SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 5, 1996
------------------------------
ATEC GROUP, INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware 0-227-10 13-3673965
- -------------------------------------------------------------------------------
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
1952 Jericho Turnpike, East Northport, N.Y. 11731
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 462-2832
----------------------------
- -------------------------------------------------------------------------------
(Former Address) (Zip Code)
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSET
In June, 1996, ATEC Group, Inc. (the "Registrant" or the "Company")
acquired 100% of the outstanding capital stock of Innovative Business Micros,
Inc. ("Innovative"), a computer integrator located in Long Island. Innovative
was formerly owned by Surinder Rametra and Ashok Rametra, the Company's
Principal Executive Officer and Principal Financial Officer respectively, and
Rajnish Rametra the brother of Surinder and Ashok.
The consideration for the acquisition was the issuance by the Company of an
aggregate of 4,900,000 shares of the Company's Common Stock to the former
shareholders of Innovative. Rajnish Rametra intends to enter into a three year
employment agreement with Innovative at an annual salary of $165,000 subject to
annual increases, Mr. Rametra will also be provided with major medical health
coverage as well as other benefits.
The terms of the acquisition were not negotiated in an arms-length manner
and there can be no assurance that an unaffiliated company would have paid less
consideration for Innovative than paid by the Company. The Acquisition will be
accounted for as a pooling of interests.
The physical property underlying the Innovative stock acquired by the
Registrant consists of substantially all of the assets of a computer integrator
located at 90 Adams Avenue, Happauge, New York, 11788.
Reference is made to the Stock Purchase Agreement annexed hereto for a
complete description of the Company's transactions with Innovative.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
The following Financial Statements and Exhibits are annexed to this Form
8-K:
a) Audited balance sheets, statements of operations and statements of cash
flows on behalf of Innovative as and for the years ended September 30, 1995 and
1994.
b) Pro forma combined financial statements (including the Pro Form
Adjustments) of ATEC Group, Inc. and Innovative Business Micros, Inc., as at
March 31, 1996 and June 30, 1995 and 1994 and for the nine month period and the
years then ended.
c) A copy of the Stock Purchase Agreement between the Company and Innovative.
<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ATEC GROUP, INC.
(Registrant)
By: s/Surinder Rametra
------------------------------
Surinder Rametra,
Principal Executive Officer and
Chairman of the Board
<PAGE>
George S. Goldberg
Certified Public Accountant
To the Stockholders
Innovative Business Micros, Inc.
I have audited the accompanying balance sheet of Innovative Business
Micros, Inc. as of September 30, 1995 and 1994 and the related statements of
income, retained earnings, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financials statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation. I
believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statement referred to above present fairly, in
all material respects, the financial position of Innovative Business Micros,
Inc. as of September 30, 1995 and 1994 and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
George S. Goldberg
Certified Public Accountant
Roslyn Heights, New York
December 12, 1995
F-1
<PAGE>
Innovative Business Micros, Inc.
Balance Sheet
September 30, 1995 and 1994
1995 1994
------------ ------------
ASSETS
Current Assets
Cash $ 477,633 $ 9,612
Accounts receivable, net 2,787,683 2,571,996
Inventories 288,415 213,530
Other assets 9,646 2,459
---------- ----------
Total current assets 3,563,377 2,797,597
---------- ----------
Property and equipment, net 94,131 60,130
Other assets 17,445 15,480
---------- ---------
$3,674,953 $2,873,207
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $2,097,341 $1,341,094
Accrued expenses 384,294 347,141
---------- ----------
Total current liabilities 2,481,635 1,688,235
Notes payable - shareholders 522,045 610,000
---------- ----------
Total liabilities 3,003,680 2,298,235
Stockholders' equity
Common stock of no par value 60,000 60,000
Additional paid-in capital 108,100 108,100
Retained earnings 503,173 406,872
--------- ---------
Total stockholders' equity 671,273 574,972
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $3,674,953 $2,873,207
========== ==========
See accompanying notes
F-2
<PAGE>
Innovative Business Micros, Inc.
Statement of Operations
For the year Ended September 30, 1995 and 1994
1995 1994
----------- -----------
Net sales $18,194,799 $18,386,621
Cost of sales 16,379,241 16,414,593
----------- -----------
Gross profit 1,815,558 1,972,028
----------- -----------
Operating expenses
General & administrative 1,565,192 1,050,891
Selling 105,541 824,752
----------- -----------
Total operating expense 1,670,733 1,875,643
----------- -----------
Income from operations 144,825 96,385
----------- -----------
Other income
Interest income 8,236 16,708
Other income 7,772 31,969
----------- -----------
Total other (expense) income 16,008 48,677
----------- -----------
Income before taxes 160,833 145,062
Provision for income taxes 64,532 61,250
----------- -----------
Net income $ 96,301 $ 83,812
=========== ===========
See accompanying notes
F-3
<PAGE>
Innovative Business Micro, Inc.
Statements of Cash Flows
For the Years Ended September 30, 1995 and 1994
1995 1994
----------- -----------
Cash Flows From Operating Activities
Net income from operations $ 96,301 $ 83,812
Noncash item included in net income
Depreciation and amortization 17,349 11,922
Changes in:
Accounts receivable 216,364 (132,255)
Merchandise inventory 74,885 (46,351)
Prepaid expenses 6,511 (4,380)
Deposits 1,965 2,000
Franchise fee -- 5,000
Accounts payable (633,651) 586,009
Customer credit balances (33,875) 43,383
Accrued liabilities (125,873) 47,431
--------- ---------
Total adjustment (511,023) 488,915
--------- ---------
Net Cash Provided By
(Used By) Operating
Activities 607,324 (405,103)
Cash Flows From Investing Activities
Capital expenditures 51,349 3,800
--------- ---------
Net Cash Provided By
(Used By) Investing
Activities 51,349 3,800
Cash Flows From Financing Activities
Borrowings (87,955) 365,000
--------- ---------
Net Cash Provided By
(Used By) Financing
Activities (87,955) 365,000
--------- ---------
Net Increase (Decrease) In Cash 468,020 (43,903)
Cash at Beginning of Year 9,612 53,515
--------- ---------
Cash at End of Year $ 477,632 $ 9,612
========= =========
See accompanying notes
F-4
<PAGE>
Innovative Business Micros, Inc.
Notes to Financial Statements
September 30, 1995
Note 1: General and Accounting Policies
-------------------------------
Innovative Business Micros, Inc. was incorporated under the laws of the State of
New York on February 1, 1986 and began its operations on June 1, 1987.
Principal Business Activity:
The company operates in one industry segment and is engaged primarily in the
sale of computer hardware and software to businesses, and professional
health care facilities. The Company also provides its customers with a full
spectrum of computer services and technical support; revenues derived from such
services are insignificant.
Inventories:
Inventories are stated at the lower of cost or market using the first-in,
first-out method. Inventories consist of microcomputer hardware, software and
related peripherals and accessories.
Property and Equipment:
Property and equipment are carried at cost. When assets are sold or
retired the cost and related accumulation of depreciation are eliminated from
the accounts, and any gain or loss is reflected in income for the period. the
cost of maintenance and repairs is charged to expense as incurred; significant
renewals and replacements which substantially extend the lives of the assets are
capitalized.
Depreciation is computed on accelerated methods over useful lives ranging
from 5 to 7 years. Leasehold improvements are amortized over the shorter of the
useful life of the improvements or the life of the related lease.
Revenue Recognition:
The Company recognizes revenue at the time products are shipped to its
customers, or when sales are made on a "cash and carry" basis.
Note 2: Other Financial Information
---------------------------
Accounts Receivables:
Accounts receivable, net at September 30, 1995 consists of the following:
Trade receivables $2,802,183
Less allowance for doubtful accounts 14,500
----------
Net receivables $2,787,683
==========
F-5
<PAGE>
Property and Equipment:
Property and equipment are carried at cost and consist of the following at
September 30, 1995:
Automotive equipment $103,586
Furniture and fixture 36,857
Leasehold improvements 31,334
Machinery and equipment 17,076
--------
188,853
Less accumulated depreciation
and amortization 94,722
--------
Total $ 94,131
========
Line of Credit:
To accommodate the Company's financial needs for inventory financing, the
Company has in place credit lines with Deutsche Financial Services and IBM
Corporation ($1,500,000 and $250,000 respectively). IBM Corporation has
temporarily increased the credit line to $500,000. At September 30, 1995, the
indebtedness was as follows:
Deutsche Financial Services $1,184,716
IBM Corporation 107,546
----------
Total lines of credit $1,292,262
==========
Related Party Transactions:
Sales: During the normal course of business, the Company sells to other
entities owned by relatives of former shareholders of Micro Computer Store, Inc.
(MCS) and Sun Computers and Software, Inc. (SCSI). MCS and SCSI were merged into
Hillside Bedding, Inc. a publicly held corporation. Sales to these related
parties for the two years ended September 30, 1995 were $3,080 and $6,816
respectively. As of September 30, 1995, the Company is due from SCSI the amount
of $4,154.
Purchaser: During the normal course of business, the Company buys from
other entities owned by relatives of former shareholders of MCS and SCSI.
Purchases from these related parties amounted to $104,444 and $363,772
respectively for the two years ended September 30, 1995. As of September 30,
1995 and 1994, the Company was indebted to MCS and SCSI in the amount of $10,776
and $1,466, respectively.
F-6
The Pro Forma Combined Financial Statements (including the Pro Forma
Adjustments) of ATEC Group, Inc. and Innovative Business Micros, Inc. As at
March 31, 1996 and June 30, 1995 and 1994 and for the nine month period and the
years then ended included in this Prospectus and Registration Statement were not
examined, reviewed or compiled by Yohalem Gillman & Company or Bianculli,
Pascale & Co., and those firms do not express an opinion or any other form of
assurance on them.
