosure Schedule
and at the Closing Date will consist of items of quality and quantity which
are usable or saleable in the ordinary course of business of Seller in the
conduct of its Business No. 1 and/or its Business No. 2, and items of below
standard quality and items not usable or saleable in the ordinary course of
Seller's business have been written down in value in accordance with good
business practices to estimated net realizable market value or adequate
reserves have been provided therefor. The values at which the inventory are
carried on the list attached to the Disclosure Schedule reflect the normal
valuation policy of Seller in setting inventory at the lower of cost or net
realizable market values, all in accordance with generally accepted
accounting principles. Except as set forth on the Disclosure Schedule,
since December 31, 1998, the inventory of Seller has been maintained at
normal and adequate levels for the continuation of the Business No. 1
and/or Business No. 2 in its normal course. No change has occurred in such
inventory which affects or will affect the usability or salability thereof,
no write-downs or write-offs of the value of such inventory has occurred
and no additional amounts have been reserved with respect to such
inventories except in each case those adjustments made in the ordinary
course of business. The Disclosure Schedule lists the location of all
inventory together with a brief description of the type and amount at each
location.
8.10 Accounts Receivable and Vendor Receivables.
----------------------------------------------
All accounts receivable and vendor receivables of Seller which have arisen
in connection with Business No. 1 and/or Business No. 2 or otherwise and
which are reflected on the Financial Statements and all receivables which
have arisen since December 31, 1998 through the Closing shall have arisen
only from bonafide transactions in the ordinary course of business and
represent valid, collectible and existing claims, net of any reserve as
reflected on the Pro Forma Balance Sheet No. 1 and/or the Pro Forma Balance
Sheet No. 2. Subject to customer credit, the payment of each account and
vendor receivable will not be subject to any known defense, counterclaim
condition (other than Seller's performance in the ordinary course of
business) whatsoever. The Disclosure Schedule hereto accurately lists, as
of April 22, 1999, all receivables arising out of or
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relating to Business No. 1 and/or Business No. 2, the amount owing and
aging of such accounts receivable, the name of the party from whom such
account receivable is owing, any security in favor of Seller for the
repayment of such account receivable which Seller purports to have. Seller
has made available to Purchaser No. 1 and Purchaser No. 2 complete and
correct copies of all instruments, documents and agreements evidencing such
accounts receivable and of all instruments, documents or agreements (if
any) creating security therefor.
8.11 Taxes.
-----
Except as to Taxes not yet due and payable, and except for Taxes the
payment of which is being diligently contested in good faith and by proper
proceedings and for which adequate reserves have been established in
accordance with generally accepted accounting principles, and except as set
forth in the Disclosure Schedule, Seller has filed all returns and reports
that are now required to be filed by it in connection with any federal,
state or local tax, duty or charge levied, assessed or imposed upon it, or
its property, including unemployment, social security and similar taxes;
and all of such taxes have been either paid or adequate reserves or other
provision has been made therefor. Seller and Shareholders shall pay,
without right of reimbursement from Purchaser No. 1 and/or Purchaser No. 2,
all of Seller and Shareholders income Taxes including but not limited to
any Taxes attributable to any gain under Section 1374 of the Code,
including any interest and penalties thereon, that relate to the activities
of Seller through the Closing including this transaction, as due.
8.12 Title to Purchased Assets; Encumbrances.
-------------------------------------------
(a) With respect to Purchased Assets No. 1 and Purchased Assets No. 2
sold, at the Closing Seller shall have good title to Purchased Assets
No. 1 and/or Purchased Assets No. 2 being acquired by Purchaser No. 1
and/or Purchaser No. 2, respectively, and except for matters expressly
set forth in Section 3.1, Section 3.2 Section 3.3 or Section 3.4,
which Encumbrances, if any, upon Purchased Assets No. 1 and/or
Purchased Assets No. 2 shall be removed at Closing, free and clear of
all Encumbrances whatsoever; immediately after the transfer of
Purchased Assets No. 1 being acquired by Purchaser No. 1 from Seller
and Purchased Assets No. 2 being acquired by Purchaser No. 2 from
Seller, Purchaser No. 1 will own all of said Purchased Assets No. 1
and Purchaser No. 2 will own all of said Purchased Assets No. 2, free
and clear of all Encumbrances whatsoever, whether perfected or
unperfected; and, by way of illustration but not limitation, there are
not any unpaid taxes, assessments or charges due or payable by Seller
to any federal, state or local agency, or any obligations or
liabilities or any unsatisfied judgments against, or, to the best of
Seller's knowledge, any litigation or proceedings pending or
threatened against Seller by Seller's employees, clients, customers,
creditors, suppliers, or any other party (nor state of facts for any
such obligation, liability, litigation or proceeding), that could
become a claim, obligation, liability, lien or other charge of or
against Purchaser No. 1, Purchaser No. 2, or Purchased Assets No. 1 or
Purchased Assets No. 2. To the best of knowledge of Seller, all of
Seller's tangible and other operating assets used in Business No. 1
and/or Business No. 2 which are being sold hereunder to Purchaser No.
1 and/or Purchaser No. 2, respectively, are, in all material respects,
in good operating condition and repair, free of all structural,
material or mechanical defects and conform with all applicable laws
and regulations.
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(b) Except as otherwise specifically set forth herein, Seller is not a
party to any contract, agreement, lease or commitment that would
result in any claim, obligation, liability, lien or other charge
against Purchaser No. 1 and/or Purchaser No. 2 or Purchased Assets No.
1 or Purchased Assets No. 2, and Purchaser No. 1 and Purchaser No. 2
are not obligated to assume the obligations under any contract,
agreement, lease or commitment of Seller, except as specifically set
forth herein.
8.13 Pending Actions.
----------------
Seller has not been served with or received notice of any actions, suits,
arbitrations, OSHA, EPA or other governmental violations, or any other
proceedings or investigations, either administrative or judicial, strikes,
lockouts or NLRB charges or complaints ("Actions and Disputes"). To the
best of Seller's knowledge, there are no Actions or Disputes pending or
threatened against or affecting (directly or indirectly) the Seller or its
property or assets, nor are there any facts or conditions which exist which
would give rise to any such Actions or Disputes which, if determined
adversely to Seller, would have a material adverse effect upon Seller's
Business No. 1 and/or Sellers Business No. 2.
8.14 Insurance.
---------
The Disclosure Schedule contains an accurate and complete listing (showing
type of insurance, amount, insurance company, annual premium and special
exclusions) of all policies of fire, liability, worker's compensation and
other forms of insurance owned or held by the Seller. All such policies are
in full force and effect; are sufficient for compliance with all
requirements of law and of all agreements to which the Seller is a party;
are valid, outstanding and enforceable policies; provide adequate insurance
coverage for the assets and operations of the Seller and will remain in
full force and effect through the Closing. There are no outstanding
requirements or recommendations by any insurance company that issued a
policy with respect to any of the properties and assets of the Seller by
any Board of Fire Underwriters or other body exercising similar functions
or by any Governmental Entity requiring or recommending any repairs or
other work to be done on or with respect to any of the properties and
assets of the Seller or requiring or recommending any equipment or
facilities to be installed on or in connection with any of the properties
or assets of the Seller.
8.15 Status of Business.
--------------------
(a) Since October 2, 1998, Business No. 1 and Business No. 2 of the Seller
have been operated only in the ordinary course, and, except as set
forth in the Disclosure Schedule or permitted under Section 2.4
dealing with Excluded Assets, there has not been with respect to
Business No. 1 and/or Business No. 2:
(i) Any material change in its condition (financial or other),
assets, liabilities, obligations, business or earnings, except
changes in the ordinary course of business, none of which in the
aggregate has been materially adverse;
(ii) Any material liability or obligation incurred or assumed, or any
material contract, agreement, arrangement, lease (as lessor or
lessee), or
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other commitment entered into or assumed, on behalf of Business
No. 1 and/or Business No. 2, whether written or oral, except in
the ordinary course of business;
(iii)Any purchase or sale of material assets in anticipation of this
Agreement, or any purchase, lease, sale, abandonment or other
disposition of material assets, except in the ordinary course of
business;
(iv) Any waiver or release of any material rights, except for rights
of nominal value;
(v) Any cancellation or compromise of any material debts owed to
Seller or material claims known by Seller against another person
or entity, except in the ordinary course of business;
(vi) Any damage or destruction to or loss of any physical assets or
property of Seller which materially adversely affects Business
No. 1 and/or Business No. 2 or any of the properties of the
Seller (whether or not covered by insurance);
(vii)Any material changes in the accounting practices, depreciation
or amortization policy or rates theretofore adopted by the
Seller, or any material revaluation or write-up or write-down of
any of its assets;
(viii) Any direct or indirect redemption, purchase or other
acquisition for value by the Seller of its shares, or any
agreement to do so;
(ix) Any material increase in the compensation levels or in the method
of determining the compensation of any of the Seller's officers,
directors, agents or employees, or any bonus payment or similar
arrangement with or for the benefit of any such person, any
increase in benefits expense to the Seller, any payments made or
declared into any profit-sharing, pension, or other retirement
plan for the benefit of employees of the Seller, except in the
ordinary course of business;
(x) Any loans or advances between the Seller and any Shareholder, or
any family member or any associate or Affiliate of the Seller or
of any Shareholder;
(xi) Any material contract canceled or the terms thereof amended or
any notice received with respect to any such contract terminating
or threatening termination or amendment of any such contract;
(xii)Any transfer or grant of any material rights under any leases,
licenses, agreements, or with respect to any trade secrets or
know-how;
(xiii) Any labor trouble or employee controversy materially adversely
affecting Business No. 1 and/or Business No. 2 or assets; or
(xiv)Any dividend or other distribution on or in respect of shares of
its capital stock, except for any distributions made pursuant to
the provisions of Section 2.4 relating to Excluded Assets or S
corporation
28
<PAGE>
distributions consistent with prior business practices or
otherwise shown on the Disclosure Schedule.
(b) Seller is not
(i) in violation of any outstanding judgment, order, injunction,
award or decree specifically relating to Business No. 1 and/or
Business No. 2, or
(ii) in violation of any federal, state or local law, ordinance or
regulation which is applicable to Business No. 1 and/or Business
No. 2, except where such violation does not have a materially
adverse effect on Business No. 1 and/or Business No. 2.
Seller has all permits, licenses, orders, approvals, authorizations,
concessions and franchises of any federal, state or local governmental
or regulatory body that are material to or necessary in the conduct of
Business No. 1 and/or Business No. 2, except where failure to have
such permit, license, order, approval, authorization, concession or
franchise does not have a materially adverse effect on Business No. 1
and/or Business No. 2. All such permits, licenses, orders, approvals,
concessions and franchises are set forth on the Disclosure Schedule
and are in full force and effect and there is no proceeding, or to the
knowledge of Seller, threatened to revoke or limit any of them.
(c) No claim, litigation, action, investigation or proceeding is pending
or, to the knowledge of Seller, threatened, and no order, injunction
or decree is outstanding, against or relating to Business No. 1 and/or
Business No. 2 or its assets, and Seller does not know of any
information which could result in such a claim, litigation, action,
investigation or proceeding, which, if determined adversely to Seller,
would have a material adverse effect upon Seller's Business No. 1
and/or Business No. 2.
(d) At the Closing, Seller shall have accrued or paid in full, to all
employees of Business No. 1 and/or Business No. 2, all wages,
salaries, commissions, bonuses, vacations and other direct
compensation for all services performed by them. To the best of
Seller's Knowledge, Seller is in compliance with all federal, state
and local laws, ordinances and regulations relating to employment and
employment practices at Business No. 1 and/or Business No. 2, and all
employee benefit plans and tax laws relating to employment at Business
No. 1 and/or Business No. 2, except where such non-compliance would
not have a materially adverse effect on Business No. 1 and/or Business
No. 2. There is no unfair labor practice complaint against Seller
relating to Business No. 1 and/or Business No. 2 pending before the
National Labor Relations Board or similar agency or body and, to the
best of Seller's Knowledge, no condition exists that could give rise
to any unfair labor practice complaint. There is no labor strike,
dispute, slowdown or stoppage actually pending or, to the Knowledge of
Seller, threatened against or involving Business No. 1 and/or Business
No. 2. Seller has no labor contracts or collective bargaining
agreements with respect to any of its employees.
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8.16 Environmental Laws.
-------------------
(a) To the best of Seller's Knowledge, the real estate located at 200 N.
Cobb Parkway, Suite 413, Marietta, Georgia 30062, which is leased by
Seller, (Real Estate) has not been used or operated in any fashion
involving producing, handling and disposing of chemicals, toxic
substances, wastes and effluent materials, x-rays or other materials
or devices in material violation of any laws, rules, regulations or
orders, and to the best of Seller's Knowledge, the Real Estate is in
material compliance with applicable laws, regulations, ordinances,
decrees and orders arising under or relating to health, safety, and
environmental laws and regulations, including without limitation the
Federal Occupation and Safety Health Act, 29 U.S.C. 651, et seq.;
Federal Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
6901, et seq.; Federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601, et seq.;
the Federal Clean Air Act, 42 U.S.C. 2401, et seq.; the Federal Clean
Water Act, 33 U.S.C. 1251, et seq.; and all state and local laws that
correspond therewith or supplement such laws.
(b) To the best of Seller's Knowledge, the Real Estate has not been
operated, in violation of any laws, rules, regulations or orders, so
as to involve or create any surface impoundments, incinerators, land
fills, waste storage tanks, waste piles, or deep well injection
systems or for the purpose of storage, treatment or disposal of a
hazardous waste as defined by RCRA or hazardous substance, pollutant
or contaminate as defined by CERCLA and, to the best of Seller's
Knowledge, no acts have been committed that would make the Real Estate
or any part thereof subject to remedial action under RCRA or CERCLA or
corresponding state or local laws.
(c) To the best of Seller's Knowledge, there have not been, are not now
and as of the Closing Date, there will be no solid waste, hazardous
waste, hazardous substance, toxic substance, toxic chemicals,
pollutants or contaminants, underground storage tanks, purposeful
dumps, or accidental spills in, on or about the Real Estate or any of
the assets of the Seller, whether real or personal, owned or leased,
or stored on any real property owned or leased by the Seller or by the
Seller's lessees, licensees, invites, or predecessors.
(d) Seller is not engaged in, and to the best of Seller's Knowledge and
belief, is not threatened with any litigation, or governmental or
other proceeding which may give rise to any claim against the Real
Estate. Specifically, there are no pending suits, charges, actions,
governmental investigations, or other proceedings, involving, directly
or indirectly without limitation, the laws, statutes and regulations
set forth in subsection (a), above, whether initiated by a third party
or by Seller and there are none, to the best of Seller's Knowledge,
threatened against or relating to or involving the Real Estate or the
transactions contemplated by this Agreement. Seller is not in default
with respect to any order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or instrumentality.
(e) The Disclosure Schedule will list all waste disposal sites, dump sites
and other areas either on the Real Estate or offsite at which
hazardous or toxic waste generated by the Seller has been disposed (in
each case identifying
30
<PAGE>
such waste) and it will specifically identify each such site or area
which is or has been included in any published federal, state or local
(domestic or foreign) superfund or other list of hazardous or toxic
waste sites or areas.
(f) To the best of Seller's Knowledge, Seller has obtained all permits,
and licenses and other authorizations required by all environmental
laws; and all of such permits, licenses and other authorizations are
in full force and effect as of the date hereof. A true and correct
list of all such permits, licenses and other authorizations is set
forth in the Disclosure Schedule.
8.17 Certain Employees
------------------
(a) Each of the following is included in the list of agreements set forth
in the Disclosure Schedule: all collective bargaining agreements,
employment and consulting agreements, bonus plans, deferred
compensation plans, employee pension plans or retirement plans,
employee profit-sharing plans, employee stock purchase and stock
option plans, hospitalization insurance, and other plans and
arrangements providing for employee benefits of employees of the
Seller.
(b) The Disclosures Schedule contains a true, complete and accurate list
of the following: the names, positions, and compensation of the
present employees of the Seller, together with a statement of the
annual salary payable to salaried employees and a summary of the
bonuses and description of agreements for additional compensation and
other like benefits, if any, paid or payable to such persons for the
period set forth in the Disclosure Schedule. Except as listed in the
Disclosure Schedule, to the best of Seller's Knowledge, all employees
of Seller are employees--at--will.
(c) Seller has no retired employees who are receiving or are entitled to
receive any payments, health or other benefits from Seller.
8.18 Payments to Employees.
-----------------------
All accrued obligations of Seller relating to employees and agents of
Seller, whether arising by operation of law, by contract, or by past
service, for payments to trusts or other funds or to any governmental
agency, or to any individual employee or agent (or his heirs, legatees, or
legal representatives) with respect to unemployment compensation benefits,
profit sharing or retirement benefits, or social security benefits have
been paid or accrued by Seller. All obligations of Seller as an employer or
principal relating to employees or agents, whether arising by operation of
law, by contract, or by past practice, for vacation and holiday pay,
bonuses, and other forms of compensation which are or may become payable to
such employees or agents, have been paid or will be paid or accrued by
Seller.
8.19 Change of Corporate Name.
---------------------------
At the Closing, Seller, if requested by either Purchaser No. 1 and/or
Purchaser No. 2, will adopt and file with the Secretary of State of Georgia
an Amendment to the Charter of Seller changing the name of Seller to a name
substantially dissimilar to Systems Atlanta Commercial Systems, Inc. and
Seller shall also execute a Consent for Use of Similar Name form, as set
forth in the
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Disclosure Schedule, granting to Purchaser No. 1 and/or Purchaser No. 2 (as may
be agreed by such parties) the use of the name Systems Atlanta, Inc.
8.20 Brokers and Finders.
---------------------
Except as set forth in the Disclosure Schedule, no broker, finder or other
person or entity acting in a similar capacity has participated on behalf of
Seller in bringing about the transaction herein contemplated, or rendered
any service with respect thereto or been in any way involved therewith.
8.21 Preservation of Organization.
------------------------------
Except as set forth on the Disclosure Schedule, since December 31, 1998,
the Seller has kept intact Business No. 1 and/or Business No. 2 and
organization of the Seller; retained the services of all the Seller's
material employees and agents, retained the Seller's arrangements with the
manufacturers of the products distributed by Seller in the same manner as
conducted prior to such date, and engaged in no transaction other than in
the ordinary course of Seller's Business No. 1 and/or Business No. 2.
8.22 Absence of Certain Business Practices.
-----------------------------------------
Neither Seller, nor, to Seller's Knowledge, any officer, employee or agent
of the Seller, nor any other Person acting on its behalf, has, directly or
indirectly, within the past five years given or agreed to give any gift,
bribe, rebate or kickback or otherwise provide any similar benefit to any
customer, supplier, governmental employee or any other Person who is or may
be in a position to help or hinder Seller or Business No. 1 and/or Business
No. 2 (or assist Seller in connection with any actual or proposed
transaction relating to Business No. 1 and/or Business No. 2 or any other
business previously operated by Company) (i) which subjected or might have
subjected Seller to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) which if not given in the past,
might have had a material adverse effect on Business No. 1 and/or Business
No. 2, (iii) which if not continued in the future, might have a material
adverse effect on Business No. 1 and/or Business No. 2 or subject Seller to
suit or penalty in any private or governmental litigation or proceeding,
(iv) for any of the purposes described in Section 162(c) of the Code or (v)
for the purpose of establishing or maintaining any concealed fund or
concealed bank account.
8.23 Suppliers.
---------
The Disclosure Statement sets forth the names of and description of
contractual arrangements (whether or not binding or in writing) with the
ten (10) largest suppliers of the Seller by sales or services in dollars.
Assuming that Purchaser No.1 and/or Purchaser No. 2, as applicable,
continues to conduct Business No. 1 and/or Business No. 2 in the ordinary
course consistent with Seller's prior practices generally and specifically
with respect to Seller's current suppliers, Seller has no direct knowledge
that any of the current suppliers of the Seller will, or intend to, (a)
cease doing business with the Seller; or (b) materially alter the amount of
business they are currently doing with the Seller; or (c) not do business
with Purchaser No. 1 and/or Purchaser No. 2 after the Closing.
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8.24 Product Liability Claims.
--------------------------
To the best of Seller's Knowledge, there are no material product liability
claims against the Seller, either potential or existing, which are not
fully covered by product liability insurance coverage with a responsible
company which, if determined adversely to Seller, would have a material
adverse effect upon Seller's Business No. 1 and/or Business No. 2.
8.25 Employee Benefit Plans.
------------------------
For the purposes of this Section 8.25, "Seller" shall include all persons
who are members of a controlled group, a group of trades or businesses
under common control, or an affiliated service group (within the meanings
of Sections 414(b), (c) or (m) of the Code), of which the Seller is a
member.
(a) The Employee Benefit Plans presently maintained by the Seller or to
which the Seller has contributed within the past six (6) years,
including any terminated or frozen plans which have not yet
distributed all plan assets, are fully set forth in the Disclosure
Schedule. For purposes of this provision, the term "Employee Benefit
Plan" shall mean:
(i) A Welfare Benefit Plan as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")
established for the purpose of providing for its participants or
their beneficiaries, through the purchase of insurance or
otherwise, medical, surgical, or hospital care or benefits, or
benefits in the event of sickness, accident, disability, death or
unemployment (including any plan or program of severance pay), or
vacation benefits, apprenticeship or other training programs, or
day care centers, scholarship funds, or prepaid legal services,
or any benefit described in Section 302(c) of the Labor
Management Relations Act of 1947;
(ii) An Employee Pension Benefit Plan as defined in Section 3(2) of
ERISA established or maintained by the Seller for the purpose of
providing retirement income to employees or for the purpose of
providing deferral of income by employees for periods extending
to the termination of covered employment or beyond; and
(iii)Any other plan or arrangement not covered by ERISA but which
provides benefits to employees or former employees and results in
an accrued liability on the part of the Seller either by contract
or by operation of law.
(b) With respect to any such Employee Benefit Plans, the Seller represents
and warrants that, to the best of Seller's Knowledge;
(i) The Seller has not, with respect to any Employee Benefit Plans,
engaged in any prohibited transaction, as such term is defined in
Section 4975 of the Code or Section 406 of ERISA.
(ii) The Seller has, with respect to any Employee Benefit Plans,
substantially complied with all reporting and disclosure
requirements required by Title I, Subtitle B, Part 1 of ERISA.
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(iii)There was no accumulated funding deficiency (as defined in
section 302 of ERISA and Section 412 of the Code) with respect to
any Employee Pension Benefit Plan which is a defined benefit
pension plan, whether or not waived, as of the last day of the
most recent fiscal year of the plans ending prior to the date of
this Agreement.
(iv) Except as described on the Disclosure Schedule, there are no
contributions due to any Employee Pension Benefit Plan for the
most recent fiscal year of the plans ending prior to the date of
this Agreement and the Seller's Financial Statements reflect any
liability of the Seller to make contributions to the Employee
Pension Benefit Plans.
(v) No material liability to the Pension Benefit Guaranty Corporation
("PBGC") has been asserted with respect to any Employee Pension
Benefit Plan which is a defined benefit pension plan.
(vi) There has been no reportable event as described in Section
4043(b) of ERISA since the effective date of Section 4043 of
ERISA with respect to any Employee Pension Benefit Plan which is
a defined benefit plan.
(vii)Except for claims for benefits by participants and beneficiaries
in the normal course of events, to the best of Seller's
knowledge, there are no claims, pending or threatened, by any
individual or Governmental Entity, which, if decided adversely,
would have a material adverse effect upon the financial condition
of any Employee Benefit Plan, the plan administrator of any
Employee Benefit Plan, or the Seller.
(viii) The Seller has made available for inspection all annual reports
for the Seller filed on Internal Revenue Service ("IRS") Form
5500 or 5500C, all reports for the Seller prepared by an actuary
for the last three plan years, the plan and trust documents and
the Summary Plan Description, as amended, for each Employee
Benefit Plan and the last filed PBGC1 Form (if applicable) for
each Employee Benefit Plan, with respect to any Employee Benefit
Plans other than multi-employer plans (within the meaning of
Section 3(37) of ERISA), and other reports filed with the PBGC
during the last three plan years.
(ix) All Employee Pension Benefit Plans are intended to be qualified
retirement plans under the Code. The IRS has issued, and the
Seller has made available for inspection, one or more
determination letters with respect to the qualification of all
Employee Pension Benefit Plans stating that the IRS has made a
favorable determination as to the qualification of such Plan
under Section 401(a) of the Code, and that continued
qualification of the Plan in its present form will depend upon
its effect in operation. The time for adoption of any amendments
required by changes in the Code since such determination letters
were issued, or changes required by the IRS as a condition for
continued qualification of such plans has not expired, or did not
expire
34
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without such amendments being made. Such plans are now, and
always have been, established in writing and maintained and
operated in accordance with the plan documents, ERISA, the Code,
and all other applicable laws. Except as described in the
Disclosure Schedule, such Plans are now and always have been,
established in writing and maintained and operated substantially
in accordance with the plan documents, ERISA, the Code and all
other applicable laws, in all material respects.
(x) There is no liability arising from the termination or partial
termination of any Employee Benefit Plan, except for liabilities
as to which adequate reserves are reflected on the Financial
Statements, and there exists no condition presenting a material
risk of such liability.
(xi) The Seller has timely made any contributions it is obligated to
make to any multi-employer plan within the meaning of Section
3(37) of ERISA. The Seller has no liability arising as a result
of withdrawal from any multi-employer plan, no such withdrawal
liability has been asserted and no such withdrawal liability will
be asserted with regard to any withdrawal or partial withdrawal
on or before the date of this Agreement.
8.26 Assets Necessary to the Business.
------------------------------------
The Seller owns, leases or holds under license all assets and properties
(tangible and intangible) necessary to carry on its Business No. 1 and
Business No. 2 and operations as presently conducted and as shown on the
Financial Statements. Such assets and properties are all of the assets and
properties necessary to carry on Seller's Business No. 1 and Business No. 2
as presently conducted and Shareholders (other than through their ownership
of stock in the Seller and/or as set forth on the Disclosure Schedule) nor
any member of their family owns or leases or has any interest in any assets
or properties presently being used to carry on Business No. 1 or Business
No. 2 of Seller other than the joint use of the trade name Systems Atlanta.
