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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into
this 13th day of August, 1998, by and among IntraNet Solutions, Inc.
("Solutions"), a Minnesota corporation and IntraNet Distribution Group, Inc.
("Distribution") a Minnesota corporation and wholly-owned subsidiary of
Solutions (hereinafter Solutions and Distribution are sometimes referred to
singularly as "Seller" and referred to collectively as "Sellers"); and
Communication Connections, Inc., a Wisconsin corporation ("Buyer").
WHEREAS, Buyer desires to purchase and Sellers desire to sell
substantially all of the printing business assets of Sellers at Sellers' Phoenix
location (the "Business"), including goodwill, customer lists and all other
intangible assets;
NOW, THEREFORE, it is hereby agreed:
ARTICLE 1. PURCHASE AND SALE OF ASSETS
1.1. ASSETS TO BE ACQUIRED. On the terms and subject to the conditions
of this Agreement, Sellers hereby transfer, assign and deliver to Buyer or
Buyer's nominee, by and through duly executed instruments for the sale, transfer
and conveyance to Buyer, all tangible and intangible assets used in the
Business, including, without limitation, all current equipment, furniture,
fixtures, inventories, tooling, service parts, trademarks, trade names, patents,
drawings, designs, the license rights under the Software License Agreements (see
Section 1.7, below), proprietary computer software and systems (excluding all
software licensed by Sellers to Buyer pursuant to Section 1.7 hereof) and
similar assets utilized by Sellers in the Business, together with technical
expertise, order backlog details, customer lists, sales records and information,
marketing information, advertising materials and all of the records relating to
the Business (sometimes herein referred to as the "Purchased Assets"), excluding
only cash, accounts receivable and the Xxxxxx 29" two color offset press.
1.2. Purchase Price. As and for consideration for the Purchased
Assets, Buyer shall pay to Sellers the purchase price ("Purchase Price") set
forth in this Section 1.2. The Purchase Price for the Purchased Assets shall be
equal to the following:
(a) The Purchase Price allocated to the Purchased Assets other
than goodwill, customer lists, and all other intangibles (the "Tangible Assets")
is $486,680.00, subject to adjustment on a dollar for dollar basis to the extent
the value of Distribution's total inventory and prepaid expense on the Closing
Date differs from the recorded book, June 30, 1998 balance for total inventory
and prepaid expenses of $135,330.00. On the Closing Date Sellers and Buyer shall
conduct a physical inventory of the inventory and shall determine, based on the
results of the physical inspection, the value of inventory and prepaid expenses
as of the Closing Date. The Purchase Price for the Tangible Assets shall be paid
as follows:
(i) At Closing, Buyer shall assume those liabilities of
Seller set forth on, and only to the extent listed on, the attached Schedule 1.2
(the "Assumed Liabilities"), the aggregate amount of which shall not exceed
$486,680.00.
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(ii) if the aggregate amount of the Assumed Liabilities are
less than $486,680.00, Buyer shall pay to Sellers at Closing by certified check,
cashier's check, or wire transfer an amount equal to the difference between
$486,680.00 and the aggregate total of Assumed Liabilities. If the aggregate
total of Assumed Liabilities is equal to $486,680.00, there shall be no cash
payment due Sellers under this Section 1.2(a); and if such aggregate total is
greater than $486,680.00, Sellers shall pay to Buyer at Closing the amount by
which the Assumed Liabilities exceed $486,680.00.
(b) The Purchase Price allocated to Sellers' goodwill,
customer lists and all other intangible assets (the "Intangible Assets") shall
be equal to 2% of the gross revenue received by Buyer for the Current Major
Accounts (defined below) during the five year period commencing on the Closing
Date, provided, however, that the Purchase Price for Intangible Assets under
this Section 1.2(b) shall not exceed $300,000 in the aggregate. The Purchase
Price for the Intangible Assets shall be paid to Seller in quarterly
installments due by the end of the month immediately following the close of the
quarter. The amount of each installment shall be based on the revenues actually
received by Buyer during the quarter for which the payment is made. In the event
Buyer makes a refund to a Current Major Account on an order for which Buyer had
previously submitted 2% of received revenues to Sellers pursuant to this Section
1.2(b), Buyer shall be entitled to a credit against amounts otherwise due Seller
hereunder in an amount equal to 2% of the refund provided to the Current Major
Account. Notwithstanding anything contained herein or otherwise to the contrary,
and in consideration of Buyer's assumption of Sellers' Komori Lithrone Model
L426II Four Color Press operating lease with International Financial Services
Corporation, Buyer shall receive a credit from Sellers in the amount of $55,000
to be applied and credited against the first $55,000 of the Purchase Price for
the Intangible Assets payable to Seller, if any, pursuant to this Section
1.2(b).
Notwithstanding the above, in the event that Buyer enters into an
agreement to provide services to any of the Current Major Accounts where Special
Pricing (defined below) is to be provided to secure additional business, the 2%
revenue sharing shall be limited on an annual (year 1 begins on Closing Date and
subsequent years begin on the 1st, 2nd, 3rd and 4th anniversary dates of the
Closing Date) basis to an annual amount equal to 2% of the gross sales revenue
from May 1, 1997 to April 30, 1998 for that account, as listed below. As used
herein, the phrase "Special Pricing" shall mean pricing discounted from Buyer's
standard post-Closing pricing on any pricing agreement with a term of six months
or longer.