F-7
<PAGE>
<TABLE>
ATEC GROUP, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEETS (Unaudited)
March 31, 1996
<CAPTION>
Proforma Proforma
ATEC Group, Inc. Innovative Adjustments Combined
---------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 1,159,430 $ 335,757 $ 1,495,187
Accounts receivable, net 3,551,284 4,325,978 (29,844) 7,847,418
Inventories 1,884,553 166,408 2,050,961
Deferred taxes 15,213 -- 15,213
Other current assets 581,807 5,632 587,439
----------- ---------- -----------
Total current assets 7,192,287 4,833,775 11,996,218
----------- ---------- -----------
Property and equipment, net 384,124 85,760 469,884
Goodwill, net 2,000,045 -- 2,000,045
Other assets 91,982 22,445 114,427
----------- ---------- -----------
$ 9,668,438 $4,941,980 $14,580,574
=========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Revolving inventory line of credit $ 2,411,192 $ -- $ 2,411,192
Accounts payable 706,009 3,343,119 29,844 4,019,284
Accrued expenses 923,807 130,009 1,053,816
Deferred sales tax obligation 502,052 -- 502,052
Other current liabilities 1,318 -- 1,318
----------- ---------- -----------
Total current liabilities 4,544,378 3,473,128 7,987,662
Notes payable - officers and shareholders 397,244 500,000 897,244
----------- ---------- -----------
Total liabilities 4,941,622 3,973,128 8,884,906
Stockholders' equity
Preferred stocks 11,003,496 -- 11,003,496
Common Stock 141,138 60,000 (55,100) 146,038
Additional paid-in capital 4,085,300 108,100 55,100 4,248,500
Discount on preferred stock (9,046,100) -- (9,046,100)
Retained earnings (deficit) (1,457,018) 800,752 (656,266)
----------- ---------- -----------
Total stockholders' equity 4,726,816 968,852 5,695,668
----------- ---------- ----------
$ 9,668,438 $4,941,980 $14,580,574
=========== ========== ===========
</TABLE>
F-8
<PAGE>
<TABLE>
ATEC GROUP, INC. AND SUBSIDIARIES
PROFORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDED MARCH 31, 1996
<CAPTION>
Proforma Proforma
ATEC Group, Inc. Innovative Adjustments Combined
---------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $45,196,268 $13,115,208 167,523 58,143,953
Cost of sales 41,585,007 12,197,666 (167,523) 53,615,150
----------- ----------- ----------
Gross profit 3,611,261 917,542 4,528,803
----------- ----------- ----------
Operating expenses
Selling and administrative 2,965,989 639,207 3,605,196
Amortization of goodwill -
computer businesses 108,051 -- 108,051
----------- ----------- ----------
Total operating expenses 3,074,040 639,207 3,713,247
----------- ----------- ----------
Income (Loss) from operations 537,221 278,335 815,556
----------- ----------- ----------
Other income (expense)
Miscellaneous income 12,199 5,569 17,768
Interest income 6,745 13,675 20,420
Interest expense (42,666) -- (42,666)
----------- ----------- ----------
Total other (expense) income (23,722) 19,244 (4,478)
----------- ----------- ----------
Income (loss) before provision for
income taxes 513,499 297,579 811,078
Provision for income taxes 205,400 113,100 151,546
----------- ----------- ----------
Net income (loss) $ 308,099 $ 184,479 $ 659,532
=========== =========== ==========
Net earnings (loss) per share:
Primary $ 0.03 N/A $ 0.05
=========== =========== ==========
Fully Diluted $ 0.02 N/A $ 0.04
=========== =========== ==========
Weighted average number of
share - primary 8,868,008 N/A 13,768,008
=========== =========== ==========
Weighted average number of
share - fully diluted 12,513,922 N/A 17,413,922
=========== =========== ==========
</TABLE>
F-9
<PAGE>
<TABLE>
ATEC GROUP, INC. AND SUBSIDIARIES
PROFORMA COMBINED BALANCE SHEETS (UNAUDITED)
June 30, 1995
<CAPTION>
Proforma Proforma
ATEC Group, Inc. Innovative Adjustments Combined
---------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash $ 441,462 $ 477,633 $ 919,095
Accounts receivable, net 3,129,688 2,787,683 (6,622) 5,910,749
Inventories 1,438,126 288,415 1,726,541
Current portion of note receivable
- officer 16,218 -- 16,218
Due from officers and related parties 65,791 -- 65,791
Deferred taxes 15,213 -- 15,213
Other Current assets 310,336 9,846 319,982
---------- ---------- ------------
Total current assets 5,416,834 3,563,577 8,973,589
---------- ---------- ------------
Property and equipment, net 340,493 94,131 434,624
Goodwill, net 2,108,096 -- 2,108,096
Note receivable - officer 94,691 -- 94,691
Other assets 96,493 17,445 113,938
---------- ---------- -----------
$ 8,056,607 $3,674,953 $11,724,938
========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Revolving inventory line of credit $ 1,668,371 -- $ 1,668,371
Accounts payable 1,597,144 2,097,341 6,622 3,687,863
Accrued expenses 390,077 384,294 774,371
Deferred sales tax obligation 502,052 -- 502,052
Due to related parties 25,000 -- 25,000
Other current liabilities 206,754 -- 206,754
----------- ---------- ------------
Total current liabilities 4,389,398 2,481,635 6,684,411
Notes payable - related parties 396,246 522,045 918,291
----------- ---------- ------------
Total liabilities 4,785,644 3,003,680 7,782,702
----------- ---------- ------------
Stockholders' equity
Preferred stocks 3,338,193 -- 3,338,193
Common stock 128,321 60,000 (55,100) 133,221
Additional paid-in capital 2,736,566 108,100 55,100 2,899,766
Discount on preferred stock (1,167,000) -- (1,167,000)
Retained earnings (deficit) (1,765,117) 503,173 (1,261,944)
----------- ---------- -----------
Total stockholders' equity 3,270,963 671,273 3,942,236
----------- ---------- -----------
$ 8,056,607 $3,674,953 $11,724,938
=========== ========== ===========
</TABLE>
F-10
<PAGE>
<TABLE>
ATEC GROUP, INC. AND SUBSIDIARIES
PROFORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED JUNE 30, 1995
<CAPTION>
Proforma Proforma
ATEC Group, Inc. Innovative Adjustments Combined
---------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $29,738,315 $18,194,799 367,572 47,565,542
Cost of sales 26,848,934 16,379,241 (367,572) 42,860,603
----------- ----------- ----------
Gross profit 2,889,381 1,815,558 4,704,939
----------- ----------- ----------
Operating expenses
Selling and administrative 2,892,604 1,670,733 4,563,337
Amortization of goodwill -
computer businesses 52,655 -- 52,655
Write-off of media advertising credits 448,011 -- 488,011
----------- ----------- ----------
Total operating expenses 3,393,270 1,670,733 5,064,003
----------- ----------- ----------
Income (Loss) from operations (503,889) 144,825 (359,064)
----------- ----------- ----------
Other Income (expense)
Charge-off of goodwill relating to
acquisition of Hillside (2,045,628) -- (2,045,628)
(Losses) gain on marketable securities (4,136) -- (4,136)
Gain on sale of fixed assets 4,432 -- 4,432
Dividend and interest income 14,472 8,236 22,708
Interest expense (138,553) -- (138,553)
Management fees 375,000 -- 375,000
Other income 37,661 7,772 45,433
----------- ----------- ----------
Total other (expense) income (1,756,752) 16,008 (1,740,744)
----------- ----------- ----------
Income (loss) before provision for
income taxes (2,260,641) 160,833 (2,099,808)
Provision for income taxes 87,014 64,532 151,546
----------- ----------- ----------
Net income (loss) ($2,347,655) $ 96,301 ($2,251,354)
=========== =========== ===========
Net earnings (loss) per share:
Primary ($0.59) N/A ($0.25)
=========== =========== ===========
Fully Diluted ($0.59) N/A ($0.25)
=========== =========== ===========
Weighted average number of
share - primary 3,972,333 N/A 8,872,333
=========== =========== ===========
Weighted average number of
share - fully diluted 3,972,333 N/A 8,872,333
=========== =========== ===========
</TABLE>
F-11
<PAGE>
<TABLE>
ATEC GROUP, INC. AND SUBSIDIARIES
PRO FROMA COMBINED BALANCE SHEETS (UNAUDITED)
June 30, 1994
<CAPTION>
Proforma Proforma
ATEC Group, Inc. Innovative Adjustments Combined
---------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash $ 222,459 $ 9,612 $ 232,071
Accounts receivable, net 1,446,221 2,571,996 (1,466) 4,016,751
Inventories 898,477 213,530 1,112,007
Current portion of note
receivable - officer 20,119 -- 20,119
Due from officers and related parties 130,091 -- 130,091
Deferred taxes 6,285 -- 6,285
Other current assets 54,571 2,459 57,030
---------- ---------- ----------
Total current assets 2,778,223 2,797,597 5,574,354
---------- ---------- ----------
Property and equipment, net 292,047 60,130 352,177
Media advertising credits 448,011 -- 448,011
Goodwill, net 1,210,000 -- 1,210,000
Notes receivable - officer 109,155 -- 109,155
Other assets 19,175 15,480 34,655
---------- ---------- ----------
$4,856,611 $2,873,207 $7,728,352
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Revolving inventory line of credit $ 665,020 $ -- $ 665,020
Accounts payable 869,939 1,341,094 1,466 2,209,567
Notes payable - related parties 300,000 -- 300,000
Accrued expenses 428,741 347,141 775,882
Deferred sales tax obligation 443,212 -- 443,212
Due to related parties 26,615 -- 26,615
Other current liabilities 122,396 -- 122,396
---------- ---------- ----------
Total current liabilities 2,855,923 1,688,235 4,542,692
Convertible notes payable 415,500 -- 415,500
Notes payable - related parties 554,755 610,000 1,164,755
---------- ---------- ----------
Total liabilities 3,826,178 2,298,235 6,122,947
---------- ---------- ----------
Stockholders' equity
Preferred stocks 5,898 -- 5,898
Common stock 53,441 60,000 55,100 58,341
Additional paid-in capital 388,246 108,100 (55,100) 551,446
Discount on preferred stock -- -- --
Retained earnings (deficit) 582,848 406,872 989,720
---------- ---------- ----------
Total stockholders' equity 1,030,433 574,972 1,605,405
---------- ---------- ----------
$4,856,611 $2,873,207 $7,728,352
========== ========== ==========
</TABLE>
F-12
<PAGE>
<TABLE>
ATEC GROUP, INC. AND SUBSIDIARIES
PROFORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED JUNE 30, 1994
<CAPTION>
Proforma Proforma
ATEC Group, Inc. Innovative Adjustments Combined
---------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $25,481,246 $18,386,621 111,262 43,756,605
Cost of sales 23,662,100 16,414,593 (111,262) 39,965,431
----------- ----------- ----------
Gross profit 1,819,146 1,972,028 3,791,174
----------- ----------- ----------
Operating expenses
Selling and administrative 2,167,528 1,875,643 4,043,171
Amortization of goodwill -
computer businesses -- -- --
Write-off of media advertising credits -- -- --
----------- ----------- ----------
Total operating expenses 2,167,528 1,875,643 4,043,171
----------- ----------- ----------
Income (Loss) from operations (348,382) 96,385 (251,997)
----------- ----------- ----------
Other income (expense)
Charge-off of goodwill relating to
acquisition of Hillside -- -- --
(Losses) gain on marketable securities (17,577) -- (17,577)
Gain on sale of fixed assets -- -- --
Dividend and interest income 42,847 16,708 59,555
Interest expense (48,051) -- (48,051)
Management fees -- -- --
Other income 72,543 31,969 104,512
----------- ----------- ----------
Total other (expense) income 49,762 48,677 98,439
----------- ----------- ----------
Income (loss) before provision for
income taxes (298,620) 145,062 (153,558)
Provision for income taxes 11,271 61,250 72,521
----------- ----------- ----------
Net income (loss) ($309,891) $ 83,812 ($226,079)
=========== =========== ==========
Net earnings (loss) per share:
Primary ($0.80) N/A ($.04)
=========== =========== ==========
Fully Diluted N/A N/A ($.04)
Weighted average number of share
- primary 389,573 N/A 5,289,573
=========== =========== ==========
Weighted average number of share
- fully diluted 389,573 N/A 5,289,573
=========== =========== ==========
</TABLE>
F-13
<PAGE>
ATEC GROUP, INC.
