EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of March 6,
2003, by and among Quipp Systems, Inc., a Florida corporation (the "Purchaser"),
USA Leader, Inc., a Missouri corporation (the "Company"), Xxxxxxx X. Chick,
President and a shareholder of the Company ("Mr. Chick"), and Xxxxxx X.
Xxxxxxxx, Vice President and a holder of an option to purchase forty-nine
percent of the shares of the Company ("Xx. Xxxxxxxx" and together with Mr.
Chick, the "Security Holders").
BACKGROUND
The Company is engaged in the business of developing, manufacturing and
selling certain proprietary insertion and stacking systems, including, but not
limited to, the M2 Digital Zoned Insertion System, the M3 PC Based Packaging
System, the Semi-Sert Insertion System and The Leader Counter Stacker (the
"Systems"), to newspaper businesses and other organizations in the field of
printing.
The Company desires to sell, and the Purchaser desires to buy, certain
of the assets of the Company associated with the Systems as described in Section
1 hereof, and, in connection therewith, the Purchaser has agreed to assume
certain liabilities of the Company associated with the Systems, upon the terms
and conditions described below.
In consideration of the mutual covenants and agreements set forth in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Sale and Purchase.
1.1 Sale and Purchase of Assets. Subject to the terms and conditions
set forth in this Agreement, the Company shall sell, convey, assign, transfer
and deliver to the Purchaser, or such entity as the Purchaser designates, and
the Purchaser shall purchase, acquire and take assignment and delivery of, all
of the right, title and interest of the Company in and to all of the assets,
properties and rights of any kind owned by the Company used in connection with
or related to the Systems, of every type and description, real, personal and
mixed, tangible and intangible, wherever located and whether or not reflected on
the books and records maintained by the Company, excluding those assets,
properties and rights which are specifically excluded pursuant to Section 1.2
hereof (collectively the "Assets"), free and clear of all mortgages, liens,
pledges, security interests, charges, claims, restrictions and encumbrances of
any nature whatsoever ("Liens"). The Assets include, without limitation, all of
the right, title and interest of the Company in or to the following:
(1) any and all rights of the Company to any patents
(including, without limitation, any registrations, continuations, continuations
in part, renewals and applications for any of the foregoing and, in particular,
Application No. 09/817,508); trademarks, service marks, trade names, service
names, copyrights, URL's and Internet domain names and applications therefor
(and all interests therein), designs, and general intangibles of like nature,
together with all goodwill related to the foregoing (including, without
limitation, any registrations, applications and renewals for any of the
foregoing); websites and website content (including, without limitation, text
and graphics); all customer and supplier lists, all sales, marketing and other
records; technology, trade secrets and other confidential information, know-how,
proprietary technology, processes, formulae, algorithms, models, inventions,
source codes and object codes and methodologies, architecture, structure,
layouts, development tools, instructions, templates, marketing materials,
inventions, drawings and all documentation and media constituting, describing or
relating to the foregoing owned or used by the Company in connection with the
Systems (the "Intellectual Property"), including, without limitation, the
Intellectual Property set forth on SCHEDULE 1.1(1);
(2) any and all rights of the Company to agreements relating
to licenses for software, modules, routines, data, text or graphics files,
source or object codes and other components of the Systems (the "License
Agreements"), including, without limitation, the License Agreements set forth on
SCHEDULE 1.1(2);
(3) all contracts, agreements, sales orders, purchase orders
related to the Systems or the business of the Company (collectively, the
"Company's Contract Rights"), including, without limitation, the Company's
Contract Rights set forth on SCHEDULE 1.1(3);
(4) all machinery, equipment and supplies (including, without
limitation, manufacturing equipment and supplies, computer hardware, software
and telephones and other communications equipment and supplies), tools, dies,
fixtures, spare parts, furniture and furnishings and other personal property,
wherever located, of the Company, whether currently in use or idle
(collectively, "Tangible Personal Property");
(5) any and all rights of the Company in the leases of
Tangible Personal Property, together with any options to purchase or sell the
underlying Tangible Personal Property (the "Personal Property Leases"),
including, without limitation, the Personal Property Leases set forth on
SCHEDULE 1.1(5);
(6) all inventory of the Company, including, without
limitation, raw materials, supplies, works-in-process and finished goods (the
"Inventory");
(7) all express and implied warranties and guarantees from
third parties with respect to any property constituting part of the Assets;
(8) rights of the Company under any liability insurance
policies now or heretofore in effect to the extent any claim is made against the
Purchaser with respect to liabilities and obligations of the Company that are
not Assumed Liabilities (as defined in Section 1.3 hereof); and
(9) all rights or choses in action against third parties
relating to the Systems.
1.2 Excluded Assets. Notwithstanding any provision of this Agreement
to the contrary, the Purchaser shall not acquire and there shall be excluded
from the Assets, the Company's interest in each of the following (the "Excluded
Assets"):
(1) any and all rights of the Company to cash received from
the conduct of its business prior to the Closing Date (as defined in Section 2
hereof), including all cash on hand or in banks, cash equivalents, accounts
receivable ("Accounts Receivable"), marketable and non-marketable securities and
other investments and all rights in any funds of any nature wherever maintained;
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(2) the rights of the Company under this Agreement and the
documents and other papers delivered to the Company by the Purchaser pursuant to
this Agreement;
(3) the minute book, stock book, tax returns and related
papers, employment and personnel records and other books and records of the
Company that do not relate to the Systems;
(4) any and all rights of the Company in and under the
Commercial Lease Agreement dated May 25, 2000 by and between Xxxxxxx Plumbing
Co., the Company, Mr. Chick and Xx. Xxxxxxxx (the "Real Property Lease");
(5) all refunds or credits, if any, of taxes due to or from
the Company by reason of its ownership of the Assets or operation of its
business to the extent attributable to any time period ending prior to the
Closing Date;
(6) motor vehicles or leases therefor;
(7) United States Patent # 5,575,319; and
(8) the names (including without limitation any rights of use)
"USA Leader" and "USA Leader, Inc." or any URLS or Internet domain names
containing such names or any variation thereof, except as provided in Section
5.8 hereof.
1.3 Assumed Liabilities. Subject to the terms set forth in this
Agreement, the Purchaser hereby assumes and shall pay, perform and discharge
when due only the following liabilities and obligations of the Company (the
"Assumed Liabilities"):
(1) customer deposits as of the Closing Date set forth in the
Working Capital Statement;
(2) express warranty obligations of the Company to correct
services rendered, or to repair or replace defective products related to the
Systems of the Company shipped, prior to Closing Date, but only to the extent
that the Purchaser's costs associated therewith do not exceed the reserve
therefor as set forth in the December 31 Balance Sheet (as defined in Section
3.11 hereof) (provided, however, that to the extent the Purchaser's costs
associated therewith do exceed the reserve therefor, the Purchaser may perform
the express warranty work during the life of the warranty and invoice the
Company at the Purchaser's full absorption cost for such correction, repair or
replacement); and
(3) all performance obligations of the Company arising on or
after the Closing Date under the License Agreements set forth on SCHEDULE
1.1(2), the Company's Contract Rights set forth on SCHEDULE 1.1(3), and the
Personal Property Leases set forth on SCHEDULE 1.1(5) in accordance with the
terms thereof, except to the extent such liabilities or obligations arise or
have arisen out of any claim asserted by another party thereto related to breach
of contract, warranty, tort, infringement or other default or alleged default by
the Company.