Also notwithstanding the above, annual (year 1 begins on Closing Date
and subsequent years begin on the 1st, 2nd, 3rd and 4th anniversary dates of the
Closing Date) gross sales revenue over the annual amount indicated below would
be exempt from the 2% revenue sharing provided for under this Section 1.2(b).
The following is a listing of the Current Major Accounts which would be
eligible for the 2% revenue sharing with their annual sales revenue from May 1,
1997 to April 30, 1998 indicated to the right of the account name:
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Intel $ 277,226.60
Computerprep $ 195,252.72
Samaritan Design Center $ 172,280.20
Orion Research $ 142,976.06
University of Phoenix $ 134,062.86
Microchip Technology $ 120,013.10
Jewelway $ 106,107.00
Best Western $ 78,258.06
Lockheed Xxxxxx $ 68,955.16
Paragon Vision Science $ 66,733.08
The Dial Corp. $ 61,404.00
Xxxxx Company $ 58,860.44
Western International University $ 56,241.59
As used herein, the term "Current Major or Accounts" shall mean and be
limited to the thirteen accounts listed above
1.3. Transition Period Income Statement.
(a) Within 20 days following the Closing Date, Sellers shall
deliver to Buyer an income statement (the "Transition Period Income Statement")
for the Business for the period July 1, 1998 to the Closing Date, inclusive (the
"Transition Period"). Sellers covenant and agree that the Transition Period
Income Statement shall (i) be prepared in accordance with the books and
records of Sellers, (ii) present fairly the financial condition of the Business
for the Transition Period and (iii) be prepared in accordance with good
accounting principles, applied on a basis consistent with that applied in the
preparation of the Interim Financial Statements (as described in Section 3.6,
below).
(b) Buyer shall have the right, exercisable by written notice
delivered to Sellers within 30 days following the receipt of the Transition
Period Income Statement, to dispute any element of the Transition Period Income
Statement. The foregoing notice is referred to herein as a "Dispute Notice."
The Dispute Notice shall set forth with specificity the items in dispute. For a
period of 30 days after the delivery of a Dispute Notice, Sellers and Buyer
shall negotiate in good faith to attempt to settle the dispute. If they are able
to settle the dispute, the Transition Period Income Statement shall be adjusted
to reflect the resolution of the dispute. If they are unable to settle the
dispute, the parties shall submit the matters then in dispute to binding
arbitration in Milwaukee, Wisconsin, pursuant to the commercial arbitration
rules of the American Arbitration Association. The arbitrator shall be a member
of an accounting firm which has not rendered services to Sellers or Buyer during
the two year period preceding the Closing Date. Each of the parties agrees to
initially share the costs of arbitration, but further agree that upon a final
determination, the prevailing party shall be reimbursed for all of its expenses
in such arbitration, including reasonable attorneys' fees, and the nonprevailing
party shall pay all costs thereof, as determined by such arbitration. Sellers
hereby agree that Buyer's (i) right to review the Transition Period Income
Statement and (ii) Buyer's failure to dispute any or all items contained therein
as contemplated in this Section 1.3 shall not constitute approval or
ratification
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of any amounts contained in the Transition Period Income Statement (except for
purposes of the calculation of the Purchase Price hereunder), nor in any way
limit Sellers' representations, warranties, covenants or indemnification
obligations under this Agreement.
1.4. Adjustment of Purchase Price Following Transition Period.
(a) The Purchase Price shall be increased in the amount of
pre-tax losses, if any, incurred by the Business during the Transition Period as
shown on the Transition Period Income Statement. The Purchase Price shall be
decreased in the amount of pre-tax income, if any, earned by the Business
during the Transition Period as shown on the Transition Period Income Statement.
(b) Within five days after Buyer and Sellers agree on, or the
Arbitrator determines, the amounts on the Transition Period Income Statement:
(i) in the case where the Transition Period Income Statement results in income
for the Transition Period, Sellers shall deliver to Buyer a certified check for
an amount equal to the Transition Period income, as adjusted by any change in
accounts receivable during the Transition Period (to be retained by Sellers), or
(ii) in the case where the Transition Period Income Statement results in a loss
for the Transition Period, Buyer shall deliver to Sellers a certified check for
an amount equal to the Transition Period loss, as adjusted by any change in
accounts receivable during the Transition Period (to be retained by Sellers).
1.5. Assignment of Contracts and Assumption of Certain Obligations and
Liability. Sellers assign, transfer and deliver all of Sellers' rights, title
and interest in and under the contracts, agreements and commitments of the
Business, and Buyer agrees to and will assume and perform, pay, discharge and
satisfy those leases specifically listed on Schedule 1.5 pursuant to an
Assignment and Assumption Agreement in the form attached hereto as Exhibit A.