8.27 Transactions with Affiliates.
------------------------------
Except as disclosed on the Disclosure Schedule, there is no lease,
sublease, contract, agreement or other arrangement of any kind whatsoever
entered into by Seller and any Shareholder or Affiliate.
8.28 Territorial Restrictions.
-------------------------
Except as described in the Disclosure Schedule, Seller is not restricted by
any written agreement or understanding with any other Person from carrying
on the Business No. 1 and/or Business No. 2 anywhere in the world. Neither
Purchaser nor any of its Affiliates will, as a result of its acquisition of
Purchased Assets No. 1 and/or Purchased Assets No. 2 become restricted in
carrying on Business No. 1 and/or Business No. 2 anywhere in the world as a
result of any contract or other agreement to which Seller is a party or by
which it is bound.
8.29 Full Disclosure.
----------------
None of the representations and warranties made by the Seller herein, or
made on its behalf, including any disclosures made in the Disclosure
Schedule, contains or will contain, to the best of Seller's knowledge, any
untrue statement of material fact or omits or will omit any material fact.
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9.
REPRESENTATIONS AND WARRANTIES
------------------------------
OF PURCHASER NO. 1 AND PURCHASER NO. 2
--------------------------------------
Purchaser No. 1 hereby represents and warrants to Seller that the following
statements are true and correct as of the date hereof.
9.1 Organization, Good Standing and Power of Purchaser No. 1.
----------------------------------------------------------------
(a) Purchaser No. 1 is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has
full corporate power and lawful authority to execute, deliver and
perform this Agreement and conduct Business No. 1 of Seller currently
conducted by Seller in each of the jurisdictions in which Seller
currently conducts its Business No. 1, which are the only
jurisdictions where the failure to be so qualified by Purchaser No. 1
will have a material adverse effect on the business prospects or
financial condition of Purchaser No. 1.
9.2 Status of Agreements.
----------------------
(a) All requisite corporate action (including action of its Board of
Directors) to approve, execute, deliver and perform this Agreement and
each of the other agreements, instruments and other documents to be
delivered by and on behalf of Purchaser No. 1 ("Other Purchaser No. 1
Documents") in connection herewith has been taken by Purchaser No. 1.
This Agreement has been duly and validly executed and delivered by
Purchaser No. 1 and constitutes the valid and binding obligation of
Purchaser No. 1 enforceable in accordance with its terms. All Other
Purchaser No. 1 Documents in connection herewith will, when executed
and delivered, constitute the valid and binding obligation of
Purchaser No. 1 enforceable in accordance with their respective terms.
(b) No authorization, approval, consent or order of, or registration,
declaration or filing with, any court, governmental body or agency or
other public or private body, entity or person is required (except for
Purchaser No. 1's primary lender, Deutsche Financial Services Company,
whose consent shall be obtained prior to Closing) in connection with
the execution, delivery or performance of this Agreement or any Other
Purchaser No. 1 Documents in connection herewith.
(c) Neither the execution, delivery nor performance of this Agreement or
any of the Other Purchaser No. 1 Documents in connection herewith does
or will:
(i) conflict with, violate or result in any breach of any judgment,
decree, order, statute, ordinance, rule or regulation applicable
to Purchaser No. 1;
(ii) conflict with, violate or result in any breach of any agreement
or instrument to which Purchaser is a party or by which Purchaser
No. 1 or any of Purchaser's assets or properties is bound, or
constitute a default
36
<PAGE>
thereunder or give rise to a right of acceleration of an
obligation of Purchaser No. 1; or
(iii)conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Purchaser No. 1.
9.3 Brokers and Finders.
---------------------
No broker, finder or other person or entity acting in a similar capacity
has participated on behalf of Purchaser No. 1 in bringing about the
transaction herein contemplated, or rendered any service with respect
thereto or been in any way involved therewith.
Purchaser No. 2 hereby represents and warrants to Seller that the following
statements are true and correct as of the date hereof.
9.4 Organization, Good Standing and Power of Purchaser No. 2.
----------------------------------------------------------------
(a) Purchaser No. 2 is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has
full corporate power and lawful authority to execute, deliver and
perform this Agreement and conduct Business No. 2 of Seller currently
conducted by Seller in each of the jurisdictions in which Seller
currently conducts its Business No. 2, which are the only
jurisdictions where the failure to be so qualified by Purchaser No. 2
will have a material adverse effect on the business prospects or
financial condition of Purchaser No. 2.
9.5 Status of Agreements.
----------------------
(a) All requisite corporate action (including action of its Board of
Directors) to approve, execute, deliver and perform this Agreement and
each of the other agreements, instruments and other documents to be
delivered by and on behalf of Purchaser No. 2 ("Other Purchaser No. 2
Documents") in connection herewith has been taken by Purchaser No. 2.
This Agreement has been duly and validly executed and delivered by
Purchaser No. 2and constitutes the valid and binding obligation of
Purchaser No. 2 enforceable in accordance with its terms. All Other
Purchaser No. 2 Documents in connection herewith will, when executed
and delivered, constitute the valid and binding obligation of
Purchaser No. 2 enforceable in accordance with their respective terms.
(b) No authorization, approval, consent or order of, or registration,
declaration or filing with, any court, governmental body or agency or
other public or private body, entity or person is required (except for
Purchaser No. 2's primary lender, Deutsche Financial Services Company,
whose consent shall be obtained prior to Closing) in connection with
the execution, delivery or performance of this Agreement or any Other
Purchaser No. 2 Documents in connection herewith.
(c) Neither the execution, delivery nor performance of this Agreement or
any of the Other Purchaser No. 2 Documents in connection herewith does
or will:
37
<PAGE>
(i) conflict with, violate or result in any breach of any judgment,
decree, order, statute, ordinance, rule or regulation applicable
to Purchaser No. 2;
(ii) conflict with, violate or result in any breach of any agreement
or instrument to which Purchaser No. 2 is a party or by which
Purchaser No. 2 or any of Purchaser's assets or properties is
bound, or constitute a default thereunder or give rise to a right
of acceleration of an obligation of Purchaser No. 2; or
(iii)conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Purchaser No. 2.
9.6 Brokers and Finders.
---------------------
No broker, finder or other person or entity acting in a similar capacity
has participated on behalf of Purchaser No. 2 in bringing about the
transaction herein contemplated, or rendered any service with respect
thereto or been in any way involved therewith.
9.7 MD& A UPDATE
--------------
Since January 5, 1999, there has been no material adverse change in the
results of operations or financial condition of Purchaser No. 1, nor are
there any demands, commitments, events or uncertainties known to Purchaser
No. 1 which No. 1 which could affect Purchaser No. 1s and/or Purchaser No.
2's liquidity, capital resources, or results or operations as of the date
hereof (other than those previously disclosed by Purchaser in its periodic
reports filed with the Securities and Exchange Commission) that would
require discussion in Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) prepared in accordance with Item
303 of Regulation S-K promulgated by the Securities and Exchange Commission
if such MD&A were required to be updated through the date hereof.
9.8 Full Disclosure
----------------
None of the representations and warranties made by Purchaser No. 1 herein
contains or will contain, to the best of Purchaser No. 1's knowledge, any
untrue statement of material fact or omits or will omit any material fact.
None of the representations and warranties made by Purchaser No. 2 herein
contains or will contain, to the best of Purchaser No. 2's knowledge, any
untrue statement of material fact or omits or will omit any material fact.
38
<PAGE>
10.
SURVIVAL OF AND RELIANCE UPON
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION
-----------------------------------------------------------
10.1 Survival of Representations and Warranties.
----------------------------------------------
The parties acknowledge and agree that all representat-ions, warranties and
agreements contained in this Agreement or in any agreement, instrument,
exhibit, certificate, schedule or other document delivered in connection
herewith, shall survive the Closing and continue to be binding upon the
party giving such representation, warranty or agreement and shall be fully
enforceable to the extent provided for in Sections 10.3 and 10.4 hereof, at
law or in equity, for the period beginning on the date of Closing and
ending two (2) years thereafter, except for the representations, warranties
and agreements designated and identified in Sections 3.1, 3.2, 3.3, 4.2,
8.3, 8.11, 8.12, 8.13, 8.16, 9.2 and 9.4 which shall survive the Closing
and shall terminate in accordance with the statute of limitations governing
written contracts in the State of Georgia and Exhibits H and H-1 and I,
I-1, I-2, I-3, I-4, I-5, I-6, I-7, I-8 and I-9, which shall terminate as
provided therein.
10.2 Reliance Upon and Enforcement of Representations, Warran-ties and
---------------------------------------------------------------------------
Agreements.
----------
(a) Seller hereby agrees that, notwithstanding any right of Purchaser No.
1 and/or Purchaser No. 2 to fully investigate the affairs of Seller,
and notwithstanding knowledge of facts determined or determinable by
Purchaser No. 1 and/or Purchaser No. 2 pursuant to such investigation
or right of investigation, Purchaser No. and/or Purchaser No. 2 have
the right to rely fully upon the representations, warranties and
agreements of Seller contained in this Agreement and upon the accuracy
of any document, certificate or exhibit given or delivered to
Purchaser No. 1 and/or Purchaser No. 2 pursuant to the provisions of
this Agreement.
(b) Purchaser No. 1 and/or Purchaser No. 2 hereby agree that,
notwithstanding any right of Seller to fully investigate the affairs
of Purchaser No. 1 and/or Purchaser No. 2, and notwithstanding
knowledge of facts determined or determinable by Seller pursuant to
such investigation or right of investigation, Seller have the right to
rely fully upon the representations, warranties and agreements of
Purchaser No. 1 and/or Purchaser No. 2 contained in this Agreement and
upon the accuracy of any document, certificate or exhibit given or
delivered to Seller pursuant to the provisions of this Agreement.
10.3 Indemnification by Seller and Shareholder.
---------------------------------------------
Provided Purchaser No. 1 and/or Purchaser No. 2 make a written claim for
indemnification against Seller and/or Shareholders within any applicable
survival period specified in Section 10.1 and subject to the limitations
set forth in Section 10.6, Seller and Shareholders (jointly and severally),
shall indemnify Purchaser No. 1 and/or Purchaser No. 2 against and hold
them harmless from:
(i) any and all loss, damage, liability or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation,
warranty, covenant, or obligation made or incurred by Seller herein or
in any other agreement, instrument or document delivered by or on
behalf of Seller pursuant to the provisions of the Agreement;
39
<PAGE>
(ii) any imposition (including by operation of law) or attempted imposition
by a third party upon Purchaser No. 1 and/or Purchaser No. 2 of any
liability of Seller which Purchaser No. 1 has not specifically agreed
to assume pursuant to Section 3.1 of this Agreement and/or which
Purchaser No. 2 has not specifically agreed to assume pursuant to
Section 3.2 of this Agreement;
(iii)any liability (except for any Assumed Liabilities No. 1 or Assumed
Liabilities No. 2 described in Sections 3.1 and 3.2, respectively) or
other obligation incurred by or imposed upon Purchaser No. 1 and/or
Purchaser No. 2 resulting from the failure of the parties to comply
with the provisions of any law relating to bulk transfers which may be
applicable to the transaction herein contemplated;
(iv) any and all costs and expenses (including reasonable legal and
accounting fees) related to any of the foregoing.
Except as otherwise provided in this Agreement, nothing in this Section
10.3 shall be construed to limit the amount to which, or the time by which,
by reason of offset or otherwise, that Purchaser No. 1 and/or Purchaser No.
2 may recover from Seller or any Shareholder pursuant to this Agreement
resulting from Seller's or any Shareholders breach or violation of any
representation, warranty, covenant or agreement contained herein.
Any amounts to which Purchaser No. 1 and/or Purchaser No. 2, their
successors or assigns, is entitled to indemnification pursuant to the
provisions of this Section, shall first be offset against the amount
payable to Seller under the applicable subordinated promissory note.
Provided, however, the offset in any one year may not exceed the aggregate
amount of principal and interest due on said applicable subordinated
promissory note for said year.
10.4 Indemnification by Purchaser No. 1 and/or Purchaser No. 2.
-----------------------------------------------------------------
Provided Shareholders and Seller make a written claim for indemnification
against Purchaser No. 1 and/or Purchaser No. 2, as applicable, within any
applicable survival period specified in Section 10.1 and subject to the
limitations set forth in Section 10.6, Purchaser No. 1 and/or Purchaser No.
2, as applicable, shall indemnify Seller and Shareholders against and hold
it harmless from any and all loss, damage, liability or deficiency
resulting from or arising out of: (i) any Assumed Liabilities of Purchaser
No. 1 or any Assumed Liabilities of Purchaser No. 2 , as applicable; (ii)
any liability of Purchaser No. 1 and/or Purchaser No. 2 arising out of
Purchaser No. 1's and/or Purchaser No. 2's operations subsequent to the
Closing (except to the extent such liability is the result of a breach of a
covenant or warranty of Seller hereunder); (iii) any inaccuracy in or
breach of any representation, warranty, covenant or obligation made or
incurred by Purchaser No. 1 and/or Purchaser No. 2, as applicable herein or
in any other agreement, instrument, or document delivered by or on behalf
of Purchaser No. 1 and/or Purchaser No. 2 pursuant to the provisions of
this Agreement; and (iv) any and all related costs and expenses (including
reasonable legal and accounting fees). Except as otherwise provided herein,
nothing in this Section 10.4 shall be construed to limit the amount to
which, or the time by which, by reason of offset or otherwise, that Seller
may recover from Purchaser No. 1 and/or Purchaser No. 2 pursuant to this
Agreement resulting from its breach or violation of any representation,
warranty, covenant or agreement contained herein.
40
<PAGE>
10.5 Notification of and Participation in Claims.
------------------------------------------------
(a) No claim for indemnification shall arise until notice thereof is given
to the party from whom indemnity is sought. Such notice shall be sent
within ten (10) days after the party to be indemnified has received
notification of such claim, but failure to notify the indemnifying
party shall in no event prejudice the right of the party to be
indemnified under this Agreement, unless the indemnifying party shall
be prejudiced by such failure and then only to the extent of such
prejudice. In the event that any legal proceeding shall be instituted
or any claim or demand is asserted by any third party in respect of
which Seller/Shareholders on the one hand, or Purchaser No. 1 and/or
Purchaser No. 2, as applicable, on the other hand, may have an
obligation to indemnify the other, the party asserting such right to
indemnity (the "Party to be Indemnified") shall give or cause to be
given to the party from whom indemnity is sought (the "Indemnifying
Party") written notice thereof and the Indemnifying Party shall have
the right, at its option and expense, to participate in the defense of
such proceeding, claim or demand, but not to control the defense,
negotiation or settlement thereof, which control shall at all times
rest with the Party to be Indemnified, unless the Indemnifying Party
irrevocably acknowledges in writing full and complete responsibility
for and agrees to provide indemnification of the Party to be
Indemnified, in which case such Indemnifying Party may assume such
control through counsel of its choice and at its expense. In the event
the Indemnifying Party assumes control of the defense, the
Indemnifying Party shall not be responsible for the legal costs and
expenses of the Party to be Indemnified in the event the Party to be
Indemnified decides to join in such defense. The parties hereto agree
to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such third party legal proceeding,
claim or demand.
(b) If the Party to be Indemnified is also the party controlling the
defense, negotiation or settlement of any matter, and if the Party to
be Indemnified determines to compromise the matter, the Party to be
Indemnified shall immediately advise the Indemnifying Party of the
terms and conditions of the proposed settlement. If the Indemnifying
Party agrees to accept such proposal, the Party to be Indemnified
shall proceed to conclude the settlement of the matter, and the
Indemnifying Party shall immediately indemnify the Party to be
Indemnified pursuant to the terms of Sections 10.3 and 10.4 hereunder.
If the Indemnifying Party does not agree within fourteen (14) days to
accept the settlement (said 14-day period to begin on the first
business day following the date such party receives a complete copy of
the settlement proposal), the Indemnifying Party shall immediately
assume control of the defense, negotia-tion or settlement thereof, at
that Indemnifying Party's expense. Thereafter, the Party to be
Indemnified shall be indemnified in the entirety for any liability
arising out of the ultimate defenses, negotiation or settlement of
such matter.
(c) If the Indemnifying Party is the party controlling the defense,
negotiation or settlement of any matter, and the Indemnifying Party
determines to compromise the matter, the Indemnifying Party shall
immediately advise the Party to be Indemnified of the terms and
conditions of the proposed settlement. If the Party to be Indemnified
agrees to accept such proposal, the Indemnifying Party shall proceed
to conclude the settlement of the matter and immediately indemnify the
Party to be Indemnified pursuant to the terms of Sections 10.3 or
41
<PAGE>
10.4 hereunder. If the Party to be Indemnified does not agree within
fourteen (14) days to accept the settlement (said 14-day period to
begin on the first business day following the date such party receives
a complete copy of the settlement proposal), the Party to be
Indemnified shall immediately assume control of the defense,
negotiation or settlement thereof, at the Party to be Indemnified's
expense. If the final amount paid to resolve the claim is less than
the amount of the original proposed settlement made by the
Indemnifying Party, then the Party to be Indemnified shall receive
such indemnification pursuant to Sections 10.3 or 10.4 hereof,
including any and all expenses incurred by the Party to be Indemnified
incurred in connection with the defense, negotiation or settlement of
such matter up to the maximum of the original proposed settlement. If
the amount finally paid to resolve the claim is equal to or greater
than the amount of the original proposed settlement proposed by the
Indemnifying Party, then the Indemnifying Party shall provide
indemnification pursuant to Sections 10.3 and 10.4 for the amount of
the original settlement proposal submitted by the Indemnifying Party,
and the Party to be Indemnified shall be responsible for all amounts
in excess of the original settlement proposal submitted by the
Indemnifying Party and all costs and expenses incurred by the Party to
be Indemnified in connection with such defense, negotiation or
settlement.
10.6 Limitation on Liability.
-------------------------
(a) Notwithstanding anything contained herein to the contrary, no claims
for indemnification shall be made by Purchaser No. 1 and/or Purchaser
No. 2 against the Seller and Shareholders until such time as all
claims hereunder, net of income tax benefit realized and/or realizable
and any applicable insurance coverage, if any, by Purchaser No. 1
and/or Purchaser No. 2, exceed Twenty Thousand Dollars ($20,000.00) in
the aggregate and then indemnification shall be made only to the
extent that such claim or claims exceed Twenty Thousand Dollars
($20,000.00) in the aggregate. In addition, notwithstanding anything
contained herein to the contrary, the maximum aggregate liability that
the Seller and Shareholders may be collectively required to pay
Purchaser No. 1 and Purchaser No. 2 under this Agreement shall be
limited to an amount equal to Eight Hundred Nineteen Thousand Five
Hundred Thirty-Five Dollars ($819,535.00).
(b) For purposes of this Section 10.6 ($20,000.00 basket amount), the
amount of any indemnification claim shall be reduced by the effect of
any income tax benefit realized by Purchaser No. 1 and/or Purchaser
No. 2. For purposes hereof, the marginal income tax rate of 40% shall
be utilized.
(c) Notwithstanding anything contained herein to the contrary, in the
event any Excluded Liability would attach to Purchased Assets No. 1
and/or Purchased Assets No. 2 under any successor liability statute or
otherwise, notwithstanding the fact that such liability was an
Excluded Liability, Seller and Shareholders shall be jointly and
severally responsible for the payment of such Excluded Liability and
the lien on Purchased Assets No. 1 and/or Purchased Assets No. 2
(which would represent a breach of certain representations under the
Agreement) related to such liability.
42
<PAGE>
11.
THE CLOSING
-----------
11.1 Date, Time and Place of Closing.
------------------------------------
Consummation of the transactions contemplated hereby (the "Closing") shall
take place on May 6, 1999 (the "Closing Date"), at 10:00 a.m. EDT at the
offices of Lindhorst & Dreidame, 312 Walnut Street, Suite 2300, Cincinnati,
Ohio 45202, or on such other Closing Date, or at such other time and/or
place as the parties may mutually agree upon.
11.2 Conditions Precedent to Purchaser No. 1's and Purchaser No. 2's
---------------------------------------------------------------------------
obligations.
-----------
The obligation of Purchaser No. 1 and/or Purchaser No. 2 to perform in
accordance with this Agreement and to consummate the transactions herein
contemplated is subject to the satisfaction of the following conditions at
or before the Closing:
(a) Seller shall have complied with and performed all of the
representations, warranties, agreements and covenants hereunder
required to be performed by it prior to or at the Closing;
(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) The business, aggregate properties and operations of Seller shall not
have been materially adversely affected as a result of any fire,
accident or other casualty or any labor disturbance or act of God or
the public enemy, and there shall otherwise have been no material
adverse change to the business, aggregate properties, or operations of
Seller since December 31, 1998;
(d) Seller shall have delivered to Purchaser No. 1 and/or Purchaser No. 2,
as applicable, at or before the Closing, the following documents, all
of which shall be in form and substance reasonably acceptable to
Purchaser No. 1 and Purchaser No. 2 and its counsel:
(i) The instruments of transfer required by Sections 2.6 and 2.7;
(ii) Releases (or copies thereof) of all liens, claims, charges,
encumbrances, security interests and restrictions on Purchased
Assets No. 1 and Purchased Assets No. 2 necessary to provide
Purchaser No. 1 with good title to each of the Purchased Assets
No. 1 at the Closing and to provide Purchaser No. 2 with good
title to each of the Purchased Assets no. 2 at the Closing.
(iii)Certified copies of the corporate actions taken by the Board of
Directors and Shareholders of Seller authorizing the execution,
delivery and performance of this Agreement;
(iv) Certificates of Existence for Seller from the Secretary of State
of Georgia dated no earlier than fifteen (15) days prior to
Closing;
43
<PAGE>
(v) Seller shall have entered into the Subordination Agreement in the
form attached hereto as Exhibits D and F;
(vi) Seller and each Shareholder shall have entered into the
non-competition agreements as set forth in Exhibits I, I-1, I-2,
I-3, I-4, I-5, I-6, I-7, I-8 and I-9.
(vii)S. Dobson and T. Dobson shall have entered into his respective
Employment Agreement set forth in Exhibits H and H-1.
(e) Seller will adopt and file with the Secretary of State of Georgia an
Amendment to the Charter of Seller changing the name of Seller to a
name substantially dissimilar to Systems Atlanta Commercial Systems,
Inc. and Seller shall execute a Consent for Use of Similar Name form
as set forth in Section 8.19.
(f) Purchaser No. 1 and Purchaser No. 2 shall have received assurances in
form and substance satisfactory to it (that may include insurance
certificates) that Seller has made all provisions necessary under
applicable law, with regard to an employer's obligation to provide for
a continuation of health insurance and other benefits of any employee,
who is not employed by Seller following termination of employment.
11.3 Conditions Precedent to Seller's Obligations.
------------------------------------------------
The obligation of Seller to perform in accordance with this Agreement and
to consummate the transactions herein contemplated is subject to the
satisfaction of the following conditions at or before the Closing:
(a) Performance by Purchaser No. 1 and Purchaser No. 2 of all of the
representa-tions, warranties, agreements and covenants to be performed
by it at or before the Closing;
(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) Purchaser No. 1 shall deliver to Seller at or before the Closing the
following documents, all of which shall be in form and substance
acceptable to Seller and its counsel:
(i) A certified or bank cashier's check or wire transfer for the
aggregate amount to be paid to Seller at the Closing pursuant to
Section 4.3(a) hereof;
(ii) Assumption of Liabilities Agreement under which Purchaser No. 1
assumes the Liabilities set forth in Section 3.1;
(iii) A promissory note as set forth in Section 4.3(c);
(iv) Certified copies of the corporate actions taken by Purchaser No.
1 authorizing the execution, delivery and performance of this
Agreement;
44
<PAGE>
(v) Certificate of Good Standing for Purchaser No. 1 from the
Secretary of State of Delaware dated no earlier than fifteen (15)
days prior to the date of Closing; and
(d) Purchaser No. 2 shall deliver to Seller at or before the Closing the
following documents, all of which shall be in form and substance
acceptable to Seller and its counsel:
(i) A certified or bank cashier's check or wire transfer for the
aggregate amount to be paid to Seller at the Closing pursuant to
Section 4.4(a) hereof;
(ii) Assumption of Liabilities Agreement under which Purchaser No. 2
assumes the Liabilities set forth in Section 3.2;
(iii) A promissory note as set forth in Section 4.4(c);
(iv) Certified copies of the corporate actions taken by Purchaser No.
2 authorizing the execution, delivery and performance of this
Agreement;
(v) Certificate of Good Standing for Purchaser No. 2 from the
Secretary of State of Delaware dated no earlier than fifteen (15)
days prior to the date of Closing;
(e) Purchaser No. 1 shall have entered into the Employment Agreements set
forth in Exhibits H and H-1.
12.
GENERAL PROVISIONS
------------------
12.1 Publicity.
---------
All public announcements relating to this Agreement or the transactions
contemplated hereby will be made by Purchaser No. 1 and Purchaser No. 2
with the consent of Seller, which consent will not be unreasonably
withheld, except for any disclosure which may be required because of
Purchaser No. 1's being a publicly-traded corporation on the
over-the-counter market.
12.2 Expenses.
--------
Purchaser No. 1 will bear and pay all of its expenses incident to the
transactions contemplated by this Agreement which are incurred by Purchaser
No. 1 or its representatives, Purchaser No. 2 will bear and pay all of its
expenses incident to the transactions contemplated by this Agreement which
are incurred by Purchaser No. 2 or its representatives, and Seller shall
bear and pay all of the expenses incident to the transactions contemplated
by this Agreement which are incurred by Seller or their respective
representatives.
45
<PAGE>
12.3 Notices.
-------
46
<PAGE>
All notices and other communications required by this Agreement shall be in
writing and shall be deemed given if delivered by hand or mailed by
registered mail or certified mail, return receipt requested, to the
appropriate party at the following address (or at such other address for a
party as shall be specified by notice pursuant hereto):
(a) If to Purchaser No. 1, to:
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
(b) If to Purchaser No. 2, to
Pomeroy Select Integration Solutions, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to:
James H. Smith III, Esq.
