-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P2g2WnjeEGFEjcS8chcCH0ni2VQv2U/up3HARQcspy8iuNSDPWV9J8I1yM7cKhnw 9+xMGhOIiziOIKTjmVcSNA== 0000892569-97-001496.txt : 19970526 0000892569-97-001496.hdr.sgml : 19970526 ACCESSION NUMBER: 0000892569-97-001496 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970509 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970523 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRISTOL TECHNOLOGY SYSTEMS INC CENTRAL INDEX KEY: 0001016657 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [5040] IRS NUMBER: 582235556 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21633 FILM NUMBER: 97613589 BUSINESS ADDRESS: STREET 1: 18201 VON KARMAN STREET 2: STE 305 CITY: IRVINE STATE: CA ZIP: 92612 BUSINESS PHONE: 7144750800 MAIL ADDRESS: STREET 1: 18201 VON KARMAN AVE STREET 2: SUITE 305 CITY: IRVINE STATE: CA ZIP: 92612 8-K 1 CURRENT REPORT AS REPORTED ON MAY 9, 1997 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) May 9, 1997 Bristol Technology Systems, Inc. (Exact name of registrant as specified in its charter) Delaware 0-21633 58-2235556 (State or other juridiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 5000 Birch Street,Suite 205, Newport Beach, California 92660 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (714) 475-0800 18201 Von Karman Avenue, Suite 305, Irvine, California 92612 (Former name or former address, if changed since last report) 2 ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS On May 9, 1997, the Agreement and Plan of Merger (the "Agreement") by and among Bristol Technology Systems, Inc. (the "Company"), the Company's wholly-owned subsidiary, Bristol Merger Corporation (the "Purchaser"), International Systems & Electronics, Inc. (ISE) and the sole shareholder of ISE, Pedro Penton (the "Shareholder") was consummated. ISE is a point-of-sale (POS) systems dealer for NCR, Omron and Sharp equipment. ISE sells, installs and services POS solutions to the hospitality and general retail markets in Florida and Latin American countries. For the year ended December 31, 1996, ISE had unaudited gross revenues of $4,800,000 and total assets of $3,600,000. Assets acquired as a result of the Agreement consist primarily of accounts receivable and inventory. In consideration for the merger, the Shareholder will receive $1,100,000 in cash and 130,434 shares of non-registered, restricted Common Stock of the Company which were valued at April 25, 1997 to be $750,000. The purchase price to be paid to the Shareholder as a result of the merger was negotiated on an "arms-length" basis with the Shareholder, and neither the Shareholder nor any of the principals of the Company had a pre-existing relationship prior to the consummation of the transaction. Cash utilized for the acquisition was obtained by the Company from its recently concluded public offering of its securities consummated on November 20, 1996. The Shareholder has entered into an employment agreement dated May 1, 1997, pursuant to which he will serve as President of ISE and will serve on the Board of Directors of ISE. The term of the employment agreement is five years concluding April 30, 2002, during which term Mr. Penton will receive a base salary of $150,000, will be eligible to earn certain bonuses and will receive certain additional benefits. Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of the businesses acquired (TO BE PROVIDED BY AMENDMENT) (b) Pro Forma Financial information (TO BE PROVIDED BY AMENDMENT) (c) Exhibits: (1) Agreement and Plan of Merger by and among Bristol Technology Systems, Inc., Bristol Merger Corporation, International Systems & Electronics Corporation (Exhibit 10.27) (2) Employment Agreement to be effective May 1, 1997 by and between Pedro Penton and International Systems & Electronics Corporation (Exhibit 10.28) 3 INDEX TO EXHIBITS Index Number Description 10.27 Agreement and Plan of Merger by and among Bristol Technology Systems, Inc., Bristol Merger Corp., International Systems & Electronics Corporation and Pedro Penton. 10.28 Employment Agreement to be effective as of May 1, 1997 by and between Pedro Penton and International Systems & Electronics Corporation. 4 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BRISTOL TECHNOLOGY SYSTEMS, INC. By: /s/ KELLY KAUFMAN --------------------------------------------- Kelly Kaufman, Vice President of Finance May 23, 1997 EX-10.27 2 AGREEMENT AND PLAN OF MERGER 1 EXHIBIT 10.27 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of March 26, 1997, by and among BRISTOL TECHNOLOGY SYSTEMS, INC., a Delaware corporation ("Bristol"); BRISTOL MERGER CORPORATION, a Delaware corporation ("Purchaser"); INTERNATIONAL SYSTEMS & ELECTRONICS CORPORATION, a Florida corporation ("Company"); and PEDRO PENTON, a resident of the State of Florida ("Shareholder"). RECITALS A. Bristol owns all of the issued and outstanding capital stock of Purchaser. B. Shareholder owns all of the issued and outstanding capital stock of Company. C. This Agreement contemplates a forward subsidiary merger of Company with and into Purchaser in a tax free reorganization pursuant to Code Section 368(a)(2)(D), whereby Shareholder shall exchange all of his shares of capital stock of Company (the "Company Shares") for cash and shares of non-registered, restricted Common Stock of Bristol (the "Restricted Stock"), which consideration shall be subject to adjustment as expressly provided below. D. The parties hereto anticipate that the merger will further certain of their business objectives, including, without limitation, increased market share, reduced administrative costs and volume efficiencies. NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties herein contained, the parties hereto do hereby agree as follows: ARTICLE 0 CERTAIN DEFINITIONS Capitalized terms not ascribed a meaning in this Section 0 shall have the meaning ascribed to such term elsewhere in this Agreement. The capitalized terms set forth below shall have the following meanings: "Approval" has the meaning set forth in Section 2.5(d). "Audited Closing Balance Sheet" has the meaning set forth in Section 1.5. "Audited Closing Income Statement" has the meaning set forth in Section 1.5. "Audited Value" has the meaning set forth in Section 1.6. "Book Value" has the meaning set forth in Section 1.6. "Certificates" has the meaning set forth in Section 1.1. 2 "Class I Inventory" and "Class II Inventory" have the meanings set forth in Section 2.4(c). "Closing" has the meaning set forth in Section 1.4. "Closing Balance Sheet" has the meaning set forth in Section 1.5. "Closing Date" has the meaning set forth in Section 1.1. "Closing Income Statement" has the meaning set forth in Section 1.5. "Code" means the Internal Revenue Code of 1986, as amended. "Company Shares" has the meaning set forth in Recital C. "Confidential Information" means any information concerning the business and affairs of Company that is not already generally available to the public. "Delaware General Corporation Law" means the General Corporation Law of the State of Delaware, as amended. "Effective Time" has the meaning set forth in Section 1.1. "Employee Benefit Plan" means any (i) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan; (ii) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan; (iii) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan); or (iii) Employee Welfare Benefit Plan or fringe benefit plan or program. "Employee Pension Benefit Plan" has the meaning set forth in ERISA Section 3(2). "Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section 3(1). "Encumbrance" means any mortgage, pledge, lien, encumbrance, security interest, charge, option, or other adverse interest, other than (i) mechanic's, materialmen's, and similar liens; (ii) liens for Taxes not yet due and payable or for Taxes that Company is contesting in good faith through appropriate proceedings; (iii) purchase money liens and liens securing rental payments under capital lease arrangements; and (iv) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Financial Statements" has the meaning set forth in Section 2.3(a). "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Hazardous Substances" has the meaning set for in Section 2.5(d). 2 3 "Knowledge" means that Company and/or Shareholder, as applicable, are actually aware of the fact or matter in question after a reasonable investigation concerning the existence of such fact or matter. "Leased Premises" has the meaning set forth in Section 2.4(a). "Leases" has the meaning set forth in Section 2.4(a). "Liability" means any debt, claim, loss, liability, damage, judgment, fine, penalty, cost, expense or other obligation of any nature, whether known or unknown, asserted or unasserted, absolute or contingent, liquidated or unliquidated, or due or to become due, including any Liability for Taxes. "Materially Adverse Effect" means a substantial and materially adverse effect on the business, financial condition, sales, results of operation, prospects, customers, suppliers, employee relations, insurability, assets or properties of Company. "Merger" has the meaning set forth in Section 1.1. "Net Worth" means the difference between (i) the audited aggregate book value of the assets of Company, and (ii) the audited aggregate book value of the liabilities of Company as reflected on the Audited Closing Balance Sheet, provided, that in determining Net Worth for purposes of the Audited Closing Balance Sheet, Ernst & Young, LLP may (i) make reasonable adjustments to or establish reasonable reserves for uncollectible accounts receivable, (ii) adjust the book value of Company's inventory, other assets or liabilities, to account for under- or over-valued inventory, other assets or liabilities, as the case may be; and/or (iii) make any other adjustments that the auditors deem necessary or appropriate in order to state the Audited Closing Balance Sheet in accordance with GAAP. "Net Worth Deficiency" has the meaning set forth in Section 1.5(b). "Net Worth Reduction" has the meaning set forth in Section 1.5(b). "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "Personal Property" has the meaning set forth in Section 2.4(b). "Pre-Tax Earnings" means audited earnings before income taxes as reflected on the Audited Closing Income Statement, provided, that in determining Pre-Tax Earnings for purposes of the Audited Closing Income Statement, Ernst & Young, LLP may make any adjustments that such accountants deem necessary or appropriate in order to state the Audited Closing Income Statement in accordance with GAAP. "Pre-Tax Earnings Deficiency" has the meaning set forth in Section 1.5(c). "Pre-Tax Earnings Reduction" has the meaning set forth in Section 1.5(c). "Restricted Shares" has the meaning set forth in Section 1.4. "Restricted Stock" has the meaning set forth in Recital C. 3 4 "Surviving Corporation" has the meaning set forth in Section 1.1. "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs, duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on, minimum, estimated, or other tax, duty or assessment of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. ARTICLE 1 THE BASIC TRANSACTION 1.1 The Merger. On and subject to the terms and conditions of this Agreement, the Company will merge with and into Purchaser (the "Merger") on April 30, 1997 (the "Closing Date"), at such time (the "Effective Time") as the Purchaser and Company file Certificates of Merger (the "Certificates") with the Secretaries of State of the States of Delaware and Florida, substantially in the form of Exhibits "A" and "B" hereto. Purchaser shall be the corporation surviving the Merger (the "Surviving Corporation"). 1.2 Actions Taken on or Prior to the Closing Date. On or prior to the Closing Date, Bristol and Purchaser shall conduct a due diligence investigation of Company and the parties shall perform their respective delivery obligations set forth in Article 6, below. 1.3 Effect of Merger. 1.3.1 General. At the Effective Time, the merger shall have the effect set forth in Sections 259, 260 and 261 of the Delaware General Corporation Law. Without limiting the foregoing, Surviving Corporation may, at any time after the Effective Time, take any action (including executing and delivering any document) in the name and on behalf of either Purchaser or Company in order to carry out and effectuate the transactions contemplated by this Agreement. 1.3.2 Certificate of Incorporation. The Certificate of Incorporation of Purchaser in effect at and as of the Effective Time shall remain the Certificate of Incorporation of Surviving Corporation. 1.3.3 By-laws. The By-laws of Purchaser in effect at and as of the Effective Time shall remain the By-laws of Surviving Corporation. 