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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27102
ROMTECH, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2694937
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2000 Cabot Boulevard West, Suite 110
Langhorne, PA 19047-1833
(address of Principal executive offices)
Issuer's Telephone Number, Including Area Code: 215-750-6606
Not Applicable
(Former name, former address and former
fiscal year, if changed since last report.)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes (X) No ( )
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ( ) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 6,285,128 shares of common
stock, no par value per share, as of November 1, 1996.
Transitional Small Business Disclosure Format (check one):
Yes ( ) No (X)
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RomTech, Inc.
INDEX
<TABLE>
<CAPTION>
Page
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Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheet as of September 30, 1996................ 3
Consolidated Statements of Operations for the three months
ended September 30, 1996 and 1995................................ 4
Consolidated Statements of Cash Flows for the three ended
September 30, 1996 and 1995...................................... 5
Notes to Consolidated Financial Statements......................... 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 8-9
Part II. Other Information
Exhibit Index...................................................... 10
Financial Data Schedule............................................ 11
Signatures......................................................... 12
</TABLE>
Page 2
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RomTech, Inc.
Consolidated Balance Sheet
(Unaudited)
September 30,
1996
-------------
ASSETS
Current assets:
Cash and cash equivalents $758,596
Restricted cash 14,788
Accounts receivable, net of allowance for doubtful
accounts of $88,970 577,358
Inventory 280,929
Prepaid expenses 233,026
-------
Total current assets 1,864,697
Furniture and equipment, net 157,338
Intangibles and other assets 136,083
----------
Total assets $2,158,118
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $337,054
Accounts payable 598,784
Accrued expenses 643,640
-------
Total current liabilities 1,579,478
Capital lease obligations net of current portion 35,374
Notes payable-long term portion 316,519
Convertible subordinated debt 150,000
-------
Total liabilities 2,081,371
Commitments and contingencies, Note 4
Stockholders' equity:
Convertible preferred stock 1,000,000
Common stock, no par value (40,000,000 shares
authorized: 6,285,128 issued and outstanding) 4,217,517
Additional paid in capital 747,738
Accumulated deficit (5,888,508)
-----------
Total stockholders' equity 76,747
----------
Total liabilities and stockholders' equity $2,158,118
==========
See accompanying notes to the consolidated financial statements.
Page 3
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RomTech, Inc.
Consolidated Statements of Operations
(Unaudited)
Three months ended
September 30,
-----------------------
1996 1995
---- ----
Net revenues $ 1,071,017 $ 629,124
Cost of revenues 317,457 206,517
----------- -----------
Gross profit 753,560 422,607
Operating expenses:
Product development 121,992 137,021
Selling, general and administrative 851,559 391,170
----------- -----------
Total operating expenses 973,551 528,191
----------- -----------
Operating loss (219,991) (105,584)
Interest expense, net 13,513 63,009
----------- -----------
Loss before taxes (233,504) (168,593)
Income tax refund -- 3,152
----------- -----------
Net loss ($ 233,504) ($ 165,441)
=========== ===========
Net loss per common share ($0.04) ($0.06)
Weighted average common
shares outstanding 6,285,128 2,859,440
See accompanying notes to the consolidated financial statements.
Page 4
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RomTech, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ($233,504) ($165,441)
Adjustment to reconcile net loss to net cash
from operating activities:
Depreciation and amortization 31,299 14,084
Loss on disposal of equipment 4,683 --
Interest expense incurred but not paid 4,350 45,945
Changes in items affecting operations net of effect
from acquired businesses:
Restricted cash (14,788) (10,469)
Accounts receivable (152,060) (69,056)
Prepaid expenses (191,616) 22,642
Inventory (75,708) 15,071
Accounts payable 222,617 62,255
Accrued expenses (82,650) 42,924
--------- ---------
Net cash used in operating activities (487,377) (42,045)
--------- ---------
Cash flows from investing activities:
Sales and maturities of short term investments 398,952 --
Purchase of furniture and equipment (27,023) (11,431)
Purchase of software rights and other assets (58,654) --
Loan to related parties 500 --
--------- ---------
Net cash provided by (used in) investing activities 313,775 (11,431)
--------- ---------
Cash flows from financing activities:
Net advances of factored receivable -- 39,925
Net advances to officers -- 3,772
Repayment of note payable (7,483) (4,967)
Repayment of lease obligations (14,982) (6,467)
--------- ---------
Net cash (used by) provided by financing activities (22,465) 32,263
--------- ---------
Net decrease in cash and cash equivalents (196,067) (21,213)
Cash and cash equivalents:
Beginning of period 954,663 85,173
--------- ---------
End of period $ 758,596 $ 63,960
========= =========
Supplemental cash flow information:
Cash paid during the quarter for interest $ 22,194 $ 6,367
========= =========
Noncash investing activities:
Capital lease additions during the quarter $ 38,388 $ --
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 5
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RomTech, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements were
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The Notes to Consolidated Financial Statements included in
the Form 10-KSB for the fiscal year ended June 30, 1996 should be read in
conjunction with the accompanying statements. These statements include all
adjustments (consisting only of normal recurring adjustments) which the Company
believes are necessary for a fair presentation of the statements. The interim
operating results are not necessarily indicative of the results for a full year.
The accompanying consolidated financial statements as of September 30, 1996
include the accounts of RomTech, Inc., ("RomTech"), which successfully completed
an initial public offering on October 18, 1995 with Applied Optical Media
Corporation ("AOMC"), which merged with RomTech concurrent with the completion
of RomTech's public offering, and Virtual Reality Laboratories, Inc. ("VRLI"),
its wholly owned subsidiary, which was acquired on April 5, 1996 in a
transaction accounted for using the pooling of interests method of accounting.
As further described in Note 2, the AOMC merger was accounted for as a reverse
acquisition whereby AOMC was deemed to be the acquiring entity for accounting
purposes. In addition, the fiscal 1996 financial statements have been restated
to reflect VRLI's operations on a pooled basis. Accordingly, the consolidated
statements of operations include the activities of the following entities for
the following periods:
o July 1, 1995 to September 30, 1995 - AOMC and VRLI
o July 1, 1996 to September 30, 1996 - RomTech, AOMC and VRLI
Description of Business
RomTech, Inc. (the "Company") is a Pennsylvania Corporation which was
incorporated in July 1992. The Company develops, publishes, markets and is a
reseller of a diversified line of personal computer software for consumer,
educational and business applications. The Company's sales are primarily made
through retail stores, by direct mail and sales of CD-ROM titles in jewel case
packaging at computer trade shows.
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Virtual Reality Laboratories, Inc. All
intercompany balances and transactions have been eliminated.
2. Merger/Completion of Pubic Offering
Applied Optical Media Corporation ("AOMC")
On October 18, 1995, the Company merged with AOMC, whereby the stockholders
of AOMC exchanged all their outstanding shares for 1,575,000 common shares of
the Company and 425,000 warrants to purchase common shares at $.50 per share. In
addition, concurrently with the Merger certain stockholders of AOMC exchanged
debt with a carrying value of $1,936,452 for 1,000,000 shares of convertible
preferred stock, a $300,000, 8.75% note payable, a $50,000 cash payment and
forgiveness of $586,607 of debt. The preferred stock has a face value of
$1,000,000 and is convertible into common stock of the Company beginning two
years after October 18, 1995 at a price of $3.30 per share. The Company has the
right to redeem the preferred stock for an aggregate redemption price of
$1,000,000.
Page 6
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RomTech, Inc.
Notes to Consolidated Financial Statements
As a result of the AOMC merger, the former stockholders of AOMC had a
majority of the voting rights of the combined enterprise on a fully diluted, if
converted basis. Therefore, for accounting purposes, AOMC was considered the
acquirer (reverse acquisition). The cost of acquiring the Company was based on
the fair market value of the Company's net assets which approximated their
recorded value.
In connection with the reverse acquisition, the outstanding shares of the
Company and the shares of the Company issued to AOMC stockholders have been
reflected as a recapitalization of the previously outstanding AOMC common stock.
On October 18, 1995, the Company consummated an initial public offering of
1,550,000 shares of common stock at a price of $3.00 per share resulting in net
proceeds of $4,070,500 before deducting offering costs of $446,704.
Virtual Reality Laboratories, Inc. ("VRLI")
On April 5, 1996, the Company acquired VRLI, a California corporation, in a
transaction structured as a merger of VRLI with a newly formed subsidiary of the
Company ("RomTech subsidiary"), with the RomTech subsidiary as the surviving
corporation. VRLI, which is located in San Luis Obispo, California, publishes
software for use on desktop computers. Its products include business forms and
imaging processing software targeted for the small-office, home-office market,
three-dimensional landscape rendering software and astronomy software for
special interest users and the education market. In connection with the
acquisition, the Company issued a total of 1,284,440 shares of its common stock,
in exchange for all of the equity interests of Virtual Reality, which included
common stock, stock options, convertible subordinated debt and a $100,000
promissory note to an officer and stockholder of VRLI. In addition, the Company
incurred acquisition-related expenses of approximately $757,804, including
$204,340 in the form of the Company's Common Stock, related to investment
banking, consulting, accounting and legal costs which were charged to
operations. This acquisition was accounted for using the pooling-of-interests
method, and accordingly the Company's historical financial statements presented
have been restated to include the accounts and results of operations of VRLI.
The following supplemental unaudited pro forma information summarizes the
combined results of operations of the Company as if the combination with AOMC
occurred July 1, 1995.
Three months ended
September 30, 1995
------------------
Revenues $861,147
Net loss (415,517)
Loss per share (.09)
Weighted average common shares 4,462,181
3. Subsequent Event
On September 27, 1996, the Company entered into an agreement in principle to
acquire FileABC(TM), a Nevada Limited Partnership, ("FileABC") in exchange for
$500,000 in cash and 200,000 shares of the Company's common stock and an
additional 1,000,000 shares contingent upon achieving certain revenue targets.
The terms of the agreement were amended on October 18, 1996, whereby FileABC
will be paid $325,000 in cash in addition to the interim payments of $50,000 on
July 17, 1996 and $125,000 on October 30, 1996. Additionally, a maximum of
1,200,000 shares will be paid to FileABC for each $1,000,000 of revenues
generated from the sale of FileABC's current software product and any
enhancements or derivative products on or before March 31, 2000. FileABC
develops, publishes and markets document imaging, management and archiving
software for the Windows(TM) operating systems. The acquisition is subject to
certain conditions and is expected to be consummated during the second quarter
of fiscal 1997. If completed, the acquisition of FileABC will be accounted for
using the purchase method of accounting.
Page 7
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RomTech, Inc.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The accompanying consolidated financial statements as of September 30, 1996
include the accounts of RomTech, Inc., ("RomTech"), which successfully completed
an initial public offering on October 18, 1995 with Applied Optical Media
Corporation ("AOMC"), which merged with RomTech concurrent with the completion
of RomTech's public offering, and Virtual Reality Laboratories, Inc. ("VRLI"),
its wholly owned subsidiary, which was acquired on April 5, 1996 in a
transaction accounted for using the pooling of interests method of accounting.
As further described in Note 2, the AOMC merger was accounted for as a reverse
acquisition whereby AOMC was deemed to be the acquiring entity for accounting
purposes. In addition, the fiscal 1996 financial statements have been restated
to reflect VRLI's operations on a pooled basis. Accordingly, the consolidated
statements of operations include the activities of the following entities for
the following periods:
o July 1, 1995 to September 30, 1995 - AOMC and VRLI
o July 1, 1996 to September 30, 1996 - RomTech, AOMC and VRLI
Management believes that the results of operations for the three months ended
September 30, 1996 may not be indicative of anticipated future results because
of the significant changes made in the combined businesses of AOMC, RomTech and
Virtual Reality (see note 2 to the financial statements). The acquisition of
Virtual Reality was accounted for using the pooling-of-interests method of
accounting, and accordingly the Company's historical financial statements have
been restated to include the accounts and results of operations of Virtual
Reality.
Results of Operations
Three Months Ended September 30, 1996 and 1995
Net revenues for the three months ended September 30, 1996 were $1,071,000
compared to $629,000 for the three months ended September 30, 1995, representing
an increase of $442,000 or 70.3%. This increase resulted primarily from
increases in the distribution through the retail channel of company developed
titles and in the reselling of budget category jewel case products through the
trade show channel.
Cost of revenues, consists primarily of packaging costs (boxes and jewel cases),
CD-ROM pressing or replication activities through third party vendors and
royalty expenses. The cost of revenues for the three months ended September 30,
1996 was $317,000 compared to $207,000 for the three months ended September 30,
1995, representing an increase of $110,000 or 53.1% due mainly from the increase
in revenues. The Company's gross profit margin increased to 70.4% in the three
months ended September 30, 1996 from 67.2% for the three months ended September
30, 1995.
Product development expenses consist primarily of personnel costs, supplies and
product testing. Product development expenses for the three months ended
September 30, 1996 were $122,000 compared to $137,000 for the three months ended
September 30, 1995, a decrease of $15,000 or 10.9%.
Selling, general and administrative expenses for the three months ended
September 30, 1996 were $852,000 compared to $391,000 for the three months ended
September 30, 1995 representing an increase of $461,000. The increase was
primarily from increases in marketing costs ($159,000), salary and related costs
($113,000), commissions ($85,000) related to the increase in revenues.