1.6. Limitation as to Undertakings. Except as expressly provided in
this Agreement and the Schedules hereto, Buyer does not hereby assume and will
not assume or be deemed to assume any obligations or liabilities of Sellers,
whether arising out of or relating to the Purchased Assets or otherwise, and
Sellers agree, jointly and severally, to indemnify Buyer and hold Buyer harmless
in accordance with the provisions of ARTICLE 7 from any such liabilities and
obligations. Except as expressly provided herein, the provisions of this
Agreement and the Schedules hereto shall not confer any rights on any person not
a party to this Agreement.
1.7. Software License Agreements. Sellers have developed software
necessary and required to support the Intel contract (listed in Section 1.2(b)
as a Current Major Account).n partial consideration of payment of the Purchase
Price for the Intangible Assets, Seller shall grant to Buyer two Intra.doc!
Management System server licenses and two Intra.doc! Order Management System
server licenses for use at two locations pursuant to the software license
agreements attached hereto as Exhibit B ("Software License Agreements"). Buyer
shall have the express right to assign and sub-license the rights under one of
each of the agreements to Commercial Communications, Inc. ("CCI"), a Wisconsin
corporation and the parent corporation of Buyer, for use by CCI at CCI's
Hartland, Wisconsin location. Further, Sellers shall provide,
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at no additional cost to Buyer, all future upgrades to and standard maintenance
support on such software for a period of five years.
1.8. Proration of Personal Property Taxes. Personal property taxes, if
any, for 1998 shall be prorated based on 1997 personal property taxes. Seller
shall be responsible for personal property taxes accruing prior to and including
the Closing Date.
ARTICLE 2. THE CLOSING
2.1. Time and Place of Closing. The sale contemplated by this
Agreement shall be consummated ("Closing") on August 13, 1998 at 10:00 a.m.
local time ("Closing Date") at the offices of von Briesen, Xxxxxxx & Xxxxx,
s.c., 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000.
2.2. Deliveries by Seller. At the Closing, Sellers shall execute and
deliver to Buyer the following:
(a) A good and sufficient xxxx of sale with covenants or
warranty of title, endorsements, assignments and other good and sufficient
instruments of sale, transfer and assignment in the form attached as Exhibit C
in order to vest effectively in Buyer or its nominee good and marketable title
to the Purchased Assets, free and clear of all liens, encumbrances, security
interests and other burdens;
(b) Business records and other documents relating specifically
to the Business, excluding any of Distribution's existing insurance policies,
Distribution's corporate records, canceled checks of Distribution or of any of
its affiliates, bank statements or tax returns, provided, however, that Sellers
shall provide Buyer with copies of Distribution's bank statements to the extent
necessary to substantiate the Transition Period Income Statement..
(c) The written opinion of Sellers' legal counsel with respect
to the Sellers and their authority and the Purchased Assets in the form attached
as Exhibit D.
(d) A Non-Competition Agreement executed by Sellers, pursuant
to which Sellers agree not to compete with Buyer in accordance with the terms
and provisions thereof in the form attached hereto as Exhibit E (the
"Non-Competition Agreement").
(e) All approvals and consents of third parties which are
necessary to convey title to the Purchased Assets in accordance with this
Agreement and otherwise consummate the transactions hereunder.
(f) Physical possession of all Tangible Assets to be purchased
hereunder.
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(g) Certified copies of resolutions of Sellers' board of
directors and Distribution's sole shareholder authorizing the execution and
performance of this Agreement and the transactions contemplated hereby.
(h) The Assignment and Assumption Agreements duly executed by
Sellers.
(i) The Software License Agreements duly executed by Sellers.
(j) Other documents reasonably required by Buyer to consummate
the transactions contemplated hereby including evidence that encumbrances on the
Purchased Assets have been removed or otherwise terminated.
2.3. Further Assurances. Any time and from time-to-time after the
Closing Date, Sellers shall, at the request of Buyer, take all action necessary
to put Buyer in actual possession and operating control of the Purchased Assets
and shall execute and deliver such further instruments of sale, conveyance,
transfer, assignment and consent and use its best efforts to obtain such further
consents, and take such other action, as Buyer may request in order to more
effectively sell convey, transfer and assign to Buyer any of the Purchased
Assets, to confirm the title of Buyer thereto and to assist Buyer in exercising
its rights with respect thereto.
2.4. Deliveries by Buyer. At Closing, Buyer shall deliver to Sellers
the following:
(a) That portion of the Purchase Price payable at Closing
pursuant to Section 1.2(b), above.
(b) The Non-Competition Agreement executed by Buyer.
(c) The Assignment and Assumption Agreements executed by Buyer.
(d) The Software License Agreements executed by Buyer.
(e) Certified copy of resolutions of Buyer's board of
directors authorizing the execution of this Agreement and the performance by
Buyer of the transactions contemplated hereby.
(f) Other documents reasonably required by Seller to consummate
the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to the Buyer that
as of the day hereof; and as of the Closing Date:
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3.1. Incorporation and Qualification. Sellers are corporations duly
organized, validly existing and in good standing under the laws of Minnesota,
have the corporate power to own their properties and conduct their business and
are duly qualified to do business in each jurisdiction in which their failure to
so qualify could reasonably be expected to have a material and adverse impact on
the Purchased Assets.