Lindhorst & Dreidame
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
(b) If to Seller, to:
Systems Atlanta Commercial Systems, Inc.
200 North Cobb Parkway, Suite 413
Marietta, GA 30062
With a copy to:
Tully H. Hazell, Esq.
Burr & Forman, LLP
P.O. Box 54617
Atlanta, Georgia 30308
(c) If to Shareholders, to:
Scott Dobson
303 Luke Street
Woodstock, GA 30188
12.4 Binding Effect.
---------------
Except as may be otherwise provided herein, this Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives,
successors and assigns.
12.5 Headings.
--------
47
<PAGE>
The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or
interpretation of this Agreement.
12.6 Exhibits.
--------
The Exhibit and Disclosure Schedule referred to in this Agreement
constitute an integral part of this Agreement as if fully rewritten herein.
12.7 Counterparts.
------------
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which constitute together one and
the same document.
12.8 Governing Law.
--------------
This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia, without regard to its laws regarding conflict
of laws.
12.9 Severability.
------------
If any provision of this Agreement shall be held unenforceable, invalid, or
void to any extent for any reason, such provision shall remain in force and
effect to the maximum extent allowable, if any, and the enforceability or
validity of the remaining provisions of this Agreement shall not be
affected thereby.
12.10 Waivers; Remedies Exclusive.
-----------------------------
No waiver of any right or option hereunder by any party shall operate as a
waiver of any other right or option, or the same right or option with
respect to any subsequent occasion for its exercise, or of any right to
damages. No waiver by any party of any breach of this Agreement or of any
representation or warranty contained herein shall be held to constitute a
waiver of any other breach or a continuation of the same breach. No waiver
of any of the provisions of this Agreement shall be valid and enforceable
unless such waiver is in writing and signed by the party granting the same.
Except as otherwise provided in the note issued pursuant to Sections 4.3(c)
and 4.4(c), the Employment Agreements and the Covenant Not to Compete
Agreements, the indemnification provided for by Section 10 herein shall
constitute the exclusive remedy of any party with respect to (i) the
matters for which such indemnification is provided and (ii) any other
matters arising out of, relating to or connected with this Agreement or the
transactions contemplated hereby, and whether any claims or causes of
action asserted with respect to any such matters are brought in contract,
tort or other legal theory whatsoever.
12.11 Assignments.
-----------
Except as otherwise provided in this Agreement, no party shall assign its
rights or obligations hereunder prior to Closing without the prior written
consent of the other party.
48
<PAGE>
12.12 Entire Agreement.
-----------------
This Agreement and the agreements, instruments and other documents to be
delivered hereunder constitute the entire understanding and agreement
concerning the subject matter hereof. All negotiations between the parties
hereto are merged into this Agreement, and there are no representations,
warranties, covenants, understandings, or agreements, oral or otherwise, in
relation thereto between the parties other than those incorporated herein
and to be delivered hereunder. Except as otherwise expressly contemplated
by this Agreement, nothing expressed or implied in this Agreement is
intended or shall be construed so as to grant or confer on any person, firm
or corporation other than the parties hereto any rights or privilege
hereunder. No supplement, modification or amendment of this Agreement shall
be binding unless executed in writing by the parties hereto.
12.13 Business Records.
-----------------
Seller and Shareholders shall be permitted to retain copies of such books
and records relating to Purchased Assets No. 1 and/or Purchased Assets No.
2 and relating to the accounting and tax matters of Business No. 1 and/or
Business No. 2 and to have access to all original copies of records so
delivered to Purchaser No. 1 and/or Purchaser No. 2 at reasonable times,
for any reasonable business purpose, for a period of six (6) years after
the Closing.
12.14 Compliance with Bulk Sales Act.
----------------------------------
Purchaser No. 1 and Purchaser No. 2 waive compliance with the provisions of
any applicable bulk sales law and Seller and Shareholders, jointly and
severally, agree to indemnify and hold harmless Purchaser No. 1 and
Purchaser No. 2 from any liability incurred as a result of the failure to
so comply, except to liabilities explicitly assumed hereunder by Purchaser
No. 1 and/or Purchaser No. 2.
13.
SYSTEMS ATLANTA, INC.
--------------------
13.1 SAI, an Affiliate of Seller, is executing this Agreement for the purpose of
acknowledging that record title to certain of the Purchased Assets No. 1
and/or Purchased Assets No. 2 being conveyed hereunder by Seller to
Purchaser No. 1 and/or Purchaser No. 2 may be in the name of SAI and to
acknowledge that certain obligations being paid hereunder by Purchaser No.
1 and Purchaser No. 2 represent obligations to third party lenders which
obligations are originally in the name of SAI, but the proceeds of which
have been used by Seller in the operation of its Business No. 1 and
Business No. 2. Incident thereto, and at no additional cost to Purchaser
No. 1 and Purchaser No. 2 other than the consideration to be paid under
this Agreement to Seller, SAI agrees to execute at closing, General Bills
of Sale and Assignments to Purchaser No. 1 and Purchaser No. 2,
respectively, incident to it conveys any and all interest that SAI may own
in any of Purchased Assets No. 1 and/or Purchased Assets No. 2, free and
clear of any Encumbrances, to Purchaser No. 1 and Purchaser No. 2 and that
SAI agrees to do any and all further acts that may be necessary currently
or in the future, including those items set forth in Sections 2.6 and 2.7
of this Agreement, to effectuate the transfer of such Purchased Assets No.
1 and Purchased Assets No. 2 and to do any and all further things that may
be necessary to effectuate the intent of this Agreement.
The parties hereto have executed this Agreement as of the date first above
written.
49
<PAGE>
WITNESSES: SYSTEMS ATLANTA COMMERCIAL
SYSTEMS, INC.
___________________________
___________________________ By:________________________________
B. Scott Dobson, Vice-President
POMEROY COMPUTER RESOURCES,
___________________________ INC.
___________________________ By: _______________________________
POMEROY SELECT INTEGRATION SOLUTIONS, INC.
___________________________
___________________________ By: ______________________________
___________________________
___________________________ __________________________________
B. SCOTT DOBSON
___________________________
___________________________ __________________________________
CHARLEY G. DOBSON
___________________________
___________________________ __________________________________
BETTY H. DOBSON
___________________________
___________________________ __________________________________
TYLER H. DOBSON
50
<PAGE>
For purposes of Section 13 of this Agreement:
SYSTEMS ATLANTA, INC.
___________________________
___________________________ By:________________________________
51
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 6th day of May, 1999, by and between POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation ("Company"), and B. SCOTT
DOBSON ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement ("Purchase
Agreement") of even date pursuant to which it purchased substantially all the
assets of Systems Atlanta Commercial Systems, Inc. (Systems Atlanta) used in its
business of marketing and selling a broad range of microcomputers and related
products including equipment selection procurement and configuration; and
WHEREAS, Employee, as an inducement for and in consideration of Company entering
into the Purchase Agreement, has agreed to enter into and execute this
Employment Agreement pursuant to Section 6 thereof; and
WHEREAS, Company desires to engage the services of Employee, pursuant to the
terms, conditions and provisions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
----------
agrees to be employed by the Company, upon the following terms and
conditions.
2 Term. The initial term of Employee's employment pursuant to this Agreement
----
shall begin on the 6th day of May, 1999, and shall continue for a period of
four (4) years, ending May 5th, 2003 unless terminated earlier pursuant to
the provisions of Section 10, provided that Sections 8, 9, 10(b) and 11, if
applicable, shall survive the termination of such employ-ment and shall
expire in accordance with the terms set forth therein.
3. Renewal Term. The term of Employee's employment shall automatically renew
-------------
for additional consecutive renewal terms of one (1) year unless either
party gives written notice of his/its intent not to renew the terms of this
Agreement sixty (60) days prior to expiration of the then expiring term.
4. Duties. Employee shall serve as General Manager for the Company's Atlanta
------
Division. Employee shall perform such duties in Cobb County, Georgia, or
the counties contiguous to Cobb County, Georgia. Employee shall be
responsible to and report directly to the officers of Company. The duties
assigned to Employee shall not be inconsistent with those typically
assigned to a person holding the position set forth above. Employee shall
at all time have such powers and authorities as shall be reasonably
required to discharge such duties in an efficient manner together with such
facilities and services as are appropriate to his position. Employee shall
devote his best efforts and substantially all his time during normal
business hours to the diligent, faithful and loyal discharge of the duties
of his employment and towards the proper, efficient and successful conduct
of the Company's affairs. Employee fur-ther agrees to refrain during the
term of this Agreement from making any sales of competing services or
products or from profiting from any transaction
-1-
<PAGE>
involving computer services or products for his account without the express
written consent of Company. Nothing contained herein shall preclude
Employee from owning stock in Systems Atlanta, Inc. or serving as a
director thereof.
5. Compensation. For all services rendered by the Employee under this
------------
Agreement (in addition to other monetary or other benefits referred to
herein), compensation shall be paid to Employee as follows:
(a) Award of Stock Options: On the execution of this Agreement, Employee
shall be awarded, pursuant to an Award Agreement, a copy of which is
attached hereto as Exhibit A, the right to acquire 10,000 shares of
common stock, .01 par value, of the Company subject to any conditions
contained in the Pomeroy Computer Resources, Inc. Non-Qualified and
Incentive Stock Option Plan and Award Agreement. Such award of stock
options to acquire the common stock of the Company shall be at the
fair market value of such common stock as of the applicable date. For
purposes of this Agreement, the fair market value as of the applicable
date shall mean with respect to the common shares, the average between
the high and low bid and ask prices for such shares on the
over-the-counter market on the last business day prior to the date on
which the value is to be determined (or the next preceding date on
which sales occurred if there were no sales on such date).
(b) Base Salary: During each fiscal year of the initial term of this
Agreement (unless renegotiated by the mutual agreement of the
parties), Employee shall be paid an annual base salary of Eighty-Four
Thousand Dollars ($84,000.00). Said base salary shall be payable in
accordance with the historical payroll practices of the Company.
(c) Annual Cash Bonus - Atlanta Division: In addition to Employee's base
salary as set forth in Section 5(b) above, for the period commencing
upon the closing of the Purchase Agreement and ending January 5, 2000,
Employee shall be entitled to a cash bonus and incentive stock option
award in the event Employee satisfies certain economic criteria
pertaining to the Company's Atlanta Division set forth as follows:
(i) Gross sales of Company's Atlanta Division greater than
$6,666,667.00 but not less than $8,000,000.00 with net profit
before taxes (NPBT) greater than 4%, equals $6,667.00 cash bonus
plus 3,333 incentive stock options;
(ii) Gross sales of Company's Atlanta Division greater than
$8,000,000.00 but less than $9,333,333.00 with NPBT greater than
4% equals $13,333.00 cash bonus plus 5,000 incentive stock
options;
(iii)Gross sales of Company's Atlanta Division greater than
$9,333,333.00 with NPBT greater than 4% equals $20,000.00 cash
bonus plus 6,667 incentive stock options.
(iv) For purposes of this Section 5(c), the term Gross Sales shall
mean the gross sales of equipment, software and services by
Company's Atlanta Division or any other Atlanta Division operated
by any subsidiary of Company, determined on a consolidated basis
during the applicable period. In making said gross sales
determination, all gains and losses realized on the sale or other
disposition of Companys or any subsidiarys Atlanta Division's
assets not in the ordinary course shall be excluded. In addition,
any gross sales of Company's or its subsidiarys Atlanta Division
relating to any acquisitions that are closed in
-2-
<PAGE>
such year shall be excluded. All refunds or returns which are
made during such period shall be subtracted along with all
accounts receivable derived from such sales that are written off
during such period in accordance with Companys Atlanta
Divisions's accounting system. Such gross sales and NPBT of
Company's Atlanta Division shall be determined by the Company's
internally generated accounting statements determined on a
consolidated basis in the manner set forth above and in
accordance with generally accepted accounting principles. During
the period commencing with the closing of the Purchase Agreement
and ending January 5, 2000, a combined 1.8% MAS royalty and
AdFund fee on gross sales by Companys Atlanta Division shall be
made incident to said NPBT determination. Key services to be
provided the Atlanta Division by Company under the MAS royalty
and AdFund fee include the following: (i) accounting (including
AP and financial statement preparation); (ii) payroll, HR
(including benefits), legal, MIS support and administration;
(iii) centralized warehousing and configuration; (iv) advertising
and technical training; (v) Company and branch events, marketing
and promotional materials; and (vi) HQ Funds, soft dollar, spiff
and co-op tracking. For each subsequent fiscal year for which
Employee may be entitled to a bonus hereunder, the parties shall,
in good faith, agree upon MAS royalty and AdFund fees to be
charged hereunder based on the level of services and support
being provided by the Company to its Atlanta Division. Provided,
however, such MAS royalty and AdFund fees shall be 1.8% if the
parties are unable to come to an agreement for such year. Any
cash bonus amount determined under Section 5 (c) shall be payable
to Employee within thirty (30) days of the determination. For
purposes of this Section, the term Companys Atlanta Division
shall be the business acquired by Company from Seller under the
Purchase Agreement including the business acquired by Companys
wholly-owned subsidiary, Pomeroy Select Integration Solutions,
Inc. under the Purchase Agreement and shall include Companys
operations in Atlanta, Georgia that existed prior to the closing
of the Purchase Agreement.
(v) Any award of the incentive stock options to acquire the common
stock of Company shall be made fifty percent (50%) in the shares
of the Company and fifty percent (50%) in the shares of the
Companys subsidiary (Pomeroy Select Integration Solutions, Inc.)
if it is a publicly traded entity at such time, as of January 5,
2000 or any other applicable date, which shall mean with respect
to such shares, the average between the high and low bid and
asked prices for such shares on the over-the-counter market on
the last business day prior to the date on which the value is to
be determined (or the next preceding date on which sales occurred
if there were no sales on such date). In the event the stock of
Pomeroy Select Integration Solutions, Inc. is not publicly traded
as of January 5, 2000, Company shall have the right to award 100%
in the shares of the Company (in lieu of 50%) or shall have the
right to pay to Employee, in cash, the fair
-3-
<PAGE>
market value of such 50% of the stock options of the Company
determined under the Black Scholes method of valuation of stock
options. Any options awarded shall be subject to a vesting period
determined by the Board of Directors of the Company, but in no
event shall said vesting period be greater than five (5) years.
(vi) The parties agree that in January, 2000, January, 2001, January,
2002 and January, 2003, they will negotiate in good faith, the
level of gross sales and NPBT of Company's Atlanta Division for
the aforementioned cash bonus and incentive stock option award to
be earned for such years, which gross sales and NPBT criteria
shall be predicated upon Company's Atlanta Division's goals,
projections and budgets established at the outset of such fiscal
year.
(d) In addition to Employee's base salary as set forth in Section 5(b) and
any annual cash bonus/incentive stock option award that Employee may
be entitled to under Section 5(c) based on Company's Atlanta
Division's performance, Employee shall be entitled to a cash bonus and
incentive deferred compensation and an incentive stock option award
for the year 1999 in the event Employee satisfies certain economic
criteria pertaining to Company's performance during the fiscal year
1999, as follows:
(i) Gross sales of Company greater than $770,000,000.00 but less than
or equal to $800,000,000.00 with NPBT greater than 5.5% equals
$10,000.00 cash plus 2,500 incentive stock options;
(ii) Gross sales of Company greater than $800,000,000.00 but less than
or equal to $830,000,000.00 with NPBT greater than 5.5% equals
$20,000.00 cash plus 5,000 incentive stock options;
(iii)Gross sales of Company greater than $830,000,000.00 with NPBT
greater than 5.5% equals $30,000.00 cash plus 7,500 incentive
stock options.
(iv) For purposes of this Section, the term Gross Sales shall mean the
gross sales of equipment, software and services by Company during
the applicable period, determined on a consolidated basis. In
making said gross sales determination, all gains and losses
realized on the sale or other disposition of Companys assets not
in the ordinary course shall be excluded. All refunds or returns
which are made during such period shall be subtracted along with
all accounts receivable derived from such sales that are written
off during such period in accordance with Companys accounting
system. Such Gross Sales and net pre-tax margin of Company shall
be determined by the Chief Financial Officer of the Company in
accordance with generally accepted accounting principles and such
determination shall be final, binding and conclusive upon all
parties hereto. All amounts due Employee under Section 5(d)
(other than the award of any incentive stock options) will
constitute incentive deferred compensation which shall be payable
to Employee according to the terms and the Incentive Deferred
Compensation Agreement attached hereto and incorporated herein as
Exhibit B. Any incentive deferred compensation shall be fully
vested over a five-year period, vesting 20% per year of
employment from the effective date of this Agreement.
-4-
<PAGE>
(v) Any award of the incentive stock options to acquire the common
stock of Company shall be made fifty percent (50%) in the shares
of the Company and fifty percent (50%) in the shares of the
Companys subsidiary (Pomeroy Select Integration Solutions, Inc.)
if it is a publicly traded entity at such time, as of January 5,
2000 or any other applicable date, which shall mean with respect
to such shares, the average between the high and low bid and
asked prices for such shares on the over-the-counter market on
the last business day prior to the date on which the value is to
be determined (or the next preceding date on which sales occurred
if there were no sales on such date). In the event the stock of
Pomeroy Select Integration Solutions, Inc. is not publicly traded
as of January 5, 2000, Company shall have the right to award 100%
in the shares of the Company (in lieu of 50%) or shall have the
right to pay to Employee, in cash, the fair market value of such
50% of the stock options of the Company determined under the
Black Scholes method of valuation for stock options. Any options
awarded shall be subject to a vesting period determined by the
Board of Directors of the Company, but in no event shall said
vesting period be greater than five (5) years.
(vi) The parties agree that in January, 2000, January, 2001, January,
2002 and January, 2003, they will negotiate in good faith the
implementation of economic criteria for the earning of incentive
deferred compensation and incentive stock option award for
Employee for each of the remaining fiscal years of this Agreement
which will be predicated upon the attainment of Companys goals,
projections and budgets established at the outset for such fiscal
year which shall be consistent with the goals set forth for
senior management of Company for such year(s). The incentive
deferred compensation and incentive stock option awards shall be
predicated on the structure (as to amounts) used for the
incentive deferred compensation/incentive stock option award of
Company for the year 1999.
(vii)Company will deliver to Employee copies of the reports of any
determination made hereunder by Company for the subject period,
along with any documentation reasonably requested by Employee.
Within fifteen (15) days following delivery to Employee of such
report, Employee shall have the right to object in writing to the
results contained in such determination. If timely objection is
not made by Employee to such determination, such determination
shall become final and binding for purposes of this Agreement. If
a timely objection is made by Employee, and the Company and
Employee are able to resolve their differences in writing within
fifteen (15) days following the expiration of the initial 15-day
period, then such determination shall become final and
-5-
<PAGE>
binding as it pertains to this Agreement. If timely objection is
made by Employee to Company, and Employee and Company are unable
to resolve their differences in writing within fifteen (15) days
following the expiration of the initial 15-day period, then all
disputed matters pertaining to the report shall be submitted and
reviewed by the Arbitrator (Arbitrator), which shall be an
independent accounting firm selected by Company and Employee. If
Employee and Company are unable to promptly agree on the
accounting firm to serve as the Arbitrator, each shall select, by
not later than fifteen (15) days following the expiration of the
initial fifteen (15) day period, one accounting firm and the two
selected accounting firms shall then be instructed to select
promptly a third accounting firm, such third accounting firm to
serve as the Arbitrator. The Arbitrator shall consider only the
disputed matters pertaining to the determination and shall act
promptly to resolve all disputed matters. A decision with respect
to all disputed matters shall be final and binding upon Company
and Employee. The expenses of Arbitration shall be borne one-half
by Employee and one-half by Company. Each party shall be
responsible for his/its own attorney and accounting fees.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
----------------
entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with the standard family
medical health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent (50%) of
the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a vacation of three
weeks during which time his compensa-tion will be paid in full.
Provided, however, such weeks may not be taken consecutively without
the written consent of Company.
(c) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or
welfare plans maintained by the Company during the term of this
Agreement.
(d) Automobile - Company shall provide Employee with an automobile
allowance of $400.00 per month. Employee shall be responsible for all
insurance, maintenance and repairs to such vehicle.
(e) Cellular Telephone - Company shall provide Employee with a cellular
telephone allowance of $75.00 per month. Employee shall provide
Company, upon request, with documentation supporting the business use
of said cellular telephone.
(f) Other Company Programs - Employee shall be eligible to participate in
any other plans or programs implemented by the Company for all of its
employees with duties and responsibilities similar to Employee.
(g) Employee shall be responsible for any and all taxes owed, if any, on
the fringe benefits provided to him pursuant to this Section 6.
7. Expenses. During the term of this Agreement, Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses incurred by
-6-
<PAGE>
Employee in fulfilling the Employee's duties and responsibilities
hereunder, including, all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the
Company, provided that such expenses are incurred and accounted for in
accordance with the reasonable policies and procedures established by the
Company.
8. Non-Competition. Employee expressly acknowledges the provisions of Section
---------------
7 of the Purchase Agreement relating to Employee's Covenant Not to Compete
with Company and also Employees Covenant Not to Compete with Companys
wholly-owned subsidiary, Pomeroy Select Integration Solutions, Inc.
Accordingly, such provisions of Section 7 are incorporated herein by
reference to the extent as if restated in full herein. In addition to the
consideration received under this Agreement, Employee acknowledges that as
one of the owners of the common stock of Systems Atlanta Commercial
Systems, Inc., he has received substantial consideration pursuant to such
Purchase Agreement and that as an inducement for, and in consideration of,
Company entering into the Purchase Agreement and Company entering into this
Agreement, Employee has agreed to be bound by such provisions of Section 7
of the Pur-chase Agreement. Accordingly, such provisions of Section 7 and
Exhibits I-2 and I-3 and the restrictions on Employee thereby imposed shall
apply as stated therein.
9. Non-Disclosure and Assignment of Confidential Information. The Employee
------------------------------------------------------------
acknowledges that the Company's trade secrets and confidential and
proprietary information, including without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including unpublished information
concerning revenues, profits and profit margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for purposes
of the Securities Exchange Act of 1934, as amended;
all constitute valuable, special and unique proprietary and trade secret
information of the Company. In recognition of this fact, the Employee agrees
that the Employee will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly available
without violation of this Agreement, (ii) information of which the Employee did
not know and should not have known was disclosed to the Employee in violation of
any other person's confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make use of any such
information for the benefit of any person, firm, operation or other entity
except the Company and its subsidiaries or affiliates. The Employee's obligation
to keep all of such information confidential shall be in effect during and for a
period of five (5) years after the termination of his employment; provided,
however, that the Employee will keep confidential and will not disclose any
trade secret or similar information protected under law as intangible property
(subject to the same exceptions set forth in the parenthetical clause above) for
so long as such protection under law is extended.
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<PAGE>
10. Termination.
-----------
(a) The Employee's employment with the Company may be terminated at any
time as follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability which renders
Employee unable to perform his duties hereunder;
(iii)By the Company, for cause upon three (3) day's written notice to
Employee. For purposes of this Agreement, the term "cause" shall
mean termination upon: (i) the engaging by Employee in conduct
which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including but not limited to any
material misrepresentation related to the performance of his
duties; (ii) the conviction of Employee of a felony or other
crime involving theft or fraud, (iii) Employee's gross neglect,
gross misconduct or gross insubordination in carrying out his
duties hereunder resulting, in either case, in material harm to
the Company; or (iv) any material breach by Employee of this
Agreement. Notwithstanding the foregoing, Employee shall not be
deemed to have been terminated for cause under (i) and (iv)
above, unless and until there has been delivered to him a copy of
the resolution of an officer of the Company, finding that
Employee engaged in the conduct set forth above in this section
and specifying the particulars thereof in detail, and Employee
shall not have cured or abated such conduct to the reasonable
satisfaction of the Company within fifteen (15) days of receipt
of such resolution. This provision shall be applicable solely to
the extent the conduct to which the alleged breach relates is
susceptible to being cured in the reasonable determination of
such officer.
(b) Compensation upon Termination: In the event of termination of
employment, the Employee or his estate, in the event of death, shall
be entitled to his annual base salary and other benefits provided
hereunder to the date of his termination. In addition, Employee shall
be entitled to receive any bonus accrued to the date of his
termination of employment as provided in Sections 5(c) and 5(d), which
shall be payable (if applicable) pursuant to the terms thereof.
11. Disability. In the event that Employee becomes temporarily disabled and/or
----------
totally and permanently disabled, physically or mentally, which renders him
unable to perform his duties hereunder, Employee shall receive one hundred
percent (100%) of his base annual salary (in effect at the time of such
disability) for a period of one (1) year following the initial date of such
disability (offset by any payments to the Employee received pursuant to
disability benefit plans, if any, maintained by the Company.) Such payments
shall be payable in twelve consecutive equal monthly installments and shall
commence thirty (30) days after the determination by the physicians of such
disability as set forth below.
-8-
<PAGE>
For purposes of this Agreement, Employee shall be deemed to be temporarily
disabled and/or totally and permanently disabled if attested to by two
qualified physicians, (one to be selected by Company and the other by
Employee) competent to give opinions in the area of the disabled Employee's
physical and/or mental condition. If the two physicians disagree, they
shall select a third physician, whose opinion shall control. Employee shall
be deemed to be temporarily disabled and/or totally and permanently
disabled if he shall become disabled as a result of any medically
determinable impairment of mind or body which renders it impossible for
such Employee to perform satisfactorily his duties hereunder, and the
qualified physician(s) referred to above certify that such disability does,
in fact, exist. The opinion of the qualified physician(s) shall be given by
such physician(s), in writing directed to the Company and to Employee. The
physician(s) decision shall include the date that disability began, if
possible, and the 12th month of such disability, if possible. The decision
of such physician(s) shall be final and conclusive and the cost of such
examination shall be paid by Company.