Net interest expense for the three months ended September 30, 1996 was $14,000
compared to $63,000 for the three months ended September 30, 1995, a decrease of
$49,000 or 77.7%. This decrease is due primarily to the reduction of long term
debt as a result of the merger between RomTech, Inc. and AOMC and the proceeds
from the IPO concurrent with this merger, and the investment of the proceeds
from the IPO.
Page 8
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RomTech, Inc.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources
The financial information presented reflects the Company's financial position at
September 30, 1996.
As of September 30, 1996, the Company's cash and working capital balances were
$758,596 and $285,219, respectively. To date the Company continues to operate at
a loss. At September 30, 1996 the Company does not satisfy the minimum level of
stockholders' equity required to be listed ($1,000,000) for trading on the
Nasdaq SmallCap Market(TM). The Company is seeking additional capital to, among
other things, increase its stockholders' equity to at least the minimum level
required. The Company's ability to achieve positive cash flow depends upon a
variety of factors, including the timeliness and success of developing and
selling its products, the costs of developing, producing and marketing such
products and various other factors, some of which may be beyond the Company's
control. In the future, the Company's capital requirements will be affected by
each of these factors. Although, the Company believes cash and working capital
balances will be sufficient to fund the Company's operations for the foreseeable
future, the Company plans to raise additional capital and it will seek such
funding through additional public or private financings. There can be no
assurances that the Company will achieve a positive cash flow or that additional
financing will be available if and when required or, if available, will be on
terms satisfactory to the Company. Currently, the Company has no significant
capital expenditure commitments.
On September 27, 1996, the Company entered into an agreement in principle to
acquire FileABC(TM), a Nevada Limited Partnership, ("FileABC") in exchange for
$500,000 in cash and 200,000 shares of the Company's common stock and an
additional 1,000,000 shares contingent upon achieving certain revenue targets.
The terms of the agreement were amended on October 18, 1996, whereby FileABC
will be paid $325,000 in cash in addition to the interim payments of $50,000 on
July 17, 1996 and $125,000 on October 30, 1996. Additionally, a maximum of
1,200,000 shares will be paid to FileABC for each $1,000,000 of revenues
generated from the sale of FileABC's current software product and any
enhancements or derivative products on or before March 31, 2000. FileABC
develops, publishes and markets document imaging, management and archiving
software for the Windows(TM) operating systems. The acquisition is subject to
certain conditions and is expected to be consummated during the second quarter
of fiscal 1997. If completed, the acquisition of FileABC will be accounted for
using the purchase method of accounting.
Management of the Company is nearing the completion of a private placement
financing which along with funds generated from operations, management
anticipates will be sufficient to fund operations, make acquisitions of
proprietary products and software development companies, and make capital
expenditures for at least the next twelve month period. The Company currently
has no significant capital expenditure commitments.
Page 9
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RomTech, Inc.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ROMTECH, INC.
(Registrant)
Date: November 14, 1996 /s/ Joseph A. Falsetti
------------------ -----------------------
Joseph A. Falsetti
Chief Executive Officer
Principal Financial Officer
Date: November 14, 1996 /s/ Gerald W. Klein
------------------ --------------------
Gerald W. Klein
Vice President and
Chief Financial Officer
Page 10
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RomTech, Inc.
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page Number
- ------------- ---------------------- -----------
<S> <C> <C>
10.1 Asset Acquisition Agreement Between RomTech, Inc. and FileABC, L.P..
27.1 Financial Data Schedule
</TABLE>
Page 11
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EXHIBIT 10.1
ASSET ACQUISITION AGREEMENT
Parties: FileABC, L.P.
a Nevada limited partnership ("Seller")
2533 N. Carson City Street, Suite 1937
Carson City, NV 89706
ROM TECH, INC.
a Pennsylvania corporation ("Buyer")
2000 Cabot Blvd., Suite 110
Langhorne, PA 19047
Date: October 18, 1996
Background: Seller is engaged in the business of developing, marketing and
distributing FileABC(TM) (the "Business"), a document imaging and management
software package ("FileABC"). Buyer is a developer, reseller and publisher of
multi-media software and developer of forms processing software on CD-ROM discs
for consumer, educational and business applications. The parties desire that
Seller sell and Buyer buy substantially all of Seller's assets and the Business,
subject to the terms and conditions stated in this Asset Acquisition Agreement
(the "Agreement").
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual
agreements contained herein, Seller and Buyer agree as follows:
SECTION 1: DEFINED TERMS
All defined terms used in this Agreement and not specifically defined
in context are defined in this Section 1, as follows:
1.1 "Accounts Receivable" means (a) any right to payment for
goods sold, leased or licensed or for services rendered, whether or not it has
been earned by performance, whether billed or unbilled, and whether or not it is
evidenced by any Contract, (b) any note receivable, or (c) any other receivable
or right to payment of any nature.
1.2 "Asset" means any real, personal, mixed, tangible or intangible
property of any nature, including Cash Assets, prepayments, deposits, escrows,
Accounts Receivable, Tangible Property, Real Property, Software, Contract
Rights, Intangibles and good will, and claims, causes of action and other legal
rights and remedies.
1.3 "Agreement" means this Asset Acquisition Agreement as the same may
be amended or supplemented from time to time in accordance with its terms.
1.4 "Business Location" means the location of Seller's Business at 2533
N. Carson City Street, Suite 1937, Carson City, Nevada 89706.
<PAGE>
1.5 "Cash Asset" means any cash on hand, cash in bank or other
accounts, marketable securities, and other cash-equivalent assets of any nature.
1.6 "Consent" means any consent, approval, order or authorization of,
or any declaration, filing or registration with, or any application or report
to, or any waiver by, or any other action (whether similar or dissimilar to any
of the foregoing) of, by or with, any Person, which is necessary in order to
take a specified action or actions in a specified manner and/or to achieve a
specified result.
1.7 "Contract" means any written or oral contract, agreement,
instrument, order, arrangement, commitment or understanding of any nature,
including sales orders, purchase orders, leases, subleases, data processing
agreements, maintenance agreements, license agreements, sublicense agreements,
loan agreements, promissory notes, security agreements, pledge agreements,
deeds, mortgages, guaranties, indemnities, warranties, employment agreements,
consulting agreements, sales representative agreements, joint venture
agreements, buy-sell agreements, options or warrants.
1.8 "Contract Right" means any right, power or remedy under any
Contract, including rights to receive property or services or otherwise derive
benefits from the payment, satisfaction or performance of another party's
Obligations, rights to demand that another party accept property or services or
take any other actions, and rights to pursue or exercise remedies or options.
1.9 "Disclosure Letter" means the letter delivered by Seller to Buyer
contemporaneously with the execution and delivery of this Agreement that (i)
sets forth information called for by Seller's representations and warranties,
and (ii) clearly identifies the particular provision pursuant to which such
information is furnished.
1.10 "Employee Benefit Plan" means any employee benefit plan or any
employee benefit or fringe benefit arrangement of any nature, including bonus
plans, incentive compensation plans, severance pay plans, vacation pay plans,
deferred compensation plans, pension plans, profit sharing plans, retirement
plans, payroll savings plans, stock option plans, stock purchase plans, stock
ownership plans, hospitalization plans, medical plans, dental plans, disability
plans, sick pay plans, group insurance plans, death benefit plans, or employee
welfare plans, but not including employment Contracts with individual employees.
1.11 "Encumbrance" means any lien, security interest, pledge, mortgage,
easement, covenant, restriction, reservation, conditional sale, prior
assignment, or other encumbrance, claim, burden or charge of any nature.
1.12 "GAAP" means generally accepted accounting principles under United
States accounting rules and regulations, consistently applied.
1.13 "General Partner" means FileABC, L.L.C.
1.14 "Insurance Policy" means any public liability, product liability,
general liability, comprehensive, property damage, vehicle, life, hospital,
medical, dental, disability, worker's compensation, key man, fidelity bond,
theft, forgery, errors and omissions, directors' and officers' liability, or
other insurance policy of any nature.
2
<PAGE>
1.15 "Intangible" means any name, corporate name, fictitious name,
trademark, trademark application, service mark, service mark application, trade
name, brand name, product name, slogan, trade secret, know-how, patent, patent
application, copyright, copyright application, design, logo, formula, invention,
product right or other intangible asset of any nature, whether in use, under
development or design, or inactive.
1.16 "Judgment" means any order, writ, injunction, citation, award,
decree or other judgment of any nature of any foreign, federal, state or local
court, governmental body, administrative agency, regulatory authority or
arbitration tribunal.
1.17 "Law" means any provision of any foreign, federal, state or local
law, statute, ordinance, charter, constitution, treaty, rule or regulation.
1.18 "Limited Partners" means the Limited Partners of Seller as listed
in Exhibit 4.1 of the Disclosure Letter.
1.19 "Material" means, with respect to any Person, material, in a legal
sense or in an accounting sense, to (i) the financial condition or financial
performance of such Person, or (ii) the Assets of such Person, or (iii) the
Assets of any other Person which are used by such Person and cannot be readily
replaced.
1.20 "Obligation" means any debt, liability or obligation of any
nature, whether secured, unsecured, recourse, nonrecourse, liquidated,
unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained,
known, unknown or otherwise.
1.21 "Partners" means the General Partner and Limited Partners of
Seller as listed in the Disclosure Letter, and/or any other such Person(s) that
may appear from time to time on the records of Seller in accordance with the
Partnership Agreement.
1.22 "Partnership Agreement" means the Partnership Agreement of Seller,
as amended from time to time.
1.23 "Permit" means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature, granted, issued, approved or
allowed by any foreign, federal, state or local governmental body,
administrative agency or regulatory authority.
1.24 "Person" means any individual, sole proprietorship, joint venture,
partnership, corporation, association, cooperative, trust, estate, governmental
body, administrative agency, regulatory authority or other entity of any nature.
1.25 "Prime Rate" means the prime rate of general application as set
forth in the "Money Rates" section (or such future section as shall replace it)
of The Wall Street Journal (Eastern Edition), as published on a specified date
or dates, or, if no date(s) are specified, as the same shall be published from
time to time.
1.26 "Proceeding" means any demand, claim, suit, action, litigation,
investigation, arbitration, administrative hearing or other proceeding of any
nature.
1.27 "Real Property" means any real estate, land, building,
condominium, townhouse, structure or other real property of any nature, all
shares of stock or other ownership interests in
3
<PAGE>
cooperative or condominium associations or other forms of ownership interest
through which interests in real estate may be held, and all appurtenant and
ancillary rights thereto, including easements, covenants, water rights, sewer
rights and utility rights.
1.28 "Rom Tech Stock" means the shares of common stock, without par
value, of Buyer, as adjusted for any stock dividends, stock splits,
reclassifications, or other changes in the capitalization of Buyer.
1.29 "Software" means any computer program, operating system,
applications system, firmware or software of any nature, whether operational,
under development or inactive, including all object code, source code, technical
manuals, user manuals and other documentation therefor, whether in
machine-readable form, programming language or any other language or symbols,
and whether stored, encoded, recorded or written on disk, tape, film, memory
device, paper or other media of any nature.
1.30 "Specified Contracts" mean the Contracts set forth in Section 4.12
of this Agreement.
1.31 "Tangible Property" means any furniture, fixtures, leasehold
improvements, vehicles, office equipment, computer equipment, other equipment,
machinery, tools, forms, supplies or other tangible personal property of any
nature.
1.32 "Tax" means (i) any foreign, federal, state or local income,
earnings, profits, gross receipts, franchise, capital stock, net worth, sales,
use, occupancy, general property, real property, personal property, intangible
property, transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security or other tax of any nature, (ii) any foreign,
federal, state or local organization fee, qualification fee, annual report fee,
filing fee, occupation fee, assessment, sewer rent or other fee or charge of any
nature, or (iii) any deficiency, interest or penalty imposed with respect to any
of the foregoing.
SECTION 2: SALE AND PURCHASE OF SPECIFIED ASSETS
2.1 Sale and Purchase. On the Closing Date (as defined in Section
10.1), effective as of the Effective Date (as defined in Section 10.1), and
subject to the terms and conditions of this Agreement, Seller shall sell,
transfer, assign and convey to Buyer, and Buyer shall purchase from Seller, all
right, title and interest in and to all of the Specified Assets (as defined in
Section 2.2), and Seller shall assign to Buyer, and Buyer shall assume, the
Specified Liabilities (as defined in Section 2.3).
2.2 Specified Assets. "Specified Assets" means all of the Assets of
Seller as of the Effective Date, wherever located and whether or not reflected
on Seller's books and records, including, but not limited to the following
Assets, but excluding the Assets specifically excepted below:
(a) All of Seller's Software and Intangibles.