3.2. Corporate Authority. Sellers have full corporate authority to
execute and perform in accordance with this Agreement and this Agreement
constitutes a valid and binding obligation of Sellers; this Agreement and all
transactions contemplated hereby have been and will be, prior to Closing, duly
authorized by all requisite corporate authority and will not result in any
violation of any of the terms and provisions of Sellers' governing instruments
or of any other agreement to which any Seller is a party or by which any Seller
is bound.
3.3. Title to Property. Sellers own all of the right, title and
interest in and to the Purchased Assets and, except as set forth on Schedules
1.2 or 1.5, such assets are herewith conveyed to Buyer free and clear of all
mortgages, liens, charges, encumbrances or security interest of any nature
whatsoever.
3.4. Information Furnished. Information concerning the Business sales
history, gross receipts and other financial information with respect to the
Business furnished by Sellers to Buyer is substantially correct and Sellers know
of no pending events which they have reason to believe might adversely affect
the future prospects of the Business.
3.5. Tax Returns and Payments. Sellers have filed all federal, state,
local and foreign tax returns and reports required to be filed under applicable
law, and no taxes, assessments, fees or penalties (U.S., foreign, state, local
or other) upon it for upon any of its properties, assets, income or franchises
are delinquent.
3.6. Financial Statements. The divisional financial statements of
Distribution for the fiscal year ended March 31, 1998 (the "Annual Financial
Statements") and for the interim period ended June 30, 1999 (the "Interim
Financial Statements") present fairly the financial position and results of
operations of Distribution as of and for the periods indicated. However, both
the Annual Financial Statements and the Interim Financial Statements, as
divisional financial statements, exclude transactions that, in the sole
discretion of Sellers' management, are not directly attributable to
Distribution. Except for the omission of footnotes and a statement of cash
flows, the Annual Financial Statements have been prepared in accordance with
generally accepted accounting procedures ("GAAP") and have been prepared
consistent with the principles applied in preparing the consolidated financial
statements of Solutions. The Interim Financial Statements have been prepared
consistent with unaudited interim financial statements and, in the opinion of
management, contain all adjustments (including only normal recurring
adjustments) necessary for a fair presentation. However, the Interim Financial
Statements do not include the required disclosures and statement of cash flows
necessary for a presentation in accordance with GAAP.
3.7. No Litigation or Other Proceedings. Except as described on
Schedule 3.7:
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(a) No claim, litigation, investigation or proceeding is pending
or threatened against Sellers, or has been concluded in the past three years,
relating to the Business;
(b) To Sellers' knowledge, there is no state of facts or event
which could reasonably be expected to form the basis for such a claim,
litigation, investigation or proceeding; and
(c) No arbitration award, judgment, order, decree or similar
restriction is outstanding against or relating to the Business or the Purchased
Assets.
3.8. Patents, Trademarks and Copyrights. Except for the patents,
trademarks, and licenses relating to the software to be licensed by Sellers to
Buyer pursuant to Section 1.7 hereof, there are no patents, trademarks, or
copyrights used in connection with the Business. No claim, suit or action is
pending or to Sellers' knowledge is threatened against that Sellers are
infringing upon a patent, trademark or copyright held by a third party.
3.9. Product Liability. Sellers are not aware of any product liability
claims or potential product liability claims against Sellers with respect to the
Business. Buyer shall have no responsibility with respect to such claims or any
other product liability claims against Sellers with respect to contracts sold,
completed and delivered to third parties by Sellers prior to the Closing, which
Sellers shall defend in such manner as it deems appropriate and for which
Sellers shall be totally responsible. Schedule 3.9 includes:
(a) A history of any and all product liability claims made
against Sellers with respect to the Business since November 20, 1996;
(b) Any insurance coverages with respect to the foregoing claims
in effect during such period, the manner in which such claims were discharged
and the amounts of any payments therefor. Seller agrees to provide Buyer with
supplemental information concerning such claims and payments and to provide such
consent to its insurer as may be necessary therefor. Buyer shall not assume any
liability or responsibility (other than with respect to any outstanding warranty
assumed by Buyer hereunder) as to any products sold and delivered by Seller
prior to the Closing Date.
3.10. Governmental Consents. Neither the execution and delivery of
this Agreement nor the consummation of any of the transactions of the Sellers
contemplated hereby requires any consent, approval, order or authorization of or
registration with or the giving of notice to any governmental or public body or
authority.
3.11. Disclosures and Reliances. The information given to Buyer
concerning the transactions covered by this Agreement is true and correct in all
material respects and does not omit any material fact necessary in order to make
the statements contained herein not misleading.
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3.12. Condition and Sufficiency of Assets. The Tangible Assets are
structurally sound, are in good operating condition and repair, and are adequate
for the uses to which they are being put, and none of such Tangible Assets are
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The Tangible Assets are
sufficient for the continued conduct of the Business after the Closing in
substantially the same manner as conducted prior to the Closing.
3.13. Inventory. All inventory being purchased that is reflected in the
financial statements of Sellers provided to Buyer, consists of a quality and
quantity useable and saleable in the ordinary course of business and are
recorded in accordance with GAAP.
