<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
F O R M 8 - K
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act
of 1934
May 6, 1996
Date of Report (Date of earliest event reported) ..........................
MICROS-TO-MAINFRAMES, INC.
...............................................................................
(Exact name of registrant as specified in charter)
New York 0-22122 13-3354896
...............................................................................
(State or other jurisdiction (Commission) (IRS Employer
of incorporation) File Number) Identification No.)
614 Corporate Way, Valley Cottage, New York 10989
...............................................................................
(Address of principal executive offices) (Zip Code)
(914) 268-5000
Registrant's telephone number, including area code ........................
N/A
...............................................................................
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Acquisition of Assets
On May 6, 1996, a subsidiary of Micros-to-Mainframes, Inc. (the
"Company"), Data.Com DIRECT, Inc. (which, subsequent to the closing of the
acquisition referred to herein, changed its name to Data.Com RESULTS, Inc. the
"Buyer")), acquired (the "Acquisition") substantially all of the assets of
Data.Com. RESULTS, Inc. (the "Seller"). Seller is a data communication, wide
area networking (WAN) and local area networking (LAN) consultant and advanced
technology solutions provider primarily serving clients located in the State of
Connecticut. The Acquisition was pursuant to an Asset Purchase Agreement among
the Company, Buyer, Seller and Robert A. Fries ("Fries"), the sole shareholder
of Seller, dated as of May 1, 1996 (the "Agreement"). The parties executed the
Agreement on May 3, 1996. The closing of the Acquisition was consummated upon
the satisfaction of certain conditions, which conditions were satisfied on May
6, 1996 (the "Closing").
The consideration for the Acquisition included the following:
(a) The Buyer's payment on the Closing of Seller's obligations to IBM
Credit Corp., the company which provided accounts receivable financing for the
Seller, in the amount of $1,374,708);
(b) The Buyer's assumption of substantially all of the accounts payable
of Seller (approximately $477,000);
(c) Eighty-seven thousand (87,000) shares of the Company's common
stock, $.001 par value ("MTM Common Stock");
(d) Contingent payments ("Contingent Payments") after Closing,
determined as follows:
(i) 5,000 shares of MTM Common Stock, as adjusted for any
changes by reason of recapitalization, reclassification, stock
split-up, combination or exchange of Common Stock or the like, or by
the issuance of dividends payable in Common Stock ("Recapitalization
Event"), in the event Buyer's earnings before taxes and depreciation
and amortization determined in accordance with generally accepted
accounting principles ("EBTDA") commencing on May 1, 1996 and ending
March 31, 1997, determined on an annualized basis, is $500,000 or more
and less than $600,000; 15,000 shares of MTM Common Stock, as adjusted
for any Recapitalization Event, in the event Buyer's EBTDA commencing
on May 1, 1996 and ending March 31, 1997, determined on an annualized
basis, is $600,000 or more and less than $700,000; or 25,000 shares of
MTM Common Stock, as adjusted for any Recapitalization Event, in the
2
<PAGE>
event Buyer's EBTDA commencing on May 1, 1996 and ending March 31,
1997, determined on an annualized basis, is $700,000 or more;
(ii) 10,000 shares of MTM Common Stock, as adjusted for any
Recapitalization Event, in the event Buyer's EBTDA for the fiscal year
ending March 31, 1998 is $700,000 or more and less than $800,000;
15,000 shares of MTM Common Stock, as adjusted for any Recapitalization
Event, in the event Buyer's EBTDA for the fiscal year ending March 31,
1998 is $800,000 or more and less than $850,000; or 25,000 shares of
MTM Common Stock, as adjusted for any Recapitalization Event, in the
event Buyer's EBTDA for the fiscal year ending March 31, 1998 is
$850,000 or more;
(iii) 10,000 shares of MTM Common Stock, as adjusted for any
Recapitalization Event, in the event Buyer's EBTDA for the fiscal year
ending March 31, 1999 is $900,000 or more and less than $1,000,000;
20,000 shares of MTM Common Stock, as adjusted for any Recapitalization
Event, in the event Buyer's EBTDA for the fiscal year ending March 31,
1999 is $1,000,000 or more and less than $1,150,000; 30,000 shares of
MTM Common Stock, as adjusted for any Recapitalization Event, in the
event Buyer's EBTDA for the fiscal year ending March 31, 1999 is
$1,150,000 or more and less than $1,200,000, or 35,000 shares of MTM
Common Stock, as adjusted for any Recapitalization Event, in the event
Buyer's EBTDA for the fiscal year ending March 31, 1999 is $1,200,000
or more;
(iv) An amount equal to the excess of $27,594 and the amount of
credits claimed and taken by Seller's customers with respect to certain
accounts receivable by the first anniversary of the Closing, payable in
MTM Common Stock based on the closing price therefor on the exchange on
which the MTM Common Stock is traded on the first anniversary of the
Closing, rounded up or down to the next whole number; and
(v) In the event Buyer has recovered any funds from the sale of
inventory written down in connection with the Closing ("Written-Off
Inventory") during the period beginning April 1, 1996 and ending on the
first anniversary of the Closing, an amount, determined individually
with respect to each item of Written-Off Inventory, equal to the net
amount received upon the sale of such item of Written-Off Inventory,
but not in excess of the respective cost thereof (the "Recoverable
Amount"), payable within thirty (30) days after the first anniversary
by the delivery of MTM Common Stock valued at the closing price
therefor on the exchange on which the MTM Common Stock is traded on the
first anniversary of the Closing, rounded up or down to the next whole
number, or if notice is received by Buyer from Seller prior to the
first anniversary of the Closing that such amount should be applied
against the principal amount as of the Closing Date of the Fries
promissory note assigned by the Seller to the Buyer in connection with
3
<PAGE>
the Acquisition or that a portion of the amount owing be paid in MTM
Common Stock and the remainder being applied against the principal
amount of the Fries note, the amount shall be paid as directed by
Seller in such notice.
For purposes of computing EBTDA (X) corporate overhead (including, but not
limited to, (i) compensation payable to the Company's corporate officers and
support staff, but excluding compensation and benefits payable to the Company's
directors and executive officers required to be named in the Company's Summary
Compensation Table included as part of its Annual Report on Form 10-K, (ii)
legal and accounting fees not attributable to any specific division or
subsidiary of the Company, and (iii) corporate office expenses) shall be
allocated among the Company and its subsidiaries based on the gross revenues
attributable to each, (Y) earnings shall be computed without giving effect to
extraordinary items of income and expense determined in accordance with
generally accepted accounting principles and (Z) earnings with respect to
Written-Off Inventory shall only be included to the extent the amount of net
proceeds received exceeds the Recoverable Amount. Subject to the preceding
sentence, EBTDA shall be determined by the Company's chief financial officer in
accordance with the Buyer's customary and normal accounting procedures within
ninety (90) days after the end of the applicable measuring period, and any
additional stock issuance shall be made within thirty (30) days thereafter.
Simultaneously with the Closing, pursuant to a Pledge and Security
Agreement ("Security Agreement"), the Seller delivered 80,000 of the shares
received by it at Closing (the "Escrowed Shares") to an escrow agent in order to
secure Seller's, its assigns, and Fries' indemnification under the Agreement.
The Escrowed Shares were delivered in escrow for a period of up to one (1) year
from the Closing, subject to extension in the event an unresolved claim is made
on or prior to said one (1) year period. The Escrowed Shares shall be used to
satisfy all or a portion of any indemnity claims by Buyer. The MTM Common Stock
shall be valued at five dollars ($5.00) per share. Forty-Five Thousand of the
Escrowed Shares shall be released upon the Seller's delivery of a consent of the
State of Connecticut to the assignment of the Information Processing Systems
Master Software License Agreement dated October 23, 1995 between the State of
Connecticut and Seller or the State of Connecticut and Buyer entering into a
substantially similar contract. If such consent or new contract is not delivered
within six (6) months of Closing or the Seller receives notice of termination of
such contract from the State of Connecticut prior to such six (6) months, such
45,000 shares shall be delivered to Buyer. The remaining Escrowed Shares shall
be released from escrow one (1) year from Closing, provided any Escrowed Shares
in the possession of the escrow agent at such time shall be retained in escrow
to the extent necessary to satisfy in full any claims arising prior to such year
date remain unresolved. Any Escrowed Shares retained after one year from closing
4
<PAGE>
as provided above shall be released from time to time as the claims are resolved
and the need for all or part of the Escrowed Shares to satisfy remaining claims
is unnecessary.
The shares of MTM Common Stock which Seller received or may receive
under the Agreement (the "Shares") will, except for certain limited permitted
transfers, have a two year restriction on resale unless sooner registered under
the Securities Act of 1933, as amended and the Company has consented to such
sale. The Company is not required to seek to have the Shares registered with the
Securities and Exchange Commission or any other body, provided, however that the
Company granted customary piggyback registration rights with respect thereto.
Simultaneous with the consummation of the Closing, the Company and
Fries entered into a three year employment agreement whereunder Fries was
employed as a senior executive of the Company and co-President of the Buyer.
The employment agreement provides for the following compensation:
(A) $140,000 base salary and a $400/month car allowance;
(B) a bonus of 6% of Buyer's EBTDA for the respective
fiscal year, but in no event more than $60,000 with
respect to a fiscal year; and
(C) receive grants in fiscal 1997 of incentive stock
options to acquire 5,000 shares of MTM common stock
in the event Buyer's EBTDA for the fiscal year
ending March 31, 1997 is $1,250,000 or more;
receive grants in fiscal 1998 of incentive stock
options to acquire 5,000 shares of MTM common stock
in the event Buyer's EBTDA for the fiscal year
ending March 31, 1998 is $1,250,000 or more;
receive grants in fiscal 1999 of incentive stock
options to acquire 10,000 shares of MTM common
stock in the event Buyer's EBTDA for the fiscal
year ending March 31 1999 is $1,350,000 or more.
The option price for any option so granted shall be
110% of the fair market value of the MTM common
stock as at the first day of the taxable year in
which the respective options, if any, are granted.
The options shall not vest until the first day of
the taxable year following the year of grant, at
which time all such options shall vest.
On May 6, 1996, Fries and Ramon Mota were designated and appointed as
directors of the Company to occupy two newly-created directorships until the
Company's next annual meeting of shareholders. The Company further agreed to do
all things necessary, to the extent possible, to designate Fries a member of
5
<PAGE>
the Board from and after the next annual meeting of the Company's shareholders
through the initial term of his employment agreement with the Company.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired. It is impracticable
for the Registrant to file the financial information of the business acquired
hereunder at this time and such information will be filed by amendment to this
Form 8-K within sixty days from the date hereof.
(b) Pro-forma Financial Information. It is impracticable for the
Registrant to file the pro-forma financial information required hereunder at
this time and such information will be filed by amendment to this Form 8-K
within sixty days from the date hereof.
(c) Exhibits.
2.1 Asset Purchase Agreement (the "Asset Purchase
Agreement") dated as of May 1, 1996 by and among by
and among DATA.COM RESULTS, INC. ("DATA.COM"), the
sole shareholder of DATA.COM, Micros-to-Mainframes,
Inc. (the "Company") and the Company's wholly-owned
subsidiary, DATA.COM DIRECT, INC.
99.1 Pledge and Escrow Agreement dated as of May 6, 1996
by and among by and among DATA.COM RESULTS, INC.
("Data.Com"), the sole shareholder of DATA.COM,
Micros-to-Mainframes, Inc. (the "Company") and the
Company's wholly-owned subsidiary, DATA.COM DIRECT,
INC.
99.2 Employment Agreement dated as of May 1, 1996 by and
between Micros-to-Mainframes, Inc. and Robert A.
Fries.
6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 16, 1996
MICROS-TO-MAINFRAMES, INC.
By: /s/ Howard A. Pavony
-----------------------------------
Howard A. Pavony
President and
Co-Principal
Executive Officer
/s/ Steven H. Rothman
-----------------------------------
Steven H. Rothman
Vice President and Co-
Principal Executive Officer
7
<PAGE>
ASSET PURCHASE AGREEMENT
AMONG
DATA.COM DIRECT, INC.
("BUYER"),
MICROS-TO-MAINFRAMES, INC.,
Parent of Buyer
("MTM")
DATA.COM RESULTS, INC.
("SELLER")
AND
ROBERT A. FRIES, SOLE SHAREHOLDER OF SELLER
("FRIES)
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
----
1. Sale of Assets.................................................1
2. Assumption of Specific Liabilities.............................7
3. Purchase Price.................................................8
4. Closing ......................................................11
5. Representations and Warranties of the Seller and the
Stockholder ..................................................12
6. Representations and Warranties of the Stockholder.............24
7. Representations and Warranties of Buyer and MTM ..............24
8. Covenants of the Seller.......................................29
9. Covenants of Buyer and MTM....................................33
10. Conditions Precedent to Obligations of Buyer..................34
11. Conditions Precedent to Obligations of Seller ................37
12. Registration Rights...........................................38
13. Indemnities...................................................43
14. Use Best Efforts to Satisfy Condition Precedents .............46
15. Determination of Forum in the Event of Litigation.............47
16. Notices..................................................... 47
17. Binding Effect; Benefits......................................48
18. Assignment....................................................48
19. Confidentiality...............................................48
20. Brokerage.....................................................49
21. Governing Law ................................................50
22. Expenses; Transfer Taxes......................................50
23 Severability .................................................50
24. Survival .....................................................50
25. Non-Waivers...................................................51
<PAGE>
26. Headings......................................................51
27. Entire Agreement; Modifications...............................51
28. Counterparts .................................................51
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of May 1, 1996, by and among DATA.COM
RESULTS, INC. a Connecticut corporation (the "Seller"), ROBERT A. FRIES ("FRIES"
or the "Stockholder"), MICROS- TO-MAINFRAMES, INC., a New York corporation
("MTM") and DATA.COM DIRECT, INC., a corporation organized under the laws of the
State of New York and a wholly-owned subsidiary of MTM (the "Buyer").
Preliminary Statement
---------------------
Buyer desires to acquire from Seller, and Seller desires to sell to
Buyer, certain of the assets, properties and rights of the business conducted by
Seller (the "Business"), subject to certain liabilities and obligations of
Seller specifically assumed by Buyer in this Agreement. It is the intention of
the parties hereto that the aforementioned acquisition be characterized as a
tax-free reorganization under Section 368(a)(1)(C) of the Internal Revenue Code
of 1986, as amended.
The Stockholder, who beneficially owns all of the outstanding capital stock
of the Seller, desires to facilitate such transaction.
In consideration of the premises and in reliance upon the representations,
warranties, covenants and agreements contained in this Agreement, and upon the
terms and subject to the conditions set forth in this Agreement, the parties
agree as follows:
1. Sale of Assets.
1.1 Assets to be Sold. Seller agrees to sell, assign, transfer and
convey to Buyer, and Buyer agrees to purchase from Seller, at the closing
1
<PAGE>
referred to in Section 4 below (the "Closing"), all of Seller's assets not
listed on Schedule 1.2 hereof (the assets to be purchased hereunder collectively
referred to as the "Assets"), by delivery at Closing of such duly executed
instruments, in form satisfactory to Buyer's attorneys, sufficient to convey to
Buyer good and marketable title, free and clear of all claims, liabilities,
obligations, mortgages, liens, security interests, charges or other encumbrances
(hereinafter referred to collectively as "Liens"), except as otherwise
specifically provided herein. The Assets include, but are not limited to the
following assets, properties and rights used by Seller in the operation of the
Business,:
(a) Equipment and Other Personal Property. All of (i) Seller's
machinery, equipment, furniture, fixtures, tools, supplies and spare parts, and
(ii) Seller's right, title and interest in and to the leases of equipment,
machinery, installations, vehicles and other personal property, including all
items of owned and leased equipment and other personal property listed in
Schedule 1.1(a) hereto (the "Personal Property"), which Schedule 1.1(a)
comprises, to the extent not listed on Schedule 1.2, all of the Seller's
Personal Property;
(b) Inventories. All inventories of Seller ("Inventory"), wherever
located, including without limitation, all raw materials, work in process and
finished goods inventory, including all items set forth on Schedule 1.1(b)
hereto, which Schedule 1.1(b) comprises, to the extent not listed on Schedule
1.2, all of Seller's Inventory;
(c) Cash. Cash and checks on hand, on deposit or in transit to bank
accounts maintained by Seller (collectively, "Cash Balances"), to the extent not
listed on Schedule 1.2. Schedule 1.1(c) comprises, to the extent not listed on
Schedule 1.2, all of Seller's Cash Balances. As at the date of execution of this
Agreement, there are Cash Balances on deposit of $201,724.20 and a cash balance
reflected on the Seller's books and records of $61,609.09. Schedule 1.1(c)
2
<PAGE>
comprises, to the extent not listed on Schedule 1.2, all of Seller's cash on
hand.