1.3.4 Directors and Officers. The directors and officers of Surviving Corporation at and as of the Effective Time, shall be those individuals holding such titles and positions set forth on Schedule 1.3.4 hereto. Such directors and officers shall be duly and properly appointed and/or elected by Surviving Corporation in accordance with the Delaware General Corporation Law and shall serve until such individuals 4 5 are either re-elected or removed and replaced by Surviving Corporation's Board of Directors or shareholder, as the case may be. 1.3.5 Conversion of Company Shares. At and as of the Effective Time, the Company Shares owned by Shareholder shall be converted into the right of Shareholder to exchange his Company Shares at the Closing for cash and Restricted Shares in accordance with Sections 1.4 and 1.5, below. Upon such conversion, no Company Share shall be deemed to be outstanding or to have any rights attributed to it other than those set forth in this Section 1.3.5. Shareholder shall deliver all of his Company Shares to Bristol on or before the Closing Date and such shares shall be canceled at the Closing. 1.3.6 Capital Stock of Purchaser and Bristol. Each share of capital stock of Purchaser and Bristol, including, but not limited to, each share of Restricted Stock, issued and outstanding at and as of the Effective Time shall remain issued and outstanding. 1.4 Closing. If the conditions to close, as set forth in Article 5, below, are satisfied, then the parties hereto shall meet on the Closing Date at the offices of Bristol, located at 18201 Von Karman, Irvine, California 92612, commencing at 9:00 a.m. local time (the "Closing"), or at such other place or in such other manner as the parties shall mutually agree. At the Closing, Bristol shall file the Certificates and, thereafter (and on the Closing Date) (i) Purchaser shall deliver to Shareholder One Million One Hundred Thousand Dollars ($1,100,000) in immediately available funds; and (ii) Bristol shall deliver to Shareholder Seven Hundred Fifty Thousand Dollars ($750,000) worth of Restricted Stock.(1) 1.5 Adjustments. Commencing immediately after the Closing Date, (i) Shareholder shall prepare a balance sheet (the "Closing Balance Sheet") as of the Closing Date. Ernst & Young, LLP shall thereafter audit in accordance with GAAP the Closing Balance Sheet (the "Audited Closing Balance Sheet") and the Company's income statement for the year ended December 31, 1996 (the "Closing Income Statement" and, as audited by Ernst & Young, LLP, the "Audited Closing Income Statement"). Upon completion of the Audited Closing Balance Sheet and the Audited Closing Income Statement, the parties hereto shall have the following rights and obligations: (a) If the Net Worth of Company as stated on the Audited Closing Balance Sheet is greater than One Million One Hundred Thousand Dollars ($1,100,000), then such excess amount shall be paid to Shareholder within ten (10) of the completion of the Audited Closing Balance Sheet, on a dollar for dollar basis, in the ratio of 40.54% cash paid by Purchaser and 59.46% Restricted Shares delivered by Bristol. (b) If the Net Worth of Company as stated on the Audited Closing Balance Sheet is less than One Million Dollars ($1,000,000) (the "Net Worth Deficiency"), then Surviving Corporation, as its sole and exclusive remedy, shall have the right to reduce any amounts otherwise due Shareholder under the "First - -------- (1) The exact number of shares of Restricted Stock which Bristol is to deliver to Shareholder on the Closing Date (which shall be rounded to the nearest whole number of shares) shall be determined by and based upon the April 25, 1997 closing price of Bristol's publicly traded Common Stock as reported in the Wall Street Journal (the Restricted Stock delivered by Bristol to Purchaser shall hereinafter referred to as the "Restricted Shares"). 5 6 Bonus" (as defined in the Employment Agreement described in Section 6.2, below), by that portion of the "Net Worth Reduction" (defined below) in excess of One Hundred Thousand Dollars ($100,000). "Net Worth Reduction" means the product of (i) the Net Worth Deficiency, times (ii) 1.85. (c) If the Pre-Tax Earnings of Company as stated on the Audited Closing Income Statement are less than Two Hundred Thousand Dollars ($200,000) (the "Pre-Tax Earnings Deficiency"), then Surviving Corporation, as its sole and exclusive remedy, shall have the right to reduce any amounts otherwise due Shareholder under the "First Bonus" (as defined in the Employment Agreement described in Section 6.2, below) by that portion of the "Pre-Tax Earnings Reduction" (defined below) in excess of One Hundred Thousand Dollars ($100,000). "Pre-Tax Earnings Reduction" means the product of (i) the Pre-Tax Earnings Deficiency, times (ii) 9.25. 1.6 Right to Purchase Inventory and Accounts Receivable. If (i) Surviving Corporation is entitled to reduce the "First Bonus" pursuant to section 1.5(b), above, and (ii) an item of inventory or an account receivable is valued on the Audited Closing Balance Sheet ("Audited Value") in an amount less than the book value of such item of inventory or account receivable as stated on the Closing Balance Sheet ("Book Value"), then Shareholder may, within thirty (30) days of the completion of the Audited Closing Balance Sheet, purchase such item of inventory or account receivable from Surviving Corporation in cash at its Audited Value and sell such item of inventory or collect such account receivable for his own account. Shareholder's right to purchase inventory and accounts receivable pursuant to this Section 1.6 is subject to the prior written approval of Surviving Corporation's Board of Directors, which approval may be granted or denied in the Board's absolute and sole discretion; provided, however, that if the Board denies such request, then such item of inventory or account receivable shall, for purposes of the adjustments set forth in Section 1.5(b), above, be stated on the Audited Closing Balance Sheet at Book Value. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDER Company and Shareholder jointly and severally represent and warrant to, and agree with, Bristol, Purchaser and Surviving Corporation that (except for changes contemplated by this Agreement), each of the following statements is true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing Date (each such statement to be made again by Company and Shareholder on that date with the Closing Date being substituted for the date of this Agreement throughout this Article 2): 2.1 Organization and Authority. (a) Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, has all requisite corporate power and authority to carry on its business as currently conducted and to own or lease and operate its properties, and is duly qualified to do business as a foreign corporation in each jurisdiction where its business makes such qualification necessary. 6 7 Company and Shareholder have the requisite power to enter into this Agreement and to carry out their respective obligations hereunder. (b) The copies of the Certificate of Incorporation and the By-laws of Company which have been heretofore made available to Purchaser and Bristol, are true copies of such instruments as amended to date, and such instruments are in full force and effect. The stock certificates, transfer books and minute books of Company heretofore made available to Purchaser and Bristol are true and complete and constitute all of the stock certificates, transfer books and minute books of Company (it being acknowledged by the parties hereto that the original stock certificates, transfer books and minute books of Company, and contents, has been lost or misplaced and were recently replaced and updated by Company; and that Company shall deliver to Bristol prior to the Closing Date written indemnities for such lost certificates). (c) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by Company's Board of Directors and shareholders, and no other proceedings on the part of Company are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement is a valid and binding obligation of Company and Shareholder enforceable in accordance with its terms except as enforcement may be limited to bankruptcy, insolvency or other similar laws affecting the enforcement of creditors rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. (d) Except as disclosed in Schedule 2.1(d) attached hereto, there are no persons or entities of any kind in which Company owns, directly or indirectly, any shares of capital stock, or any partnership, membership, joint venture or equitable or similar interest. (e) Except as set forth on Schedule 2.1(e)(1) attached hereto, to the Knowledge of Company and Shareholder no consent, approval or authorization of, or declaration, filing or registration with, any third party, including any government or regulatory authority, is required in connection with the execution and delivery by Company or Shareholder of this Agreement and the consummation by Company and Shareholder of the transactions contemplated hereby. Except as set forth on Schedule 2.1(e)(2) attached hereto, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) conflict with, result in a breach of, or constitute a default under any of the terms, conditions, or provisions of the Certificate of Incorporation or By-laws of Company; (ii) violate any law, order, judgment or decree to which any of Company's properties or assets are bound; (iii) violate or constitute a default under (whether after the giving of notice, passage of time or both), or permit the termination of, or impair any rights or increase any obligations of Company under, any agreement or instrument to which Company is a party or by which any part of Company's properties or assets is bound; or (iv) result in the acceleration of the maturity of any debt or obligation of Company or in the creation or imposition of any Encumbrance upon any of the property or assets of Company. 2.2 Capitalization. The authorized capital stock of the Company consists of 100 shares of common stock, $1.00 par value per share, of which 100 shares are issued and outstanding. All outstanding capital stock of Company was duly authorized and validly issued, and is fully paid and nonassessable. Company does not have outstanding, and is not 7 8 bound by, any option, warrant or other right, call or commitment to issue, or any obligation or commitment to purchase, any of its capital stock or any securities convertible into or exchangeable for any of its authorized capital stock. Shareholder (i) owns all of the outstanding capital stock of Company; (ii) is the sole legal and beneficial owner of that number of Company Shares set forth on Schedule 2.2(1) hereto; (iii) is in possession of the certificate(s) representing such shares; (iv) owns such shares free and clear of all Encumbrances with respect thereto; and (iv) has the full power, authority and right to exchange, surrender and cancel such shares in accordance with this Agreement and to perform his obligations hereunder with respect to the exchange, surrender and cancellation of such shares. Except as set forth on Schedule 2.2(2) attached hereto, there are no buy-sell agreements, shareholders' agreements or similar agreements relating to any of the shares of the capital stock of Company. 2.3 Financial Matters. (a) Attached hereto as Schedule 2.3(a)(1) are the unaudited balance sheets of Company at December 31, 1994, at December 31, 1995, at December 31, 1996, and at February 28, 1997, the related statements of income, shareholders' equity and cash flows for the annual and one (1) month period then ended, respectively, and the related notes to such financial statements (all of such financial statements and notes being hereinafter referred to as the "Financial Statements"). Except as set forth in Schedule 2.3(a)(2) attached hereto, to the Knowledge of Company and Shareholder the Financial Statements (including the notes thereto) (i) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby; (ii) except as disclosed on Schedule 2.3(a)(3), present fairly and accurately the financial condition of Company as of such dates and the results of operations of Company for such periods; and (iii) are correct and complete, and are consistent with the books and records of Company (which books and records are correct and complete). (b) Except as set forth on Schedule 2.3(b), Company does not have any Liabilities, other than those which (i) are set forth in the Financial Statements; (ii) have been specifically and expressly disclosed in the Schedules hereto by reference to the specific Section of this Agreement to which such disclosure relates; (iii) have been incurred since the date of the most recent Financial Statements in the Ordinary Course of Business in amounts and on terms consistent, individually and in the aggregate, with Company's past practice; or (vi) are expressly contemplated by this Agreement. (c) Except as set forth on Schedule 2.3(c ), since the date of the February 28, 1997 Financial Statements, (i) Company has operated its business only in the Ordinary Course of Business; (ii) there has not occurred any event, condition or circumstance that has had or is likely to have a Materially Adverse Effect on Company; (iii) Company has not issued or sold, or contracted to sell, any of its capital stock, notes, bonds or other securities, or any option to purchase the same, or entered into any agreement with respect thereto; (iv) Company has not incurred any property damage, destruction or similar loss in an aggregate amount exceeding Five Thousand Dollars ($5,000) whether or not covered by insurance; (v) Company has not suffered any loss or any prospective loss, of any significant supplier, distributor, licensor, contractor or customer or altered any contractual arrangement with any such supplier, distributor, licensor, contractor or customer; (vi) Company has not incurred any Liability, made any expenditure, or sold any assets or properties; except in each case in 8 9 the Ordinary Course of Business, consistent with past practices and at arms-length; (vii) there has been no declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of Company, and Company has not redeemed, repurchased or otherwise acquired any of its capital stock or securities convertible into or exchangeable for its capital stock or entered into any agreement to do so; (viii) Company has not made any material prepayments on any of its Liabilities, securities or other obligations, other than trade payables in the Ordinary Course of Business; (ix) there has not been any increase in the rate of compensation payable or to become payable to any of Company's officers or employees or any increase in the amounts paid or payable to such officers or employees under any bonus, insurance, pension or other benefit plan, or any arrangements theretofore made for or with any of such officers or employees; (x) Company has not adopted or amended any benefit plan, agreement, trust, fund or other arrangement for the benefit of employees except as required by Tax laws; and (xi) except as required by applicable law, there has been no change in any accounting principle, procedure or practice followed by Company or in the method of applying such principle, procedure or practice. (d) Attached as Schedule 2.3(d) is a list containing all distributions, credits or compensation, of any nature, paid or to be paid to Shareholder by Company in fiscal year 1996 and 1997. 