Technisource Hardware Inc. Purchase Agreement

Exhibit 10.10


ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the " Agreement") is dated as of the day of May 30, 2003, by and between (i) CSP, Inc., a Massachusetts corporation, together with its wholly owned subsidiary, Modcomp, Inc., a corporation (collectively the " Buyer"), and (ii) Technisource, Inc. (" Technisource") and its wholly owned subsidiary, Technisource Hardware, Inc. (" Technisource Hardware"), each a Florida corporation (each individually and collectively the " Seller").

WHEREAS, Technisource Hardware, Inc. is engaged in the marketing, distribution, sale and installation of computer hardware and software (the " Hardware Business"); and


WHEREAS, the Buyer, acting through Modcomp, Inc., desires to purchase selected assets owned by the Seller and used in the Hardware Business;

NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, the Buyer and Seller agree as follows:

Article 1


Purchase And Sale

1.1. Acquired Assets . Subject to the terms and conditions set forth in this Agreement, at the Closing referred to in Article 3 hereof the Seller shall sell, assign, transfer and deliver to the Buyer, and the Buyer shall purchase, acquire and take assignment and delivery of all assets of the Seller that are used in the conduct of the Hardware Business, or otherwise listed on one of the Schedules described in Section 1.1, including but not limited to the following assets of the Seller (other than the Excluded Assets specified in Section 1.2) (all of which assets are hereinafter referred to collectively as the " Acquired Assets"):


(a) Any and all machinery, installations, equipment, furniture, tools, spare parts, supplies, materials and other personal property items described on Schedule 1.1(a) hereto, with such additions thereto and deletions therefrom as may hereafter arise in the ordinary course of business prior to the Closing (the " Equipment");


(b) All of the Seller's title to, interest in and rights under the leases of personal property described on Schedule 1.1(b) hereto (the " Personal Property Leases");

(c) All of the Seller's title to, interest in and rights under the leases of real property described on Schedule 1.1(c) hereto (the " Real Property Leases");


(d) All of the Seller's rights under the agreements with respect to employees described on Schedule 1.1(d) hereto (collectively, the " Employee Agreements");

(e) All of the Seller's rights under the purchase orders, contracts, licenses and agreements described on Schedule 1.1(e) hereto, for the purchase, license or sale of utilities, goods, materials and services (the contracts and agreements referred to in this paragraph (e) being referred to collectively as the " Other Contracts");

(f) All of the Seller's prepaid expenses, trade accounts receivable and miscellaneous receivables related to the Hardware Business, and the proceeds thereof, as set forth on the March 31, 2003 financial statements, with such additions and deletions thereto occurring in the ordinary course of business through Closing (the " Accounts Receivable");


(g) All of the Seller's inventories related to the Hardware Business, meaning hardware and related equipment for which the Seller has taken delivery from the manufacturer and for which the Seller's customers have a contractual obligation to purchase (the " Inventories"). Inventories shall not include hardware and equipment sold to a customer to whom the Seller has issued an invoice;

(h) All of the Seller's trade secrets, copyrights, designs, patents, licenses (as licensee or licensor), other agreements and applications with respect to the foregoing, production records, software, technical information, manufacturing know-how, processes and other intangible assets, all as related to the Hardware Business, but excluding the trade names "Technisource Hardware," "Technisource" or any variant thereof (the " Intangibles");


(i) All of the Seller's Hardware Business-related customer lists, credit files, accounting books, records and ledgers, employment and personnel records for all Hardware Employees (as defined in Section 1.5 below) and all files, papers, books, records, designs, specifications and all other public or confidential business records, all to the extent reasonably required for the orderly continuation of the business operations of the Hardware Business and all other documents and records relating to the Acquired Assets, in original or copy form, as the parties may agree prior to the Closing;


(j) All of Seller's goodwill and business as a going concern as they relate to the Hardware Business, including the right to use the name Technisource Hardware, Inc., for a limited time under the license attached hereto as Exhibit A, and, as part of and in order to effect the transfer of such goodwill, Seller and its related companies shall enter into the Non-Solicitation Agreement attached hereto as Exhibit G ; and

(l) Except as otherwise specified on the Schedules hereto, all of Seller's causes of action, judgments, claims and demands of whatever nature, claims for refunds and rights of offset and credits, all to the extent that they are assignable by the Seller, but excluding the proceeds from that certain Settlement Agreement by and between Cyberco Holdings, Inc. d/b/a Cybernet Engineering and Technisource.