NOTES TO PRO FORMA COMBINED
FINANCIAL STATEMENTS
Innovative Business Micros, Inc.
1. Basis of Presentation
The pro forma combined financial statements include historical financial
statements of ATEC Group, Inc. and Innovative Business Micros, Inc.
("Innovative"). Innovative's year end is September 30. The proforma financial
statements at March 31, 1996 includes its results of operations for the six
months ended March 31, 1996. If the transaction is consummated Innovative will
change its fiscal year end to June 30. The audited information at September 30,
1995 and 1994 of Innovative is included in the proforma combined financial
statements at June 30, 1995 and 1994. All intercompany transactions have been
eliminated.
2. Acquisition
On June 13, 1996, the Company acquired Innovative, a Long Island, NY
computer systems integrator. The Company acquired 100% of the issued and
outstanding capital stock of Innovative. As consideration for the Innovative
stock, the Company agreed to issue to the Shareholders 4,900,000 shares of the
Company's common stock.
Innovative is owned by Surinder Rametra, Ashok Rametra (officers, directors
and shareholders of ATEC) and Rajnish Rametra. Rajnish Rametra is the brother of
Surinder and Ashok Rametra. The transaction will be accounted for by application
of the pooling of interests method.
3. Intercompany sales and purchases
For the nine months ended March 31, 1996 and the year ended June 30, 1995
ATEC and Innovative had intercompany sales and purchases of $108,262 and
$367,572, respectively. Intercompany sales and purchases were $111,262 for the
year ended June 30, 1994. These transactions have been eliminated in the
accompanying pro forma combined statements. There was $29,844 of intercompany
receivables or payables at March 31, 1996.
F-14
STOCK PURCHASE AGREEMENT ("Agreement"), effective as of June __, 1966, as
amended, by and between:
ATEC GROUP, INC., a Delaware corporation
with offices located at 1952 Jericho,
Turnpike, East Northport, New York, New York
11731
("ATEC");
INNOVATIVE BUSINESS MICROS, INC., a New York
corporation with offices located at 90 Adams
Avenue, Hauppauge, New York 11788 (the
"Company"); and
RAJNISH RAMETRA, SURINDER RAMETRA
AND ASHOK RAMETRA (collectively the
"Stockholders")
WHEREAS, ATEC desires to acquire 100% of the issued and outstanding shares
of capital stock of the Company in accordance with the terms and conditions
hereinafter set forth;
WHEREAS, the Stockholders desire to sell to ATEC 100% of the issued and
outstanding shares of the Company in accordance with the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants set forth herein, it is
agreed as follows:
ARTICLE I
THE EXCHANGE
1.1 Terms of Exchange. On the basis of the representations, warranties,
covenants and agreements contained herein, and subject to the terms and
conditions of this Agreement:
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(i) The Stockholders shall sell, assign, transfer and convey to ATEC at the
Closing Date (as hereinafter defined) all of the outstanding shares of
capital stock of the Company (the "Shares"). The Stockholders shall deliver
to ATEC, at the Closing Date, certificates representing the Shares duly
endorsed in blank or accompanied by stock powers duly endorsed in blank, in
each case in proper form for transfer, with signatures guaranteed as
reasonably requested by ATEC and with all stock transfer and other required
documentary stamps affixed thereto.
(ii) In consideration for the Shares, ATEC shall cause an aggregate of
4,900,000 shares of ATEC's common stock to be issued to the Stockholders'
and/or their designees.
ARTICLE II
CLOSING
2.1 Closing. The Closing contemplated by Article 1 of this Agreement shall
be held at the offices of the Stockholders' counsel, Silverman, Collura &
Chernis, P.C., 381 Park Avenue South, New York, New York 10016 within three (3)
business days following the satisfaction and/or waiver of the conditions set
forth in Article 8 of this Agreement (the "Closing Date"). The Closing Date may
be changed by mutual agreement of the parties.
2.2 After the Closing Date and from time to time thereafter, the parties to
this Agreement shall execute such additional instruments and take such other
action as either party may reasonably request in order to effectuate the
transactions contemplated by this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to ATEC as follows:
3.1 Organization and Standing.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York and has all requisite
power, qualification and authority, corporate or otherwise, to own, lease and
operate its properties and assets and carry on its business as and in the places
where such properties and assets are now owned, leased or operated or such
business is now being conducted. The Company is in good standing in each and
every jurisdiction where its failure to qualify or to be in good standing would
have an adverse effect on its financial condition, the conduct of its business
or the ownership of its assets. Annexed hereto as Schedule 3.1(a) are true,
complete and correct copies of the Company's certificate of incorporation (or
other charter document), by-laws and all amendments thereto, as presently in
effect, all corporate minutes of Board and Shareholder Meetings for the last
three years and the stock ledger and minute books of the Company. The
Stockholders has no interest, directly or indirectly, whether through the
ownership of securities or otherwise, in any entity in competition with the
Company, any of the Company's Subsidiaries, ATEC and/or any of ATEC's
Subsidiaries.
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(b) Schedule 3.1(b) sets forth all subsidiaries (the "Subsidiaries") owned
by the Company as well as the Company's ownership of any other shares of capital
stock or other equity interests in any corporation, partnership, joint venture
or other business organization or enterprise. The Subsidiaries are all
corporations duly organized, validly existing and in good standing under the
laws of their respective states of incorporation and have all the requisite
power, qualification and authority, corporate or otherwise, to own, lease and
operate their respective properties and assets and carry on their respective
businesses as and in the place where such properties are now owned, leased or
operated or such businesses now being conducted. All the Subsidiaries are in
good standing in each and every jurisdiction where the failure to qualify or to
be in good standing would have an adverse effect on its respective financial
condition, the conduct of its business or the ownership of its respective
business. Annexed hereto is Schedule "3.1(b)" are the true, complete and correct
copies of the Certificates of Incorporation (or other charter documents),
by-laws and all amendments thereto, as presently in effect, all corporate
minutes of board and shareholder meetings for the last three years and the stock
ledger and minute books of each of the Subsidiaries. The Company and the
Subsidiaries are hereinafter collectively referred to as the "Company".
3.2 Authorization. The Company and the Stockholders have requisite power
and authority to execute, deliver and perform this Agreement. All necessary
corporate proceedings of the Company have been duly taken to authorize the
execution, delivery and performance of this Agreement. This Agreement has been
duly authorized, executed and delivered by the Company and the Stockholders,
constitutes the legal valid and binding obligation of the Company and the
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Stockholders, and is enforceable as to them in accordance with the terms hereof.
3.3 No Further Action Needed. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or filing with, any
federal, state, local or other governmental authority or any court or other
tribunal is required by the Company and/or the Stockholders, for the execution,
delivery and/or performance of this Agreement. No consent of any party to any
contract, agreement, instrument, lease, license, arrangement, or understanding
to which the Company and/or the Stockholders are a party, or to which they or
any of their respective properties or assets are subject, is required for the
execution, delivery and/or performance of this Agreement (except as to any such
consents referred to on Schedule 3.3 annexed hereto, which consents will be
delivered to ATEC prior to the Closing Date). The execution, delivery and
performance of this Agreement will not (i) violate, result in a breach of,
conflict with, or entitle any party to terminate or call a default under any
term of any contract, agreement, instrument, lease, license, arrangement, or
understanding whereby the Company and/or the Stockholders are a party to, or
(ii) violate or result in a breach of any term of the Certificate of
Incorporation (or other charter document) or by-laws of the Company; (iii)
violate, result in a breach of, or conflict with any law, rule, regulation,
order, judgment, or decree binding on the Company and/or the Stockholders or to
which any of its or his operations, business, properties or assets are subject;
and/or (iv) cause or give any person grounds to cause (with or without notice,
the passage of time, or both), the maturity of any liability or obligation of
the Company to be accelerated or will increase any such liability or obligation.