2.4 Assets. (a) Company does not own any real property. Schedule 2.4(a)(1) attached hereto contains a list of all real property leased by Company (the "Leased Premises"), together with copies of each of the leases (the "Leases"), including the name of the landlord or sublandlord, a description of the Leased Premises, the commencement and expiration dates of the current term, the security deposited by Company with the landlord or sublandlord, if any, and the monthly rental (including all base rent and all additional rents). Except as set forth on Schedule 2.4(a)(2), each Lease is in full force and effect and has not been assigned, modified, supplemented or amended, and neither Company nor the landlord or sublandlord under any Lease is in default under any of the Leases, and no circumstance or state of facts exists which, with the giving of notice or passage of time, or both, would permit the landlord or sublandlord under any Lease to terminate any Lease. (b) Schedule 2.4(b) attached hereto contains a list of all personal property (other than inventory and other than items with a book value of less than Ten Thousand Dollars ($10,000)) ("Personal Property") and real property improvements (including fixtures but excluding items with a book value of less than Ten Thousand Dollars ($10,000)) owned by Company. All Personal Property and real property improvements of Company are in good condition and repair and are adequate for the uses to which they are being put or would be put in the Ordinary Course of Business, and such Personal Property and real property improvements are not in need of maintenance or repair except for routine maintenance and repair and as otherwise disclosed on Schedule 2.4(b). The parties acknowledge that that certain lease with Forsythe McArthur has been called into default by the Lessor. (c) The inventory of Company is comprised of two types: (i) inventory held for sale to customers ("Class I Inventory"), which inventory is identified on Schedule 2.4(c)(i) attached hereto; and (ii) inventory of products, parts and supplies held for customer support and service ("Class II Inventory"), which inventory is identified on 9 10 Schedule 2.4(c)(ii) attached hereto. Each item of Class I Inventory is in good and marketable condition and fit for the purpose for which it was produced or manufactured, and each item of Class II inventory is fairly and reasonably valued on the balance sheet of the most recent Financial Statements and is not obsolete, damaged or defective (except for obsolescence, damages or defects which in the aggregate are not likely to have a Materially Adverse Effect on Company). (d) The accounts receivable of Company reflected on the balance sheet of the January 31, 1997 Financial Statements have arisen from sales or the rendering of services in the Ordinary Course of Business and are not in dispute or subject to any setoffs, discounts, credits, reductions or counterclaims whatsoever and, with usual and ordinary collection efforts, will be paid in full, net of reserves reflected on such balance sheet, within one hundred twenty (120) days after the Closing Date, without resort to legal action. (e) Company owns, licenses or otherwise has the full right to use, all patents, trademarks, trade names, service marks, copyrights, technology, know-how and processes and confidential information used in the conduct of its business. Schedule 2.4(e)(1) attached hereto contains a list of all registered and unregistered patents, trademarks, trade names, service marks and copyrights used by Company, all applications therefor and all licenses and other agreements relating thereto, which are owned by Company or used in the business of Company. To the Knowledge of Company and Shareholder, no consent of any third party will be required for the use thereof upon completion of the transactions contemplated by this Agreement. No claims are currently being asserted by any person or entity with respect to the use of any such patents, trademarks, service marks, trade names, copyrights, technology, know-how or processes or confidential information or challenging or questioning the validity or effectiveness of any such license or agreement, nor, to the Knowledge of Company and Shareholder, is there any basis for any such claims. The perpetual use of such patents, trademarks, trade names, service marks, copyrights, technology, know-how or processes or confidential information by Company does not infringe on the rights of any person or entity, and, to the Knowledge of Company and Shareholder, there is no infringing use of Company's patents, trademarks, trade names, service marks or copyrights by others. (f) Schedule 2.4(f) attached hereto contains a list of all written and oral agreements (other than the Leases) that either are not terminable at will or which involve more than Ten Thousand Dollars ($10,000) during the term thereof and to which Company is a party or by which Company or any of Company's assets or properties are bound. Each such agreement is legally binding and in full force and effect, and to the Knowledge of Company and Shareholder there is no existing or alleged default or event of default under any such agreement, nor does there exist any event or condition which, with notice or lapse of time or both, would constitute such a default or event of default by Company. Copies of all documents listed in Schedule 2.4(f) have been delivered to Purchaser and Bristol, and are true and complete in all respects and include all amendments and supplements thereto and modifications thereof. (g) Schedule 2.4(g) attached hereto contains a list of (i) every bank, savings and loan or other financial institution in which Company has any accounts or lock boxes and the corresponding account identification number, if any; (ii) the names of the persons authorized to make withdrawals therefrom or have access thereto; and (iii) each person who holds a power of attorney for Company. 10 11 (h) Schedule 2.4(h) attached hereto contains a list of the ten (10) largest customers of Company measured by the revenues from such customers during the twelve (12) month period commencing April 1, 1996 and ending March 31, 1997, showing the approximate total billings by Company to each such customer during such period. To the Knowledge of Company and Shareholder, there has not been any materially adverse change in the business relationship of Company with any customer named in Schedule 2.4(h). Except for the customers named in Schedule 2.4(h), Company did not have any customer who accounted for more than five percent (5%) of the aggregate sales or services of Company during the twelve (12) month period commencing April 1, 1996 and ending March 31, 1997. No person or entity that was a customer of Company at any time during the past twelve (12) months was at such time controlled by, in control of or under common control with Company or Shareholder. (i) Schedule 2.4(i) attached hereto contains a list of the ten (10) largest suppliers of the Company measured by payments to such suppliers during the twelve (12) month period commencing April 1, 1996 and ending March 31, 1997. To the Knowledge of Company and Shareholder, there has not been any materially adverse change in the business relationship of Company with any supplier named in Schedule 2.4(i). Except as set forth on Schedule 2.4(i), no person or entity that was a supplier of Company at any time during the past twelve (12) months was at such time controlled by, in control of or under common control with Company or Shareholder. (j) Schedule 2.4(j) attached hereto contains a list of insurance policies in force currently or at any time during the past two (2) years and relating to Company or its assets or properties, including in each instance the name of the carrier, the term of the policy, the periods for which it has been continuously in effect, the annual premium and the general scope of coverage. The premiums for such insurance policies are fully paid. None of the policies provides for the assessment of additional or retroactive premiums, and there are no loans outstanding against any of such policies. No notice of cancellation or non-renewal with respect to, or disallowance of any claim under, any insurance policy listed or required to be listed on Schedule 2.4(j) or binder listed or required to be listed in Schedule 2.4(j) has been received by Company. To the Knowledge of Company and Shareholder, no claim or event which forms the basis of a claim has occurred which could cause Company's insurers to substantially increase the cost of insurance for Company. (k) Except as set forth on Schedule 2.4(k) attached hereto, all assets and properties purported to be owned by Company are owned free and clear of all Encumbrances. Company rightfully possesses or has the right to use all assets and properties necessary to conduct its business. 2.5 Legal Matters. (a) Except as set forth on Schedule 2.5(a) attached hereto, there is no action, suit, proceeding or investigation pending, or, to the Knowledge of Company or Shareholder, threatened, at law or in equity, before any arbitrator or court or other governmental authority, nor any outstanding judgment, decree, injunction, charge, award or order, against or in any manner involving Company or any of Company's assets or properties, or the Company Shares. 11 12 (b) Company has complied with all judgments, orders, rulings, statutes, laws, permits, licenses, franchises, ordinances and other governmental authorizations, approvals and regulations applicable to it or any of its operations, properties or assets. To the Knowledge of Company and Shareholder, Company has all licenses and permits and other governmental authorizations and approvals required for the operation of its business and the use of its assets and properties. (c) Company has filed or caused to be filed all federal, state, local and foreign income and other Tax Returns required under applicable law to be filed on or before the Closing Date, Company has paid or made provision for all Taxes and other charges which have or may become due for the periods covered by such Tax Returns, all such Tax Returns are true, correct and complete in all respects. None of the Tax Returns of Company are currently under investigation or audit, nor to the Knowledge of Company or Shareholder is an investigation or audit pending, and there has not been an investigation or audit of the Tax Returns of Company during the past seven (7) years. There are no outstanding agreements or waivers extending the statutory period of limitations applicable to any Tax Return for any period. The accounting treatment of all items of income, gain, loss, deduction and credit as reported on all Tax Returns and estimates filed by or on behalf of Company are true and complete, and all deferred Taxes and all Taxes due for the period ending on the Closing Date have been accrued on the Balance Sheet of the most recent Financial Statements through the date thereof. Company has never been, nor is Company currently, a party to any agreement relating to the sharing of any liability for, or payment of, Taxes with any third party. Schedule 2.5(c) attached hereto (i) lists all federal, state, local and foreign income Tax Returns filed with respect to Company for taxable periods ended on or after December 31, 1992; (ii) indicates those Tax Returns that have been audited, if any; (iii) and indicates those copies of all income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by Company since December 31, 1992. No claim has ever been made by an authority in a jurisdiction where Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Encumbrances on any of the assets of Company that arose in connection with any failure (or alleged failure) to pay any Tax. All Taxes owed by Company or which Company is obligated to withhold from amounts owing to any employee, independent contractor, stockholder, creditor or third party have been paid. There are no unresolved claims concerning Company's Tax Liability, and, to the Knowledge of Company and Shareholder, no basis for any such claim exists. (d) No solid, hazardous or toxic wastes, substances or materials, as those terms are used in the Clean Air Act, Resource Conservation and Recovery Act of 1976, as amended, the Hazardous Materials Transportation Act or the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments and Reauthorization Act of 1986 (SARA), or in any other federal, state or local law or ordinance governing hazardous, toxic or solid wastes, materials or substances, and no asbestos, polychlorinated biphenyls, urea formaldehyde foam, explosives, infectious or biological wastes or radioactive materials (all of the above being collectively referred to herein as "Hazardous Substances") have been or are unlawfully stored, treated, disposed of, managed, generated, manufactured, produced, released, emitted or discharged, in, on, under or about the Leased Premises by Company so as to (i) require, under any applicable law or treaty, a governmental approval, consent, waiver, exemption, variance, franchise, order, permit, authorization, right or license (an "Approval"), unless such Approval has been obtained 12 13 and remains in full force and effect; or (ii) render the Leased Premises in noncompliance with or in violation of any applicable law, regulation, or permit or subject to any obligation, Liability, order or requirements for remediation. No governmental or private action, suit or proceeding concerning or arising out of the use, storage, treatment, discharge, disposal, handling, manufacturing, processing, treatment, transportation, release or threat of release of any Hazardous Substance at, under or in connection with Company's business or the Leased Premises, or to enforce or impose liability under environmental pollution laws, common law or laws relating to the protection of worker and work place health and safety has been instituted, initiated or, to the Knowledge of Company and Shareholder, threatened against or with respect to Company or Shareholder or the Leased Premises as a result of the Company's or Shareholders' acts or omissions. (e) Product Warranty. Each product manufactured, sold, or delivered by Company has been in conformity with all applicable contractual commitments and all express and implied warranties, and Company has no Liability (and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any Liability) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth on the face of the balance sheet of the most recent Financial Statements (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Company. No product manufactured, sold, or delivered by Company is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale. Schedule 2.5(e) includes copies of the standard terms and conditions of sale for Company (containing applicable guaranty, warranty, and indemnity provisions). (f) Product Liability. Except as set forth on Schedule 2.5(f), Company has no Liability (and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any Liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, or delivered by Company. (g) Health and Safety. Except as set forth on Schedule 2.5(g), Company has received no notice of any violation, nor, to the Knowledge of Company and Shareholder, is there any basis for any assertion of a violation by Company, of the Occupational Safety and Health Act of 1970, as amended, together with all other laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings and changes thereunder) of federal, state and local governments (and all agencies thereof) concerning public health and safety or employee health and safety laws. 2.6 Employment Matters (a) None of Company's employees belongs to a labor union in connection with his or her employment by Company nor has there been any request by any employee to be represented by a union in such connection. (b) Except as identified on Schedule 2.6(b) attached hereto, no officer, manager or key employee of Company has indicated within the past twelve (12) months that he or she may terminate his or 13 14 her employment with Company (regardless of whether such indication was formal or informal). (c) Schedule 2.6(c) attached hereto sets forth the names of all Company's directors and officers, and the names of all persons whose compensation from Company during the current year will exceed Thirty Thousand Dollars ($30,000). (d) Schedule 2.6(d) attached hereto contains a list of each pension, retirement, profit-sharing, deferred compensation, bonus or other incentive plan, employee program, arrangement, agreement or understanding, medical, vision, dental or other health plan, life insurance plan, severance plan or any other employee benefit plan to which Company or any entity under common control with the Company contributes or is a party or is bound and under which current or former employees of Company are eligible to participate or derive a benefit. (e) Company does not maintain, never has maintained or contributed to, and has never been required to contribute to any Employee Benefit Plan or has any Liability under any Employee Benefit Plan. (f) Company does not contribute to, never has contributed to, and has never been required to contribute to any multiemployer plan or has any Liability (including withdrawal liability) under any multiemployer plan. 2.7 Continuity of Interest. Shareholder has no present plan, intention or arrangement to dispose of any of the Restricted Shares in a manner that would cause the Merger to violate the continuity of shareholder interest requirement set forth in Treasury Regulation Section 1.368-1. 2.8 Brokers. No broker, finder or investment banker has acted directly or indirectly for Company, any of its officers or directors, or shareholders in connection with this Agreement or the transactions contemplated hereby, and no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in respect thereof based in any way on agreements, arrangements or understandings made by or on behalf of Company or Shareholder. 2.9 Disclosure. No representation or warranty by Company or Shareholder in this Agreement or in any other certificate or document delivered to Purchaser and Bristol and their representatives contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact which has not been disclosed to Purchaser and Bristol which has had or is likely to have a Materially Adverse Effect on Company. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER 14 15 Purchaser and Bristol hereby represent and warrant to, and agree with, Company and Shareholder that (except for changes contemplated by this Agreement), each of the following statements is true, correct and complete as of the date of this Agreement and will be true correct and complete as of the Closing Date (each such statement to be made again by Purchaser on that date with the Closing Date being substituted for the date of this Agreement throughout this Article 3): 3.1 Organization and Authority. (a) Purchaser and Bristol are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, have all requisite corporate power and authority to carry on their respective businesses as currently conducted and to own or lease and operate their respective properties, and are duly qualified to do business as foreign corporations in each jurisdiction where their respective businesses makes such qualification necessary. Purchaser and Bristol have the requisite power to enter into this Agreement and to carry out their respective obligations hereunder. (b) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by Purchaser's and Bristol's respective Boards of Directors, and no other proceedings on the part of Purchaser or Bristol are necessary to authorize this Agreement and the transactions contemplated hereby, and this Agreement is a valid and binding obligation of Purchaser and Bristol enforceable in accordance with its terms except as enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. (c) Except as set forth on Schedule 3.1(c)(1) attached hereto, no consent, approval or authorization of, or declaration, filing or registration with, any third party, including any government or regulatory authority, is required in connection with the execution and delivery by Purchaser and Bristol of this Agreement and the consummation by Purchaser and Bristol of the transactions contemplated hereby. Except as set forth on Schedule 3.1(c)(2) attached hereto, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) conflict with, result in a breach of or constitute a default under any of the terms, conditions or provisions of the Certificate of Incorporation or By-laws of Purchaser or Bristol; (ii) violate any law, order, judgment or decree to which any of Purchaser's or Bristol's properties or assets are bound; (iii) violate or constitute a default under (whether after the giving of notice, passage of time or both), or permit the termination of, or impair any rights or increase any obligations of Purchaser or Bristol under, any agreement or instrument to which Purchaser or Bristol is a party or by which any part of Purchaser's or Bristol's properties or assets are bound; or (iv) result in the acceleration of the maturity of any debt or obligation of Purchaser or Bristol, or in the creation or imposition of any Encumbrance upon any of the properties or assets of Purchaser or Bristol. 3.2 Brokers. No broker, finder or investment banker has acted directly or indirectly for Purchaser or Bristol, or any of their officers or directors in connection with this Agreement or the 15 16 transactions contemplated hereby, and no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in respect thereof based in any way on agreements, arrangements or understandings made by or on behalf of Purchaser or Bristol. 3.3 Disclosure. No representation or warranty by Purchaser or Bristol in this Agreement or in any other certificate or document delivered to Company and Shareholder and their representatives contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact which has not been disclosed to Company and Shareholder which has had or is likely to have a Materially Adverse Effect on Bristol. 3.4 Restricted Stock. The Restricted Stock when issued to Shareholder in accordance with Section 1.4, above, will be duly issued, authorized and outstanding non-registered, restricted Common Stock of Bristol, fully paid and non-assessable, and free and clear of all Encumbrances; and Bristol has the full power, authority and right to exchange the Restricted Stock in accordance with the terms of this Agreement. 3.5 Governmental Matters. Bristol and Purchaser have complied with all judgments, orders, rulings, statutes, laws (including any securities laws), permits, licenses, franchises, ordinances and other governmental authorizations, approvals and regulations applicable to it or any of its operations, properties or assets. To the best of their knowledge and belief, Bristol and Purchaser have all licenses and permits and other governmental authorizations and approvals required for the operation of its business and the use of its assets and properties. ARTICLE 4 COVENANTS 4.1 General. Each of the parties hereto shall use its best efforts to take all action and to do all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the conditions to close set forth in Article 5, below). 4.2 Notices and Consents. Company shall give all notices to third parties and shall obtain prior to the Closing Date any third party consents that are necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. Company's obligations with respect to the above shall include, but not be limited to, obtaining prior to the Closing Date the consents of (i) lenders holding a majority of Company indebtedness to the assignment to and assumption by Surviving Corporation of such indebtedness, without default, acceleration, amendment or modification thereof; and (ii) manufacturers to the assignment to and assumption by Surviving Corporation of all manufacturing agreements between such manufacturers and Company, without default, modification or amendment thereof. Bristol's obligations shall include but not be limited to obtaining the release of Shareholder of any personal guarantees provided by Shareholder in connection with any Company indebtedness with financial institution, including, if necessary, the assumption of such personal guarantees by Bristol. 4.3 Regulatory Matters and Approvals. Each of the parties shall give all notices to, make any filings with, and use its best efforts to 16 17 obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in Sections 2.1(e) and 3.1(c), above, or elsewhere in this Agreement. 