3.14. Employee Benefits. Except as set forth on Schedule 3.14 and
except for the Retirement Fund (defined in Section 3.15 below), no Seller is a
participating employer in any employee benefit plan, as defined in Section 3(3)
of the Employment Retirement Income Security Act of 1974, as amended. The
attached Schedule 3.14 discloses all written and unwritten "employee benefit
plans" within the meaning of Section 3.3 of the Employment Retirement Income
Security Act of 1974, and any other written and unwritten profit sharing,
pension, savings, deferred compensation, fringe benefit, insurance, medical,
medical reimbursement, life, disability, accident, post-retirement health or
welfare benefit, sick pay, vacation, employment, severance, termination or other
plan, agreement, contract, policy, trust fund or arrangement (each, a "Benefit
Plan"), whether or not funded and whether or not terminated, (a) maintained or
sponsored by Seller with respect to the Business, or (b) with respect to which
the Seller, with respect to the Business, has or may have liability or is
obligated to contribute, (c) that otherwise covers any of the current or former
employees of Seller with respect to the Business or their beneficiaries, or (d)
as to which any such current or former employee or their beneficiaries
participated or were entitled to participate or accrue or have accrued any
rights thereunder (each, a "Company Plan"). Each Company Plan and all related
trusts, insurance contracts and funds have been created, maintained, funded and
administered in all respects and compliance with all applicable laws, rules and
regulations and in compliance with the plan document, trust agreement, insurance
policy or other writing creating the same or applicable thereto. No Company Plan
is, or, to Sellers' knowledge, proposed to be, under audit or investigation, and
no completed audit of any Company Plan has resulted in the imposition of any
tax, fine or penalty.
3.15. Labor Relations; Compliance. Other than the agreement with
the Graphic Communications International Union Local No. 512-M, AFL-CIO, CLC
(the "Union"), Sellers have not been and are not a party to any collective
bargaining agreement or other labor contract applicable to employees employed in
the Business. Except as set forth on Schedule 3.15, there has not been nor are
there presently pending or existing, and to Sellers' knowledge there is not
threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process relating to the Business, (b) any proceeding against or
affecting any Sellers relating to the alleged violation of any requirement
pertaining to labor relations or employment matters relating to the Business,
including any charge or complaint filed by an employee or the Union, or any
union, with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable state or federal governmental body, organizational
activity, or other labor or
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employment dispute against or affecting the Sellers relating to the Business, or
(c) any application for certification of a collective bargaining agent other
than the Union relating to employees employed in the Business. No event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute relating to the Business. There is no lockout of
any employees by Sellers, and no such action is contemplated by Sellers. Each
Seller has complied in all respects with all laws, statutes, regulations, and
rules applicable to the Business relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. Except as set forth on Schedule 3.15,
neither Solutions, Distribution, nor, to Sellers' knowledge. The XxXxxxxxxx
Corporation (an Arizona corporation which engaged in business as Xxxx Printing
Co.) are in violation of any provision of the contract with the Union or any
other obligation owed to the Union. Neither Solutions, Distribution, nor, to
Sellers' knowledge, The XxXxxxxxxx Corporation are in violation of any
obligation under the Graphic Communications International Union Supplemental
Retirement Disability Fund (the "Retirement Fund") and/or the Agreement and
Declaration of Trust governing the Retirement Fund. Sellers have complied with
all applicable laws, rules and regulations relating to employment or labor,
including but not limited to those relating to wages, hours, collective
bargaining, age, sex, and discrimination in the payment and withholding of
taxes.
3.16. Year 2000 Compliant. To Sellers' knowledge, except as set forth
in Schedule 3.16, none of the Purchased Assets will be adversely affected, or
their functionality impaired in any way, by the transition to the year 2000. For
purposes of the foregoing, a Purchased Asset or its functionality is deemed
adversely affected or impaired if, as a result of the change of centuries, it is
unable to process, or calculate date related data without error or to
distinguish between dates having the same day and month in different centuries.
3.17. Environmental Compliance. Sellers are in compliance with all
Environmental Laws applicable to the Business. "Environmental Laws" shall mean
all federal, state and local laws. including statutes, regulations and other
governmental restrictions and requirements relating to the discharge of air
pollutants, water pollutants or processed waste water, or the storage, use,
generation or disposal of solid or hazardous waste, or otherwise relating to the
environment or hazardous substances or employee health and safety.
3.18. Preferred Purchasing Arrangements. Except as set forth on
Schedule 1.5, Sellers are not a part of any preferred purchasing arrangement
with respect to the purchase of materials for use in the Business.
3.19. Unemployment Compensation. Sellers have made all required
payments to the appropriate governmental authorities with respect to
unemployment compensation reserve accounts related to the operation of the
Business.
3.20. Government License and Regulation. Sellers have all governmental
licenses and permits necessary to conduct the Business and own and use the
Purchased Assets.
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3.21. Compliance with Law. The Business and the use of the Purchased
Assets by Sellers do not violate any laws, including, without limitation, all
energy, safety, environmental, health, export, import, antidiscrimination,
antitrust, wage and hour, and price and wage control laws, orders, rules or
regulations applicable to the Business or the Purchased Assets.