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3.4 Capitalization.
(i) The authorized capital stock of the Company consists of 200 shares of
common stock, of which 200 shares are outstanding (the "Shares"). Each of the
Shares is validly authorized, validly issued and fully paid and non-assessable,
has not been issued and is not owned or held in violation of any preemptive
right of stockholders, and is owned of record by the Stockholders.
(ii) The authorized capital stock of each of the Subsidiaries is accurately
set forth on Schedule 3.4 annexed hereto. Each of the outstanding shares of
common stock of each of the Subsidiaries is validly authorized, validly issued
and fully paid and non-assessable, has not been issued or is not owned or held
in violation of any preemptive rights of stockholders and is owned of record by
the Company.
3.5 Lack of Commitment to Issue Securities. Except as set forth on Schedule
3.5 annexed hereto, there is not presently outstanding nor is there any
commitment, plan, or arrangement to issue, any options, warrants or other rights
calling for the issuance of any shares of common or preferred stock of the
Company and/or any of the Subsidiaries or any other security or other instrument
convertible into, exercisable for or exchangeable for securities of the Company
and/or the Subsidiaries.
3.6 Financial Condition.
(a) Annexed hereto as Schedule "3.6" are true and complete copies of
(i) the audited consolidated balance sheet of the Company for the
fiscal year ended September 30, 1995 and 1994 and the related
audited consolidated statements of income and cash flows of the
Company together with all related notes thereto, accompanied by
the report thereon of the Company's accountants (collectively the
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"Financial Statements") and (ii) the unaudited consolidated
balance sheet of the Company for the period ended March 31, 1996
and the related unaudited statements of income and cash flow,
together with all related notes thereto (collectively referred to
herein as the "Financial Statements"). The Financial Statements
and the Interim Financial Statements (i) were prepared in
accordance with the books of account and other financial records
of the Company and the Subsidiaries (ii) present fairly the
financial condition, results of operations and cash flows of the
Company and the Subsidiaries as of the dates thereof and for the
periods covered thereby (iii) have been prepared in accordance
with United States general accepted accounting principles
("GAAP") applied on a basis consistent with the past practices of
the Company and the Subsidiaries and (iv) include all adjustments
(consisting only of normal recurring accruals) that are necessary
for a fair presentation of the financial conditions of the
Company and the Subsidiaries, the results of operations and cash
flows of the Company and/the Subsidiaries as of the dates thereof
or for the periods covered thereby.
3.7 Lack of Material Changes. Except as set forth on Schedule 3.7 annexed
hereto, since March 31, 1996:
(a) There has not been any change having a "material adverse effect"
on the Company. The term "material adverse effect", as used in
this Agreement, means any circumstance, change, event,
transaction, loss, failure, effect or other occurrence that is,
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or is reasonably likely to be materially adverse to the business,
operations, properties (including any intangible properties),
condition (financial or otherwise) assets, liabilities, results
of operations or prospects of the Company and/or the
Subsidiaries.
(b) Neither the Company nor any of the Subsidiaries have authorized,
declared, paid, or effected any dividend or liquidating or other
distribution in respect of its capital stock or any direct or
indirect redemption, purchase, or other acquisition of any such
stock.
(c) The operations and business of the Company and the Subsidiaries
have been conducted in all respects only in the ordinary course.
(d) Neither the Company nor any of the Subsidiaries have mortgaged,
pledged or subjected to lien or other encumbrances any of its
assets.
(e) Neither the Company nor any of the Subsidiaries have suffered an
extraordinary loss (whether or not covered by insurance) or
waived any right of substantial value.
(f) Neither the Company nor any of the Subsidiaries have sold or
transferred any of its assets having a book value of $5,000 or
more or canceled any debts or claims, except, in each case, in
the ordinary course of business.
(g) Neither the Company nor any of the Subsidiaries have issued any
common stock, preferred stock, capital stock, bonds, warrants,
options, rights or any other form of corporate securities.
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(h) There has not been any strike, lockout, labor trouble or any
similar event or condition of any character which would have a
material adverse effect on the Company.
(i) There has not been any increase in the compensation payable or to
become payable by the Company and/or the Subsidiaries to any of
its respective officers, employees or agents, or any known
payment or arrangement made to or with any of such persons.
(j) Neither the Company nor any of the Subsidiaries have made any
change in the method of accounting or accounting practice or
policy used by the Company, other than changes required by GAAP.
(k) Neither the Company nor any of the Subsidiaries have made any
material changes in the customary methods of operations of the
Company, including practice and policies relating to purchasing,
inventory, marketing, selling or pricing.
(l) Neither the Company nor any of the Subsidiaries have merged with,
been merged with or entered into a consolidation with or acquired
(by purchase, merger, consolidation, stock acquisition or
otherwise) a substantial portion of the assets of any entity or
otherwise acquired assets other than in the ordinary costs and in
accordance with past practices.
(m) Neither the Company nor any of the Subsidiaries have agreed,
whether in writing or otherwise, to take any of the acts
specified in this Article 3.7, except for those contemplated by
this Agreement.
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(b) There is no fact known to the Company and/or the Stockholders which
will have a material adverse effect or in the future (as far as the Company or
the Stockholders can foresee) may have a material adverse effect on the
financial condition, results of operations, business, properties, assets,
liabilities, or future prospects of the Company and/or any of the Subsidiaries
which has not been disclosed to ATEC in this Agreement; provided, however, that
the Company and the Stockholders express no opinion as to political or economic
matters of general applicability.
3.8 Absence of Undisclosed Liabilities. (i) Except as set forth on Schedule
3.8 annexed hereto, neither the Company nor any of the Subsidiaries, to the best
knowledge of the Company and/or the Stockholders have any liabilities or
obligations of any nature (whether absolute, accrued, contingent, or otherwise)
including without limitation liabilities for federal, state, local, or foreign
taxes, liabilities to customers or suppliers, direct or indirect, claims,
losses, damages, deficiencies (including deferred income tax and other net tax
deficiencies), costs, expenses, obligations, guarantees, or responsibilities,
whether accrued, absolute, or contingent, known or unknown, fixed or unfixed,
liquidated or unliquidated, secured or unsecured, (hereinafter collectively
referred to as "Liabilities") other than the following:
(a) Liabilities for which full provision and disclosure have been
made on the audited balance sheet of the Company for its most
recent fiscal year ended September 30, 1995; and/or
(b) other liabilities arising since September 30, 1995 and prior to
the Closing Date which have been incurred in the ordinary course
of business and which are not inconsistent with the
representations and warranties of the Company and the
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Stockholders contained in this Agreement or any other provisions
of this Agreement and do not individually exceed $5,000 and in
the aggregate exceed $25,000.
3.9 Taxes. The term "Tax" or "Taxes" as used in this Agreement means all
income, gross receipts, sales, use, transfer, employment, franchise, profits,
property, excise or other similar taxes, estimated import duties, fees, stamp
taxes and duties, value added taxes, assessments or charges of any kind
whatsoever (whether payable directly or by withholding), together with any
interest and penalties, additions to tax or additional amounts imposed by any
taxing authority with respect thereto.
(a) Except as set forth in Schedule 3.9(a) annexed hereto (i)(A) all
material returns and reports in respect of federal, local, state
and/or local Taxes ("Tax Returns" or "Return") required to be
filed with respect to the Company (including the consolidated
federal income Tax Returns and state and local income or
franchise Tax Returns that include the Company or any Subsidiary
on a consolidated, combined, or unitary ("combined") basis) have
been timely filed; (B) all Taxes shown to be payable on such
Returns or otherwise due, and all assessments of Tax made against
the Company with respect to such Returns, have ben paid; (C) all
such Returns are true, correct, and complete in all material
respects, and (D) no adjustment relating to such Returns has been
proposed formally or informally by any Tax authority and, to the
best knowledge of the Company, no basis exists for any
suchadjustment; (ii) there is no pending or, to the best
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knowledge of the Company, threatened actions or proceedings for
the assessment or collection of Taxes against the Company; (iii)
there are no Tax liens on any assets of the Company; (iv) there
are no outstanding waivers or agreements extending the statute of
limitations with respect to any Tax to which the Company may be
subject; (v) there are no outstanding requests for information
made by a taxing authority to the Company; (vi) the Company has
not been advised by any taxing authority of any proposed
reassessments of the value (or other Tax base) of any property
owned by the Company that could increase the amount of a property
Tax to which the Company would be subject; (vii) the Company has
made all payments of estimated Taxes required to be made under
the Code and all state or local Tax provisions; (viii) all Taxes
required to be withheld, collected or deposited by or with
respect to the Company have been timely withheld, collected or
deposited, as the case may be, and, to the extent required, have
been paid to the relevant taxing authority, and (iv) no power of
attorney that is currently in force has been granted with respect
to any matter relating to Taxes that could affect the Company.
(b) Schedule 3.9(b) annexed hereto (i) lists by type all income,
franchise and other material Tax Returns (federal, state, local,
and foreign filed with respect to the Company for taxable periods
ended on or after the Company's 1993 year end; (ii) indicates for
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which jurisdictions Returns have been filed on a combined basis
for taxable periods ended on or after the Company's 1993 year
end, and the companies joining in such Returns; (iii) indicates
the most recent income, franchise, or other material Tax Return
for each relevant jurisdiction for which an audit has been
completed or the statute of limitations has lapsed, and (iv)
indicates all Tax Returns that currently are the subject of
audit.
(c) Schedule 3.9(c) annexed hereto (i) lists the amount and
expiration dates of any net operating loss, net capital loss,
unused business credit, unused foreign tax credit, or excess
charitable contribution allocable to the Company as of the
Company's 1993 year end.