1.4 No Other Liabilities Assumed. Except as expressly set
forth in Section 1.3, the Purchaser shall not and does not assume any direct or
indirect liability, indebtedness, obligation (including, but not limited to,
accounts payable ("Accounts Payable")), tax liability, expense, claim, loss,
damage, deficiency, guaranty or endorsement of, related to, or arising out of,
in any manner whatsoever, the Assets, the Company or the Company's business,
whether absolute or contingent, accrued or unaccrued, due or to become due,
liquidated or unliquidated (collectively, the "Unassumed Liabilities").
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1.5 Consideration.
(1) In exchange for the Assets and for the covenants not to
compete set forth in Section 6 herein (the "Non-Competition Covenants"), the
Purchaser shall deliver to the Company $388,950.50 plus 6,000 shares of
restricted common stock, par value per share $0.01 (the "Shares"), of the
Purchaser's parent, Quipp, Inc. ("Parent"), a Florida corporation (the "Base
Purchase Price"). The Base Purchase Price is subject to adjustment as provided
herein. In addition to the Base Purchase Price, for the period commencing on the
Closing Date and for three (3) years thereafter (the "Additional Purchase Price
Period"), the Purchaser shall pay to the Company an amount equal to * percent of
the Purchaser's Product Sales during the Additional Purchase Price Period (the
"Additional Purchase Price"). For purposes of this Agreement, the term "Products
Sales" shall mean sales from shipments by the Purchaser during the Additional
Purchase Price Period of those Systems of the same type and model manufactured
by the Company as of the Closing Date, as well as parts and components for the
Systems of the same type and model supplied by the Company as of the Closing
Date.
(2) Delivery of Consideration.
(i) At the Closing (as defined in Section 2 hereof),
the Purchaser shall deliver to the Company $188,950.50, by a
wire transfer of immediately available funds to such bank and
account as is set forth on SCHEDULE 1.5(2) hereto, and the
Shares.
(ii) The Purchaser shall deliver $200,000 (the "Hold
Back Amount"), by a wire transfer of immediately available
funds to such bank and account as is set forth on SCHEDULE
1.5(2) hereto, upon the occurrence of the later of: (a) the
issuance of a patent by the United States Patent and Trademark
Office in the name of the Company or the Purchaser related to
Application No. 09/817,508 (the "Patent Issuance Event"), (b)
final determination of the Working Capital Amount (as defined
in Section 1.5(3) hereof)(the "Working Capital Determination
Event"), or (c) evidence of full payment and satisfaction by
the Company of all liabilities due and owing by it to Xxxxx
Electric Co., Inc., RMF Industries, Inc., RMF Steel Products
Company, The Xxxxxxxx Group, L.P. and any and each of their
affiliates and any other creditors to which more than $1,000
is due and owing (the "Creditor Satisfaction Event"). To the
extent that the Patent Issuance Event and the Working Capital
Determination Event have been fully satisfied and completed
and the occurrence of the Creditor Satisfaction Event is the
sole remaining, outstanding condition under this Section
1.5(2), Buyer shall deliver $20,000, by a wire transfer of
immediately available funds to such bank and account as is set
forth on SCHEDULE 1.5(2) hereto.
(iii) Within 30 days after the end of each quarter of
its fiscal year, the Purchaser shall pay to the Company the
Additional Purchase Price applicable for such quarter. In
determining the amount of the Additional Purchase Price
payable by the Purchaser for any particular quarter, the
Purchaser shall be required to pay only those amounts of the
Additional Purchase Price for which it has received payment of
the final invoice from its customer.
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* We have requested confidential treatment of certain information included in
this exhibit pursuant to Rule 24b-2 of the Exchange Act of 1934. The entire
agreement has been filed separately with the Securities and Exchange Commission.
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(3) Adjustments to the Base Purchase Price. The Base Purchase
Price shall be increased or decreased, as the case may be, by the amount by
which the Working Capital Amount as of the Closing Date is greater than or less
than, as the case may be, -$19,637.50 (the "Base Working Capital Amount"). For
purposes of this Agreement, the term "Working Capital Amount" shall mean, as of
the Closing Date, (x) the sum of the Company's fixed assets (net of
depreciation) sold hereby and Inventory, minus (y) customer deposits and
warranties accrued.
(i) Physical Inventory. As provided in SCHEDULE
1.5(3), the Purchaser and the Company will take a physical
inventory to determine the Inventory as of the Closing Date.
The Purchaser and the Company will each appoint a supervisor
to plan and direct the taking of the physical inventory and
will notify each other of the respective names of each such
supervisor. If the supervisors determine it to be appropriate,
several physical inventory teams may be appointed. A team will
consist of at least one representative of the Purchaser and
one representative of the Company. In the absence of manifest
error, such inventory shall be conclusive and accepted as the
final Inventory for that location.
(ii) Statement of Adjustments. Within thirty (30)
days after the Closing Date, the Purchaser, with the Company's
assistance, shall compute and deliver to the Company a
proposed statement (the "Working Capital Statement") prepared
in accordance with the procedures set forth on SCHEDULE
1.5(3), setting forth the Working Capital Amount as of the
Closing Date and the adjustments to the Purchase Price
provided for in Section 1.5(3), together with a reasonably
detailed basis for establishing such amounts. Within thirty
(30) days following its receipt of the Working Capital
Statement, the Company shall present the Purchaser with a
written statement setting forth the Company's proposed
adjustments thereto, if any, together with a reasonably
detailed explanation of the reason for each such proposed
adjustment. The Purchaser and the Company shall negotiate in
good faith to resolve any disagreement regarding the
Purchaser's proposed adjustments. If they are unable to do so
within ninety (90) days after the Closing Date, either the
Purchaser or the Company shall have the right to refer the
dispute to an independent accounting firm mutually agreeable
to both parties (the "Independent Accounting Firm"). The
determination by the Independent Accounting Firm with respect
to the correctness of each item in dispute shall be conclusive
and binding on the Purchaser and the Company. All fees and
expenses billed by the Independent Accounting Firm in
connection with the resolution of disputes under this Section
1.5(3)(ii) shall be borne one-half by the Company and one-half
by the Purchaser.
(iii) Payment Procedures for Adjustments. Upon the
occurrence of the Working Capital Determination Event: (a) if
the Working Capital Amount as of the Closing Date is less than
the Base Working Capital Amount (the "Shortfall Amount"), the
Base Purchase Price shall automatically be reduced by an
amount equal to the Shortfall Amount and the Purchaser shall
be entitled to immediately retain and deduct the Shortfall
Amount from the Hold Back Amount, or (b) if the Working
Capital Amount as of the Closing Date is greater than the Base
Working Capital Amount (the "Surplus Amount"), the Base
Purchase Price shall automatically be increased by an amount
equal to the Surplus Amount and the Purchaser shall promptly
pay to the Company an amount equal to the Surplus Amount.