(d) Real Property Leases. All of the leases of real property where the
Seller conducts business ("Real Property Leases"), together with all of Seller's
rights in and to the security deposits with respect to these leases, as well as
all rights of Seller to utilities and related services at the premises covered
by the Real Property Leases (the "Premises"). Schedule 1.1(d) comprises all of
Seller's Real Property Leases and sets forth thereon any required consents
needed in connection with the assignment thereof. Seller and Buyer shall use
their best efforts to procure any required consents of the respective
landlords/lessors or sublessors (collectively the "Landlords") as soon as
practicable after the date hereof.
(e) Intellectual Property. All United States and foreign patents,
patent applications, patent licenses, trade names, trademarks, trade name and
trademark registrations (and applications therefor), copyrights and copyright
registrations (and applications therefor), trade secrets, inventions, processes,
designs, know-how, formulae, and mask works, including without limitation, any
and all computer code, derivative work, development documentation,
documentation, enhancement, maintenance modification, object code, software
source code, and user documentation, which are in any way connected to the
Business or operation of the Business, whether or not subject to statutory
representation or protection, including, but not limited to, those items
described in Schedule 1.1(e) (the "Intellectual Property"), which Schedule
1.1(e) comprises all of Seller's Intellectual Property;
(f) Other Intangibles. All of the business of Seller, as a going
concern, including without limitation, all corporate names used in the Business,
as set forth in Schedule 1.1(f) hereof, including without limitation, "DATA.COM
RESULTS", "DATA.COM" and all variations thereof, and all other trade or business
names and logos heretofore used by Seller in the Business, together with the
3
<PAGE>
goodwill of the business associated therewith, and any and all rights of Seller
in and to any trademarks, service marks and trade names all as set forth on
Schedule 1.1(f) to the extent not listed on Schedule 1.1(e) above.
(g) Accounts and Notes Receivable. Any and all accounts receivable,
trade receivables, notes receivable described in Schedule 1.1(g) (the parties
acknowledging that as at Closing, Fries' note to the Company ("Fries Note")
shall be in a principal amount of $100,000), other receivables, claims and
causes of action of Seller arising out of the operation of the Business to the
extent not listed on Schedule 1.2 (for purposes of this Agreement, accounts
receivable and trade receivables are hereinafter referred to as "Accounts
Receivable");
(h) Customer Purchase Orders. All of the Seller's customer purchase
orders, sales contracts and agreements for the sale of goods and services
("Customer Orders") listed on Schedule 1.1(h), which Schedule 1.1(h) comprises,
to the extent not listed on Schedule 1.2, all of Seller's Customer Orders and
such other purchase orders, sales contracts and agreements with customers as
shall be entered into between the date hereof and the Closing Date, as defined
below, in the ordinary course of business and which are, to the extent required
hereunder, approved by Buyer;
(i) Seller Purchase Orders. Only the purchase orders, purchase
contracts and purchase agreements for the purchase of goods, materials and
services (collectively "Purchase Orders") described in Schedule 1.1(i), which
Schedule 1.1(i) comprises, to the extent not listed on Schedule 1.2, all of
Seller's Purchase Orders and such other purchase orders or contracts as shall be
entered into between the date hereof and the Closing Date in the ordinary course
of business and which are, to the extent required hereunder, approved by Buyer;
(j) Other Contracts. All of the other agreements, contracts,
instruments and commitments of Seller arising out of the operation of, or
related to the Business (collectively, the "Contracts") listed on Schedule
1.1(j) and contracts entered into after the date hereof and through the Closing
4
<PAGE>
Date which shall have been expressly accepted and approved in writing by Buyer
prior to the Closing, and all rights of Seller under the Contracts, which
Schedule 1.1(j) comprises (x) all contracts for assets not otherwise listed on a
Schedule hereto, (y) contracts for the purchase, rental or other use of assets
to be acquired or performed by Seller in connection with the Business and (z)
contracts with respect to supply, distribution, agency or other such
arrangements. Schedule 1.1(j) also sets forth the third party consents required
to transfer the Contracts;
(k) Permits. All government permits, business licenses, variances,
interim permits, permit applications, approvals and other governmental
authorizations related to the Business, wherever located (collectively the
"Permits") listed on Schedule 1.1(k) hereto, to the extent Seller is allowed to
transfer such permits, business licenses and approvals to Buyer. Schedule 1.1(k)
comprises all of Seller's permits;
(l) Prepaid Expenses. The prepaid expenses of Seller, and all
prepayments, advances or other deposits, if any, made by customers of the
Business arising out of the operation of the Business for products or services
to be provided subsequent to the Closing, as set forth on Schedule 1.1(l);
(m) Information and Records. Available books of account, and
accounting, financial and other records of the Seller relating to the Business,
including without limitation, any list(s) of the customers (including a separate
listing of customers who are extended credit), a list of vendors of the
Business, all production records, product files, technical information,
laboratory notebooks, confidential information, price lists, marketing
information, sales records, tax, historical and financial records, all personnel
and labor relations records, and all files and other proprietary information
which are related to, or used by Seller in connection with, the Business and the
operation of the Business.
5
<PAGE>
(n) Insurance Policies. All insurance policies of Seller relating to
the Assets or the Business, as set forth on Schedule 1.1(n), all proceeds
thereof, and all claims and rights thereunder.
(o) Miscellaneous Assets. The miscellaneous assets listed on Schedule
1.1(o) hereof.
1.2 Excluded Assets. Anything to the contrary notwithstanding, any
assets and properties listed on Schedule 1.2 to this Agreement (the "Excluded
Assets Schedule") are excluded from the Assets, including without limitation:
(a) Cash Balances on the Closing Date in excess of the difference
between the net worth of the Seller as at Closing determined in accordance with
generally accepted accounting principles and $100,000. Such determination shall
be made jointly immediately prior to Closing by the Buyer's and Seller's
respective accountants (based on a review of the information available at such
time and not an audit or compilation thereof). If such accountant's cannot agree
in good faith upon such number, said accountants shall select a third accountant
to determine such number based on its review of such information without
conducting an audit or compilation thereof. Such third party's decision shall be
binding on the parties hereto. Fries and Buyer shall equally bear the costs
attributable to said third accountant, if any.
(b) Other assets specifically set forth on Schedule 1.2 hereof.
1.3 Effect of Failure to Obtain Third Party Consents. To the extent
that the assignment of any Contract, Real Property Lease, Personal Property
lease or license to be assigned to Buyer under this Agreement shall require the
consent of a party other than Seller which has not been obtained by the Closing
Date and if Buyer shall nevertheless elect to consummate the transactions
contemplated by this Agreement, this Agreement shall not constitute an agreement
to assign the same if an attempted assignment without that consent would
constitute a breach thereof; it being understood by the parties that the
election of Buyer to consummate the transactions contemplated by this Agreement
6
<PAGE>
without a particular consent(s) shall not relieve Seller of the obligation to
obtain such consent(s).
2. Assumption of Specific Liabilities.
2.1 Liabilities Assumed. The Buyer assumes no obligations of Seller
except as specifically set forth herein. Buyer agrees to assume and agrees to
discharge and perform when due, the following liabilities and obligations of
Seller (the "Assumed Liabilities"):
(a) The accounts payable of Seller listed on Schedule 2.1(a) hereof
(the "Liabilities Schedule");
(b) The Real Property Leases;
(c) The Personal Property leases;
(d) The Customer Orders acquired pursuant to Section 1.1(h) hereof;
(e) The Purchase Orders acquired pursuant to Section 1.1(i) hereof;
(f) Liabilities and obligations of Seller under the Contracts;
(g) Seller liabilities reasonably accrued in the ordinary course of
business after the date first written above and prior to Closing, but in no
event to exceed the amount of Seller's Account Receivables (after allowing for
Seller's customary allowance for bad debts) accrued after the date first written
above;
(h) To the extent not otherwise included in this Section 2.1(a),
Seller's obligations to IBM Credit Corp. existing at the date of Closing and as
reflected on Seller's books and records as of such date; and
(i) Any other liabilities or obligations of Seller listed on Schedule
2.1(a) hereof.
2.2 Seller Responsible for Liabilities Not Assumed by Buyer. Seller
shall remain responsible for all claims, liabilities and obligations of Seller
with respect to the Assets or arising out of or relating to the operation of the
Business, or otherwise:
(a) which are not expressly assumed by Buyer in Section 2.1; or
7
<PAGE>
(b) under any Real Property Lease, Contract, lease or license
which is assigned by Seller to Buyer if failure to obtain a required consent to
the assignment by Seller to Buyer deprives Buyer of the enjoyment of any of
Seller's rights thereunder.
2.3 Seller Responsible for Tax Liabilities. Buyer is not hereby
assuming any liability, now or in the future, for any Federal, state or local
taxes arising out of the operation of Seller's business prior to the Closing
Date or incurred by Seller as a result of the Closing or for wages, salaries,
accrued vacation and other employee benefits of Seller's present and former
employees. Seller shall be responsible for reporting and payment of all said
taxes, including the preparation of Forms W-2 and 1099 in respect of payments to
Seller's employees.
2.4 Seller Responsible for Employee-Related Liabilities. Seller shall
remain responsible for all liabilities and obligations to present and former
employees of Seller, arising out of or in connection with any pension,
retirement or other employee benefit plan (collectively, "Employee Benefit
Plans") covering employees of Seller. Seller shall continue to fund the accrued
benefits (as of the Closing Date) of all then and former employees of Seller.
Buyer assumes no obligation to provide for, maintain or fund benefits or
liabilities for benefits accrued under such Employee Benefit Plans covering
employees of Seller.
3. Purchase Price.
3.1 Base Purchase Price. In consideration for the sale of the Assets by
Seller to Buyer, Buyer shall assume the liabilities referred to in Section 2.1
above and Buyer shall deliver to the Seller at the Closing, subject to Section
13.4 hereof, stock certificates issued in the name of Seller (the "Purchase
Securities"), representing ownership of an aggregate of eighty-seven thousand
(87,000) shares of MTM's common stock, $.001 par value ("MTM Common Stock"), as
adjusted to reflect any Recapitalization Event, as defined below occurring after
the day first written above and the Closing Date. Recapitalization Event
8
<PAGE>
means for purposes hereof changes by reason of recapitalization,
reclassification, stock split-up, combination or exchange of Common Stock or the
like, or by the issuance of dividends payable in Common Stock.
3.2 INTENTIONALLY OMITTED.
3.3 Contingent Purchase Price. Seller shall be entitled to receive, as
additional consideration for the sale of its Assets, contingent payments
("Contingent Payments") after Closing, determined as follows:
(i) 5,000 shares of MTM Common Stock, as adjusted for any
Recapitalization Event, in the event Buyer's earnings before taxes and
depreciation and amortization determined in accordance with generally
accepted accounting principles ("EBTDA") commencing on Closing and
ending March 31, 1997, determined on an annualized basis, is $500,000
or more and less than $600,000; 15,000 shares of MTM Common Stock, as
adjusted for any Recapitalization Event, in the event Buyer's EBTDA
commencing on Closing and ending March 31, 1997, determined on an
annualized basis, is $600,000 or more and less than $700,000; or 25,000
shares of MTM Common Stock, as adjusted for any Recapitalization Event,
in the event Buyer's EBTDA commencing on Closing and ending March 31,
1997, determined on an annualized basis, is $700,000 or more;
(ii) 10,000 shares of MTM Common Stock, as adjusted for any
Recapitalization Event, in the event Buyer's EBTDA for the fiscal year
ending March 31, 1998 is $700,000 or more and less than $800,000;
15,000 shares of MTM Common Stock, as adjusted for any Recapitalization
Event, in the event Buyer's EBTDA for the fiscal year ending March 31,
1998 is $800,000 or more and less than $850,000; or 25,000 shares of
MTM Common Stock, as adjusted for any Recapitalization Event, in the
event Buyer's EBTDA for the fiscal year ending March 31, 1998 is
$850,000 or more;
(iii) 10,000 shares of MTM Common Stock, as adjusted for any
Recapitalization Event, in the event Buyer's EBTDA for the fiscal year
9
<PAGE>
ending March 31, 1999 is $900,000 or more and less than $1,000,000;
20,000 shares of MTM Common Stock, as adjusted for any Recapitalization
Event, in the event Buyer's EBTDA for the fiscal year ending March 31,
1999 is $1,000,000 or more and less than $1,150,000; 30,000 shares of
MTM Common Stock, as adjusted for any Recapitalization Event, in the
event Buyer's EBTDA for the fiscal year ending March 31, 1999 is
$1,150,000 or more and less than $1,200,000, or 35,000 shares of MTM
Common Stock, as adjusted for any Recapitalization Event, in the event
Buyer's EBTDA for the fiscal year ending March 31, 1999 is $1,200,000
or more;
(iv) An amount equal to the excess of $27,594 and the amount of
credits claimed and taken by Seller's customers with respect to
accounts receivable set forth on Schedule 3.3(iv) by the first
anniversary of the Closing, payable in MTM Common Stock based on the
closing price therefor on the exchange on which the MTM Common Stock is
traded on the first anniversary of the Closing, rounded up or down to
the next whole number; and
(v) In the event Buyer has recovered any funds from the sale of
the inventory listed on Schedule 3.3(v) hereof ("Written-Off
Inventory") during the period beginning April 1, 1996 and ending on the
first anniversary of the Closing, an amount, determined individually
with respect to each item of Written-Off Inventory, equal to the net
amount received upon the sale of such item of Written-Off Inventory,
but not in excess of the amount set forth on Schedule 3.3(v) after the
item (the "Recoverable Amount"), payable within thirty (30) days after
the first anniversary by the delivery of MTM Common Stock valued at the
closing price therefor on the exchange on which the MTM Common Stock is
traded on the first anniversary of the Closing, rounded up or down to
the next whole number, or if notice is received by Buyer from Seller
prior to the first anniversary of the Closing that such amount should
be applied against the principal amount of the Fries Note as of the
Closing Date or that a portion of the amount owing be paid in MTM
10
<PAGE>
Common Stock and the remainder being applied against the principal
amount of the Fries Note, the amount shall be paid as directed by
Seller in such notice.
Notwithstanding anything contained herein to the contrary, the parties hereto
acknowledge that (X) corporate overhead (including, but not limited to, (i)
compensation payable to MTM's corporate officers and support staff, but
excluding compensation and benefits payable to MTM's directors and executive
officers required to be named in MTM's Summary Compensation Table included as
part of its Annual Report on Form 10-K, (ii) legal and accounting fees not
attributable to any specific division or subsidiary of MTM, and (iii) corporate
office expenses) shall be allocated among MTM and its subsidiaries based on the
gross revenues attributable to each, and shall be an item of deduction in
computing EBTDA, (Y) earnings shall be computed without giving effect to
extraordinary items of income and expense determined in accordance with
generally accepted accounting principles and (Z) earnings with respect to
Written-Off Inventory shall only be included to the extent the amount of net
proceeds received exceeds the Recoverable Amount. Subject to the preceding
sentence, EBTDA shall be determined by MTM's chief financial officer in
accordance with the Buyer's customary and normal accounting procedures within
ninety (90) days after the end of the applicable measuring period, and any
additional stock issuance shall be made within thirty (30) days thereafter.
3.4 Shares. For purposes of this Agreement, the term Shares, other than
where the context otherwise would require, means the sum of the Purchase
Securities, the shares of MTM Common Stock received upon any adjustment pursuant
to Section 3.2 above or Contingent Payments pursuant to Section 3.3 above, all
of which Shares shall be validly issued, fully paid and non-assessable.
4. Closing.
4.1 Time and Place of Closing; Deliveries. The Closing of the
transactions contemplated by this Agreement shall take place at the offices of
SNOW BECKER KRAUSS P.C., 605 Third Avenue, 25th floor, New York, New York, on
11
<PAGE>
May 3, 1996 at 11:00 A.M. or at such other date, place and time mutually
acceptable to Buyer and Seller. The Closing and all schedules set forth herein,
except for tax purposes, shall be deemed as at the end of business on April 30,
1996. At Closing:
(a) Seller will deliver to Buyer:
(i) duly executed instruments in form satisfactory to Buyer's
attorneys, conveying or transferring to Buyer good and marketable title to the
Assets, free and clear of all Liens, other than the Assumed Liabilities;
(ii) all documents and instruments required to be delivered
hereunder which have not been previously furnished; and
(iii) all lists and schedules to be delivered at Closing as
herein provided.