(d) Reserves and allowances have been provided on the Financial
Statements and the Interim Financial Statements that are adequate
to satisfy all Liabilities for Taxes relating to the Company for
periods through the date of such financial statements (without
regard to the materiality thereof).
(e) The Company has delivered or made available to the Stockholders
correct and complete copies of all federal, state and local Tax
Returns of the Company for periods ending on or after the
Company's 1993 year end, and correct and complete copies (or
summaries) of all examination reports, correspondence with taxing
authorities, statements of deficiencies assessed against or
agreed to by the Company since the Company's 1993 year end and
any formed or informed tax sharing arrangements to which the
Company is a party.
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3.10 Litigation and Claims.
(a) There is no litigation, arbitration, claim, governmental,
administrative, regulatory or other proceeding or investigation (formal or
informal) pending, threatened, or in process (or any basis therefore known
to the Company or the Stockholders) with respect to the Company and/or any
of the Subsidiaries, any transaction in the Company's and/or the
Subsidiaries' securities, the transactions contemplated by this Agreement,
or any of the Company's and/or the Subsidiaries' business, properties, or
assets except as described on Schedule 3.10(a) annexed hereto. Neither the
Company nor any of the Subsidiaries are in violation of, or in default with
respect to, any law, rule, regulation, order, judgment, or decree; nor is
any action required to be taken in order to avoid such violation or
default. Except as set forth on Schedule 3.10(a) annexed hereto, there are
no citations, fines or penalties heretofore asserted against the Company
and/or the Subsidiaries under any federal, state or local laws which bind
unpaid or which otherwise bind the assets of the Company.
(b) Annexed hereto as Exhibit 3.10(b) are true and complete copies of
all pleadings, orders and other relevant documents regarding all matters
identified on Schedule 3.10(a).
3.11 Assets. Attached hereto as Schedule 3.11 is a true and complete list
of all real and other properties and material assets (including but not limited
to machinery, equipment, inventories, and intangibles owned, leased, used in its
business and/or licensed by the Company and/or the Subsidiaries, (collectively
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the "Assets"). The Assets constitute all such properties and assets which are
necessary to conduct the business of the Company and/or the Subsidiaries.
3.12 Title to Assets. The Company and the Subsidiaries have good and
marketable titles to all of the Assets (except real and other properties and
assets as are held pursuant to leases as described on Schedule 3.15 annexed
hereto), free and clear of all liens, mortgages, security interests, pledges,
charges, conditional sales agreements and security investments, and encumbrances
(except as are listed in Schedule 3.22 attached hereto).
3.13 Lack of Restrictions. No real property owned, leased, licensed, or
used by the Company and/or the Subsidiaries lies in the area which is, or to the
knowledge of the Company and/or the Stockholders, will be, subject to zoning,
use, or building code restriction which would prohibit, and no state of facts
relating to the actions of another person or entity or its ownership, leasing,
licensing, or use of any real or personal property exists or will exist which
would prevent, the continued effective ownership, leasing, licensing, or use of
such real property in the business in which the Company and/or the Subsidiaries
are engaged or the business in which they contemplate engaging.
3.14 Contracts and Other Instruments. (i) Schedule 3.14 accurately and
completely details all contracts, licenses, instruments, powers of attorney and
agreements to which the Company and/or the Subsidiaries are a party, including
but not limited to, all agency agreements; supply agreements; manufacturer
agreements; price protection agreements; distributorship agreements; OEM
agreements; partnership agreements; dealership agreements; fiduciary agreements;
license agreements; marketing agreements; commission agreements; sales agency
agreements; bank credit agreements; factoring agreements; loan agreements;
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indentures; promissory notes; guarantees; undertakings; other evidences of
indebtedness; letters of credit; joint venture agreements; agreements for the
acquisition of merger or combination with any other company, corporation or
businesses signed within the last three years; employment agreements; labor
agreements; salesmen commission agreements; independent contractor agreements;
sales or purchase agreements for a term in excess of one year which have an
aggregate sale or purchase price in excess of $25,000; contracts, agreements,
arrangements, or understandings with any stockholder, any director, officer, or
employee, any relatives or affiliate of any stockholder or of any such director,
officer, or employee, or any other corporation or enterprise in which any
stockholder, any such director, officer, or employee, or any such relative or
affiliate then had or now has a 5% or greater equity or voting or other
substantial interest; government contracts; franchise agreements; management
agreements; advisory agreements; consulting agreements; advertising agreements;
construction agreements; warehousing agreements; engineering agreements; design
agreements; major utility agreements and any other agreements which involve the
payment of in excess of $25,000 prior to the date it can be terminated without
penalty or premium; (all of which contracts, licenses, instruments, power of
attorneys and agreements are hereinafter referred to collectively as the
"Contracts").
(ii) Neither the Company nor any of the Subsidiaries is nor do they expect
to be in the future, in violation or breach of, or in default with respect to
complying with, any material provision of any such Contract thereof, and each
such Contract, is in full force and effect and is the legal, valid, and binding
obligation of the parties thereto and is enforceable as to them in accordance
with their respective terms. Neither the Company, the Subsidiaries nor any other
party to any such Contract has given notice of termination or taken any action
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the continuance thereof. The execution, delivery, and performance of this
Agreement will not prejudice any such Contract. Neither the Company nor any of
the Subsidiaries are party to or bound by any other contract, agreement,
instrument, lease, license, arrangement, or understanding, or subject to any
charter or other restriction, which has had or may in the future have a material
adverse effect on the financial condition, results of operations, business
properties, assets, liabilities, or future prospects the Company and/or the
Subsidiaries.
3.15 Leases. Attached hereto and made a part hereof as Schedule "3.15" are
complete and correct copies of all of the Company's and the Subsidiaries' leases
and subleases to which they are a party ("Leases"). The Company and the
Subsidiaries enjoys peaceful and undistributed possession under all such Leases.
All such Leases are legal, valid and binding agreements and the Company and/or
the Subsidiaries are tenants or possessor in good standing thereunder, free of
any default or breach whatsoever and quietly enjoys the premises providing for
therein. Each rental and other payment due thereunder has been made; each act
required to be performed which, if not performed, will constitute a material
breach thereof has been duly performed; and no acts prohibited to be performed
have been performed thereunder which, if presented, would constitute a material
breach thereof. Each of such leases are in full force and effect and there is
not under any such lease any default or claim of default or event which, with or
without notice of the lapse of time or both would constitute a breach or default
thereunder.
3.16 Capital Projects. As of the date of this Agreement, neither the
Company nor the Subsidiaries have undertaken any capital projects the cost of
completion of which would exceed $10,000.
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3.17 Environmental Laws
(i) (a) The assets and all real properties utilized by the Company and/or
the Subsidiaries have, and continues to be, owned and operated by
them in material compliance with all applicable Environmental
Laws.
(b) Neither the Company nor the Subsidiaries have received notice of
any pending or threatened claims, complaints or requests for
information with respect to any alleged violation of any
Environmental Laws.
(c) There have been no material releases, as defined under any
Environmental Laws, of Hazardous Substances, by the Company
and/or the Subsidiaries.
(d) The Company and the Subsidiaries have been issued and is in
material compliance with all permits, certificates, approvals,
licenses, registrations, orders, administrative consent orders
any other authorizations, approvals or consents relating to
Environmental Laws or Hazardous Substances necessary for the
operation of its businesses.
(e) Neither the Company nor the Subsidiaries have received notice
that any of their respective properties are listed or proposed
for listing in the National Priorities List created pursuant to
CERCLA or on the CERCLIS, or any similar state list of sites
requiring investigation or cleanup.
(f) There are no polychlorinated biphenyls (other than may be
contained in electrical transformers which are labeled, operated
and maintained in accordance with all Environmental Law) or
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asbestos-containing materials present at any of the properties
owned and/or operated by the Company and/or the Subsidiaries.
(g) Neither the Company nor the Subsidiaries have received notice of
pending or threatened claims with respect to any Properties owned
and/or operated by the Company, whether or not the subject of any
indemnity, under any Environmental Law or involving any Hazardous
Substances.
(ii) As used in the preceding paragraph and elsewhere in this Agreement the
following terms shall have the following meanings:
(a) Environmental Laws means any federal, state or local statute,
code, ordinance, rule, regulation, permit, consent, approval,
license, judgment, order, writ, judicial decision, decree, agency
interpretation, injunction or other authorization or requirement
whenever promulgated, issued, or modified, relating to:
(A) emissions, discharges, spills, release or threatened
releases of pollutants, contaminants, Hazardous Substances,
materials containing Hazardous Substances, or hazardous or toxic
materials or wastes into ambient air, surface water, groundwater,
watercourses, publicly or privately owned treatment works,
drains, sewer systems, wetlands, septic systems or onto land;
(B) the use, treatment, storage, disposal, handling,
manufacturing, transportation, or shipment of Hazardous
Substances, materials containing Hazardous Substances or
hazardous and/or toxic wastes, material, products or by-products
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(or of equipment or apparatus containing Hazardous Substances) as
defined in or regulated under the following statutes and their
implementing regulations: the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 1801 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Sections 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Sections 9601 et seq. ("CERCLA"), The Clean Water
Act, 33 U.S.C. Sections 1251 et seq., The Clean Air Act, 42
U.S.C. Sections 7401 et seq, and/or the Toxic Substances Control
Act, 15 U.S.C. Sections 2601 et seq., each as amended from time
to time; or
(b) Hazardous Substances means (A) hazardous materials, hazardous
wastes and hazardous substances as defined or regulated under any
Environmental Laws, (B) any mixtures, blends, compounds or
liquids containing any hazardous substances in any proportions,
(C) petroleum and petroleum products including crude oil and any
fractions thereof, (D) asbestos and/or any material which
contains any hydrated mineral silicates, whether friable or
non-friable, (E) PCBs, or PCB-containing materials or fluids, (F)
any other hazardous radioactive, toxic or noxious substance,
material, pollutant, or solid, liquid or gaseous waste, and (G)
any substance with respect to which a federal, state or local
agency requires environmental investigation, monitoring or
remediation.