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1.6 Allocation of the Purchase Price. The Base Purchase Price shall be
allocated among the Assets as mutually agreed to by the Company and the
Purchaser and as set forth on SCHEDULE 1.6 in accordance with the respective
fair market values of the Assets pursuant to Section 1060 of the Code and the
regulations adopted thereunder (the "Purchase Price Allocation"). Neither the
Company nor the Purchaser will take a position on any income tax return, before
any governmental agency charged with the collection of any income tax, or in any
judicial proceeding that is in any way inconsistent with the terms of this
Section 1.6, and the Company and the Purchaser shall file Form 8594 with the
U.S. Internal Revenue Service in a manner consistent with the Purchase Price
Allocation.
2. Closing. The closing of the purchase and sale of the Assets (the
"Closing") shall take place simultaneously with the execution of this Agreement.
The date on which the Closing occurs shall be called the "Closing Date." The
Closing shall be consummated by facsimile transmission. On the Closing Date,
subject to the terms and conditions herein contained, the following shall occur:
2.1 Deliveries by the Company and the Security Holders at the Closing.
On the Closing Date, the Company and the Security Holders shall deliver, or
cause to be delivered, to the Purchaser:
(1) a Xxxx of Sale and Assignment and Assumption Agreement,
dated as of the date hereof and in a form satisfactory to the Purchaser, duly
executed by the Company (the "Assignment and Assumption Agreement");
(2) copies of the executed consents specified in SCHEDULE 3.3
hereto;
(3) a certificate of the secretary of the Company certifying
to (i) the incumbency of the proper officers of the Company, (ii) the
authenticity of the attached organizational documents of the Company and (iii)
the authenticity of the attached Company action authorizing the execution,
delivery and performance of this Agreement;
(4) a certificate of good standing with respect to the
Company, issued by the Secretary of State of the State of Missouri;
(5) the originals of all License Agreements, the Company's
Contract Rights and the Personal Property Leases or, if originals are not
available, true and correct copies thereof;
(6) a Trademark Assignment, a Copyright Assignment, a Patent
Assignment and a Domain Name Assignment, as applicable, for such registered
trademarks, copyrights, patents and URL's included as are in the Assets (the
"Intellectual Property Conveyance Documents"); and
(7) such other documentation reasonably requested by the
Purchaser, in a form reasonably satisfactory to the Purchaser and its counsel,
as shall be necessary and effective to transfer and assign to, and vest in, the
Purchaser all of the Company's right, title and interest in and to the Assets,
and simultaneously with such delivery, all steps will be taken as may be
required to put the Purchaser in actual possession and operating control of the
Assets.
2.2 Deliveries by the Purchaser at the Closing. On the Closing Date or
as otherwise provided herein, the Purchaser shall deliver, or cause to be
delivered to the Company (except as noted below):
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(1) the Purchase Price, less the Hold Back Amount, the Shares
to be evidenced by an irrevocable instruction to the Parent's transfer agent to
deliver a certificate for the Shares to the Company promptly after the Closing;
and
(2) the Assignment and Assumption Agreement duly executed by
Purchaser.
3. Representations and Warranties of the Company. The Company and each
Security Holder jointly and severally represents, warrants and covenants to the
Purchaser as follows:
3.1 Organization. The Company is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Missouri and has
all requisite corporate power and authority to own, lease, and operate its
properties and to carry on its business as it is now being conducted. True and
complete copies of the Company's Articles of Incorporation and bylaws have been
delivered to the Purchaser.
3.2 Power and Authority.
(1) The Company has the full right, power, lawful authority
and legal capacity to execute and deliver this Agreement, the Assignment and
Assumption Agreement, the Sublease and the Intellectual Property Conveyance
Documents (collectively, the "Transaction Agreements") and to consummate and
perform the transactions contemplated hereby and thereby. The execution and
delivery of the Transaction Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action required on the part of the Company, and no other
corporate proceedings on the part of the Company are necessary to authorize the
Transaction Agreements or to consummate the transactions contemplated hereby and
thereby. The Transaction Agreements have been, and any other agreements,
documents and instruments required to be delivered by the Company in accordance
with the provisions hereof have been duly executed and delivered by or on behalf
of the Company and constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as enforceability may be limited by laws of general application
relating to bankruptcy, reorganization, moratorium, insolvency and debtors'
relief and similar laws affecting the enforcement of creditors' rights, and by
general principles of equity.
(2) Each of the Security Holders has full legal capacity,
right, power and authority to execute and deliver this Agreement and to perform
all transactions contemplated hereby. This Agreement has been, and any other
agreements, documents and instruments required to be delivered by the Security
Holders in accordance with the provisions hereof have been duly executed and
delivered by or on behalf of the Security Holders and constitute the legal,
valid and binding obligations of the Security Holders, enforceable against the
Security Holders in accordance with their respective terms, except as
enforceability may be limited by laws of general application relating to
bankruptcy, reorganization, moratorium, insolvency and debtors' relief and
similar laws affecting the enforcement of creditors' rights, and by general
principles of equity.
3.3 Conflicts; Consents. Neither the execution and delivery of the
Transaction Agreements by the Company nor the consummation and performance of
the transactions contemplated hereby and thereby (i) conflict with or result in
the breach or violation of any provision of the Articles of Incorporation or
bylaws of the Company, (ii) conflict with or violate any agreement to which the
Company is a party or by which the Company is bound or any federal, state, local
or other governmental law or ordinance, (iii) require the authorization,
approval, consent or permit of, or any notice to or filing with or declaration
to, any third party (including, without limitation, any governmental or
regulatory authority), except as set forth on SCHEDULE 3.3, or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its assets, including the Assets.
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3.4 Contracts. The Company is not party to any contracts, agreements or
commitments in connection with the Systems or the Assets other than the License
Agreements itemized on and included as SCHEDULE 1.1(2), the Company's Contract
Rights itemized on and included as SCHEDULE 1.1(3), the Personal Property Leases
itemized on and included as SCHEDULE 1.1(5) (collectively the "Contracts"). Each
Contract is a valid and binding obligation in full force and effect in
accordance with its respective terms with respect to the Company and is a valid
and binding obligation in full force and effect in accordance with its
respective terms with respect to any other party thereto, except as
enforceability may be limited by laws of general application relating to
bankruptcy, reorganization, moratorium, insolvency, fraudulent conveyance and
debtors' relief and similar laws affecting the enforcement of creditors' rights,
and by general principles of equity. The Company is not in default under any of
the Contracts and, to the knowledge of the Company and the Security Holders (the
"Company's Knowledge"), no other party is in material default under any of the
Contracts.