4.4 Continuity of Interest. Shareholder shall not dispose of any of the Restricted Shares within two (2) years after the Closing Date in a manner that would cause the Merger to violate the continuity of shareholder interest requirement set forth in Treasury Regulation Section 1.368-1. If before two (2) years after the Closing Date, Shareholder desires to dispose of any of the Restricted Shares, then he shall provide written notice to Bristol, not less than sixty (60) days prior to the intended date of disposition, specifying the number of Restricted Shares that Shareholder desires to dispose. 4.5 Continuity of Business. Purchaser shall continue at least one significant historical business line of Company, or use at least a significant portion of Company's historical business assets in a business, in each case in accordance with Treasury Regulation Section 1.368- 1(d). 4.6 Tax Free Reorganization. Shareholder shall assume his Liability, including all Tax Liability, caused by, arising from, or related to the failure of the Merger to qualify, in any respects, as a tax-free reorganization pursuant to Code Section 368(a)(2)(D). 4.7 Registration and Listing of Restricted Shares. On the second anniversary of the Closing Date, Bristol shall forthwith use its best efforts to cause and shall pay for the Restricted Shares to be (i) registered with the Securities and Exchange Commission; and (ii) approved for listing and transfer on the NASDAQ stock exchange or on such other stock exchange as Bristol's publicly traded securities are then listed. 4.8 Operation of Business. From the date of this Agreement, Company shall not engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business which is likely to have an adverse effect on Company. Without limiting the generality of the foregoing: (a) Company shall not authorize or effect any change in its Certificate of Incorporation or By-laws; (b) Company shall not grant any options, warrants, or other rights to purchase or obtain any of its capital stock or issue, sell, or otherwise dispose of any of its capital stock; (c) Company shall not declare, set aside, or pay any dividend or distribution with respect to its capital stock (whether in cash or in kind), or redeem, purchase, or otherwise acquire any of its capital stock; (d) Company shall not issue any note, bond or other debt security or create, incur, assume, or guarantee any indebtedness for borrowed money or capitalized lease obligation; (e) Company shall not impose, or allow to be imposed, any Encumbrance upon any of its assets; (f) Company shall not make any capital investment in, make any loan to, or acquire the securities or assets of any person or entity; 17 18 (g) Company shall not make any change in the terms and conditions of employment for any of its directors, officers, and employees; and (h) Company shall not commit to do any of the foregoing. 4.9 Full Access. Company shall permit representatives of Bristol and Purchaser to have full access to all personnel, premises, properties, books, records (including tax records), accounts, contracts, and documents of or pertaining to Company and, unless otherwise agreed, such due diligence shall be conducted at reasonable times during business hours and shall not unduly disrupt the business and employees of Company. Purchaser and Bristol shall treat and hold as such any Confidential Information they receive from Company in the course of the due diligence investigation contemplated by this section 4.9, shall not use any of the Confidential Information except in connection with the transactions contemplated by this Agreement, and, if this Agreement is terminated for any reason whatsoever, shall return to Company all tangible embodiments (and all copies) thereof which are in their possession. 4.10 Notice of Developments. Each party hereto shall give prompt written notice to the other of any material adverse development causing a breach of any of its own representations and warranties in Articles 2 and 3, above, or the breach of any of its own covenants in this Article 4. No disclosure by any party pursuant to this Section 4.10, however, shall be deemed to amend or supplement the Schedules hereto or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant. 4.12 Exclusivity. So long as this Agreement is in effect, Company shall not solicit, initiate, or encourage the submission of any proposal or offer from any person or entity relating to the acquisition of all or substantially all of the capital stock or assets of Company. 4.13 Financing of Surviving Corporation. Bristol shall use its best efforts to secure and arrange for adequate ongoing financing of the operations of Surviving Corporation in accordance with its requirements and capabilities, as determined by the Board of Directors of Surviving Corporation. ARTICLE 5 CONDITIONS TO CLOSE 5.1 Conditions to Obligations of Bristol and Purchaser to Close. The obligations of Bristol and Purchaser to consummate the transactions to be performed by them on or prior to the Closing Date are subject to the satisfaction of the following conditions: (a) This Agreement and the Merger shall have been approved by the Board of Directors and shareholder of Company; 18 19 (b) The representations and warranties set forth in Article 2, above, shall be true and correct in all material respects on and as of the Closing Date; (c) Company and Shareholder shall have performed and complied with all of their covenants hereunder in all material respects through the Closing Date; (d) Company shall have obtained all third party consents that are necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement; (e) Company and Shareholder shall have performed their respective delivery obligations set forth in Article 6, below; (f) Except for the Company's pending litigation with Forsyth McArthur, no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent consummation of any of the transactions contemplated by this Agreement; (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; or (iii) affect adversely the right of Surviving Corporation to own the former assets and to operate the former businesses of Company, and no such injunction, judgment, order, decree, ruling or charge shall be in effect; (g) Company shall have completed and delivered the Schedules to this Agreement and the information contained in such Schedules shall be satisfactory to Purchaser and Bristol in their absolute and sole discretion, which determination shall be made on or prior to the Closing Date; (h) Bristol and Purchaser shall have completed their due diligence investigation of Company and shall be satisfied with the results of such investigation in their absolute and sole discretion; (i) Ernst & Young, LLP shall have confirmed in writing to Bristol not later than ten (10) days prior to the Closing Date that Ernst & Young, LLP is capable of completing an audit of Company not later than sixty (60) days following the Closing Date; provided, however, that Bristol's sole remedy if this condition to close is not satisfied is to delay the Closing Date until the last day of the month after which Ernst & Young, LLP shall be able to complete the audit within such sixty (60) day timeframe. Bristol and Purchaser may waive any condition specified in this Section 5.1 if they execute a writing so stating on or prior to the Closing Date. 5.2 Conditions to Obligations of Company and Shareholder to Close. The obligations of Company and Shareholder to consummate the transactions to be performed by them on or prior to the Closing Date are subject to satisfaction of the following conditions: (a) The representations and warranties set forth in Article 3, above, shall be true and correct in all material respects on and as of the Closing Date; 19 20 (b) Bristol and Purchaser shall have performed and complied with all of their covenants hereunder in all material respects through the Closing Date; (c) Bristol and Purchaser shall have performed their respective delivery obligations set forth in Article 6, below; (d) There shall not be any injunction, judgment, order, decree, ruling or charge in effect against Bristol or Purchaser preventing the consummation of any of the transactions contemplated by this Agreement; and (e) All actions to be taken by Bristol and Purchaser in connection with the consummation of the transactions contemplated by this Agreement and all certificates, instruments, and other documents required to effect the transactions contemplated by this Agreement shall be satisfactory in form and substance to Company and Shareholder in their reasonable discretion. (f) This Agreement, the Merger and the issuance of the Restricted Shares shall have been approved by the Board of Directors and, if necessary, the shareholders of Bristol and Purchase. (g) Bristol and Purchaser shall have performed and complied with all of their covenants hereunder in all material respects through the Closing Date. (h) No action, suit or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent consummation of any of the transactions contemplated by this Agreement to be rescinded following consummation; or (ii) affect adversely the right of Surviving Corporation to own the former assets and to operate the former businesses of Company, and no such injunction, judgment, order, decree, ruling or charge shall be in effect. Company and Shareholder may waive any condition in this Section 5.2 if they execute a writing so stating on or prior to the Closing Date. ARTICLE 6 DELIVERIES ON OR PRIOR TO THE CLOSING DATE 6.1 Deliveries Subject to Filing of Certificates. All deliveries to be made pursuant to this Article 6 shall, to the extent appropriate, be prepared in such a manner so as to become effective only upon the filing of the Certificates in accordance with Section 1.1, above. 6.2 Mutual Deliveries. On or prior to the Closing Date, (i) Purchaser and Shareholder shall execute and deliver to each other Shareholder's Employment Agreement with Surviving Corporation in substantially the form set forth as Exhibit "C" attached hereto; and 20 21 (ii) Bristol, Purchaser and Company shall deliver to each other the Certificates. 6.3 Deliveries by Company. Not less than ten (10) days prior to the Closing Date, Shareholder shall cause Company to deliver to Purchaser and Bristol the Schedules to this Agreement. On or prior to the Closing Date, Shareholder shall cause Company to deliver to Purchaser and Bristol (i) a certificate stating that the representations and warranties of Company contained in this Agreement are true and correct on and as of the Closing Date as though made at and as of that date (except where such representation and warranty is made as of a date specifically set forth therein); (ii) a copy of the Certificate of Incorporation, as amended, and By-laws of Company as then in effect, an incumbency certificate, and resolutions of the Board of Directors and shareholders of Company approving the Agreement and authorizing the performance of the transactions contemplated hereby, all as certified by the Secretary of Company; (iii) a long-form good standing certificate dated as of or within fifteen (15) business days of the Closing Date from the Secretary of State of the State of Florida; (iv) the legal opinion of Company's counsel in the form attached hereto as Exhibit "D;" (v) the resignations, effective as of the Closing Date, of each director and officer of Company; and (vi) such other documents as Purchaser may reasonably request for the purposes of consummating the transactions contemplated hereby. 6.4 Deliveries by Shareholder. On or prior to the Closing Date, Shareholder shall deliver to Bristol and Purchaser (i) the certificate(s) representing all of the Company Shares owned by Shareholder, duly endorsed for surrender and cancellation; (ii) a certificate stating that the representations and warranties of Shareholder contained in this Agreement are true and correct on and as of the Closing Date as though made at and as of that date (except where such representation and warranty is made as of a date specifically set forth therein); and (iii) such other documents as Purchaser may reasonably request for the purposes of consummating the transactions contemplated herein. 6.5 Deliveries by Purchaser. On or prior to the Closing Date, Purchaser shall deliver to Shareholder (i) a certificate stating that the representations and warranties of Purchaser contained in this Agreement are true and correct on and as of the Closing Date as though made at and as of that date (except where such representation and warranty is made as of a date specifically set forth therein); (ii) a copy of the Certificate of Incorporation, as amended, and By-laws of Purchaser as then in effect, and resolutions of the Board of Directors of Purchaser approving the Agreement and authorizing the performance of the transactions contemplated herein, all as certified by the Secretary of Purchaser; (iii) a long-form good standing certificate dated as of or within fifteen (15) business days of the Effective Date from the Secretary of State of the State of Delaware; and (iv) such other documents as Shareholder may reasonably request for the purposes of consummating the transactions contemplated hereby. Immediately after the Effective Time and on the Closing Date, Purchaser shall deliver to Shareholder One Million One Hundred Thousand Dollars ($1,100,000) in immediately available funds. 