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1.2. Excluded Assets . Notwithstanding the foregoing, the Seller is not selling and the Buyer is not purchasing, pursuant to this Agreement, and the term " Acquired Assets" shall not include, any of the following assets (the " Excluded Assets"):


(a) all of the Seller's rights under the employee benefit plans described on Schedule 1.2(a ) hereto and all related plan assets and plan sponsorships;


(b) the Seller's right to the trade name "Technisource Hardware" and any variant thereof, except with respect to Buyer's right to use the trade name as provided for in the license attached hereto as Exhibit A ;


(c) all of the Seller's minute books, stock ledgers and other corporate records;


(d) the consideration received by the Seller pursuant to this Agreement;

(e) the rights of the Seller under this Agreement;


(f) all cash, cash equivalents and short-terms investments;

(g) the shares of capital stock of the Seller;


(h) all insurance policies and rights thereunder;


(i) all personnel files and other records that Seller is required by law to retain in its possession; and


(j) all claims for refunds of taxes and other governmental charges of whatever nature.

1.3. Assumption of Certain Liabilities . Buyer shall assume as of the Closing those liabilities of Seller specifically listed on Schedule 1.3 hereto (the " Assumed Liabilities"), and Buyer shall not assume, incur, guarantee, or be otherwise obligated with respect to any liability whatsoever of Seller other than as so stated. With respect to any Assumed Liability, such assumption by Buyer is for the benefit only of the Seller and shall not expand, increase, broaden, or enlarge the rights or remedies of any other party, nor create in any other party any right against Buyer that such party would not have against Seller if this Agreement had not been consummated.


1.4. Other Liabilities Not Assumed . Buyer shall not assume any liabilities of Seller that are not listed on or described in Schedule 1.3 , and with respect to the Assumed Liabilities listed on Schedule 1.3, Buyer does not assume and shall not have or be under any liability or obligation over and above any amount, or after the occurrence of any limitation or expiration date of such liability or obligation stated on such schedule; provided, however, that Buyer shall be responsible for the increase of, or addition to, any liability or obligation


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to the extent that such increase or addition is caused by the actions or inaction of Buyer subsequent to the Closing. Without limiting the generality of the foregoing and except as otherwise provided on the Schedule 1.3 , the Assumed Liabilities will not include, and Buyer shall not assume under this Agreement, any of the following obligations or liabilities of Seller:

(a) Any cost, expense, or tax liability of Seller arising from or growing out of the sale provided for by this Agreement;


(b) Any debt, obligation, or liability to any employee, agent, officer, director, or security holder of Seller or of any entity owned or controlled in whole or in part by Seller under any employment, sales, representation, or similar agreement not identified as an Assumed Liability (as defined above), or under any employee stock option plan, stock purchase plan, bonus plan or arrangement, pension plan or other benefit plan, paid time off plan, health plan, or other employee welfare plan or arrangement;


(c) Any debt, liability, or obligation of Seller (or costs and expenses in connection therewith) to the extent that such debt, liability, or obligation is actually satisfied or paid on behalf of Seller by an insurer or insurers under a policy issued to such Seller;


(d) Any liability or obligation arising from any violation by Seller or by its officers, employees, or agents of any statute (or rule or regulation thereunder) or executive regulation of the United States or any State or any political subdivision or agency thereof or any statutes (or rule or regulation thereunder) or executive, administrative, or quasi-judicial regulation of any foreign government;