3.5 Legal Proceedings; Compliance with Law. There are no disputes,
claims, actions, suits or proceedings, arbitrations or investigations pending
or, to the Company's Knowledge, threatened against or affecting the Systems or
the Assets. There is no state of facts that might reasonably form the basis of
any claim, liability or litigation against the Company affecting the Systems or
the Assets. The development of the Systems by the Company, and the Company's use
thereof, are in compliance with all applicable federal, state, local or other
governmental laws, ordinances, codes, rules and regulations. The Company owns or
possesses all franchises, licenses, permits, consents, approvals, rights,
waivers and other authorizations, governmental or otherwise, which are necessary
for the Company to develop and use the Systems as now used; the Company is not
in default, nor has the Company received any notice of any claim or default
thereunder, or any notice of any other claim or proceeding or threatened
proceeding relating thereto; and neither the execution or delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
require any notice or consent thereunder.
3.6 Intellectual Property. SCHEDULE 1.1(1) contains a true, correct and
complete list of all Intellectual Property used by the Company in connection
with the Systems. The Company owns or licenses pursuant to the License
Agreements all of the Intellectual Property used or held for use by the Company
in connection with the Systems (the "Company Intellectual Property"), free and
clear of any Lien, and no other person or entity has any proprietary, financial
or other interest, direct or indirect, in whole or in part, in any of the
Company Intellectual Property. The Company Intellectual Property and the
Company's use thereof do not infringe upon or unlawfully or wrongfully use any
Intellectual Property owned or claimed by any other person or entity, or
otherwise use any material that defames, slanders, libels or violates any right
of publicity, right of privacy or other proprietary right of any other person or
entity, and the Company has not received notice of any claim or threatened claim
to the contrary. All rights of the Company in and to the Company Intellectual
Property are fully valid and enforceable, and the Company has not received
notice of any claim or threatened claim to the contrary. To the Company's
Knowledge, the Company Intellectual Property is not being infringed upon or
unlawfully or wrongfully used by any other person or entity. The Company has not
provided any other person or entity with notice of any claim or threatened claim
to the contrary. The Company has taken all reasonable and appropriate steps to
protect, maintain and defend its rights in and to the Company Intellectual
Property and, where applicable, to preserve the confidentiality of the Company
Intellectual Property.
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3.7 Operational Elements. The Company Intellectual Property includes
any and all rights (whether by ownership or license under the License
Agreements) for software programs, modules, routines, data, text or graphic
files, source or object codes and other components of the Systems and such
operational elements include all written or electronic documentation applicable
thereto.
3.8 Permits. SCHEDULE 1.1(7) contains a true, correct and complete list
of all government permits and licenses used to operate the Assets (the "Business
Permits"). All Business Permits are in full force and effect and in good
standing. The Company has not received notice of any claim of revocation of any
Business Permits and, to the Company's Knowledge, there are no events that might
give rise to such a claim.
3.9 Taxes.
(1) Except as set forth in SCHEDULE 3.9, all federal, state,
local and foreign tax returns, reports, statements and other similar filings
required to be filed by the Company with respect to any federal, state, local or
foreign taxes, assessments, fees and other governmental charges or impositions
(including without limitation all income tax, social security, payroll, sales
and use, excise, privilege, property, ad valorem, franchise, license, school,
and any other tax or similar governmental charge or imposition under the laws of
the United States or any state or municipal or political subdivision thereof )
(the "Tax Returns") have been timely filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns are required to be
filed, and all such Tax Returns properly reflect the liabilities of the Company
for taxes for the periods, property or events covered thereby. All taxes
required to be paid, or withheld by the Company and any deficiency assessments,
penalties and interest have been timely paid or withheld. The Company has not
received any notice of assessment or proposed assessments in connection with any
Tax Returns and, to the Company's Knowledge, there are not any pending tax
examinations of or tax claims asserted against the Company or any of its assets
or properties.
(2) All federal, state or local income, profit, franchise or
other taxes, fees, assessments or charges whatsoever, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto,
for any period or portion thereof ending on or before the Closing Date, (i) due
as of the Closing Date have been fully paid by the Company or (ii) due after the
Closing Date shall be fully paid by the Company after the Closing Date.
3.10 Transactions with Affiliates. Neither the Company nor any
affiliate of the Company nor any member of any Security Holder's family, owns or
has a controlling ownership interest in any corporation or other entity that is
a party to any agreement, commitment or other arrangement with the Company in
connection with the Systems.
3.11 Financial Statements. SCHEDULE 3.11 sets forth complete and
correct copies of the unaudited balance sheet of the Company at December 31,
2002 (the "December 31 Balance Sheet") and the statement of income for the year
then ended. Such financial statements were prepared in accordance with GAAP and
present fairly and accurately the financial condition of the Company at December
31, 2002 and results of its operations for the year then ended.
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3.12 Undisclosed Liabilities. The Company, with respect to its
business, the Systems and the Assets, is not liable for or subject to, and, to
the Company's Knowledge, there is no basis for assertion against it with respect
to its business, the Systems and the Assets of, any liabilities that are not
adequately reflected, reserved against or given effect to in the December 31
Balance Sheet.
3.13 Absence of Certain Changes or Events. With respect to the Systems,
the Assets and the business of the Company, since December 31, 2002, except as
set forth in SCHEDULE 3.13, there has not been: (i) any Material Adverse Effect,
(ii) any damage, destruction or casualty loss, whether or not covered by
insurance, (iii) any agreement, commitment or transaction entered into by the
Company that is material to the ownership or operation of the Assets, and (iv)
any sale or disposition of any fixed assets. For purposes of this Agreement,
"Material Adverse Affect" shall mean any change (or changes taken together) in,
or effect on, the Assets, the Systems or the business of the Company that is
materially adverse to the operations or condition (financial or otherwise) of
the Assets, the Systems or the business of the Company taken as a whole.
3.14 Inventory. SCHEDULE 1.1(6) contains a listing of all of the
Inventory comprising the Assets as of December 31, 2002. The Inventory (i) was
acquired and has been maintained in accordance with the regular business
practices of Company with respect to its business, (ii) subject to the reserves
on the books of the Company, which have been disclosed to the Purchaser,
consists of new and unused items of a quality and quantity useable or saleable
in the ordinary course of business consistent with past practice, (iii) is owned
by the Company free and clear of all Liens, (iv) subject to the reserves on the
books of the Company, which have been disclosed to the Purchaser, is valued
using the methodology as set forth in SCHEDULE 3.3, and (v) subject to the
reserves on the books of the Company, is not obsolete, unusable, damaged, slow
moving or unsaleable in the ordinary course of business.
3.15 Insurance. All policies of fire, liability, workers' compensation
and other forms of insurance owned or held by the Company and insuring the
Assets or the Systems are in full force and effect, all premiums with respect
thereto covering all periods up to and including the date hereof, if due, have
been paid in full and no notice of cancellation or termination has been received
with respect to any such policy.