6.6 Deliveries by Bristol. On or prior to the Closing Date, Bristol shall deliver to Shareholder (i) a certificate stating that the representations and warranties of Bristol contained in this Agreement are true and correct on and as of the Closing Date as though made at and 21 22 as of that date (except where such representation and warranty is made as of a date specifically set forth therein); (ii) a copy of the Certificate of Incorporation, as amended, and By-laws of Bristol then in effect, and resolutions of the Board of Directors of Bristol approving the Agreement and authorizing the performance of the transactions contemplated herein, all as certified by the Secretary of Bristol; (iii) a long-form good standing certificate dated as of or within fifteen (15) business days of the Effective Date from the Secretary of State of the State of Delaware; and (iv) such other documents as Shareholder may reasonably request for the purposes of consummating the transactions contemplated hereby. Immediately after the Effective Time and on the Closing Date, Bristol shall deliver to Shareholder Seven Hundred Fifty Thousand Dollars ($750,000) worth of Restricted Shares. 6.7 Waivers. A party may waive any deliveries to which it is entitled pursuant to this Article 6 if it executes a writing so stating on or before the Closing Date. ARTICLE 7 INDEMNITIES 7.1 Indemnity by Bristol and Purchaser. (a) Bristol and Purchaser hereby expressly and unequivocally agree to indemnify, defend and hold harmless Shareholder, his heirs, successors, attorneys, agents, employees and representatives from and against and in respect of any and all claims, demands, losses, costs, expenses, obligations, guaranties, liabilities, actions, suits, damages and deficiencies, including without limitation, interest, penalties, reasonable attorneys' fees and all amounts paid in settlement of any claim, action or suit (all such claims, demands, losses, costs, expenses, etc. being referred to herein collectively as "Claims") which are asserted against Shareholder or which Shareholder incurs or suffers, whether as a result of third party claims or otherwise, and which arise out of, result from or relate to (i) any failure by Bristol and Purchaser to fully perform in a timely manner any agreement, covenant or obligation of Bristol and Purchaser hereunder; or (ii) the existence or non-existence of any fact or circumstance which is different from or inconsistent with or a breach of any representation or warranty of Bristol and Purchaser made herein, provided, however, that any insurance proceeds paid to Shareholder with respect to any indemnification claim hereunder shall reduce Purchaser's and Bristol's indemnification obligations, dollar for dollar. (b) The indemnities provided for above shall not require payment as a condition precedent to recovery. 7.2 Indemnity by Company and Shareholder. (a) The Company and Shareholder hereby expressly and unequivocally agree to indemnify, defend and hold harmless Bristol, Purchaser and Surviving Corporation, and Bristol's, Purchaser's and Surviving Corporation's officers, directors, employees, agents, affiliates, attorneys, representatives and related entities (for purposes of this Section 7.2 only, the "Indemnified Parties") from and against and in respect of any and all Claims which are asserted against any Indemnified Party or which any Indemnified Party incurs or suffers, whether as a result of third party claims or otherwise, and which arise out of, result from or relate to (i) any failure by Company and/or Shareholder to fully perform in a timely manner any agreement, covenant 22 23 or obligation of Company and Shareholder hereunder; (ii) the existence or non-existence of any act or circumstance which is different from or inconsistent with or a breach of any representation or warranty of Company and/or Shareholder made herein; (iii) any Liabilities of Company which are based on acts or omissions occurring prior to the Closing Date and which are not (a) specifically listed in the Schedules to this Agreement or (b) expressly assumed by Purchaser under this Agreement; (iv) all Liability arising in connection with the Company's pending litigation with Forsyth McArthur; or (v) any Liability arising from the lost stock certificates discussed in Section 2.1(b), below; provided, however, that any insurance proceeds paid to Bristol or Surviving Corporation with respect to any indemnification claim hereunder shall reduce Company's and Shareholder's indemnification obligations, dollar for dollar. (b) The indemnities provided for above shall not require payment as a condition precedent to recovery. 7.3 Defense of Claims. If any party receives notice of the commencement of any action or of the existence of any Claim or a written assertion of any facts by a third party with respect to any matter that would give rise to a Claim hereunder or otherwise suffers a loss for which such party is entitled to be indemnified pursuant to Section 7.1 or Section 7.2, above, then that party (the "Indemnified Party") shall give the party required to indemnify (the "Indemnifying Party") reasonable notice thereof and shall permit the Indemnifying Party to have reasonable access to relevant information in the Indemnified Party's possession or control regarding such Claim. The Indemnifying Party shall have the right to take all reasonable action, at its own expense, as it deems desirable in order to minimize or eliminate such Claim. In the event of a Claim requesting solely monetary damages, the Indemnifying Party shall have the right, at its own expense, to appoint counsel to handle the defense of such matter and the exclusive right to prosecute, defend, compromise, settle or pay such Claim provided that the Indemnifying Party acknowledges in writing its obligations and Liability for such Claim as between the parties hereto or procures from the person making the Claim a full and complete release of the Indemnified Parties which is satisfactory in form and substance to counsel for the Indemnified Parties. If the foregoing acknowledgments or releases are not furnished to the Indemnified Party, then they may appoint associate counsel to participate in the defense of such matter at the expense of the Indemnifying Party. If the person asserting the Claim requests relief other than or in addition to monetary damages, then the Indemnifying Party may not settle any aspects of such Claim requesting relief other than monetary damages without the Indemnified Parties' prior written consent, which consent shall be subject only to their obligation to act in good faith. 7.4 Remedies Not Exclusive. The remedies provided in this Article 7 shall be in addition to, and not in lieu of, any other remedies which a party may have at law, in equity or otherwise. ARTICLE 8 TERMINATION 23 24 8.1 Termination of Agreement. This Agreement and the transactions contemplated herein may be terminated as follows: (a) By the mutual written consent of the parties hereto at any time prior to the Effective Time; (b) By Bristol and/or Purchaser by giving oral or written notice to Company and Shareholder at any time prior to the Effective Time (i) in the event Company or Shareholder has breached any representation, warranty, or covenant contained in this Agreement; or (ii) in the event of the failure of a condition to close set forth in Section 5.1, above; and (c) By Company and/or Shareholder by giving oral or written notice to Bristol and Purchaser at any time prior to the Effective Time (i) in the event Bristol and/or Purchaser has breached any material representation, warranty, covenant contained in this Agreement in any material respect; or (ii) in the event of the failure of a condition set forth in Section 5.2, above. 8.2 Effect of Termination. If any Party terminates this Agreement pursuant to Section 8.1, above, then all rights and obligations of the parties hereto shall terminate without any Liability of any party to any other party (except for any Liability of any party then in breach); provided, however, that the confidentially provisions contained in Section 4.9, above, shall survive any such termination. ARTICLE 9 GENERAL PROVISIONS 9.1 Publicity. After the Effective Time and except as may otherwise be required by law (i) Bristol shall determine the timing and content of any press release or public announcement relating to the transactions contemplated by this Agreement; and (ii) Bristol, Surviving Corporation and Shareholder shall determine the timing and content of any announcements to Company's customers, suppliers, licensors, licensees or employees relating to the transactions contemplated by this Agreement and no such announcement shall be made without the prior written consent of such parties. Nothing contained in this Section 9.1 shall preclude Shareholder and Company from giving notice of the anticipated Merger to any party from which consent to the Merger must be obtained. 9.2 Complete Agreement; Modifications. This Agreement and any documents referred to herein or executed in connection herewith constitute the parties' entire agreement with respect to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings, whether oral or written, with respect to the subject matter hereof. This Agreement may not be amended, altered or modified except by a writing signed by the parties. 9.3 Additional Documents. Each party hereto agrees to execute, acknowledge and deliver any and all further documents, instruments, certificates, agreements and other writings and to perform such other actions which may be or become necessary or expedient to effectuate and carry out this Agreement. 9.4 Notices. Unless otherwise specifically permitted by this Agreement, all notices under this Agreement shall be in writing and shall be delivered by personal service, telecopy (to be followed on the 24 25 same day by regular or certified mail, return receipt requested), federal express or comparable overnight service or certified mail (if such service is not available, then by first class mail), postage prepaid, to such address as may be designated from time to time by the relevant party. Any notice sent by certified mail shall be deemed to have been given three (3) days after the date on which it is mailed. All other notices shall be deemed given when received. No objection may be made to the manner of delivery of any notice actually received in writing by an authorized agent of a party. The initial addresses of the parties shall be as follows: IF TO BRISTOL: WITH A COPY TO: Bristol Technology Systems, Inc. Gregory S. Lane, Esq. 18201 Von Karman, Suite 305 Smith, Silbar, Duffy, Irvine, CA 92612 Parker & Woffinden, LLP Attn: Richard H. Walker 19100 Von Karman President Suite 400 Irvine, CA 92612 Tel: (714) 475-0800 Fax: (714) 475-0808 Tel: (714) 263-8066 Fax: (714) 263-8073 IF TO PURCHASER: WITH A COPY TO: Bristol Merger Corporation Gregory S. Lane, Esq. [Same as above] [Same as above] IF TO SHAREHOLDER: WITH A COPY TO: Pedro Penton Moises T. Grayson, Esq. 8899 N.W. 18th Terrace Blaxberg, Grayson & Miami, Florida 33172 Singer, P.A. 25 S.E. 2nd Av, Suite 730 Tel: (800) 423-4046 Miami, Florida 33131 Fax: (305) 371-6816 Tel: (305) 381-7979 Fax: (305) 371-6816 IF TO COMPANY: WITH A COPY TO: International Systems & Moises T. Grayson, Esq. Electronics Corporation [Same as above] 8899 N.W. 18th Terrace Miami, Florida 33172 Attn: Pedro Penton Tel: (800) 423-4046 Fax: (305) 591-4255 9.5 No Third Persons or Entities. None of the provisions of this Agreement shall be for the benefit of, or enforceable by, any third person or entity; provided, however, that Bristol shall be a third-party beneficiary of all rights of Purchaser and Surviving Corporation hereunder. 25 26 9.6 Governing Law; Jurisdiction. This Agreement, the respective rights, obligations and remedies of the parties hereunder, the interpretation hereof and all disputes, controversies and Liabilities arising out of or related to this Agreement or the relationship between the parties created hereby shall be governed by and construed in accordance with the internal laws of the State of Delaware without reference to its principles of conflict of laws. 9.7 Attorneys' Fees. Should any litigation or arbitration be commenced (including any proceedings in a bankruptcy court) between the parties hereto or their representatives concerning any provision of this Agreement or the rights and duties of any person or entity hereunder, the party or parties prevailing in such proceeding shall be entitled, in addition to such other relief as may be granted, to the reasonable attorneys' fees and costs incurred by reason of or in connection with such litigation or arbitration. 9.8 Post-Judgment Attorneys' Fees. The prevailing party in any legal action or other proceeding between the parties regarding this Agreement shall be entitled, in addition to and separately from the amounts recoverable under Section 9.7, to the payment by the losing party of the prevailing party's reasonable attorneys' fees, costs, and litigation expenses incurred in connection with (i) any appellate review of the judgment rendered in such action or of any other ruling in such action; and (ii) any proceeding to enforce, collect or execute upon a judgment in such action. It is the intent of the parties that the provisions of this Section 9.8 be distinct and severable from the other rights of the parties under this Agreement, shall survive the entry of judgment in any action and shall not be merged into such judgment. 