(b) Buyer will pay to Seller the Purchase Price as provided in Section
3.1 and deliver to Seller a duly executed instrument in form satisfactory to
Seller's counsel effecting its assumption of the Assumed Liabilities and
evidence of Fries' release from his guarantee of Seller debt as reflected on
Schedule 4.1(b) (the "Guarantees").
4.2 Assets Not Capable of Physical Delivery. With respect to the
Assets asterisked on any Schedule that cannot be physically delivered to Buyer
because they are in the possession of third parties, or otherwise, Seller shall
give irrevocable instructions to the party in possession of such Assets, with
copies to Buyer, that all right, title and interest in such Assets have been
vested in Buyer, and that the same are to be held for Buyer's exclusive use and
benefit.
4.3 Title. Title and risk of loss with respect to the Assets and
Buyer's right to operate and control the Business will pass from Seller to Buyer
as of the Closing.
5. Representations and Warranties of Seller and the Stockholder. Seller and
the Stockholder, jointly and severally, represent and warrant to Buyer as
follows:
12
<PAGE>
5.1 Organization Standing and Corporate Power. Seller is a corporation,
duly organized, validly existing and in good standing under the laws of its
state of incorporation; has full corporate power and authority to carry on its
business, and to own or lease its properties as and in the places where such
business is now conducted and such properties are now owned, leased or operated,
and to enter into this Agreement, consummate the transactions contemplated by
this Agreement and perform its obligations under this Agreement. Schedule 5.1
sets forth all the jurisdictions in which the Seller does business. Seller is
not qualified or licensed to do business as a foreign corporation in any
jurisdiction other than Connecticut. No proceedings for the bankruptcy or
insolvency of Seller are pending or, to the best of their knowledge, are
contemplated.
5.2 Ownership. The authorized, issued and outstanding capital stock of
Seller is set forth on Schedule 5.2. Except as set forth in Schedule 5.2, all of
the issued and outstanding shares of Seller are owned by the Stockholder, free
and clear of all Liens, and no third person holds any proxy or similar right
with respect thereto. Except as set forth on Schedule 5.2, Seller has no
subsidiaries and does not own, directly or indirectly, shares or other
securities in any other corporation, or any interest in any partnership, joint
venture or other business entity.
5.3 Authorization and Binding Effect; No Governmental Consents
Required. The execution and delivery by Seller of this Agreement and the
consummation by Seller of the transactions contemplated by this Agreement, as
well as the performance of its obligations under this Agreement, have been duly
and validly authorized by all necessary corporate action on the part of Seller.
This Agreement has been duly executed and delivered by Seller and constitutes
the legal, valid and binding obligation of Seller, enforceable in accordance
with its terms. No consent, approval, or authorization of, notice to, or
declaration, filing or registration with, any governmental body is required in
13
<PAGE>
connection with the execution, delivery and performance of this Agreement, or
the consummation of the transactions contemplated by this Agreement.
5.4 Financial Statements; No Undisclosed Liabilities; and Absence of
Changes. (a) The audited balance sheets of Seller as at December 31, 1995 and
the unaudited balance sheets of Seller at December 31, 1994 and 1993, and the
applicable audited and unaudited statements of income and retained earnings, and
statements of cash flows of Seller for the periods then ended, and the adjusted
statements of operations for such periods and the related notes thereto annexed
hereto as Schedule 5.4 (collectively, the "Financial Statements"), present
fairly the financial position, results of operations and retained earnings,
adjusted results of operations and cash flows of Seller, as at such dates and
for such periods.
(b) Except as set forth on the Financial Statements, as of December 31,
1995 (the "Cut-Off Date"), (A) Seller did not have any claims, liabilities or
obligations of any material nature, known or unknown, fixed or contingent,
matured or unmatured, liquidated or unliquidated, which were not shown or
otherwise provided for in the Financial Statements or included in the Assumed
Liabilities and (B) all reserves (if any) established by Seller and set forth in
the Financial Statements are adequate, appropriate and reasonable and there are
no loss contingencies (as such term is used in Statement of Financial Accounting
Standard No. 5, of the Financial Accounting Standards Board) which are not
adequately provided for in the Financial Statements.
(c) Except as described in Schedule 5.4, since the Cut-Off Date there
has been no:
(i) Material and adverse change in the business, properties,
assets or liabilities, operations, condition (financial or otherwise) or
prospects of Seller, nor has any event occurred or been threatened, which may
reasonably be expected to have a material and adverse effect on the Assets or
the Business;
(ii) Sale, transfer or other disposition of any assets owned or
used by Seller in the operation of the Business (whether or not capitalized or
14
<PAGE>
expensed for tax or financial statement purposes), except of inventory in the
ordinary course of business;
(iii) Cancellation or notice of cancellation, or surrender of
any policy of insurance (which has not been cured by payment of premium,
procurement of an equivalent policy, or otherwise) relating to or affecting the
Assets or the Business;
(iv) Waiver of any right of material value or any cancellation
of any indebtedness due to Seller which may have an adverse effect on the Assets
or the Business;
(v) Claim, obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due, matured or unmatured,
liquidated or unliquidated) incurred by Seller other than claims, obligations or
liabilities (X) incurred in the ordinary course of business and consistent with
past practice or (Y) not in excess of $2,500 in the aggregate;
(vi) Payment, discharge or satisfaction of any claim, lien,
obligation, encumbrance or liability by Seller (whether absolute, accrued,
contingent or otherwise and whether due or to become due, matured or unmatured,
liquidated or unliquidated), other than claims, liens, encumbrances or
liabilities (A) which are reflected or reserved against in the Financial
Statements or (B) which were incurred and paid, discharged or satisfied since
such date, in the ordinary course of business and consistent with past practice;
(vii) Material default by Seller on any claim, liability or
obligation;
(viii) Except as set forth in Schedule 3.3(v), write-down of the
value of any inventory of Seller, or write-off as uncollectible of any notes or
Accounts Receivable or any portion thereof of Seller in excess of the amount
reserved therefor on the Seller's books and records;
(ix) Prepayments, advances or other deposits, made by customers
of the Business with respect to products or services contracted for but not
provided as of the Closing Date or any other unearned income;
15
<PAGE>
(x) Damage, destruction or loss of physical property (whether or
not covered by insurance) which may have a material and adverse effect on the
Assets or Business;
(xi) Dividend declared, paid or set aside for payment or other
distribution on Seller's capital stock in the event the Seller's net worth at
Closing (exclusive of any Notes, as defined below) is less than $100,000;
(xii) Increase in the compensation of any of the Seller's
officers or employees, or loans made by Seller to any of its stockholders,
directors, officers or employees;
(xiii) Transaction not in the ordinary course of business; or
(xiv) Agreement or commitment, whether or not in writing, to do
any of the aforementioned.
(d) At Closing, its Net Worth, as determined pursuant to Section 13.4
hereof, shall not have a greater deficit than ($203,106).
5.5 No Violation or Breach. The execution and delivery of this
Agreement, and the fulfillment of the terms and conditions herein set forth and
the consummation of the transactions herein contemplated, will not (i) violate
or conflict with any provision of the Certificate of Incorporation or By-laws of
Seller, as in effect on the date hereof; or (ii) violate, result in a breach of,
conflict with, or (with or without notice or the lapse of time or both) entitle
any party to terminate, cancel, accelerate or call a default under the terms,
conditions or provisions of any agreement, contract, instrument, lease, license,
note, bond, mortgage, indenture or other obligation to which Seller is a party
or by which it or any of the Assets may be bound, or (iii) violate, result in a
breach of, or conflict with any statute, rule, regulation, order, judgment or
decree applicable to Seller or any of the Assets. Except as set forth on
Schedule 5.5, no consent of any party to any agreement, contract, instrument,
lease, license, note, bond, mortgage, indenture or other obligation to which
16
<PAGE>
Seller is a party, or by which it or any of the Assets is subject, is required
for the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
5.6 Inventories. Schedule 1.1(b) contains a true and complete list of
all the inventories owned by Seller at the date first written above showing the
location of and Seller's standard carrying value of each item. Inventories are
carried on the books of Seller at the lower of cost or market value, in
accordance with generally accepted accounting principles applied on a consistent
basis. Such inventories consist of items of a quality and quantity which are
reasonably usable or saleable in the ordinary course of Seller's business as of
the date hereof, except for items (x) in excessive quantity, (y) which are
obsolete or (z) which are below standard quality, each of which is identified as
such on Schedule 1.1(b), and all of which have been written-off or written down
to realizable market value or with respect to which adequate reserves have been
provided therefor. Since the date first written above, the inventories of Seller
have been maintained at a level consistent with the operation of the business of
Seller in its normal course, and no change has occurred in such inventories
which materially and adversely affects or will materially and adversely affect
their usability or saleability. Orders for inventory items have not been given
for amounts materially in excess of the amounts necessary to maintain the
inventories of Seller at normal levels based upon past practice.
5.7 Accounts Receivable. The Accounts Receivable of the Seller
reflected in the Financial Statements as at December 31, 1995, and the Accounts
Receivable created by the Seller since such date are valid, bona-fide subsisting
claims for the aggregate amounts thereof reflected in the Financial Statements
as at December 31, 1995 net of the reserves or allowances for doubtful
receivables reflected in such Financial Statement or thereafter in the Seller's
books and records uniformly maintained in accordance with the financial
17
<PAGE>
statements, accounted for in accordance with GAAP, and the Seller knows of no
reason as of the Closing Date that would make such Accounts Receivable, taken as
a whole, not collectible, except as Section 3.3(iv) may be applicable.
5.8 Leases. Schedules 1.1(c) and (d) sets forth a true and complete
list of all Real Property Leases and Personal Property leases (collectively the
"Leases") to which Seller is a party. Seller enjoys peaceful and undisturbed
possession under all such leases. True and correct copies of the Leases have
heretofore been furnished to Buyer. No notice of default or claim under any
Lease, or to the best of Seller's and Stockholder's knowledge, no indication of
any default or claim has occurred or desire not to renew any Lease, has been
received by Seller, and Seller has performed in all material respects, all
obligations required to be performed by it to date under the Leases.
5.9 Contracts. Schedule 5.9 contains a true and complete list and
description of all contracts, agreements, instruments, commitments,
understandings and arrangements to which Seller is a party or by which it or its
properties or assets were bound, as at the date hereof (other than contracts,
agreements, instruments and commitments set forth on any other Schedule to this
Agreement) and the terms thereof, including without limitation, contracts,
agreements, instruments, commitments, understandings and arrangements relating
to:
(i) the acquisition of services, materials, equipment,
inventory, supplies or other personal property involving more than $2,500 over
the remaining term, not terminable within thirty days or less without obligation
on the part of Seller;
(ii) the sale of products or services;
(iii) the lease of real or personal property as lessor or lessee
or sublessor or sublessee;
(iv) distribution, dealer, agency, or financing agreements or
arrangements (including without limitation, letters of credit) not terminable
within thirty days or less without obligation on the part of Seller;
18
<PAGE>
(v) employment agreements not terminable within thirty days or
less;
(vi) the sale of personal property (other than in the ordinary
course of business);
(vii) purchase of inventory on consignment;
(viii) non-competition, confidential information or similar
agreements; or
(ix) other contracts, agreements, commitments or understandings
which materially affect the business, properties or assets of Seller or which
were entered into other than in the ordinary and usual course of business.
5.10 Tangible Property. Schedule 1.1(a) sets forth a true and complete
list of all the tangible property of Seller, including a description of each
item, whether it is owned or leased, the location and serial number, if any, the
gross book value of each item, and to the extent available, accumulated
depreciation, if any, with respect thereto (except to the extent such
information is provided on other Schedules to this Agreement). Each item of
Personal Property is in good working condition and repair, ordinary wear and
tear excepted, none of such items has any material defects or is in need of
maintenance or repairs, except for ordinary, routine maintenance and repairs
which are not material in nature or cost, and all of the items listed are
adequate for the uses to which they are being put.
5.11 Accounts Payable. Schedule 2.1(a) to this Agreement sets forth a
true, correct and complete list of all accounts payable of Seller at the date
first written above, including amounts payable to trade creditors (the "Trade
Creditors") and other short-term liabilities commonly identified as accounts
payable, which are, to the best of their knowledge, bona fide, valid and binding
obligations of Seller incurred in the ordinary course of business on an
arms-length basis. Schedule 2.1(a) indicates the dates upon which payment to
each of the items listed therein is due.
19
<PAGE>
5.12 Binding Nature of Contracts; No Breach. Each of the agreements,
contracts, instruments, leases and licenses listed on any Schedule hereto 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 its terms.
Seller has not given or received notice of, and they do not know that there
exists, any material default or event of default under any such agreement,
contract, instrument, lease or license, or any event or condition which with or
without notice or lapse of time or both would constitute an event of default
under any such agreement, contract, instrument, lease or license by Seller or by
any other party thereto. Each supply, distribution, agency or other arrangement
or understanding of Seller listed on Schedule 1.1(j) is a valid and continuing
arrangement or understanding. Neither Seller nor any other party to any such
arrangement or understanding has given notice of termination or taken any action
inconsistent with the continuance of such arrangement or understanding.
5.13 Title to Assets; Liens. Seller has good and marketable title to
all the Assets (except real and other properties and assets held pursuant to
leases or licenses described in the Schedules to this Agreement), free and clear
of all Liens, except the Assumed Liabilities and such other Liens as are
specified in such Schedules and are to be removed at or before the Closing.
Following the Closing, Buyer will have good and marketable title to all the
Assets (except real and other properties and assets held pursuant to leases or
licenses described in the Schedules to this Agreement), free and clear of all
Liens, except the Assumed Liabilities and such other Liens as are specified in
such Schedules. The Assets constitute all properties and assets which are
necessary to operate the Business as presently conducted.
5.14 Litigation. Except as set forth in Schedule 5.14 to this
Agreement, there are no actions, suits, claims or legal, administrative or
arbitration proceedings or investigations pending, or to their knowledge
threatened, against, involving or affecting Seller, the Assets or the Business,
20
<PAGE>
or which relates to any product alleged to have been assembled, produced,
distributed or sold by Seller and alleged to have been defective or improperly
designed, assembled or produced, and they do not have knowledge of any state of
facts or of the occurrence of any event which is likely to form the basis of any
thereof. There are no outstanding orders, writs, injunctions or decrees of any
court, governmental agency or arbitration tribunal against, involving or
affecting Seller, the Assets or the Business.
5.15 Taxes. Seller is an S corporation for Federal income tax purposes
and a regular corporation for Connecticut income tax purposes, and Seller and
the Stockholder will maintain the status of Seller as an S corporation for
Federal income tax purposes until the Closing. Seller has filed with appropriate
Federal, state and local authorities (or has obtained appropriate extensions of
the time to file) all tax returns required by law, regulation, or otherwise to
be filed by it for all taxable periods ending on or prior to the date hereof,
for which returns have become due. Seller or the Stockholders have paid or made
adequate provision for the payment of all taxes, penalties and interest which
have or may become due for or during all taxable periods ending on or prior to
the date hereof. Seller has not executed or filed with any taxing authority any
agreement which is still in effect extending the period for assessment or
collection or any income or other taxes for which it may be directly or
indirectly liable. Seller is not a party to any pending action, proceeding or
audit by any governmental authority for assessment or collection of taxes for
which it may be directly or indirectly liable, and no claim for assessment or
collection of taxes for which it may be directly or indirectly liable has been
asserted or threatened against it. Schedule 5.15 sets forth the jurisdictions in
which Seller pays sales and use taxes. Seller has not made any payments and is
not required to pay sales and use taxes in any other jurisdiction and it has not
21
<PAGE>
received any claim or notice, and neither Seller nor the Stockholder have any
knowledge that Seller has not paid all required sales and use taxes.
5.16 Permits. All of the governmental permits, business licenses and
approvals held by Seller, listed on Schedule 1.1(k), are in full force and
effect as of the date hereof and constitute all of the governmental permits,
business licenses and approvals required for the conduct of the Business. No
violations are or have been recorded in respect of any such existing permits,
business licenses or approvals and remain uncorrected as of the date hereof, no
proceeding is pending or threatened looking toward the revocation or limitation
of any such existing permits, business licenses or approvals, and there are no
violations of any laws, rules, regulations, orders or ordinances applicable to
the business conducted by Seller with respect to the Assets or the assets and
properties used in the operation of that business (including reporting
requirement of any Federal or state agency) which would materially and adversely
affect the Assets or the Business.
5.17 Compliance with Law. Seller has conducted the Business in
compliance with all applicable Federal, state and local laws, rules, regulations
and orders (collectively, "Laws"), including without limitation, all Laws
relating to the disposal of toxic or hazardous substances and occupational
health and safety standards. For purposes of this Section 5.17, the
non-compliance with any Law or Laws (other than willful non-compliances
therewith) which individually or in the aggregate would result in a loss in
value of $7,500 or less to the Buyer shall not be deemed a breach of this
representation.