3.16 Environmental Matters. Except as disclosed in SCHEDULE 3.16:
(1) the Company holds and is, and has been, in compliance with
all permits, certificates, licenses and governmental approvals, consents and
authorizations required under applicable environmental laws for the Company to
own and operate the Assets and the Systems ("Environmental Permits");
(2) the Company is in compliance with applicable environmental
laws;
(3) the Company has not been notified by any governmental
authority or third party of any pending or threatened claim under any
environmental law against the Company in connection with the Assets or the
Systems and, to the Company's Knowledge, there is no event, condition or
circumstance which could give rise to any claim under any environmental law;
(4) the Company has not been notified by any governmental
authority or any third party that the Company in connection with its business,
the Assets or the Systems may be a potentially responsible party for
environmental contamination or any release or remediation of hazardous
substances and, to the Company's Knowledge, there is no event, condition or
circumstance which could give rise to such potential responsibility;
10
(5) the Company has not in connection with its business
entered into or agreed to any settlement agreement, consent decree or order with
respect to or affecting the Assets or the Systems relating to compliance with
any environmental law or to investigation, remediation or cleanup of hazardous
substances under any environmental law;
(6) there are no aboveground or underground storage tanks,
lagoons, pits or surface impoundments located on, in or under any properties
currently or formerly owned, operated or leased by the Company in connection
with its business or any predecessor of the Company;
(7) no releases of hazardous substances have occurred at,
from, in, on, to or under any property currently or formerly owned, operated or
leased by the Company in connection with its business, the Assets or the Systems
or any predecessor of the Company, and no hazardous substances are present in,
on or about or are migrating to or from any such property that could give rise
to a claim under environmental laws by a governmental authority or third party
against the Company, its business, the Assets or the Systems;
(8) the Company has not in connection with its business, the
Assets or the Systems nor has any predecessor of the Company transported,
treated, stored, handled or disposed of nor arranged for the treatment, storage,
handling, disposal or transportation of any hazardous substance to any location
that could result in a claim under environmental laws by a governmental
authority or third party against the Company, its business, the Assets or the
Systems; and
(9) there have been no environmental investigations, studies,
audits or tests conducted by, on behalf of or which are in the possession of the
Company with respect to any property currently or formerly owned, leased or
operated by the Company in connection with its business, the Assets or the
Systems which have not been delivered to the Purchaser prior to execution of
this Agreement.
3.17 Employees. SCHEDULE 3.17 lists all of the present employees of the
Company (other than the Security Holders) and each such employee's position,
location, social security number, date of hire and current annual salary rate or
hourly wage.
3.18 Tangible Personal Property. SCHEDULE 1.1(4) contains a listing of
all of the material Tangible Personal Property comprising the Assets as of the
date hereof. All Tangible Personal Property is in good operating condition and
repair (ordinary wear and tear excepted) in all material respects and is useable
in the ordinary course of the Company's business consistent with past practice.
Except for items subject to the License Agreement, the Personal Property Leases
and the Real Property Lease, no person other than the Company owns any equipment
or other property used in the operation of the business of the Company.
3.19 Litigation; Warranty Claims. SCHEDULE 3.19 contains a list and
brief description of any and all litigation, including any settlement thereof,
to which the Company has been a party with respect to its business, the Systems
or the Assets since April 1, 1995, all warranty or similar claims made by any
purchaser of any of the Systems and my unresolved disputes with customers.
Except as disclosed on SCHEDULE 3.19, there is no claim, action, proceeding or
investigation pending or, to the Company's Knowledge, threatened against the
Company with respect to its business, the Systems or the Assets, and to the
Company's Knowledge, no event has occurred that provides a reasonable basis for
a material claim, action, proceeding or investigation against the Company with
respect to its business, the Systems or the Assets.
11
3.20 Systems. The sale of the Assets to be sold by the Company to the
Purchaser pursuant to this Agreement will effectively convey to the Purchaser
all of the Systems and all of the tangible and intangible property used by the
Company (whether owned, leased or held under license by the Company) in
connection with the Systems. There are no material facilities, services, assets
or properties, including any Intellectual Property, shared with any other
person, which are used by the Company in connection with the Systems.
3.21 Shares.
(1) Investment Representations. The Company and each of the
Security Holders acknowledge and understand that (i) the Shares have not been
registered with the Securities and Exchange Commission (the "SEC") or with any
state official or agency and is being offered and issued pursuant to an
exemption from the registration requirements set forth in the Securities Act of
1933, as amended (the "Securities Act"), and applicable state blue sky or
securities laws, and that no governmental agency has recommended or endorsed the
Shares or made any finding or determination relating to the fairness of the
transaction set forth herein and (ii) the Company is acquiring the Shares
issuable to it hereunder for its own account for investment, with no present
intention of reselling or otherwise distributing the same, except (x) pursuant
to an offering of shares duly registered under the Securities Act or (y) under
other circumstances which do not require registration under the Securities Act
and applicable state securities laws.
(2) Information Related to Parent. The Company and each of the
Security Holders have received and had an opportunity to review for a reasonable
time preceding the Closing Date certain filings made by Parent with the SEC
under the Securities Exchange Act of 1934 (excluding exhibits, unless requested
by the Company or any of the Security Holders) (the "Parent SEC Filings"). The
Company and each of the Security Holders acknowledge that the Purchaser and
Parent have made available to the Company and each of the Security Holders the
opportunity to ask questions and receive answers concerning Parent and the
Shares and to obtain any additional information which the Purchaser and Parent
possess or can acquire without unreasonable effort or expense that is necessary
to verify the accuracy of such additional information and/or the Parent SEC
Filings. The Company and each of the Security Holders possess such knowledge and
experience in financial and business matters or have been advised by such
persons who do possess such knowledge that each is capable of evaluating the
merits and risks of the investment in the Shares contemplated by this Agreement.
3.22 Disclosure. No representations or warranty of the Company
contained in this Agreement, and no statement contained in the Schedules
attached hereto or in any certificate, list or other writing furnished to the
Purchaser pursuant to any provision of this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading.
4. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company and the Security Holders as follows:
4.1 Organization and Good Standing. The Purchaser and Parent are
corporations duly organized, validly existing and in good standing under the
laws of the State of Florida. The Purchaser and Parent have full power and
authority to conduct their respective businesses as now conducted and to own and
operate their assets and properties.
12
4.2 Power and Authority. The Purchaser has the power and authority to
execute and deliver the Transaction Agreements and to consummate and perform the
transactions contemplated hereby and thereby. The execution and delivery of the
Transaction Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action required on the part of the Purchaser and Parent, and no other
corporate proceedings on the part of the Purchaser or Parent are necessary to
authorize the Transaction Agreements or to consummate the transactions
contemplated hereby and thereby. The Transaction Agreements have been duly
executed and delivered by or on behalf of the Purchaser. The Transaction
Agreements constitute the legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their respective terms,
except as enforceability may be limited by laws of general application relating
to bankruptcy, reorganization, moratorium, insolvency and debtors' relief and
similar laws affecting the enforcement of creditors' rights, and by general
principles of equity.
4.3 Conflicts; Consents. The execution, delivery and performance of the
Transaction Agreements by the Purchaser will not violate or conflict with the
organizational documents of the Purchaser or Parent.
4.4 Valid Issuance of the Shares. The Shares when issued and delivered
in accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable and will
be free of restrictions on transfer, other than restrictions on transfer under
this Agreement and under applicable state and federal securities laws.
4.5 Parent SEC Filings. The Parent SEC Filings were complete and
accurate in all material respects as of the date of the filings and there were
no material misstatements therein as of such dates.