9.9 Successors and Assigns. Neither this Agreement nor any rights or obligations hereunder may be assigned, transferred or delegated by operation of law or otherwise, without the prior written consent of the other parties hereto. Subject to the above, this Agreement shall inure to the benefit of the parties' respective successors and assigns. 9.10 Survival of Warranties. Each representation and warranty contained herein shall survive the Closing Date for a period of three (3) years following the Closing Date. The right to indemnification pursuant to this Agreement shall survive any investigation made by the parties or their representatives, lenders or investors, or the receipt of any opinion or certificate. 9.11 Joint and Several Liability. Notwithstanding any provision of this Agreement to the contrary, the Liability of Company and Shareholder arising prior to the Effective Time for the representations and warranties made by, and the covenants and indemnification obligations imposed upon Company and Shareholder or either of them under this Agreement, shall be joint and several. The Liability of Company shall terminate at the Effective Time. Notwithstanding any provision of this Agreement to the contrary, the Liability of Bristol and Purchaser arising prior to the Effective Time for the representations and warranties made by, and covenants and indemnification obligations imposed upon Bristol and Purchaser or either of them under this Agreement, shall be joint and several. 9.12 Remedies Not Exclusive. No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy will be cumulative and will be in addition to every other remedy given hereunder or now or hereafter 26 27 existing at law or in equity or by statute or otherwise. The election of any one or more remedies will not constitute a waiver of the right to pursue other available remedies. 9.13 Expenses. Each party shall pay all of the costs and expenses incurred by such party in connection with the authorization, preparation, execution and performance of this Agreement, including, without limitation, all fees and expenses of its agents, representatives, counsel and accountants. 9.14 Waivers Strictly Construed. With regard to any power, remedy or right provided herein or otherwise available to any party hereunder (i) no waiver or extension of time shall be effective unless expressly contained in a writing signed by the waiving party; and (ii) no alteration, modification or impairment shall be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or by any other indulgence. 9.15 Rules of Construction. The Article and Section headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, or interpret the scope of this Agreement or any particular Article or Section. Throughout this Agreement, as the context may require, the singular tense and number includes the plural, and the plural tense and number includes the singular. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. The parties intend that each representation, warranty, or covenant contained herein shall have independent significance. 9.16 Severability. If any provision, clause or application of this Agreement is determined by a court of competent jurisdiction or arbitrator to be invalid or unenforceable for any reason whatsoever, then (i) this Agreement shall remain binding and in full force and effect to the maximum extent permitted under applicable law, except for such invalidated or unenforceable provision, clause or application; (ii) the parties shall negotiate in good faith to provide adjustments to ameliorate any injustice or frustration of purpose resulting therefrom in a manner consistent with the original intent of the parties; and (iii) if the parties are unable to agree upon such adjustments, then the invalid or unenforceable provision, clause or application shall be modified and reformed by such court or arbitrator so that it is valid and enforceable in a manner that comes the closest to expressing the original intention of the parties with respect thereto, and each party hereto agrees to be bound by any such modification and reformation as if such modification and reformation were contained in this Agreement in the first instance. 9.17 Funds. Any requirement in this Agreement to pay immediately available funds may be satisfied by delivery of a certified or cashier's check in the applicable amount or by wiring to an account designated by the recipient of the applicable amount. 27 28 9.18 Exhibits and Schedules. All Exhibits and Schedules attached hereto are hereby incorporated in and made a part of this Agreement as if fully set forth herein. 9.19 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first set forth above. "BRISTOL" "COMPANY" BRISTOL TECHNOLOGY SYSTEMS, INTERNATIONAL SYSTEMS & INC., a Delaware corporation ELECTRONICS CORPORATION, a Florida corporation By:________________________ By:______________________ Richard H. Walker, Pedro Penton, President President "PURCHASER" "SHAREHOLDER" BRISTOL MERGER CORPORATION, a Delaware Corporation _________________________ Pedro Penton By:_________________________ Richard H. Walker, President 28 EX-10.28 3 EMPLOYMENT AGREEMENT TO BE EFFECTIVE AS OF 5/1/97 1 EXHIBIT 10.28 EMPLOYMENT AGREEMENT (PEDRO PENTON) This Employment Agreement (the "Agreement") is made to be effective as of the 1st day of May, 1997, by and between PEDRO PENTON, whose address is 9865 SW 108th Terrace, Miami, Florida 33176 ("You" or the "Executive"), and INTERNATIONAL SYSTEMS & ELECTRONICS CORPORATION, a Delaware corporation with its principal office at 8899 N.W. 18th Street, Miami, Florida (the "Company" or "ISE"). Where appropriate in the context, the term "Company" shall also mean and include the Company and its, parents, subsidiaries and affiliates. In consideration of the mutual agreements and promises hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company agrees to employ You and You agree to serve as an employee of the Company upon the following terms and conditions: 1. Condition Precedent. This Agreement and the parties respective rights and obligations set forth herein are conditioned in their entirety on the filing of Certificates of Merger in the States of Delaware and Florida by Bristol Technology Systems, Inc., a Delaware corporation ("Bristol"), pursuant to which International Systems & Electronics Corporation, a Florida corporation ("ISE-FLA"), shall merge with and into Company, formerly known as Bristol Merger Corporation, a Delaware corporation ("BMC"). 2. Term. Subject to the other terms and conditions of this Agreement, the initial term of Your employment hereunder (the "Term") shall be for the five (5) year period commencing May 1, 1997 and ending April 30, 2002, unless earlier terminated in accordance with this Agreement. Following the expiration of the Term, this Agreement may be extended for an additional period of time by the mutual agreement of the parties; provided, however, You expressly acknowledge and agree that all compensation and bonus provisions under any extension of this Agreement shall be renegotiated by the parties. Notwithstanding the foregoing, Your obligations under Sections 8(b) and 9, below, shall survive the expiration or termination of this Agreement or any extension thereof. 3. Position; Duties; etc. (a) Your title shall be President and it shall be Your responsibility to perform all functions generally appropriate to such position at all times in a lawful and professional manner which reflects positively upon the Company and serves its best interests, and such other reasonable duties as may be assigned by the Company's Board of Directors (the "Board"). In this capacity, You shall report to the Board. You shall perform substantially all of Your duties, at the Company's sole and exclusive discretion, at the Company's office located at the address set forth above. The Company, however, reserves the right from time to time to change the person(s) to whom You report, as may be necessary or appropriate and in the best interests of the Company. 1 2 (b) You shall, to the best of Your abilities, effectively, diligently, in good faith and with integrity, devote Your full time, attention, energy and skill to the fulfillment of Your duties hereunder and shall at all times be promotive and supportive of the Company, its products, services, management and other employees, at a level of competence and effectiveness consistent with the position occupied. (c) You shall be subject to and will comply with such policies and procedures as are from time to time established for employees of the Company generally, except to the extent that such policies or procedures are inconsistent with the express terms of this Agreement, and in those instances, the terms of this Agreement shall control. (d) You shall carefully monitor all aspects of the business, properties and affairs of the Company. Without limiting the generality of the foregoing, it shall be Your duty to notify the Board promptly upon becoming aware of any matter which constitutes or which might constitute a breach of any of Your representations, warranties or covenants under that certain Agreement and Plan of Merger, dated March 26, 1997, by and among Bristol, BMC, ISE-FLA and You (the "Merger Agreement"). Nothing herein shall in any manner be construed to limit the duties and obligations that You have as an officer of the Company under applicable State law or the applicable articles of incorporation or bylaws of the Company. 2 3 4. Compensation and Benefits (a) Salary. As remuneration for Your services and provided You remain employed and are fulfilling Your duties hereunder, during the Term the Company will pay You, in accordance with Company policies, an annual gross salary of One Hundred Fifty Thousand Dollars ($150,000). Such salary shall be payable in arrears in substantially equal installments on the Company's regular pay days, less any withholding of tax or any amounts required by law to be withheld and less any payments for fringe benefits or payments and contributions as may otherwise be authorized by You or required under employee benefit plans maintained from time to time by the Company. (b) Bonus. With respect to each year of the Term, and provided, in the sole discretion of the Board, You have been employed and have satisfactorily performed Your duties during the entire year, You shall be eligible to earn the following annual bonus payments, determined as of the end of Company's fiscal year and payable within thirty (30) days after then end of such fiscal year: First, to the extext that the Company's pre-tax profits exceed Two Hundred Thousand Dollars ($200,000) (the "Baseline"), then You shall earn a bonus (the "First Bonus") equal to this excess up to a maximum total of $ 100,000; provided, however, that the First Bonus is subject to reduction in accordance with Section 1.5(b) of the Merger Agreement; If pre-tax profits are not sufficient in a year to yield the One Hundred Thousand sum, then this deficiency shall be carried forward into subsequent years where it may be paid provided that the Company's pre-tax profits are suffiently in excess of Two Hundred thousand dollars to satisfy that year's obligation and the prior year deficiency. If You do not receive Five Hundred Thousand Dollars ($500,000) in bonus payments under this First Bonus during the Term, then the First Bonus shall continue under any agreed to extension of the Term, provided that Company reserves the right to increase the Baseline under such extension; Second, if the Company's pre-tax profits exceed Two Hundred Thousand Dollars ($200,000) (the "Baseline"), then You shall earn a bonus equal to twenty-five percent (25%) of the amount of pre-tax profits in excess of the Baseline (the "Second Bonus"); Third, if, during the Term, pre-tax profits in excess of the Baseline exceed, in the aggregate, Two Million Six Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars and Sixty-Seven Cents ($2,666,666.67), then Your right to receive payments under the Second Bonus shall terminate and You shall thereafter be entitled to a bonus equal to One Hundred Percent (100%) of pre-tax profits in excess of the Baseline (the "Third Bonus"). If this Third Bonus is activated during the Term but You do not receive Five Hundred Thousand Dollars ($500,000) in bonus payments under this Third Bonus during the Term, then the Third Bonus shall continue under any agreed to extension of the Term, provided that Company reserves the right to increase the Baseline under such extension; and Fourth, if, during the Term or any extension thereof, You receive, in the aggregate, Five Hundred Thousand Dollars ($500,000) in bonus payments under the First Bonus, then Your right to receive payments under the First Bonus shall terminate. Fifth, if, during the Term or any extension thereof, You receive, in the aggregate, Five Hundred Thousand Dollars ($500,000) in bonus payments under the Third Bonus, then Your right to receive payments under the Third Bonus shall terminate and Your right to receive payments under the Second Bonus shall be reinstated. 