12. Severability. In case any one (1) or more of the provisions or part of a
------------
provision contained in this Agreement shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of this Agreement. In such a situation, this Agreement shall be
reformed and construed as if such invalid, illegal or unenforceable
provision, or part of a provision, had never been contained herein, and
such provision or part shall be reformed so that it will be valid, legal
and enforceable to the maximum extent possible.
13. Governing Law. This Agreement shall be governed and construed under the
-------------
laws of the State of Georgia and shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the parties.
14. Notices. All notices, requests, demands and other communications relating
-------
to this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed by certified or registered mail,
return receipt re-quested, postage prepaid to the following addresses (or
to such other address for a party as shall be specified by notice pursuant
hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III, Esq.
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
With a copy to: Tully Hazell, Esq.
Burr & Forman
600 W. Peachtree
Suite 1200
Atlanta, GA 30308
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<PAGE>
15. Enforcement of Rights. The parties expressly recognize that any breach of
---------------------
this Agreement by either party is likely to result in irrevocable injury to
the other party and agree that such other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction in Cobb County, Georgia, either at law or in equity, to obtain
damages for any breach of this Agreement, or to enforce the specific
performance of this Agreement by each party or to enjoin any party from
activities in violation of this Agreement. Should either party engage in
any activities prohibited by this Agreement, such party agrees to pay over
to the other party all compensation, remuneration, monies or property of
any sort received in connection with such activities. Such payment shall
not impair any rights or remedies of any non-breaching party or obligations
or liabilities of any breaching party pursuant to this Agreement or any
applicable law.
16. Entire Agreement. This Agreement and the Purchase Agreement referred to
-----------------
herein contain the entire understanding of the parties with respect to the
subject matter contained herein and may be altered, amended or superseded
only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
17. Parties in Interest.
---------------------
(a) This Agreement is personal to each of the parties hereto. No party may
assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided,
however, that nothing in this Section 17 shall preclude (i) Employee
from designating a beneficiary to receive any benefit payable
hereunder upon his death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any rights
hereunder to person or persons entitled thereto. Notwithstanding the
foregoing, this Agreement shall be binding upon and inure to the
benefit of any successor corporation of Company
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the assets of the Company or the business with respect to which
the duties and responsibilities of Employee are principally related,
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Company would have been required to
perform it if no such succession had taken place. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which
executes and delivers the assumption agreement provided for in this
Section 17 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
18. Representations of Employee. Employee represents and warrants that he is
----------------------------
not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in
connection with previous employment which prevents Employee from entering
into and performing his obligations under this Agreement.
19. Counterparts. This Agreement may be executed simulta-neously in several
------------
counterparts, each of which shall be deemed an original part, which
together shall constitute one and the same instrument.
-10-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed effec-tive as of the day
and year first above written.
WITNESSES: COMPANY:
POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________ By:_________________________________
Stephen E. Pomeroy
Chief Financial Officer
EMPLOYEE:
__________________________
__________________________ ____________________________________
B. SCOTT DOBSON
-11-
<PAGE>
SUBORDINATED PROMISSORY NOTE
$424,372.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) May 6, 1999
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (hereinafter, together with its successors in title and assigns,
called the "Borrower") does hereby absolutely and unconditionally promise to pay
to the order of SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation
("Lender"), the sum of Four Hundred Twenty-Four Thousand Three Hundred
Seventy-Two Dollars ($424,372.00) (as may be adjusted in the manner hereinafter
set forth), together with interest on the outstanding principal balance from the
date hereof, at the rate specified below.
2. The initial face amount of this note Four Hundred Twenty-Four Thousand
Three Hundred Seventy-Two Dollars ($424,372.00) shall be adjusted downward by
any decrease required by Section 4.2(e) of the Asset Purchase Agreement. Such
adjustment and the manner in which it is to be made shall be done in accordance
with Section 5.2 of the Asset Purchase Agreement. If, prior to such adjustment,
Borrower has made any interest payment to Lender hereunder, the parties agree to
adjust any prior payments to equitably reflect the decrease made as a result of
any adjustment contained in Sections 4.2(e) of the Asset Purchase Agreement.
3. Interest shall accrue at the prime rate of Chase Manhattan Bank as of the
date of Closing. Interest on the unpaid principal balance of this note shall be
due and payable quarterly with the first interest payment due and payable ninety
(90) days from the date hereof and on the 6th day of each successive quarter
thereafter. Principal shall be paid in one (1) annual installment of Four
Hundred Twenty-Four Thousand Three Hundred Seventy-Two Dollars ($424,372.00), as
may be adjusted pursuant to the provisions of paragraph 2, on the first
Anniversary Date of this Note.
4. All payments received hereunder shall be applied first to interest and
then to principal. Subject to the Subordination Agreement, as defined below,
this Note may be prepaid, in whole or in part, at any time, without penalty.
5. This Note and all obligations of the Borrower hereunder are subordinated
and made junior in right of payment to the extent and in the manner provided in
the Subordination Agreement of even date herewith (the "Subordination
Agreement") between Deutsche Financial Services Company, the Lender and the
Borrower and no action may be taken by the Lender except in accordance with the
terms of such Subordination Agreement as long as it is in effect.
6. Upon the occurrence of an Event of Default, the entire principal amount
outstanding under this Note, and accrued interest thereon, shall at once become
due and payable, at the option of the Lender and the Lender shall have the
remedies set forth in the Asset Purchase Documents and Subordination Agreement.
During the continuance of any Event of Default, all principal evidenced by this
Note (whether for principal or otherwise) shall (to the extent permitted by
applicable law) bear interest at the annual rate of twelve percent (12%). The
unpaid interest accrued during the continuation of any Event of Default on the
indebtedness evidenced by this Note (whether for principal or otherwise) in
accordance with the foregoing terms of this paragraph shall become and be
absolutely due and payable by the Borrower to the Lender hereof on demand by the
Lender of this Note at any time. Interest will continue to accrue on all
indebtedness evidenced hereby until the Event of Default shall be cured or
otherwise remedied.
<PAGE>
7. This Note is issued pursuant and subject to the terms and conditions of
the Asset Purchase Agreement. This Note is subject to all terms and conditions
set forth in the Asset Purchase Documents, including, but not limited to, terms
of default and rights of acceleration, if any. Any holder of this Note is
subject to all claims and defenses which the Borrower could pursue against
Lender under the Asset Purchase Agreement.
8. When this Note becomes due, by acceleration or otherwise, the Lender may,
at its option, subject to the Subordination Agreement, demand, sue for, collect
or make any compromise or settlement it deems desirable with reference to
property held as security herefor. The failure to exercise any option, to
declare the maturity hereof, or to exercise any other rights under any of the
covenants or conditions contained in the Asset Purchase Documents shall not be
taken or deemed to be a waiver of the right to exercise such option or to
declare such maturity after any subsequent violation of any such covenants or
conditions. All remedies provided for herein upon any default by the Borrower
shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Asset Purchase Agreement,
Lender made certain representations, warranties, covenants and agreements with
and to the Borrower. Lender agrees that if the Borrower is entitled to
indemnification from the Lender under the Asset Purchase Agreement or any other
of the Asset Purchase Documents, the amount of such indemnification due from
Lender may be set off against the amounts payable hereunder if permitted under
the Asset Purchase Agreement, being first applied to interest and the
withholding all or any part of payment due hereunder as a result of such a set
off shall not be considered an Event of Default hereunder. Lender agrees that
the amount to which the Borrower may be entitled to recover from Lender shall
not be limited by either the amount paid or due to be paid to Lender hereunder
or by the terms of this Note but shall be governed by the terms of the Asset
Purchase Documents.
10. The provisions of this Note and the obligations of the Borrower
hereunder shall in all respects be governed by and interpreted and determined in
accordance with the internal laws of the State of Georgia.
11. The rights of the Lender hereunder are fully assignable and
transferrable, except that any assignment and/or transfer made to a competitor
of Borrower shall be made only with the prior written approval of Borrower,
which approval shall not be unreasonably withheld. A competitor of Borrower is
any individual or entity that engages in the leasing, servicing or selling of
computers, computer equipment or computer support solutions.
12. The Borrower hereby unconditionally and irrevocably waives notice of
acceptance, presentment, notice of nonpayment (except as provided herein),
protest, notice of protest, suit and all other conditions precedent in
connection with the delivery, acceptance, collection and/or enforcement of this
Note.
13. Should all or any part of the indebtedness represented by this Note be
collected by action in law, or in bankruptcy, insolvency, receivership or other
court proceedings, or should this Note be placed in the hands of attorneys for
collection after the occurrence of an Event of Default, the Borrower hereby
promises to pay to the Lender of this Note, upon demand by the Lender hereof at
any time, in addition to principal and all (if any) other amounts payable on or
in respect of this Note or the indebtedness evidenced hereby, all court costs
and reasonable attorneys' fees and all other reasonable collection charges and
expenses incurred or sustained by the Lender of this Note.
14. If for any circumstances whatsoever, the fulfillment of any provision of
this Note involves transcending the limit of validity prescribed by any
applicable usury statute or any other applicable law with regard to obligations
of like character and amount, then the obligation to be fulfilled will be
<PAGE>
reduced to the limit of such validity as provided in such statute of law, so
that in no event shall any exaction of interest be possible under this Note in
excess of the limit of such validity. In no event shall the Borrower be bound
to pay interest of more than the legal limit for the use, forbearance or
detention of money, and the right to demand any such excess is hereby expressly
waived by the Lender.
15. No delay or omission of the holder of this Note to exercise any right or
power arising from any default shall impair any such right or power or be
considered to be a waiver of any such default or any acquiescence therein, nor
shall the action or non-action of the holder in case of default on the part of
the Borrower impair any right or power resulting therefrom.
16. As used herein, the following terms shall have the following meanings,
respectively:
(a) "Anniversary Date" - May 6th, 2000.
(b) "Asset Purchase Agreement" - The Asset Purchase Agreement by and
between the Borrower and the Lender dated May 6th, 1999.
(c) "Asset Purchase Documents" - The Asset Purchase Agreement and all
Exhibits thereto (except for any employment agreements and all noncompetition
agreements, other than the one provided by Lender) by and between the parties to
the Asset Purchase Agreement.
(d) "Event of Default" -
(i) The failure of Borrower to make any payment of principal or
interest due under this Note for a period of ten (10) days after receipt of
written notice from the Lender to the Borrower that such installment has not
been paid; or
(ii) A default under the Senior Debt loan documentation that has
been declared in writing, remains uncured past any applicable cure period, and
results in the declared acceleration of the Senior Debt.
(e) "Senior Debt" - The Debt of the Borrower to Deutsche Financial Services
Company, as set forth in the Subordination Agreement.
WITNESSES: BORROWER
Pomeroy Computer Resources, Inc.
_____________________________
By: _____________________________
_____________________________ Its: _____________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A
SUBORDINATION AGREEMENT DATED MAY 6TH, 1999 IN FAVOR OF DEUTSCHE FINANCIAL
SERVICES COMPANY, TO WHICH REFERENCE IS HEREBY MADE, RESTRICTING THE RIGHTS OF
THE MAKER OR DRAWER AND OF ANY HOLDER WITH RESPECT TO PAYMENTS ON ACCOUNT OF THE
PRINCIPAL AND INTEREST HEREOF.
<PAGE>
SUBORDINATED PROMISSORY NOTE
$121,984.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) May 6th, 1999
1. FOR VALUE RECEIVED, POMEROY SELECT INTEGRATION SOLUTIONS, INC., a
Delaware corporation (hereinafter, together with its successors in title and
assigns, called the "Borrower") does hereby absolutely and unconditionally
promise to pay to the order of SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a
Georgia corporation ("Lender"), the sum of One Hundred Twenty-One Thousand Nine
Hundred Eighty-Four Dollars ($121,984.00) (as may be adjusted in the manner
hereinafter set forth), together with interest on the outstanding principal
balance from the date hereof, at the rate specified below.
2. The initial face amount of this note One Hundred Twenty-One Thousand Nine
Hundred Eighty-Four Dollars ($121,984.00) shall be adjusted downward by any
decrease required by Section 4.2(e) of the Asset Purchase Agreement. Such
adjustment and the manner in which it is to be made shall be done in accordance
with Section 5.2 of the Asset Purchase Agreement. If, prior to such adjustment,
Borrower has made any interest payment to Lender hereunder, the parties agree to
adjust any prior payments to equitably reflect the decrease made as a result of
any adjustment contained in Section 4.2(e) of the Asset Purchase Agreement.
3. Interest shall accrue at the prime rate of Chase Manhattan Bank as of the
date of Closing. Interest on the unpaid principal balance of this note shall be
due and payable quarterly with the first interest payment due and payable ninety
(90) days from the date hereof and on the 6th day of each successive quarter
thereafter. Principal shall be paid in one (1) annual installment of One
Hundred Twenty-One Thousand Nine Hundred Eighty-Four Dollars ($121,984.00), as
may be adjusted pursuant to the provisions of paragraph 2, on the first
Anniversary Date of this Note.
4. All payments received hereunder shall be applied first to interest and
then to principal. Subject to the Subordination Agreement, as defined below,
this Note may be prepaid, in whole or in part, at any time, without penalty.
5. This Note and all obligations of the Borrower hereunder are subordinated
and made junior in right of payment to the extent and in the manner provided in
the Subordination Agreement of even date herewith (the "Subordination
Agreement") between Deutsche Financial Services Company, the Lender and the
Borrower and no action may be taken by the Lender except in accordance with the
terms of such Subordination Agreement as long as it is in effect.
6. Upon the occurrence of an Event of Default, the entire principal amount
outstanding under this Note, and accrued interest thereon, shall at once become
due and payable, at the option of the Lender and the Lender shall have the
remedies set forth in the Asset Purchase Documents and Subordination Agreement.
During the continuance of any Event of Default, all principal evidenced by this
Note (whether for principal or otherwise) shall (to the extent permitted by
applicable law) bear interest at the annual rate of twelve percent (12%). The
unpaid interest accrued during the continuation of any Event of Default on the
indebtedness evidenced by this Note (whether for principal or otherwise) in
accordance with the foregoing terms of this paragraph shall become and be
absolutely due and payable by the Borrower to the Lender hereof on demand by the
Lender of this Note at any time. Interest will continue to accrue on all
indebtedness evidenced hereby until the Event of Default shall be cured or
otherwise remedied.
<PAGE>
7. This Note is issued pursuant and subject to the terms and conditions of
the Asset Purchase Agreement. This Note is subject to all terms and conditions
set forth in the Asset Purchase Documents, including, but not limited to, terms
of default and rights of acceleration, if any. Any holder of this Note is
subject to all claims and defenses which the Borrower could pursue against
Lender under the Asset Purchase Agreement.
8. When this Note becomes due, by acceleration or otherwise, the Lender may,
at its option, subject to the Subordination Agreement, demand, sue for, collect
or make any compromise or settlement it deems desirable with reference to
property held as security herefor. The failure to exercise any option, to
declare the maturity hereof, or to exercise any other rights under any of the
covenants or conditions contained in the Asset Purchase Documents shall not be
taken or deemed to be a waiver of the right to exercise such option or to
declare such maturity after any subsequent violation of any such covenants or
conditions. All remedies provided for herein upon any default by the Borrower
shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Asset Purchase Agreement,
Lender made certain representations, warranties, covenants and agreements with
and to the Borrower. Lender agrees that if the Borrower is entitled to
indemnification from the Lender under the Asset Purchase Agreement or any other
of the Asset Purchase Documents, the amount of such indemnification due from
Lender may be set off against the amounts payable hereunder if permitted under
the Asset Purchase Agreement, being first applied to interest and the
withholding all or any part of payment due hereunder as a result of such a set
off shall not be considered an Event of Default hereunder. Lender agrees that
the amount to which the Borrower may be entitled to recover from Lender shall
not be limited by either the amount paid or due to be paid to Lender hereunder
or by the terms of this Note but shall be governed by the terms of the Asset
Purchase Documents.
10. The provisions of this Note and the obligations of the Borrower
hereunder shall in all respects be governed by and interpreted and determined in
accordance with the internal laws of the State of Georgia.
11. The rights of the Lender hereunder are fully assignable and
transferrable, except that any assignment and/or transfer made to a competitor
of Borrower shall be made only with the prior written approval of Borrower,
which approval shall not be unreasonably withheld. A competitor of Borrower is
any individual or entity that engages in the providing of integrated desktop
management and network services including life cycle services, internet working
services and end user support services.
12. The Borrower hereby unconditionally and irrevocably waives notice of
acceptance, presentment, notice of nonpayment (except as provided herein),
protest, notice of protest, suit and all other conditions precedent in
connection with the delivery, acceptance, collection and/or enforcement of this
Note.
13. Should all or any part of the indebtedness represented by this Note be
collected by action in law, or in bankruptcy, insolvency, receivership or other
court proceedings, or should this Note be placed in the hands of attorneys for
collection after the occurrence of an Event of Default, the Borrower hereby
promises to pay to the Lender of this Note, upon demand by the Lender hereof at
any time, in addition to principal and all (if any) other amounts payable on or
in respect of this Note or the indebtedness evidenced hereby, all court costs
and reasonable attorneys' fees and all other reasonable collection charges and
expenses incurred or sustained by the Lender of this Note.
14. If for any circumstances whatsoever, the fulfillment of any provision of
this Note involves transcending the limit of validity prescribed by any
<PAGE>
applicable usury statute or any other applicable law with regard to obligations
of like character and amount, then the obligation to be fulfilled will be
reduced to the limit of such validity as provided in such statute of law, so
that in no event shall any exaction of interest be possible under this Note in
excess of the limit of such validity. In no event shall the Borrower be bound
to pay interest of more than the legal limit for the use, forbearance or
detention of money, and the right to demand any such excess is hereby expressly
waived by the Lender.
15. No delay or omission of the holder of this Note to exercise any right or
power arising from any default shall impair any such right or power or be
considered to be a waiver of any such default or any acquiescence therein, nor
shall the action or non-action of the holder in case of default on the part of
the Borrower impair any right or power resulting therefrom.
16. As used herein, the following terms shall have the following meanings,
respectively:
(a) "Anniversary Date" - May 6th, 2000.
(b) "Asset Purchase Agreement" - The Asset Purchase Agreement by and
between the Borrower and the Lender dated May 6th, 1999.
(c) "Asset Purchase Documents" - The Asset Purchase Agreement and all
Exhibits thereto (except for any employment agreement(s) and all noncompetition
agreements, other than the one provided by Lender) by and between the parties to
the Asset Purchase Agreement.
(d) "Event of Default" -
(i) The failure of Borrower to make any payment of principal or
interest due under this Note for a period of ten (10) days after receipt of
written notice from the Lender to the Borrower that such installment has not
been paid; or
(ii) A default under the Senior Debt loan documentation that has
been declared in writing, remains uncured past any applicable cure period, and
results in the declared acceleration of the Senior Debt.
(e) "Senior Debt" - The Debt of the Borrower to Deutsche Financial
Services Company, as set forth in the Subordination Agreement.
WITNESSES: BORROWER
Pomeroy Select Integration Solutions, Inc.
_____________________________
By: _____________________________
_____________________________ Its: _____________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A
SUBORDINATION AGREEMENT DATED MAY 6TH, 1999 IN FAVOR OF DEUTSCHE FINANCIAL
SERVICES COMPANY, TO WHICH REFERENCE IS HEREBY MADE, RESTRICTING THE RIGHTS OF
THE MAKER OR DRAWER AND OF ANY HOLDER WITH RESPECT TO PAYMENTS ON ACCOUNT OF THE
PRINCIPAL AND INTEREST HEREOF.
<PAGE>
GENERAL BILL OF SALE AND ASSIGNMENT
-----------------------------------
KNOW ALL MEN BY THESE PRESENTS:
That Systems Atlanta Commercial Systems, Inc., a Georgia corporation,
("Company") for good and valuable consideration received from Pomeroy Computer
Resources, Inc., a Delaware corporation ("Purchaser No. 1"), does hereby, in
accordance with the terms and conditions of the Asset Purchase Agreement, dated
May 6, 1999 (the "Agreement"), by, between and among Company, Purchaser No. 1,
Purchaser No. 2 and B. Scott Dobson, Charley G. Dobson, Betty H. Dobson and
Tyler H. Dobson, sell, assign, transfer, convey, deliver and confirm to
Purchaser No. 1, its successors and assigns, or its nominee, those certain
assets of Company ("Purchased Assets No. 1") described in the Agreement as the
Purchased Assets No. 1, relating to Company's Business No. 1 as described in the
Agreement, which Purchased Assets No. 1 shall include without limitation:
The Purchased Assets No. 1 but excluding the Excluded Assets as defined
in the Agreement.
TO HAVE AND TO HOLD to Purchaser No. 1, its successors and assigns forever.
Company hereby represents, warrants and covenants that, at and until delivery of
this General Bill of Sale and Assignment, Company has good title to the
Purchased Assets No. 1, free and clear of any imperfections of title, liens,
encumbrances, charges, equities or restrictions, of any nature whatsoever; that
from and after the delivery by Company to Purchaser No. 1 of this General Bill
of Sale and Assignment, Purchaser No. 1 will own the Purchased Assets No. 1 and
have good and marketable title thereto, free and clear of any imperfections of
title, liens, encumbrances, charges, equities or restrictions of any nature
whatsoever.
Company, for itself and its successors, further covenants and agrees that, in
the event there are any such Purchased Assets No. 1 covered by this General Bill
of Sale and Assignment which cannot be transferred or assigned by it without the
consent of or notice to a third party and in respect of which any necessary
consent or notice has not at the date of delivery of this General Bill of Sale
and Assignment been given or obtained, the beneficial interest in and to the
asset/contract shall, in any event, pass hereby to Purchaser No. 1, and Company,
for itself and its successors and assigns, covenants and agrees (i) to hold and
hereby declares that it holds such Purchased Assets No. 1 in trust for and for
the benefit of Purchaser No. 1, its successors and assigns; (ii) if requested by
Purchaser No. 1, Company will use all reasonable efforts (not including the
obligation to make any payment of funds incident thereto) to obtain and secure
such consents to transfer such Purchased Assets No. 1; and (iii) to make or
complete such transfer or transfers as soon as reasonably possible.
- 1 -
<PAGE>
Company hereby further covenants that it will, at any time and from time to
time, at the request of Purchaser No. 1, execute and deliver to Purchaser No. 1
any new or
confirmatory instrument and all other and further instruments necessary or
convenient, which Purchaser No. 1 may reasonably request, to vest in Purchaser
No. 1 Company's full right, title and interest in or to any of the Purchased
Assets No. 1, or to enable Purchaser No. 1 to realize upon or otherwise to enjoy
any such property, assets or rights or to carry into effect the intent or
purpose hereof.
This General Bill of Sale and Assignment, being further documentation of the
transfers, conveyances and assignments provided in the Agreement, does not
expand or limit the rights and obligations provided in said Agreement.
This instrument shall be binding upon, inure to the benefit of and be
enforceable by the Company and Purchaser No. 1 and their respective successors
and assigns.
Any capitalized terms used, but not defined herein, shall have the definition
set forth in the Agreement.
IN WITNESS WHEREOF, Systems Atlanta Commercial Systems, Inc. has caused this
instrument to be executed by its officer thereunto duly authorized as of this
____ day of May, 1999.
Signed and delivered in SYSTEMS ATLANTA COMMERCIAL
the presence of SYSTEMS, INC., a Georgia corporation
_________________________ By: ________________________________
B. Scott Dobson, Vice-President
_________________________
STATE OF________________
COUNTY OF ______________: ss
BE IT REMEMBERED, that on this _____ day of May, 1999, before me, the
undersigned, a Notary Public in and for said County, personally appeared Scott
Dobson, who acknowledged himself to be the Vice-President of Systems Atlanta
Commercial Systems, Inc., a Georgia corporation, and that he, as such
Vice-President being authorized to do so, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as Vice-President.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
notarial seal on the day and year last above written.
____________________________________
NOTARY PUBLIC
- 2 -
<PAGE>
GENERAL BILL OF SALE AND ASSIGNMENT
-----------------------------------
KNOW ALL MEN BY THESE PRESENTS:
That Systems Atlanta Commercial Systems, Inc., a Georgia corporation,
("Company") for good and valuable consideration received from Pomeroy Computer
Resources, Inc., a Delaware corporation ("Purchaser No. 1"), does hereby, in
accordance with the terms and conditions of the Asset Purchase Agreement, dated
May 6, 1999 (the "Agreement"), by, between and among Company, Purchaser No. 1,
Purchaser No. 2 and B. Scott Dobson, Charley G. Dobson, Betty H. Dobson and
Tyler H. Dobson, sell, assign, transfer, convey, deliver and confirm to
Purchaser No. 1, its successors and assigns, or its nominee, those certain
assets of Company ("Purchased Assets No. 1") described in the Agreement as the
Purchased Assets No. 1, relating to Company's Business No. 1 as described in the
Agreement, which Purchased Assets No. 1 shall include without limitation:
The Purchased Assets No. 1 but excluding the Excluded Assets as defined in
the Agreement.
TO HAVE AND TO HOLD to Purchaser No. 1, its successors and assigns forever.
Company hereby represents, warrants and covenants that, at and until delivery of
this General Bill of Sale and Assignment, Company has good title to the
Purchased Assets No. 1, free and clear of any imperfections of title, liens,
encumbrances, charges, equities or restrictions, of any nature whatsoever; that
from and after the delivery by Company to Purchaser No. 1 of this General Bill
of Sale and Assignment, Purchaser No. 1 will own the Purchased Assets No. 1 and
have good and marketable title thereto, free and clear of any imperfections of
title, liens, encumbrances, charges, equities or restrictions of any nature
whatsoever.