(e) Any liability or obligation whose existence violates or is contrary to any representation or warranty of Seller;

(f) Federal and other domestic or foreign income tax, Federal excise tax, state or local sales tax or other Federal, state or local tax liabilities known or unknown, existing, or arising from operations prior to the Closing;


(g) Any liability or obligation for or arising under any claim for workers' compensation or for any tort, breach of any legal duty, breach or violation of any contract or violation or breach of any law, statute, ordinance, rule, regulation, injunction, or decree, or any liability or obligation for any "product liability" or other claim connected in any manner with any products, events, or activities produced or taking place prior to the Closing.

1.5. Employees .

(a) Buyer will offer at-will employment to all employees of Technisource Hardware listed on Schedule 1.5 on terms and conditions consistent with Buyer's standard employment policies.,. Employees who accept


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Buyer's offer of employment are referred to as " Hardware Employees ." Nothing in this Section 1.5 shall obligate Buyer to continue to employ any Hardware Employee for any period of time. Seller agrees that it shall not re-employ any Hardware Employees, without Buyer's written consent, either directly or through a related company, for a period through and including December 31, 2003.


Article 2

Purchase Price

2.1. Delivery of Purchase Price . At the Closing, and subject to the terms and conditions of this Agreement, the Buyer shall pay to the Seller, as the aggregate purchase price for the Acquired Assets, (i) Two million, six hundred eighty thousand dollars ($2,680,000.00) by wire transfer of immediately available funds (the " Purchase Price"), subject to the provisions of Section 2.2 below. The Purchase Price shall be allocated among the Acquired Assets in the manner set forth on Schedule 2.1 hereto. After the Closing, the parties shall make consistent use of the allocation, fair market value and useful lives specified in Schedule 2.1 for all tax purposes and in all filings, declarations and reports with the IRS in respect thereof, including the reports required to be filed under Section 1060 of the Internal Revenue Code of 1986. Buyer shall prepare and deliver IRS Form 8594 to Seller within forty-five (45) days after the Closing Date to be filed with the IRS. In any proceeding related to the determination of any tax, neither Buyer nor Seller shall contend or represent that such allocation is not a correct allocation.

2.2. Escrow . Thirty thousand dollars ($30,000.00) of the Purchase Price (the " Escrowed Amount") shall be subject to an escrow arrangement pursuant to a Escrow Agreement, in the form of Exhibit B hereto (the " Escrow Agreement"), among the Buyer, the Seller and _US Bank, as Escrow Agent (the " Escrow Agent").

2.3. Working Capital .

(a) At the Closing, Seller will deliver an estimated closing balance sheet (" Estimated Closing Balance Sheet") for the Hardware Business, including an estimated Net Working Capital amount. " Net Working Capital" shall mean the net accounts receivable, plus Inventories and prepaid expenses, less current liabilities. Seller shall prepare the Estimated Closing Balance Sheet in accordance with GAAP.

(b) Within fifteen (15) days of the Closing, the Buyer will prepare, using the same GAAP accounting standards as were used for the Estimated Closing Balance Sheet, a final closing balance sheet (" Final Closing Balance Sheet"), including a final closing Net Working Capital amount, updating and, if appropriate, adjusting the Estimated Closing Balance Sheet . In the event Buyer fails to deliver the Final Closing Balance Sheet to Buyer


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within fifteen (15) days of the Closing, the Estimated Closing Balance Sheet shall be deemed to be the Final Closing Balance Sheet.