(b) All of Seller's Accounts Receivable, Tangible Property and
Contract Rights, but excluding: (i) all Contract Rights under (a) the real
estate lease for Seller's office located at 2533 N. Carson City Street, Suite
1937, Carson City, Nevada 89706 (the "Business Location"), (b) Contracts that
constitute or evidence Employee Benefit Plans of Seller, (c) this Agreement and
any
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other Contracts entered into between Seller and Buyer, or among Seller, Buyer
and other parties, in connection with the transactions contemplated by this
Agreement, and (d) those Contracts specifically excluded in Exhibit 2.2 (the
"Excluded Contracts"); and (ii) Seller's Tangible Property specifically excluded
in Exhibit 2.2.
(c) All rights under all Permits granted or issued to Seller
or otherwise held by Seller.
(d) All of Seller's rights with respect to telephone numbers,
telephone directory listings and advertisements, all of Seller's goodwill, and
all of Seller's customer, prospect and supplier lists, data bases and computer
media, sales and marketing materials, invoices, correspondence, files, books and
records, but excluding (i) Seller's files, books and records relating
exclusively to Seller's Assets not included in the Specified Assets or to
Seller's liabilities not included in the Specified Liabilities.
(e) All of Seller's claims, causes of action and other legal
rights and remedies, whether or not known, relating to Seller's ownership of the
Specified Assets and/or the operation of the Business, but excluding causes of
action and other legal rights and remedies (i) against Buyer with respect to the
transactions contemplated by this Agreement, or (ii) relating exclusively to
Seller's Assets not included in the Specified Assets or to Seller's liabilities
not included in the Specified Liabilities.
(f) All rights under all Insurance Policies owned, held or
maintained by Seller but excluding (i) all rights under Insurance Policies that
constitute Employee Benefit Plans, and (ii) the rights of Seller under Insurance
Policies pertaining exclusively to actual or potential claims or losses that
remain Seller's responsibility after the Effective Date.
Notwithstanding the foregoing, the Specified Assets shall not include those
Assets specifically excluded in Exhibit 2.2 (the "Excluded Assets").
2.3 Specified Liabilities. "Specified Liabilities" means the
liabilities of Seller as of the Effective Date under the Specified Contracts,
but only to the extent that such liabilities arise after the Effective Date
under the terms of such Contracts and are not due to any breach or default by
Seller under any such Contract. Notwithstanding the foregoing, the Specified
Liabilities shall not include the liabilities of Seller under (i) any Contracts
that constitute or evidence Employee Benefit Plans of Seller, (ii) this
Agreement or any other Contracts entered into between Seller and Buyer, or among
Seller, Buyer and other parties, in connection with the transactions
contemplated by this Agreement, and (iii) the Excluded Contracts.
2.4 No Other Liabilities. Notwithstanding any other provisions of this
Agreement, Buyer shall not purchase the Specified Assets subject to, and Buyer
shall not in any manner assume or be liable or responsible for, any Obligations
of Seller other than the Specified Liabilities, and all Obligations of Seller
other than the Specified Liabilities shall remain the sole responsibility of
Seller.
SECTION 3: CONSIDERATION FOR SPECIFIED ASSETS
3.1 Purchase Price. The purchase price payable by Buyer to Seller for
the Specified Assets ("Purchase Price") shall consist of certain cash payments
and the issuance and delivery of
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certain unregistered shares of Buyer's common stock, without par value ("Rom
Tech Stock"), in the amounts and payable at the time set forth herein.
(a) Cash Payment. On the Closing Date, Buyer shall pay to
Seller Five Hundred Thousand Dollars ($500,000) (the "Cash Payment") as follows:
(i) Three Hundred and Twenty-Five Thousand Dollars
($325,000), which shall be deposited in a bank account in the name of Seller,
subject to the condition that any checks to be drawn on such account may only be
drawn with the joint signature of an officer of Seller and an officer of Buyer
for the sole purpose of paying the creditors of Seller listed in Exhibit 3.1(a).
(ii) Fifty Thousand Dollars ($50,000) by cancellation
of the Promissory Note, dated July 17, 1996 from Seller to Buyer in the
principal amount of Fifty Thousand Dollars ($50,000) with interest due thereon
being forgiven.
(iii) One Hundred and Twenty-Five Thousand Dollars
($125,000) by cancellation of the Promissory Note dated the date hereof from
Seller to Buyer in the principal amount of One Hundred and Twenty-Five Thousand
Dollars ($125,000) with interest due thereon being forgiven, which such
Promissory Note evidences One Hundred and Twenty-Five Thousand Dollars
($125,000) that Buyer loaned to Seller on the date hereof and which was
deposited in a bank account, in the name of Seller, subject to the condition
that any checks to be drawn on such account may only be drawn with the joint
signature of an officer of Seller and an officer of Buyer for the sole purpose
of paying the creditors of Seller listed in Exhibit 3.1(a).
(b) Rom Tech Stock. Buyer shall deliver to Seller shares of
Rom Tech Stock as follows:
(i) If, between the Closing Date and March 31, 2000
(the "Measurement Period"), Buyer achieves the cumulative sales of FileABC's
current software product, and any enhancements or derivative products (the
"FileABC Product") set forth in Exhibit 3.1(b), Buyer shall deliver to Seller,
within ninety (90) days after achieving such cumulative sales, such number of
shares of unregistered Rom Tech Stock set forth in Exhibit 3.1(b), up to a
maximum aggregate of 1,200,000 shares so deliverable by Buyer to Seller,
provided, however, that (x) in connection with the first $1,000,000 in sales of
FileABC Product only, Buyer shall deliver to Seller, within thirty (30) days
after the close of each 90-day period following the Closing Date, a pro rated
number of shares determined by multiplying 100,000 by a fraction, the numerator
of which is the sales of FileABC Product actually achieved for such period (up
to an aggregate of $1,000,000 in sales for all such periods) and the denominator
of which is $1,000,000 (it being understood that such quarterly payments of
shares shall cease upon achieving the first $1,000,000 in sales and in no event
shall Seller be entitled to more than 100,000 shares for such first $1,000,000
in sales), and (y) the last installment of shares of Rom Tech Stock deliverable
shall be pro-rated by multiplying 100,000 by a fraction, the numerator of which
is the amount of sales of FileABC Product in excess of the last $1,000,000 level
of sales actually achieved as set forth on Exhibit 3.1(b), and the denominator
of which is $1,000,000. For the purposes of this Section 3.1(b)(ii) only, sales
of the FileABC Product shall be deemed to have occurred at such time as Buyer
records such sales in accordance with GAAP.
(ii) For purposes of the above Section 3.1(b)(i), (A)
in the event the FileABC Product is bundled with one other software product of
Buyer, one-half (1/2) of the sales price of such bundled product shall be
allocated to the FileABC Product; in the event FileABC
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Product is bundled with two other software products of Buyer, one-third (1/3) of
the sales price of such bundled product shall be allocated to the FileABC
Product, and so on; and (B) for purposes of calculating the number of additional
shares of Rom Tech Stock to be issued relative to the cumulative sales of
FileABC Product as described in Exhibit 3.1(b), the amount of any direct
development costs required to upgrade FileABC Product shall be added to the
amount of cumulative sales of FileABC Product required by Exhibit 3.1(b) (for
example, and not by way of limitation, if Buyer expends $1,000,000 in direct
development costs, the amount of cumulative sales of FileABC Product required
for Seller to receive 1,200,000 shares of Rom Tech Stock in accordance with
Exhibit 3.1(b) shall be $13,000,000).
3.2 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Specified Assets and such noncompetition covenants contained in
Section 11.7 in a manner that is satisfactory to both Buyer and Seller.
3.3 Currency and Method of Payment. All dollar amounts stated in this
Agreement are stated in United States currency, and all payments required under
this Agreement shall be paid in United States currency. All payments required
under this Agreement shall be made as follows: (i) any payment may be made by
wire transfer of immediately available funds; (ii) any payment exceeding
$100,000 shall be made by wire transfer of immediately available funds; (iii)
any payment exceeding $10,000, but not exceeding $100,000, may be made by bank
certified, treasurer's or cashier's check; and (iv) any payment not exceeding
$10,000 may be made by ordinary check.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF SELLER
Knowing that Buyer is relying thereon, Seller represents and warrants
to Buyer, as follows:
4.1 Organization and Authority. Seller is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Nevada, the jurisdiction of its organization, and has the full power and
authority to own its Assets, conduct the Business as and where such Business is
presently conducted, and enter into this Agreement and the transactions
contemplated hereby. Seller is duly qualified to do business and in good
standing as a foreign limited partnership in each other jurisdiction listed in
the Disclosure Letter, and Seller is not required to be qualified as a foreign
limited partnership in any other jurisdiction except where the failure to be so
qualified would not be Material to Seller. The General Partner is the sole
general partner of Seller, and the Limited Partners of Seller are set forth in
Exhibit 4.1 of the Disclosure Letter. The respective ownership interests of the
General Partner and the Limited Partners in the Seller, and the shareholders of
the General Partner and their respective ownership of the capital stock of the
General Partner, are set forth in Exhibit 4.1 of the Disclosure Letter. Seller
does not own any subsidiaries or any interest in any other Person. The
Disclosure Letter sets forth a list of (i) all names under which, and all
addresses at which, Seller has conducted any business at any time since its
formation, and (ii) all fictitious names, product names and other names used by
Seller in connection with the Business during the five-year period ending on the
date of this Agreement.
There are no predecessors to the business of Seller.
4.2 Effect of Agreement. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby, (a)
have been duly authorized by all necessary action by Seller in accordance with
the Partnership Agreement and all applicable Laws, (b) do not and will not
constitute a breach or violation of, or a default under the Partnership
Agreement or any other organizational documents of Seller, (c) do not and will
not, with or without
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notice and/or lapse of time, constitute a breach or violation of, or a default
under, any Contract to which Seller is a party or by which Seller or its Assets
or Business is bound, (d) do not and will not, with or without notice and/or
lapse of time, constitute a violation of any Law or Judgment applicable to
Seller or to the Business or Assets of Seller, (e) do not and will not, with or
without notice and/or lapse of time, constitute a violation of, and do not and
will not result in the revocation, restriction, suspension or modification of
any Permit of Seller, (f) do not and will not, with or without notice and/or
lapse of time, accelerate or otherwise modify any Obligation of Seller, (g) do
not and will not, with or without notice and/or lapse of time, result in the
creation of any Encumbrance upon, or give to any other Person any interest in
the Business or Assets of Seller, and (h) do not require any Consent of any
Person, except as listed in the Disclosure Letter ("Seller's Required
Consents"). This Agreement constitutes the valid and legally binding agreement
of the Seller (to the extent they are a party thereto or bound thereby),
enforceable against each of them in accordance with their respective terms.
4.3 Financial and Corporate Records. Seller's books and records are and
have been properly prepared and maintained in form and substance adequate for
preparing audited financial statements in accordance with GAAP, and fairly and
accurately reflect, in all material respects, all of Seller's Assets and
Obligations and all Contracts and transactions to which Seller is or was a party
or by which any of Seller's or its business or Assets is or was affected. Copies
of the Partnership Agreement, articles of association and other organizational
documents of Seller have been delivered to Buyer.
4.4 Compliance with Law. Seller's operations, the conduct of Seller's
Business as and where such Business has been or presently is conducted, and
Seller's Assets and their uses, comply with all Laws and Judgments applicable to
Seller, and its Business or Assets, except where the failure to so comply would
not be Material to Seller, and Seller has not received any notice that it is not
in compliance. Seller has obtained and holds all Permits required for the lawful
operation of its Business as and where such Business is presently conducted,
except where the failure to do so would not be Material to Seller. All Permits
held by Seller that are Material to Seller are listed in the Disclosure Letter.
4.5 Seller's Financial Statements. Seller's fiscal year ends on
December 31. Except as set forth in the Disclosure Letter, the unaudited
financial statements of Seller ("Seller's Financial Statements"): (i) include a
balance sheet of Seller as of August 31, 1996 ("Balance Sheet Date") and related
statements of income, cash flows and changes in Partners' equity for the period
ended August 31, 1996, (ii) have been prepared in accordance with GAAP; and (ii)
fairly present the financial condition and results of operations, cash flows and
changes in Partners' equity of Seller as of the dates and for the periods
indicated.
4.6 Conduct of Operations. Except as set forth in the Disclosure
Letter, from the Balance Sheet Date to the date of this Agreement:
(a) Except in the ordinary course of its business consistent
with its past practices, Seller has not (i) created or assumed any Encumbrances
upon any of its business or Assets, (ii) incurred any Obligation, (iii) made any
loan or advance to any Person, (iv) assumed, guaranteed or otherwise become
liable for any Obligation of any Person, (v) committed for any capital
expenditure, (vi) sold, abandoned or otherwise disposed of any of its business
or Assets, (vii) purchased, leased or otherwise acquired any business, Assets or
capital stock of any other Person, (viii) settled any dispute, waiver any right
or canceled any Obligation, (ix) assumed, entered into or amended any Contract
other than this Agreement, or canceled or terminated any Contract other than in
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accordance with its terms, (x) increased, or authorized an increase in, the
compensation or benefits paid or provided to any of its directors, officers,
employees, agents or representatives, or (xi) done anything else outside the
ordinary course of business, whether or not specifically described in any of the
foregoing clauses.