Company, for itself and its successors, further covenants and agrees that, in
the event there are any such Purchased Assets No. 1 covered by this General Bill
of Sale and Assignment which cannot be transferred or assigned by it without the
consent of or notice to a third party and in respect of which any necessary
consent or notice has not at the date of delivery of this General Bill of Sale
and Assignment been given or obtained, the beneficial interest in and to the
asset/contract shall, in any event, pass hereby to Purchaser No. 1, and Company,
for itself and its successors and assigns, covenants and agrees (i) to hold and
hereby declares that it holds such Purchased Assets No. 1 in trust for and for
the benefit of Purchaser No. 1, its successors and assigns; (ii) if requested by
Purchaser No. 1, Company will use all reasonable efforts (not including the
obligation to make any payment of funds incident thereto) to obtain and secure
such consents to transfer such Purchased Assets No. 1; and (iii) to make or
complete such transfer or transfers as soon as reasonably possible.
Company hereby further covenants that it will, at any time and from time to
time, at the request of Purchaser No. 1, execute and deliver to Purchaser No. 1
any new or confirmatory instrument and all other and further instruments
necessary or convenient, which Purchaser No. 1 may reasonably request, to vest
in Purchaser No. 1 Company's full right, title and interest in or to any of the
Purchased Assets No. 1, or to enable Purchaser No. 1 to realize upon or
otherwise to enjoy any such property, assets or rights or to carry into effect
the intent or purpose hereof.
<PAGE>
This General Bill of Sale and Assignment, being further documentation of the
transfers, conveyances and assignments provided in the Agreement, does not
expand or limit the rights and obligations provided in said Agreement.
This instrument shall be binding upon, inure to the benefit of and be
enforceable by the Company and Purchaser No. 1 and their respective successors
and assigns.
Any capitalized terms used, but not defined herein, shall have the definition
set forth in the Agreement.
IN WITNESS WHEREOF, Systems Atlanta Commercial Systems, Inc. has caused this
instrument to be executed by its officer thereunto duly authorized as of this
____ day of May, 1999.
Signed and delivered in SYSTEMS ATLANTA COMMERCIAL
the presence of SYSTEMS, INC., a Georgia corporation
_________________________ By: ________________________________
B. Scott Dobson, Vice-President
_________________________
STATE OF________________
COUNTY OF ______________: ss
BE IT REMEMBERED, that on this _____ day of May, 1999, before me, the
undersigned, a Notary Public in and for said County, personally appeared Scott
Dobson, who acknowledged himself to be the Vice-President of Systems Atlanta
Commercial Systems, Inc., a Georgia corporation, and that he, as such
Vice-President being authorized to do so, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as Vice-President.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
notarial seal on the day and year last above written.
____________________________________
NOTARY PUBLIC
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT and Assumption Agreement (Assignment) is made this 6th day
of May, 1999 by and between SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia
corporation (Seller), and POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (Purchaser No. 1).
WHEREAS, pursuant to an Asset Purchase Agreement, dated May 6th, 1999 (the
Agreement), by and among Purchaser No. 1, Pomeroy Select Integration Solutions,
Inc. (Purchaser No. 2"), Seller, B. Scott Dobson, Charley G. Dobson, Betty H.
Dobson and Tyler H. Dobson, Purchaser No. 1 wishes to assume Sellers rights,
benefits and privileges of certain contracts, and Seller is desirous of
assigning to Purchaser No. 1 all of its rights, benefits and privileges in
certain contracts.
NOW, THEREFORE, in consideration of the foregoing and the agreements and
covenants herein set forth, and other good and valuable consideration paid by
Purchaser No. 1 to Seller, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ASSIGNMENT:
- ----------
1. Seller does hereby sell, assign, transfer and convey to Purchaser No. 1, to
the extent legally permitted, the contracts set forth on Exhibit A attached
hereto, and all of Sellers rights, interest, benefits and privileges
thereunder.
REPRESENTATIONS:
- ---------------
2. Seller hereby represents, warrants and covenants to Purchaser No. 1 that
(i) Seller is a party to the contracts listed on Exhibit A and has not
sold, assigned, transferred or conveyed its interest therein to any other
person or entity; (ii) Seller has complied with and fulfilled all of its
duties and obligations under the contracts, is not in default, and has not
breached any of the terms or provisions of the contracts and the contracts
remain in full force and effect as of the date hereof; (iii) Seller is not
aware of any facts or circumstances which give rise or could give rise with
the giving of notice or the lapsing of time to a breach or default under
the contracts; and (iv) the other parties to the contracts set forth on
Exhibit A are not in default and have not breached any of the terms or
provisions of the contracts.
ADDITIONAL ACTION BY SELLER:
- ------------------------------
3. To the extent this Assignment does not result in a complete transfer of the
contracts to Purchaser No. 1 because of a prohibition in the contracts
against Sellers assignment of any of its rights thereunder, Seller shall
cooperate with Purchaser No. 1 in any reasonable manner proposed by
Purchaser No. 1 (which shall not be required to expend any funds incident
thereto) to complete the acquisition of the contracts and Sellers rights,
benefits and privileges thereunder in order to fulfill and carry out
Sellers obligations under the Agreement. Such additional action may
include, but is not limited to: (i) entering into a subcontract between
Seller and Purchaser No. 1 which allows Purchaser No. 1 to perform Sellers
duties under the contracts set forth on
Page 1 of 3
<PAGE>
Exhibit A and to enforce Sellers rights thereunder; (ii) the sale of
Sellers stock owned by B. Scott Dobson, Charley G. Dobson, Betty H. Dobson
and Tyler H. Dobson to Purchaser No. 1 on terms to which all parties then
mutually agree in good faith to allow Purchaser No. 1 to operate Seller as
a wholly-owned subsidiary to enforce the contracts; or (iii) entering into
a new multi-party agreement with the customers identified in the contracts
set forth on Exhibit A which allows Purchaser No. 1 to perform Sellers
obligations and enforce Sellers rights under the contracts.
ASSUMPTION OF OBLIGATIONS:
- ---------------------------
4. Purchaser No. 1 shall be responsible for the performance and discharge of
all the duties and obligations of Seller contained in the contract set
forth on Exhibit A upon the earlier to occur of: (i) the completion of the
assignment of the contracts and Sellers rights, interest, benefits and
privileges thereunder; or (ii) in accordance with any proposed transaction
contemplated or set forth in Paragraph 3 hereof, or (iii) Purchaser No. 1
is receiving the entire economic benefit from such contracts.
MUTUAL INDEMNIFICATION:
- -----------------------
5. Purchaser No. 1 hereby agrees to indemnify and hold harmless Seller from
and against any and all loss, cost or expense (including, without
limitation, reasonable attorneys fees), resulting by reason of Purchaser
No. 1s failure to perform any of the obligations of Seller under the
Contracts after the date that Purchaser No. 1 actually acquires all of the
rights, interest, benefits and privileges of the Seller under each
contract. Seller hereby agrees to indemnify and hold harmless Purchaser No.
1 from and against any and all loss, cost or expense (including, without
limitation, reasonable attorneys fees) resulting by reason of the failure
of Seller to perform any of the obligations of the Seller under the
contracts on or prior to the date that the rights, interest, privileges,
benefits and any interest in the contracts are actually assigned to
Purchaser No. 1.
BINDING EFFECT:
- ---------------
6. All of the covenants, terms and conditions set forth herein shall be
binding upon and shall inure to the benefit of the parties hereof and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date first above written.
WITNESSES: SELLER:
------
____________________________ SYSTEMS ATLANTA COMMERCIAL SYSTEMS. INC.
____________________________ BY:________________________________
B. Scott Dobson, Vice-President
____________________________
____________________________ ________________________________
B. SCOTT DOBSON, Individually
Page 2 of 3
<PAGE>
____________________________
____________________________ ________________________________
CHARLEY G. DOBSON, Individually
____________________________
____________________________ _______________________________
BETTY H. DOBSON, Individually
____________________________
____________________________ _______________________________
TYLER H. DOBSON, Individually
WITNESSES: PURCHASER NO. 1:
-----------------
____________________________ POMEROY COMPUTER RESOURCES, INC.
____________________________ BY: ___________________________________
Stephen E. Pomeroy, Chief Financial
Officer
Page 3 of 3
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT and Assumption Agreement (Assignment) is made this 6th day
of May, 1999 by and between SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia
corporation (Seller), and POMEROY SELECT INTEGRATION SOLUTIONS, INC., a Delaware
corporation (Purchaser No. 2).
WHEREAS, pursuant to an Asset Purchase Agreement, dated May 6th, 1999 (the
Agreement), by and among Purchaser No. 2, Pomeroy Computer Resources, Inc.
(Purchaser No. 1"), Seller, B. Scott Dobson, Charley G. Dobson, Betty H. Dobson
and Tyler H. Dobson, Purchaser No. 2 wishes to assume Sellers rights, benefits
and privileges of certain contracts, and Seller is desirous of assigning to
Purchaser No. 2 all of its rights, benefits and privileges in certain contracts.
NOW, THEREFORE, in consideration of the foregoing and the agreements and
covenants herein set forth, and other good and valuable consideration paid by
Purchaser No. 2 to Seller, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ASSIGNMENT:
- ----------
1. Seller does hereby sell, assign, transfer and convey to Purchaser No. 2, to
the extent legally permitted, the contracts set forth on Exhibit A attached
hereto, and all of Sellers rights, interest, benefits and privileges
thereunder.
REPRESENTATIONS:
- ---------------
2. Seller hereby represents, warrants and covenants to Purchaser No. 2 that
(i) Seller is a party to the contracts listed on Exhibit A and has not
sold, assigned, transferred or conveyed its interest therein to any other
person or entity; (ii) Seller has complied with and fulfilled all of its
duties and obligations under the contracts, is not in default, and has not
breached any of the terms or provisions of the contracts and the contracts
remain in full force and effect as of the date hereof; (iii) Seller is not
aware of any facts or circumstances which give rise or could give rise with
the giving of notice or the lapsing of time to a breach or default under
the contracts; and (iv) the other parties to the contracts set forth on
Exhibit A are not in default and have not breached any of the terms or
provisions of the contracts.
ADDITIONAL ACTION BY SELLER:
- ------------------------------
3. To the extent this Assignment does not result in a complete transfer of the
contracts to Purchaser No. 2 because of a prohibition in the contracts
against Sellers assignment of any of its rights thereunder, Seller shall
cooperate with Purchaser No. 2 in any reasonable manner proposed by
Purchaser No. 2 (which shall not be required to expend any funds incident
thereto) to complete the acquisition of the contracts and Sellers rights,
benefits and privileges thereunder in order to fulfill and carry out
Sellers obligations under the Agreement. Such additional action may
include, but is not limited to: (i) entering into a subcontract between
Seller and Purchaser No. 2 which allows Purchaser No. 2 to perform Sellers
duties under the contracts set forth on Exhibit A and to enforce Sellers
rights thereunder; (ii) the sale of Sellers stock owned by B. Scott Dobson,
Charley G. Dobson, Betty H. Dobson and Tyler H.
Page 1 of 3
<PAGE>
Dobson to Purchaser No. 2 or Purchaser No. 1 on terms to which all parties
then mutually agree in good faith to allow Purchaser No. 2 or Purchaser No.
1 to operate Seller as a wholly-owned subsidiary to enforce the contracts;
or (iii) entering into a new multi-party agreement with the customers
identified in the contracts set forth on Exhibit A which allows Purchaser
No. 2 to perform Sellers obligations and enforce Sellers rights under the
contracts.
ASSUMPTION OF OBLIGATIONS:
- ---------------------------
4. Purchaser No. 2 shall be responsible for the performance and discharge of
all the duties and obligations of Seller contained in the contract set
forth on Exhibit A upon the earlier to occur of: (i) the completion of the
assignment of the contracts and Sellers rights, interest, benefits and
privileges thereunder; or (ii) in accordance with any proposed transaction
contemplated or set forth in Paragraph 3 hereof, or (iii) Purchaser No. 2
is receiving the entire economic benefit from such contracts.
MUTUAL INDEMNIFICATION:
- -----------------------
5. Purchaser No. 2 hereby agrees to indemnify and hold harmless Seller from
and against any and all loss, cost or expense (including, without
limitation, reasonable attorneys fees), resulting by reason of Purchaser
No. 2s failure to perform any of the obligations of Seller under the
Contracts after the date that Purchaser No. 2 actually acquires all of the
rights, interest, benefits and privileges of the Seller under each
contract. Seller hereby agrees to indemnify and hold harmless Purchaser No.
2 from and against any and all loss, cost or expense (including, without
limitation, reasonable attorneys fees) resulting by reason of the failure
of Seller to perform any of the obligations of the Seller under the
contracts on or prior to the date that the rights, interest, privileges,
benefits and any interest in the contracts are actually assigned to
Purchaser No. 2.
BINDING EFFECT:
- ---------------
6. All of the covenants, terms and conditions set forth herein shall be
binding upon and shall inure to the benefit of the parties hereof and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date first above written.
WITNESSES: SELLER:
------
____________________________ SYSTEMS ATLANTA COMMERCIAL
SYSTEMS, INC.
____________________________ BY:__________________________________
B. Scott Dobson, Vice-President
____________________________
____________________________ __________________________________
B. SCOTT DOBSON, Individually
Page 2 of 3
<PAGE>
____________________________
____________________________ __________________________________
CHARLEY G. DOBSON, Individually
____________________________
____________________________ __________________________________
BETTY H. DOBSON, Individually
____________________________
____________________________ __________________________________
TYLER H. DOBSON, Individually
WITNESSES: PURCHASER NO. 2:
-----------------
____________________________ POMEROY SELECT INTEGRATION
SOLUTIONS, INC.
____________________________ BY: ________________________________
Stephen E. Pomeroy, President
Page 3 of 3
<PAGE>
ASSUMPTION OF LIABILITIES
-------------------------
THIS ASSUMPTION OF LIABILITIES is made this 6th day of May, 1999 by and between
Systems Atlanta Commercial Systems, Inc., a Georgia corporation ("Seller") and
Pomeroy Computer Resources, Inc., a Delaware corporation ("Purchaser No. 1").
WHEREAS, pursuant to an Asset Purchase Agreement dated May 6th, 1999 (the
"Agreement") by and among Purchaser No. 1, Pomeroy Select Integration Solutions,
Inc. (Purchaser No. 2"), Seller and B. Scott Dobson, Charley G. Dobson, Betty H.
Dobson and Tyler H. Dobson, Purchaser No. 1 wishes to assume certain obligations
of Seller.
NOW, THEREFORE, pursuant to the Agreement and in consideration of the premises,
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the Seller and Purchaser No. 1 hereby agree as follows:
1. Assumption
----------
Purchaser No. 1 hereby accepts, assumes and agrees to pay and perform the
obligations of Seller as set forth on Exhibit "1" attached hereto and made
a part hereof. Purchaser No. 1 agrees to indemnify and hold Seller harmless
from any liability with respect to such assumed obligations.
2. Excluded Liabilities
---------------------
Notwithstanding anything to the contrary in the Agreement or in this
Assumption of Liabilities, Purchaser No. 1 shall not assume or be liable
for any liabilities of Seller not listed on Exhibit "1" attached hereto and
made part hereof.
3. The Agreement
--------------
Nothing contained in this Assumption of Liabilities shall be deemed to
supersede, restrict, impair, diminish, enlarge or expand in any respect any
of the obligations, agreements, covenants or warranties of Seller or
Purchaser No. 1 contained in the Agreement. All terms used in this
Assumption of Liabilities shall have the meaning defined in the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Assumption of
Liabilities to be executed in their names on the date first above written.
SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a
Georgia corporation
By: ________________________________
B. Scott Dobson, Vice-President
POMEROY COMPUTER RESOURCES, INC.,
a Delaware corporation
- 1 -
<PAGE>
By: ________________________________
Stephen E. Pomeroy, Chief Financial
Officer
STATE OF ___________ )
) SS:
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ____ day of May,
1999 by B. Scott Dobson, Vice-President of Systems Atlanta Commercial Systems,
Inc., a Georgia corporation, on behalf of the corporation.
_________________________________
NOTARY PUBLIC
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me this ____ day of May,
1999 by Stephen E. Pomeroy, Chief Financial Officer of Pomeroy Computer
Resources Inc., a Delaware corporation, on behalf of the corporation.
_________________________________
NOTARY PUBLIC
- 2 -
<PAGE>
EXHIBIT 1"
LIABILITIES BEING ASSUMED
(a) Sellers obligation to SAI (whose obligation is to AT&T - Finova) under a
floor plan credit facility, the outstanding amount of which on the March
31, 1999 Pro Forma Balance Sheet No. 1 is $522,731.86 and as of the Closing
Date is $227,585.40, which is collateralized by a security interest in SAIs
assets;
(b) Sellers obligation to SAI (whose obligation is to the Bank of Canton) under
a term financing line, the outstanding amount of which on the March 31,
1999 Pro Forma Balance Sheet No. 1 is $0.00 and as of the Closing Date, is
$138,581.91, which is collateralized by a security interest in certain of
SAIs assets;
(c) Sellers obligation to GMAC on a vehicle being transferred to Purchaser No.
1, the outstanding amount of which on the March 31, 1999 Pro Forma Balance
Sheet is $12,052.93 and as of the Closing Date, is $11,729.69, which is
collateralized by a security interest in said vehicle.
(d) All of the trade accounts payable of the Seller relating to Business No. 1
incurred in the ordinary course of business consistent with Sellers prior
practices, the outstanding amount of which is $334,937.90 on the March 31,
1999 Pro Forma Balance Sheet No. 1, and as may be incurred, increased or
decreased since the March 31, 1999 Balance Sheet No. 1 to the Pro Forma
Balance Sheet No. 1 for operations in the ordinary course of business or
any other transaction provided by this Agreement, and subject to the
satisfaction of the Net Asset Amount No. 1 requirement set forth in Section
4.1(d) as of the Closing Date.
<PAGE>
ASSUMPTION OF LIABILITIES
-------------------------
THIS ASSUMPTION OF LIABILITIES is made this 6TH day of May, 1999 by and between
Systems Atlanta Commercial Systems, Inc., a Georgia corporation ("Seller") and
Pomeroy Select Integration Solutions, Inc., a Delaware corporation ("Purchaser
No. 2").
WHEREAS, pursuant to an Asset Purchase Agreement dated May 6th, 1999 (the
"Agreement") by and among Purchaser No. 2, Pomeroy Computer Resources, Inc.
(Purchaser No. 1"), Seller and B. Scott Dobson, Charley G. Dobson, Betty H.
Dobson and Tyler H. Dobson, Purchaser No. 2 wishes to assume certain obligations
of Seller.
NOW, THEREFORE, pursuant to the Agreement and in consideration of the premises,
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the Seller and Purchaser No. 2 hereby agree as follows:
1. Assumption
----------
Purchaser No. 2 hereby accepts, assumes and agrees to pay and perform the
obligations of Seller as set forth on Exhibit "1" attached hereto and made
a part hereof. Purchaser No. 2 agrees to indemnify and hold Seller harmless
from any liability with respect to such assumed obligations.
2. Excluded Liabilities
---------------------
Notwithstanding anything to the contrary in the Agreement or in this
Assumption of Liabilities, Purchaser No. 2 shall not assume or be liable
for any liabilities of Seller not listed on Exhibit "1" attached hereto and
made part hereof.
3. The Agreement
--------------
Nothing contained in this Assumption of Liabilities shall be deemed to
supersede, restrict, impair, diminish, enlarge or expand in any respect any
of the obligations, agreements, covenants or warranties of Seller or
Purchaser No. 2 contained in the Agreement. All terms used in this
Assumption of Liabilities shall have the meaning defined in the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Assumption of
Liabilities to be executed in their names on the date first above written.
SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a
Georgia corporation
By: ________________________________
B. Scott Dobson, Vice-President
- 1 -
<PAGE>
POMEROY SELECT INTEGRATION SOLUTIONS, INC.,
a Delaware corporation
By: ________________________________
Stephen E. Pomeroy, President
STATE OF ___________ )
) SS:
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ____ day of May,
1999 by B. Scott Dobson, Vice-President of Systems Atlanta Commercial Systems,
Inc., a Georgia corporation, on behalf of the corporation.
_________________________________
NOTARY PUBLIC
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me this 6th day of May,
1999 by Stephen E. Pomeroy, President of Pomeroy Select Integration Solutions,
Inc., a Delaware corporation, on behalf of the corporation.
_________________________________
NOTARY PUBLIC
- 2 -
<PAGE>
EXHIBIT 1"
LIABILITIES BEING ASSUMED
(a) All of the trade accounts payable of the Seller relating to Business No. 2
incurred in the ordinary course of business consistent with Sellers prior
practices, the outstanding amount of which is $5,959.43 on the March 31,
1999 Pro Forma Balance Sheet No. 2; and as may be incurred, increased or
decreased since the March 31, 1999 Balance Sheet No. 2 to the Pro Forma
Balance Sheet No. 2 for operations in the ordinary course of business or
any other transaction provided by this Agreement, and subject to the
satisfaction of the Net Asset Amount No. 2 requirement set forth in Section
4.1(d) as of the Closing Date.
<PAGE>
May 6th, 1999
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
Gentlemen:
Reference is made to that certain Asset Purchase Agreement dated May 6th,
1999, and an Assignment and Assumption Agreement of even date herewith pursuant
to which the undersigned, SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC. (Seller)
sold, assigned, transferred and conveyed to POMEROY COMPUTER RESOURCES, INC.
(Purchaser No. 1") to the extent permitted, its interest in certain contracts as
set forth on Exhibit A attached to said Assignment and Assumption Agreement.
Pursuant to such Assignment and Assumption Agreement, Seller agreed to take
additional action to carry out the terms of the Asset Purchase Agreement to
enable Purchaser No. 1 to perform the obligations of Seller under these
contracts and to allow Purchaser No. 1 to enforce Sellers rights under these
contracts.
In order to fulfill this obligation, the undersigned hereby agrees that
until such time as a new contract with these customers is obtained, or an
assignment is approved by them, Purchaser No. 1 is hereby engaged by Seller to
perform Sellers obligations under the contracts in consideration for all
remaining amounts to be paid to Seller under such contracts and/or any other
consideration to be provided to Seller under the contracts. Seller agrees to
cooperate with Purchaser No. 1 in performing these contracts and in dealing with
the customers, including such billing procedures, invoicing procedures,
collection procedures and other bookkeeping issues or customer relations issues
as Purchaser No. 1 may deem necessary and appropriate to fulfill its duties
under the contracts. To acknowledge your agreement and acceptance to the
foregoing, please execute the duplicate original enclosed herewith and return it
to the undersigned.
Sincerely,
SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC.
By: ___________________________________________
B. Scott Dobson, Vice-President
Agreed and Accepted this 6th day of May, 1999
POMEROY COMPUTER RESOURCES, INC.
By: ___________________________________________
Stephen E. Pomeroy, Chief Financial Officer
<PAGE>
May 6th, 1999
Pomeroy Select Integration Solutions, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
Gentlemen:
Reference is made to that certain Asset Purchase Agreement dated May 6th,
1999, and an Assignment and Assumption Agreement of even date herewith pursuant
to which the undersigned, SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC. (Seller)
sold, assigned, transferred and conveyed to POMEROY SELECT INTEGRATION
SOLUTIONS, INC. (Purchaser No. 2") to the extent permitted, its interest in
certain contracts as set forth on Exhibit A attached to said Assignment and
Assumption Agreement. Pursuant to such Assignment and Assumption Agreement,
Seller agreed to take additional action to carry out the terms of the Asset
Purchase Agreement to enable Purchaser No. 2 to perform the obligations of
Seller under these contracts and to allow Purchaser No. 2 to enforce Sellers
rights under these contracts.
In order to fulfill this obligation, the undersigned hereby agrees that
until such time as a new contract with these customers is obtained, or an
assignment is approved by them, Purchaser No. 2 is hereby engaged by Seller to
perform Sellers obligations under the contracts in consideration for all
remaining amounts to be paid to Seller under such contracts and/or any other
consideration to be provided to Seller under the contracts. Seller agrees to
cooperate with Purchaser No. 2 in performing these contracts and in dealing with
the customers, including such billing procedures, invoicing procedures,
collection procedures and other bookkeeping issues or customer relations issues
as Purchaser No. 2 may deem necessary and appropriate to fulfill its duties
under the contracts. To acknowledge your agreement and acceptance to the
foregoing, please execute the duplicate original enclosed herewith and return it
to the undersigned.
Sincerely,
SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC.
By: ___________________________________________
B. Scott Dobson, Vice-President
Agreed and Accepted this 6th day of May, 1999
POMEROY SELECT INTEGRATION SOLUTIONS, INC.
By: ___________________________________________
Stephen E. Pomeroy, Chief Financial Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Seller")
hereby constitutes and appoints POMEROY COMPUTER RESOURCES, INC. ("Purchaser No.
1"), its successors and assigns, the true and lawful attorney of Seller with
full power of substitution, in the name of Purchaser No. 1, or the name of
Seller, on behalf of and for the benefit of Purchaser No. 1, to collect all
receivables and other items being transferred and assigned to Purchaser No. 1 as
provided herein, to endorse, without recourse, any and all checks in the name of
Seller the proceeds of which Purchaser No. 1 is entitled to hereunder, to
institute and prosecute, in the name of Seller or otherwise, all proceedings
which Purchaser No. 1 may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Purchased Assets No. 1, to defend
and compromise any and all actions suits and proceedings in respect of any of
the Purchased Assets No. 1, and to do all such acts and things in relation
thereto as Purchaser No. 1 may deem advisable. Seller agrees that the foregoing
powers are coupled with an interest and shall be irrevocable by Seller, directly
or indirectly, by the dissolution of Seller or in any manner or for any reason.
Seller further agrees that Purchaser No. 1 shall retain for its own account any
amounts collected pursuant to the foregoing powers, and Seller shall pay or
transfer to Purchaser No. 1, if and when received, any amounts which shall be
received by Seller after the Closing in respect of any receivables or other
assets, properties, rights or business to be transferred and assigned to
Purchaser No. 1 as provided herein.
Seller hereby gives unto Purchaser No. 1 full power to do and perform any, all
and every act requisite, necessary or proper to be done in carrying out the
purposes for which this power is granted as might or could be done if personally
present, with full power of substitution or revocation.
This power shall survive the liquidation or dissolution of Seller.