3.22. Assumed Contracts and Equipment Leases. Sellers are current with
and not in default or breach of any and all obligations under any contract or
equipment lease listed on Schedule 1.5, such contracts and equipment leases to
be assigned by Sellers and assumed by Buyer pursuant to Section 1.5, above.
ARTICLE 4.
Sellers covenant to Buyer as follows:
4.1. Covenant Not to Compete. Sellers will execute and deliver a
Non-Competition Agreement in substantially the form attached hereto as Exhibit
E.
4.2. Other Action. Sellers shall use their best efforts to cause the
fulfillment at the earliest practical date of all of the conditions to Sellers'
obligations to consummate the transactions contemplated in this Agreement.
4.3. Continuing Disclosure. Seller shall have a continuing obligation
to promptly notify Buyer in writing with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described, but no such disclosure shall
cure any breach of any representation or warranty which is inaccurate when made.
The delivery of any information pursuant to this Section 4.3 shall not
constitute a waiver by Buyer of any of the provisions of Section 7.2 and any and
all adverse changes contained in any such notices shall be considered in the
determination of whether the conditions set forth in such section are met.
4.4. Payment of Creditors. At Closing, Seller shall deliver to Buyer a
list of all Distribution's creditors as of the Closing Date, including amount
due to each such creditor certified as true and correct by the President of
Distributions.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers that as of the day hereof and
as of the Closing Date:
5.1. Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Wisconsin, has the corporate
power to own its properties and conduct its business and is qualified to do
business in each jurisdiction in which its failure to so qualify could
reasonably be expected to have a material and adverse impact on its operations.
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5.2. Corporate Authorization. Buyer has full corporate authority to
execute and perform in accordance with this Agreement and this Agreement
constitutes a valid and binding obligation of Buyer; this Agreement and all
transactions contemplated hereby have been and will be, prior to Closing, duly
authorized by all requisite corporate authority and will not result in any
violation of any of the terms and provisions of Buyer's governing instruments or
of any other agreement to which Buyer is a party or by which it is bound.
5.3. No violation. Consummation of the transactions contemplated by
this Agreement will not result in:
(a) The breach of any term or condition of, or constitute
default under, any term or condition of any contract or agreement to which Buyer
is a party, or constitute an event which, with notice, lapse of time or both,
would result in such a breach or event of default, nor
(b) To the Buyer's knowledge, the violation by Buyer of any
statute, rule, regulation, ordinance, code, judgment, order, injunction or
decree.
5.4. Governmental Consents. Neither the execution and delivery of this
Agreement nor the consummation of any of the transactions of the Buyer
contemplated hereby requires any consent, approval, order or authorization of or
registration with or the giving of notice to any governmental or public body or
authority.
ARTICLE 6. COVENANTS OF BUYER
Buyer covenants to Sellers as follows:
6.1. Other Action. Buyer shall use its best efforts to cause the
fulfillment at the earliest practicable date of all of the conditions to Buyer's
obligations to consummate the transactions contemplated in this Agreement.
6.2. Access to Books and Records. Upon execution by Sellers of a
confidentiality agreement acceptable to Buyer, Buyer will allow Sellers
reasonable access to books and records relating to the pre-Closing Date
operation of the Business at all reasonable times during normal business hours
in order to permit Sellers or any of their authorized representatives to timely
file tax returns or respond to any audits concerning the Business.
6.3. Books and Records Relating to Revenue Sharing. Buyer shall
maintain complete and accurate books, records and accounts of all revenues
received from and credits granted to Current Major Accounts. Upon execution by
Sellers of a confidentiality agreement acceptable to Buyer, all such books,
records and accounts of Buyer shall be available for inspection and audit by
Sellers or any of their authorized representatives at all reasonable times
during normal business hours in order to permit Sellers to verify amounts
payable to Sellers pursuant to Section 1.2(b) hereof.
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ARTICLE 7. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
7.1. Survival of Representations and Warranties. All representations
and warranties made by the parties in Sections 3 and 5 shall survive the Closing
and shall continue for a period of 30 months following the Closing, except as
set forth below in this section 7.1.
(a) The representations and warranties contained in the
following section shall continue until expiration of all applicable federal,
state and local statutes of limitations (including extensions thereof):
(1) Section 3.5 (Tax Returns and Payments);
(2) Section 3.14 (Employee Benefits);
(3) Section 3.15 (Labor Relations; Compliance);
(4) Section 3.17 (Environmental Compliance); and
(5) Section 3.19 (Unemployment Compensation).
(b) The representations and warranties contained in the
section set forth below shall continue indefinitely;
(1) Section 3.1 (Incorporation and Qualification);
(2) Section 3.2 (Corporate Authority);
(3) Section 3.3 (Title to Property);
(4) Section 5.1 (Organization); and
(5) Section 5.2 (Corporate Authorization).
(c) Notwithstanding the above, the provisions set forth in
this Section 7.1 shall not limit in any way a party's right to bring a cause of
action against another party based on that party's intentional misrepresentation
or fraudulent conduct in connection with the negotiation and execution of this
Agreement and/or the consummation of the transactions contemplated by this
Agreement.