(c) If Buyer calculates and delivers a Final Closing Balance Sheet as provided for in Section 2.3(b) above, Seller shall have five (5) days thereafter to object to the Final Closing Balance Sheet. If Seller so objects, then Seller and Buyer shall submit the dispute to the Miami, Florida office of KPMG (the " Independent Accountants") for resolution applying the same accounting standards as were used in the Estimated Closing Balance Sheet, unless and except to the extent that such standards deviate from GAAP. If issues are submitted to the Independent Accountants for resolution, (i) Seller and Buyer shall furnish or cause to be furnished to the Independent Accountants such work papers and other documents and information relating to the disputed issues as the Independent Accountants may request and are available to that party or its agents and shall be afforded the opportunity to present to the Independent Accountants any material relating to the disputed issues and to discuss the issues with the Independent Accountants; (ii) the determination by the Independent Accountants shall be final, binding and conclusive on the parties and shall be used in the calculation of the Final Closing Balance Sheet; and (iii) Seller and Buyer will each bear fifty percent (50%) of the fees and costs of the Independent Accountants for such determination.

(d) Within thirty days following the Closing Date, or, if later, within five (5) days following the determination of the Independent Accountants as provided for in Section 2.3(c), Buyer shall pay to Seller via wire transfer of immediately available funds an additional amount equal to the Net Working Capital as determined by the Final Closing Balance Sheet. Any amount not paid to Seller when due hereunder shall thereafter bear interest at the maximum rate allowable under Florida law. Buyer shall pay all costs of collection, including reasonable attorneys' fees, incurred by the Seller in the enforcement of the provisions of this Section 2.3(d).


Article 3

Closing


3.1. Time and Place . The closing of the transfer and delivery of all documents and instruments necessary to consummate the transactions contemplated by this Agreement (the " Closing") shall be held at the offices of the Buyer, 43 Manning Road, Billerica Massachusetts, at 10:00 a.m. on a mutually acceptable date, or at such other place as the Buyer and the Seller may agree. The date on which the Closing is actually held hereunder is sometimes referred to herein as the " Closing Date".


3.2. Transactions at Closing . At the Closing:


(a) The Seller shall duly execute and deliver to the Buyer or its nominee or nominees such deeds, certificates of title or other instruments of assignment and transfer with respect to the Acquired Assets as the Buyer may reasonably request and as may be


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necessary to vest in the Buyer good and marketable title to all of the Acquired Assets, in each case subject to no Encumbrance (as defined in Section 4.9).


(b) Without limitation to the requirements of Section 3.2(a) above, Seller shall deliver to Buyer a Release, in a form acceptable to Buyer's counsel and substantially similar to that set forth in Exhibit C hereto, from Fleet Capital Corporation and the Lenders (as defined in the Fleet Loan, as hereinafter defined in this paragraph), releasing the Acquired Assets from any and all security interests, liens, claims, charges, options, mortgages, debts, title retention agreements, or other encumbrances of any kind under the Third Amended and Restated Credit and Security Agreement, dated as of July 23, 2002, and any amendments or restatements thereof (the " Fleet Loan"). In addition, Seller shall deliver any and all documents reasonably requested by Buyer, executed by Fleet Capital Corporation and the Lenders, necessary to release any U.C.C. Financing Statements or other filings related to such security interests in the Acquired Assets.

(c) The Buyer shall duly execute and deliver to the Seller such instruments of assumption and other documents with respect to the Assumed Liabilities as the Seller may reasonably request.

(d) The Seller shall deliver or cause to be delivered to the Buyer all of the Seller's leases, contracts and agreements included in the Acquired Assets, with such assignments thereof and consents to assignments as are necessary to assure the Buyer of the full benefit of the same, and all of the Seller's business records, books and other data relating to the Acquired Assets (originals or copies, as the parties reasonably agree). The Seller shall take all requisite steps to put the Buyer in actual possession and operating control of the Acquired Assets.


(f) The Buyer shall deliver the Escrowed Amount to the Escrow Agent and, the Purchase Price (other than the Escrowed Amount) to the Seller or to such other person as Seller may designate.

(g) Within thirty days following the Closing, Buyer shall deliver to Seller payment for the Net Working Capital, as defined in Section 2.3 above.