(b) Even in the ordinary course of business consistent with
its past practices, Seller has not (i) declared, paid or set aside for payment
any distribution, or made any direct or indirect redemption, retirement or
acquisition of any partnership interest, (ii) made any change in its accounting
policies or practices, (iii) made any loan or advance to any of its partners,
officers or directors, or any affiliate, associate or family member of any of
the foregoing, (iv) paid directly or indirectly any of its Obligations before it
became due in accordance with its terms, (v) distributed, or authorized the
distribution, of any units of partnership interest or granted any rights with
respect to its units of partnership interest (vi) amended the Partnership
Agreement, articles of association or other organizational documents, or merged
with or into, consolidated with, completely or partially liquidated or
dissolved, or was involved in any other business combination with any other
Person, (vii) changed, or authorized a change in, the rights of its outstanding
capital stock or the character of its business, or (viii) adopted or amended any
Employee Benefit Plan.
(c) There has been no casualty loss (whether or not covered by
insurance) Material to Seller, and there has been no event or occurrence
Material to, or which might be Material to, Seller.
4.7 Assets. Except as set forth in the Disclosure Letter, Seller has
good and marketable title to all Assets that it purports to own and none of such
Assets is subject to any Encumbrances. All assets owned or used by Seller in the
Business are in good condition, ordinary wear and tear excepted, and are
sufficient for the conduct of the Business.
4.8 Tangible Property. The Disclosure Letter sets forth a detailed list
of all of Seller's Tangible Property. Except as set forth in the Disclosure
Letter, Seller has good and marketable title to all of its Tangible Property,
free and clear of any Encumbrances. Except as set forth in the Disclosure
Letter, all of Seller's Tangible Property is located at Seller's Business
Location, and Seller has the unqualified right to require the immediate return
of any of Seller's Tangible Property not located at Seller's Business Location.
All Tangible Property owned or used by Seller is in good condition, ordinary
wear and tear (other than that which materially detracts from the value or
impairs the present use of the property) excepted, and is sufficient for the
business conducted by Seller or proposed to be conducted by it.
4.9 Real Property. Except for Seller's Business Location listed in the
Disclosure Letter, there is no Real Property owned or leased by Seller. Neither
Seller's occupancy nor use of the Business Location is in violation of any
Contract or Law, and no notice from any lessor, governmental body or other
Person has been received by Seller claiming any violation of any Contract or
Law, or requiring or calling attention to the need for any work, repairs,
construction, alteration or installations.
4.10 Software and Intangibles. The Disclosure Letter sets forth a
detailed list and description of all Software and Intangibles owned or used by
Seller. Except as set forth in the Disclosure Letter, Seller has (i) good and
marketable title to all of its owned Software and Intangibles, free and clear of
any Encumbrances, and (ii) the right to use all non-owned Software and
Intangibles used by it. The Software and Intangibles owned or used by Seller are
adequate for the Businesses conducted by it or proposed to be conducted by it.
None of the Software or
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Intangibles owned or used by Seller, or their respective past or current uses,
has violated or infringed upon or is violating or infringing upon any Software
or Intangible of any Person, and to the knowledge of Seller, no Person is
violating or infringing upon any Software or Intangibles owned by Seller. None
of Seller's owned Software or Intangibles is owned by or registered in the name
of any current or former partners, officer, employee, salesman, agent,
representative or contractor of Seller, nor does any such Person have any
interest therein or right thereto.
4.11 Obligations. The Disclosure Letter sets forth a detailed list of
all of Seller's accounts payable, accrued expenses and other current and
long-term liabilities, grouped by balance sheet account. Except as set forth in
the Disclosure Letter, Seller has no Obligations other than (i) Obligations
listed in the Disclosure Letter, (ii) Obligations incurred since the Balance
Sheet Date in the ordinary course of business consistent with past practice and
not in violation of any of the representations or warranties in this Section 4
and (iii) Obligations under the Specified Contracts listed in the Disclosure
Letter, or any Contracts not required to be listed in the Disclosure Letter.
4.12 Contracts.
(a) The Disclosure Letter sets forth a detailed list of all of
the following types of Contracts to which Seller is a party or by which Seller
or its Business or Assets is bound (collectively, the "Specified Contracts"),
grouped into the following categories: (i) Contracts with customers, (ii) loan
agreements, mortgages, notes, and other financing Contracts, (iii) Contracts for
the purchase, sale, lease or use of Real Property of any nature, (iv) Contracts
for the purchase, lease, license and/or maintenance of Tangible Property,
Intangibles or Software under which Seller is the purchaser, licensee, lessee or
user, and other supplier Contracts, (v) Contracts with current or former
partners, officers, employees, agents or representatives of Seller, or any
affiliates, associates or family members of any current or former partner,
officer or employee of Seller (other than Contracts that constitute Employee
Benefit Plans), (vi) Contracts under which Seller agrees to indemnify any
Person, share the tax liability of any Person, or guarantee any Obligation of
any Person, or any similar Contract, (vii) Contracts containing covenants of
Seller not to compete in any line of business or with any Person in any
geographical area, (viii) Contracts for joint ventures, partnerships or
strategic alliances, and (viii) other Contracts that are Material to Seller
(other than Contracts that constitute Insurance Policies). Copies of each
written Specified Contract have been delivered to Buyer, and a description of
each oral Specified Contract is included in the Disclosure Letter.
(b) With respect to the Specified Contracts, (i) Seller is not
in default thereunder or would be in default thereunder, with or without notice
and/or lapse of time, (ii) to the knowledge of Seller, none of the other parties
to any Specified Contract is in default thereunder or would be in default
thereunder, with or without notice and/or lapse of time, and (iii) Seller has
not given or received any notice of default or notice of termination with
respect to any Specified Contract, and each Specified Contract is in full force
and effect in accordance with its terms. To the knowledge of Seller, there is no
fact or circumstance that would adversely affect Seller's ability to perform any
such contract within budget and Seller will be able to perform its obligations
under each such Specified Contract on a profitable basis. Except as set forth in
the Disclosure Letter, there are no currently outstanding proposals or offers
submitted by Seller to any customer, prospect, supplier or other Person which,
if accepted, would result in a legally binding Contract of Seller involving an
amount or commitment exceeding $5,000 in any single case or $10,000 in the
aggregate, or, with respect to property, plant and equipment, involving an
amount or commitment exceeding $2,500 any single case or $5,000 in the
aggregate.
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4.13 Customers and Suppliers. The Disclosure Letter sets forth a list
of all of Seller's customers and suppliers. Seller's relationship with each
customer and supplier is continuing on a good basis. No customer or supplier has
given notice of or otherwise indicated any intent to terminate or not renew its
Contracts with Seller before its scheduled expiration or otherwise to terminate
its relationship with Seller. Seller has no knowledge or belief that the
transactions contemplated by this Agreement will adversely affect relations with
any Customer or supplier.
4.14 Employees and Independent Contractors. The Disclosure Letter sets
forth a list of all of Seller's employees, together with (i) their titles or
responsibilities, (ii) their social security numbers and states or countries of
residence, (iii) their current salaries or wages, (iv) their dates of hire, (v)
their last compensation changes and the dates on which such changes were made,
(v) any specific bonus, commission or incentive plans or agreements for or with
them, including all bonuses, commissions and incentives paid during the past
twelve months, and (vi) any outstanding loans or advances made to them. The
Disclosure Letter sets forth a list of all sales representatives and independent
contractors engaged by Seller, their tax identification numbers and states or
countries of residence, their payment arrangements and a brief description of
their jobs or projects currently in progress. Except as limited by any
employment Contracts listed in the Disclosure Letter and except for any
limitations of general application which may be imposed under applicable
employment Laws, Seller has the right to terminate the employment of each of its
employees at will and without incurring any penalty or liability other than
liability for severance pay in accordance with Seller's disclosed severance pay
policy. Seller is in full compliance with all Laws respecting employment
practices, except where the failure to so comply would not be Material to
Seller. Seller's relations with its employees are currently on a good and normal
basis, and there have been no strikes or labor disputes involving Seller. Seller
is not subject to any Contract with any labor union, and to the knowledge of the
Seller, no labor union has sought to represent any employees of Seller. No
employee of Seller has indicated an intention to terminate his or her employment
with Seller. Seller does not have any knowledge or belief that the transactions
contemplated by this Agreement will adversely affect relations with Seller's
employees.
4.15 Employee Benefit Plans. Except as set forth in the Disclosure
Letter, Seller has not established, does not sponsor, maintain or contribute to,
and does not have any current or future Obligations with respect to, any
Employee Benefit Plan. The Disclosure Letter includes a description of each
Employee Benefit Plan that is currently in effect or as to which Seller has any
current or future Obligation, which description indicates the employees covered
or affected thereby and all of the Obligations of Seller thereunder. Copies of
all Employee Benefit Plans described on in the Disclosure Letter, and all
written materials used by Seller to describe its Employee Benefit Plans to
employees have been delivered to Buyer.
4.16 Taxes. Seller has timely filed all returns, declarations, reports
and statements ("Tax Returns") required to be filed by it relating to any Tax,
all of which were accurately prepared. Seller has duly paid all Taxes and
withholdings required to be paid by it in respect of such Tax Returns. Seller
has properly withheld from payments to its employees, contractors, salesmen,
agents, representatives, vendors and other Persons all amounts required by Law
to be withheld, and Seller has timely filed all Tax Returns required to be filed
by it with respect to such withholdings. Copies of all sales, use, excise,
payroll, withholding and similar Tax Returns filed by Seller since January 1,
1994 have been delivered to Buyer. No audit or similar Proceeding is pending or,
to the knowledge of the Seller, threatened against Seller, no notice of
deficiency or adjustment has been received by Seller, by or from any
governmental taxing authority, and no Tax is being contested by Seller.
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4.17 Proceedings and Judgments. No Proceeding is currently pending or,
to the knowledge of the Seller, threatened, nor has any Proceeding occurred at
any time since January 1, 1994, to which Seller is or was a party, or by which
the Business or Assets is or was affected, and there is no basis known to the
Seller for any such Proceeding. No Proceeding is currently pending or, to the
knowledge of the Seller, threatened against Seller, relating to this Agreement
or the transactions contemplated hereby. No Judgment is currently outstanding,
nor has any Judgment been outstanding at any time since January 1, 1994, against
Seller, or by which the Business or Assets or the Assets of any other Person
which are used by Seller, is or was affected.
4.18 Insurance. The Disclosure Letter sets forth a list of the
Insurance Policies currently owned or maintained by Seller (excluding Insurance
Policies that constitute Employee Benefit Plans) and all Insurance Policies
owned or maintained by Seller at any time since January 1, 1994 Except as set
forth in the Disclosure Letter, all such Insurance Policies are or were on an
"occurrence" rather than a "claims made" basis. Copies of all Insurance Policies
described in the Disclosure Letter have been delivered to Buyer. Each such
Insurance Policy is or was (i) in full force and effect during the period(s) of
coverage indicated in the Disclosure Letter, (ii) with financially sound and
reputable insurance companies or associations, and (iii) in amounts and covering
such risks as were or are sufficient to allow Seller to replace any of its
Assets that might be damaged or destroyed, protect it and its Business from
risks customarily insured against by companies engaged in similar businesses in
the same general areas without it becoming a co-insurer, and comply with the
requirements of all Laws, Contracts and Permits applicable to it or its business
or Assets. Except as described in the Disclosure Letter, there are no claims
pending under any of the Insurance Policies described in the Disclosure Letter.
Seller has not received any notice of cancellation with respect to any of its
current Insurance Policies, and there is no basis for the insurer thereunder to
terminate any of Seller's current Insurance Policies.
4.19 Questionable Payments. Neither Seller, nor any of Seller's current
or former partners, officers, representatives, agents or employees (when acting
in such capacity or otherwise on behalf of Seller or any of its predecessors),
(i) has used or is using any partnership funds for any illegal contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
(ii) has used or is using any partnership funds for any direct or indirect
unlawful payments to any foreign or domestic government officials or employees,
(iii) has established or maintained, or is maintaining, any unlawful or
unrecorded fund of partnership monies or other properties, (iv) has made any
false or fictitious entries on the books and records of Seller, (v) has made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of any nature.
4.20 Related Party Transactions. Except as set forth on in the
Disclosure Letter, there are no Contracts under which Seller has any current or
future Obligations, or any other arrangements or transactions of any nature,
between Seller and (i) any current or former partner, officer or controlling
Person of Seller, (ii) any other Person affiliated or associated with Seller, or
(iii) any affiliate, associate or family member of any Person listed in clause
(i) of this Section 4.20.
4.21 Brokerage Fees. No Person acting on behalf of Seller shall be
entitled to any brokerage or finder's fees in connection with the transactions
contemplated by this Agreement.
4.22 Investment Matters.
(a) Seller confirms that the Rom Tech Stock to be received by
Seller will be acquired for investment for Seller's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof except in accordance with the Securities Act of 1933,
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as amended (the "Act"), and that Seller has no present intention of selling,
granting any participation in, or otherwise distributing the same. Seller
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Rom Tech Stock.
(b) Seller has received and examined: (i) Buyer's Quarterly
Report on Form 10- QSB for the quarter ended September 30, 1996; (ii) Buyer's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996; (ii)
Buyer's Prospectus dated October 13, 1995; (iv) Buyer's Current Report on Form
8-K dated April 30, 1996; and (v) Buyer's Current Report on Form 8-K dated April
4, 1996. Seller believes it has received all the information it considers
necessary or appropriate for deciding whether to acquire the Rom Tech Stock.