4.6 Material Changes. There has not been, since September 30, 2002, any
material adverse change in the financial condition or in the results of
operations, business or properties of Parent.
5. Other Agreements.
5.1 Assignment of Contracts. If any required consent to the assignment
of any of the Contracts is not obtained or if an attempted assignment thereof
would be ineffective, the Company and each Security Holder shall cooperate with
the Purchaser to provide the Purchaser with the benefits and obligations
thereunder in accordance with such agreement until such consent or effective
assignment can be obtained or until a replacement contract is in place. To the
extent the assignment of any of the Contracts is not obtained, the Company
shall, to the extent legally permissible without risk of penalty or loss to the
Company or the Security Holders, terminate such contract at the request of the
Purchaser.
5.2 Transition of the Assets; Audit of Financial Statements. The
Company, each Security Holder and the Purchaser shall use commercially
reasonable efforts to cooperate in an orderly transfer of the Assets to the
Purchaser. The Company and the Security Holders will cooperate with the
Purchaser and its accountants in connection with an audit of the financial
statements of the Company at December 31, 2002 and for up to a three year period
then ended and provide to the auditor such information and customary management
representation letters as the auditor may reasonably request in connection with
such audit.
13
5.3 Access to Facilities. On a week to week basis following the Closing
Date, the Company shall permit the Purchaser to have access to and use of the
premises used by the Company located at 0000 XX Xxxx Xxxxx, Xxx'x Xxxxxx, XX
00000 for the purposes of completing any production work and/or transferring
production to the Purchaser's facilities. For each week or part thereof that the
Purchaser requires access, the Purchaser shall pay to the Company the sum of
$540.
5.4 Consulting and Employment Arrangements.
(1) Mr. Chick Consulting Arrangement. Effective on the Closing
Date and for a period of six (6) months thereafter, Mr. Chick shall provide
consulting and transitional services to the Purchaser in exchange for
compensation of $5,000 per month plus travel and other expenses incurred in
connection with his performance of consulting and transitional services and
which have been approved in advance by the Purchaser.
(2) Employment of Xx. Xxxxxxxx. Effective on the Closing Date
and pursuant to separate employment letters heretofore delivered by the
Purchaser to Xx. Xxxxxxxx (the "Xxxxxxxx Employment Letters"), the Purchaser
shall employ Xx. Xxxxxxxx and Xx. Xxxxxxxx shall accept such employment with the
Purchaser upon the terms and conditions set forth in the Xxxxxxxx Employment
Letters.
(3) Transition Arrangements. Effective on the Closing Date,
the Purchaser will contract with those employees of the Company listed on
SCHEDULE 3.17, as independent contractors at their present rate of compensation,
to assist in the transition of business operations from the Company to the
Purchaser (the "Transition"). Those individuals who assist in the Transition are
hereinafter referred to as "Transition Personnel". Upon termination by the
Purchaser of an individual's engagement as one of the Transition Personnel,
subject to satisfactory completion (which shall be in the sole discretion of the
Purchaser) of such individual's duties in connection with the Transition, such
individual shall be entitled to a one-time payment equal to three months of such
individual's present compensation.
5.5 Restricted Shares. Following the Closing Date, the Company shall
not directly or indirectly sell, assign, pledge, encumber or otherwise transfer
("Transfer") the Shares to any person or entity, except Mr. Chick and Xx.
Xxxxxxxx. The Company shall not Transfer any Shares to either Mr. Chick or Xx.
Xxxxxxxx unless and until they agree to be bound by the terms and conditions of
this Agreement with respect to the Shares. Notwithstanding the foregoing and
subject to compliance with the Securities Act and applicable state blue sky or
securities laws, the Company shall be permitted to Transfer: 2,000 Shares on and
after the first anniversary of the date hereof; an additional 2,000 Shares on
and after the second anniversary of the date hereof; and all of the Shares on
and after the third anniversary of the date hereof.
5.6 Legends. The Company and each of the Security Holders acknowledge
that the following legend may be placed by Parent upon the certificates
representing the Shares delivered to the Company hereunder:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 BUT HAVE BEEN ACQUIRED FOR INVESTMENT
BY THE REGISTERED OWNER. NO SALE, PLEDGE OR OTHER TRANSFER MAY BE MADE
UNLESS THE ISSUER IS FURNISHED WITH AN OPINION OF COUNSEL FOR THE
SHAREHOLDER IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH
SALE IS IN COMPLIANCE WITH THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS.
14
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE HELD SUBJECT TO
TERMS, COVENANTS AND CONDITIONS OF A ASSET PURCHASE AGREEMENT, DATED
MARCH 6, 2003, BY AND AMONG QUIPP SYSTEMS, INC., USA LEADER, INC.,
XXXXXXX X. CHICK AND XXXXXX X. XXXXXXXX, AND MAY NOT BE TRANSFERRED OR
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF.
A COPY OF SAID AGREEMENT AND ALL AMENDMENTS THERETO IS ON FILE AND MAY
BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
5.7 Further Assurances. From and after the Closing, the Company and
each Security Holder agree to execute and deliver such further documents and
instruments and to do such other acts and things as may reasonably be requested
of such party in order to effectuate the transactions contemplated by this
Agreement.
5.8 Operation of the Company.
(1) Following the Closing Date, the Company shall pay all
Accounts Payable and its other creditors in existence as of the Closing Date on
a timely basis, but in no event, later than the day such Accounts Payable or
other amounts are due.
(2) At the request of the Company, the Purchaser shall use
commercially reasonable efforts to cooperate in the collection of the Company's
Accounts Receivables.
(3) The Company shall not commence any legal action, of any
form whatsoever, against any customers of its business (as of the Closing Date
or within the last 2 years prior to the Closing Date) without the Purchaser's
prior written consent, which consent shall not be unreasonably withheld.
(4) For a transition period of up to one year following the
Closing Date, the Company shall allow the Purchaser to use the name "USA Leader"
and "USA Leader, Inc." in connection with the Systems.
5.9 Website Operations. Following the Closing, operation of the
Company's website will transfer to the Purchaser, and the Company's website will
be modified so as to direct all persons accessing the Company's website to the
Purchaser's website.
6. Non-Competition and Confidentiality. During the period beginning on the
Closing Date and for sixty (60) months thereafter (the "Non-Competition Period")
and in the Geographic Area (as defined below) each of the Security Holders and
the Company agree not to in any capacity, engage or have a financial interest in
any Competing Business (as defined below) or provide managerial, supervisory,
administrative, financial or consulting services relating to the business of any
Competing Business, including making available any information or funding to any
such Competing Business; provided that the foregoing restrictions shall not
restrict the Security Holders or the Company from owning up to five percent (5%)
of any entity whose equity securities are traded on Nasdaq or on a national
securities exchange. During the Non-Competition Period, the Security Holders and
the Company shall not solicit any former employee of the Company who becomes an
employee of the Purchaser for the purposes of having any such employee terminate
his or her employment with the Purchaser. If a court determines that the
foregoing restrictions are too broad or otherwise unreasonable under applicable
law, including with respect to time or space, the court is hereby requested and
15
authorized by the parties to revise the foregoing restrictions to include the
maximum restrictions allowable under applicable law. Each of the Security
Holders and the Company acknowledge, however, that the parties have negotiated
this Section 6 and that the time limitations, the limitation on activities and
the geographic limitations are reasonable in light of the circumstances
pertaining to the Company, the Systems and this transaction. For purposes of
this Agreement, "Competing Business" means any person or entity of any type
whatsoever engaged in the business of developing, manufacturing and selling
insertion and stacking systems to newspaper businesses and other organizations
in the field of printing; and "Geographic Area" means North America.