IN WITNESS WHEREOF, Systems Atlanta Commercial Systems, Inc. has caused this
instrument to be executed by its officer thereunto duly authorized as of this
____ day of May, 1999.
WITNESSES SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC.
a Georgia corporation
______________________________
<PAGE>
______________________________ BY:___________________________________
B. Scott Dobson, Vice- President
STATE OF ____________
COUNTY OF ____________, ss
BE IT REMEMBERED, that on this ____ day of May, 1999, before me, the
undersigned, a Notary Public in and for said County, personally appeared B.
Scott Dobson, who acknowledged himself to be the Vice-President of Systems
Atlanta Commercial Systems, Inc., a Georgia corporation, and that he, as such
Vice-President being authorized to do so, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as Vice-President.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
notarial seal on the day and year last above written.
_________________________________
NOTARY PUBLIC
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Seller")
hereby constitutes and appoints POMEROY SELECT INTEGRATION SOLUTIONS, INC.
("Purchaser No. 2"), its successors and assigns, the true and lawful attorney of
Seller with full power of substitution, in the name of Purchaser No. 2, or the
name of Seller, on behalf of and for the benefit of Purchaser No. 2, to collect
all receivables and other items being transferred and assigned to Purchaser No.
2 as provided herein, to endorse, without recourse, any and all checks in the
name of Seller the proceeds of which Purchaser No. 2 is entitled to hereunder,
to institute and prosecute, in the name of Seller or otherwise, all proceedings
which Purchaser No. 2 may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Purchased Assets No. 2, to defend
and compromise any and all actions suits and proceedings in respect of any of
the Purchased Assets No. 2, and to do all such acts and things in relation
thereto as Purchaser No. 2 may deem advisable. Seller agrees that the foregoing
powers are coupled with an interest and shall be irrevocable by Seller, directly
or indirectly, by the dissolution of Seller or in any manner or for any reason.
Seller further agrees that Purchaser No. 2 shall retain for its own account any
amounts collected pursuant to the foregoing powers, and Seller shall pay or
transfer to Purchaser No. 2, if and when received, any amounts which shall be
received by Seller after the Closing in respect of any receivables or other
assets, properties, rights or business to be transferred and assigned to
Purchaser No. 2 as provided herein.
Seller hereby gives unto Purchaser No. 2 full power to do and perform any, all
and every act requisite, necessary or proper to be done in carrying out the
purposes for which this power is granted as might or could be done if personally
present, with full power of substitution or revocation.
This power shall survive the liquidation or dissolution of Seller.
IN WITNESS WHEREOF, Systems Atlanta Commercial Systems, Inc. has caused this
instrument to be executed by its officer thereunto duly authorized as of this
____ day of May, 1999.
WITNESSES SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC.
a Georgia corporation
______________________________
<PAGE>
______________________________ BY:__________________________________
B. Scott Dobson, Vice-President
STATE OF _____________
COUNTY OF _____________, ss
BE IT REMEMBERED, that on this ____ day of May, 1999, before me, the
undersigned, a Notary Public in and for said County, personally appeared B.
Scott Dobson, who acknowledged himself to be the Vice-President of Systems
Atlanta Commercial Systems, Inc., a Georgia corporation, and that he, as such
Vice-President being authorized to do so, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as Vice-President.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
notarial seal on the day and year last above written.
_________________________________
NOTARY PUBLIC
<PAGE>
CONSENT FOR USE OF SIMILAR NAME
On the ____ day of __________, 1999, the Board of Directors of Systems
Atlanta Commercial Systems, Inc. a Georgia corporation, passed the following
resolution:
RESOLVED, that Systems Atlanta Commercial Systems, Inc. gives its consent
to Pomeroy Computer Resources, Inc., a Delaware corporation, for the use of
the name Systems Atlanta Commercial Systems, Inc.
SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC.
By: __________________________________
B. Scott Dobson, Vice-President
<PAGE>
CONSENT FOR USE OF SIMILAR NAME
On the ____ day of __________, 1999, the Board of Directors of Systems
Atlanta Commercial Systems, Inc. a Georgia corporation, passed the following
resolution:
RESOLVED, that Systems Atlanta Commercial Systems, Inc. gives its consent
to Pomeroy Select Integration Solutions, Inc., a Delaware corporation, for
the use of the name Systems Atlanta Commercial Systems, Inc.
SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC.
By: __________________________________
B. Scott Dobson, Vice-President
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6th day of May, 1999, by and between
SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation (hereinafter
referred to as "Seller") and POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (hereinafter referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is a full-service provider of a variety of computer service and
support solutions, including installation, training, set-up and consultation,
to large and medium size commercial, governmental and other professional
customers throughout the Atlanta, Georgia Metropolitan area; and
WHEREAS, simultaneously with the execution of this Agreement, Seller and
Purchaser have entered into an Asset Purchase Agreement ("Asset Purchase
Agreement") whereby Seller has sold to Purchaser substantially all of the assets
of Seller relating to Sellers Business of marketing and selling a broad range of
microcomputers and related products including equipment selection, procurement
and configuration; and
WHEREAS, the Purchaser would not have entered into the Asset Purchase Agreement
with Seller without the consent of Seller to enter into this Covenant Not to
Compete Agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Seller agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. In consideration of the payments to be made by Purchaser to Seller for its
assets, Seller covenants and agrees that for a period equal to five (5)
years from the closing of the Asset Purchase Agreement of even date, Seller
will not, or with any other person, corporation or entity, directly or
indi-rectly, by stock or other ownership, investment, management,
employment or otherwise, or in any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
<PAGE>
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Seller from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
(f) Nothing in this Agreement shall prohibit Seller from owning or
purchasing any stock of Systems Atlanta, Inc., an affiliate of
Company, engaged in providing integrated systems, including hardware,
software and peripheral devices and related products and services for
entities, persons or governmental entities engaged in air traffic
control
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing, or supporting of microcomputer products,
microcomputer support solutions and computer integration products,
peripheral devices and related products and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Seller has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Seller herein, and agrees that the same are necessary for the
reasonable and proper protection of Seller's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter
- 2 -
<PAGE>
into the Asset Purchase Agree-ment and pay the consideration described in
Paragraph 2 by the represen-tation of Seller that it will abide by and be
bound by each of the covenants and restrictions herein; and Seller agrees
that Purchaser is entitled to injunctive relief in the event of any breach
of any covenant or restriction contained herein in addition to all other
remedies provided by law or equity. Seller hereby acknowledges that each
and every one of said covenants and restrictions is reasonable with respect
to the subject matter, the length of time and geographic area embraced
therein, and agrees that irrespec-tive of when or in what manner this
agreement may be terminated, said covenants and restrictions shall be
operative during the full period or periods hereinbefore mentioned and
throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Seller's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Seller pursuant to an Asset Purchase Agreement to which
Seller and Purchaser are parties of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Seller
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
SELLER:
------
SYSTEMS ATLANTA COMMERCIAL
SYSTEMS, INC.
By: __________________________________
B. Scott Dobson, Vice-President
- 2 -
<PAGE>
PURCHASER:
---------
POMEROY COMPUTER RESOURCES, INC.
By: ___________________________________
Stephen E. Pomeroy, Chief Financial Officer
- 3 -
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6TH day of May, 1999, by and between
SYSTEMS ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation (hereinafter
referred to as "Seller") and POMEROY SELECT INTEGRATION SOLUTIONS, INC., a
Delaware corporation (hereinafter referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is a full-service provider of a variety of computer service and
support solutions, including installation, training, set-up and consultation,
to large and medium size commercial, governmental and other professional
customers throughout the Atlanta, Georgia Metropolitan area; and
WHEREAS, simultaneously with the execution of this Agreement, Seller and
Purchaser have entered into an Asset Purchase Agreement ("Asset Purchase
Agreement") whereby Seller has sold to Purchaser substantially all of the assets
of Seller relating to Sellers Business of integrated desktop management and
network services; and
WHEREAS, the Purchaser would not have entered into the Asset Purchase Agreement
with Seller without the consent of Seller to enter into this Covenant Not to
Compete Agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Seller agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. In consideration of the payments to be made by Purchaser to Seller for its
assets, Seller covenants and agrees that for a period equal to five (5)
years from the closing of the Asset Purchase Agreement of even date, Seller
will not, or with any other person, corporation or entity, directly or
indi-rectly, by stock or other ownership, investment, management,
employment or otherwise, or in any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Seller from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
(f) Nothing in this Agreement shall prohibit Seller from owning or
purchasing any stock of Systems Atlanta, Inc., an affiliate of
Company, engaged in providing integrated systems, including hardware,
software and peripheral devices and related products and services for
entities, persons or governmental entities engaged in air traffic
control.
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) The providing of integrated desktop management and network services
including life cycle services, internet working services, and end user
support services.
(ii) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(iii)Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iv) Sale, servicing, or supporting of microcomputer products,
microcomputer support solutions and computer integration products,
peripheral devices and related products and the sale of networking
services; and
(v) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Seller has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Seller herein, and agrees that the same are necessary for the
reasonable and proper protection of Seller's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in
- 2 -
<PAGE>
Paragraph 2 by the represen-tation of Seller that it will abide by and be
bound by each of the covenants and restrictions herein; and Seller agrees
that Purchaser is entitled to injunctive relief in the event of any breach
of any covenant or restriction contained herein in addition to all other
remedies provided by law or equity. Seller hereby acknowledges that each
and every one of said covenants and restrictions is reasonable with respect
to the subject matter, the length of time and geographic area embraced
therein, and agrees that irrespec-tive of when or in what manner this
agreement may be terminated, said covenants and restrictions shall be
operative during the full period or periods hereinbefore mentioned and
throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Seller's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Seller pursuant to an Asset Purchase Agreement to which
Seller and Purchaser are parties of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Seller
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
SELLER:
------
SYSTEMS ATLANTA COMMERCIAL
SYSTEMS, INC.
- 3 -
<PAGE>
By: __________________________________
B. Scott Dobson, Vice-President
PURCHASER:
---------
POMEROY SELECT INTEGRATION
SOLUTIONS, INC.
By: ___________________________________
Stephen E. Pomeroy, President
- 4 -
<PAGE>
EXHIBIT A
----------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6TH day of May, 1999, by and between
B. SCOTT DOBSON (hereinafter referred to as "Owner") and POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with SYSTEMS
ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Company ), for the
acquisition of certain of its assets (the Business); and
WHEREAS, Owner owns forty-four and 18/100 percent (44.18%) of the outstanding
stock of Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (44.18% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to the later of five (5) years
from the closing of the Asset Purchase Agreement of even date or one (1)
year after the termination of Owners employment with Purchaser pursuant to
the terms of an Employment Agreement of even date, Owner will not, or with
any other person, corporation or entity, directly or indi-rectly, by stock
or other ownership, investment, management, employment or otherwise, or in
any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an officer or director, of Systems
Atlanta, Inc., an affiliate of Company engaged in providing integrated
systems, including hardware, software and peripheral devices and
related products and services for entities, persons or governmental
entities engaged in air traffic control.
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any
- 2 -
<PAGE>
covenant or restriction contained herein in addition to all other remedies
provided by law or equity. Owner hereby acknowledges that each and every
one of said covenants and restrictions is reasonable with respect to the
subject matter, the length of time and geographic area embraced therein,
and agrees that irrespec-tive of when or in what manner this agreement may
be terminated, said covenants and restrictions shall be operative during
the full period or periods hereinbefore mentioned and throughout the area
hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
__________________________________
B. SCOTT DOBSON
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial Officer
- 3 -
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6TH day of May, 1999, by and between
B. SCOTT DOBSON (hereinafter referred to as "Owner") and POMEROY SELECT
INTEGRATION SOLUTIONS, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with SYSTEMS
ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Company ), for the
acquisition of certain of its assets (the Business); and
WHEREAS, Owner owns forty-four and 18/100 percent (44.18%) of the outstanding
stock of Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (44.18% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to the later of five (5) years
from the closing of the Asset Purchase Agreement of even date or one (1)
year after the termination of Owner's employment with Purchaser pursuant to
the terms of an Employment Agreement of even date, Owner will not, or with
any other person, corporation or entity, directly or indi-rectly, by stock
or other ownership, investment, management, employment or otherwise, or in
any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its parent company, Pomeroy Computer Resources, Inc. (Pomeroy), or any
of Pomeroys other subsidiaries has an office during the term of this
Agreement. A list of the states in which Purchaser, Pomeroy and
Pomeroys subsidiaries currently transact business is attached hereto
as Exhibit A; or
- 1 -
<PAGE>
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser, Pomeroy or any of
Pomeroys subsidiaries.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an officer or director, of Systems
Atlanta, Inc., an affiliate of Company engaged in providing integrated
systems, including hardware, software and peripheral devices and
related products and services for entities, persons or governmental
entities engaged in air traffic control.
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) The providing of integrated desktop management and network services
including life cycle services, internet working services, and end user
support services.
(ii) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(iii)Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iv) Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(v) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser, Pomeroy or any of Pomeroys other subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that
- 2 -
<PAGE>
Purchaser is entitled to injunctive relief in the event of any breach of
any covenant or restriction contained herein in addition to all other
remedies provided by law or equity. Owner hereby acknowledges that each and
every one of said covenants and restrictions is reasonable with respect to
the subject matter, the length of time and geographic area embraced
therein, and agrees that irrespec-tive of when or in what manner this
agreement may be terminated, said covenants and restrictions shall be
operative during the full period or periods hereinbefore mentioned and
throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
__________________________________
B. SCOTT DOBSON
POMEROY SELECT INTEGRATION
SOLUTIONS, INC.
By:________________________________
STEPHEN E. POMEROY, President
- 3 -
<PAGE>
EXHIBIT A
---------
STATES IN WHICH PURCHASER, POMEROY
AND/OR ANY OF POMEROYS OTHER
SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 6th day of May, 1999, by and between POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation ("Company"), and TYLER H.
DOBSON ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement ("Purchase
Agreement") of even date pursuant to which it purchased substantially all the
assets of Systems Atlanta Commercial Systems, Inc. (Systems Atlanta) used in its
business of marketing and selling a broad range of microcomputers and related
products including equipment selection procurement and configuration; and
WHEREAS, Employee, as an inducement for and in consideration of Company entering
into the Purchase Agreement, has agreed to enter into and execute this
Employment Agreement pursuant to Section 6 thereof; and
WHEREAS, Company desires to engage the services of Employee, pursuant to the
terms, conditions and provisions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
----------
agrees to be employed by the Company, upon the following terms and
conditions.
2 Term. The initial term of Employee's employment pursuant to this Agreement
----
shall begin on the 6th day of May, 1999, and shall continue for a period of
one (1) year, ending May 5th, 2000 unless terminated earlier pursuant to
the provisions of Section 10, provided that Sections 8, 9, and 10(b), if
applicable, shall survive the termination of such employ-ment and shall
expire in accordance with the terms set forth therein.
3. Renewal Term. The term of Employee's employment shall automatically renew
-------------
for additional consecutive renewal terms of one (1) year unless either
party gives written notice of his/its intent not to renew the terms of this
Agreement sixty (60) days prior to expiration of the then expiring term.
4. Duties. Employee shall serve as Business Manager for the Company's Atlanta
------
Division. Employee shall perform such duties in Cobb County, Georgia, or
the counties contiguous to Cobb County, Georgia. Employee shall be
responsible to and report directly to the General Manager of the Companys
Atlanta Division. Employee shall devote his best efforts and substantially
all his time during normal business hours to the diligent, faithful and
loyal discharge of the duties of his employment and towards the proper,
efficient and successful conduct of the Company's affairs. Employee
fur-ther agrees to refrain during the term of this Agreement from making
any sales of competing services or products or from profiting from any
transaction involving computer services or products for his account without
the express written consent of Company. Nothing contained herein shall
preclude Employee from owning stock in Systems Atlanta, Inc. or serving as
a director thereof.
- 1 -
<PAGE>
5. Compensation. For all services rendered by the Employee under this
------------
Agreement (in addition to other monetary or other benefits referred to
herein), compensation shall be paid to Employee as follows:
(a) Award of Stock Options: On the execution of this Agreement, Employee
shall be awarded, pursuant to an Award Agreement, a copy of which is
attached hereto as Exhibit A, the right to acquire 1,000 shares of
common stock, .01 par value, of the Company subject to any conditions
contained in the Pomeroy Computer Resources, Inc. Non-Qualified and
Incentive Stock Option Plan and Award Agreement. Such award of stock
options to acquire the common stock of the Company shall be at the
fair market value of such common stock as of the applicable date. For
purposes of this Agreement, the fair market value as of the applicable
date shall mean with respect to the common shares, the average between
the high and low bid and ask prices for such shares on the
over-the-counter market on the last business day prior to the date on
which the value is to be determined (or the next preceding date on
which sales occurred if there were no sales on such date).
(b) Base Salary: During the initial one-year term of this Agreement,
Employee shall be paid an annual base salary of Fifty-Five Thousand
Dollars ($55,000.00). Said base salary shall be payable in accordance
with the historical payroll practices of the Company.
(c) Annual Cash Bonus - Atlanta Division: In addition to Employee's base
salary as set forth in Section 5(b) above, for the period commencing
upon the closing of the Purchase Agreement and ending January 5, 2000,
Employee shall be entitled to a cash bonus and incentive stock option
award in the event Employee satisfies certain economic criteria
pertaining to the Company's Atlanta Division set forth as follows:
(i) Gross sales of Company's Atlanta Division greater than
$6,666,667.00 but not less than $8,000,000.00 with net profit
before taxes (NPBT) greater than 4%, equals $3,334.00 cash bonus
plus 333 incentive stock options;
(ii) Gross sales of Company's Atlanta Division greater than
$8,000,000.00 but less than $9,333,333.00 with NPBT greater than
4% equals $4,667.00 cash bonus plus 500 incentive stock options;
(iii)Gross sales of Company's Atlanta Division greater than
$9,333,333.00 with NPBT greater than 4% equals $6,666.00 cash
bonus plus 667 incentive stock options.
(iv) For purposes of this Section 5(c), the term Gross Sales shall
mean the gross sales of equipment, software and services by
Company's Atlanta Division or any other Atlanta Division operated
by any subsidiary of Company, determined on a consolidated basis
during the applicable period. In making said gross sales
determination, all gains and losses realized on the sale or other
disposition of Companys or any subsidiarys Atlanta Division's
assets not in the ordinary course shall be excluded. In addition,
any gross sales of Company's or its subsidiarys Atlanta Division
relating to any acquisitions that are closed in such year shall
be excluded. All refunds or returns which are made during such
period shall be subtracted along with all accounts receivable
derived from such
- 2 -
<PAGE>
sales that are written off during such period in accordance with
Companys Atlanta Divisions's accounting system. Such gross sales
and NPBT of Company's Atlanta Division shall be determined by the
Company's internally generated accounting statements determined
on a consolidated basis in the manner set forth above and in
accordance with generally accepted accounting principles. During
the period commencing with the closing of the Purchase Agreement
and ending January 5, 2000, a combined 1.8% MAS royalty and
AdFund fee on gross sales by Companys Atlanta Division shall be
made incident to said NPBT determination. Key services to be
provided the Atlanta Division by Company under the MAS royalty
and AdFund fee include the following: (i) accounting (including
AP and financial statement preparation); (ii) payroll, HR
(including benefits), legal, MIS support and administration;
(iii) centralized warehousing and configuration; (iv) advertising
and technical training; (v) Company and branch events, marketing
and promotional materials; and (vi) HQ Funds, soft dollar, spiff
and co-op tracking. For each subsequent fiscal year for which
Employee may be entitled to a bonus hereunder, the parties shall,
in good faith, agree upon MAS royalty and AdFund fees to be
charged hereunder based on the level of services and support
being provided by the Company to its Atlanta Division. Provided,
however, such MAS royalty and AdFund fees shall be 1.8% if the
parties are unable to come to an agreement for such year. Any
cash bonus amount determined under Section 5 (c) (other than the
award of any incentive stock options) will constitute incentive
deferred compensation which shall be payable to Employee
according to the terms of the Incentive Deferred Compensation
Agreement attached hereto and incorporated herein as Exhibit B.
Any incentive deferred compensation shall be fully-vested over a
five-year period, vesting twenty percent (20%) per year of
employment from the effective date of this Agreement. For
purposes of this Section, the term Companys Atlanta Division
shall be the business acquired by Company from Seller under the
Purchase Agreement including the business acquired by Companys
wholly-owned subsidiary, Pomeroy Select Integration Solutions,
Inc. under the Purchase Agreement and shall include Companys
operations in Atlanta, Georgia that existed prior to the closing
of the Purchase Agreement.
(v) Any award of the incentive stock options to acquire the common
stock of Company shall be made fifty percent (50%) in the shares
of the Company and fifty percent (50%) in the shares of the
Companys subsidiary (Pomeroy Select Integration Solutions, Inc.)
if it is a publicly traded entity at such time, as of January 5,
2000 or any other applicable date, which shall mean with respect
to such shares, the average between the high and low bid and
asked prices for such shares on the over-the-counter market on
the last business day prior to the date on which the value is to
be determined (or the next preceding date on which sales occurred
if there were no sales on such date). In the event the stock of
Pomeroy Select Integration Solutions, Inc. is not publicly traded
as of January 5, 2000, Company shall have the right to award 100%
in the shares of the Company (in lieu of 50%) or shall have the
right to pay to Employee, in cash, the fair
- 3 -
<PAGE>
market value of such 50% of the stock options of the Company
determined under the Black Scholes method of valuation of stock
options. Any options awarded shall be subject to a vesting period
determined by the Board of Directors of the Company, but in no
event shall said vesting period be greater than five (5) years.
(vi) Company will deliver to Employee copies of the reports of any
determination made hereunder by Company for the subject period,
along with any documentation reasonably requested by Employee.
Within fifteen (15) days following delivery to Employee of such
report, Employee shall have the right to object in writing to the
results contained in such determination. If timely objection is
not made by Employee to such determination, such determination
shall become final and binding for purposes of this Agreement. If
a timely objection is made by Employee, and the Company and
Employee are able to resolve their differences in writing within
fifteen (15) days following the expiration of the initial 15-day
period, then such determination shall become final and binding as
it pertains to this Agreement. If timely objection is made by
Employee to Company, and Employee and Company are unable to
resolve their differences in writing within fifteen (15) days
following the expiration of the initial 15-day period, then all
disputed matters pertaining to the report shall be submitted and
reviewed by the Arbitrator (Arbitrator), which shall be an
independent accounting firm selected by Company and Employee. If
Employee and Company are unable to promptly agree on the
accounting firm to serve as the Arbitrator, each shall select, by
not later than fifteen (15) days following the expiration of the
initial fifteen (15) day period, one accounting firm and the two
selected accounting firms shall then be instructed to select
promptly a third accounting firm, such third accounting firm to
serve as the Arbitrator. The Arbitrator shall consider only the
disputed matters pertaining to the determination and shall act
promptly to resolve all disputed matters. A decision with respect
to all disputed matters shall be final and binding upon Company
and Employee. The expenses of Arbitration shall be borne one-half
by Employee and one-half by Company. Each party shall be
responsible for his/its own attorney and accounting fees.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
----------------
entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with the standard family
medical health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent (50%) of
the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a vacation of two
weeks during which time his compensa-tion will be paid in full.
Provided, however, such weeks may not be taken consecutively without
the written consent of Company.
- 4 -
<PAGE>
(c) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or
welfare plans maintained by the Company during the term of this
Agreement.
(d) Automobile - Company shall provide Employee with an automobile
allowance of $300.00 per month. Employee shall be responsible for all
insurance, maintenance and repairs to such vehicle.
(e) Other Company Programs - Employee shall be eligible to participate in
any other plans or programs implemented by the Company for all of its
employees with duties and responsibilities similar to Employee.
(f) Employee shall be responsible for any and all taxes owed, if any, on
the fringe benefits provided to him pursuant to this Section 6.
7. Expenses. During the term of this Agreement, Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses incurred by
Employee in fulfilling the Employee's duties and responsibilities
hereunder, including, all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the
Company, provided that such expenses are incurred and accounted for in
accordance with the reasonable policies and procedures established by the
Company.
8. Non-Competition. Employee expressly acknowledges the provisions of Section
---------------
7 of the Purchase Agreement relating to Employee's Covenant Not to Compete
with Company and also Employees Covenant Not to Compete with Companys
wholly-owned subsidiary, Pomeroy Select Integration Solutions, Inc.
Accordingly, such provisions of Section 7 are incorporated herein by
reference to the extent as if restated in full herein. In addition to the
consideration received under this Agreement, Employee acknowledges that as
one of the owners of the common stock of Systems Atlanta Commercial
Systems, Inc., he has received substantial consideration pursuant to such
Purchase Agreement and that as an inducement for, and in consideration of,
Company entering into the Purchase Agreement and Company entering into this
Agreement, Employee has agreed to be bound by such provisions of Section 7
of the Pur-chase Agreement. Accordingly, such provisions of Section 7 and
Exhibits I-4 and I-5 and the restrictions on Employee thereby imposed shall
apply as stated therein.
9. Non-Disclosure and Assignment of Confidential Information. The Employee
------------------------------------------------------------
acknowledges that the Company's trade secrets and confidential and
proprietary information, including without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
- 5 -
<PAGE>
(b) unpublished financial information, including unpublished information
concerning revenues, profits and profit margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for purposes
of the Securities Exchange Act of 1934, as amended;
all constitute valuable, special and unique proprietary and trade secret
information of the Company. In recognition of this fact, the Employee agrees
that the Employee will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly available
without violation of this Agreement, (ii) information of which the Employee did
not know and should not have known was disclosed to the Employee in violation of
any other person's confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make use of any such
information for the benefit of any person, firm, operation or other entity
except the Company and its subsidiaries or affiliates. The Employee's
obligation to keep all of such information confidential shall be in effect
during and for a period of five (5) years after the termination of his
employment; provided, however, that the Employee will keep confidential and will
not disclose any trade secret or similar information protected under law as
intangible property (subject to the same exceptions set forth in the
parenthetical clause above) for so long as such protection under law is
extended.