3 4 For purposes of this Section 4(b), the term "pre-tax profits" shall mean earnings before income taxes, calculated in accordance with generally accepted accounting principles and specifically reduced by (i) any interest expense of Company, whether external or inter-company; and (ii) with respect to the Second and Third Bonus, the amount of the First Bonus. (c) Partial Employment Period. The above salary and bonus payments shall be pro rated for any partial employment period. (d) Resolution of Compensation Disputes. Any dispute arising between the parties hereto in connection with the compensation and bonus provisions of this Section 4, including but not limited to the manner in which the bonus payments are calculated, which dispute involves an amount less than $10,000, shall be determined and resolved by the Vice President of Finance of Bristol, and such determination and resolution shall be binding on both parties. Any other dispute in connection with the compensation and bonus provisions of this Section 4, which cannot be resolved between the parties, shall be resolved by binding arbitration. 5. Expenses. The Company shall reimburse You for all reasonable, ordinary and necessary travel (except normal travel between home and office) and other out-of-pocket expenses incurred by You for the purpose of and in connection with performing Your duties, subject to proper submission of substantiating documentation, and subject further to all Company policies respecting expense reimbursement, as the same may vary from time to time. 6. Employee Benefit Programs. (a) Benefit Programs. You shall be entitled to participate in or receive benefits under all benefit programs, arrangements or perquisites which the Company maintains generally from time to time for its executive employees. (b) Vacation. You shall be entitled to four (4) weeks of paid vacation per year during the Term. 7. Consequences of Termination of Employment. (a) Death/Disability. In the event of Your death during the Term, Your employment hereunder shall be terminated as of the date of Your death and Your designated beneficiary, or, in the absence of such designation, Your estate or other legal representative (collectively, the "Estate") shall be paid Your unpaid salary through the date occurring on the earlier of three (3) months from the date of death or the expiration of the Term. Other death benefits that do not overlap the foregoing will be determined in accordance with the terms of the Company's benefits programs and plans maintained from time to time by the Company for its executive employees. In the event You are mentally or physically disabled for a period of four or more consecutive months ("disability" being defined as a mental or physical impairment or condition which substantially and effectively prevents You from performing Your duties hereunder), or for any 120 days during any twelve month period during the Term, Your employment may be terminated on written notice to You. In such event, Your salary shall be continued for a period of two (2) months following the effective date of termination. Other than the salary set forth in this Section 7(a), You or Your estate shall not be entitled to any other payment or benefit by reason of Your death or disability. 4 5 (b) Termination of Employment by the Company for Cause. The Company shall have the right to terminate Your employment and this Agreement for "Cause" and nothing herein, or in any other agreement between You and the Company shall prevent the Company from terminating Your employment for "Cause." In the event You are terminated for "Cause," You shall be paid Your salary through the date of termination and You shall be entitled to those rights and benefits You may have earned through the date of termination in respect of benefits under any employee benefit plans or programs of the Company maintained from time to time by the Company for its executive employees as determined in accordance with the terms of such plans or programs, as the case may be. (c) Cause Defined. The Company shall have "Cause" to terminate Your employment hereunder prior to the end of the Term (or any extension thereof) for: (i) Gross negligence, willful misconduct, or breach of fiduciary duty to the Company; (ii) If the Company fails to achieve for any (2) consecutive quarters certain quarterly performance criteria (A) reasonably set by the Board of Directors of the Company at the beginning of each fiscal year, and (B) based upon the Company's performance in the prior fiscal year, which failure is not cured within the four (4) month period immediately following the second consecutive quarter; (iii) Drug or alcohol use or addiction which materially interferes with the performance of Your duties at any time; (iv) Illegal, immoral or dishonest conduct; (v) Your breach or failure to perform any of the provisions of this Agreement, the Merger Agreement, ancillary or related agreements thereto, or any present or future agreement between You and the Company respecting non-competition or the ownership or protection of confidential information, inventions, patents, trademarks, copy-rights or other intellectual properties; and (vi) Your voluntary termination of employment prior to expiration of the Term. 8. Covenants Regarding Confidential Information and Proprietary Rights. (a) Confidential Information Defined. As used herein, "Confidential Information" means all proprietary information, trade secrets and any non-public information, oral and written, and any document or media containing such information, concerning the Company or used by the Company in the operation of its business, including, without limitation, any of the Company's actual or prospective customers, suppliers, contractors and co-venturers or concerning any actual or planned discoveries, inventions, developments, improvements, technology, know-how, processes, products, services, businesses, business opportunities, operations, activities or plans of or belonging to the Company (including, without limitation, technical formulae and designs, computer hardware and software, databases, original works of authorship, customer lists, bills of material, business plans, financial information, trade secrets and other proprietary information); provided, however, that Confidential Information shall not include such portion of the aforesaid information which has become of hereafter becomes public knowledge within the business equipment industry through no fault of Your own. (b) Confidentiality. It is understood and agreed that prior to and during the Term You have, and will become aware of, Confidential Information, the unauthorized disclosure of 5 6 which may harm the Company. Accordingly, You agree that, except as expressly authorized by the Company or as reasonably necessary in order to fulfill Your duties under this Agreement, both during and after the Term, You will never communicate, divulge or use for the benefit of Yourself or any other person or entity, directly or indirectly, any Confidential Information discovered, conceived of, or disclosed, communicated or in any manner obtained by You or coming into Your possession prior to or during the Term. Upon termination of this Agreement for whatever reason or whenever requested by the Company, You will promptly deliver to the Company, and shall retain no copies of, all documents, media, records or other materials containing Confidential Information which are in Your possession or under Your control. Further, You agree that You will not, during Your employment with the Company, improperly use or disclose any proprietary information or trade secret of any former or concurrent employer, and that You will not bring onto the premises of the Company any unpublished document or any property belonging to any such former or concurrent employer unless consented to in writing by such former or concurrent employer. (c) The Company. For purposes of this Section 8, the term "Company" shall include any parent, subsidiary, affiliated company or business predecessor to the Company. 9. Covenant Not to Compete. For a period of three (3) years from and after the expiration or earlier termination of this Agreement, within the state of Florida (the "Territory"), You shall not: (i) directly or indirectly enter into the employ of, or render any service to, or act in concert with, any person, partnership, corporation or other business entity (other than the Company or its Affiliates) engaged in any business or in the rendering of any service of the type being conducted or rendered by the Company at any time during the Term (a "Competitive Business"); or (ii) directly or indirectly engage in any such Competitive Business on Your own account; or (iii) become interested in any such Competitive Business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee or in any other relationship or capacity; provided, that the purchase of a publicly traded security of a corporation, partnership or other entity engaged, or which becomes engaged, in such business or service shall not in itself be deemed violative of this Agreement so long as You do not own, directly or indirectly, more than 1% of the securities of such corporation, partnership or other entity. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 9 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to place any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. You expressly agree that the running of the restricted period of competition shall be tolled for any period during which You are in breach of the covenants set forth in this Section 9. 10. Equitable Relief. You expressly agree that the Company may not be adequately compensated by damages for a breach by You of any of the covenants contained in Sections 8 and 9, above, and further agree that, in the event of a breach or threatened breach by You of any provision of Section 8 or 9, above, the Company shall be entitled to enforce the covenants contained in Section 8 or 9, above, by specific performance and to enjoin or restrain any such breach or threatened breach (without the necessity of posting a bond or other security in any action 6 7 initiated for such relief), but nothing herein shall be construed as prohibiting the Company from pursuing any remedy available to the Company for such breach or threatened breach. 11. Notices. Any notice to be given under this Agreement by either party shall be in writing and hand delivered (by courier or otherwise) or mailed via first class mail and by certified or registered mail with return receipt requested, and addressed to the other party at its address at the head of this Agreement or at such other address as such other party shall have given notice to the first party in accordance with the provisions of this Section. 7 8 12. Non-Waiver of Rights. The failure to enforce, at any time, any of the provisions of this Agreement or to require, at any time, performance by the other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement. Any waiver of any provision of this Agreement shall be valid only if in writing signed by the party so waiving, and no waiver of a provision hereof in any given instance shall operate as a waiver of such provision in any other instance or the waiver of any other provision of this Agreement. 13. Severability. The invalidity or inability to enforce any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 14. Assignment. This Agreement shall be binding upon, and shall inure to the benefit of, You and the Company and their respective executors, administrators, heirs, successors and permitted assigns. This Agreement shall not be assignable by You, in whole, or in part, without the written consent of the Company. 15. Governing Law. The validity, interpretation and construction hereof shall be governed by and construed and enforced in accordance with the laws of the State of Florida, excepting any rule thereof which would refer such matters to the law of any other jurisdiction. 16. Miscellaneous. This Agreement embodies the entire agreement of the parties with respect to the matters within its scope and supersedes any prior oral or written agreements and understandings of the parties respecting same. This Agreement shall not be modifiable except in writing signed by both parties hereto, and the provisions hereof shall override any contrary or conflicting provisions in any acknowledgment, invoice or other document unilaterally issued by either party. The headings contained in this Agreement have been inserted solely for convenience of reference and shall be of no force or effect in the construction or interpretation of the provisions of this Agreement. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The remedies available to the Company for breach of this Agreement shall be cumulative, and nothing herein shall prevent the Company from pursuing any such remedies, whether inconsistent or otherwise. 8 9 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized representative, and You have signed this Agreement, to be effective as of the day and year first above written. ____________________________________________ Pedro Penton INTERNATIONAL SYSTEMS & ELECTRONICS CORPORATION, a Delaware corporation By:_________________________________________ Its:________________________________________ 9 -----END PRIVACY-ENHANCED MESSAGE-----