5.18 Employees. Schedule 5.18 sets forth the names of all employees of
Seller, their date of hire, current compensation, amount and date of last
increase, the amount and date of bonuses paid within the last twelve months and
other benefits to which they are entitled. Except as set forth on Schedule 5.18,
since the Cut-Off Date, Seller has not granted nor has it become obligated to
grant any increases in the wages or salary or paid or become obligated to pay
any bonus or made or become obligated to make any similar payment to, or granted
22
<PAGE>
any benefit, promotion or change in working conditions to or on behalf of, any
employee listed on Schedule 5.18 (each, an "Employee"). Seller has not directly
or indirectly paid or become obligated to pay any severance or termination pay
to any Employee or any other person. Except as set forth on Schedule 5.18,
Seller does not have in effect with any Employee or other person an employment
contract or other arrangement relating to the length or terms and conditions of
such Employee's or other person's employment, and other commitments imposed by
applicable law. Further, except as set forth on Schedule 5.18, Seller does not
have in effect any agreements, commitments, arrangements, policies or practices
relating to bonuses, vacations, vacation pay, pensions, profit sharing,
retirement, stock options, stock purchases, employee expense reimbursements,
employee discounts or other benefits affecting any of its employees. Except as
set forth on Schedule 5.18, Seller does not maintain any "employee pension
benefit plan" as that term is defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); and none of Seller's
employees are participants in a "multi-employer plan" as defined in Sections
3(37) or 4001(a)(3) of ERISA. Seller is not a party to any collective bargaining
agreement with any union representing its employees, and there are no strikes,
union representation contests, National Labor Relations Board proceedings or any
labor disputes, litigation or proceedings of any kind pending, or to their
knowledge, threatened against Seller.
5.19 All Documentation has Been Furnished or Made Available to Buyer.
Seller has previously furnished to, or made available for inspection by, Buyer
and its representatives, true and complete copies of all contracts, agreements,
instruments, commitments, licenses and leases referred to in this Agreement or
the Schedules hereto. No material documents relating to the business of Seller,
the Assets or the Assumed Liabilities have been removed, destroyed or withheld
from inspection by Buyer.
23
<PAGE>
5.20 Full Disclosure. No representation or warranty made by Seller in
this Agreement or in writing pursuant to this Agreement, including without
limitation, the Schedules or any other documents, certificates or written
statements, delivered or to be delivered to Seller in connection herewith,
contains, or will contain, any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make the statements contained
herein and therein not misleading, and all copies of the documents delivered
hereunder are true and complete copies. There is no fact known to Seller which
materially and adversely affects or may (so far as Seller can now foresee)
materially and adversely affect the business, operations or condition (financial
or otherwise) of Seller, which has not been set forth in this Agreement or in
the Schedules, or the other documents, certificates and statements furnished to
Buyer by or on behalf of Seller prior to or on the date hereof in connection
with the transactions contemplated hereby.
6. Representations and Warranties of the Stockholder. The Stockholder
represents and warrants to Buyer as follows:
6.1 Binding Obligation. This Agreement constitutes his legal, valid and
binding obligation, enforceable against him in accordance with its terms.
6.2 No Violation. The execution and delivery of this Agreement, the
performance of his obligations hereunder, and the consummation of the
transactions contemplated by this Agreement will not (a) violate, be in conflict
with, or constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under any agreement or commitment to which
he is a party or by which his property is bound or (b) violate any statute or
law or any judgment, decree, order, regulation or rule of any court or
governmental body applicable to him.
7. Representations and Warranties of Buyer and MTM. Buyer and MTM jointly
and severally represents and warrants to Seller as follows:
24
<PAGE>
7.1 Organization and Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
7.2 Corporate Power. Buyer has full corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement and to perform its obligations under this Agreement.
7.3 Authorization; Binding Effect. The execution and delivery by Buyer
of this Agreement, and the consummation by Buyer of the transactions
contemplated by this Agreement and the performance by Buyer of its obligations
under this Agreement have been duly and validly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable against it in accordance with its terms.
7.4 Capitalization. (a) The authorized capital stock of the Buyer
consists of 10,000,000 shares of Common Stock, $.001 par value and 1,400,000
shares of Preferred Stock, par value $.001 (the "Preferred Stock"), of which
1,400,000 shares of the Preferred Stock are designated "Convertible Preferred
Stock, Series A" (the "Series A Stock"). As of the date hereof, the issued and
outstanding capital stock of the Company consists of (i) 3,363,374 shares of
Common Stock, (ii) 225,000 shares of Common Stock reserved for issuance upon
exercise of all options granted under the Buyer's stock option plans, (iii)
1,400,000 shares of Common Stock reserved for issuance upon conversion of the
Series A Stock, and (iv) 1,400,000 shares of Series A Stock. All such shares of
the Company are duly authorized, those shares described in clauses (i) and (iv)
above are validly issued, fully paid and non-assessable, and those shares
described in clauses (ii) and (iii) above, when so issued, will be validly
issued, fully paid and non-assessable.
(b) Except as set forth in Section 7.4(a) and Schedule 7.4, the Buyer
does not have outstanding any capital stock or securities convertible into or
25
<PAGE>
exchangeable for any shares of capital stock, and there are no options, warrants
or other rights, agreements, arrangements or commitments of any character to
which the Buyer is a party or otherwise obligating the Buyer to issue or sell,
entitling any person to acquire from the Buyer, and the Buyer is not a party to
any agreement, arrangement or commitment obligating it to repurchase, redeem or
otherwise acquire, any shares of its capital stock or securities convertible
into or exchangeable for any of its capital stock.
(c) Except as contemplated by this Agreement or as set forth on
Schedule 7.4 hereof, the Buyer has not granted any registration rights with
respect to any shares of its capital stock to any third party.
7.5 Subsidiaries. Schedule 7.5 hereto sets forth a list of all
subsidiaries of the Buyer (the "Subsidiaries"), showing, as to each such
Subsidiary, the jurisdiction of its organization, the number of shares or other
equity or ownership interests of each class of its capital stock authorized and
the amount of each class outstanding, and the percentage of the outstanding
shares or other equity or ownership interests of each such class owned, directly
or indirectly, by the Buyer. On the date hereof, except as and to the extent set
forth in Schedule 7.5, (i) all the outstanding stock or other equity or
ownership interest of each Subsidiary, owned directly or indirectly by the Buyer
as shown on Schedule 7.5, is owned free and clear of all liens and encumbrances
and is duly authorized, validly issued, fully paid and non-assessable, and (ii)
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which any Subsidiary is a party or otherwise
obligating any Subsidiary to issue or sell, or entitling any person to acquire
from any Subsidiary, and no Subsidiary is a party or otherwise obligating any
Subsidiary to issue or sell, or entitling any person to acquire from any
Subsidiary, and no Subsidiary is a party to any agreement, arrangement or
commitment obligating it to repurchase, redeem or otherwise acquire, any shares
26
<PAGE>
of the capital stock or any securities convertible into or exchangeable for the
capital stock of any such Subsidiary.
7.6 Authority to Conduct Business. The Buyer and the Subsidiaries have
all requisite corporate power and authority necessary or advisable to own or
hold their respective properties and conduct their respective businesses and
hold all material licenses, permits and other required authorizations and
approvals from governmental authorities and have made all material registrations
and given all notifications required under federal, state or local law that are
necessary or advisable for the conduct of their respective businesses.
7.7 No Violation. The execution, delivery and performance of this
Agreement (including the issuance and delivery of the Shares) will not (i)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default or give rise to any right of termination,
cancellation or acceleration under, or result in the creation of any lien or
encumbrance on or against any of the properties of the Buyer or any of its
Subsidiaries pursuant to any of the terms or conditions of any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which the Buyer or any of its Subsidiaries is a party or by which any of them or
any of their properties or assets may be bound, (ii) violate any statute, law,
rule, regulation, writ, injunction, judgement, order or decree of any
governmental authority, binding on the Buyer or any of its Subsidiaries or any
of their properties or assets, or (iii) result in or give rise (whether upon
demand by the holder of any such securities or by the terms of any such
security) to the issuance of any additional capital stock of the Buyer or
accelerate or alter the conversion rights of any holder of any securities
exercisable into or convertible for shares of capital stock of the Buyer other
than as set forth on Schedule 7.7 hereto.
7.8 Litigation. Other than as set forth in the Company's Form 10-K
dated March 31,1995, the 8-K's or 10-Q's filed subsequent thereto and as set
forth in Schedule 7.8, there is no pending or threatened legal or governmental
27
<PAGE>
claim, action or proceedings against or relating to the Buyer which could,
individually or in the aggregate, have a material adverse effect on the Buyer.
7.9 Full Disclosure. With respect to the Buyer or any Subsidiary, this
Agreement (including the schedules hereto and all materials incorporated by
reference herein), are true and correct and do not contain an untrue statement
of material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading.
7.10 SEC Filings. (a) The Buyer has made available to the Seller for
inspection a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by MTM with the SEC since April
1, 1994 and prior to the date of this Agreement (the "SEC Documents"), which are
all the documents (other than preliminary material) that MTM was required to
file with the SEC since such date. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained as of
the date of its filing any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statement therein, in light of the circumstances under which they were made, not
misleading.
(b) The financial statements of the Buyer included in the SEC Documents
(including the information contained in the notes to the financial statements)
comply as to form in all material respects with the published rules and
regulations of the SEC with respect thereto and were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated on the notes thereto or,
in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC). The consolidated financial statements fairly
28
<PAGE>
present, in accordance with applicable requirements of GAAP (subject, in the
case of the unaudited statements, to normal, recurring adjustments, none of
which will be material), the consolidated financial position of the Buyer and
its consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of the Buyer and its
consolidated Subsidiaries for the periods presented therein.
7.13 Conduct of Business. Since January 1, 1996, (i) except as set
forth on Schedule 7.13 hereof, the Buyer and its Subsidiaries have conducted
their respective businesses, operations and affairs in the ordinary course of
business consistent with past practice; and (ii) there have not been changes,
conditions or events that, in the aggregate, have had or could reasonably be
expected to have a material adverse effect.
8. Covenants of Seller.
8.1 Third Party Consents. Seller will obtain and deliver to Buyer all
written consents of third parties as specified on the Schedules in connection
with the transfer or conveyance of the Assets and to enable Buyer to obtain the
benefits intended to be conferred by this Agreement.
8.2 Interview and Hire Employees. Buyer shall have the right to
interview and hire the employees of Seller listed on Schedule 8.2.
8.3 Access. Seller will allow Buyer and its representatives full access
to the books, records and properties of Seller and furnish such information
concerning Seller as Buyer may request from time to time.
8.4 Notice of Events or Changes. Seller shall promptly notify Buyer of
any event, occurrence or transaction which would have been required to have been
disclosed on any Schedule to this Agreement, had such event, occurrence or
transaction existed on the Effective Date, including, without limitation, any
actions, claims, or legal, administrative or arbitration proceedings, or
investigations, threatened or commenced, which, if pending on the Effective
29
<PAGE>
Date, would have been required to be described in any Schedule hereto, or which
otherwise relate to or affect the Business or Assets in any material respect.
Seller shall use its best efforts to defend against any such actions, claims,
proceedings or investigations.
8.5 Compliance with Sales and Use Tax Laws. Seller has complied with
the provisions of the sales and use tax law in each state where it is required
to collect such taxes. Seller hereby agrees to indemnify and hold Buyer harmless
from and against any and all costs, losses, damages, liabilities, claims and
expenses which may be asserted by third parties against Buyer arising out of or
resulting from the failure of Seller to comply with any such law or laws, in the
manner described in Section 13.1.
8.6 Conduct of Business Until Closing. Seller agrees that until the
Closing Date, unless it has received the prior written consent of Buyer, it
will:
(a) Operate its business only in the usual, regular and ordinary
course consistent with reasonable business practice;
(b) Use all reasonable efforts as to events within Seller's
control to prevent the occurrence of any change or event which would prevent any
of the representations and warranties of Seller contained herein from being true
at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Use its best efforts to preserve its present relationship
with suppliers, customers and others having business dealings with it;
(d) Pay and discharge all costs and expenses of carrying on its
business consistent with past business practices;
(e) Neither enter into any Customer Order or Purchase Order in
excess of $100,000 nor enter or make any contract or commitment and render no
bid or quotation, written or oral, except in the ordinary course of business
consistent with past practice;
30
<PAGE>
(f) Create or suffer no Lien upon any of the Assets (other than
Liens set forth in the Schedules);
(g) Not acquire or dispose of any assets or enter into any
transaction, except in the ordinary course of business consistent with past
practice;
(h) Maintain books, accounts and records in the usual, regular,
true and ordinary manner;
(i) Incur no obligation or liability (fixed or contingent),
except in the ordinary course of business consistent with past practice;
(j) Not cancel or compromise any material debt or claim, other
than in the ordinary course of business consistent with past practice;
(k) Not waive or release any rights of material value with
respect to the Assets, except in the ordinary course of business consistent with
past practice;
(l) Not modify or change in any material respect or terminate
any existing license, lease, Contract or other document required to be listed on
the Schedules to this Agreement other than in the ordinary course of business
consistent with past practice, except that Seller shall be permitted to modify
or change existing licenses, leases, Contracts and other documents to obtain the
consents referred in any Schedule hereto if Buyer consents to such modification
or change;
(m) Make no loans or extensions of credit, except to trade
purchasers in the ordinary course of business consistent with past practice;
(n) Not increase the compensation (including wages and benefits
described in Schedule 5.18) of any Employee or make any representation or
commitment to do so;
(o) Maintain its properties, machinery and equipment in their
present condition and repair, normal wear and tear excepted; and
(p) Continue all policies of insurance in full force and effect
up to and including the Closing Date.
31
<PAGE>
8.7 Update Schedules. From the date of this Agreement to the Closing
Date, Seller will update by amendments or supplements each of the Schedules and
any other written disclosure in writing from Seller to reflect any change in the
information set forth in said Schedules or other disclosure. Seller hereby
represents and warrants that such Schedules and such written disclosures, as so
amended or supplemented, shall be true, correct and complete in all material
respects as of the date or dates thereof.
8.8 No Solicitation of Competing Offers. Prior to the Closing Date,
Seller will not, directly or indirectly, seek, solicit, initiate or encourage
(including by way of furnishing any non-public information concerning the
business, properties or assets of Seller) or enter into any discussions or
negotiations with any person or group regarding any Acquisition Proposal (as
defined below). Seller will notify Buyer promptly by telephone, and thereafter
confirm in writing, if any Acquisition Proposal is received by Seller. As used
in this Agreement, "Acquisition Proposal" shall mean any proposal received by
Seller prior to the Closing Date for a merger or other business combination
involving Seller or relating to the disposition of any of the Assets except for
dispositions of Assets for not less than fair market value which are made in the
ordinary course of business and are consistent with past practice and with this
Agreement.
8.9. Further Assurances. Without further consideration, Seller will, at
any time, execute and deliver such further instruments of conveyance and
transfer and take such other action as Buyer may request to transfer more
effectively to Buyer the Assets.
8.10 Pledge and Escrow Agreement. Seller, Buyer, and the Stockholder
shall enter into the Pledge and Security Agreement in the form attached hereto
as Exhibit 8.10.
8.11 Limitation of Transfers of Shares. Except for transfers to
Seller's sole stockholder, any transfers to not more than nine (9) employees of
Seller not exceeding 8,000 Shares in the aggregate, and any transfers to
Principals (as defined below) and Immediate Family Members (as defined below),
32
<PAGE>
provided such transferees acknowledge and agree that they are assuming such
shares subject to this Section 8.11 and the Pledge and Escrow Agreement, Seller
shall not sell, assign, convey, pledge, or otherwise transfer title, ownership
or possession, legal or equitable, of or in, the Shares, for a period of two (2)
years following the Closing Date. Furthermore, in all events, all sales or other
transfers of the Shares must be made in compliance with applicable federal and
state securities laws, rules and regulations. The Shares will bear a legend
setting forth this transfer restriction as well as the restriction set forth in
the Pledge and Security Agreement. For purposes of this Section 8.11,
"Principal" shall mean Fries and any Immediate Family Members of Fries who
become shareholders of Buyer hereafter, Seller, and Buyer. For purposes of this
Section 8.11, "Immediate Family Member" shall mean any spouse, lineal descendant
of such individual, any trust primarily for the benefit of the individual or
such individual's Immediate Family Member, or any corporation in which all the
shares are owned by any of the individuals or entities described in this
sentence. Notwithstanding the above, the above restriction shall lapse upon the
happening of both (a) registration under the Securities Act of 1933, as amended
and (b) the receipt of MTM's permission to sell same.