Seller represents that it has had an opportunity to ask questions and receive
answers from Buyer regarding the Rom Tech Stock, the Business, properties,
prospects and financial condition of the Company. The foregoing, however, does
not limit or modify the representations and warranties of Seller in Section 4 of
this Agreement or the right of Buyer to rely thereon.
(c) Seller acknowledges that it is able to fend for itself,
can bear the economic risk of its investment in Rom Tech Stock, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in Rom Tech Stock.
(d) Seller understands that the Rom Tech Stock it is acquiring
is characterized as "restricted securities" under the federal securities laws
inasmuch as it is being acquired from the Buyer in a transaction not involving a
public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Act only in certain
limited circumstances. In this connection, Seller represents that it is familiar
with the Securities and Exchange Commission's ("SEC") Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
(e) Without in any way limiting the representations set forth
above, Seller agrees not to make any disposition of all or any portion of the
Rom Tech Stock unless and until (i) there is then in effect a Registration
Statement under the Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement, or (ii) Seller shall
have notified Buyer of the proposed disposition and shall have furnished Buyer
with a detailed statement of the circumstances surrounding the proposed
disposition, and if reasonably requested by Buyer, Seller shall have furnished
Buyer with an opinion of counsel, reasonable satisfactory to Buyer that such
disposition will not require registration of such shares under the Act.
(f) Seller acknowledges that the certificates evidencing the
Rom Tech Stock may bear the following legend and any other legend required by
applicable law:
"These securities have not been registered under the
Securities Act of 1933, as amended, or any state securities
laws. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in
effect with respect to the securities under such Act and such
state securities laws or an opinion of counsel satisfactory to
Rom Tech, Inc. that such registration is not required or
unless sold pursuant to Rule 144 of such Act."
4.23 Full Disclosure. No representation or warranty made by Seller in
this Agreement or pursuant hereto contains any untrue statement of any material
fact or omits to state any material
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fact that is necessary to make the statements made, in the context in which
made, not false or misleading. The Disclosure Letter and copies of documents
attached thereto or otherwise delivered to Buyer pursuant to or in connection
with this Agreement are accurate and complete and are not missing any
amendments, modifications, correspondence or other related papers which would be
pertinent to Buyer's understanding thereof. There is no fact known to Seller
that has not been disclosed to Buyer in the Disclosure Letter that was or is, or
so far as the Seller can reasonably foresee will be, Material to Seller or to
the ability of Seller to perform their obligations under this Agreement.
SECTION 5: REPRESENTATIONS AND WARRANTIES OF BUYER
Knowing that Seller is relying thereon, Buyer represents and warrants
to Seller as follows:
5.1 Organization and Authority. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania, the jurisdiction of its incorporation, and has the full corporate
power and authority to enter into and perform this Agreement and the
transactions contemplated hereby.
5.2 Effect of Agreement. Buyer's execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby and
thereby, (i) have been duly authorized by all necessary corporate actions by
Buyer, (ii) do not and will not constitute a breach or violation of, or a
default under, the articles of incorporation and by-laws of Buyer, (iii) do not
and will not, with or without notice and/or lapse of time, constitute a breach
or violation of, or default under, any Contract to which Buyer is a party or by
which Buyer or its Assets or business, is bound, (iv) do not and will not, with
or without notice and/or lapse of time, constitute a violation of any Law or
Judgment, applicable to Buyer or its business or Assets, and (v) do not require
the Consent of any Person. This Agreement constitutes the valid and legally
binding agreement of Buyer, enforceable against Buyer in accordance with its
respective terms.
5.3 Public Reports. Buyer has delivered to Seller accurate copies of
the following reports and documents filed by Buyer with the SEC ("Public
Reports"): (i) Quarterly Report on Form 10-QSB for the quarter ended March 31,
1996; and (ii) Annual Report on Form 10-KSB for the fiscal year ended June 30,
1996; (iii) Buyer's Prospectus dated October 13, 1995; (iv) the Current Report
on Form 8-K dated April 30, 1996; and (v) the Current Report on Form 8-K dated
April 4, 1996.
5.4 Financial Statements. The consolidated financial statements of
Buyer ("Buyer's Financials") contained in the Public Reports (including the
related notes and schedules thereto) were prepared in accordance with GAAP, and
fairly present the financial condition and results of operations of Buyer as of
the dates and for the periods indicated. Buyer's Financials contained in the
Quarterly Report on Form 10-QSB for the quarter ended September 30, 1996 are
subject to year end adjustment and do not contain footnote disclosure.
5.5 Rom Tech Stock. The Rom Tech Stock to be delivered to Seller at
Closing and during the Measurement Period has been duly authorized and when
issued in accordance with the terms of this Agreement will be validly issued,
fully paid and non-assessable.
5.6 Proceedings. No Proceeding is currently pending or to the knowledge
of Buyer, threatened, against Buyer relating to this Agreement or the
transactions contemplated hereby.
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5.7 Brokerage Fees. Except for the fee, if any, to Lambert Thom, which
shall be paid by Buyer, no Person acting on behalf of Buyer is entitled to any
brokerage or finder's fee in connection with the transactions contemplated by
this Agreement.
5.8 Full Disclosure. No representation or warranty made by Buyer in
this Agreement or pursuant hereto, contains any untrue statement of any material
fact and omits to state any material fact necessary to make the statements made,
in the context in which made, not false or misleading.
SECTION 6: CERTAIN OBLIGATIONS OF SELLER PENDING CLOSING
6.1 Investigation. During the period from the date of this Agreement to
the Closing Date, (i) to the extent reasonably requested by Buyer, Seller shall
permit Buyer and its authorized representatives to have full access to its
Business Location and other facilities during normal business hours, to observe
the Business operations, to meet with Seller's employees, and to audit, examine
and copy all of Seller's files, books and records, and other documents and
papers relating to the Business, and (ii) Seller shall provide to Buyer and its
authorized representatives all information concerning the Business and its
Assets, and all information concerning the financial condition of Seller, that
is reasonably requested by Buyer.
6.2 Conduct Pending Closing. During the period from the date of this
Agreement to the Closing Date, except with the express prior written consent of
Buyer:
(a) Seller shall, (i) conduct the Business in the ordinary
course consistent with past practices, shall not make any change in its business
practices that is or would be Material to Seller, and (ii) in good faith, use
its best efforts to preserve the Business organization intact, retaining the
services of its current employees, salesmen, contractors, agents and
representatives and maintaining the good will of its suppliers, customers and
other Persons having business relations with Seller.
(b) Seller shall not, (i) create or assume any Encumbrance
upon Seller's Assets, (ii) incur any Obligation involving an amount exceeding
$5,000 in any single case or $10,000 in the aggregate, (iii) make any loan or
advance to any Person, (iv) assume, guarantee or otherwise become liable for any
Obligation of any Person, (v) commit for any capital expenditure exceeding
$5,000 in any single case or $10,000 in the aggregate, (vi) purchase, lease, or
otherwise acquire any business, Assets or capital stock of any other Person,
(vii) sell, abandon or otherwise dispose of any of Seller's Business or Assets,
(viii) settle any dispute, waive any right or cancel any Obligation of Seller,
(ix) assume or enter into or amend any Contract involving an amount exceeding
$5,000 in any single case or $10,000 in the aggregate, or cancel or terminate
any Contract other than in accordance with its terms, (x) increase, or authorize
an increase in, the compensation or benefits paid or provided to any of Seller's
directors, officers, employees, agents or representatives, (xi) initiate any
lawsuit or other Proceeding, or (xii) do anything outside the ordinary course of
business, whether or not specifically described in any of the foregoing clauses.
(c) Seller shall not, (i) do or omit to do any act, or permit
any act or omission to occur, which will cause a breach or violation of, or a
default under, any of its Contracts, Insurance Policies or Permits, except where
the breach or violation would not be Material to the Seller, (ii) completely or
partially liquidate or dissolve, or (iii) terminate any part of the Business.
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(d) Seller shall, (i) maintain Seller's Assets in good
condition and repair, (ii) maintain Seller's Insurance Policies and Permits in
full force and effect, (iii) comply with all applicable Contracts, Permits and
Laws, except where the failure to so comply would not be Material to Seller,
(iv) duly and timely withhold from payments to employees, contractors, salesmen,
agents, representatives, vendors and other Persons involved in the Business all
amounts required by Law to be withheld and timely file all Tax Returns required
to be filed by it with respect to such withholdings.
(e) Seller shall, maintain its existence and good standing in
Nevada and its good standing as a foreign corporation in each jurisdiction where
it is currently qualified as a foreign corporation.
(f) Seller shall not, enter into any Contract which requires
or commits it to take any action or omit to take any action which would be
inconsistent with the foregoing provisions of this Section 6.2.
6.3 Acquisition Proposals. Seller, nor any of Seller's Partners,
officers, employees, representatives or agents, shall, directly or indirectly,
solicit, initiate or encourage inquiries or proposals from, or participate in
any discussions or negotiations with, or provide any non-public information to,
any Person (other than Buyer and its respective officers, employees,
representatives and agents) concerning any sale of any of Seller's Assets, any
sale of ownership interests of Seller, or any merger, consolidation, business
combination or similar transaction involving Seller or its Business or Assets.
6.4 Material Consents. Between the date of this Agreement and the
Closing Date, Seller shall, in good faith, use its best efforts to obtain all of
Seller's Required Consents.
6.5 Audited Financial Statements. Between the date of this Agreement
and the Closing Date, Seller shall, instruct an accounting firm that is a member
of the SEC practice section of the AICPA ("Seller's Accountants") to conduct an
audit ("Audit") of, certain financial statements of Seller ("Audited Financial
Statements"), in accordance with the following:
(a) The Audited Financial Statements shall include: (i) a
balance sheet of Seller as of December 31, 1995 and related statements of
income, changes in Partners' equity and cash flows for the years ended December
31, 1995 and December 31, 1994 ("Seller's Annual Financials"); (ii) a balance
sheet of Seller as of September 30, 1996 and a related statement of income,
changes in Partners' equity and cash flows for the period ended September 30,
1996 ("Seller's Interim Financials"); and (iii) as a footnote to Seller's Annual
Financials and Seller's Interim Financials, unaudited balance sheets of Seller
as of the quarterly periods ended September 30, 1996, June 30, 1996, March 31,
1996, December 31, 1995, September 30, 1995, June 30, 1995 and March 31, 1995
and related statements of income, changes in Partners' equity and cash flows for
the quarterly periods ended September 30, 1996, June 30, 1996, March 31, 1996,
December 31, 1995, September 30, 1995, June 30, 1995 and March 31, 1995.
(b) Seller shall fully cooperate with Seller's Accountants in
connection with the Audit, including, but not limited to, agreeing to any
required adjustments and taking any other necessary actions to enable the audit
report issued by Seller's Accountants with respect to the Audited Financial
Statements ("Audit Report") to be completely unqualified, without any
explanatory paragraphs, and in form acceptable for inclusion in the Current
Report on Form 8-K ("Buyer's 8-K") to be filed by Buyer with the SEC with
respect to the closing of the transactions
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contemplated by this Agreement. Seller shall instruct Seller's Accountants to:
(i) review with Buyer and KPMG Peat Marwick, Philadelphia, Pennsylvania
("Buyer's Accountants") the work papers prepared by Seller's Accountants in
connection with the Audit ("Audit Work Papers") before Seller's Accountants
finalize the Audited Financial Statements and Audit Report; and (ii) assist
Buyer and Buyer's Accountants to the extent reasonably requested by them in
connection with the preparation of financial information (including "pro forma"
financial information) to be included in Buyer's 8-K.
6.6 Advice of Changes. Between the date of this Agreement and the
Closing Date, Seller shall promptly advise Buyer in writing of any fact of which
it obtains knowledge and which, if existing or known as of the date of this
Agreement, would have been required to be set forth or disclosed in or pursuant
to this Agreement (it being understood that any such advice shall not be deemed
to modify the representations, warranties and covenants of Seller contained in
this Agreement).
6.7 Best Efforts. Seller shall use their best efforts to consummate the
transactions contemplated by this Agreement in accordance herewith, and Seller
shall not take, cause to be taken, or to the best of their ability permit to be
taken, any action that would impair the prospect of completing the transactions
contemplated by this Agreement.
SECTION 7: CERTAIN OBLIGATIONS OF BUYER PENDING CLOSING
7.1 Material Consents. Between the date of this Agreement and the
Closing Date, Buyer shall in good faith cooperate with Seller in its efforts to
obtain all of Seller's Required Consents.
7.2 Advice of Changes. Between the date of this Agreement and the
Closing Date, Buyer shall promptly advise Seller in writing of any fact of which
it obtains knowledge and which, if existing or known as of the date of this
Agreement, would have been required to be set forth or disclosed in or pursuant
to this Agreement (it being understood that any such advice shall not be deemed
to modify the representations, warranties and covenants of Buyer contained in
this Agreement).