The Company and each of the Security Holders recognize and acknowledge that by
reason of involvement with the Company, each has had access to Trade Secrets (as
defined below) relating to the Systems. The Company and each of the Security
Holders acknowledge that such Trade Secrets are a valuable and unique asset and
agree to take all reasonable measures to preserve the confidentiality of the
Trade Secrets and covenant that they will not knowingly allow the disclosure of
any such Trade Secrets to any person for any reason whatsoever, unless such
information is in the public domain through no wrongful act of the Company or
any of the Security Holders or such disclosure is required by law. For purposes
of this Agreement, "Trade Secrets" means all know-how, trade secrets,
confidential information, subscriber and visitor lists, business and product
plans, hardware and software designs and code, product specifications and
documentation, technical information, data, process technology, plans, drawings,
and blue prints, owned, used or licensed (as licensor or licensee) by the
Company.
In the event of any breach or threatened breach by the Company or any of the
Security Holders of any provision of this Section 6, the Purchaser shall be
entitled to injunctive or other equitable relief, restraining such party from
engaging in conduct that would constitute a breach of the obligations of the
Company or any of the Security Holders under this Section. Such relief shall be
in addition to and not in lieu of any other remedies that may be available,
including an action for the recovery of damages.
7. Indemnification.
7.1 Survival. All of the representations, warranties, covenants and
obligations contained in this Agreement or in any instrument or document
delivered pursuant to this Agreement shall survive the execution of this
Agreement and the Closing.
7.2 Indemnification by the Company and each of the Security Holders.
The Company and each of the Security Holders shall jointly and severally
reimburse and indemnify and hold Purchaser and Parent and their officers,
directors, employees, affiliates and agents (collectively, the "Purchaser
Parties") harmless against and in respect of any and all damage, loss,
liability, deficiency, settlement payments, costs, levies, expenses or
obligations, whether or not the result of a third party claim (collectively,
"Damages"), in connection with, resulting from or relating to:
(1) any and all Unassumed Liabilities;
(2) any misrepresentation, breach of representation or
warranty or nonfulfillment of any covenant or agreement on the part of the
Company or any of the Security Holders under this Agreement;
16
(3) any claim that any Intellectual Property used in the
Systems constitutes an infringement of any intellectual property right of any
third party;
(4) noncompliance with the provisions of the bulk sales law of
any state that may be applicable to the transactions contemplated hereby;
(5) any claim by RMF Steel Products Company arising out of the
Agreement and Option to Purchase Corporation Stock dated April 1, 2002 between
Xxxxxxx X. Chick and RMF Steel Products Company; and
(6) any and all actions, suits, claims, allegations,
proceedings, investigations, audits, demands, assessments, fines, judgments,
settlements, levies, costs and other expenses (including without limitation
reasonable audit and legal fees) incident to any of the foregoing or the
enforcement of this Section 7.2.
7.3 Indemnification by the Purchaser. The Purchaser shall reimburse and
indemnify and hold the Company its directors, officers, employees,
representatives and agents and the Security Holders (the "Company Parties")
harmless against and in respect of any Damages in connection with, resulting
from or relating to:
(1) any and all Assumed Liabilities (except for those
liabilities and obligations for which the Company and the Security Holders are
required to indemnify the Purchaser under Section 7.2);
(2) any misrepresentation, breach of representation or
warranty or nonfulfillment of any covenant or agreement on the part of the
Purchaser under this Agreement; and
(3) any and all actions, suits, claims, allegations,
proceedings, investigations, audits, demands, assessments, fines, judgments,
settlements, levies, costs and other expenses (including without limitation
reasonable audit and legal fees) incident to the foregoing or the enforcement of
this Section 7.3.
7.4 Procedure for Indemnification.
(1) Third Party Claims. If any claim is made against a party
(an "Indemnified Party") that, if sustained, would give rise to a liability of
another party (the "Indemnifying Party") under this Agreement (a "Third Party
Claim"), the Indemnified Party shall promptly, and in any case within ten (10)
business days of its receipt of notice of such Third Party Claim, cause notice
of the Third Party Claim to be delivered to the Indemnifying Party along with
all of the facts, information or materials relating to such claim of which the
Indemnified Party is aware (the "Claim Notice"), provided however, that failure
to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure.
(i) The Indemnifying Party shall have ten (10) calendar days
after delivery thereof to elect, in writing to the Indemnified Party,
to defend or settle the Third Party Claim, at its own expense. Until
written notice electing to defend or settle any Third Party Claim, the
Indemnified Party may take, at the expense of the Indemnifying Party,
any action it reasonably believes necessary to preserve its rights with
respect to such Third Party Claim. If the Indemnifying Party does not
assume the defense of any claim, then the Indemnified Party may defend
against such Third Party Claim in such manner as it deems appropriate
at the expense of the Indemnifying Party.
17
(ii) If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party shall be entitled to participate in the
defense thereof and, if it so chooses, to assume the defense thereof
with counsel selected by the Indemnifying Party, which counsel must be
reasonably satisfactory to the Indemnified Party, provided that all
Indemnifying Parties with respect to such Third Party Claim jointly
acknowledge to the Indemnified Party its right to indemnity pursuant
hereto in respect of the entirety of such claim and provide assurances
reasonably satisfactory to the Indemnified Party that the Indemnifying
Parties will be financially able to satisfy such claim in full if it is
decided adversely. Should the Indemnifying Party so elect to assume the
defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for legal expenses subsequently
incurred by the Indemnified Party in connection with the defense
thereof (except as hereinafter provided), but shall continue to pay for
any expenses of investigation or any Damage suffered. If the
Indemnifying Party assumes such defense, the Indemnified Party shall
have the right to participate in the defense thereof and to employ
counsel, at its own expense (except as hereinafter provided), separate
from the counsel employed by the Indemnifying Party. Notwithstanding
the foregoing, if (a) the Indemnifying Party shall not assume the
defense of a Third Party Claim with counsel reasonably satisfactory to
the Indemnified Party within ten (10) business days of any Claim
Notice, or (b) legal counsel for the Indemnified Party notifies the
Indemnifying Party that there are or may be legal defenses available to
the Indemnified Party or to other Indemnified Parties which are
different from or additional to those available to the Indemnifying
Party, which, if the Indemnified Party and the Indemnifying Party were
to be represented by the same counsel, would constitute a conflict of
interest for such counsel or prejudice prosecution of the defenses
available to such Indemnified Party, or (c) if the Indemnifying Party
shall assume the defense of a Third Party Claim and fails to diligently
and vigorously prosecute such defense in a timely manner after due
notice, then in each such case the Indemnified Party, by notice to the
Indemnifying Party, may employ its own counsel and control the defense
of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by
the Indemnified Party and the Indemnified Party shall be promptly
reimbursed for any such fees, charges and disbursements, as and when
incurred. Whether the Indemnifying Party or the Indemnified Party
control the defense of any Third Party Claim, the parties hereto shall
cooperate in the defense thereof. Such cooperation shall include the
retention and provision to the counsel of the controlling party of
records and information that are reasonably relevant to such Third
Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. The Indemnifying Party shall have the right to
settle, compromise or discharge a Third Party Claim (other than any
such Third Party Claim in which criminal conduct is alleged) without
the Indemnified Party's consent if such settlement, compromise or
discharge (x) constitutes a complete and unconditional discharge and
release of all Indemnified Parties, and (y) provides for no relief
other than the payment of monetary damages and such monetary damages
are paid in full by the Indemnifying Party, and in all other cases may
not so settle without the prior written consent of the Indemnified
Party.