9. Covenants of Buyer, and with respect to 9.5, 9.6 and 9.7, MTM and
Buyer.
9.1 Access. Following the Closing and until such time as the Assumed
Liabilities have been paid and discharged, Buyer will allow Seller and its
representatives full access to the books, records and properties of Seller and
furnish such information concerning Buyer as Seller may reasonably request from
time to time to ascertain whether Buyer has paid and discharged the Assumed
Liabilities. Thereafter, Buyer will allow Seller and its representatives such
access to the books and records of Seller and furnish such information
33
<PAGE>
concerning Buyer as Seller may reasonably require for tax purposes and to defend
any action brought against Seller or its officers and directors.
9.2 Employment Agreement. Buyer will retain the services of FRIES and
the persons set forth in Schedule 9.2 as employees pursuant to the terms of
employment agreements substantially in the form set forth herein as Exhibit 9.2
("Employment Agreement").
9.3 Pledge and Escrow Agreement. Seller, Buyer, and the Stockholder
shall enter into the Pledge and Security Agreement in the form attached hereto
as Exhibit 8.10.
9.4 IBM Indebtedness. Following Closing, Buyer shall pay in full
Seller's debt to IBM Credit Corp. existing and as reflected on the books and
records of Seller at Closing ("IBM Indebtedness").
9.5 Transfer of MTM Common Stock to Buyer. MTM shall transfer to Buyer
a number of shares of MTM Common Stock equal to the number of Shares by the time
Buyer is required to transfer shares of MTM Common Stock hereunder, and if
required, an amount of cash to pay the IBM indebtedness referred to in Section
9.4.
9.6 Conduct of Business after Closing. Buyer and Seller share a common
vision with respect to the Business. Notwithstanding the above, the parties
acknowledge that the amount of financial and personnel commitment which MTM
shall make to Buyer is completely subject to the discretion of MTM's Board of
Directors.
9.7 Director. Fries shall have the right to nominate a director to be
included in the management slate of nominees to the Board of MTM and Buyer at
the next annual meeting of Shareholders and each annual meeting thereafter which
is to take place before the earlier of April 1, 1999 or the date his Employment
Agreement, as defined below, is terminated.
10. Conditions Precedent to Obligations of Buyer. The obligations of
Buyer under this Agreement are subject to the satisfaction at or prior to
Closing of each of the following conditions (one or more of which may be waived
by Buyer):
34
<PAGE>
10.1 Representations and Warranties Correct. The representations and
warranties made by Seller and the Stockholder in this Agreement or in any
writing pursuant to this Agreement, including without limitation, the Schedules
or any other documents, certificates or written statements delivered or to be
delivered to Buyer in connection with the transactions contemplated by this
Agreement, shall be true and correct in all material respects as of the Closing
Date as though such representations and warranties were restated and made at and
as of the Closing Date, and Seller and the Stockholder shall have furnished
Buyer with a certificate to that effect, which in the case of Seller shall be
executed by its chief executive officer.
10.2 Compliance with Obligations. All of the terms, covenants and
conditions of this Agreement required to be complied with by Seller at or prior
to the Closing, including the obtaining of any required consents to the transfer
or assignment of the Assets, shall have been duly complied with and Seller shall
have furnished Buyer with a certificate executed by its chief executive officer
to that effect and such other evidence of compliance as Buyer may reasonably
request.
10.3 Furnishing of Documents. Seller shall have furnished Buyer with
(i) certificates of the Secretary of State and the Department of Revenue
Services of the State of Connecticut dated not more than ten business days prior
to the Closing Date, (ii) copies, certified by the Secretary of State of
Connecticut as of a date not more than ten business days prior to the Closing
Date, of all documents on file in the office of the Department of State relating
to Seller, including its Certificate of Incorporation and all amendments
thereto; (iii) copies, certified by the Secretary of Seller as of the Closing
Date, of the By-laws of Seller at the Closing Date, and of resolutions duly
adopted by the Board of Directors of Seller and all of its stockholders,
approving and authorizing the sale of the Assets on the terms hereof; and (iv)
counterpart originals or certified or other copies of all of the documents,
35
<PAGE>
certificates, schedules and other instruments required to be furnished to Buyer
by Seller or requested by Buyer or its counsel, pursuant to or consistent with
the terms of this Agreement.
10.4 No Action or Litigation. There shall be no order of any court or
governmental body restraining or prohibiting the transactions contemplated by
this Agreement, nor shall any litigation or other proceeding be pending or
threatened against Seller or Buyer seeking to prohibit or otherwise challenge
the consummation of the transactions contemplated by this Agreement or to obtain
substantial damages in respect thereof.
10.5 Third Party Consents. Except as otherwise indicated on any
Schedule to this Agreement, Seller shall have obtained, at or prior to the
Closing Date, all consents required for the consummation of the transactions
contemplated by this Agreement without the imposition of conditions unacceptable
to Buyer.
10.6 Change of Corporate Name. Seller shall have amended its
Certificate of Incorporation so as to change its corporate name to a name
reasonably acceptable to Buyer.
10.7 Fries Note. The Fries Note shall have a principal balance
remaining of not less that $100,000, shall have a term of four (4) years from
Closing, bear interest at the Federal Mid-Term Rate (as defined in Section
1274(d)(4) of the Internal Revenue Code of 1986, as amended), in effect at
Closing compounded annually, with equal monthly payments commencing on the last
day of the month in which the third anniversary of the Closing occurs. If Fries
shall voluntarily leave the employ of MTM or Buyer at a time when Buyer or MTM
is not in breach of Fries' Employment Agreement or Fries shall be terminated by
MTM or the Buyer for cause, such Note shall become immediately due and payable.
10.8 Employees. The employees of Seller designated as key personnel on
Schedule 10.8 hereof shall have demonstrated to the satisfaction of Buyer their
intention to become employees or independent contractors to Buyer on terms
proposed by Buyer, and the Employment Agreements shall be executed by the
respective parties, subject to the consummation of this Agreement.
36
<PAGE>
10.9 Opinion of Counsel. Buyer shall have received an opinion from
Seller's counsel substantially in the form attached hereto as Exhibit 10.9.
10.10 Pledge and Escrow Agreement. Seller and Stockholder shall have
executed the Pledge and Escrow Agreement attached as Exhibit 8.10 hereto.
10.11 Audited Financial Statements. Delivery of audited statements of
Seller acceptable to MTM's auditors for the period required to satisfy the
financial reporting requirements with respect to this acquisition under Rule
3-05 of Regulation S-X and the written consent of Seller's auditors that said
financial statements may be included in all appropriate SEC filings to be made
by MTM, including, but not limited to, MTM's Form 8-K with respect to this
acquisition and Form 10-K where such report must be incorporated or included.
11. Conditions Precedent to Obligations of Seller. The obligations of
Seller under this Agreement are subject to the satisfaction at or prior to
Closing of each of the following conditions (one or more of which may be waived
by Seller):
11.1 Representations and Warranties Correct. The warranties and
representations made by Buyer in this Agreement shall be true and correct in all
material respects as of the Closing Date, as though such warranties and
representations were restated and made as and at the Closing Date, and Buyer
shall have furnished Seller with a certificate executed by its president or
chief executive officer to that effect.
11.2 No Action or Litigation. There shall be no order of any court or
governmental body restraining or prohibiting the transactions contemplated by
this Agreement, nor shall any litigation or other proceeding be pending or
threatened against Seller or Buyer seeking to prohibit or otherwise challenge
the consummation of the transactions contemplated by this Agreement, or to
obtain substantial damages in respect thereof.
37
<PAGE>
11.3 Employment Agreement. The Employment Agreements shall be executed
by the respective parties, subject to the consummation of this Agreement.
11.4 Board Representation. Fries, subject to the consummation of the
Closing, will become a member of the Buyer's Board of Directors upon Closing,
and unless removed for cause, shall remain as a member of the Board at least
until the first annual meeting of Buyer's shareholders taking place after March
31, 1996.
11.5 Opinion of Counsel. Seller shall have received an opinion from
Buyer's counsel substantially in the form attached hereto as Exhibit 11.5.
11.6 Funding. Seller shall believe in good faith that the Buyer and/or
MTM, if MTM is obligated to so pay, has sufficient funds to pay the IBM
Indebtedness.
11.7 Release of Guarantee. Fries' release from the Guarantees upon the
consummation of this Agreement.
12. Registration Rights. Except as specifically provided herein, MTM is
not required to seek to have the Shares registered with the Securities and
Exchange Commission or any other body.
(a) Commencing on the Closing hereof, MTM shall advise the Seller or
its transferee, provided such transferee is a Principal or Permitted Transferee,
(such persons being individually referred to as "Holder" and collectively
referred to herein as "Holders") by written notice at least 30 days prior to the
filing of any registration statement or post-effective amendment thereto
("Registration Statement") under the Securities Act of 1933 ("Act"), covering a
public offering of equity securities of the Buyer solely for cash (other than a
registration relating solely to the sale of securities to participants in a
stock plan of MTM and/or one or more of its subsidiaries, or a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Shares) and shall, except as otherwise provided herein or any registration
38
<PAGE>
rights agreement outstanding as of the date hereof which MTM is a party to or
entered into subsequent hereto in good faith, register in any such Registration
Statement the number of Shares that the Holder shall notify MTM within twenty
(20) days after mailing of such notice by MTM that it desires to register and
shall include in any such Registration Statement such information as may be
required to permit a public offering of such Shares. MTM shall supply
prospectuses and other documents as the Holder may reasonably request in order
to facilitate the public sale or other disposition of the Shares. MTM shall bear
the entire cost and expense of a registration of securities initiated by it
under this subsection including the cost of compliance with Blue Sky Laws. The
Holder shall, however, bear any transfer taxes and underwriting discounts or
commissions applicable to the Shares sold by it and any legal fees incurred by
them. MTM may include other securities in any such Registration Statement. MTM
shall do any and all other acts and things which may be necessary or desirable
to enable the Holder to consummate the public sale or other disposition of the
Shares, and furnish indemnification in the manner as set forth in subsection (e)
of this Section 12, but shall not be required to qualify as a foreign
corporation to qualify the Shares for sale under the securities laws of any
state. The Holder shall furnish information and indemnification as set forth in
subsection (f) of this Section 12. All decisions as to whether and when to
proceed with any Registration Statement shall be made solely by MTM.
(b) In connection with any offering involving an underwriting of shares
of MTM's securities, MTM shall not be required to include any of the Shares in
such underwriting unless the Holders accept the terms of the underwriting as
agreed upon between MTM and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by MTM. If the total amount of securities requested by selling
stockholders to be included in such offering exceeds the amount of securities to
be sold, other than by MTM, and the underwriters determine in their sole
39
<PAGE>
discretion that such amount will jeopardize the success of the offering, then
MTM shall be required to include in the offering only that number of such Shares
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering. Subject to existing agreements and subsequent
agreements entered in good faith, the securities so included are to be
apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder (or in such other proportions as shall mutually be agreed to by such
selling stockholders).
(c) The minimum number of Shares which can be so registered as part of
any piggyback registration is the number that would result in an aggregate
offering price attributable to the Shares of $75,000 or more.
(d) Notwithstanding the foregoing subsection (a), in the event that
there is an underwritten offering of MTM's securities offered pursuant to said
Registration Statement pursuant to the above, the underwriters shall have the
right to refuse to permit any Shares, or to limit the amount of Shares, to be
sold by the Holder to such underwriters as such underwriter(s) may determine in
its discretion and the Holder shall refrain from selling such remainder of its
Shares covered by such Registration Statement for the period of days following
the effective date, which period of days shall not be greater than the lock-up
period for other directors of the Company whose shares are included within the
Registration Statement, and shall also refrain at any time when notified by MTM
that an amendment or supplement to the prospectus is required.
(e) Whenever pursuant to this Section 12 a Registration Statement
relating to the Shares is filed under the Act or amended or supplemented
thereto, MTM will indemnify and hold harmless each Holder covered by such
Registration Statement, amendment or supplement (such Holder being hereinafter
called the "Distributing Holder"), and each person, if any who controls (within
the meaning of the Act) the Distributing Holder, against any losses, claims,
40
<PAGE>
damages or liabilities, joint or several, to which the Distributing Holder or
any such controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any such Registration Statement or
any preliminary prospectus or final prospectus constituting a part thereof or
any amendment or supplement thereto or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and will reimburse the
Distributing Holder and each such controlling person for any legal or other
expenses reasonably incurred by the Distributing Holder and each such
controlling person for any legal or other expenses reasonably incurred by the
Distributing Holder or such controlling person or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that MTM will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in said Registration Statement, preliminary prospectus, final prospectus or
amendment or supplement, in reliance upon and in conformity with written
information furnished by the Distributing Holder or underwriter for use in the
preparation thereof.
(f) To the extent permitted by law, the Distributing Holder will
indemnify and hold harmless MTM, each of its directors, each of its officers who
have signed said Registration Statement and such amendments and supplements
thereto, each person, if any, who controls MTM (within the meaning of the Act)
and MTM's underwriters) and each person, if any, who controls such underwriters
(within the meaning of the Act) against any losses, claims, damages or
liabilities to which MTM or any such director, officer, underwriter or
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities arise out of or are based upon any
41
<PAGE>
untrue or alleged untrue statement of any material fact contained in said
Registration Statement, preliminary prospectus, final prospectus, or amendment
or supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in said Registration
Statement, preliminary prospectus, final prospectus or amendment or supplement,
in reliance upon and in conformity with written information furnished by such
Distributing Holder for use in the preparation thereof and will reimburse MTM or
underwriter or any such director, officer or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action.
(g) Promptly after receipt by an indemnified party under (e) or (f) of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party if such delay has not prejudiced the
indemnifying party's ability to defend such claim.
(h) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and to the extent that it
may wish, jointly with any other indemnifying party similarly notified to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section 12 for any legal or other
42
<PAGE>
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(i) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 12.
13. Indemnities.
13.1 In Favor of Buyer. Seller and FRIES, agree jointly and severally,
to indemnify, defend and hold Buyer, its successors and permitted assigns, free
and harmless from and against all claims, actions, liabilities and damages
(including reasonable attorneys' fees and expenses) as and when incurred arising
out of or based upon (i) the operation of the Business prior to the Closing
Date, other than the payment of the Assumed Liabilities set forth on Schedule
2.3 (the parties hereto agreeing that the indemnification provided by this
clause (i) does apply to any action, conduct or omission of Seller or the
Stockholder with regard to the performance of any other obligation of Seller
under the terms and conditions or other provisions of the agreements,
instruments or other documentation relating to the Assumed Liabilities other
than the non payment thereof); (ii) any obligations or liabilities of Seller,
fixed or contingent, matured or unmatured, liquidated or unliquidated, or
otherwise, other than the Assumed Liabilities; (iii) the failure of Seller or
the Stockholder to file timely any Federal, state, county, local or other
excise, franchise, property, payroll, income, capital stock, sales and use, or
other tax returns which are required to be filed by it or them relating to the
Business, whether before or subsequent to the Closing Date, or the failure of
Seller or the Stockholder to pay any such taxes when due; (iv) any claims,
obligations, liabilities or commitments made by Seller to present and former
employees of Seller, or otherwise, arising out of or in connection with their
employment or pursuant to any pension, retirement or other employee benefit plan
covering employees of Seller, or the failure to fund properly and adequately the
benefits provided under any such plans; (v) the non-compliance with any
43
<PAGE>
applicable bulk sales provisions in connection with the sale of the Assets to
Buyer under this Agreement; (vi) the breach by Seller or Stockholder of any of
their representations, warranties or covenants contained in this Agreement, or
the failure of Seller to obtain the consent of any person whose consent is
required to effectuate the assignment to Buyer of any Asset or the assumption by
Buyer of any of the Assumed Liabilities.
13.2 In Favor of Seller. Buyer agrees to indemnify, defend and hold
Seller, its successors and permitted assigns, free and harmless from and against
all claims, actions, liabilities and damages (including reasonable attorneys'
fees and expenses) as and when incurred arising out of or based upon (i) Buyer's
failure to discharge the Assumed Liabilities; (ii) the operation of the Business
subsequent to the Closing, except to the extent the claim, action, liability
and/or damages arises from an event to which Buyer is entitled to
indemnification under Section 13.1 hereof or (iii) the breach by Buyer of any of
its representations, warranties or covenants contained in this Agreement.