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(c) CERCLA has the meaning specified in the definition of
"Environmental Laws".
(d) CERCLIS means the Comprehensive Environmental Responsive,
Compensation and Liability Information System, 42 U.S.C.
Section 9616(a).
3.18 Compliance with Laws. Annexed hereto as exhibit 3.18 is a list of all
permits, licenses, orders, certificates, and approvals (collectively "Licenses")
of all federal, state or local governmental regulatory bodies required for the
Company and/or the Subsidiaries to conduct their businesses as presently
conducted; all such Licenses, are in full force and effect and no suspension or
cancellation of any of them is pending or threatened; and none of such Licenses,
will be adversely affected by the consummation of the transaction contemplated
by this Agreement.
3.19 ERISA Matters and Employees. Neither the Company nor the Subsidiaries
do have, nor do it contribute to, any pension, profit sharing, option, other
incentive plan, or any other type of employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974), or any
obligation to or customary arrangement with employees for bonuses, incentive
compensation, or severance pay. Annexed hereto as Schedule 3.19 is a list
detailing the name and current salary (or rate of pay) and other compensation
now paid by the Company and/or the Subsidiaries to each employee whose total
annual compensation is $25,000 or more, including a description of any increase
scheduled to be effective after the date of this Agreement.
3.20 Insurance. Schedule 3.20 attached hereto and made a part hereof is a
complete and correct list of all insurance policies, of any kind held by the
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Company and/or the Subsidiaries. Each such policy is valid and enforceable; all
premiums and other payments due from the Company and/or the Subsidiaries on
account of any such policy have been paid, there is no act or failure to act
which has or might cause any such policy to be canceled or terminated.
3.21 Labor Disputes. Except as set forth on Schedule 3.21 annexed hereto,
neither the Company nor the Subsidiaries a party to any union representation or
labor contract. Neither the Company nor any of the Subsidiaries have received
any notice from any labor union or group of employees that such union or group
represents or believes or claims it represents or intends to represent any of
their employees; no strike or work interruption by any of their employees is
planned, under consideration, threatened or imminent; and neither the Company
nor any of the Subsidiaries have made any loan or given anything of value,
directly or indirectly, to any officer, official, agent or representative of any
labor union or group of employees. Neither the Company nor the Subsidiaries are
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to the date hereof or amounts required to be reimbursed to such employees.
In the event of termination of the employment of any said employees, neither the
Company nor the Subsidiaries will by reason of anything done prior to the
Closing Date be liable to any of said employees for "severance pay" or any other
payments except as set forth in Schedule 3.21. The Company and the Subsidiaries
are in compliance with all Federal, state and local laws and regulations
respecting labor, employment and wages and hours; and there is no unfair labor
practice complaint against them pending before the National Labor Relations
Board or any comparable state or local agency.
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3.22 Liens on Assets. Except as set forth on Schedule 3.22 attached hereto
the Company and the Subsidiaries have good and marketable title to all of their
respective Assets and such Assets are not subject to any mortgages, pledges,
liens, conditional sales agreements, encumbrances and security interests or
claims except for minor imperfections in title and encumbrances, if any, which
singularly and in the aggregate are not substantial in amount and do not
materially detract from the value of the property subject thereto or impair the
use thereof by their business.
3.23 Condition of Tangible Assets. As of the Closing Date, all of the
Company's and the Subsidiaries' Assets will be in normal, operating and useable
condition, in a state of good maintenance and repair, subject to ordinary wear
and tear and scheduled maintenance items, taking into consideration the age and
utilization thereof, and, conform to all applicable ordinances, regulations and
other laws (including those relating to building and zoning and environmental
protection and occupational safety and health).
3.24 Validity of Contemplated Transactions. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby (i) have been duly approved by the unanimous consent of the
Board of Directors of the Company; (ii) do not and will not contravene, violate
and/or result in a breach or default under any provision of the Certificate of
Incorporation or Bylaws of the Company are in effect; (c) do not violate, are
not in conflict with, and do not constitute a default under, or cause the
acceleration of any payments pursuant to, or otherwise impair the good standing,
validity, or effectiveness of any material agreement, contract, license,
indenture, instrument, lease, or mortgage, or subject the Company or any of
their assets to any indenture, mortgage, contract, commitment, or agreement,
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other than this Agreement, to which they are a party or by which any of the
assets are bound; and (d) do not violate any material provision of law, rule,
regulation, order, permit, or license to which the Company is subject.
3.25 Questionable Payments. Neither the Company, the Subsidiaries, any
director, officer, agent, employee, nor other person associated with or acting
on behalf of such entities or individuals has, directly or indirectly: (i) used
any corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful payment to foreign or domestic governmental officials or employees or
to foreign or domestic governmental officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; (ii) violated any
provision of the Foreign Corrupt Practices Act of 1977; (iii) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets;
(iv) made any false or fictitious entry on the books or records of the Company
and/or the Subsidiaries; (v) made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment; (vi) given any favor or gift which is not
deductible for federal income tax purposes; and/or (viii) made any bribe,
kickback, or other payment of a similar or comparable nature, whether lawful or
not, to any person or entity, private or public, regardless of form, whether in
money, property, or services, to obtain favorable treatment in securing business
or to obtain special concessions, or to pay for favorable treatment for business
secured or for special concessions already obtained.
3.26 Directors and Officers. A true and complete list as of the date of
this Agreement indicating the Company's and the Subsidiaries, directors and
officers, each of whom has been duly elected is as follows:
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NAME POSITION
---- --------
Rajnish Rametra President, Treasurer, Director
Vijay Rametra Secretary
3.27 Patents, Trademarks, Et Cetera. Schedule 3.27 accurately sets forth
all patents, patent applications, trademark, trademark applications, trade name,
service mark, copyright, franchise, or other intangible property or asset (all
of the foregoing being herein called "Intangibles"), owned by, licensed by
and/or pending on behalf of the Company and/or the Subsidiaries. All Intangibles
are in good standing and uncontested. Schedule 3.27 accurately sets forth with
respect to Intangibles owned by the Company and/or the Subsidiaries, where
appropriate, a statement of cost, book value and reserve for depreciation of
each item for financial reporting purposes, and with respect to Intangibles
licensed by the Company and/or the Subsidiaries from or to a third party, a
description of such license. Neither the Stockholders nor any employee of the
Company and/or the Subsidiaries, any relative or affiliate of the Stockholders,
any such director, officer, or employee of the foregoing, or any such relative
or affiliate had or now has a 5% or greater equity or voting or other
substantial interest, possesses any Intangible which relates to the business of
the Company. There are no trademarks used by the Company and/or the Subsidiaries
to identify its products, and such trademark is protected by registration in the
name of the Company and/or the Subsidiaries on the [principal] [supplemental]
register in the United States Patent Office. There is no right under any
Intangible necessary to the business of the Company and/or the Subsidiaries as
presently conducted or as it contemplates conducting, except such as are so
designated in Schedule 3.27. Neither the Company nor the Subsidiaries have
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infringed, is infringing, or has received notice of infringement with asserted
Intangibles of others. There is no infringement by others of Intangibles of the
Company and/or the Subsidiaries. There is no Intangible of others which may
materially adversely affect the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company
and/or the Subsidiaries.
3.28 Accounts and Notes Receivable. All accounts and notes receivable
reflected on the Financial Statements and the Interim Financial Statements
annexed hereto as Schedule 3.6 constitute valid and binding obligations, have
been collected or are and will be good and collectible, in each case at the
aggregate recorded amounts thereof without right of recourse, defense,
deduction, return of goods, counterclaim, offset, or set off on the part of the
obligor, and, if not collected, can reasonably be anticipated to be paid within
90 days of the date incurred.
3.29 Inventories. All inventories of the Company and/or the Subsidiaries
are good and marketable on a normal basis in the existing product lines of the
Company and/or the Subsidiaries. All inventory is merchantable and fit for the
particular purpose for which it is intended.
3.30 Customer, Supplier, Franchisees. Schedule 3.30(a) attached hereto
lists the names and addresses of all of material customers, suppliers and
franchisees of the Company and/or the Subsidiaries. None of such suppliers,
customers, and/or franchisees has asserted any claim against or threatened to
terminate its relationship with the Company and/or the Subsidiaries. Except as
set forth in Schedule 3.18(b) annexed hereto neither the Company nor the
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Subsidiaries have any direct involvement, interest in or affiliation with any
customer, supplier or franchisee of the Company.
3.31 Bank Accounts. Schedule 3.31 annexed hereto lists the names and
address of every bank and other financial institution in which the Company
and/or the Subsidiaries maintain an account (whether checking, savings or
otherwise), lock box or safe deposit box, and the account numbers and names of
persons having signing authority or other access thereof.
3.32 Veracity of Statements. To the best knowledge of the Company and/or
the Stockholders, neither this Agreement nor the representations and warranties
by the Company and/or the Stockholders contained herein or in any documents,
instruments,certificates or schedules furnished pursuant hereto or in connection
with the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
or facts contained herein and therein not misleading. To the best knowledge of
the Company and/or the Stockholders, there is no fact which has a material
effect, or in the future may have a material adverse effect (to the knowledge of
the Company and/or the Stockholders) on the business, operations, affairs,
condition or prospects of the Company and/or the Subsidiaries, its assets, its
business or the Stockholders, which has not been set forth in this Agreement,
provided however that the Company and/or the Stockholders express no opinion as
to political or economic matters of general applicability.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ATEC
ATEC hereby represents and warrants to the Company and the Stockholders as
follows:
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4.1 Organization and Standing.