10. Termination.
-----------
(a) The Employee's employment with the Company may be terminated at any
time as follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability which renders
Employee unable to perform his duties hereunder;
(iii)By the Company, for cause upon three (3) day's written notice to
Employee. For purposes of this Agreement, the term "cause" shall
mean termination upon: (i) the engaging by Employee in conduct
which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including but not limited to any
material misrepresentation related to the performance of his
duties; (ii) the conviction of Employee of a felony or other
crime involving theft or fraud, (iii) Employee's gross neglect,
gross misconduct or gross insubordination in carrying out his
duties hereunder resulting, in either case, in material harm to
the Company; or (iv) any material breach by Employee of this
Agreement. Notwithstanding the foregoing, Employee shall not be
deemed to have been terminated for cause under (i) and (iv)
above, unless and until there has been delivered to him a copy of
the resolution of an officer of the Company, finding that
Employee engaged in the conduct set forth above in this section
and specifying the particulars thereof in detail, and Employee
shall not have cured or abated such conduct to the reasonable
satisfaction of the Company within fifteen (15) days of receipt
of such resolution. This provision shall be applicable solely to
the extent the conduct to which the alleged breach relates is
susceptible to being cured in the reasonable determination of
such officer.
- 6 -
<PAGE>
(b) Compensation upon Termination: In the event of termination of
employment, the Employee or his estate, in the event of death, shall
be entitled to his annual base salary and other benefits provided
hereunder to the date of his termination. In addition, Employee shall
be entitled to receive any bonus accrued to the date of his
termination of employment as provided in Section 5(c), which shall be
payable (if applicable) pursuant to the terms thereof.
11. Severability. In case any one (1) or more of the provisions or part of a
------------
provision contained in this Agreement shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of this Agreement. In such a situation, this Agreement shall be
reformed and construed as if such invalid, illegal or unenforceable
provision, or part of a provision, had never been contained herein, and
such provision or part shall be reformed so that it will be valid, legal
and enforceable to the maximum extent possible.
12. Governing Law. This Agreement shall be governed and construed under the
--------------
laws of the State of Georgia and shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the parties.
13. Notices. All notices, requests, demands and other communications relating
-------
to this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed by certified or registered mail,
return receipt re-quested, postage prepaid to the following addresses (or
to such other address for a party as shall be specified by notice pursuant
hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
With a copy to: Tully Hazell, Esq.
Burr & Forman
600 W. Peachtree
Suite 1200
Atlanta, GA 30308
14. Enforcement of Rights. The parties expressly recognize that any breach of
---------------------
this Agreement by either party is likely to result in irrevocable injury to
the other party and agree that such other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction in Cobb County, Georgia, either at law or in equity, to obtain
damages for any breach of this Agreement, or to enforce the specific
performance
- 7 -
<PAGE>
of this Agreement by each party or to enjoin any party from activities in
violation of this Agreement. Should either party engage in any activities
prohibited by this Agreement, such party agrees to pay over to the other
party all compensation, remuneration, monies or property of any sort
received in connection with such activities. Such payment shall not impair
any rights or remedies of any non-breaching party or obligations or
liabilities of any breaching party pursuant to this Agreement or any
applicable law.
15. Entire Agreement. This Agreement and the Purchase Agreement referred to
----------------
herein contain the entire understanding of the parties with respect to the
subject matter contained herein and may be altered, amended or superseded
only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
16. Parties in Interest.
---------------------
(a) This Agreement is personal to each of the parties hereto. No party may
assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided,
however, that nothing in this Section 16 shall preclude (i) Employee
from designating a beneficiary to receive any benefit payable
hereunder upon his death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any rights
hereunder to person or persons entitled thereto. Notwithstanding the
foregoing, this Agreement shall be binding upon and inure to the
benefit of any successor corporation of Company
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the assets of the Company or the business with respect to which
the duties and responsibilities of Employee are principally related,
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Company would have been required to
perform it if no such succession had taken place. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which
executes and delivers the assumption agreement provided for in this
Section 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
17. Representations of Employee. Employee represents and warrants that he is
-----------------------------
not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in
connection with previous employment which prevents Employee from entering
into and performing his obligations under this Agreement.
18. Counterparts. This Agreement may be executed simulta-neously in several
------------
counterparts, each of which shall be deemed an original part, which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed effec-tive as of the day
and year first above written.
- 8 -
<PAGE>
WITNESSES: COMPANY:
POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________ By:_________________________________
Stephen E. Pomeroy
Chief Financial Officer
EMPLOYEE:
__________________________
__________________________ ____________________________________
TYLER H. DOBSON
- 9 -
<PAGE>
AWARD AGREEMENT
---------------
(Non-Qualified Stock Option)
This Award Agreement is made effective ____________, 1999, between POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (hereinafter called the
"Company"), and SCOTT DOBSON, an employee of the Company (hereinafter called the
"Employee").
WHEREAS, the Company has heretofore adopted the 1992 Non-Qualified and
Incentive Stock Option Plan (the "Plan");
WHEREAS, per an Employment Agreement between Company and Employee dated
_______________, Employee is to be awarded Ten Thousand (10,000) stock options
under the Plan upon the execution of such Employment Agreement.
WHEREAS, it is a requirement of the Plan that an Award Agreement be
executed to evidence the Non-Qualified Stock Option (the "Award") granted to the
Employee;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:
1. Grant of Award. The Company hereby grants to the Employee the right
--------------
and option (hereinafter called the "Option") to purchase all or any part of an
aggregate of Ten Thousand (10,000) shares of the Common Stock, $.01 par value,
of the Company ("Shares") (such number being subject to adjustment as set forth
herein and in the Plan) on the terms and conditions set forth herein and in the
Plan.
2. Type of Award. The Option granted under this Award Agreement is a
---------------
Non-Qualified Stock Option and shall not be treated by the Company or the
Employee as an Incentive Stock Option for Federal income tax purposes.
3. Purchase Price. The option price of the Shares covered by the
---------------
Option is $_____ per Share.
4 Term of Award.
---------------
(a) The Term of the Award shall be for a period of five (5) years from
the effective date hereof, subject to earlier termination as hereinafter
provided; and
(b) prior to its expiration or termination the Award may be exercised
as to any part or all of the Shares originally subject to the Option.
5. Exercise of Award.
--------------------
(a) In order to exercise the Award, the person or persons entitled to
exercise it shall deliver to the Treasurer of the Company written notice of the
number of full Shares with respect to which the Award is to be exercised. The
notice shall be accompanied by payment in full for any Shares being purchased,
which payment will be in cash, or, with the Committee's (as defined in the Plan)
approval, in Shares (as defined in the Plan) held by the Employee for at least
six months valued at Fair Market Value (as defined in the Plan) at the time of
exercise, or a combination thereof. No fractional Shares will be issued.
(b) No Shares shall be issued until full payment therefor has been
made, and the Employee will have none of the rights of a stockholder in respect
of such Shares until they are issued.
Page 1 of 5 Pages
<PAGE>
6. Nontransferability. The Award shall not be transferable otherwise
------------------
than: (a) by will or the laws of descent and distribution, and the Award may be
exercised, during the lifetime of the holder of the Award, only by him or the
event of death, his Successor, as defined in the Plan, or in the event of
disability, his personal representative, or (b) pursuant to a qualified domestic
relations order, as defined in the Code or the Employee Retirement Income
Security Act (ERISA) or the Rules thereunder.
7. Termination of Employment. In the event that the employment of the
--------------------------
Employee is terminated (otherwise than by reason of death, disability or
retirement), the Award may be exercised by the Employee (to the extent that he
was entitled to do so at the termination of his employment) at any time within
three (3) months after such termination, but not beyond the original Term
thereof. So long as the Employee shall continue to be an employee of the
Company or one or more of its subsidiaries, the Award shall not be affected by
any change of duties or position. Nothing in this Award Agreement is intended
to confer upon Employee any right to continue in the employ of the Company or
any of its subsidiaries or interfere in any way with the right of the Company or
any such subsidiary to terminate his employment at any time. Anything herein
contained to the contrary notwithstanding, in the event of any termination of
the Employee's employment for cause or if the Employee voluntarily terminates
his employment without cause, the Award, to the extent not theretofore
exercised, shall forthwith terminate.
8. Death of Employee. If the Employee dies while he is employed by the
-----------------
Company or one or more of its subsidiaries or within three (3) months after the
termination of his employment, the Award may be exercised (to the extent that
Employee was entitled to do so at the time of his death) by a legatee or
legatees of the Employee under his last will, or by his personal representatives
or distributees, at any time within six (6) months after his death, but not
beyond the original Term of the Award.
9. Disability of Employee. If the employment of the Employee
------------------------
terminates on account of his having become "disabled," as defined in Section
22(e)(3) of the Code, the Award may be exercised by the Employee (to the extent
that he was entitled to do so at the termination of his employment on account of
his becoming disabled) at any time within six (6) months after the date on which
his employment terminated, but not beyond the original Term of the Award.
Page 2 of 5 Pages
<PAGE>
10. Retirement of Employee. If the employment of the Employee
------------------------
terminates by reason of retirement entitling the Employee to benefits under the
provisions of any retirement plan of the Company or a subsidiary in which the
Employee participates (or, if no such plans exist, at or after age sixty-five
(65)), the Award may be exercised by the Employee (to the extent that he was
entitled to do so at the time of his retirement) at any time within ninety (90)
days after the date on which his employment terminated, but not beyond the
original Term of the Award.
11 Taxes. The Company shall have the right to require a person
-----
entitled to receive Shares pursuant to the exercise of this Award under the Plan
to pay the Company the amount of any taxes which the Company is or will be
required to withhold with respect to such Shares before the certificate for such
Shares is delivered pursuant to the Award. Furthermore, the Company may elect
to deduct such taxes from any amounts payable in cash or in Shares at the time
of exercise or from any other amounts payable any time thereafter in cash to the
Employee. If the Employee disposes of Shares acquired pursuant to an Incentive
Stock Option in any transaction considered to be a disqualifying transaction
under Sections 421 and 422 of the Code, the Employee shall notify the Company of
such transfer and the Company shall have the right to deduct any taxes required
by law to be withheld from any amounts otherwise payable in cash then or at any
time thereafter to the Employee.
Subject to Committee approval, an Employee may satisfy his tax liability
with respect to the exercise of an Option by having the Company withhold Shares
otherwise issuable upon exercise of the Option; provided, however, if the
Employee is subject to Section 16b of the Securities Exchange Act of 1934, as
amended, he may so elect only if such Employee makes an election to do so which
satisfies the requirements of Rule 16b-3.
12. Changes in Capital Structure. In the event of changes in all of
-------------------------------
the outstanding Shares by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of Shares,
separations, reorganizations or liquidations, or similar events or, in the event
of extraordinary cash dividends being declared with respect to the Shares, or
similar transactions, the number and class of Shares available under the Plan in
the aggregate, the number and class of Shares subject to Awards theretofore
granted, applicable purchase prices and all other applicable provisions, shall,
subject to the provisions of the Plan, be equitably adjusted by the Committee
(which adjustment may, but need not, include payment in cash or in Shares in an
amount equal to the difference between the price at which such Award may be
exercised and the then current Fair Market Value of the Shares subject to such
Award as equitably determined by the Committee). The foregoing adjustment and
the manner of application of the foregoing provisions shall be determined by the
Committee in its sole discretion. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become subject to an
Award.
Page 3 of 5 Pages
<PAGE>
13. Securities Law Compliance, The Award may not be exercised and the
--------------------------
Company shall not be required to issue any Shares hereunder if such issuance
would, in the judgment of the Board or the Committee, constitute a violation of
any state or federal law, or of the rules or regulations of any governmental
regulatory body, or any securities exchange. The Company may, in its sole
discretion, require the Employee to furnish the Company with appropriate
representations and a written investment agreement prior to the exercise of the
Award and the delivery of any Shares pursuant to the Award.
14. Incorporation of Provisions of the Plan. All of the provisions of
----------------------------------------
the Plan, pursuant to which this Award is granted, are hereby incorporated by
reference and made as part hereof as if specifically set forth herein, and to
the extent of any conflict between this Award Agreement and the terms contained
in the aforesaid Plan, the Plan shall control. To the extent any capitalized
terms are not otherwise defined herein, they will have the meaning set forth in
paragraph 2 of the Plan.
IN WITNESS WHEREOF, the Company has caused this Award Agreement to be duly
executed by its officer thereunto duly authorized, and the Employee has hereunto
set his hand, all on the day and year first above written.
POMEROY COMPUTER RESOURCES, INC.,
By: __________________________________
_____________________________________
Scott Dobson - Employee
Page 4 of 5 Pages
<PAGE>
AWARD AGREEMENT
---------------
(Non-Qualified Stock Option)
This Award Agreement is made effective ____________, 1999, between POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (hereinafter called the
"Company"), and TYLER DOBSON, an employee of the Company (hereinafter called the
"Employee").
WHEREAS, the Company has heretofore adopted the 1992 Non-Qualified and
Incentive Stock Option Plan (the "Plan");
WHEREAS, per an Employment Agreement between Company and Employee dated
_______________, Employee is to be awarded One Thousand (1,000) stock options
under the Plan upon the execution of such Employment Agreement.
WHEREAS, it is a requirement of the Plan that an Award Agreement be
executed to evidence the Non-Qualified Stock Option (the "Award") granted to the
Employee;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:
1. Grant of Award. The Company hereby grants to the Employee the right
--------------
and option (hereinafter called the "Option") to purchase all or any part of an
aggregate of One Thousand (1,000) shares of the Common Stock, $.01 par value, of
the Company ("Shares") (such number being subject to adjustment as set forth
herein and in the Plan) on the terms and conditions set forth herein and in the
Plan.
2. Type of Award. The Option granted under this Award Agreement is a
---------------
Non-Qualified Stock Option and shall not be treated by the Company or the
Employee as an Incentive Stock Option for Federal income tax purposes.
3. Purchase Price. The option price of the Shares covered by the
---------------
Option is $_____ per Share.
4 Term of Award.
---------------
(a) The Term of the Award shall be for a period of five (5) years from
the effective date hereof, subject to earlier termination as hereinafter
provided; and
(b) prior to its expiration or termination the Award may be exercised
as to any part or all of the Shares originally subject to the Option.
5. Exercise of Award.
--------------------
(a) In order to exercise the Award, the person or persons entitled to
exercise it shall deliver to the Treasurer of the Company written notice of
the number of full Shares with respect to which the Award is to be
exercised. The notice shall be accompanied by payment in full for any
Shares being purchased, which payment will be in cash, or, with the
Committee's (as defined
Page 1 of 4 Pages
<PAGE>
in the Plan) approval, in Shares (as defined in the Plan) held by the
Employee for at least six months valued at Fair Market Value (as defined in
the Plan) at the time of exercise, or a combination thereof. No fractional
Shares will be issued.
(b) No Shares shall be issued until full payment therefor has been
made, and the Employee will have none of the rights of a stockholder in
respect of such Shares until they are issued.
6. Nontransferability. The Award shall not be transferable otherwise
------------------
than: (a) by will or the laws of descent and distribution, and the Award may be
exercised, during the lifetime of the holder of the Award, only by him or the
event of death, his Successor, as defined in the Plan, or in the event of
disability, his personal representative, or (b) pursuant to a qualified domestic
relations order, as defined in the Code or the Employee Retirement Income
Security Act (ERISA) or the Rules thereunder.
7. Termination of Employment. In the event that the employment of the
--------------------------
Employee is terminated (otherwise than by reason of death, disability or
retirement), the Award may be exercised by the Employee (to the extent that he
was entitled to do so at the termination of his employment) at any time within
three (3) months after such termination, but not beyond the original Term
thereof. So long as the Employee shall continue to be an employee of the
Company or one or more of its subsidiaries, the Award shall not be affected by
any change of duties or position. Nothing in this Award Agreement is intended
to confer upon Employee any right to continue in the employ of the Company or
any of its subsidiaries or interfere in any way with the right of the Company or
any such subsidiary to terminate his employment at any time. Anything herein
contained to the contrary notwithstanding, in the event of any termination of
the Employee's employment for cause or if the Employee voluntarily terminates
his employment without cause, the Award, to the extent not theretofore
exercised, shall forthwith terminate.
8. Death of Employee. If the Employee dies while he is employed by the
-----------------
Company or one or more of its subsidiaries or within three (3) months after the
termination of his employment, the Award may be exercised (to the extent that
Employee was entitled to do so at the time of his death) by a legatee or
legatees of the Employee under his last will, or by his personal representatives
or distributees, at any time within six (6) months after his death, but not
beyond the original Term of the Award.
9. Disability of Employee. If the employment of the Employee
------------------------
terminates on account of his having become "disabled," as defined in Section
22(e)(3) of the Code, the Award may be exercised by the Employee (to the extent
that he was entitled to do so at the termination of his employment on account of
Page 2 of 4 Pages
<PAGE>
his becoming disabled) at any time within six (6) months after the date on which
his employment terminated, but not beyond the original Term of the Award.
10. Retirement of Employee. If the employment of the Employee
------------------------
terminates by reason of retirement entitling the Employee to benefits under the
provisions of any retirement plan of the Company or a subsidiary in which the
Employee participates (or, if no such plans exist, at or after age sixty-five
(65)), the Award may be exercised by the Employee (to the extent that he was
entitled to do so at the time of his retirement) at any time within ninety (90)
days after the date on which his employment terminated, but not beyond the
original Term of the Award.
11 Taxes. The Company shall have the right to require a person
-----
entitled to receive Shares pursuant to the exercise of this Award under the Plan
to pay the Company the amount of any taxes which the Company is or will be
required to withhold with respect to such Shares before the certificate for such
Shares is delivered pursuant to the Award. Furthermore, the Company may elect
to deduct such taxes from any amounts payable in cash or in Shares at the time
of exercise or from any other amounts payable any time thereafter in cash to the
Employee. If the Employee disposes of Shares acquired pursuant to an Incentive
Stock Option in any transaction considered to be a disqualifying transaction
under Sections 421 and 422 of the Code, the Employee shall notify the Company of
such transfer and the Company shall have the right to deduct any taxes required
by law to be withheld from any amounts otherwise payable in cash then or at any
time thereafter to the Employee.
Subject to Committee approval, an Employee may satisfy his tax liability
with respect to the exercise of an Option by having the Company withhold Shares
otherwise issuable upon exercise of the Option; provided, however, if the
Employee is subject to Section 16b of the Securities Exchange Act of 1934, as
amended, he may so elect only if such Employee makes an election to do so which
satisfies the requirements of Rule 16b-3.
12. Changes in Capital Structure. In the event of changes in all of
-------------------------------
the outstanding Shares by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of Shares,
separations, reorganizations or liquidations, or similar events or, in the event
of extraordinary cash dividends being declared with respect to the Shares, or
similar transactions, the number and class of Shares available under the Plan in
the aggregate, the number and class of Shares subject to Awards theretofore
granted, applicable purchase prices and all other applicable provisions, shall,
subject to the provisions of the Plan, be equitably adjusted by the Committee
(which adjustment may, but need not, include payment in cash or in Shares in an
amount equal to the difference between the price at which such Award may be
exercised and the then current Fair Market Value of the Shares subject to such
Page 3 of 4 Pages
<PAGE>
Award as equitably determined by the Committee). The foregoing adjustment and
the manner of application of the foregoing provisions shall be determined by the
Committee in its sole discretion. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become subject to an
Award.
13. Securities Law Compliance, The Award may not be exercised and the
--------------------------
Company shall not be required to issue any Shares hereunder if such issuance
would, in the judgment of the Board or the Committee, constitute a violation of
any state or federal law, or of the rules or regulations of any governmental
regulatory body, or any securities exchange. The Company may, in its sole
discretion, require the Employee to furnish the Company with appropriate
representations and a written investment agreement prior to the exercise of the
Award and the delivery of any Shares pursuant to the Award.
14. Incorporation of Provisions of the Plan. All of the provisions of
----------------------------------------
the Plan, pursuant to which this Award is granted, are hereby incorporated by
reference and made as part hereof as if specifically set forth herein, and to
the extent of any conflict between this Award Agreement and the terms contained
in the aforesaid Plan, the Plan shall control. To the extent any capitalized
terms are not otherwise defined herein, they will have the meaning set forth in
paragraph 2 of the Plan.
IN WITNESS WHEREOF, the Company has caused this Award Agreement to be duly
executed by its officer thereunto duly authorized, and the Employee has hereunto
set his hand, all on the day and year first above written.
POMEROY COMPUTER RESOURCES, INC.,
By: __________________________________
_____________________________________
Tyler Dobson - Employee
Page 4 of 4 Pages
<PAGE>
INCENTIVE DEFERRED COMPENSATION AGREEMENT
-----------------------------------------
This Incentive Deferred Compensation Agreement is made effective this ____ day
of _________, 1999, by and between POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (the "Company") and SCOTT DOBSON ("Dobson").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement, the Company and
Dobson have entered into an Employment Agreement for the employment of Dobson by
Company;
WHEREAS, pursuant to Section 5(d) of said Employment Agreement, Dobson may be
entitled to incentive deferred compensation in the event certain economic
criteria are satisfied;
WHEREAS, the parties wish to define the terms governing the incentive deferred
compensation in the event the economic criteria and the terms and conditions of
the Employment Agreement are satisfied.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. In the event Dobson satisfies the economic criteria set forth in the
Employment Agreement for such year and is entitled to incentive deferred
compensation, the incentive deferred compensation shall be governed by the
terms of this Agreement.
2. In the event Dobson should die or become disabled during the term of the
Employment Agreement, or if the Employment Agreement is not renewed by
Company at the expiration of the initial term or any renewal term, all
incentive deferred compensation earned shall be vested in full and shall be
payable to Dobson and/or his designated beneficiary at that time. For
purposes of this Paragraph, the term "disabled" shall have the meaning set
forth in said Employment Agreement.
3. In the event Dobson discontinues employment with the Company during the
initial term or any renewal term of this Employment Agreement or if Dobson
does not renew the Employment Agreement at the expiration of the initial
term or any renewal term and such discontinuation of employment is not a
result of Dobson becoming disabled, the vested portion of his deferred
compensation account will be paid to him at said time and all non-vested
amounts will be forfeited. Provided, however, if Dobson would violate the
terms of his covenant not to compete and confidentiality agreement as set
forth in Sections 8 and 9 of his Employment Agreement, the vested portion
of his deferred compensation account will likewise be forfeited. The
incentive deferred compensation shall vest according to the following
schedule:
- 1 -
<PAGE>
Years of Service With Company or its Percentage of Vested
------------------------------------ ----------------------
Subsidiaries from the Effective Date Interest
------------------------------------ --------
of This Agreement
-------------------
Less than 1 year 0%
One year 20%
Two years 40%
Three years 60%
Four years 80%
Five years 100%
This vesting schedule shall apply separately to each year that incentive
deferred compensation is earned by Dobson upon the satisfaction of the economic
criteria set forth in the Employment Agreement.
By way of illustration, if Dobson satisfied the economic criteria for years 1
and 2 of the Agreement, at the end of year 2, Dobson would be 40% vested as to
the incentive deferred compensation credited in year 1 and 20% vested as to the
incentive deferred compensation credited in year 2.
4. No deferred compensation shall be paid under the terms of this Agreement in
the event Dobson is discharged from the service of the Company for cause.
For purposes of this Paragraph, the term "cause" shall have the meaning set
forth in Section 10(a)(iii) of said Employment Agreement
5. Dobson shall not have the right to commute, sell, transfer, assign or
otherwise convey the right to receive any payments under the terms of this
Agreement. Any such attempted assignment or transfer shall terminate this
Agreement and the Company shall have no further liability hereunder.
6. It is the intention of the parties that the incentive deferred compensation
to be payable to Dobson hereunder (if applicable) shall be includable for
Federal Income Tax purposes in his, or such beneficiary's gross income only
in the taxable year in which he or the beneficiary actually receives the
payment and Company shall be entitled to deduct such incentive deferred
compensation as a business expense in its Federal Income Tax return in the
taxable year in which such payment is made to Dobson or his beneficiary.
7. Nothing contained in this Agreement shall in any way affect or interfere
with the right of Dobson to share or participate in a retirement plan of
the Company or any profit sharing, bonus or similar plan in which he may be
entitled to share or participate as an employee of the Company.
8. This Agreement shall be binding upon the heirs, administrators, executors,
successors and assigns of Dobson and the successors and assigns of Company.
This Agreement shall not be modified or amended except in writing signed by
both parties.
9. This Agreement shall be subject to and construed under the laws of the
Commonwealth of Kentucky.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the day and year first above written.
POMEROY COMPUTER RESOURCES, INC.
By:____________________________________________
Stephen E. Pomeroy, Chief Financial Officer
_____________________________________
SCOTT DOBSON
- 3 -
<PAGE>
INCENTIVE DEFERRED COMPENSATION AGREEMENT
-----------------------------------------
This Incentive Deferred Compensation Agreement is made effective this ____ day
of _________, 1999, by and between POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (the "Company") and TYLER DOBSON ("Dobson").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement, the Company and
Dobson have entered into an Employment Agreement for the employment of Dobson by
Company;
WHEREAS, pursuant to Section 5(c) of said Employment Agreement, Dobson may be
entitled to incentive deferred compensation in the event certain economic
criteria are satisfied;
WHEREAS, the parties wish to define the terms governing the incentive deferred
compensation in the event the economic criteria and the terms and conditions of
the Employment Agreement are satisfied.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. In the event Dobson satisfies the economic criteria set forth in the
Employment Agreement for such year and is entitled to incentive deferred
compensation, the incentive deferred compensation shall be governed by the
terms of this Agreement.
2. In the event Dobson should die or become disabled during the term of the
Employment Agreement, or if the Employment Agreement is not renewed by
Company at the expiration of the initial term or any renewal term, all
incentive deferred compensation earned shall be vested in full and shall be
payable to Dobson and/or his designated beneficiary at that time. For
purposes of this Paragraph, the term "disabled" shall have the meaning set
forth in said Employment Agreement.