13.3 Procedure for Indemnification. If any party seeks indemnification
pursuant to Sections 13.1 or 13.2 it shall notify the party required to provide
indemnification hereunder of any claim made or action commenced against the
party to be indemnified, within a reasonable time after such party shall have
been notified of the claim or shall have been served with the summons or other
first legal process giving information as to the nature and basis of the claim.
The indemnifying party shall assume the defense of such claim or action, employ
counsel of its choice and bear all expenses relating to such defense. The
indemnified party shall have the right to participate in the defense of such
claim or action and to employ separate counsel, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (a) the
employment thereof shall have been specifically authorized by the indemnifying
party or (b) the indemnifying party shall fail to assume the defense and employ
counsel. Notwithstanding anything to the contrary in the foregoing, the
44
<PAGE>
indemnified party, upon written notice to the indemnifying party, may at its
expense assume the defense of such claim or action, and employ counsel of its
choice. The parties shall each cooperate in the defense of any such claim and
shall make available to each other records and other materials required for use
in such defense. In no event shall the indemnifying party be liable for any
settlement of any action or claim made without its written consent.
13.4 Pledge and Escrow. (a)(1) As security for Seller's, its assigns,
and the Shareholder's indemnification hereunder, the Seller and the Shareholder
will deliver to Snow Becker Krauss P.C. as escrow agent under the Pledge and
Escrow Agreement, 80,000 of the shares received at Closing in escrow for a
period of up to one (1) year from the Closing, subject to extension in the event
an unresolved claim is made on or prior to said one (1) year period ("Escrowed
Shares"). The Escrowed Shares shall be used to satisfy all or a portion of any
indemnity claims by Buyer. The MTM Common Stock shall be valued at five dollars
($5.00) per share. Forty-Five Thousand of the Escrowed Shares shall be released
upon the Seller's delivery of a consent of the State of Connecticut to the
assignment of the Information Processing Systems Master Software License
Agreement dated October 23, 1995 between the State of Connecticut and Seller or
a substantially similar contract between the State of Connecticut and Buyer. If
such consent or new contract is not delivered within six (6) months of Closing
or the Seller receives notice of termination of such contract from the State of
Connecticut prior to such six (6) months, such 45,000 shares shall be delivered
to Buyer. The remaining Escrowed Shares shall be released from escrow one (1)
year from Closing, provided any Escrowed Shares in the possession of the Escrow
Agent at such time shall be retained in escrow to the extent necessary to
satisfy in full any claims arising prior to such year date remain unresolved.
Any Escrowed Shares retained after one year from closing as provided above shall
be released from time to time as the claims are resolved and the need for all or
part of the Escrowed Shares to satisfy remaining claims is unnecessary.
45
<PAGE>
(2) Within ninety (90) days after the date of Closing, Seller's net
worth as at the date of Closing shall be determined based upon the audited
statement of Seller as at December 31, 1995 and Buyer's accountant's unaudited
review of financial results thereafter until the Closing Date (the "Post Closing
Audit"). Seller shall have the right to review the Post Closing Audit at its
sole cost and expense and dispute same. In the event Seller disagrees with the
results of the Post Closing Audit, the accountants for Seller and Buyer shall
pick a third accountant who shall determine the actual net worth of Seller at
Closing based upon the assumptions on which the net worth set forth in Section
5.4(d) was based. The decision of said third accountant shall be final.
Accounting fees with respect to said third accountant shall be paid in the
proportion each of Seller's and Buyer's values differ from the third
accountant's valuation. In the event the actual net worth of Seller as of the
Closing is a deficit greater than ($203,106) (valuing the Written-Off Inventory
at zero (0) and the Fries Note at the principal amount thereof at Closing),
Buyer shall be entitled to receive the portion of the Escrowed Shares equal to
the amount of such difference divided by $5.00. For purposes of computing net
worth, any amounts payable to the broker referred to in Section 20 below shall
not be considered a liability of Seller. In the event of any inconsistency
between the language set forth in this Section 13.4 and the Pledge and Escrow
Agreement, the Pledge and Escrow Agreement shall be controlling.
14. Use Best Efforts to Satisfy Conditions Precedent. Each of Seller
and FRIES agree to use its or his best efforts to bring about the satisfaction
of the conditions specified in Section 10 hereof, and Buyer agrees to use its
best efforts to bring about the satisfaction of the conditions specified in
Section 11 hereof. If any condition specified in any of said Sections shall not
be satisfied by such best efforts and such condition shall not be waived by the
party or parties for the benefit of which such condition is stated, such party
after giving notice of such non-satisfaction and giving the other parties a
reasonable opportunity to satisfy such condition, may terminate this Agreement
46
<PAGE>
by notice in writing to the other parties. In the event this Agreement is not
consummated by May 15, 1996, provided, however that the party electing to
terminate is not otherwise in default hereunder and the party not electing to
terminate is ready, willing and able to close hereunder, either party can elect
to terminate this Agreement. Upon such termination, this Agreement shall cease,
other than with respect to Sections 19, 20 and 22 and no party hereto shall have
any liability hereunder of any nature whatsoever, including liability for
damages, except as they relate to the above referenced sections.
15. Designation of Forum in the Event of Litigation. Seller, the
Stockholders, and Buyer agree that any legal action or proceedings with respect
to, or arising out of, the negotiation, execution, performance or breach of, or
the rights and privileges provided by, or responsibilities and obligations
under, this Agreement must be brought in either the Supreme Court of the State
of New York for the County of New York or the United States District Court for
the Southern District of New York and in no other jurisdiction. By execution and
delivery of this Agreement, Seller, each of the Stockholders, and Buyer accept
and submit to the jurisdiction of such courts in any such legal action or
proceeding and irrevocably consent to service of process in any action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to each of the parties at its address for notices as specified
herein, such service to become effective five (5) days after such mailing.
Nothing herein shall affect the right to serve process in any other manner
permitted by law.
16. Notices. All notices, requests, demands and other communications
which are required or permitted under this Agreement shall be in writing and
shall be deemed sufficiently given upon receipt if personally delivered, faxed
or mailed by certified mail, return receipt requested, addressed to the party to
be notified at the address hereafter set forth for such party or to such other
address as such party may hereafter designate in writing:
47
<PAGE>
(a) If to Seller or FRIES:
DATA.COM RESULTS, Inc.
Inwood Business Park
Rocky Hill, CT. 06067
Attention: Robert A. Fries, President
Fax:
with a copy to:
Michael K. Brown, Esq.
Wiggin & Dana
One Century Towers
New Haven, Connecticut 06508
Fax: (203) 782-2889
(b) If to Buyer:
Steven Rothman, President
Micros-To-Mainframes, Inc.
614 Corporate Way
Valley Cottage, New York 10989
Fax: (914) 267-3785
with a copy to:
Jack Becker, Esq.
Snow Becker Krauss P.C.
New York, New York 10158-0125
Fax: (212) 949-7052
17. Binding Effect; Benefits. This Agreement shall inure to the benefit
of, and be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns, and no other person shall
acquire or have and other rights under this Agreement or by virtue of this
Agreement.
18. Assignment. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by Seller or Buyer without the prior written consent of the other.
19. Confidentiality. Seller and the Stockholder, on the one hand, and
Buyer on the other hand, shall maintain the confidentiality of all confidential
information furnished to it or him by the other concerning the other's business,
assets and financial condition, and shall not disclose such information to
others, or use any such information for any purpose, except in furtherance of
48
<PAGE>
the transactions contemplated by this Agreement (and except as such information
may be required to be disclosed under applicable law or in connection with
litigation arising out of this Agreement), unless and until such information is
or becomes in the public domain by reason other than disclosure by it or him. In
the event the transactions contemplated herein are not consummated, (i) MTM and
its principals, shareholders, officers, employees, agents or representatives
shall not disclose to any third party or use in any manner whatsoever any of the
confidential information disclosed to them by Seller, its shareholders,
officers, employees, agents or representatives in connection with the
negotiations for this transaction, and (ii) Seller and its principals,
shareholders, officers, employees, agents or representatives shall not disclose
to any third party or use in any manner whatsoever any of the confidential
information disclosed to them by MTM, its shareholders, officers, employees,
agents or representatives in connection with the negotiations for this
transaction. This confidential information shall extend, but not be necessarily
limited, to the sales techniques, vendors, independent contractors, employees,
and customer lists disclosed by one party to the other. Confidential information
as used herein shall not include that which (i) was in the public domain prior
to receipt thereof in the same context as the disclosure so made; (ii) the
receiving party can show it was in possession thereof in the same context prior
to receipt; (iii) subsequently becomes known to the receiving party by third
parties as a matter of right and without restriction on disclosure; or (iv)
subsequently comes into the public domain in the same context as the disclosure
by the disclosing party through no fault of the receiving party. In the event
this Agreement is terminated, upon the written request, the shareholders,
officers, employees, agents or representatives of the respective parties hereto
shall return or destroy the confidential information previously disclosed to
them by the disclosing party. This provision shall survive the termination of
this Agreement.
20. Brokerage. Each of the parties hereto represents and warrants to
the other that it has not dealt with any broker or finder in connection with the
49
<PAGE>
transactions contemplated by this Agreement, except Robert Arnold. The parties
hereto acknowledge that in the event the Acquisition Agreement is consummated,
MTM shall bear the fee payable to said broker. No inference should be given by
this Paragraph 20 whether or not Mr. Arnold is due a fee if the Acquisition is
not consummated or, if such fee is so payable at such time, who bears the cost
thereof. Insofar as any claims for brokerage commission or finder's fees may be
alleged to be based on any arrangements or agreements made by, or on behalf of a
party, such party agrees to indemnify and hold the other harmless against all
liability, damage or expense, including reasonable attorneys' fees and expenses,
arising therefrom.
21. Governing Law. This Agreement shall in all respects be governed by,
construed under and enforced in accordance with the laws of the State of New
York.
22. Expenses; Transfer Taxes.
22.1 Each of the parties shall pay its or his own legal, accounting and
other expenses in connection with the negotiation and preparation of this
Agreement and the consummation of the transactions contemplated hereby.
22.2 Seller and Buyer (upon presentation of tax returns, invoices or
documentation reasonably satisfactory to Buyer) shall each pay one-half of the
total sales and transfers taxes resulting from the consummation of the
transactions contemplated hereby. Seller shall provide Buyer with copies of all
correspondence with governmental authorities concerning sales and transfer taxes
arising out or relating to the transactions contemplated hereby.
23. Severability. If any section, term or provision of this Agreement
shall to any extent be held or determined to be invalid or unenforceable, the
remaining sections, terms and provisions shall nevertheless remain in full force
and effect.
24. Survival. The representations, warranties, covenants and agreements
of the parties set forth in this Agreement (including the Schedules) and in any
other documents, certificates or written statements delivered by or on behalf of
any a party to this Agreement shall survive the Closing for a period of two (2)
years.
50
<PAGE>
25. Waiver. Any waiver by any party of a breach of any of the provisions of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions will not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
26. Headings. The headings in this Agreement are for convenience only and
shall not affect the construction of this Agreement.
27. Entire Agreement; Modification. This Agreement constitutes the entire
understanding between the parties with respect to its subject matter. It
supersedes and cancels all prior agreements and understandings among the parties
relating to its subject matter. This Agreement may not be amended or
supplemented, except by subsequent written agreement of the parties which
specifically states that it is intended to be an amendment or supplement to this
Agreement, signed by the parties hereto. No course of dealing or custom shall be
referred to as modifying any of the terms and conditions of this Agreement.
28. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
51
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on this day of May, 1996.
DATA.COM RESULTS, INC.
By: /s/ ROBERT A. FRIES
____________________________________
ROBERT A. FRIES
President
/s/ ROBERT A. FRIES
_____________________________________
ROBERT A. FRIES, individually
DATA.COM DIRECT, INC.
By: /s/ STEVEN ROTHMAN
_____________________________________
MICROS-TO-MAINFRAMES, INC.
By: /s/ STEVEN ROTHMAN
____________________________________
<PAGE>
PLEDGE AND ESCROW AGREEMENT
---------------------------
This PLEDGE AND ESCROW AGREEMENT ("Agreement") is made as of May 6,
1996, by and among those persons who have executed this Agreement as pledgors
(the "Pledgors"), MICROS-to-MAINFRAMES, INC., a New York corporation with its
principal place of business at 614 Corporate Way, Valley Cottage, New York 10989
("MTM"), DATA.COM DIRECT, INC. a New York corporation with its principal place
of business at 614 Corporate Way, Valley Cottage, New York 10989 ("Subsidiary")
and SNOW BECKER KRAUSS P.C. with offices at 605 Third Avenue, New York, New York
10158 (the "Escrow Agent").
RECITALS
--------
A. MTM, Subsidiary, Data.Com Results, Inc., a Connecticut corporation
with its principal place of business at Inwood Business Park, Rocky Hill,
Connecticut 06067 ("Data.Com") and Robert A. Fries, the principal shareholder of
Data.Com ("Fries") have entered into an Asset Purchase Agreement dated as of the
1st day of May, 1996 (the "Purchase Agreement") All defined terms herein shall
have the meaning ascribed to same in the Purchase Agreement, except as the
context hereof otherwise requires.
B. Under the Purchase Agreement, Data.Com and Fries agreed to indemnify
and hold harmless MTM and Subsidiary from and against any and all costs, losses,
liabilities, damages, claims, demands or expenses (including reasonable legal
fees and expenses incurred in defending against any such claims) incurred by MTM
and/or Subsidiary and arising out of or resulting from (i) any misrepresentation
or breach of any warranty or covenant by Data.Com and/or Fries under the
Purchase Agreement and (ii) the nonfulfillment of any obligation or covenant of
Data.Com and Fries under the Purchase Agreement. The Purchase Agreement provides
that 80,000 of the shares received at Closing shall be held in escrow for a
period of up to one (1) year from the Closing, subject to extension in the event
an unresolved claim is made on or prior to said one (1) year period ("Escrowed
Shares"). The MTM Common Stock shall be valued at five dollars ($5.00) per
share.
C. Escrow Agent is willing to enter into this Agreement, accept the
escrow deposits, and perform services hereunder.
AGREEMENT
---------
IN CONSIDERATION of the above recitals and the mutual covenants set
forth in this Agreement, the parties agree as follows:
<PAGE>
SECTION 1. ESCROW.
1.1. Collateral. (a) As collateral security for the indemnification set
forth in Section 13.1 of the Purchase Agreement by Data.Com and Fries, Data.Com,
on behalf of itself, its successors and assigns (including but not limited to
its Shareholders) (collectively the "Pledgors") does hereby grant a collateral
security interest in, and sell, assign, transfer, set over and pledge to MTM and
Subsidiary (collectively the "Pledgees"), and to their respective successors and
assigns for collateral purposes, and delivers to Escrow Agent, for the purpose
herein stated, the Escrow Shares. All items deposited hereunder from time to
time, are hereinafter collectively referred to as the "Collateral" or "Escrow
Amount". This Agreement shall be deemed a Security Agreement under the Uniform
Commercial Code of New York.
(b) The Collateral is assigned and transferred to Pledgees by
way of collateral security only and accordingly, MTM, Subsidiary and Escrow
Agent, by their acceptance hereof, shall not be deemed to have assumed or become
liable for any of the obligations or liabilities of Pledgors thereunder, if any,
whether arising by operation of law or otherwise, Pledgors hereby acknowledging
and agreeing that Pledgors are and remain liable thereunder to the same extent
as though this Agreement had not been made.
1.2. Additional Collateral; Substituted Collateral. From and after the
date of execution of this Agreement, Pledgors shall deposit with Escrow Agent
all cash dividends (except as otherwise specifically provided in Section 1.6
hereof), stock dividends and distributions with respect to the Collateral,
together with executed stock powers, the signatures on which have been
guaranteed by a member firm of the New York Stock Exchange or a national bank.
Any such additional property required to be deposited hereunder shall constitute
part of the Collateral for all purposes hereof. Data.Com and its permitted
assigns, to the extent permitted and in accordance with the procedure set forth
in the Purchase Agreement, may at any time during the term of this Agreement
sell any of the securities constituting the Collateral (and Escrow Agent shall
accept instructions from Data.Com and its assigns for such purposes to the
extent Data.Com and its assigns have complied with the Purchase Agreement, and
shall comply with such instructions to the extent practicable), but the proceeds
from such sale shall be pledged hereunder and shall constitute part of the
Collateral.