Article 4

Representations And Warranties Of The Seller

The Seller represents and warrants to the Buyer as follows:

4.1. Organization of Seller; Authority . Each of the Seller corporations is a corporation duly organized, validly existing and in good standing under the laws of the state of their incorporation. Technisource Hardware is duly qualified and in good standing as a foreign corporation in all jurisdictions in which the character of the properties owned or leased or the nature of the activities conducted by it makes such qualification necessary,


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except for jurisdictions in which failure to be qualified or in good standing would not have a material adverse effect on the Hardware Business. The Seller has delivered to the Buyer complete and correct copies of the Articles of Incorporation and By-Laws of Technisource Hardware and all amendments thereto. Technisource Hardware has no Subsidiaries (as defined in Article 11) except for those disclosed in Schedule 4.1 . The Seller has all requisite power and authority to own and hold the Acquired Assets owned or held by it, to carry on the Hardware Business as such business is now conducted and to execute and deliver this Agreement and the other documents, instruments and agreements contemplated hereby (collectively, the " Transaction Documents") to which it is a party and to carry out all actions required of it pursuant to the terms of the Transaction Documents.


4.2. Corporate Approval; Binding Effect . Each of the Seller corporations has obtained all necessary authorizations and approvals from their respective Board of Directors and stockholders required for the execution and delivery of the Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Seller and constitutes, and when the Escrow Agreement is executed and delivered by the Seller it will constitute, the legal, valid and binding obligation of the Seller enforceable against it in accordance with its terms, except the enforceability thereof may be limited by any applicable bankruptcy, reorganization, insolvency or other laws affecting creditors' rights generally or by general principles of equity.


4.3. Non-Contravention . Except as set forth in Schedule 4.3 hereto, the execution and delivery by the Seller of the Transaction Documents and the consummation by the Seller of the transactions contemplated hereby and thereby will not (a) violate or conflict with any provision of the Articles of Incorporation or By-Laws of the Seller, each as amended to date; or (b) constitute a violation of, or be in conflict with, or constitute or create a default under, or result in the creation or imposition of any Encumbrance upon any property of the Seller (including without limitation any of the Acquired Assets) pursuant to (i) any material agreement or instrument to which the Seller is a party or by which the Seller or any of its properties (including without limitation any of the Acquired Assets) is bound or to which the Seller or any of such properties is subject, or (ii) any statute, judgment, decree, order, regulation or rule of any court or governmental or regulatory authority.


4.4. Governmental Consents; Transferability of Licenses, Etc . Except as set forth on Schedule 4.4 , no consent, approval or authorization of, or registration, qualification or filing with, any governmental agency or authority (" Governmental Consent") is required for the execution and delivery by the Seller of the Transaction Documents to which it is a party or for the consummation by the Seller of the transactions contemplated hereby or thereby, except where the absence of such Governmental Consent would not have a material adverse effect on the Hardware Business.


4.5. Financial Statements . The Seller has delivered or will deliver the following financial statements (the " Financial Statements") to the Buyer, and there are attached as Schedule 4.5 hereto: (a) a financial statement for Technisource Hardware as of its fiscal


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quarter ending March 31, 2003, and (b) the Estimated Closing Balance Sheet as of the Closing Date. Each of the Financial Statements are true and correct and have been prepared in accordance with generally accepted accounting principles (subject, in the case of the Estimated Closing Balance Sheet, to the absence of footnotes and to year-end audit adjustments); each of such balance sheets fairly and accurately presents the financial condition of the Seller's Hardware Business as of its respective date; and such statements of income, retained earnings and cash flows fairly and accurately present the results of operations for the periods covered thereby.