(2) Claims by the Purchaser or Claims by the Company. In the
event the Indemnified Party should have a claim against the Indemnifying Party
that does not involve a Third Party Claim, the Indemnified Party shall promptly
cause notice of such claim to be delivered to the Indemnifying Party. If the
Indemnifying Party (i) does not notify the Indemnified Party within fifteen (15)
calendar days after the Indemnified Party's notice that it disputes such claim
18
or (ii) notifies the Indemnified Party that it does not dispute such claim, the
amount of such claim shall be conclusively deemed as a liability of the
Indemnifying Party under Section 7.1. If the Indemnifying Party has timely
disputed its liability with respect to such claim, the parties will proceed in
good faith to negotiate a resolution to such dispute, and if not resolved within
twenty (20) business days, shall be resolved by confidential binding arbitration
in accordance with the rules of the American Arbitration Association in Miami,
Florida. The decision of the arbitrator shall be final, conclusive and binding
on the parties to the arbitration. Judgment may be entered on the arbitrator's
decision in any court having jurisdiction.
8. Miscellaneous.
8.1 Broker's Fees. Each of the parties hereto represents and warrants
that it has not taken and will not take any action that would cause any other
party hereto to have any obligation or liability to any person for a finder's or
broker's fee and agrees to indemnify the other parties hereto for breach of the
foregoing representation and warranty.
8.2 Expenses. Each party hereto shall pay its own expenses, including
without limitation the reasonable fees and expenses of its, his or her counsel,
incurred in connection with this Agreement and the transactions contemplated
hereby.
8.3 Bulk Sales Compliance. The Purchaser hereby waives compliance by
the Company with the provisions of the bulk sales law of any state that may be
applicable to this transaction. In consideration of such waiver, the Company and
the Security Holders, agree to defend and indemnify the Purchaser against and
hold it harmless from any and all loss, liability, claims, damage or expense
(including reasonable attorneys' fees) arising out of or resulting from such
noncompliance, as provided in Section 7.
8.4 Contents of Agreement; Amendment; Parties in Interest; Assignment;
Etc. This Agreement, which includes all schedules and exhibits hereto, the
Assignment and Assumption Agreement, the Sublease and the Intellectual Property
Conveyance Documents set forth the entire understanding of the parties hereto
with respect to the subject matter hereof. There are no restrictions, promises,
representations, warranties, covenants or undertakings other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties, including, without
limitation, that certain letter of intent dated January 13, 2003 entered into by
the Company, the Security Holders and the Purchaser and the Confidentiality and
Non-Disclosure Agreement between the Purchaser and the Company dated as of
November 15, 2002. This Agreement may be amended, modified or supplemented only
by written instrument duly executed by each of the parties hereto. All
representations, warranties, covenants, terms and conditions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, legal representatives, successors and permitted assigns of the
parties hereto. No party hereto shall assign this Agreement or any right,
benefit or obligation hereunder to any other party without obtaining the prior
written consent of the other party; provided, however, that (i) the Purchaser
may assign its rights and benefits hereunder, including without limitation the
benefit of any representation, warranty or covenant, to any affiliated entity
and (ii) the Company may, with notice to the Purchaser, assign its rights
hereunder in whole or in part to the Security Holders or either of them. Nothing
herein shall prohibit the dissolution of the Company. Any term or provision of
this Agreement may be waived at any time by the party entitled to the benefit
thereof by a written instrument duly executed by such party.
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8.5 Notices. All notices and other communications hereunder shall be in
writing (including wire, telefax or similar writing) and shall be delivered,
addressed, or telefaxed as follows:
If to the Purchaser:
Quipp Systems, Inc.
0000 X.X. 000 Xxxxxx
Xxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxx
Facsimile: 305.623.0980
with a required copy to (which copy shall not constitute notice):
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxxxx, Esquire
Facsimile: 215.963.5001
If to the Company or the Security Holders:
USA Leader, Inc.
000 X. X000 Xxx XXX-000
Xxx'x Xxxxxx, XX 00000
Attn: Xxxxxxx X. Chick
Facsimile: 816.795.7576
with a required copy to (which copy shall not constitute notice):
Xxxxxx, Xxxxxxx & Associates, LLC
000 X.X. Xxxxxxxx Xxxx, Xxxxx 000
Xxx'x Xxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx
Facsimile: 816.525.3444
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 8.5 (or in accordance with the latest
unrevoked written direction from such party); and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 8.5
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
8.6 Severability. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
8.7 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA, WITHOUT REGARD TO ITS
PROVISIONS CONCERNING CONFLICTS OF LAWS.
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8.8 Public Announcements. Neither the Company nor any Security Holder
shall make any public statements, including without limitation, any press
releases, with respect to this Agreement and the transactions contemplated
hereby without the prior consent of the Purchaser, except as may be required by
law.
8.9 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be considered an original and all of which
together shall constitute the same instrument. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for any of the other counterparts.
8.10 Incorporation of Exhibits and Schedules. The exhibits and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof. The term "Agreement" shall include all such exhibits,
schedules, certificates, and writings.
8.11 Rights of Third Parties. Nothing in this Agreement shall be
construed as giving any person, firm, corporation, or other entity, other than
the parties who are signatory hereto and their respective successors and
permitted assigns, any right, remedy, or claim under or in respect of this
Agreement or any provision hereof.
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IN WITNESS WHEREOF, this Asset Purchase Agreement has been executed by
the parties hereto as of the day and year first written above.
QUIPP SYSTEMS, INC.
By: /s/ XXXXXXX X. XXXX
-----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and Chief Executive Officer
USA LEADER, INC.
By: /s/ XXXXXXX X. CHICK
-----------------------------------------
Name: Xxxxxxx X. Chick
Title: President
/s/ XXXXXXX X. CHICK
--------------------------------------------
XXXXXXX X. CHICK
/s/ XXXXXX X. XXXXXXXX
--------------------------------------------
XXXXXX X. XXXXXXXX
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