1.3 Appointment of Escrow Agent. Each of Pledgors and Pledgees hereby
appoints Snow Becker Krauss P.C. as Escrow Agent to receive, hold, administer,
and deliver the Collateral in accordance with this Escrow Agreement, and Snow
Becker Krauss P.C. hereby accepts its appointment, accepts the deposit of the
Collateral, acknowledges receipt thereof, agrees to accept additional deposits
-2-
<PAGE>
to be made hereunder, and agrees to hold the Collateral and dispose of it, all
subject to and upon the terms and conditions set forth herein. The Escrow Agent
shall dispose of the Escrow Amount in accordance with the express provisions of
this Agreement, and shall not make, be required to make, or be liable in any
manner for its failure to make, any determination under the Purchase Agreement
or any other agreement, including without limitation any determination whether
Pledgors or Pledgees has complied with the terms of the Purchase Agreement or is
entitled to payment or to any other right or remedy thereunder.
1.4. Safekeeping; Investments. The Escrow Agent shall place the Escrow
Shares in its vault at a bank located in the City of New York. The Escrow Agent
shall invest and reinvest any cash which may in the future become collateral in
one or more interest-bearing federally insured money market accounts, or other
like investments.
1.5 Financing Statements. Data.Com and its assigns will join with
Pledgees in executing such financing statements, continuation statements,
partial releases and termination statements as Pledgees may deem reasonably
necessary or appropriate. A photographic, carbon or other reproduction of this
Agreement shall be sufficient as a financing statement. Data.Com and its assigns
will execute such additional security agreements, pledge agreements, or other
documentation in form and substance satisfactory to Pledgees (in Pledgee's
reasonable opinion) as Pledgees may reasonably request in connection with the
pledge hereunder.
1.6 Voting. So long as Data.Com and its assigns comply with the terms
of this Agreement, Data.Com and its assigns shall be entitled to vote any
Escrowed Shares, and to receive all cash dividends and distributions (other than
stock dividends or liquidating distributions) thereon.
1.7. Release of Collateral. The Escrow Agent shall hold the Escrow
Amount until it delivers the Escrow Amount as provided in this Section 1.7, as
follows:
(a) Escrowed Shares. Forty-Five Thousand (45,000) of the
Escrowed Shares shall be released upon the Pledgor's delivery of a consent of
the State of Connecticut to the assignment of the Information Processing Systems
Master Software License Agreement dated October 23, 1995 between the State of
Connecticut and Data.Com or a substantially similar contract between the State
of Connecticut and Buyer. If such consent or new contract is not delivered
within six (6) months of Closing or Pledgor receives notice of termination of
such contract from the State of Connecticut prior to such six (6) months, such
45,000 shares shall be delivered to Pledgee. The Escrowed Shares shall be
released from escrow one (1) year from Closing, provided any Escrowed Shares in
the possession of the Escrow Agent at the end of such one (1) year period shall
be retained in escrow to the extent necessary to satisfy in full any claims
-3-
<PAGE>
arising prior to the end of such period that then remain unresolved. Any
Escrowed Shares retained after one year from closing as provided above shall be
released from time to time as the claims are resolved and the need for all or
part of the Escrowed Shares to satisfy remaining claims is unnecessary.
(b) Joint Instructions. If the Escrow Agent receives written
instructions signed by Fries, as representative for all the Pledgors, or in the
event of the death of Fries, Barbara Fries, as representative for all the
Pledgors, and Pledgees, directing delivery of all or a portion of the
Collateral, the Escrow Agent shall comply with the instructions, regardless of
whether or not the instructions comply with (a) and/or (b) above.
(c) Pledgees' Demand. If the Escrow Agent receives a written
notice signed by both Pledgees stating that they are entitled to all or a
portion of the Escrow Amount to the extent set forth above, and that Pledgees
have delivered a copy of the notice to Fries, the Escrow Agent shall resend such
notice to Fries. Unless the Escrow Agent has received a written objection to
Pledgees' demand from Fries within ten (10) calendar days after the Escrow
Agent's delivery of a copy of Pledgees' notice to Fries, the Escrow Agent shall
deliver to Pledgees, the Escrow Amount claimed by Pledgees fifteen (15) calendar
days after the Escrow Agent's delivery of a copy of Pledgees' notice to Fries.
If the Escrow Agent receives a written objection from Fries as provided above,
the Escrow Agent shall continue to hold the Escrow Amount until it has received
written instructions signed by the parties hereto or a final non-appealable
order of a court of competent jurisdiction directing delivery of the disputed
Escrow Amount, in which case the Escrow Agent shall deliver the disputed Escrow
Amount in accordance with the instructions or order.
(d) Pledgor's Demand. If the Escrow Agent receives a written
notice signed by the Fries, as the representative for all the Pledgors, stating
that Pledgors are entitled to the Escrow Amount to the extent set forth above
and that Fries has delivered a copy of the notice to Pledgees, then the Escrow
Agent shall deliver a copy of the notice to Pledgees. Unless the Escrow Agent
has received a written objection to Fries's demand from a Pledgee within ten
(10) calendar days after the Escrow Agent's delivery of a copy of Fries's notice
to Pledgees, the Escrow Agent shall deliver to Pledgors all or a portion of the
Escrow Amount claimed by Fries fifteen (15) calendar days after the Escrow
Agent's delivery of a copy of Fries's notice to Pledgees. If the Escrow Agent
receives a written objection from a Pledgee as provided above, the Escrow Agent
shall continue to hold the Escrow Amount until it has received written
instructions signed by the parties hereto or a final non-appealable order of a
court of competent jurisdiction directing delivery of the disputed Escrow
Amount, in which case the Escrow Agent shall deliver the disputed Escrow Amount
in accordance with the instructions or order.
-4-
<PAGE>
(e) Other Dispositions. Notwithstanding anything to the
contrary in this Escrow Agreement:
(1) The Escrow Agent may deposit the Escrow Amount with the
clerk of any court of competent jurisdiction upon commencement of an
action in the nature of interpleader or in the course of any court
proceedings.
(2) If at any time the Escrow Agent receives a final
non-appealable order of a court of competent jurisdiction directing
delivery of the Escrow Amount, the Escrow Agent shall comply with the
order.
1.8. Termination. Upon any delivery or deposit of the entire Escrow
Amount as provided in Section 1.7, the Escrow Agent shall thereupon be released
and discharged from any and all further obligations arising in connection with
this Escrow Agreement.
SECTION 2. CONCERNING THE ESCROW AGENT.
The Escrow Agent has been induced to accept its duties under this
Escrow Agreement by the following terms and conditions:
2.1. Limitation on Liability. The Escrow Agent shall not be liable
except for its own gross negligence or willful misconduct. Except for claims
based upon gross negligence or willful misconduct that are finally judicially
determined against the Escrow Agent, Pledgors and Pledgees shall jointly and
severally indemnify and hold the Escrow Agent harmless from and against any and
all losses, liabilities, claims, actions, damages and expenses, including but
not limited to reasonable attorneys' fees and disbursements, arising out of or
in connection with this Agreement. Without limiting the foregoing, the Escrow
Agent shall in no event be liable in connection with its investment or
reinvestment of the Escrow Amount in good faith in accordance with this
Agreement, including without limitation any delays (not resulting from its gross
negligence or willful misconduct) in the investment or reinvestment of the
Escrow Amount, or any loss of interest incident to any of such delays.
2.2. Disputes. If any disagreement arises between Pledgors, on one
hand, and Pledgees, on the other, resulting in adverse claims or demands being
made in connection with the Escrow Amount, or if the Escrow Agent in good faith
is unsure of the action it should take hereunder, the Escrow Agent shall be
entitled to hold the Escrow Amount until the Escrow Agent receives (i) a final
non-appealable order of a court of competent jurisdiction directing delivery of
the Escrow Amount or (ii) a written agreement executed by MTM and Fries
directing delivery of the Escrow Amount, in which event the Escrow Agent shall
disburse the Escrow Amount in accordance with the order or agreement.
-5-
<PAGE>
2.3. Reliance. The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument, or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume that any
person purporting to give any notice or receipt or advice or make any statement
or execute any document in connection with the provisions hereof has been duly
authorized to do so. The Escrow Agent may act in good faith pursuant to the
advice of its counsel with respect to any matter relating to this Escrow
Agreement, including without limitation any determination that a court order is
final and non-appealable.
2.4. Other Agreements. This Escrow Agreement sets forth all the duties
of the Escrow Agent with respect to any and all matters pertinent hereto. The
Escrow Agent shall not be bound by the provisions of any other agreement.
2.5. Duty. The Escrow Agent shall not be under any duty to give the
Escrow Amount held by it hereunder any greater degree of care than it gives its
own similar property.
2.6. No Interest in Escrow Amount. The Escrow Agent does not have any
interest in the Escrow Amount deposited hereunder but is serving as escrow
holder only.
SECTION 3. RESIGNATION OF ESCROW AGENT.
The Escrow Agent may at any time resign by delivering the Escrow Amount
to a successor escrow agent designated jointly by MTM and Fries in writing, or
to any court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any further obligation arising in connection with this
Escrow Agreement.
SECTION 4. MISCELLANEOUS.
4.1. Tax Reporting. For tax reporting purposes, any interest or other
proceeds earned on the sale of collateral shall be deemed to be for the account
of Pledgors.
4.2. Escrow Agent Fees. Pledgees shall reimburse the Escrow Agent
promptly upon request for all reasonable expenses, including reasonable
attorneys' fees and any transfer taxes relating to the Escrow Amount, incurred
by it in the performance of its duties under this Escrow Agreement.
Notwithstanding the above, in the event of a dispute, the party hereto to which
the Escrow Amount is not finally distributed shall ultimately bear all such
costs arising from and after the dispute. This Section shall survive the
termination of this Escrow Agreement or the resignation of the Escrow Agent.
Pledgors and Pledgees hereby grant to the Escrow Agent a lien on the Escrow
-6-
<PAGE>
Amount such that, in the event that any and all charges payable under this
Section shall not be timely paid, the Escrow Agent shall have the right to pay
itself from the Escrow Amount the full amount owed, provided that written notice
of the Escrow Agent's intent to proceed under this sentence shall be given at
least five (5) business days in advance of such action.
4.3. Notices. All notices, demands and requests required or permitted
to be given under the provisions of this Agreement shall be in writing and shall
be deemed to have been duly delivered and received (a) on the date of personal
delivery to the person who is to receive notice provided such person executes a
receipt for such notice or an attorney in Escrow Agent executes an
acknowledgment of such delivery, or (b) on the date of receipt (as shown on the
return receipt) if mailed by registered or certified mail, postage prepaid and
return receipt requested, in each case addressed to the address first written
above of the respective party. Notwithstanding the above, in the event a Pledgor
or Pledgee do not accept or receive the item mailed as set forth in (b) above
within seven (7) days of the mailing thereof, the Pledgor or Pledgee shall be
deemed to have received such notice, demand and/or request referred to in (b)
above seven (7) days after the due delivery and receipt of such notice, demand
and/or request to the respective parties' attorneys set forth below. Copies
(which shall not constitute notice except as set forth above) will also be sent
to the following respective parties' attorneys:
If to Pledgees: Jack Becker, Esq.
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Fax: (212) 949-7052
If to Pledgors/Fries: Michael K. Brown, Esq.
Wiggin & Dana
One Century Tower
New Haven, Connecticut
06508-1832
Fax: (203)782-2889
or to any other or additional persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 4.3.
4.4. Benefit and Binding Effect. Neither party hereto may assign this
Agreement without the prior written consent of the other party hereto. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
4.5. Further Assurances. The parties shall execute any other documents
that may be necessary and desirable to the implementation and consummation of
this Agreement.
-7-
<PAGE>
4.6. Governing Law. This Agreement shall be governed, construed and
enforced in accordance with the laws of the State of New York (without regard to
the choice of law provisions thereof).
4.7. Headings. The headings herein are included for ease of reference
only and shall not control or affect the meaning or construction of the
provisions of this Agreement.
4.8. Gender and Number. Words used herein, regardless of the gender and
number specifically used, shall be deemed and construed to include any other
gender, masculine, feminine, or neuter, and any other number, singular or
plural, as the context requires.
4.9. Amendment. This Agreement cannot be amended, supplemented or
changed except by an agreement in writing that makes specific reference to this
Agreement and which is signed by the party against which enforcement of any such
amendment, supplement or modification is sought.
4.10. Counterparts. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were upon the same
instrument.
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized signatory of MTM, the duly authorized signatory of Subsidiary, the
duly authorized signatory of Data.Com and Fries, and the Escrow Agent as of the
date first written above.
DATA.COM RESULTS. INC.
By: /s/ ROBERT A. FRIES
________________________________
Name: Robert A. Fries
Title: President
MICROS-to-MAINFRAMES, INC.
By: /s/ STEVEN ROTHMAN
________________________________
Name: Steven Rothman
Title: President
DATA.COM DIRECT, INC.
By: /s/ STEVEN ROTHMAN
________________________________
Name: Steven Rothman
Title: President
-8-
<PAGE>
/s/ ROBERT A. FRIES
____________________________________
Robert A. Fries
SNOW BECKER KRAUSS P.C.
By: /s/ H. DAVID BERKOWITZ
________________________________
-9-
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT entered into as of the 1st day of May, 1996, by and between
Micros-to-Mainframes, Inc., a New York corporation with its principal place of
business at 614 Corporate Way, Valley Cottage, New York 10989 (the "Company"),
and Robert A. Fries, residing at 71 Peria Drive, Rocky Hill, Connecticut 06067,
(the "Employee").
W I T N E S S E T H :
WHEREAS, the Employee is currently engaged as the President of Data.Com.
Results, Inc., a Connecticut corporation ("Data.Com"), a corporation whose
assets were acquired by a wholly-owned subsidiary of MTM this date;
WHEREAS, the Company's wholly-owned subsidiary, DATA.COM Direct, Inc., a
New York corporation ("Newco") has as of the date first written above acquired
substantially all of the assets of Data.Com;
WHEREAS, the Company is desirous of engaging Employee and the Employee is
desirous of being engaged by the Company upon the terms and conditions contained
herein;
WHEREAS, the Company sells computer hardware and software, designs and
installs computer systems, provides computer consulting services and is engaged
in the development of new products and new procedures to enhance its business;
WHEREAS, the compensation to be paid to the Employee by the Company is at
least in part dependent upon profits which may accrue to the Company through its
ownership and/or operation of processes and procedures, involving trade secrets
and proprietary information relating to its business;
WHEREAS, the Company is engaged in a highly competitive business; and
WHEREAS, the Company must maintain its competitive position by protecting
its inventions, trade secrets, patents, know-how, and proprietary information.
NOW, THEREFORE, in consideration of the mutual premises and agreements
contained herein and for other good and valuable consideration by each of the
parties, the parties hereby agree as follows:
1. Employment
The Company hereby employs the Employee and the Employee hereby accepts
employment upon the terms and conditions set forth herein.
-1-
<PAGE>
2. Term
The term of this Agreement (the "Term") shall commence as of May 1,
1996 (the "Commencement Date") and conclude at 5:00 p.m. on the third
anniversary of the Commencement Date; provided, however, that the term of this
Agreement shall be automatically continued and extended for additional
consecutive twelve month periods commencing upon such termination date, unless,
at least thirty (30) days before the date of termination of the initial term of
this Agreement or of any such extended term, the Company shall give the
Employee, or the Employee shall give the Company, a notice in writing electing
to terminate this Agreement as of such termination date.
3. Services To Be Rendered
During the term of this Agreement, the Employee shall serve as a senior
Vice President of the Company and either President or at the pleasure of Newco's
Board of Directors, from time to time, as Co-President, and shall perform such
duties as are determined from time to time by the Company's and Newco's Board of
Directors, respectively, provided, however, that such duties shall be generally
consistent with such duties as are customarily performed by an executive officer
of a corporation. Such job description shall not be deemed to be the sole
responsibilities of Employees, which responsibilities shall be determined from
time to time by the Company's and Newco's Board of Directors, respectively. If
requested by the Company's Board of Directors, Employee shall serve as an
executive officer of one or more other subsidiaries of the Company and shall in
the performance of such duties, comply with the policies of the Board of
Directors of such subsidiary. If Employee shall be elected or appointed as a
director of the Company during the term of this Agreement, he will serve in such
capacity without further compensation. Unless prevented by death or disability,
the Employee shall devote his full business time, allowing for vacations and
national holidays, as set forth in Sections 5(e) and (f) hereof, and illnesses,
exclusively to the business and affairs of the Company and its subsidiaries, and
shall use his best efforts, skill and abilities to promote its interests.
Nothing herein contained shall be construed as preventing the Employee from
purchasing securities in any publicly held entity, if such purchases shall not
result in his owning beneficially 2% or more of the equity securities of such
company.
4. Compensation
For the services rendered hereunder, the Company shall pay and the
Employee shall accept the following compensation:
(a) From the Commencement Date through the third anniversary of the
Commencement Date, the Employee shall receive a base annual salary of $140,000.