(a) ATEC is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and has all requisite power, qualification
and authority, corporate or otherwise, to own, lease and operate its properties
and assets and carry on its business as and in the places where such properties
and assets are now owned, leased or operated or such business is now being
conducted. ATEC is in good standing in each and every jurisdiction where its
failure to qualify or to be in good standing would have an adverse effect on its
financial condition, the conduct of its business or the ownership of its assets.
4.2 Authorization. ATEC has all requisite power and authority to execute,
deliver and perform this Agreement. All necessary corporate proceedings of ATEC
have been duly taken to authorize the execution, delivery and performance of
this Agreement. This Agreement has been duly authorized, executed and delivered
by ATEC, constitutes the legal valid and binding obligation of ATEC, and is
enforceable as to them in accordance with the terms hereof.
4.3 No Further Action Needed. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or filing with, any
federal, state, local or other governmental authority or any court or other
tribunal is required by ATEC, for the execution, delivery and/or performance of
this Agreement. No consent of any party to any contract, agreement, instrument,
lease, license, arrangement, or understanding to which ATEC is a party, or to
which it or any of its properties or assets are subject, is required for the
execution, delivery and/or performance of this Agreement (except as to any such
consents referred to on Schedule 4.3 annexed hereto, which consents will be
delivered to ATEC prior to the Closing Date). The execution, delivery and
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performance of this Agreement will not (i) violate, result in a breach of,
conflict with, or entitle any party to terminate or call a default under any
term of any contract, agreement, instrument, lease, license, arrangement, or
understanding whereby ATEC is a party to, or (ii) violate, result in a breach
of, or conflict with any law, rule, regulation, order, judgment, or decree
binding on ATEC or to which any of its or his/her operations, business,
properties or assets are subject; and/or (iii) cause or give any person grounds
to cause (with or without notice, the passage of time, or both), the maturity of
any liability or obligation of ATEC to be accelerated or will increase any such
liability or obligation.
4.4 Veracity of Statements. Neither this Agreement nor the representations
and warranties by ATEC contained herein or in any documents, instruments,
certificates or schedules furnished pursuant hereto or in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements or facts
contained herein and therein not misleading. There is no fact which adversely
affects, or in the future may have a material adverse effect (to the knowledge
of ATEC) on the business, operations, affairs, condition or prospects of ATEC,
its assets and/or business, which has not been set forth in this Agreement,
provided however that ATEC experiences no opinion as to political or economical
matters of general applicability.
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ARTICLE 5
ADDITIONAL AGREEMENTS
5. Additional Agreements. The obligation of the parties are conditioned, in
addition to the issuance and exchange of the shares of stock described in
Article 1 hereof and compliance with the requirements of Articles 6, 7, 8 and 9
hereof, upon consummation of the following additional agreements, commitments
and occurrences:
The entry into an employment agreement, upon execution of the Agreement in
the form annexed hereto as Exhibit 6.3, between the Company and Rajnish
Rametra.
ARTICLE 6
COVENANTS OF ATEC
6. ATEC covenants as follows:
6.1 The representations and warranties of ATEC contained in this Agreement
and in the schedules hereto shall be true and correct in all material respects
as of the Closing Date. ATEC shall give the Company and the Stockholders prompt
notice of any material change in any of the information contained in the
representations and warranties of ATEC, the schedules hereto or the documents
furnished by ATEC in connection herewith which occurs prior to the Closing Date.
Upon the happening of any occurrence or event prior to the Closing Date, which
shall have a material adverse effect upon the business or assets of ATEC, the
Company and the Stockholders shall have the right to terminate this Agreement by
written notice to ATEC, provided ATEC has not cured such occurrence or event by
the earlier of June 30, 1996 or 30 days after the happening of such occurrence
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or event or at a later time mutually agreed to by the parties, and upon such
termination, no party shall have any further liability or obligation under this
Agreement.
6.2 The Current Board of ATEC shall, at or prior to the issuance of the
shares, prepare and present to the Company Consents of its Directors evidencing
the approval of this Agreement and the transactions contemplated hereby.
6.3 ATEC will, prior to the Closing Date, use its best efforts to comply
with all laws affecting operation of its business.
6.4 ATEC shall use its best efforts to take or cause to be taken all action
and do or cause to be done all things necessary and proper to consummate the
transactions contemplated by this Agreement, including, without limitation, to
obtain all consents, approvals and authorizations of third parties, to make all
filings with and give all notices to third parties which may be necessary or
required in order to effectuate the transactions contemplated hereby.
6.5 ATEC will cause itself to conduct its respective affairs so that at the
Closing Date no representation or warranty contained in this Agreement and
schedules, will be inaccurate, no covenant, commitment or agreement of ATEC will
be breached, and no condition in this Agreement will remain unfulfilled by
reason of the actions or omissions of ATEC.
ARTICLE 7
COVENANTS OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, covenant as
follows:
7.1 To the best knowledge of the Company and the Stockholders, the
representations and warranties regarding the Company and the Stockholders,
contained in this Agreement shall be true and correct in all material respects
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as of the Closing Date, and the Company and the Stockholders shall give ATEC
prompt notice of any material change in any of the information contained in the
representations and warranties regarding the Company and the Stockholders,
hereunder or the documents furnished by the Company and the Stockholders in
connection herewith which occurs prior to the Closing Date.
7.2 The Company and the Stockholders will use their best efforts to, prior
to the Closing Date, comply with all laws affecting the operation of the
Company's and Subsidiaries' businesses and will not operate said businesses
other than in the ordinary course, and will give notice to ATEC of any event or
circumstance not in the ordinary course which materially affect the Company, the
Subsidiaries and/or the Assets.
7.3 The Company and the Stockholders shall, at or prior to the Closing
Date, prepare and present to ATEC Resolutions of the Boards of Directors of the
Company and its stockholders, evidencing the approval of the entry of the
parties into this Agreement and the transaction contemplated hereby.
7.4 The Company and the Stockholders shall use its best efforts to take or
cause to be taken all action and do or cause to be done all things necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement, including, without limitation, to obtain all consents, approvals and
authorizations of third parties and to make all filings with and give all
notices to third parties which may be necessary or required in order to
effectuate the transactions contemplated hereby.
7.5 Except as otherwise requested by ATEC in writing, the Company and the
Stockholders will, use their best efforts to preserve the business operation of
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the Company and the Subsidiaries as such businesses are presently operated upon
the signing of this Agreement, to keep available the services of their present
personnel, to preserve in full force and effect the Contracts, and Leases and to
preserve the goodwill of the Company and its Subsidiaries with their respective
suppliers, customers, and others having business relations with them as the same
exist upon the signing of this Agreement. Unless this Agreement is rightfully
terminated, the Company and the Subsidiaries will cause themselves to conduct
their business and operation in all respects only in the ordinary course.
7.6 The Company shall make available for inspection all of its corporate
books, records, documents and assets, and will otherwise afford to ATEC and its
representatives reasonable access to all documentation, contracts, agreements,
patents, patent applications and all other information concerning the business,
financial and legal conditions of the Company and the Subsidiaries for the
purpose of conducting a due diligence investigation thereof. ATEC agrees that
all information so provided will be treated as confidential, that ATEC will not
make any use of such information, other than for the purpose of consummating the
transactions in this Agreement, unless the same was previously in ATEC's
possession, or became available to ATEC through non-confidential means or shall
otherwise come into the public domain.
7.7 The Stockholders will not sell, assign, pledge, transfer, lien,
encumber in any manner or grant any rights whatsoever (including, but not
limited to calls, puts, options or warrants) to the Shares to any party other
than ATEC (or enter into any agreement, written or otherwise to do any of the
foregoing). Neither the Company, the Subsidiaries nor the Stockholders will
undertake or consummate any of the items referred to in Article 3.7 hereof.
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ARTICLE 8
CONDITIONS OF CLOSING
8.1 The obligation of the Company and the Stockholders to close hereunder
shall be subject to the fulfillment and satisfaction, prior to or at the Closing
Date, of the following conditions or the written waiver thereof by the Company
and the Stockholders:
(i) Additional Agreements. All of the agreements and commitments set forth
in Article 5 of this Agreement shall be consummated.
(ii) Representations and Warranties. The representation and warranties of
ATEC in this Agreement shall be true and correct in all material respects
when made and shall be true and correct in all material respects on and as
of the Closing Date.
(iii) Delivery of Officers' Certificate. Certificates signed by the current
president of ATEC shall be delivered to the Company and the Stockholders
certifying that each of the warranties and representations set forth in
this Agreement are materially true and accurate as of the Closing Date and
that no event or occurrence has transpired as of the Closing Date which has
or will have a material adverse effect upon the business of ATEC.
(iv) Compliance with Agreement. ATEC shall have performed and complied with
all of its covenants and obligations under this Agreement and delivered all
shares and other documents and materials required hereunder to the Company
and the Stockholders.
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(v) Absence of Suit. No action, suit or proceedings before any court or any
governmental or regulatory authority shall have been commenced or
threatened and, no investigation by any governmental or regulatory
authority shall have been commenced, against ATEC, seeking to restrain,
prevent or change the transactions contemplated hereby, or questioning the
validity or legality of any such transactions, or seeking damages in
connection with any of such transactions.
(vi) Receipt of Approvals, Etc. All approvals, consents and/or waivers for
ATEC that are necessary to effect the transactions contemplated hereby
shall have been received.
(vii) Proceedings and Instruments Satisfactory; Certificates. All
proceedings, corporate or otherwise, to be taken in connection with the
transactions contemplated by this Agreement shall have occurred and all
appropriate documents incident thereto as ATEC may reasonably request shall
have been delivered to ATEC.
8.2 The obligation of ATEC to close hereunder shall be subject to the
fulfillment and satisfaction, prior to or at the Closing Date, of the following
conditions by the Company and the Stockholders or the written waiver thereof by
ATEC:
(i) Additional Agreements. All of the agreements and commitments set forth
in Article 5 of this Agreement shall be consummated.
(ii) Representations and Warranties. The representation and warranties
regarding the Company and the Stockholders, in this Agreement shall be true
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and correct in all material respects when made and shall be true and
correct in all material respects on and as of the Closing Date.