7.3 Best Efforts. Buyer shall use its best efforts to consummate the
transactions contemplated by this Agreement in accordance herewith, and Buyer
shall not take, cause to be taken, or to the best of its ability permit to be
taken, any action that would impair the prospect of completing the transactions
contemplated by this Agreement.
7.4 Employment Agreements. Between the dated of this Agreement and the
Closing Date, Buyer shall execute employment agreements ("Employment
Agreements") with Brent Edwards, Celeste Rogers and Jill Lewellen-Aiona
(collectively, the "Employees") substantially in the form attached hereto as
Exhibit 9.8, provided, however, that the Employment Agreements shall
automatically terminate if the Closing is not held on or before December 31,
1996.
SECTION 8: CONDITIONS PRECEDENT TO CLOSING BY SELLER
Each obligation of Seller to be performed on the Closing Date shall be
subject to the satisfaction of each of the following conditions, except to the
extent that such satisfaction is waived by Seller in writing:
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8.1 Representations of Buyer. All representations and warranties of
Buyer contained in this Agreement shall be accurate on and as of the Closing
Date, with the same force and effect as though made on and as of the Closing
Date.
8.2 Performance by Buyer. All of the covenants, terms and conditions of
this Agreement to be satisfied or performed by Buyer on or before the Closing
Date shall have been substantially satisfied or performed.
8.3 Absence of Proceedings. No Proceeding shall have been instituted or
threatened on or before the Closing Date by any Person (other than Seller), no
Judgment shall have been issued, and no new Law shall have been enacted, that
seeks to or does prohibit or restrain, or that seeks damages as a result of, the
consummation of the transactions contemplated by this Agreement.
SECTION 9: CONDITIONS PRECEDENT TO CLOSING BY BUYER
Each obligation of Buyer to be performed on the Closing Date shall be
subject to the satisfaction of each of the following conditions, except to the
extent that such satisfaction is waived by Buyer in writing:
9.1 Representations of Seller. All of the representations and
warranties of Seller contained in this Agreement shall be accurate on and as of
the Closing Date, with the same force and effect as though made on and as of the
Closing Date, and the Schedules to this Agreement shall be complete, accurate
and current on and as of the Closing Date.
9.2 Performance by Seller. All of the covenants, terms and conditions
of this Agreement to be satisfied or performed by Seller on or before the
Closing Date shall have been substantially satisfied or performed.
9.3 Absence of Adverse Changes. There shall not have been any adverse
changes Material to Seller between the date of this Agreement and the Closing
Date.
9.4 Absence of Proceedings. No Proceeding shall have been instituted or
threatened on or before the Closing Date by any Person (other than Buyer), no
Judgment shall have been issued, and no new Law shall have been enacted, that
seeks to or does prohibit or restrain, or that seeks damages as a result of, the
consummation of the transactions contemplated by this Agreement.
9.5 Absence of Encumbrances, Judgments and Tax Liens. The Uniform
Commercial Code and/or title searches for Encumbrances, judgments and tax liens
(collectively, the "Searches"), conducted by Buyer shall show that the Assets
and Business of Seller are free and clear of all Encumbrances other than those
Encumbrances set forth in the Disclosure Letter.
9.6 Material Consents. Seller shall have obtained (i) all of Seller's
Required Consents other than with respect to assignment with customers, and (ii)
at least 95% of all of Seller's contracts with customers.
9.7 Due Diligence. All matters investigated by Buyer in the course of
its due diligence shall be satisfactory to Buyer.
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9.8 Morway Agreement. Buyer shall have received the Consulting
Agreement with David Morway, substantially in form and substance satisfactory to
Buyer, executed by Mr. Morway.
9.9 Delivery of Audited Financial Statements. Seller shall have
delivered, and Buyer shall have received four signed copies of the Audit Report
and Audited Financial Statements, a copy of the Audit Schedule, and four signed
copies of a proper consent to inclusion of the Audit Report and Audited
Financial Statements in Buyer's 8-K. Upon Buyer's request, Seller shall have
delivered to Buyer copies of the Audit Work papers
SECTION 10: CLOSING
10.1 Closing. Unless this Agreement is terminated in accordance with
Section 13, the closing of the sale of the Specified Assets by Seller to Buyer
and the other transactions contemplated by this Agreement ("Closing") shall be
held at 10:00 A.M. local time on the fifth (5th) day following delivery of the
Audited Financial Statements, or such other time and date as is agreed upon by
Seller and Buyer ("Closing Date"), provided that the Closing shall not be held
later than December 31, 1996. The Closing shall be held at the offices of
Buyer's counsel, Blank Rome Comisky & McCauley, Four Penn Center Plaza,
Philadelphia, Pennsylvania, 19103, or such other location as is agreed upon by
Seller and Buyer; provided, however, that if acceptable to Seller and Buyer,
Closing may be effected by facsimile transmission of executed Closing Documents
(as defined in Section 10.2) and payment of the Cash Payment in the manner set
forth in Section 3.3 and by sending original copies of Closing Documents by
reputable overnight delivery service, postage or delivery charges prepaid, for
delivery to the parties at their addresses stated on the first page of this
Agreement by the fifth (5th) business day following the Closing Date. The
Closing shall be considered effective as of the close of business on the day
preceding the Closing Date or such other effective date as is agreed upon in
writing by Seller and Buyer ("Effective Date").
10.2 Obligations of Seller at Closing. At the Closing, Seller shall,
deliver to Buyer the following (collectively, with the documents required to be
delivered by Buyer pursuant to Section 10.3, the "Closing Documents"):
(a) Specified Assets. Ownership and control of the Business
and all of the Specified Assets. Seller shall provide to Buyer a detailed
listing of all Specified Assets located at locations other than Seller's
Business Location as of the Effective Date.
(b) Documents of Transfer. Such bills of sale, assignments,
endorsements, affidavits, and other instruments and documents of sale, transfer,
assignment and conveyance as Buyer may reasonably require, in order to lawfully
and effectively sell, transfer, assign and convey to Buyer all right, title and
interest in and to all of the Specified Assets, in form and substance acceptable
to Seller and Buyer, dated as of the Effective Date, and duly executed by
Seller, and the original copies of all of Seller's Required Consents.
(c) Resolutions. Copies of the resolutions or other action
duly adopted by the Seller, authorizing Seller to enter into and perform this
Agreement, certified by proper officers of Seller as in full force and effect on
and as of the Closing Date.
(d) Good Standing Certificates. Good standing certificates for
Seller from the State of Nevada and from each jurisdiction set forth in Section
4.1 of the Disclosure Letter with
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respect to its qualification to do business therein as a foreign limited
partnership, each dated no earlier than 15 days before the Closing Date.
(e) Incumbency Certificate. A certificate, dated the Closing
Date, executed by the Secretary or Assistant Secretary of Seller, certifying the
names, titles and signatures of all of Seller's officers who execute this
Agreement and other documents on behalf of Seller, and the authority of such
officers to do so, in form and substance acceptable to Buyer.
(f) Closing Certificate. A certificate ("Seller's Closing
Certificate"), dated the Closing Date and duly executed by Seller, in which
Seller represents and warrants to Buyer that: (i) all of the representations and
warranties of Seller contained in this Agreement are accurate on and as of the
Closing Date, with the same force and effect as though made on and as of the
Closing Date; (ii) the Disclosure Letter is complete and accurate on and as of
the Closing Date; (iii) all of the covenants, terms and conditions of this
Agreement to be satisfied or performed by Seller on or before the Closing Date
have been substantially satisfied or performed; (iv) there have not been any
adverse changes Material to Seller between the date of this Agreement and the
Closing Date; and (v) as of the Closing Date, no Proceeding has been instituted
or threatened in writing against Seller by any Person, and no Judgment has been
issued against Seller, that seeks to or does prohibit or restrain, or that seeks
damages as a result of, the consummation of the transactions contemplated by
this Agreement.
(g) Other Documents. All other agreements, certificates,
instruments and documents reasonably requested by Buyer in order to fully
consummate the transactions contemplated by this Agreement and carry out the
purposes and intent of this Agreement.
10.3 Obligations of Buyer at Closing. At the Closing, Buyer shall
deliver to Seller the following:
(a) Closing Payment. Telephone confirmation of the wire
transfer of funds in the amount of the Closing Payment, in accordance with
Seller's proper wire transfer instructions.
(b) Delivery of Rom Tech Stock. Stock Certificates
representing 200,000 shares of Rom Tech Stock.
(c) Assumption of Liabilities. An assumption of the Specified
Liabilities, in form and substance acceptable to Buyer and Seller, dated as of
the Effective Date, and duly executed by Buyer.
(d) Resolutions. Copies of the resolutions duly adopted by the
board of directors of Buyer, authorizing Buyer to enter into and perform this
Agreement certified by proper officers of Buyer as in full force and effect on
and as of the Closing Date.
(e) Good Standing Certificates. Good standing certificates for
Buyer from Pennsylvania, dated no earlier than 15 days before Closing Date.
(f) Incumbency Certificate. A certificate, dated the Closing
Date, executed by the Secretary or Assistant Secretary of Buyer, certifying the
names, titles and signatures of all of Buyer's officers who execute this
Agreement and other documents on behalf of Buyer, and the authority of such
officers to do so, in form and substance acceptable to Seller.
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(g) Closing Certificate. A certificate ("Buyer's Closing
Certificate"), dated the Closing Date and duly executed by Buyer, in which Buyer
represents and warrants to Seller that: (i) all of the representations and
warranties of Buyer contained in this Agreement are true on and as of the
Closing Date, with the same force and effect as though made on and as of the
Closing Date; (ii) all of the covenants, terms and conditions of this Agreement
to be satisfied or performed by Buyer on or before the Closing Date have been
substantially satisfied or performed; and (iii) as of the Closing Date, no
Proceeding has been instituted or threatened in writing against Buyer by any
Person, and no Judgment has been issued against Buyer, that seeks to or does
prohibit or restrain, or that seeks damages as a result of, the consummation of
the transactions contemplated by this Agreement.
(h) Other Documents. All other agreements, certificates,
instruments and documents reasonably requested by Seller in order to fully
consummate the transactions contemplated by this Agreement and carry out the
purposes and intent of this Agreement.
SECTION 11: CERTAIN OBLIGATIONS OF SELLER AND BUYER AFTER CLOSING
11.1 Employment Matters. Except for Messrs. Edwards, Rogers and
Lewellen-Aiona, Buyer may, but shall have no obligation to, offer to employ any
or all of Seller's employees on such terms as Buyer determines in its sole
discretion. Except as otherwise specifically provided in this Agreement, Buyer
shall have no liability of any nature for any salary, accrued vacation or sick
pay, accrued vacation or sick time, pension or profit-sharing plan
contributions, group insurance payments, severance pay, or other accrued
benefits or employment-related payments due to any such employee as a result of
his or her employment by Seller or as a result of the transactions contemplated
hereby. From and after the date of this Agreement, Seller shall provide to Buyer
access to the personnel records of Seller's employees hired by Buyer upon
Buyer's reasonable request from time to time during normal business hours.
11.2 Cooperation with Buyer. From and after the Effective Date, (i)
Seller shall fully cooperate to place Buyer in full possession and enjoyment of
all of the Specified Assets and to transfer to Buyer the full control and
benefits of the Business; (ii) Seller shall not undertake any action, directly
or indirectly, alone or together with any other Person, which obstructs or
impairs the smooth assumption by Buyer of the Business; and (iii) all
correspondence, papers, documents and similar items and materials received by
Seller relating to the Specified Assets, or otherwise relating to the Business,
shall be immediately forwarded to Buyer.
11.3 Use of Names. Beginning immediately upon the Closing Date, Seller
shall cease all use of all corporate names, fictitious names, product names and
other names set forth in the Disclosure Letter under which the Business has been
conducted or which have been used by Seller in connection with the Business.
Upon Buyer's request, Seller shall promptly sign all Consents and other
documents that may be necessary to allow Buyer to use or appropriate the use of
any name set forth in the Disclosure Letter under which the Business has been
conducted or which have been used by Seller in connection with the Business.
11.4 Contract Matters. With respect to each Contract ("Transferred
Contract") as to which Seller's Contract Rights are included in the Specified
Assets and Consent to the assignment thereof from Seller to Buyer is required
thereunder but was not obtained on or before the Closing Date, the following
provisions shall apply, effective immediately if and when the Closing is
completed:
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(a) Seller shall fully cooperate with Buyer in Buyer's effort
to obtain any such Consent to assignment from the other party or parties
thereto. If and when such Consent to assignment is obtained, such Transferred
Contract shall no longer be subject to the following provisions of this Section
11.4.
(b) Seller shall make available to Buyer all Contract Rights
and other benefits of such Transferred Contract, including all profits relating
to such Transferred Contracts, on a subcontract or sublease basis or in some
other appropriate manner to the fullest extent possible, and Buyer shall be
considered an independent subcontractor or sublessee of Seller, or an agent of
Seller, with respect to all matters concerning such Transferred Contract.
Without limiting the foregoing, Buyer shall be considered Seller's agent for the
purposes of (i) collecting all amounts which may be due from the other party or
parties to such Transferred Contract, and (ii) negotiating or otherwise handling
all disputes and issues which arise in connection with such Transferred
Contract, except to the extent that such disputes relate to liabilities of
Seller arising before the Effective Date.