-2-
<PAGE>
(b) The Employee shall be entitled to an annual non- cumulative bonus
during the term hereof based upon the performance of Newco equal to six percent
(6%) of Newco's earnings before taxes, depreciation and amortization ("EBTDA")
for the respective fiscal year determined in accordance with generally accepted
accounting principles, but in no event more than $60,000 with respect to any
fiscal year. Notwithstanding anything contained herein to the contrary, the
parties hereto acknowledge that (X) corporate overhead (including, but not
limited to, (i) compensation payable to MTM's corporate officers and support
staff, but excluding compensation and benefits payable to the Company's
directors and executive officers required to be named in the Company's Summary
Compensation Table included as part of its Annual Report on Form 10-K, (ii)
legal and accounting fees not attributable to any specific division or
subsidiary of MTM, and (iii) corporate office expenses) shall be allocated among
the Company and its subsidiaries based on the gross revenues attributable to
each, and shall be an item of deduction in computing EBTDA and (Y) earnings
shall be computed without giving effect to extraordinary items of income and
expense determined in accordance with generally accepted accounting principles.
Subject to the preceding sentence, EBTDA shall be determined by the Company's
chief financial officer in accordance with the Buyer's customary and normal
accounting procedures within ninety (90) days after the end of the applicable
measuring period, and any payment due shall be made within thirty (30) days
thereafter.
(c) The Employee's salary shall be payable subject to such deductions
as are then required by law and such further deductions as may be agreed to by
the Employee, in accordance with the Company's prevailing salary payroll
practices.
(d) Employee shall be granted incentive stock options pursuant to the
Company's option plan to purchase 5,000 shares of the common stock of the
Company on April 1, 1997 if Newco's EBTDA, as computed above, for the fiscal
year ending March 31, 1997 is $1,250,000 or more; be granted incentive stock
options to purchase 5,000 shares of the common stock of the Company on April 1,
1998 if Newco's EBTDA for the fiscal year ending March 31, 1998 is $1,250,000 or
more; be granted incentive stock options to purchase 10,000 shares of the common
stock of the Company on April 1, 1999 if Newco's EBTDA for the fiscal year
ending March 31, 1999 is $1,350,000 or more. The option price for any option so
granted shall be 110% of the fair market value of the Company's common stock, as
determined in good faith by the Board of Directors of the Company, as at the
date the respective option is granted. The options granted with respect to each
respective fiscal year shall not vest until the first day of the taxable year
following the year of grant, at which time all such options granted on the
respective April 1 shall vest. The aforementioned options shall expire upon the
earlier of five (5) years from the date such options are granted or Employee's
termination of employment with the Company. Employee agrees to be bound by all
-3-
<PAGE>
tax withholding requirements with respect to such options and the exercise
thereof and to execute such investment representation letters as counsel for the
Company shall require in order to comply with applicable securities laws.
Notwithstanding anything contained herein which may be to the contrary, in the
event of a Recapitalization Event, as defined below, any options not yet granted
shall be adjusted, as shall the exercise price therefor, so as to reflect any
such Recapitalization Event occurring after the day first written above and
before the respective grant so that the resultant of multiplying the adjusted
number of options by the new exercise price shall equal the resultant of
multiplying the number of such options prior to the Recapitalization Event and
the exercise price in effect prior to the Recapitalization Event.
Recapitalization Event means for purposes hereof changes by reason of
recapitalization, reclassification, stock split-up, combination or exchange of
Common Stock or the like, or by the issuance of dividends payable in Common
Stock.
5. Benefits and Expenses
(a) The Employee shall be entitled to participate, subject to customary
eligibility requirements, in all fringe benefits customarily granted or made
available to an executive officer of the Company, other than Howard Pavony and
Steven Rothman, such as medical, disability, hospital and health insurance
plans, and profit sharing and pension plans, life insurance and other plans, if
any. Notwithstanding the above, the Company's Board of Directors retains the
right to determine the magnitude of any benefits so granted. The Employee shall
also be included in the Directors and Officers' indemnification insurance
policy, if obtained.
(b) In the event that the Employee's employment by the Company is
terminated for any reason, the Employee shall have the right to purchase from
the Company any insurance policies on his life owned by the Company for a price
equal to the cash surrender value of the policies at the date of such
termination, plus prepaid premiums. The right to purchase shall be exercised by
the Employee by written notice to the Company not less than thirty (30) days
after the date of such termination, and the purchase price for such policies
shall be paid by the Employee to the Company simultaneously with such written
notice.
(c) During the term of this Agreement, the Company shall, upon
presentation of proper vouchers, also reimburse the Employee for all reasonable
expenses incurred by him directly in connection with his performance of services
as an officer and employee of the Company.
(d) The Company shall pay Employee an additional $400 a month as a
non-accountable car allowance. The Company shall not be responsible for
-4-
<PAGE>
insurance for said car not any other expenses associated with such car. Any
income taxes resulting from the payment of such allowance shall be the
responsibility of the Employee.
(e) The Employee shall be entitled to three (3) weeks of paid vacation
per calendar year, provided that the Employee shall not take more than two
consecutive weeks of vacation during any year.
(f) The Employee shall receive as paid days off all national holidays
that the Company, pursuant to established policy, recognizes and observes.
6. Disability and Death
If, during the term of this Agreement, the Employee becomes so disabled
or incapacitated by reason of any physical or mental illness so as to be unable
to perform the services required of him pursuant to this Agreement for a
continuous period of twelve (12) months, then this Agreement shall terminate at
the end of such twelve (12) month period, provided that during such period, the
Employee shall be paid the full salary, benefits, and expenses otherwise payable
to him as set forth above, less the amount paid to the Employee from mandatory
disability insurance for the period of such illness or incapacity. This
agreement shall also terminate upon and as of the date of death of the Employee
at any time during the term of this Agreement.
7. Covenants and Restrictions. The Employee covenants that, except in
carrying out his duties hereunder, during the term of his employment and for a
period of two (2) years following the date of termination of employment
hereunder (or such lesser period specifically provided herein upon the happening
of certain specified events with respect to Employee's covenant not to compete
or unless such longer period of time is specifically set forth herein):
(a) Employee will not, directly or indirectly, own any interest in,
participate or engage in, assist, render any services (including advisory
services) to, become associated with, work for, serve (in any capacity
whatsoever, including, without limitation, as an employee, consultant, advisor,
agent, independent contractor, officer or director) or otherwise become in any
way or manner connected with the ownership, management, operation, or control
of, any business, firm, corporation, partnership or other entity (collectively
referred to herein as a "Person") that engages in, or assists others in engaging
in or conducting any business, which deals, directly or indirectly, in products
or services competitive with the Company's product line or services, within a
fifty (50) mile radius of any office of the Company or its subsidiaries
provided, however, the above shall not be deemed to exclude Employee from acting
-5-
<PAGE>
as director of a corporation for the benefit of the Company with the consent of
the Company's Board of Directors; provided further, however, that the above
shall not be deemed to prohibit Employee from owning or acquiring securities
issued by any corporation whose securities are listed with a national securities
exchange or are traded in the over-the-counter market, provided that Employee at
no time owns, directly or indirectly, beneficially or otherwise, two (2%)
percent or more of any class of any such corporation's outstanding capital
stock.
(b) Except as specifically provided in this subsection (b),
notwithstanding anything contained in subsection (a) above, Employee will not
knowingly provide or solicit to provide to any Person or individual (i) any
goods or services which are competitive with those provided by the Company or
which would be competitive with the goods or services that the Company has
planned to provide, or (ii) any goods or services to any customer of the
Company. The term "customer" shall mean any Person or individual to whom the
Company has provided goods or services within the twenty-four (24) month period
prior to the termination of Employee's employment hereunder. Notwithstanding
anything herein to the contrary, no limitation shall be imposed on Employee
hereunder with respect to any goods and services that the Company has planned to
provide and which are not actually being provided at the time of the termination
of Employee's employment hereunder or which are not actually provided within
eighteen (18) months following the termination of Employee's employment
hereunder.
(c) Employee agrees that he shall not divulge to others, nor shall he
use to the detriment of the Company or in any business or process of manufacture
competitive with or similar to any business or process of manufacture engaged in
by the Company or any of its subsidiary or affiliated companies, at any time
during his employment with the Company or thereafter, any confidential or trade
secret information obtained by him during the course of his employment with the
Company relating to sales, salesmen, sales volume or strategy, customers,
formulas, processes, methods, machines, manufactures, compositions, ideas,
improvements or inventions belonging to or relating to the business of the
Company, or its subsidiary or affiliated companies.
(d) Employee will neither solicit, hire or seek to solicit or hire any
of the Company's personnel in any capacity whatsoever nor shall Employee induce
or attempt to induce any of the Company's personnel to leave the employ of the
Company to work for Employee or otherwise.
(e) Employee acknowledges that his breach of any of the restrictive
covenants contained in this Section 7 may cause irreparable damage to the
Company for which remedies at law would be inadequate. Accordingly, if Employee
breaches or threatens to breach any of the provisions of this Section 7, the
Company shall be entitled to appropriate injunctive relief, including, without
-6-
<PAGE>
limitation, preliminary and permanent injunctions, in any court of competent
jurisdiction, restraining Employee from taking any action prohibited hereby.
This remedy shall be in addition to all other remedies available to the Company
at law or equity. If any portion of this Section 7 is adjudicated to be invalid
or unenforceable, this Section 7 shall be deemed amended to delete therefrom the
portion so adjudicated, such deletion to apply only with respect to the
operation of this Section 7 in the jurisdiction in which such adjudication is
made.
(f) Notwithstanding anything contained herein which may be to the
contrary, in the event the Company does not tender an offer to extend the
Agreement at a base salary comparable to that set forth above or the Agreement
is not extended pursuant to its terms, the non compete shall be for a one (1)
year period and extend to only the limited geographical area set forth in (a)
above. In the event the Company materially breaches the Agreement at a time when
Employee is not otherwise in default, the non compete shall be for a period
ending one (1) year from the end of the term set forth herein. This subparagraph
(f) in no way limits Employee's prohibition from soliciting any of the Company's
or its subsidiaries' customers for the period of the non compete.
8. Proprietary Property.
(a) The Employee agrees that any and all inventions or improvements as
well as any and all ideas, creations, know-how and methods of applying and
putting into practice any inventions or improvements (all of the foregoing being
hereinafter called "Proprietary Property" and being more fully defined in
subparagraph (b) below) that are created, developed, conceived of or discovered
either (i) by the Employee (solely or jointly with others) either in the course
of his employment, on the Company's time, with the Company's materials or
facilities, relating to any subject matter with which his work for the Company
is or may be concerned, or relating to any business in which the Company or any
of its subsidiaries or affiliated companies is involved, or (ii) by or for the
Company, or (iii) by any independent individual or Person and thereafter
acquired by the Company, and which are within the Employee's knowledge or
possession in the case of (i) above or that come into the Employee's knowledge
or possession during and in the course of the Employee's employment hereunder in
the case of (ii) or (iii) above, shall be, if created, developed, conceived of
or discovered by the Employee, promptly disclosed to the Company, or shall be,
if otherwise developed or acquired by the Company, received by the Employee as
an employee of the Company and not in any way for his own benefit. Employee
shall neither have nor obtain any right, title or interest in or to such
Proprietary Property unless and until the Company shall expressly and in writing
waive the rights that it has therein and thereto under the provisions of this
sentence. With respect to any and all Proprietary Property that is invented,
-7-
<PAGE>
created, written, developed, furnished or produced by the Employee, or suggested
by the Employee to the Company, during the term of the Employee's employment
under this Agreement, Employee does hereby agree that all such Proprietary
Property shall be the exclusive property of the Company, and that the Employee
shall neither have nor retain any right, title or interest, of any kind therein
and thereto or in and to any results or proceeds therefrom. At any time, whether
during or after the term of this Agreement, the Employee will, upon the request
and at the expense of the Company, (A) obtain patents or copyrights on, or (B)
permit the Company to patent or copyright, any such Proprietary Property,
whichever (A) or (B) is appropriate, and/or (C) execute, acknowledge and deliver
any and all assignments, instruments of transfer, or other documents, that the
Company deems necessary or appropriate to transfer to and vest in the Company
all right, title and interest in and to such Proprietary Property and to
evidence the Company's ownership of such Proprietary Property, including,
without limitation, taking all steps necessary to enable the Company to publish
or protect said Proprietary Property by patents or otherwise in any and all
countries and to render all such assistance as the Company may require in any
patent office proceeding or litigation involving said Proprietary Property. The
Employee shall not, without limitation as to time or place, use any Proprietary
Property except on Company business, during or after his period of employment,
nor disclose the same to any other Person or individual except for disclosure on
Company business or as may be required by law.
(b) As used in this Agreement, "Proprietary Property" means proprietary
technical information not generally known in the Company's industry and which is
disclosed to Employee or known or developed by Employee as a consequence of or
through his employment with the Company.
(c) During or subsequent to the Employee's employment by Company,
Employee will never, directly or indirectly, lecture upon, publish articles
concerning, use, disseminate, disclose, sell or offer for sale any Proprietary
Property without the Company's prior written permission.
9. Prior Agreements
Employee represents that he is not now under any written agreement, nor
has he previously, at any time, entered into any written agreement with any
person, firm or corporation, which would or could in any manner preclude or
prevent him from giving freely and the Company receiving the exclusive benefit
of his services.
10. Termination Provisions
In addition to, and not in lieu of, the termination provisions set
forth in Section 6 hereof, the employment of the Employee hereunder may be
-8-
<PAGE>
terminated by the Company prior to the termination date of the initial term or
any renewal term thereafter (as set forth in Section 2 hereof) in the event that
the Employee is guilty of (i) reckless disregard to perform his duties as set
forth in Section 3 herein, or (ii) willful misfeasance, or (iii) any act of
dishonesty by the Employee with respect to the Company. Termination of the
Employee's employment by the Company for either willful misfeasance or reckless
disregard of his duties to the Company hereunder shall constitute, and is
referred to elsewhere herein, as termination for "Cause". Such termination of
the Employee's employment hereunder for Cause shall be effective immediately
upon delivery of written notice to the Employee setting forth the reason or
reasons for such termination. Upon the termination of this Agreement in
accordance with this Section 10, the Company shall not be obligated to make any
further payments hereunder to the Employee.
11. Miscellaneous
(a) This Agreement shall inure to the benefit of and be binding upon
the Company, its successors and assigns, and upon the Employee, his heirs,
executors, administrators, legatees and legal representatives.
(b) Should any part of this Agreement, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Agreement had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Agreement without including therein any portion which
may for any reason be declared invalid.
(c) This Agreement shall be construed and enforced in accordance with
the laws of the State of New York applicable to agreements made and performed in
such State without application to the principles of conflicts of laws.
(d) This Agreement and all rights hereunder are personal to the
Employee and shall not be assignable, and any purported assignment in violation
thereof shall be null and void. Any person, firm or corporation succeeding to
the business of the Company by merger, consolidation, purchase of assets or
otherwise, shall assume by contract or operation of law the obligations of the
Company hereunder; provided, however, that the Company shall, notwithstanding
such assumption and/or assignment, remain liable and responsible for the
fulfillment of the terms and conditions of the Agreement on the part of the
Company.
-9-
<PAGE>
(e) This Agreement constitutes the entire agreement between the parties
hereto with respect to the terms and conditions of the Employee's employment by
the Company, as distinguished from any other contractual arrangements between
the parties pertaining to or arising out of their relationship, and this
Agreement supersedes and renders null and void any and all other prior oral or
written agreements, understandings, or commitments pertaining to the Employee's
employment by the Company. No variation hereof shall be deemed valid unless in
writing and signed by the parties hereto, and no discharge of the terms hereof
shall be deemed valid unless by full performance by the parties hereto or by a
writing signed by the parties hereto. No waiver by either party of any provision
or condition of this Agreement by him or it to be performed shall be deemed a
waiver of similar or dissimilar provisions and conditions at the same time or
any prior or subsequent time.
(f) Any notice, statement, report, request or demand required or
permitted to be given by this Agreement shall be in writing, and shall be
sufficient if delivered in person or if addressed and sent by certified mail,
return receipt requested, to the parties at the addresses set forth above, or at
such other place that either party may designate by notice in the foregoing
manner to the other.
(g) The failure of either party to insist upon the strict performance
of any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Agreement on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
REST OF PAGE LEFT INTENTIONALLY BLANK
-10-
<PAGE>
(h) The heading of the paragraphs herein are inserted for convenience
and shall not affect any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
MICROS-TO-MAINFRAMES, INC.
By: /s/ STEVEN ROTHMAN
____________________________________
Steven Rothman, President
/s/ ROBERT A. FRIES
____________________________________
Robert A. Fries
-11-