7.2. Indemnification of Buyer. Sellers shall, jointly and severally,
indemnify and save Buyer harmless from, against, for and in respect of any and
all damages, losses, settlement payments, obligations, liabilities, claims,
actions or causes of action, encumbrances and reasonable costs and expenses
suffered, sustained, incurred or required to be paid by Buyer
(a) because of the untruth, inaccuracy or breach of any
representation, warranty, agreement or covenants of Sellers
contained in or made in connection with this Agreement; (b)
for or relating to any deficiencies, shortfalls, penalties,
fines, assessments or other liabilities with respect to the
Retirement Fund, any other Union sponsored employee pension
or benefit plan, or any audit of any of the foregoing, for
the period from November 20, 1996 through the Closing Date;
(c) for or relating to any payments or contributions Buyer
makes or is required to
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make, during the five year period following the Closing Date,
into the Retirement Fund or any other Union sponsored or
mandated pension or benefit plan, for or on behalf of any
employees of Buyer, other than employees of Buyer who were
previously employed by Sellers; (d) for or relating to any
payments or contributions CCI makes or is required to make,
during the five year period following the Closing Date, into
any union sponsored or mandated pension, retirement or other
employee benefit plan, for or on behalf of any of its
employees; and (e) arising out of or relating to the failure
of the landlord under that certain "Lease," with Distribution
as tenant, dated November 20, 1996 for the Property located
at 3320 Xxxx Xxxxxx, Phoenix, Arizona to consent to the
assignment of the Lease to Buyer in accordance with the
"Assignment and Assumption of Lease" in the form attached
hereto as Exhibit F.
including all reasonable costs and expenses (including without limitation,
attorneys fees, interest and penalties) incurred by any indemnified party in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against.
7.3. Indemnification of Sellers. Buyer shall indemnify and save
Sellers harmless from, against, for and in respect of any and all damages,
losses, settlement payments, obligations, liabilities, claims, actions or causes
of action, encumbrances and reasonable costs and expenses suffered, sustained,
incurred or required to be paid by Sellers because of the untruth, inaccuracy or
breach of any representation, warranty, agreement or covenants of Buyer
contained in or made in connection with this Agreement, including all reasonable
costs and expenses (including without limitation, attorneys fees, interest and
penalties) incurred by any indemnified party in connection with any action,
suit, proceeding, demand, assessment or judgment incident to any of the matters
indemnified against.
7.4. Rules Regarding Indemnification.
(a) The obligation and liabilities of each indemnifying party
hereunder with respect to claims resulting from the assertion of liability by
the other party shall be subject to the following terms and conditions:
(i) The indemnified party shall give prompt written notice
to the indemnifying party of any claim which might give rise to a claim by the
indemnified party against the indemnifying party based on the indemnity
agreements contained in Sections 7.2 and 7.3 hereof, stating the nature and
basis of said claims and the amounts thereof, to the extent known.
(ii) In the event any action, suit or proceeding is brought
against the indemnified party, with respect to which the indemnifying party may
have liability under the indemnity agreements contained in Sections 7.2 and 7.3
hereof, the action, suit or proceeding shall, upon the written acknowledgment by
the indemnifying party that it is obligated to indemnify under such indemnity
agreement, be defended (including all proceedings on appeal or for review which
counsel for the indemnified party shall deem appropriate) by the indemnifying
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party. The indemnified party shall have the right to employ its own counsel in
any such case, but the fees and expenses of such counsel shall be at the
indemnified party's own expense unless (A) the employment of such counsel and
the payment of such fees and expenses both shall have been specifically
authorized by the indemnifying party in connection with the defense of such
action, suit or proceeding, or (B) such indemnified party shall have reasonably
concluded and specifically notified the indemnifying party that there may be
specific defenses available to it which are different from or additional to
those available to the indemnifying party or that such action, suit or
proceeding involves or could have an effect upon matters beyond the scope of the
indemnity agreements contained in Sections 7.2 and 7.3 hereof, in any of which
events the indemnifying party, to the extent made necessary by such defenses
shall not have the right to direct the defense of such action. In such case only
that portion of such fees and expenses reasonably related to matters covered by
the indemnity agreements contained in Sections 7.2 and 7.3 hereof shall be borne
by the indemnifying party. The indemnified party shall be kept fully informed of
such action, suit or proceeding at all stages thereof whether or not it is so
represented. The indemnified party shall make available to the indemnifying
party and its attorneys and accountants all books and records of the indemnified
party relating to such proceedings or litigation and the parties hereto agree to
render to each other such assistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such action,
suit or proceeding.
(b) The indemnified party shall not make any settlement of
any claims without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld or delayed.