(c) Without Buyer's prior written consent, Seller shall not
agree to any amendment, modification, extension, renewal, termination or other
change in the terms of such Transferred Contract, nor shall Seller exercise any
Contract Right thereunder.
(d) At Buyer's direction, Seller shall (i) notify the other
party or parties to such Transferred Contract that Buyer is Seller's
subcontractor, sublessee or agent with respect thereto and that all further
payments, notices and other communications with respect thereto shall be
directed to Buyer, (ii) agree to such amendments, modifications, extensions,
renewals, terminations or other changes in the terms of such Transferred
Contract as may be made in the ordinary course of business and as Buyer
determines, in its reasonable discretion, to be advisable, provided that Buyer
remains liable for all of Seller's obligations thereunder, and (iii) exercise
any Contract Right thereunder when and in the manner Buyer determines, in its
reasonable discretion, to be advisable.
(e) Seller hereby collaterally assigns to Buyer (except and
only to the extent that such collateral assignment is expressly prohibited by
the terms of such Transferred Contract), and grants to Buyer a security interest
in, all of Seller's Contract Rights under such Transferred Contract and all cash
and non-cash proceeds thereof, as security for the prompt and timely
satisfaction and performance of Seller's obligations under this Section 11.4.
Buyer shall have, and Seller shall deliver to Buyer at the Closing, possession
of the original execution copy of such Transferred Contract. At Buyer's request,
Seller shall take such actions as Buyer deems necessary or appropriate to
protect, perfect and continue perfected the security interest granted hereunder,
including the execution and filing of such financing statements and other
documents as Buyer deems necessary or appropriate.
11.5 Further Assurances. At any time and from time to time after the
date of this Agreement, at Buyer's request and expense, and without further
consideration, Seller shall promptly execute and deliver all such further
agreements, certificates, instruments and documents, and perform such further
actions, as Buyer may reasonably request in order to fully consummate the
transactions contemplated hereby and carry out the purposes and intent of this
Agreement. Without limiting the generality of the foregoing, Seller shall timely
file all Tax returns and reports required to be filed with respect to the Assets
and Business for all periods ending on or before the Effective Date.
11.6 Nondisclosure. At all times after the Closing Date, except with
Buyer's express prior written consent, Seller shall, directly or indirectly
(through subsidiaries, affiliates, associates or
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<PAGE>
otherwise), communicate, disclose or divulge to any Person (other than Buyer),
or use for the benefit of any Person (other than Buyer), any confidential or
proprietary knowledge or information, no matter when or how acquired, concerning
the Specified Assets or the conduct and details of the Business, including (a)
the identity of customers, prospects and suppliers, (b) names, addresses and
telephone numbers of individual contacts at customers, prospects and suppliers,
(c) fees, renewal dates, and other details of customer and supplier contracts
and proposals, (d) pricing policies, marketing strategies, product strategies,
technical know-how, trade secrets, and methods of operations, (e) software
designs and concepts, (f) budgets and other nonpublic financial information, and
(g) expansion plans, management policies, and other business strategies and
policies. For purposes of this Section 11.6, confidential information shall not
include any information that is now known by the general public or becomes known
by the general public other than as a result of any improper act or omission of
Seller.
11.7 Noncompetition. Seller acknowledges that the Business conducted by
Seller and the business conducted by Buyer (referred to as "Buyer's Business")
are highly competitive, require substantial and continuous expenditures of money
and the time of skilled experts to develop, market and support, and are marketed
on a worldwide basis. Accordingly, for a period of five years after the Closing
Date, except with Buyer's express prior written consent, Seller shall not,
directly or indirectly (through subsidiaries, affiliates or otherwise), in any
capacity, for the benefit of any Person, at any location worldwide:
(a) Communicate with or solicit any Person who is then a
customer of Buyer or the Business in any manner which interferes or might
interfere with such relationship between such Person and Buyer or the Business,
or in an effort to obtain such Person as a customer of any Person that conducts
a business competitive with or similar to the Business or Buyer's Business.
(b) Communicate with or solicit any Person who is then an
employee, salesman, agent or representative of Buyer or the Business in any
manner which interferes or might interfere with such relationship between such
Person and Buyer or the Business, or in an effort to obtain such Person as an
employee, salesman, agent or representative of any Person that conducts a
business competitive with or similar to the Business or Buyer's Business.
(c) Establish, own, finance, manage, operate or control, or
participate in the establishment, ownership, financing, management, operation or
control of, any Person that conducts a business competitive with or similar to
the Business or Buyer's Business.
11.8 Consideration. Seller expressly acknowledges that (i) the
restrictive covenants of this Section 11 ("Covenants") are a material part of
the consideration bargained for by Buyer, and (ii) without the agreement of
Seller to be bound by the Covenants, Buyer would not have agreed to enter into
this Agreement and consummate the transactions contemplated hereby.
11.9 Enforcement. Seller expressly acknowledges that any breach by them
of any of the Covenants will result in irreparable injury to Buyer for which
money damages could not adequately compensate. If there is such a breach, Buyer
shall be entitled, in addition to all other rights and remedies it may have at
law or in equity, to have an injunction issued by any competent court enjoining
and restraining Seller and all other Persons involved therein from continuing
such breach. The existence of any claim or cause of action which Seller or any
such other Person may have against Buyer shall not constitute a defense or bar
to the enforcement of any of the Covenants. If Buyer must resort to litigation
to enforce any of the Covenants that has a fixed term, then such term shall be
extended for a period of time equal to the period during which a breach of such
Covenant
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<PAGE>
was occurring, beginning on the date of a final court order (without further
right of appeal) holding that such a breach occurred or, if later, the last day
of the original fixed term of such Covenant.
11.10 Scope. If any portion of any Covenant or its application is
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable due to
its scope, duration, geographical area or similar factor, then the court making
such determination shall have the power to reduce or limit such scope, duration,
area or other factor, and such Covenant shall then be enforceable in its reduced
or limited form.
11.11 Allocations. All current rent, lease payments and other amounts
due under leases included within the Specified Contracts, all current
maintenance fees and other periodic charges due under the Specified Contracts,
all current property taxes with respect to the Specified Assets, and all other
payments and expenses with respect to the Business which are properly allocable
between Seller and Buyer, shall be allocated between Seller and Buyer as of the
Effective Date, to the extent that Seller has paid any such allocable amounts
with respect to periods after the Effective Date or to the extent that Buyer
will pay any such allocable amounts with respect to periods before the Effective
Date. As soon as possible after the date of this Agreement, Seller and Buyer
shall determine the amount of all allocable payments and expenses contemplated
by this Section 11.11, and the net difference of all such allocable amounts
shall be paid by Buyer to Seller, or by Seller to Buyer, as the case may be.
24
<PAGE>
11.12 Registration of Rom Tech Stock.
(a) Within 180 days after Seller receives an aggregate of
100,000 shares of Rom Tech Stock pursuant to Section 3.1(b)(i), Buyer shall use
its best efforts to register such shares under the Securities Act of 1933 (the
"Act"), by filing a Registration Statement on Form S-3 ("Form S-3") with the SEC
covering such shares and will use its best efforts to cause such Form S-3 to
become effective within 90 days after the filing thereof. In addition, Buyer
shall grant Seller piggyback rights to include the shares of Rom Tech Stock
earned by Seller pursuant to Section 3.1(b)(i) in any underwritten public
offering of Rom Tech Stock for cash by Buyer subject to the right of the
managing underwriter to reduce or eliminate any of such shares proposed to be
registered, if in the opinion of the managing underwriter, inclusion of such
shares would adversely affect the marketing of the underwritten shares.
(b) Buyer will prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with respect to
the offer of the shares covered by such registration statement for a period
which shall be as long as the Seller is subject to any volume limitations under
Rule 144 promulgated under the Act;
(c) The Seller agrees to (i) provide the Buyer with such
information about the Seller and the sale of the shares covered by the
Registration Statement as the Buyer may reasonably request, (ii) update any such
information provided to the Buyer promptly upon the occurrence of any change in
such information, and (iii) otherwise cooperate with the Buyer in connection
with such Registration Statement.
11.13 Rule 144 Sales. For a period of three (3) years after the
Effective Date, so long as Buyer's common stock is publicly-traded, Buyer shall
take all actions reasonably required to be taken by Buyer in order to permit
sales of Rom Tech Stock pursuant to Rule 144 promulgated under the Securities
Act of 1933 or any successor rule or provision ("Rule 144"), including making
available such adequate public information with respect to Buyer as is set forth
in paragraph (c) of Rule 144. Buyer agrees that it will remove the restrictive
legend and stop transfer order imposed on the Rom Tech Stock delivered pursuant
to Section 3.1 and will allow the transfer of such shares upon the receipt of a
favorable legal opinion from Buyer's counsel, in form and substance reasonably
satisfactory to Buyer.
SECTION 12: INDEMNIFICATION AND SETOFF
12.1 Indemnification Obligations of Seller. From and after the Closing
Date, Seller shall indemnify and hold harmless Buyer, and its successors and
assigns, from and against any and all Proceedings, Judgments, Obligations,
losses, damages, deficiencies, settlements, assessments, charges, costs and
expenses (including, but not limited to, reasonable attorneys' fees,
investigation expenses, court costs, interest and penalties) arising out of or
in connection with, or caused by, directly or indirectly, any or all of the
following:
(a) Any misrepresentation, breach or failure of any warranty
or representation made by Seller in this Agreement.
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(b) Any failure or refusal by Seller to satisfy or perform any
covenant, term or condition of this Agreement required to be satisfied or
performed by them.
(c) Any Obligation of Seller other than the Specified
Liabilities, including, but not limited to, the Excluded Liabilities and the
other Obligations specifically described in Section 2.4, including any such
Obligation that may be imposed directly upon Buyer as a result of the failure by
Seller to comply with any so-called "bulk sales law" or "bulk transfers law" of
any jurisdiction that may be applicable to the transactions contemplated by this
Agreement (it being understood that Buyer waives such compliance by Seller), and
including, without limitation, any claim brought by Paperwise, Inc.
(d) Any Obligation of Seller for any Tax or under any Employee
Benefit Plan of Seller imposed directly upon Buyer as a result of any Law under
which Buyer may have successor liability for any Tax or under any Employee
Benefit Plan of Seller.
(e) Any Proceeding against Buyer by or on behalf of any
employee of Seller who is not hired by Buyer.
(f) Any Proceeding against Buyer by any Person based on any
act or omission occurring prior to the Closing Date relating to or arising in
connection with Seller's operation of the Business.
12.2 Indemnification Obligations of Buyer. From and after the Closing
Date, Buyer shall indemnify and hold harmless Seller, and its successors,
assigns, heirs and personal representatives, from and against any and all
Proceedings, Judgments, Obligations, losses, damages, deficiencies, settlements,
assessments, charges, costs and expenses (including, but not limited to,
reasonable attorneys' fees, investigation expenses, court costs, interest and
penalties) arising out of or in connection with, or caused by, directly or
indirectly, any or all of the following:
(a) Any misrepresentation, breach or failure of any warranty
or representation made by Buyer in this Agreement.
(b) Any failure or refusal by Buyer to satisfy or perform any
covenant, term or condition of this Agreement required to be satisfied or
performed by them.
(c) The payment or nonpayment and performance or
nonperformance by Buyer of the Specified Liabilities.
(d) Any Proceeding against Seller by any Person (other than
Buyer) based on any act or omission occurring after the Closing Date relating to
or arising in connection with Buyer's operation of the Business.
12.3 Indemnification Notice. With respect to each event, occurrence or
matter ("Indemnification Matter") as to which Buyer on the one hand, or Seller
on the other hand (referred to as the "Indemnitee"), is entitled to
indemnification from the other (referred to as the "Indemnitor") under this
Section 12, within ten days after the Indemnitee receives any written documents
underlying the Indemnification Matter, or, if the Indemnification Matter does
not involve a third party action, suit, claim or demand, promptly after the
Indemnitee first has actual knowledge of the Indemnification Matter, the
Indemnitee shall give notice to the Indemnitor of the nature of
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the Indemnification Matter and the amount demanded or claimed in connection
therewith ("Indemnification Notice").
12.4 Defense of Indemnification Matters. If an Indemnification Matter
involves a third party action, suit, claim or demand, then, upon receipt of the
Indemnification Notice, the Indemnitor shall, at its expense and through counsel
of its choice, promptly assume and have sole control of the litigation, defense
or settlement of the Indemnification Matter (referred to as the "Defense"),
except that:
(a) The Indemnitee may, at its option and expense and through
counsel of its choice, participate in (but not control) the Defense.
(b) If the Indemnitee reasonably believes that the handling of
the Defense by the Indemnitor may have a material adverse affect on the
Indemnitee's business or its relationship with any customer, supplier, employee,
contractor, salesman, agent or representative, then the Indemnitee may, at its
option and expense and through counsel of its choice, assume control of the
Defense; provided that the Indemnitor shall continue to be obligated to
indemnify the Indemnitee with respect thereto and shall be entitled to
participate in the Defense at its expense and through counsel of its choice.