3. In the event Dobson discontinues employment with the Company during the
initial term or any renewal term of this Employment Agreement or if Dobson
does not renew the Employment Agreement at the expiration of the initial
term or any renewal term and such discontinuation of employment is not a
result of Dobson becoming disabled, the vested portion of his deferred
compensation account will be paid to him at said time and all non-vested
amounts will be forfeited. Provided, however, if Dobson would violate the
terms of his covenant not to compete and confidentiality agreement as set
forth in Sections 8 and 9 of his Employment Agreement, the vested portion
of his deferred compensation account will likewise be forfeited. The
incentive deferred compensation shall vest according to the following
schedule:
- 1 -
<PAGE>
Years of Service With Company or its Percentage of Vested
------------------------------------------ ----------------------
Subsidiaries from the Effective Date Interest
---------------------------------------- --------
of This Agreement
-------------------
Less than 1 year 0%
One year 20%
Two years 40%
Three years 60%
Four years 80%
Five years 100%
This vesting schedule shall apply separately to each year that incentive
deferred compensation is earned by Dobson upon the satisfaction of the economic
criteria set forth in the Employment Agreement.
By way of illustration, if Dobson satisfied the economic criteria for years 1
and 2 of the Agreement, at the end of year 2, Dobson would be 40% vested as to
the incentive deferred compensation credited in year 1 and 20% vested as to the
incentive deferred compensation credited in year 2.
4. No deferred compensation shall be paid under the terms of this Agreement in
the event Dobson is discharged from the service of the Company for cause.
For purposes of this Paragraph, the term "cause" shall have the meaning set
forth in Section 10(a)(iii) of said Employment Agreement
5. Dobson shall not have the right to commute, sell, transfer, assign or
otherwise convey the right to receive any payments under the terms of this
Agreement. Any such attempted assignment or transfer shall terminate this
Agreement and the Company shall have no further liability hereunder.
6. It is the intention of the parties that the incentive deferred compensation
to be payable to Dobson hereunder (if applicable) shall be includable for
Federal Income Tax purposes in his, or such beneficiary's gross income only
in the taxable year in which he or the beneficiary actually receives the
payment and Company shall be entitled to deduct such incentive deferred
compensation as a business expense in its Federal Income Tax return in the
taxable year in which such payment is made to Dobson or his beneficiary.
7. Nothing contained in this Agreement shall in any way affect or interfere
with the right of Dobson to share or participate in a retirement plan of
the Company or any profit sharing, bonus or similar plan in which he may be
entitled to share or participate as an employee of the Company.
8. This Agreement shall be binding upon the heirs, administrators, executors,
successors and assigns of Dobson and the successors and assigns of Company.
This Agreement shall not be modified or amended except in writing signed by
both parties.
9. This Agreement shall be subject to and construed under the laws of the
Commonwealth of Kentucky.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the day and year first above written.
POMEROY COMPUTER RESOURCES, INC.
By:___________________________________________
Stephen E. Pomeroy, Chief Financial Officer
______________________________________________
TYLER DOBSON
- 3 -
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6TH day of May, 1999, by and between
TYLER H. DOBSON (hereinafter referred to as "Owner") and POMEROY SELECT
INTEGRATION SOLUTIONS, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with SYSTEMS
ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Company"), for the
acquisition of certain of its assets (the "Business"); and
WHEREAS, Owner owns twelve and 43/100 percent (12.43%) of the outstanding stock
of Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (12.43% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to the later of five (5) years
from the closing of the Asset Purchase Agreement of even date or one (1)
year after the termination of Owner's employment with Purchaser pursuant to
the terms of an Employment Agreement of even date, Owner will not, or with
any other person, corporation or entity, directly or indirectly, by stock
or other ownership, investment, management, employment or otherwise, or in
any relationship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its parent company, Pomeroy Computer Resources, Inc. ("Pomeroy"), or
any of Pomeroy's other subsidiaries has an office during the term of
this Agreement. A list of the states in which Purchaser, Pomeroy and
Pomeroy's subsidiaries currently transact business is attached hereto
as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser, Pomeroy or any of
Pomeroy's subsidiaries.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an officer or director, of Systems
Atlanta, Inc., an affiliate of Company engaged in providing integrated
systems, including hardware, software and peripheral devices and
related products and services for entities, persons or governmental
entities engaged in air traffic control.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) The providing of integrated desktop management and network services
including life cycle services, internet working services, and end user
support services.
(ii) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(iii)Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iv) Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
2
<PAGE>
(v) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser, Pomeroy or any of Pomeroy's other subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agreement and pay the
consideration described in Paragraph 2 by the representation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespective of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining provisions of Paragraph 1 of this Agreement shall continue in
force and effect; and that if such invalidity or unenforceability is due to
the reasonableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be determined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3
<PAGE>
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
__________________________________
TYLER H. DOBSON
POMEROY SELECT INTEGRATION
SOLUTIONS, INC.
By:________________________________
STEPHEN E. POMEROY, President
4
<PAGE>
EXHIBIT A
---------
STATES IN WHICH PURCHASER, POMEROY
AND/OR ANY OF POMEROY'S OTHER
SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6th day of May, 1999, by and between
TYLER H. DOBSON (hereinafter referred to as "Owner") and POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with SYSTEMS
ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Company"), for the
acquisition of certain of its assets (the "Business"); and
WHEREAS, Owner owns twelve and 43/100 percent (12.43%) of the outstanding stock
of Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (12.43% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to the later of five (5) years
from the closing of the Asset Purchase Agreement of even date or one (1)
year after the termination of Owner's employment with Purchaser pursuant to
the terms of an Employment Agreement of even date, Owner will not, or with
any other person, corporation or entity, directly or indirectly, by stock
or other ownership, investment, management, employment or otherwise, or in
any relationship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
- 1 -
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an officer or director, of Systems
Atlanta, Inc., an affiliate of Company engaged in providing integrated
systems, including hardware, software and peripheral devices and
related products and services for entities, persons or governmental
entities engaged in air traffic control.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
- 2 -
<PAGE>
Owner has carefully read all the terms and conditions of this
Paragraph 1 and has given careful consideration to the covenants and
restrictions imposed upon Owner herein, and agrees that the same are
necessary for the reasonable and proper protection of Owner's Business
acquired by Purchaser and have been separately bargained for and
agrees that Purchaser has been induced to enter into the Asset
Purchase Agreement and pay the consideration described in Paragraph 2
by the representation of Owner that he will abide by and be bound by
each of the covenants and restrictions herein; and Owner agrees that
Purchaser is entitled to injunctive relief in the event of any breach
of any covenant or restriction contained herein in addition to all
other remedies provided by law or equity. Owner hereby acknowledges
that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespective of when
or in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is
ancillary to the main thrust of the Asset Purchase Agreement, is being
entered into to protect the legitimate business interests of
Purchaser, including, but not limited to, (i) trade secrets; (ii)
valuable confidential business or professional information that
otherwise does not qualify as trade secrets; (iii) substantial
relationships with specific prospective or existing customers or
clients; (iv) client or customer good will associated with an on-going
business by way of trade name, trademark, or service mark, a specific
geographic location, or a specific marketing or trade area; and (v)
extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the
validity or enforceability of any other provision of Paragraph 1 of
this Agreement, but the remaining provisions of Paragraph 1 of this
Agreement shall continue in force and effect; and that if such
invalidity or unenforceability is due to the reasonableness of the
line of business, time or geographical area covered by certain
covenants and restrictions contained in Paragraph 1, said covenants
and restrictions shall nevertheless be effective for such line of
business, period of time and for such area as may be determined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
__________________________________
TYLER H. DOBSON
POMEROY COMPUTER RESOURCES, INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial Officer
- 3 -
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6TH day of May, 1999, by and between
CHARLEY G. DOBSON (hereinafter referred to as "Owner") and POMEROY SELECT
INTEGRATION SOLUTIONS, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with SYSTEMS
ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Company"), for the
acquisition of certain of its assets (the "Business"); and
WHEREAS, Owner owns forty-two and 59/100 percent (42.59%) of the outstanding
stock of Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (42.59% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to five (5) years from the
closing of the Asset Purchase Agreement of even date, Owner will not, or
with any other person, corporation or entity, directly or indirectly, by
stock or other ownership, investment, management, employment or otherwise,
or in any relationship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its parent company, Pomeroy Computer Resources, Inc. ("Pomeroy"), or
any of Pomeroy's other subsidiaries has an office during the term of
this Agreement. A list of the states in which Purchaser, Pomeroy and
Pomeroy's subsidiaries currently transact business is attached hereto
as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser, Pomeroy or any of
Pomeroy's subsidiaries.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an employee, officer or director,
of Systems Atlanta, Inc., an affiliate of Company engaged in providing
integrated systems, including hardware, software and peripheral
devices and related products and services for entities, persons or
governmental entities engaged in air traffic control.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) The providing of integrated desktop management and network services
including life cycle services, internet working services, and end user
support services.
(ii) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(iii)Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iv) Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
2
<PAGE>
(v) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser, Pomeroy or any of Pomeroy's other subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agreement and pay the
consideration described in Paragraph 2 by the representation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespective of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining provisions of Paragraph 1 of this Agreement shall continue in
force and effect; and that if such invalidity or unenforceability is due to
the reasonableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be determined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3
<PAGE>
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
__________________________________
CHARLEY G. DOBSON
POMEROY SELECT INTEGRATION
SOLUTIONS, INC.
By:________________________________
STEPHEN E. POMEROY, President
4
<PAGE>
EXHIBIT A
---------
STATES IN WHICH PURCHASER, POMEROY
AND/OR ANY OF POMEROY'S OTHER
SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6TH day of May, 1999, by and between
CHARLEY G. DOBSON (hereinafter referred to as "Owner") and POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with SYSTEMS
ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Company"), for the
acquisition of certain of its assets (the "Business"); and
WHEREAS, Owner owns forty-two and 59/100 percent (42.59%) of the outstanding
stock of Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (42.59% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to five (5) years from the
closing of the Asset Purchase Agreement of even date, Owner will not, or
with any other person, corporation or entity, directly or indirectly, by
stock or other ownership, investment, management, employment or otherwise,
or in any relationship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
- 1 -
<PAGE>
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an employee, officer or director,
of Systems Atlanta, Inc., an affiliate of Company engaged in providing
integrated systems, including hardware, software and peripheral
devices and related products and services for entities, persons or
governmental entities engaged in air traffic control.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agreement and pay the
consideration described in Paragraph 2 by the representation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespective of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
- 2 -
<PAGE>
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining provisions of Paragraph 1 of this Agreement shall continue in
force and effect; and that if such invalidity or unenforceability is due to
the reasonableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be determined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
__________________________________
CHARLEY G. DOBSON
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial Officer
- 3 -
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6TH day of May, 1999, by and between
BETTY H. DOBSON (hereinafter referred to as "Owner") and POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with SYSTEMS
ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Company"), for the
acquisition of certain of its assets (the "Business"); and
WHEREAS, Owner owns 80/100 of a percent (.8%) of the outstanding stock of
Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (.8% of the stock of which is owned by Owner), Owner covenants
and agrees that for a period equal to five (5) years from the closing of
the Asset Purchase Agreement of even date, Owner will not, or with any
other person, corporation or entity, directly or indirectly, by stock or
other ownership, investment, management, employment or otherwise, or in any
relationship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
- 1 -
<PAGE>
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an employee, officer or director,
of Systems Atlanta, Inc., an affiliate of Company engaged in providing
integrated systems, including hardware, software and peripheral
devices and related products and services for entities, persons or
governmental entities engaged in air traffic control.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agreement and pay the
consideration described in Paragraph 2 by the representation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespective of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
- 2 -
<PAGE>
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining provisions of Paragraph 1 of this Agreement shall continue in
force and effect; and that if such invalidity or unenforceability is due to
the reasonableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be determined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
__________________________________
BETTY H. DOBSON
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial Officer
- 3 -
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this 6TH day of May, 1999, by and between
BETTY H. DOBSON (hereinafter referred to as "Owner") and POMEROY SELECT
INTEGRATION SOLUTIONS, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with SYSTEMS
ATLANTA COMMERCIAL SYSTEMS, INC., a Georgia corporation, ("Company"), for the
acquisition of certain of its assets (the "Business"); and
WHEREAS, Owner owns 80/100 of a percent (.8%) of the outstanding stock of
Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 12.2(d)(vi) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (.8% of the stock of which is owned by Owner), Owner covenants
and agrees that for a period equal to five (5) years from the closing of
the Asset Purchase Agreement of even date, Owner will not, or with any
other person, corporation or entity, directly or indirectly, by stock or
other ownership, investment, management, employment or otherwise, or in any
relationship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its parent company, Pomeroy Computer Resources, Inc. ("Pomeroy"), or
any of Pomeroy's other subsidiaries has an office during the term of
this Agreement. A list of the states in which Purchaser, Pomeroy and
Pomeroy's subsidiaries currently transact business is attached hereto
as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate.
1
<PAGE>
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser, Pomeroy or any of
Pomeroy's subsidiaries.
(f) Nothing in this Agreement shall prohibit Owner from owning or
purchasing any stock, or serving as an employee, officer or director,
of Systems Atlanta, Inc., an affiliate of Company engaged in providing
integrated systems, including hardware, software and peripheral
devices and related products and services for entities, persons or
governmental entities engaged in air traffic control.
For purposes of this Section, the "Business of Purchaser" shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) The providing of integrated desktop management and network services
including life cycle services, internet working services, and end user
support services.
(ii) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(iii)Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iv) Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(v) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser, Pomeroy or any of Pomeroy's other subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agreement and pay the
consideration described in Paragraph 2 by the representation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespective of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
2
<PAGE>
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining provisions of Paragraph 1 of this Agreement shall continue in
force and effect; and that if such invalidity or unenforceability is due to
the reasonableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be determined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
__________________________________
BETTY H. DOBSON
POMEROY SELECT INTEGRATION
SOLUTIONS, INC.
By:________________________________
STEPHEN E. POMEROY, President
3
<PAGE>
EXHIBIT A
---------
STATES IN WHICH PURCHASER, POMEROY
AND/OR ANY OF POMEROY'S OTHER
SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
GENERAL BILL OF SALE AND ASSIGNMENT
-----------------------------------
KNOW ALL MEN BY THESE PRESENTS:
That Systems Atlanta, Inc., a Georgia corporation, ("Company") for good and
valuable consideration received by its affiliate, Systems Atlanta Commercial
Systems, Inc. from Pomeroy Computer Resources, Inc., a Delaware corporation
("Purchaser No. 1"), does hereby, in accordance with the terms and conditions of
Section 13 of the Asset Purchase Agreement, dated May 6, 1999 (the "Agreement"),
by, between and among Systems Atlanta Commercial Systems, Inc., Purchaser No.
1, Purchaser No. 2 and B. Scott Dobson, Charley G. Dobson, Betty H. Dobson and
Tyler H. Dobson, sell, assign, transfer, convey, deliver and confirm to
Purchaser No. 1, its successors and assigns, or its nominee, those certain
assets of Company ("Purchased Assets No. 1") described in the Agreement as the
Purchased Assets No. 1, relating to Company's Business No. 1 as described in the
Agreement, which Purchased Assets No. 1 shall include without limitation:
The Purchased Assets No. 1 but excluding the Excluded Assets as defined in
the Agreement.
TO HAVE AND TO HOLD to Purchaser No. 1, its successors and assigns forever.
Company hereby represents, warrants and covenants that, at and until delivery of
this General Bill of Sale and Assignment, Company has good title to the
Purchased Assets No. 1, free and clear of any imperfections of title, liens,
encumbrances, charges, equities or restrictions, of any nature whatsoever; that
from and after the delivery by Company to Purchaser No. 1 of this General Bill
of Sale and Assignment, Purchaser No. 1 will own the Purchased Assets No. 1 and
have good and marketable title thereto, free and clear of any imperfections of
title, liens, encumbrances, charges, equities or restrictions of any nature
whatsoever.
Company, for itself and its successors, further covenants and agrees that, in
the event there are any such Purchased Assets No. 1 covered by this General Bill
of Sale and Assignment which cannot be transferred or assigned by it without the
consent of or notice to a third party and in respect of which any necessary
consent or notice has not at the date of delivery of this General Bill of Sale
and Assignment been given or obtained, the beneficial interest in and to the
asset/contract shall, in any event, pass hereby to Purchaser No. 1, and Company,
for itself and its successors and assigns, covenants and agrees (i) to hold and
hereby declares that it holds such Purchased Assets No. 1 in trust for and for
the benefit of Purchaser No. 1, its successors and assigns; (ii) if requested by
Purchaser No. 1, Company will use all reasonable efforts (not including the
obligation to make any payment of funds incident thereto) to obtain and secure
such consents to transfer such Purchased Assets No. 1; and (iii) to make or
complete such transfer or transfers as soon as reasonably possible.
Company hereby further covenants that it will, at any time and from time to
time, at the request of Purchaser No. 1, execute and deliver to Purchaser No. 1
any new or confirmatory instrument and all other and further instruments
necessary or convenient, which Purchaser No. 1 may reasonably request, to vest
in Purchaser No. 1 Company's full right, title and interest in or to any of the
Purchased Assets No. 1, or to enable Purchaser No. 1 to realize upon or
otherwise to enjoy any such property, assets or rights or to carry into effect
the intent or purpose hereof.
1
<PAGE>
This General Bill of Sale and Assignment, being further documentation of the
transfers, conveyances and assignments provided in the Agreement, does not
expand or limit the rights and obligations provided in said Agreement.
This instrument shall be binding upon, inure to the benefit of and be
enforceable by the Company and Purchaser No. 1 and their respective successors
and assigns.
Any capitalized terms used, but not defined herein, shall have the definition
set forth in the Agreement.
IN WITNESS WHEREOF, Systems Atlanta, Inc. has caused this instrument to be
executed by its officer thereunto duly authorized as of this ____ day of May,
1999.
Signed and delivered in SYSTEMS ATLANTA, INC.,
the presence of a Georgia corporation
_________________________ By: ________________________________
B. Scott Dobson, Vice-President
_________________________
STATE OF________________
COUNTY OF______________
BE IT REMEMBERED, that on this _____ day of May, 1999, before me, the
undersigned, a Notary Public in and for said County, personally appeared Scott
Dobson, who acknowledged himself to be the Vice-President of Systems Atlanta,
Inc., a Georgia corporation, and that he, as such Vice-President being
authorized to do so, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as Vice-President.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
notarial seal on the day and year last above written.
____________________________________
NOTARY PUBLIC
2
<PAGE>
GENERAL BILL OF SALE AND ASSIGNMENT
-----------------------------------
KNOW ALL MEN BY THESE PRESENTS:
That Systems Atlanta, Inc., a Georgia corporation, ("Company") for good and
valuable consideration received by its affiliate, Systems Atlanta Commercial
Systems, Inc. from Pomeroy Select Integration Solutions, Inc., a Delaware
corporation ("Purchaser No. 2"), does hereby, in accordance with the terms and
conditions of Section 13 of the Asset Purchase Agreement, dated May 6, 1999 (the
"Agreement"), by, between and among Systems Atlanta Commercial Systems, Inc.,
Purchaser No. 2, Pomeroy Computer Resources, Inc., and B. Scott Dobson, Charley
G. Dobson, Betty H. Dobson and Tyler H. Dobson, sell, assign, transfer, convey,
deliver and confirm to Purchaser No. 2, its successors and assigns, or its
nominee, those certain assets of Company ("Purchased Assets No. 2") described in
the Agreement as the Purchased Assets No. 2, relating to Company's Business No.
2 as described in the Agreement, which Purchased Assets No. 2 shall include
without limitation:
The Purchased Assets No. 2 but excluding the Excluded Assets as defined in
the Agreement.
TO HAVE AND TO HOLD to Purchaser No. 2, its successors and assigns forever.
Company hereby represents, warrants and covenants that, at and until delivery of
this General Bill of Sale and Assignment, Company has good title to the
Purchased Assets No. 2, free and clear of any imperfections of title, liens,
encumbrances, charges, equities or restrictions, of any nature whatsoever; that
from and after the delivery by Company to Purchaser No. 2 of this General Bill
of Sale and Assignment, Purchaser No. 2 will own the Purchased Assets No. 2 and
have good and marketable title thereto, free and clear of any imperfections of
title, liens, encumbrances, charges, equities or restrictions of any nature
whatsoever.
Company, for itself and its successors, further covenants and agrees that, in
the event there are any such Purchased Assets No. 2 covered by this General Bill
of Sale and Assignment which cannot be transferred or assigned by it without the
consent of or notice to a third party and in respect of which any necessary
consent or notice has not at the date of delivery of this General Bill of Sale
and Assignment been given or obtained, the beneficial interest in and to the
asset/contract shall, in any event, pass hereby to Purchaser No. 2, and Company,
for itself and its successors and assigns, covenants and agrees (i) to hold and
hereby declares that it holds such Purchased Assets No. 2 in trust for and for
the benefit of Purchaser No. 2, its successors and assigns; (ii) if requested by
Purchaser No. 2, Company will use all reasonable efforts (not including the
obligation to make any payment of funds incident thereto) to obtain and secure
such consents to transfer such Purchased Assets No. 2; and (iii) to make or
complete such transfer or transfers as soon as reasonably possible.
Company hereby further covenants that it will, at any time and from time to
time, at the request of Purchaser No. 2, execute and deliver to Purchaser No. 2
any new or confirmatory instrument and all other and further instruments
necessary or convenient, which Purchaser No. 2 may reasonably request, to vest
in Purchaser No. 2 Company's full right, title and interest in or to any of the
Purchased Assets No. 2, or to enable Purchaser No. 2 to realize upon or
otherwise to enjoy any such property, assets or rights or to carry into effect
the intent or purpose hereof.
- 1 -
<PAGE>
This General Bill of Sale and Assignment, being further documentation of the
transfers, conveyances and assignments provided in the Agreement, does not
expand or limit the rights and obligations provided in said Agreement.
This instrument shall be binding upon, inure to the benefit of and be
enforceable by the Company and Purchaser No. 2 and their respective successors
and assigns.
Any capitalized terms used, but not defined herein, shall have the definition
set forth in the Agreement.
IN WITNESS WHEREOF, Systems Atlanta, Inc. has caused this instrument to be
executed by its officer thereunto duly authorized as of this ____ day of May,
1999.
Signed and delivered in SYSTEMS ATLANTA, INC.,
the presence of a Georgia corporation
_________________________ By: ________________________________
B. Scott Dobson, Vice-President
_________________________
STATE OF ____________
COUNTY OF __________, ss
BE IT REMEMBERED, that on this _____ day of May, 1999, before me, the
undersigned, a Notary Public in and for said County, personally appeared Scott
Dobson, who acknowledged himself to be the Vice-President of Systems Atlanta,
Inc., a Georgia corporation, and that he, as such Vice-President being
authorized to do so, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as Vice-President.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
notarial seal on the day and year last above written.
____________________________________
NOTARY PUBLIC
- 2 -
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
July 5, July 5,
---------------- ----------------
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
BASIC
Weighted average common shares
outstanding. . . . . . . . . . . . . . . . . 11,450 11,697 11,421 11,691
======= ======= ======= =======
Net income . . . . . . . . . . . . . . . . . $ 5,008 $ 5,680 $ 9,285 $10,748
======= ======= ======= =======
Net income per common share. . . . . . . . . $ 0.44 $ 0.49 $ 0.81 $ 0.92
======= ======= ======= =======
DILUTED
Weighted average common shares
outstanding. . . . . . . . . . . . . . . . . 11,450 11,697 11,421 11,691
Dilutive effect of stock options outstanding
during the period. . . . . . . . . . . . . . 354 94 337 129
Total common and common equivalent
shares . . . . . . . . . . . . . . . . . . . 11,804 11,791 11,758 11,820
======= ======= ======= =======
Net income . . . . . . . . . . . . . . . . . $ 5,008 $ 5,680 $ 9,285 $10,748
======= ======= ======= =======
Net income per common share. . . . . . . . . $ 0.42 $ 0.48 $ 0.79 $ 0.91
======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedule contains standard data for the Six Months
Ended July 5, 1999.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-05-2000
<PERIOD-START> JAN-06-1999
<PERIOD-END> JUL-05-1999
<CASH> 5146
<SECURITIES> 0
<RECEIVABLES> 178209
<ALLOWANCES> 1097
<INVENTORY> 38249
<CURRENT-ASSETS> 224867
<PP&E> 24356
<DEPRECIATION> 11373
<TOTAL-ASSETS> 277123
<CURRENT-LIABILITIES> 148992
<BONDS> 0
<COMMON> 117
0
0
<OTHER-SE> 123916
<TOTAL-LIABILITY-AND-EQUITY> 277123
<SALES> 350772
<TOTAL-REVENUES> 350772
<CGS> 304205
<TOTAL-COSTS> 304205
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 46
<INTEREST-EXPENSE> 1650
<INCOME-PRETAX> 17781
<INCOME-TAX> 7033
<INCOME-CONTINUING> 10748
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10748
<EPS-BASIC> .92
<EPS-DILUTED> .91
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedule contains restated standard data for the
Six Months Ended July 5, 1998.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-05-1999
<PERIOD-START> JAN-06-1998
<PERIOD-END> JUL-05-1998
<CASH> 2018
<SECURITIES> 0
<RECEIVABLES> 132329
<ALLOWANCES> 787
<INVENTORY> 33941
<CURRENT-ASSETS> 170571
<PP&E> 21108
<DEPRECIATION> 8562
<TOTAL-ASSETS> 208676
<CURRENT-LIABILITIES> 104989
<BONDS> 0
<COMMON> 115
0
0
<OTHER-SE> 99342
<TOTAL-LIABILITY-AND-EQUITY> 208676
<SALES> 294041
<TOTAL-REVENUES> 294041
<CGS> 255500
<TOTAL-COSTS> 255500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1301
<INCOME-PRETAX> 14737
<INCOME-TAX> 5452
<INCOME-CONTINUING> 9285
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9285
<EPS-BASIC> .81
<EPS-DILUTED> .79
</TABLE>