4.6. Absence of Certain Changes . Except as set forth on Schedule 4.6 , since March 31, 2003, the Seller has carried on the Hardware Business only in the ordinary course, and there has not been with relation to the Hardware Business, ( a ) any change in the assets, liabilities, sales, income or business of the Seller or in its relationships with suppliers, customers or lessors, other than changes which were both in the ordinary course of business and have not been, either in any case or in the aggregate, materially adverse; ( b ) any acquisition or disposition by the Seller of any asset or property other than in the ordinary course of business; ( c ) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting, either in any case or in the aggregate, the property or business of the Seller; ( d ) any increase in the compensation, pension or other benefits payable or to become payable by the Seller to any of its officers or employees, or any bonus payments or arrangements made to or with any of them (other than pursuant to the terms of any existing written agreement or plan of which the Buyer has been supplied complete and correct copies of); ( e ) any forgiveness or cancellation of any debt or claim by the Seller or any waiver of any right of material value other than compromises of accounts receivable in the ordinary course of business; ( f ) any entry by the Seller into any transaction other than in the ordinary course of business; ( g ) any incurrence by the Seller of any obligations or liabilities, whether absolute, accrued, contingent or otherwise (including, without limitation, liabilities as guarantor or otherwise with respect to obligations of others), other than obligations and liabilities incurred in the ordinary course of business; or ( h ) any mortgage, pledge, lien, lease, security interest or other charge or encumbrance on any of the assets, tangible or intangible, of the Seller.


4.7. Litigation, Etc . Except as set forth on Schedule 4.7 hereto, no action, suit, proceeding or investigation is pending or, to Seller's knowledge, threatened, relating to or affecting any of the Acquired Assets or the Seller, or which questions the validity of the Transaction Documents or challenges any of the transactions contemplated hereby or thereby, nor is there any basis for any such action, suit, proceeding or investigation.


4.8. Conformity to Law . Except as set forth on Schedule 4.8 , the Seller has, in all respects that would have a material effect on the Hardware Business or the Acquired Assets, complied with, and is in compliance with (a) all laws, statutes, governmental regulations and all judicial or administrative tribunal orders, judgments, writs, injunctions, decrees or similar commands applicable to the Seller or any of the Acquired Assets (including, without limitation, any labor, environmental, occupational health, zoning or other law, regulation or ordinance) and (b) all unwaived terms and provisions of all contracts, agreements and


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indentures to which the Seller is a party, or by which the Seller or any of the Acquired Assets is subject. Except as set forth on Schedule 4.8 hereto, the Seller has not committed, been charged with, or, to Seller's knowledge, been under investigation with respect to, nor does there exist, any violation of any provision of any federal, state or local law or administrative regulation that would have a material adverse effect on the Hardware Business or the Acquired Assets.


4.9. Title to Acquired Assets . Except as noted on Schedule 4.9 , the Seller is the lawful owner of and has good and valid record and marketable title to all of the Acquired Assets, and has the full right to sell, convey, transfer, assign and deliver the Acquired Assets, without the need to obtain the consent or approval of any third party. Except for liens described on Schedule 4.9 hereto, all of which will be discharged at Closing, all of the Acquired Assets are entirely free and clear of any security interests, liens, claims, charges, options, mortgages, debts, leases (or subleases), conditional sales agreements, title retention agreements, encumbrances of any kind, material defects as to title or restrictions against the transfer or assignment thereof (collectively, " Encumbrances"). At and as of the Closing, the Seller will convey the Acquired Assets to the Buyer by deeds, bills of sale, certificates of title and other instruments of assignment and transfer effective in each case to vest in the Buyer, and the Buyer will have, good and valid record and marketable title to all of the Acquired Assets, free and clear of all Encumbrances.

4.10. Environmental Matters . Without limitation to the representations contained in Section 4.8:


(a) Seller is in compliance in all material respects with all applicable Environmental Laws (as such term is defined in Article 11 hereto);

(b) Seller has obtained all material permits and approvals required under Environmental Laws, including, without limitation, all material environmental, health and safety permits, licenses, approvals, authorizations, variances, agreements, and waivers of fede ...