(c) The Indemnitor shall not consent to any Judgment or agree
to any settlement without the Indemnitee's prior written consent.
(d) If the Indemnitor does not promptly assume control over
the Defense or, after doing so, does not continue to prosecute the Defense in
good faith, the Indemnitee may, at its option and through counsel of its choice,
but at the Indemnitor's expense, assume control over the Defense; provided that
the Indemnitor shall continue to be obligated to indemnify the Indemnitee with
respect thereto.
(e) In any event, the Indemnitor and the Indemnitee shall
fully cooperate with each other in connection with the Defense, including, but
not limited to, furnishing all available documentary or other evidence as is
reasonably requested by the other.
12.5 Indemnification Payments. All amounts owed by the Indemnitor to
the Indemnitee (if any) shall be paid in full within three business days after a
final settlement or agreement as to the amount owed is reached, or after a final
Judgment (without further right of appeal) determining the amount owed is
rendered.
12.6 Limits on Indemnification . Regardless of which party or parties
is the Indemnitor, and notwithstanding the other provisions of this Section 12,
the Indemnitor's liability under this Section 12 shall be limited as follows:
(a) No amount shall be payable by the Indemnitor under this
Section 12 unless and until the aggregate amount otherwise payable by Indemnitor
under this Section 12 exceeds Twenty-Five Thousand Dollars ($25,000), in which
event such aggregate amount and all future amounts payable by the Indemnitor
under this Section 12 shall be payable in full.
(b) With respect to any Indemnification Matter which does not
result from or arise out of or in connection with an action, suit, claim or
demand by a third Person, the Indemnitor
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shall have no liability unless the Indemnitee gives an Indemnification Notice in
accordance with Section 12.3 within three (3) years after the Effective Date.
(c) No limitation in this Section 12.6 shall apply to any
Indemnification Matter involving the liabilities described in Section 2.3, Tax
liability, criminal liability, intentional misrepresentation, or violation of
the Covenants contained in Sections 11.6 and 11.7.
12.7 Setoff and Holdback. In addition to all other rights and remedies
that the Indemnitee may have, the Indemnitee shall have the right to setoff,
against any monies due to the Indemnitor (whether under this Agreement or
otherwise), any sums for which the Indemnitee is entitled to indemnification
under this Section 12 or any other sums which the Indemnitor may owe to the
Indemnitee (whether under this Agreement or otherwise). The Indemnitee's rights
to indemnification under this Section 12 shall under no circumstances be in any
manner limited by this right of setoff. If any Indemnification Matters are
pending at the time the Indemnitee is required to make any payment to the
Indemnitor (whether under this Agreement or otherwise), then the Indemnitee
shall have the right, upon notice to the Indemnitor, to withhold from such
payment, until final determination of such Indemnification Matters, the total
amount for which the Indemnitor may become liable as a result thereof,
determined by the Indemnitee reasonably and in good faith. Any payment by the
Indemnitee to the Indemnitor of an amount held back by the Indemnitee in
accordance with the foregoing shall be accompanied by interest from the date
such amount was originally due, calculated at an annual rate equal to the Prime
Rate.
SECTION 13: TERMINATION, AMENDMENT AND WAIVER
13.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time before Closing, in accordance with any
of the following methods:
(a) By the mutual written consent of Buyer and Seller.
(b) By written notice from Buyer to Seller, or from Seller to
Buyer, if the Closing does not occur on or before December 31, 1996, for any
reason other than a breach of this Agreement by the party giving such notice.
(c) By written notice from Buyer to Seller, if it becomes
certain, for all practical purposes, that any of the conditions to the closing
obligations of Buyer set forth in Section 9 cannot be satisfied for a reason
other than Buyer's breach of this Agreement, and Buyer is not willing to waive
the satisfaction of such condition.
(d) By written notice from Seller to Buyer, if it becomes
certain, for all practical purposes, that any of the conditions to the closing
obligations of Seller set forth in Section 8 cannot be satisfied for a reason
other than Seller's breach of this Agreement, and Seller is not willing to waive
the satisfaction of such condition.
(e) By written notice from Buyer to Seller, if Seller breaches
any of its representations, warranties, covenants or agreements contained in
this Agreement.
(f) By written notice from Seller to Buyer, if Buyer breaches
any of its representations, warranties, covenants or agreements contained in
this Agreement.
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13.2 Effect of Termination. Upon termination of this Agreement pursuant
to Section 13.1, this Agreement shall be of no further force and effect, and
there shall be no liability on the part of any party hereto, except for the
obligations of the parties under Sections 14.1, 14.2 and 14.3, and except that
no such termination shall relieve any party from liability for any breach of
this Agreement prior to such termination.
13.3 Amendment. This Agreement may be amended, modified or supplemented
by the parties hereto, whether before or after approval by Buyer's shareholders,
provided that any such amendment, modification or supplement shall be in writing
and signed by the parties hereto.
13.4 Waiver. No waiver with respect to this Agreement shall be
enforceable unless in writing and signed by the party against whom enforcement
is sought. Except as otherwise expressly provided herein, no failure to
exercise, delay in exercising, or single or partial exercise of any right, power
or remedy by any party, and no course of dealing between or among any of the
parties, shall constitute a waiver of, or shall preclude any other or further
exercise of the same or any other right, power or remedy.
SECTION 14: OTHER PROVISIONS
14.1 Confidentiality. During the period from the date of this Agreement
to the Closing Date, (a) each of the parties shall maintain the confidentiality
of all information normally maintained as confidential and exchanged among them
in connection with this Agreement, in the same manner that the recipient of the
information maintains the confidentiality of its own confidential information,
and (b) none of the parties will discuss the existence or nature of this
Agreement or the transaction contemplated hereby with any of Seller's customers,
prospects, suppliers, employees, contractors, salesmen, agents or
representatives, except in the manner reasonably determined by Buyer.
14.2 Publicity. All voluntary public announcements concerning the
transactions contemplated by this Agreement shall be mutually acceptable to both
Buyer and Seller. Unless required by Law, neither party shall make any public
announcement or issue any press release concerning the transactions contemplated
by this Agreement without the prior written consent of the other party. With
respect to any announcement that any of the parties is required by Law to issue,
such party shall, to the extent possible under the circumstances, review the
necessity for and the contents of the announcement with the other party before
issuing the announcement.
14.3 Expenses. Each party shall pay all of the costs and expenses
incurred by it in negotiating and preparing this Agreement (and all other
agreements, certificates, instruments and documents executed in connection
herewith), in performing its obligations under this Agreement, and in otherwise
consummating the transactions contemplated by this Agreement.
14.4 Notices. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) three business
days after being mailed by first class certified mail, return receipt requested,
postage prepaid, or (c) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the first page of this Agreement.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding sentence. A copy of
each notice
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<PAGE>
to Seller shall be simultaneously sent to Lee Lewellen, President, FileABC,
L.L.C, 733 Bishop Street, suite 170-170, Honolulu, HI 96813. A copy of each
notice to Buyer shall be simultaneously sent to Blank Rome Comisky & McCauley,
1200 Four Penn Center Plaza, Philadelphia, Pennsylvania 19102, Attention: Arthur
H. Miller, Esquire. Any party may change its address for notice and the address
to which copies must be sent by giving notice of the new addresses to the other
parties in accordance with this Section 14.3, except that any such change of
address notice shall not be effective unless and until received.
14.5 Reliance by Buyer. Notwithstanding the right of Buyer to
investigate the Business, Seller's Assets and the financial condition of Seller,
Buyer has the unqualified right to rely, and has relied, upon the
representations and warranties of Seller made in this Agreement.
14.6 Survival of Representations. All representations, warranties and
covenants made by Seller in or pursuant to this Agreement shall survive the date
hereof, the Closing Date and the consummation of the transactions contemplated
hereby. All representations, warranties and covenants of Buyer in or pursuant to
this Agreement shall terminate on the Closing Date.
14.7 Interpretation of Representations. Each warranty and
representation made by Seller in this Agreement is independent of all other
warranties and representations made by Seller (whether or not covering related
or similar matters) and must be independently and separately satisfied.
Exceptions or qualifications to any such warranty or representation shall not be
construed as exceptions or qualifications to any other warranty or
representation.
14.8 Entire Understanding. This Agreement, together with the Exhibits
and the Disclosure Letter hereto, states the entire understanding among the
parties with respect to the subject matter hereof, and supersedes all prior oral
and written communications and agreements, and all contemporaneous oral
communications and agreements, with respect to the subject matter hereof.
14.9 Parties in Interest. This Agreement shall bind, benefit, and be
enforceable by and against each party hereto and its successors and assigns. No
party shall in any manner assign any of its rights or obligations under this
Agreement without the express prior written consent of the other parties.
14.10 Severability. If any provision of this Agreement is construed to
be invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
14.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall constitute an
original hereof, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one original counterpart hereof.
14.12 Section Headings. The section and subsection headings in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement, and shall not affect its interpretation.
14.13 References. All words used in this Agreement shall be construed
to be of such number and gender as the context requires or permits. Unless a
particular context clearly provides otherwise, (i) the words "hereof" and
"hereunder" and similar references refer to this Agreement in
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<PAGE>
its entirety and not to any specific section or subsection hereof, (ii) the word
"including" and similar references shall be construed to mean "including without
limitation" or "including but not limited to."
14.14 Controlling Law. This Agreement is made under, and shall be
construed and enforced in accordance with, the laws of Pennsylvania applicable
to agreements made and to be performed solely therein, without giving effect to
principles of conflicts of law.
14.15 No Third Party Beneficiaries. No provision of this Agreement is
intended to or shall be construed to grant or confer any right to enforce this
Agreement, or any remedy for breach of this Agreement, to or upon any Person
other than the parties hereto, including any customer, prospect, supplier,
employee, contractor, salesman, agent or representative of Seller.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first stated above.
FileABC, L.P. Rom Tech, Inc.
FileABC, L.L.C.,
a Nevada limited liability company as By:_________________________
General Partner of FileABC, L.P. Name:
Title:
By:___________________________
Name:
Title:
31
<PAGE>
ROMTECH, INC.
2000 Cabot Boulevard
Suite 110
Langhorne, PA 19047
November 14, 1996
FileABC, L.P.
2533 North Carson City Street
Suite 1937
Carson City, NV 89706
Gentlemen:
Reference is made to the Asset Purchase Agreement, dated as of October
18, 1996 (the "Agreement"), between RomTech, Inc. (the "Buyer") and FileABC,
L.P. (the "Seller") relating to the purchase by the Buyer from the Seller of
substantially all of the assets of Seller. Terms used herein without definition
shall have the same meaning as defined in the Agreement.
It is hereby agreed that Section 3.1(a) of the Agreement shall be
amended to read in its entirety as follows:
(a) Cash Payment. Buyer shall pay to Seller Five
Hundred Thousand Dollars ($500,000) (the "Cash Payment") as follows:
(i) On the Closing Date, Buyer shall
pay to Seller (the "Closing Payment"):
(A) One Hundred Seventy-Five
Thousand Dollars ($175,000), which shall be deposited in a bank account
in the name of Seller, subject to the condition that any checks to be
drawn on such account may only be drawn with the joint signature of an
officer of Seller and an officer of Buyer for the sole purpose of
paying the creditors of Seller listed in Exhibit 3.1(a).
(B) Fifty Thousand Dollars ($50,000)
by cancellation of the Promissory Note, dated July 17, 1996 from Seller
to Buyer in the principal amount of Fifty Thousand Dollars ($50,000)
with interest due thereon being forgiven.
(C) One Hundred Twenty-Five Thousand
Dollars ($125,000) by cancellation of the Promissory Note dated the
date hereof from Seller to Buyer in the principal amount of One Hundred
and Twenty-Five Thousand Dollars ($125,000) with interest due thereon
being forgiven, which such Promissory Note evidences One Hundred and
Twenty-Five Thousand
32
<PAGE>
Dollars ($125,000) that Buyer loaned to Seller on the date hereof and
which was deposited in a bank account, in the name of Seller, subject
to the condition that any checks to be drawn on such account may only
be drawn with the joint signature of an officer of Seller and an
officer of Buyer for the sole purpose of paying the creditors of Seller
listed in Exhibit 3.1(a).
(ii) Upon the receipt by Buyer after the
Closing Date of an aggregate of $100,000 in payments from Franklin
Quest Co. ("Franklin") pursuant to the terms of the Business
Development Agreement, dated August 20, 1996, between Seller and
Franklin, Buyer shall pay to Seller, within thirty (30) days after
receipt of such payment in an aggregate amount equal to $100,000, One
Hundred Fifty Thousand Dollars ($150,000).
Please indicate your agreement with the foregoing by executing the
enclosed copy of this letter where indicated below.
Sincerely,
ROMTECH, INC.
By: ___________________________
Name:
Title:
AGREED TO AND ACCEPTED AS OF
THE DATE FIRST WRITTEN ABOVE:
FILEABC, L.P.
By: ___________________________
Name:
Title:
33
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 773,384
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0
1,000,000
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<CGS> 317,457
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<INCOME-PRETAX> (233,504)
<INCOME-TAX> (233,504)
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<NET-INCOME> (233,504)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