7.5. Limitation on Sellers' Liability. Notwithstanding any provision
to the contrary set forth herein, Sellers will have no liability for
indemnification under Section 7.2(a) until the aggregate total of indemnifiable
damages suffered by Buyer exceeds $10,000.00. However, when the indemnifiable
damages suffered by Buyer pursuant to Section 7.2(a) exceed $10,000.00, Buyer
shall be entitled to full indemnification of all indemnifiable damages suffered
by Buyer in accordance with the provisions of Section 7.1, 7.3, and 7.4, above;
provided, however, that the maximum aggregate liability of Sellers for
indemnifiable damages pursuant to Sections 7.2(b), (c) and (d) shall not exceed
the amounts paid or payable to Sellers, if any, as the Purchase Price for the
Intangible Assets pursuant to Section 1.2(b) above. However, this Section 7.5
will not apply to any breach of any of Sellers' representations and warranties
of which either Seller had knowledge at any time prior to the Closing Date or
any intentional breach by either Seller of any covenant or obligation, and
Sellers will be jointly and severally liable for all damages with respect to
such breaches.
7.6. Right of Set Off. Sellers expressly acknowledge and agree that
Buyer shall be entitled, in addition to and not in lieu of any other remedies
which may be available to it, to set off against amounts due and owing or to
become due and owing to Sellers pursuant to Section 1.2(b) above or otherwise
hereunder, any indemnifiable damages suffered or incurred by Buyer as provided
in this ARTICLE 7.
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ARTICLE 8. ADDITIONAL MUTUAL COVENANTS; MISCELLANEOUS
8.1. Brokers. Except for an agreement entered into by CCI, payments
under which shall be the responsibility of CCI or Buyer, each of the parties
hereto represents and warrants to the other that there are no claims for
brokerage commissions or finder's fees in connection with the transaction
contemplated by this Agreement, and each party shall indemnify the other from
and against any and all claims for brokerage commissions or finder's fees,
incurred by reason of any action taken by it.
8.2. Individual Expenses. Each party agrees to be responsible for the
payment of all expenses incurred by or on behalf of it in connection with the
preparation, authorization, execution and performance of this Agreement,
including without limitation all fees of counsel, accountants and consultants
incurred by that party, whether or not this transaction is completed.
8.3. Notices. All notices, demands and communications hereunder shall
be in writing and shall be deemed to be duly given if delivered or mailed by
registered or certified mail, postage prepaid, return receipt requested, as
follows:
If to Seller: Xxxxxx Xxxxx
President
IntraNet Solutions, Inc.
Lake Corporate Center
0000 Xxxxxxx Xxxx
Xxxx Xxxxxxx, XX 00000
With a copy to: Gay Greiter
Maslon, Edelman, Xxxxxx & Brand, LLP
3300 Norwest Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
If to Buyer: Xxxxxx X. Xxxxxxx
Communication Connections, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
With a copy to: Xxxxxxx X. Xxxxxxxxx
von Briesen, Xxxxxxx & Xxxxx, s.c.
000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000-0000
8.4. Entire Agreement. This Agreement, and the schedules and exhibits
referred to herein or delivered pursuant hereto, contain the entire
understanding of the parties with respect to the subject matter, and supersede
all prior agreements and understandings between the parties
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with reference thereto. This Agreement may be amended only by a written
instrument duly executed by the parties subsequent to the date hereof.
8.5. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
interpretation of the Agreement.
8.6. Successors and Assigns. The terms and conditions of this
Agreement shall bind, and inure to the benefit of, the parties hereto and their
respective successors, personal representatives and assigns.
8.7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same Agreement.
8.8. Applicable Law. This Agreement and the transactions contemplated
hereby shall be governed by and construed and enforced in accordance with the
laws of the State of Wisconsin.
8.9. Waiver of Bulk Sale Laws. In consideration of Buyer's willingness
to waive compliance with any applicable bulk sale laws, Sellers shall, jointly
and severally, hold Buyer harmless (in accordance with the provisions of ARTICLE
7) from and against all claims asserted against the Purchased Assets or Buyer
pursuant to such bulk sale laws except to the extent that such claims are based
upon or arise from Buyer's failure to pay or otherwise discharge any liability
or obligation assumed by Buyer under this Agreement or under any other
instrument contemplated by this Agreement.
8.10. Publicity. All publicity and announcements concerning the
transactions contemplated hereby shall be made with the joint approval of the
parties hereto. Buyer shall approve issuance of a press release mutually agreed
upon by Sellers and Buyer regarding the transactions contemplated by this
Agreement within two days of such a request by Sellers so that Sellers may make
a timely public disclosure of the transactions.
8.11. Facsimile Signatures. Facsimile signatures shall be acceptable
as original signatures and shall be binding upon the parties provided, however,
that each party shall immediately forward to the other, via nationally
recognized overnight delivery service, original executed copies of all such
documents exchanged by the parties.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date above written.
SELLERS: BUYER:
INTRANET SOLUTIONS, INC. COMMUNICATION CONNECTIONS, INC.
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------- -------------------------------
Title: Chief Executive Officer Title: President
------------------------------ ----------------------------
INTRANET DISTRIBUTION GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Title: Chief Executive Officer
------------------------------
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LIST OF EXHIBITS
Exhibit Section Reference Description
------- ----------------- -----------
A. 1.3 Assignment and Assumption Agreement
B. 1.5 Software License Agreements
C. 2.2(a) Xxxx of Sale
D. 2.2(c) Sellers' Counsel's Legal Opinion
E. 2.2(d) Non-Competition Agreement
EXHIBITS ARE OMITTED
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