(iii) Delivery of Officers' Certificate. The Company and the Stockholders
shall deliver to ATEC a certificate signed by the Company's President and
the Stockholders, certifying that each of the warranties and
representations regarding the Company and the Stockholders, set forth in
this Agreement is true and accurate as of the Closing Date and that no
event or occurrence has transpired as of the Closing Date which has or will
have a material adverse effect upon the business or assets being acquired.
(iv) Compliance with Agreement. The Company and the Stockholders shall have
performed and complied with all of its obligations under this Agreement and
delivered all shares, securities and binding commitments required
hereunder.
(v) Absence of Suit. No action or lawsuit shall have been commenced against
the Company and the Stockholders, seeking to restrain, prevent or change
the transactions contemplated hereby, or questioning the validity or
legality of any such transactions, or seeking damages in connection with
any of such transactions.
(vi) Receipt of Approvals, Etc. All approvals, consents and/or waivers for
the Company and the Stockholders that are necessary to effect the
transactions contemplated hereby shall have been received.
(vii) Accuracy of Financial Statements. The Financial Statements, the
Interim Financial Statements and all other balance sheets, statements of
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income and other financial statements of the Company and/or the
Subsidiaries furnished pursuant to this Agreement shall be true, accurate
and prepared in accordance with GAAP.
(viii) Legal Opinion. ATEC shall have received an opinion of counsel for
the Company and the Stockholders in a form reasonably satisfactory to ATEC.
(ix) Proceedings and Instruments Satisfactory; Certificates. All
proceedings, corporate or otherwise, to be taken in connection with the
transactions contemplated by this Agreement shall have occurred and all
appropriate documents incident thereto as ATEC may reasonably request shall
have been delivered to ATEC.
ARTICLE 9
INDEMNIFICATION
9.1 By the Company and the Stockholders. The Company and the Stockholders
shall defend and promptly indemnify ATEC, and its officers, board members, and
save and hold them harmless from, against, for and in respect of and shall pay
any and all damages, losses, obligations, liabilities, claims, encumbrances,
deficiencies, costs and expenses, including without limitation, reasonable
attorneys' fees and other costs and expenses incident to any suit, action,
investigation, claim or proceeding suffered, sustained, incurred or required to
be paid by ATEC, its officers and/or board members by reason of (i) the
existence of any and all obligations and/or liabilities of the Company and/or
the Subsidiaries which were not disclosed in this Agreement; (ii) any breach or
failure of observance or performance of any representation, warranty, covenant,
agreement or commitment made by the Company and/or the Stockholders hereunder
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or relating hereto or as a result of any such representation, warranty,
covenant, agreement or commitment being untrue or incorrect in any respect, or
(ii) any and all actions, suits, investigations, proceedings, demands,
assessments, audits, judgments and claims arising out of any of the foregoing or
from any material misrepresentation or omission from any Schedules or Exhibits
to this Agreement, certificates, financial statements or from any document
furnished or required to be furnished hereunder.
9.2 ATEC. ATEC shall defend and promptly indemnify the Company and the
Stockholders, and save and hold them harmless from, against, for and in respect
of and shall pay any and all damages, losses, obligations, liabilities, claims,
encumbrances, deficiencies, costs and expenses, including without limitation,
reasonable attorneys' fees and other costs and expenses incident to any suit,
action, investigation, claim or proceeding suffered, sustained, incurred or
required to be paid by any of them by reason of (i) any breach or failure of
observance or performance of any representation, warranty, covenant, agreement
or commitment made by ATEC hereunder or relating hereto or as a result of any
such representation, warranty, covenant, agreement or commitment being untrue or
incorrect in any respect, or (ii) any and all actions, suits, investigations,
proceedings, demands, assessments, audits, judgments and claims arising out of
any of the foregoing or from any material misrepresentation or omission from any
Schedules or Exhibits to this Agreement, certificates, financial statements or
from any document furnished or required to be furnished hereunder.
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ARTICLE 10
BROKERAGE; EXPENSES
10.1 Brokers. The parties covenant and represent to each other that they
had no dealings with any broker or finder in connection with this Agreement or
the transactions contemplated hereby.
10.2 Expenses. The parties agree to bear their expenses individually, each
in respect of all expenses of any character incurred by it in connection with
this Agreement or the transactions contemplated hereby. Neither party shall have
any liability for legal or accounting fees incurred prior to, or in connection
with finalization of this Agreement.
ARTICLE 11
SECURITIES ACT PROVISIONS
11.1 Restrictions on Disposition of Shares. The Company and the
Stockholders covenants and warrants that the shares of common stock of ATEC to
be received in accordance with the provisions of Article 1 hereof will not be
disposed of except (i) pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Act"), or (ii) in any other transaction
which, in the opinion of ATEC's counsel, is exempt from registration under the
Act or the rules and regulations of the Securities and Exchange Commission
("SEC") promulgated thereunder. In order to effectuate the covenants of this
sub-section 11.1, an appropriate legend will be placed upon each of the
certificates of stock at the time of distribution of such Shares by ATEC
pursuant to this Agreement, and stop transfer instructions shall be placed with
ATEC's transfer agent regarding such shares.
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11.2 Evidence of Compliance with Private Offering Exemption. The Company
and the Stockholders agrees to supply ATEC with such evidence as counsel for
ATEC may reasonably require in order to evidence the private offering character
of the distribution of the Shares of ATEC common stock made pursuant to this
Agreement.
11.3 Notice of Limitation Upon Disposition. The Company and the
Stockholders are are aware that the Shares of ATEC common stock distributed
pursuant to this Agreement will not have been registered under the Act and,
therefore, under current interpretations and applicable rules, unless an
exemption from the registration provisions of the Act is legally available to
the holder thereof, ATEC common shares must be retained for a period of at least
two years, and at the expiration of such two year period, sales of such shares
may be confined to brokerage transactions of limited amounts requiring certain
notification filings with the SEC and such disposition may be available only if
ATEC is current in its filings with the SEC under the Act, or other public
disclosure requirements, and other limitations imposed by the Act.
11.4 Piggy Back Registration Rights. The Company agrees to register all of
the Shares in the Company's pending Form S-1 Registration Statement. In the
event the Company does not file an amendment to such Registration Statement, the
Company agrees to include all of the Shares in the next Registration Statement
filed by the Company under the Act.
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ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement along with the additional agreements
referred to in Article 5 hereof constitutes the entire agreement of the parties
with respect to the subject matter hereof. The representations, warranties,
covenants and agreements set forth in this Agreement and in any financial
statements, schedules or exhibits delivered pursuant hereto constitute all the
representations, warranties, covenants and agreements of the parties hereto and
upon which the parties have relied and except as may be specifically provided
herein. No change, modification, amendment, addition or termination of this
Agreement or any part thereof shall be valid unless in writing and signed by or
on behalf of the party to be charged therewith.
12.2 Survival of Covenants, etc. All warranties, representations and
covenants set forth herein shall survive for a period of three years after the
Closing Date of this Agreement. There shall be a 30 day period to cure any
breach of representations, warranties and covenants hereunder, commencing upon
receipt of written notice of such breach.
12.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be given or made pursuant to any of the provisions of
this Agreement shall be deemed to have been duly given or made for all purposes
if sent by Federal Express delivery or by certified or registered mail, return
receipt requested and postage prepaid or hand delivered as follows:
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If to the Company:
Innovative Business Micros, Inc.
90 Adams Avenue
Hauppauge, NY 11788
If to ATEC:
1952 Jericho, Turnpike
East Northport, New York, New York 11731
12.4 Waiver. No waiver of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, either of a similar or different nature, unless expressly so
stated in writing.
12.5 Governing Law. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York applicable to
contracts to be performed entirely within that State. Any dispute in any way
related to the subject matter of this Agreement shall be litigated exclusively
within the State of New York and all parties hereto, consent to the jurisdiction
of the State and/or United States Federal District Courts of New York. Should
any clause, section or part of this Agreement be held or declared to be void or
illegal for any reason, all other clauses, sections or parts of this Agreement
which can be affected without such illegal clause, section or part shall
nevertheless continue in full force and effect.
12.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
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or heirs and personal representatives; provided, however, that no party may
assign any of its rights or delegate any of its duties under this Agreement
without the prior written consent of the other parties hereto.
12.7 Captions. The headings, captions or titles of paragraphs under
sections or subsections of this Agreement are for convenience and reference only
and do not in any way modify, interpret or construe the intent of the parties or
effect any of the provisions of this Agreement.
12.8 Time Periods. Any time period provided for herein which shall end or
expire on a Saturday, the Company and the Stockholders, or legal holiday shall
be deemed extended to the next full business day thereafter.
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same Agreement.
12.10 Confidentiality. Neither this Agreement nor any memorandum of this
Agreement shall be recorded amongst the Public Records of any State or County.
The parties hereto agree to keep this Agreement confidential, as well as any
information or document obtained by either party in connection with this
transaction, except to the extent disclosure is required to or by any government
agency or regulatory or quasi-regulatory body. ATEC will not release any
information by press release or otherwise regarding this transaction without the
prior consent of the Company and the Stockholders.
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12.11 Joint Draftsmanship. The preparation of this Agreement has been a
joint effort of the parties and this Agreement shall not, solely as a matter of
judicial construction, be construed more severely against one of the parties
than the other.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on the date and year first above written.
ATEC GROUP, INC.
By: /s/ SURINDER RAMETRA
-------------------------------------
INNOVATIVE BUSINESS MICROS, INC.
By: /s/ RAJNISH RAMETRA
-------------------------------------
/s/ RAJNISH RAMETRA
----------------------------------------
RAJNISH RAMETRA
/s/ SURINDER RAMETRA
----------------------------------------
SURINDER RAMETRA
/s/ ASHOK RAMETRA
----------------------------------------
ASHOK RAMETRA
ATEC\AGMTS\INNOVATI.STK.RW
44
